Keir Starmer today moved to water down Labour’s hated inheritance tax raid on farmers amid widespread rural anger.
Under the original plan unveiled by Rachel Reeves in the 2024 Budget farmers faced paying IHT at a 20 per cent rate on agricultural property and land worth more than £1million from April.
It triggered a huge wave of protests in London and a backlash from Labour MPs in rural seats.
But in the PM’s latest U-turn Defra today lifted that threshold to £2.5million, admitting that it had acted after it ‘listened to concerns of the farming community’.
It comes a little over a week after Sir Keir said that the reforms in their original form – expected to bring in around £500 million a year – were ‘sensible’.
A Defra spokesman said the change would halve the number of farms affected by the change to Agricultural Property Relief.
NFU President Tom Bradshaw said: ‘I am thankful common sense has prevailed and government has listened.
‘From the start the government said it was trying to protect the family farm and the change announced today brings this much closer to reality for many.’
But shadow environment secretary Victoria Atkins said the change to the ‘vindictive’ scheme would be ‘too late for some’, adding: ‘Businesses and lives have been lost.
‘Rural communities will not forget the distress, pain and panic this government has caused them.
It is the latest in a series of U-turns that either water down or scrap government proposals, following changes to the winter fuel payment for pensioners and the two-child benefit cap.
One despairing government source lamented that as with winter fuel allowance, they had taken all the political pain, only to back down.
They told the Daily Mail: ‘And we’ll probably be saying the same on business rates and pubs in a few months time.’
Other Labour veterans were gloomy about the U-turn, criticising No10’s failure to recognise ‘political reality’ faster.
One quipped that the climbdown was ‘very on brand’ for Sir Keir.
But Environment Secretary Emma Reynolds said: ‘Farmers are at the heart of our food security and environmental stewardship, and I am determined to work with them to secure a profitable future for British farming.
‘We have listened closely to farmers across the country and we are making changes today to protect more ordinary family farms.
We are increasing the individual threshold from £1m to £2.5m which means couples with estates of up to £5m will now pay no inheritance tax on their estates.
‘It’s only right that larger estates contribute more, while we back the farms and trading businesses that are the backbone of Britain’s rural communities.’
Earlier this week an official report produced for the government said the IHT change had left farmers ‘bewildered and frightened’.
The farm profitability report by former National Farmers’ Union president Baroness Minette Batters called for a ‘new deal for profitable farming’ that recognises the true cost of producing food and delivering for the environment.
She warned that some farmers, particularly those growing arable crops, ‘are questioning viability, let alone profitability’.
The terms of her review did not include the controversial changes to inheritance tax, but she said it was raised as the single biggest issue regarding farm viability by almost all respondents.
‘The change to IHT is a major issue for the sector and I have great sympathy with their concerns,’ she wrote.
‘It has been made clear in my terms of reference that is not for me to offer proposals to the Government on IHT. However, I could not write this report without reference to it.’
She added: ‘The farming sector is bewildered and frightened of what might lie ahead.’
At the Liaison Committee on December 15, a panel of senior parliamentarians who chair the various Commons committees, Lancaster and Wyre Labour MP Cat Smith said rural communities ‘put their trust in Labour for the very first time in a very long time and gave us a mandate for change in this country’ in the 2024 landslide election win.
But she said farmers felt ‘misled’ by the changes to inheritance tax and agricultural property relief announced in Rachel Reeves’s first Budget.
She said ‘elderly farmers, or farmers with a terminal diagnosis, are in a position whereby if they die before April, their farm will pass to the next generation with no tax implications’ but if they survive until after that date they face the family farm becoming ‘completely unviable’ for their descendants.
The MP asked Sir Keir: ‘Can you see how farmers can feel that this Government hasn’t necessarily treated them the way that they expect to be treated as working people?’
The Prime Minister told her: ‘I do understand the concern, and I met with the president of the NFU (National Farmers’ Union) just last week, as I’ve met with him before, to run through the particular concerns they have.
‘I do think on agricultural property relief, there had to be sensible reform. And I think this is sensible reform.’
Tim Farron, the Lib Dem environment, food and rural affairs spokesman, said the tax change should be scrapped in full, saying: ‘It is utterly inexcusable that family farmers have been put through over a year of uncertainty and anguish since the Government first announced these changes.’
