Tens of thousands of farmers from across the UK gathered on November 19th to protest parliament’s newly proposed inheritance tax. The primary group of protestors consisted of family farmers spanning through multiple generations of labor and hard work.
Beginning at Downing Street, the protestors heard from various speakers like Conservative Party member Kemi Badenoch, Liberal Party member Ed Davey and journalist Jeremy Clarkson. Protestors held signs that read “Starmer-Farmer-Harmer” and “Save family farms, save Britain’s farming future”, calling for Prime Minister Keir Starmer to take back the inheritance tax. At the conclusion of the speeches, the crowd was first led by children on their toy tractors and adults then followed with their real tractors all the way to Westminster.
Recap of the status of family farms in the UK
Generational farms in the UK have survived tax-free in order to elevate food security and encourage people to remain on the land. The current rules have regarded small/family farms to include those with cottages, houses, and those used for crops, animal rearing, etc. It has been commonly understood that farming is not a lucrative business so, the tax exemption was considered reasonable. Especially since the BREXIT referendum in 2016 that eventually led to the UK leaving the European Union, farming has become a less substantial contributor to the country’s overall food production. When the UK left the EU, trade barriers largely increased hindering access to a large agricultural market. As a result, food production in the UK became more expensive compared to what could be imported. Now, UK farms produce less than 60% of the amount of food that is consumed, as the government imports more goods from outside sources at cheaper prices. This has led to family farms suffering from severely low profit margins.
To impact this for the US, the UK’s current state means there will potentially be an increase in their importation of US produce.
Newly proposed inheritance tax
Rachel Reeves, the UK’s finance minister, put forward the policy to place a 20% tax on farms valuing above one million pounds (the equivalent of $1,267,300 USD). The government stated that this tax would only apply to the most valuable farms – around 500 based on inherited farms from 2021-2022. The intent is to apply the funds generated from the tax to fixing public services across the UK, like schools and hospitals.
Details of farmers’ opposition
Farmers remain outraged by the proposal, saying that the government hasn’t considered important factors like Agricultural Property Relief (APR) and Business Property Relief (BPR), which would group most farms under the one-million-pound ceiling. APR and BPR are tax reliefs that help reduce the amount of inheritance tax that is paid on the transfer of certain assets. APR applies to generational farmland, and BPR applies to business assets within a farm like machinery and livestock. If the Labor Party had included these things into the tax plan, farmers say they would realize that this would cause most farms to be subjected to the 20% tax. If APR and BPR are to be applied to the proposal, the Country Land and Business Association estimate that 70,000 farms will then accrue a value above one million pounds. In the end, this tax proposal would affect more than the originally estimated 500 farms.
The biggest stance of opposition is grounded on the difference between land value and profit margins. Farmers say that while their land and machinery appear highly valuable on paper, their profit margins are low. The definitive quality of a functioning farm is not the estimated value on paper but the profits that fuel the business. Since most farms in the UK would be subjected to the 20% inheritance tax on behalf of their APR & BPR rates, farmers say they will have to sell their generational farms because they do not have a large enough profit margin to pay off the tax.
Global perspective
To analyze this from a global perspective, let’s compare and contrast with France and their similar issue. Since the beginning of the year, French farmers have been protesting on behalf of low income, excessive regulations, competition with cheaper imports and a recent trade deal between the EU and Mercosur (a South American trade bloc between Argentina, Bolivia, Brazil, Paraguay and Uruguay as the main members). Most relevant to the content of this article, French farmers are similarly facing an issue with low income and low profit margins, while dealing with a high cost of production. It has been confirmed that France’s agricultural production is the most valuable in the EU, reaching 72.9 billion euros in value.
Both within and outside of the EU, farms are not reaping what they are required to sow. As a result, farmers are standing against their respective governments in fear of having to sell their generational property in the near future.
Impact
According to a study conducted by Science Direct in 2021, family farms produce nearly 80% of the world’s food in terms of value. In all, there are ~ 600 million farms globally and 90% are family farms as defined by the study. The Food and Agriculture Organization of the UN also confirmed this statistic. Looking at agriculture on a global spectrum, the Convention on Biological Diversity estimates that it produces around 24 million tons of food for nearly 3 billion people. They also explain that agriculture is “the largest source of income and jobs for poor, rural households” and accounts for 29% of GDP in developing countries. Ultimately, farming is important around the world.
If you are a farmer, rancher, or anyone working within the agricultural industry, what does this mean for you? Are you affected by the global attitude toward farming, let alone family farming? Do you find a similar pattern within US agriculture? Do you think this will begin to have an impact on US farming? That is for you to decide.
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