(Bloomberg) -- They piled into central London in their thousands, mostly on foot but some in tractors, with placards reading “No Farmers, No Food, No Future” and “The Final Straw” to protest the new Labour government’s decision to impose inheritance tax on farms for the first time in over three decades.
Speaking to the crowd on Tuesday was Clare Wise, a fifth-generation farmer with sheep, cows and crops in northern England who said the new levy would “cripple” the business for her children if it was ever called in. “Farmers are asset rich, but we are cash poor,” she said, accusing Prime Minister Keir Starmer’s administration of seeking to “destroy my and your farms forever.”
The backlash is a major political headache for Starmer and one of the main drawbacks from Chancellor of the Exchequer Rachel Reeves’ debut budget, which raised taxes by £40 billion ($50.7 billion) for higher public spending and to cover a shortfall inherited from the previous Conservative administration.
Both Starmer and Reeves have dug in on the inheritance tax change, which puts a 20% levy on farming land worth over £1 million — payable over 10 years — when it is passed down. “With current farm income so low no bank would lend me the money to get my children out of this hole,” said Wise, who estimated the value of her farm at about £4 million. “Even if they did, it would cripple our business and it wouldn’t allow reinvestment or progress for over a decade.”
Wise and the other farmers, many of whom targeted Starmer and Reeves personally with “Keir Starver” and “Rachel Thieves” signs, have an array of celebrity support. TV presenter and farm owner Jeremy Clarkson spoke on stage, while billionaire entrepreneur James Dyson, who owns swathes of land that would be affected by the tax changes, has called Reeves’ budget “spiteful” and ignorant.” Elon Musk, who has used his X platform to slam Starmer’s left-leaning government in recent weeks, said “Britain is going full Stalin.”
The government argues that the majority of farms won’t be affected, estimating that only about 500 farms would be hit with an inheritance tax charge each year. Ministers have pointed out that a couple wanting to pass on their farm to their children would only have to pay inheritance tax if the estate is worth more than £3 million, due to each person in the couple having the £1 million agricultural relief plus the standard £500,000 tax-free inheritance allowance.
They also point to a £5 billion package to support sustainable food production in the UK, and argue the tax change would close a loophole where wealthy people buy up agricultural land to avoid having to pay inheritance tax.
Soaring land values are a long-running complaint, locking would-be farmers out of land ownership as wealthier buyers seek to shield money from the taxman.
According to real estate agent Knight Frank, agricultural land values rose 7% in 2023 to over £9,000 an acre for the first time, compared with a 4% rise in the FTSE 100. In the decade to December 2023, agricultural land was a better-performing asset class than prime residential London and the FTSE 100, and only just behind UK house prices, the analysis showed.
“The yield on farmland is low so why would someone own it rather than, say, FTSE shares?” said Arun Advani, a director at the Centre for the Analysis of Taxation and associate economics professor at the University of Warwick. “The value is in passing the land on tax free. But that is driving up land prices.”
But the government has struggled to get that part of its argument across, instead focusing mostly on the need to raise revenue. Ministers have repeatedly said rural communities will benefit from improvements to the National Health Service and other public spending, and that farmers should pay their share.
A major problem for Starmer’s government is that the tax change is hitting a community which has long felt let down by politicians. Leaving the European Union, for example, was promised as a chance to shed excessive bureaucracy and leading Brexiteer Boris Johnson said farmers would get the same subsidies after leaving the bloc. Instead, farmers complain support payments have fallen.
Farmers have also been hit by higher costs to export to the bloc, increased fertilizer and energy prices in the wake of Russia’s invasion of Ukraine, and setbacks due to animal disease and climate change. Government data show income was lower for all farm types except specialist pig and poultry farms, in the year 2023/24 — a less than ideal backdrop for changing tax rules.
“It’s the final thing, it’s been the straw that broke the camel’s back,” Rachel Hallos, vice president of the National Farmers’ Union, told Bloomberg Radio. “We’re tired of having to deal with whatever’s thrust in front of us.”
There’s an obvious risk to angering the farmers for Starmer, whose Labour Party won a landslide victory in the general election in part by picking up swathes of rural seats that previously voted Tory. Conservative leader Kemi Badenoch, as well as Liberal Democrat leader Ed Davey, both denounced the government’s tax plan. Even Labour peer Ann Mallalieu has warned that people already regret backing Starmer’s party due to the inheritance tax policy.
The protest also points to a deeper challenge facing mainstream politicians. The opposition from prominent voices such as Dyson and Musk shows how Starmer is having to contend with powerful vested interests as he tries to deliver Britain’s first left-wing governing agenda since 2010, at a time when populist, right-wing political forces are in the ascendancy elsewhere.
Starmer’s popularity has already cratered since his election victory in July, with early mishaps over the role of Labour donors and winter fuel payments for pensioners being followed by the controversial budget. Yet his problems have been compounded by being unable to counter powerful critics.
On Tuesday they included Clarkson, whose Amazon Prime series Clarkson’s Farm has given him a prominent platform to talk about the industry. Despite once telling the Times newspaper he bought his Diddly Squat farm to avoid inheritance tax — he told the BBC at the protest the real reason was so he could go shooting — many of the protesters expressed their gratitude.
The Metropolitan Police said more than 10,000 people joined the protest.
“I’m here to support the farmers, it’s that simple, because they need all the help they can get really, even from me,” Clarkson said. Referring to Reeves, he told Channel 4 News: “If she wanted to get me and Dyson and all the investment bankers, she could have used a sniper’s rifle. What she actually used was a blunderbuss and she’s hit everybody here.”
Farmer anger is not unique to the UK. Producers across the world have taken to the streets to protest policies from reduced fuel subsidies, a lack of support amid increased climate risk and changes to trade policy.
Yet there’s a pattern in some European countries that Starmer will be eager to avoid, where populist politicians have capitalized on the plight of rural communities, in particular the burden placed on farms in the fight against climate change. At the rally in London, there were frequent calls for Reform UK leader Nigel Farage, like Johnson a prominent Brexit campaigner, to speak.
“I can feel myself that today is not just about inheritance tax,” Farage told some at the protest, according to PA. “It really is farmers versus Starmer.”
