The Central Association of Agricultural Valuers (CAAV) has explored the impact of the autumn budget, stating: Labour’s aim for growth backfires; farming takes the pain.
Jeremy Moody, secretary and advisor, notes that the consequences for the wider economy and farming are becoming clear. The changes to inheritance tax will be costly to many farms and rural businesses, while the arguments used appear to be based on misunderstood and partial data, he states.
“These changes will affect many more family farms than the Government suggests and will do so when farming needs its resources to meet the new policies, to invest and adapt to advancing climate change.
“At a strategic level, the Government may have missed its optimum moment to drive the economic growth programme we need,” he adds.
“The Budget lacks significant measures to stimulate growth through entrepreneurship, relying heavily on taking taxes from businesses, and distinctively farming and the food chain – rather than fostering an environment which supports innovation, business expansion and the rural economy. Instead, we have more tax levied in destructive ways and higher interest rates in bond markets, where we depend on the kindness of strangers.”
Jeremy explains that the budget was not about investment. “The signal given in July by the Chancellor’s cancellation of the £800m exacomputer project at Edinburgh University (one which is 50 times faster than any computer now in the UK, with a capability for key research and industry projects) seems confirmed.
“The Office for Budget Responsibility sees no real lift in growth in this Parliament, observing that the only Parliament with less growth will have been the last one – with its pandemic and Ukraine war. In an increasingly uncertain world, even that forecast is prey to Tuesday’s US election.”
There were also changes to holiday lets – a popular diversification option – which from April 2025 will be treated on the same basis as residential lettings.
When discussing the wider implications of the changes to agricultural property relief and business property relief, Jeremy says that while the government believes only a quarter of farms will be affected, this figure shows a misunderstanding of the tax data.
- First, it is only based on APR claims and takes no account of the farm’s machinery, livestock, working capital or other business assets, including diversified business activities supporting the farm and the rural economy. That figure misses half the picture and so understates the effects of the change.
- Second, it is not an assessment of farms but of individual ownerships of agricultural land. The average value of £486,000 might generally be just 50 acres but nearer 20 in some areas. Some will be small intense farms or family members’ land used by the family farm, but more will be lifestyle units and stray fields let out for grazing round a house – both likely with wealthier non-farming owners. The data does not record farms when, on Defra data, the average cereals farm would need four owners to be out of tax on its farming activity.
“If farmland has to be sold, the increased capital gains tax rate will mean more acres must go, reducing the farm’s production capacity and its ability to meet its overheads,” he warns.
This is on top of the immediate impact that accelerating delinked payment cuts will have, and the increase in employers’ National Insurance, which Jeremy states will impact the entire food change.