Labour
wants tax rises to fall on the ‘broadest shoulders’. The farmers furore shows
why that’s so hard to achieve
Rafael Behr
In place of
precision-targeted revenue raids, Reeves needs to win a bigger argument about
the reason we have taxes
Wed 20 Nov
2024 06.00 GMT
It is hardly
advanced political science to observe that governments are more popular when
giving people stuff than when taking it away. Junior doctors, who are getting a
pay rise, are probably better disposed towards Keir Starmer and Rachel Reeves
right now than farmers, who are losing a tax break.
Not all
farmers. The government says its reforms to agricultural property relief (APR)
and business property relief (BPR) will mean inheritance tax is levied on about
500 estates that were previously exempt. Agribusiness lobby groups say many
more will be affected, potentially 70,000. Farmers have marched on Westminster
to vent their fury.
Dispute over
the numbers is largely a function of different ways of measuring the “impact”
of a tax. One dead farmer could bequeath assets to many people, not just a
spouse and children. All might be affected – financially and emotionally – by
the prospect of a bill from the exchequer. None of them will be happy to sell
land that they had expected to inherit tax-free.
It is also
feasible that the Treasury has not fully modelled the way the two reliefs being
adjusted – APR and BPR – work in combination with each other. It may have
undercounted the number of farms whose value on paper has risen steeply as land
prices have soared. But that latter point could be construed as a defence of
the new policy. The extra millions of pounds added to the value of an asset by
nothing more innovative or enterprising than the passage of time is exactly the
sort of unearned windfall that a fair-minded taxman should be raiding.
Even if the
true number of farms affected by the proposed changes is higher than official
estimates, it will represent a tiny fraction of the total number of estates
annually covered by inheritance tax. The rate will still be half of that paid
by non-farmers, and there will be more time to find the money.
In the wider
context of inheritance tax (which accounts for just 0.7% of all tax revenue),
agricultural land will still be privileged, only not quite so much. This is not
how the issue has been projected into the public arena.
Partly that
expresses the peculiar demographic and financial fixations of certain
newspapers. The same distorting lens has been applied to the imposition of VAT
on private school fees. Only about 6% of children attend those schools, but
their families are overrepresented in the ranks of Fleet Street editors.
One
significant difference between the two policies is that the levy on private
education was advertised in Labour’s manifesto, and enjoys public support.
Parents wincing at rising bills can’t say they weren’t warned, nor expect
sympathy from people who don’t have to pay.
By contrast,
Labour’s manifesto only mentioned farming as something to be “supported” and
“championed”. Also, inheritance tax is reviled even by those who will be
untouched by it. Since only about 4% of estates meet the threshold, that is
most people.
Farmers also
benefit from a countryside premium when stirring national sentiment. People
whose main contact with nature is rambling through it at the weekend or cooking
and eating its bounty are easily pricked into anxiety about potential spoilage.
Sentimental
attachment to the way things have traditionally been done isn’t necessarily
misguided, but nor is it easily kept in economic and political proportion. That
is why the fantasy of restoring sovereignty over British fish was a more potent
argument in the Brexit campaign than the much more urgent task of keeping
supply chains friction-free for less photogenic goods.
Images of
tractors trundling down Whitehall and sheep gambolling in fields can distract
from what is essentially an argument about fair distribution of pain in an era
of hard fiscal choices.
The
economics of who can probably afford to pay doesn’t map neatly on to the
politics of who can be made to pay. Rachel Reeves encountered this conundrum
earlier in the year, when she cut pensioners’ entitlement to winter fuel
payment.
That
decision dented a lot more bank balances than ending farmers’ inheritance tax
exemptions, but there are political similarities. The unwelcome element of
surprise is one. No one likes to feel ambushed by the chancellor. Related to
that is the reverberation of anger beyond the relatively small group of people
who might really suffer to a much wider group that is socially aligned – and
still feels targeted.
Many
pensioners who can afford to give up their winter fuel payments still resent
its confiscation. Farmers whose estates will still be passed on, tax-free,
after the changes feel no less solidarity with neighbours and friends whose
assets might be worth millions more on paper but who don’t feel rich. Land is
not liquidity. Incomes keep shrinking and margins keep tightening.
Pensioners
and farmers are also two categories of habitually Tory voter that saw some
switching to Labour on 4 July, albeit with narrow-eyed, probationary caution.
Their new MPs are now getting letters filled with bitter recrimination and
charges of betrayal.
Starmer’s
electoral coalition is not so secure that he can afford to make too many
sections of it irate. Nor does he enjoy the personal following that means
unaffected onlookers will give him much benefit of the doubt when protests are
kicking off and accusations of vindictive or bungled exchequer hit jobs are
flying.
This is the
beginning of a slow-burn political payback for the decision not to seek a
mandate for more wide-ranging, universal tax rises (or just to reverse
unaffordable Tory tax cuts). That may have been justified as a strategy for
winning power, but it leaves Reeves overly reliant on fiddly,
precision-targeted revenue raids to balance the books. And each one carries a
customised risk of aggravating some sectional interest group with lobbying
power disproportionate to the number of people and sums involved.
In these
battles, the caveat that “working people” will be spared or that “those with
the broadest shoulders should bear the heavier burden” don’t get much traction.
Only a weaselly definition of work allows the former pledge to be met, and the
latter one is meaningless because breadth of shoulder is a relative metric.
Everyone can think of a candidate more suitable than themselves for a higher
burden.
The only way
to get sustainable consent for the project Starmer and Reeves are undertaking
is to hammer home the case for public goods funded by public subscription.
There needs to be a rupture from the narrow transactional calculus that frames
taxes and benefits as things that industrious people feed into a system for
needy (or lazy) people to draw out. Not “I subsidise them”, but “we provide for
each other and ourselves”.
Reeves’s
budget speech tilted in that direction, but without much emotional heft.
Starmer ventured on to this terrain in opposition, when he described the NHS as
the “crowd-funded solution for all of us”. But tax-and-spend policy as an
instrument of a collaborative national endeavour has not been central to the
message.
This is why
Labour in government struggles to lift itself out of the defensive crouch
adopted for fiscal arguments in opposition. It was hard to shape the terms of
debate before winning power. It isn’t easy now. The perfect time to make – and
win – this argument would have been before the election. Since that isn’t an
option, the second best time is now.
Rafael Behr
is a Guardian columnist
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