Jeremy's Blog 8th November 2024: The Budget, Trump and Other Risks

This article by Jeremy Moody first appeared in the CAAV e-Briefing of 7th November 2024

Farming is now at the centre of politics in a way not seen for years (save in Wales this spring). A subject on BBC Any Questions and then of a Financial Times leader, the Budget reductions in APR and BPR are a story that keeps running. The CAAV has been providing members with briefing on what is known and related practical points and is also talking with the Treasury and DEFRA about the data used, the issues raised and scale of payments required.

This would not be a tax on the whole business where ownership is shared but of what a deceased taxpayer owned – that is what is to be valued. Official figures are about APR claims but ministers slip from that into saying three quarters of farms would not be affected. We are working to explain that this is not what the data say. Some would be land owned by a tenant, the core of a larger specialist cropping business or a family member’s land but many of those claims under ￡1m, averaging around 50 acres (less in some areas), would be stray fields or lifestyle units. Using APR claims data for land then ignores all the business assets of the farm.

The valuation of not only farmland and farmhouses but now all business assets will matter, whether in the farm or ancillary diversified activity. The new situation reopens questions that have not much needed to be asked for Inheritance Tax since 1992, such as:

• the valuation of tenancies in the estates of some tenants – see the CAAV publication, Valuation of Agricultural Tenancies
• the valuation of company shares – see the CAAV publication, Reviewing a Business

There are reports of land sales falling through and, perhaps premature, of property reviews by both in hand owners and landlords. The sudden change in prospective circumstances for farming and the effective loss of English delinked payments mean we are looking at whether there is a material uncertainty issue for valuations until we see markets more clearly.

Ahead of the legislation and any possible response to the current reaction, it is too early to know whether any necessary disposals might act over time to move more land into the hands of proficient farmers, lifestyle buyers or environmental buyers, as with the Rothbury Estate and Lyscombe Down. The latter might counter the view that land will always be productively farmed whoever owns it.

There may be an irony in this week’s announcement for England of a Commissioner for Tenant Farming Sector in conjunction with increasing the tax on the agricultural landlords and investors needed for there to be tenants. The overheads of an owner-occupied model for farming have been put into sharp relief by the Budget proposals but this might give an advantage to institutional, rather than individual, farming ownership.

More widely, the Employers NI increase is a powerful shock to the food chain, from processing to catering and hospitality and retail, likely to drive business change perhaps even more than we might see in farming. With the scale of the Budget’s tax raising from business, it is not a surprise that the OBR expects private business investment to fall.

Meanwhile and from January, the US electorate has handed Donald Trump a level of unchecked power perhaps not seen for 80 years with the Presidency with Republican control of the Senate and probably the House of Representatives while he has made key appointments to the Supreme Court. With four years’ knowledge of how to use the Presidency and a transactional approach, relationships may now count for little. His single longstanding view is that “tariffs” is “the most beautiful word in the world” which, if followed through, is a major threat to trading countries like the UK. Trade deals would be hard won and our consumer and other concerns would have a price. The long US tradition in which he sits, less obvious since the 1940s, may look isolationist from Europe but is concerned about China. All this at a point when Russia’s invasion of Ukraine is becoming yet more international with North Korean troops in combat while west European economies and defence sectors are generally in poor shape.

The last week confirms a world of greater risk, now whether our own government or our US ally as much as markets, extreme weathers and other factors. We can no longer take the relative stability of the last 70 years for granted, perhaps the core of the argument over the Budget’s tax demands on private UK businesses, especially farming.