Starmer backs down in farm tax row – but why now?

The government’s recent and partial U-turn on what had been widely condemned as the "farms tax" arrived like an unexpected Christmas present for the agricultural sector, particularly those who had tirelessly campaigned against the imposition of a 20% inheritance tax on productive farmland, slated to begin next April. This significant policy reversal means that approximately half of the farms that would have been subjected to the levy will now find themselves exempt, a substantial concession from a government that had steadfastly defended the policy for the preceding 14 months since its initial announcement in last year’s Budget. The abrupt change naturally begs two crucial questions that resonate through Westminster and rural communities alike: Why the sudden change of heart? And why now, after more than a year of unwavering commitment?

One of the most visible and undoubtedly effective catalysts for the government’s volte-face was the sustained and increasingly vocal campaign waged by farmers across the country. For months, the sight of tractor convoys, horns blaring in unison, became a familiar and potent symbol of agricultural discontent. These powerful demonstrations, often converging on Parliament Square in central London, but also manifesting in regional cities and towns, were meticulously organised by the National Farmers’ Union (NFU) and other rural advocacy groups. They were not merely noisy spectacles; they were carefully choreographed displays of unity and resolve, designed to capture media attention and exert pressure directly on policymakers. Beyond the roar of engines and the visual impact of dozens of tractors snaking through urban streets, the NFU also engaged in a more discreet, yet equally determined, campaign of "quieter diplomacy" behind the scenes. This involved high-level discussions with key figures in Downing Street and the Department for Environment, Food and Rural Affairs (Defra). Initially, these private conversations likely focused on outright opposition to the tax, but reports suggest that as the pressure mounted, the dialogue shifted towards mitigating its harshest effects, eventually paving the way for the exemptions that were ultimately announced. The arguments put forth by the NFU were multifaceted, highlighting not just the financial burden on farming families but also the broader implications for food security, the viability of rural economies, and the preservation of multi-generational family legacies. The potential for the tax to force the break-up or sale of farms, eroding decades or even centuries of family stewardship, was a particularly emotive and compelling point.

However, the protests, while instrumental, were not the sole factor influencing the government’s decision. A significant and relatively new dynamic within the Labour Party itself also played a pivotal role. The landslide election victory last year dramatically altered the electoral map, resulting in Labour gaining a substantial number of rural and semi-rural constituencies – seats traditionally held by the Conservatives. This influx of new Labour MPs, often from communities with deep agricultural ties, created an internal pressure group that proved increasingly difficult for the government to ignore. Behind the closed doors of parliamentary offices and party meetings, these "rural rebels" had been pressing hard for concessions. Their concerns were rooted in the very real anxieties of their constituents, who faced the prospect of losing their family farms due to an inheritance tax that seemed to disregard the unique nature of agricultural assets. While party discipline meant only one Labour MP ultimately voted against the inheritance tax policy in a parliamentary vote earlier this month, a far more telling statistic emerged: more than 30 of them actively abstained. This act of abstention, a deliberate choice to withhold support without openly defying the party whip, served as a powerful and undeniable demonstration of their deep-seated concerns, sending an unambiguous message to the party leadership about the policy’s unpopularity within their ranks.

The reasons for the precise timing of the government’s sudden policy reversal are, to some extent, speculative, but informed observers point to several converging factors. One of the aforementioned rural rebels confided that their conversations with ministers had taken a distinctly more positive turn in the month leading up to the announcement, suggesting that the government was already considering its options, even if the backbenchers weren’t forewarned of the specific timing. Crucially, many believe that Sir Keir Starmer’s appearance earlier this month before the Liaison Committee, a powerful body comprising senior MPs who chair cross-party parliamentary committees and is tasked with scrutinising the Prime Minister, played a decisive role. During this session, Starmer was subjected to particularly uncomfortable and emotionally charged questioning from Labour MP Cat Smith and Liberal Democrat MP Alistair Carmichael. Both MPs, drawing on anecdotal evidence from their constituencies, painted a stark and harrowing picture of the potential human cost of the inheritance tax. They effectively suggested that some farmers, facing the prospect of losing their ancestral lands to the tax, were contemplating extreme measures, with Smith directly referencing farmers "actively planning to expedite their own deaths" before the tax was introduced next April, in a desperate attempt to ensure their family farms could be passed on intact.

This shocking and deeply disturbing testimony had a palpable impact. The prospect of personal tragedies – individual farmers driven to despair, and the inevitable awful headlines that would follow such events – was made chillingly clear to the Prime Minister and the wider government. Such an outcome would not only be a moral catastrophe but also a political disaster of immense proportions, overshadowing any perceived revenue benefits from the tax. Downing Street, acutely aware of the political calendar, is keen to begin the new year on a strong footing, particularly as MPs prepare to return to Parliament in January. Dispelling this particular "political dark cloud," with its potential for both human suffering and severe reputational damage, might well have been regarded as an essential precursor to any attempt to seize the initiative in the new session.

The Conservatives, naturally, seized on the timing, accusing the government of having "sneaked out" the policy change while MPs were away for the Christmas recess, thereby avoiding immediate scrutiny and accountability. A "recess reversal" of such a high-profile policy certainly does not radiate confidence from a government that, paradoxically, commands a formidable majority of 400 seats out of Parliament’s 650. While many Labour MPs expressed relief that the government had ultimately listened to their concerns and those of their constituents, others privately questioned why the government had persisted with a policy that was always destined to generate relatively little revenue. The cost of this particular change, estimated at £130 million, is, after all, a tiny fraction of the approximately £900 billion generated in total taxation annually. The disproportionate political damage inflicted by the "farms tax" compared to its financial yield highlights a significant misjudgment.

Furthermore, with Labour consistently trailing in the polls, there are growing concerns within the party about the government’s overall ability to "make the political weather" – that is, to dictate the national agenda and maintain public confidence. Indeed, a worrying "modus operandi" appears to be emerging, characterised by a distinct pattern of policy formulation and subsequent retreat. It typically begins with the Treasury announcing ambitious, often revenue-raising, policies. This is then followed by a significant public backlash, amplified by media coverage, coupled with mounting internal Labour discontent from backbenchers and sometimes even within the Shadow Cabinet. Some time later, usually once the political damage has been sustained and the government’s image bruised, a partial reversal or significant concession is announced.

This pattern is not new. It has been observed in previous policy battles under this Labour administration, notably with proposals surrounding winter fuel payments and aspects of welfare reform. In each instance, an initial policy, often presented as fiscally responsible or necessary, met fierce resistance, forcing the government to backtrack. Now, the "family farms tax" joins this growing list. This recurring cycle raises profound questions about the government’s political judgment, its internal policy development processes, and its ability to accurately gauge public sentiment and the political ramifications of its decisions before they are announced. Is the government testing the waters with controversial policies, or are these genuine missteps born of insufficient foresight and consultation? The repeated need for course corrections, even if presented as a sign of responsiveness, risks eroding public trust and projecting an image of indecisiveness or, worse, incompetence. It also emboldens opposition parties and pressure groups, signaling that sustained pressure can indeed force the government’s hand.

While the immediate relief for farming communities is palpable, and the internal Labour dissent has been temporarily quelled, the larger questions about the government’s approach to governance persist. The policies may have changed, demonstrating a willingness to listen, but the underlying questions over political judgment, strategic planning, and the potential for repeated policy misfires remain a significant challenge for Starmer’s administration as it navigates a complex political landscape with an eye towards the next general election.