It's the lack of taxes on land that's causing small farmers a problem

I used to believe that the most damaging intellectual errors were essentialism and reification. These days I'm inclined to think that alliteration trumps them both.

Over the holidays I saw two Liberal Democrat MPs calling for the total abolition of the "Family Farm Tax" or the "Unfair Family Farm Tax". And the Welsh Lib Dems have just called for that too.

Here's David Chadwick, the Lib Dem MP for Brecon, Radnor and Cwm Tawe, quoted in the Abergavenny Chronicle:

"The Liberal Democrats were the first to call out and oppose the unfair family farm tax in last year's budget and we have been proud to stand alongside our Welsh farming communities to campaign against it ever since."

"This is about fairness and security, if we undermine Welsh farming, then we also undermine our ability to provide the country with the food we need to keep us secure in an uncertain world and to build a healthy nation.

"Despite this welcome change, many Welsh family farms will still find themselves crippled, with incomes barely at minimum wage levels. The Liberal Democrats still believe this unfair tax should be scrapped in full and will be submitting amendments in the new year to try to do so."

 David puts his finger on farmers' central complaint. It's that the value of farmland has lost all connection with the income that can be derived from it. This means that small farms fear they would have to sell land or buildings to pay inheritance tax, though even before the government's recent concessions, farmers had been granted significant exemptions.

But why has the value of farmland loss any connection with farm incomes? The answer is that the generous treatment of landholdings in recent decades has led to land being used as a tax shelter. So it's the absence of inheritance or other taxes on land that has caused the problem farmers most complain about.

Here's Bio-Waste Spreader in the new Private Eye:

Has the government really "climbed down" or "U-turned", as opposition parties claim? The tax was never intended to raise much revenue (about £500m per annum) but instead act as a deterrent to ultra-high net worth individuals (think James Dyson and Jeremy Clarkson) buying farmland because it was exempt from IHT [Inheritance Tax]. 

On farmland estates where the net worth of more than £2.5m, a 20 per cent IHT charge will continue to apply from April (the Treasury estimates that raising the tax threshold will only cost the government about £130m). So the ending of farmland's exemption from IHT will help deter super wealthy individuals from driving up prices to the point where real farmers can't afford to buy land. An initiative the Eye has consistently supported.

And, for what it's worth, it's one this blog supports too.