Land, wealth and taxes - a thorny issue!

Introduction

The changes to Inheritance tax announced in the budget on 30th October and their possible impact on farming have generated debate, fuelled commentary on social media, led to argument and counter argument and attracted various political opportunists. 

 

Depending on what you read the changes will either only affect a minority of farms – the government line or conversely, severely impact on many family farms.

 

It would appear from reports that the threshold would be £1.5 million for a single farmer transferring a property to a child or £3 million for a couple transferring property to a child.  Anything above that limit would be taxable at 20%.  Bearing in mind that earnings on farms are relatively low the ability to pay any tax is limited.

 

There is a degree of confusion as to whether large estates owned by the great landowners or those owned by rich investors will be affected. Further work is required to determine the situation here.

 

The two camps

Supporters such as Richard Murphy argues that the effect of the tax would be to reduce land values making it easier for new entrants.  Paul Cheshire asserts that the impact of the tax would be to reduce land values and make it easier for young entrants to farming. It has also been asserted that more dynamic farmers would take on land that was released.  Such views are contestable and probably lack validity.  Any land available would be liable to be bought by people who were niether interested in farming it or creating nature friendly areas.

 

Opponents contend that many relatively small farms would end up paying tax which would result in land having to be sold off making farms unviable.

 

Context

According to Savills grade 3 pasture is valued at £7,100. So a 100 acre farm would be: Farmhouse- £400,000, buildings and stock say £150,000, land £710,000 . A total of £1.26 million.  These days to provide a reasonable income farms need a larger acreage taking them above the threshold. A 200 acre farm would probably be over the £2 million level.

 

Farm holdings in Cornwall - 2022

 

 

	<5ha	5<20ha	20<50ha	50<100ha	>=100ha	Total holdings
Holdings	543	1333	1022	802	747	4447
% share	12	30	23	18	17	100
Extent (ha)	922.7	14763	33647	56734	155229	261295
Extent (acres)	2279	36464	83108	140132	383416	645400
% share	0.4	5.6	12.9	21.7	59.4	100.0

[Defra, Agricultural Survey].

 

Issues

There are three main issues here – inequality in land ownership, what is land for and who should own it?

 

Inequality in land ownership

Although data on land ownership is difficult to find which makes it difficult to arrive at robust figures, evidence of inequality exists  and is a major problem in the UK. Work by Guy Shrubshole suggests the following breakdown of ownership:

Aristocracy = 30%

Corporations = 18%

Tycoons – 17%

Public sector – 8.5%

Individual home owners – 5.1%

Charities = 2%

Crown and Royals =1.4%

 

However, there are no figures for the share owned by family farms and small landowners which renders these figures of limited if any use.

 

Figures for Cornwall are to say the least unavailable. From the limited figures we have the Tregothnan estate (25,000 acres) and the Duchy of Cornwall (18,7100 acres).  Other estates exist.

 

A fundamental question here is should such large estates exist and also who should be able to own land.

 

What is land for?

Most land in England is farmed (63.1%) or used for forestry or open land (20.1%). There are questions around how much land should be used for food production, environmental services etc. 

 

Who should own it?

This is a fundamental question. Should we allow certain people and companies to hold the majority of land or does there need to be a system which ensures that ownership is not concentrated and if so how do we achieve that objective?  Are restrictions on who can own land required and who might be included and who might be excluded and why?

 

Such issues will be examined in a later post.