Brussels Notebook: For now farmers have won the moral and economic battle but they are set to lose the APR war

This week saw a report from Irish scientists, challenging carbon reduction targets. The criticism was directed at Ireland, but no doubt green lobby groups will seek to extend the conclusions to other economies with productive livestock industries. The claim was that “privilege” is being shown over the need for methane reductions, with agriculture favoured at the expense of poorer, developing countries. The suggestion is that climate change mitigation targets need to go beyond maintaining global temperatures at the agreed base line figure, suggesting instead the aim should be a reduction rather than neutrality. Claims like this put agriculture, unfairly, in the firing line. They overlook the reality that for many countries and for the EU livestock farming and the processing of meat and dairy products are core economic interests.

They create wealth and jobs in areas where opportunists in a digital age are limited. What makes green claims more hollow is that agriculture is expected to don a hair shirt, while those creating the climate problem ignore it.

China is driving the world’s manufacturing economy with coal-fired power stations; Russia is completely ignoring climate change and in the US Donald Trump has killed off net zero thinking in favour of fossil fuels. In its botched trade deal with the US, the EU has committed to American liquid gas imports that make a nonsense of European renewable energy policies. Against that background nothing farmers do will make any difference to a global problem.

Yet they are expected to watch politicians destroy their industry in pursuit of an agenda doomed to fail because the source of the problem ignores it. This week brought even more bad news on the UK economic front.

Growth for the April to June quarter was an anaemic 0.3 per cent down from a still poor 0.7 per cent.

The Chancellor, Rachel Reeves, claimed the figure might have been worse, but that is a classic fig leaf defence. In reality her policies have left the UK with a weak economy that is getting worse. It was also confirmed this week that, come the autumn, she will have to fill a £40 billion budget gap between still liberal public spending and tax receipts. Reports suggest inheritance tax is again being targeted.

Treasury thinking is around a tightening of the rules on gifting money. This is free of tax if gifted seven years before death and tapers from three to seven years.

Even in the Treasury sights is the ability to give children and grandchildren a tax free sum each year, replaced with a less generous lifetime allowance. The other side of this coin is that at a time when rules are being tightened by a government in a desperate financial position there is no hope of any change on agricultural property relief. The arguments, moral, political and economic are as sound as they ever were, but to paraphrase Harold Macmillan, logic has been overtaken by “events, dear boy, events”. It is not surprising the government is targeting inheritance tax. It pulled in a record £6.7 billion in 2023. That tax take is rising with inflation impacting property values and eating away thresholds that have not increased. Worse is to come for an unfair tax, paid generally on assets bought with incomes already taxed. The same applies to APR denial, but it is even more unfair as the economic character of agriculture has always been as an asset rich, cash poor industry. The Reeves plan can only make this worse. The entire inheritance tax take for a year is a fraction of the massive tax gap that needs to be filled. The government can no longer blame the past government for the financial mess; it backed down over welfare spending cuts, which are the biggest source of spending that can be managed by tough decisions. Tax rises that targeted employers last time around have only served to weaken the economy and reduce employment; the denial of APR will hit family farms but not those using it for tax avoidance. Taxes will rise in the autumn and that will slow an already stagnant economy. Inheritance tax is an unfair tax that combines the old adage about death and taxes being inescapable. For now the harsh reality for farmers is that they have won the moral and economic battle, but look set to lose the APR war.