The government’s controversial “tractor tax” could lead to the loss of over 200,000 jobs, according to new research by the independent consultancy CBI-Economics.
The move, part of Labour’s proposed changes to inheritance tax, has been under increasing scrutiny after a detailed study highlighted its potential negative impact on British businesses and farms.
The research, commissioned by Family Business UK, raises serious concerns about the economic consequences of the planned changes. This warning follows the government’s insistence that the new policy will boost public finances, particularly as it applies to farms valued at £1 million or more.
The policy aims to apply a 20 percent inheritance tax to these estates, despite criticism from industry groups and supermarkets like Tesco, which have called for a re-evaluation of the proposal.
The Economic Impact: 200,000 Jobs at Risk
The study reveals that 23 percent of family businesses and 17 percent of family farms have already scaled back recruitment or cut jobs since the announcement of the tractor tax in October’s budget.
This is compounded by a sharp reduction in investment, with 49 percent of family farms halting or canceling planned investments in response to the looming tax hikes.
The research estimates that by the time of the next election, the policy could result in the loss of approximately 208,000 jobs across various sectors. Neil Davy, CEO of Family Business UK, stressed the detrimental effects of the tax on family-owned businesses, saying it would ultimately be working communities that pay the price for the policy.
The economic fallout, he warns, is already being felt across farms and family businesses, with job cuts and investment delays leading to broader financial instability.
Government Response and Policy Rationale
Despite the growing concerns, the government has defended the inheritance tax reforms, with officials arguing that the changes are necessary to address the £22bn public finance gap inherited from the previous Conservative administration.
A government spokesperson assured that significant investments are being made into the agricultural sector, with £5 billion earmarked for farming over the next two years, marking the largest budget in the history of sustainable food production in the UK.
The Treasury also clarified that the changes would not affect all farms. According to government statements, only farms worth over £3 million would be subject to the tax, which comprises 28 percent of all family farms.
Additionally, the policy offers tax allowances and payment plans that aim to make the burden less severe for most estates, with payments spread over a ten-year period, interest-free. Ministers have described these measures as “fair and balanced,” with an emphasis on supporting farmers while addressing the financial challenges facing the country.
