Farming might be important, but despite whatever the farmer might wish to claim, the ability to farm is not eugenically passed from generation to generation. It is a learned skill like any other, and a wise parent really should not demand that their children follow in their footsteps. That’s simply not good parenting.
So that’s following the family grift in making YouTube videos right out.
This, however, is really fun:
Alternatively, farmers are pointing out the glaringly obvious fact that the land that they are using in their farming process has no economic value because it earns no return. Their claim in that case should be that all the profits generated by their efforts are due to their own labour, and not to the value of the underlying assets used in the farming process, and therefore, those assets should have no value when it comes to inheritance tax purposes.
The problem with that claim is that, of course, the market price of that land does not bear this out. There is an active market in farmland, and so the question has to be asked as to why that is true if what farmers are suggesting that no profit can be earned from its use is true. There are two options here. One is that the claim farmers are making is not true. The other is that the price being paid for farmland is solely motivated by the existence of generous inheritance tax relief, which relief has massively inflated the price of farmland.
If this second option is true, then farmers should welcome the imposition of this tax charge because what it should do is significantly reduce the value of their land. This has two obvious advantages for them.
As with Willy Hutton there’s an implication to this.
The argument is that high farmland prices are a barrier to new entrants into farming. We agree, as we’ve said before. High farmland prices also mean that the return on capital of farming is pitiful. As we’ve also pointed out before. And as we’ve pointed out more than once there’s a strong implication of these truths. We must abolish farm subsidies.
Farm subsidies drive up the price of farmland. This isn’t a difficult point to grasp. If farming were subsidyless then there would be less money in farming. Land would therefore be worth less. This is more obvious under schemes that just pay a per acre amount but it’s true of any form of such subsidy. More money from the activity means the limited stock of assets upon which to undertake the activity are higher priced. Just are, obviously.
So Hutton’s telling us it’s righteous to take money off farmers in order to reduce land prices. Possibly – but if we accept that contention then it’s also true that we should stop giving tax money to farmers in order to reduce land prices. Something we wholly agree with – we’re always more favourable to not spending taxes than we are to collecting taxes after all.
Abolish all farm subsidies, go the full New Zealand. Now, does Spud have the courage to follow to that conclusion?
He really is in the “We don’t need farmers, all the food comes from supermarkets” club. I can’t believe he became an FCA. When I passed a hundred years ago, the pass rate for the finals was 19% and I can’t see Spud being in the top 19% of anything at all.
Since socialism requires a heavy dose of Green to be fashionable, I suppose the idea of obliterating farms might have come from the subsidy leecher Dale Vince who wants lots of cheap land to replace useless crops with lovely windmills and solar panels which make him filthy rich.
It is amusing how people like Spud and Hutton, by the use of circular logic actually manage to end up with the right answer. He’s right, subsidies should end.
But of course when we were in the EU and farmers were not then Enemies of the State, subsidies and support for farmers were vital to our food security, but on the brink of WW3 as we are, that is no longer importamt and we do not ‘need’ farmers.
Also he’s right insofar as land on its own has no real value. It has to have some sort of potential : growing stuff, digging stuff up, building things on it.
Indeed, Murphy has discovered Improvement.
400 years late admittedly, but it’s a start.
To farm “farmland” you need a farmhouse very near as commuting is not an option. You also need barns etc. and some very very expensive machinery. A 9 year old large tractor with 7,000 miles on the clock is going to set you back 50k. Depending on you type of farm you also need a multitude of other bits of agricultural machinery to complement it. It all needs to be reliable too. If it fails at the wrong time it’s going to be a huge problem.
Farming is an expensive business. Land prices are only part of it.
7,000 miles.,,,,,, should have read 7,000 hours as that’s the way it’s done with machinery.
Abolish all farm subsidies
If we do this, would you also ban agricultural imports from nations which do not impose the same requirements regarding animal welfare, health & safety etc on farmers? Or repeal the requirements which make British produce more expensive?
Farming might be important, but despite whatever the farmer might wish to claim, the ability to farm is not eugenically passed from generation to generation. It is a learned skill like any other, and a wise parent really should not demand that their children follow in their footsteps. That’s simply not good parenting.
I’m fairly sure that Jim has pointed out a number of times that one of the reasons a lot of farmers are getting killed by cows is that they are getting too old to farm and their sons/daughters didn’t want to take over the farm. He’s also made the point about sons and daughters not taking over farms on numerous occasions.
But still, how dare we argue with Spud, especially when he uses words of the day like “eugenically”?
If the return on farmland is only 1%, I think we must conclude that food is too cheap. The prevalence of land whales confirms it. How did this happen, and what sustains it?
Also, how did it come about that the use of farmland for useless solar panels, windmills and ‘rewilding’ is more valuable than food production? I can understand that developers want to pay loads for farmland to build shit pricey houses, but what are their occupants to eat? Food from overseas? Does overseas not have food price and land value problems similar to ours?
>Ensure we have the most expensive electricity in the developed world so all our industries leave
>Fuck employers with jobs taxes so back office jobs go to India
>Stop people growing food
>Spike the population with millions and millions and millions of hungry migrants
>Force everybody into trillions of debt to fund Climate Cum
>Profit ?
I think normal people value farmers because they create and maintain farmland.
Farmland is bucolic and attractive. It looks orderly, under control, productive. This pleasantly alleviates our instinctive fear of scarcity and famine. Whereas, wild country and forest is disorderly, unproductive, contains predators that can kill and eat us – or at least, it did – and can only be scavenged rather than cropped. We kinda grew out of that when we became pastoralists.
Wild country is only attractive to the well-fed, one of the reasons why the Diversity regard the countryside as racist. They come from places where there are still plenty of creatures that can harm them.
How would Pigou deal with this obviously beneficial externality of farming? He’d subsidise it.
the ability to farm is not eugenically passed from generation to generation.
Probably true but when you see a young farm lad barely able to reach the pedals but able to reverse a huge tractor it makes you wonder. I have a 3 year old grandson who can identify pretty much any agricultural equipment he sees and even who makes it. His father, grandfather, great grandfather etc. are/were farmers. But for the fact he is pretty good with dinosaurs too I would have put it down to eugenics.
“I’m fairly sure that Jim has pointed out a number of times that one of the reasons a lot of farmers are getting killed by cows is that they are getting too old to farm and their sons/daughters didn’t want to take over the farm.”
Its not so much that the sons and daughters don’t want to take over, more that the elderly parents don’t want to let go of the reins. Not least because up until the recent Budget the most tax efficient way of passing the farm on to the next generation was to ‘die with your boots on’ ie still be owning and running the farm (on paper at least) when you die. This revalued the land at the time of death, and 100% APR meant the heirs paid no IHT. So there are a lot of 80+ years old ‘farmers’ out there, still owning the land and all the assets, while the majority of the work is done by children who will be in their 50s themselves. The children may be partners in the business but don’t own any of the land, which is the biggest asset by far.
The problem has arisen because of the massive increase in life expectancy over the last 40 years. My grandfather died in 1974, aged 70, pretty much average life expectancy for a man then. My late father inherited the farm aged about 38. He died aged 85 a couple of years ago. Had he not had a heart bypass aged about 70 he’d have gone the same way as his father. So he got 15 extra years. Now he had the sense to pass everything on to me back when he was too ill to carry on working, but had he stayed fit and healthy I can see he wouldn’t have wanted to let go either. Farmers are independent sorts, and stubborn (you have to be to keep going when everything seems against you) and retiring voluntarily isn’t something they look forward too. Their farms often are their lives, and giving them up, even to children is a hard thing to do. My father had no interests outside of farming, it was his entire life. So many just soldier on, getting older and older. There’s no retirement date set for the self employed (maybe there should be?) so unless health intervenes there’s often no trigger to force a shift of assets down a generation.
Jim – I remember when people used to be old at the age of 50.
The IHT laws proposed in the budget just keep appearing worse as people look into them more.
Consider IHT on pension pots. Suppose you take out a joint life annuity, the contract specifying that when you die an income continues to be paid to, say, your mistress, your invalid daughter, your ancient sister, …
The Telegraph now carries a piece pointing out that the annuity on the second life will now have to pay IHT. Will it be retrospective i.e. will it apply if the second annuity kicks off after 05/04/2027? I wouldn’t put it past them.
Steve
Given the activities of the likes of Murphy, for whom the promotion of evil seems to be his life’s work, I think a lot of people are feeling a good deal older after three to four months of this rubbish. And even more depressingly there seems to be no UK equivalent of Trump to at least hint at the possibility of a fightback.
Incidentally, one of the things I’ve been banging on about on the farming forums for years is the ever increasing age of farmers, and the need to create a tax ‘trigger’ for elderly farmers to arrange their affairs well before they die and pass things on to the next generation in good time. Not least because it might get elderly people off farms – about 25-30 people die on farms every year, and the majority of those are 60+. Farming is a dangerous activity when you are young and fit, when you’re old it can be lethal.
It usually goes down like a bucket of cold sick, but I often suggest that there should be a retirement age for the self employed farmer. Because the reality is that many of the ‘farmers’ in their 70s and 80s are in name only. They couldn’t run the business themselves without the help of their children, not only because of the physical work required, but also the technology thats involved nowadays. Not only the machinery, but also the online form filling etc. So the idea they are ‘in business’ is really a fiction. A fiction that HMRC accept, but in reality they aren’t at all, its the kids who are really running the business.
So my suggestion was that up to a certain age (say 70) you could be considered a ‘working farmer’. If you fail to pass on your business assets by that date they become personal assets, and you lose all the tax perks of being in business, and you are treated like you are doing a hobby instead. This would create a natural retirement age of 70 for farmers, because without the ability to reclaim VAT (for example) you’d never be able to continue.
Thus given the average life expectancy is well north of 77 the IHT issue would become moot as most people would survive the 7 years after giving the assets away.
VP – what I can never get my head around is the unreality of it all.
I don’t know anybody who thinks it’s a good idea to destroy Europe’s ability to feed and heat itself, yet here we are, sliding down the slippery slide, going “wheeeeee!”
Remember politics used to be about normal stuff, such as schools-n-hospitals, instead of ingenious plans to turn your country into a starving refugee camp with mandatory homosexuality?
Honestly.. Only the Elyan Potato would be able to imagine that anyone would welcome any form of
robbery by the statetaxation.So, why is farmland so expensive if you can’t make a living off it? A 1% return isn’t going to have PE firms lining up to purchase it, so it must be something else.
I think a repeal of the Town and Country Planning Act 1947 would go a long way to sorting out speculative purchasing of land against productive use.
– It is amusing how people like Spud and Hutton, by the use of circular logic actually manage to end up with the right answer. He’s right, subsidies should end.
That’s neither R. Murphy or W. Hutton, it’s T. Worstall.
@Joe Smith
So, why is farmland so expensive if you can’t make a living off it? A 1% return isn’t going to have PE firms lining up to purchase it, so it must be something else.
You can make a living out of it, just one that’s apparently out of kilter with the value of the asset. Then there are subsidies. There’s something about the ownership of land which is inherently desirable, and the ability to pass it on is a big part of that, and there’s also the old but true saw that they’re not making any more of it.
I have farmers (beef, arable) in my family – the beef lot are quite famous in their circles. They’re not wealthy, but they’re not poor.
I defer to Jim and Andyf and others of course.
I suppose the likely outcome of all of this is that over a period of time all the small and smallish family owned farms in the UK will get swallowed up by BlackRock etc… which throws another log on my conspiracy theory fire 🙂
@ Interested
If the living you can make is out of kilter with the value of the asset, then it’s not really a realistic occupation. That said, you then mention that farmers are not poor. That’s quite different to the general message that comes across where the lowly farmer is always at the brink of bankruptcy.
Something doesn’t quite add up in all of this.
Steve
I remember when people used to be old at the age of 50. Yes, it was when fudge-packing was illegal (but ignored), seeing a black face was a rarity, men in frocks were prosecuted, teachers were respected professionals (not whiney women who commit suicide when criticised), kids could play outside unsupervised, sensible lads learned a trade rather than take a ‘mickey mouse’ degree at Uni, the streets were largely safe, the wogs began at Calais…
Theo – but we were ‘appy!
Fermers are ay girnin’ – wisdom from my childhood.
Land is worth a lot in the UK because we are a small island with 70+m people on it. Everyone who makes a few quid wants their own bit of the countryside, to get away from all the other people. Its the one thing real wealth buys you nowadays, the absence of other people living near you. It just about pays its way, there are tax advantages as well, so its a no brainer. Make your pile in the City, or in trade, buy a country estate with your loot. Jeremy Clarkson is the classic example. Makes money in TV, buys himself 1000 acres of the Cotswolds. Thats who buys land, the money from outside farming and farmers who have sold land for development, and are rolling their gains over into more land. Thats it. No one else can afford it. You’d never make enough money from just farming 1000 acres to pay the bank back what it would cost to buy. Very roughly speaking an acre is £10k, you might make a profit of £200/acre (before tax) so even ignoring interest it would take 50 years to pay it off. And you have to live on something, and pay interest, and taxes, and replace machinery etc etc. If land was £2k/acre you could do it. But if land was £2k acre then every man and his dog would be bidding for it, so it isn’t.
Grikath at 12:22 pm
Unless ‘I am the State’ Grikath.
Grikath
He did write of ‘The Joy of Tax’ and believes the base rate should be around the 90% mark.
@pjf
“That’s neither R. Murphy or W. Hutton, it’s T. Worstall.” – it’s Worstall of time gone by commenting on Hutton and pointing out he came to the correct conclusion by incorrect logic. Being quoted by Worstall now as the error was similar.
@grikath
The prof seem to have clocked that the damage caused to farmers by higher taxes could exceed the benefit they experience from lower land prices. Or the fact that for farmers looking to sell up, lower land prices aren’t exactly a gift from God either.
“We don’t need farmers, all the food comes from supermarkets”
Writing through clenched teeth, to an extent he’s right. The “family farm” is too small to be a productive part of modern agriculture, large populations are only feedable through industrialised food production, which requires large units, and “large units” are often subsidaries of the supermarkets.
Our Host has made the point many times that the NHS was only possible through the utter destruction of the agricultural workforce. You can’t healthcare catering for more than just the aristocracy if 90% of the population is engaged in growing food. On the same theme, effecient food production requires large units of production, not family farms. Corporate farming is inevitable for a modern society.
Our Host has also pointed out that this is the way out of poverty for places like Shitholistan and BoogaBoogaLand. Stop farming with three square metres and a pig, go and work in a factory and let somebody else farm three million square metres.
Actual farmland that can only be used for farming (if there is such a thing) can’t be expensive, no matter how it may be ‘valued’, because its productivity is of insufficient value. The capital used for its purchase would get far better returns elsewhere. The land’s actual value will obviously rise if it can be repurposed for development, solar farms, bloody turbines or ‘rewilding’, (a.k.a corporations buying it to plant trees for carbon credits).
There, I think, is where we see the rationale for IHT on farmers. In the guise of ‘fairness’, Labour can destroy naturally Tory small family businesses and achieve their ‘green’ goals without having to repeal the TCPA 1947. Trebles all round.
But hasn’t the current IHT set up resulted in the well to do (Norman barons, James Dyson etc ) buying land (or never selling it) so as to benefit from the lack of death duties?
“and “large units” are often subsidaries of the supermarkets.”
No they aren’t. The Co-op was the only supermarket chain that owned its own farms, and it couldn’t make them make economic sense. Its no cheaper for a supermarket to buy the food from its own farms at market prices than buy from the market itself at the same prices, and not have all that money tied up in land and machinery. There’s no economies of scale from owning a supermarket chain AND tens of thousands of acres of land. The Co-op sold its land off about ten years ago, to the Wellcome Trust. No other supermarket owns any farms.
There’s room for everyone, throughout the market. The sensible small farmer doesn’t compete with agribusiness but instead gets involved in organic or regenerative, offering a premium product and service at premium prices and selling into restaurants, Borough Market, etc, just as any boutique small business survives.
There’s also the fact that some people are very keen on what they do, and take job and life satisfaction in lieu of maximising possible income. You can’t knock ’em for this, they’re enjoying their lives, and why shouldn’t they?
Grist.
“I can’t believe he became an FCA. When I passed a hundred years ago, the pass rate for the finals was 19% and I can’t see Spud being in the top 19% of anything at all.”
When Timmy got his Third Class degree in (he says “with”) Accountancy and Finance I can’t see him being as high third class in anything at all.
@ Anon
– it’s Worstall of time gone by commenting on Hutton and pointing out he came to the correct conclusion by incorrect logic.
?
No, it’s Tim of today at ASI commenting on Willy of yesterday in the Guardian. Tim doesn’t claim Willy came to the correct conclusion via incorrect logic, he says that by Hutton’s logic (taking money off farmers will reduce land prices) we should remove farm subsidies.
Indeed, the poster calls himself Me. One should not judge people by their academic qualifications but by their achievements. And what has the Sage of Ely achieved apart from a rabbit hutch on an “executive development” with no doubt attached debt & a necessity to grift for grant money? Not exactly fame & fortune, is it?
@pjf
Badly worded sorry. I only meant that Tim’s two pieces were written one after the other and this is (obviously) quoting the previously written one. I didn’t read “As with Willy Hutton there’s an implication to this” to imply the following quote was by Hutton, it was very clearly Worstall on Hutton. And to be generous to Hutton he is reaching towards what an economic liberal would see as the correct conclusion – the government shouldn’t be picking up the tab for farmers – while missing the wider point of agricultural subsidies for the smaller fry of IHT tax breaks.
I approve of the idea of putting a cap on IHT exemptions. What I haven’t seen is a government justification for the caps it has chosen for APR and BPR viz a million smackers.
I would approve of a cap being put on the regular gifts out of surplus income exemption too. What should the cap be? Dunno: make your case.
Anyway: details. Would farmers be happier if the IHT exemption were increased to two million a pop while at the same time the IHT rate above the exemption be raised to 40% rather than 20%? Make your case.
I like that Mirrlees analysis that investment decisions should be tax neutral. So you’ve got a pot of money you’ve built up and are interested in getting into farming. You could blow it in the same year you earned it on blow and yachts and onlyfans, or get into farming. The decision should be neutral of tax considerations, so in theory CGT should be charged if you make excess real gains on your investment, but it should be IHT free.
Similar with other decisions such as the timing of gifts to your kids – they should be tax neutral too.
I don’t know anybody who thinks it’s a good idea to destroy Europe’s ability to feed and heat itself, yet here we are, sliding down the slippery slide, going “wheeeeee!”
It’s possible that Europe (as the EU) could be maybe, just about, self-sufficient in food, but for the UK it’s a hopeless dream. We weren’t self-sufficient during WW2 (even with Dig for Victory etc) and the population then was only ~70% of what it is today.
Chris
Maybe you could manufacture synthetic sugar or carbohydrates from petrol? Since you’ll soon all be driving electric vehicles.
>The other is that the price being paid for farmland is solely motivated by the existence of generous inheritance tax relief, which relief has massively inflated the price of farmland.
Spud does appear, prima-facie , to be correct about this, at least if Lord Clarkson’s example is representative. I could be reading too much into this, but what he appears to be suggesting is that enough people to be significant are doing something like
– buy farmland
– die
– children/grandchildren inherit farmland at a significantly-reduced rate of IHT
– children/grandchildren sell farmland to someone else about to embark on step one, and as it’s still a farm there aren’t any capital gains
So is this actually true? And if it is, will removing IHT incentives lead to reduced demand (and therefore price) for farmland? And is this a desirable thing?
“So is this actually true? And if it is, will removing IHT incentives lead to reduced demand (and therefore price) for farmland? ”
No, because they capped Business Property Relief at the same time. So nothing has changed, its just that the equation is now ‘pay 20% IHT on farmland (or other business assets) with £1-3m exemption vs 40% IHT on cash/shares/non-business property’ when it was ‘pay zero IHT on farmland (or other business assets) vs 40% IHT on cash/shares/non-business property’. The incentive for people with loads of non-business assets to hide from the taxman is still to buy farms. Especially if they are under £3m.