Why government climbdown on inheritance tax finally gives farmers some Christmas cheer

A tractor is driven through Oxford Circus in central London, during a protest by farmers. PIC: Ben Whitley/PA Wire

It’s a Christmas miracle! After months of protest and political pressure over the government’s hike on farm inheritance tax, ministers have finally run up the white flag.

It did not quite happen on the night before Christmas, and we may never know whether or not the U-turn was caused by a visitation of the ghosts of farmers past, present and future to Keir Starmer’s bedroom. One way or another, however, this is a major concession from the government and should be welcomed as such. After a tough year, farmers finally have a reason to give cheers this Christmas – and to feel more optimistic about the challenges ahead in 2026.

I am proud of the small part played by the Rural Affairs Select Committee that I chair, through our unanimous, cross-party report calling for the tax changes to be paused (and more recently in reminding the Prime Minister of the intolerable pressures that farmers were under, during the Liaison Committee session last week).

Ultimately, however, this is a victory for farmers and rural organisations, who have worked tirelessly to make the government see sense. It is their unity and their determination that won the day – and it is that unity of purpose that rural communities need to take forward into the new year.

The lesson here surely must be that the government should listen to farmers and the wider rural community across the piece on the issues that matter to us. The Government could have saved themselves a lot of time and heartache if they had started with an approach based on respect and genuine engagement.

Whether it is on the farm tax, on support payments, regulation or future trading arrangements, the government will have a better time politically – and in terms of outcomes – if they engage more and dictate less.

Even with the worst of the inheritance tax harm reversed, we are not short on challenges for farming communities in the year ahead. After all, if there was one silver lining to the inheritance tax debate it was that for the first time, the sheer lack of profitability in agriculture was brought fully into the public debate.

One of the biggest challenges to farm profitability is the fact that farmers are price takers, being forced into a corner by the major supermarkets. Farming campaigner Olly Harrison just last week highlighted the fact that Lidl and Aldi are now selling carrots at 8p per kilo, well below the cost of production.

There is a serious risk that by massively underpricing produce for the sake of a short-term price war, supermarkets wind up doing fatal damage to farming businesses. The answer is not to raise food prices but it is surely to ensure that supermarkets do not make their profits by squeezing farmers further still – which is precisely why I have been pushing for a stronger food supply chain fairness regulator for the past few years.

If we want vibrant farming and crofting communities in this country then we need a better deal for farmers and food producers, across all the challenging headwinds they face. We have had a “miraculous” reprieve this week, but a fair deal for farmers should be for life – not just for Christmas.

Alistair Carmichael is the Scottish Liberal Democrat MP for Orkney and Shetland