Government rejects call from supermarket giants to halt controversial tractor tax plan

Ministers have rejected calls from supermarket giants including Tesco to halt their controversial ‘tractor tax’ plan.

In a highly unusual move, some of the UK’s largest retailers have backed farmers in their fight against Rachel Reeves’ inheritance tax raid, warning the “UK’s future food security is at stake”.

But Treasury minister James Murray told MPs ministers would not give in to calls to pause and look again. He said the government was “committed to delivering the reforms announced at the Budget”, adding that it was a “fair approach” that would help to fix “the public services we all rely on”.

The row erupted as the chancellor attempted to woo business investment to the UK at the World Economic Forum in Davos.

In a separate blow, a new report by the Office for Budget Responsibility (OBR) warned the policy may raise less than the Treasury hopes, with the £500m-a year-revenue forecast given a “high” uncertainty rating and likely to fall after seven years as families use tax planning to avoid the charge.

On Tuesday Tesco’s chief commercial officer Ashwin Prasad said that ensuring farms remained economically sustainable was “essential” not just to food security but so customers “can continue to get the great quality food they want, at a price they can afford”.

The calls have added to pressure on Ms Reeves to U-turn on her tax raid, following a furious backlash over her decision to extend inheritance tax, which critics warn could sound the death knell for family farms in England.

The changes mean that farms valued at £1m or more would be liable for 20 per cent inheritance tax.

The Treasury says that, with tax allowances, in reality, only farms worth £3m would be affected, just 28 per cent of family farms. But official Defra figures appear to suggest as many as 66 per cent could be hit.

Thousands of farmers brought Westminster to a standstill in November when they descended on the capital to voice their opposition to the change.

Mr Murray defended the changes in the Commons, saying that at the Budget ministers had been “very clear” that they had to take “difficult decisions that will have consequences”.

Maintaining a tax “loophole” for farmers is “not fair or sustainable”, he added.

Labour blames the last Tory government for what it says is a £22bn black hole in the public finances.

But shadow environment secretary Victora Atkins accused ministers of letting farmers and pensioners, because of cuts to the Winter Fuel Allowance also announced in the Budget, “pay the price for their economic incompetence”.

She also said the number of farmers taking their own lives should be measured to “understand the human cost” of the government’s changes. She told Mr Murray: “As worrying reports of suicides amongst farmers begin to emerge, will he please do as the Defra (Department for Environment Food and Rural Affairs) Secretary (Steve Reed) has failed to do, which is measure the number of suicides over the next 12 months so that we can understand the human cost of this policy?”

He replied: “I think that one of the confusions on the benches opposite, is to confuse the value of farms with the value of claims under inheritance tax. And the only way to truly understand the impact of changes to inheritance tax policy on inheritance tax claims is to look at the claims data itself.”

Asked later if the supermarkets were wrong, Downing Street said: “We’ve set out our approach. We think it’s a fair and balanced approach. Obviously we’ll engage with the stakeholders in the sector and they’re entitled to their position. The government has committed $5bn to the sector, and in relation to supermarkets and supply chains we’ve acted to make these supply chains fairer to farmers.”