Labour's farm tax retreat exposes a government that announces first and thinks later
The Christmas climbdown is the latest in a pattern that threatens Starmer's authority
Christmas Eve. Parliament empty, Westminster deserted, the press winding down. Into this convenient silence, the government dropped its announcement: the inheritance tax threshold for farmers would more than double, from £1 million to £2.5 million. Half the farms facing the new levy would now be exempt.
A government commanding 400 of 650 Commons seats should not need to bury policy reversals on the quietest news day of the year. That it did tells us something important about how Keir Starmer's administration operates—and why, eighteen months after a landslide victory, it already looks exhausted.
The farm tax was never significant revenue. The concession costs £130 million annually, a rounding error against £900 billion in total taxation. Yet ministers defended it for fourteen months as though the fiscal future depended on it. They insisted the measure targeted wealthy speculators, not family farms. They deployed Treasury statistics. They held firm through tractor convoys in Parliament Square, through Jeremy Clarkson rallying protesters, through a rebellion that cost one MP his whip and saw thirty others abstain.
Then they folded. The question is why—and what it reveals about a government losing its grip.
A pattern emerges
This is the third time. Each episode follows the same script, and each inflicts damage the original policy never would have.
Winter fuel came first. In July 2024, Rachel Reeves announced means-testing that stripped the payment from ten million pensioners. The backlash was ferocious. By June 2025, after local elections confirmed the political cost, the government partially retreated. Welfare reform followed. Disability benefit cuts provoked more than a hundred Labour MPs to rebel. By July, the most controversial measures were shelved. Now farms.
The pattern is consistent: announce, defend stubbornly, absorb damage, retreat partially. It delivers the worst of all worlds. The government bears the political cost of unpopular policies and the reputational cost of appearing weak. Each reversal teaches opponents that sustained pressure works. Each makes the next campaign against government policy more likely to succeed.
For an administration that promised competence after years of Conservative chaos, this is a peculiar governing doctrine.
The ghost of 1993
Norman Lamont's verdict on John Major has haunted British politics for three decades. The government, he told the Commons in June 1993, "gives the impression of being in office but not in power."
Major had excuses. A small majority. A party fractured over Europe. The aftermath of Black Wednesday. Starmer has none. His majority insulates him from backbench rebellion for years. No European question divides his party. Yet the perception of weakness has taken hold with startling speed.
The polling is brutal. YouGov places Starmer's net favourability at minus 54—identical to Boris Johnson on the day he resigned, to Jeremy Corbyn at his lowest ebb. A majority of those who voted Labour in 2024 now view their Prime Minister unfavourably. Reform UK, dismissed eighteen months ago as a protest vehicle, leads in voting intention. Labour has collapsed from 35 per cent at the election to 18 per cent.
Major limped on for four years before landslide defeat. Starmer has time. But his trajectory suggests a government that has already stopped believing it can win arguments—if it ever believed it could.
The moment it became personal
The farm tax debate turned on 16 December, when abstraction collided with desperation.
At the Commons Liaison Committee, Labour MP Cat Smith confronted the Prime Minister directly. Farmers with terminal diagnoses, she told him, were "actively planning to expedite their own deaths" before April. If they died before the tax took effect, their farms would pass untaxed. Smith's Lancaster and Wyre constituency contains 950 farm holdings. Her constituents, she said, felt "misled."
Starmer's response was telling. He acknowledged he had "had discussions with a number of individuals who have drawn all manner of things to my attention." The words conveyed awareness without concern, information without feeling.
Alistair Carmichael, the Liberal Democrat chairing the Environment Committee, pressed harder. "Nobody should be left feeling that they would be better off dying between now and next April."
The Prime Minister's reply: "No, of course. But governments have to bring about sensible reform."
Jon Charlesworth never heard the exchange. The 78-year-old South Yorkshire farmer died the day before the October 2024 Budget. His family said anxiety about his £2 million estate—in the family for nearly seventy years—had "eaten away" at him. His son Jonathan told reporters he could not repeat what he would say to the Prime Minister.
The Farming Community Network, which functions as a Samaritans for agricultural workers, confirmed rising numbers presenting with acute stress. Reform UK's Sarah Pochin described meeting a farmer "in tears" in her constituency. The prospect of suicides generating headlines appears to have concentrated minds in ways tractor protests had not.
The Treasury problem
Why did ministers persist so long with a policy raising negligible revenue? The answer points to something structural.
The £1 million threshold bore the fingerprints of Treasury optimisation—a figure calibrated to maximise yield while theoretically protecting "most" family farms. That it trapped families whose wealth was tied up in land rather than cash, generating modest incomes despite high paper valuations, seemed not to have occurred to anyone.
Tim Shipman, writing in The Spectator, reported Treasury officials were "genuinely surprised" by the backlash. The policy "reeked of clever, clever Treasury number crunchers obsessed by the figures and ignorant of the politics." One of Reeves' team, Shipman noted, effectively admitted the reaction had blindsided them.
This is the core dysfunction. The Treasury dominates policy-making across government. The Institute for Government has documented its outsized influence over strategic thinking, its "deadening scepticism" toward novel ideas, its insularity. Departments complain of enduring minute Treasury scrutiny while gaining no reciprocal insight into tax initiatives affecting their areas.
The result is policies that are fiscally coherent and politically catastrophic. The farm tax made sense on a spreadsheet—closing a loophole, raising revenue, targeting wealth sheltered in agricultural property. It made no sense to anyone familiar with the emotional resonance of family farming, or the electoral geography that had just delivered Labour dozens of rural seats for the first time in generations.
Many of those new Labour MPs had made explicit promises about protecting family farms. The policy forced them to choose between government loyalty and constituency trust. Their abstentions in December reflected not policy disagreement but fury at being placed in an impossible position.
What reversals cost
Policy credibility accumulates through signals. When governments announce measures and defend them, they build reputations for resolve. When they retreat under pressure, they teach opponents that resistance works.
The National Farmers' Union combined visible protest with quiet diplomacy. Tom Bradshaw, the NFU president, reportedly had "very constructive meetings" with Starmer that shifted discussions from abolishing the policy to mitigating it. Other lobby groups have taken note. The template is established: mobilise visibly, negotiate privately, maintain pressure, wait for concessions.
This will make governing harder. An administration that cannot hold the line on £130 million will struggle when larger sums are at stake. Every interest group contemplating resistance will factor in the demonstrated willingness to climb down.
The machinery, not the man
The tempting verdict is weakness or incompetence. Such judgments may prove correct. But they miss the more important question: why does an administration with such parliamentary latitude keep making unforced errors?
The answer lies in machinery rather than character. A policy process dominated by Treasury technocracy generates initiatives that are fiscally logical but politically naive. A political operation that neither abandons failing policies quickly nor defends them resolutely delivers the costs of unpopular decisions combined with the appearance of capitulation. The combination is lethal.
Starmer remains far from any formal challenge. Four years stretch before the next election. Reform may struggle to convert poll leads into seats. The Conservatives remain unpopular despite Labour's collapse.
Yet the Christmas Eve announcement will stand as a marker. Faced with sustained pressure, the government chose retreat over confrontation, partial concession over full reversal, a pre-holiday news dump over parliamentary defence. These are the decisions of an administration that has stopped believing it can win.
The farm tax was always a minor measure. The habit of capitulation is not.