Farming inheritance tax changes will cost Government money by putting off investment, CBI report finds

It comes as the Chancellor is battling against tough economic circumstances - with the price of borrowing increasing amid Donald Trump’s tariff threats - as she delivers her spring statement today.

She will confirm a £2.2bn increase in defence funding from next month, which will go towards cutting-edge weapons and better homes for military families.

Ms Reeves is expected to say: “We have to move quickly in a changing world, and that starts with investment.

“So I can today confirm that I will provide an additional £2.2bn for the Ministry of Defence next year - a further downpayment on our plans to deliver 2.5 per cent of GDP.

“This increase in investment is not just about increasing our national security but increasing our economic security, too.

“As defence spending rises, I want the whole country to feel the benefits.”

Labour MPs told The Yorkshire Post that they were hopeful of Ms Reeves’ address injecting some positivity into the economy.

The Chancellor has been under pressure since October’s Budget, when she announced that from April 2026 farmers will have to pay an effective rate of 20 per cent inheritance tax on assets over £1 million.

Previously, they were exempt from this tax to allow family farms to be passed down through the generations.

Farmers have claimed that the measures will force them to sell off land to pay inheritance tax bills.

Both the Chancellor and the Prime Minister said this was important for helping fill an apparent £22bn black hole in the public finances.

However, now the CBI Economics’ report has found that the inheritance tax changes could lead to more than 200,000 jobs being lost this Parliament, with a loss of £1.9bn to the Treasury.

According to the survey, almost a quarter of agricultural businesses and one in six family farms have cut jobs or paused recruitment since the Budget.

While around half of the 4,000 respondents said they had paused or cancelled planned investments.

Ms Vyvyan said: “The Prime Minister recently told the Liaison Committee that the only reason the government is capping vital inheritance tax reliefs is to generate more revenue.

“As this comprehensive new report shows, tax revenue will in fact fall, with hundreds of thousands of jobs lost in the process.

“The government’s case is collapsing under increasing evidence that shows these reforms will inflict lasting damage on farms and family businesses.

“When the Chancellor announces billions of pounds of cuts today, we should remember that the whole country is paying the price for the government's unnecessary attacks on farmers and family businesses.”

A Treasury spokesperson said: “While we do not recognise this analysis, we remain determined to make the tax system fairer.

“The vast majority of estates will not have to pay any inheritance tax at all under our changes, and we are providing the stability businesses so desperately need by capping corporation tax for the duration of parliament and locking in permanent full expensing to boost investment."

Ahead of the spring statement, the Chancellor said she will not be raising taxes again, which means spending cuts are likely.

The proposed reforms to welfare are set to cut £5bn off the Government’s books by 2030, as Ms Reeves tries to meet her self-imposed fiscal rules.

“This government was elected to change our country,” the Chancellor is expected to say to the House of Commons tomorrow.

“To provide security for working people and deliver a decade of national renewal.

“That work of change began in July – and I am proud of what we have delivered in just nine months.

“Restoring stability to our public finances, giving the Bank of England the foundation to cut interest rates three times since the general election, rebuilding our public services with record investment in our NHS and bringing down waiting lists for five months in a row.”

It comes as the Good Growth Foundation’s survey of businesses in Yorkshire and the Humber found that a majority feel confident about their firm’s ability to grow.

Praful Nargund, director of the GGF, said: "The idea that the economy is all ‘doom and gloom’ doesn’t reflect reality.

“Our research shows that there is optimism amongst businesses across the UK, including those in Yorkshire and the Humber, with many confident in growth, rising revenues and profitability.

“However, we must ensure that smaller businesses - the backbone of our economy - aren’t left behind.”