The Great Tax Backfire: A Fiscal Folly Dressed as Prudence

By Steve Conley

One might be forgiven for assuming that when a government embarks upon a mission to “plug the fiscal deficit,” it would at the very least endeavour to ensure said plug is watertight. Instead, ministers appear to have located the nation’s economic lifeboat, bored a fresh hole in the hull, and declared the resulting deluge an act of progress.

The Chancellor’s inheritance tax reforms – framed with the usual rhetorical varnish of “fairness” and “fiscal responsibility” – are now revealed, unsurprisingly, to be costing far more than they promise to gain. According to a study by CBI-Economics, commissioned by Family Business UK, the cap on Business Property Relief (BPR) and reforms to Agricultural Property Relief (APR) are expected to cost the nation 208,000 jobs and a staggering net fiscal loss of £1.9 billion by the end of this Parliament.

This, one assumes, was not the sort of “levelling up” voters had in mind.

In what can only be described as a masterclass in economic self-sabotage, the Treasury’s tinkering has sent shockwaves through the backbone of British enterprise: family-run businesses and farms. These are not the tax-dodging conglomerates haunting Canary Wharf, but the humble SMEs that constitute 85% of private sector employment and quietly ensure the nation continues to function. Or rather, they did.

Now, facing the dual spectres of inheritance tax caps and investment paralysis, these same businesses are shedding jobs, halting capital projects, and – in some cases – selling up entirely. Nearly one in ten family enterprises have already exited stage left, their swan songs a requiem for policy conceived in theory and delivered with all the nuance of a sledgehammer.

The government, of course, assures us this is all part of a noble campaign to “raise revenue.” But alas, raising revenue by bleeding your most resilient economic contributors is akin to curing anaemia by applying leeches. It ought to be self-evident – to any entity outside Westminster, at least – that taxing capital without accounting for consequence is not sound economics but ideological indulgence.

Let us consider the specifics. BPR, long the mechanism by which family businesses passed on their life’s work without undue penalty, is now capped at £1 million – a figure generous only to those unfamiliar with the cost of land, livestock, or legacy. Meanwhile, APR – the only instrument keeping agricultural succession marginally viable – has been deftly restructured to ensure its utility diminishes just as rural communities teeter on the edge of viability.

Naturally, the Office for Budget Responsibility – whose job, one imagines, is to flag such imprudence – has rated the policy’s outcome as “highly uncertain.” Which is to say, they haven’t the faintest idea what will happen, only that it probably won’t be good.

Yet the data, now freely available, speaks plainly. Confidence is eroding. Investment is frozen. Redundancies are rising. And what revenue was anticipated may soon evaporate, swept away by the inevitable contraction in economic activity.

Still, ministers remain curiously sanguine, as though the destruction of 200,000 livelihoods were a regrettable, yet ultimately acceptable, side effect of what they deem a necessary correction. This is austerity rebranded as reform – the same bitter draught, merely relabelled for palatability.

Neil Davy of Family Business UK states the obvious with uncommon candour: “These policies are already damaging confidence, pushing businesses to sell up, cut back, or shut down entirely.” Quite. It is the sort of sentence that, if printed in The Beano, might be followed by the government slipping on its own banana peel of economic logic.

And so we wait. As the April 2026 deadline approaches, businesses brace for more pain, while the Treasury – armed with spreadsheets and splendid isolation – persists in its belief that numbers on a balance sheet matter more than the lives behind them.

It is perhaps not too late to reverse course. But that would require humility, and one suspects such a virtue is in even shorter supply than agricultural tax relief.