What did the Office for Budget Responsibility reveal about the ‘tractor tax’?

Tesco, Lidl and the Co-op, three of Britain’s biggest retailers, have joined calls for Rachel Reeves to abandon her inheritance tax raid on farmers, claiming that “the UK’s future food security is at stake”. The estimate was published in the OBR’s forecast at the time of the Budget, but the OBR says it has received requests for “further detail” about how it arrived at its figures – hence the new document. It reveals that older farmers are assumed to be less likely to take action to avoid the extra tax: “In the medium term, it is likely to be more difficult for some older individuals to quickly restructure their affairs in response to the measure.” How reliable is the OBR estimate? The document lists the ways in which the OBR expects farmers to avoid the tax: “Greater use of other reliefs, greater bequests to charity and potentially running down the value of estates are likely to be the main behavioural channels in the medium term.” But it admits that this is mostly speculative, and that its uncertainty “reflects the relative lack of academic evidence on the elasticity of IHT receipts to policy changes”.