Sir Keir Starmer is under fresh pressure from within his party as Labour MPs prepare to rebel against plans to scale back inheritance tax relief for farmers measures critics warn could devastate family-run farms.
More than 40 MPs are weighing up amendments to dilute the policy, which they say could leave farming families saddled with unaffordable tax bills. Their defiance follows a successful revolt this week that forced the Prime Minister to U-turn on proposed welfare cuts the government’s third major reversal in just two months.
These repeated U-turns on disability benefits, the winter fuel allowance, and a promised grooming gangs inquiry have only intensified concerns over the £40 billion fiscal gap that Chancellor Rachel Reeves must address in the next Budget.
Tensions are flaring among backbenchers, with rebellions now brewing not just over farming policy but also on immigration and the two-child benefit cap. One senior rebel MP said.
“It’s clearly a government in crisis. The back benches feel shut out. The current strategy isn’t working, and it’s time for a change of direction.”
Earlier this week, more than 100 MPs broke ranks over the government’s disability benefits reform, prompting Downing Street to backtrack.
Now, Labour MPs are eyeing amendments to a forthcoming Bill that would shield smaller farms from harsh inheritance tax changes set to take effect in April 2026. Currently, agricultural estates can be passed down tax-free. Under the new rules, full tax relief will be limited to estates worth £1 million or less, with only 50% relief applying above that.
The so-called rural growth group of Labour MPs is pushing for a far more generous system: full relief for estates up to £10 million, 50% up to £20 million, and none beyond that. These changes, if adopted, would spare the vast majority of small farms from inheritance tax altogether.
Sam Rushworth, MP for Bishop Auckland and a member of the group, said they would prefer to avoid a direct confrontation but are prepared to act.
“I don’t want it to get to that point,” he said. “But we would like the government to bring forward different recommendations.”
Some Labour MPs have already broken ranks publicly. Markus Campbell-Savours, MP for Penrith and Solway, said last December he would vote against the plan, warning Parliament that the policy could ruin family farms.
Starmer is also facing discontent over his recently announced immigration policies. While many of the changes such as new visa rules can be implemented without parliamentary approval, a proposed levy on international student fees will require MPs’ backing.
One Labour rebel urged the government to use the summer recess to adopt an evidence-based approach and consult more widely.
“Backbench MPs were completely bypassed,” another added. “That has to change.”
Refugee charities have also voiced concern, reporting that requests to meet Home Secretary Yvette Cooper were ignored.
Tensions escalated further this week after Starmer apologised for calling Britain an island of strangers in his immigration speech. He blamed emotional distress following an arson attack on his family home for not reviewing the speech properly before delivery. While he acknowledged the mistake in language, he gave no indication that immigration policy itself would change.
Nigel Farage, leader of Reform UK, seized on the apology, branding it Starmer’s biggest mistake to date.
“This proves he has no principles. The public wanted change and they’re getting more mass immigration and border chaos.”
Some on Labour’s Right were stunned by the Prime Minister’s climbdown. One MP said, “That row-back was the most staggering of all. It’ll further undermine discipline.”
Labour is also bracing for a possible confrontation in the autumn over the two-child benefit cap, which many MPs want to see abolished. Tho
ugh the Prime Minister has reportedly committed to scrapping it, no official decision has been announced.
In a speech next week, Business Secretary Kemi Badenoch is expected to mock the growing list of policy reversals.
“Labour said the adults were back in charge but this is amateur hour,” she is expected to say. “The Prime Minister can’t stick to a decision.”
A senior Labour figure privately admitted that discipline inside the party is eroding fast.
“This is beyond the welfare bill it’s spreading. Loyal, moderate MPs who defended tough decisions for months now feel abandoned. The frustration is real and it’s aimed at both Rachel and No.10.”
The internal mood is souring, with MPs describing the past week as a “deep crisis” marked by infighting and disillusionment. One MP said:
“Rachel Reeves’s economic strategy is falling apart. The Prime Minister keeps reversing her plans. It’s a circular firing squad.”
In response to the inheritance tax revolt, a government spokesperson defended the policy, stating:
“Our reforms to agricultural and business property relief are essential to fund vital public services.
Three-quarters of estates will still pay no inheritance tax, and those that do will pay only half the rate most people pay. Payments can also be spread interest-free over 10 years.”
They added that the government is investing billions in sustainable food production and has appointed former NFU president Baroness Minette Batters to advise on policies to improve farm profitability.
