Labour is poised to axe the controversial family farm tax at the Budget, The Mail on Sunday can reveal.

In what would spell victory for celebrity farmer Jeremy Clarkson, those close to Andy Burnham say he wants to abolish the levy – which sees farmers pay inheritance tax (IHT) when they pass family farms down to their children – on October 28.

Despite the perilous state of the public finances, those inside No10 see it as a ‘relatively cheap’ way to show Andy Burnham is different to Sir Keir Starmer, who introduced it in his first Budget. 

One Labour source described it as ‘scraping the barnacles off the Starmer boat’.

Axeing the levy would cost the exchequer £300million a year, a relatively modest sum, say some in the Treasury, compared to other tax cuts.

Another option is to raise the threshold people start paying the tax to £5million.

One source close to the PM admitted that Mr Burnham may go for this option to stop those using farms as an IHT loophole whilst limiting the impact on family farmers.

But critics say this would defeat the point of making any changes because even at £5million many farms would still face paying enormous bills to pass their farm down a generation.

John Healey will get the final economic forecast from the Office for Budget Responsibility (OBR) three weeks before the Budget – meaning he does not yet know for certain how much money he has to play with.

Jeremy Clarkson joins thousands of farmers protesting in Whitehall against changes made by the UK government to agricultural inheritance

Sources close to Prime Minister Andy Burnham say abolishing the levy could cost the Treasury around £300million a year. Farmers are seen taking part in a protest in 2024 

Insiders say getting rid of it altogether ‘would go a long way’ with the 135 rural Labour MPs they see as ‘grumpy’ and help Andy Burnham win tight marginal seats.

Another senior Labour source last night told The Mail on Sunday: ‘The next election is going to be tight. There are well over 100 Labour MPs on wafer-thin majorities in the countryside. If we are going to do it, we should do it now.’

Changing this politically potent policy has set alight further speculation that Mr Burnham is considering calling an early election.

It would not be the only u-turn on Sir Keir’s unpopular decisions, after Mr Burnham announced this weekend he would abandon his predecessor’s plans to do away with jury trials.

More than a quarter of rural residents say they would reconsider voting for Labour if he dropped the policy, according to a poll by Orb International for the Countryside Alliance.

Having won a record number of rural seats at the last General Election, the family farm tax sent countryside support for Labour plummeting.

Farmers were left furious when then-Chancellor Rachel Reeves announced plans to levy a 20 per cent tax on assets worth more than £1million, ending a waiver in place since the 1980s.

After a massive backlash and protests from farmers across the country, Sir Keir watered it down and raised the threshold to £2.5million.

Many farmers still have to pay under the watered-down measures. And those close to Mr Burnham are fearful of the persistent levels of anger at Labour in the countryside.

Last year, a record 6,300 forestry, fishing and farming businesses closed, according to the ONS. The Tories claim this as proof that the family farms tax is bad for the economy.

Tory shadow farming secretary Victoria Atkins described the tax as ‘vindictive’. 

Last night she said: ‘Labour MPs were warned repeatedly that not only were they damaging businesses, leading to record farm closures in the last year, but also that they were taking an enormous personal toll on families. 

‘They ignored those warnings, and Labour MPs including the new Chancellor voted for it seven times.

‘Labour should axe it in its entirety at the Budget, and if they don’t, the Conservatives will.’

Despite the concerns at the OBR, Labour advisers are optimistic that there will be enough of a financial cushion at the Budget to fund this tax cut.

At Rachel Reeves’ last Budget, the so-called headroom was £24billion. One Treasury expert and Budget veteran put it at closer to £10billion right now. But ‘it’s highly sensitive to global market movements so can change each day.’

Pressure is mounting internally for Mr Burnham to do something about the tax. This weekend ex-farming minister under Sir Keir said the tax was flawed and ruined relations with the countryside.

And Labour grandee Lord Blunkett this week said the IHT raid was a ‘mistake’.

James Wright, a farmer in Somerset, last night told the MoS: ‘Labour never should have introduced the family farm tax. It’s bad for the families that steward our countryside and undermines our food security. Its removal is long overdue.’

And Mo Metcalf-Fisher, director of external affairs at the Countryside Alliance said: ‘Scrapping the disastrous family farm tax would be a much welcome first step in beginning to repair the government’s approach to the countryside.’

An HMT spokesperson said: ‘As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.’