Alistair Carmichael: Labour had a generational opportunity but they blew it

When MP Alistair Carmichael was elected unopposed last September to be the new chair of the influential Environment, Food and Rural Affairs (Efra) committee at Westminster, he said he “would hit the ground running”. And for the son of an Islay hill farmer, the husband of a country vet and a working sheep and cattle farmer himself, he started with the advantage of understanding some of the pain that the country’s farmers were about to feel.

A month after his appointment, Rachel Reeves delivered her first budget as Chancellor of the Exchequer, which would have huge ramifications for the agricultural sector. She announced a new inheritance tax on farms, removing the relief that they had previously been granted and which prevented many farms being broken up, taken outwith families who had farmed the land for generations and sold off simply to pay off inheritance tax. The implications were far-reaching and went beyond just hurting the immediate families of farmers and their future livelihoods and onto issues of national food security and wider economic sustainability.

Farmers said it would “ruin” farms and push food prices up. Broadcaster-turned-farmer Jeremy Clarkson led opposition to the proposed changes when he said “farmers have been shafted”. And farmers from across the UK called for strike action, with thousands descending on London in their tractors during a series of national protests.

For a Labour Party already experiencing teething problems in government and already perceived as being out of touch with rural Britain, this was to be yet another test of its credibility.

First and foremost, I’m a political geek. I joined a political party when I was 14. I love talking politics

In 2023, Sir Keir Starmer had pledged to have “a new relationship with the countryside and farmers”. There were promises to provide “certainty” and “work with farmers,” insisting that he agreed “food security is national security.” Those words came back to bite him.

The Countryside Alliance argued that while the government had a “legitimate aim” in seeking to limit the purchase of agricultural land as part of plans to avoid inheritance tax, the policy would impact family farms.

NFU president Tom Bradshaw said the measures would “snatch away much of the next generation’s ability to carry on producing British food, plan for the future and shepherd the environment”.

“It’s clear the government does not understand that family farms are not only small farms, and that just because a farm is a valuable asset it doesn’t mean those who work it are wealthy. Let’s not sugar-coat this, every penny the chancellor saves from this will come directly from the next generation having to break up their family farm.”

In an emergency debate in the House of Commons, Carmichael criticised the government’s approach and said: “Agricultural property relief is not a loophole; it has been a deliberate policy of successive governments for the past 40 years, designed to avoid the sale and break-up of family farms. […] These changes will have a ripple effect across the whole rural community.”

Carmichael is a politician not unfamiliar with issues that cause ripples in government. He was deputy chief whip to the coalition when his party controversially went into government with the Tories in 2010, an experience to which we will return, but on the inheritance tax announcement alone, he says Labour just got the politics as well as the economics badly wrong.

He says there had been “a simmering unhappiness in farming communities for a long time” and the IHT changes became “the catalyst that really sparked the anger” that witnessed farmers taking to the streets to protest. Besides the prospect of hefty tax bills, the sector is fighting to absorb the added costs of climate change, real cuts to subsidies, high inflation, thinning margins and the possibility of increased competition as the UK strikes post-Brexit trade deals.

Carmichael says the government is expending a lot of political capital on a policy which ultimately isn’t going to bring in much money for the Treasury and that it should think again.

The Tories are now not a centre right party. They’re at the right and drifting further right

“Look, this is where that economic political balancing act comes into play,” says Carmichael. “The Labour Party won seats in parts of the country that they’ve not had representation in for decades. So, it was a real opportunity for them, a generational opportunity, but they’ve blown it. And if you look at what inheritance tax changes will actually bring in, first of all, they’ll bring in nothing in this parliament, I know this because I know how fast my former professional colleagues in the legal profession are able to work when it comes to winding up. But actually, inheritance tax is the most easily avoided tax. This is something that causes massive political damage to the government in areas where they suddenly had representation and for very little return.

“I think they have lost momentum and generally, you need to have time in opposition to recapture it. What would be fascinating to see is if this Labour government is able to prove me wrong in that. Because they have completely lost momentum, and you compare what the Starmer government has done with the Blair-Brown government in 1997 when the Blair-Brown majority  was 172, same number, but day one, gave independence to the Bank of England, created the Scottish Parliament, the Welsh Assembly, the Northern Ireland peace process, the Human Rights Act, Freedom of Information, Sure Start Centres… remember what it was like, Mandy, it was unrelenting. And they really used that momentum. Compare to day one of Keir Starmer and I think Rachel Reeves told everybody to go off to their departments and just stay there. And they then left this political vacuum for over four months, from 4 July to the end of October, when they eventually had their budget. In which time – politics 101 – if you don’t define yourself, then somebody else will come along and define you for you. And that, I think, is what’s happened, and that’s killed them.

“I see the weakness being actually in Downing Street, because it strikes me – and this comes back to the stuff I do now with Efra – it strikes me that you’ve got the Treasury calling the shots on just about everything. Treasury ministers have, to quote one of my Labour friends, drunk the Kool-Aid. And there is not that counter-balancing political operation in Downing Street, which is what you need. So, yes, the Treasury should be strong on the numbers, but Downing Street should be strong on the politics of it. Now, it’s not a direct parallel, because actually Gordon Brown was a much better politician than an economist, which he actually wasn’t, but I think he was a politician who understood economics in the Treasury, and in Downing Street what you had with Blair, Mandelson, Campbell was this phenomenal political operation which would sometimes take things like the fuel protests – remember that, late ’97, ’98 maybe – and they would just do the sniff test and say, ‘we now need to fill this’ and they would act.

“That lack of a political filter is the weakness of the Starmer government. You will see the consequences of that perhaps most immediately in Scotland and probably in Wales, because we’ve got elections there in 2026, but the political swiftness just isn’t being done. The narrative just isn’t there.

^{Credit: Alamy}

“Look, I was in government, in coalition with the Tories, and in the first coalition budget we put VAT up to 20 per cent. Not an easy thing to do. There was a lot of unease and unhappiness with it, but it was worth it because it brought in a shitload of money. And if we hadn’t had that then the spending cuts would have had to be even deeper. And also, it’s a dependable tax. VAT is very difficult to avoid, unlike inheritance tax, which is quite easily avoided.

“And yes, we were faced with welfare cuts too but in the context of government spending that had been rising well above inflation for at least five, possibly 10 years ahead of that. So, there was an economic context that said, you know, there are opportunities here to reduce public expenditure, and I think that was understood. We’ve not got that same scenario now, but the government is doing it in that traditional Labour way of making decisions at the top and then just expecting everybody else to fall into line.

“Good politics would bring people along with them better. And you know, rightly or wrongly, you had the move in the coalition years to Universal Credit, for example, which was designed to ease the transition from benefits into employment. It’s been undermined by the fact that it’s not been properly resourced. But as a principle, it was a much better system. And you were able to construct a narrative that said, these are changes for a purpose. Where is that narrative now? Universal Credit was phased in over a long period of time, again learning the lessons of Gordon Brown and tax credits in 2002, 2003, which was a big bang and an absolutely catastrophic shambles. The difference now is it looks like you’ve got the spending cuts in welfare without the political purpose attached. It’s back to this idea that the decisions are all made in the Treasury without the political counterbalance coming from Number 10 or an ability to communicate.”

On the contentious issue of the two-child benefit cap, I wonder if Carmichael thinks that would have happened if the coalition had continued.

“We would have stopped it. We stopped stuff like that all the time. It was never, in fairness to Cameron and Osborne, something that was even discussed in coalition terms because they would have known the answer. Policies like that appear because the agenda is being driven by wonks who bluntly don’t have the life experience to think ‘how is this going to look, how is it going to feel?’ Again, that is one of the weaknesses I’ve seen developing in politics, that, yes, you do need to have your clever people, some of your pointy heads who will come up with the brilliant stuff, but at the same time, you need to have people who’ve got that real life experience and that rich hinterland to counter some of that. That’s what makes politics work and right now, it doesn’t appear to be.

There has not been in the last 24 years a moment of boredom. Sometimes I would crave a day of that boredom

“First and foremost, I’m a political geek. I joined a political party when I was 14. I love talking politics. But these days, since I took on the select committee job, I get a lot of stuff on email or on Facebook from people in farming and people in rural communities saying, ‘oh, thank you so much for doing what you do, you’re the only person who understands us’. I think the only person is a bit of an overstatement, but it tells you quite a lot that there are people in rural communities and farming in particular who feel that they aren’t understood and that they feel that they are everybody’s favourite whipping boy. And you know, you ignore that at your peril. And part of me thinks, well, yeah, okay, I’m a farmer’s son, I now actually own and run the farm, I’m married to a farm vet, living in a farming community, I may not be the fastest learner in Westminster, but even I would need to be particularly dim not to have picked up some understanding of the issues.

“Can Starmer turn it around? I honestly don’t know. It’s a massive task. But you know, they have the advantage of being in government. And never underestimate the extent to which being in government, especially with the sort of majority they’ve got, allows you to meet the weather. So, at this stage, I think they should still be trying, but they really need to be much more alive. They need to be able to read the room in country areas in a way that they just haven’t done. And if you look at what Defra [Department for Environment, Food and Rural Affairs] is saying and doing now, there are some good and very useful pieces of work there, some of which we could learn lessons from in Scotland, but nobody’s listening because until they take inheritance tax off the table they are not going to be able to explain the sort of overarching vision, if they have one, for various initiatives that they’ve taken. Steve Reed [Secretary of State] is desperate to claw back the political momentum and he says things like ‘we are a government that believes in food security and that is why we want to do this, that and the other’, but he’s not getting that message across because it’s being drowned out by the inheritance tax.”

Carmichael is arguably Scotland’s longest serving MP. I say arguably because he and the SNP’s Pete Wishart were both elected in 2001 and while Wishart will claim he is the longest serving between them because his then seat of North Tayside was called before Carmichael’s Orkney and Shetland, Carmichael says he was sworn in before Wishart and “them’s the rules”.

“Back in 2001 when I was first elected, I remember sitting on the Lib Dem benches in the House of Commons, and I said to one of my colleagues, the Labour Party has just been re-elected, we have Tony Blair, in his pomp, with a majority of 166, and with iron discipline. And I said, I think this could be quite a boring parliament. That was in July. In September, al-Qaeda flew planes into the World Trade Center in New York and the Pentagon in Washington DC. We had a bombing campaign in Afghanistan. We had a ground war in Afghanistan. We then had the run-up to war in Iraq and war in Iraq. Then remembered we were still in Afghanistan. We then had a credit crunch, a banking crisis, us in a coalition government with the Tories, an independence referendum, we were out of government, Brexit, pandemic… and so it went on and you know, there has not been in the last 24 years and however many days it has been now, a moment of boredom. Sometimes I would crave a day of that boredom. But it just never happens.”

Reflecting on all that has happened during his almost 25 years of being an MP, I wonder if he has regrets about his party getting into bed with the Tories in 2010 and the damage that then inflicted on the Liberal Democrats at the 2015 election, when their number in the House of Commons was decimated to just eight and Carmichael returned to Westminster as the sole Scottish Lib Dem MP. I ask him where the blame for that lies.

“Honestly, I’ve never thought of it in terms of blaming and I don’t do regrets; life is too short. I think the result of the 2015 election for the Liberal Democrats has fairly lazily been attributed to the coalition, and the coalition was always going to be a difficult defence for us but having spoken to a number of my colleagues from English seats who lost in 2015, they say that they lost in the last week to 10 days of the campaign, that they were going back to people with whom they had [previously voted for]. They had stayed with us all through the difficult coalition stuff, and they said, ‘No, we just can’t risk it this time’. And it was the idea of a weak Labour government led by Ed Miliband, controlled by Alex Salmond, that was influencing them. I remember that picture with Miliband in Salmond’s pocket, that genuinely scared people here. And at that point you had people voting for an English national interest, as opposed to a British national interest. I think some of that receded by 2017 and it was obviously a very different story in 2024. But I think that had as much to do with the losses in 2015 as the consequence of the coalition. I think the one lesson that we take, though – and remember the Tories were absolutely cock-a-hoop in 2015, they thought they’d been the cleverest people ever – is see where they are today, 10 years later. Politics, if it’s nothing else, it’s the long game, and you’ve got to be prepared to play the long game sometimes.

“Of course, for me personally, coming back in as the one Scottish Lib Dem was painful but I never, ever regret winning. Like everybody else there are ups and downs for me, and that ’15 to ’17 parliament was a difficult one with eight of us. We were, without breaching too much of a confidence, not the natural team, shall we say, but you know, Mandy, life’s too short for regrets, it really is. And you do the best in any circumstance, you make mistakes, we all do, but you learn from them, or you don’t, and you let other people learn from them.

Ultimately, there’s not the same economic imperative to get a stable government in the Scottish Parliament as there is in the House of Commons

“One thing I learnt from the coalition was the willingness of the Conservatives in government to work with other people. That did surprise me. With hindsight, I wonder maybe if I was wrong to be surprised, because the traditional Conservative party, not what we have now, was a much more pragmatic, non-ideological party. And their raison d’etre, the basis of their hitherto significant success, was always their willingness to do what they needed to do to get the hands on the levers of power. That willingness to work together was rooted in that. I think we [Lib Dems] are, in our core, much more ideological than the Tories were then, led by David Cameron. You can only take the Lib Dems to a point beyond which they will not go. It’s not always easy to find that point for Conservatives.”

Does he think then that his party could consider going into a coalition with the current Conservatives?

“No, not with the Tory party of now and for all sorts of reasons, but in 2010 it wasn’t a natural fit, shall we say; you had a centre-left and a centre-right party, but we managed to make it work in the main. The Tories are now not a centre-right party. They’re at the right and drifting further right. But also in 2010 you had an economic imperative, which was the glue that held the coalition together. It was about deficit reduction and as long as that was the thing which was more important than anything else, the coalition could hold. Once you found something that was more important then it would never hold. And I don’t see any basis on which you could build a coalition with Kemi Badenoch’s Conservative Party or even Russell Findlay’s Scottish Conservative Party.”

Carmichael has something of a reputation – even if it is just between him and me – of being a successful political forecaster. I remind him that back in 2010, when he was campaign director for the Lib Dems ahead of that year’s general election, I interviewed him about his party’s prospects. He predicted then that the story of that election would be the emergence of one Nick Clegg as a substantial political figure, but even accounting for Carmichael’s inflated optimism that claim seemed so left field. Few people had even heard of Nick Clegg at that point. And yet the phrase which emerged during the televised leaders’ debates during the campaign of “I agree with Nick” caught the momentum carrying the Lib Dems into government and Clegg into the Downing Street Rose Garden where he was announced as deputy prime minister to David Cameron.

On the question of the 2026 Holyrood election, I ask Carmichael to put his forecasting talents to use.

“Mandy, I’m genuinely worried, as somebody who believes in the existence and the importance of having a Scottish Parliament, I am worried that the next election could throw up one which is an absolute bonfire.

“Almost a year out and with so many people willing to stake out positions, saying, ‘we absolutely will not work with them or them and them’ and then you’ve got the coming of Reform, and whatever that is actually going to mean. You’ve got question marks over what’s going to happen to the Conservatives and frankly, to us, the SNP is it seems fighting its own fires, Labour doesn’t seem to have a clear purpose and is buffeted by what happens down south, and I honestly don’t know how you construct a stable government out of all of that.

“So, could Anas [Sarwar] emerge as first minister? Possibly, I don’t know. It will all be down to the numbers at the end of the day. And this is the recovering whip speaking here, victory goes to the ones that can count. The imperative for us in 2010 was that there was a stable government that could command the majority in the House of Commons. And I remember conversations I had on the phone with Alex Salmond at the time and I don’t think that breaches any great confidence now, but he was arguing that we could have a Rainbow Coalition with the Lib Dems, Labour and the SNP, along with Plaid and the Unionists, all ganging up against the perfidious Tories. And I remember thinking, you really think that’s going to work, that you’re going to play nicely, Alex, in a way that, frankly, you have not done for the last 20 years, to my certain knowledge, I don’t think so. Alex was enormously successful as a politician, but he always pursued the SNP’s best interests first, last, and always, that was why he didn’t go into the Constitutional Convention. That’s why they’ve never worked with other parties, except in the Scottish Parliament, and the only time the SNP ever did work with other parties in any structured way was with the Greens, and you can see how that ended.

“Ultimately, there’s not the same economic imperative to get a stable government in the Scottish Parliament as there is in the House of Commons because the finances come from here. And this is where the markets look to, as Liz Truss found out to her cost. But in terms of actually delivering a coherent programme for public services, making the necessary reforms that is a constant in politics, I think you have to have some sort of overarching vision, and you’ve got to say at the start ‘here is our programme, here’s our vision and this is where we are headed’. The coalition had a coalition agreement that said, ‘these are the things that we are going to do’. The starting point might be a manifesto but if you’re in a minority, and everybody’s going to be in minority in that parliament, then you have to have some sort of coherent approach, otherwise it all becomes sort of transportable. I was in Wales recently, and you know that the one Liberal Democrat member of the Senedd has come from mid-Wales, and her predecessor held a lot of political sway which they have performed both on the big stage with the stuff that Kirsty Williams did in creating a new Erasmus programme, educational reform in Wales, that sort of thing, but now they say that every time the Labour administration needs to pass a budget, another swimming pool is built in Powys.”

Carmichael is a self-confessed political junkie. He joined the Liberal Democrats as a 14-year-old schoolboy, has held most senior positions within the party, been an elected politician for almost 25 years, been instrumental in taking his party into a coalition with the Tories, and was Scottish Secretary during the independence referendum. He has had a front-row seat during all the major political issues of the last quarter of a century. I ask him if there is anything that still surprises him.

“Oh yes, I mean, my own party continues to surprise me,” he laughs. “There was one glorious moment at a Lib Dem conference, and you know what Lib Dem conferences can be like, sometimes at the upper end of eccentric, and there was a difficult vote on something, and there were various points of order being made in the conference hall. And amid all this one woman came to the front of the stage and said, ‘I have a point of order’. So, the chair said, ‘okay, come to the main podium and make your point of order’. And she came to the main podium, and she said, ‘I am a white witch, and I bring you a warning’. At which point she was rugby tackled off the stage by the  students while the chair is turning off her microphone and shouting, ‘that’s not a point of order’, and I’ve often wondered whether we should have listened to her warning.”

What was it?

“Ah, that’s the thing, we don’t know, history does not record, so we will never know and that’s the mystery of politics.”