Chancellor Rachel Reeves has suffered another budget blow with a rebellion by rural Labour MPs over inheritance tax on farmers.

Speaking during the final day of the Commons debate on the budget, Labour backbenchers demanded a U-turn on the controversial proposals.

Plans to introduce a 20% tax on farm estates worth more than £1m from April have drawn protesters to London in their tens of thousands, with many fearing huge tax bills that would force small farms to sell up for good.

MPs voted on the so-called “family farms tax” just after 8pm on Tuesday, with dozens of Labour MPs appearing to have abstained, and one backbencher – borders MP Markus Campbell-Savours – voting against, alongside Conservative members.

In the vote, the fifth out of seven at the end of the budget debate, Labour’s vote slumped from 371 in the first vote on tax changes, down by 44 votes to 327.

‘Time to stand up for farmers’

The mini-mutiny followed a plea to Labour MPs from the National Farmers Union to abstain.

“To Labour MPs: We ask you to abstain on Budget Resolution 50,” the NFU urged.

“With your help, we can show the government there is still time to get it right on the family farm tax. A policy with such cruel human costs demands change. Now is the time to stand up for the farmers you represent.”

After the vote, NFU president Tom Bradshaw said: “The MPs who have shown their support are the rural representatives of the Labour Party. They represent the working people of the countryside and have spoken up on behalf of their constituents.

“It is vital that the chancellor and prime minister listen to the clear message they have delivered this evening. The next step in the fight against the family farm tax is removing the impact of this unjust and unfair policy on the most vulnerable members of our community.”

The government comfortably won the vote by 327-182, a majority of 145. But the mini-mutiny served notice to the chancellor and Sir Keir Starmer that newly elected Labour MPs from the shires are prepared to rebel.

Speaking in the debate earlier, Mr Campbell-Savours said: “There remain deep concerns about the proposed changes to agricultural property relief (APR).

“Changes which leave many, not least elderly farmers, yet to make arrangements to transfer assets, devastated at the impact on their family farms.”

Samantha Niblett, Labour MP for South Derbyshire abstained after telling MPs: “I do plead with the government to look again at APR inheritance tax.

“Most farmers are not wealthy land barons, they live hand to mouth on tiny, sometimes non-existent profit margins. Many were explicitly advised not to hand over their farm to children, (but) now face enormous, unexpected tax bills.

“We must acknowledge a difficult truth: we have lost the trust of our farmers, and they deserve our utmost respect, our honesty and our unwavering support.”

Labour MPs from rural constituencies who did not vote included Tonia Antoniazzi (Gower), Julia Buckley (Shrewsbury), Jonathan Davies (Mid Derbyshire), Maya Ellis (Ribble Valley), and Anna Gelderd (South East Cornwall), Ben Goldsborough (South Norfolk), Alison Hume (Scarborough and Whitby), Terry Jermy (South West Norfolk), Jayne Kirkham (Truro and Falmouth), Noah Law (St Austell and Newquay), Perran Moon, (Camborne and Redruth), Samantha Niblett (South Derbyshire), Jenny Riddell-Carpenter (Suffolk Coastal), Henry Tufnell (Mid and South Pembrokeshire), John Whitby (Derbyshire Dales), Steve Witherden (Montgomeryshire and Glyndwr) and Amanda Hack, (North West Leicestershire).

As an opening gambit at PMQs, Kemi Badenoch attacked Labour’s knight, the prime minister, over his Treasury queen, Rachel Reeves.

“We now know the black hole was fake, the chancellor’s book was fake, her CV was fake – even her chess claims are made up,” said the Tory leader.

Politics Live: Labour MP who voted against inheritance tax suspended

“She doesn’t belong in the Treasury; she belongs in la-la land.”

Chess claims made up? Where did that attacking move from Kemi come from? Hasn’t the chancellor told us for years that she was a national chess champion in 1993?

Indeed she has. “I am – I was – a geek. I played chess. I was the British girls’ under-14 champion,” she declared proudly in a 2023 interview with The Guardian.

She posted a video showing her playing chess in parliament and before last week’s budget posed for photos with a chessboard.

But her chess champion claim has been disputed by a former junior champion, Alex Edmans, who has accused her of misrepresenting her credentials.

“Her claim was quite specific,” Edmans, now a professor of finance at the London Business School, told Ali Fortescue on the Politics Hub on Sky News.

“She said she was the British girls’ under-14 champion. There was one event that can go on that title, which is the British Championship. And in the year that she claimed, it was Emily Howard who won that title instead.

“She did indeed win a quite different title. There was a British Women’s Chess Association championship, but that’s a more minor title. I’ve won titles like the British squad title, but that’s not the same.

“Just like running a marathon in London is not the same as the London Marathon, there was one event which is very prestigious, which is the British Championship.

“So the dispute is not whether she was a good or bad chess player. That shouldn’t be the criterion for a chancellor. But if you weren’t the British champion, you shouldn’t make that statement.”

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Oh dear! So now, along with allegations of plagiarism, a dodgy CV and “lying” – according to Ms Badenoch – about the nation’s finances, the chancellor is between a rook and a hard place.

Or is she? “This story is absolute nonsense,” a Treasury mate told Sky News. No word from the No.10 knight, Sir Keir Starmer, or his Downing Street ranks, however.

Emily Howard, as it happens, is now an accomplished composer, having graduated from the chessboard to the keyboard.

The chancellor’s opponents, meanwhile, claim her budget blunders means the Treasury queen has now become a pawn, there for the taking.

But since Rachel Reeves did indeed win a chess title, just not the one she claimed, her supporters insist she can justifiably claim to have been a champion.

So it’s too soon for Kemi Badenoch and the Conservatives to claim checkmate. The dispute remains a stalemate. For now.

The UK is “really unprepared” to fight a war and has been living on a “mirage” of military strength that was shocking to discover, interviews with almost every defence secretary since the end of the Cold War have revealed.

With Sir Keir Starmer under pressure to accelerate plans to reverse the decline, two new episodes of Sky News and Tortoise’s podcast series The Wargame uncover what happened behind the scenes as Britain switched funding away from warfare and into peacetime priorities such as health and welfare after the Soviet Union collapsed.

👉Search for The Wargame on your podcast app👈

This decades-long saga, spanning multiple Labour, Conservative and coalition governments, includes heated rows between the Ministry of Defence (MoD) and the Treasury, threats to resign, and dire warnings of weakness.

It also exposes a failure by the military and civil service to spend Britain’s still-significant defence budget effectively, further compounding the erosion of fighting power.

‘Russia knew’ about UK’s weaknesses

Now, with the threat from Russia returning, there is a concern the UK has been left to bluff about its ability to respond, rather than pivot decisively back to a war footing.

“We’ve been living on a sort of mirage for so long,” says Sir Ben Wallace, a Conservative defence secretary from 2019 until 2023.

“As long as Trooping the Colour was happening, and the Red Arrows flew, and prime ministers could pose at NATO, everything was fine.

“But it wasn’t fine. And the people who knew it wasn’t fine were actually the Americans, but also the Russians.”

Not enough troops, medics, or ammo

Lord George Robertson, a Labour defence secretary from 1997 to 1999 and the lead author of a major defence review this year, says when he most recently “lifted the bonnet” to look at the state of the Army, Royal Navy and Royal Air Force, he found “we were really unprepared”.

“We don’t have enough ammunition, we don’t have enough logistics, we don’t have enough trained soldiers, the training is not right, and we don’t have enough medics to take the casualties that would be involved in a full-scale war.”

Asked if the situation was worse than he had imagined, Lord Robertson says: “Much worse.”

‘I was shocked,’ says ex-defence secretary

Sir Gavin Williamson, a former Conservative defence secretary, says he too had been “quite shocked as to how thin things were” when he was in charge at the MoD between 2017 and 2019.

“There was this sort of sense of: ‘Oh, the MoD is always good for a billion [pounds] from Treasury – you can always take a billion out of the MoD and nothing will really change.’

“And maybe that had been the case in the past, but the cupboards were really bare.

“You were just taking the cupboards.”

But Lord Philip Hammond, a Conservative defence secretary from 2011 to 2014 and chancellor from 2016 until 2019, appears less sympathetic to the cries for increased cash.

“Gavin Williamson came in [to the Ministry of Defence], the military polished up their bleeding stumps as best they could and convinced him that the UK’s defence capability was about to collapse,” he says.

“He came scuttling across the road to Downing Street to say, I need billions of pounds more money… To be honest, I didn’t think that he had sufficiently interrogated the military begging bowls that had been presented to him.”

What to expect from The Wargame’s return

Episodes one to five of The Wargame simulate a Russian attack on the UK and imagine what might happen, with former politicians and military chiefs back in the hot seat.

The drama reveals how vulnerable the country has really become to an attack on the home front.

The two new episodes seek to find out why.

The story of the UK’s hollowed-out defences starts in a different era when an Iron Curtain divided Europe, Ronald Reagan was president of the US, and an Iron Lady was in power in Britain.

Sir Malcolm Rifkind, who went on to serve as defence secretary between 1992 and 1995 under John Major, recalls his time as minister for state at the Foreign Office in 1984.

In December of that year, then prime minister Margaret Thatcher agreed to host a relatively unknown member of the Soviet Communist Party Politburo called Mikhail Gorbachev, who subsequently became the last leader of the Soviet Union.

Sir Malcolm remembers how Mrs Thatcher emerged from the meeting to say: “I think Mr Gorbachev is a man with whom we can do business.”

It was an opinion she shared with her close ally, the US president.

Sir Malcolm says: “Reagan would have said, ‘I’m not going to speak to some unknown communist in the Politburo’. But if the Iron Lady, who Reagan thought very highly of, says he’s worth talking to, he must be worth it. We’d better get in touch with this guy. Which they did.

“And I’m oversimplifying it, but that led to the Cold War ending without a shot being fired.”

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In the years that followed, the UK and  much of the rest of Europe reaped a so-called peace dividend, cutting defence budgets, shrinking militaries and reducing wider readiness for war.

Into this different era stepped Tony Blair as Labour’s first post-Cold War prime minister, with Lord Robertson as his defence secretary.

Lord Robertson reveals the threat he and his ministerial team secretly made to protect their budget from then chancellor Gordon Brown amid a sweeping review of defence, which was meant to be shaped by foreign policy, not financial envelopes.

“I don’t think I’ve ever said this in public before, but John Reid, who was the minister for the Armed Forces, and John Speller, who was one of the junior ministers in the department, the three of us went to see Tony Blair late at night – he was wearing a tracksuit, we always remember – and we said that if the money was taken out of our budget, the budget that was based on the foreign policy baseline, then we would have to resign,” Lord Robertson says.

“We obviously didn’t resign – but we kept the money.”

The podcast hears from three other Labour defence secretaries: Geoff Hoon, Lord John Hutton and the current incumbent, John Healey.

For the Conservatives, as well as Rifkind, Hammond, Williamson and Wallace, there are interviews with Sir Liam Fox, Sir Michael Fallon, Dame Penny Mordaunt and Sir Grant Shapps.

In addition, military commanders have their say, with recollections from Field Marshal Lord David Richards, who was chief of the defence staff from 2010 until 2013, General Sir Nick Carter, who led the armed forces from 2018 until 2021, and Vice Admiral Sir Nick Hine, who was second in charge of the navy from 2019 until 2022.

‘We cut too far’

At one point, Sir Grant, who held a variety of cabinet roles, including defence secretary, is asked whether he regrets the decisions the Conservative government took when in power.

He says: “Yes, I think it did cut defence too far. I mean, I’ll just be completely black and white about it.”

Lord Robertson says Labour too shares some responsibility: “Everyone took the peace dividend right through.”

Building on the success of the highly acclaimed podcast The Wargame, Sky News presents The Wargame: Decoded – a one-off live event that takes you deep inside the minds of the wargame’s participants. Discover how they tackled the toughest challenges, the decisions they made under intense pressure, and even experience key moments of the game for yourself.

Click here to get tickets.

Sky News’ Deborah Haynes will guide the conversation with Sir Ben Wallace, Robert Johnson, Jack Straw, Amber Rudd, Keir Giles and General Sir Richard Barrons – real-life military chiefs, former government officials and leading experts. Together, they will unpack their experiences inside The Wargame, revealing the uncertainty, moral dilemmas and real-world pressures faced by those who must make decisions when the nation is under threat.

Join us for this unique event exploring how the UK might respond in a moment of national crisis and get a rare, unfiltered glimpse into how prepared the country truly is for war.