Agricultural Property Relief

[Graham Stringer in the Chair]

I beg to move,

That this House has considered the impact of changes to Agricultural Property Relief.

It is a pleasure to serve under your chairmanship, Mr Stringer. I refer Members to my entry in the Register of Members’ Financial Interest as a tenant dairy farmer. In Wales, 80% of our land is given over to farming, and our food foundation sector—including businesses that produce, process, manufacture and wholesale food and drink goods—is a vital part of our economy, hitting a turnover of £9.3 billion in 2023. In fact, Cabinet Ministers in the Labour Welsh Government have lauded Wales as a “food nation”, but the UK Government’s decision in the autumn Budget to change the agricultural property relief and business property relief will have a real effect on food, sustainable food production and food security in Wales.

Business property relief and agricultural property relief were introduced in the 1970s and the 1980s respectively to ensure that a farm or family business could continue trading after the owner’s death, protecting it from being sold and broken up. However, on 30 October 2024, the Chancellor of the Exchequer announced that the Labour UK Government intend to change APR and BPR conditions from 6 April 2026. From that date, 100% relief from inheritance tax will be restricted to the first £1 million of combined agricultural and business property, and 50% thereafter. The proposals equate to landowners paying inheritance tax at a rate of 20% of estate value, with the threshold from which they pay being dependent on individual circumstances. That tax is payable in instalments over 10 years without interest.

Combining APR and BPR under those changes means that the asset value of the tools and the machinery necessary to operate a farming business are affected, as well as the agricultural land and property, alongside any diversification activities that the UK Government have told farmers to explore to increase their income. The UK Government contend that those changes will affect around 500 estates a year, and that small family farms will not be affected, but organisations within the agricultural sector say otherwise.

The National Farmers Union calculated that 75% of commercial family farms will fall above the £1 million threshold across the UK. The Farmers’ Union of Wales, using other figures, estimated that essentially all farms that produce nearly 90% of agricultural output in Wales could be liable under the changes. In fact, Eirian Humphreys of LHP Accountants, a large accountancy firm across south and west Wales, told me that of the 51 farming clients who have inquired about those changes so far, 46—around 90%—will have to pay inheritance tax if they die after 6 April 2026.

I congratulate the hon. Lady on bringing this matter before the House again. On the subject of the 500 estates, can we all agree that that only relates to the number of estates that claim under APR? It does not take account of the effect of APR and BPR together. In fact, BPR valuations are taken at book value, not at market value, so the number of estates that are liable must inevitably be massively greater than 500.

Absolutely. We all know that is the case.

The Minister is shaking his head. I wonder whether the hon. Lady would join me in inviting him to intervene to explain why that fact is wrong.

I do not know whether the Minister would like to do so now or at the end. It is up to him.

I will at some length explain why the remarks that the right hon. Gentleman just made—

Order. If Members wish to make an intervention, they should stand to do so. It is up to the person who is speaking whether to accept an intervention.

I was going to say this at the end of Ann Davies’s speech, but I will say it now. This debate is oversubscribed, so I will put a time limit on speeches. Members should make short interventions, because interventions will mean less time for those people who have put in to speak.

Of the clients that Eirian mentioned, five of them will not come under the tax liability because they have very small farms with off-farm income, they have transferred their farms following ill health, or they have significant debt that offsets the value of their farms.

It is clear that the assessments of the impact of the changes on working farms across the UK, on the wider economy and on the wider food supply chain are inadequate. The data that we have is deficient; it includes smallholdings and non-working farms. Data based on the basic payment scheme or on agricultural output would provide a fairer representation of the situation for genuine farmers.

The hon. Lady is speaking remarkably well about the challenges that this Government policy will create for farmers in Wales, in Scotland and across the UK. Research by Scottish Land and Estates shows that the average UK farm size is 217 acres and the average agricultural land value in Great Britain is £8,200 per acre, which means that the average working farm in the UK is worth about £1.8 million. Does that not show the flaw in the Government’s argument? This policy is not attacking the richest landowners; it is attacking working farms the length and breadth of the UK.

I thank the hon. Gentleman for his intervention and I totally agree. Indeed, I will give further details about that issue later in my speech.

It is also clear that industry experts were not consulted on the changes prior to the announcement, even though consultation could have led to a fairer and more appropriate solution that is not detrimental to family farms or the wider industry.

The hon. Lady is making a very passionate speech on an extremely important topic. She will know that my constituency of Chester South and Eddisbury borders Wales, and that there are many family farmers in north Wales who are deeply concerned about the consequences of this policy. Does she agree that it will impact not only farmers but the wider agricultural-industrial community, including businesses in my constituency that work alongside Welsh farmers in north Wales, such as Meadow Foods in Chester?

I absolutely agree with the hon. Lady, and perhaps I should mention that Meadow Foods is the company that takes the milk from our farm—so we are that close to one another. I will say more about that issue as I move through my speech.

The lack of any data on the particular effects of the changes in Wales is a genuine problem. The available data, especially the data used by the Treasury, is a combination of Wales data and England data, or is UK-level data; it is not Welsh data. That is why organisations in Wales have to make their own calculations about the impact in Wales. The Country Land and Business Association calculated that an average 250-acre dairy farm in Wales could be hit by a £119,000 inheritance tax charge, while the average 250-acre livestock farm would expect an £85,000 charge. However, those figures do not include the asset value of diversified enterprise, meaning, of course, that they could be higher still.

It is crucial that farmers, policymakers and other stakeholders in Wales have accurate data to understand the real impacts of the changes within the specific context of Wales. The FUW called for the Wales-specific impact assessment to be modelled with working farms only, as the Welsh Government—the Welsh Labour Government—did during their 2023 sustainable farming scheme analysis. Today, I reiterate the call for the Government to implement that assessment, as my Plaid Cymru colleagues and I have continuously called for since October. The arguments have not changed.

There is evidence that the changes will not make even an iota of difference to the Treasury. In fact, modelling from the Confederation of British Industry Economics found that the changes to BPR will actually cost the Exchequer £1.25 billion between 2026-27 and 2029-30. It is unclear how they work towards Labour’s mission of growth, as industry organisations have come across numerous cases of farms and businesses delaying investments, putting orders on hold and preparing to reduce staffing. Let us not forget that each £1 a farmer spends generates another £9 in that community. What other rural industry does that?

The hon. Lady is making an excellent speech. Does she agree that, if the Treasury had considered increasing the threshold and raising the overall rate for very wealthy landowners to 40%, it might have achieved the outcome it was looking for? I put on record that I would not have gone down the route that it has anyway.

I thank the hon. Lady for that intervention. I am coming on to solutions in a minute; I hope that the Minister will listen to my proposed options.

Extending the existing scope of APR to land managed under environmental agreements with or on behalf of, for example, the Government or public bodies also suggests that foundations and large companies could buy up land sold to pay inheritance tax, without being subject to it in the same way. We have a train of people in west Wales who are already buying land for planting trees, carbon offsetting and solar and wind farms.