Family Farming in Northern Ireland

I beg to move,

That this House has considered the impact of agricultural property relief and business property relief on family farming in Northern Ireland.

It is a pleasure to serve under your chairmanship, Mr Efford. I am very grateful for the opportunity to bring forward this debate on an issue that cuts right to the heart of rural Northern Ireland and indeed Britain.

The proposed changes to agricultural property relief and business property relief will have devastating consequences for family farms across our nation. Agriculture is not just another sector in our economy; for Northern Ireland it is our very foundation. It sustains our rural communities, feeds over 10 million people annually, underpins our agrifood industry and provides work for tens of thousands of families. I make no apology for repeating a comment that I have made previously, and that my grandfather tells me every Sunday at the dinner table: if the farmer is not doing well in this country, no one is.

In Northern Ireland we have over 26,000 farms. They form the backbone of our rural life—

I commend my hon. Friend for that point. She is absolutely right to underline the impact on family farms of the Chancellor’s proposals. In tandem with decisions being made by the Department of Agriculture, Environment and Rural Affairs Minister in Northern Ireland, they will leave many farmers feeling that their generational family farms have no future. My hon. Friend will probably have seen “Countryfile” on Sunday. It highlighted two things for farmers: first, the mental health impact and that there have been suicides; secondly, the generational loss of the farms. If farms are not working, they are not viable, do not produce the food and the impact is great. The Government really need to sit down, take account of where we are and change the decision.

I thank my hon. Friend for his consistent voice on this issue. I will come to “Countryfile” later in my speech.

The vast majority of our farms in Northern Ireland are family run, often handed down proudly through several generations. The farm is not just a business: it is a home, a heritage and a legacy. That is why any policy that affects how farms are passed on to the next generation goes to the very core of who we are as rural people. For many families, the dream is simple: to see the next generation take over, work the same land and continue the proud tradition of stewardship. The reality of that dream is now under threat like never before.

Agricultural property relief has existed for a reason. It recognises that farming is asset-rich but cash-poor, or as we would say in Northern Ireland, “We are asset-rich but penny-poor.” A farm may be worth millions on paper, but that value is tied up in land, livestock, machinery, buildings and—most concerningly for many farmers—debt. Farmers spend money and they thrive in advancing. But for what—when they see what this Government are doing to them?

With over 26,000 farms in Northern Ireland, the value of farmland is incredibly high, if not higher, than in any other part of the United Kingdom. Does the hon. Lady agree that the negative impacts of changes to APR and BPR on Northern Ireland farmland will be much higher for those farming families than anywhere else across the United Kingdom?

I agree with the hon. Member. I thank him for using his intervention to speak up for Northern Ireland farmers, because they will be hard hit because of the land values.

When a farmer dies, there is not the liquid cash available to meet a large inheritance tax bill. That is precisely why successive Governments introduced and retained APR, so that farms would not have to be sold off bit by bit, just to pay the tax man. It was a recognition that the nation needs farms to continue and not be broken up at the point of succession. The change is being dressed up as modernisation or rebalancing, but in reality it is an attack on the very concept of family farming. I am pleased to say that colleagues from every party in Northern Ireland have been absolutely united in our opposition to the policy.

Does the hon. Lady agree that although the Government say that the effect of the inheritance tax on farms will be pro-growth, it will actually be anti-growth? In order to prepare for the day when a huge tax bill will have to be met, rather than investing in growing their enterprise, farmers are holding back so that they can hopefully make some contribution towards the exorbitant demands that are made upon death.

The hon. and learned Member is right; the policy is stifling growth. As I have said before, farmers want to advance and grow, and they want to spend money.

The hon. Lady is making an important point. To follow up on the previous intervention, I wonder whether she has noticed in Northern Ireland, as I have in Cumbria, that farmers are holding money back. If they need a drystone wall fixing, they are not paying for that. If they need a new tractor, they are not investing in it. If they need to upgrade a barn for animal welfare purposes, they are not doing it. The policy is damaging not only farms but the rural communities that service those farms, and, as the hon. and learned Member for North Antrim (Jim Allister) said, constricting growth.

I agree with the hon. Member. I need to give way to the leader of my party at this point.

I congratulate my hon. Friend on securing this debate. It is quite right that she took the last two interventions because she was talking about cross-party support for Northern Ireland farms. She is blessed to have a constituency with some of the most fertile and therefore valuable agricultural land in Northern Ireland, with an average of around £30,000 per acre. Although there may be a policy intention in relation to the industrialisation of farms or people shielding their wealth through farms, would she like the Government to recognise that that is not the case in Northern Ireland, and even a small family holding of 30 acres could get caught by the policy change?

Absolutely. It does not take much arithmetic to work out the facts of that scenario.

In a recent joint letter to the Chancellor, signed by all MPs and peers from Northern Ireland, we set out a clear position:

“Agriculture is not simply an economic sector; it is a way of life. The removal or restriction of Agricultural Property Relief will place an unfair and unsustainable burden on family farms, jeopardising their ability to pass on their farms to the next generation and threatening the future of family farming.”

Those are not my words alone. They are the voices of rural Northern Ireland, speaking in unison in the House today.

I congratulate the hon. Member on securing a debate that focuses specifically on Northern Ireland. Does she agree that what the Treasury and the Government have missed in the proposal is the unique nature of farms in Northern Ireland, where 99% are actually family owned? Even that promise of the opportunity to spread the tax bill over 10 years restricts families who want to invest in their farms, and puts pressure on not only the older generation who are concerned about the farm they are leaving, but the younger generation who are looking to the future.

I agree with the hon. Member.

According to an estimate from the Department of Agriculture, Environment and Rural Affairs in Northern Ireland, the policy will impact a third of all farms and three quarters of dairy farms. Think about that for a moment. Three quarters of our dairy farms—the heart of our agrifood export industry—could be hit by a tax change that would make succession financially impossible.

The knock-on effects will be vast. Meat factories will face reduced throughput and rising costs, forcing scale-back and possibly relocation. Feed and supply companies will see demand collapse, threatening jobs and investment. It is not just farms that will be hit, and this is not a matter of large estates or wealthy landowners. The average Northern Ireland farm is about 40 hectares. Land values in some counties, including my own, are in excess of £30,000 per acre. It does not take much arithmetic to see that many modest family farms would easily surpass the £1 million threshold.

The hon. Lady is making an extremely good point about the impact on Northern Irish farms, and a similar thing will happen in South Norfolk. I would like to present solutions to this problem. I posit—and she may want to comment on this later on—that the Centre for Tax Reform’s policy would actually raise the amount of income for the Treasury by 71%. I also encourage the hon. Lady to look at separating APR and BPR, pausing the process and looking at whether we can raise revenues and protect the family farm.

I commend the Member for the stand he is taking and for encouraging the Minister in this way. We are not talking about millionaires; we are talking about hard-working family farmers who live modestly and work from dawn to dusk to feed us all. If these proposals proceed, we will inevitably see forced sales of land simply to pay the tax liability when a family member dies. That means the fragmentation of farms, the loss of viable holdings and the disappearance of many small-to-medium sized family farms.

The Government talk about a fair and balanced approach, but what about the 80-year-old who has not got time to plan? Did my brother think my dad would pass away at age 66? Absolutely not. Does a family think they are going to lose a son or a daughter at age 40, 41 or 42? They do not.

This will deter young farmers from taking on the responsibility of a business that leaves them saddled with debt before they have even begun. We cannot afford to drive the next generation away from farming. Once that chain of succession is broken, it is almost impossible to restore.

This debate is not just about fairness for rural families: it is about food security, which is a matter of national importance. We have learned through recent global shocks—the pandemic, supply-chain disruption and now inflationary pressures—that domestic food production is essential. To undermine family farming through ill-judged taxation would be a profound mistake that this Government will rue. Certainly, rural MPs will rue it in the days and weeks to come. It would make us more dependent on imports and less resilient to crisis, while sending a terrible message to those who feed our nation.

The policy is being advanced in the name of fairness, but there is nothing fair about it. Farming families have worked their land for generations, paid their taxes and cared for the countryside. They are not speculators; they are custodians. APR is not, as it is presented in public discourse, a loophole; it is a lifeline that allows farms to pass from parent to child without having to be broken apart. To impose a new tax burden at the point of bereavement is not reform; it is punishment for choosing to farm.

Does my hon. Friend agree that the Government need to understand that Northern Ireland represents around 3% of the population of the UK, but produces a multiple of that in terms of food produce for the rest of the United Kingdom? If that was recognised, there might be more recognition in terms of what she is trying to achieve through this debate.

I thank my hon. Friend for his comments, and I wholeheartedly agree. I urge the Treasury and the Department for Environment, Food and Rural Affairs to pause, and engage in genuine consultation with the farming community. Sit with us and talk to us. They have refused every meeting request.

We need a review that recognises the unique structures of Northern Ireland farming, made up of predominantly family-run farms and regional variations. Many suggestions have been made that are worth exploration, including in the latest Centre for the Analysis of Taxation report, as has been noted. I am not saying that it is a silver bullet, but we should sit down, talk about it and start to engage in the conversation.

At its heart, this debate is about how we as a society value those who feed us. We speak often in this House about sustainability and food strategy, but sustainability begins with sustaining the people who produce our food. We cannot say we care about the environment and rural life on one hand and on the other make policies that threaten to strip families of the land they have cared for over generations. I say to the Exchequer Secretary, with the full force of rural Northern Ireland behind me: think again. Listen to the voices of those who know the land and who understand the realities of farming life. Do not create a policy that will devastate small family farms in pursuit of a marginal tax return. Agriculture is a national asset, not a target for revenue generation.

The changes to agriculture property relief are not reform. They are an attack on our family farming. They form part of a wider Labour agenda that is anti-rural, anti-farmer and anti-common sense. That is how it is seen out in rural Britain, and it is somewhat similar to the direction of travel of our own Agriculture, Environment and Rural Affairs Minister in Northern Ireland. While our producers face rising costs and red tape, Labour’s response is more tax and more barriers. Their net zero plans are driving good farmland out of production and into solar panels and their planning rules are choking rural life and pushing young families off the land.

It is a pleasure to serve under your chairmanship, Mr Efford, for my first time speaking from this position in this fantastic Westminster Hall. I congratulate the hon. Member for Upper Bann (Carla Lockhart) on securing the debate, and she spoke with passion and with personal insight from her own family farming background. She spoke clearly about the impact on jobs and employment and on communal life in Northern Ireland, about how essential farmers are to so many of the villages, towns and communities in Northern Ireland and across the whole country, and of course about the importance of farming to family life.

The decision to reform agricultural property relief and business property relief from next April was not one the Government took lightly. Over the past 12 months, the Government have listened to the concerns of the hon. Member for Upper Bann, of other hon. Members and of external organisations. The Government and I recognise the strength of feeling on this topic in Northern Ireland and elsewhere across the country. But having listened and discussed the question with a range of stakeholders, the Government believe that the approach set out at the Budget last year is the appropriate one.

I recognise and deeply respect the contribution that small businesses and farms make to the economy in Northern Ireland and across the United Kingdom, but I and the Government also recognise the need to restore economic stability, fix our public finances and contribute to funding our public services. As well as all this, we need to make sure we raise taxes in a way that is fair for all of us.

Will the Minister take a look at the University of Cumbria report that shows that upland farmers in all four corners of the United Kingdom will, at the end of the transition, will be earning only on average 55% of the national minimum wage—barely half the living wage? Those are the same farms, often worth £2 million or £3 million on paper, that may have to spend £20,000 a year to pay off the tax. How does he think that is fair and how does it raise money for the Government coffers in a sustainable way?

I will happily look at any report any Member recommends I read, so I encourage the hon. Gentleman to send it my way.

Since we took office, the Government have taken a range of decisions to seek to restore economic stability and raise revenue to help support our public services, because it was vital to attempt to sort out the mess we inherited, so that we can invest again in the future. The decision to reform APR and BPR was one of the decisions that enabled us to do that.

Under the current system, the 100% relief on business and agricultural assets is heavily skewed towards the very wealthiest estates. According to data from His Majesty’s Revenue and Customs for 2021-22, almost half of agricultural property relief across the UK—40%—was claimed by just 7% of the estates that made claims. That is £219 million in tax foregone from just over 100 estates.

It is a similar picture for business property relief, which is linked and is treated in the same way under the reforms, with more than 50% of business property relief claimed by just 4% of estates. That is £558 million in tax foregone from just 158 estates. That contributes to the very largest estates paying much lower tax rates than smaller estates and everyday people up and down the country.

In that context, does the CenTax report not make evident sense? If we impose the full-blooded inheritance tax on the top end—on those above £10 million—are we not reaping the same tax return, while at the same time not punishing and driving out of existence those at the bottom end? Is that not logical, and is that not right?

The hon. and learned Member raises the CenTax report, and it is worth noting some points about the analysis in that report. First, the Government have consistently said that around 520 farms would be paying additional inheritance tax as a result of the reforms announced at the Budget last year.

Members from all parties have been turning to the CenTax report as an independent analysis of the Government’s reforms. That report agrees with us on the number of farms that will be affected. That independent analysis conducted separately from the Government comes out with the same conclusion on the number of farms that will be affected and it says that its proposal—the minimum share proposal, which the hon. and learned Member for North Antrim mentions—would more than double the number of estates that would pay additional inheritance tax. I do not think the right way forward is to have the number of estates that would be affected increase from about 500 to, I think, about 1,200. I have looked at the report, which has been raised by Members from all parties, but I do not think it is the silver bullet that others have concluded it could be.

The context I just set out is why we are changing how we target agricultural property relief and business property relief from April next year. We are doing so in a way that maintains a significant relief for estates, including smaller farms and businesses. Individuals will still get 100% relief for the first £1 million of combined business and agricultural assets. I know that Members know this, but it is worth setting out the position again. On top of that amount, there will be a 50% relief. That means that inheritance tax will be paid at a rate of up to 20% rather than the standard 40%.

A £1 million threshold is nothing when we take into account the value of farmland, a cottage, a farmhouse, growing crops, stocks in store, livestock and machinery valuations—all of which will be taken into account at the valuation of an estate on death. A £1 million threshold is nothing before a 20% IHT liability is put on that estate. I urge the Minister to look at this again. Farmland values are significantly higher in Northern Ireland, and I reiterate my point that Northern Ireland farmers will see a greater impact from the £1 million threshold.

I do not agree that £1 million is nothing. It is a significant increase and a significantly higher threshold than that for anyone who does not have access to APR or BPR. I understand the point about land values in Northern Ireland, but at the same time, as far as I am aware, farms in Northern Ireland are smaller than those elsewhere. It is also worth bearing in mind that the £1 million relief comes on top of the spousal exemptions and nil-rate bands, so, depending on individual circumstance, up to £3 million can be passed on by two people, free of inheritance tax, and, as has been mentioned, the payment can be spread over 10 years, interest free. That policy design is not seen anywhere else in the inheritance tax system.

The Minister is certainly sticking to the script, but can he give us even an opening through the door of the Treasury? Will he open that door and speak with the farming unions across the nation?

I thank the hon. Lady for that intervention and hope that today we have been able to have that open and public discussion to share the different views on this policy. I would be happy to continue the discussion with her and others who think that the issue is important. Just last week, I made sure to speak to individual farmers to understand their perspectives on the policy. I will continue to engage with people who will be affected by the changes, and with Members in this place. I hope that we can continue those conversations across the aisle.

Let me make progress—I can see the time is slipping away from us. Overall, the reforms are expected to result in up to around 520 estates claiming UK agricultural property relief, including those also claiming BPR, paying more inheritance tax in 2026-27. Almost three quarters of such estates will not pay any more tax as a result of the changes, based on the data. As I have already mentioned, CenTax has looked at the Government’s figures and has reached a similar conclusion. Its work concludes that of the estates that are affected, half will see an increase in their effective inheritance tax rate of less than 5 percentage points, and 86% of those estates could pay their entire inheritance tax bill out of non-farm assets.

I congratulate the Minister on his first appearance in Westminster Hall. My question is about that 5 percentage point change. This year has been a terrible year for yields, especially in South Norfolk with the droughts. That hits the profitability of farming, which is non-existent—there is not enough profitability in farming. Will the Minister share what investigations the Treasury has done on that fluctuation in profitability and the ability of our farmers to pay the 5 percentage point increase he mentioned?

The figures that I raised were from research carried out by an independent organisation, CenTax. Profitability and incomes change from year to year, of course, and can change for different types of farms—we can see that beef prices, for example, are higher this year than they have been in the past, and the Government are aware of that.

Overall, we understand that the reforms to inheritance tax generate strong views from Members from Northern Ireland and from all over the country, who are here to represent their constituents. I understand that, and I respect and admire the work of Members on both sides of the House in bringing their residents’ concerns to this place.

I know that the questions about inheritance and family businesses are deeply personal, and I do not pretend that such changes are not difficult, but I believe that the reforms get the balance right between supporting farms and businesses and funding our public services. They mean that assets will be taxed at a lower rate than most others, and, in this tough context, I think that the Government have made the right decision. I thank the hon. Member for Upper Bann again, as well as all the Members who have intervened today.