- Question for Short Debate
- 7:50 pm
- Asked by
- To ask His Majesty’s Government what consideration they have given to the different impacts in the nations and regions of the United Kingdom of the removal of the agricultural property relief for inheritance tax, the increases to employers’ National Insurance contributions, and the extension of VAT to private school fees.
- My Lords, the government-proposed changes that will come into effect from April of this year present a glaring threat to food security across the United Kingdom. For example, Northern Ireland’s agricultural industry provides food for over 10 million people throughout GB. Over 24,000 family farms in Northern Ireland will have no certainty about their futures, and therefore no certainty about the contribution they make to our food production and security. As farmers struggle to maintain the cost of uptake, little by little farms will be subsumed by the economic burdens, ending the line of succession necessary to continue feeding our country.Figures from HM Treasury illustrate the impact that our Northern Irish farmers have among the nations and regions of this United Kingdom, contributing £1,333 million to the UK’s total agricultural GVA—gross value added—the highest proportion of all. They give so much to our economy, yet the Government are content to deprive them of succession and stability. The Prime Minister said last year,“losing a farm is not like losing any other business—it can’t come back”.How right he was. Their contribution is woven into the social and economic fabric of this country; the farming community gives so much and is rewarded so poorly.The changes put forward by the Chancellor last autumn will be the death knell for many farming families. Recent years have been characterised by difficult circumstances for the agricultural community, be that unprecedented weather extremities or rising prices amid the cost of living. In Northern Ireland, our agricultural sector has been held in a chokehold by the Windsor Framework, as farmers are subject to onerous regulations and red tape. These inheritance tax reforms compound a serious negligence of the agricultural community, as family members who have worked on farms all their lives will be forced to sell land and assets to cover the bill of a parent’s death. Can the Government in all conscience accept that their reforms will end innumerable careers?As we consider the impact of the changes to agricultural property relief on inheritance tax across the nations and regions of the United Kingdom, it is worth noting that Northern Ireland will be disproportionately hit by these policies. Although £14,000 per acre is reported as the average price—and I could cite some instances where £24,000 has been realised for the same size of land—an acre of ground is much more expensive in Northern Ireland than in any other region of the United Kingdom. I know that because I worked on that for some 30 years of my life. Many of these small to medium-sized family farms will be made subject to the new rules, with DAERA reporting that 36% of farms in Northern Ireland own more than 27 hectares of land.I have in my hand an advertisement from one of the local farming papers in Northern Ireland, which is offering an agricultural holding extending to just over 37 acres, with a residential farmhouse. The asking price is just £1,035,000. Yet we are told that most farmers will not be caught in the £1 million trap. I think the advertisement dispels that claim; if anyone wants a copy of it, I am happy to give it to them.
- 8:01 pm
- We need to thank the noble Lord, Lord Morrow, for introducing this debate. I admire the passion and clarity of the arguments he presented; unfortunately, I just do not agree. I think the Labour Government’s adjustment—the Motion says removal, but of course it is not being removed; it is being cut back—of APR for inheritance tax, the increase in national insurance contributions and the extension of VAT to private school fees are all steps towards greater economic fairness in funding for public services.We had a debate on the school fees issue, in which I spoke and I do not wish to repeat what I said there. We are having an apparently endless debate in the Committee on the national insurance contributions Bill, and I will save my remarks on that for that arena. But I will add that the point that the money will be spent on improved public services—providing jobs and buying in services from suppliers—is always ignored by the opponents of the increase in national insurance contributions. Perhaps my noble friend could say something about the positive impact that will have on the economy, as reflected in the figures from the OBR.I am running out of time, but I will say something about inheritance tax. I do not give advice on inheritance tax, but I do read the financial pages. Clearly, until this whole debate took place, the general view was that inheritance tax was essentially voluntary; you paid it only if you did not arrange your affairs appropriately. Now is not the time to provide advice but, given succession planning and insurance, the problems can be overcome.
- 8:03 pm
- My Lords, I congratulate the noble Lord, Lord Morrow, on securing this debate. I will focus my remark on the Budget proposals threatening to break up and cause the collapse of family farms, in turn taking land out of food production while also threatening prospects for tenant farmers.This proposal is economically illiterate. The current policy was permitted in the first place precisely because farms are capital rich and cash poor. Farmers contribute significantly to the UK economy. The figures from the ONS demonstrate that, in 2022, agriculture contributed £12.7 billion to England’s GVA—of which Yorkshire and the Humber contributed almost £1.5 billion—and in Scotland agriculture contributed £2.5 billion. So why would any Government imperil that part of the economy, and how much would it raise?In the Urgent Question repeat today, the Minister admitted that figures from the OBR show that these proposals for APR and inheritance tax, taken together, will raise only £0.5 billion and not before 2029-30. As the OBR Supplementary Forecast Information Release of 22 January shows:“the yield from this measure is not likely to reach a steady state for at least 20 years”and that“This policy costing was assigned a ‘high’ uncertainty rating”,owing to the uncertainty of how farmers would respond to the measures“given the range of options potentially available. This in turn adds uncertainty to the modelling of the behavioural responses”.You could not make it up. It is a highly uncertain as well as highly undeliverable policy, representing a complete onslaught on rural life from a metropolitan elite, on top of the cancellation of the rural services delivery grant and planning laws leading to the destruction of the countryside. This is a cruel, nonsensical policy and should be reversed.
- 8:05 pm
- My Lords, I will focus on employers’ national insurance exclusively in my three minutes of stardom.An employer’s national insurance has no direct relationship to that employer’s profitability and thus to that employer’s ability to pay more tax. If an employer happens to be in an industry that habitually has payroll costs at a relatively high proportion of its total expenditure, it will necessarily attract a higher cost from the increase in employers’ national insurance than if it had the same turnover but spent a lower percentage of its outgoing costs on payroll but, for example, a higher amount on technology, data and other non-labour costs.If a business has a very substantial turnover but relatively low margins, such as a lot of the major construction contractors—and, in the past, Carillion—then its ability to pay more national insurance may be much less than it would be in another more profitable sector. Not all big businesses have equally broad shoulders—I know that is a popular government expression—and some big businesses may find the additional NIC charge very much more damaging than others. It may even be the final straw that breaks the camel’s back in some cases.Different industries form larger or smaller proportions of economic activity in different areas of the UK, and they tend to be concentrated. If a high proportion of local business activity happens to be in a high-payroll model of business, this means that the local economy is likely to be disproportionately impacted. We are hearing examples of that in Northern Ireland, but it is not just there.What I am saying is not rocket science, I must admit, but I am not sure that HM Government have considered these points of differential damage. If not, they should do so.
- 8:07 pm
- My Lords, it is entirely legitimate for the Government to target rich business owners and billionaires who have bought farmland for the sole purpose of avoiding inheritance tax, However, Jeremy Moody of the Central Association of Agricultural Valuers said recently that the reform of APR“hits the people it is supposed to protect, and protects those it is supposed to hit.In doing this, we are jeopardising our food security, the resilience of our farming sector and the very livelihoods of many farmers and their families.On Saturday last, I visited Henry Ward, who farms with David, his 85-year-old grandfather outside Lincoln. They own half the land they farm. David paid off the mortgage only last year. Five generations of the family have farmed there, and now David is made to feel a burden and told me it would be best if he were to die before next April. With an ageing population of farmers, this is a widespread feeling.The likelihood of the break-up of farms makes tenancies uncertain and undermines the job security of agricultural workers. Inheritance tax would be about £1.5 million for Henry, on a farm that had a net income last year of £45,000. Land only recently finally secured would have to be sold.The Country Land and Business Association, a rural membership organisation representing half the rural land in England and Wales, has called for a review of the changes to APR, and last week several major supermarkets echoed this plea. Will the Minister commit to further consultation and engagement with stakeholders across the sector, including family farmers, to mitigate what might otherwise be a truly disastrous negative spiral?
- 8:09 pm
- My Lords, I will focus my comments on small farms, and refer to my entries in the register.The impact of removing APR will engineer the collapse of many small family farms, as we have heard. They struggle to survive as it is. Who would have believed that our own Government would be the assassin? In our fragile countryside, the wider impact will include, among others, schools, shops, pubs, and rural engineering and other small businesses. We will witness the slow destruction of the social cohesion of these communities, which have survived for centuries. Small farms are not an anachronism; they are vital and important contributors. What do the Government think they are doing? This is a clear example of national self-harm from those elected to defend and protect.It is also economically illiterate, as we have heard. It will raise little money spread over many years, yet the damage to families and communities will be irreversible. This astonishing naivety betrays ignorance of the sector within government. We should not forget that these families work longer hours than any politician or Defra bureaucrat. They are unpaid, often husband and wife teams simply trying to make a profit. They have no paid holidays and no index-linked pension. Government is responsible for assisting small farms with help and encouragement, not wilful destruction, and Labour promised it was business friendly.What of food security and food miles? Have the Government forgotten climate change: the impact of aeroplanes criss-crossing the world every day, delivering food, much of which can be produced at home? As we heard, even the major supermarkets, which try to buy local, have written open letters asking the Government to think again. Paying IHT, even at reduced rates initially, will undeniably force the sale of small farms, destroying these small family businesses. Many Acts of Parliament are subject to monitoring and review. This is not a proposal which can be monitored or reviewed; it will be too late.
- 8:12 pm
- My Lords, I support my noble friend Lord Morrow’s Question.The tax changes made in the recent Budget will clearly affect many parts of society throughout all the regions of the United Kingdom. With reference to the increase in national insurance contributions, it is clear that additional tax burden will fall not only on employers but on other taxpayers, particularly employees, who may face wage cuts or indeed the loss of their jobs. The Office for Budget Responsibility forecast in 2024 that workers would bear around 60% of the national insurance increase, rising to 76% in the medium term. Surely, similar amounts of tax could have been raised without causing such harm to the labour market. How does such an imposition sit with Labour’s pledge not to increase taxes on working people?I fully concur with the justified criticisms that other noble Lords have made of the abolition of inheritance tax agricultural property relief on farmland. It seems abundantly clear to me that this relief is a financial necessity for hard-working farming families, who have perhaps passed their land on through many generations. Surely the law should have been amended to ensure that those who are not working farmers and who have invested in agricultural land purely to avoid inheritance tax would not be entitled to the relief. Is it not time that the Government started to talk up the economy rather than deal in the negatives?
- 8:13 pm
- My Lords, I welcome this debate and I declare an interest as a farmer and a landowner.First, I want to touch briefly on the national insurance contributions increase. This will be increased on the employers, but who will really pay for it? The people who will pay for are the consumers, the people who use the services and buy the goods, because the employer is going to pass that on. So what is it? It is really a tax—another tax on the individuals and the people of our community. That is what the additional national insurance contributions are.I move on to the inheritance tax and the APR: damaging, unfair, destructive—we have heard all these terms for the last couple of months around this policy, and that is exactly what it is. It is going to do exactly the opposite of what I believe the genuine intention of the Government is. So there is bound to be a way around it. Look at the active farmer issue: safeguard those active farmers and the small family farms and hit the bigger corporations, because those are the people who will ultimately gain out of it now.We need to produce food here in an environmentally safe way, that is good for the consumer, and that has better welfare standards than importing it from those countries that do not have the same welfare standards as we do in the United Kingdom, which we pride ourselves on.So, please, let us not throw the baby out with the bathwater here. I say to the Government: make sure that you protect those family-run farms in the United Kingdom that can produce that good food. I just believe that this is an unfair picking on the family farm that will ruin that sector, and all it will do is provide more land and more income for the big, commercialised people.
- 8:16 pm