Inheritance Tax Relief: Farms

Order. Before I call the hon. Member for South Norfolk (Ben Goldsborough) to move the motion, I should inform Members that during today’s debate the parliamentary digital communications team will be conducting secondary filming for its series on procedural explainers.

Forty-nine colleagues have asked to speak in the debate, so if everyone is to get in, I have to impose from the beginning a three-minute limit on everybody taking part after the opener, apart from the winding-up speeches. Every time Members intervene, they will ensure that one of their colleagues will not get in at the end. If the hon. Member for South Norfolk, in his opening speech, takes too many interventions, or his speech goes on too long, he will prevent others from taking part. Let us all bear that in mind—short speeches of no more than three minutes, please.

I beg to move,

That this House has considered e-petition 700138 relating to Inheritance Tax relief for working farms.

It is a pleasure to serve under your chairship, Sir Edward. To date, the petition in question has received just shy of 150,000 signatures, which is a mark of the strength of feeling that exists about the proposed policy change. The petitioners argue that

“changing inheritance tax relief for agricultural land will devastate farms nationwide, forcing families to sell land and assets just to stay on their property.”

I put on the record my thanks to the diligent staff of the Petitions Committee who have secured for me, as a representative of the petitioners, meetings with the National Farmers Union, the Country Land and Business Association, the Tax Policy Associates, the Institute for Fiscal Studies and the Rural Accountancy Group. As the Member of Parliament for the rural constituency of South Norfolk, which is formed of a patchwork quilt of farms, I am honoured to lead this debate and, in doing so, to give a voice to the farmers in my constituency who have contacted me to share their thoughts about the planned changes to inheritance tax on agricultural businesses.

In 2012, my right hon. Friend the Member for Goole and Pocklington (David Davis) and I opposed the then Chancellor’s proposal to impose VAT on static caravans, as it was clearly wrong when we looked into it. Will the hon. Gentleman do the right thing, represent his rural constituents and recognise that this ruinous policy will not only destroy family farms across the country but put up food prices and worsen our national energy security? He should do the right thing, challenge his Chancellor and take some of his colleagues with him.

I thank the right hon. Member for his intervention after one minute and 26 seconds. I will try to get through my speech so that he can hear what I am about to say. As I was saying, I want to give a voice to the farmers in my constituency who have contacted me to share their thoughts about the planned changes to inheritance tax on agricultural businesses. It is their views, not mine, that I will focus on today.

Not many petitions submitted to the Petitions Committee can demonstrate not just a willingness to engage in online activism but real-world engagement with Parliament. Campaigns by the NFU, the CLA and the Campaign to Protect Rural England have been effective in drawing attention to petitioners’ concerns, as has the “Stop the family farm tax” campaign, which has placed banners across many constituencies, including mine. No matter what our opinions on the proposed policy changes, this issue has created public engagement with politics from the countryside that has not been seen in over 20 years. That is why this debate is both needed and important to demonstrate to farmers that, by peacefully engaging with Parliament, their voices can be heard. They have been effective in successfully shedding light on the daily challenges that face this fundamental sector. I thank them for that and encourage them to continue to advocate positively for rural Britain.

I want to touch on three key areas that I have discussed with the NFU, the CLA and others: first, the feeling of many farmers about the planned policy changes; secondly, the statistics that underpin the debate; and thirdly, proposals put forward by petitioners, stakeholders and experts that it is important for the Minister to hear and respond to based on the Government’s current thinking. I will aim to cover those topics on behalf of petitioners without being sensationalist. After all, a lot of emotion and politics has been attached to this debate so far, and understandably so. Nonetheless, that has arguably been done at times to obscure the rational arguments that many farmers, MPs and organisations have been making, some of which accept that agricultural property relief is likely to change but advocate for more graduated approaches.

If we take it that the Government are trying to address the large tax avoiders—the Dysons and the billionaires who invest to avoid tax—and that they want to protect real farmers, it is perfectly possible for His Majesty’s Revenue and Customs to do so. Farmers are not on pay-as-you-earn; they all make submissions, every year, on the amount of time, work and effort they put in, and the money they make from farming. Would it not be possible to give an unlimited exemption to people who are real farmers, based on their HMRC submissions?

I thank the right hon. Gentleman for his intervention; I will cover that later in my speech.

Since being elected as the MP for South Norfolk, I have made a conscious choice to sit around as many farmhouse tables as humanly possible. It has been clear to me that South Norfolk needed politics to be done differently and, instead of being on broadcast mode, I have done all I can to listen, engage and try to deliver for all constituents in my little slice of Norfolk. I know that many of my colleagues on the Government Benches have done exactly the same.

Not all conversations have been smooth but, as I said to my recent meeting with the NFU’s Norwich and Loddon branch, I will never shirk away from my responsibility to be their voice in Parliament and to raise their views with Ministers. Today, I have had the opportunity to do that as a member of the Petitions Committee, and I welcome the opportunity to lay out the arguments I have heard over the past few weeks in preparation for this debate.

Listening is really important. I have heard from my local farmers that they are caught between thinking, “Is this a mistake?” and thinking, “Is this done on purpose?” Did the Government mistakenly not realise that they were going to bring all these family farmers into inheritance tax and agricultural change? Or, worse still, was it planned all along as a way to get the land for housing and some of the net zero targets? Either could be true. Does the hon. Gentleman have a preference over which one it is? Farmers want to know whether it was a mistake that should be rectified or it is an ideal policy driven by the Government.

I am about to share the testimonies of my local farmers in South Norfolk. All too often as politicians we are keen to take the limelight for ourselves instead of listening to those on the ground who want us to put forward their opinions, which is what I am about to do.

One of my local farmers, Will, asked me to share his words:

“The government’s decision to make major changes to APR and BPR”—

business property relief—

“will spell the end for many family farms. Before this announcement, agriculture was already going through a difficult period and for many farmers, this news has left them without hope.”

Another farmer, Robert, wished for me to say:

“We are trapped with no way to mitigate against the effects of this cruel tax. Farming is who we are, it’s in our blood, it’s all we want to do.”

And another farmer, Tim, requested that I share this:

“I have spent my entire working life trying to build this farm up and have added about 200 acres in my time. I see myself as a custodian of the land which I know like the back of my hand and I feel responsible for it…to have to sell would be devastating and would go against all that I have worked for.”

Will, Robert and Tim all fear the significant consequences of the proposed APR changes on smaller family farmers, and I believe that their views are shared by many farmers who have historically operated under a 100% agricultural property relief system. There is no getting away from their genuine concerns and I know that, in his response, my hon. Friend the Minister will address those feelings in the sensitive manner required.

There can be no doubt that the arguments that land values are artificially high due to APR have credence. It is also undeniably true that we see non-farmers buying land for tax-efficiency reasons. Neither of those trends are positive but, to be clear, that does not mean that farmers are wrong when they raise concerns about paying a large one-off inheritance tax bill with anything other than the land they need to keep their heads above water, even if the bill is spread over 10 years.

I thank my hon. Friend for introducing the petition, which some Monmouthshire farmers have signed. Does he agree with the policy of our Labour Government to protect farmers through trade deals, unlike the Conservative party, which unfortunately signed trade deals that flooded our high streets and towns with foreign imports? That protection would really help the profitability of farms.

This debate has created a space in which we can talk about other issues that affect farms. The hon. Member for Epping Forest (Dr Hudson) and I had an amazing debate on biosecurity in the UK, and there was cross-party consensus on many issues. There are also the issues with the sustainable farming initiative, payments through the basic payment schemes and the future of the environmental land management schemes. There is so much we need to do, including through trade deals. I thank my hon. Friend for her intervention.

I have touched on some of our farmers’ concerns, but facts and figures are also important. I apologise in advance, but the next bit of my speech may be a bit dry. The most recent data shows that the top 7% of inheritance tax relief claims accounts for 40% of the total cost of agricultural property relief—that is a value of £219 million. The top 2%—just 37 claims—accounted for 22% of the total cost of the relief and was worth £119 million. This is factual data, and in this context the Government’s ambition for implementing this policy is sound: to end the system by which the very wealthiest in this country can avoid huge sums of inheritance tax by buying up land.

The petitioners argue that the proposed policy changes will not achieve that ambition because not just the wealthiest landowners will be impacted. The CLA estimates that capping agricultural property relief at £1 million could impact 70,000 UK farms. The NFU estimates that 75% of commercial family farms will exceed the £1 million cap, which of course can rise to £3 million under certain conditions. Petitioners and local farmers regularly remind me that not every farmer is married or lives in a farmhouse in their own name.

By contrast, the Treasury projects that around only 500 estates will be affected each year, based on historical claims. The IFS and the CLA both independently acknowledged in discussions with me that it is hard to project revenue or impact because behavioural changes are extremely hard to account for. It is clear, however, that the behavioural changes required by farmers will be enormous.

Will the hon. Gentleman give way?

I will continue for a little while.

There is a deep uncertainty among farmers about what the changes will mean for them. Uncertainty is bad for business and it is bad for farmers’ mental health, so I encourage the Government to offer as much proactive engagement and clarity to farmers as possible, including in their response to this debate.

Another primary reason why farmers are so concerned is that they already face a challenge in keeping their businesses profitable. The CLA modelled a typical 350-acre arable farm. They told me that even if they spread the cost over 10 years, the farmer would be paying 100% of their annual profits for each of those 10 years to cover the proposed inheritance tax bill. That is a decade without profit. It should be acknowledged that all individuals across the UK are subject to rules that encourage gifting in advance of death. Farmers look likely to enter this world. It is true that farmers have held on to assets for longer than the average person because of APR, and the habit is unlikely to continue.

Will the hon. Gentleman give way?

I am sorry but I have taken a lot of interventions and want to move on to the next part of my speech.

I will now touch on solutions. The petition is clear that it seeks the scrapping of the policy. I will leave it for the Minister to respond with the official position; suffice it to say that all Members in this debate can agree that land banking for inheritance tax purposes is wrong, and that land values are prohibitively expensive for many farms to be able to expand and, even more so, for new farmers looking to enter the industry. Many farmers would like to see those things change over the coming years.

Farmers have told me that if the policy is not scrapped altogether, alternatives could be considered to give the sector more stability at the same time as helping the Government to achieve their ambition of a thriving rural economy. One such alternative is a shortened taper rate for older farmers. Under that proposal, a farmer aged 70, for example, would be given two to three years to hand over their property with a 33% or 50% taper rate after one year. Farmers in my constituency would welcome the Minister’s thoughts on that proposal, as it was raised with me at a recent meeting I had with the NFU eastern team. There are, of course, various ways of tweaking such approach by age or taper time but, according to farmers, movement on that front would give those who have worked the longest under the existing APR rules the ability to arrange their affairs more quickly.

With respect to the hon. Gentleman, I am confused by his argument. He is talking about the crux of the issue: what is the scope of this tax? He voted in favour of it. He was quoted in the Eastern Daily Press as saying that it would not hit “proper farming families”. Is it his position that this tax does not hit proper farming families, or should the scope of the tax be changed? That is the crux of the issue, and with respect to the argument he has set out, I do not know what his position is, other than that he voted not to change the scope.