My Lords, I am grateful to Conservative colleagues for giving me the opportunity to hold this very topical and important debate. I look forward to hearing what noble Lords have to say on the matter. Indeed, looking down the list I see that it is populated with titans from this House. I also look forward, albeit with some sadness, to the valedictory speech of my remarkable noble friend Lady Cumberlege. She has been a giant at the centre of healthcare for decades, and we are grateful to her for her many achievements.
The achievements by the Chancellor in the Budget are too many for me to list in 15 minutes, so I shall rely on noble Lords following me to elaborate on those I miss. The delinked BPS payments have been summarily cut, out of the blue, with no warning. Money that businesses had earmarked for growth or investment, or to pay the wages of a new tractor driver to undertake all the environmental work on a farm that I know of, has gone. Meanwhile, national insurance contributions have gone up and the baseline has come down. The living wage has gone up way beyond inflation again, with no recognition that this affects the pay differentiation of supervisors and junior managers who are just above employees on the minimum wage or living wage. This will have a huge effect on all business across the country. I know of a small GP surgery in Norfolk that now has another £250,000 added to its costs. Were we not told that this money was to plug the gap in NHS funding?
The cost of employment has become prohibitive, inflation is creeping up and interest rates remain stubbornly high. This Government are making the cost of business prohibitive. Then the Chancellor dropped the “A-bomb” in the Budget, which she followed with a “B-bomb”: agricultural property relief capped at £1 million as if it were personal wealth, instead of what it really is—a business asset.
The president of the CLA, Victoria Vyvyan, visited Lower Leighton Dairy in Wales a couple of weeks ago. It has invested millions of pounds in technology. It is a cutting-edge dairy, an incredible place with inquisitive animals that themselves are valued at over £1 million. Now, all that investment is going to be taxed on death. Will the dairy go to the bank to borrow £10 million again? I do not think so. Why would it bother?
All the CLA and NFU modelling shows that farmers and their businesses cannot afford this change. There is not the profitability in farms or in the diversified farm businesses to pay this tax. I have heard it said on the Government Benches that APR is a loophole—that is so not true. It is a specifically designed policy introduced in the Inheritance Tax Act 1984 to protect Britain’s family farms from being sold and broken up. For this reason, Governments of all parties have retained APR. APR and BPR are necessary tax reliefs that help people do business across multigenerational businesses.
My Lords, I thank the noble Earl, Lord Leicester, for initiating this debate. If last night’s Bill goes through, we may lose from this House a number of people who have first-hand knowledge of farming and whose going will leave the countryside immeasurably less well represented in this House.
I declare my interests as president of the Countryside Alliance and as a small livestock farmer on Exmoor—too small to be affected by the APR changes, which I will talk about. We are, I hope, debating the unintended consequences of a government policy that has pitched its figures for those likely to be affected by the changes proposed far too low. Also, it will affect those beyond whom the Government say are the target: tax-dodging non-farmers. In fact, it now catches farms with anything over 200 acres. The blow to them is exceptionally cruel, because it strikes not just at the pockets, as most tax rises do, but at a whole way of life, at people’s families, at their homes and at the futures that they had planned.
The Treasury cannot have intended to put one of my near neighbours, a widower in his late 80s and in poor health, in the position of having to die before April 2026 or leave his son and young family who share the farmhouse with him with a tax bill which his advisers say far exceeds any profit that the farm is likely to make over the next 10 years. There have already been suicides. Most farmers have a gun. I hope that the Treasury is listening, because this is urgent.
I believe the Government know that they have got this one wrong. The question is: how do they get out of the mess? I invite Ministers to sit down and correct me if I am wrong on any of the things that I now say.
Defra has not denied that it was not told about this change until the day before the Budget. Steve Reed, as shadow Environment Secretary, went around the farming groups reassuring them that it was not even “in contemplation”, and I believe he is an honourable man. The industry was not consulted, and it was not just Defra. Where was the rural-proofing to which this Government are committed? I hope the Minister will tell us, if he can, because so many other departments and policies are going to be adversely affected.
My Lords, I thank the noble Earl, Lord Leicester, for bringing this debate today and enabling us to talk about these issues.
I welcome the valedictory speech of the noble Baroness, Lady Cumberlege, not because she is going but because it gives me the chance to say something about her. She has done so much for women’s health, in particular maternity care and empowering women to choose the sort of birth that they want. She then went on, among other things, to look at pelvic mesh repairs, which had not been much talked about and were affecting many women’s lives so adversely.
I first met the noble Baroness here through a shared interest in food and health, and the food and health agenda is very relevant to today’s debate. One of the biggest issues facing farmers today—I suggest that it is bigger than APR—is the state of the food system itself. Who sells what to whom, and where do the profits go at each stage of that transaction? Farmers produce good, wholesome food; how then can it end up as ultra-processed food?
The report of the Food, Diet and Obesity Committee, chaired by my noble friend Lady Walmsley, concluded that the Government should develop a
“comprehensive and integrated long-term food strategy”
to fix our broken food system. Sue Pritchard, the CEO of the Food, Farming and the Countryside Commission, said:
“There is a clear and urgent economic case for changing the UK food system … As things are, Big Food companies are profiting from developing, making and marketing unhealthy food, leaving people with too many unhealthy options—while farmers struggle to make ends meet”.
There you have it. That is why farmers are particularly struggling. It did not start with this Government.
My Lords, I thank the noble Earl for promoting this debate, and I declare my interest as a retired farmer who has already handed on to his son.
To plagiarise LP Hartley’s famous opening lines: “The farm is a foreign country: they do things differently there”. There is a different culture, with different priorities, in this foreign country. Here is where humans work from dawn to dusk, weekends included, to harness the soil, with its miraculous ability to produce growth. Here is where those humans manage this growth to feed the nation, and where most are simultaneously nurturing the soil and biodiversity so that the next generation can also feed the nation—live as if you die tomorrow, but farm as though you live for ever.
Those nurturing these farms do it not for the small amounts of money desperately needed to keep the bank at bay but because they have come to love the land on which they were reared. The rewards are the pride they have in their own work—there is nothing better than harvesting a crop that you yourself have sown and grown—and pride in the local recognition of being good stewards. To sell would be a betrayal of their duty, a betrayal of their grandchildren, and to fail in the eyes of their community. Underlying this morality in this foreign country is a key emotion that says to them that they do not own the land, it owns them. As I say, the farm is a foreign country: they do things differently there.
These inheritance tax changes will undoubtedly force family farms to sell their assets—which they know how to manage better than any man alive, which is a key point—thus placing more land in the hands of large corporations. It is a form of madness to change this tax when food security is now more important than ever in our fragile world and when the Government’s stated priority is growth—it cannot be the growth of food, nor of business. Business property relief is vital to all family businesses, wherever they might be based, such as key local shops or those that make the nuts and bolts that keep our wider economy on track. These businesses have involved the owners, and probably their parents before them, working all hours to make a living, earning the respect of their community and paying their annual taxes to the Government year in, year out—a Government who now seem determined to undermine them and their country’s economy.
My Lords, I am grateful to the noble Earl, Lord Leicester, for bringing this timely debate. Let us not beat about the hedgerow: the Government’s Budget proposals are bringing huge stress and deep concern to the farming community, as we have already heard. For many, this is the final straw after years of challenges.
I have become aware of a particularly tragic circumstance in south Norfolk where, due to a terminal cancer diagnosis, if the farmer survives after 5 April 2026, the policy change will have a huge impact on his family’s well-being and fortunes. That pressure puts enormous strain on him, almost wishing him to die sooner, because then the farm will be safe.
What of situations of the unexpected sudden death of a young farmer? The family would not only have lost the primary breadwinner but would probably have an unsustainable farm to carry on farming.
For others considering a lifetime gift, I am hearing deep concerns about the fact that you need to be able to afford to make it. The challenge is what you are going to live off or where you are going to live, because farming businesses have been squeezed in so many ways. In many cases, there is simply not the spare cash available outside funding capital, machinery and living costs.
All of this is affecting the well-being and mental health of our farming communities. The suicide rate among male farmers is three times the national average. Thank goodness, at a time like this, with added worries and pressures, that we have organisations such as the Farming Community Network and the excellent YANA charity in Norfolk ready to provide a listening ear and practical advice.
It is not just farming finances: there are wider implications of this policy change. If small farms have to be broken up or are no longer viable, there is a major risk of multinationals buying up family farms. That is likely to negatively impact the 30 by 30 biodiversity target, as research shows that smaller farms tend to have higher biodiversity.
My Lords, I congratulate my noble friend on calling this debate and on bringing to it his customary knowledge and experience. It is a pleasure to follow the right reverend Prelate the Bishop of Norwich: that is three speakers from Norfolk already in this debate.
The tax changes for farmers announced in the Budget have sent shockwaves through every rural community in the land. People feel betrayed—we have heard evidence of that—and let down by the Government, and with reason. Why? Because the Labour manifesto promised that it would champion British farmers, because Keir Starmer’s pre-election speech to the NFU promised a constructive relationship with the farming industry and because, as we have heard this afternoon, government departments apparently cannot agree on how many firms will be affected. I believe that the Treasury is claiming that it is only a quarter—but it would, wouldn’t it? Defra, which was not consulted, claim that it will be two-thirds. This is not a good basis for a farm business plan.
All this follows cuts to grants for nature restoration and for the promotion of British food and the pausing of capital grant offers. Every rural community will be affected, and this matters. Our farmers produce 60% of our food. Food security becomes ever more important when the incoming United States President is telling the world that “tariff” is the most beautiful word in the language. It is important because farmers care for 70% of our land. They are the guardians of our countryside and environment. Above all, it is important because the rural economy depends heavily on the prosperity and stability of the farming sector. The Government so far show no sign of understanding this basic fact, although they should after this debate. They should, at least, act on the recently revised advice from the IFS and tweak their plans.
My Lords, I too very much welcome this debate. Like other speakers, I am indebted to the noble Earl, Lord Leicester, for tabling it. It is a privilege to follow the noble Baroness, Lady Shephard.
I declare my interests. Until six years ago I was a tenant farmer, having started farming in 1971 with very little capital. I mention this because I know what it is like to be under serious financial pressure. I can relate to those thousands of family farms—farmers who are worried, stressed and unsure about the future of their businesses. I know what it is like to lie awake at night knowing that there is not enough cash to pay the bills, having difficult conversations with the bank manager when the overdraft limit is exceeded, having to arrange extended credit and having lots of hire-purchase agreements.
On top of all that, those farmers who demonstrated a couple of weeks ago and came to town yesterday with their tractors have had to contend with the most extreme weather events in history. Many are embracing the change in policy—the transition to ELMS—and finding it incredibly complex and difficult to access. The rules keep changing and the RPA records are unreliable, according to a friend of mine who has been a consultant on environmental schemes for 25 years. He tells me that
“there seems to be a hostile culture within Defra and the RPA to farmers causing worry and stress over tiny details. The SFI is the most complicated scheme yet designed, mostly due to rotational options and multiple schemes on the same farm”.
The previous Government promised that leaving the EU would be a great opportunity to reduce bureaucracy, red tape and complexity. The reverse has happened. In addition, the recent decision by Defra to suspend capital grant applications is causing confusion and concern. A friend of mine has embarked on an arable reversion scheme within the SFI and everything is in place—the crops sown, the field ready and the stock purchased—but he is now unable to get the grant to put the fence up to graze the field. It does not make sense.
My Lords, I thank the noble Earl for bringing this debate to the House, as it is of fundamental importance that we discuss the impact of the recent Budget on the UK’s rural community. Obviously, it would have been preferable that the discussion on the impact of the Budget measures had been assessed before their announcement, but that was not what the Government chose on this occasion. It means that policy decisions have been made on flawed data.
We have heard much from the Government about how the changes to agricultural property relief will impact on only relatively few farming families, but the reality is somewhat different, certainly in Northern Ireland. This week the Department of Agriculture, Environment and Rural Affairs in Northern Ireland published an analysis of the impact of the budgetary measures. The figures are stark. The price of land in Northern Ireland is high, for a variety of reasons, and the latest government figures for 2026 projecting forward are that it will cost £21,000 per acre. That figure covers agriculture and business property on farms. This means that farms that own greater than 19.5 hectares of agricultural land will be caught by the new measures announced in the Budget. That is 50% of the farms in Northern Ireland. Those figures are not from farmers or their union, the UFU, but from the government department in Northern Ireland. Even more striking is that this covers 80% of total farmed land in Northern Ireland.
I think noble Lords will agree that those are devastating figures, which is why solutions will have to be found before 2026. Food security for the whole of the UK is at risk. Why do I say that? Noble Lords will say, “Surely Northern Ireland is only a small part of the equation”. It is true that we have a population of only 1.9 million, but our farmers produce enough food for 10 million people, and 6 million of them are here in Great Britain. As a former Economy Minister in Northern Ireland, I know the importance of the agri-food industry very well. It is simply the largest economic driver in Northern Ireland. That is why these new tax rules will have a disproportionate impact in Northern Ireland, on not just our rural communities but our economic well-being.
20 of 70 shown
Ironically, this Government were elected on a mandate for growth. In the rural economy we have the capacity to grow, so instead of taxing small businesses into non-existence, perhaps if they encouraged people to grow their businesses with the right policies, they might end up with more income tax.
While in opposition, Defra’s Secretary of State, Steve Reed, provided multiple reassurances privately and publicly to the NFU and the CLA that Labour had no intention of changing APR. Rural businesses now have no faith in the man or his party, although I have some sympathy for those at Defra and its hapless Ministers. They have been cut off at the knees by an unthinking Treasury.
Outside of agriculture, many small family businesses will be caught by this. According to BDO accountants, in one short month since the Budget, high street retailers had their worst slump since Covid, with November sales tumbling 5.8% year on year. Part-time Christmas job vacancies have fallen by a staggering 12.9% this year. Business confidence, as judged by the IoD, has nosedived to the lowest form since April 2020, plunging from minus 52 to minus 65.
Business leaders are pointing the finger directly at the Chancellor and her tax hikes, with national insurance contribution hikes alone expected to cost industry £7 billion. Wetherspoons boss Sir Tim Martin said:
“All democratic governments need to manage the relationship between an economic horse and the public services cart—society needs both. This Government has disincentivised and discouraged the horse”.
BPR is crucial for family business owners, helping them to plan for succession, with long-term strategies that retain value within the business to drive investment and growth. Changes to inheritance tax create uncertainty among family businesses, which will feed through to reductions in investment, headcount and turnover.
There are currently an estimated 4.8 million family-owned businesses in the UK. They are predominantly very small. Oxford Economics has estimated that 74% have zero employees, owned by people who are themselves self-employed, while 25% have between one and 49 employees. The vast majority—92%—of UK family businesses are worth more than £1 million.
Family Business UK commissioned CBI Economics to undertake research into the effects of the loss of this relief on family businesses. More than a quarter of family businesses expect to change ownership in the forecast period, which is the four and a half years that this Government might hope to have in office. Some 18% of businesses expect to change ownership between April 2026 and 2028, with a further 9% expecting to change ownership between April 2028 and 2030.
There will be a reduction in economic activity as a result of the Budget changes: 85% of family businesses say they will decrease investment by, on average, 17%. More than half—54%—will decrease headcount by an average of 10%. Four in 10—41%—are anticipating reductions in turnover, with an average loss of 7%. An overwhelming majority of family-owned businesses expect detrimental impacts from the changes to BPR, with 15% expecting to have to sell off their business entirely, 2% closing the entire business and liquidating it, and 2% locating the business overseas.
When BPR reliefs are reduced the Government believe that it will bring an increase in tax revenue and, bizarrely, an increase in UK economic activity. But the reality is that an increase in tax burden on businesses due to increased costs will lead to reduced investment, reduced headcount, reduced turnover, partial or full selling of the business, reduced stability and, crucially, reduced competitiveness versus foreign and non-family businesses that do not have to pay these charges or make tax planning a priority. The net result is that the total tax take will be smaller than the Government think they will get. In the process, they will have destroyed thousands of family businesses that are the bedrock of the country’s economy.
Every single Labour Government that ever existed left office with unemployment higher than when they came in; with this Budget, we will see more of the same. The Exchequer is expecting to raise £1.4 billion in tax revenue from family-owned businesses over a five-year period by changing BPR. However, the reality is that the Exchequer can expect a £2.6 billion reduction in total tax revenue from family-owned businesses, caused by reduced activity of those businesses in the same period: less production, less spending, less income and less national insurance contributions. The Exchequer will actually be expected to make a net fiscal loss of £1.26 billion over the next five years.
I return to family farms. Farming has a very small profit margin. We are talking about a return on capital of anything between 0.5% and 0.9% each year, from what a farm’s land, buildings, tractors, equipment and stock are worth. I predict that the impact of the brutal withdrawal of the remaining single farm payment of agri-funding, with no warning, will supress that surplus by a third—let us say a 0.5% return. A tax of 20% over a generation—typically 30 years—comes out at 0.66% recurring. That is clearly unpayable if someone’s return has dropped to 0.5% a year. Can the Minister please acknowledge the mathematics of this question?
Then there is the practicality of actually paying this death tax—because that is what it is, a tax on death. The first instalment has to be paid within six months of the date of death. This can be interest-free and paid over 10 years, but only as long as you have paid the first 10% within the first six months. But how many farms, quite complicated businesses, will even have completed probate by this time? District valuer officers have not dealt with these sorts of valuations for over 40 years—over a generation. I doubt very much whether they will be tooled up with enough resources to provide the service they should and ensure that their letter, or that of the capital taxes office, arrives within six months. What the successors pay on time to qualify for this interest-free allowance will therefore be guesswork. This is unnecessarily cruel when you have just lost your father.
The Government say that 75% of farmers claiming agricultural property relief will not be affected, but most claimants are not even farmers. Nearly 40% of land holdings that claim APR in England are under 50 acres, containing perhaps a couple of horse paddocks. These account for barely 4% of the farmed area, so the Government’s claim is specious. Furthermore, BPR is to be merged with APR, meaning that all tractors and combines—which can cost up to £0.5 million—and stock will fall into the equation too. Therefore, it is very likely that, if the owner of a small family farm dies, his or her successors will be charged IHT at the new rate of 20% on at least some of their assets, even if the land does not reach the APR threshold.
Suppose a farmer is hit with an IHT demand of £500,000; it is very unlikely that that money will be in the bank. Most farmers are either in debt or have very small cash reserves. It is unlikely that they will be able to pay that bill out of income, so they will have to sell some acres—admittedly, for quite a bit of money. However, this will make the farm less viable in future. Sale of land or assets, integral to the viability of the farm, will be the only way to get cash to pay the tax. In this case, they will have to realise an asset, with all the costs of selling it, and then from the profit of selling it, hand back a big chunk to the Government. Of course, they have just become liable for 24% capital gains tax too.
CLA modelling has suggested that, based on differing models of farm size, this may mean selling between 16% and 28% of the farm. A farm is not like a share portfolio or a collection of buy-to-let properties; it is so much more difficult and inefficient to try to sell 20% of a farm. The land cannot be consolidated or relocated.
Who will buy this land? It will not be the neighbouring family farm, as they will be in the same boat. It is more likely to be a very rich individual, to whom a 20% tax hit will not necessarily be a problem. It is much more likely to be a corporate farming business—a corporate that wants the land for energy generation or tree-planting and carbon sequestration; a charity such as the RSPB or the National Trust; a government body such as Natural England or the Forestry Commission; or a local council that may need it as a carbon land bank. What is the single factor that separates these large organisations from a family farmer? They do not die—I repeat to the Minister: they do not die—so they never have to pay this tax, whereas individuals do. That is simply unfair.
IHT is a death tax on family businesses and on small people. It is deeply unfair, when, as I have just illustrated, much larger and wealthier land-owning organisations are exempt from it. I would like the Minister to answer that. One thing I hope this debate does is to shine a spotlight on IHT generally. As I understand it, 96% of people in this country do not pay it and it does not raise a great deal of money.
What we are seeing now in some sections of the Labour Party is the old-school socialist view that land should not belong to an individual: yes, you can own a house, but land should belong to the state. That was Lenin’s view, and he deliberately expropriated land from an enormous number of people, with disastrous effect. Following the Budget, the Deputy Prime Minister was heard to say that, when a farmer dies, it is right that some of the value of the land comes back to the state. Really?
As Jeremy Clarkson said, if Rachel Reeves had wanted to attack landowners such as himself or Sir James Dyson,
“she would have used a sniper’s rifle, but she’s used a blunderbuss”.
I hope that, at the end of this debate, the Labour Government will have gained a greater understanding of the issues at stake. They must surely reconsider this disastrous Budget, or are they really determined to be this tribal and venal? If they are, it will not end well for them. This is structural vandalism of the farming ecosystem by a Government that did not consult, did not listen, did not learn and did not see the flaws in their plan, and that now need to stop, listen and think through the harm that their Budget proposals will cause. They need to step back and understand that APR and BPR are not tax loopholes; they are enablers of successful tax-paying businesses that take multiple generations to achieve the ability to operate in a highly competitive, difficult and volatile market.
Net zero requires investment from the farming industry, yet this policy is a disincentive to invest. What about growth? This policy means a cutback on each owner’s death. Small farmers may be asset-rich, but the money is in the farm, not in the bank, so that means they will have to sell land, and possibly even the whole farm. Surely you do not increase productivity by selling off the means of production.
If the land has to be sold to pay, who will buy it? The noble Earl has made some suggestions. All those people who are likely to buy it will be either industrial livestock farmers, who we condemn abroad, or the environmental groups and charities that will plant trees and rewild or find better ways of using the land to make better returns. Where does that leave us on food security, given that the food strategy which the Government have embraced says we must increase our production?
What about rural unemployment, given not only the wage rises which apply to all employers—national insurance and the minimum wage—but the rampant inflation in the cost of farm inputs? This is the last straw, and a disincentive to farm for the future and take people on.
I am very much afraid that my Government—and I stress “my” Government—have underestimated public affection for family farms. When you turn on the television or the radio, it is there. It is not just Clarkson, there is the Yorkshire Shepherdess, “The Archers” and “Lambing Live”. This rightly is seen as an attack on a way of life which is held in great affection, far beyond the farming community. In the last few weeks, all those trees came down in the storm. Who cut them up and took them off the road first thing so that people could get to work? It was the small, local farmers.
Good will towards my party in the countryside was higher than I have known it for many years at the time of the general election. That is no more. There are over 100 Labour MPs representing rural seats. Good will and trust are essential for the success of any Government, even one with a large majority. It is surely time for the Government to sit down with the agricultural industry and put these figures right.
There are things not in the power of the Government that really are affecting farmers very adversely, including extreme weather challenges—that has to be a huge one—and biosecurity incidents, as was highlighted at Question Time today. Then there are the things that the Government are responsible for, such as the tax changes. I am sure that much will be said about APR today, so I will simply say that I feel that the Government set the threshold too low, especially considering land prices.
I want to talk more about the massive increase in land values that has had such a swathe of negative effects. It is much harder to enter farming now, for example. I believe that some of the massive increases in land values should be returned to the public. The Government need to devise how to do that, rather than hit simply on family farms.
Guy Singh-Watson, who made Riverford Farm in Devon so successful, with its vegetable box scheme, made the point that he farms both in Devon and in the French Vendée. In France, the price of land is less than a 10th of its equivalent in Devon. Why is that? I spent a bit of time in France, and I have seen that you cannot just buy up land speculatively because the Government make sure that the people buying it are serious farmers and are qualified to farm. Even the local mayor has a say in that. Some noble Lords may say that there is too much control there, but it has meant that land is available for genuine farmers.
We are a nation of shopkeepers, of family businesses. It is the essence of what we are and what makes us so resilient. So why attack rural and other businesses in this way, for comparatively small reward, when your declared priority is economic growth? Surely a priority is a policy that trumps all other interests and prejudices. It makes no sense. It also shows a complete lack of understanding of what makes our countryside tick and re-emphasises my point about farms and family businesses being a foreign country to our political masters. If this goes through as it currently stands, they will never be forgiven.
A second impact, which I am sure the Government will be concerned about, is around community cohesion. Farming families have played, and continue to play, an important and valuable part as community leaders, volunteering in their neighbourhoods as local councillors and churchwardens, and running agricultural and county shows. Fewer farms, fewer people.
So let me dare to ask the Minister whether he will pledge to do two things. The first is simply to raise the threshold on APR. The Treasury’s own figures estimate that a substantial amount of the money raised through these reforms will come from the wealthiest 2% of farm estates. Raising the threshold will not make a great deal of difference in terms of tax revenue. Secondly, please tweak the rules around tax-free gifts made in the seven years before death and exempt people over a certain age, so that farm owners who die in the next seven years have an opportunity to make tax-avoiding gifts in light of the Budget changes. This seems to be eminently sensible and compassionate.
Wendell Berry, the American poet, essayist and farmer, has reflected that the agricultural economy has almost always, from the earliest times, been slanted against the primary producers, the real risk takers, the real workers. Our farming families feed our nation. They provide nature benefits. They contribute to the warp and weft of community life. We need them. We owe them a fair system. I urge the Minister to choose a positive way forward.
I have comments from three businesses based in north-east Norfolk. Nicholsons, a farm machinery business established in 1937, faces a huge annual rise in wage costs from national insurance increases. It says that uncertainty over the the future of family farms will reduce its income, with the consequence that:
“Investment in people, infrastructure and technology will have to further reduce … firms will fail”
and jobs will be lost. The second comment is from a large animal veterinary practice with 23 staff. Because of the national insurance increases, it has to increase its fees. The director fears that, because of the Budget changes for farmers, the practice and all such practices will lose many of their farm customers, with dire consequences for the whole veterinary profession.
The third comment concerns grain merchants. Mr Dewing writes that, as a result of tax changes for farmers, the farming industry will focus on holding on to cash, reducing capital investment, employee numbers and investment in diversity projects. He adds:
“The Budget is killing employment, investment, UK family businesses, rural economies and structures, confidence in government, and the future of an industry which once ‘dug for victory’”.
The Government must change their mind.
Against this background, the Budget decision on inheritance tax has been the final straw. I applaud the Chancellor on achieving a remarkable feat. She has succeeded in completely uniting the entire farming sector: landowners, owner-occupiers, tenants, the NFU, the CLA, the TFA, the NSA, the CAAV and numerous other organisations. The decision to change the rules on APR and BPR demonstrates a complete misunderstanding of the way the countryside is managed and the crucial role of the family farm.
There is confusion about the numbers affected. To take a snapshot of one year, as the Treasury appears to have done, is far too simplistic. The CAAV is quite clear that, over a generation—and that is what we are facing here: the ability of one generation to pass on to the next—75,000 businesses will be affected. This is potentially devastating for farming families.
A lady spoke to me after the demonstration a couple of weeks ago. Her aunt, who is 86, asked whether she thought the assisted dying Bill would be in place next year, because she needs to die next year before the changes to inheritance tax take place. Otherwise, her family will have to sell the farm.
This is a big mistake. The Treasury needs to review the detail. To try to capture those who are investing in land only as a tax shelter is perfectly understandable, but to destroy thousands of family farms in the process is unacceptable. Farmers are not good at succession planning, and many have been advised not to do it. Give them more time to prepare. Raise the limit. Do something to reduce the risk of potential devastation that this Budget will cause.
Incidentally, I feel rather sorry for the Defra ministerial team, as the noble Baroness, Lady Mallalieu, stated. They worked hard before the election to build relationships with farmers and growers with significant success, and the Chancellor has chopped their legs off. Farmers feel undervalued and unsupported. This inheritance tax issue needs to be reviewed.
The next issue is that these tax rules, if implemented in full, will cut to the very heart of the fabric of rural Ulster. If farms have to be sold to pay tax bills, families will leave the rural way of life. That will bring hugely negative changes to our society. Schools, rural shops, churches, sporting organisations—life will fundamentally change if there are fewer rural dwellers. Of course, farmland is not just an asset; it is a legacy, a symbol of perseverance, and a promise to future generations. We have to allow that promise to be fulfilled.
The well-being of our rural dwellers is also of huge concern. We all know that farming is a solitary profession, and mental ill-health is often an undiagnosed issue. The implications of the tax burden have added to farmers’ worries, and that cannot be dismissed. I commend the National Farmers’ Union’s president on trying to explain the emotional stress yesterday to the Select Committee in the other place. Whether you are an elderly farmer worrying about estate planning or a young farmer wondering whether it is worth the worry taking on the debt that you would have to take on to keep the family farm going, it is a really worrying time. Yes, farmers are particularly bad at succession planning—I used to be a country solicitor before I entered politics, so I know it all too well—but they often work for very little just to have the hope of handing on the farm to the next generation. This policy threatens that hope and adds to the growing burden on farmers. They are already under pressure from government regulation and supermarket powers.
So solutions have to be found. Of course, I would prefer the tax to be scrapped but, if that does not find favour with the Treasury, please set the threshold much higher—so you are not attacking the rural way of life—or have a definition of an active farmer and exempt active farmers from the tax. That would deal with those who are buying up farmland for other purposes. That is what happens in Germany and the Republic of Ireland, so solutions are available. I really hope the Government take the time to listen to those solutions, because farmers are fair people and it is wrong to attack their way of life.
Small Farms and Family Businesses · Order Paper · Order Paper