Farming Families
(1 month ago)
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Baroness Northover
To ask His Majesty’s Government what steps they are taking to ensure the continuity of farming families.
Baroness Northover (LD)
My Lords, I am glad to have secured this debate, but I am sad that it was necessary to do so. I am the daughter of a tenant farmer. My father had always wanted to farm, though he originally trained as an engineer, mending steam engines on the railway—a skill which proved useful in due course with the maintenance of his fourth-hand and fifth-hand farm machinery. He gradually built up 350 acres on the South Downs just below Cissbury in Sussex. Ours was a full-time family farm and around us were many others—a community lying behind the coastal towns.
It was these family farmers whom I thought about when I listened to the Budget. The figure at which IHT was to be applied made no sense to me. Even I knew what seemingly the Treasury did not: small and medium-sized family farms are potentially asset-rich but cash-poor.
The Government might have wished to target those who have been buying agricultural land to avoid IHT. Those landowners will probably find ways around this. Meanwhile, the Government have ended up undermining small and medium-sized family farms—hence the absolute devastation in the farming community at the Budget. I received an email from a farmer whose widowed father, in his 90s, owns the farm. There are simply no spare resources to pay IHT should, as sadly is likely, his father die before seven years have passed. I heard so many similar stories on Tuesday when the farmers gathered in Westminster.
Two Cornish farmers whom I met almost broke down as they told me their stories, just as NFU president Tom Bradshaw did when he was speaking to us in Church House, with sustained applause allowing him to recover. One of the Cornish farmers I met owns 270 acres on the Lizard peninsula. He and his brother actively farm the land, but the farm is owned by their widowed father, who is 94. It was never thought necessary to pass on the ownership of the farm, because it was protected from IHT, as had been established years back with the very intention of preserving family farms. To pay IHT, they would need to sell land, which would make the farm unviable. In the other Cornish case, the farm of 350 acres is owned a widow of 87. Her daughter’s voice broke as she told me that her mother thought she was better off dying before the change comes into effect in April 2026. The debates over assisted dying and the elderly potentially feeling that they are a burden came horribly to mind as I listened to her.
The distress is palpable. Families may have farmed their land for generations, which is why this debate is focused on seeking continuity in farming families. I know from my own extended family how extreme financial pressures in farming can play out. My mother came from a farming family—my father did not—and vowed that she would never be a farmer’s wife. Then she met my father and paid for her engagement ring from her schoolteacher’s salary, as his milk cheque had not yet come through. But a cousin of my mother’s, facing great financial pressure on his mid-Sussex farm, went out one morning with his shotgun and took his own life. His 20 year-old son had to abandon college to come back to run the family farm.
Farmers may love their lives—my father certainly did—but they are people who work all hours, whatever the weather, every day of the year. I remember the 5 am starts to check on lambing ewes and Christmas presents that could not to be opened until my father came in from milking and had had his porridge. I cannot complain. I happily revised for my various exams in the lambing field, reluctant to miss anything. I stacked bales, was an excellent sheepdog, burned fields of straw when that was allowed and knew so much more about my parents’ work and lives than did any of my school friends. But I also recall the endless financial discussions, the loans from the bank and the visits from the bank manager. My father used to say, when we had arable, sheep and beef, that one would be making a loss, another would break even and the third might make a profit—but he would never know which one would be which.
Weather, disease blights, the prices that supermarkets are willing to pay, government policies and global events that drive up the cost of fuel and fertiliser: there are so many aspects over which the farmer has little or no control. But we depend on those farms for food security, and the farmers as custodians of the countryside. Some 60% of our food comes from the UK and Governments have pledged to increase, not reduce, that.
This Budget comes after a series of blows to British agriculture. Brexit damaged farming, undermining our ability to trade into the EU and removing its financial support. The Government promised their own scheme but that has been less, late and complex, so where are we now? I am shocked that the Chancellor has not agreed to meet the NFU. If she is so sure of what she is doing, she should have that confidence. I am shocked that the Treasury did not consult Defra. Will the Minister confirm that the Chancellor will now meet the NFU, and is Defra now fully engaged with the Treasury?
The NFU calculates that 75% of farms are affected, strongly disputing the Treasury’s claim that it is only a quarter. The NFU argues that many agricultural property relief claims would have been alongside business property relief claims, making the APR claim unrepresentative of the total worth of the farm. In addition, the Treasury’s figures are skewed by its inclusion of smallholdings. Nearly 40% of holdings for which APR is claimed in England are under 20 hectares; many of these are not really working farms. Defra’s own figures show that 66% of farms have a net value of over £1 million. If families are unable to pay IHT from their limited resources—the product of a 0.5% return on their capital—they will have to sell their land, thus breaking up farms, which may also have a devastating effect on rural communities.
I have had a sense that the Government have had their fingers in their ears. I hope that this is not true of the Minister. Can she confirm that the Government’s intended targets were not small and medium-sized working family farms? I note that a Defra Minister yesterday gave financial advice to farmers on how to avoid the implications of his own Government’s measures—the irony of that. I know that many Labour MPs now hold rural constituencies. They hear the distress that this sudden policy change is causing.
I understand that this proposal is not in the current Finance Bill. That gives time, I hope, for proper consideration of the policy to be undertaken. Will the Minister accept that a solution must be sought that does not cause further damage to this sector, which has suffered so much in recent years? Farmers may be willing to work long hours in all weathers, for little reward and for the love of that life, but it does not bode well for them, or for our food security, if we pull the rug out from under them. I look forward to the Minister’s response and the contributions of others.
Viscount Goschen (Con)
My Lords, I thank the noble Baroness, Lady Northover, for bringing the House’s attention to this issue today and for her powerful speech. I declare at the outset that I am the owner of a smallholding of farmland in Devon. I am not going to cover the IHT issue; I will leave that to others in this distinguished company with much greater knowledge than I have. However, I listened carefully to the noble Baroness’s powerful speech and look forward to the Minister’s detailed response to her specific questions.
I am certainly not an agricultural expert, but I have great admiration for those who have farmed land for generations and a strong belief that a thriving farming sector lies at the heart of prospering rural communities. We are very fortunate in the UK in having farms run by families for generations. They have immeasurable expertise in understanding what works and what does not for their land. They are prepared to make a total commitment to the management of their enterprises, their stock, their ground and the habitats it contains in what is, as we must recognise, particularly in the hill-farming world, a tough, demanding and often dangerous vocation.
Farmers also have a very deep and multi-generational commitment to the environment, and tend to take a very long-term view of maintaining and enhancing the quality of the land and the habitat that they manage. However, we should not take them for granted, and this is a very delicate balance which should be preserved.
We have heard that farming is a highly capital-intensive activity that typically generates a very low return on capital employed and a relatively high risk, given the volatility of commodity prices and, of course, the vagary of the weather. It is, therefore, a very long-cycle business. What is required is a stable and settled regulatory and financial settlement, against which long-term investment decisions can be taken. That requires an unambiguous agricultural policy with very clear objectives against which a regulatory settlement can be developed. There was extraordinary frustration even before the Budget that this really was not the case. That is not a party-political view, given the total lack of clarity that the previous Administration provided in the post-Brexit subsidy settlement.
Food production goals must be put front and centre of a regulatory system. It is far too complex to be understood, but clearly many small businesses do not have the resources to drill down to truly understand the regulatory and financial environment. There is an overall concern that farmers’ voices are not being given sufficient weight in the development of agricultural policy. I look forward to the Government’s response.
Lord Carrington (CB)
My Lords, I also thank the noble Baroness, Lady Northover, for bringing this debate forward and for her extremely powerful speech. I declare my interests in farming as set out in the register.
Like others, I attended the farming demonstration in Whitehall on Tuesday, which only confirmed the desperation in the farming and small-business community in relation to the Budget measures affecting them, particularly the changes to APR and BPR. I would like to concentrate on the likely effect of these measures on growth and investment in the industry and, by association, the continuity of family farms.
When a previous Government first introduced these inheritance tax reliefs, it was on the basis that tax charges, when there was a change of ownership of a family business, were viewed as having a
“damaging effect on risk-taking and enterprise within a particularly important sector of the economy”.
This rationale remains, and is why agricultural relief has existed since the late 19th century, when estate duty was introduced. Using IHT reliefs to pass on a family farm is not about avoiding tax; it is about facilitating the long-term stewardship of the land and keeping the family business going.
Unfortunately, at present there is considerable dispute on the number and nature of farming businesses likely to be affected, so I urge the Minister to ensure that the Treasury, Defra, the NFU and the CLA establish an agreed factual base as soon as possible, as well as then having the much-needed meeting between the Chancellor and the NFU.
Remember Mark Twain’s dictum:
“There are three kinds of lies: lies, damned lies, and statistics”.
Perhaps this is case here. Current government figures for APR claims appear to be based on only one year—2020-21—and no BPR figures have been given. Clearly, this is insufficient information. The £1 million combined APR/BPR limit per person will protect only the very smallest of farms. These tend to be smallholdings operated as a sideline for people with other sources of income; they are not the businesses that provide most of the nation’s food.
The payment of the proposed IHT in an industry of low and volatile returns, which is asset rich and cash poor, will result in the sale of land, which will affect the viability of farms and inevitably have huge consequences for further investment in both working capital and fixed capital, which could also increase any future IHT liability. Have the Government assessed in any way the likely impact on growth and productivity in farming as well as the consequential effect on related businesses and communities?
Lord Taylor of Holbeach (Con)
My Lords, I congratulate the noble Baroness—my coalition friend—on getting this debate. How topical it is. The industry is in shock; the truth is that nobody expected this, probably including Defra. Farmers are having to cope with lots of other difficulties, in particular the weather. Uncertainty is one thing, but deception is another. I use that word as a third-generation farmer. I do not farm any more, but the business is in the hands of my son and my nephew and I have a grandson reading agriculture at Newcastle at the moment. This is what family businesses are about. The shock is fed by the sense of deception.
At the Lincolnshire Show, during the general election campaign, I challenged the president of the NFU, Tom Bradshaw, about the rumour in the paper. He said, “That’s only Conservative propaganda”. I had no idea, but I expected a better answer or at least an acknowledgement that this might have some bearing on things. On 15 October, I hosted in this House the presentation of the agricultural societies awards. The Secretary of State, Steve Reed, came along and was asked directly whether he believed that inheritance tax alterations were likely; he said that he had no such information and no view that they were likely to occur. I think the anger was based on that deception.
I like and admire the Minister, but what would she say if a progressive farmer asked her advice about investing in a new automated harvesting machine, for example, or whether he should buy the acreage of land up for sale next door? If we want growth in farming—I agree with the Government’s growth agenda—we need progressive farming, investment in farming and farmers prepared to back the Government’s policy.
Lord Cryer (Lab)
I apologise for interrupting the debate, but I gently remind all noble Lords that the speaking limit is three minutes. If noble Lords go well over that, we will eat into the time of the Front Benches and the Minister.
The Lord Bishop of St Albans
My Lords, I too congratulate the noble Baroness, Lady Northover, on securing this debate. I declare my interests as president of the Rural Coalition and a vice-president of the LGA. I am a farmer’s son, and one of the great privileges of my job serving in a diocese that covers Bedfordshire and Hertfordshire is going into some of the most wonderful, forward-looking and innovative farms in this country, which are at the forefront of farming across Europe.
Even though there are many successful, go-ahead farmers, there is nevertheless a huge level of mental stress among them. That has been true for many years. Sadly, there is an extraordinarily high number of suicides among the farming community. As one elderly farmer put it, “Many of us are feeling so depressed because these announcements suggest that we are not wanted and are worth more dead than alive”. He pointed out that if he manages to die before April 2026, his assets will be passed on; if he does not, the farm will probably not survive.
This cost on the mental health of so many of our farmers should not be underestimated. They are performing a fundamental service to our nation. The responsibility of government is defence of the realm, of course, but also to guarantee that we can feed the realm. If we cannot feed it, we will not have anybody here to defend within a very short time indeed, and that is why I pay tribute to organisations such as the Farming Community Network for their marvellous support for our farmers.
We understand that the Government are facing challenges and the need to raise revenue. We also know that APR has been used by some as a means of tax avoidance and treated as a loophole. We have some extraordinarily complex tax arrangements in various areas of life; is it not possible to find some way of defining those who really use their land and produce food to make a living? Can we not define that in some way, to address the loophole of those who are causing huge hikes in the value of land and sometimes taking it out of production because they have bought it as an investment? Can the Minister give us any clues as to whether some work is being urgently done on this? Will she commit to responding to the modelling done by the CLA and the NFU, so that we can really try to understand this huge disparity between the Government’s analysis and what the people on the land believe is happening? It would help us as we try to find a way through this impasse.
The Earl of Caithness (Con)
My Lords, the Budget is notable for kicking an industry that is already stressed as it adapts to the new farming regime. It is not just the bombshell announcement of the change in inheritance tax that is causing so much anger and distress in the farming community. Besides climate change, they are having to cope with accelerated BPS reduction, costing a modest-sized arable farm between £30,000 and £40,000 a year in subsidy income; minimum wage and NI increases; carbon tax on fertiliser imports; and now the less-publicised changes to double-cab pick-up tax status. Trade deals are allowing cheaper imports of products of lower standards than they are required to meet. In September this year, average earnings were £651 a week in this country. In agriculture, the average was almost 25% less at £507 a week. While the farming budget of £2.4 billion—a reduction in real terms—was confirmed, it is only for one year, making planning for farmers that much harder.
To meet their net-zero and biodiversity targets, the Government must rely on land manager and farmer engagement. That requires incentives, consistency and trust. The Government have just shattered that and will not get it back. They clearly do not understand that you cannot farm green if you are in the red. The uplands, with their many family farms, are particularly at risk, with few options within the current ELMS. It could be that these farmers decide to sell out to carbon farming, given the payments offered, which would be detrimental to other public goods and to communities, associated employment and businesses, as well as putting food security and nature recovery more at risk.
Many good, well-run family farms, especially those on our less good land, are currently not making any return and are often living on overdrafts. The Budget proposals have already resulted in banks reducing lending facilities and increasing lending rates to farmers. As a very good farmer put it to me yesterday:
“Right now I have no wish to pass the farm down to my children. Growing food is a thankless task, every year we are taking a gamble when we put seeds in soil, and each year the odds are more and more against us. The risk/reward is just not there anymore. I tell my kids to pursue other more rewarding work, where you get paid holidays, sick pay and are reasonably certain of your income”.
The Government are sacrificing the farming industry, all in the hope of raising half a billion pounds in tax revenue—that is 0.3% of the NHS budget.
Lord Colgrain (Con)
My Lords, I also thank the noble Baroness, Lady Northover, for bringing this debate. I declare my interests as set out in the register.
The Minister will know that there was no consultation about how the Budget would affect farmers. It is said that the Treasury told Defra only the day before about the APR/BPR changes, which partly explains why they cannot agree between themselves on the figures for affected farms. Both their sets of figures differ from those of the Institute for Fiscal Studies, a more reliable commentator in this instance. In the run-up to the election, the then shadow Minister Steve Reed said consistently that there would be no change to APR. His discomfort was clear when interviewed on television two nights ago after the march, and indeed at the NFU conference this morning.
Those farms that have diversified their holdings, to endeavour to create new income streams away from traditional sources of farming, now find they will be liable for BPR as well as APR reductions. This will be found all the way down the feed chain, from seed and fertiliser suppliers to hauliers and abattoirs—a significant additional burden on an already beleaguered section of the agricultural economy. The capping of BPS for the next year at £7,200 has thrown the cash flows of many farms into disarray. With no indication of how future payments will be calculated for the next two years, it is now impossible for them to realistically forward plan. Self-evidently, both these measures will discourage investment.
Most importantly of all, with reduced investment will come reduced food production. We produce only 60% of foodstuffs in this country as it is, and this will reduce further. With an inflationary budget, interest rates that will stay higher for longer—so the gilt market is telling us—and additional NI and minimum wage costs further curtailing investment, it is difficult to see how this will reflect the Government’s desire to see increased productivity. It will do precisely the opposite.
Mitigations are said to be that the price of land will fall, thus making it easier for new entrants. But what will this do for farmers whose land is collateral for mortgages or bank loans? If land is sold off in small parcels to pay IHT, with the current environmental and woodland schemes in place, it will be bought at enhanced values and taken out of food production. We must ensure that we have a productive, secure and profitable agricultural economy, and this Budget looks designed to undermine all three of these objectives.
Lastly, there has been little mention of the state of our woodlands and how the Budget will bear down on an asset class which, by its very nature, can mean that, for decades, no income will derive from it. Can the Minister please confirm today that the Government will be providing the Forestry Commission with the budgetary resources it needs to meet the targets that it has been set for tree planting by 2025?
I also ask the Minister to take back to the Treasury some suggestions: to apply 100% capital allowances and partnerships to farm buildings, extend the £1 million limit to £3 million, and exempt those farmers who are over 80 on the day of the Budget from the BPR and APR taxes.
Baroness Hoey (Non-Afl)
My Lords, I rise to express my disappointment and indeed my sadness at the Government’s attack on family farms. The Budget decision to abolish APR on inheritance tax—whatever is said by the Treasury about the dubious figures of the number of families affected—is a body blow to small family farms and is undermining the most important industry in our country. What makes it so much worse is that a specific promise was given before the general election that there were no plans to abolish APR, and it was not in the manifesto.
As has been said, this proposal was introduced with no prior involvement or discussion with the National Farmers’ Union. Indeed, it is impossible to find anyone who was consulted. I would like the Minister to confirm that it seems that even Defra officials and the Secretary of State were told only the night before the Budget. It is a measure being pushed through by the Treasury, which has long wanted to do this but was stopped by both Labour and Conservative Chancellors over the years. Sadly, the current Chancellor has given in, and now she will have to face the consequences—not just for her party but for the country. It sends a signal that the Government still do not really understand or even care about how farming works and the massive effects this will have on our rural communities.
I was born and reared in a very small farm in County Antrim in Northern Ireland, where there is a particularly large number of small-sized to medium-sized family farms. This will affect thousands of family farms in Northern Ireland. Not much unites politicians in Northern Ireland, but a letter was signed to the Chancellor just last week by every Member of Parliament, and every Peer in this House, from all the parties in Northern Ireland. That shows how strongly people in Northern Ireland feel.
Farming is not a normal business in so many ways, and even the Prime Minister seemed to understand that when he told the NFU that
“losing a farm is not like losing any other business—it can’t come back”.
Does the Minister understand that what can appear to be an affluent farm, with perhaps a well-maintained farmhouse, can be making virtually no money at the end of the year? The farm may be asset-rich, but the farming family is cash-poor.
What is so deeply worrying about this is that there has been no rural proofing. I thought that this was something that the Government said:
“Rural proofing is a commitment by government to review and examine all public policy to ensure it does not disadvantage rural areas”.
Have I missed this? Surely this could have been done by every government department before such a drastic measure was introduced. Even at this late stage, the Government could show that they have listened. Changing policy when it is proving disastrous is a mark of strength in a Government, not weakness. We all know what we want to achieve: to stop the very big, rich people buying land not for farming but just to get tax incentives—we must stop that. Surely there are some brains somewhere in the Treasury or the Government that could have come up with something that would have protected the small family farms and the livelihoods of those people and their rural countryside.
The Earl of Shrewsbury (Con)
My Lords, I congratulate the noble Baroness, Lady Northover, on securing this important debate and making such a powerful speech. I declare my interest as a member of the National Farmers’ Union. In addition, my eldest son is a land agent and my youngest son is a poultry farmer.
It is vital that young people are encouraged into the farming industry. They are the seed corn of the future for farming. Becoming a tenant farmer is often the first step into the industry for a young hopeful. In the past, council-owned smallholdings have played a significant role in this process, but over the years the number of these holdings has diminished as councils have needed to draw in their horns and realise capital assets. Many hopefuls rely on becoming tenants of private landlords. Indeed, tenant farmers look after over one-third of England’s farmland and are thus vital to food production.
Now, thanks to this Budget, they will face additional obstacles placed in their path. In this Budget, delinked farm payments have been capped from next year at £8,000, which will inevitably make it more difficult for tenants to pay their rent. The changes to employers’ national insurance contributions will make employing a farm worker more expensive. In addition, the announced changes to APR and BPR may well force landlords to take tenanted land back in hand and sell it to pay their IHT liability.
The incentive for landlords to invest in and improve their tenanted farm will be severely compromised. Who in their right mind would wish to enhance the value of their property and thus risk a higher tax bill? The banks will be far less inclined to lend to farmers and landlords—especially to tenant farmers.
Both the Government and, in particular, the Secretary of State Steve Reed—I listened to his speech to the CLA conference earlier today—have demonstrated that they are unsupportive of, and uninterested in, either the agricultural industry or the wider rural community. Throughout the run-up to the general election, and ever since, the Government have trumpeted that they are fully supportive of, and wish to protect—in their words—“working people”. I ask the Minister: in their definition of “working people”, do they include tenant farmers and owner-occupier farmers, some of the hardest-working people in the land? If not, why not?
The Government should take a deep breath and rethink these Budget decisions. They have lost the trust of the rural community.
Lord Herbert of South Downs (Con)
My Lords, I draw attention to my entry in the Register of Lords’ Interests as chairman of the Countryside Alliance.
I was proud to join the farmers’ demonstration in Whitehall on Tuesday. The sentiment was clear: farmers were already desperately worried about wider policy challenges, but the change announced in the Budget was a tax too far. The Government do not appear to understand that farms are not conventional businesses. Where farm incomes are too low to pay this new inheritance tax bill, part or all of the farm will have to be sold. If the next generation cannot afford to pay this tax, they will lose not just the chance to run a family business but their home, their way of life and their chance to maintain their family’s custody of the land.
So many talk freely of the “family farm”, without apparently the slightest comprehension of what that actually means and how valuable this institution is in the story of the British countryside. If it is so wrong that farms have relief from inheritance tax, why did Ministers, when they were in opposition, promise farmers that they would not change it? Reneging on that explicit assurance has not just fatally undermined the trust of farmers and indeed the wider rural community but damaged trust in politics generally.
Yet instead of trying to repair this fissure with farming, the Government seem intent on opening up the wound. The Defra Secretary has said that:
“Half of farmland sold last year went to non-farmers including wealthy individuals trying to avoid inheritance tax”.
Does he not understand that if family farms are broken, more farmland will be sold to non-farmers? He says he wants everyone to pay their share so that young farmers can realise their dream of buying their farm. So today, this is a Levellers’ policy to change the ownership structure of land. Yesterday, it was a redistributionist policy to help pay for the public services on which farmers rely. Only a few farms would be affected, yet somehow it would help to save the NHS.
Even if the Treasury’s claim that only 500 farms a year would be caught by this tax was right—and all the agricultural experts say it is not—that would mean that over a generation of four decades 20,000 farming families would be affected. That is not a small number. It is a seismic change that would change forever the social fabric of the countryside.
It is intolerable that highly controversial tax changes such as this should be imposed without a proper assessment of their impact and where there is disagreement on the data within government, never mind outside it. If the Government want to find a way through this and genuinely tackle tax avoidance, which is a perfectly proper aim, the starting point must be to reach agreement on the actual effect of the change. I suggest that the Government should consider appointing an independent person or body to assess the true impact of the tax changes and to advise on how to meet their declared policy objective of preventing tax avoidance while protecting family farms.
Braving the rain and the cold will hardly have troubled farmers, of all people, this week, but it is not a small thing for these fundamentally decent, hardworking people to leave their farms to come to London to try to protect their livelihoods. These are the people who care for our countryside and who put food on our tables. They run one of our most important industries and manage one of our most valuable national assets. They deserve better.
Baroness Bakewell of Hardington Mandeville (LD)
I congratulate my noble friend Lady Northover on her excellent speech. I have a Riverford box of organic vegetables once a week, including a leaflet with thoughts on farming and the countryside. I have permission to quote from Guy Singh-Watson of Riverford. On 11 November, Guy wrote:
“Should James Dyson (who owns 36,000 acres of land) or Jeremy Clarkson (1000 acres) be the beneficiaries of a tax break designed to help working family farms?
In her budget, Rachel Reeves announced that Agricultural Property Relief (APR) is changing ... Under the new rules, assets above £1m will be taxed at 20% (half the general rate of inheritance tax). This may sound generous – but £1m will buy you about 100 acres, which is far short of a viable farm. If … Reeves’ aim was to close the loophole whereby rich tax dodgers buy up land primarily as a way of passing wealth, tax free, to their children”,
which may result in small farmers going out of business.
“As a second-generation farmer”,
Guy understands,
“the impact of this change. Farming is a long-term business requiring substantial assets that … earn meagre returns. Introducing inheritance tax to our work and planning is a big deal … If Reeves, quite rightly, wants to extract from wealthy landowners some of the £40 billion we need to rebuild our country, here would be a fairer approach. Firstly, a higher threshold on the APR change. In most cases, the smallest commercially viable farm is 300 acres. Taking an average land price of £10k per acre, that would suggest a threshold of £3m before inheritance should be taxed. I can see little reason why those owning land worth more than, say, £7m should not pay the standard rate of 40%. Secondly, where planning permission is granted, land value can increase 10- to 1000-fold – and as long as the owners reinvest in more land, they pay no tax. Reeves could target these capital gains, where the landowner has added no value … Finally, APR is given to all landowners, without differentiating between working farmers and those who are buying up our country mostly to avoid tax. The unintended consequence … has been to inflate land prices, and … exclude new entrants … from farming. Taxation to encourage the sale of such estates could create opportunities for new farmers to buy land and revitalize farming rather than adding to its decline”.
We have had some excellent contributions this afternoon, and I look forward to the Minister’s response.
The Earl of Effingham (Con)
My Lords, as many of the 13,000 farmers on the streets of Whitehall flagged on Tuesday, the Government’s policy is a hammer blow to farmers, and taxation into bankruptcy is not sustainable.
I urge the Minister to listen to her own team. The Labour MP Steve Witherden has called on the Government to reveal their modelling so that everyone knows where they stand and can plan accordingly. Defra figures show that 49% of farms are worth more than £1.5 million pounds, and Defra states that there are 70,000 farms more than 200 acres in size, which, according to the CLA, means at current land rates that they will be subject to the new tax. We desperately need transparency and clarification on the model. Please will the Government provide it?
These changes to inheritance tax for family farms will mean that those who I have just highlighted, who have farmed their land for generations, will be unable to afford the tax bill, forcing them to sell their farm. Will the Minister, who I know to be a friend to our farming communities, say what impact the Government expect this policy to have on the mental well-being of our farmers, who are already at a higher risk of suicide than the rest of the population? Will she commit to publishing the Government’s data on suicides, including among farmers and business owners, for the past few years and on an ongoing basis?
His Majesty’s Official Opposition are committed to reversing the family farms tax if the Government refuse to listen to farmers before the next general election. These rules will be extremely challenging for farming families when the current owners of farms die, and many noble Lords have pressed the Government on this point already. Tenant farmers farm one-third of the farmed land in England. Can the Minister confirm whether the impact assessment for the changes to inheritance tax specifically addressed the effect these changes would have on the number of tenant farmers in the UK?
Regarding fertiliser, in the Budget the Government confirmed that carbon pricing will be applied to fertiliser from 1 January 2027. Does the Minister accept that this will see fertiliser prices rise, hammering our hard-working farmers, many of whom already struggle to turn a profit each year?
Given that this tax will hit many families who have to secure other incomes to keep their farms and smallholdings going, does the Minister accept that this tax will see many farms sold to larger corporates and foreign businesses? What impact do the Government expect this to have on our countryside?
Finally, what might the Minister say to a young woman or man today who has already spent years helping their parents working on the family farm who has just seen their future dashed by the Government’s policy? What hope does a young woman or man in that position have now?
The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Baroness Hayman of Ullock) (Lab)
My Lords, I thank the noble Baroness, Lady Northover, for securing this important debate and all noble Lords who have taken part and made their contributions. I welcome the opportunity to speak further about the central role that family farms have in this country.
I know that the noble Baroness comes from a farming family—she has expressed that on many occasions—and that this is a subject very close to her heart. She has spoken before about the number of challenges that upland farmers face. As a resident in Cumbria and the niece of an upland farmer, I completely understand the points that she makes in this area.
The Government’s commitment to British farmers, including family farms, remains steadfast. We must not forget that farmers are the beating heart of our great country. Farming and food security are the foundations of a healthy and resilient economy, the local community and the environment, and it is the hard work of this country’s farmers that puts food on our tables and stewards our beautiful countryside.
I know that many farmers have found recent years very challenging. They have faced down major issues, such as the coronavirus pandemic. They have been struggling with extreme weather events, such as flooding, and huge rises in energy costs. They have been undermined by damaging trade deals and have endured poor harvests. I know how low farmer confidence has become as a consequence of these challenges, and that is why the Government want to restore stability and confidence in the sector.
Clearly, the APR announcement has been met with great concern in some quarters, but I also draw attention to the fact that, in the Budget announced last month, the Government committed £5 billion to the farming budget over two years, including more money than ever for sustainable food production. This enables us to keep momentum on the path to a more resilient and sustainable farming sector. Environmental land management schemes will remain at the centre of our offer for farmers and nature, receiving £1.8 billion for the financial year 2025-26.
Our three ELM schemes—the Sustainable Farming Incentive, Countryside Stewardship higher tier and Landscape Recovery—are all continuing. We now have over 67,000 live agreements across all our agri-environment schemes, including 24,500 Sustainable Farming Incentive and 35,100 Countryside Stewardship agreements. This enables thousands of farmers to be supported to produce food and support the environment. There are 56 Landscape Recovery projects, covering over 240,000 hectares.
In order to focus investment on ELM schemes and achieve that more resilient and sustainable farming sector, the Government are accelerating the end of the era of payouts to large and wealthy landowners simply for owning land. The fastest reductions in subsidies will be to those who historically received the largest payments. For example, the 4% who received more than £100,000 in subsidies in 2020 will receive no more than £8,000 in 2025. The majority of farmers, who received less than £10,000 to start with, will continue to see a gradual reduction in their delinked payments but will have ongoing access to funding through SFI and other schemes, which offer funding streams for farmers who have often been ignored, such as small, grassland, upland and tenant farmers.
Tenant farmers have been mentioned on a number of occasions, and I remind noble Lords that we have announced a commissioner for tenant farmers to work to support them in their endeavours.
What is more, the Government have announced that they will rapidly release £60 million through the Farming Recovery Fund. This will support farmers, including those operating family farms, who were affected by unprecedented extreme wet weather last winter. Around 13,000 farm businesses, including family farms, will receive an exceptional, one-off payment to help with severe flooding. The Government are also investing £208 million so they can protect the nation from disease outbreaks that threaten the industry, food security and human health.
We will continue funding the Farming Community Network to support tuberculosis-affected communities by putting in place a three-year contract, starting from 1 December this year. The support, which began in 2009, provides TB-affected farmers and their families with a national, free-to-access business and pastoral advice service.
I absolutely recognise that farmers face challenges on many fronts, and we will do everything we can to safeguard the mental health of people working in the sector. Access to mental health support can be very important to farming families, who can often find themselves isolated and sometimes struggle to ask for help. The Government are working to improve mental health and access to services. I pay tribute to all those who work to raise awareness of these issues and encourage farming families who are struggling to reach out for help.
All this support forms just part of the Government’s new deal for farmers. Besides these measures, the Government are working to cut red tape at our borders and get British food exports moving again, and to protect farmers from being undercut by trade deals. The Government will lower energy bills for farmers by switching on GB Energy; introduce grid reform to allow farmers to plug their renewable energy into the National Grid; use their own purchasing power to back British food, so that 50% of food bought in hospitals, army bases and prisons is locally produced or certified to high environmental standards; introduce a land use framework which balances long-term food security and nature recovery; introduce the first ever cross-government rural crime strategy to crack down on antisocial behaviour, fly-tipping and GPS theft; and set up a new British infrastructure council to steer private investment in rural areas, including broadband rollout in our rural communities.
I turn to the points raised in the debate. The noble Lord, Lord Herbert of South Downs, asked, as did others, why the Secretary of State said when in opposition that he did not expect the inheritance tax situation to change. Unfortunately, the Government have had to take tough decisions on tax, and on welfare and spending, to fix the foundations and deliver change, including a series of decisions on tax that protect the payslips of working people. This has been possible only by making changes to a number of taxes, such as agricultural property relief, which was previously available on all agricultural properties at a rate of 100%.
I appreciate the real disappointment felt by the noble Baroness and others in the Chamber at these changes, and I assure noble Lords that the measures have been designed to protect small farms. We know, as we have heard, that the current rules have been used by wealthy landowners to avoid inheritance tax. Currently, the largest estates pay a lower effective inheritance tax rate than smaller estates. The latest figures show that the top 7%—the largest 117 claims—account for 40% of the total value of agricultural property relief. This costs the taxpayer £290 million. The top 2% of claims—which is 37 claims—account for 22% of agricultural property relief, costing £190 million.
I understand the point raised by the right reverend Prelate the Bishop of St Albans—that that there has been a great deal of discrepancy in the figures. Our figures are based on actual claims for APR and show that around three-quarters of claims each year are expected to be unaffected by the changes. Looking at asset value alone does not necessarily mean that the farm will be impacted, as it depends on individual circumstances. If anybody wants to look at the figures in more detail, they are available to view online and have been assessed by the independent OBR.
We do not think the current situation is fair or sustainable, which is why we have been making changes to ensure that larger estates contribute more than smaller ones. But we want to safeguard small family farms while also fixing the public services those same families rely on, so that they can pass the family farm down to their children just as previous generations have always done.
The Question specifically refers to the continuity of farming families. An issue that needs to be addressed is succession. The noble Earl, Lord Shrewsbury, mentioned it, although it was not generally brought up in the debate. Succession is a really important point, which is why we need to make farming a much more attractive business for people to move into. This has been the case for many years, and I am pleased that we are starting to talk about this within Defra and in government, with a long-term strategy for farming. For example, when my uncle wanted to retire, nobody from my generation wanted to take the farm on. We had seen how hard he had worked as a hill sheep farmer. We had seen that he worked part-time as a mechanic at the local garage to try to make ends meet. It simply was not attractive enough for us to decide that that was where we wanted to invest our future. Among the many discussions we have had on this, if we are going to secure family farms for the future, we need to make farming more attractive for new people who want to come into farming. The noble Earl also made a very important point about council farms, which have been sold off far too frequently. I wanted to make that point before I close, because it is important.
The noble Baroness asked whether the Chancellor of the Exchequer had met with the NFU. I can tell her that earlier this week, both Defra and Treasury officials met with farming sector representatives to look at this.
We recognise the valuable role that farming families serve in this country, and we are committed to working with farmers to enable the vast majority to pass the family farm down to their children. The new deal for farmers, and other support announced at the Budget, will support that.
I would like to make a final point. In opening the CLA’s rural conference, the Secretary of State for Defra said that he wants to listen in order to understand how government can make these changes easier to bear. I support him in that, and my door is open to anyone who would like to come and discuss this with me.