Small Farms and Family Businesses

Thursday 12th December 2024 Lords Chamber

Motion to Take Note

14:16

Moved by

[The Earl of Leicester]

That this House takes note of the impact of the Government’s budget proposals on the future of small farms and family businesses.

[The Earl of Leicester (Con)]

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.

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.

14:33

[Baroness Mallalieu (Lab)]

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.

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.

14:38

[Baroness Miller of Chilthorne Domer (LD)]

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.

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.

14:42

[Lord Cameron of Dillington (CB)]

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.

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.

14:46

[The Lord Bishop of Norwich]

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.

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.

14:50

[Baroness Shephard of Northwold (Con)]

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.

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.

14:55

[Lord Curry of Kirkharle (CB)]

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.

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.

15:00

[Baroness Foster of Aghadrumsee (Non-Afl)]

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.

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.

15:05

[Baroness Cumberlege (Con) (Valedictory Speech)]

My Lords, it gives me great pleasure to follow the noble Baroness’s interesting speech, for which I thank her.

Farming should be a really important subject of concern. In this country, we are 50% reliant on food from abroad. The Government may well stock vaccines for pandemics, increase GP numbers and cut health service waiting lists—all moves to appease critics—but we must never forget that the first essentials for life are food and water.

I have lived in tied houses on a farm that my husband managed. I witnessed the collapse of 10 smaller farms, now incorporated into one big unit, which, like so many industries, has had to change. The farm is now highly mechanised and efficient, but the margins are tiny.

I think the policy of taxing large, efficient farms out of existence in an uncertain world is wholly ill-conceived. These enterprises will become fragmented. Less efficient farmers have already been reclassified as not being working people. How come? I know from experience that producing food is a seven-day-a-week job.

While my husband farmed, I was able to bring about some changes in the NHS—for instance, giving nurses the right to be practitioners and to prescribe. That was part of women’s liberation, as well as using the workforce much more effectively.

We closed great, out-of-date Victorian mental institutions. So-called fallen women, handicapped people and others with shell shock lived in those institutions. I thought that was a poor existence, so we did close them and put the people into the community—or gave them an opportunity to be in the community.

With friends, I started one of the first rural playgroups for children aged under five. The playgroups were opposed at the time by a formidable neighbour who had no children of her own, and I was told by her in no uncertain terms, “Mothers should look after their own children, day and night”. Well, some of us did to some extent, while some of us had relatives who were very forgiving and who took part in bringing up my children.

Changes are important. I remember clearly going to boarding school at the age of eight, and the first question I was asked was, “My dear, where is your ration book?” Today there is a belief that food will always be plentiful and affordable. However, that is really not a sustainable policy for the long term. Would any Government expect manufacturers to close or sell off part of their factory? That is what they expect the agricultural industry to do. Their policy is that the expected shortfalls will be made up by imports from abroad.

We should remember the thousands who lost their lives in the wartime convoys trying to bring food to Britain as the population—including MPs and Ministers—drift further away from farming roots, in the knowledge that many people will have scant ability to grow food. We must support farmers, and it is time for food to be priced realistically.

I beg noble Lords’ patience for just a minute. It is no secret that this is the last formal occasion that I have to say a few words in your Lordships’ House in this wonderful Chamber. I want to thank so many—the army of secretaries, advisers, professional staff and, not least, all the Members of this House. I have learned so much from all my colleagues and I have enjoyed my time here. I am truly grateful for the debates, the incisive questions and the contributions made by all noble Lords that enrich all our debates.

Of course, with regrets, I leave. But I know that this House is in very good hands and I look forward with excitement to reading Hansard—did you know that Hansard can be exciting?—and discovering the progress on some of the subjects that really are so dear to my heart.

[Noble Lords]

Hear, hear!

15:11

[Lord Taylor of Holbeach (Con)]

My Lords, it is a real privilege to follow my noble friend Lady Cumberlege. She has been a remarkable Member of this House and we are very lucky to have had a speech which was so characteristic of her. My noble friend was in this House 16 years before I came here, and I came 18 years ago. So she has been here an awfully long time and has done so much.

The House listens to her in a way that it does not listen to others. When she rises, whether at Question Time or in debate, the House gives way to her, because Members know she is an interesting contributor to whatever is being discussed. She has done so much. She is really well known. She was known in my household when my wife was involved with social services in Lincolnshire. She has been involved in all these reports on community nursing and maternity services and the emancipation of women through medical care and home care. My noble friend was also a Minister in the Department of Health when my noble friend Lord Waldegrave was the Secretary of State. He and I share offices and I know he pays tribute to her as well.

Hers has been a dedicated life, lived for others, and she has achieved so much. She is quietly spoken but, as her former Chief Whip, I can say that she is steely of purpose. I think her vocation came from her early education. She described being taught to care for others and, by caring for others, she herself has taught us that we can help, wherever we sit in this place, by caring for other people.

I turn now to the subject of the debate. My interest in this debate is twofold. People will know that I am a farmer and grower. In fact, I am retired from my family business; like others, I have moved on. I moved here House instead. It is a very important business in its sector.

I believe that this particular debate gives us a chance to show the impact this will have on businesses such as my own family’s. Fortunately, it has not affected my generation but it will successive generations. I have a grandson at Newcastle University—the right reverend Prelate the Bishop of Newcastle will be following me later—who wants to go into the family business. Our customers are small businesses in the main: garden centres and retailers. We all face the imposition of a tax on death that is a total disincentive to what really matters.

I believe in the Government’s growth agenda and I want it to succeed; I want this Government to provide this country with economic growth because that will furnish us with everything that we plan for ourselves and our colleagues, in terms of care, education, training, job opportunities and everything else. I believe they have made a great mistake with this tax, because they have destroyed the concept of investment and that is what is needed for people to make progress in business. If investment is going to be taxed on death, it is a discouragement from making that sort of investment.

We need to achieve food security in a global world that needs food and be efficient in the way we produce it. Our farmers need to feel that they are doing the right thing by investing in the future of their business, and they will be discouraged by the concept that they may well be taxed on the benefits that they are giving through their life’s work within such a business. It is a global task, and the farming industry needs investment just like any other.

I asked the Minister about this, and he replied to my Written Question on Monday about the consequences of this tax. There is no impact assessment; there is no concept in Government of what the impact of this tax will be. I think we have all gathered what it may well be from this debate, but there is no impact assessment. Instead, I got a scenario about how the tax will be levied.

I am president of the Institute of Agricultural Management. I believe in investment, in progressive agriculture and that we can do better than we do now. We are doing well now but we can do better, but only if farmers are encouraged to invest. As was pointed out by my noble friend Lord Leicester in moving this debate, investment will actually increase tax yields and give the Government more money. I cannot, for the life of me, think why they chose to take this path. I regret it very much and feel that it is a great mistake.

15:18

[The Earl of Devon (CB)]

My Lords, it is always a privilege to follow the noble Lord, Lord Taylor. It is the season, so I will try to lighten the mood by offering some congratulations. The first is to the noble Baroness, Lady Cumberlege, for her amazing valedictory speech and remarkable career. I live on the west bank of the River Exe and grew up in the shadow of Exminster’s Starcross and Langdon hospitals—mental institutions that she described. She really transformed our community with that work, so I am hugely grateful. I also congratulate the noble Earl, Lord Leicester, for calling such an important debate and gathering such a wise group of heads to address this important issue; and the Minister and the Government, for they have managed to convert London into Paris or the Thames into the Seine. We have Monet at the Courtauld and revolting farmers across the boulevards of our fair city.

I note my interests: I am a farmer in Devon and inherited farmland and a local long-owned family business relatively trouble-free under the previous rules. I am also a lawyer at a law firm, based in the south-west of England and London, that advises numerous rural businesses. I congratulate my partners, who will have an awful lot of work over the next few years advising these poor rural businesses on how to deal with this terrible and very surprising change in the tax regime for rural family businesses. I also congratulate the Government, who achieved something quite notable: the urban population, who do not really know how rural businesses work, were surprised that farmers are so wealthy in assets and did not pay any inheritance tax. This has cast a fresh light upon how our farming and rural businesses work.

There are some good things about this policy. I remember, as a relatively young man, being incredibly disappointed when my father discovered that he could own the family business until death and that that was to his and my benefit. It meant I would not get my hands on the business until very late in life. Speaking seriously, there is a good thing in this policy—I will give the Labour Party some credence here—which is that we will get farms and family businesses into the younger generation’s hands sooner. We have complained for years about flatlining productivity in the rural economy and farming. If we can get these businesses into younger and more ambitious hands sooner, that may be a good thing. However, the way the Government have done it is so cruel.

We have heard from the noble Baroness, Lady Mallalieu, the right reverend Prelate the Bishop of Norwich, and the noble Lord, Lord Curry, about how individual farmers—those in their 70s and 80s, who have planned their lives and their inheritance based on these reliefs—are in an incredibly cruel spot right now. I implore the Government please to think again: they do not need to change the policy, but please soften the impact, as some people are really suffering.

Many other aspects of this Budget are challenging for rural businesses and farmers. The inheritance tax burden is apparently payable over 10 years, but delinked payments for BPS have decreased to £7,600 a year without any notice. No one has mentioned the carbon border tax. Importing fertiliser, which impacts every single piece of food produced in this country, will have £50 a tonne added by 2027. That will impact all of our food production. The increased cost of employment in rural businesses is incredibly cruel too. So please think again. I look forward to the rest of this debate.

15:22

[The Earl of Caithness (Con)]

My Lords, I congratulate my noble friend Lord Leicester on this debate, and I take this opportunity to say a fond goodbye to my noble friend Lady Cumberlege—and not only that but a thank you. She is one of the few people who have changed this country for the better.

Promoting growth is supposedly the Prime Minister’s number one priority:

“productivity growth in every part of the country”,

screamed the Labour Party manifesto. That is absolutely a laudable goal, but is it realistic? Unfortunately it is not. Growth comes from the private sector, not state employment. Productivity in the state sector is below the level seen in 1997, yet state workers have been rewarded with significant pay rises, which will be paid for by the private sector.

The £40 billion in tax rises in the Budget, so applauded by the Cabinet, was

“an egregious act of self-harm”.

It will

“kill entrepreneurship, snuff out wealth creation and stunt growth”.

The Government would do well to heed these words of Sir James Dyson, one of Britain’s leading industrialists.

The consequences will be severe, and we have already witnessed the sharpest fall in hiring for four years, with huge damage to the employment prospects of many and the inevitable increase in unemployment to come. It is a remarkable feat, even for this Labour Government, to alienate the entire food sector in under six months in office. The most recent Defra English farm profitability data demonstrates that 30% of English farms lost money in the last year, with another 25% making less than £25,000, even when all the income streams were accounted for, with hill and upland farms suffering the most. Does the Minister realise that we have lost 7,000 farm businesses since 2019?

There were no significant pay rises for farmers. Instead, the Government poured petrol on to the flames of an industry in crisis. In addition to the ideological attack on farmers by changing the APR and BPR rules in the Budget, there have been announcements on changes to employee national insurance and 4x4 double cab tax rules, an immediate reduction in BPS from original timescales, no increase in ELMS payments despite input cost increases, a carbon tax on fertiliser imports from January 2027, the pausing of most of the capital grant schemes, the Defra review into farming rules for water guidance and delays to SFI applications.

Furthermore, climate change is resulting in more extreme rainfall events, which is challenging the ability to farm heavy land. Its viability was formerly aided by grants for drainage and the advent of pesticides and fertilisers. About a third of lowland England is relatively low-grade clay soils, and these fields are becoming waterlogged and unviable. This will have a significant implication for food production and food security. A catastrophe is unfolding in front of our eyes and the Government do not seem to care.

15:26

[The Lord Bishop of Newcastle]

My Lords, I begin by paying tribute to the noble Baroness, Lady Cumberlege. I commend her speech and her lifetime of bold interventions.

Stretching from the Scottish borders to the River Tyne, my diocese is largely made up of farming communities. For many, farming is about much more than making a living and has been their way of life for generations. A tractor horn outside this Chamber yesterday loudly proclaimed that “Old MacDonald has a farm”,’ but for how much longer?

I appreciate that the Government intend to target wealthy landowners buying land to avoid tax, but I fear that they have not adequately considered the impact on tenant farmers. The north-east has the highest regional proportion of tenant farmers. I pay tribute to my noble friend from the north Lord Curry of Kirkharle, who spoke from his own experience. Following the Budget, farming tenants are now faced with a greater lack of security. What assessment has been made, and will be made, of the impact that the changes to inheritance tax will have on tenant farmers?

Furthermore, only 32% of farming land in the north-east is arable. The national average is 52%. Most farmland in the region is used for upland and hill sheep farming. These farms receive a lower income, with the average business income for hill farms in 2023-24 being £23,500. Many farming families in Northumberland are cash poor, and hidden poverty is widespread. Hill farming requires less land than arable farming, meaning that under the new tax reforms, if a family is forced to sell their land to pay inheritance tax, in many cases there would not be enough land left to make the farm viable. As a farmer at the Hexham auction mart said last week: “If I die, that’s it”. What assessment have the Government made of the impact that the changes to inheritance tax will have specifically on upland and hill farmers?

I finish by sharing the situation of a farming family in Northumberland, where three generations are living in one farmhouse, with five adults and three children. Three of the adults have full-time jobs away from the farm to make ends meet but spend their evenings and weekends working on the farm. Last week, the grandfather had to take time off work to sell his sheep at the auction mart. Families such as this one illustrate how farming is not simply a way to make money but their way of life. If a death were to occur in this family, three generations would be left without their home.

I urge the Government to truly consider the impact of these reforms and encourage them to have continued dialogue and an assessment of the impact on farming families and rural communities—the people to whom we owe the food on our tables.

15:29

[Viscount Goschen (Con)]

My Lords, I remind the House of my interests in owning a small farm in Devon, not too far away from that of the noble Baroness, Lady Mallalieu, to whose speech I listened with great interest. I hope that her noble friend on the Front Bench listened with equal interest and took note of the very powerful arguments that she and other noble Lords have put forward today.

I start my remarks by paying tribute to my noble friend Lady Cumberlege, whose valedictory speech, to which I listened with such care, was so splendid. She really is an extraordinary person—an extraordinary Member of your Lordships’ House. She is kind, compassionate, committed and deeply knowledgeable—and great fun, if I may say so. Whenever I see my noble friend, I am taken back to 31 May 1992, the day when I made my maiden speech—from the very seat that the noble Lord, Lord Livermore, occupies at the moment—holding that Dispatch Box as a rather windy 25 or 26 year-old. My noble friend was kind enough to hand over the keys to the famous Community Care (Residential Accommodation) Bill, which she allowed me to take to Second Reading. I am deeply grateful to her for her trust in me and for all the guidance that she has given me since that time.

The House is full of experts on farming, and I am not one of them, but I have listened and learned a lot from the debate today. I will use my small allocation of time to look at the broader context of farming. It seems to me that a gulf has arisen between the regulators and the regulated, between government and the farmers, and perhaps between Defra and other arms of government. That is a regrettable situation. The industry needs to have confidence that the Government are knowledgeable, deeply understand the issues that farmers face, and are able to be their champion and make representations within the broader government effectively. That is not the case at the moment. In case the noble Lord on the Government Front Bench thinks that this is a party-political point, it really is not; it is a gulf that has grown up over a long period of time.

The farming industry is unique in its national strategic significance, but much of it is delivered by small, multigenerational family businesses. It is hugely capital intensive, as we have heard, but it produces very small returns. It is intertwined with national and international government policy, yet the farmers are also the instruments of delivering government environmental policy. Farmers take their role as stewards of the countryside incredibly seriously, but they need to understand what the Government’s agricultural policy is. To my mind, it is not clear. The weight with which food production is put right at the centre of that strategy is not clear. Farmers have to deal with a great deal of complexity in interacting with Defra, with perverse incentives not to grow food. It makes one wonder at the strength of the commitment at the centre to food production.

A great indication of the strength, confidence, wisdom and maturity of a Government is that they listen when powerful arguments are put to them. I hope that the Minister on the Government Front Bench will demonstrate that when he replies to the debate this afternoon.

15:33

[Lord Bilimoria (CB)]

My Lords, the Government’s Budget proposals talk about addressing the £22 billion fiscal gap, but, as a result, they are undermining the viability of our family-run farms, disrupting food security and having a long-lasting effect on our rural communities. I refer to the reform of agricultural property relief, or APR, and business property relief, or BPR. This will, in effect, lead to 20% tax over a value of £1 million, on top of a national living wage increase of 6.7%, which will raise labour costs for farmers, as well as the phasing out of direct payments.

I think that many farmers will regret voting for Brexit, as many of them did, and losing so many subsidies as a result, which have not been replaced by Governments since then. On top of that, there are food security concerns and the combined effects of rising costs, land consolidation and a reduction of direct payments, all destabilising food production. The UK’s reliance on food imports increases the risk of food insecurity, with the global supply chain disruptors.

I thank the noble Earl, Lord Leicester, for initiating this debate. As has been said before, we produce 60% of our food for consumption but we rely on imports for nearly half of it. However, domestic food production is vulnerable to many factors: climate change; the prices offered by purchasers; high energy costs—in the UK we have some of the highest energy costs in the world; the international supply chain—we saw fertiliser costs shooting up after the Ukraine war started, for example; labour shortages; biodiversity and water quality; and biosecurity and animal health.

The Government say that 73% of APR claims come from estates with qualifying assets worth less than £1 million. But the National Farmers’ Union says that 75% of farmers are affected. Will the Minister clarify why there is a huge difference between what the NFU thinks and what the Government think? They say that the agricultural property relief addresses a loophole, but Alistair Carmichael, chair of the Environment, Food and Rural Affairs Committee, said:

“Agricultural property relief is not a loophole; it has been a deliberate policy of successive Governments for the past 40 years, designed to avoid the sale and break-up of family farms … These changes will have a ripple effect across the whole rural community.””.—[Official Report, Commons, 4/11/24; col. 24.]


The NFU has said why it feels that the Government’s assumptions are flawed. It says that there is a failure to adjust for inflation, an unfair inclusion of non-commercial holdings and an underestimation of the tax burden of APR and BPR combined. Does the Minister agree? Further, on the economic impact on working farms, the NFU says that there are unsustainable tax liabilities. It says: “Medium-sized firms will face annual inheritance tax instalments that far exceed their profits”. Of course, it is a fact that farming is asset-rich and cash-poor. On top of that, NFU analysis shows that the £1 million threshold means that cereal farms will see their returns entirely wiped out by their tax liabilities. Dairy farms will lose approximately 50% of their returns to inheritance tax. On top of that, there will be implications for food security, the undermining of domestic food production, the disincentivising of long-term investment and a contraction in available farmland.

I do not know who is advising this Government. When I was president of the CBI, Keir Starmer and Rachel Reeves had good intentions but, since coming into government, they have upset pensioners, farmers and family businesses. They have upset the business community with a £40 billion tax rise and a £25 billion national insurance rise. They have upset employers with regulations that will make us less competitive, at a cost of £5 billion. The Government rightly want economic growth, but how can we have economic growth if we kill the goose that lays the golden egg?

This country’s farmers are precious; they are the backbone of our country. We need to appreciate our farmers and always be grateful for our farming community.

15:37

[Lord Harlech (Con)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Bilimoria. I pay tribute to my noble friend Lady Cumberlege for her eloquent valedictory speech. I have been moved by so many speeches in today’s debate, including those of the noble Lord, Lord Cameron of Dillington, and the right reverend Prelate the Bishop of Norwich, but in particular by that of the noble Baroness, Lady Mallalieu, who put her head above the parapet to call her own party to account on the disastrous situation facing family farms and businesses. I declare my interests as a Welsh farmer, as set out in the register.

I want to address these rural economy issues, which go to the very fabric of our communities, and the impact of the Government’s recent Budget proposals. Small farms and family-run enterprises are the lifeblood of many regions in our country. They contribute to the agricultural sector and are pivotal in sustaining local economies, creating jobs and preserving our rural landscapes. However, recent proposals from the Government have put these and many businesses like them under unprecedented strain, threatening their survival and, by extension, the very essence of rural life.

The Budget includes changes to agricultural funding and the ongoing transition away from the common agricultural policy. While the Government have repeatedly assured us that the reforms ensure a fairer and more sustainable future for farmers, there is growing concern that the current pace of change is leaving too many behind.

Moreover, as we have heard today, many farmers are operating on razor-thin margins given the continuing rise in input costs, including of feed, fertiliser and fuel. The Government’s Budget proposals, particularly the lack of direct support for those facing these rising costs, will result in many farms facing the impossible choice of scaling back or closing down entirely. For family farms, this is not just a financial issue; often, generations of history, pride and identity are at risk.

Let us also consider the issue of access to finance. Small farmers and rural entrepreneurs often struggle to access the capital they need to invest in their businesses, particularly in a climate where traditional lending institutions are reluctant to take on risk. We need to stimulate this growth. Without easy access to affordable credit and loans, these businesses cannot expand, innovate or weather the financial storms that inevitably come.

Small farms and family-run businesses are major employers in many rural areas. A reduction in support for these sectors will lead to a loss of local jobs, further exacerbating the rural/urban divide. As larger corporations dominate the marketplace, the social fabric of our rural communities will fray, leading to a rise in economic inequality and a depletion of rural services.

The Government must change course now. I think that we on these Benches always suspected that the mask would slip, but we have just been surprised by how quickly. To any farmers or others in rural communities listening to or watching this debate: the Government do not understand you and they do not care about you. Worse still, they want what is yours—or they want the Deputy Prime Minister to bulldoze it.

15:41

[Lord Rogan (UUP)]

My Lords, I too congratulate the noble Earl, Lord Leicester, on securing this most timely of debates. It is sometimes said that that the two most important responsibilities of any Government are to keep the nation safe and to ensure that the population is fed. I am sorry to say that the previous Conservative Government failed to properly invest in our Armed Forces over the past 14 years, with the consequences now being laid bare in an increasingly dangerous world. I wish the Labour Government well in their efforts to paper over these cracks.

However, the new Government now stand accused of placing their duty to provide proper food supplies for the nation at risk by seeking to implement a tax rise with what I suspect are unintentional consequences. The Chancellor’s decision to propose an inheritance tax on farms worth over £1 million will affect a small minority of families in rural England, Scotland and Wales, and a significant number in Northern Ireland.

Northern Ireland is a part of the United Kingdom that is particularly resilient, and reliant on farming. Agriculture provides £6 billion to the local Ulster economy. Given the well-documented problems with the Irish Sea border which the Windsor Framework has created—an agreement negotiated by the previous Government but fully supported by the new crop of Ministers—local farmers’ produce is arguably more important to people in Northern Ireland now than ever before. In light of these plain facts, the Government’s ill-advised—and, it would appear, ill-informed—Budget measure has the potential to decimate the Province’s agriculture sector.

UK Ministers have been wheeling statistics over the past few weeks which they claim indicate that the inheritance tax changes will affect only a tiny proportion of farms. However, earlier this week, the Department of Agriculture, Environment and Rural Affairs in Northern Ireland published the results of its own analysis, which the Minister may or may not be aware of. Either way, I will welcome his response when he winds up the debate.

This analysis, which took into account residential property, farm buildings, machinery, livestock and land, found that around half of the 26,000 farms in Northern Ireland could be impacted by the inheritance tax changes that the Government seem determined to drive through. To put that into perspective, as the noble Baroness, Lady Foster, has mentioned, this would account for 80% of farmed land across the province, including 40% to 45% of cattle and sheep farms and around 87% of dairy farms. I pose a simple and straight question to the Minister: based on those official figures from a Northern Ireland executive department, how much damage are this Government prepared to inflict on the Northern Ireland farmers before they accept that they have got this wrong?

Whatever the Chancellor may be trying to achieve, her decisions have badly backfired. Respectfully, I suspect that most in government, particularly those forced to defend the Chancellor’s move, including the noble Lord, Lord Livermore, agree. This Government are still in their early moments of office, and mistakes may inevitably be made while they get to grips with the realities of power. Sadly, the farming tax is one of their biggest mistakes. The correct approach should be to acknowledge the error, scrap the tax and move on. They will get credit for doing so, not least from the beleaguered agricultural community in Northern Ireland.

15:46

[Lord Marlesford (Con)]

My Lords, I declare an interest as a Suffolk farmer of a certain age. Since the dawn of civilisation, family farming has provided seed for enterprise, food and survival. Yet these retrospective IHT proposals have been widely perceived, not just by Britain’s farmers, as a betrayal of the rural community. In politics, perception is reality. To persist with these proposals could, as the noble Baroness, Lady Mallalieu, suggested, cost Labour 100 seats at the next election.

In any Government, the relationship between Prime Minister and Chancellor is crucial, and it can be sensitive. We remember that between Margaret Thatcher and Nigel Lawson, or Tony Blair and Gordon Brown. Much depends on the public and political standing of the Chancellor. Five months ago, Rachel Reeves arrived at the Treasury flourishing a sparkling CV that might have even suggested she could be a future Governor of the Bank of England. The media searchlights have now illuminated the realities of her skills and experience, however. She will never again, I suspect, be able to avoid pre-Budget political and economic scrutiny of her plans from her senior colleagues, such as Mr Pat McFadden.

So far, the Chancellor has rejected all requests to reconsider the IHT proposals. I will remind your Lordships of a precedent which, I suggest, could be a way out. It means going back 50 years to the 1974 Budget of Chancellor Denis Healey. This proposed the introduction of an annual wealth tax, something that had been in Harold Wilson’s February manifesto. A Green Paper came out in August 1974, with the promise of a White Paper to follow. There was consequent alarm that the effect on cash flows would force many SMEs out of business. In response, in December 1974 the Commons set up the Select Committee on Wealth Tax. It reported in November 1975 that the Government had failed to recognise

“the special dangers inherent in introducing such a tax at a time of … economic crisis”.

On 29 November 1976, Denis Healey, in a Written Answer said:

“The Government have decided they should not introduce a wealth tax in the life of this Parliament, but the tax will continue to be an important part of their programme”.—[Official Report, Commons, 29/11/1976; col. 49W.]


So it has been for the last 50 years.

Healey related the outcome in his 1989 autobiography, The Time of My Life:

“Another lesson was that you should never commit yourself in Opposition to new taxes unless you have a very good idea how they will operate in practice. We had committed ourselves to a Wealth Tax: but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle”.


If Denis Healey could change his mind, surely the Prime Minister could at least have second thoughts.

15:50

[Lord Londesborough (CB)]

My Lords, I too salute the noble Earl for securing this topical debate. Like others here today, he is an excellent example of this place’s vintage intake of hereditaries in 2021—but I am in danger of straying into yesterday’s debate.

I will focus on family businesses and inheritance tax overall. Given the dire state of our public finances, I acknowledge that this Government had no choice but to raise taxes in the Budget, but it is the way that it was done that troubles me. I have been an outspoken critic and raised a number of questions in this place on the impact of employer national insurance and capital gains tax increases and the minimum wage hike. We now have the troubling issue of inheritance tax and how to levy it in a way that is proportionate and does not unduly damage the economy.

Why should family businesses, and indeed farmers, not share in the burden of inheritance tax like the rest of us, particularly those sitting on valuable assets? It is a perfectly reasonable question. In my own case, I set up and built a business over 30 years, which I sold back in 2014. The sales proceeds first incurred capital gains tax—which, interestingly, thanks to Gordon Brown, had dropped to a much lower rate than under previous Conservative Governments—and, on my death, whenever that will be, a 40% inheritance tax will be applied to virtually all those proceeds, bar £325,000.

This was not a family business; I had no intention of burdening my son or daughter with succession, but that would have been far more tax efficient, as the noble Earl, Lord Devon, already noted. It would not have been in the interest of the company, the staff or the shareholders, let alone my children or indeed the wider economy. My point is that family succession can be far from optimal—just look at the Trumps and the Murdochs, for instance. Economies thrive from the trading of assets and changes of ownership.

I accept that, for small family businesses and farms, the situation is more complex, as we have already heard. In my attempt to be a constructive Cross-Bencher, I will propose to the Government three changes. First, they should cap BPR and APR at £2.5 million per person, rather than at £1 million. Secondly, they should apply the 20% inheritance tax rate above that figure up to £5 million. Thirdly, above that figure, they should apply the full 40% rate—the rate that most of us pay from a much lower level. That, in my view, is more measured and proportionate, and would still generate the budgeted tax revenues. It means that the very asset-rich will contribute more—as I think they should. Yes, some may have to sell their businesses or some of their assets, but that is life and how a modern economy should work.

15:53

[Baroness Bennett of Manor Castle (GP)]

My Lords, I thank the noble Earl, Lord Leicester, for securing this debate. I join the torrent of tributes to the noble Baroness, Lady Cumberlege, for her many decades of service. She taught me a great deal about working in your Lordships’ House when we were debating the now Medicines and Medical Devices Act. I often used her as an example of one of my favourite hashtags, #CampaigningWorks. I note that the existence of the Patient Safety Commissioner is just one of the contributions for which we should pay tribute to the noble Baroness.

On the topic of today’s debate, I am here to demonstrate the breadth of opposition to the Government’s current plans for inheritance tax on farms across the political spectrum. Some noble Lords have already noted this, but we particularly note the huge toll that the announcement and its subsequent concerns have had on the mental health of many farmers. As the Green Party, we strongly support the idea of cracking down on tax dodging where the purchase of land is being used by individuals who are companies to dodge tax and very often to take it out of farming production, but it should not be beyond the wit of the Government to make a distinction between that use of land and genuine farming businesses.

Taking the constituency of my honourable friend Adrian Ramsay, the MP for Waveney Valley, as an example, the typical farm there is about 320 acres and these holdings may be valued at between £3 million and £5 million. That is the value on paper but very often the income is very low. In the Green Party we believe we need more farmers and to create opportunities for the entry of new people into farming, leading to smaller farms and a bigger range of businesses, not even more consolidation which this tax change could well produce. We also need a great deal of support for the diversification of crops and cropping systems, agroecology and the growing of vegetables and fruit.

Given that many issues have been heavily canvassed in this debate, I will take this opportunity to look forward to the spending review. We have to look at the history of what has been done to Defra over the past 15 years or so. From 2009 to 2019, funding for Defra declined 35% in monetary terms and 45% in real terms. That compared to a cut across the whole of government of 20% on average. There was then an injection of funding as an enormous range of new roles came in with Brexit, but we are now again hearing talk—and talk that the Secretary of State is volunteering for this—of at least a 20% cut in Defra. That means big cuts in spending on nature and flood prevention, which has huge potential impacts on farmers as well as rural communities and broader communities in general.

I have limited time, but I want to throw into this debate the point that we need to rethink how we can ensure that farmers who are growing the food that we need have a secure life and business. We cannot keep relying on other people’s soil, water and labour to feed ourselves as we do so much now. We are seeing a very fast-growing campaign for a universal basic income for farmers and that is an area we should be looking at. We need a Defra department that is able to shape the right policies and a Government that acknowledge the importance of food to all of us and food security, which is, I am afraid, not what we are currently getting.

15:58

[Baroness McIntosh of Pickering (Con)]

My Lords, I add my congratulations to my noble friend Lord Leicester for securing the debate and for speaking so eloquently, setting out the difficulties of the Budget proposal. I also add my heartfelt tribute to my noble friend Lady Cumberlege who, as the daughter of a GP, has maintained a life-long interest in healthcare. She will be much missed.

My focus today is on the human aspect and the potential social crisis unfolding as a result of the Government’s proposals, in particular what the implications will be for the uplands and tenant farmers. Issues of food security have been recounted in the debate but I recognise that taking land out of production for farming, such as the plans for solar farms on a small scale in Old Malton and on a much greater scale in East Yorkshire—up to four square miles—are just nonsensical. Reducing basic farm payments with a slow uptake of ELMS and the complexity of the SFI on top of the removal of capital grants for those farmers equipping themselves to farm in an environmentally friendly way are deeply regrettable.

What exactly will the impact on tenant farms be? If you look at North Yorkshire, County Durham and many northern counties—the right reverend Prelate the Bishop of Newcastle mentioned Northumbria—48% of farms are tenanted, yet it is deeply unclear how these proposals will apply to them. At the very least, will the Minister, in summing up, commit to issuing draft legislation or the usual tax information and impact note before July next year to ensure that tenants can prepare in the best way possible for these proposals, well in advance of the timescale that the Government are minded to introduce?

Your Lordships will be aware that farmers are fiercely proud, private and independent. They are reluctant even to visit the GP and seek healthcare when they most need it. What I regret most about these Budget proposals is the mood of anxiety, distress and uncertainty that they have created about the future, affecting whole families—not just the adult farmers but their children, who are now displaying signs of mental health issues which need to be addressed. As others have mentioned, this impacts on the whole rural community; farmers are the glue holding it together.

I pay tribute to the farming charities, which are being called on to intervene even more this year—such as RABI, the Farming Community Network, Upper Teesdale Agricultural Support Services, of which I am a patron, and the chaplain to the auction mart at Thirsk, Yvonne Bowling, whom I meet regularly. She is deeply distressed by the hardship caused to the farmers, particularly financially, and she requests urgent action to address this. The Government have not even brought forward greater climate resistance to the farming system nor ensured that productivity does not compromise their farms. Yvonne Bowling says:

“The health issues for our farmers are still serious with many issues, but as chaplains, we continue God’s work listening and walking alongside farmers in their worries and concerns”.


I am deeply grateful that she and others are showing concern for farmers in this way.

Farmers are in a unique and vulnerable position, and the Government seem totally incapable of understanding the uncertainty that they face. I hope that the noble Lord in winding up today will be respectful and mindful of what they are facing at this time.

16:02

[Lord Northbrook (Con)]

My Lords, I declare my interest as a Hampshire farm owner.

The Prime Minister, when speaking to the NFU in 2023, pledged to have

“a new relationship with the countryside and farmers”.

He promised to provide certainty and to work with farmers, insisting that

“food security is national security”.

Also, the Defra Secretary Steve Reed, while in opposition, provided multiple reassurances that Labour had no plans to change agricultural property relief. In this speech I will be refuting several government claims to justify the tax change and how they are underestimating its impact on family farms. For this information, I am drawing on briefings from the CLA and NFU. Can the Minister respond to my refutations?

The first claim is that it will affect only a small number of farms. Several bodies and member organisations in the rural sector have independently concluded that this is inaccurate. The CLA estimates that, in its current form, the cap could affect 70,000 farms in the UK over a generation. Significantly, these farms make up 75% of the utilised agricultural area in the UK. This means that, although the cap may not affect the smallest holdings, it has the potential to be immensely damaging to UK food security.

CLA modelling has also found that, for an average arable farm in England, IHT will start applying at 250 acres for a farming couple and 100 acres for a single farmer. With the average farm at around 215 acres, it cannot be claimed that only the largest farms will be affected. This cap will lead to transformational change in the industry over time. The CLA has already heard of numerous examples of rural businesses stopping investment due to these changes.

The next government claim is that most farms will not be affected until they are worth £3 million. It is true that some farming couples will be allowed assets worth up to £3 million before IHT occurs on their farm. However, the £3 million will be available only if both the couple’s nil-rate bands are not used up, and if resident nil-rate relief is available in both cases. Often it is not.

The position also fails to consider the 46% of farms that are owned by single farmers. CLA modelling shows that a typical 200-acre farm owned by an individual with an expected profit of £27,300 would face an IHT liability of £370,000. If spread over a period of 10 years, this would require the farm to allocate 136% of its profit each year to cover the tax bill. To meet this bill, successors could be compelled to sell 16% of their land. For a 250-acre single farmer, the cost would be 151% of their yearly profit for a decade. The fact that these costs are spread over a decade means little to working farms if they are forced to pay over 100% of their yearly profit for each of those 10 years in order to fund their IHT bill.

The next government claim is that, with good succession planning, most farmers will not have to pay IHT. On several occasions, the Government have hinted at this. This misunderstands farming businesses. A major concern is based around rules on gifts with reservation of benefit. In its current form, to avoid IHT, a farmer will have to pass on their land to a successor seven years prior to their death. However, for this transfer to be valid, the farmer cannot take income from the farm or live in their property without paying a market rent for those seven years and after. This is a major concern, as a significant number of farmers do not hold a pension. A recent assessment from Investec wealth management found that 96% of farmers see their farm as their pension, while 46% expect the farm to provide more than 50% of their retirement income. These farmers will not be in a position to succession plan and avoid IHT. In addition, as acknowledged by independent organisations such as the IFS, this policy is unfair to those who will pass on in the next seven years.

16:07

[Baroness Fox of Buckley (Non-Afl)]

My Lords, I thank the noble Earl for giving us an opportunity to ask again that Ministers really hear the concerns of farmers through our remarks here today. I found the speeches surprisingly moving, because this topic matters. By the way, I must fangirl the noble Baroness, Lady Cumberlege: she and her work really matter and she has changed the face of women’s liberation.

It strikes me that Government Ministers seem genuinely to have been taken aback by the despair and fury of thousands of farmers reacting to the Budget’s inheritance tax policy. I thought that, when they saw the backlash, we would find Rachel Reeves and team saying, “Oh, we didn’t mean you. We were targeting”—oh, I do not know—“big agriculture, mega-rich landowners or Jeremy Clarkson types”. But, instead of backing down, Ministers seemed to double down, and, worse, they defensively demonised hard-working farmers and carry on doing so. Those who graft 365 days a year with 5 am starts in all weathers, for often meagre rewards—working people, albeit not public sector employees, so possibly unfamiliar in Westminster bubble circles—are now smeared as tax dodgers who are avoiding paying their dues to society for public services.

I sometimes wonder whether Ministers are getting their insider knowledge of farming from “The Archers”. There has been an interminable political messaging storyline on the virtues of rewilding, which has driven me mad for a while. Yet, in a mere 30-second exchange on this topic recently, David Archer said:

“There’s a lot of anger about this new inheritance tax on farms”,


only for this to be batted away by Leonard, who says:

“But we need those taxes to pay for things like the NHS”.


This is scurrilous propaganda, and actually misinformation.

It is concerning when those who are influential in society seem oblivious to the material reality of working lives. Yesterday, one Labour MP went on the BBC’s “Politics Live” and smirked that it was

“quite hard to find a poor farmer”.

She needs to get out more—she could have even walked out of the Millbank studio and met the drivers of the magnificent 400-plus tractor parade going around Westminster, or she could watch Together’s Alan Miller’s insightful interviews with farmers from all over the country vividly explaining their plight.

As one explained, anyone who says that farmers with assets of over £1 million are rich is someone who does not know that a combine harvester costs over £500,000. One bit of confusion is on what family farms are. Commentators talk as though they are a Downton Abbey-style hereditary dynasty. Instead, I present John Shaw, who farms at Crookdyke. His farm’s history is telling, and a challenge to stereotypes. His father was not a toolmaker, but his great-great-grandfather was a coalminer and his great-grandfather a railway worker. His grandfather left school at 14 and worked as a farm labourer. He was forced to, but he got the bug, so, in 1929, when he married, he took a tenancy of a small farm. Three more tenancies later, he bought the farm that John now owns, which his father worked on from leaving school—as did John and John’s son.

This should be an inspiring story of nearly four generations building up a family farm that supports two families and is at the heart of the local community. However, now that the farm has been valued, John says that after his death, the inheritance tax of £750,000 will be impossible to pay without selling most of the land, with the remaining land being unviable as a farm. It is tragic, wanton and destructive.

So I issue a warning and a plea. We are told in this House that we should look to Europe. Do not stop at the EU when you look to Europe. Look at the European farmers, who have brought down Governments, taken over streets and been involved in a revolt. I want to see our farmers win. I would rather that the Government sat round the table with them before they took to the streets in a destructive way, but they have to resolve this.

16:11

[Lord Framlingham (Con)]

My Lords, my text for today is “Barley, Not Bulrushes”.

There is nothing more damaging to the fate of a nation than a Government with a huge majority taking massive decisions affecting us all without having the slightest understanding of what they are doing, or perhaps—which is even more frightening—understanding the damage that they are inflicting and being happy if the result is disaster because that suits their long-term ends. In the case of farming, it is this destruction of the independent small to medium-sized family farm, to be swallowed up by huge conglomerate blocs that are much more amenable to government control. Whatever the motive, the result is the same and it simply cannot be allowed to happen.

Our striving to increase food production is as old as time itself, from hunter-gatherers to the sophisticated techniques of today, taking in the great improvements of the 18th and 19th centuries, led famously by, among others, Charles “Turnip” Townsend and Coke of Holkham. The latter would, I feel sure, strongly approve of his descendants’ efforts today.

We have a long and proud history of making every acre capable of food production play its part in feeding the nation. Now, with a population growing at an alarming rate and growing demands not just to feed the people but to improve our lamentable record on self-sufficiency, what are the Government proposing to do? They are proposing to tax thousands of farmers out of existence: the kinds of farmers who not only make maximum use of their acreage but understand and care for our unique and vital countryside and its wildlife in a way that larger units simply cannot do.

Taxing farmers in the way that is proposed is deeply shaming. Labour specifically promised not to do it. Breaking your word on an issue of this kind not only does huge damage to the Government’s reputation, which is really not my concern, but shames every parliamentarian in the eyes of the people. All this to fill an invented and entirely fictional £22 billion black hole, the script for the justification of which every Labour MP has learned by heart and repeats ad nauseam. This is childish and insulting to political opponents and, more importantly, the general public.

The other tragic fiction is the need for net zero and all the dreadful consequences resulting from it. The idea that, to meet some scientifically unsubstantiated target by a rigidly imposed date, we should rewild thousands of acres of fertile farmland and smother vast tracts of land in hideous Chinese-manufactured solar panels, will have all our forebears who dedicated themselves to improving agricultural productivity turning in their graves.

We must support our farmers in this battle, which, for the sake of the nation, they cannot afford to lose. The supermarkets must be made to understand that they cannot go on indefinitely screwing farm prices down. It really is farcical that milk, with all that goes into its production, often costs less than bottled water.

Not so many years ago, the government department responsible for farming was MAFF—the Ministry of Agriculture, Fisheries and Food. It served farmers very well in many ways. We changed this—heaven knows why—to Defra, the Department for the Environment, Food and Rural Affairs. There is no mention of farming or fishing. We took our eye off the ball. It is time to get our priorities right and put farming back centre stage where it belongs.

I thank the noble Earl for allowing us the opportunity to set out our thoughts on this vital issue. I urge the Minister, when he responds to the debate, to make it clear to the House and to the country that, when it comes to keeping the nation fed, he understands the difference between barley and bulrushes.

16:16

[Lord Elliott of Ballinamallard (UUP)]

My Lords, I declare an interest as a small landowner and farmer in Northern Ireland. I thank the noble Earl, Lord Leicester, for bringing this important debate forward. I know a number of noble Lords have tried to bring forward similar debates, and I welcome this opportunity. I am interested in the contribution and assessment of the noble Lord who spoke previously. The noble Earl who brought forward the debate went into some detail, and I welcome the assessment and analysis that he carried out in relation to inheritance tax and the APR.

I have to ask the question: what do this Government want from agriculture and farming? Do they want farmers who have the countryside at heart, who want to do the best for the environment, and who want to produce food of good quality and with good environmental standards? Or do they want those smallholdings to be bought up by big institutions and large landowners, with no interest in farming and agriculture, buying produce from countries that do not have the same standards as we do in the United Kingdom? I ask that simply because that is what this is going to be about. If the Government’s intention is to bring about the better movement of farms and land, which other people will have the opportunity to purchase, they are doing exactly the opposite. Instead, they are going to force small family farms, or parts of them, to be sold and bought up by big institutions or people who have no interest in agriculture or producing food for the nation of the United Kingdom.

I heard it mentioned earlier that Northern Ireland punches above its weight. With a small nation, we feed 10 million people. I think it was the noble Baroness, Lady Foster, who indicated that. That is true, and a large number of those people are within Great Britain.

We need to wake up; if we bring about and follow through on this policy, we are going to decimate small, family farms. I am old enough to remember pre-1984, when there was inheritance tax on farms. I saw how that decimated small rural farms in Northern Ireland. Things have changed greatly since then. The value of farms and livestock has increased, and the amount of machinery needed has increased, along with its value. Many more farms will fall into the category that is now required to pay inheritance tax. Is that what we want? Do we want to stop those individuals and farming families who have worked hard?

I remind your Lordships’ House that many farmers go out and tend to their livestock every morning, making sure that they have feed and water, before going back home to for their own food and water. That is the dedication these farmers have. Some of them are up in the middle of the night tending to their animals, and are still up to milk their cows or tend to their livestock in the morning. That is the dedication of this community. It is not just a job or an individual business that has been there for a small number of years; it is a way of life, which contributes significantly to this economy and this community. Let it go at your peril.

I challenge the Government once again: what type of farming community, and what type of produce, food and agriculture, do they want for our society? If they want proper food, produced to good environmental and animal welfare standards, they should not go through with this taxation.

16:20

[Viscount Trenchard (Con)]

My Lords, I congratulate my noble friend Lord Leicester on securing this most topical debate, and on his moving and convincing introductory speech. I pay tribute to my noble friend Lady Cumberlege for her great speech and great contribution to your Lordships’ House over many years.

Farmers deserve compensation for their protection and stewardship of our beautiful countryside, but the Budget has now removed indiscriminately most of the remaining BPS payments and, at the same time, put in jeopardy the long-term viability of many farms with the restrictions placed on APR and BPR. The Government defend their attack on APR by citing the growing number of rich people seeking to avoid inheritance tax by investing in farmland. That may to some extent be true, but surely a solution must be found that closes that loophole while not punishing long-term farmers, many of whom are of advanced years and have reasonably held expectations that they would be able to pass on their farms to the next generation, free of tax. They have done exactly as they have been asked to do by Governments over the past 50 years—to produce food, manage the environment and comply with tax policy. These people have not invested purely to avoid IHT. They are the backbone of the countryside.

Many farms may well now face a cost of over £1 million on death—a bill equivalent to 20 to 30 years of income, or one generation’s worth of income from the land. Farming will rapidly become unviable in this country if we punish farmers in this way. Can the Minister say whether this is really what the Government intended and if he thinks that it is fair?

I understand that the Government want to close the loophole, so should they not restrict APR to exclude mere investors and instead back tenant farmers, allowing both landlord and tenant to invest in the countryside, while the retention of BPR could provide support to genuine farming businesses, suitably qualified, to close any loopholes? Did not the working farmers’ relief scheme, introduced by the then Labour Government in 1976, provide the right solution and form of words?

Farmers should have to qualify for IHT relief. The current qualification for BPR is for at least half the business to be farming. Perhaps the 50% hurdle could be increased a little. Genuine farmers would still get the relief, while those just investing would not qualify.

The new SFI is working, so why, in its first few years, change the underlying rules relating to owning farm assets? Without adjustment, the Government’s proposal to tax farms will mean that holdings which have been built up over many generations will be split up and sold.

The Government should revise their plans. Instead, they should first end holdover relief on premium land sales. That is more palatable and would bring intermediate revenue. Secondly, the Budget measures may, perversely, encourage wealthy individuals to purchase a small farm to avoid IHT, so why not revise the qualification rules to close the loophole? Thirdly, the Government should continue to improve the targeting of subsidies to help farmers most in need, as opposed to the blunt instrument of IHT. Fourthly, they should provide a fair timeframe for those elderly farmers who may not now expect to live seven years from handover.

Finally, let us look at how the Government and farmers can work together to encourage British companies to invest in farming and the environment, ultimately satisfying ESG and carbon-reduction requirements. I trust the Minister will agree that it is enormously important to avoid an outcome where small farms and parcels of land have to be sold in order to pay tax bills. I look forward to hearing other contributions and the Minister’s winding-up speech.

16:25

[Lord de Clifford (CB)]

My Lords, I congratulate the noble Earl, Lord Leicester, on securing this debate at such an appropriate time, with so many farmers feeling the need to demonstrate outside this House yesterday and a few weeks ago. The small farmers and family farmers of this country are feeling betrayed, unwanted and targeted. I compliment the noble Lord, Lord Cameron of Dillington, on his moving speech describing the farming community.

The recent Budget has sent shockwaves through the industry as lifelong plans for farming business have been turned upside down. The next three years see three added burdens. The unexpected announcement of the delinking of basic payment scheme payments was disappointing, as it was a direct subsidy to farmers. A family farm that received £19,000 this year would have expected £14,000 next year, but now that has been capped at £7,200.

In 2026 we will see the introduction of the of the APR and BPR capping. While the change is understandable to close an IHT loophole for large individual investor landowners, the new limit of £1 million is far too low and adds large IHT bills to many productive family farms.

I repeat the comment by the noble Earl, Lord Devon, that in 2027 another increase to the cost base of farms will be the interest reduction of the UK carbon border adjustment mechanism—or, as it is known to farmers, the fertiliser tax—which is anticipated to add £50 per tonne to nitrogen fertiliser, and a typical 400 acre or 500 acre farm uses about 60 tonnes a year.

There has been much debate on the figure that the Treasury has used for the number of farmers who will be affected. The Central Association of Agricultural Valuers has stated that 73 farmers was a perfectly accurate figure but was entirely uninformative. A farm is made up of not just agricultural land but machinery, livestock, deadstock, corn in the store and many other assets. Has the Treasury looked into the number of farming estates in the past few years that have claimed BPR as well as APR? That would be much more reflective of the working farms to be affected.

The CAAV issued a discussion paper in November, a detailed document taking into account the many different factors regarding the farming business. It acknowledges that it has made certain assumptions, but its conclusion was that the measure would affect 60,000 producing farms over the next 30 years, which is a generational change period. On average, that is 2,000 farms per year, which is 1,500 more than the Treasury thinks. That is why the farming community is fearful of this change.

I will not report the figures given by the noble Lord, Lord Northbrook, from the CLA, but they make stark reading for the rural community. For those farming business owners who can plan for the future, there is definitely mitigating action to be taken, which is welcome, but the risk from April 2026 is that, for those farms that have planned on the basis of APR relief and are relying on their farms to provide for their retirement, there is no time to change so they will suffer greatly. I again ask the Minister, as I did in the Budget debate: please could the Treasury do an impact assessment of these changes and engage with professional bodies within the agricultural sector, such as the CAAV and special agricultural accountancy firms, to provide a broader depth of the figures to the sector? I would also support the suggestion made in this debate by the noble Lord, Lord Londesborough, as a possible solution.

The farming industry welcomes the additional funding announcements this week, but accessing environmental support is complex, not easy, as other Peers have stated. Farmers want a decent price for the products they produce so they can make a living that is above the minimum wage and can have spare funds to invest in their long-term future.

16:29

[Lord Douglas-Miller (Con)]

My Lords, I thank my noble friend Lord Leicester for bringing forward this important debate. I declare my farming interests, as set out in the register.

The lack of any engagement or consultation with those impacted by the Chancellor’s APR and BPR Budget announcement leads to the conclusion that the Treasury either does not value the opinion of those it has impacted, or that it understood the impact and simply does not care. I am not sure which is worse.

I sense that the Minister is on unfamiliar ground when dealing with the detail of family farms and farming matters generally. I notice that, with one single exception, he is not overwhelmingly supported by his Back-Benchers today. So I hope that today’s debate will help the Minister to understand why farmers and small family businesses the length and breadth of the country are so angry. They are angry because they feel that they have been lied to and deceived by this Labour Government.

The Prime Minister said that he understood farming and promised not to interfere with APR and BPR—and yet he has. The Chancellor said that Labour’s new tax will impact only very few, but this is not true. Both the NFU’s and Defra’s own statistics contradict the Treasury estimates, and I suspect that they have a much better understanding of this matter.

The Secretary of State for Defra has insulted farmers by saying, “Look at the small print; you’ll all be fine”. Well, they have, and it is not fine. There are numerous reasons why removing APR and BPR constitutes a disaster for farming and the business community. Many of these reasons have been articulated in the press by the NFU, the farming community and small businesses across the country, and by noble Lords in this debate.

Clearly, the Government have misunderstood both the scale and impact of reducing APR and BPR and, most importantly, the consequences of this disastrous new tax for working farmers and small businesses. By taxing farmers and small businesses so that they are unable to pass on their farms or businesses to future generations of their family, this Government are striking at the very heart of our rural communities.

Not only will it rapidly accelerate the disintegration of family farms and businesses and the subsequent speeding up of the corporate ownership of our countryside; it puts at risk the very fragile web that holds our rural communities together. The obvious and most widely understood casualties will be reduced measures to mitigate climate change and biodiversity loss, the loss of public access to the countryside and, critically, reduced UK food security. These are really important points—in addition to the numerous small businesses that will simply close or reduce in scale and profitability.

There are other more subtle but equally disruptive outcomes: the unravelling of rural schools; village shops closing; fewer farmers’ markets and less local produce; fewer varieties of heritage crops and livestock; and the loss of key skills such as drystone walling, fencing and hedge laying. Crucially, as has been mentioned many times in this debate, it will impact farmers’ mental health and well-being, which has been a growing area of concern for some time.

If the Minister now understands why these changes have caused so much anguish to so many farmers, can he tell us why there was no consultation in advance of their being announced and explain what additional support the Government can offer to those who are struggling to make sense of them?

Finally, can the Minister give us a proper explanation for this devastating attack on working farmers and small businesses, and not regurgitate the rather tired £22 billion black hole excuse or parrot that there are a few rich people who were getting away with it? Punishing a critical sector of our society and disabling our rural economy deserves a more thorough explanation than this soundbite.

16:34

[Baroness Bakewell of Hardington Mandeville (LD)]

It is a pleasure to follow the noble Lord, Lord Douglas-Miller. I congratulate the noble Earl, Lord Leicester, on securing this important debate and on his knowledgeable and thorough introduction. I also congratulate the noble Baroness, Lady Cumberlege, on her valedictory speech. She will be greatly missed in this Chamber.

Ministers have given reassurances that small farms will be unaffected. Sadly, there is something of a misunderstanding of just what constitutes a small farm. The cost of land has a distorting influence. A small farm of 100 acres could be valued at £1 million but, as your Lordships and farmers will know, you cannot make a living out of 100 acres. The minimum size for a farm to be able to support the farmer is about 240 acres, and even then it would be a struggle. Farmers at the lower end of the size range are capital rich but income poor.

While the legislation was intended to target the rich, who may not be farmers and have used farmland as a tax dodge, the new tax legislation will have a far greater impact. The new threshold for inheritance tax includes both APR and BPR, combining the value of land, machinery, buildings and other assets. Many family farms, even modest operations, could exceed the £1 million threshold in assets, leaving up to 66% of farms facing higher tax bills.

Those following nature-friendly farming principles have found this a bitter pill to swallow when they have faced so many pressures in recent years, including seeing their profits dwindle as suppliers and retailers extract value from the food system. While supermarkets continue to post profits year after year, farmers can be left with less than 1% profit from the food they produce. The Government are allowing farmers 10 years to pay their IHT on an interest-free loan. Banks will not lend for investment while there is a loan against the farm. In many cases, the yearly IHT payment will be more than the income generated from the farm. This will lead to selling off the land. The APR changes will have a significant disruptive effect in the land market. These disruptive effects will affect even tenants, who are not directly affected by the APR.

As the noble Earl, Lord Devon, has said, this is not the only pressure facing farmers and their cash flow. There are the NI changes, the speeding up of the BPS transition, border adjustment taxes on fertiliser, tax changes on pick-ups et cetera. All this is having an effect on the morale of farmers. We have heard little about the impact of these pressures, as it is all being lost in the noise around APR. The right reverend Prelate the Bishop of Norwich referred to the mental state of farmers.

Unfortunately, in some cases APR has been used by wealthy landowners to avoid inheritance tax. This is the driver for the Government announcing their plans to reform APR. Their view is that it is not fair for a small number of claimants each year to claim such a significant amount of relief, when this money could be better used to fund public services. That may be a reasonable argument for large farmers and landowners, and I agree with the noble Lord, Lord Londesborough, but why penalise the small family farm? Food production and biodiversity schemes could suffer as a result. The NFU view, which I share, is that the Government do not understand that family farms are not only small farms. Just because a farm is a valuable asset, it does not mean that those who work it are wealthy. Every penny the Chancellor saves from this introduction will come directly from the next generation having to break up their family farm.

An Institute for Fiscal Studies analysis has said that the policy could be tweaked. For example, farmers passing away in the next seven years will not have had the opportunity to avoid inheritance tax by making lifetime gifts. The policy could therefore be brought in more slowly, or gifts of agricultural property made before a certain future date could be inheritance tax free, regardless of the timing of the death. Other noble Lords have raised this issue.

The Government might also consider raising the threshold for the introduction of APR from £1 million to £3 million—the noble Lord, Lord Londesborough, gave a higher figure. My colleague in the other place, Alistair Carmichael—and the noble Earl, Lord Leicester —said:

“Agricultural property relief is not a loophole; it has been a deliberate policy of successive Governments for the past 40 years, designed to avoid the sale and break-up of family farms … These changes will have a ripple effect across the whole rural community”.—[Official Report, Commons, 4/11/24; col. 24.]


The current price paid to farmers for food is at rock bottom. Some supermarkets squeeze producers beyond what is feasible. The price paid by consumers bears little relationship to the cost to the farmer of growing the crop or rearing the stock. Despite what the Government might think, very few small farmers own tractors of the size and scale that television viewers see on Jeremy Clarkson’s programme. The media concentration on this television programme has led to a total misrepresentation of the role of the small family farmer.

In addition, the CLA rejects the Government’s claim that this move will not affect family farms. Its modelling highlights how a couple who own an average 350-acre English arable farm would have to spend 99% of their yearly profit over a decade to afford their inheritance tax bill. More starkly, a single farmer with 200 acres would have to pay 136% of their yearly profit to cover the bill.

Outside APR, the plight of farmers is also hit by the unexpected cut to delinked BPS payments. The current payments should have been 15% to 20%, which was 76% of the first basic payment, but that is now down to £7,000. The previous predicted basic payment this year would have paid the rent of a tenant farmer, but it will not do so now. The CLA believes that the announced cap would affect 70,000 farms, which is 75% of utilised agricultural area in the UK. This will be damaging to food security—the noble Baroness, Lady Mallalieu, referred to this.

As we approach Christmas, spare a thought for the farmer who gets up in the dark to feed and tend their stock, all while children are opening their stockings. It is right that the wealthy farmers and landowners should pay inheritance tax, but the effect on the smaller family farm has been misjudged. I ask the Minister and his Treasury colleagues to think again.

16:42

[Lord Roborough (Con)]

My Lords, I declare my interests in the register as the owner of a dairy farming business, commercially managed forestry and let agricultural property, and as a shareholder in Agricarbon and John Deere. I am most grateful to my noble friend Lord Leicester for securing this vital debate on these highly unpopular Budget proposals. It allows the Government to reflect on whether they are wise or appropriate.

I very much enjoyed my noble friend Lady Cumberlege’s valedictory speech, bringing an end to a remarkable 34 years in this House. It is clear that the House has been lucky to have my noble friend as a Member and is very grateful for her dedication to healthcare, and women’s healthcare in particular.

It is widely reported and understood that this was a business-unfriendly Budget, with the rise in employers’ national insurance contributions the biggest hit to business. However, I want to spend my time in this debate addressing inheritance tax reliefs. This was a disastrous Budget for family businesses. The reduction in APR and BPR inheritance tax relief to 50% of the value of estates in excess of £1 million will destroy existing long-term plans for those businesses. According to Oxford Economics, family businesses employ 14 million people; they are already responsible for £225 billion per annum in tax, according to PwC. Given that most of our largest businesses began as family-owned companies, I ask the Minister how this tax can be anything but negative for our economic growth outlook.

Beyond that, this tax is cruel as it falls unexpectedly on those who are now nearing the end of their lives and have no ability to mitigate or plan around it. It also falls on those who die young through accident or illness. As the noble Baroness, Lady Mallalieu, the right reverend Prelate the Bishop of Norwich and the noble Lord, Lord Curry of Kirkharle, have already mentioned, what do the Government expect the most elderly and infirm to consider to avoid the inheritance tax burden on the next generation as the tax deadline nears?

In a Written Answer to my question on whether the Government planned

“to keep monthly data on farmer, landowner and family business owner suicides”,

the Government answered that

“the ONS is committed to continuing its quarterly publication of suicide statistics and analysing suicide deaths by occupation using annual data … a more regular presentation of suicide deaths by occupation is not planned”.

Given that the Government have just created an incentive for such individual tragedies, I think this House might feel that they should at least measure its outcome. I ask the Minister to commit that the Government will gather and publish monthly statistics on suicide rates by those potentially impacted by these taxes in the run-up to their introduction on 6 April 2026.

Members of His Majesty’s Government have suggested that this can be avoided by passing assets to the younger generation more than seven years before dying, relying on the potentially exempt transaction rule. Who in this House knows when they are going to die? Should this tax be paid only by the children of those farmers or business owners who have suffered a fatal accident or succumbed to a sudden illness?

The Government have claimed that only 500 farms will be affected in 2026-27—equivalent still to over 10,000 farms in total with this guillotine hanging over them. However, the Central Association of Agricultural Valuers calculates that 75,000 farms will be impacted and the NFU, 75% of commercial farms. I listened with interest to the noble Baroness, Lady Foster of Aghadrumsee, citing 50% of Northern Irish farms also being caught.

The Government have failed to take into account the 14,000 tenant farms, many of which have over £1 million of business property, or the vast number of farms that are in companies or partnerships, which also qualify for BPR only. Can the Minister explain whether this is indeed the case and makes the claim of 500 farms incorrect? It would appear in recent answers to my Written Questions that this claim has been modified to 520 estates claiming APR that will be affected. Could it be that the real answer is that many times as many as this number of farms will be affected, as every organisation well informed on this sector claims?

On tenant farmers, I would add that the loss of 50% APR will incentivise private landlords to dispose of their land rather than let it out. Rental yields are typically less than 2% before tax, making the payment of IHT completely unaffordable. Surely it is not the wish of the Government to restrict the opportunities for those wishing to rent farmland. Around two-thirds of working farmers rent some or all of their farm’s land, according to the NFU.

While family businesses outside farming may be better placed through lower capital intensity to pay this death tax, many, if not most, will be structured as companies, with the tax paid from dividends. The cost on those companies being transferred from one generation to the next will incur a full inheritance tax rate of around 50%, as tax on dividends will also be levied prior to HMRC getting its money.

As my noble friend Lord Leicester also mentioned, family businesses compete against foreign-owned, publicly owned and institutionally owned companies that will not face this death tax. For family-owned companies, investment in new products and services, in more efficient equipment and in expansion becomes crippled by this new cost of doing business that is not borne by their competitors. Markets are fiercely competitive and small cost or technology advantages can mean the difference between thriving and dying. In a post-Budget survey, CBI Economics found that 56% of family businesses planned to reduce investment and 32% to reduce employment. That does not bode well for the competitiveness of family companies.

The figures, explained so well by my noble friend Lord Leicester, show that family farms have no prospect of paying this death tax out of income, which in turn means either taking on debt or selling off assets. Both further cripple those farms by either high annual interest and capital repayments or reduction in scale. On the payment data that my noble friend gave as an example, it is likely that family farms will not have paid off the debt for one inheritance tax bill before another one comes along. This is why 13,000 farmers protested in Whitehall recently and why we saw more than 600 tractors driven in Parliament Square yesterday. This is an attack on a way of life and farmers are in despair.

In answer to an Oral Question on 2 December, the Minister, the noble Baroness, Lady Hayman of Ullock, said that

“the APR changes are not designed to undermine small family farms and I know that both Defra and the Treasury have been meeting with stakeholders to discuss this matter further”.—[Official Report, 2/12/24; col. 912.]

Does this mean that the Government are still consulting on these Budget proposals?

I hope that this debate has explained to the Minister that the reduction of IHT reliefs for agricultural and business assets could lead to a loss of £9.4 billion of economic output, a loss of 125,000 jobs and a net cost to the Treasury of £1.3 billion between 2026-27 and 2029-30, all according to CBI Economics, while bringing misery to many, as it will largely be a tax on unexpected tragedy, if business owners follow the Government’s tax advice. Noble Lords have highlighted so many other negative impacts—on rural communities, land stewardship, food security and nature restoration. That leaves the only remaining justification for this policy to be ideology, or perhaps a mistake. I hope that the Government are big enough to concede that this was a mistake that they will reverse or heavily revise. I very much look forward to the Minister’s response.

16:51

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I begin by thanking the noble Earl, Lord Leicester, for securing today’s debate and congratulate him on his opening speech. I also pay tribute to the noble Baroness, Lady Cumberlege, following her valedictory speech. Throughout her many years in this House the noble Baroness has been an important and influential voice, on the issue of healthcare in particular. I wish her well for the future.

I have listened closely to the words of all noble Lords throughout this debate, and I of course acknowledge the strength of feeling expressed today. I pay tribute to the huge contribution that our farmers make, not only to our economy and to our food security but to our way of life. The Government are deeply committed to supporting them and our rural communities. As the right reverend Prelate the Bishop of Norwich observed, I know that many in the sector are anxious about what the changes announced in the Budget mean for them. In the time I have available, I shall set out some facts and seek to provide some reassurance about the impact of the measures we are introducing.

Let me first, though, remind your Lordships’ House about the economic context in which the Budget decisions were taken. As noble Lords will know, the Government faced an incredibly challenging fiscal position, with a need to both repair the public finances and rebuild our public services. We believe that economic stability is the foundation of economic growth and that stability in the public finances is a core part of that, so ignoring or postponing difficult decisions was simply not an option.

Many noble Lords have spoken in today’s debate about the fragile state of the rural economy, and they are of course right. Problems including poor public transport, a lack of affordable housing and poor digital connectivity have plagued rural communities for years. That is why fixing the foundations of our economy for the long term is so important, so we can invest in the public services and the infrastructure that will benefit the whole of our country.

Among the many difficult decisions that we had to take in the Budget, much of this debate has focused on the reforms that we are making to agricultural property relief and business property relief. I recognise that inheritance tax is an emotive issue. It is an understandable and natural desire for people to want to pass on the assets they worked hard for to the people they love when they die, and the Government recognise the role that these reliefs play in supporting farms and small businesses. Importantly, they will continue to play that role, but the reality is that the full, unlimited exemption, introduced in 1992, has become unsustainable.

The main issue is one of fairness. Under the current system, the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest landowners and business owners. According to the latest data from HMRC, 40% of agricultural property relief is claimed by just 7% of estates making claims. That is just 117 estates claiming £219 million of relief.

It is a similar picture for business property relief. More than 50% of business property relief is claimed by just 4% of estates making claims, which equates to 158 estates claiming £558 million in tax relief. It is neither fair nor sustainable to maintain such a large tax break for such a small number of claimants, given the wider pressures on the public finances.

A secondary issue relates to the purchase of farmland. The reality today is that buying agricultural land is now one of the most well-known ways to shield wealth from inheritance tax. This has artificially inflated the price of farmland, locking younger farmers out of the market. Clearly, this was not the objective of this 100% relief when it was first introduced in 1992.

For the reasons that I have set out, the Government are changing how we target agricultural property relief and business property relief from April 2026. We are doing so in a way that maintains significant tax relief for estates, including farms and businesses, while supporting the public finances in a fair way.

Many different numbers were used in today’s debate, so let me set out some of the facts. Under the new system, individuals will still benefit from 100% relief for the first £1 million of combined business and agricultural assets. Above this amount, there will be 50% relief. That means that inheritance tax will be paid at a reduced effective rate of up to 20%, rather than the standard 40%.

Up to 520 estates claiming agricultural property relief, including those that also claim business property relief, are expected to be affected as a result of these changes in 2026-27. Therefore, nearly three-quarters of estates making claims in that period will not pay any more tax as a result of this change in the year it is introduced. Similarly, around three-quarters of estates claiming business property relief alone in 2026-27 will not pay any more inheritance tax either.

Indeed, all estates making claims for these reliefs will continue to receive generous support, at a cost of £1.1 billion to the Exchequer in the first year. The reliefs also sit on top of all the other spousal exemption and nil-rate bands. Therefore, a couple with agricultural or business assets will typically be able to pass on up to £3 million-worth of assets without paying any inheritance tax.

The noble Earl, Lord Leicester, and the noble Lord, Lord Curry of Kirkharle, spoke about the longer-term projections for this tax change. However, forecasts for the impact of these changes over a long period are unreliable, as estates will make changes to the way they plan their tax affairs in order to reduce their liabilities. For example, they may change ownership structures or plan for their succession differently.

After these reforms are implemented, the system will remain more generous than it was before 1992, when inheritance tax was applied at a maximum rate of 50%, including on the first £1 million. As the Institute for Fiscal Studies has said, our reforms will leave farmland

“much more lightly taxed than most other assets”.

Importantly, however, people can also access existing features of the inheritance tax system. Full exemptions for transfers between spouses and civil partners will continue to apply, meaning that any agricultural and business assets left to a spouse or civil partner will be completely tax free.

Any inheritance tax liability on relevant assets can be paid in 10 annual instalments in most circumstances and will be interest free. These payment terms are more generous than in any other part of the tax system. If owners pass on their businesses seven or more years before their death, no inheritance tax will be due. Taper relief will also apply within that time. The noble Lord, Lord Northbrook, asked about taking an income in these circumstances; there are several ways in which this would still be possible.

The changes will not be introduced until April 2026, giving farmers time to plan and assess their liabilities. As the changes are implemented, we expect estates to reduce their tax liabilities. For example, individuals may change ownership structures or plan for their succession differently. The costings by the independent Office for Budget Responsibility take full account of this and assume that it will occur.

At this point, I would like to directly address some of the misinformation that has surrounded this issue. Much of this has focused on the data used to determine how many estates will be affected, mentioned by the noble Baronesses, Lady Shephard of Northwold and Lady Foster, and the noble Lords, Lord Curry of Kirkharle, Lord Bilimoria, Lord Rogan, Lord Northbrook, Lord de Clifford and Lord Douglas-Miller. I encourage all noble Lords who have not yet seen it to review the letter that the Chancellor sent to the Treasury Select Committee in the other place setting out the facts in this regard, copies of which are available in the Library.

It is important that we avoid causing unnecessary concern to farmers and farming communities. The data the Government use is based on HMRC’s inheritance tax claims data—that is to say, the actual claims made by estates for agricultural and business property relief. This is the most robust data there is and is endorsed by the independent Office for Budget Responsibility.

Some noble Lords have referred to data published regularly by Defra, data from the Northern Ireland Executive and from other organisations and have used this to claim that the number of estates affected will actually be far higher. However, this data relates to the total value of farms across the country. It is impossible to accurately calculate inheritance tax liability from this data because owning assets over the exemption threshold does not necessarily mean you will pay inheritance tax on those assets. This is because such data does not account for key factors such as who owns the farm or the nature of that ownership, how many people own the farm and how they plan their affairs. It also assumes no succession planning over the coming years.

The noble Lords, Lord Taylor of Holbeach and Lord de Clifford, the right reverend Prelate the Bishop of Newcastle and the noble Baroness, Lady McIntosh of Pickering, asked about assessments made of this tax change. The Government set out their modelling at the Budget and more recently the Chancellor provided further details to the Treasury Select Committee, including in her follow-up letter. As is standard practice, we will publish a tax information and impact note in the usual way alongside the draft legislation next year.

My noble friend Lady Mallalieu and the noble Lord, Lord Douglas-Miller, asked what steps the Government have taken to consult on these measures. Alongside routine engagement, the Government received Budget representations from the National Farmers’ Union, the Country Land and Business Association and the Tenant Farmers Association which covered this specific issue. We will continue to work closely with key stakeholders in the industry as we implement this change.

My noble friend Lady Mallalieu, the right reverend Prelate the Bishop of Norwich, the noble Baronesses, Lady Foster and Lady Bennett of Manor Castle, and the noble Lord, Lord Douglas-Miller, also raised concerns around mental health among farmers and in rural communities. Mental health is of course an issue that the Government take extremely seriously, which is why we are working to improve mental health services across the country, including through plans to recruit an additional 8,500 mental health workers. Defra also works through its farming and countryside programme with a range of farming charities, including the Royal Agricultural Benevolent Institution and the Yellow Wellies charity, which have highlighted mental health challenges for farming communities.

The right reverend Prelate the Bishop of Norwich, the noble Earl, Lord Devon, and the noble Baroness, Lady Bakewell of Hardington Mandeville, asked if the Government will consider dispensation for farmers above a certain age. The Government remain committed to the changes as set out in the Budget, but clearly individual circumstances will vary. Therefore, any individual who is concerned about their specific tax liability should consult an accountant or financial adviser.

The right reverend Prelate the Bishop of Newcastle, the noble Lords, Lord Curry of Kirkharle, Lord Londesborough and Lord de Clifford, the noble Viscount, Lord Trenchard, and the noble Baroness, Lady Foster, asked about the level of the threshold. The Government’s position remains that our approach gets the balance right between supporting farms and fixing the public finances in a fair way.

Many noble Lords raised the issue of wider support to farmers and rural communities. The changes we are introducing should of course be seen in this wider context. The Budget committed £5 billion to farming over the next two years, including being the biggest Budget for sustainable food production in our history. It also committed £60 million to help farmers affected by the unprecedented wet weather last winter, and we are protecting farms and rural businesses by committing £2.4 billion over the next two years to rebuild crumbling flood defences.

We will also continue to provide existing support for the farming industry in the wider tax system. This includes, for example, the exemption from business rates for agricultural land and buildings, and the ongoing entitlement for vehicles and machinery used in agriculture to use rebated diesel and biofuels.

Many noble Lords, including the noble Baronesses, Lady Miller of Chilthorne Domer, Lady Cumberlege and Lady Foster, and the noble Lords, Lord Rogan, Lord Cameron of Dillington and Lord Taylor of Holbeach, spoke about food security. That is an issue we approach with the utmost seriousness. It is why we have committed £5 billion to the farming sector over this year and next to support long-term food security. As the United Kingdom Food Security Report 2024 published yesterday showed, our food security has been resilient in the face of a number of shocks over the last three years.

The Government recognise that a small minority of estates will be affected by these changes, but reform of these reliefs is necessary given the fiscal challenge that confronts us. We must put our economy back on to a stable footing and repair our broken public services. That includes the schools, hospitals and roads which communities across the country, including those in rural areas, rely on every day. We have taken this decision in a way which makes the tax system fairer and more sustainable, and it is set against the backdrop of significant new investment for farming as well as support for small businesses. Again, I thank all noble Lords who have spoken today, and in particular the noble Earl, Lord Leicester, for securing this debate.

17:05

[The Earl of Leicester (Con)]

My Lords, first I must apologise for not mentioning earlier my interests as laid out in the register. They include land ownership in Norfolk, let land, my own farming interests and managing arguably the most important national nature reserve in the land at Holkham.

This has been an excellent debate, with many excellent points made by noble Lords from all sides. I thank all Peers who have contributed. I started writing down everybody’s name, but it was pointless because everybody’s contribution has been incredibly meaningful, emotional and well researched. There were certain noble Lords who could not participate today, such as the noble Baroness, Lady Batters, my noble friends Lord Forsyth and Lord Fuller, and those who were scratched. Other noble Lords were unable to speak on such a controversial topic by virtue of the committees they chair. It is only controversial because this Government made it so by producing such a venal Budget.

I thank noble Lords from the Conservatives, Lib Dems, Cross Benches and the Bishops for taking such an interest in this Bill. It must be very embarrassing that the Government had only one Member of their Back Benches speaking on it, the noble Baroness, Lady Mallalieu—and she was speaking on our side of the argument. It is a great shame, and just demonstrates that this Government do not really seem to care about this issue. I feel sorry for the Minister having to read out that brief, parrot-fashion. He should credit Members of this House with some intelligence; we all spoke in this debate because we know something about it.

Unfortunately, this tin-eared Government have yet again demonstrated their lack of understanding of wealth creation other than through what is arguably their only understanding of it: the short-term and inevitably short-lived medium of taxation. With not a single Cabinet Minister having any real-world business experience of wealth creation, how could they? Before the general election, without exception, every single candidate for their top-100 target seats came from the public sector. Together, they have trumpeted the same old socialist mantra of misconceived wealth redistribution. With this Budget, they have completely missed their target.

The Minister was wise enough not to mention the £22 billion black hole. How we in this House are getting bored with it, as are the public. Last week, I discussed this very matter with the right honourable Jeremy Hunt. He, and we on these Benches, have rubbished that figure, and the OBR has stepped back from it. I hate to have to inform the Minister, but frankly the voters no longer believe it either. As the oldest democracy in the world, we are lucky enough to have a very sophisticated electorate. They can clearly see that the so-called black hole was entirely of Labour’s own making. They created it when they gave their chums in the unions—the train drivers and the junior doctors—huge pay rises without negotiating any change in their terms and conditions.

This Budget was sadly put together with no impact assessment, no consultation with Defra, no idea of how much revenue it would generate, and certainly no consideration whatever for the damage, and in many cases the destruction, it will cause to hundreds, maybe thousands, of small family farms and businesses.

We always hear this Government and their acolytes decrying the far right for rioting and for questioning or criticising the perceived wisdom of the intellectual elite and its progressive policies—and now, increasingly, for thought crime. Let us see it as it is: this is not a Labour Government; this is a far-left Government. History records that the far left has been far crueller and always does far more damage to its subjects, particularly its agrarian population, in its vainglorious pursuit of misplaced ideology. It is straight out of the World Economic Forum’s playbook: “In the future, you will own nothing and be happy”.

Motion agreed.