Crown Estate Bill [Lords]

Alistair Carmichael Excerpts

2nd reading
Tuesday 7th January 2025 Commons Chamber

[Darren Jones]

The right hon. Gentleman is doing a brilliant job of anticipating sections in my speech. Once again, I will point at him when I come to the relevant section; in fact, it is the next section, so he is in luck.

There will be a memorandum of understanding in place between the Treasury and the Crown Estate that will govern how the borrowing powers will be exercised. Above all, the Crown Estate will be borrowing for investment, maximising the profits returned to the public purse. Any such borrowing will require Treasury consent and will be within our fiscal rules.

Given that the new powers will enable the Crown Estate to first draw on its cash holdings, it is not envisaged that these borrowing powers will be used until the end of the decade. As with any public sector borrowing, the Treasury will ensure that this is consistent with “Managing Public Money” principles to ensure value for money for the taxpayer. The fiscal impact of any Crown Estate borrowing will be fully considered, starting with this year’s spending review, to ensure it is consistent with our fiscal rules.

The Bill contains a set of necessary reforms, ensuring that the two key objectives can be met and that the Crown Estate can continue to operate effectively, both now and in the years ahead. It is composed of five key elements. First, it widens investment powers by removing existing restrictions on investing in the current Crown Estate Act 1961, and clarifies the Crown Estate’s ability to invest in complementary activities, such as research, digital technology and energy supply chains. Secondly, it grants the Crown Estate the power to borrow with Treasury consent. As well as generating returns for the public purse, the new ability to borrow will free it up to make better use of its existing assets, leveraging these to give it more room to invest.

Thirdly, the Bill makes amendments relating to the governance of the Crown Estate to provide legislative simplification and to bring it in line with best practice for modern corporate governance. By expanding the number of commissioners, the board will be able to better reflect the growing breadth of the Crown Estate business and ensure a greater range of expertise and diversity at board level. The Bill also requires the appointment of commissioners to advise on Wales, England and Northern Ireland, which will ensure that the board continues to act in the best interests of the areas in which it operates.

Fourthly, the Bill requires the commissioners to keep under review the impact of their activities on the achievement of sustainable development goals in the UK. It is important that progress towards national goals on the environment and climate, as well as wider considerations on society and the economy, continue to be at the core of the Crown Estate’s strategy.

Fifthly, the Bill requires the annual report to include a section on the activities of the commissioners under their recently announced partnership with Great British Energy. That will ensure that details of the partnership and the benefits it creates are publicly available, clear to all and subject to debate in this House when those reports are published.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I understand that the Minister is proposing that, in relation to the seabed, the Crown Estate will be a licensing authority for renewable energy projects and will now be able to invest in them too. The commissioners have a primary duty to maximise the return to the Crown Estate of any activity they undertake. To comply with the law, will the Crown Estate be compelled to side with renewable energy development at the expense of the fishing industry if, for example, there is a conflict between the siting of an offshore wind farm and the use of that sea by the fishing industry, and is that fair?

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[Darren Jones]

I am continually grateful for the team effort, and I am grateful to my hon. Friends for having paid such close attention to the Bill.

[Mr Carmichael]

I am aware of the duty to keep this under review, but that will surely be overridden, because the primary duty remains to maximise the return for the Crown Estate. I am quite happy for the Crown Estate to be both a licensor and an investor, although there is something of a conflict of interest, but surely there needs to be more concern about the Bill’s impact on other seagoing industries. In a way, I fear that the Minister’s response to my initial question suggests this has not been given sufficient attention thus far.

[Darren Jones]

The right hon. Gentleman should not take my not knowing the answer as meaning that other people are not paying sufficient attention to the issue. He has asked a very technical question, and I commit to making sure an answer is made available to him and the House before the Bill goes to Committee.

The Bill currently places an obligation on the commissioners in relation to salmon farming, due to an amendment made in the other place. The Government do not believe this obligation would be effective or, indeed, appropriate, given that it relates to a devolved policy area. We therefore intend to seek to remove this measure in Committee.

The Bill has seven clauses. Clause 1 inserts two new measures into the Crown Estate Act 1961 to clarify and broaden the commissioners’ powers. It also removes section 3(4) of the 1961 Act, thereby removing limitations on the commissioners’ investment powers.

The two new measures grant a power to borrow, subject to Treasury consent, and clarify that the commissioners have the powers to do that which is connected, conducive or incidental to meeting their general functions, including enhancing and maintaining the Crown Estate and the returns obtained from it. This allows the Crown Estate to borrow from the National Loans Fund, the Treasury or otherwise, subject to Treasury consent, and authorises the Treasury to provide financial assistance to the commissioners or to provide loans from the National Loans Fund.

Clause 2 makes two amendments to modernise the Crown Estate’s governance, by increasing the maximum number of board members from eight to 12 and removing the requirement for the salaries and expenses of its commissioners to be paid out of voted funds.

Clause 3 requires the commissioners to keep under review the impact of their activities on the achievement of sustainable development in the United Kingdom. Clause 4 requires the commissioners’ annual report to include a specific report relating to the Crown Estate’s partnership with Great British Energy.

Clause 5 requires the commissioners to make assessments relating to salmon farms on Crown Estate land, and to refuse or revoke a licence for a salmon farm if the assessment determines that it may cause, or is causing, environmental damage, or if it raises significant animal welfare concerns.

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[James Wild]

My right hon. Friend is absolutely right to highlight the potential risk. There is no one-way bet in life, and there is no guarantee that the Crown Estate will successfully invest in projects that go well. I will come on to the point about the energy side of things later in my speech.

It is perfectly reasonable, as we proposed in the other place, to have that 25% cap in legislation, which could be amended. I am sure we will consider the issue further in Committee.

The Bill alters the governance of the Crown Estate and provides for the number of commissioners to be increased to 12. Given the extension of the powers and the decrease in parliamentary oversight, pre-appointment scrutiny is of great importance. Again, I thank Baroness Vere for seeking and securing assurances from the Government that the chairman of the Crown Estate commissioners could be added to the Cabinet Office pre-appointment scrutiny list. Just before Christmas, Ric Lewis was announced as the preferred candidate for the role and I am pleased that the appointment will now be considered by the Treasury Committee. Will the Minister confirm in his winding-up speech whether other commissioners will be subject to any pre-appointment scrutiny?

Turning to salaries, which I do not believe the Chief Secretary referred to, under clause 2, Parliament will no longer be responsible for approving them through the estimates. Instead, they will be paid out of the income of the Crown Estate. Currently, the framework document sets out that remuneration of the chief executive should be in line with or below that of an appropriate benchmark group approved by the Treasury and that a clear majority of the chief executive’s total reward should be conditional upon performance. We support rewarding success, but with the loss of parliamentary oversight, will the Minister confirm whether any changes are proposed to the remuneration framework and, specifically, for the chief executive? Will he undertake to report to the House on any such change in future?

Turning to Great British Energy, on the day the Bill was introduced, the Government announced a partnership between the Crown Estate and GB Energy, which they claimed will

“unleash billions of investment in clean power.”

Indeed, the press release went on to say it

“will lead to up to 20-30GW of new offshore wind developments reaching seabed lease stage by 2030”.

However, there is a lack of transparency over how the partnership will work, the difference it will make, and its impact on the Estate’s primary duties. Given the supposed significance, I would have expected to have seen a partnership agreement by now, as without one, we do not know what has been agreed. Will the Minister confirm if there is a partnership agreement yet? Will he commit to publishing it before the Committee stage? Has the Crown Estate agreed to invest a certain amount with GB Energy? What process is there to ensure the Crown Estate continues to deliver on its duty to maintain and enhance the value of the estate? How will the Crown Estate decide between projects GB Energy backs and other projects that may have a higher rate of return?

The GB Energy founding statement adds to the confusion, adding that the Crown Estate

“will establish a new division ‘Great British Energy: The Crown Estate’.”

That raises several questions. Will new staff be required, or will it simply be a restructuring of the existing group? The statement also says it will sit

“under both Great British Energy and The Crown Estate, with strategy and investment agreed by Great British Energy.”

Will decisions be made jointly on investments, or will the Crown Estate retain its independence? Given the Government voted down our amendments to the Great British Energy Bill to introduce more accountability, it simply fuels some suspicion that the partnership has been created for political rather than economic reasons. The reporting requirements that were secured and added to the Bill in clause 4, which the Chief Secretary referred to, will at least help to bring some transparency to this, but there is a need for a lot more.

Under the previous Government, the UK became the first to more than halve emissions while growing the economy and became a leader in offshore wind. However, we must acknowledge that renewables are not cheap in all scenarios. There is clearly a risk that the Government will push up the cost of wind by rushing ahead to meet their political target and increase prices for consumers as a result. That is a far cry from the £300 cut in energy bills that Labour promised during the general election. As we scrutinise the Bill, Parliament has an important role to play to ensure the Government do not seek to use the Crown Estate to try and deliver the Energy Secretary’s damaging policies and undermine returns to the taxpayer.

As I set out earlier, the Crown Estate owns some vital assets, so it is surprising that there are so few safeguards to prevent commissioners from selling off such important assets. In the business case for the changes, the Crown Estate was planning £1.4 billion of disposals to fund investments, representing nearly 10% of its portfolio. When I asked Crown Estate representatives what that covered, they said they were unable to disclose plans for disposals because it is commercially sensitive information. Again, that raises concerns about transparency. In response to questions in the other place, the Government said they were working with legal experts

“to establish the extent to which the Crown Estate can currently sell the seabed”

for example. On Report, Lord Livermore confirmed that if the Government establish that

“further legislation is required to restrict the ability of the Crown Estate to sell the seabed,”—[Official Report, House of Lords, 5 November 2024; Vol. 840, c. 1412.]

they would bring forward an amendment.

I would be grateful if, in his winding up, the Minister could update the House on the process of those discussions and the need for such an amendment. The disposal of assets should be properly scrutinised. The Government rejected attempts in the other place to bring more scrutiny here and said that a statutory limit on disposals would undermine the flexibility of the Crown Estate to operate commercially. Given that the assets are held for the benefit of the nation, we should ensure some form of transparency if they are to be disposed of, whether that is reporting to Parliament, or seeking HMT approval for disposal of specific assets, or those over a set value.

Finally, let me turn to salmon. Clause 5 would require the commissioners to assess the environmental impact and animal welfare standards on salmon farms on the Crown Estate. If a salmon farm is causing damage or animal welfare issues, its licence would have to be refused. I commend my noble Friend Lord Forsyth of Drumlean for his tireless work on this matter and for highlighting that salmon farming can cause detrimental impacts in the event of escapes in terms of disease, breeding and other issues. Given that wild Atlantic salmon are now on the international union for conservation of nature’s red list, these are perfectly reasonable obligations which he said might influence how the Crown Estate of Scotland is to operate. The amendment was sponsored by Lord Forsyth, but also by Green and Labour party Members, so it is disappointing to hear the Chief Secretary to the Treasury talking about reversing that measure, and we look forward to that debate in the Committee stage.

[Mr Carmichael]

Salmon farming is enormously important in my community and in many other communities around the highlands and islands. Those communities will not be affected by this apparently, although we might hear conformation on that at a later stage, but is it the hon. Gentleman’s position that this is the only way of regulating salmon farmers? Is he not aware that there is a massive amount of regulation affecting salmon farming already? Does he really think that the Crown Estate commissioners are the people to be doing this job?

[James Wild]

Like me, the right hon. Gentleman will have read the Hansard reports of the debates in the other place where this issue was covered at some great length, so I defer to the points made by Lord Forsyth there. Regulation is obviously in place, but this addition would simply raise awareness of the issues in the Bill. The Government said that they supported the objective of the amendment when it was discussed in the other House, but did not think it was necessary. They did not think that it would do any damage, so I suggest that it remains part of the Bill.

To conclude, the Crown Estate Bill will help deliver the modernisation that is needed, but the purpose must be supporting the estate’s duty to maintain and enhance its value for maximised return to taxpayers, rather than becoming an extension of GB Energy’s cheque book. We will be pursuing the concerns that I have raised about checks on borrowing governance, the relationship with GB Energy and the safeguards in response to the disposal of assets to ensure that that remains the case.

Farming and Inheritance Tax

Alistair Carmichael Excerpts

Wednesday 4th December 2024 Commons Chamber

[James Murray]

I would like to make a bit of progress to explain some of the detail behind our policy, which may answer some of the questions that hon. Members are jumping to their feet to ask.

We know that inheritance tax is always an emotive issue, and understandably so. It is a natural desire for people to want to pass on their assets to the people they love when they pass away.

The standard single rate of inheritance tax has been 40% since 1988, and assets have generally long been entitled to nil-rate bands, reliefs and exemptions. A form of relief for agricultural property was introduced on estate duty in the Finance Act 1948, meaning that this duty was charged at 55% of the rate that would normally have applied. A new agricultural property relief and a business property relief were created in the mid-1970s with the introduction of the capital transfer tax. The rate of relief increased over time to a maximum of 50% relief; that maximum rate was then increased to 100% in 1992. This means that agricultural landowners and farmers did not receive 100% relief for almost all of the 20th century, and yet farms passed down between the generations.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I am grateful to the Minister for giving way. That was why the law was changed to introduce 100% relief. Family farms were not being passed down because the value of land was increasing. Will he consider that before bringing in these changes?

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[James Murray]

I thank my hon. Friend very much for her intervention. It is telling that when she makes such an important and sensible point, the Opposition do not want to hear it and try to shout her down. As she rightly points out, our changes to the reliefs will make buying land less attractive as a means of inheritance tax planning. This means that land prices are likely to become more affordable for farmers, thanks to a reduction in tax-motivated investment in agricultural land.

[Mr Carmichael]

Will the Minister give way?

[James Murray]

I have given way already, so I am going to make some progress.

The reforms should be seen in the context of the significant existing support for the farming industry in the wider tax system, including the exemption from business rates for agricultural land and buildings, the ongoing entitlement for vehicles and machinery used in agriculture to use rebated diesel and biofuels, and the exemption from the plastic packaging tax for the plastic film used to produce silage bales. On top of that, farmers are able to add together their profits from farming over two to five years and be taxable on the average of those profits, building flexibility into their tax arrangements for difficult years and unexpected challenges.

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[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I remind the House of my entry in the Register of Members’ Financial Interests.

It is a pleasure to follow the hon. Member for Peterborough (Andrew Pakes), who is a fellow member of the Select Committee, and the hon. Member for Ribble Valley (Maya Ellis). They both, in their own way, made an important contribution to the debate by giving a bit more context to it. I will vote for the motion in the name of the Leader of the Opposition, not because it is the most elegant piece of drafting that I have seen in 23 years in the House, but because there is nothing in it with which I really disagree. It does feel, though, like a bit of a missed opportunity to move the debate onwards. I say that not as any real criticism, because it is a response to a Government measure in the Budget, which was also a bit of a missed opportunity.

It is worth taking a minute or two to pause and reflect on how things might have been done differently. We could have gone through the process that multiple Governments and Departments have gone through over the years by starting with a Green Paper or a White Paper, and looking at the way in which inheritance tax has worked, and some of the unintended consequences that it has generated. We have all heard of the super-rich buying up land and inflating the price as some sort of tax avoidance measure. I have not met a single working farmer who wants to defend that, so there was a real opportunity to do things differently. We could have built a consensus about the proper value of land, and about some stuff that is not really being spoken about in this debate.

I speak as a former solicitor. Thankfully, I never did any executory practice, but some of those who are still in practice and with whom I am in contact tell me candidly that, because there was 100% relief on agricultural land, they did not really give a great deal of thought to the valuation that went into the application for confirmation. That is bound to have had an impact on the figures on which the Government rely. Had we done things in a proper and reflective way, we would have been able to build consensus on values and thresholds, for example, and do things very differently.

[Sir John Hayes]

I welcome the contribution of my former ministerial colleague. Had the tax been levied on exactly the people he describes—the super-rich, and non-working farmers—few would have complained, but it has been set at the wrong level. That is why I asked for detailed modelling to be made available to the House.

[Mr Carmichael]

I think I just said more or less exactly that. A debate of the sort that I am talking about would have allowed for a wider debate about farming finances. We have had 70 years of very direct Government intervention in the agricultural economy through farm subsidies. Taking a step back, critical though those farm subsidies are, their net effect has ultimately been to keep farmers poor. There is now such an enormous mismatch between the capital value of the assets being farmed and the derisory return on them. DEFRA tells us that there is a 0.5% return on capital. Farmers in my constituency tell me that a £3 million farm will give them an income of about £25,000 a year. That is pretty much in line with DEFRA’s figures.

We hear about farmers working into their 80s. It is a slightly patronising and very romantic view of doughty farmers working on into their 80s because they are seized with a sense of vocation. There absolutely is a sense of vocation among farmers, but let us not forget that a lot of them work into their 70s and 80s because they have been running businesses that have had no spare money to put into a pension so that they can look after themselves in their old age.

[Alicia Kearns]

The right hon. Gentleman makes an important point about just how little farmers earn, and yet they are consistently being described by Labour Members as asset-rich. Should farmers not fall into their definition of working people, and therefore Labour should be on their side rather than what they are doing to them?

[Mr Carmichael]

“Working people” hardly does justice to farmers. Some of my young constituents told me they were working for returns of about £6 an hour. There is a reason I chose not to become a farmer at 16 and why I thought law was a more attractive career opportunity to pursue, but I bow to no one in my admiration for those who make that choice.

Of course, there is the question of those who have made their estate planning decisions on the basis of APR being available. Others have pointed to that, but it is absolutely critical, and it goes beyond estate planning. I wonder how many farmers over the years decided in a divorce settlement to take the farm as their part of the capital, because they have a familial and emotional connection to the land, and are now finding that what looked like an equitable settlement a few years ago risks being much more inequitable.

The particular opportunity I fear we have missed is that in relation to tenant farmers. The Tenant Farmers Association came up with an excellent proposal, which would reward landlords who grant leases in excess of 10 years with exemption from inheritance tax liability. That would be good for the very people who everybody on both sides of the House says they want to help: the small family farmers. There are multiple reasons why people might buy up agricultural land. I do not know anybody who takes an agricultural tenancy thinking that it will make them a member of the super-rich as a result.

The idea that is being mooted of a clawback—something on which we could see a bit of a sensible discussion and a consensus between the Front Benches—or the idea of a suspended inheritance tax liability which would crystallise only at the point of the land sale after the death of the owner, would both work to keep land in active food production. The irony of the way in which the Government have structured the measure is that, by allowing a 50% relief on farmland above £1 million, the purchase of agricultural land will probably remain an attractive proposition for the super-rich.

We have reached a point in the debate where we need to broaden it out beyond just inheritance tax, and look at the wider question of farming finance and ask ourselves how we can build a consensus that puts farming and food production at the heart of the countryside, where it truly belongs.

[Madam Deputy Speaker (Ms Nusrat Ghani)]

Now, with a speaking limit of five minutes, I call Matt Bishop.

Business Property Relief and Agricultural Property Relief

Alistair Carmichael Excerpts

Thursday 17th October 2024 Westminster Hall

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

It is a pleasure to serve with you in the Chair, Dr Huq, and I congratulate the hon. Member for Gordon and Buchan (Harriet Cross) on securing a very timely debate. She has provided us with what is definitely my favourite euphemism, the “succession event”, and I think we know what that means in most cases.

This is a timely debate because we have had a lot of speculation in the media in recent weeks about the possibility of changes coming in the Budget very soon. There is very little that is certain in politics these days, but I am as near certain as anybody can be that, when the Minister comes to reply, he will say that he is not going to tell us anything about the Budget. I understand the reasons for that, which are essentially sound, long-standing and respected by all, but it illustrates the inadequacy of this as a way of effecting meaningful change. Without the ability to have a proper debate involving the Treasury, change will inevitably come in a haphazard and chaotic way, and it will bring with it many unintended consequences that will have an effect on not just farmers but the wider rural community. I should have said right at the start that I have my own interests in agriculture, which are in the Register of Members’ Financial Interests, and I remind the House of those.

There may be a case for reform, but this really is not the way to go about it. The hon. Member for Gordon and Buchan was right to say that farming is a capital-rich and revenue-poor industry. Of course, any changes in farming will have consequences that spread beyond agricultural businesses. What affects farmers will affect vets, agricultural merchants, local shops and post offices in some of the most economically fragile communities to be found anywhere in the country. My concern has long been—it is not exclusive to this Government—that the Treasury does not quite understand the way the rural economy works. It is a cliché, but true, to say that farming underpins just about everything in rural communities and the rural economy, whether environmentally—through the way in which land is managed, which has consequences for nature—or financially.

The Tenant Farmers Association provided a briefing for this debate, which said that it is already seeing consequences among its members:

“We are already seeing, first hand, concerns about how Inheritance Tax charges change the way that traditional estates have thought about the management of their agricultural land, and that is before there is any change to the Inheritance Tax regime. Rural estates with significant residential and mineral interests will want to ensure that they have sufficient business activity elsewhere on their estates to be able to qualify for BPR from Inheritance Tax across the whole of their estates. If APR was abolished this will make things hugely much more difficult for farm tenants.”

That important point gets right to the heart of the matter. That is why I am pleased that the hon. Lady, in framing this debate, covered APR and BPR, which work in an interlinked way. It also shows the responsibility we in politics have when we set hares running.

North of the border, for the last few years we have had an active and often welcome debate about land reform, but one of the consequences of that debate is that many agricultural land owners, instead of moving out and putting in tenants, have moved into grass lets. A lot of the larger landowners’ estates, in particular, have replaced the secure agricultural tenancies for which they had been known for generations with a much less secure system of tenure.

As the TFA says, there might be a case for reform. It suggests ways to reward longer tenancies of 10-plus years and more secure tenancies. We have to have that debate, but we cannot effect that in a meaningful way that looks at agricultural spending in the round once the decision has been announced in a Budget. There are many other influences at play. For example, in recent years we have had the reform of agricultural support payments in England and Wales, and that is now coming through in Scotland.

For decades, farmers have been told that they have to diversify—diversify, diversify, diversify—so they have renovated farm cottages and turned them into furnished holiday lets, and now they are being told that they are responsible for the housing crisis in the country and are being hit with furnished holiday let reform, which this Government appear to have inherited from the previous one.

Inheritance tax can be avoided by intra vires transfers, but the way they work can often be arbitrary. They can also have some difficult personal consequences when it comes to the transfer from one generation to the other, as the family interaction can be difficult.

I congratulate the hon. Member for Gordon and Buchan. I hope that when the Chancellor delivers the Budget next week, if this issue is under the Treasury’s active consideration, we will see the Government’s direction of travel and the overall picture that they want to achieve, rather than just one quick hit, because that could have serious consequences for family farms and rural communities across the country.

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[The Exchequer Secretary to the Treasury (James Murray)]

It is a pleasure to serve under you in the Chair, Dr Huq. Let me join others in congratulating the hon. Member for Gordon and Buchan (Harriet Cross) on securing the debate. I thank all hon. Members for their contributions —including the advice from the shadow Minister, the hon. Member for Droitwich and Evesham (Nigel Huddleston), on what to expect in my new role from the hon. Member for Strangford (Jim Shannon).

As many Members have rightly highlighted, there has been a great deal of speculation in recent weeks about potential changes to taxation in the Budget, including to the reliefs that we are debating today. Hon Members will understand—indeed, many of them acknowledged in their speeches that they understand—that I cannot add to that speculation. The Budget is on 30 October, and my right hon. Friend the Chancellor of the Exchequer will set out any changes to the tax system then, in the normal way. However, ahead of that, I welcome this opportunity to hear Members’ views on this matter.

Let me start by briefly setting out the context for this Budget. Following the spending audit in July, the Chancellor has been clear that difficult decisions lie ahead on spending, welfare and taxation to address the £22 billion black hole that we inherited from the previous Government. Decisions on how to address that will be taken at the Budget in the round. It is crucial that we get the public finances back on a firm footing so that we can restore economic stability. On those foundations, we will boost investment, increase growth across the UK and improve public services. That is the prize ahead and how we will make people across Britain better off.

Let me turn to how inheritance tax operates in the UK tax system. Inheritance tax, as other Members have said, is a wealth transfer tax and applies to the estate of the deceased. Transfers made in the seven years before death are also taken into account. The estates of all individuals benefit from a £325,000 nil-rate band. The residence nil-rate band is a further £175,000 and is available to those passing on a qualifying residence on death to their direct descendants, such as children or grandchildren. That means that, altogether, qualifying estates can pass on up to £500,000. Furthermore, the qualifying estate of a surviving spouse or civil partner can pass on up to £1 million without an inheritance tax liability, because any unused nil-rate band or residence nil-rate band is transferable to the surviving spouse or civil partner.

Above those thresholds, the headline rate of inheritance tax is 40%, but it is important to remember that that rate is charged only on the part of the estate that is above the threshold, and after the application of reliefs. That is obviously the subject of today’s debate, so let me turn first to business property relief. That relief is a long-standing part of the inheritance tax system. It is designed to ensure that businesses need not be broken up or sold on the death of an owner in order to pay an inheritance tax liability. That reflects concerns that there may not always be enough liquid assets in the business to pay the tax. Subject to certain qualifying conditions, the relief generally applies to unquoted shares and interests in a business. It also applies to shares designated as “not listed” on a “recognised stock exchange”, such as shares that are quoted on AIM, as mentioned by the shadow Minister. The rate of business property relief is usually 100%, but can be 50% in some circumstances. Until March 1992, the maximum rate of the relief was 50% and there was a lower rate of 30% alongside that. Hon. Members may be interested to know that the cost of the relief has risen from £685 million in 2019-20 to a forecast £1.3 billion in 2023-24.

Agricultural property relief is also a long-standing part of the system. It has a similar purpose to business property relief, although the main benefit is to ensure that relief is available when land is let to tenant farmers, as we heard from various hon. Members today. This is largely because owner-occupiers of agricultural land also qualify for business property relief. Again, the rate of agricultural property relief is usually 100%, but can be 50% in some circumstances, and as with business property relief, lower rates existed before 1992. The cost of this relief has risen from £320 million in 2019-20 to a forecast £365 million in 2023-24.

There are many different views on these reliefs. Stakeholders, including Family Business UK and the Country Land and Business Association, have argued strongly against any prospect of the reliefs being abolished. Other organisations are in favour of changes to the reliefs, with the Institute for Fiscal Studies suggesting that a cap on such reliefs could allow those passing on small farms or businesses to be taken out of inheritance tax, while preventing agricultural and business investments from being used to avoid it. The right hon. Member for Orkney and Shetland (Mr Carmichael), whom I thank for his contribution, said that there may be a case for certain reforms to agricultural property relief. Of course, the previous Government had views on these reliefs. I understand from reports in the Telegraph that the previous Government considered abolishing these reliefs as part of reforms to the system.

I welcome the opportunity today to hear from Members on their views, particularly on agricultural property relief, but also on issues relating to farmers and their constituents more widely. The hon. Member for Chester South and Eddisbury (Aphra Brandreth) rightly highlighted the importance of food security for this Government and its importance in our policy making. The hon. Member for Strangford (Jim Shannon)—in nudging me gently, to quote the shadow Minister—spoke eloquently about the importance of farming in his constituency and in the economy of Northern Ireland. The hon. Member for Central Suffolk and North Ipswich (Patrick Spencer) spoke of some of the wider challenges facing the farming community in recent years, not least energy bills. My hon. Friend the Member for Hexham (Joe Morris) is proving to be a very effective constituency MP already, raising a number of important issues on behalf of those he represents, as well as drawing attention to the wider significance of having economic stability and security for farmers and everyone in his constituency.

[Mr Carmichael]

The Minister reminds us—it is our fault for doing this—that we have focused very much on the family farm as the unit of concern, because that is what concerns most of our constituents. However, a lot of agricultural land is, in fact, owned by bodies such as the Royal Society for the Protection of Birds, of which I am a member. The RSPB is never going to have a succession event, to join the hon. Member for Gordon and Buchan (Harriet Cross) in using that expression. The consequence of abolition could be that two farms right next door to each other—one owned by a charity or an institution of that sort, and the other owned by a family—would be left having to farm in very different economic circumstances. Is that really fair?

[James Murray]

I thank the right hon. Gentleman for his point, although he presupposes he knows what will happen to agricultural property relief, which, as I set out earlier, I cannot comment on further. He will have to wait a couple of weeks, perhaps, to have further conversations about what the Government will do in this space. I thank him and all hon. Members for their comments today, because it has been an interesting debate. As we have heard, the issue generates some strong views among many of our constituents and the Members present, who represent them.

I understand that there are many different views on what the Government should do, and the debate has allowed me to hear them. As always, the Government welcome all opinions and keep all taxes under review. However, I return to my earlier point: the Chancellor will, of course, announce changes to the tax system at the Budget. There is not long to wait.