Alistair Carmichael
Main Page: Alistair Carmichael (Liberal Democrat - Orkney and Shetland)Department Debates - View all Alistair Carmichael's debates with the HM Treasury
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Mr Alistair Carmichael (Orkney and Shetland) (LD)
As Chair of the Environment, Food and Rural Affairs Select Committee, I have not been short of opportunities to speak about this issue in recent months, so I shall keep my remarks short so that others might place their constituents’ concerns on the record. I should declare that I am a farmer and landowner. That is entered in the Register of Members’ Financial Interests.
The hon. Member for South Norfolk (Ben Goldsborough), introducing the debate, said that what is necessary now is meaningful engagement with the Government. He is absolutely right. May I say to the Minister who is replying to that debate that that engagement has to come from the Chancellor of the Exchequer herself? For her not yet to have met with representatives of the farming unions from across the four nations of this country is unacceptable, and that has to change soon.
Farmers are not, as the Secretary of State said to the Select Committee on 19 November, wrong in their understanding of this issue. What is wrong are the numbers on which the Government have based the policy that they have brought forward. It will affect many more farmers and estates than is currently believed or admitted by the Treasury. As Jeremy Moody said when he gave evidence to the Committee, this is a policy that penalises those whom the Government want to protect while protecting those whom they say they want to penalise.
The whole policy needs to be paused and reconsidered. It needs to be done because no proper consideration was given in the first instance to the full range of unintended consequences. In that regard, I have one question that I want the Minister to answer today: before the policy announcement was made, what consideration was given in the Treasury to the very particular position of tenants in Scotland who hold their tenancy under the Agricultural Holdings (Scotland) Act 1991? Essentially, the situation there is that a 1991 tenancy gives rise to an asset that is a chargeable asset for taxation purposes, which survives death; but because they are tenants, they do not have an asset that they can sell on in order to pay their tax bill. That seems to me to be a point of fundamental inequity.
If Ministers did not consider that before they put their proposals in the Budget, what else was given insufficient consideration? There is a need to reform inheritance tax. There are good things that, with proper consideration, we could do for agriculture, but in order to do that, the policy must first of all be paused, and the proper engagement that we have spoken of needs to happen.
Ben Maguire
My hon. Friend will not be surprised to hear that I completely agree and wholeheartedly support those suggestions.
The changes have not even taken effect yet, but their harsh effects are already on show. If no full U-turn is on the horizon, surely we can urge the Minister, with one voice, to look for an alternative to this ill-thought-through tax. The change will not hit the wealthy investors that the Government have taken aim at.
Mr Carmichael
I do not think I can listen to many more people say that. When I questioned the Prime Minister at the Liaison Committee before Christmas, he specifically said that what rich people do with their money within the rules was a matter for them, and that the policy did not have a target audience. Does that not point to an inconsistency in messaging among the Treasury and Downing Street?
Ben Maguire
As always, my right hon. Friend makes a very good point. I urge the Minister to look for alternatives. We have heard about the Liberal Democrats’ proposal for a working farm test. Other hon. Members have suggested some kind of clawback scheme in cases in which the farm is sold within, say, 10 years of inheriting it.
I will draw my remarks to a close, because I know that other hon. Members want to come in. This family farm tax will raise around £500 million a year—not an insignificant sum—but is it a price worth paying to kill farming in this country and, crucially, risk our food security? The Liberal Democrats have proposed restoring the cut that the Conservative party made to the big bank levy in 2016. That would have raised around £4 billion a year, which certainly puts this family farm tax into perspective.
James Murray
I will make a little progress, and then take interventions in a second.
The data that I just referred to on where the relief currently goes—I was going to address in a moment the data on how many estates making claims we think will be affected in 2026-27—is based on actual claims, so we believe it is the right data on which to base the reforms.
James Murray
I will take interventions in a moment, but let me make a little progress. Based on the statistics I have just set out, which show where the bulk of the benefit from agricultural property relief and business property relief has been going, we felt it was appropriate to reform how those reliefs operate. That is why the Government decided to change how we target agricultural property relief and business property relief from April 2026. As I have said, we are doing so in a way that maintains significant tax relief for all estates, including for small farms and businesses, while making sure that we repair the public finances.
Under the reforms that we have announced, all individuals will, of course, be able to access the general nil-rate bands and spousal exemptions that apply within the inheritance tax system. On top of those allowances, any business and agricultural property within people’s estates will benefit from 100% relief on a further £1 million of combined assets, except in cases of shares designated as “not listed” on the markets of recognised stock exchanges. Beyond the £1 million of full relief, a further 50% relief will apply with no limit. That means that any inheritance tax paid will be at a reduced effective rate of up to 20%, rather than the standard 40%.
Mr Carmichael
Does the Minister not understand that by penalising family farming at the same time as offering the 20% threshold, he leaves a situation in which purchasing land is still an attractive option for those who wish to shelter their wealth? He penalises those he wants to protect while protecting those he seeks to penalise.
James Murray
I thank the right hon. Gentleman for his intervention, but let us consider those who will still have generous protection from inheritance tax under the reformed system that we have announced. I point the right hon. Gentleman towards the fact that the reliefs in the reformed system, when taken together with the spousal exemptions and the nil-rate bands, will mean that, depending on people’s individual circumstances, up to £3 million can be passed on by a couple to their children or grandchildren, free of any inheritance tax.