Inheritance Tax Relief: Farms

Dave Doogan Excerpts

Monday 10th February 2025 Westminster Hall

[Dave Doogan (Angus and Perthshire Glens) (SNP)]

It is a pleasure to serve under your chairmanship, Sir Edward. I rise to speak for the 468 signatories to this petition who are residents of my constituency. I have to tell you that that is about 11 times more Angus and Perthshire Glens constituents than have signed any other petition from this place. Never in my time in this Parliament have I seen MPs perched on windowsills to be in the room for a debate. There are mass demonstrations outside, and there was a demonstration on the South Inch in Perth at the weekend.

This policy is fundamentally unjust. The Government said that they would not do it, and they have gone ahead and done it. They have applied it without any warning. There is no taper into the new regime. It gives no time for farmers to adjust their tax arrangements. It is diametrically opposed to current tax advice, which is grossly unfair. It ignores the fact that there is no actual financial enrichment; farmers simply become the custodian of an asset. It does not go after the non-farming interests that are avoiding tax. It ignores the disproportionate effect on Scotland. It ignores the fact that a quarter of Scottish farms are tenanted—it has zero provision for those—and it does not take cognisance of the 15,000 Scottish crofts that are grossly adversely affected by it.

This policy is economically incoherent. It is a tax on the production of food. It will precipitate a reduction in investment. That will mean lower yields, which will mean higher prices. That will be inflationary, which is the last thing that this economy needs. It is not just farmers who will be undone by this policy; it is the entire agricultural supply chain.

This policy undermines the reinvestment model from generation to generation. It ignores the societal benefit of agriculture to our rural communities. With BPR, it is a betrayal of the divestment drive to which farmers have so dutifully been applying themselves over the past 20 years. It risks the sell-off of family farms across places such as Angus and Perthshire Glens to faceless international corporations that will not leave anything positive behind—certainly not any profit.

This policy is anti-growth. As I suspect the Government now fully realise behind closed doors, it is a disastrous mis-step. It plays fast and loose with the mental health of farmers. Let me echo the chorus from the National Farmers Union Scotland that this policy must be paused and the industry must be properly consulted. The outcome must be the removal of this iniquitous threat to all that we hold dear in our agricultural and rural communities and economies.

On behalf of the agricultural sector in Angus and Perthshire Glens and across the whole of Scotland—in fact, the whole of the United Kingdom, to which I do not often make reference in a speech—it is not too late to do the right thing. I implore the Minister to do so.

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[Sarah Dyke]

I thank my hon. Friend for a very well made point, and farming is indeed often multigenerational. This is putting huge stress on farming families. I myself am from a farming family. My mother is 81, and my father died about a year ago. The pressure that it is putting on her to think about whether she can survive another seven years is so distressing, and I know that she is not alone.

[Dave Doogan]

For very good reason, we do not apply tax to food. Does the hon. Lady agree that for the same good reason, we should presumably not apply tax to the production of food? Does it not amount to the same thing?

[Sarah Dyke]

I agree with the hon. Gentleman.

Levels of confidence among the farming community are at a worryingly low ebb. The National Audit Office reports that only one in three farmers are confident that DEFRA and its agencies can deliver their proposed changes to schemes and regulations. The family farm tax will only increase pressure on farmers, while burdening with extra uncertainty and anxiety farmers who are already suffering with their mental health. Today marks the beginning of Mind Your Head week. Now in its eighth year, it is a campaign that amplifies mental health awareness, run by the Farm Safety Foundation and Yellow Wellies. This year’s themes are love, positivity and resilience—three characteristics we should show to our farmers.

Recently, the Office for Budget Responsibility assigned any revenue from this tax a high uncertainty rating, stating that any

“yield from this measure is not likely to reach a steady state for at least 20 years.”

The Treasury projects that the combined changes to agricultural property relief and business property relief will raise approximately £520 million annually. Using HMRC figures on the total cost of each relief, however, the Liberal Democrats have calculated that the proportion attributed to the APR changes will be only around £115 million, confirming that this misguided tax will penalise British farmers for essentially no benefit.

In its report, the OBR reiterates that the measure will hit older farmers hardest, because they will find it difficult to quickly put in place the transitional arrangements to restructure their affairs in response to the pending changes. I recently spoke to a farmer from Martock who told me that their parents, who are in their late 80s, are horrified by this tax raid. They do not want to lose their home and their business, but the lack of time to implement the changes may make that their sad reality. They implore the Government to consult on transitional arrangements that work with them and for them.

I fear that these family farms will instead be broken up and parcels of land will be sold off at a deflated land value to already wealthy landowners, who will simply add to their large land portfolios.

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[Robbie Moore]

My hon. Friend makes the point powerfully: collectively, all industry bodies and professionals in the sector are united. The NFU, the CLA, the CAAV—of which I put it on record that I am a fellow, having previously practised as a rural practice surveyor, so I understand the implications on the value of farmland—and Savills, as a key land agent, are all saying exactly the same thing: that this Government’s policy will have catastrophic consequences. My understanding is that the Chancellor has not yet even bothered to reach out to any of those professional organisations to sit round a table and try to understand their concerns. That point was made very eloquently by my hon. Friend the Member for Bridlington and The Wolds (Charlie Dewhirst).

[Dave Doogan]

The shadow Minister is articulating the substance of the issue with great passion. Does he agree that at the heart of this fiscal misadventure is classic Treasury dogma, whereby the principal objective is to quantify the price of something and take no cognisance of its value? APR and BPR will unravel for this Government. Does he agree that it would be far better for them to take steps to row back on this policy now, rather than waiting for it to go absolutely pear-shaped?

[Robbie Moore]

The hon. Member makes a very powerful point: this is about the choices that the Labour Government are imposing on many of our family farming businesses. Those families are now having to make difficult decisions about whether to look at disposing of land, plant and machinery or livestock to fit an IHT liability that may come down the line. All of that is reducing their productivity, which will have an impact not only on those family farming businesses, but on UK food production and UK food security. That is why I join all Opposition Members in calling on the Government to change course immediately.

Farmers are not multimillionaires. Many struggle to break even. As my right hon. Friends the Members for Beverley and Holderness and for Dumfriesshire, Clydesdale and Tweeddale (David Mundell) have said, the vast majority of returns for our farming businesses are less than 1%, yet in most cases the value of the land on which they sit will be severely affected by the IHT changes, because the threshold that the Government are bringing out is £1 million. When the average size of a farm in England is 200 acres, and we take into account the farmland, the cottage that might exist on the farm, the plant and machinery, the livestock and the growing crops or stocks that may be in store, the value will be significantly higher than £1 million. That is why the Government need to listen to the NFU and its statistics.

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[James Murray]

I thank my hon. Friend for her intervention. She is absolutely right about the importance of repairing the public finances and supporting public services, for her constituents in North Warwickshire and Bedworth and indeed for all of our constituents across the country.

I noted that, in her contribution earlier, my hon. Friend made a point about what this Government are doing to support the profitability of the farming sector. She may have seen that, at the Oxford farming conference in January, the Secretary of State for Environment, Food and Rural Affairs set out the Government’s long-term vision. That includes reforms to use the Government’s own purchasing power to make sure that we are buying more British food, planning reforms to speed up the delivery of infrastructure, and work to ensure supply chain fairness, which will help people involved in the farming industry and more widely, across her constituency and those of other Members here today.

As I said, the decision that we took to reform agricultural property relief and business property relief was one of the difficult but necessary decisions that we needed to take on tax, welfare and spending to restore economic stability, to fix the public finances and to support public services, including an NHS in crisis. We have taken those decisions in a way that makes the tax system fairer and more sustainable.

The reforms to agricultural property relief and business property relief mean that, despite the tough fiscal context, the Government will still maintain significant levels of relief from inheritance tax beyond what is available to others. The Government recognise the role that these reliefs play, particularly in supporting small farms and businesses, and, under our reforms, they will continue to play that role.

The case for reform is underlined by the fact that the full, unlimited exemption, as introduced in 1992, has become unsustainable. Under the current system, the benefit of the 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates. According to the latest data from HMRC, and as hon. Members have mentioned, 40% of agricultural property relief benefits the top 7% of estates making claims—that is 117 estates claiming £219 million-worth of relief.

[Dave Doogan]

On the point the Minister just made about the notional value of estates, I think I can help him, because that is where he is going wrong, and where he has taken his Government up an agricultural cul-de-sac. When it comes to agriculture, what is important is not the notional value of the estate, but how someone came by that estate—whether they used billions of pounds of money on which they should have been paying tax in order not to pay tax, or whether they inherited the family farm from the generation that went before. That is the differentiation that the Treasury should be making. The value is irrelevant; the Minister should focus on the nature of the inheritance or acquisition.

[James Murray]

What has driven the Government in making the decision to reform agricultural and business property relief is the overwhelming priority of fixing the public finances in a fair and sustainable way. That is why the statistics to which I just referred, about how agricultural and business property relief have come to be used in recent years, are important for understanding the context in which we decided that the time for reform was now.