Inheritance Tax Relief: Farms

David Smith Excerpts

Monday 10th February 2025 Westminster Hall

[David Smith (North Northumberland) (Lab)]

It is a pleasure to serve under your chairmanship, Sir Edward. I have held dozens and dozens of conversations with farmers across my constituency of North Northumberland. It has become clear to me that they welcome the principle of this policy, which is to stop the super-wealthy from minimising their tax liabilities by land banking with agricultural land. Not one of those farmers told me that they have a problem with the aim of the policy: to stop the wealthy avoiding tax. However, in the same conversations, many of the farmers told me that they are concerned that their businesses will be adversely affected. I wonder, therefore, if the relief element of the policy could be recalibrated.

The Government’s aim is to support our farmers and our food security, but we are doing that in a context where Tory inaction over 14 years has left great challenges, including climate change, a muddled and chaotic Brexit, and, as we have heard, deals on lamb and beef that our farmers are concerned about. We are not working in a vacuum. I am the first Labour MP in history for the vast majority of my constituency; that is not because the population were happy with what the Conservatives delivered for the countryside and farmers. I ask the Government to consider whether the balance is right. I have spoken to farmers in my constituency whose farms are worth £5 million, £8 million, £20 million and everything in between.

[Catherine Fookes]

Yesterday I visited Emma, a dairy farmer in my constituency. She still has a mortgage on her farm, which means that she cannot pass it on now. How might the inheritance tax work for her?

[David Smith]

Our farmers are facing a great many challenges, including being very over-leveraged in debt, and we should consider that. I spoke to one farmer whose land is valued at £16 million, so their new inheritance tax liability will be about £2.8 million, but they make just £96,000 profit per year. There are several examples of farmers who have low profits but face enormous bills.

[Julia Buckley (Shrewsbury) (Lab)]

My farmers in my Shrewsbury constituency have told me that they have struggled to make a profit for many years now. Indeed, they say, “The only game in town is to go big or go bust.” In other words, 12,000 small farmers have gone under because, over the last decade, farming has not been a profitable business. They tell me that they are ready to make some of the behavioural changes needed to pass the asset down to the next generation, who have just come out of agricultural college and learned all these new techniques, so that it can be profitable, sustainable and environmentally friendly. However, they also want me to pass on the information that our oldest farmers will not be able to make that behaviour change quickly enough. Will the Minister consider a temporary transitional extension to the taper, perhaps at year two, to help them to make the changes, which they are willing to do, and to make this policy work?

[David Smith]

I agree with my hon. Friend that these are some of the challenges our farmers are facing. As these examples show, the value of the land often bears no relation to the limited cash flow and the profit that is made. It is reassuring that a few tweaks to the policy would remove most of the pressure on family farms while maintaining the pressure on land bankers, who are the focus of the policy. Hardly a single North Northumberland farm will enjoy 100% relief, even with the nil-rate band, so raising the threshold would give instant peace of mind to family farmers.

I suspect that the Government could use data from the Rural Payments Agency and DEFRA to implement an active farmer test and judge whether the land is being put to public use and is therefore eligible for relief. That would differentiate intergenerational farmers and those simply buying farmland to reduce their tax liability. If a clawback mechanism is added and the land is then sold, for example, 10 years after gifting, the Government can reserve the right to claw the relief back for the public purse. Many of these measures have been in place in Ireland since 2015.

I know that the Minister is hearing the same thing that I am from farmers across the country. I urge him and his colleagues to work together to consider whether this policy can be recalibrated to achieve both the Government’s aims of supporting our nation’s family farms and of closing the loopholes that have distorted our land values for too long.

--- Later in debate ---

[Graham Stuart]

I am afraid that the hon. Gentleman shrunk inside his shell, and the farmers in his constituency will have heard that.

It is possible to challenge one’s Government. I said to my Whips then that the best service we could do the Government was to prevent them from doing something stupid, harmful and alienating to voters. I hope that Government Members can see that, because the Opposition cannot change this. People outside say to me, “Can we get this changed?” It is actually up to Labour MPs. They have the majority. Democracy is not about having a majority and doing what one likes. Democracy is about listening and doing what the now Prime Minister told the NFU when he said:

“You deserve a Government that listens, that heeds early warnings”.

There are one or two warnings about. Listen, change: if the Government change, four years on, no one will remember the U-turn. Whatever civil servants say—they are always very keen to stick with a policy—if it is wrong, stop doing it. And this is wrong. In the minute and 20 seconds I have left, let me say why it is so wrong. We have touched on the various elements, but I am not sure we have pulled it all together.

We have a really peculiar group of businesspeople in this country; they are called farmers. They take a return on capital—the millions they have invested in their farms—that is typically less than 1%. There is nobody that I am aware of—no business I was ever involved in—that would remotely consider continuing in an industry that paid less than 1%. These farmers take a pittance and get up at 4 o’clock in the morning for the privilege. They look after the animals and it does not matter if they are ill; they cannot carry their employment rights and go, “I’m not well, I shouldn’t have to go out,” because the cows do not care: they have to go out and look after them, and then they get less than 1% return. Those farmers, the most beneficent public-minded businesspeople in the whole country, then provide excellent food at among the lowest prices in Europe. If ever there were a business that we would not want to go and mess with, it is these—I should not say it, because I will make enemies of them.

[David Smith]

I thank the hon. Member for his scoring system, but can he confirm whether he was part of the last Government, which failed to get £300 million of subsidies to farmers out the door?

[Graham Stuart]

For the hon. Gentleman’s political career, as he has been so brave today, I entirely forgive him that piece of whataboutery.

We must understand how remarkable it is that there is a whole group of businesspeople who take practically nothing from their business, work all the hours God gives, and provide us with some of the finest food in the world at among the lowest prices in Europe. Why would we want to mess with that? Not only do they do that, but they brainwash their children from the earliest age so that they carry on doing it. These people are in indentured service to the nation, providing food while making very little profit. They do it willingly and, in fact, love it: it is their life. To go and mess with them out of some stupid, socialist spite is ridiculous and absurd, and Government Members know that—the hon. Member for North Northumberland certainly does, and he should lead his colleagues to tell the Chancellor to change course, just as we did in 2012 when George Osborne got it wrong.

Farming and Inheritance Tax

David Smith Excerpts

Wednesday 4th December 2024 Commons Chamber

[David Smith (North Northumberland) (Lab)]

I welcome the opportunity to speak in this debate, and I am grateful that the Conservatives, after many years of ignoring farmers, have finally decided to pay attention to farming and food security.

Farming plays a vital role in the past, present and future of North Northumberland. There are almost 2,000 farms across Northumberland, in my constituency and that of my hon. Friend the Member for Hexham (Joe Morris); each of them proudly and patiently shaped the landscape that we view as quintessentially British, and they play a crucial role in sustaining local communities.

Farmers are good for North Northumberland. Since becoming a Member of Parliament, I have spent a great deal of time meeting them and representing their concerns in Parliament. In fact, my first non-maiden speech was on the virtues and challenges of sheep farming. I have done that because I understand, as the Government do, that farming is central both to the communities I represent and to our way of life in the UK. Put simply, our country cannot flourish without a flourishing farming sector.

Farming has been battered for 14 years under previous Governments. As I was preparing for this debate, I read a recent letter from a farming constituent about a range of difficulties he faces:

“For many years government intervention has always dominated the top of my risk register, due to inconsistent policy and its oft re-enforced reputation as a poor payer.”

It would be convenient for the Conservatives if farmers across the UK were to forget about the past 14 years and blame all the current difficulties on a Government who have been in office for just six months. However, creating a reputation for Government as a “poor payer” and having inconsistent policy takes years, not months.

In July 2023, the Competition and Markets Authority found that the post-2020 squeeze inflicted on our food supply chain was a combination of significant rises in energy, commodity and labour costs, made worse in some cases by adverse movements in the exchange rate. In other words, farmers have been squeezed for years by energy prices, labour costs and a depreciation of the pound, and the previous Government bear some responsibility for all those factors.

In April 2024, the Energy and Climate Intelligence Unit found that since Russia’s invasion of Ukraine, the Government had enacted only three out of 10 policies necessary to improve energy security and bring prices down in the long term, which speaks to years of failure on energy, whether that is selling off gas storage capacity, dodging tough decisions on nuclear or going cool on the urgency of global warming by banning onshore wind. When global energy fluctuated, the lack of long-term preparation left our farmers exposed to rocketing prices.

Another matter I would like to raise is the issue of large retailers at times letting down our farmers. They are able to dominate negotiations around own-label products, and, with 90% of farm-produced vegetables being sold by supermarkets, farmers are stuck in a monopoly position that threatens their business. I urge the Government to do what they can to ensure reliable pricing and supply arrangements can be set between farmers and retailers that benefit our national food security.

There is also the issue of subsidy. We need to get the money out the door to farmers, and make sure they can actually get the funding that they did not get under the previous Government.

I will finish by mentioning another of the issues we have talked about today on APR. There is a need for continued constructive engagement around the recently announced proposed reforms. While every farmer I have spoken to welcomes the proposal to end taxpayer subsidies for the super-wealthy buying up land in order to avoid inheritance tax, I am aware that the Government are facing two competing responsibilities. The first managing the national finances, and the second is ensuring that every community can follow its traditions and dreams. As a farmer recently wrote to me:

“Despite all that was thrown at my father over the years, all he ever wanted to do was farm and he LOVED it. Somehow, it was in his blood.”

I know the Government understand this. I urge the Minister to continue to keep that front and centre as we support the contribution of farmers to our national life. After many years of ineptitude, neglect and the doling out of crumbs by the Conservatives, it must be Labour that truly becomes the party of farming and rural life.

Banking Services: Rural Northumberland

David Smith Excerpts

Monday 2nd September 2024 Commons Chamber

[Joe Morris]

I agree with my hon. Friend, and I thank her for giving me an unintended promotion. It may seem like we are just saying names on a map, but consider the vast scale of my constituency in our wonderful county of Northumberland. These places are separated by huge distances, and have a public transport system that does not always seem to work as it should. It is simply not fair that vulnerable people in my constituency are forced to travel for as long as an hour by car or 90 minutes by public transport, either way. It is unfair to expect our constituents to put up with a second-class service because they live rurally. Unfortunately that has been the case in large parts of our county. It is incredibly important that we address these issues.

We all recognise that many of these communities, particularly in my constituency and in that of my hon. Friend the Member for North Northumberland (David Smith), have historically voted Conservative, but they put their faith in the Labour party for the first time at the last election. We were elected to deliver meaningful change for our constituencies. I applied for this debate having spent my time as a candidate listening to the concerns of people across the constituency, but there is one area I wish to highlight. In Haltwhistle, and the towns and villages around it, the loss of Barclays last year is still damaging the local economy. I have been in touch with the chair of Haltwhistle chamber of trade, Ian Dommett, who told me directly that the loss of banking facilities in rural towns such as Haltwhistle has had a negative effect on every business. His members have been affected; most had accounts at Barclays because of its presence in the town.

The replacement of an active branch with a peripatetic community hub has removed the relationship between business and branch. Many businesses deal in cash—Ian’s business is a bed and breakfast, with many guests paying in cash, and a lot of Haltwhistle’s passing trade is from tourist spend on Hadrian’s wall—but they have lost the ability to pay directly into the bank, with the nearest Barclays’ branch being 20 miles away. Haltwhistle businesses say that the bank has simply told them to use the post office, a separate business over which it has no control.

[David Smith (North Northumberland) (Lab)]

I thank my hon. Friend for securing the debate on an issue that is important in both his constituency and mine. I draw attention to the correlated issue of post offices. In Wooler in North Northumberland, where there are no bank branches, the post office, which provides the only banking services for that community, is also at risk of closure. Thankfully, an incredible community response, led by the Glendale Gateway Trust, is fighting to retain it. I will do everything in my power, too. Does my hon. Friend agree that banking hubs more generally, and the Post Office specifically, must be part of the solution to the lack of access to banking services in Northumberland?

[Joe Morris]

I completely agree with my hon. Friend. For many businesses and constituents, the post office represents a lifeline, albeit one that unfortunately for many businesses is accessed far too infrequently to operate with security. The decision to close rural branches is taken in head offices, with little or no understanding of the rural economy and the impact that such decisions have on our constituents, their businesses and their daily lives.