Agricultural Property Relief

Graham Stringer Excerpts
Tuesday 28th January 2025

(2 days, 23 hours ago)

Westminster Hall
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Torsten Bell Portrait Torsten Bell
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I will at some length explain why the remarks that the right hon. Gentleman just made—

Graham Stringer Portrait Graham Stringer (in the Chair)
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Order. If Members wish to make an intervention, they should stand to do so. It is up to the person who is speaking whether to accept an intervention.

I was going to say this at the end of Ann Davies’s speech, but I will say it now. This debate is oversubscribed, so I will put a time limit on speeches. Members should make short interventions, because interventions will mean less time for those people who have put in to speak.

Ann Davies Portrait Ann Davies
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Of the clients that Eirian mentioned, five of them will not come under the tax liability because they have very small farms with off-farm income, they have transferred their farms following ill health, or they have significant debt that offsets the value of their farms.

It is clear that the assessments of the impact of the changes on working farms across the UK, on the wider economy and on the wider food supply chain are inadequate. The data that we have is deficient; it includes smallholdings and non-working farms. Data based on the basic payment scheme or on agricultural output would provide a fairer representation of the situation for genuine farmers.

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Graham Stringer Portrait Graham Stringer (in the Chair)
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Order. I remind hon. Members that they should bob if they wish to be called. The debate is well subscribed, so I am going to start with a four-minute limit. If there are a lot of interventions, that time will have to be reduced.

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Carla Lockhart Portrait Carla Lockhart
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The hon. Member is not wrong—he is rarely wrong. That the policy could lead to the splitting up of family farms is a concern for many farming families across Northern Ireland and this United Kingdom.

Agriculture has long been and continues to be the backbone of the UK economy. The agrifood sector contributes significantly to our GDP and employs hundreds of thousands of people across the country, yet, despite their crucial contribution, farmers face ever-increasing pressures that are not of their making.

Farming is deeply personal for me: I was raised on a farm, I am the daughter of a farmer, I am the wife of a farmer and, as I have said in this place before, I am the proud mum of a little boy who aspires to be a family farmer. He also dreams of being a professional footballer, but we will talk about that another day. So when I speak of farming, it really cuts deep, and it is from my heart that I bring the Government the simple but urgent message that they continue down this path at their peril. The proposed tax changes are a heavy blow to those who are already struggling, and they will be a wrecking ball to our rural communities and rural way of life across this United Kingdom. They will undermine our food security, drive up prices and undermine the world-class environmental standards that British farmers adhere to day and daily.

The changes to agricultural property relief and business property relief fly in the face of the manifesto commitments of this Government. Prior to the general election, the Prime Minister told farmers what they wanted to hear. It feels very much like “you’ve threw them under the bus,” as we would say in Northern Ireland, for little monetary return for the Government coffers. He said:

“Losing a farm is not like losing any other business, you can’t come back…You deserve better than that.”

Those words came from the Prime Minister’s mouth, and they ring very hollow in our rural community.

The Department of Agriculture, Environment and Rural Affairs in Northern Ireland has done a deep dive into the figures, which clearly outline the significant and disproportionate impact that the changes will have on Northern Ireland’s agricultural sector. DAERA’s analysis has shown that the vast majority of farms will be affected. In fact, under the current land valuation of £21,000 per acre in Northern Ireland, approximately 40% to 45% of cattle and sheep farms will be impacted, and an astounding 87% of dairy farms will be caught by the tax. It is not a marginal impact; it will affect almost half of farms in Northern Ireland, which together account for 80% of the total agricultural land, 70% of beef cattle, 90% of dairy cows and 80% of all cattle. The proposed changes will disrupt the very heart of our agricultural output. Sadly, that situation is replicated across the whole of the UK.

Despite all the evidence and concerns, the UK Government continue to state that only 500 farmers will be impacted by the changes. The official figures from the Office for Budget Responsibility remain highly uncertain. In fact, the OBR itself acknowledged that the estimates are among the most uncertain in the entire Budget package. According to independent analysis, the true number of affected farmers is likely to be five times greater than the Government’s estimate. I have made this point repeatedly in this place: no farmers, no food.

Graham Stringer Portrait Graham Stringer (in the Chair)
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Order. I call Jim Shannon.

Jim Shannon Portrait Jim Shannon (Strangford) (DUP)
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On a point of clarification, Mr Stringer, I understand that the Front-Bench speeches will begin at 3.28 pm. Does that mean that the hon. Member for Tiverton and Minehead (Rachel Gilmour) and myself can divide the 17 minutes until then between ourselves?

Graham Stringer Portrait Graham Stringer (in the Chair)
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On the time limit that I have set, if people took the four minutes, we would finish the Back-Bench speeches at 3.19 pm. One of the problems is that some people have put in to speak but are not standing. That made the calculation difficult, because I assumed that people who had put in to speak would be bobbing, and they have not. At the moment, I will go with the four minutes that we have agreed.

Jim Shannon Portrait Jim Shannon
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Thank you for that clarification, Mr Stringer. I did not intend to put you under any pressure. I wish you well and thank you for your chairship.

I thank the hon. Member for Caerfyrddin (Ann Davies) —I hope my pronunciation is right, with my Ulster Scots accent—for securing this important debate on a matter of grave concern for many constituents and communities across the United Kingdom, and for those that I proudly represent as the Member of Parliament for Strangford. I declare an interest as a member of the Ulster Farmers’ Union, a farmer and a landowner. All my neighbours—every one of them—are concerned about this issue, and they have expressed that to me very clearly.

Farmers are the backbone of our rural economy. Their work provides not only the food that graces our tables but the stewardship of our natural landscapes, which are an integral part of our cultural and environmental heritage. Yet the changes to APR threaten to destabilise that foundation. I have spoken to farmers in my constituency and beyond, and their message is clear: the changes will place a substantial financial burden on farming families, forcing many to sell land to cover tax liabilities.

In response to a survey by the Country Land and Business Association, 86% of farmers indicated that they would need to sell all or part of their land if APR were removed. I understand that approximately 70% of farms in Northern Ireland—that comes from the Ulster Farmers’ Union legal officer—will be affected, because the farms are smaller.

It is really important that we get this right. Farmers have faced unrelenting challenges in recent years, including soaring energy and fertiliser costs, unpredictable weather patterns and inflationary pressures. The past decade has been marked by uncertainty. The loss of APR would mean that future generations could face unsurmountable inheritance tax. For smaller farms, especially, that could spell the end of their viability. The reality is that the changes will sweep up in their net many genuine, hard-working family farms. It is not just a financial issue; it is a matter of fairness, community sustainability and food security.

The Minister is an honourable person, but let us be honest and reasonable: what is right and what is wrong? Justice is what we are looking for here, and that must be addressed. When global supply chains are increasingly fragile, it is unwise to undermine domestic food production. Every acre lost to inheritance tax obligations reduces our ability to feed our population sustainably and affordably.

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Rachel Gilmour Portrait Rachel Gilmour (Tiverton and Minehead) (LD)
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It is a pleasure to serve under your chairmanship, Mr Stringer. First and foremost, I congratulate the hon. Member for Caerfyrddin (Ann Davies) on securing this vital debate. Right hon. and hon. Members will perhaps be sick of hearing me talk on this topic, but I feel compelled to provide a voice for my farmers. My constituency of Tiverton and Minehead has a similar make-up to the hon. Lady’s. It is overwhelmingly rural agricultural land and home to many farming communities. There are some 1,600 holdings according to the CLA and 432 of those farms will be hit by the Government’s APR changes.

We Liberal Democrats applaud our farmers. As a former director of the National Farmers Union, I feel well placed to highlight the damaging consequences that will inevitably be visited upon them as a result of the changes to agricultural property relief. The Government’s claim that 27% of all farms will be affected is, if I am being generous, misinformed. According to in-depth analysis conducted by the National Farmers Union in collaboration with the OBR and Treasury experts, 75% of the nation’s working farms fall above the £1 million threshold and will be struck by the punitive changes. The changes are said to be caveated by different assumptions on rate relief.

There are misapplied exceptions. The first one is that the average family farm would not top the threshold of £3 million in value, which is just not the case. Great Ash farm in my constituency is a typical good-sized family farm consisting of 256 acres and is on the market for £3.5 million. In an inheritance tax valuation, the farm’s livestock and machinery would be added to the value, bringing the total to around £3.68 million. Even when the acreage is not as large, the value of agricultural land alone often pushes farmers close to, if not over, the £3 million threshold and can certainly shatter the individual threshold of £1 million. If we add to the value of the land the livestock, deadstock, properties, machinery and business, the owners of the farm are looking at a hefty valuation—not one that they can capitalise on to keep the farm, but one that will ensure they are caught in the claws of this onerous death duty.

The second misapplied exception is because farm ownership is not in all cases split equally between a husband and wife, and it does not always pass to a direct descendant. Existing capital gains tax rules have discouraged many older farmers from transferring their farms to their children owing to the potential tax burden, which means that ownership is staggered across many generations in some cases. Often, when there are not ownership models that meet the co-owning married couple status that the Chancellor uses for the modelling of those exceptions, it means that the various personal and dependent inheritance tax exemptions that go into the flawed Treasury equation on this policy cannot be used on many occasions.

The third misapplied exception, the residence nil rate band, is unlikely to be applicable. It is reduced by £1 for every £2 when the estate exceeds £2 million. Therefore, if a farm business exceeds £2.65 million, the residence nil rate tax band is no longer valid. That is yet another misapplied Treasury exemption, which will not have a realistic effect on family farms’ ability to keep the taxman from taking everything they have. In conclusion, I will make no apology for standing up for my rural communities—

Graham Stringer Portrait Graham Stringer (in the Chair)
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Order. Your four minutes are up. I call Alistair Carmichael.

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Alistair Carmichael Portrait Mr Carmichael
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There are other options. On another day, with more time available, we might be able to look at what the tax take will be for the changes. The Secretary of State, when he gave evidence to the Select Committee, said that they were not going to be a problem because most people will avoid them. In fact, there will be opportunities for that to be the case.

The underlying concern here, which the Minister has the opportunity to address, is whether the Government still adhere to the belief that there is a public policy interest in ensuring the transition of family farms down the generations. If that was the original basis on which the reliefs were introduced, and if it remains the policy objective to this day, the figures need to be looked at more carefully. The thresholds could be increased or there could be a 10-year clawback—whatever the solution may be; the industry is full of ideas. There are any number of people who will come forward with suggestions for the things that at least some people in Government say they sought to achieve by making the change.

If—the Prime Minister was not very clear about this; well, he was clear that he was not bothered—the object was to avoid the super-rich using land to shelter their wealth, there are better ways of doing that. The Minister will get full co-operation from the farming unions and communities, but in order to have that, there has to be a dialogue. At the moment we are getting nothing from the Treasury. If he takes no other message back to the Treasury today, he should take this: the Chancellor must meet the farming unions.

Graham Stringer Portrait Graham Stringer (in the Chair)
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We are back on schedule, so there are 10 minutes each for the Front-Bench spokespeople.

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Robbie Moore Portrait Robbie Moore (Keighley and Ilkley) (Con)
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It is a pleasure to serve under your chairmanship, Mr Stringer. I thank the hon. Member for Caerfyrddin (Ann Davies) for securing this incredibly important debate.

Here we are yet again, having summoned yet another Minister to the House. We have slowly worked our way through all the DEFRA Ministers, and now here we are with the Treasury. I welcome the new Treasury Minister to his place; he is replacing the Farming Minister, who seems to have disappeared from these debates. I hope the new Treasury Minister lasts longer in his post than the infamous “Ed Stone”, which he was so proud to have masterminded.

Let us remember why we are here. Last weekend, the NFU’s farming day of unity saw one of the biggest agricultural rallies, which took place in all parts of the United Kingdom, with people from all walks of life coming together to support our farmers. That followed protests outside supermarkets and Westminster, and at auction marts, but still the Government refuse to get behind our farming community and listen. Let them be under no illusion: the strength of feeling outside this place is rightly strong, and the issue will not go away.

When the Government announced this policy, I thought they were just being naive. Then I thought they were perhaps being arrogant. Now the only conclusion I can come to is that this is a vindictive policy aimed at our farming community. That is because the Government are still unwilling to listen to the concerns raised by Members and stakeholders, whether that be the NFU, the CLA or the Tenant Farmers Association. The Chancellor is yet to engage with any of them.

Although the Government will no doubt claim that only affect 27% of farms will be affected, research conducted by those industry experts concludes that at least 75% of commercial family farms will be, because the £1 million threshold will impact the many. This disconnect stems from significant flaws in the Government’s methodology, which fails to account for the many market conditions and economic realities that our farming businesses face.

Given that the average size of a farm is about 200 acres, the average value of a farm holding will without doubt be well in excess of the £1 million threshold. When we take into account the value of the farmland; the farmhouse, and potentially a cottage or two; and any stocks, machinery or growing crops that may be in store, it will exceed the £1 million cap, therefore impacting the farming business. When we take into account the profit that a business may be making—or indeed struggling to make—on an average-sized farm of 200 acres, it is going to struggle to pay that bill.

What do farmers do? What are the options available to them? They can sell assets to pay the inheritance tax bill, or they can sell some of the livestock or some of the machinery, stocks or crops that may be in store, all impacting the productivity of that farming unit. Alternatively, they may want to take out a loan, which is an option suggested by the Government. I do not know whether the Treasury Minister has spoken to any banks, but I have, and none of them is saying that they will offer a loan to pay a tax bill. That is because the gearing of many of our family farming businesses is so highly strung that they could not pay any additional loan that may be granted to them, because the serviceability of that debt, which probably exists alongside the family farming business they already occupy, is so strongly geared.

That is before we take into account all the other budgetary consequences the Government have brought about: the increase in employer’s national insurance contributions, the increase in the minimum wage, the immediate effect of delinked payments, the removal of capital grants, the fertiliser tax that will no doubt be introduced and the double-cab pick-up tax. All impact the profitability and productivity of our many family farming businesses. This policy will also lead to a significant reduction in the land available to rent, given that around two thirds of working farms rent some or all of their land.

That is before we take into account the human cost. Farming can be a very lonely business, and I fear that the added weight of the changes to not only agricultural property relief but business property relief will be forcing some of the older generation, including those who are seriously ill at the moment, to make decisions right now. Indeed, I have spoken to a few. I spoke to one farmer just last week who is aged 78 and in ill health. If he passes away before April 2026, any death tax will be zero. If he passes away after April 2026, the death tax imposed on his family will be over £1 million. What decisions is that individual having to make right now? Those are the consequences of the decisions and choices this Government have made.

Will the Government have the moral courage to pause their actions and consult the industry experts I mentioned, as well as Opposition Members who continue to raise concerns on behalf of their constituents? As the shadow Secretary of State, my right hon. Friend the Member for Louth and Horncastle (Victoria Atkins), has rightly asked every time she has been at the Dispatch Box, will the Government record farm suicides in the next few months so that we can properly assess the human impact of the choices this Labour Government are making? What measures could be put in place to mitigate the impact of these changes on those who are already over retirement age or in serious ill health? They have held on to these assets for many years and many generations, and they simply want to be in a position to hand them down to the next generation.

I want to ask the Minister a few questions. Why on earth has an economic impact assessment been undertaken of the consequences of the changes to agricultural property relief, and of agricultural property relief dual-claimed with business property relief, but not solely of business property relief? Has any impact assessment been taken into account in the changes to inheritance tax, as well as the wider budgetary changes as a result of the measures I have already alluded to?

Why do the Government believe that it is unnecessary to take into account the size of a family farm when indicating the negative consequences that this proposal will have? If they implement a £1 million threshold, the size of a farm absolutely matters, because that takes into account not only the amount of land being farmed, but the existing productivity and the assets retained within that business. Why is the size of the farms not being taken into account?

If the Government are so determined to push ahead, can they tell us why on earth have they arrived at the £1 million threshold as the appropriate figure? How do they deal with the progressive disappearance of the residence nil rate band on estates valued at more than £2 million? How will they protect tenanted land on estates that will be valued at levels much higher than any threshold? What hope is there for the tenant farmer who is told that their landlord is now having to liquidate the capital value tied up in the land that they rent to satisfy the Government’s potential tax liability? As a result, that tenant farmer will have no tenancy, because the tenancy will have to come to an end. For the tenant farmer, that will mean losing their home, their business and their livelihood. No amount of tax planning will help those tenant farmers to find a way forward.

In setting out the £1 million threshold, the Chancellor of the Exchequer claimed that she wanted to protect hard-working family farmers. I can tell the Minister that all family farmers are hard-working, so why on earth was the threshold set at that level? On behalf of the tenant farming sector, I can say that whatever level is set, it will do nothing to protect our tenant farmers. They will be impacted by the collateral damage caused by the decisions their landlord will have to make.

Just this week, the noble Lord Mackinlay of Richborough received an answer to a written parliamentary question in the other place that stated that agricultural property relief and business property relief on assets tied up in private pension funds will not receive any of the reliefs that Ministers are citing. As the Pensions Minister, can the Minister confirm that and explain why the Government have further excluded farms held under those types of ownership from this calculation? Given the Government’s response in the other place, they will absolutely be impacted.

There is much more to do. As we have indicated, the Conservatives will reverse this disastrous family farm tax, which will impact hard-working family farms. The Opposition position is clear: this policy is bad for farming businesses, bad for rural economic growth, bad for food prices and bad for food security. Farmers can see it, the NFU can see it, the CLA can see it, the Tenant Farmers Association can see it and the Central Association of Agricultural Valuers—of which I must declare I am a fellow, Mr Stringer—can see it. The supermarkets can see it, the Opposition can see it and the hon. Member for Montgomeryshire and Glyndŵr (Steve Witherden)—the one lonely Labour MP sitting on the Government Benches—can see it, so why on earth can the Government not see it?

Graham Stringer Portrait Graham Stringer (in the Chair)
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Minister, we have a generous amount of time left. Can you try to ensure that you leave at least two minutes for a winding-up speech?

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Robbie Moore Portrait Robbie Moore
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You are not listening to the question.

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Torsten Bell Portrait Torsten Bell
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No, I am going to finish. Communities across the UK, including in rural areas, rely on those things every single day. We have taken these decisions to make the system fairer and more sustainable and the decisions come alongside significant new investments in farming and support for small business.

Thank you, Mr Stringer, and all those who have spoken today, in particular the hon. Member for Caerfyrddin for securing the debate. I look forward to her concluding remarks.

Graham Stringer Portrait Graham Stringer (in the Chair)
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I call Ann Davies.