Agricultural and Business Property Reliefs: OBR Costing

Lindsay Hoyle Excerpts

Thursday 23rd January 2025 Commons Chamber

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

At the autumn Budget, we took difficult decisions on tax, welfare and spending that were necessary to restore economic stability, fix the public finances and support public services. We had to do that to address the mess we inherited from the previous Government, which the right hon. Member for Louth and Horncastle (Victoria Atkins) will remember well, having served in that ill-fated Government. We have taken these decisions in a way that makes the tax system fairer and more sustainable.

The Government are better targeting agricultural property relief and business property relief to make them fairer. These reforms mean that despite the tough fiscal context, the Government are maintaining very significant levels of relief from inheritance tax beyond what is available to others.

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 His Majesty’s Revenue and Customs, 40% of agricultural property relief benefits the top 7% of estates making claims. That is just 117 estates claiming £219 million of relief. It is a similar picture for business property relief, with more than 50% of it being claimed by just 4% of estates making claims, which equates to 158 estates claiming £558 million in tax relief. Our reforms mean that individuals can access 100% relief for the first £1 million of combined business and agricultural assets, and 50% thereafter. Given the nil rate bands, this means that a couple can pass on up to £3 million between them to a direct descendant, inheritance tax free.

Yesterday, the Office for Budget Responsibility published further details on the data sources and modelling used to estimate costings across a number of the tax measures announced at Budget, including the reforms to agricultural property relief and business property relief. The costing is the same as published at Budget, and the approach to modelling the costing is typical and in line with other tax policies. As the Government have set out, the reforms mean that almost three quarters of estates claiming APR in 2026-27, including those that also claim BPR, will not pay more inheritance tax. This is a fair approach that protects farms while also fixing the public services we all rely on.

[Mr Speaker]

I call the shadow Secretary of State for Environment, Food and Rural Affairs.

[Victoria Atkins]

Having inherited the fastest-growing economy in the G7, the Chancellor’s Budget has led to the highest borrowing costs since the pandemic, growth flatlining, business confidence plummeting and job freezes. Who has Labour chosen to pay the price for its economic illiteracy? Pensioners, family businesses and farmers. For months, farmers, farming businesses, professional advisers and economists, and now eight major supermarkets, have warned the Chancellor that she has got her figures wrong, but Ministers cleave desperately to their soundbites. Let us hope that they listen to the OBR.

Yesterday, the independent OBR released additional information about this particular measure and reiterated the “‘high’ uncertainty” of the predicted yield. It noted that the yield of the measure is likely to be reduced by 35% because of behavioural responses, and that it is unlikely to reach a steady state for 20 years. The OBR also expressed grave concerns about the impact on older individuals and their ability to plan. In short, the reassurances provided by Ministers are falling almost as flat as the economy.

The Chief Secretary to the Treasury has lectured this House about the perils of sidelining the OBR. In light of its analysis, will the Minister now commit to a full and proper review of this dreadful policy? The public have noticed that Government Ministers are failing to answer reasonable questions about their policies, so will the Minister please give straight answers to the farmers and businesses watching our proceedings today?

In light of the new analysis, how many farms does the Treasury think will be affected by the changes to APR, APR/BPR and BPR alone? What assessment has he made of the Central Association of Agricultural Valuers’ finding that the Chancellor has underestimated the number of farms affected by the changes by a factor of five? How many tenant farmers will be evicted? As worrying reports of suicides among farmers begin to emerge, will the Minister please do what the Secretary of State for Environment, Food and Rural Affairs has failed to do and measure the number of suicides over the next 12 months, so that we can understand the human cost of this policy?

Finally, why does the Minister think that Tesco, Sainsbury’s, Asda, Morrisons, Marks & Spencer, Aldi, Lidl and the Co-op have all come out against this tax policy and believe the Treasury’s figures to be wrong? Why does he think they are wrong and he is right?

--- Later in debate ---

[James Murray]

There certainly is evidence that the current inheritance tax system has caused people to use these reliefs for tax planning and to avoid inheritance tax bills. My hon. Friend alludes to the broader question of the fairness and sustainability of this measure. As I mentioned earlier, 40% of agricultural property relief benefits the top 7% of estates, and 50% of business property relief benefits the top 4% of estates. The Leader of the Opposition has said that she thinks this is a good way to prioritise public money, but we think it is neither fair nor sustainable.

[Mr Speaker]

I call the Liberal Democrat spokesperson.

[Steve Darling (Torbay) (LD)]

After years of the Tories failing our rural communities, including with a dodgy and utterly shameful Australian trade deal, it is a great pity that the new Government have picked up the baton. From Orkney to the Isles of Scilly, Liberal Democrat colleagues are extremely concerned about the impact of these proposals.

The report published yesterday clearly demonstrates the uncertainty about the income from the misguided family farm tax over the next two decades. In the light of this, and given that it will hit older farmers in particular and those who put food on the tables of the United Kingdom, will the Minister do the right thing and scrap this tax?

--- Later in debate ---

[Jim Dickson (Dartford) (Lab)]

rose—

[Mr Speaker]

Mr Dickson, I think you were very late. I would not want to embarrass you by allowing you to ask a question.

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

One of the witnesses before the Environment, Food and Rural Affairs Committee told us that the Government’s changes hit the people the Government say they are protecting, and protect the people the Government say they are hitting. It is difficult to improve on that analysis of what is proposed. It really does not have to be like that. There is a sensible debate to be had about reforming inheritance tax to stop the super-rich from sheltering their wealth while still protecting family farms. His Majesty’s Revenue and Customs has its technical consultation coming up. Why does the Minister not agree to broaden its terms, engage with the farming communities, and look for a way to protect family farms and get at those who are sheltering their wealth in land?

--- Later in debate ---

[Mr Speaker]

Order. Surely that is not relevant to the question you are going to ask. Come on!

[Dame Harriett Baldwin]

The Office for Budget Responsibility forecasts that the measure will raise £500 million in revenue by 2029, which, in the context of tax revenues of over £1,150 billion, is a very small number. What value does the Minister put on food security for the United Kingdom?

--- Later in debate ---

[Mr Carmichael]

On a point of order, Mr Speaker. Before questioning the Minister, I should have reminded the House of my entry in the Register of Members’ Financial Interests. My failure to do so, for which I apologise, was inadvertent—I just got carried away with the excitement of the moment.

[Mr Speaker]

Thank you for that wonderful clarification.