Small Farms and Family Businesses

Lord Bilimoria Excerpts

Thursday 12th December 2024 Lords Chamber

[Lord Bilimoria (CB)]

My Lords, the Government’s Budget proposals talk about addressing the £22 billion fiscal gap, but, as a result, they are undermining the viability of our family-run farms, disrupting food security and having a long-lasting effect on our rural communities. I refer to the reform of agricultural property relief, or APR, and business property relief, or BPR. This will, in effect, lead to 20% tax over a value of £1 million, on top of a national living wage increase of 6.7%, which will raise labour costs for farmers, as well as the phasing out of direct payments.

I think that many farmers will regret voting for Brexit, as many of them did, and losing so many subsidies as a result, which have not been replaced by Governments since then. On top of that, there are food security concerns and the combined effects of rising costs, land consolidation and a reduction of direct payments, all destabilising food production. The UK’s reliance on food imports increases the risk of food insecurity, with the global supply chain disruptors.

I thank the noble Earl, Lord Leicester, for initiating this debate. As has been said before, we produce 60% of our food for consumption but we rely on imports for nearly half of it. However, domestic food production is vulnerable to many factors: climate change; the prices offered by purchasers; high energy costs—in the UK we have some of the highest energy costs in the world; the international supply chain—we saw fertiliser costs shooting up after the Ukraine war started, for example; labour shortages; biodiversity and water quality; and biosecurity and animal health.

The Government say that 73% of APR claims come from estates with qualifying assets worth less than £1 million. But the National Farmers’ Union says that 75% of farmers are affected. Will the Minister clarify why there is a huge difference between what the NFU thinks and what the Government think? They say that the agricultural property relief addresses a loophole, but Alistair Carmichael, chair of the Environment, Food and Rural Affairs Committee, said:

“Agricultural property relief is not a loophole; it has been a deliberate policy of successive Governments for the past 40 years, designed to avoid the sale and break-up of family farms … These changes will have a ripple effect across the whole rural community.””.—[Official Report, Commons, 4/11/24; col. 24.]


The NFU has said why it feels that the Government’s assumptions are flawed. It says that there is a failure to adjust for inflation, an unfair inclusion of non-commercial holdings and an underestimation of the tax burden of APR and BPR combined. Does the Minister agree? Further, on the economic impact on working farms, the NFU says that there are unsustainable tax liabilities. It says: “Medium-sized firms will face annual inheritance tax instalments that far exceed their profits”. Of course, it is a fact that farming is asset-rich and cash-poor. On top of that, NFU analysis shows that the £1 million threshold means that cereal farms will see their returns entirely wiped out by their tax liabilities. Dairy farms will lose approximately 50% of their returns to inheritance tax. On top of that, there will be implications for food security, the undermining of domestic food production, the disincentivising of long-term investment and a contraction in available farmland.

I do not know who is advising this Government. When I was president of the CBI, Keir Starmer and Rachel Reeves had good intentions but, since coming into government, they have upset pensioners, farmers and family businesses. They have upset the business community with a £40 billion tax rise and a £25 billion national insurance rise. They have upset employers with regulations that will make us less competitive, at a cost of £5 billion. The Government rightly want economic growth, but how can we have economic growth if we kill the goose that lays the golden egg?

This country’s farmers are precious; they are the backbone of our country. We need to appreciate our farmers and always be grateful for our farming community.