Inheritance Tax, National Insurance and VAT

Lord Morrow Excerpts

Monday 27th January 2025 Lords Chamber

Asked by

[Lord Morrow]

To ask His Majesty’s Government what consideration they have given to the different impacts in the nations and regions of the United Kingdom of the removal of the agricultural property relief for inheritance tax, the increases to employers’ National Insurance contributions, and the extension of VAT to private school fees.

[Lord Morrow (DUP)]

My Lords, the government-proposed changes that will come into effect from April of this year present a glaring threat to food security across the United Kingdom. For example, Northern Ireland’s agricultural industry provides food for over 10 million people throughout GB. Over 24,000 family farms in Northern Ireland will have no certainty about their futures, and therefore no certainty about the contribution they make to our food production and security. As farmers struggle to maintain the cost of uptake, little by little farms will be subsumed by the economic burdens, ending the line of succession necessary to continue feeding our country.

Figures from HM Treasury illustrate the impact that our Northern Irish farmers have among the nations and regions of this United Kingdom, contributing £1,333 million to the UK’s total agricultural GVA—gross value added—the highest proportion of all. They give so much to our economy, yet the Government are content to deprive them of succession and stability. The Prime Minister said last year,

“losing a farm is not like losing any other business—it can’t come back”.

How right he was. Their contribution is woven into the social and economic fabric of this country; the farming community gives so much and is rewarded so poorly.

The changes put forward by the Chancellor last autumn will be the death knell for many farming families. Recent years have been characterised by difficult circumstances for the agricultural community, be that unprecedented weather extremities or rising prices amid the cost of living. In Northern Ireland, our agricultural sector has been held in a chokehold by the Windsor Framework, as farmers are subject to onerous regulations and red tape. These inheritance tax reforms compound a serious negligence of the agricultural community, as family members who have worked on farms all their lives will be forced to sell land and assets to cover the bill of a parent’s death. Can the Government in all conscience accept that their reforms will end innumerable careers?

As we consider the impact of the changes to agricultural property relief on inheritance tax across the nations and regions of the United Kingdom, it is worth noting that Northern Ireland will be disproportionately hit by these policies. Although £14,000 per acre is reported as the average price—and I could cite some instances where £24,000 has been realised for the same size of land—an acre of ground is much more expensive in Northern Ireland than in any other region of the United Kingdom. I know that because I worked on that for some 30 years of my life. Many of these small to medium-sized family farms will be made subject to the new rules, with DAERA reporting that 36% of farms in Northern Ireland own more than 27 hectares of land.

I have in my hand an advertisement from one of the local farming papers in Northern Ireland, which is offering an agricultural holding extending to just over 37 acres, with a residential farmhouse. The asking price is just £1,035,000. Yet we are told that most farmers will not be caught in the £1 million trap. I think the advertisement dispels that claim; if anyone wants a copy of it, I am happy to give it to them.

The Institute for Fiscal Studies rebuked any suggestion by the Government that the national insurance increase will lead to anything close to the £25 billion revenue claimed, stating that this move

“will result in lower wages, reducing the amount raised from employer NI and reducing employee NI”.

In reality, the Chancellor has put before business a choice between product prices and staff. This is wrong and immoral. Sainsbury’s announced at the weekend that the Government’s plans will compel it to cut 3,000 jobs, slash 20% of senior management roles and close 61 hot food cafes around the country. Other leading grocers have made similar statements and have announced that job cuts will follow. In the case of Sainsbury’s, 3,000 people’s livelihoods, 3,000 sources of income and 3,000 jobs will now be culled thanks to Labour’s plans. Although the second-largest grocer in the United Kingdom is facing grotesque choices such as these, we ought to spare a thought for the small and medium-sized businesses which cannot afford any remedial measures.

The Government’s plans are detrimental in many ways—not least the reality that many businesses will simply be unable to absorb the increased cost of national insurance contributions or the inflation-busting wage increases—but the bill still has to be paid, and that will be shifted on to the consumer, who will have to contend with higher prices amid an extremely difficult time for many families across Northern Ireland. In Northern Ireland, the rise in the national insurance contribution rate from 13.8% to 15% will hit our agriculture sector hard. Labour has dealt yet another blow to our industrious farming communities, as this will directly impact the security of thousands of jobs and pay conditions. The Government, through their combined economic assault on agriculture, have opened the door to rising food prices, a threat to food security, inflated consumer prices and the dissolution of many farms across Northern Ireland.

At the beginning of this month, a 20% standard VAT rate charge to private, boarding and independent schools came into effect. The Government expect private school fees to increase by around 10%, and it is envisaged that some 37,000 pupils will leave the private sector. It is patently obvious that this is an ideological move by the Labour Government, ending parental choice as to where their child may be educated, out of a fear of inherited classism. This is nonsensical and designed to fit Labour’s plans to redesign the national curriculum; it is a fear of dissidence.

However, Labour has not given consideration to the disproportionately negative impact this policy will have on Northern Ireland compared with the rest of the UK’s nations and regions. Currently, about 2,500 pupils in Northern Ireland attend grammar school preps and Christian and other independent schools, according to the BBC. While some places in England, such as Eton, charge around £50,000, private schools in Northern Ireland charge a substantially reduced amount, often as low as £2,000. The parents of these children will inevitably face a stark increase in their school fees, as principals will have little to no choice but to up the fees they ask for, meaning that many children will have to be taken out of their schools, and that their education will be disrupted.

Of most concern is the Government’s lack of care for the independent Christian schools throughout Northern Ireland, of which I understand there are nine. These schools do not have the same volume of money that others have and, instead, offer a much smaller fee. The Reverend Brian McClung, administrator of Newtownabbey, an independent Christian school in County Antrim told the BBC that they already fundraise to cover the total cost of running the school in order to keep fees affordable, but in this scenario they have no option but to charge parents more.

Religion is a protected characteristic in Northern Ireland, no matter what side of the divide you might come from, and if parents wish to send their children to a school where they can be taught under the auspices of Christian values, then surely that is their right. No Government have any right to infringe upon the practices of Christian schools, by inflating their fees just to appease an ideological battle against class. We know that these schools are far from being classist echo chambers, as the Government might label them. The removal of the VAT exemption for private schools could see funding challenges, followed by a massive enrolment decline and potential school closures, which will reduce educational choice and place greater strain on the already oversubscribed waiting lists.

The voluntary sector does not escape either. I am sure many noble Lords have read the excellent briefing paper produced by Age UK. When asked, Age UK said it may well have to reduce the level of service that it provides because of these costs—it will have to reduce its service offer and seriously consider if it can continue to deliver contracted services without realistic uplifts.

I see that the Whip is looking sternly at me and I do not want to fall out with her, so I will listen intently to what everybody else has to say.