Family Businesses

Rebecca Smith Excerpts

Wednesday 26th February 2025 Commons Chamber

[James Murray]

To correct the hon. Gentleman, I did not say that only 4% will be affected. We have set out that up to 520 estates claiming agricultural property relief, including those that also claim business property relief, are expected to be affected in 2026-27. That means that about three quarters of estates will be unaffected and will not pay any more inheritance tax. All the data on that has been set out in a letter from the Chancellor to the Treasury Committee, and if the hon. Gentleman looks at that document, he will see some of the stats that I refer to.

[Rebecca Smith (South West Devon) (Con)]

Of the 500 or so that the Minister has just explained will have to pay inheritance tax, does he have any idea what number are small businesses, compared with the large estates that he seeks to challenge in the legislation?

[James Murray]

The data that I refer to is based on claims data. This is an important point that comes up frequently when we have debates on agricultural property relief and business property relief. If one were to consider assets owned by farmers or other business owners, the actual value of the asset does not give a guide to what claim might be made against inheritance tax because that will depend on the ownership structure, on debt that might be owned or on what inheritances have happened earlier in people’s lives and so on. The only data that can give an indication of what impact the changes will have from April 2026 is the claims data.

The data that I referred to earlier and which I referred to in response to the hon. Member for West Suffolk (Nick Timothy) is the real claims data that HMRC has. That is the data on which we made decisions around this policy and which informs some of the Chancellor’s statistics in her response to the Treasury Committee, which the hon. Lady may like to consult.

--- Later in debate ---

[Esther McVey (Tatton) (Con)]

I must say, I am disappointed—as will be business owners up and down the country—that the Chancellor could not find her way into the Chamber today. If she had done, she might have learned a thing or two.

In Tatton, there are family businesses that go back four or five generations. Before the Budget, some were planning to get ready for the next generation—but not now. Some, founded in the 1800s, have told me that their businesses survived two world wars, the Spanish flu, the high tax and economic lunacy of the 1970s, and even the recent covid lockdowns, but the Chancellor’s Budget will be the death of them. They have told me that on their family business gravestone will be written: “RIP. 1830-2026. Reeves’ budget the fatal blow.” Here we have a Chancellor who wanted her legacy to be that she was the first female Chancellor; in fact, her legacy will be as the grim Reeves reaper who fatally killed off family businesses and destroyed enterprise in the UK.

The Labour Government show no sign of understanding business, let alone family businesses that employ 14 million people and add £575 billion to the economy. The family business is a living entity; it needs to be nurtured, and if it is, it will grow and last hundreds of years, to be passed on to the next generation. It has a unique place in the business ecosystem—it serves a special purpose. Even previous Labour Governments knew that. That is why they introduced the business property relief; they knew that it was required. But not this Labour Government—oh no! Now, the death of a family member could spell the death of the family business, too.

The CBI and Family Business UK have warned that the changes to property business relief alone could lead to 125,000 job losses and reduce economic output by £9.4 billion. Businesses must think about how much money they will put aside for those tax changes. With every £1 put into tax, they can invest £1 less in their business, which will stifle the growth of the company. This Labour Government talk about growth, but these measures will only kill it off. The impact is not just from inheritance tax: we have the family farm tax, the increase to employer national insurance contributions and the minimum wage changes. Every single one of those will add a final nail in the coffins of many of our businesses.

[Rebecca Smith]

Does my right hon. Friend agree that the myriad Labour attacks on family businesses will have a huge impact on businesses like Vospers vehicle franchise in my constituency? Founded in 1946, it employs 600 people but faces a £1.4 million increase in national insurance contributions and a future business property relief levy on the next generation, in an industry that has seen a 20% reduction in sales in January alone, following the Government’s so-called growth Budget.

[Esther McVey]

My hon. Friend speaks knowledgably and passionately about the business in her constituency, and she is right. A family business I spoke to said, “We are already working on small profit margins. We do not know how we will cope. The enormity of the changes will change the way we look at our business. What are we going to do? We might have to carve up the business or cut it down. We might end up selling up or we might look for foreign investment, whether we seek that out or they seek us out”. They say that their business will not survive and thrive, and there is no doubt that it will shrink or end.

Another essential point, which other hon. Members have mentioned, is that family businesses are the breeding ground of entrepreneurs. Family members will work of a weekend, be trained up and go into the family business. People talk about love and passion—all those things—but it is that entrepreneurial spirit that this Government will kill, along with jobs in local communities, because family businesses have a special place in the heart of communities.

This Chancellor said that the changes would only impact the wealthiest of businesses—have we not heard that before? The Government said that the farm tax would impact only the wealthiest of farms, that the removal of the winter fuel payment would impact only the wealthiest of pensioners, and that VAT on schools would impact only the wealthiest of people: that is utter nonsense. The Labour party is removed from reality, ideologically driven and blinded by jealousy.

Labour’s raid on family businesses, worth about £500 million by 2030—that is the Treasury’s forecast—will actually lose billions of pounds more. These tax changes are ideologically driven and the Chancellor is killing the geese that lay the golden eggs. There is a vacuum of business know-how and business knowledge among those on the Government Benches. What they are doing to our country is an utter disgrace.