Inheritance Tax Relief: Farms

Sarah Dyke Excerpts

Monday 10th February 2025 Westminster Hall

[Sarah Dyke (Glastonbury and Somerton) (LD)]

It is a pleasure to serve under your chairmanship, Dr Murrison, and to speak on behalf of the Liberal Democrats on this incredibly important issue. I thank all right hon. and hon. Members for their contributions, which highlight clearly the strength of feeling from around the country. I also thank the people who signed the petition, especially the 520 from Glastonbury and Somerton.

As has been well rehearsed, British agriculture is staring over a cliff edge. It has suffered from an almost never-ending list of difficulties over recent years: Brexit, energy prices, the war in Ukraine, the terrible Tory trade deals and a botched transition from BPS to ELMs. Against that background, the Government’s decision to implement changes to APR and BPR has rightly drawn criticism and anger from across the sector. The Liberal Democrats are deeply concerned about the impact that the family farming tax will have on farmers and rural communities right across the country.

I am in constant dialogue with farmers from across Glastonbury and Somerton. A consistent message from many is that this decision will inevitably lead to many family farms closing their gates for the very last time over the next few years. Just this weekend, I met a farmer’s son, who is in his 40s, on his family farm in Low Ham. He explained that he hoped to move away from his career as a civil engineer and go back to the farm full time, keeping the beef suckler herd at the heart of the business but introducing diversification projects to maintain a baseload of income for when agricultural markets fluctuate. He told me that the changes to IHT

“will be the end of any chances we have of keeping our farm going. I feel totally demoralised.”

[Wendy Chamberlain]

My hon. Friend is outlining the impact of this policy. The example that she gave about her constituent reminds us that there is a multigenerational element to farming, and families often live together. The Government have said that farmers should consider tax planning, but one challenge with tax planning is that a donor cannot keep any benefit from a gift. Do we think the Government intend to suggest that older parent farmers who tax plan need to move off the farm?

[Sarah Dyke]

I thank my hon. Friend for a very well made point, and farming is indeed often multigenerational. This is putting huge stress on farming families. I myself am from a farming family. My mother is 81, and my father died about a year ago. The pressure that it is putting on her to think about whether she can survive another seven years is so distressing, and I know that she is not alone.

[Dave Doogan]

For very good reason, we do not apply tax to food. Does the hon. Lady agree that for the same good reason, we should presumably not apply tax to the production of food? Does it not amount to the same thing?

[Sarah Dyke]

I agree with the hon. Gentleman.

Levels of confidence among the farming community are at a worryingly low ebb. The National Audit Office reports that only one in three farmers are confident that DEFRA and its agencies can deliver their proposed changes to schemes and regulations. The family farm tax will only increase pressure on farmers, while burdening with extra uncertainty and anxiety farmers who are already suffering with their mental health. Today marks the beginning of Mind Your Head week. Now in its eighth year, it is a campaign that amplifies mental health awareness, run by the Farm Safety Foundation and Yellow Wellies. This year’s themes are love, positivity and resilience—three characteristics we should show to our farmers.

Recently, the Office for Budget Responsibility assigned any revenue from this tax a high uncertainty rating, stating that any

“yield from this measure is not likely to reach a steady state for at least 20 years.”

The Treasury projects that the combined changes to agricultural property relief and business property relief will raise approximately £520 million annually. Using HMRC figures on the total cost of each relief, however, the Liberal Democrats have calculated that the proportion attributed to the APR changes will be only around £115 million, confirming that this misguided tax will penalise British farmers for essentially no benefit.

In its report, the OBR reiterates that the measure will hit older farmers hardest, because they will find it difficult to quickly put in place the transitional arrangements to restructure their affairs in response to the pending changes. I recently spoke to a farmer from Martock who told me that their parents, who are in their late 80s, are horrified by this tax raid. They do not want to lose their home and their business, but the lack of time to implement the changes may make that their sad reality. They implore the Government to consult on transitional arrangements that work with them and for them.

I fear that these family farms will instead be broken up and parcels of land will be sold off at a deflated land value to already wealthy landowners, who will simply add to their large land portfolios.

[Jim Shannon]

I commend the hon. Lady on her excellent speech. I echo what she says about the stress experienced by the elderly generation—the mums and dads. They are probably getting ready for the future and settling themselves into handing the land over to their families, but the situation is causing stress, anxiety and depression. She has been at the forefront in addressing mental health in the countryside. It is not only the young farmers who will feel the pressures of this change; it will also be the mums and the dads, the aunts and the uncles, the grannies and the grandads.

[Sarah Dyke]

I thank the hon. Gentleman for making that point. Indeed, a recent survey shows that 95% of young farmers under 40 see mental health as their biggest concern. It is so significant.

I agree with farmers in Glastonbury and Somerton who feel that the thresholds have been set far too low. Some of them have told me that the figures that the Government have arrived at are just plain insulting. Many farms have a land value that is way in excess of any returns that can be earned on their land. As we have heard, farmers are capital-rich but asset-poor.

A dairy farm near Broughton has been a family farm for five generations and more than 100 years. The farmers there have told me that they already struggle to make a living as it is, without having to face the prospect of thousands of pounds each year being eked away from their business when they pass away. Their son wants to come into the farming business, but the proposed changes will destroy his chances of success. The changes will destroy everything that that family has worked so hard for throughout their lives, trying to secure the business for the next generation.

What is so galling is that the family farm tax fails to address the key issue of land being snapped up by wealthy individuals as a tax haven. Like others, I am desperately concerned about the actual number of farmers who will be impacted by the IHT changes. The Government resolutely refer to a figure of only 500. In my view, however, one farm is one farm too many. My point is: where has this figure of 500 come from? The Government claim that it is from the OBR, but the OBR says that is not the case. If it is not, perhaps the Minister can confirm today where this figure has originated from, and how.

[Helen Morgan]

My hon. Friend is doing an excellent job of summing up the debate. Lots of residential houses in rural areas such as mine have a couple of acres at the back, which people might use for hobby farming. They are not commercially viable farms. Does she agree that if the Treasury have taken those into account, it will have grossly underestimated the impact of this change?

[Sarah Dyke]

My hon. Friend is absolutely right. Many in the industry feel that that figure is a vast underestimate, with inflation likely to bring yet more farms over the threshold within the next generation.

I hope that the Government will look again at their modelling to see how they can protect family farms and target those who use agricultural land to avoid paying tax. The Liberal Democrats urge the Government to reconsider and raise revenue for public services more fairly by reversing the Conservatives’ tax cuts for big banks, increasing the remote gaming duty on online gambling profits and raising the digital service tax on social media companies and tech giants. We urge the Government to support British farming by investing £1 billion annually in profitable, sustainable and nature-friendly farming; reducing trade barriers with Europe, including with a comprehensive veterinary agreement; and strengthening the Groceries Code Adjudicator to protect consumers and farmers from unfair price rises while supporting our producers.

The food security of the nation is imperative to national security, but I fear that these latest measures may have a negative impact on it. It is deeply disappointing that after years of the Conservatives taking rural communities for granted, we now see more of the same from this Government. I urge the Minister to rethink his attitude to farming and rural communities. My colleagues and I on the Liberal Democrat Benches will be fighting tooth and nail to make sure that no family farm receives a hammer blow to their business from these changes. I echo my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael) in urging the Minister to please pause and reconsider.