Agricultural and Business Property Reliefs: OBR Costing

Victoria Atkins Excerpts

Thursday 23rd January 2025 Commons Chamber

[Victoria Atkins (Louth and Horncastle) (Con) (Urgent Question)]

To ask the Chancellor of the Exchequer what assessment she has made of the Office for Budget Responsibility’s supplementary forecast information release on the costing of changes to agricultural and business property relief.

[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?

[James Murray]

I think there may be some confusion on the Conservative Benches about what the OBR data shows. The data published by the OBR yesterday refers to exactly the same costing as was published at Budget. It sets out the approach to modelling and the costing, which is typical and in line with other tax policies. Indeed, the OBR’s statement makes it clear that:

“The OBR’s role is to provide independent scrutiny and certification of whether the Government’s policy costings are reasonable and central.”

That is exactly what the OBR has done in publishing the extra information, which shows the modelling behind the data that was published at the time of the Budget.

The shadow Secretary of State asked about the data. The data on the number of affected estates claiming APR and, indeed, APR/BPR—some 530 is the upper estimate—is in table 1.1 of the OBR document published yesterday. That is consistent with what we have been saying for many months since the Budget. I think Opposition Members are confusing the value of farms with the value of claims under inheritance tax. The only way to truly understand the impact of changes to inheritance tax policy on inheritance tax claims is to look at the claims data itself.

We are working in partnership with the large supermarket chains to make sure they are driving economic growth. We are very clear that some of the decisions we had to take in the Budget were difficult decisions that will have consequences, but we are determined to work with businesses across the country to drive economic growth, which is the No. 1 mission of this Government.