Small Farms and Family Businesses

Viscount Trenchard Excerpts

Thursday 12th December 2024 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, I congratulate my noble friend Lord Leicester on securing this most topical debate, and on his moving and convincing introductory speech. I pay tribute to my noble friend Lady Cumberlege for her great speech and great contribution to your Lordships’ House over many years.

Farmers deserve compensation for their protection and stewardship of our beautiful countryside, but the Budget has now removed indiscriminately most of the remaining BPS payments and, at the same time, put in jeopardy the long-term viability of many farms with the restrictions placed on APR and BPR. The Government defend their attack on APR by citing the growing number of rich people seeking to avoid inheritance tax by investing in farmland. That may to some extent be true, but surely a solution must be found that closes that loophole while not punishing long-term farmers, many of whom are of advanced years and have reasonably held expectations that they would be able to pass on their farms to the next generation, free of tax. They have done exactly as they have been asked to do by Governments over the past 50 years—to produce food, manage the environment and comply with tax policy. These people have not invested purely to avoid IHT. They are the backbone of the countryside.

Many farms may well now face a cost of over £1 million on death—a bill equivalent to 20 to 30 years of income, or one generation’s worth of income from the land. Farming will rapidly become unviable in this country if we punish farmers in this way. Can the Minister say whether this is really what the Government intended and if he thinks that it is fair?

I understand that the Government want to close the loophole, so should they not restrict APR to exclude mere investors and instead back tenant farmers, allowing both landlord and tenant to invest in the countryside, while the retention of BPR could provide support to genuine farming businesses, suitably qualified, to close any loopholes? Did not the working farmers’ relief scheme, introduced by the then Labour Government in 1976, provide the right solution and form of words?

Farmers should have to qualify for IHT relief. The current qualification for BPR is for at least half the business to be farming. Perhaps the 50% hurdle could be increased a little. Genuine farmers would still get the relief, while those just investing would not qualify.

The new SFI is working, so why, in its first few years, change the underlying rules relating to owning farm assets? Without adjustment, the Government’s proposal to tax farms will mean that holdings which have been built up over many generations will be split up and sold.

The Government should revise their plans. Instead, they should first end holdover relief on premium land sales. That is more palatable and would bring intermediate revenue. Secondly, the Budget measures may, perversely, encourage wealthy individuals to purchase a small farm to avoid IHT, so why not revise the qualification rules to close the loophole? Thirdly, the Government should continue to improve the targeting of subsidies to help farmers most in need, as opposed to the blunt instrument of IHT. Fourthly, they should provide a fair timeframe for those elderly farmers who may not now expect to live seven years from handover.

Finally, let us look at how the Government and farmers can work together to encourage British companies to invest in farming and the environment, ultimately satisfying ESG and carbon-reduction requirements. I trust the Minister will agree that it is enormously important to avoid an outcome where small farms and parcels of land have to be sold in order to pay tax bills. I look forward to hearing other contributions and the Minister’s winding-up speech.