Clause 1

David Smith Excerpts

Monday 12th January 2026 Commons Chamber

[Charlie Maynard]

That is a very good question, but £100 million is 0.1% of £1.23 trillion. In materiality, it is important to think of it in that range. I do not think this is the way of going about it.

I ask the Government to consider voting in favour of amendment 3, which would remove the transition period in respect of the changes to APR and BPR and delay the implementation date so that changes would take effect for transfers made after 1 March 2027, and of our new clause 7, which would require the Secretary of State to undertake and publish an assessment of annually uprating the relief allowance for APR by the change in the value of agricultural land.

While awareness of the APR changes is very high among the farming community, I am concerned that awareness of the changes to BPR may not be as high among business owners in many sectors. Do the Government have any plans to raise awareness so that people know what is headed their way?

[David Smith (North Northumberland) (Lab)]

I welcome the Finance Bill. I will address clause 62 and schedule 12, which relate to APR and BPR. I have spoken on this subject several times, and did so back in November, because my constituency of North Northumberland has over 700 farm holdings, each of them growing the food that we eat and stewarding our land. As one farmer said to me recently:

“We have farmed this land since the mid-1800s—each generation investing in long-term decisions…which have benefited not just the farm, but the local area.”

I believe it is messages like that and the ability of farmers in North Northumberland to get this message across that were pivotal to bringing about these Government amendments.

The amendments will establish 100% relief up to £5 million for a couple, transferable between spouses, and a 50% relief thereafter. That will protect most family farms, with 85% of estates seeing no additional burden from April. I am indebted to the farmers of North Northumberland both for the way that they have engaged on the issue of inheritance tax and for the hard work they do day in, day out to put food on our dinner tables.

[Samantha Niblett (South Derbyshire) (Lab)]

I have enjoyed working with my hon. Friend on the Labour rural research group. We are so grateful to our farmers for engaging with us and educating us as we have gone along, so does he agree that we now have a fantastic opportunity to rebuild trust with our farmers? I have had many emails of thanks from them, and I thank the Prime Minister and the Treasury for this policy amendment. I wonder how many of my hon. Friend’s farmers have also said that, despite the fact that they have usually or often voted Conservative, they always do better under a Labour Government.

[David Smith]

As I will go on to say, I can confirm that I have had many messages of support for this change in policy. It has been a pleasure to work with the Labour rural research group and other colleagues on this matter, as my hon. Friend mentioned. As I thank farmers, I also want to thank the Government for listening, learning and acting. It is the hallmark of a mature Government and of a healthy parliamentary debate that we have got to this point.

A multitude of structural factors contribute to the sustainability of intergenerational farming. There are many similarities between Britain’s blue-collar workers in the factories and what we might call green-collar workers in the fields. Both are squeezed by commercial interests and a globalised race to the bottom in pricing, costs and wages, which is why the laissez-faire approach to farming economics, such as in the imbalanced trade deals of the Conservative party, work against the sustainability of farming.

We have to plough a new furrow that will make farming genuinely sustainable in an intergenerational way. Protecting farming will require Government to form a new covenant with farming and green-collar workers more generally. The implementation of the Batters review will be very important here, particularly the farming and food partnership board, so that the whole supply chain can be examined and improved. It is high time the supermarkets in particular gave a fair price for the produce of our famers. Despite what the Liberal Democrats spokesperson, the hon. Member for Witney (Charlie Maynard), said, the Secretary of State announced last week the plan for the SFI application process later this year. I particularly welcome the fact that there will be ringfenced support for smaller farms within that.

As I draw my remarks to a conclusion, I will just mention that some larger farms will be impacted even after the changes to APR and BPR. For those just above the threshold, I encourage the Government to consider addressing the potential time and capacity challenges for accurate estate valuation and speedy probate, which must dovetail with the expectation of inheritance tax payments, so that estates that need to pay have clarity and are not penalised for blockages in the wider system.

I know that the Government are totally committed to the success of farming. That is vital, because the country needs a flourishing farming sector.

[John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)]

As the hon. Gentleman’s constituency neighbour, representing a similarly rural constituency, I know how strongly farmers on my side of the border feel—like farmers on his side. The word “betrayal” comes up time and again among my local farmers. The Labour party said that it would not introduce this tax, and then it did. Does he now regret not following the lead of the hon. Member for Penrith and Solway (Markus Campbell-Savours), who did the right thing by rebelling against the policy?

[David Smith]

I thank my constituency neighbour for his intervention. Rather than go down the route of his question, let me respond with the words of one of my local farmers. She wrote to me on 23 December and said:

“As you know, we have been very vocal in opposing the earlier proposals, so it is equally important to state how strongly we welcome this change in policy. Increasing the threshold, together with the ability to retrospectively transfer unused APR and BPR allowances from my late mother to my father, will make a huge difference to our family and the viability of our farm business.

I will leave my remarks there.

[Robbie Moore]

I will speak to clause 62, schedule 12 and the amendments to them tabled by the Conservative Front Benchers.

Throughout debate on the Finance Bill, we have heard about the changes to inheritance tax, predominantly in relation to the agricultural and business property reliefs. My comments refer not only to the many family farming businesses affected by the Government’s changes, but to many other family businesses, be they hospitality or manufacturing businesses, including in my Keighley constituency. They are all affected by the direction that the Labour Government are taking.

The changes that the Government have brought to the Committee do not get rid of the cliff edge associated with the measure kicking in a few months from now in April. Changing the threshold from £1 million to £2.5 million does not remove that cliff edge for a family business that has an IHT liability kicking in. I would like the Minister to explain further why the Government are not addressing that stark cliff edge, even though Members from all Opposition parties have reiterated that problem to the Government over the past 14 months.

The second matter I will raise is the absolutely bizarre and bonkers scenario that we find ourselves in. Two estates valued at £5 million could be subject to different tax liabilities depending on the ownership structure. How bizarre is it that we now find ourselves in a scenario in which an estate valued at over and above £2.5 million and owned by a single person could be subject to an IHT liability of 20%, but a farm valued at £5 million and owned by a married couple is subject to no IHT liability at all? I would like further explanation from the Minister on that specific point.

Of course, values vary dramatically across the country. In Northern Ireland, where most farmland assets are given very high valuations, farms of 200 acres, say, could be valued significantly more or less in different parts of the country, so they would be subject to different tax liabilities if they surpassed the £2.5 million and £5 million thresholds, depending on their ownership structures. Let us not forget that, for arable farmers, feed wheat prices have not changed dramatically over the past 20 years—they still average about the same—but input prices are going up, no thanks to this Government’s raising of employer national insurance contributions and imposition of the fertiliser tax. In reality, the productivity and return rate for a farming business, if it breaks even at all, is about 1%. Those with asset base that is valued significantly higher will be subject to a higher tax liability, and they will have to sell off more assets to pay the same amount, despite their level of return being 1%, if that. That is different from a farm that has been valued at a much lower rate. Will the Minister explain what level of detail the Government have gone into to explore such challenges that are facing many farming businesses?