Farmers may never forgive Labour for changes to inheritance tax rules on agricultural land, Tory Party claims

By Flaminia Luck

Farmers may never forgive Labour for the change to inheritance tax rules on agricultural land, the Conservative Party has claimed, as it said there was a "palpable" feeling of betrayal in rural communities.

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Shadow environment secretary Victoria Atkins said farmers faced a threat from a "city-dwelling socialist Government which does not understand or care for the rural way of life".

But food security minister Daniel Zeichner warned MPs against misrepresentation which he said had struck a "real fear" into farming communities.

Speaking from the despatch box for the first time since her appointment by Kemi Badenoch last week, Ms Atkins said the Government's approach on three policies had critically hit farmers' levels of trust in the Labour Party.

She drew attention to the increase in employers' national insurance, the accelerated reduction in direct payments to farmers, and the removal of inheritance tax relief on agricultural land being badly received by farmers.

The Conservative MP said that while she supported a clampdown on potential abuse of the tax system, which the introduction of inheritance tax on agricultural land would stop, she said its poor design would impact farmers.

Ms Atkins told the Commons: "The way in which the Chancellor has designed this policy means it is tenant farmers and farmers in the middle who will struggle, not the very wealthiest."

She added: "This morning I asked farmers on social media to send me details of how this policy will affect them and their businesses. It has made for anguished reading. Farmers are furious, anxious, even distressed about these changes.

"They feel that the Government is coming after them and their family's livelihoods, when all they and their ancestors have done is work hard, follow the rules, and fed us."

Under Labour's policy, the 100% relief for family farms would be limited to only the first £1 million of combined agricultural and business property.

For anything above that, landowners will pay a 20% tax rate, rather than the standard 40% rate of inheritance tax (IHT) applied to other land and property.

The Government has said the reforms will only affect 2,000 estates each year, with small farms not affected by the changes.

Ms Atkins went on to say: "The sense of betrayal is palpable. As a fifth generation farmer put it to me this morning, would you want to work somewhere that you knew, over your lifetime, was going to be taken away bit by bit.

"Another (farmer) has urged us to, and I quote, 'fight this vindictive, illogical and ideologically driven tax'."

Environment Secretary Steve Reed told the Commons that farmers should not "believe every alarming claim or headline" on changes to inheritance tax.

The minister said the Government is "committed to ensuring the future of family farms".

Mr Reed told MPs: "The House is aware that this Government inherited a catastrophic £22 billion black hole in the nation's finances, meaning we've had to take tough decisions on tax, welfare and spending to protect the payslips of working people.

"This has required reforms to agricultural property relief (APR).

"Now I recognise many farmers are feeling anxious about these changes.

"I would urge them not to believe every alarming claim or headline, and I reassure them that this Government is listening to them.

"We are committed to ensuring the future of family farms.

"The vast majority of farmers will not be affected at all by the changes."

He added: "Our reforms will put a stop to wealthy individuals buying up agricultural land to avoid inheritance tax, and in the process of doing that, pricing younger farmers out of buying land for themselves and for their families."

Referring to contributions by backbenchers throughout the debate, Mr Zeichner said: "There's a real fear out there because of the way (data) have been misrepresented, not because of the figures."

Summing up, he continued: "I hear and I understand what people are saying, but I was waiting in vain through the entire debate for a member on the opposite benches to actually address the real figures, the real figures that are the actual claims that have been made under APR which are published by - not a projection, not a guess, but guess what - by the people who actually collect the tax, by the Treasury."

Mr Zeichner said current claims above the £1 million threshold stood at between the 400 and 500 mark, but a "change in behaviour which is absolutely likely as a consequence of this, possibly quite likely very good consequences" could produce a "very small" number of future claims.

"We are confident this could be made to work," the minister added.

Liberal Democrat environment and farming spokesperson Tim Farron said the changes to the tax could lead to "Lakeland clearances" near his Westmorland and Lonsdale constituency in Cumbria, with big corporates buying up small businesses.

He said: "When it comes to farming, you'll see the land passed over to no agricultural use whatsoever and the house turned into yet another second home.

"This will be devastating not just for family farms but for rural communities as a whole."