Keir Starmer has undermined the leading justification for his government’s “family farm tax“ in an evidence session with MPs on the powerful liaison committee.
Previously his farming minister Daniel Zeichner had told MPs that the changes to inheritance tax rules to include agricultural land was to prevent the super rich like entrepreneur Sir James Dyson and TV personality Jeremy Clarkson from investing in farms to avoid death duties.
But in a dramatic turn of events today in the Commons, the prime minister admitted this was not true and that his government was simply looking at a way of raising revenue.
It has led to accusations from farmers’ representatives that the changes to inheritance tax were “an indiscriminate revenue-raising measure with no thought given to who it impacts”.
On 4 November in the Budget debate on implications for farming communities, Mr Zeichner said: “Sadly, [the inheritance tax exempion on farms] has been used in some cases by wealthy landowners to avoid inheritance tax. That is why the government have announced plans to reform agricultural property relief.”
But grilled by environment, food and rural affairs committee chairman Alistair Carmichael on liaison committee, Sir Keir admitted this justification given to MPs and others was not true.
Mr Carmichael asked: “Who were the targets for these changes? Was it the super rich sheltering wealth? Was it the family farmers? Or was it both?”
Starmer replied: “The purpose was to raise revenue in the budget. It wasn’t aimed at a particular group of individuals. We inherited a really bad situation and we decided we couldn’t hit the pay packets of working people.
“It wasn’t targeted at this group or that group. What we tried to do was protect the family farm by putting a high threshold.”
Pressed further on the subject, he added: “What the very wealthy do within the rules is a matter for them. But what we wanted to do is to raise the revenue necessary because we had to not only balance the books in the budgets but we also had to make important investments in schools and the NHS.”
The prime minister was also confronted over laughing about the issue.
Mr Carmichael noted: “We had one witness giving evidence to the select committee who, when talking about the impact on his farming business, broke down. So there are a lot of people who don’t find this funny. How does it make you feel to hear that witnesses were breaking down before my select committee?”
Sir Keir replied: “Well of course nobody’s comfortable with that but that is why I took the decision to have a meeting with the president of the NFU (Tom Bradshaw) to invite him in for a meeting with me. Not with a great fanfare but just for a private meeting so that I could hear for myself first hand from him as to the points that he wanted to make understandably.”
The exchanges follow revelations by The Independent that the economists who first proposed the changes have changed their position and now become critical of the government’s approach hitting many family farms.
Sir Keir insisted that he believed Treasury figures suggesting only 500 farms a year would be dragged into the changes were “robust”. But they have been disputed by the NFU using Defra figures which suggest it could be as many as 70 per cent of farms.
The prime minister also insisted he would not back down over the policy despite hundreds of tractors descending on London in two major demonstrations so far as well as blockades at the ports of Dover and Holyhead in north Wales.
Asked by liaison committee chair Dame Meg Hillier if there will be changes, Sir Keir said: “No, we’ve got the policy, we’ve set out the policy and I was clear about that but did I want to hear what he had to say in a respectful way? Yes, of course I did.”
The exhanges provoked a furious response from farmers’ representatives.
National Farmers’ Union (NFU) President Tom Bradshaw said: “Despite ministers previously claiming this was about punishing wealthy people avoiding tax, it’s clear from the prime minister’s words today that it is simply an indiscriminate revenue-raising measure with no thought given to who it impacts.
“What’s worse is that the government has clearly forgotten the reason agricultural inheritance tax reliefs were brought in in the first place – which was to ensure that farms would not be sold or broken up following the death of the owner and could continue to produce high quality British food through each generation2. It’s clear that this government has entirely broken with that premise, and it will be farming, then its associated industries, and then consumers who will bear the impact.”
After the evidence session, Mr Carmichael said: “The prime minister has undermined the case made by Treasury and Defra ministers who have sought to pretend that this was about tackling the Jeremy Clarksons and James Dysons of this world.
“It was clear from his answers that it is just about raising money. He could not have been clearer that if farmers are caught and farms have to be sold then that is fine by him.
“Six months on from the general election the prime minister looks out of touch from ordinary people, especially those living in rural communities.”
In a briefing the National Farmers’ Union has noted that the government has not yet given a rationale for changing the rules on agricultural property relief (APR) or busines property relief (BPR).
The NFU noted: “It is generally understood that the main policy rationale for BPR and APR is to prevent the sale or break up of businesses or farms to finance inheritance tax payments following the death of the owner.”
A Conservative spokesperson said: “Labour are in chaos over their Family Farm Tax. Keir Starmer has overruled his own Farming Minister and now admitted that Labour see farms as cash cows they milk to fund their mad spending plans.
“Farmers will never forgive Labour for their betrayal.”