Welcome to the Northern Ireland Affairs Select Committee session on the impact of the autumn Budget on the farming sector in Northern Ireland. I would like to welcome Richard Beattie, William Irvine and Peter McCann. Unfortunately, Jeremy Moody is not available online, because of technical problems at our end, but we hope that he might be able to pop up. Thank you for coming. I know that it has been a difficult time. Would you like to outline to me the impact that the autumn Budget has had on the farming community in Northern Ireland.

Thank you for this opportunity to talk about Northern Ireland agriculture. The Budget changed the agenda drastically within Northern Ireland. Agriculture within Northern Ireland is worth about £6 billion to our economy, so it is massively significant in a small province such as ours. The agricultural pound reaches every sector of Northern Ireland’s communities. As an industry, the farms are predominantly owner-occupied. We do not have a tenanted sector within agriculture. Our average farm size is 100 acres, but our average value per acre is extremely high. This combination of factors leaves Northern Ireland, in our view, impacted to a greater extent than other parts of the UK.

Peter, how have you seen the community now?

There is no doubt that inheritance tax and agricultural property relief have got a lot of the headlines, and I am sure that we will be talking extensively about that later, but there are other issues around the farm budget. The pot of money for agricultural support is no longer ringfenced. Instead of being set by the Treasury in London, it is now set by our friends in Belfast, so there is some uncertainty around that. There are potentially some benefits in that, given that there does seem to be a lot of political appetite among our parties in Northern Ireland to support farmers, but still some uncertainty. There are also other issues, such as double cab pick-ups no longer getting the full allowance for income tax calculations. The carbon border adjustment mechanism is, effectively, a tax on fertiliser, varying from £50 to £70 a tonne from January 2027. Another thing that may be lost in a lot of this is national insurance. A lot of farms in Northern Ireland are large businesses that will be affected by having higher contributions. Plus the inheritance tax thing is massive as well.

On behalf of our membership, we are very reluctant to see the effects of the change in APR in the Budget. From the young farmers’ point of view, we are very much trying to push succession. A lot of our members who we are looking at are very well educated and encouraged to or want to go into further education. When I start crunching the numbers on some of these things, it really looks at, “Are we going to be going home to a farm business that is viable?”, given a potentially huge inheritance tax bill that they cannot work with going into their future farming careers. That is really the apprehension that we are seeing from our members in that regard. It is also about those working directly in rural areas and involved in agri-food processing. There are 150,000 people in Northern Ireland directly employed by agri-food businesses. Ultimately, if the output at the farmer level is potentially reduced, the chances of employability further down the line are also reduced. From a young person’s point of view, there is a real fear and apprehension: “Should I be taking up a career in agriculture at the minute?”

Good afternoon, gentlemen. Peter, you write for the Irish Farmers Journal. You had an article on Saturday the 7th, which I found fascinating. I am going to invite you to explain to Members for the evidence session today. You indicated that HMRC had released clarification on the agricultural property relief, which contradicted the Treasury position that 50% was on relief rather than estate values. Is that correct, or is it on estate values and not on relief? Could you explain to the Committee how that clarification may give a more positive interpretation of a bad situation than what seems to be the case?

It is helpful but it is certainly not a “get out of jail” card at all. The main takeaway from it is probably, as you say, how Treasury and HMRC were, effectively, saying two different things, or at least that it was not very clear at all. That may tell us something about the guidance and even about the amount of thought that went into this policy and the autumn Budget to begin with. Until now there has been 100% relief from agricultural property under APR. The proposed change is that that 100% relief remains up to £2 million. After that, there is 50% relief. The clarification is that that 50% relief applies to the value of the APR or BPR qualifying assets—the farm, the land, the stock or whatever. That is different to some initial guidance, which suggested that it applied to the tax rate: instead of a 40% inheritance tax rate, it was going to be 20%. When you crunch a few numbers and do a few worked examples, the clarification does help in certain circumstances. It will help reduce the tax burden on some farmers—maybe not hugely, but slightly—and, in some cases, it will help some farms get away from the inheritance tax burden completely. Again, it is still a huge issue, but certainly a bit of clarification is welcome. It may also show how, by tinkering around the edges of this policy and how it is implemented in other things that we might do, you could help alleviate the impact of this without it being seen politically as a screeching U-turn by the Labour Government.

That is very helpful. I appreciate it. What is the make-up of Northern Ireland’s farming sector in terms of land value, farm size and ownership?

That may be why I am here. As part of my work with the Irish Farmers Journal, I am a co-author of the agricultural land price report, which is a magazine that comes out every year. It is the only independent analysis and survey of the agricultural land market in Ireland and Northern Ireland. Last year, we found that the average price was £13,794 an acre. Again, that is an average price. Beware of the law of averages, as the saying goes. My survey ranged from £3,500 an acre to almost £46,000 an acre, so there is a huge variation there. For example, where William farms in Armagh, it has notoriously been a land market hotspot, as well as in County Down, which are the top two or three counties in Ireland every year. In places such as Armagh, the average price was £17,600 an acre, and 73% of the sales in our survey in that county were over £15,000 an acre. Compare that to the rest of the UK. England has seen an average land price of just £11,000. In Scotland, for arable land, it is £10,000 an acre, and £5,000 an acre for pasture land. In Wales, it is around £8,500 an acre. We are significantly ahead for various reasons. A key reason is our extremely tight supply of land that comes on to the market every year. We have been doing this survey for 13 or 14 years. Last year, it was 11,370 acres. That sounds like a lot of land, but it is not. Even across Northern Ireland, which is a relatively small geographical area, that is about 0.54% of the agricultural land area. That is publicly advertised land for sale. Some land changes hands privately, and we cannot get a handle on that, but, even if we estimated that that doubled the number, you are still talking about 1% of the land area that comes on to the market. That is a key reason why land prices in Northern Ireland are so expensive.

Peter, your figure there of an average cost per acre for sale for Northern Ireland contrasts with some other figures that we have seen of around £21,000 an acre in Northern Ireland. What is your sense of the reason for the variance even within the average figure?

I can explain that average figure. Are you talking about the DAERA analysis of £21,000 an acre? I should have clarified that at the start. That £13,800 is for bare or clean land—just land on its own. Since this came out in the Budget, we have done more analysis of our figures, redone them, and included farmhouses and farmyards. Increasingly, farmyards are having a bigger impact and are worth more, because of tight planning permission rules around ammonia and all that sort of stuff. Any kind of farmyard at all has an increasingly important role to play. Our sales included houses, yards and things that were well over £18,000 an acre. That is a 33% jump. To get to the £21,000 that DAERA has used, it is using some figures from its farm business survey, which gives an estimate of working capital; that is machinery, livestock, et cetera. It is also making a slight assumption as to what land values will be in April 2026. Our figures are watertight. I will defend them to the hilt. DAERA’s farm business survey figure is £21,000 an acre, to include everything. Remember that that is what is included in these inheritance tax calculations. It is not just bare land.

That is helpful, thank you. The DAERA analysis states, “The traditional practice in Northern Ireland is that land on a farm tends to be owned by a single person”. Is there data available to back up that claim?

No, not that I know of, not that DAERA knows of, and the union would say the same, but, anecdotally, that would seem to be the case. I have seen some advice from Jeremy, who cannot join us, but said at an event last week that farmers should check that out themselves, because it all depends on whose name is on the deeds. That is some advice to farmers, who perhaps do not even know themselves who exactly owns that bit of land.

Just on that point, significant working farms in Northern Ireland are typically two or three-way partnerships for trading purposes, but the bulk of the collateral tends to be owned by the person who inherited it from their previous generation. That skews the effect of this and leaves Northern Ireland vulnerable. We spoke to a Treasury spokesman, along with the Secretary of State, and he said that, typically, English farms are owned by three people, which is absolutely not the case in Northern Ireland.

The last time you and I were on a farm, it was a limited company. How prevalent would that be in Northern Ireland agriculture?

I cannot give you a precise figure, but it is not massively prevalent. It is more the exception than the norm.

I would back that up. I work in the agri-food industry as well from the family farm, and there are very few that you would be dealing with that are fully limited companies.

Just on succession, Richard, how hard is it to get the older generations to pass their holding to the younger generation?

We have done a lot of work on succession. We had previously our land mobility scheme for young farmers. Rural Support is setting up its scheme, Farming for the Generations. Succession planning is important for everybody and every business in that regard, but, as businesses expand for younger people, there is more conversation going on there.

This change has encouraged a discussion around tax planning, tax shielding, passing things and getting tapered relief over seven years. Very often, you hear farmers come back and say that they are concerned about who the son is in a relationship with and where that is going to go. There is a reluctance there. There just seems to be this traditional reluctance about passing on. As a representative of young farmers, is that something that you try to engage with, work with and deal with?

We do, very much so. We want to ensure succession planning for every business. Where a young person is coming into the farm, for years it was hereditary, so that the eldest son inherits the farm, but maybe they did not want it and there was a daughter or a younger sibling who wanted to farm it. That is why we encourage them to have those conversations. Previously, if you had looked at succession, in terms of accountancy it maybe was not really encouraged, but succession is vitally important. Ultimately, in terms of how succession planning is looking at the minute, where we do look at the figures of potential tax bills that people want to pay, you have a generation thinking, “I cannot make this work. Why would I take on this farm business?” That is a really scary thing that we are seeing at the minute. We have done so much work for years to try to encourage succession and, suddenly, with one move and the change in APR, you are inheriting a business that is not financially viable.

I would back up what Richard just said. As a body of people in Northern Ireland, farmers tended to invest every penny that they had in their farm. Consequently, a significant portion of our members would not have private pensions, so part of the reluctance to hand over is to maintain income and lifestyle.

You are making a strong case that there will be a disproportionate impact on Irish farmers, and DAERA has said the same thing. Do you see a clear rationale for a specific Northern Ireland mitigation that would protect the principle that we are trying to achieve in terms of preventing big businesses using this as a workaround to acquire land, but which would protect the unique role that family farms have and occupy in our social and economic life? Do you see a clear rationale, and do you have proposals in that regard?

I will lead on that. I see this as a United Kingdom issue. I see it as a food security issue. When I think of home, I see us impacted to a greater extent, but we need a UK-wide solution to this issue, because food security is not a given.

It would be unprecedented to have a separate tax issue. Just thinking back a few years ago, corporation tax was potentially going to be a devolved matter, so it would be a big step to have a Northern Ireland-specific solution. As William says, our friends and colleagues in the rest of the UK are impacted too. Honestly, there are various solutions. As I said at the start, some of them may be more politically acceptable at this stage. The Government do not want to be seen to be making a screeching U-turn. Ideally, yes, they could drop the whole thing. APR is probably due a bit of a reform. A lot of people would accept that, but it should really be reformed only after a detailed review or consultation. Another thing that they could do is lift that allowance from £1 million to something a bit more realistic to allow a lot more family farms through. An interesting proposal from Tax Policy Associates a few weeks ago was to lift that threshold way up to maybe £20 million, and to have inheritance tax apply as a clawback mechanism only if the next generation sells the land. That is fundamentally the issue. We have land and expensive assets, but we do not have cash. I will not speak for all farmers, but that may be something that is more acceptable in the farming community. If the next generation decides to cash it in, maybe some of it should go back to the state. We are not against taxation. There are really simple things. Going back to Gavin’s question about the 50% relief and the nerdy tax stuff, that £1 million of APR is not, for some reason, transferrable between spouses. Other inheritance tax reliefs are, such as the nil rate band and the residence nil rate band. Even allowing that to be transferrable between spouses would make succession planning a lot less complicated on farms, because a farmer would not feel the need to try to maximise the spouse’s APR relief. It could be shared. It would also mean that farms are not passing to the next generation in two steps, which can be messy. At the end of the day, one spouse in a married couple can die and the other might live for 20 or 30 years. It is not sustainable to have a farm owned over two generations for that length of time or whatever, so it would make it a lot less messy and take a lot of the sting out of it. It is just a really subtle change that could be beneficial. The other thing that I would do is to amend the seven-year rule. This would potentially lead to a lot of lifetime gifts, with farmers passing the farm during their lifetime instead of waiting until their death, to avoid this inheritance tax. As things stand, that seven-year rule is still there. That means that, if the farmer died within seven years, there could still be an inheritance tax bill. If we amended that for a while, even on a temporary basis, it would allow a lot of farmers to transfer to the next generation, and the farmer would be confident that, if they died within seven years, they would not still be hit with an inheritance tax bill.

In the Republic, they have the active farmer designation. Are there other examples elsewhere in Europe that may be applied to help ensure that we are supporting farmers and the aim of food security, but not facilitating those who are using this as a way to avoid tax?

In the south, I think you are allowed a 90% relief, off the top of my head. The British Agriculture Bureau has a useful paper comparing it across Europe, and the UK is going in a very different direction from every other European country. They can see that agriculture is treated as a special case—asset rich but cash poor.

Right around Europe, there are mitigations in place to help farms stay within families and to keep that generational thing going. As Peter just said, this Budget proposal steps away from the norm right around the whole European piece.

Finally from me, I appreciate that this has come quite suddenly, but are there more thoughtful uses of things such as APR that we could use? Is this creating a discussion for achieving other public policy objectives, maybe around sustainability, water protection and food security, and linking those taxes to some of the functions and services that farmers and landowners are already doing?

One of our frustrations with the way that this Budget announced this massive change is the lack of consultation. If there had been proper consultation, there could have been ways of raising more tax without putting the future of family farms at risk. One of the issues for agriculture is big business money coming in, basically on a tax dodge. For all the changes that are proposed within the Budget, they are not closing that door. A genuine farmer would have no issue with that door being closed, and it is a frustration that it has not been. Proper consultation could have solved a lot of these issues.

A good few years ago, when George Eustice was in Defra, he made a suggestion—this will need to be thoroughly consulted on and looked at—that, for people who do not farm their land but let it out, to be eligible for APR, the requirement might be that the land is leased out on a long-term lease rather than the conacre system that is very common in Northern Ireland of one-year leases. That gives farmers the confidence to invest in their land, and has benefits in terms of agricultural production and the environment. It is just a suggestion that was on the table before. The Office of Tax Simplification did a detailed review on inheritance tax a few years ago, and a report was published in 2019. I remember looking at it closely at the time and wondering, “Is this something that they are going to recommend?” but it was not. It is a suggestion for something that could be looked at. There could be, again, unintended consequences, but there is certainly an idea there.

If I may come in there, the proposal that Peter just mentioned is a fantastic way to bring new entrants into the industry. It is a challenge to get new entrants in, just because of the value of land, but a secure five or eight-year lease, with a tax advantage to the landlord, would ease that entry process for young entrants.

Just to add to that, we had our land mobility scheme within Northern Ireland, and that was the main barrier that we had. It was setting long-term leases for land for young people to enter into the industry. Again, in terms of succession, not everybody wants to take on the family farm. Yes, it is an enjoyable career, but the return on investments may not always be there. There are ways and means—and those are good suggestions—of, ultimately, bringing people into the sector and producing food. If we are more productive, we will increase our tax take too. If we are producing more produce locally, that is better for the whole sector and the whole economy, so I am in full support of that.

You have both talked about the seven-year rule. We are talking a lot about a generation of farmers who are potentially quite elderly. They are very fearful of what that seven-year rule could imply for them, because they will perhaps not last the seven years and the tapering does not happen until year 4 or 5. Are any of your members or any in the community already talking about receiving offers from corporate interests or organisations to purchase land? That is one of the issues that I have talked a lot about with my farmers, who are talking about having to sell off parts of their farm. Are those conversations or offers already happening within the community?

They are to a small extent, but not as much as happens in other parts of the United Kingdom. Part of the reason for that is that we tend not to have as large parcels of land for sale. If you are a big multinational company and a thousand acres of marginal ground comes up, and you can plant trees on it and feel very good about yourself forever, that ticks their box, but we tend not to have thousand-acre plots of land for sale within Northern Ireland. On a smaller scale, it is an issue.

Our figures back that up too. Last year, the average parcel of land that came on to the market was 27 acres. You would not believe how little that changes year on year. The year before, it was 28. The year before that, it was 28. As William says, if you are a big corporation on down the Thames there, you may as well buy a far larger parcel of land elsewhere. Also, you can buy land more cheaply elsewhere. At £13,000 or £14,000 an acre, you could buy three or four acres of marginal land in Wales or Scotland.

If farmers make a decision to sell land to try to reduce the value of their farm and shield from IHT, are they going to have trouble selling their plots of land because they are going to be smaller compared to the rest of the UK? Is that going to be an issue?

I just do not think that that will happen. Again, maybe there is the odd circumstance where a farmer would decide to sell, but, fundamentally, the issue that we are talking about here is that farmers do not want to have to sell that land. You will try everything other than that to avoid this. You will do lifetime gifts to try to dodge the seven-year rule. Hopefully, you live seven years. The next generation should probably take out life insurance, because, at the end of the day, none of us is guaranteed another day or hour. The key issue that I have with this is that it is fair enough to encourage lifetime gifts and allow younger farmers to take control of the farm, but, as I say, the person who really gets hit with this is the person who drops dead at the age of 40 or 50, with a young family, an active farm business, and a completely ruinous tax bill. The farm is over.

With the average farm size within Northern Ireland at 100 acres, a lot of farms do not sell very much land until it puts the whole viability of their business in question. That is really the sinister aspect. We are unsure yet what this will do to land values, but the reality is that there is always somebody who will want to buy it, and it is a fact that that core farm business may not be viable following that sale.

My question is to William, if I may, but thank you to all of you for joining us today. William, I believe that you had a meeting with Defra yesterday.

Yes.

That is certainly what we have been told. First of all, it would be really helpful for the Committee if you happened to have had a transcript produced from that meeting yesterday, or any detailed notes that might have come out of that meeting, and you could lodge those with us for our records.

We have notes. We have no word-for-word transcript as such. We met with the Secretary of State for Environment, Food and Rural Affairs, Steve Reed. He was well aware of the broader issues around this piece. I am not sure that he was totally up to speed on the Northern Ireland-specific impact, and that was why we walked through the door, to have the opportunity to explain that to him.

That was going to be my second question. To what extent did the Secretary of State understand the Northern Ireland-specific concerns that you were, presumably, trying to take to him yesterday?

It was a very constructive meeting. At the end of the meeting, I felt that he was much more over the detail of the Northern Ireland specifics than at the start, and he listened. Significantly, he undertook to try to facilitate a meeting between us and the Chancellor. We really welcome that opportunity and his help in achieving that.

I am going to preface this as a dairyman’s granddaughter. The family moved out of farming. We were tenant farmers in Galloway. You have touched on this slightly, but it is for us all to be able to get our heads around how the combination of the cap on agricultural property relief and business property relief will affect people who inherit farming estates.

In most cases, the main collateral is the land, but, on an average working farm, there is quite a lot of additional capital tied up in livestock and the various kit that you need to make a farm work. Farmers usually live on site, so there is a house there. It is the combination of all of that that has brought DAERA to put this £21,000 per acre figure on the value of a farm. If you were sitting looking at 100 acres of bare land today, unless you had either stock or the money to purchase stock, or kit or the money to purchase kit, you could not make a living out of that land. You need the whole infrastructure to make it work.

On that, as I say, in Northern Ireland, we are very much livestock intense. For anybody who has been there, it is very wet and great for growing grass, but that is the only thing we can really do in that regard. Going back to the DAERA figures on the land value and the stock, to make it work, you need to really strongly invest between housing and livestock, and that really throws those figures up a lot in that regard.

Just listening to the debate last week on the non-binding motion, it is very clear that the Labour Government are completely pinning this on these historic APR figures that you talked about there. I just have to question this and I generally think that the figures are wrong. It makes sense that they are wrong too, when you think about it, because, in terms of these historic figures on APR, until now, for 40 years, the question was, “Is this a farm? Does it qualify for 100% relief?” It did not really matter if the valuer valued that land at £8,000 an acre or £20,000 an acre. In fact, even DAERA is saying, in some of its correspondence to this Committee and to Defra, that it did not matter if some of the land was even on the APR claim at all. That may explain why the figures are so low. The DAERA analysis suggests that the acreage should be around seven times what is suggested by those APR claims. Fundamentally, what we are saying now is that, if it is no longer 100% relief, and even if it is 50% relief, it still really matters. Every pound has to be accounted for, especially if you are over that allowance. Every bale of silage in the yard counts. On a £30 bale of silage, there will be £5 or £6 of tax. There is no doubt about it. Jeremy said some stuff recently about how the historic guidance from HMRC about APR, and especially if a business was going through a full BPR claim, was that the value of the assets should be based on the farm tax accounts, which are historic values and almost certainly never market values. That is what the inheritance tax bills will be based on going forward.

Just to back up what Peter says there on Jeremy’s piece of work, those values that those are based on may, very often, have been put in place a generation ago—the last time that that farm changed hands. While the Treasury’s calculation may well have been the correct one, if you start with the wrong figures it is fundamentally flawed. That is what has skewed this situation so much.

How is this going to affect the ability of farmers in Northern Ireland to pass farms on to their heirs?

In some cases, it is going to drive a coach and horses through it. Land will have to be sold, and the viability of what is left is in serious question.

From the young farmer point of view, agriculture businesses historically offer a 0.5% return on working capital compared to many other businesses at 20%. Certainly, in many farms, there just is not the cash to service that inheritance tax bill. Going back to succession, if you sit down and plan through it, and you are hit with a bill this year, there simply is not the cash to make it work without selling land or reducing the viability of the farm business.

In the past, even before all of this and with APR, succession planning on farms for the last generation has been a very difficult thing to do. At the end of the day, we are talking about death and passing on, your family’s heritage, and your non-farming siblings who may need a cut or whatever. Farmers often might not have made a great job of doing it to begin with, and now you have the tax man in the middle of the whole thing, making it even more complicated.

Those are discussions that no family wants to have. We have to recognise the effect that that has. What has your membership been saying about this, Richard?

We put a survey out to it, and 100% of them came back saying that it would have a negative effect on the future of agriculture. We got a 65% response rate, so it is very clear. I have an analogy from our first agri and rural affairs committee meeting after this was announced. The way I put it is that I have been to more optimistic wakes. For young people, it is like, “What do we do now?”

Within our organisation, when we were getting our heads around the implications of this, we decided to have a rally on the evening of Monday the 18th, because the NFU was holding an event here in London on Tuesday the 19th. I thought that, if we had a rally with 2,000 people at it, that would be a very major statement for Northern Ireland. We would run it in conjunction with a petition and I was hoping for 5,000 names on that. We got 15,000 names on the petition and 6,500 people at the rally. This tax change has been a tipping point for a lot of agriculture. Right around the UK, they have been feeling under pressure for a very long list of reasons. This has come along out of the blue, and feeling is running high. Sitting suspended for a Division in the House. On resuming—

You have mentioned concerns about the lack of funds for farmers to be able to settle these inheritance bills over the time. I was just interested in whether you could comment a bit more. I have spoken to a lot of farmers in my constituency—and I have seen a lot of books for the last 10 or 15 years—about average incomes over those times. The thing that I could not escape was the many challenges that farmers are facing in terms of the squeezing of their incomes, with perhaps not the best trade deals done with other countries, and poorer-standard foods coming into the country from outside interests. I know that we are having a good conversation about IHT itself, but is it also about the fact that farming is not paying what it should do at the moment and all those other issues? One of my frustrations about this whole conversation is that we may come to some compromises, or there might be changes discussed about IHT, but we are avoiding the big elephant in the room, which is that, at the moment, there are so many challenges for farmers that we are doing nothing about.

I could not have said it better myself. You are so right on so many fronts. Part of the reason that the removal of the APR has been a tipping point is that farmers feel under extreme pressure. Society wants them to deliver on so many fronts, with no extra income and without making a fuss about it when they are doing it. Most of our guys are up for addressing all of these environmental challenges and doing what can be done, but every change and every mitigation takes money. The market needs to reflect that, or else support needs to reflect that. APR was the big challenge within the Budget, but, for us in Northern Ireland, the removal of the ringfence of the agricultural budget is also a challenge. The mood music at home is quite positive about restoring that ringfence, and we welcome that response from right round the political sphere at home, but the fact remains that the budget that we have been allocated is the same as has been in place since 2016. When you run that through the inflation calculator, we would have needed an extra £50 million to stand still for on-farm support. Back in the EU, we had seven-year budgets, which gave us a certain amount of security around what support was there for us. Then we had the Conservative Government, which guaranteed that support for the life of their mandate, which was five years, and now we are at a one-year budget. I know that next year is going to move forward from that a bit, but does a one-year budget give farmers the confidence to make long-term monetary commitments? That is the crucial point here. This inheritance tax piece now on top of that is the biggest disincentivisation for on-farm investment that has come along in years, and that is the sinister side to this, at a point when we could be doing so much for society and moving the whole climate change and carbon capture agenda. We have a role to play in all of that. Many people do not, and we do, but we cannot do it with both hands tied behind our back.

Farm income is another point. Even on the DAERA figures—these are for bigger farms—in 2023-24 the average dairy farm was £36,000, cereals £11,000, and cattle and sheep around £20,000. As you say, these are very modest incomes, and these are bigger farms of over 0.5 labour units. I was saying to Claire during the interval that I am a farmer. I work part time, three days a week, for the farmers journal. I always wanted to be a farmer. It is to supplement my income, just because my own upland farm just does not pay enough for a full-time income support. Just be careful too on the thing about farm incomes and increasing farm profitability to pay these inheritance tax bills. That is grand. As I say, I am not against taxation, but there is a broader question in that too. Is it really fair to be paying tax on land that was bought by your father or grandfather, or whatever? Fundamentally, any land that has been bought has been paid for by taxed money. That is why some farmers are so annoyed about this. From their point of view, they have worked their entire life on their farm. They have bought land and expanded. You are not given an allowance on that. If you buy land, you are in debt for your income tax, so it is paid for by taxed money. At the end of your day, they are saying, “We are going to tax you another 40% or 20% on it”. That is just a broader question. I am not so sure that lifting farm incomes, although I would love it, is an answer to this issue.

It is very much a frustration for young people who are coming into the business. The younger generation of farmers are very much more environmentally focused. They understand that best practice is more profitable, but also a bit more environmentally friendly in that regard too. Coined very simply, you cannot go green if you are in the red. Ultimately, if farmers want to invest in the best new technologies and be more efficient on the farm, there needs to be that incentive there. If we have this huge tax bill, we will have to de-invest to ensure that we can keep the farm as is, as opposed to asking, “How can we expand? How can we invest in what we have and do it better?” Peter and William spoke about bringing people into the business, but I work off farm. There is not the income to keep me there, like so many other people and young farmers. We have our agri and rural affairs committee, and fewer and fewer people are able to take their full income from the farm. They are having to supplement it off farm.

Just on that, Richard, could you tell us what the average income is for a young farmer? Do you have that sort of information?

For a young farmer on farm, it depends how much your parents want to pay, in some cases.

Average farm income last year was in the low thirty-thousands, and that was on the back of poor produce prices. It is the volatility of agricultural markets that leaves it extremely challenging. Some years, you make money and then, the next few years, you might do well to break even. It is that scenario that would give people serious pause for thought if they were taking on a £20,000 or £30,000 loan per year for 10 years to pay a tax bill.

I wonder if I might ask a supplementary to the preceding conversation before I go into the question that I am planning to ask. The Government are in the process of publishing a defence industrial strategy, which is recognising the place that we are in at the moment in the world, and investing in the production of armaments and so on in this country. You may think, “What does this have to do with farming?” I am just wondering—and I suspect I know what the answer might be, but it is worth a conversation—if you think that farming should be in that bracket of a sector in society that really is about our national security.

It should be within that conversation. The world is quite frightening at the minute, from the point of view of potential for a war. Weather events are getting more extreme, which also is a threat. There are medical people who would say that there is the potential of another pandemic. Any of those three things would immediately put food security front and centre. I have to say that, at home and even here, everybody gives lip service to food security, but it does not significantly impact on the policies that are developed, and it should.

It is a great strategy. If we look at other countries around the world—in America, for example—food security is national security, and that is very much coming for the USDA, whereas, here, we are only 58% self-sufficient in food. It really does question whether we need to look at it from a national security point of view and, ultimately, what mitigations we have and what we are trying to do. If you do not look at your history, you are doomed to repeat it. Certainly, in the 1930s, the UK lacked in food security, so it is very much front and centre of the agenda.

It is worth further discussion, but I should probably take us back to some of the specifics to do with inheritance tax. This might be covering ground that we have already covered to a degree, but it is the nub of the issue here. There is a difference between the number of farms projected to be affected by inheritance tax coming from different sources. The Treasury is saying 250 to 500 estates. Other sources, whether it be the NFU, the CAAV or Defra, have slightly different figures. Maybe I can address this to Peter, because you have already touched on this. What source of data provides the most accurate picture? It seems to me that the real nub of the issue is how many estates would be affected by this, especially in Northern Ireland.

As I said earlier, I seriously question the accuracy of those figures on historic APR claims, just generally. I am not having a go at HMRC agricultural valuers. Before, it did not matter. Those figures are, in a lot of cases, nominal figures, especially for working farms. Before now, the question was, “Is it a farm? It looks like a farm, sounds like a farm and smells like a farm, so it is a farm. It is 100% APR”—no problem. Now it is to do with values, and it is completely different. We have not done this in a generation. Jeremy and the CAAV have put out their figures saying that it is about five times more—instead of 500 a year, it is 2,500, so 75,000 over a 30-year generation. That is what we need to look at. The DAERA figures are based on market values. Fundamentally, our figures are based on land values. That is what the tax bills are going to be calculated on going forward, and it is a completely different scenario to where we were in the past. The DAERA analysis is suggesting that around 80,000 hectares a year were claimed under APR. Just very crudely, based on the amount of money claimed divided by the average UK land price, they reckon that it should be closer to 570,000 hectares, so that is seven times out. The CAAV is saying that we are five times out. I think we are out.

I find it interesting. The Treasury’s own impact assessment talked about 500 farms. Even without crunching the numbers, we did not feel that that was accurate. As time went on and they did more detailed and in-depth reports, every report that has come out since the Budget is getting worse as to what the impact is. It joins back to food security a bit in this, because the threshold, as is proposed, gives cover for the smaller farms. The mega farms are well fit to look after themselves, but the farms that are getting clobbered with this are those where two and three family members are relying on the income. The DAERA figures that were published last night back up our assertion that those are the farms that fill the shelves and put out the bulk of the produce that helps to feed the nation. Those farms are taking an unfair hit here, and this is what really concerns me around food security. It is threatening those core businesses that keep the meat and milk processors busy and make the whole operation viable.

Your concern is that the food-producing family farms are the ones that are going to be hit most.

Going back to that there, you are looking at 80% of the farmland in Northern Ireland, if you take the £1 million threshold. That is 49% of farms, but, ultimately, it is 80% of the total farmed area. It is about what percentage of food producers we are affecting, and that is just a quick example of it.

In the DAERA piece, farms that are over £1 billion cover 80% of total land farmed, 70% of beef cows, 90% of dairy cows, 80% of total cattle and about 78% of total sheep. It is that fundamental, core element that feeds the country that is being challenged here.

Someone suggested earlier—forgive me; I cannot remember who said it—that the majority of farms in Northern Ireland would tend to be owned farms and would be their own landlord. Have you anything further to say about that differential between tenants and owner-occupiers, as it were, with farmers, in terms of how this policy might affect in Northern Ireland?

Owner-occupiers are vulnerable here. Although they are owner-occupiers of what seems to the general public like quite a nice estate in regard to numbers, the problem is that, as has been repeated several times, it is hard to get a living wage out of that business. Richard quoted the 0.5% return on investment. It is wafer thin. A good year comes along, and people invest for the future. They have done that over the generations, thinking, “We will tighten our belt a bit, but the farm will be in a better place for the next generation”, but now the next generation has a huge question mark hanging over it.

At the end of the day, this inquiry session is about the impact of the autumn Budget in Northern Ireland. I love, in my job, backing things up with figures, but unfortunately there is one thing that we cannot back up with figures. No harm to our friends in England, Scotland and Wales, but farmers in Northern Ireland and in the Republic of Ireland have a serious, strong attachment to the land. We are owner-occupied, small farms passed from generation to generation. That attachment to the land defines the whole structure of farming. It goes back 100 years to the first Irish Land Acts. Our farms are smaller than they are in the rest of the UK, because peasant farmers had the opportunity to buy them back off the bigger landowners. Fundamentally, that is why we have that attachment, why we are well rooted in the land, and why our backs are up so much about this. That is under threat now. You might have to sell off a whack of land that your grandfather bought. I am a third-generation farmer. While 75 years seems like a long time, in the case of a lot of farming families in Northern Ireland it is not long at all. As far as I am concerned, we are only getting started. I do not want to be the last person on the land. Certainly, that is what every farmer is thinking. We think in terms of generations, not years.

It is a pity that Jeremy Moody of the Central Association for Agricultural Valuers could not join us today. They have done two significant papers on this, and they are the guys who are involved in the transfer of estates and really know what they are talking about here. We will lodge the papers with the Committee after this session so that everybody can see them. When they talk about 2,500 farms annually, and 75,000 over a generation, that is an accurate assessment of what we are looking at here and it spells devastation. Within that, that is when deaths and generational changes happen in their order. You could have an unexpected death due to health or an accident, or whatever. You could have a family farm business having two deaths closer together than the standard 30 years of a generation. They might cling on the first time by the skin of their teeth, but, if they get hit again inside 10 or 15 years, there is not a chance that they could survive that.

We have done a lot of work with young farmers and the Yellow Wellies Farm Safety Partnership. We are working in the most dangerous industry in the UK. We all sit on this front desk. We all know people who have been killed or badly maimed in farm accidents. Nobody is immune to that and the seven-year rule is putting a lot of strain on them in that regard.

William, you made a good point about Jeremy Moody’s information not being available. You will send that through. It would also be worthwhile if he were able to review the Hansard transcript and perhaps comment on all of the issues today.

For the Committee and people here to know, I have asked one of the clerks to contact Jeremy. He is listening and, if we could have a written response, it would be very useful.

That would be useful. Thank you. William, you said at the agriculture committee last week that, from the Ulster Farmers Union perspective, there is an urgency for specific data. Since then, we have had the letter from the DAERA Minister, and we have talked about some of the other sources available. Is that picture getting better?

It is getting more complete. The story that is emerging could not be described as better. As more in-depth analysis is being carried out, the situation gets more alarming. Going back to one of the auctioneers and valuers points, because of the historic lead-up to this point, they did not do the calculation with correct or accurate baseline figures. That was not anybody’s fault. That was because the 40 years that have led up to this point did not require those accurate figures, and HMRC advised that, “It is not relevant to what is happening here. We will just move on through on old valuations”.

If you say that we are getting a more complete picture, although it is bleak, what is absent and yet would be required to give a complete picture? What dataset would it be important to have that we just do not have the ability to review at this stage?

Within last night’s DAERA paper, it is making an assumption on, within a farm business, who owns the collateral. I am convinced that it is making the right assumption on that, but, as of yet, it does not have the core data to verify that assumption. It knows incomes and has a fair handle on values, but, unless you know individual farm situations, you do not know who is the landowner.

I would agree that that is probably the issue. It is, honestly, very difficult to get a handle on that. I do not know where it is, unless it is from a survey. If anyone has that data and they want to exclusively give it to the Irish Farmers Journal first, we can review it.

You had a reader in east Belfast at the weekend. That is good going. I hope that this is not an unfair question, but we have talked about the threats, the dangers, the lack of data, and maybe the misunderstanding of Northern Ireland’s perspective over England, Scotland and Wales. Have any of you, over the last number of weeks since the Budget was passed, got any sense that, whether it is a screeching U-turn or a reversal that makes sense for farmers, there will be a positive outcome in the short term with this issue?

By the very fact that I am a lifetime in agriculture, I am an eternal optimist, but there is no real indication yet. Maybe we can succeed in meeting the Chancellor and laying out our case; as I say, I am always an eternal optimist, but the Government have shown every indication of digging in on this issue. It is still all to play for, and we are still at our work.

Peter, you talked about some changes that would not be embarrassing for Government and would allow them to limit the impact. Have you had a chance to think, because you think about these issues and write about them quite extensively, whether that would have a material detriment to what the Government have planned to raise through these relief changes?

I am not sure. They are talking about £500 million a year, but, at the end of the day, we are fairly certain that their figures around who is affected are wrong, so that is probably wrong too. I am not sure if it would affect the tax intake that much, but, fundamentally, it does not matter. It was £22 billion that they were going to raise with the national insurance thing, so £500 million is not huge. My first reaction when I saw this was, “This is not worth the fight. In terms of government spending, there would be such a kickback about this. Alienating the rural community as a whole is not worth the bother”. That was my initial reaction, and that still stands. Even making some of these adjustments around upping the threshold and having a clawback tax instead of a tax on early death or, as I say, amending that seven-year rule, or even that really simple one of making the APR transferable between spouses, will certainly be useful. As William says, the Government appear to be digging in on it to an extent, but, fundamentally, they are giving people advice on how to avoid this. It makes me think that they may realise that it is not right and are giving some advice on how to get around it, so a bit more would be very useful.

As an organisation, we are concerned about the future of our members. We are not really out to be demanding screeching U-turns. We just need a workable solution here.

There are so many opportunities to maybe bring it in. In the current format, it is not going to work for young people, as we have discussed here today. Ultimately, can we look at Europe and what it does for young people in terms of succession planning? As I said, we all need our public services, and everything needs to be properly funded, but, as Peter has mentioned, how much pain are we going to go through for the sake of this £500 million? Ultimately, HMRC has not looked at it for 40 years. What level of investment is it going to take to get there? What is the overall tax take going to be out of this?

In that debate last week they kept giving this example of a £5 million farm, which could be owned by five different people, so £1 million each, with no inheritance tax. You think, “Is that the advice that they are suggesting, that you break farms up and bring in all these different family members?” As William says, most of them are sole owners in Northern Ireland anyway. It just gets very messy, very quickly, when you start doing this. To date, it has not been the advice of any farm adviser, tax expert or solicitor looking at passing farms from generation to generation. In what other business would you do that? If that relief is not transferable, are you going to have five different people dying at five different stages? It is just a mess. As I say, this was a complicated enough issue within families to begin with, so it has just been made a lot worse, especially with that sort of recommendation.

One of the conversations that we had in the early days of this was with a guy who is a member of the Agricultural Law Association in Northern Ireland. I think that I am right in saying that he has been practising law for 20 years. This was a week or more ago, when the Treasury was making a big play that the £1 million really meant £3 million. He said, “That is all very well, but, in my 27 years, I know of no family that would have ticked all those boxes to have achieved the £3 million threshold”. Families are not tidy units. They come in all forms. You would be very lucky to avail of all the work-throughs that are being touted as reasons to let this go forward.

A lot of the examples are very much hypothetical. They are removing one element of it, which is the human factor. In all these agreements, I do not know one where you would split the thing five ways and everybody would be happy in that regard. As William said, they have not found one example with that £3 million threshold in 27 years, so I would put to the Government, “Name us an example”, and I very much doubt that they will find one.

I absolutely would, and we thank the Minister and DAERA for doing this piece of work. It confirms the point that I made earlier. It is those core farms that produce more than half of the food that are adversely impacted here. As I said, that brings you back to the food security question, and the viability of the processors opening their doors and switching their lights on every morning. The whole system works on throughput to meet demand. Once you start reducing that throughput for any reason, it puts in question the whole process.

We really welcome the opportunity to be here and to have our voice.

I am going to be putting a little bit of the words of the Treasury to you. I already recognise in the panel that there is some distrust in what the Treasury has been saying around this issue, but let me just put the point to you that it is using to justify these changes. It claims that “one third” of agricultural property relief claims “relate to estates used as investment portfolios set up to minimise inheritance tax liabilities”. That is the claim that the Treasury makes. Do you recognise that characterisation of estates in your part of the world?

I do not at all. When I hear that, I think of 10,000-acre estates in some part of England. We tend not to have those. The average farm size is 100 acres. They are small family farms. That is what we are trying to protect here. We do not recognise that scenario at all.

I thought that you might say that.

The work by Tax Policy Associates has blown that argument apart too. If a third of the farms that are affected are people who are avoiding tax, that means that two-thirds of the farms affected are working, active farmers. The Treasury is admitting that itself at this stage. As William says, we are looking at Northern Ireland here in this session. Truthfully, in the land report here that we do, we have not seen that. There is the odd exception of somebody buying a whack of land who may not be properly a farmer, or whatever, but that has certainly not been happening in Northern Ireland to the extent that it has in other parts of the UK. In our magazine, I refer to it as businesspeople with farming interests potentially buying land. They may be, fundamentally, someone who is from farming stock or has a small farm, but has done well with farm diversification or another business and has decided to use the money to increase their farm. That is probably fair enough. It is not Jeremy Clarkson, or Dyson. It is still that farming type of person buying land in Northern Ireland.

We have many characters within Northern Ireland farming, but they are not called Jeremy Clarkson.

To back up Peter’s point, within my job I work with a lot of farmers. You would find that, for many spouses on the farm, there was not enough income to support them on the farm. They maybe do well in business or another career but, ultimately, their driving passion is to go into farming. They are using that off-farm income to buy land to go into farming, because it was always their passion. It was very different between Northern Ireland and GB in that example.

I had a feeling that that might be your answer, but we had to ask the question to establish that as a baseline piece of evidence. I just wish that Jeremy Moody could have been here joining us online, because he would have been able to contribute some clarity to that question as well. Let me then just put a follow-up to you. Given that that policy does apply to GB and NI, can you see a scenario or develop a policy that would target those investment portfolios, where, arguably, money is being shielded for future generations, while also not adversely attacking farms such as those that are held by the communities that you represent? Is there a way through this for the Government? Can you offer any advice or help to the Government? If they are in a listening mindset right now, can you see a way to tackle that challenge that they face in terms of those big estates in, let us say, England, and possibly Scotland as well, while protecting farms such as those in your communities?

If we sat around the table, there would be a solution there. One of the frustrations with the current proposal is that, for those big entities that are buying the larger blocks of land, it is still worth their while, because they are getting £1 million threshold and a 50% reduction in tax following that £1 million. There is still an advantage for those wealthy entities to do that, and the family farms that we represent would be quite happy to see that door closed.

The best example that I have seen so far is to have a clawback mechanism, with a very high threshold to allow all working family farms—and even some of our friends who are buying it for tax avoidance reasons—through, but, if the next generation cash it in and sell it, hit them with inheritance tax, because they will have the cash to pay for it.

It goes back to the point about Europe. Certainly in Germany, for example, if you inherit the family farm and you farm it for seven years, you are exempt from that. There are ways and means to go around this here that are beneficial, ultimately, for food producers and farmers. As William said, it would be very good to be involved in that conversation. Unfortunately, we were not involved at the start of this.

I am interested in the clawback mechanism. Presumably, though, that then requires, as has been described elsewhere, an active farmer test or designation to identify who is in this middle ground of family farmers. What would be the best way to create that definition?

Historically, even during our membership of the EU, we all struggled with a definitive definition of what an active farmer is. It is possibly 80% of your income, or something like that, but it is hard to define.

Is there a feature that has to do with longevity, and demonstrating the longevity over a generation, a decade or whatever—pick a number—of farming in that location?

That is back to the seven-year piece that happens in Germany. If the next generation continues to farm for seven years, their tax liability is nil.

What you are suggesting is that, if you were to cash out, you would get clobbered.

It is almost a type of capital gains tax by a different term. The vast majority of farmers would have no issue with that. The issue is that we are not cashing it in. We are trying to hold on to it.

William, you said that the mood music was good about restoring the ringfencing. You think the Executive are going to agree. Over what kind of timescale do you expect that to happen?

It was hinted that it might happen prior to breaking up for the Christmas break. I am not sure if that is feasible, but there is a draft budget early in the new year and, if it was within that, it would happen. While we would welcome that, a just transition fund has been talked about for a good while now to help deal with the environmental challenges. While we would welcome the on-farm support being ringfenced, as I stated earlier it is an old sum that inflation has devalued to a huge extent. As for this term of a “just transition fund”, it will be a just fund only if it is new money, because we are being asked to do new things with it.

Steve Reed, Secretary of State for Environment, Food and Rural Affairs, said to the House, “Devolved Administrations should have the right to take decisions about their own countries”. Is it a positive step forward for the Government to put discretion over agricultural funding in the hands of the Northern Ireland Executive?

It puts the Executive under a certain amount of pressure, because they have many difficult decisions to make. Utilities are under-invested probably right around the UK. We are definitely no different, and probably worse behind that loop. It makes us in agriculture nervous that there are some challenges there. Some arguments are hard to win if you go head to head with education or health. We are nervous of this. When it was targeted money for agriculture sent across to Northern Ireland, that gave us confidence to move forward, and this has removed that confidence.

It goes back to the point that we talked about earlier on UK food security. Each of the devolved nations is funded for that. It is a national as opposed to a regional issue. If you take Northern Ireland, we feed 10 million people from a population of 1.8 million, and that is worth protecting.

We feed 10 million people, but 6 million of those live in GB. We feed ourselves, and then there are exports to ROI and mainland Europe. We are a significant part of the whole UK food security piece.

There may be a benefit, as William says, if we could get a new ringfence within Northern Ireland. Looking on as a journalist, particularly at how the handling of this has been done in England, with new farm schemes, and even in Wales, the lads have said, and publicly before, that they would not want to be a part of that. The way that it has been handled has not been farmer friendly at all. There is that political appetite at Stormont across all parties to support farmers. If we could get that ringfenced within Stormont, it would mean that we are not going back. For example, the Budget announced that the English support is only for another two years, at £5 billion. If that was the case across the whole of the UK, in two years’ time we would be all chewing our nails again and wondering whether they are going to give us any money. At least now it is baselined in the block grant. If we can keep it there within farming, it is probably beneficial.

Within Northern Ireland, the First and Deputy First Minister, our Minister of Agriculture and our Finance Minister have all signed a joint letter to the Chancellor highlighting how exposed Northern Ireland agriculture is. For a roundtable approach from Northern Ireland, that is a very significant statement, in my view, with everybody coming together on the one page on this issue. It does not always happen within Northern Ireland.

Richard, William and Peter, I would like to thank you for your contribution today, and I want you to know that every member of this Committee agreed to taking this session today in advance of the EFRA Committee tomorrow morning, which I will be guesting on. Thank you very much for your time.