Labour-dominated Welsh committee demands delay to IHT plans

Government plans to levy inheritance tax (IHT) on farms from next April must be put on hold to allow time for a proper impact assessment, according to the Labour-dominated Welsh affairs committee in Westminster.

The committee, which includes six Labour MPs out of 11 members, has accused the government of creating “confusion and uncertainty” in Wales, saying its handling of the reforms has created a vacuum which has been “filled by competing statistics”.

See also: NFU urges Labour backbenchers to back IHT amendments

Hopes that the government would reverse the move were dashed recently when Defra farming minister Dame Angela Eagle ruled out any softening of the IHT reforms on farmland and agricultural assets.

“We are disappointed that the government has maintained a complacent approach to measuring the impact of these tax changes despite the scale of public disquiet in Wales,” the committee said in a report published on Wednesday (12 November).

Delay plans

The government has not extracted specific data for Wales from UK-wide figures for farming estates potentially liable to pay IHT, and therefore the plans must be delayed, the committee said.

“This complacent approach by the government is a prime example of how UK policy too often overlooks the distinct nature of the farming sector in Wales,” said committee chairman Ruth Jones, Labour MP for Newport West and Islwyn.

“It must hit the brakes on its inheritance tax reforms so a proper comprehensive assessment can be made of the true likely impact on current and future generations living in farming communities across the country.”

Similar calls have been made by the environment, food and rural affairs committee (Efra) and the Northern Ireland affairs committee, which suggested IHT plans should be postponed for a year.

A noble aim

Labour MP for Montgomeryshire and Glyndŵr Steve Witherden, also a member of the committee, told Farmers Weekly that if the aim of the policy was to crack down on the super-rich buying agricultural land to dodge tax, it would be a noble one.

“But the threshold is too low and so family farms will be caught in the crossfire,” he said.

As well as missing their target, the report says the reforms will have a “disproportionate impact” on elderly farmers or those with terminal illness who have arranged their affairs on the basis that their estates would not be subject to IHT.

The report also calls for the Welsh government to “ring fence” future spending on Welsh farm support, and to protect the tenanted sector, given the incentive provided by IHT for landowners to sell off parts of their estates. 

A clear message

The farming unions have backed calls for a delay.

“This report sends a clear and timely message to the UK government that Welsh farming cannot continue to be treated as an afterthought in Whitehall,” said Farmers’ Union of Wales president, Ian Rickman.

The chancellor, he said, must take the committee’s findings seriously and ensure future decisions protect Wales’s family farms.

NFU Cymru president Aled Jones added: “When MPs, no matter what their political party, sit down and consider in detail the impact on ordinary farmers of the government’s IHT policy proposals, they recognise and understand the inadvertent consequences of the proposed changes.

“They reach the view that a pause and review of the policy is needed to better understand its impact on farming families and to look at alternatives.”

The Treasury has been approached by Farmers Weekly for a comment.