Ben Lowry: Ten thoughts about the farm inheritance tax row in relation to Northern Ireland

(Click here to read Ben Lowry on the Sydenham bypass, a road inspired by Hitler, turning 65)

Recently I asked a Tory MP who survived the electoral massacre in July. Why did Rishi Sunak go to the country early? Was it selfishness? “No,” he replied. “He knew everything was going to get worse and worse politically.”

Of all the crises facing the last government, the UK’s financial position was arguably the greatest. There is a theory that the price of gold is so high because western governments such as Britain and America are so indebted that a financial calamity is coming. Neither the Tories nor Labour were prepared to raise tax or to make public expenditure cutbacks enough to balance the books.

It is why Sir Keir Starmer has got into trouble over cuts to the winter fuel payments and farm inheritance tax. Here are thoughts on the latter:

1. The News Letter has since its inception in 1737 closely followed agricultural affairs in Ulster.

Inside today’s paper is a mammoth Farming Life, with pages on the farm tax row. Like so many people in Northern Ireland, my close ancestors were farmers (Fergusons on the Fermanagh border, and Kernohans in Co Antrim – my grandfather JT Kernohan was secretary of the RUAS). As a paper, we worry about the big rural challenges.

2. Younger generations often simply do not want to take on farms.

This is related to a wider cultural shift in which few people in the UK are willing do work in which they get their hands dirty, from cleaning to plumbing (have you tried to get a plumber recently? and seen what they charge? they earn more than a regional newspaper editor). Many young people want a desk job, with much home working and no weekend work.

Families who have held a farm for generations often struggle to get their offspring to take it on.

3. Farm inheritance is not like a general inheritance.

What might sound like a huge farmer’s estate can often include vastly pricey machinery like harvesters that cost hundreds of thousands of pounds.

4. Northern Ireland is particularly vulnerable to this tax because land is so pricey here.

I know of only one reason why agricultural land in NI costs more than the rest of the UK, even the richer and far more densely populated south of England: the desire to hold and retain land is greater on this island (it is a cross-border thing) than in Great Britain. With land in parts of the province such as Co Down £20,000 an acre. Thus an 80 acre farm could be worth £1.6m in land alone, and £2m after housing and farm buildings are included.

5. This sky high price of land means that the returns on the cost of the farm are often miniscule.

The popular idea that farmers are asset rich and cash poor is more true than ever. If a family with a farm technically worth £2 million has to pay a reduced inheritance tax bill, compared to everyone else, of £200,000 (£1m of the farm’s value is exempt, £1m taxed at 20%), then they might be unable to pay it, even if given 10 years to do so.

6. Labour are justified in trying to clamp down on wealthy tax evaders, just as the Tories did.

We are all outraged when we hear that billionaires pay ludicrously low rates of tax, often for impenetrable tax rule reasons that none of us understand. But we do understand if we are paying a higher marginal rate. Earners on a decent but hardly huge salary of £50,500 pay 42% on every extra pound earned.

It was the Conservatives who began to charge swingeing rates of stamp duty on homes worth over £1.5 million to stop wealthy and overseas buyers hoovering up UK property and pushing prices up. Similarly, it is appropriate to clamp down on wealthy individuals who buy land on a big scale for tax reasons, even if they are few in number.

7. Inheritance tax, while understandably hated, is now surprisingly low in the UK.

Any married couple can leave £1m to their children tax-free. They can both leave £325,000 tax-free and then another £175,000 if passing a house to children or grandchildren. This is £500,000 each, which if doubled is £1m. Wills can be amended by consent after death to ensure both parents use up this allowance.

8. Very few people in NI have a net worth as high as £1m.

Informal research I have done on this suggests about 2% of the population die with such a valuation to their name. I had the good fortune to grow up in North Down, perhaps the most affluent part of NI and even there tens of thousands of prosperous people have net worth below that figure (for homeowners, their house is overwhelmingly their biggest asset and even in N. Down 80% of houses are worth under £600,000).

9. A exemption for farmers of £3 million free of inheritance tax is not onerous.

Such an exemption is available to farmers under the proposed change if a married couple both use their general £1m inheritance tax limits (as above) and then the suggested farming limit of another £1m each, followed by a lower 20% rate of inheritance tax (compared to the 40% norm). The problem is that the sudden introduction of this tax catches widowed or widower farmers who can’t avail of those double allowances.

And it is all quite complicated-sounding, and has cause immense stress.

So I think the government, in clamping down on the wealthy, should have reversed into this and tried to make it clear that it would exempt £4m or even £5m, such was its determination to avoid small farmers getting caught by the change.

10. There should be greater tests to see who is actually farming.

I believe that this happens in France. It would be manifestly unjust for someone to inherit a £3m farm, pay no tax on it, and put it up for sale in the morning, as was always their intention. Such an inheritance would put the beneficiary in the wealthiest 1% of the population in London, and 0.3% of the population here, and would in all other circumstances such a large windfall would be liable for inheritance tax in excess of £1m.

If real farming families are identified, then proper inheritance protections can and should be focused on them.

• Ben Lowry (@BenLowry2) is News Letter editor