Levying inheritance tax on farms is “pretty fair”, a Treasury minister has said in the face of calls for Environment Secretary Steve Reed to resign over broken promises.

Labour frontbencher Lord Livermore defended the controversial measure contained in last week’s Budget, after being challenged in Parliament.

Under the plans, inheritance tax will be charged at 20% on farms worth more than £1 million, although Chancellor Rachel Reeves has said that in some cases the threshold could in practice be about £3 million.

The move has sparked a major backlash from the industry and seen a heated dispute over just how many farms and farm businesses would be affected.

Speaking at Westminster, Lord Livermore said the Government had had to “take some very difficult decisions” in the Budget, which saw £40 billion of tax hikes, including increases to employers’ national insurance contributions.

But the minister said: “They were the right decisions to clear up the mess that we inherited from the party opposite, to rebuild the NHS after years of neglect, to choose investment and not decline, and to keep our promises to working people.”

He told peers: “This was a very significant Budget, because of the need to repair the public finances and rebuild our public services simultaneously.

“We have now wiped the slate clean, meaning we never have to do a Budget like this again.”

He also argued the Government had “kept every single promise that we made on tax”.

But Tory former environment secretary John Gummer, who sits in the upper chamber as Lord Deben, took issue with the claim “that there were no promises broken in the Budget”.

He said: “The Secretary of State for Defra (the Department for Environment, Food and Rural Affairs), which looks after agriculture, promised farmers that there would be no tax on inheritance. Why has he not resigned?”

Responding, Lord Livermore said: “On inheritance tax, currently the largest estates pay a lower effective tax rate than the smaller estates. I do not think that that can be right.

“Agricultural property relief is given on top of the normal inheritance tax thresholds.

“Individuals can pass up to £500,000 to a direct descendant, and then agricultural property relief would provide a further £1 million tax-free allowance. This means a couple can pass on up to £3 million tax free.

“Above that, there is a 50% discount on inheritance tax, so a rate of only 20% applies, and any liability can be paid in 10 yearly instalments.

“This seems to me to be pretty fair in the context of the decisions we have taken and in the context of what everyone else in society gets.”