HL Deb 10 May 2001 vol 625 cc1111-31

2.10 p.m.

Brought from the Commons on 9th May and printed pursuant to Standing Order 50, and read a first time.

Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May)

Lord Whitty

My Lords, I beg to move that this Bill be now read a second time. The Rural White Paper Our Countryside: the future, which we published last November, sets out the Government's comprehensive strategy for rural communities and the countryside. We have already pushed ahead with many of the initiatives and measures in the White Paper.

The Bill contains two important measures that are part of implementing our strategy: first, to assist farm diversification; and, secondly, to help maintain village services. These are now all the more important, as they will also help with the longer term effects of the outbreak of foot and mouth disease.

The Prime Minister launched the Action Plan for Farming on 30th March last year. That promised measures to help farmers diversify into nonagricultural businesses as a way of supporting or supplementing their agricultural activities. One way of doing that is through relief from business rates.

Last August we consulted on rate relief for farmers who diversified into horse enterprises. The response to that consultation made clear that there was a far wider range of potential diversification businesses. We therefore consulted again last November on proposals for rate relief for all types of farm diversification. These would have limited rate relief to farmers for newly established enterprises. We listened to the response to that consultation. The Bill reflects the resulting changes to the proposal. It will provide rate relief to all small properties which were previously in agricultural use, whoever occupies them, whether it be a farmer owner-occupier, a tenant farmer, or a third party.

The Bill introduces a rate relief scheme for new, small-scale farm diversification enterprises. It allows rate relief to all small properties occupied by any enterprise which is newly established in former agricultural premises. That includes those run by tenant farmers and those where the farmer lets or sells the property to a third party. Farms are already fully exempt from non-domestic rates. But as soon as any part of a farm is used for anything other than agriculture, it becomes liable for rates. For example, when a barn is converted to a shop or to livery stables it becomes rateable.

These types of activity can provide a useful supplement to a farmer's income. But the costs of using part of their farm in that way are increased by the additional rates bill on property that was previously rate free. That is seen as a major disincentive to diversification. To help farmers establish new diversification enterprises, the Bill would provide rate relief to reduce the costs of doing so. Relief would be available to any small rateable property that previously benefited from the agricultural exemption from rates.

Relief would be on similar terms to that which already applies for village shops. There would be a 50 per cent mandatory relief and local authorities would have the discretion to increase that to 100 per cent. It would be limited to properties below a certain rateable value, set by order, which we intend to set initially at £6,000. It would be reviewed at subsequent national revaluations to ensure that it keeps in line with any general changes in rateable values. For a property of the maximum size, 50 per cent relief would be worth £1,290 in this financial year and 100 per cent relief would be worth £2,580.

The scheme would be available initially for five years. It would then be reviewed and extended if necessary. The review would need to take into account the possible availability of rate relief to all small businesses, as proposed in the Green Paper on local government issued last year.

If the farm diversification scheme is extended, relief would only be available to any individual property for a maximum of five years from when it first received the relief. That is because the relief is intended to help farmers establish new diversification businesses, rather than provide long-term subsidy.

A rating concession is already given to stud farms that are on agricultural land. These currently receive a flat-rate reduction in their rateable value of £2,500, which is worth £1,075 in this financial year for all stud farms. For the smallest stud farms it amounts to a complete exemption from rates. Because of that existing concession, which is not time limited, new stud farms that qualify for it would not also receive the new farm diversification relief. However, when the farm diversification relief comes into effect we will raise the stud farms concession to a £3,000 reduction in rateable value. That would be worth £1,290 in 2001–2002, which is the same as the maximum mandatory relief under the farm diversification scheme. For most stud farms it would therefore be worth more than the mandatory farm diversification relief.

For those with gross rateable values below £6,000, the £1,290 stud farms concession would be more than 50 per cent of their rates bill. It would be worth the same to those with gross rateable values of exactly £6,000. It would also be available to stud farms with higher rateable values, which would not be eligible for the farm diversification relief. Similarly, it would apply to existing stud farms, including those established in premises that were not previously agricultural, which would not qualify for the farm diversification relief. Stud farms that would otherwise qualify for the farm diversification relief would be eligible for the discretionary element of the new scheme. That means that local authorities would be able to top-up relief to 100 per cent, on top of the stud farms' concession for that five-year period.

I now move on to the mandatory relief for village food shops. In 1998 we implemented the village shop rate relief scheme. That provides 50 per cent mandatory rate relief to the sole small general store and post office in designated villages with a population below 3,000. Local authorities can give discretionary relief up to 100 per cent to these and any other small businesses in such villages. The scheme is intended to provide support to essential services in isolated rural communities. We want villages to be active living communities where people are also able to meet their essential needs. The most basic community service for most rural communities is the local shop. We want to retain shops in small communities offering a wider range of products and services.

The Green Paper on local government finance published last September suggested extending the mandatory rate relief to other food shops, pubs and petrol stations. We have already implemented the extension of mandatory rate relief to the sole small pub or petrol station in small villages, through secondary legislation. That took effect on 5th April 2001. The Bill would do the same for all small food shops in those villages.

At the moment, where there is one general store selling food it gets mandatory rate relief. But where there are two—for example a grocer and a butcher—neither gets mandatory relief. Some local authorities already give discretionary relief in such cases. But the Bill would ensure that all food shops get mandatory relief in those villages. Primary legislation is needed because the current legislation specifically limits mandatory relief to the sole general store selling mainly food and household goods. That cannot be overridden by orders made under the power used to extend the relief to pubs and petrol stations.

Mandatory relief would be extended to shops that mainly sell food for human consumption, as these are all equally essential to the community. Separate butchers, bakers and grocers provide the same service to a village as a general store that provides a wider range of foods. Shops that sell other goods or services, subsidiary to their food sales, would also be eligible for the mandatory relief. But it would not extend to shops which are, for example, mainly confectioners, tearooms, restaurants or takeaways. These catering businesses do not provide the same essential community service as shops that provide basic foodstuffs. However, shops that sell basic foodstuffs but also provide hot food or confectionery would still get the relief', provided that those catering and confectionery activities accounted for less than half of their trade.

Relief would be given on the same terms as that for sole general stores and post offices, limited to properties with a rateable value of less than £6,000. Again, local authorities would have the discretion to top up the 50 per cent mandatory relief to provide 100 per cent relief where needed. They would also retain the discretion to give relief to any business in a designated village with a rateable value up to £12,000 if it is of benefit to the local community, including those providing mainly catering or confectionery.

The Bill amends the main rating legislation, the Local Government Finance Act 1988. Therefore, it extends to England and Wales. The new order-making powers would be exercisable in Wales by the National Assembly, including setting rateable value thresholds, and commencement and possible extension of the farm diversification scheme.

The two measures in the Bill would provide welcome financial assistance to small rural businesses; they would help reduce costs for farmers who wish to diversify; and would provide more rate relief to village food shops. This further support to rural businesses takes forward the policies set out in the Action Plan for Farming and the Rural White Paper. It would be even more welcome to help with the long-term recovery in those areas from the current foot and mouth outbreak. I commend the Bill to the House.

Moved, That the Bill be now read a second time. — (Lord Whitty.)

2.20 p.m.

Baroness Byford

My Lords, I rise to give support to the measures proposed in the Bill before us today. I would also add that these measures were first called for some three years ago by my honourable friend Jim Paice. That is recorded at col. 1172 of Hansard of another place of 21st May 1998. It is a great pity that it has taken three years of deep declines in farm incomes and the outbreak of foot and mouth to stir the Government into action. At this stage, I should remind the House of my family's farming interest. which is entered in the House's register of interests.

We have seen the incomes of farmers fall dramatically. Deloitte & Touche published an analysis of farm incomes last October, before the foot and mouth outbreak. It showed that the average sized farm of some 500 acres, which earned £80,000 in the mid-1990s earned only some £8,000 in 2000. That same sized farm is estimated to make a loss of some £4,000 in 2001. Consequential to that loss are the jobs of some 47,000 farmers and farm workers, who have left the industry over the past two years. Agriculture's contribution to the nation is now down to just 0.80 per cent. It was 1.6 per cent just five years earlier. Its contribution has halved thanks to many of the Government's policies.

The Bill will give statutory rate relief of 50 per cent on rates levied on former agricultural buildings with a rateable value of £6,000 or less that are to be used for non-agricultural enterprises. The limit of £6,000 on rateable values contrasts with the definition of small business in the Green Paper on local government finance as one which occupies space with a rateable value of £8,000 or less. It contrasts even less favourably with that offer of hardship rate relief to businesses in rural areas targeted at businesses with a rateable value below £12,000 announced by the noble Lord on 23rd April this year. Will the Minister comment on the level of diversification that the Government expect to achieve by using a £6,000 limit?

The scheme is set to run for five years. I understand that it will be reviewed again after that period. Will the five-year period be extended to someone who enters the scheme in year three, or will that person receive relief for only two years? It is important that this issue is clarified to ensure that the person wishing to diversify has a sound financial base on which to build his business. Is the Minister confident that businesses which have been caught up in the foot and mouth outbreak and whose animals were slaughtered at its start—as early as last February—will be able to qualify within the 183 days laid down in the Bill for those farm buildings that have been used for agricultural purposes? It would be appalling if the very people whom the Bill is intended to help should be jeopardised in any way.

Will the Minister explain why a fiscal limit on rateable value is preferred to a limit on an area of premises involved? The latter—the area of premises—would surely be a fairer way to view the differences of rateable values across the country. One has only to look at the difference between schools to know that the value varies enormously even within a county. Will the Minister confirm that the limit of £6,000 will apply to buildings being used and will ignore common access, parking, shared toilets or secretarial facilities that might be possible on that land? Will the Minister clarify whether the relief will be restricted to a single business over five years? For example, what will happen if one company which starts in year one either fails or moves away in year three and the building falls vacant?

I understand from the Explanatory Notes that it is for the local authority to decide which of its communities located in a designated rural area meets the qualifying criteria and to place them on the rural settlement list. The rural areas themselves are designated centrally by government. Will the Minister clarify how many rural areas are so currently designated and whether a local authority can request an additional area to be included? My understanding is that there is no legislative definition of a designated rural area. Perhaps the Minister would like to comment on that.

I further understand that the department decrees that rural areas must be a given distance away from built-up areas and that they are physically separated from them. Will that disadvantage farmers whose buildings are closer perhaps to an edge of a town or a larger village? Will it be possible for one part of a farm to be classified as rural while the part containing the buildings for diversification might not be so?

Much debate took place in another place on the question of equestrian businesses that are currently worth some £2.5 billion to the nation. My honourable friends Owen Paterson and James Gray argued at great length during the proceedings of the Bill about the anomalies within the "horse world". I wonder whether the Government have had second thoughts about the additional variations to the Bill in favouring new businesses against those that are already established. Many of the already established businesses are going through difficult times. Those existing businesses have been devastated by the restrictions that the foot and mouth outbreak has brought to them. Those very same establishments would not qualify for help under the Bill. Have the Government reconsidered the suggestion that the only way to tackle the problem of equestrianism is to provide full agricultural exemption for old and existing equestrian businesses?

I turn to Clause 3 of the Bill, which refers specifically to village shops. I should again declare an interest as Patron of VIRSA, an organisation which helps to promote and encourage shops. Clause 3 deals with rate relief for rural food shops. While this inclusion is welcome, I am concerned that the Government have not taken fully on board the dire circumstances in which many shops presently find themselves. The incomes of many in an infected foot and mouth area have virtually dried up completely. Even now, when fewer daily outbreaks of the disease are being reported, some of those shops are still experiencing a lack of visitors. The Government have made welcome additional announcements of financial help. But I have to say to the noble Lord that many organisations and individuals have been in contact with me. They feel that some of these moves, while welcome, are totally inadequate to deal with the situation.

We on these Benches welcome and support the Bill. It is more than necessary, particularly at this time. However, bearing in mind our contracted discussion today, I should be grateful if the Minister could respond to my questions before we move on to consider amendments in Committee.

2.30 p.m.

Baroness Miller of Chilthorne Domer

My Lords, we on these Benches welcome the Bill and believe that it demonstrates a move in the right direction. The noble Baroness, Lady Byford, pointed out that her honourable friend had called for these measures some time ago. I must tell the House that Liberal Democrat local authorities up and down the country have been implementing all the discretion they have at their disposal as regards offering rate relief to rural businesses. They, too, will welcome this extension of relief to support the struggle to maintain the kinds of services that we all agree are necessary.

I shall deal first with the agricultural part of the Bill, on which I should like to raise two points with the Minister. First, why have the Government found it necessary to repeat what I believe to he a mistake when addressing farm enterprises; that is, to continue with the practice of designating rural areas? Wherever it is situated, a farm may need to diversify. It could be on the edge of a town or even in a semi-urban area, but that makes little difference to the farming process. Continuing with the designation of rural areas simply adds to the red tape and difficulty of implementing this Bill. I believe that it would have been better if all farm enterprises had been able to qualify.

I hope that the Minister will be able to comment on why it was felt necessary to continue with the practice of designation, which I believe is merely a hangover from previous years. Indeed I, too, shall be interested in his reply to the question put to him by the noble Baroness; namely, what would happen if a large holding fell into both a designated and an undesignated area, so that some of its buildings might be in the wrong place?

Secondly, I wish to question how firmly in reality are the provisions of this Bill based. Certainly if it was not being introduced at the end of this Session, the Liberal Democrats would have proposed a large number of amendments to it. The fact that we have not done so indicates that we shall welcome its inclusion in the statute book, but I do not believe that it recognises the reality of life in rural areas today. The Bill is too prescriptive as regards what diversification may mean for farms and ignores the reality of village life. Perhaps I may explain exactly what I mean by that statement.

The Bill attempts to define which enterprises can be helped within a village by suggesting that such enterprises should provide essential village services and that their turnover in food should comprise more than 50 per cent. However, it is a fact that nowadays one might find that an Internet café had been established. Its main turnover would not be in catering, through supplying coffee, cakes and so forth to those coming into the cafe to use the essential service of Internet access. I understand that, under the terms of the Bill, such a business would not qualify for any relief because more than 50 per cent of its income derives from the catering element. However, all of the other facilities available to the people living in that village may have closed down. Such a circumstance clearly does not recognise the way in which village life is developing.

For example, if a shop sells those goods which it is essential to purchase fresh each day, such as bread and vegetables, it should be recognised that those goods have quite a low value. Their turnover value may well be low but, again, it could be that the specialist café element of the enterprise attracts people to the premises. The cafe part would provide the highest turnover for the business as a whole, but would nevertheless support the fresh food outlet for the village. Again, such an enterprise would not qualify. I hope that the Minister will be able to explain the Government's thinking behind these provisions.

Some debate has concerned the position of third parties if they rent out farm buildings. Would such parties qualify for relief under this scheme? Can the Minister assure the House that they will do so, because if a farmer is seeking to diversify by renting out farm buildings at the attractive rate that inclusion under the terms of this Bill could offer, that would provide a powerful incentive to those considering renting such buildings?

I shall turn now to the matter of the five-year limit. This is most unfortunate and appears to have been applied in a very impractical way. For those businesses which have been affected by the foot and mouth crisis, it may well be that only in two or three years from now will they be able to think about diversification. They will then be eligible for only two or three years of relief. If they cannot establish themselves for four years, they will receive relief for merely one year. That is not as helpful as the Government would like to think.

I understand that the Government have stated that it may be possible to extend the provisions of the Bill, but we on these Benches would prefer to see this as a "holding" measure until a proper local government finance Bill can be introduced. Such a Bill would return control of the uniform business rate to local authorities. Then we would not have to discuss which services were essential for a village because the village would be able to decide for itself and make the appropriate representations to the local authority. The . authority would then be able to consider the case. While governments continue to deny local authorities the proper discretion required as regards the level of local business rates, we shall continue to need to consider complicated Bills of the kind before the House today. That is merely trying to make the best of a difficult job. We would like to look forward to the time when the uniform business rate is returned to local authority control.

Finally, I should like to make two further points. First, can the Minister explain what will be the definition of micro and small businesses when considering the threshold for this relief? Between the DTI and the DETR there appear to be several different definitions of what constitutes a small business and whether such enterprises should be eligible for relief.

Secondly, I echo the point made from the Conservative Benches as regards the importance of the equestrian community and its significant contribution to rural areas. Undoubtedly the Bill takes a small step towards helping such enterprises, in particular those concerns which have diversified into other areas. However, once again, such assistance does not go far enough.

2.37 p.m.

The Earl of Caithness

My Lords, I declare again my interest as a trustee of a small property in Scotland which has farming interests. Having more freedom than the two Baronesses who have just spoken, I do not give the Bill such a warm welcome. However. the noble Lord will be delighted to hear that I do give it a guarded welcome and that is better than has been possible for some of the government legislation that has come before us of late.

My noble friend Lady Byford reminded the House that, under this Government, agriculture and the countryside have been facing increasing difficulties. They fell into deep trouble as soon as Labour came to power. Furthermore, as the noble Lord, Lord Whitty, will know, since the Prime Minister began to take an interest in the subject and appeared on the scene, the situation has only become worse. The real added value generated within this sector in the year 2000 was 1.7 per cent below that generated in 1997. That is a pretty severe indictment, given that other industries have generated on the plus side. Only agriculture and forestry have performed worse over the period. My noble friend Lady Byford also reminded the House that farm incomes have plummeted, while the rate of clearance of farmers and farm workers from the land is accelerating.

All this happened before we were hit by the dreaded outbreak of foot and mouth disease. On the Friday following the Easter weekend, I drove from Moffat down through the Lake District, which had been terrific stock country. Over a distance of 60 miles, I saw precisely 20 fields of sheep on either side of the motorway. As soon as I came out of the foot and mouth affected area, I saw 20 fields of sheep over a distance of one-and-a-half miles. That is the scale of the desolation in certain parts of the country. Farmers in those areas have to face that on top of the already bad situation.

There is no simple way of knowing the scale of farm diversification, let alone the income that is derived from it. Opportunities will vary from area to area. In some areas there will be far too much diversification; in others there will not be enough. That is because the Bill, as the noble Baroness, Lady Miller, said, is far too prescriptive; it does not allow villages and agricultural areas to decide what is best for them. That would be wrong so far as the Government are concerned. Communities are being told that if they fall within a designated area they can have help—but that help may be needed in an area that is not designated. That will lead to further difficulties and resentment within the countryside and the farming communities.

Without question, parts of the Bill are complete nonsense and need careful scrutiny and discussion, but we are prohibited from doing that. I will highlight at Committee stage one particular area of concern which exemplifies the stupidity of some of the Government's proposals.

I should like to ask the Minister about town and country planning issues, where I anticipate major difficulties will arise. It is a basic principle that we prevent isolated developments away from centres of population unless they are for agricultural or forestry use. Many farmers are meeting resistance to diversification schemes from local authorities even though there has been a relaxation. The Government's proposed further relaxation can lead only to more difficulties in the future. Can the Government offer any further advice to local authorities on how they should handle these very difficult and sensitive issues?

I remember trying to encourage farm diversification when I was a Minister. Although one tried to help with one hand—as the noble Lord, Lord Whitty, will fully understand—the next people through the door were the preservationists, who wanted no change at all within the countryside. But the countryside is a living environment of people and animals and it must adapt. Parts of the Bill will help it to do so.

Finally, on a general point, I hope that the Minister agrees that farmers are the key to the future of the countryside. I hope that the Government will undertake a wide-ranging review of how the countryside will work in the future—particularly after the devastation of certain areas by foot and mouth disease. I repeat the call that I have made on more than one occasion to the Minister of Agriculture that there should be a Royal Commission to look into this issue, starting now. When it comes to looking into the future, I hope that the Minister will make certain that the points raised today about the restrictive nature of the Bill and the importance of making it wider and more applicable across the whole country will be taken into account.

2.43 p.m.

Lord Whitty

My Lords, there have been varying degrees of warmth of support for the Bill from noble Lords who have spoken. The Bill will be welcome in many parts of the country and will make a contribution towards resolving some of the wider questions which have been addressed today in terms of agricultural decline and the problems of rural areas, particularly those afflicted by foot and mouth disease.

The Bill is a limited but very important piece of legislation for breathing life into enterprises within the countryside. The introduction of the new rate relief will help both farmers and village communities. The Bill's proposals follow through some of the commitments that we made in our rural policy White Paper and action for farmers.

However, some of the issues raised today are not dealt with in the Bill. I do not therefore intend to reply in detail on wider issues of agricultural policy, local government finance or the planning system as a whole. The Bill needs to be taken for what it is and I shall confine my response to issues which form specific parts of the Bill.

The noble Baroness, Lady Byford, raised the issue of the threshold and asked a number of other questions in relation to that. She asked why the threshold was £6,000 in this context whereas in the context of support for other small businesses the threshold is £8,000. I should point out, however, that that support is tapered above the £6,000 level in the context to which the noble Baroness referred. There obviously has to be a cut-off point. The figure of £6,000 is the cut-off point of mandatory 100 per cent relief. However, contrary to what has been implied by some noble Lords, particularly the noble Earl, Lord Caithness, local authorities have a further discretion over and above this figure to provide rate relief up to £12,000 rateable value, 75 per cent of which will be refunded from central funds. There is therefore more flexibility and more scope for local discretion than has been implied today.

The noble Baroness asked whether the £6,000 threshold includes common assets. The answer is perhaps not entirely satisfactory: it depends upon the property. The rateable value of £6,000 will relate to the unit of property; whatever is covered in the rateable assessment will be included. If there is a supportive service in a separate rateable property, that will not have undergone the same change of use. Obviously how that applies from case to case will depend upon the layout of the buildings on which the rateable value will have been assessed.

The noble Baroness asked whether the rate relief will apply to farms which have only recently diversified and how far back it will extend, particularly in the light of foot and mouth. In order to qualify for the relief, properties would have to be used for agricultural purposes for at least half of the 12 months immediately before the Act comes into force. This is to avoid complicating a situation where there are seasonal differences. For example, if, as a result of foot and mouth disease, a barn has not been used but is still there for agricultural purposes, then it remains an agricultural purpose building and is rated as such. It would have a continuous agricultural use connotation and would be eligible.

The noble Baroness also asked about what would happen if a business changed hands after diversification. Rate relief will be given for five years per property for as long as the scheme lasts. I shall come back to the scheme in a moment. If it is granted for five years, when the business changes hands it will continue to enjoy the rate relief for that period.

Baroness Byford

My Lords, my question was that if I, as a person to whom rate relief was given, stayed in the property for three years and then moved on, would anyone who came in and took over that property have two years of rate relief to run or would be or she have five years to run?

Lord Whitty

My Lords, it will be granted for five years per property for as long as the scheme runs. The new person would have only the outstanding two years, unless there is an extension when we come to review the situation. If the property was used for non-agricultural purposes, the relief would run for five years, whoever owned it and whatever the nature of the non-agricultural activity within that property.

The noble Baroness also asked about horse enterprises. When we started on this trial, we had horse enterprises very much in mind and consulted on the proposed new rate relief for farmers who were thinking of turning over part of their property to horse enterprises. The result of the consultation was that it would not be sensible to confine the proposals to horse enterprises. We therefore did not proceed with those proposals but subsumed them into our proposals for rate relief on all new enterprises on farms. Other equestrian activities, such as stud farming and so on, are also dealt with in the proposals.

The noble Baroness asked why we had based the limit on rateable value rather than on the size of premises. The reason is that the rating system is immediately available and the local authority knows the rateable value of every building; it does not necessarily know the dimensions of properties by area or size. So it is a question of administrative convenience rather than anything else.

Perhaps I may return briefly to the question of why all equestrian premises should not in effect be classified as agricultural. All non-agricultural activities, whether or not they involve horses, are treated in the same way. It would have widespread implications were we to reclassify equestrian outlets as agricultural.

The noble Baronesses, Lady Byford and Lady Miller, raised the question of why we are using the designation "rural areas" and how it operates. "Rural areas" are based on parish council areas. They are identified with the co-operation of the local authority. Up to 10,000 have been identified following the coming into effect of the Local Government Act 1997. The use of such a designation has been reasonably successful. If areas have not been so designated but have communities of fewer than 3,000, they could immediately be added to the list; it is not restricted to the areas that already appear on it. The other point is that in relation to the diversification side, the list does not apply anyway. It is determined on the basis of property that has been used for agricultural purposes not in relation to the designation of rural areas. So the issue arises in relation to only part of the Bill.

The noble Baroness, Lady Miller, raised the issue of the Bill's restriction on what can be regarded as "essential" in relation to village shops. Our intention is that the Bill should cover the provision of mandatory relief. Again, there is some discretion in relation to local authorities and up to 75 per cent government support for local authorities extending their discretion in other areas. But we are concerned primarily with essential services. That is why we initially designated the "sole general store" and the post office and moved on to include all food provision. We regard those a s the essential services and therefore the ones to which mandatory relief should apply. Therefore, such enterprises as Internet cafés, while they may be highly desirable and may attract discretionary rate relief, are not the central part of the Bill, which is primarily about maintaining and extending services.

The noble Baroness also asked about the designation of micro-businesses. The £6,000 rateable value is based on the results of research in 1995 which showed the rates for a much higher proportion of costs for businesses with a turnover of up to £100,000. At that stage, businesses generally had rateable values of about £5,000. Upgrading that to current standards makes it about £6,000 in terms of 2000–01 rateable values. So there is a rationale, relating to the definition of micro-businesses.

I believe that I have dealt with most of the points that have been raised, except for the broader issues of planning referred to by the noble Earl, Lord Caithness. I have some sympathy with his point; however, to say that we should give heavier guidance as to how planning authorities should interpret their duties in respect of agricultural diversification runs slightly contrary to his assertion that these matters should be left to local decision-making and discretion.

We shall return to the other point raised by the noble Earl when we debate his amendment in Committee. It relates to why rate relief that was started within the five years but not at the beginning of that period should not extend beyond the five years unless the scheme itself were extended. The main reason is that. at any point, we are reacting to a situation that currently exists in rural areas and are applying a scheme which we believe is appropriate in encouraging and maintaining businesses in those areas. Whether the situation will be the same in five years' time, we shall need to judge closer to that date. Therefore, any extension beyond that and any commitment of funds beyond that would have to await that assessment.

In addition, we are addressing the issue of rate relief for small businesses as a whole. It is certainly hoped that within the next five years we shall arrive at a strategy to deal with small business costs in relation to rates more generally. While maintaining some support for rural businesses in a differential way, that may well be subsumed in a wider approach to small businesses by that date.

Baroness Miller of Chilthorne Domer

My Lords, I sense that the Minister is nearing the end of his response. I am anxious to have a reply, either now or in writing, on the issue of rental to third parties and whether the third party would be able to qualify for rate relief.

Lord Whitty

My Lords, I am sorry that I skipped that point. It was simply that the reply is unusually short. The answer is yes.

I believe that the Bill's provisions will be welcomed in many of our villages. It will be a welcome silver lining for a number of farmers who are presently experiencing severe financial constraints, not only on their main business but on their ability to diversify. I do not pretend that the Bill solves all the problems that such farmers face but it does provide some catalyst and incentive for them to move into new areas and transform village life. It also provides an incentive to village shops to maintain services to the community and to provide economic activity within villages which would otherwise lose their centres.

This is an important measure. It is one among many that we are in the process of bringing into effect in relation to rural policy. It is, of course, overladen with the current difficulties of foot and mouth and the impact of that on parts of the rural community. Nevertheless, the Bill provides a good basis for a medium-term revival of economic activity in many areas.

Lord Brennan

My Lords, I am grateful to the Minister for giving way. Perhaps I may ask him to confirm two points arising from the Bill. First, will be confirm that the passage of the Bill will not in any way diminish the efforts of the Rural Task Force to devise adequate means of compensation and rate relief for businesses and farms affected by foot and mouth disease? Secondly—and I ask the Minister's forgiveness if I have misunderstood the finance—will be confirm that nothing in the Bill will lead local authorities in rural areas to seek to make good any shortfall that it causes them by increasing the rates for those who are materially affected by the outbreak of foot and mouth disease? I refer especially to businesses that do not presently qualify under existing rate relief provisions.

3 p.m.

Lord Whitty

My Lords, as regards my noble friend's first point, I can tell him that the task force is clearly addressing the consequences of foot and mouth. Whatever policies are required to turn round and assist those areas most affected by it will be pursued. This Bill adopts an entirely separate approach to what is needed in that context. On my noble friend's second point, the discretionary area already exists for local authorities. The central funding is 75 per cent. However, for the mandatory areas for which this Bill provides, the central funding will be 100 per cent. Therefore, it would not lead to an additional rate burden being imposed on other rural enterprises or on rural residents.

Baroness Byford

My Lords, I thank the Minister for answering quite a few of the questions raised today, but perhaps I may pursue just a couple of them that need further clarification. The noble Lord, Lord Brennan, picked up on the very issue to which I wish, first, to return. There is obviously no argument on the mandatory effects of the Bill; it is a question of where discretion will be exercised. The Minister said that local authorities will have discretion to give greater help to those businesses, but some of those rural businesses are actually very short of money. Although I am sure that the Minister will deny this, yet again, across the Dispatch Box, I believe that the standard spending assessments are inadequate for some of those rural areas. Indeed, this will put extra pressure on them. I should like the noble Lord to comment on that issue.

Secondly, under today's proceedings, we do not have the opportunity to look through the Hansard report to check the Minister's response. However, I believe that he referred to "administrative convenience". I get worried when I hear such phrases. I thought that we were here to serve the population and to make it possible for people to have access to information regarding the measures that we are taking, rather than such access being subject to "administrative convenience". I was somewhat alarmed by that comment.

Thirdly, I return to the question that I raised on the whole issue of the five-year lag. I still have great reservations as regards the fact that the Minister indicated that it is only a one-off term of five years. If, as I said, someone moves into a property and manages to build a safe and successful business but then moves on because it outgrows the building, that farmer will only have two years left to offer any other incoming person. That seems to me to be very short-sighted. I know that the Bill stipulates a five-year term, but that is a short-sighted view because—I am sure that others will agree with me—it will not encourage anyone to come in and undertake a business proposition if he has only a two-year, rather than a five-year, base upon which to work. Can the Minister comment further in that respect?

I turn now to the reason why the Government decided to go down the rateable value route rather than taking account of the actual square footage involved. I hope that the Minister will acknowledge the fact that rateable values vary enormously. Indeed, in the North, the rateable value for a particular property like the one that I have in mind could be very much less than its equivalent in the South. Obviously people in the South also need help and support, but it seems to me to be illogical that this Bill does not recognise the variation that will occur across the country. If the assessment were made on the square footage, or whatever, the rateable value of the property would not matter. It alarms me that the Bill is inflexible. as suggested by my noble friend. I do not know what we can do at this late stage, but, bearing in mind the strong vibes that I hope we are sending to the Government across the Chamber, I wonder whether the Minister could reconsider the matter.

Before I conclude, I should like to return to the equestrian issue. When responding in Committee in another place, the Minister gave an assurance that such discussions would continue but added that other events might take precedence. That is fine; but we are here making Bills. We should not be creating loopholes just because we are nearing the end of a Session. Perhaps the Minister could give me slightly more clarification in that respect before we move on.

Lord Whitty

My Lords, as my noble friend the Chief Whip is sitting beside me, I am afraid that I cannot give the noble Baroness much comfort that we shall be considering these matters and coming forward with any amendments that address her concerns in time for the Committee stage, to which I believe we shall shortly be moving. Indeed, as regards the questions that the noble Baroness has just asked, I am not sure that we can resolve them in relation to changes to the Bill.

I believe that the noble Baroness's main concern related to the question posed by my noble friend Lord Brennan on the burden of rates on rural areas. I should point out that that is not a change that is brought about by the Bill: discretionary relief already receives 75 per cent central funding, but that means that 25 per cent must be found by the local authority. The Bill does not change the situation. In passing, whatever the noble Baroness's concerns may be about the relative position of rural counties in the SSA process, I should stress that they have received very substantially more money in absolute terms than they did during the latter years of the previous administration. However, we are not supposed to be political at this stage in our proceedings.

The noble Baroness's points about administrative convenience and square footage as against rateable value relate to the same issue. In immediate terms, it is easier for local authorities to check the rateable value and, therefore, to get the process into operation rapidly. It would not serve the interests of those who are seeking such relief in order to set up new enterprises, or to maintain their enterprises, if we were to require the local authority to check the square footage and work it out on that basis. I agree that there might be a slightly different impact in various parts of the country; but, nevertheless, we propose to use that system in order to get the scheme under way rapidly. That ought to be of benefit to rural areas rather than having another loop of bureaucratic administration.

In relation to the five-year lag, we shall return to those aspects shortly in. Committee. As for the question of hand-over from one company to another, it would be odd if, in the case of neighbouring farms, we were to give five years to one property that had diversified and yet award seven years, or whatever, to another property next door simply because the property had changed hands in the middle of that period. Of course, we may extend or subsume the scheme in an effort to show more widespread support for local businesses, and rural businesses in particular, at a later stage. We must maintain a degree of equity between the business that runs for the full five years and a property that changes hands within that period. Anything else would be illogical and inequitable.

With those final words for this Second Reading debate, I hope that we can proceed to further stages of the Bill. I commend the Bill to the House.

On Question, Bill read a second time.

Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May), House resolved into Committee.

[THE DEPUTY CHAIRMAN OF COMMITTEES (Lord Ampthill) in the Chair.]

3.8 p.m.

Clause 1 [Mandatory rate relief on former agricultural premises]:

The Earl of Caithness moved the amendment: Page 2, line 18, at end insert ", except that subsection t6F) will continue to apply to any hereditament, subject to the condition in subsection (6G) being fulfilled, for a period of five years beginning with the day on which it first applies

The noble Earl said: This is a subject on which we have already had rather more discussion than I thought would be the case. However, it is worth probing the Government's thoughts a little further.

The amendment highlights the rather short-term thinking of the Government. At Second Reading the noble Lord, Lord Whitty, made clear that the scheme was to run for a five year period. As I am sure the Committee will agree, substantial difficulties arise in that connection. My noble friend Lady Byford gave the example of a business that started off with good intentions but after two or three years ran in to difficulties and folded. What would be the situation with regard to an incoming business?

I am also concerned about farmers who would like to diversify but who, for a variety of reasons, are not yet in a position to do so. They might need MAFF grants which will take time to be approved. Some planning permissions will also take time to be approved. That is why I referred to town and country planning on Second Reading. The noble Lord, Lord Whitty, did not want to be drawn too deeply into that quicksand. I hope that my noble friend Lord Dixon-Smith with his experience might be able to help the Committee on that matter.

If a local authority is reluctant to allow a change of use, a farmer may have to wait a substantial length of time to obtain the planning permission he seeks. However, the clock is already ticking. The farmer has to seek MAFF's approval for a restructuring scheme and then has to obtain planning permission. By that stage two or three years could have passed and the farmer has only a further two years of rate relief unless he is able to obtain further discretionary relief. That situation will encourage farmers to submit ill thought out proposals. There will be a rush to get on to the bandwagon to try to obtain the maximum benefit from the proposals. As I say, that will encourage farmers to submit ill thought out proposals.

The foot and mouth tragedy adds irony to the situation. Farmers in areas where there is foot and mouth disease who have diversified receive very little help from the Government and have been particularly heavily penalised. Farmers in such areas will be wary of undertaking further diversification unless long-term commitments are made to them. My amendment seeks to limit the scheme to a period of five years from the commencement of the diversification. If a farmer wants to diversify in, for example, 2003, the scheme would run to 2008. If he wants to diversify now, the scheme would run to 2006. I realise that that would be tough on the business that went bankrupt that my noble friend Lady Byford mentioned and even tougher on a business for which a two-year period applied. I do not seek to make the provision open-ended. I seek to make certain that the help that the Government are now offering is a pump-priming measure for five years from the commencement of diversification. I beg to move.

Baroness Byford

I support my noble friend's amendment, although I suspect that the Minister will be unable to do so. This is an important issue. As we are well aware, many farmers have had a dreadful time. They may have good reasons for not wishing to take advantage of the measure straight away. My noble friend mentioned some of those reasons. It is not clear whether the Government will consider the issue. I do not find it referred to in the business of another place. I may have missed the reference; I do not think so.

In a year's time a farmer may feel able to diversify. As my noble friend suggested, the farmer would be eligible to a period of only four years. If he waited two years, the period would be only three years. I return to my earlier point which the Minister was unable to take on board: it is much less attractive for another person to take on the business if the timescale is shortened. We sought to make clear that point at Second Reading. I support my noble friend.

Lord Dixon-Smith

I, too, support the amendment of my noble friend Lord Caithness. The principle he enunciates seems to me unexceptionable. I accept the procedural difficulties that we all face. However, even words of sympathy from the Minister at this stage would demonstrate some understanding of the situation. Perhaps something could be undertaken subsequently regarding the principle.

The noble Earl raised the problem of planning difficulties which are a well-known quicksand into which changes of use in rural areas tumble rapidly. It is an area for which no applicant can be wholly responsible. The situation is even more vexed and difficult if he happens to be within the area of a national park where the planning situation, quite properly in many respects, is more restrictive. However, attitudes across the length and breadth of the country differ on these matters.

The crucial issue is that the relief should be available for the five-year period from the start of the diversification. The diversification cannot start until all the requisite permissions are granted. That of itself might take three or four years. If that were so, it would be nice to think that the relief would be available for that period. It is only occasionally the fault of the applicant that these matters run into the sand.

3.15 p.m.

Lord Whitty

The remarks of the noble Lord, Lord Dixon-Smith, allow me to indicate that were we not at this stage of Parliament, I might be sympathetic to the amendment. I understand the underlying problem to which noble Lords have referred. However, even were we to have more time at our disposal, we would be unlikely to accept the amendment. The noble Earl referred to the issue as short term. In a sense it is short to medium term. We are dealing with a situation which arises now. The measure is there to provide immediate help to those farmers who wish to diversify now into non-agricultural activities. The noble Earl rightly referred to other measures of support available from MAFF and others. But rate relief is an immediate and medium-term attractive support to farmers wishing to diversify their business; or to allow others to diversify their business on the properties. In one sense, therefore, it is short term and needs to be put into effect immediately. It meets a specific need which is clear at the moment.

The situation may change in five years' time. It is also true that if we had a huge take-up the scope for agricultural diversification would be limited by the existence of current buildings and so forth. So we are providing a scheme for a fixed period which will be known to potential ratepayers and the owners of that property. We have provided, if the situation is maintained and if the scheme works, for the extension of that period beyond those five years if the need is there.

I referred to the other change at the earlier stage. It is to be hoped that by that time a more general scheme for rate relief—it has been referred to in the local government finance Green Paper—may provide monetary relief to all small businesses which would be covered by the diversification scheme under the Bill, and many other schemes. If that is so, clearly one would have to adapt the scheme even if one wished to give further differential support to diversification at that stage.

With regard to businesses changing hands within the five-year period—perhaps I repeat myself—it is important to recognise that this measure relates to a property and not a business. Any new person taking over a diversified business, or a property already containing a previously diversified business, is not replacing agricultural activity. Therefore, it is not diversification in that sense. The offer of relief over five years is intended to provide an incentive to move from agricultural to other use, not to move between different forms of agricultural use.

I believe that one must see the scheme for what it is. It is a five-year definitive offer to try to help farmers who seek diversification or to attract businesses to occupy fanning premises for diversification in the context of the crisis and problems which currently affect the rural community. The context in which we are addressing that type of problem may well change within five years. Therefore, although obviously we wish to keep open the option for the scheme and may well trigger the option before the end of the five years, for the moment five years appears to us to be an adequate incentive and signal to farmers and others that the Government would support financially the diversification of such properties.

With regard to non-farming businesses, contrary to what was said, significant help is being provided to those who suffer from the knock-on effects of the foot and mouth outbreak. However, we should separate that help from assistance provided within the Bill. We started this process before the foot and mouth disease broke out. As the noble Baroness, Lady Byford, said, a serious problem already existed in relation to economic activity within the countryside, and that problem is addressed. The foot and mouth disease is a serious aggravation of the problem but it is being dealt with separately. Therefore, we should not mix up the two.

In view of the manner in which the Government are approaching the issue, I do not believe that the noble Earl's amendment would be appropriate. Therefore, I hope that he will not press it and that the Committee will resist it.

Baroness Byford

Before the noble Lord sits down, perhaps I may ask a question in response to what he said. If, for example, either a farmer chooses to take early retirement, which I suspect some farmers may do because of the enormous pressures put on them, or a farm is sold because of a death and a new owner takes over, am Ito understand that the new owner would not be eligible for this scheme?

Lord Whitty

I may have to clarify this matter in writing. However, my understanding of the situation is that if a farm changes hands but the property is still in agricultural use—the farm may not be full of animals because of foot and mouth disease, but it will be in agricultural use and will not be used for anything else—the property will continue to be eligible at the point at which it moves into non-agricultural use. In other words, the scheme applies to the property and not to the owner of the property, and it applies to the nature of the use to which the property is put.

Baroness Miller of Chilthorne Domer

Before the Minister sits down, perhaps I may make a point for the record. Although I recognise that we do not want to enter into a discussion about foot and mouth disease, he said that significant help was being offered to non-farming businesses which have suffered from the effects of the outbreak. We on these Benches do not believe that the Government are offering significant help to non-farming businesses. We have asked constantly for consequential loss and interest-free loans, but such help has not been forthcoming. Therefore, I dispute the Minister's statement.

Lord Whitty

The Liberal-Democrat Benches may well say that the help provided is not sufficient.; nevertheless, it is significant. I believe that great assistance will be given in many areas through rate relief and through help to the rural councils affected in those areas via temporary reductions in rateable value, and so forth.

It is true that the Government are not providing compensation for income loss. However, we are not providing compensation for income loss to farmers either; we are providing compensation for loss of beasts. To go down the road of compensation for income loss would be a very slippery slope for any government. In effect, they would become the insurer of last resort. My noble friend Lady Hayman and others have made it clear to the House that that is not the way in which we intend to proceed. There are other significant—I insist on that word—forms of relief for businesses that have been affected by the knock-on effects of foot and mouth.

I recognise that there will be a continuing problem in this area but we should perhaps return to it after certain events. I do not doubt that foot and mouth will be debated when we return. It is not appropriate to discuss it in detail in relation to this Bill, which deals with an underlying situation rather than one that arose as a result of the unfortunate events of the past few months.

The Earl of Caithness

I am therefore sure that my noble friend Lady Byford will be making a Statement on foot and mouth as soon as Parliament reassembles!

I thank the Minister for his full and thoughtful reply, although he will not be surprised to hear that I am not very satisfied with it. I am sure that the Chief Whip, who is sitting next to the Minister, is, deep in his heart, supportive of my amendment, which would help farmers. He helped and advised many farmers when diversification was taking place, and I am sure that they would ask him to be a little more understanding of the practical problems that they face. If we had had longer we might have made some progress.

The Minister said that the proposal is a short-term measure. That makes it sound as if farm diversification is new. However, my first job as a land agent in 1972 involved a farm diversification programme. That approach has been around for at least 30 years. To suddenly come up with the five-year limit is helpful but impractical. It would have been much better for farmers if the Government had seen fit to agree to my amendment.

I hope that the Minister will clarify one point. He lost me when responding to a query raised by my noble friend Lady Byford. He was discussing the situation in which a business goes bankrupt within five years and a new one is established. I was not certain whether or not he said that the new business could benefit from rate relief.

Lord Whitty

The new business would benefit in relation to the outstanding part of the five years; the five-year period would not start again.

The Earl of Caithness

I am grateful to the Minister.I was not certain whether the period related to the first business—the change from agriculture—rather than the change from industry to industry.

I was sorry that we got no support at all from the Liberal Benches. I congratulate the noble Lord on getting the noble Baroness, Lady Miller, to her feet, but that related to a different point.

Baroness Miller of Chilthorne Domer

I was simply trying to save the House time. I referred to the matter during my speech on Second Reading and I thought that that would be adequate. I said that if time allowed we should have supported several amendments, including that which is before us. However, we are anxious to get the Bill on to the statute book and will therefore accept it in its current form.

The Earl of Caithness

I am grateful to the noble Baroness. It is wonderful to get some Liberal support.

I am grateful to the Minister for his answer. The Government's approach is a mistake but he says that it involves a short-term measure. I hope that when he considers the longer-term measure, he will take account of the valid arguments that this side of the House has put forward. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clauses 2 to 6 agreed to.

House resumed: Bill reported without amendment; Report received.

Then, Standing Order 46 having been suspended (pursuant to Resolution of 9th May), Bill read a third time, and passed.

Lord Carter

My Lords, we have received a Commons message on the Health and Social Care Bill. We need to adjourn briefly. As a result of some effective sign langauge from the door of the Chamber, I believe that it is intended to suggest a break of 20 minutes. I therefore beg to move that the House do now adjourn during pleasure until 3.50 p.m.

Moved accordingly and, on Question, Motion agreed to.

[The Sitting was suspended from 3.30 to 3.50 p.m.]