HC Deb 20 March 1931 vol 249 cc2331-41

It shall not be lawful for the department to let new holdings, either on land belonging to the department or on land belonging to other parties; except on the basis that the new holders shall pay a fair rent for the land and shall acquire a pecuniary interest in the buildings, either existing or to be provided, by means of a loan from the Department repayable, principal and interest, over a period of years not exceeding fifty.

Provided that this section shall not apply to those cases in which the Department has constituted new holdings under schemes whereby the existing buildings on the lands are not purchased by the department but are included in the fair rents of the new holdings.—[Mr. Scott.]

Brought up, and read the First time.

Mr. SCOTT

I beg to move, "That the Clause be read a Second time."

This Clause deals with a rather intricate subject, and one which raises very sharp and important issues. I would ask the indulgence of the House while I give a short explanation. An equipped rent is a rent which a tenant of a small holding pays for the land plus the buildings, as a completely equipped holding. Until a few years ago, these equipped rents were practically unknown in connection with smallholdings. The established policy in connection with small holdings was that the smallholder paid the rent for the land, and that, as regards the buildings, he obtained a loan from the State to enable him to acquire a pecuniary interest in the buildings on the holding, and paid an annuity, which, of course, included both capital and interest, over a period of perhaps 50 or 80 years; and, if he renounced the holding or died, he or his representatives had a claim for full compensation to the extent to which he had acquired an interest in the buildings.

There was some dispute in Committee as to whether or not this, as I have stated it, was the established practice of the Department. There can be no real question about that. I have the leaflets which were in the habit of being distributed to smallholders and intending smallholders clearly setting forth that policy.

A few years ago a change was made with regard to this policy, and an equipped rent system was brought into operation. The incoming tenant was, of course, technically a non-statutory successor. He was not a member of the same family as the preceding tenant. The Conservative Government were legally advised that an incoming tenant of that character could not ask the Department, and the Department could not give to such a person a loan. The Department took upon itself, without any statutory authority whatever, no doubt sanctioned by the Secretary of State of the day, to make a departure in policy by refusing to continue these building loans and letting the holdings at equipped rents. This meant that the Department was treating the pecuniary interests in the buildings as if they belonged to the Department. They are doing so now, and they are compelling these incoming tenants to pay one rent for the land and buildings, an amount which is equal to or more than the amount of the old land rent plus the annuity, but with the unfortunate result for the holder that he never becomes the owner of the buildings. He never attains a complete pecuniary interest in them, That is a point that is prejudicial to the smallholder. I should like to read two sentences from the Annual Report of the Scottish Land Court for 1928 in which they pillory the Department in connection with this matter. They say: A new development in the practice followed by the Board of Agriculture in dealing with the method under which we are asked to fix rent on properties of which they are proprietors has rendered it necessary for us to add a new table to those hitherto appended to our reports. This new practice signalises a departure from the normal conception of a landholder, which has been embodied in the Statutes as being a tenant who has acquired a pecuniary interest in the permanent improvements on the holding on which he is not rented and for which he is entitled to claim compensation at outgo. That is the view of the Land Court upon it, not only in this Annual Report, but, in various decisions which the Land Court have issued, they have pointed out the grave departure that the Department has made from established principles of policy. The result has been to force holdings outside the Act altogether. I understand that the Department—it must be by courtesy—call these equipped landholders landholders, but as a matter of fact they do not possess the characteristics of land holders at all.

I should like to ask how the State stands in regard to the matter. Parliament has voted certain moneys to be applied for the establishment of smallholdings, and has said that part of the money is to be used for the provision of loans to holders who are taking up these holdings, but the money, by the Department's decision, is being permanently sunk in the buildings. That is to say, the loans cease to be repaid by the holders, and so the money is lost to the State. It does not come in and it is not available to the Department to go out for new loans. I want to give a statement on the finance of this matter because it affects the Treasury as well as the Department of Agriculture. I am going to quote an authority that cannot be controverted. My authority says: The position in general will be that the outgoing landholder will have a claim to compensation for permanent improvements assessed by the Land Court. Where the outstanding balance of any loan is not greater than the compensation awarded by the Land Court, the outstanding liability on the loan account is satisfied out of the compensation money. That is to say, in a case, which I maintain very seldom occurs, in which the State gets back the total amount of the loan which they have given to the holder. In the converse case, where the compensation assessed by the Land Court is not sufficient to cover the outstanding balance on the loan account, the sum awarded by the Court is set off against the loan, and the difference as a general rule will probably have to be written off. That is the general case. This method of equipped rents is losing money to the State. That is to say that in the majority of cases the Treasury does not recover the balance of the loans which have been given out to these holders. More than that, the sums will be collected by the Department, to the loss of the smallholders, whereas these payments ought to cease, and would normally have ceased, at the end of 50 years. The Department, on the new basis, is making these smallholders pay equipped rents for all time without getting finally a pecuniary interest in the buildings.

There is another matter that I want to deal with in this connection. Under the Bill, the Department have taken power to continue loans to incoming tenants, that is to say, whereas before they said, we have no power to continue the loans, if this Bill becomes law it will have power to continue them. Therefore, as a direct result, I say it is proper that the Clause should be added to the Bill. There will be no reason in future for having any equipped rents at all. The ordinary tenure of smallholdings with loans ought to become the regular course of procedure of the Department. When this matter was discussed in Committee the Under-Secretary made this statement. Tenants on the Department's estates, for one reason, are appealing to us to let them have their holdings on equipped rents. I have in my hand now from The Lawrence Kirk estate—in a division represented by an hon. Member in this Committee"— That was mine— a string of 17 applications from smallholders asking to be put on equipped rents. I am not for a moment arguing the merits of the case. It might quite well be that there are serious objections to it. What I am putting to the Committee at the moment is that the clause on the Order Paper will not do and, if it is desired to substitute for it an amended Clause, I submit that it should be done on the Report stage."—[Official Report (Standing Committee on Scottish Bills) 17th February, 1931, col. 405.] I am sure the hon. Gentleman did not set out, in saying that, to educate me with regard to the position of many of my constituents. More than a year ago I had a meeting with all these smallholders at Lawrence Kirk, and I can well imagine that they had reached such a state of desperation that they have written letters to the Department of Agriculture beseeching them to put them on any tenure they like so long as their unenviable position is relieved. They find themselves saddled with enormous liabilities to the Department. They are complaining of the state of their land, being waterlogged and so on. In order to correct this impression that the hon. Gentleman has, I will give him the true position which, as it happens, came into my hands by accident two days ago from one of these very smallholders, who writes to me: I noticed that Mr. Johnston brought forward a list of 17 names from this estate in support of this equipped rent stunt. I am not one of the 17 and you can take it from me that a good few of that 17 do not wish to alter their conditions now that they see through the system properly. The Department are taking over buildings here with 10 and 12 years of the bond paid up and letting them as equipped holdings. It looks a bit like fraud. If my hon. Friend puts against me 17 cases from my own constituency which, he says, support his view, I am entitled to give him the most up-to-date information which I posses in regard to the same matter. This is a growing custom of the Department. In 1928 they began with five, in 1929 they increased to 46, and, I believe, during the past year there must have been anything between 100 and 130 of such equipped rent applications which came to the Land Court. I wish to show how these small holders are greatly prejudiced by the system. They are paying higher rents than they need to do. Although they are paying higher rents than they did under the previous system, they never become the owners of buildings. They are liable for repairs and the upkeep of buildings, and they are paying higher rents than they ought to be called upon to pay. On those grounds I say that the smallholders are, under the present system, being prejudiced. I would be willing to exculpate the present Government from any responsibility in connection with this matter, leaving the blame entirely upon their predecessors in office who began the system, but we have reached the point where, as the faults of the system have been so clearly pointed out to the Government again and again, they will become accomplices in a system which, we maintain, ought to cease.

Sir ROBERT HAMILTON

I beg to second the Motion.

Mr. JOHNSTON

The hon. Gentleman who has moved this Clause has used some rather harsh language, including the word "fraud."

Mr. SCOTT

No. My hon. Friend should not say that. I quoted from a letter which I am prepared to show him. The words I used are not mine.

Mr. JOHNSTON

I understand that the hon. Member does not adopt those words.

Mr. SCOTT

Certainly not.

Mr. JOHNSTON

I withdraw that statement, but at least I understood the hon. Member to say, in his concluding sentence, that we were accomplices.

Mr. SCOTT

You would be.

Mr. JOHNSTON

I deny that absolutely. I am perfectly certain, from what I have been able to discover in this connection, that the hon. Gentleman has got hold of a mirage, if anyone can get hold of it. I will deal with his last point first. He said quite truly that in Committee upstairs I quoted from a letter received by the Department of Agriculture from 17 small landholders, men holding a landholder's tenure in his own area, asking that they should be placed upon equipped rent tenure. That is a statement of fact. The fact that some other holder in his division does not desire to have an equipped rent tenure and sends him a letter accordingly, does not in any way invalidate the request from the 17 landholders to whom I have referred. I put the point upstairs that there were at least some landholders who did not desire to have it made impossible for them to become holders on an equipped rent basis. I put it no higher than that. I am not seeking to compel anyone, but I do say, on a statement of fact from his own division, and from other divisions, that there are landholders in Scotland today who most definitely desire to be placed upon an equipped rent tenure.

What is this equipped rent tenure that all the bother is about? The holder previously had his land and his buildings on a separate basis. He was a landholder, but he never acquired the buildings. He never acquired a pecuniary interest in the buildings. The two things were entirely separate. The whole code of the Landholders Act is on the basis that the buildings remain the property of the landlord who is due, of course, to give compensation for improvements and all the rest of it. But the buildings remain the property of the landlord, and the tenant never acquires the ownership or a pecuniary right.

Mr. SCOTT

I am sure that the hon. Gentleman does not wish to misrepresent the position in any way. As a matter of title he is correct in saying that the buildings belong to the landholder, but he knows quite well that the tenant may acquire a complete pecuniary interest in those buildings, so as to have a full compensation claim for their value.

Mr. JOHNSTON

That is precisely the point. Obviously the hon. Gentleman was not listening to what I was saying, and I think the observation is quite unnecessary.

Mr. SCOTT

I am sorry.

Mr. JOHNSTON

The hon. Gentleman by this proposed Clause seeks to make it obligatory upon the Department of Agriculture that under no circumstances are they to let holdings on an equipped rent basis. It means that the Department, for example, may let a holding and charge an inclusive rent not only for the land but for the buildings on the land. It is quite true that under the equipped rent system the holder never acquires the buildings. He never acquires ownership or a pecuniary interest in the buildings. He never acquired it anyhow; he kept on paying an annuity. Where he bought property, the property was his. All that this equipped rent system means, as I understand it, is that the Department shall have an option, not in every case, but where they think it desirable, to let a holding on all inclusive basis. The hon. Gentleman says that the rents which are now charged are very much higher than the rents charged for the annuity on land and buildings combined. That is what I understood him to say.

Mr. SCOTT

I said that they were higher.

Mr. JOHNSTON

I am advised—I cannot give chapter and verse for it at the moment—that the old annuity system was on a non-actuarial basis; that it was an insufficient payment. But be that as it may, if in any case of an equipped rent charged by the Department it can be shown or argued that the all inclusive rent is too high, there is a remedy. The all inclusive rent can be reduced. We are in this position, that we simply ask for power in certain eases to let a holding upon an all inclusive basis. That is desired by some holders—I gave instances, and I can give others—but it may not be desired by all. There are certain instances where it is necessary. It is necessary, for example, inside the city of Edinburgh, where you cannot let land on the old landholders' tenures. I know that these things are extraordinarily complex; at least, I find them so. I would ask the attention of the House, and particularly the attention of the right hon. and learned Member for Ross and Cromarty (Mr. Macpherson) to the wording of the new Clause: It shall not be lawful for the Department to let new holdings, either on land belonging to the Department or on land belonging to other parties. Where is the third party? Land must either belong to the Department or to other parties. Where is the third category? If there is no third category, why insert these words in the Clause? I find it impossible to understand. There are other parts of the Clause which I find it impossible to understand. The general principle which the hon. Member seeks to establish is to make it impossible for the Department to let a holding for an equipped rent. Under no circumstances are they to let a holding on the basis that the tenant shall pay an all-inclusive rent. The hon. Member says that that ought not to be possible for the Department to do. We say that it ought to be possible for the Department to have the option. There are cases where that is desirable, and we ask the House not to accept the new Clause.

Sir F. THOMSON

We support the Government in resisting the Clause. It would be wrong to pass a provision which would make it unlawful for the Department to let holdings as equipped holdings. I have some sympathy for the hon. Member who moved the new Clause. He quoted a passage from the Report of the Land Court in 1928, which deals with this matter. This question of landholding tenure is extraordinarily complex. The buildings remain throughout the property of the landlord. The hon. Member for Aberdeen and Kincardine (Mr. Scott) was perfectly right when he said that under the landholding tenure as ordinarily understood the landholder acquires a pecuniary interest in the buildings, for which he is entitled to compensation on outgo. The Land Court in their 1928 Report say that that is so. They point out that the equipped rent system does abolish distinctive characteristics which had marked landholding up to that time, and that under the equipped rent system the tenant has no pecuniary interest in the permanent improvements on the holding, and no incentive to maintain the improvements.

The normal conception of a landowner is that of a tenant who has acquired a pecuniary interest in the buildings, but the Department have found that there are tenants who do not wish to acquire a pecuniary interest in the buildings. This landholding system requires a certain amount of capital and imposes obligations, and there are people who say that they do not wish to have loans and to acquire a pecuniary interest in the buildings. They say that they wish to have the holdings on the equipped rent system. At one time that was thought to be unlawful. It was thought that the landholding system meant that the landholder must necessarily acquire a pecuniary interest in the buildings and that the equipped rent system was not lawful, but the matter went to the courts, and the courts held that the equipped rent system is lawful.

2.0 p.m.

There is a good deal that is unsatisfactory in the equipped rent system, both as regards the landholder and the landlord. It is unsatisfactory so far as the landholder is concerned in regard to the buildings, as he never acquires a pecuniary interest in them. It is unsatisfactory to the landlord because he has his buildings taken from him, he is deprived of control of them and they are handed over to the landholder, who has not to pay anything for them, and he, in his turn, has no incentive to keep them up. The rent is fixed by the Department without appeal. The landlord may have his land taken from him for small holdings, he has no choice in the selection of tenants, he loses control of the buildings and he has no appeal against the Department. Therefore, there are drawbacks to this system on both sides. This shows the difficulties of landholding tenure. There are these inherent difficulties, and the Department are faced with a very practical point. Landholders say that they do not wish to be burdened with loans for the buildings. They say: "We find it an intolerable burden and we wish to sit like ordinary agricultural tenants, paying an inclusive rent." Are the Department going to say that they will not consider such proposals. That would be unreasonable and would make land settlement in Scotland more difficult than ever. The new Clause is an illustration of the difficulties which are inseparable from this form of tenure. The hon. Member could not have chosen a better illustration of the reasonableness of our attitude on an earlier new Clause. For these reasons we cannot support the Amendment and the desire of the hon. Member that the Department shall not be allowed to let holdings at equipped rents.

Mr. C. WILLIAMS

I would ask the hon. Members on the Liberal benches to try to deal with rather more modern conditions. In this new Clause they are handicapping the Department and also making it far more difficult for the small man to give up any land. Cannot they see their way to do the graceful thing and withdraw the Clause? We do not want to place these handicaps in the way of land settlement in Scotland. This Clause would make the complicated proceedings in regard to land in Scotland even more complex. Therefore, the supporters of the Amendment are not really acting in the interests of the people whom they desire to help. I am sure that the Clause was put down under some mental delusion and with no understanding of the position that was being taken. I am sure that the hon. Members try their best, but if they would follow the advice they get from the benches above the Gangway on this and other occasions they would be in a very much happier position.

Question, "That the Clause be read a Second time," put, and negatived.