Clause 6.—(ASSESSMENT OF COMPENSATION FOR IMPROVEMENTS.) (Hansard, 5 July 1961)

§ Mr. T. Fraser
I beg to move, in page 5, in line 18, to leave out "on the open market".
I hope that the Secretary of State will be able to accept this Amendment. Subsection (2) of Clause 6 deals with the assessments of compensation for improvements. The Secretary of State has an Amendment down later to take out the words in line 19 … for use for crofting purposes In assessing the amount of compensation—this is rather a long subsection and I will not trouble the Committee by reading it all out—an endeavour is to be made to assess the amount that might reasonably be expected to be received by the landlord … in respect of the improvement from a person who might reasonably be expected to obtain the tenancy of the croft if the croft were offered on the open market … for use for crofting purposes … If the Secretary of State's Amendment is passed, the words … for use for crofting purposes … 1538 will be taken out. This would obviously widen the category of person who might be expected to make an offer for the tenancy of the croft. If we widen that category and leave in the words "on the open market", then we shall appear to be inviting an assessment of the highest possible figure.
This might be seen to be an advantage to the outgoing crofter, but subsection (3) says that any amount of compensation assessed above what would have been got under the earlier provision will be paid by the Treasury. We should not leave the door open too wide to allow for a ridiculously high figure of assessment to be made, which may or may not affect the outgoing tenant but which would be an improper burden upon the Exchequer. By accepting our Amendment the Committee would be dealing with the tenancy of the croft if the croft were offered for letting as a separate croft, leaving out the few words which the Secretary of State proposes to leave out and also the words "on the open market". I hope that the right hon. Gentleman will accept the Amendment.

§ Mr. Willis
I hope that the Government will look favourably on this Amendment or, at least, tell us what has been the result of their deliberations on this subject arising from the discussions in Committee. This phrase and its meaning were referred to in a number of speeches in Committee. Some of my hon. Friends, including my hon. Friend the Member for the Western Isles (Mr. Malcolm MacMillan) who, unfortunately, is not here tonight, and my hon. Friend the Member for Glasgow, Govan (Mr. Rankin) and the Leader of the Liberal Party, the hon. Member for Orkney and Shetland (Mr. Grimond), also asked what was the relevance of these words in many Highland areas. In many circumstances there is no open market, or very little. The croft might be in a remote area in Western Ross or north-west Sutherland, or an area like that. What is the open market value of the croft in those circumstances? What is more important, what is the open market value of the improvements? We were given no information about that.
My hon. Friend the Member for Hamilton (Mr. T. Fraser) has given one side of the coin, but the other is that 1539 a crofter might get nothing at all, because there might be no open market, and yet he might have spent a considerable sum on making improvements to the croft. We did not like the words when we discussed the matter in Committee. We did not know what they meant, and they did not seem to mean very much. We said that they were liable to have the effect indicated and we thought that the Government might have done something about the matter by now.
Even if the Government think that deleting these words would not improve the Bill, at least they should give an undertaking to reconsider the matter before the Bill goes to another place to see whether something better can be provided in the Clause, so that a crofter who has made improvements at least gets some compensation for them, even though the open market value may be nothing.
My hon. Friend the Member for Hamilton quoted a case in which the open market value might be very high—for instance, if someone wanted to start a caravan site, or something of that sort, in the Highlands when he might be willing to pay a fantastic price for the croft. My hon. Friend pointed out the financial burden which would fall upon the Exchequer, but not upon the landlord. In view of all the uncertainty, we ought to have something better than we now have. If our Amendment is not acceptable, at least the Government should reconsider the matter before the Bill goes to another place.

§ Mr. Rankin
I hope that the Secretary of State will pay serious regard to what has been said, for the words "open market value" have no relevance to the circumstances with which we are dealing. If they were omitted, there would be no weakening of the subsection. They are used in a climate in which they do not belong.
My hon. Friend the Member for Edinburgh, East (Mr. Willis) said that a crofter might make permanent improvements on his croft in which case the value would accrue to the landlord and not to the crofter. If the croft were inaccessible, in an area where transport was not frequent and where transport for conveying the crofter's children to school was not as adequate as in 1540 many other places, the open market value of the croft—it not being within easy reach of a town—would be very low.
I am certain that the Lord Advocate will have very tender memories of the morning when we tried to give some reality to the meaning of the words "on the open market". With all his wonderful legal training and the natural ability that goes with it, when he had finished his explanations, along with help from hon. Members on both sides of the Committee, we were in an even deeper fog than before he embarked on the task of elucidating the meaning of the Clause. I do not know whether further thought will enable him to impart greater clarity to the Clause than it presently contains.
I hope that the Secretary of State will take the easy way out. To talk of open market value in the circumstances of many of these crofts is not to talk in the language of reality. We would not like to place crofters in the position of the Imperial Tobacco Company whose shares' open market value suddenly crashed this afternoon. That is not the atmosphere in which we have to deal with crofting. The Secretary of State has power to lift crofts out of such circumstances by accepting the Amendment. The Amendment is sound and sensible and I encourage the Government to take a sound and sensible approach to it.

§ Mr. Manuel
I hope that the Government will accept the Amendment and that, if they are not immediately seized of its importance, at least they will keep an open mind about open market value. Without dismissing the value of the speech of my hon. Friend the Member for Edinburgh, East (Mr. Willis), I am more concerned with the argument of my hon. Friend the Member for Hamilton (Mr. T. Fraser). In the remoter areas these words have no meaning. Where would the competition come from in the remote areas to make for a genuine open market value? As against that, in more populous areas prices could be driven up. The whole intention in Standing Committee was to do everything we could to encourage the community spirit and to help someone from the township to move into a vacant croft, someone with a kindred association with it. In considering this Amendment, we must 1541 have regard to the Amendment in the name of the right hon. Gentleman, in page .5, line 19, to leave out for use for crofting purposes". That Amendment gives us some idea of what the Government are aiming at, because it is an invitation to let the croft as a separate entity not for crofting purposes. It could be used for a petrol station or as a caravan site, or something akin to that.
We must have a clear explanation about this Amendment.

§ The Temporary Chairman (Sir Norman Hulbert)
Order. The hon. Member must not discuss an Amendment which is to be moved on Report, because at the moment we are in Committee.

§ Mr. Manuel
I hope that I have not strayed beyond the bounds of order. I am discussing the Amendment which has been moved by my hon. Friend, but I was referring to the Amendment in the name of the right hon. Gentleman.

§ The Temporary Chairman
The Amendment in page 5, line 19, will arise on Report. It cannot be discussed while we are in Committee.

§ Mr. Manuel
I agree, Sir Norman, I was making only an oblique reference to it in passing.
I appeal to the Government to accept the Amendment which has been moved so that we shall not have the difficulty of inflated prices and unreal advertisements in remote areas.

§ Mr. Grimond
I do not want to reiterate the doubts that I expressed in Committee upstairs about the meaning of the words "on the open market" in certain parts of the Highlands and Islands, but I should like to ask the Government whether my interpretation of the meaning of the Clause as it stands and the effect of the Amendment is correct.
To take a concrete example, if this Bill had been an Act when the island of Soay came to be depopulated, it would have been held that the market value of the crofts was nil, and the crofters could then have asked that the Secretary of State for Scotland should pay the difference between nil and the amount of compensation which would have been, and in fact was, payable under the law as it stood under the 1955 Act. Am I 1542 right in thinking that that is the effect of writing in the words "on the open market"?
7.45 p.m.
The next point is that if we had such an island as Soay which was dealt with under this Bill when it becomes an Act, the next time a croft changed hands there would be no compensation on the existing improvements which had been dealt with in the manner that I have described, but any new improvements would fall to be dealt with, if these words "on the open market" were left in the Bill, in the manner described in the next following subsection to which we may not refer. I want to be clear whether my interpretation of what we are doing is correct.

§ The Lord Advocate (Mr. William Grant)
May I deal first with the point raised by the hon. Member for Orkney and Shetland (Mr. Grimond), because I think that it goes to the heart of the matter. If I understood him aright, he is correct in what he says. We may get cases where the market value if not nil is at any rate nominal. At the moment under the existing legislation one gets the inflated price and the inflated compensation to which the hon. Member for Central Ayrshire (Mr. Manuel) referred obliquely.
This question was considered at some length in Committee upstairs, and I will try to explain briefly why I think that these words ought to be left in the Bill. If we leave these words in the Bill, the Land Court has to assess the offer which a landlord would get for the vacant croft and the associated improvements if the vacancy of the croft and the nature of the permanent improvements on it were made known to such persons as might be potential tenants. One method of doing this would be by advertisement, and at the present time in many cases vacancies of crofts are advertised. In that sense the words "on the open market" are used.
If these words were omitted the subsection could mean that the Land Court could have regard to some private arrangement between a landlord and a potential tenant whether or not the offer made by that person fell short of what the landlord might otherwise have been able to get if the tenancy had been made more widely known.
1543 The subsection has this commonsense result, that if there are potential tenants who would be approved by the Crofters Commission, who know about this because of advertisements or otherwise, one could find the value of the croft on the open market. The difficulty is that under present conditions the Land Court assumes that there will be an incoming tenant. This led to the trouble in Soay, and, if I remember rightly, to the bankruptcy of the landlord.
Under the existing provisions no inquiry is made 'by the Land Court about whether there is a potential tenant. This obviously leads to hardship on both sides. I suggest that we are not inflating the value. What we are doing is to discover what the improvements on the croft will fetch in any area. If it is a purely nominal value, fair enough, and on that occasion, or on that first occasion, the Exchequer will make up the compensation to what would be paid under the existing law.

§ Mr. T. Fraser
I am sorry to say that the Lord Advocate is wrong. The Exchequer will make up only the difference between what would have been assessed under the 1955 Act and such greater amount as is assessed under this Bill. Subsection (3) states: … if the amount last-mentioned"— that is the amount assessed under the 1955 Act— is greater than the amount fixed or assessed by the Land Court as aforesaid,"— that is, under subsection (2) which we are discussing— the difference between the two said amounts shall be payable to the crofter by the Secretary of State So that if by the removal of "on the open market" the sum assessed—a purely nominal figure under subsection (2)—is less than would have been assessed under the 1955 Act, there is no provision in the Bill for the Secretary of State to make up the difference. The Lord Advocate was, I think, caught out by that one.

§ The Lord Advocate
I am sorry. It is the difference between the old and the new where the new is less.

§ Mr. Fraser
Where the new is less, the Government do not come into the picture. That was not what the right hon. and learned Gentleman said.

§ The Lord Advocate
I am sorry, it was what I meant to say. If by a slip of the tongue I got it wrong, I apologise. It is the difference between the old and the new where the new is less.

§ Mr. Fraser
Surely, it is the difference between the old and the new where the new is greater. I do not want to prolong the discussion, but that is the position. The Government make up the difference between the old and the new where the new is greater than the old.

§ The Lord Advocate
I said "less than", not "greater than".

§ Mr. Fraser
I am sorry. We can pick up the point when we discuss the Motion, "That the Clause stand part of the Bill". I do not want to prolong the discussion, but I repeat the words in subsection (3): if the amount last mentioned"— being the amount under the 1955 Act— is greater than the amount fixed or assessed by the Land Court as aforesaid"— that is, if the amount last mentioned, under the 1955 Act, is greater than the amount fixed or assessed by the Land Court as aforesaid—under the Bill the difference between the two said amounts shall be payable by the crofter to the Secretary of State". I think, after all, that the Lord Advocate is right and I am wrong. I apologise for that.
In dealing with the Amendment, however, the Lord Advocate was imagining conditions in which the croft would be advertised, and it was only where it was advertised that there would be a proper figure. In many cases, the croft would not be advertised and the figure to be assessed is not the figure which is assessed as the result of advertisement and applications for the croft. Indeed, the word "if" appears at line 18, which states: "if the croft were offered". It is not "when the croft is offered".
In many cases where there is a renunciation, or a tenancy is terminated, it will be where there is reorganisation or where larger crofts emerge, so that the croft will not be offered for reletting where an endeavour has to be made to assess fair compensation. Therefore, there will not be the test of advertising and the amount to be assessed will, 1545 obviously, be a guess. I do not, however, want to pursue the matter. If the Lord Advocate does not agree with this proposition, I do not propose to continue the debate.