HC Deb 22 February 1973 vol 851 cc804-33

'(1) This section has effect where in pursuance of any enactment providing for the acquisition or taking of possession of land compulsorily an acquiring authority—

  1. (a) acquire the interest of the landlord in an agricultural holding or any part of it; or
  2. (b) acquire the interest of the tenant in, or take possession of, an agricultural holding or any part of it.

(2) In assessing the compensation payable by the acquiring authority to the landlord in connection with any such acquisition of an interest as is mentioned in subsection (1)(a) above—

  1. (a) there shall be disregarded any right of the landlord to serve a notice to quit, and any notice to quit already served by the landlord, if the notice would be or was effective by reason only of treating the use for the purposes of which the interest is being acquired as falling within section 24(2)(b) or 25(1)(e) of the Agricultural Holdings Act 1948 (land required for non-agricultural use); and
  2. (b) if the tenant has quitted the holding or any part of it by reason of a notice to quit which is to be so disregarded, it shall be assumed that he has not done so.

(3) In assessing the compensation payable by the acquiring authority to the tenant in connection with any such acquisition of an interest or taking of possession of land as is mentioned in subsection (1)(b) above (hereafter referred to as "the tenant's compensation"), there shall be disregarded any right of the landlord to serve a notice to quit, and any notice to quit already served by the landlord, if the notice would be or was effective by reason only of treating the use for the purposes of which the interest is acquired or possession is taken of the land as falling within the said section 24(2)(b) or 25(1)(e).

(4) Section 42 of the Agriculture (Miscellaneous Provisions) Act 1968 (tenant's compensation to be assessed without regard to his prospects of remaining in possession after contractual date) and section 15(1) of that Act (effect on tenant's compensation of provision enabling landlord to resume possession for non-agricultural use) shall cease to have effect.

(5) The tenant's compensation shall be reduced by an amount equal to any payment which the acquiring authority are liable to make to him, in respect of the acquisition or taking of possession in question, under section 12 of the said Act of 1968 (additional payments by acquiring authority in circumstances described in subsection (1)(b) above.

(6) If the tenant's compensation as determined in accordance with subsections (3) to (5) above is less than it would have been if those subsections had not been enacted, it shall be increased by the amount of the deficiency'.—[Mr. Eldon Griffiths.]

Brought up, and read the First time.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths)

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

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

With this proposed new clause it will be convenient to consider the following Government amendments:

No. 96, in Clause 74, page 71, line 4, at end insert: 'and "landlord", "tenant" and "notice to quit", in relation to an agricultural holding, have the same meaning as in those Acts respectively'.

No. 97, in page 71, line 29, after 'Wales', insert: 'and otherwise than in relation to an agricultural holding'.

No. 99, in Clause 75, page 72, line 6, leave out subsection (3) and insert: '(3) Section (Compensation in respect of agricultural holdings) above does not affect any compensation which fell or falls to be assessed by reference to prices current on a date before the passing of this Act, and the other provisions of Part IV of this Act relating to assessment of compensation do not affect any compensation which fell or falls to be assessed by reference to prices current on a date before 17th October 1972'.

No. 104, in Schedule 2, page 84, line 53, at end insert: '1968 c. 34.

The Agriculture (Miscellaneous Provisions) Act 1968.

Sections 15(1) and 42 except in relation to compensation falling to be assessed by reference to prices current on a date before the passing of this Act and except for the purposes of section (Compensation in respect of agricultural holdings) (6) of this Act'.

9.15 p.m.

Mr. Griffiths

On the face of it, this is a complicated new clause, but I hope that its purpose is clear and simple. It fulfils the undertaking which I gave in Committee on 25th January to help the tenant farmer without breaching the market value principle. We have done this by having regard to the fact that although he is usually in law a tenant from year to year, in practice he has virtual security of tenure for life. This principle is embodied in Clause 41 which allows the business tenant's security of tenure to be taken into account.

It may be for the convenience of the House if I attempt to summarise the position on compensation as it applied to the tenant and to the owner-occupier farmer before the Bill, to indicate which changes were made in Committee, and, finally, to add to those changes the additional advantages which will arise if the new clause is accepted.

Before the Bill was introduced, compensation was payable on the basis of the market value of the land taken. I am dealing primarily with the tenant farmer. Compensation was paid to him for the value of his unexpired term or interest in the land that was taken. This was based on the profit rental value, if any, of the land taken and loss of profits. In practice this usually amounted to between one and two years according to the circumstances.

In addition, compensation was paid for tenant right—that is the unexhausted manurial values, and so on—for the value of the improvements that he put it in, and for loss or injury, disturbance, removal costs and loss on forced sale of live and dead stock. Experience showed that a minimum of one year's rent would normally have been paid for disturbance items. In addition, there was the payment of four times the rent to assist in the reorganisation of the tenant's plans.

Under the Bill, as amended in Committee, the tenant farmer and indeed the owner occupier-farmer, obtained a number of additional benefits. First, if he is displaced from the farm house that he occupies, subject only to the length of his occupation of that house, he becomes entitled to home loss payment. Secondly, the tenant farmer who is served notice to quit after notice to treat has been served on the landlord will also have the right to elect to have his compensation assessed on the normally more favourable compulsory purchase basis as if notice of entry had been served.

Thirdly, where part only of a tenant's holding is being compulsorily acquired, he will now be able to elect to treat the notice of entry as a notice relating not to the part but to the entire holding if the remainder of his holding is not capable of being farmed either by itself or with other land as a separate agricultural unit. Those were the three additional benefits agreed to in Committee.

Under the new clause there is a further benefit. Essentially, it is that the unexpired term or interest will henceforth include the security of tenure provided for under the Agricultural Holdings Act 1948, unaffected by the proposals of the acquiring authority. That is an important additional benefit.

It follows, however, that to enable the agricultural tenant's security of tenure to be taken into account, it is necessary to amend the effect of a decision taken in the other place in the case of Rugby Waterboard v. Foottitt and Shaw Fox and a decision of the Court of Appeal in Minister of Transport v. Pettitt. These enable the effect of an acquiring authority's scheme to be disregarded as it affects the nature of the interest in the land which is being acquired—for example, a change from freehold land subject to a protected tenancy to freehold land subject to an unprotected tenancy.

This proposal is in line with Clause 42 which provides that landlords shall not have the benefit of vacant possession value where this was attributable solely to the rehousing of the tenant in consequence of the particular compulsory acquisition.

I said at the beginning that the clause was complex. Its purpose is clear, and I believe it genuinely improves the situation of the tenant farmer and I ask the House to accept it.

Mr. Mark Hughes (Durham)

I fear that the clause ought to be called the Solomon Grundy clause, tabled on Monday, buried on Thursday. The time allowed by the Government for the proper consideration of the implications of the clause is woefully inadequate.

On Monday I was in Brussels as a member of a Select Committee of the House. I returned early Tuesday morning by which time I was able to procure a copy of the new clause. Having been unable to go through the simple mechanism of contacting my local NFU and other interested bodies in the North-East, I have in the time available not received the necessary information about the precise indications of this fundamental change in tenant compensation.

This is no criticism of either the right hon. Gentleman or the Minister, but rather of the Leader of the House and the organisation of parliamentary business. A clause tabled on Monday cannot be expected to be debated finally in this place the following Thursday night.

It would be wrong to allow the clause to go through without registering a strong complaint about this undue haste and the insufficient time afforded to the House for dealing with something which I believe the hon. Gentleman himself referred to in Committee as "a legal labyrinth". In view of what I have said about the lack of time, I am willing to withdraw anything I may now say that is incorrect.

First, the clause suggests that because, under the Agricultural Holdings Act, an annual tenancy has every appearance of being a life interest, it gives security for life, and the compensation payable to a tenant should be determined according to a quasi-life interest position. That is my understanding of the proposal contained in the new clause.

One therefore has to look at such recherché matters as the Government actuary's life tables. A tenant aged 30 may well receive more compensation under this clause than a tenant aged 45 or 60. According to the Government Actuary's figures a male aged 30 in England or Wales has a life expectancy of 46 years. If he should be an agricultural tenant, under the 1946 Act, his expectancy is 46 years. If, unfortunately, he happens to be in Scotland, it is only 44.5 years. His interest, by the time he has reached the age of 60, has diminished to 15.1 years in England and Wales—and the poor Scotsman again is at a disadvantage at 14.47 years.

The first question I ask the Minister is whether, in calculating the reversionary interest of the landlord or the tenant, the Government Actuary's figures of life expectation, rather than the particular circumstance of the individual tenant, are to be taken into account. If it is the first, what follows inevitably is that the tenant farmer aged 60 gets rather less than a third of the compensation of a tenant farmer aged 30. If this Government are introducing a scheme which provides that the older one is the less compensation one gets, let them spell it out.

As I understand the legal consequences of the new clause, it is precisely that. A tenant's interest is determined by the value of his reversionary interest on an annual tenancy basis. By converting the right under the 1946 Act to be equivalent to an annual tenancy, one thereby automatically determines the level of compensation in terms of the age of the person to be compensated.

The health prospects of the tenant may also be taken into account. Therefore, the tenant who has a history of having had a heart attack may get only half the compensation, whatever his age, of his next-door neighbour who has not had a heart attack. Is this what the Government intend? Is this what is meant by the new clause, that the "life interest" of the tenant, with all the forgivings of previous legislation that are involved in it, ends up by meaning that the older and the more infirm the agricultural tenant, the lower the proportion of the gross compensation accruable to landlord and tenant alike he receives? If, at this point, I am totally misleading the House, or myself, I should be more than willing to give way to the Minister that he may make this clear.

Mr. Eldon Griffiths

I am not going to suggest that the hon. Gentleman is misleading the House. I will simply tell him what the facts are. What is provided here is that compensation shall be paid for a tenant's unexpired interest. It is not for the Government to tell the valuer how to arrive at this. The valuer is an independent professional person. He will make the judgment.

Mr. Hughes

I am grateful to the Minister. So what the Government are saying is that unexpired interest, although it happened to be consequent on the life expectancy of the tenant is nothing to do with the Government. That is a most appalling statement. What the Government are saying is that, because they are not to determine the compensation, the district valuer has to diminish the compensation consequent upon the age of the tenant.

The unexpired value of a guaranteed security for life must be, according to all legal precedent, dependent on the age at that time of the person involved. No tenant of 60 has an equal unexpired interest in a life tenancy of a tenant aged 30. For the Government to pretend that there is an equality of treatment between those two is to delude the House and everyone else. It is clear that an unexpired life interest, however it may be determined—whether by the Government or a district valuer—is, in the end, determined by the age and the expectancy of the tenant. Under the Agricultural Holdings Act the security of tenure is de facto for the life of a tenant, and it is that de facto interest which the clause protects and enshrines for the purposes of compensation.

9.30 p.m.

In the case of a company which happens to be a tenant, a company which cannot, by definition, die—if Bloggs and Company is the tenant—I should like the Minister to tell me the unexpired life expectancy of a life that, by definition, is sine die. This land is held in mortmain. Therefore, to calculate the tenant's interest as a proportion of the freehold interest for a company that has no possibility of cessation seems to be a difficult conceptual problem if nothing else.

I turn to the specific problem of my county. I ask the Minister to state the position where, as is frequently the case, the Church Commission is the first landlord, the National Coal Board—a corporation that has no life in any normal sense of the word—is the tenant, and the sub-tenant of the NCB is the actual occupier. As I read it and on the advice I have received, nothing in the clause covers the problem of the sub-tenant in County Durham of the NCB.

As one who has purchased property from the leasehold of the NCB with a reversionary interest to the Church Commission, I know only too well the highly complex problem faced by an agricultural tenant of how much one pays to the NCB and how much to the Church Commission on its reversionary interest. How does one calculate the compensation under this clause payable to the tenant who is, in a sense, a sub-tenant of the NCB from the Church Commission? There is nothing in the clause or in all the Minister's comments in Committee or elsewhere that makes the position of this sub-tenant clear.

Turning to the next stage, this is the problem of the agricultural worker. Under the clause, if a compulsory purchase order is obtained and the land and housing of a farm are acquired, even if the tied cottage is not demolished, does the acquiring authority retain the power vis-à-vis the agricultural worker living in the tied cottage by virtue of his previous agricultural employment? What is the position of the agricultural worker who suddenly finds that his home is purchased over his head? This is not a question of home transfer. The home may still exist. Who becomes his landlord? How is he secured in his tenure, independent of that tenure having previously been consequent upon its performing certain agricultural activities? Nothing in the short space of time between the drafting of the clause and the Minister's statement in Committee has clarified the position of the agricultural tenant.

Take, for example, the case of a farm which is compulsorily purchased and where an agricultural worker is made redundant because he is not needed on the land. He has a right to apply for redundancy payment, the cost of which in part accrues to the tenant or occupier who previously had been his employer. Does that employer have the right to transfer any liability therefrom to the purchasing authority as a consequence of that compulsory purchase? It may well be that the tenant farmer is required to pay a redundancy payment to his employee as a direct consequence of compulsory purchase. Does that farmer have a right to discount that cost automatically and receive it in return from the purchasing authority? Nothing in the clause or in the Minister's statement this evening throws any light on that problem.

There is a further difficulty that in subsection (5) the whole notion of a rent multiplied by a certain number of years is thrown out. What is quite clear, whether one reads the Estates Gazette or whatever, is that the classic relationship between rent and purchase value, which used to be expressed in terms of so many years purchase, has of the last few months, if not years, ceased totally to have any relevance. Will the Minister spell out whether the compensation under this new clause is to suggest that the rent, whatever it may be, is the basis and that the tenant, whatever the commercial value of the land, gets his compensation on the basis of the rent, or whether he gets it on the basis that the rent should have been a particular proportion of the purchase value? The rent can vary, and on recent sales it clearly has varied between 1 per cent. and 7 per cent. of purchase value. If calculation of the tenant's interest is based upon an actual rent, as opposed to a notional rent, it affects him fivefold, or it may well, and there is therefore, again, grave uncertainty as to the effects of it.

I am not certain to what extent it is reasonable to draw an analogy between the clause and the non-existence of a tenant's right to farm loss payment. The tenant on an annual tenancy is treated under the clause as having a life interest or quasi-life interest, yet under the farm loss payment clause it is clear that he does not have that, because he must have had a three-year lease or more. Where do we stand? What is the position of the tenant under the new clause and the farm loss payment clause?

There is the very complex problem of the aggregation of tax liability in respect of the compensation under the clause, particularly subsection (5). Under the 1968 Act compensation was not liable to tax, but I understand that the compensation under subsection (5) may well be subject to tax. Does the change alter the tax position of the tenant receiving compensation? Is it received gross or net of tax?

In sum, although I welcome the clause as an improvement, it is a snare and a delusion for a large number of tenants. A majority of them may well receive little or no benefit. It is a parading of hearts intent on doing good, when in reality, when it comes down to the Lsd that is transferred, a large number of tenants will receive no greater benefit consequent upon the clause.

Sir Robin Turton (Thirsk and Malton)

I had considerable sympathy with the opening remarks of the hon. Member for Durham (Mr. Mark Hughes). On 30th January my hon. Friend the Under-Secretary told the Committee that he would table amendments as soon as possible. He said, I hope that that will be done during the Committee stage so that the Committee may have the opportunity to debate them, rather than waiting until Report."—[OFFICIAL REPORT, Standing Committee A, 30th January 1973; c. 325.] In fact, we did not see the amendments until Tuesday. My hon. Friend the Member for Rye (Mr. Bryant Godman Irvine) and I tabled an amendment to leave out subsection (5), an amendment which was not selected, probably because it was tabled so late.

I disagree with the hon. Gentleman, in that I feel that the clause is a considerable advance. Before it was tabled the owner-occupier or landlord was properly looked after, but there was a tremendous gap for the tenant. The clause is a welcome attempt to put the tenant's position right. Though I have some criticism of it, I am the first to express gratitude for that, and I had hoped that the hon. Member for Durham might express gratitude.

My hon. Friend the Under-Secretary said in Committee: I summarise the position by pointing out that the tenant farmer will benefit from the full compensation arrangements laid down in the Bill In addition he will be able to obtain the home loss payment"— That I agree with. He will receive the farm payment, too, where that is appropriate."—[OFFICIAL REPORT, Standing Committee A, 30th January 1973; c. 325] I should like to have that clarified, so that we know what we are talking about. As I understand the Bill, the farm loss payment is limited to where the occupier has an owner's interest. Therefore, it will not apply to the tenant farmer. That is one of the reasons why I think that the clause is so necessary.

The drawback to the clause is, as the hon. Gentleman suggested, that it is very hard to discover what a particular farmer will receive under it. It will put a heavy burden on district valuers, and many cases will have to go on appeal to the Lands Tribunal. It would be much better if we could have the kind of formula which my hon. Friend the Member for Northants, South (Mr. Arthur Jones) proposed so that one knew exactly where one was on so many years' rental value.

9.45 p.m.

Apart from that, let us try to see how we can clarify this provision and improve it. We are in difficulty in understanding what is meant by subsection (5) of the new clause. It refers to the case where farmers are receiving, under Section 12 of the 1968 Act, a payment in respect of the reorganisation of their business—not compensation. For some odd reason, however, the Government have made that factor a deduction from the compensation under the new clause. I believe that they are in error in doing so. In dealing with a matter for compensation which is subject to tax, and a matter of payment for reorganisation of one's livelihood, which is not a matter which becomes taxable, we are in difficulty. It is very hard to construe subsection (5). I understand that many agricultural lawyers have spent an anxious 48 hours trying to understand it and have found it impossible.

Does subsection (5) mean that one first finds out the compensation one gets under the new clause, adds to that the compensation under Section 12 and then, having got these two figures, adds them together and deducts the payment under Section 12, calling that compensation? If that is so there is a danger, in mixing something that is taxable and something that is non-taxable, of putting the tenant farmer in a much worse position.

It may be argued that what one gets under Section 12 is the floor and that this is a topping-up. But again it is hard to see why we have to introduce this one category of payment that the tenant farmer receives and nothing else. If a farmer is not entitled to the Section 12 payment, he is put in exactly the same position as the tenant farmer, who is entitled to the payment. That is hardly fair because all that the tenant farmer is asking for, is receiving and has received since 1968 is a sum to enable him to go to another holding, to change his husbandry, probably to suffer certainly diminished profits and perhaps loss in the first year of the new holding. Since 1968, through the changes in the price of land and rental value, he has been suffering to a greater degree than he did in 1968.

This new clause would be much better without subsection (5). To treat farmers fairly the district valuer will seek to ascertain the goodwill value of the security of tenure of the farmer. No doubt that will be conditioned by age. That is nothing new because it is found in Clause 40. I thought that the hon. Member for Durham was exaggerating here. The valuer will be estimating the value of the security of tenure of the holding. It must be different as between someone who is very old and about to retire and a young man with the whole of his agricultural future before him. It is right that the young man deprived of that future get a larger amount.

Subsection (6) envisages a situation whereby tenant farmers will receive less than they would if the clause were not enacted. We ought to be told exactly in which cases this will happen. When we are trying to put right the position of the tenant farmer I find it hard to believe that there will actually be cases of them receiving less as a result of this clause than they would if it were not passed.

This has caused a certain amount of worry in farming circles because we thought we had a generous Government who would put the tenant farmer in the same position as those operating small businesses outside agriculture. It is worrying to see that under the subsection we envisage a situation where the tenant's compensation is less than it would be if the subsection were not enacted.

I welcome this attempt to put right the position of the agricultural tenant, because he has been at a great disadvantage. Agriculture has not been treated as have other businesses. A shopkeeper gets his goodwill and used to be far more generously treated than the agricultural tenant. This is being put right, but in too hasty a manner. It is a complicated piece of drafting and I hope that the Government will use the opportunity provided by another place to get it in a more intelligible form—without subsection (5).

Mr. Norman Buchan (Renfrew, West)

It might be useful if I speak now. I shall be brief because we have a vast amount of amendments before us, dealing not only with agriculture but with important aspects of local government. It behoves those of us dealing with agriculture, who have had a good innings, to be brief.

There is a good deal of truth in the point the Minister made about the clause being extremely complex. While we recognise and appreciate its purposes, we are anxious about the time scale which we and outside organisations have been given.

This matter arose from a long and sometimes complex series of discussions in Committee. The Committee stage was one of the least political Committee stages in which I have ever taken part. There was constant inter-party support. We pressed strongly one clear concept: that the tenant farmer had to be considered and safeguarded. It was the assurance given by the Government which gave rise to the clause. We are glad that the Government have honoured their commitment to introduce a clause to look after the interests of tenant farmers. However, we regret the timetable. It is a Solomon Grundy situation. Organisations, including the NFU have had difficulty in ensuring that some of the anxieties are being properly dealt with.

Also, while thanking the Government for bringing this proposal forward, r should have thought that much of the basis of the argument employed by hon. Members on the Government side and by me about the nature of the compensation has been ignored. We all argued on the basis of a specific formula, some kind of terms and a clear basis for compensation. I suggested a total option type of formula. I agree that there is an element of option, but the basic formula has not been used in such a way as to cover the anxieties which now arise. Provision could have been made for a person to choose in his own interests an option which could have safeguarded him. Rather than have the compensation in the hands of the district valuer, I would prefer a clear formula of one kind or another, perhaps by an extension of Section 12 of the 1968 Act. That might have been the best way. It is difficult to see how the district valuer will evaluate this new concept which is totally analogous to the small tenant or owner. Anxieties have been created.

If the compensation is to be considered separately, all the points raised by my hon. Friend the Member for Durham (Mr. Mark Hughes) become valid. However, I enter this caveat on his criticism. I do not think that those of us who have argued for this change should necessarily put ourselves in the position of asking for individual compensation for one person as against another. We must not jettison completely, even in the interests of agriculture, the concept which would apply here. Nevertheless there will be complexities and I have no doubt that a number of appeals will follow. I think that the right way of tackling this problem would have been by a formula of the kind we suggested with or without an option. Certainly that is what the unions would have preferred and what I as a politician would have preferred.

Then we come to the problem raised by subsection (5). This has presented a very real worry. An amendment has been put down to delete the subsection, but that amendment is not to be called. I would have supported it. The Government must think again very quickly in the intervening days before the Bill goes to the Lords. If they do not, I have no doubt that others will be stimulating the Lords to think about this. In some ways subsection (5) would reduce the amount of compensation under the 1968 Act. It seems strange that that should happen in this way. Quite apart from the danger that it might leave the tenant in a worse position, it is spoiling a reasonable ship for a ha'p'orth of tar. If the worries which have been expressed are realised, the position will be even more serious——

It being Ten o'clock, the debate stood adjourned.

Ordered, That the Land Compensation Bill may be proceeded with at this day's Sitting, though opposed, until any hour.—[Mr. Jopling.]

Question again proposed, That the Clause be read a Second time.

Mr. Buchan

I have tried to put my views forward in a moderate and conciliatory spirit. We should like the Government to redraft the clause, basing it on a formula related to the number of years' compensation. We think that there are different factors in agriculture which make the position of the agricultural tenant and any other kind of tenant not totally analogous.

We have to accept the clause and to thank the Government for bringing it forward. But we urge the Government to take heed of the serious criticisms that have been made.

Sir Frederick Corfield (Gloucestershire, South)

I share with other hon. Members a wholehearted welcome for the purpose of the clause and a cautious response to the means by which it meets that purpose. It is not good enough to say that we will leave this matter to the valuing profession. We cannot judge whether the clause will meet the problem adequately and without undue complexity until we know roughly what the valuation results will be. I suspect the concept of a notional lifetime lease, in part for the reasons put forward by the hon. Member for Durham (Mr. Mark Hughes), although I do not find a difference in compensation based on age necessarily offensive.

We are asking the valuer to assess the working life ahead of the farmer because that is the expectation of the lease. But there are other headings under which a valid notice to quit can be given under the Agricultural Holdings Act and the 1968 Act. The valuer also has to assess the probability or likelihood of one of these other headings coming into operation, the landlord taking advantage of it and succeeding in securing a valid notice to quit. That may result from a defect in the farmer—an inability to pay the rent, for example—or, under the 1968 Act, an estate management scheme which has nothing to do with the ability or efficiency of the farmer. The valuer presumably has to look at the whole estate and the character of the landlord to see whether he is likely to be able to serve a notice to quit under that head and, if so, whether he is likely to succeed. The same applies in relation to the hardship clause, also under the 196S Act. It is a virtually impossible task. There are so may hypotheses that one's mind boggles at the sort of cases that will come to the Lands Tribunal.

My right hon. Friend the Minister has stressed that he does not want to get away from market value. Although one may say this is analogous to a notional lifetime lease, the plain fact is that it is not a lease and it is not a marketable commodity. Although the tenant may persuade someone to give him a capital sum for vacant possession—generally the landlord—and may make mutual arrangements with a potential successor whom the landlord is willing to accept as tenant, he cannot market his security of tenure. There is no market value. Yet that is precisely what the unfortunate valuer is told to find out. That is a contradiction in terms. We are asking the valuing profession to do something that is wholly impossible. If that is not so, we must be told what valuation principles my right hon. Friend has in mind so that we can judge the likely result.

Having said that about market value, there are two other side effects, both of which are undesirable. There is no doubt that the security of tenure provision in the Agricultural Holding Act, 1948, has had the result of landlords being reluctant to make land available to rent because the financial incentive to sell or take in hand is so very considerable. This puts yet another obstacle in the way of land coming on the market to rent, particularly if it has any development potential at all.

The second undesirable side effect is that we are now to have three parties to the compensation negotiations with perhaps the most bitter wrangling between landlord and tenant—and that, again, introduces something very undesirable and alien to the agricultural world.

My final comment is on the question of tax. Another very difficult problem that arises is that, as I understand it, compensation for an "interest" in land—I should put that in inverted commas for it is a very curious interest—is nevertheless a capital sum and any tax to which it would be subject would be capital gains tax. I have to ask my right hon. Friend where is the base? It is virtually impossible to go back to 1965 and to say what its value would have been then, to take the difference and to charge tax on that difference. Does one take it with the same tenant? Clearly, in 1965, eight years ago, the tenant was eight years younger so that the sum was different.

I suggest that we are getting into very deep water when we get to the problem of capital gains tax on a notional interest which is not marketable and has no conceivable basis on which one can decide where the gain started on which to fix the capital gains tax. For these reasons, although I welcome the purpose, I hope that my right hon. Friend will give us strong assurances that lie will take this clause away, even if it is passed tonight, with the firm intention of giving it a great deal more thought and the opportunity probably for quite substantial revision in another place where, fortunately, there are many Members who know quite a lot about the subject. I hope that he will take the advice of some experienced valuers and not merely dismiss the proposed clause as something which valuers can work out when we have passed this astonishing proposition of market value for something which is not marketable.

Mr. R. J. Maxwell-Hyslop (Tiverton)

I have not expert knowledge of this subject and I certainly derived benefit from listening to the speech before my own from my right hon. and learned Friend the Member for Gloucestershire, South (Sir F. Corfield), who has expert knowledge and practice in this field.

I would not for a moment claim that I know how to draft a clause which takes into consideration the factors I want briefly to mention to my hon. Friend. The first is, if we take a formula based on actual rent, as has been recommended in the course of the debate, it assumes for the equity of the proposition that there has always been a free, competitive market in agricultural tenancy—and we all know that this has not been the case. Paradoxically, to adopt such a formula would, I believe, work out inequitably for the reason that where a farmer has had a particular benevolent landlord—and quite often this has been the case—who has charged a low rent, a formula based on actual rent would mean that the farmer concerned got very little compensation although his loss would be greater because he would be going onto an open market with high rents, his agricultural economy being based on low rents to date. Therefore, the compensation he would get would be inversely proportional to the loss he was suffering. For that reason my hon. Friend has considerable wisdom in not flying to the easy alternative of adopting a formula based on actual rent, because the hypothesis that all tenants are paying open market rent is so manifestly untrue. I suggest to my hon. Friend that there is considerable wisdom in not adopting that as his criterion.

The age point has been referred to by my right hon. Friend the Father of the House among others. My only comment on that is that it is not immediately apparent to me why the age chosen is not that of the retirement pension qualification, namely 65. Why is it 60 rather than 65? There may be a good and convincing reason for it but it is not self-evident to me.

I take the point made by my right hon. and learned Friend about valuation. To gather together a quintessence of truth about events that are decided by market values is difficult enough. To gather together a quintessence of truth about that which does not exist must pass the frontier of the difficult and move into the realm of the impossible. If an arbitrary assumption is made I do not see how anyone can challenge before a tribunal on a basis of evidence that which is not based on evidence in the first place. I should have thought that it made the appeal procedure impossible where one pulls a figure out of the sky and sets against it another figure also pulled out of the sky. This must be the difficulty about a life interest.

I think that the only way to get round this is to take an actuarial expectancy of life—whatever that may be in a given year is ascertainable—take the annual open market rent, which can fairly be assessed by reference to other properties, subtract the tenant's age from the actuarial calculation of expectancy of life and multiply that by the annual rent, which is ascertainable. One is then judging on a basis of objective reality rather on figures taken out of the sky.

I am not proposing to argue whether those engaged in agriculture live longer than those engaged in other professions. One would have to take the statistical mean figure for expectancy of life, and I think that that would have some advantages, as long as we take as the base age 65, where there is this transition compensation provision, so that we do not accentuate still further the tendency in legislation to leave a gap between the age at which some sections of our law assume people will retire and the age at which, in pension law, people are provided with the wherewithal to do so.

Mr. John Farr (Harborough)

I congratulate my right hon. Friend and the Department generally on taking a big step towards improving the conditions for tenant farmers. I share the view expressed by other hon. Members that the amendments and this clause in particular are exceedingly complex. They are so complex that it must have taken a legal mind to produce them. I hope that my right hon. Friend will not mind my saying so.

Subsection 2(a) provides that the landlord's rights are to be disregarded. Does this mean that the landlord will or will not be given the payment which he would have received in a compulsory purchase?

10.15 p.m.

I share the views which have been expressed about the complexity of the way in which the Minister has gone about doing a very good job. However, in my view the provision will cause hardship, suffering and considerable distress among people who will not be prepared to accept a district valuer's figure and who will go to the Lands Tribunal. I believe that bitterness will be caused when it is discovered that the clause will mean that the nearer a farmer gets to retirement age, the smaller will be the compensation he receives. Certainly the older the farmer, the less will he be able to go in for retraining. He will be less adaptable, he will have less chance of taking on a new farm and yet he will receive a lower amount of compensation. If the clause is enacted as drafted, considerable stress will be caused in the farming community, especially among, tenants.

The Minister has accepted the principle that tenant farmers need better compensation. I hope that he will give an undertaking that he will take note of the views that he will receive in a few days when the Bill goes to another place. I know that he will receive many representations from those who require this matter to be dealt with in a simpler way, namely by amending Section 12 of the 1968 Act to reduce the period from four to 10 years so that everybody will be able to see what is being done.

May we be told whether these provisions are to be retrospective? The Under-Secretary of State referred to a couple of judgments which were now to be set aside. That would indicate that there is something of a retrospective measure in the clause. How far will it go back? Will it go back to cover the case of the farmers of Empingham in Rutland who not so long ago were dispossessed because of the building of a reservoir?

Mr. Gwynoro Jones (Carmarthen)

The one thing that is clear is that the existing legislation affecting tenants' compensation is inadequate. Discussion and questioning of the new clause does not mean that we are seeking merely to undermine what the Minister is trying to do. However, I hope that we shall receive assurances that in "net" terms this provision will mean increased and better compensation for the tenant farmer than has been the case hitherto.

It is not good enough for the Minister to come to the House and say "The whole matter is now in the hands of the district valuer and, therefore, it is out of our hands." Many tenant farmers will be concerned at the complexity of the new system. The farmer will not be sure what these provisions will mean in terms of actual compensation. Under Section 12 of the Agriculture Act 1968 the basis for consideration was a four-year period. That is now deductible from the farm loss payment and the farm loss payment is taxable. Although on the one hand the Minister says that he is giving better compensation in terms of the farm loss payment, on the other hand he is taking away the figure based on four years' rent which obtained under the 1968 Act.

I trust that the Minister will realise that many of us are not happy that the district valuer is possibly being made the be-all and end-all in this case. As the hon. Member for Harborough (Mr. Farr) said, many cases will have to go to the Lands Tribunal since problems will arise due to the complexity of the scheme. I trust that the Minister will tell us in his reply on what sort of basis he will expect the district valuer to assess the compensation level for the tenant farmer.

The suggestion by the National Farmers' Union of the amendment to Section 12 of the 1968 Act increasing the period from four to 10 years sounds a simple and perhaps a better method, but that is not the solution in the case that has been mentioned already in which the tenant pays a lower rent than the present market rent. Merely to increase the number of years on a low rent basis will not solve the problem. What will the district valuer do? Will he base it on the existing rent or the existing market rent, or is the increased cost of land to be introduced? Clearly this will affect the level of compensation immensely.

For instance, if the value of land is to be in any way a part of the compensation factor, I must point out that in my constituency, Carmarthenshire, since March 1970 the value of agricultural land of up to 49 acres has increased by 30 to 35 per cent., and for a farm of 300 acres the value has increased by over 100 per cent. Surely the Minister will give guidelines to the district valuer. He must tell us whether he will give a basis on which the district valuer can work out a satisfactory scheme.

On the question of age, some hon. Members on the Government side have tended to agree that age should be taken into consideration when assessing the tenant's compensation. Clearly the younger tenant would be faced with major problems if he had to vacate a farm because a compulsory purchase order was made. That is self-evident, but at least there would be opportunities for him due to his age. But at the other end of the scale the tenant farmer in his fifties will be put in an intolerable, indeed impossible, position. If he is to lose his occupation after spending 30 or 40 years in the industry, it is quite clear that his opportunities to get any other occupation will be extremely limited. I can certainly say that for my part of West Wales. At the present moment I cannot think of many occupations that a tenant farmer in his fifties would be able to go into, yet his compensation payment would be lower. I am sure that the older tenant farmer will be disturbed that he will get less than the younger farmer.

On this point also, is the district valuer to make an assessment of the contribution of the older tenant farmer to agriculture over the 30 or 40 years that he has been a tenant farmer? Is this to be included in the assessment which the district valuer will make? Clearly it is important.

Many other points have been raised which I do not wish to reiterate, but there is one point on which I should like the Minister to give an assurance tonight. At the end of the day, is the Minister satisfied that under the clause no tenant farmer receiving compensation will be worse off than under the old scheme? I trust that the hon. Gentleman will be able to tell us this and so put at rest the minds of many worried tenant farmers.

Mr. Eldon Griffiths

It may be helpful if I give the hon. Gentleman that assurance now. No tenant farmer will be worse off on this account.

Mr. Jones

That is good news. I trust that that will prove to be the case.

I still doubt whether at the end of the day this will be a satisfactory level and the sort of compensation to which tenant farmers are entitled. That is another matter. However, I accept the Minister's assurance that no tenant farmer will be worse off under this scheme than under the previous scheme.

Mr. Buchan

It would also be useful to know how, under the new clause, it is established that no tenant will be worse off.

Mr. W. Benyon (Buckingham)

I wish to echo the confusion surrounding this new clause. When even lawyers do not understand a matter it behoves lesser mortals to tread very warily.

It would be churlish, however, not to welcome it. I asked for it on Second Reading and now we have it. But, like other hon. Members, I seek a little more clairfication about what is involved.

My hon. Friend the Under-Secretary has made it clear that age will be taken into account. The hon. Member for Carmarthen (Mr. Gwynoro Jones) has a very valid point here. I am not happy that a younger farmer should receive greater compensation than an older one. In a sense it goes completely contrary to the redundancy Acts. In any event it is a very difficult method of valuation.

It would be very helpful if we could be given an actual example, taking the case for instance of a farmer aged 30 whose annual rent is £1,000. I do not suggest that that be done now, but perhaps it could be done when the Bill is considered in another place.

We must also have clarification on the taxation aspect. Taking again a tenant with a yearly rent of £1,000, the present compensation is six years' rent. That means a total of £6,000, £4,000 of which is tax-free with the remaining £2,000 taxed. But let us suppose that under the clause the total gross compensation is £7,000. It that is all taxed, the tenant will be in a very much worse position. It appears from subsection (6) that such a possibility is envisaged, and we need clarification.

I also wish to echo what has been said about subsection (5). The four years' additional rent was a reorganisation measure. It should not be confused with the pure compensation aspect.

However, my chief purpose in intervening in the debate is to draw attention to the position of landlords, and here I must declare my interest since I am the landlord of let agricultural land. The clause has not been sufficiently thought out in relation to agricultural tenure in this country. I am glad to see my lion. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food present. At the moment, everything militates against a landlord letting a farm when it becomes vacant. Not only does he lose, in effect, possession for the lifetime of his tenant, but the value of the land drops substantially on letting. Now the Government are saying that if land is purchased compulsorily the owner will receive less compensation if he has let the farm than if he had farmed it himself.

I cannot believe that this matter has been fully thought out as it affects agricultural tenure. This is another nail in the coffin of the tenant farmer system which is coming more and more into its own because of the greater capital formation in agriculture and the need for a tenant farmer to have that assistance in dealing with modern systems of agriculture.

In Committee my hon. Friend said that he would seek to provide that compensation for acquisition by a public authority should take into account the fact that an agricultural tenant has, in effect, permanent security of tenure". Later he said that lie proposed, to treat the tenant farmer more nearly like the owner-occupier."—[OFFICIAL REPORT, Standing Committee A, 25th January 1973; c. 319.] In effect the tenant farmer has security of tenure, but not in law, as has been pointed out by a number of right hon. and hon. Members. He has the expectation of security for life, but this is subject to a number of factors: paying his rent, farming the land properly, the fact that the owner can get possession for development purposes and so on. Therefore, he has not got security for life in the same sense as a lessee of a business. This matter was considered extensively in the House of Lords decisions about which we have heard. The ramifications are therefore very wide indeed. I hope that my hon. Friend will listen to any suggestions which are made when the new clause is considered in another place.

The farming organisations have welcomed the new Clause and the Bill but have pointed out that the owner-occupier is still entitled to more compensation, even after the concessions granted in the Bill, because of the loss of livelihood which is involved. The fact that 70,000 acres are being taken out of agriculture each year means that it is more and more difficult to get another farm. In the opinion of the farming organisations it is wrong to rob Peter to pay Paul to get a better deal for the tenant farmer. I hope that this matter will be considered carefully, not necessarily tonight but when the Bill is in another place.

Mr. Eldon Griffiths

The majority of hon. Members who have spoken have welcomed what my right hon. Friend is trying to do. However, the welcome offered by the hon. Member for Durham (Mr. Mark Hughes) would have fooled me.

My right hon. Friend and I regret the short time between the tabling of amendments and the debate but I hope that the House will forgive us when I explain the situation. There is a lot of pressing business with which the House will have to deal. My right hon. Friend had the choice whether to try to bring the Bill forward quickly in order that the improved compensation should become available to people across the country as rapidly as possible or to allow it to take its place in the queue of other legislation that the House will have to consider, which might have resulted in the Bill not being taken for some weeks or even months. Faced with that choice, I believe that my right hon. Friend was right to bring the Report stage of the Bill before the House tonight.

My right hon. Friend has a well deserved reputation for reasonableness and an anxiety to help the House. We shall take very careful note of what has been said tonight and, if possible, will in some way produce a simpler, clearer way of achieving the purpose that right hon. and hon. Members on both sides of the House want for tenant farmers and, indeed, for other farmers who are dispossessed. My right hon. Friend will be the first to wish to do that, but this matter involves an exceedingly difficult legal and drafting problem. On the basis of what has been said tonight we shall consider whether we can improve the drafting to achieve in another place the purpose that we all want.

Mr. Charles Morrison (Devizes)

I am pleased about what my hon. Friend has said. Will he take most careful regard of representations which are made to him, particularly by the National Farmers' Union and the CLA?

Mr. Griffiths

Certainly, we have taken these carefully into account.

Of the many points raised by my right hon. and learned Friend the Member for Gloucestershire, South (Sir F. Corfield)—who speaks with great authority on these matters—there are two on which I should try to give him a direct reply. The landlord and tenant will not be in competition for the compensation. The interests of both are treated separately in the Bill, and this has always been the case. Secondly, capital gains tax is chargeable only on gains and not on receipts. The compensation for the dispossession of a tenant will be taxable on the basis of the market value of the tenancy when it was acquired by the tenant and when it was disposed of to the acquiring authority.

I take my right hon. and learned Friend's point that we are asking a great deal of the valuing profession. On the advice available to me, however, I believe that the members of that profession will in most cases be able to cope.

The hon. Member for Carmarthen (Mr. Gwynoro Jones) was upset because my right hon. Friend was not providing guidelines to the valuers. He said he was worried that the business of determining compensation would go out of the Minister's hands. I hope he is not suggesting that the valuers should be subjected to ministerial interference. That would be a most extraordinary proposition. I should be very worried if the decisions of the valuers were in the Minister's hands.

Furthermore, the hon. Member must know that these matters are not in any case in the hands of one valuer. In practice there are at least two valuers. There is the valuer of the acquiring authority and there is the valuer who is provided for the tenant or for the other person who is losing his property. The hon. Gentleman will know—perhaps he does not—that the tenant has his fees paid for him and he is not simply in the hands of the district valuer.

Mr. Gwynoro Jones

I am fully aware of that system. The Minister knows that I was not suggesting that his right hon. Friend should interfere in these matters. Equally, he will have to accept that the scheme that he is proposing is a complex one, which many tenant farmers will find it difficult to follow. It will cause not just anxiety but certainly irritation, with cases being brought before the Lands Tribunal.

Mr. Griffiths

The hon. Member persists. No doubt he can cause a certain amount of irritation and confusion. But let us be clear what the valuer does. He either operates on a rent formula or he works out the profitability of the land. The valuer is perfectly capable of doing that.

I was asked whether disturbance payment would be forthcoming in the case of farmworkers being made redundant as a result of land being taken. This was raised by an hon. Member on the Opposition side. If as a direct result of the scheme—a highway or whatever it is—a farmworker is made redundant and becomes entitled to a redundancy payment from his employer, his employer—the farmer—can claim reimbursement under the disturbance provisions of the Bill. That would be paid.

My right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton) raised, first, a small point about agricultural tenants holding year by year. I am advised that they will not be eligible for farm loss payments. It may be that my right hon. Friend was concerned about the 364-day tenant, who has been mentioned to me by other hon. Members. I shall look at this matter again with my right hon. Friend. It may be that if something further needs to be done in respect of farm loss payment for the 364-day tenant, we shall consider whether anything can be done in another place.

Mr. Mark Hughes

A lot of tenant right has been the custom and usage of the country for generations. Annual tenancies have been in usage in parts of the country for a very long time, long before the 1946 legislation. Therefore, to deny farm loss payment to the annual tenant is to go against a lot of ancient custom.

Mr. Griffiths

I have just said that we shall take note of this matter. I now wish to come to the very important points raised by my right hon. Friend the Member for Thirsk and Malton.

The central point is that my right hon. Friend and others appeared to interpret subsection (5) as having the effect of denying to a tenant farmer the four times rent payment under Section 12 of the Agriculture (Miscellaneous Provisions) Act 1968. This is a misconception. I hope that I can explain why that is so.

Section 12 of the Agriculture (Miscellaneous Provisions) Act 1968 remains in force. It is not affected by the Bill. Tenants will, therefore, continue to receive four times the rent as a non-taxable payment. There is no question of tax being paid on that sum. There is nothing in subsection (5) which removes this benefit. Section 12 remains.

The reason why, under subsection (5), the deduction of a sum equal to four times rent payment is mentioned is, first, so that a proper comparison can be made between the compensation a tenant would get under the present law and the compensation he would get under the new arrangements. It is solely for the purpose of enabling a comparison to be made to see which one is the better.

The second reason is to ensure that the tenant is not paid compensation on the basis of his security of tenure, which is the new thing, in addition to four times the rent. It would be inequitable to pay twice. After all, the latter payment, four times the rent, was enacted precisely to make up for the limited security of tenure which was available for compensation purposes previously.

Sir Robin Turton

The 1968 Act specifically stated that the four years' payment was for the reorganisation of the tenants livelihood, and nothing on good will.

Mr. Griffiths

The object there was to make up for the limited security that was available to him.

Mr. Mark Hughes

No.

Mr. Griffiths

I shall come to this point. Now that security of tenure is to be fully taken into account in the future and the Section 12 payment is to continue, it is clearly right that one must be set off against the other. There cannot be much argument about that. As the Section 12 payment will continue to be made, it follows that an equivalent amount must be subtracted from the compensation as assessed. Let me make this clear. The Section 12 payment will remain non-taxable. It is only the compensation which will attract tax.

I am grateful to the hon. Member for Renfrew, West (Mr. Buchan) for remaining in the Chamber. I know that he is present against some difficulties. He will remember that in Committee I gave an undertaking that we would attempt to provide the tenant with an option, whether he wishes to be compensated under the agricultural holdings legislation or under the compulsory purchase legislation.

10.45 p.m.

On the whole the compulsory purchase legislation is the more generous. We examined how to fulfill this undertaking and to provide an option, but if we had had an option it would have involved the tenant in two notional calculations. He would have had to work out first the agricultural holdings result or, alternatively, the compulsory purchase result. It would have meant that two very different calculations would have had to be made by someone who might find those calculations very difficult. It would have left the tenant in uncertainty and with no firm basis on which to make a judgment. We decided to be rather more generous. In other words we decided to give the tenant not simply two options, but a guaranteed base of what the law would allow him at present, whatever the outcome of the new arrangements in particular cases. In other words we have provided a floor, and that is the purpose of subsection (6).

The subsection ensures that in no circumstances will the tenant get anything less than he gets at present. He might well get more, or even substantially more. I am advised in a number of hypothetical cases that I have examined that there will be cases in which the tenant will get a very great deal more as a result of the clause. In no circumstances can he possibly get less, because of the guarantee in subsection (6).

In future the tenant will never need to worry about losing out because he does not have the so-called option. The tenant farmer will not be worse off. The major point is that the clause has been so drawn that he cannot be worse off and the four-times rent payment will not be taxable, only the compensation elements will be.

Mr. Buchan

At this stage I do not want to get involved in a close analysis of the net or gross tax position and so on, but the point remains that in spite of what he says subsection (6) will be an equivalent of option, except that the tenant will get the better of the two things from which he could have chosen. But that does not invalidate the point that that kind of proposition involving an option with two notional concepts could have been on a simpler form of calculation along the lines that I suggested tonight. Also it could have been possible to have left in the option to go for the local Government type of legislation and therefore the option, with a basic simple formula, would have remained. In spite of the Minister's reply, I hope that he will still promise to look at the arguments that have been deployed here tonight.

Mr. Griffiths

I am glad to do that, but if the options that the hon. Member has suggested were put into the Bill the compensation would all be taxable, whereas in the manner that the Government have set out the clause there is no question of the four-times rent payment being taxable. Only the compensation elements will be taxable.

Therefore I must ask the House to accept the assurance that my right hon. Friend and I, bearing fully in mind the views that have been expressed by the agricultural interests, bearing in mind as well our duty to have regard to the public funds that are being used, and the principle of market value, to which we are adhering, will take full account of what has been said tonight. We shall see whether it is possible to set out the purpose we all seek to achieve in a simpler manner. I give no guarantee of that, but my right hon. Friend and I shall try so to do.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

I have a short explanation to make. It appears that a printing error has crept in. New Clause 15 on page 172 of the Notice Paper should not be there. It should be at the bottom of page 168. If anybody is sufficiently interested to ask the reasons, I am prepared to give them, but I do not want to waste the time of the House.

The Minister for Local Government and Development (Mr. Graham Page)

It will all be solved by your selection of new Clause 15 to be discussed with new Clause 2, Mr. Deputy Speaker.

Mr. Deputy Speaker

That may be, but the right hon. Gentleman has the right to have his clauses selected in any order that he chooses, being the Member in charge of the Bill. However, we shall take it now with new Clause 2 for debate, and then when we come to it on that later page I shall have a decision from the House upon it in the new order.

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