§ As amended (in the Standing Committee), considered.11.53 pm
§ Mr. Edward Leigh (Gainsborough and Horncastle)
I beg to move, That the Bill be now read the Third time.
It is a proud moment for me that the Bill has reached this stage, because, although it is modest in its extent, it will be of great benefit to agriculture, especially in helping new businesses to come into operation. The Bill amends the Agriculture Act 1967 to enable grants to be made in respect of a wider range of co-operative marketing businesses. It amends also the Agricultural Statistics Act 1979 to enable my right hon. Friend the Minister of Agriculture, Fisheries and Food to obtain more information on land ownership. It also repeals the power of entry and inspection.
It might be helpful if I were to make a short review of the present position so that the House might have some background information to my measure. The effect of the 1967 legislation is to give powers to the Minister of Agriculture, Fisheries and Food to pay grants in respect of guarantees for a bank loan to an agricultural or horticultural business. The present arrangements cover about 370 guarantees on loans of about £9 million. They allow creditworthy farmers and growers lacking the necessary collateral access to bank loans to develop their businesses. I am sure that the House agrees that that is important.
In 1964, the original scheme for Government-supported loan guarantees was introduced. At that time, the scheme was confined to horticultural businesses. In 1965 it was extended to include agriculture — at first under the Appropriation Acts, and then consolidated under the Agriculture Act 1967, which my Bill seeks to amend. Provision was made for the qualifying period to be extended for periods of up to five years by orders made by the Minister, subject to the Treasury's approval. The arrangements are operative through the Agricultural Credit Corporation, a company set up by the National Farmers Unions of Great Britain and Northern Ireland. For its services the corporation charges a fee of up to 2.5 per cent. a year of the sum guaranteed.
The matter of a payment from Goverment funds arises only —I stress this—if the borrower fails to repay the loan and the bank claims on the corporation as guarantor under the guarantee arrangements. My hon. Friend the Parliamentary Secretary may seek to catch your eye later, Mr. Deputy Speaker, to give the financial aspects of the Bill. Those aspects are modest. I stress that the loan is called in only if someone defaults.
The Government's contribution to the arrangement is kept under regular review. The Government have agreed to meet a maximum of 80 per cent. of any loan in default. The bank bears 5 per cent. of the loss, and the corporation the remaining 15 per cent. I stress again that the financial aspects of the Bill are modest, because, since the scheme began, 927 guarantees have been given, covering almost £16 million. The important point is that defaults are very rare. So far, there have been only 53 out of 927, with total grant payments of just over £500,000. I believe that the House would agree that that is a credit to the care exercised on those guarantees by the ACC's officials.
Loan guarantees for co-operatives are covered under the scheme. In 1972 an arrangement for marketing groups 591 was introduced. My Bill deals with the co-operatives and widening the scope of the original legislation. On those aspects of the scheme, the co-operative development division of Food from Britain, which was formerly called the Central Council for Agricultural and Horticultural Co-operation, works in close collaboration with the Ministry. In appropriate cases, and on the recommendation of Food from Britain, the Ministry pays the ACC's fees.
It may be useful to the House if I answer a few questions that are sometimes asked about the scheme. What type of borrower does the scheme primarily help? It helps those who, although creditworthy, lack the necessary collateral to offer security for a normal bank loan. A typical example would be a young progressive tenant farmer in his early farming years who is anxious to expand but lacks the necessary funds. The difficulty of young farmers in entering the business is a matter of great anxiety to hon. Members who represent agricultural constituencies. Any measure that can help them by ensuring that the Government provide the collateral rather than use their own resources will be welcome.
The scheme is also available to help farmers and growers with approved development plans and provides a means to assist marketing co-operatives. I shall explain later how more complex co-operatives have been developing in agriculture.
Is the scheme of particular benefit to tenant farmers? About 75 per cent. of existing guarantees relate to tenant farmers. Owner-occupiers have sources of finance from mortgage loans from the Agriculture Mortgage Corporation secured on property, but those loans are not available to tenant farmers.
The Bill deals primarily with co-operatives. What are the special arrangements for them? Since 1972 the Ministry has been operating a scheme by which marketing co-operatives, which cannot borrow as much as they need because as new organisations they have not yet established an adequate record of operations or because of insufficient collateral can obtain a loan guarantee from the Agricultural Credit Corporation without having to pay the fee. To qualify, a marketing co-operative must satisfy Food from Britain and the guaranteeing body that its proposition is sound. I stress again that the ACC takes great care to ensure that.
§ Mr. Greg Knight (Derby, North)
We live in an age of wine lakes, butter mountains and outrageously subsidised food being sent to the USSR. There was a report in today's Daily Mail alleging that some farmers may be hoarding food. Will co-operatives be able to use these guarantees to finance expansion of products that are already in surplus? If that were so, I would have serious doubts about supporting the Bill.
§ Mr. Leigh
My hon. Friend raises a wide and interesting point. It would be tempting for me to digress at length on the nature of the surpluses that are built up in dairying. My hon. Friend will be aware that the House has been much exercised recently about how the Government in particular and the EEC in general can ensure the reduction of surpluses of dairy products——
§ Mr. Deputy Speaker (Mr. Harold Walker)
Order. I hope that the hon. Member will not do what he suggested a few minutes ago it might be inappropriate to do.
§ Mr. Leigh
I shall try to bring this point rapidly to a close, because I recognise, Mr. Deputy Speaker, that it might lead to a much wider debate.
I do not believe that my modest measure will add to the surpluses in the dairy sector, because I stress that until now the measure has been concerned primarily to help new farmers and co-operatives. I do not believe that they are the people who are producing the surpluses. Much as I should like to develop my hon. Friend's theme, I had better not.
The ACC fees are then paid by the Ministry of Agriculture, Fisheries and Food. About £2 million-worth of co-operative guarantees have been approved through that mechanism since the scheme began. At present there are only four co-operative schemes with those guarantees, totalling about £300,000.
The House may ask whether the 2 to 2.5 per cent. fee charged by the guarantor discourages many farmers from applying. This is not a free scheme, but it is surely not unfair to ask borrowers to meet the costs of the scheme that provides the credit that they cannot normally obtain. The ACC needs the fee to cover its administrative costs and part of the risk that it carries. As any expense is admissible for tax purposes, the effective cost for many farmers and growers is reduced.
The House may also wish to know whether the need for such guarantees shows that the Government are failing to ensure a sufficient return for the industry. I do not believe that to be the case. The relatively modest number of applications suggests that most farmers have no difficulty in obtaining sufficient credit for their needs. There is no evidence that the banks and other credit institutions are unable or unwilling to play their part in providing capital.
I believe that Government support is adequate. Up to £300,000 per annum is available to meet the claims for grants, plus any unspent balance from the previous year up to a maximum of £600,000. As grant of only just over £500,000 has had to be paid since the scheme started, I am satisfied, and I hope that the House will be, that the provision adequately supports the guarantees already given and those likely to be granted in the extension period.
What criteria are used to decide whether to guarantee a loan? The ACC is mainly interested in ensuring that the borrower will be able to service the loan and the capital repayments. When an application is received, the farm is visited and the project for which the loan is required is discussed and assessed, usually in consultation with the applicant's advisers and his bank manager.
Hon. Members may ask why agricultural borrowing has to be so high. I hope that we can avoid extending the debate too far in that direction. The growth in borrowing is best seen against a perspective of the growth in asset values, including land. On average, the ratio of total external liabilities of about one fifth for tenanted farms and one tenth for owner-occupied farms and mixed tenure farms remains satisfactory.
As the Bill concerns the ACC in such detail, it might be helpful if I gave the House a brief description of it. It was set up in 1959 by the National Farmers Unions of Great Britain and Northern Ireland to assist suitable farmers and growers and the co-operatives to obtain fixed-term overdraft loans which would be repayable over periods of up to 12 years. The corporation gave the bank 593 a guarantee indemnifying it against a loss arising from default on the loan. As the House will be aware, that is a central part of the Bill.
In turn, the corporation reinsured itself through the National Farmers Union Mutual Insurance Society. By the end of 1962, the losses on defaults had proved higher than expected, and the National Farmers Union Mutual Insurance Society refused to accept fresh commitments. In those circumstances, the corporation was unable to secure underwriting cover from other sources and was forced to suspend the offering of guarantees, although existing commitments were and are still being honoured.
When the Government-backed scheme for horticultural guarantees was introduced in 1964, a new corporation, Farming Loan Guarantees Limited, was formed and took over all the ACC's existing business. The corporation was then reconstituted to handle those guarantees with Government support. It subsequently assumed responsibility for Government-backed agricultural guarantees as well. FLG no longer accepts new business. Only three FLG guarantees exist, all privately insured through the National Farmers Union Mutual Insurance Society. There is no liability in that respect for Government monies.
The ACC was incorporated on 30 July 1964 as a company limited by guarantee. Its directors are appointed by the parent organisation, the NFU Development Company, and it derives its income from the 2 to 2.5 per cent. guarantee fee to which I have referred.
The present chairman is Lord Stodart of Leaston. I hope that I shall be forgiven for going into the background of the Bill in some detail. However, it is important that the House should understand its provisions.
Clause 1 enables grants to be made to persons fulfilling guarantees in respect of bank loans to a wider range of co-operative marketing businesses than is permitted by section 64(2) of the Agriculture Act 1967 as extended by the Grants for Guarantees of Bank Loan (Extension of Period) Order 1984. It extends the present definitions of "co-operative marketing business" and "co-operative association" to include properties which have as their members other co-operative associations, or associations of co-operative associations, and not only those which act directly on behalf of their producer members. The House will recognise that co-operative associations are becoming more and more complex. That explains why the Bill is necessary.
Subsection (1) amends section 64 of the 1967 Act by the insertion of subsection (8A). The new subsection provides that for the purpose of definitions of "co-operative marketing businesses" and "co-operative association" in section 64(8) of the 1967 Act, members of an agricultural co-operative association which is itself a member of another such association are deemed also to be members of that other association.
§ Mr. Deputy Speaker
Order. I remind the hon. Gentleman that this is the Bill's Third Reading and not its Second Reading. It is not usual to go into the detail of the Bill again on Third Reading.
§ Mr. Leigh
I shall bring my remarks on the detail of the Bill to a close. I shall try to keep my remaining remarks as general as possible.
The Bill recognises that since the 1967 Act came into force co-operative marketing businesses have evolved into 594 much more complex structures which give rise to second-tier co-operative associations. These bodies usually have as their members original lower or first-tier co-operative marketing associations, which exist to market the produce grown by individual farmers or growers, but may include large-scale individual producers in their own right. As cooperative marketing associations develop to meet the continually changing demands of the market place, third or even fourth-tier organisations may be created.
The provision of loan guarantees has enabled a number of agricultural co-operatives to benefit from bank loans in the early days following formation, when they may have insufficient collateral security to attract a loan in the normal course of business. Similar circumstances may apply to a co-operative with more than one tier of membership. The Bill will place such a co-operative on a similar footing to the simpler associations in respect of guarantees.
Section 64 of the 1967 Act empowers the Minister of Agriculture, Fisheries and Food, with the approval of the Treasury, to make a grant in respect of expenditure incurred in fulfilling a guarantee given as security for a loan made in the course of a banking business to a person requiring the loan for the purposes of an agricultural or horticultural business carried on by him where the guarantee was given during the period of three years beginning on 1 April 1966. This enables grants to be made by the Minister to a person guaranteeing a bank loan to an agricultural or horticultural business in the event of a default and where the guarantee is called in.
The second part of the Bill bears little relation to the first part. That is the nature of a miscellaneous provisions Bill. However, I shall briefly set out the principles that lie behind the second part.
§ Mr. Deputy Speaker
Order. I remind the hon. Gentleman that we are debating whether the Bill should receive a Third Reading. I have a duty to protect the interests of the House and those of other hon. Members who are anxious to discuss their Bills.
§ Mr. Deputy Speaker
Order. The appropriate time to discuss the principles underlying a Bill is on Second Reading. I hope that the hon. Gentleman will bear in mind that other hon. Members' business is on the Order Paper and is set down for consideration this day.
§ Mr. Leigh
I shall be brief, Mr. Deputy Speaker.
Under the Agricultural Statistics Act 1979, statistical surveys and an annual census of occupiers of agricultural land have been carried out which have provided data which have been used extensively by Government, industry and the European Community. In 1979, Lord Northfield's committee of inquiry was set up to examine recent trends in agricultural land acquisition. It was critical of the usefulness and scope of the information collected on land ownership and occupancy. It considered that more detailed information was needed on the terms on which agricultural land was occupied and on the pattern of ownership and occupancy to enable proper policy decisions to be taken. It considered that the effects of the policy decisions should be monitored.
The Act does not contain the necessary powers to enable those questions to be asked about the family 595 relationship between any one of the occupiers and any one of the owners or shareholders in the case of a private company, or the beneficiaries in the case of a trust. The Bill will allow questions to be asked about the terms on which and the arrangements under which the land is occupied, managed or farmed by any person.
This is a modest measure that will allow a wider range of co-operative associations to obtain guarantees and a wider range of information to be obtained by the Government, as recommended by Lord Northfield. I hope that the House will consider that it deserves a Third Reading.
§ The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner)
I congratulate my hon. Friend the Member for Gainsborough and Horncastle (Mr. Leigh) on piloting his Bill through the House to its consideration on Third Reading. He referred to the Bill as a modest measure, but the Government congratulate him on achieving his place in the Ballot and on being able to set down a private Member's Bill.
We support the Bill, for it will provide a welcome addition to our support for co-operatives. Since 1967, Government have actively encouraged the development, promotion and co-ordination of co-operatives. My hon. Friend referred to the organisation which has been incorporated in Food from Britain, which was called the Central Council for Agricultural and Horticultural Cooperation. Since 1982 the functions of that body have been part of the organisation called Food From Britain. Its task has been to secure an improvement in the marketing of agricultural and horticultural goods.
The co-operative activity of Food from Britain remains an important part of the organisation's overall activities. Its staff continue to assist and support in other ways, both by establishing co-operatives and by helping them to identify markets. It has set out its own priorities to aid marketing, which are directly concerned with marketing the goods and produce of the co-operatives.
Although it started only in 1982, Food from Britain set up an operational plan last October carrying it up to 1985. It has also set out its priorities in terms of United Kingdom commodities. The list includes many horticultural commodities, such as pot plants, as well as produce such as apples, and so on. The intention is to improve the standards and marketing of those commodities not just in the United Kingdom but in the export market. The four areas selected as priorities for export marketing are Benelux, France, Germany and the United States. To ensure that that objective is effectively carried out, overseas representatives have already been appointed in Benelux, France and Germany and negotiations are in train for a Food from Britain representative in the United States.
The wider objectives of idenifying the markets and encouraging consistency of supply and quality are also an integral part of producers' ambitions. That is their motive for getting together in co-operatives and the Bill will make an additional contribution to that. Before joining together into the larger co-operatives to which the Bill relates, the producers may already have been supplying overseas markets direct. For instance, first-tier producers in my home county of Kent supply the German market with good quality celery and strawberries.
596 The Bill extends the facility to guarantee loans already available to individual producers coming together in a first-tier co-operative. That availability has been assured by the recent passage of a statutory instrument to extend the loan guarantee provision for first-tier co-operatives for a further five years. The Bill will ensure that those co-operatives can form even more subsantial co-operatives to market goods both at home and abroad. Having extended the original facility for five years, it is right that the larger groups should enjoy similar benefits. The Bill will take the availability a step further to higher tiers of farming groups.
Food from Britain also plays a part in advising Ministers on the worthiness of applications by cooperatives for loan guarantees. That is an important means of ensuring the creditworthiness of the co-operative, the validity of its programme and its long-term financial viability.
My hon. Friend the Member for Derby, North (Mr. Knight) expressed concern about surpluses. He will have gathered from my comments so far that the loans are for marketing co-operatives and cover the storage, preparation and marketing, but not the production, of the goods. They will thus not add to surpluses but will improve the availability of outlets for the produce. I do not wish to wander into areas which you, Mr. Deputy Speaker, would rule out of order, but I assure my hon. Friend that the current common agricultural policy discussions involve strict rules about providing any funds to extend support for milk. I shall not go into that today, but I wish to reassure my hon. Friend that the guarantees covered relate not to production but to marketing and the improvement of outlets.
I shall not repeat the points already made about cost, save to say that under the 1967 Act Parliament provided that the Minister might pay up to £300,000 in any one year in support of guarantees, to which could be added money unspent in previous years, up to a maximum of £600,000. Those sums, to which Parliament agreed 17 years ago, should be considered in the light of the cost to the Exchequer in real terms, which has been just over £500,000 in the entire period since 1967 for grants on guarantees amounting to £16 million.
My hon. Friend the Member for Gainsborough and Horncastle referred to the 32 marketing co-operatives which have been assisted by loan guarantees involving a total of around £2 million. It is clear that it has been an extremely worthwhile system. In the past few years there has been a growth in the number of co-operatives that market what Britain produces so beautifully. We have been rather slower than some of our European competitors to market our produce well. That is why, before Food from Britain was established, the Ministry assisted the marketing of our wonderful Cox's orange pippin apples, for example, through the Kingdom apple scheme, which has now been extended to include Bramleys and Russets. I shall try not to incur your wrath, Mr. Deputy Speaker, by going on about various products, but I am only rarely able to mention my own county of Kent.
The Bill extends support for marketing co-operatives. We already have experience of the help, such as is to be found in clause 1, which is given to producers to form first-tier co-operatives. I congratulate my hon. Friend on trying to ensure growth in the number of second-tier cooperatives. He referred to the Northfield committee, which examined recent trends in agricultural land acquisition. The report was critical of the usefulness and 597 scope of information on land ownership and occupancy. We are mindful of that and welcome my hon. Friend's use of the opportunity to take extra powers to acquire such statistics.
§ Mrs. Fenner
I was about to say that present legislation does not give us authority to ask the types of question that Lord Northfield clearly felt would provide us with more useful statistics. With regard to why voluntary surveys would not be sufficient, a small pilot study showed that, with a postal questionnaire in a voluntary survey, the response rate was too low. Only about 60 per cent. responded, and they covered only 53 per cent. of land. That was unsatisfactory.
The Agricultural Holdings Bill is intended to halt the decline in the number of tenancies in farming. It will be impossible to measure its effect unless we have accurate statistics on tenanted land. It is therefore all the more important that we have extra powers to ask questions about types of tenure, the relationship between occupier and owner and different type of owners.
It might be asked whether we shall add such questions to the June census, which is the Ministry's major source of collecting statistics and which is extremely valuable and much used. It might be possible to add one or two simple questions to that census, but types of ownership and occupancy are detailed matters which call for more detailed studies that are directed to occupiers and to owners and their agents, where necessary.
This is an important addition to the armoury of statistics collection. We do not feel it right to ask more questions in the census, but there will be specific surveys. In the light of the great concern that was expressed, first, by Lord Northfield and his committee of inquiry, and, secondly, by hon. Members on both sides of the House, and which led to the introduction of the Agriculture Holdings Bill, such information is necessary to ensure an improvement in the opportunities available to tenant farmers.
I hope that I have fully supported my hon. Friend's Bill, on which I congratulate him again. He said that it was a modest Bill, but it is an extremely valuable addition to improving marketing and statistical knowledge on tenant farming and related matters. Another small, but important, part of the Bill gets rid of one power of entry, and my hon. Friend will know that it is the Government's objective to dispense with those powers as far as is humanly possible.
The need for better marketing of our home-grown agricultural and horticultural produce has been widely recognised, and the setting up of Food from Britain is a major contribution towards meeting that need. Part of the strategy is the encouragement of co-operation. The Bill is a small but useful step in that direction. Given the way in which the guarantee scheme has been administered, and the considerable skill and expertise which is evidenced throughout the co-operative movement, I am confident that any additional Government expenditure that may be incurred through this small extension of the scheme can be contained within the limits set by Parliament.
§ Question put and agreed to.
§ Bill accordingly read the Third time, and passed.