HC Deb 17 April 1986 vol 95 cc1042-106

17.—(1) The provisions of this Schedule shall apply to land which belongs to Her Majesty in right of the Crown or to the Duchy of Lancaster, the Duchy of Cornwall or a Government department or which is held in trust for Her Majesty for the purposes of a Government department, subject in each case to such modifications as the Minister may by regulations prescribe.

(2) For the purposes of this Schedule—

  1. (a) as respects land belonging to Her Majesty in right of the Crown, the Crown Estate Commissioners or the proper officer of body having charge of the land for the time being, or, if there is no such officer or body, such person as Her Majesty may appoint in writing under the Royal Sign Manual, shall represent Her Majesty and shall be deemed to be the landlord;
  2. (b) as respects land belonging to Her Majesty in right of the Duchy of Lancaster, the Chancellor of the Duchy shall represent Her Majesty and shall be deemed to be the landlord;
  3. (c) as respects land belonging to the Duchy of Cornwall such persons as the Duke of Cornwall or the possessor for the time being of the Duchy of Cornwall appoints 1043 shall represent the Duchy and shall be deemed to be the landlord and may do any act or thing which a landlord is authorised or required to do under this Act;
  4. (d) as respects land held in trust for Her Majesty for the purposes of a Government department, that department shall represent Her Majesty and shall be deemed to be the landlord.

(3) Any sum payable under this schedule by the Duke of Cornwall (or any other possessor for the time being of the Duchy of Cornwall) may be raised and paid as if it were an expense incurred in permanently improving the possessions of the Duchy as mentioned in section 8 of the Duchy of Cornwall Management Act 1863.

(4) Any sum payable under this Schedule by the Chancellor of the Duchy of Lancaster may—

  1. (a) be raised and paid as if it were an expense incurred in the improvement of land belonging to Her Majesty in right of the Duchy within section 25 of the Duchy of Lancaster Act 1817, or
  2. (b) be paid out of the annual revenue of the Duchy.

(5) The power to make regulations under this paragraph shall be exercisable by statutory instrument and any statutory instrument containing such regulations shall be subject to annulment in pursuance of a resolution of either House of Parliament.


18.—(1) In this Schedule—

(2) The designations of landlord and tenant shall continue to apply to the parties until the conclusion of any proceedings taken under or in pursuance of this Schedule.'.

The following amendments thereto:

  1. (a), in paragraph 1(3) leave out 'A tenant shall not be entitled to' and insert 'Not'.
  2. 1044
  3. (b), in paragraph 1(3) after 'paragraph', insert 'shall be made'.
  4. (c), in paragraph 7(2) leave out 'relevant' and insert 'specific'.

It may be convenient if I say that I have been asked about the first group of amendments headed by the Minister's new clause 4. If that new clause is agreed to by the House, new clause 6 standing in the name of the hon. Member for Cornwall, South-East (Mr. Hicks) will fall, and it will not be possible for a vote to be taken upon it.

We have followed the normal practice of not printing more than the first six names of hon. Members who have signed a new clause or an amendment. That practice was followed in the case of the hon. Member's new clause 6, but I confirm to him and the House that his new clause has been signed by a total of 26 hon. Members.

Mr. Robin Maxwell-Hyslop (Tiverton)

I am most grateful for that statement, Mr. Speaker, because there is a wide body of opinion in all parts of the House which wishes to have the opportunity of voting for the official National Farmers Union new clause, which is new clause 6. Your statement means that if they wish to do so, they will have to negative new clause 4. Can you further tell the House whether, if new clause 4 is carried, there will be the opportunity to have a separate vote on the Government's new schedule? Although the implication of new clause 4 is apparently to accept the schedule, which is why new clause 6 would fall, nevertheless, many hon. Members would wish for the opportunity of a separate vote on the Government's new schedule.

Mr. Speaker

The question will have to be put on the Government's new schedule, and there will be an opportunity, if Members object to it, to vote upon it.

Mr. Tony Baldry (Banbury)

When last a major agriculture debate was held in the House it was the view of the Government at that stage that it was a matter for the National Farmers Union and the Country Landowners Association to see whether they could come to some agreement on tenancies. The first that any hon. Member knew that that view had been changed was in an answer to a written question in Hansard on Friday.

This new schedule is extremely complex and lengthy. Has there been adequate time for hon. Members to consider it as it has not been considered in Committee? After all, it should be properly and fairly debated this afternoon. Having regard to the weight of work on the House this week, hon. Members have not had adequate time to apply their minds to it and the provision affects the livelihood of many people.

Mr. Speaker

The hon. Gentleman could make that point during the debate on the new schedule.

Mrs. Elaine Kellett-Bowman (Lancaster)

The debate on these amendments has been made more complicated by the fact that unfortunately they were incorrectly printed on the Order Paper for Monday, Tuesday and Wednesday. They bore no resemblance to the amendments on the Amendment Paper today. I wonder why the amendments were not starred, because they were certainly not on the Order Paper yesterday in the form in which they appear today. I refer principally to amendment No. 30. If you would like me to bring both versions to you, Mr. Speaker, I can do so.

Mr. Speaker

When I made my selection, the amendments were not starred and I was able to make my selection from all the amendments which were listed on the Order Paper at the time.

Mr. Jopling

In commenting on my hon. Friend's question, I think it is correct that when amendment 30 was tabled a week ago—I referred to it in the House at question time last Thursday—it was correctly printed.

Mr. Speaker

I think that we should proceed.

Mrs. Kellett-Bowman

It was incorrectly printed in the third succeeding edition.

Mr. Speaker

It was correct when I made my selection.

Mr. Jopling

Before I deal specifically with the clause, I should like to apologise to the House for the absence of my right hon. Friend the Minister of State who hopes to be here by 5.30 pm. His wife presented him with a small daughter within the hour. He hopes to be here as soon as possible so that he may reply to the debate.

The new clause and schedule which are tabled in my name are directed at an urgent and pressing problem. Many tenants of dairy farms are at a stage where they wish to retire or move to a new farm. If they do so, as the law stands at present the quota which they have helped to build up will remain on the land, and they will get no share of its value. Yet it is now generally accepted that in almost all cases both landlord and tenant have contributed to the quota and are entitled to some recognition of that.

In the last few months I have been engaged in the most intensive and through discussions with the National Farmers Union, the Tenant Farmers Association and the Country Landowners Association to try to find an agreed solution to the problem. Most regrettably it has not proved possible to reach agreement despite very genuine endeavours on all sides. In this situation I am clear that it is up to me to act. Indeed, 69 of my colleagues have urged me to do precisely this in early-day motion 650. It would be quite wrong to walk away from the problems, as the effect of doing so would be to leave tenants with no early prospect of any recognition of the contribution they have made to the quota which is attached to the land.

Mr. David Harris (St. Ives)

As one who signed the early-day motion, I ask my right hon. Friend whether he accepts that when we called on him to act, some of us at least did not expect him to use this Bill as the vehicle for bringing in a decision? It was expected that the whole question would be dealt with fully in legislation which would have full and proper consideration rather than being dealt with in an hour or two this evening, without hon. Members have any chance to consider it again.

Mr. Jopling

The Bill came out of Committee at the end of January. I have seen reports in the press over the past few months that its progress through the House was delayed because the Government were trying very hard to find a way of getting agreement, so that the matter could be dealt with in the Bill. I think that has been generally known and I am surprised at my hon. Friend's reaction.

I had to reach a view as to what is reasonable in a situation where the landlords' and tenants' representatives take sharply opposed views as to what should be done. Hon. Members on both sides of the House will have seen the briefing which has been put out by various parties pointing in opposite directions. They may have noted that on the one hand the National Farmers Union has described this proposal as "completely unfair", while on the other the Scottish Landowners Federation has suggested that it brings in

a principle hardly consistent with natural justice". Hon. Members may draw their own conclusions from the fact that the Government's proposal lies between the points of view of those two organisations. For my part I totally reject such extravagant assertions as have been made. On the contrary, I believe that the solution which is set out in the Government's new clause and schedule is fair and reasonable both to landlords and tenants.

5.15 pm
Mr. Eric Forth (Mid-Worcestershire)

Will my right hon. Friend help hon. Members at this stage by saying whether, when he approached the problem, he sought a solution which would provide the full range of possibilities on any one judgment from, as it were, zero to 100, or whether he had it in mind to put an arbitrary limit on the apportionment of value which could be given to either side? It would help some of us greatly if he could let us know what he had in mind.

Mr. Jopling

I shall come to exactly that point a little later in my speech. If I may be allowed to do it in my own way, I hope my hon. Friend will be satisfied.

Mr. Peter Hardy (Wentworth)


Mr. Jopling

These are complicated matters. I shall give way, but I hope that when I come to the section of my speech which is highly complicated I shall be allowed to explain the matter to the House without interruption.

Mr. Hardy

I recognise the very serious difficulty which faces the Minister in trying to secure a just arrangement, but does he not accept that, where a tenant has himself incurred considerable capital cost, perhaps as much as or more than the landlord may have done, the arrangement to which the Minister seems to have been pointing may not be quite as just as he imagined in the first place?

Mr. Jopling

I shall come to exactly that point. I think it is just and that the solution pays full regard to the investment that a tenant may have made.

Mr. Tam Dalyell (Linlithgow)

Some of us have had representations from the Scottish National Farmers Union, Mr. John Biggar, and others. In the rather special circumstances of Scotland, could not the Scottish NFU and the other parties get together in a round table conference under the chairmanship of the Scottish Office Minister to try to sort out these complex matters?

Mr. Jopling

My hon. Friend at the Scottish Office has already done that but, as I shall say later in my speech, my mind is not closed to further discussion.

I am sure that most hon. Members understand the effect of the provisions, but I have found recently in talking to hon. Members and to specialist journalists that there is a good deal of misapprehension, so it might be helpful if I give the House at the outset a brief description of how the system will work.

The starting point is that for each holding a standard quota will be calculated. That will be done by taking the number of hectares used for dairying on a holding and multiplying it by a standard yield per hectare which will be prescribed later in a statutory instrument. It is my intention to prescribe a standard yield per hectare somewhat below the national average yield of milk for this purpose. This is to take general account of the cuts which were applied in calculating quotas, which still affect a significant proportion of milk producers, especially the larger ones who did not have their quota brought back to pre-quota levels in the redistribution.

Mrs. Kellett-Bowman


Mr. Jopling

I shall not give way. I hope my hon. Friend will allow me to continue.

The yield which I have in mind to prescribe as the standard yield per hectare is based on 4,500 litres per cow. Hon. Members will be aware that the national average yield per cow is nearer 5,000 litres, which is considerably more.

If one side feels that this calculation for arriving at a standard quota for a farm does not give the right result, he can argue for a different figure to be used. For example, the landlord might argue that the tenant had used too small a part of the holding for dairying, and that a higher number of hectares should be used in the calculation.

A tenant might argue that the land was of poor quality and only marginally suitable for milk production, or that he had used a low-input system, and a lower yield per hectare should therefore he used. Those are perfectly legitimate arguments and many people have urged me to leave these difficult assessments to arbitrators, the experts. I have provided that where agreement cannot be reached on matters of that sort an arbitrator is at liberty to choose a more appropriate figure where that differs significantly from the standard.

Having fixed this standard quota—the first part of the arrangement that I have been explaining—the next stage is to compare it with the actual quota on the holding. The tenant will get the whole of the value of the quota which lies above the standard. He thus gets full acknowledgement without reduction in cash terms for the fact that he has a quota for his farm that is bigger than might have been expected. It is impossible for us to be more generous to the tenant for that part of his production because he receives 100 per cent. compensation.

We now come to the apportionment of the standard quota between tenant and landlord. In deciding how to do that, I decided that the best way was to build on the well established process of assessing tenant's improvements, a process that is already familiar in the agricultural holdings legislation. The proportion is decided by reference first to the tenant's improvements and then to the rent which the landlord has charged. These two elements determine respectively the tenant's and the landlord's share. The total amount a typical tenant receives is thus 100 per cent. of the value of his excess quota, the amount over the standard quota, plus a percentage of the standard quota, which is related to the value of his improvements.

Let me make it clear that apart from this calculation the tenant will also continue to receive at the end of the tenancy the compensation to which he is entitled under the Agricultural Holdings Act. Nothing in this affects that. That is a quite separate calculation which is unaffected by the new provisions, and compensation for quota is an additional sum which a tenant will receive.

Mr. Ralph Howell (Norfolk, North)

Will my right hon. Friend explain what he has just said? If a tenant pays for 100 per cent. of the improvement, will he get 100 per cent. of that part of the quota?

Mr. Jopling

I am afraid my hon. Friend did not catch what I said. The proportion is decided by reference to the tenant's improvement and then by reference to the rent that the landlord has charged. The value of the improvement is put in terms of rent and then that is put as a percentage of the rent and the tenant's improvement put together. That is a familiar formula for valuers and should not cause too much trouble.

Mr. Brynmor John (Pontypridd)

At the end of the day, the important figure is the percentage that a tenant might receive on the total milk quota. In an earlier discussion a figure of 33 per cent. was used. Could the Minister give an illustrative figure of the percentage a tenant might receive of the total milk quota on the present formula?

Mr. Jopling

I shall come to that point and, as I said to his hon. Friend the Member for Wentworth (Mr. Hardy) perhaps I might be allowed to come to it in my own way.

Mr. Patrick Nicholls (Teignbridge)

My right hon. Friend said that low intensive farming would be taken into account and, impliedly, no injustice would be wrought. We have heard that the variation has to be more than 20 per cent.

If that is relevant, it does not seem to answer the point about low intensive farming. If the 20 per cent. is not relevant, then clearly it does answer the point.

Mr. Jopling

The 20 per cent. trigger point is relevant to that. That is why I said that it made a substantial change in the position. I should like to talk about the tenant who, for whatever reason, has less than the standard quota, the tenant who finds himself with a quota that is lower than the standard quantity. There is a problem here, because the tenant is generally leaving behind him a quota inadequate for the holding. We have to bear in mind the interest of the incoming tenant who is likely in practice to have to find the money. The outgoing tenant's share of the actual quota, calculated for the standard quota, is therefore reduced in proportion to the shortfall. He will, however, still receive, as before, whatever compensation is due to him under the Agricultural Holdings Act, 1986.

That is the second time I have made that point, but it is important to make the position clear.

The effect of all this is, first, that we have a system which is flexible because it allows the professional judgment of arbitrators to be applied to the circumstances of the individual case, and second, the tenant who has performed well and put a great deal of skill, effort and expense into his enterprise will do well. Under certain hypotheses we estimate that the tenant who has performed well could receive more than about two thirds of the total value of the quota. At the other end of the scale the tenant who has invested nothing and has a low level of milk production could get nothing.

But just as there is virtually no case where a landlord should get nothing, there are no circumstances in which even the worst tenant would have to compensate his landlord for what I will loosely call his dilapidations on milk quota. Bearing in mind that the money will normally be found from the incoming tenant, whose ability to pay will depend upon the economic potential of the holding, these proposals provide a system which is fair to all parties.

Mr. Maxwell-Hyslop

How did my right hon. Friend arrive at the figure of 20 per cent. as a substantial difference? In the milk quota regulations 15 per cent. triggers off special hardship on grounds of weather or animal disease or other hardship. Does my right hon. Friend realise how crucial this is? The House has no control over the standard quota figure that he adopts. It is unamendable under the negative resolution procedure and may not even be debated.

5.30 pm
Mr. Jopling

I should be surprised if such a matter were not debated. However, that is a matter of opinion. As regards the figure of 20 per cent., it is important that we should try to achieve uniformity throughout the country—I shall come to that point a little later—and I believe that my hon. Friend holds that view most firmly. But variations should be made only when they are substantial. That is why I used the word "substantial".

Sir Adam Butler (Bosworth)

Will my right hon. Friend give way?

Mr. Jopling

I shall not give way, as I do not want the House to lose the drift of my remarks.

Sir Adam Butler

It is on a very important point.

Mr. Jopling

In that case, I give way to my right hon. Friend.

Sir Adam Butler

I apologise for intervening, but I wish to raise an important point. My right hon. Friend said that in the optimum situation, the maximum that an outgoing tenant would receive was two thirds. Many of us think that in that situation, where the tenant has done virtually everything to create that business and where the landlord has only drawn the rent and made no contributions to buildings or anything else, the maximum obtainable should be nearer the 90 per cent. mark.

Mr. Jopling

The important point is that in all such calculations it must be borne in mind that by providing the land, the landlord has clearly provided one of the ingredients in the quota.[Interruption.] I would not expect Opposition Members to accept that point, but perhaps they will bear with me for a moment.

The land has helped to create the quota so due accounts must be taken of it. By the very introduction of quotas, the landlord has had a penalty imposed upon his land whereby it is no longer able to produce unlimited quantities of milk as it could before the introduction of quotas.

Much of the discussion about this subject, as can be seen in the briefing that the NFU has circulated to hon. Members, has concentrated on the average award that a tenant will receive. Several hon. Members have raised that point with me, not least my hon. Friend the Member for Gloucestershire, West (Mr. Marland), who I know feels strongly about it. However, that concentration is unfortunate for two reasons. First, it is impossible to forecast with any accuracy where the average might come about. The variations in circumstances are so wide, particularly the variations in the value of tenants' improvements, that any such estimates are fraught with enormous difficulty. Secondly, and more importantly, it is not the average that matters anyway. What matters is the result for each individual farmer and whether the individual is being treated fairly. If tenants and landlords are being treated fairly in individual cases, we can say that the totality of the system is fair.

It has been suggested—it is implicit in new clause 6, or what I shall call, for shorthand purposes, the NFU clause—that a 50–50 split should be the norm. But surely the starting point should be the facts of the case rather than some arbitrary figure. The more I have thought about the matter and the more I have considered the role of the arbitrator, the more firmly convinced I have become that we should not pluck a figure from the air in that way. Superficially a 50–50 split looks fair; it always does. However, there is no logic to it.

I just do not think it right to impose an arbitrary figure in that way. But I should make it clear that if, in the further progress of the Bill through Parliament, either side in the dispute or either side in the House wishes to make representations seeking to make this method of calculation even fairer than it is, I shall be happy to listen during the next few weeks. That is the primary reason why I cannot go along with new clause 6 which stands in the name of my hon. Friend the Member for Cornwall, South-East (Mr. Hicks). That clause suggests that a 50–50 split should be the norm, based on a situation in which the landlord has provided all the dairy buildings, and their appurtenances and plant". That does not look to me like the average case, and I have grave doubts about it on that score. But in any case it implies that the tenant who has made no improvements is to get half the value of the quota.

A tenant who has allowed his farm seriously to run down would presumably get less than 50 per cent., but might still get a significant share. I do not see how that can be defended, given that the landlord's interest in the holding would have been severely damaged by that tenant's behaviour. We cannot say to the landlord, "You must not only bear the cost of the fall in the value of your land caused by your tenant's neglect, but you must compensate the tenant for the privilege." Yet that would be the inevitable result of that proposal.

There are two other reasons why I cannot accept new clause 6. First, we have to provide a framework within which professional valuers can operate. If we do not do so, we shall find very different treatment being given to essentially similar cases. Indeed, that was the point that I made to my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop). I believe that new clause 6 would give unpredictable results. The guidance that it gives is short and very general. As a result, we would have much longer arbitrations, more contentious arbitrations and, quite simply, many more of them.

Our proposal provides a framework within which, in most cases, landlord and tenant should be able to reach agreement on the amount of compensation to be paid. Where agreement cannot be reached, we have guidelines within which professional valuers can readily operate. Surely that is a better way of going about things.

Secondly, although it may look simpler, new clause 6 is seriously defective. It does not address a whole series of issues which we have covered in the proposed new schedule, such as the definition of eligible tenants and the application to Crown lands. Such matters cannot be ignored. I make no apology for the complexity of the proposals that I have put before the House. They have to cover a wide range of circumstances.

My hon. Friend the Member for Milton Keynes (Mr. Benyon) has tabled three amendments to the Government's new schedule. The third seeks to restrict the types of tenants' improvements to be taken into account. I just cannot accept that. The first two amendments are directed at a technical point that is concerned with statutory successions. If my hon. Friend would be good enough to withdraw those two amendments, I will arrange for the matter to be considered further, and for any necessary action to he taken in the other place, provided that the House agrees with these proposals.

The discussion on this subject has tended to focus on the interests of the National Farmers Union and the Tenant Farmers Association on the one hand, and of the Country Landowners Association on the other. This is natural; it is these organisations which have participated in the discussions we have had in the last few months, and I would like to thank them for their constructive approach and their willingness to consider all possibilities exhaustively. But one party is not represented in these discussions and that, quite simply, is the person who is not yet a dairy farmer.

We must not make the barriers to entry too high and we must remember that the interests of incoming and of existing tenants differ. Some people have suggested to me that in most cases we are dealing not with a landlord-tenant problem but with a tenant-tenant problem. This may be too simple a way of putting it, but there is a serious underlying point here.

I believe our proposals are fair to sitting tenants, prospective tenants and landlords. In preparing the proposals, I have been greatly assisted by the contribution of ideas from the Royal Institution of Chartered Surveyors and the Central Association of Agricultural Valuers, both of whom have long experience of being fair to both sides. The Government's new clause and schedule draw very heavily on their ideas, and I make no apology for having taken from them the idea of a standard quota.

Finally, I should mention that my right hon. Friend the Secretary of State has also been consulting interests in Scotland, and proposals which take account of particular Scottish circumstances will be brought forward in due course.

Several Hon. Members


Mr. Jopling

I have not had time to mention a number of aspects or I have touched upon them only briefly, but I hope that I have given the House an understanding of how the system will operate. I have given very careful thought to other approaches, but I have concluded that this system is the fairest, most flexible and most practical that can be devised. I believe it is necessary to take this action now to let tenants and landlords know where they stand, and I ask the House to agree.

Mr. Robert Hicks (Cornwall, South-East)

I welcome the Minister's acknowledgement that tenant farmers involved in milk production should be compensated, on termination of their tenancy, for their contribution to the establishment of the milk quota from their farm units. That is a major step forward, and I pay tribute to my right hon. Friend for his recognition of that fact. I believe it is only right that that should be done, bearing in mind that, under the rules, the milk quota, which represents a valuable capital asset which will have accrued in part from a tenant's lifetime of work and investment, will be left by the outgoing tenant with the landowner.

The key issue, of course, is, how the value of the milk quota should he apportioned between the landlord and the outgoing tenant. It is not an easy problem. I am sure that all of us, irrespective of the side of the House on which we sit, recognise that fact. Devising an acceptable and fair formula will not be easy.

I have to say to my right hon. Friend, however, that, seven days since new clause 4 was tabled, many colleagues have told me that, while they may not in every respect go along with the provisions in my new clause, they are equally uneasy in their minds about my right hon. Friend's proposals, not least because they are so complex.

5.45 pm

Furthermore, it is important that Parliament should get it right today, because this may be the forerunner of other parallel situations in the event of quotas being introduced in this country and in Europe in respect of other crops that may be produced.—[HON. MEMBERS: "God forbid."] Some of my hon. Friends say, "God forbid." But it is certainly a possibility. Therefore, if this is to be used as the blueprint, added responsibility is placed on all of us today to make sure that we achieve the most acceptable and fair compromise.

There are 37,000 milk producers in England and Wales, of whom at least 40 per cent. are involved in tenancy agreements. The Minister has today submitted his proposals and outlined the details. The basic reason why I, together with more than 20 of my hon. Friends and, indeed, a number of Opposition Members, have tabled an alternative for determining the basis of the landlord-tenant share is that the Minister's scheme does not sufficiently recognise the tenants' contribution to the milk quota value. It is on this basis of fairness and justice to the tenant's position that I wish to argue my case.

In essence, as the Minister has outlined, his proposal seeks to establish a standard quota. The proportion of that standard quota that should be attributed to the tenant is the crucial point under discussion. If, as the Minister has said, the allowed quota for that farm unit is higher than the standard quota, the excess or difference is automatically credited to the tenant. We all understand that, but, given the make-up of the formula of my right hon. Friend's proposal, I suggest that very few tenant farmers will get into the tenant quota stakes at all. They will be limited because of the physical constraints brought about by the introduction of milk quotas and by the figure that the Minister is introducing as part of his formula.

Even if one accepts the somewhat artificial division of the milk quota between the standard quota on the one hand and the tenant's fraction on the other—which I certainly do not—there are certain critical aspects of the proposal that I believe we must consider carefully. This involves the measurement of the standard quota and the criteria for assessing what part of that standard quota should be attributed to the tenant. I believe that the Minister's proposals are too narrow and restrictive. That is why I believe that structurally they act against the interest of the tenant. There is the relationship between the notional rent value, reflecting the improvements that the tenant has made, and the overall rent charged for that farm holding. My right hon. Friend will know—although naturally he did not admit it to the House when explaining his proposals—that in practice that is bound to be a relatively small percentage.

Although I do not accept some of the things that have been described to Members of Parliament as the realities of the situation, it is worth pointing out to my right hon. Friend that the Milk Marketing Board—which has no direct interest in this, unlike the CLA and NFU—has stated that it believes that the proposed formula to be used to determine the compensation to outgoing tenants for milk quota is incapable of providing many tenants with a fair deal.

That is a fair and objective assessment by a professional organisation that has direct knowledge of, but no direct involvement in, the distribution of the milk quota value. Its advice should be heeded.

Mr. W. Benyon (Milton Keynes)

How many NFU representatives are there on the Milk Marketing Board?

Mr. Hicks

To the best of my knowledge, the Milk Marketing Board is directly elected and represents geographical constituencies. Three members of that board are elected by national constituencies.

My right hon. Friend responded to the three major criticisms that have been made about the problems that will arise from his proposals. I am not convinced by his argument in respect of the low-cost, low-input farmer. Devon and Cornwall are full of such producers. Although my right hon. Friend said that the arbitrator can alter the basic reference point, I am not certain from what he said—I shall read his words carefully tomorrow—that it meets the criticisms that have been expressed. The same argument applies to those who farm in marginal areas.

Having established the standard quota, the Minister has confirmed that the fraction to be apportioned to the tenant is to be calculated on what I would describe as the narrow basis of the rental value of the improvements made by the tenant and the tenant's fixed equipment compared with the rental value of the dairy unit as a whole.

Mr. Douglas Hogg (Grantham)

My hon. Friend is critical of the method of calculation. Does he accept that it is generally used in claims for improvement under the 1948 Act and that it is also the relevant calculation in claims by business tenants under part II of the Landlord and Tenant Act 1954?

Mr. Hicks

To the best of my knowledge, that is correct. In response I would say that we are now dealing with an entirely new situation brought about by the introduction of milk quotas two years ago. Therefore, while taking account of precedent and parallel procedure, this House has a responsibility to make certain that what we formulate tonight is correct in respect of the landlord and tenant.

We can talk only in averages, because, although there is a host of individual situations, we must reflect them as averages. That means that the tenant's proportion will in most cases inevitably be well below 50 per cent. I believe that my right hon. Friend's proposals are basically unfair, because they do not do justice to the tenant's position.

Mr. William Cash (Stafford)

My hon. Friend has referred on a number of occasions to the different circumstances that could arise, and he has related them to the class of person who may be affected under the provisions in the schedule. It occurs to me that there are provisions for different cases within any given class, but has my hon. Friend considered whether these provisions might be hybrid?

Mr. Hicks

I thought that I explained in my introductory remarks that I was attempting to put forward an alternative system that I believed to be fairer and which acknowledged the tenant situation in a more practical and accurate manner than the proposals of my right hon. Friend. I accept that there may be technical deficiencies, but I am more concerned about getting it right in practice.

I shall explain why I suggest that the proposals in new clause 6 are to be preferred. In general, they recognise the contribution of the tenant's expertise and financial investment, about which I have been talking. There is no arbitrary classification of the quota into the standard quota and the tenant's fraction. The new clause takes account of the contributions made by both the landlord and the tenant. I subsections (6)(a) and (10) we set out the criteria that should be used in determining respective proportions. These include not only the fixed costs—which are also included in my right hon. Friend's proposals—but also the variable assests as well.

This list for assessing what the proportion should be reflects the situation in practice. It is more comprehensive than the Minister's somewhat narrow and restrictive formula, which, in my judgment, works to the disadvantage of the tenant. To establish the principle of justice to which I have referred—I emphasise this, because I am sure that my right hon. Friend did not deliberately wish to mislead the House about my counter proposals—the starting point of any arbitration process should be the equal division of the quota value allocation in the case outlined in subsection (6)(c).

I emphasise that that is meant to be a starting point in the interests of fairness and justice. It is right to enshrine this position into statute. Of course, the actual breakdown will vary. I understand that it could end up as 70–30 either way, but the starting point is essential, and we must be seen to be manifesting justice in formulating our proposals.

I make no apology for repeating the fact that I believe that my right hon. Friend's proposals are far too complex. In spite of what he said, I suggest that they do not in reality do justice to the expertise and financial investment that a tenant farmer may well have made over 40 years of his working life. Of course, this has political implications, too, as regards the party in government.

I ask my right hon. Friend to take account of these important additional aspects, bearing in mind the need for justice to the tenant not only to be seen but also to be effective in reality, before he throws out all the suggestions that my right hon. and hon. Friends are making this evening.

6 pm

Mr. John

May I add my congratulations in his presence to the Minister of State? I suppose that he is more accurately described as the "Minister in a state" at the moment.

The buzz phrase of this debate is "I make no apology". I have lost count of the number of times that it was used by the Minister of Agriculture, Fisheries and Food, and even the hon. Member for Cornwall, South-East (Mr. Hicks) fell into the trap. Why should I resist the temptation when it is widespread? So I make no apology for beginning my contribution by observing that we are now paying the penalty for the haste with which the milk quota scheme was introduced. It has made a capital asset of what had hitherto not been traded.

To make the case, I have only to refer to Farmers Weekly of 7 March 1986, in which the Milk Marketing Board talks about people who have milk quotas and are trying to trade them, yet who have never themselves produced milk. We are talking about a scheme which was introduced far too quickly and which has had unfortunate consequences.

This is the most peculiar Report stage of a Bill in my experience. The Bill came out of Committee on time, in accordance with an agreement, which we never hear about, on 28 January, 11 weeks ago today. This must be something of a record. I should like to know of a wider gap than that between the Report and Committee stages. We know—even the right hon. Gentleman admitted that he knew, from reading the papers—that negotiations have taken place during that time between the Country Landowners Association, the National Farmers Union and the Ministry of Agriculture, Fisheries and Food on the question of the outgoing tenant's right to milk quota.

Not suddenly, but rather surprisingly—at any rate to those of us who had given up expectation of ever seeing the Bill again—last Friday there was tabled a new clause over seven pages long. Even allowing for the postponement of the debate by one day, it means that people who have been interested and who have been waiting for this, even if it has not come as a total surprise, have had less than a week in which to study it, and it has not had the advantage of the scrutiny, sometimes tedious but necessary, which a Committee of the House of Commons, considerng a Bill, can give it.

I remind the right hon. Gentleman that when the development land tax was introduced in a schedule by my right hon. Friend the Member for Llanelli (Mr. Davies), a large number of constitutional protests came from Conservative Members, who were then in opposition, about the impropriety of introducing what was a mere three-page new clause. Yet now this has been introduced and the right hon. Gentleman says that he makes no apology for introducing it. I think that an apology is clue.

The clause will be discussed, and I shall deal with its merits, but I want to make it clear that most of the discussion of this matter and its merits will be transferred to another place and that the House will effectively be neutered in its discussion of the clause, apart from tonight's debate, because of the way in which Government have chosen to introduce it. They could have chosen another way. I understand why the right hon. Gentleman wanted to take advantage of the bus that is actually at the stop. Nevertheless, the new clause is a substantial addition to the original Bill, not a mere addition arising out of Committee, and, if the House cannot comprehend some of the explanations given by the right hon. Gentleman, it is his own fault for having introduced at so late a stage and in such complexity this sort of scheme.

Mr. Robert Maclennan (Caithness and Sutherland)

The Minister, in explanation of the hurry, sought to exculpate himself from giving the House inadequate time. He spoke of the urgency of the measure and the need for a settlement. Has the hon. Gentleman noticed that the same argument has not been applied to those w ho hold dairy quotas in Scotland?

Mr. John

I always look with trepidation on the Scottish position, for obvious reasons. Nevertheless, I agree that there is selective haste here.

In aiding the House to discuss the matter, the right hon. Gentleman really has something of a duty to give illustrative figures. He has given some, but they are not, with respect, the illustrative figures, which I understand were the subject of the discussions which all of us, including the Minister, read about in the newspapers. I understand that the figure for the average value which a tenant would get out of the milk quota, which was used as an illustration during the negotiations, was 33 per cent. I do not know how accurate are the estimates of the NFU, but it has done its best in a very short time. It estimates that the average value to the tenant of the milk quota will be 25 per cent. While conscious of the special plea of the right hon. Gentleman, I do not believe that that in any way reflects a fair value for the outgoing tenant.

As the right hon. Gentleman properly said, we must have regard to the new tenant who is coming in, but we must also have regard to the man who has built up the quota by his life's work. This seems to reproduce the conflict that often occurs—in a phoney way in my view—between what is due to the pensioner who created the wealth on which the modern generation relies and the person who is actually producing the wealth today. Unless there is a feeling of justice for a tenant farmer at the end of his tenancy in dealing with the milk quota, neither the person who is presently affected nor the one who is taking over the tenancy can feel any confidence at all.

We really must press the right hon. Gentleman for an average figure. What will be the norm? Is it, as the NFU says, 25 per cent.? Is it the Milk Marketing Board figure, quoted by the hon. Member for Cornwall, South-East, somewhere between 10 and 35 per cent.? I know that individual cases can vary, but the true measure of the overall fairness of the scheme must be the average figure. Heavens knows, we use averages in the House often enough for the right hon. Gentleman not to be squeamish about revealing the average formula on this occasion.

Mr. Nicholas Baker (Dorset, North)

It is incorrect to say that farmers have been working for years to build up the quota. What has happened is that the Government have suddenly introduced a quota, much to everyone's annoyance. What one must try to achieve is a fair way of recognising or rewarding the investment that has been made. Surely the figures that we ought to be interested in are the maximum and the minimum that a tenant can achieve, rather than the average?

Mr. John

I do not agree. I believe that a good indication of the overall fairness of a scheme is the average production of that scheme. I agree that, in shorthand, it was the building up of the dairy business that I referred to, but that does not do away with the problem that I have raised.

The right hon. Gentleman said that he did not want to look at the new clause of the hon. Member for Cornwall, South-East, to which I have added my name, because it imported an arbitrary figure, but he said in his speech that the maximum figure to which a tenant could be entitled, taking all into account, if he had built up the business and if there had been no substantial capital input from the landlord, and so on, would be 66.6 per cent.

The arbitrary figure imposed is for the provision of the land. Even accepting the right hon. Gentleman's philosophy on that, if the landlord provides the land it is to be arbitrarily recompensed at one third. Therefore, under this formula the landlord could never obtain less than one third, but the tenant could get nothing, and certainly never more than two thirds. The parameters for the landlord are between one third and 100 per cent., but for the tenant they are between nothing and two thirds. That is not equitable. I suspect that the right hon. Gentleman will wish to consider that during the course of the debate.

Dr. John Marek (Wrexham)


Mr. John

I prefer not to give way. There have been many interventions in the debate and I know that many hon. Members want to speak. It is only fair to give them the opportunity to do so.

The scheme will be a paradise for agricultural valuers. Would that we were all agricultural valuers at this time. It will not be cheap for either the tenant or the landlord—it is paid equally by them—and we know that fees even for simple things are not cheap. The matter will be complex.

I worry whether the scheme will be workable at all. I hesitate to go into the Bill in great detail, because we are really debating a Committee point. However, this debate is effectively the only Committee stage that we will ever have on the new clause. I agree with the hon. Member for Cornwall, South-East about the standard yield. By definition, the tenant cannot have more than a small fraction of the value of the standard yield. The extra yield over the standard yield may not amount to very much in many cases.

The right hon. Gentleman has tried to approach the matter in a slightly different way. I take it that the level of production that could reasonably have been expected under paragraph 6(1) of the schedule does not take account of the 10 per cent. quota cut imposed upon that land. I should be grateful if the right hon. Gentleman could confirm that, because it is one of the assumptions made by the NFU in calculating its average. It is important in assessing whether it is reasonable.

Paragraph 6(2) will make matters even more difficult, because sub-sub-paragraph (a) refers to the average number of hectares of the land used during the relevant period for the feeding of dairy cows kept on the land. There are at least two problems here. There is the division of the land, first, for different purposes and, secondly, for different species at the same time. How will the arbitrator approach that matter? How can he separate it in practice?

The new clause makes no provision for a statutory instrument. There is a provision in the Bill that a statutory instrument be introduced on average litreage, but there is nothing for the average number of hectares. What is to be the average number of hectares? How on earth is the House to know the answer to that?

The right hon. Gentleman said that he was satisfied that the schedule was right. He had better be satisfied, because the absence of provision for a statutory instrument means that if the scheme goes badly wrong the right hon. Gentleman will have to return to the House for primary legislation to enact any amendment. He will not be able to do it through the statutory instrument procedure.

6.15 pm

Under paragraph 6(3), two categories of person will be disadvantaged—the low-intensive system farmer and the producer on marginal land. The notes on clauses say that the Minister can prescribe different standard yields to suit different cases, and give the example that a different yield might be prescribed for different breeds of cattle. But what about different grades of land? Is that to be a factor? If it is not, it will mean penalisation.

The hon. Member for Tiverton (Mr. Maxwell-Hyslop) made a fair point. If there is to be at least a 20 per cent. difference to enable a departure from the standard formula, that will penalise many people who fall just short or even halfway short of that business. That will not be fair.

The right hon. Gentleman has certainly produced unanimity—I cannot find any organisation that actually approves. Even the CLA, which if not unduly grateful might at least have been reasonably grateful, does not think that the system can work. The right hon. Gentleman says, as do all Ministers, that the fact that everybody is against him means that he must be right. Whether the Government are or are not right depends on where they pitch the final result.

I believe, and I ask the House to accept, that if the final result is an average value for the tenant of 25 per cent. of the value of the milk quota—or somewhere between the 10 and 35 per cent. mentioned by the NFU and the Milk Marketing Board—it will be manifestly unfair. Even on the figures, sketchy as they are, produced by the right hon. Gentleman, the scheme is complicated and unworkable. It is a poor, scant reward for tenant farmers for their hard work and dedication.

Sir Peter Mills (Torridge and Devon, West)

I congratulate my right hon. Friend the Minister of State on producing, as I have already said, a heifer calf. Nothing could be better at this time of talking about dairy quotas than to have that. What a success. I hope that all goes well.

I am rather distressed by the need for this new clause. I do not like to say this, but I am annoyed with the CLA and the NFU because they have not got their act together and decided among themselves. That has put my right hon. Friend in an exraordinarily difficult position as he tries to be Solomon. Surely they could have reached some agreement.

I should have thought that the CLA would want to assist the Government in this dilemma. After all, it has been well looked after by the Government. It has had no fear of land taxation or nationalisation. Indeed, the Government have helped it with taxation on capital transfer and so on. Therefore, I expected it to bend over backwards to reach agreement.

Again, it gives me no pleasure to say that the NFU should have done more, although I realise that it has moved a great deal further than the CLA. Under the quota system, the dairy sector has done extremely well—margins over costs are very good and interest rates are coming down. Recently, my right hon. Friend said that for every 1 per cent. drop in interest rates, £50 million came off the burden for British agriculture. I would have hoped that the NFU could reach agreement with the CLA.

I want to blow my own trumpet a little. The Devon NFU and CLA actually got together and decided on a certain course. I congratulate the chairmen and secretaries of the NFU and CLA in Devon. As the Minister can see from that agreement, his representations were well received by them. No doubt with adjustments that agreement might have been accepted and we could have brought it with us today.

On receiving my letter detailing the agreement, the Minister replied: I find it very encouraging that these county branches should have been prepared to work together so constructively in an attempt to find a satisfactory solution. Why could that not have been done nationally? It is in the interests of the CLA and the NFU to have done so. Both sides should have given in slightly on these matters so that we could have had agreement, for much is at stake here. If we are to have further quotas, it would be better for them to reach agreement than for the Minister to bring this upon us. The Minister will not satisfy the CLA or the NFU.

The brief that we received from the NFU raises three important points. The first is: The definition of standard quota takes no account of the 10 per cent. cuts in production level already imposed. The Minister has answered that by lowering the standard level. The second point is: The proposals would penalise highly competent tenants who use low intensive systems of milk production. That is an important matter. I listened carefully to what the Minister said. I agree that this could be taken into account by the assessor or arbitrator, but I would like that firmed up. When this goes to the House of Lords, I hope that we can have something a little stronger, so that we can be clear that there is fair play towards those with low input production. The third point is: Producers on marginal land would have great difficulty in establishing any excess quota, through no fault of their own. I agree with those three points and hope that they can be considered further.

The fairness shown to the incomng tenant is the nub of the legislation. We must get the balance right between the outgoer and the incomer. The sums involved are pretty high. They might be as much as £20,000 to £25,000. Just think what that would mean to an incoming tenant. He would not be able to find that sum and buy machinery and the other things that he needs to get the farm going.

At meeting after meeting I have heard constantly from the NFU and, rightly, from young farmers, "What will you do about young people getting tenancies? If we go too far with the outgoers scheme, the incomers will not get a look in." That must be sorted out. That is why I disagree with my hon. Friend the Member for Cornwall, South-East (Mr. Hicks), with whom I have shared a room for many years. I believe that it would be unfair to the incoming tenant, so it is a crucial point.

The hon. Member for Pontypridd (Mr. John) asked why there was such a hurry to introduce the measure after such a long delay. Many tenants who are retiring now will get nothing if we do not pass the legislation. That is why the Minister has bent over backwards to get this agreement. It was necessary to save those tenants who are retiring. It is important that we pass the Bill, but I hope that adjustments can be made in the House of Lords to take into account the points that I have raised.

Mr. John

Although I concede the urgency, I do not believe that parliamentary scrutiny of the documents should be a mere formality. I do not believe that the other place should be the only place that can deal with these matters, merely because we have boxed ourselves into a corner, and cannot find the time to consider the Bill properly. Does the hon. Gentleman share my regret that the House is unable to debate the matter properly?

Sir Peter Mills

I understand the hon. Gentleman's point. The other side of the coin is that if we do not get started, those tenants will get no compensation for going out. One might criticise the Minister for not speeding this up, but he tried time after time to get the two sides together. He displayed more patience than I have, but finally he had to act as Solomon in this matter. I hope that the House of Lords will correct the small errors.

Will the capital sum that the tenants receive be taxed? Will the landlord be able to set the payment that he must make to the outgoing tenant against his income? Those are important points. The outgoer may think that he has £20,000, only to find that it is heavily taxed.

Much of the assessment work will be done by the Royal Institution of Chartered Surveyors. But what about the Association of Land Valuers? It is important that it has an equal share in these matters. I may be wrong, but I believe that tenant farmers would value its assessments more than they would assessments by the RICS. The Minister said that there would be some flexibility in the matter. Will he give firm guidelines to the assessors so that they can carry out the wishes of the House? Is there a right of appeal finally to the Minister?

Amendment No. 31 is interesting because it proposes to facilitate the use of land for other purposes. My hon. Friend the Member for Stafford (Mr. Cash) put his finger on an important point. We should study carefully alternative uses of our land instead of food production.

This is an important measure. The Minister has made some reassuring remarks about flexibility and how the assessors or arbitrators can adjust to meet the points that have been raised. Above all, I ask my right hon. and hon. Friends to think carefully about the incoming tenant, who could be penalised if the outgoer gets too much.

Mr. Maclennan

The Minister deserves some sympathy from the House for his predicament, but in the last analysis one must admit that he has not satisfied any of those who are affected by the quota arrangements that were introduced hurriedly some time ago.

Mr. Nicholas Fairbairn (Perth and Kinross)


Mr. Maclennan

The hon. and learned Gentleman says "Rubbish". If he would care to say which interest is satisfied by the Minister's proposal, I should be glad to hear it.

Mr. Fairbairn

The NFU and the Scottish NFU complained of the rigidity of a 70–30 split and proposed an equally rigid split of 50–50. The Minister is to be congratulated on introducing an equitable scheme.

Mr. Maclennan

The hon. and learned Gentleman has made my point. He was not able to cite anyone other than himself who has been satisfied by the Minister.

I recognise the urgency of coming to a conclusion on the matter. I regret the fact that the Minister has taken so long to bring forward proposals. This problem is not a new or unforeseeable one. It was inherent in the introduction of quotas, and attention was drawn to it in discussions on quotas when they were first introduced, in which context proposals were made by members of the alliance parties that they should be tradeable. We published a document the December before last suggesting that arbitration was the proper way to proceed. For many months, the Minister has been pressed to formulate an equitable solution.

6.30 pm

We cannot accept, as an excuse for the extraordinary way in which the Minister has proceeded, the need to move speedily now. The vehicle of the Agriculture Bill is convenient for the Government but not for the House of Commons. It is not convenient to be presented with more than seven pages of schedule containing detailed proposals that we have less than a week to study and consider amendments to and that we cannot properly debate on Report. The Government are making a farce of parliamentary procedure.

It appears, too, that Scottish hon. Members are to be given no opportunity to consider the proposals for Scotland. Apparently, consultations in Scotland are not yet complete. Doubtless provisions will appear in the other House at some time, but the Government's attitude remains unclear. What is clear is that the Scottish interests are no more satisfied than interests south of the border are satisfied by what the Minister has proposed for England.

Mr. John Corrie (Cunninghame, North)

If provisions about Scotland are added in another place, they will return here in the form of Lords amendments and will have to be debated.

Mr. Maclennan

I have already acknowledged that Lords amendments would be considered on the Floor of the House, but the same objection applies to that procedure as to what we are doing today. It is extremely difficult to give proper consideration to detailed legislation on the Floor of the House. Matters such as these should be considered in Committee and debated extensively, and we should be able to take advice about them. We should be able to hear, on each paragraph or sub-paragraph of such a lengthy schedule, the views of those affected.

I am sure that the Minister would not defend today's procedure as being ideal. It is far from satisfactory. We are dealing with the prospects not only of those leaving dairying but also of those who are entering it. We are dealing with a valuable asset that in many cases has been built up over a number of years. The legislation will affect not only the disposition of wealth between landlord and tenant but the disposition of the potential for an income of those who wish to farm in the future. The Country Landowners Association has drawn attention to its view that incoming tenants will be adversely affected by what is proposed, and the NFU has pointed to the adverse effects on outgoing tenants. It is clear that tenants in general will suffer under the Government's proposals.

I agree with the Minister on one point—the general principle that he stated as his starting point. He said that we should start from the facts of the case and not from an arbitrary figure. That is an attractive view. The value of the landlord's assets and the landlord's capital input into an enterprise will vary from case to case, as will the value of the tenant's.

However, when the Minister suggests that his own approach amounts to starting from the facts of the case, that argument is not sustainable. The Minister has invented a formula—complex and opaque, but a formula none the less—and that is the starting point. The concept of the standard quota is a starting point that is not neutral; it is predetermined. It is also defined with such a degree of complexity that it will be almost impossible for farmers to use it to make the ready evaluation of their entitlements that the Minister suggested that they would be able to arrive at by simple consultation with each other. The Minister must be wrong if he believes that the use of his formula will make arbitration unnecessary. It is so opaque that there is bound to be a sense of grievance on both sides. The possibilities for dispute seem to me to be legion.

I note that the suggestion was put forward by the Royal Institution of Chartered Surveyors, which is certainly not unfamiliar with dealing with such disputes. No doubt its members will be involved in sorting out disputes arising from this legislation. However, I do not think that we can feel any confidence that the Minister has avoided the problem that he rightly sought to avoid.

The Minister said that he would be prepared to listen to arguments over the next few weeks. Arguments on what? One of the arguments that has been put forward is that of the NFU, and the Minister has clearly rejected it already. The argument was that there should be a starting point of equilibrium between the two parties to a potential dispute. It is unfortunate that the Minister has so speedily rejected that starting point. It was no more than a starting point, and, as the hon. Member for Cornwall, South-East (Mr. Hicks) pointed out, the formula that the NFU has put forward could result in considerable variations in division of quota between landowner and tenant.

If the Minister will show willingness to reconsider his approach to the NFU new clause—new clause 6, which is in the name of the hon. Member for Cornwall, South-East and a number of other hon. Members from both sides of the House—the debate will have served a most valuable purpose.

The industry wants to get the matter right. The industry wants to get it right more than it wants it to be settled this week or tonight. The industry wants it to be right not only for reasons of equity, and not only because it is necessary to do justice between landowner and tenant, but also because the formula could provide for similar arrangements if in due course other quota systems are introduced in this country. I know that the Minister recoils from that thought and may regard it as utterly unattractive. He was similarly hostile to the idea of introducing milk quotas. We cannot take much comfort from that. Perhaps in reply the Minister will tell us precisely what arguments he will listen to in the next few weeks.

Mr. Cash

On behalf of the alliance, will the hon. Gentleman tell us the extent to which his arguments bear on its proposals for the rating of agricultural land?

Mr. Maclennan

the hon. Gentleman is perpetuating the myth, which has appeared in various Conservative handbooks, that the alliance is committed to rating agricultural enterprises differently from the way in which they are rated at present. He is not throwing light on the debate, but is seeking to throw dust in the jurymen's eyes.

I must address some remarks to amendment (a) to new clause 6 which seeks to extend the provisions to Scotland. I admit that that has been prepared without proper consultation with all the interests in Scotland. We have more milk marketing boards than England, and know that the National Farmers Union of Scotland is unhappy about the Government's proposals.

The Parliamentary Under-Secretary of State for Scotland (Mr. John MacKay)

The hon. Gentleman would know, if he had discussed these matters with either the Scottish NFU or the Scottish Landowners Federation, that my right hon. and noble Friend the Minister of State has had discussions with them to try to reach an agreed solution. Unfortunately, to date that has proved to be absolutely impossible.

Mr. Maclennan

We are interested to know whether the Minister proposes to apply the same solution to Scotland as has been applied to England. I assume that that is the most likely probability. It seemed reasonable to adopt the detailed and workable proposals advanced by the NFU in England. It would have been quite easy for us to try to devise another amendment embodying similar principles, but when work of this kind has been done it seems sensible to adopt it.

Many Conservative Members are anxious to participate in the debate. Therefore, I shall make my remarks brief. The Government would do well to listen to the views of those who support new clause 6, and not to remain committed against it. This is not a matter which will divide the House on party lines. It is important to say that because many regular supporters of the Government may feel that it is appropriate to support new clause 6. I hope that they will not feel inhibited from doing so because a number of hon. Members in other parts of the House support that sensible proposal.

The Minister has had a difficult job to do. I do not in the least underestimate the problem. One must recognise that he has at least tried to be equitable, but I do not think that he has succeeded. That is why I hope that the House will support new clause 6.

Mr. W. Benyon (Milton Keynes)

I declare my interest as an owner of agricultural land, some of which is subject to milk quota.

First, I shall deal with my amendment to the Government's schedule, amendment No. 30. I accept what my right hon. Friend the Minister said in his opening remarks, and I shall not seek to move amendments (a) and (b). All I seek is that only one successor should have an entitlement under section 46 of the Agricultural Holdings Act 1986.

I accept what my right hon. Friend said in respect of amendment (c) which seeks to replace "relevant" with "specific", but I hope that that matter will be considered further. With "relevant", we include matters which are not just dairying matters, for example, field drainage, which could also be used in respect of the production of beef and cereals. Every farm is different. That is why I am glad that the Government, at least on this aspect, have accepted that point, and that we shall not seek to divide the compensation on a fixed ratio.

6.45 pm

Let us consider the position before quotas were introduced. What happened at the end of a tenancy? The tenant sold his stock and machinery, was repaid the residue of his improvements or, in some cases, of dilapidation, and that was that. Then along came quotas and, lo and behold, a heavy capital tax was imposed on the landlord. If we accept new clause 6, it will mean that on a 100-cow unit the landlord will have to find about £30,000. It is said that the incoming tenant will find this, but it is a substantial sum and it will rise as the holding becomes larger.

What will all this do to the landlord-tenant system, which is recovering slowly from the Agriculture (Miscellaneous Provisions) Act 1976? At best, landlords will be reluctant to relet land, and at worst, they will say, "We will never ever put ourselves in this position again. We were kicked on the shins in 1976 and now we are being kicked again." I speak from personal experience because over the past 18 months I have let three farms, two of which are dairy farms, following the change in the tenancy laws. What will I do in the future? The most important question, which was dealt with eloquently by my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills), is what this will do to incoming tenants.

It was incredibly short-sighted of the National Farmers Union in its brief to hon. Members not once to have mentioned that point. It is all very well to concentrate on the position of existing tenants—I accept that their position must be considered—but not to mention the position of future tenants is to neglect the future of British agriculture.

I realise that my right hon. Friend the Minister has had a difficult task and that the matter is extremely complicated. There are only three cases where a tenant is entitled to share a quota. The first is where, by his own competence, he has achieved a higher quota than would otherwise be established on the land. The second is where the tenant has invested in fixed equipment, and the third is where he has purchased additional quota.

The Government's schedule is not clear. I was interested to hear the Minister mention the figure of 4,500 litres per cow. I think that that figure is too low, but that is beside the point. However, the figure is absolutely crucial in assessing the effect which the proposal will have. When the outgoing tenant leaves the industry, the money that is due to him leaves the industry, which is already in severe financial difficulties, and that is an additional loss.

Mr. Hicks

Surely my hon. Friend will accept that in many instances the outgoing tenant may well be moving to another tenancy or, indeed, to the ownership of his own cows. These people are not all retiring necessarily, and therefore it does not follow that all the money is going out of the industry.

Mr. Benyon

My hon. Friend is right, but let us agree that the vast majority will be retiring and getting out of farming, because I think that that is how we all understand the position. I appreciate how difficult the situation has been and will be in the future. It is a sad day for British agriculture when we have to consider the present proposal, and an even sadder day for young people who wish to take part in the industry.

Mr. Kevin Barron (Rother Valley)

I am concerned about the situation of a tenant farmer who came to my surgery about four weeks ago and told me about the plight he would be in should he retire from his farm, which is in the village of Brampton in my constituency. He brought with him a copy of Farmers Weekly. Last month I wrote to the Minister, and I understand why on this occasion he has not yet replied to that letter. In a long conversation in my surgery, this tenant farmer told me how concerned he was about the proposed legislation that is now before us. He said that for the past two years, although there had been a milk quota scheme, there was no way at present in which, if he gave up the tenancy, he would be compensated for what had been a lot of hard work, not just in getting quotas but in ensuring that he produced a good yield from the farm to enable him to accrue a benefit when his tenancy of the farm terminated. He also told me that the landlords' and tenants' associations had not been able to agree on the matter of quotas.

Since then we have seen the Government's new clause 4—and new clause 6, which I understand is sponsored by the National Farmers Union—in relation to what should happen between a landlord and tenant in the ending of tenancies. In his opening speech, the Minister made great play of the fact that some tenants may be able to get up to 66 per cent. of the standard quota to which he referred. He said that they would get all that they produced above the standard quota.

Although the number of tenant farmers has been mentioned, we have not been told the likely percentage of farmers who would reach the 66 per cent. and how many would be lower than that. Many percentages quoted in the debate have been much lower than two thirds of the share of the standard yield. I believe the Minister should have given us appropriate figures. He should have been able to say that the figures from the National Farmers Union are wrong, as are the percentages from the Milk Marketing Board, and that it is unlikely that people will get to that level.

I would not want to see farming in this country changed dramatically. I am a layman—my association with the countryside is walking rather than working—but I have seen dramatic changes in farming over the years which have not achieved the best results for the environment.

I am surprised that people constantly talk about the incoming tenant. The question is whether the outgoing tenant, who has worked on the farm and pushed up the quota and yield, is getting a fair deal on retirement. A similar question has been argued many times in the industry with which I was associated. In this debate we have heard arguments relating to the incoming tenant, when the important question is whether a tenant is fairly compensated when a tenancy comes to an end. The Minister has not convinced me that the arbitration provision in new clause 4 will suit the tenant farmer to whom I spoke a few weeks ago.

I also refer to the tenant landlord, who is a tenant on one holding and a landlord on the rest. Such people, together with the NFU delegation, lobbied me yesterday. A man from the village of Woodall in my constituency said that he was totally dissatisfied with what the Minister was proposing. He urged me to support new clause 6. He did not think that everything about that clause was right, but he believed that at least it provided a better arbitration provision than is provided in new clause 4. I have decided to support new clause 6, because the Minister has not convinced me that the arbitration provision in new clause 4 will satisfy tenants on farms in my constituency. Therefore, it is up to the Minister to offer proper arbitration, not involving inbuilt percentages with a maximum or minimum that people can receive. Tenants who have worked hard to build up quotas and are about to retire should be compensated for their time and work.

Sir Geoffrey Johnson Smith (Wealden)

I wish to raise with the Minister a point which has not so far come into the debate and which concerns the important area— some people may regard it as a grey area—of quota ownership. I refer to a sector of farmers who have various forms of partnership, or share farming or contractual agreements. For many reasons, when they have been drawn up, these agreements have suited landlord and farmer alike, and have helped many young people on to the farming ladder. Few such farmers are registered as landowners or milk producers. In such cases, the name of the landowner is generally used.

Under the Government clause, how is this category of farmer affected? For example, a farmer can have a contractual agreement, own the cows and machinery, provide the labour, operate and manage separate accounts, make all the decisions, and take all the risks. In one such case, a man I know doubled the milk output from his farm, mostly at his own expense, before quotas were imposed. Since then, the value of his cows has been reduced because of the quotas. What will such people do, and what will happen to them? Surely it cannot be fair or just that such a person, through no fault of his own, should see his assets—in this case, cows—fall considerably in value while, at the same time, the milk produced by those cows has increased as an asset, because the milk quota undoubtedly is an asset. In the case to which I have referred, this asset has increased by about £75,000.

Unless the Minister can assure me otherwise, under the Government's proposal, as I understand it, such a person may have no share in that asset. He has no share in the value of the farm. How will he find the capital to purchase the quota for his cows in future? Will there be a future for such people? Most hon. Members who have spoken have had in mind a person who will quit farming altogether, but there are those who, as in the case that I have described, will not quit.

It is difficult for someone in my position, when various suggestions are made on different clauses, to vote against new clause 4. I listened carefully to what my right hon. Friend had to say and I understood in large part what he was driving at. It is important to consider the incomers as well as the outgoers. I regret, as others have, that it was not possible for the CLA and the NFU to do a deal.

7 pm

Am I supposed to vote against a clause which has been introduced by my right hon. Friend and which I understand is backed by independent arbitrators which is important to me? I would have been most mistrustful of any arrangement which had not been so backed. Independent arbitration has been the basis so far which has been much prized and valued. Am I to help to kick out new clause 4 and then vote for new clause 6 which I understand has support from hon. Members on both sides of the House?

Before I decide which clause to vote for I should like to have one assurance at least from my right hon. Friend the Minister of State when he replies. When my right hon. Friend the Secretary of State talks about being flexible, I recognise that that can mean many things. He claims that he has already been flexible enough. When right hon. Members on the Front Bench claim that they have been flexible but are willing to consider representations which will make things more flexible, I wonder to what extent that is just a form of words. When my right hon. Friend replies, will he give me some idea of the areas which he thinks are suitable for further representations which will perhaps meet some of the fears that have been expressed today?

I want to express just one of the fears. Paragraph 6(5) of the new schedule says: For the purposes of sub-paragraph (4) above a number or amount shall be taken to be substantially greater or less than another only if it exceeds, or, as the case may be, falls short of that other by an amount equal to or greater than 20 per cent. of that other. That can be explained in clearer language, although I do not propose to take up time on that tonight. But why do we need to have that qualifying difference to the standard quota? It might be that some of my farmer friends would see that as working to their disadvantage. Would it not be best to throw that out altogether? Might not that be helpful? If not, will my right hon. Friend tell us of some area in future where the Government might be prepared to give so that it will be more amenable to those farmers who at present, from my conversations with them, find it difficult to accept new clause 4 because they find so much of it incomprehensible, and, where it is not incomprehensible, complex?

I believe that the Government want to be fair. Tomorrow night I shall be meeting members of the farming community in my constituency. I shall certainly explain to them as best I can what the Government say today. But I have in mind also that if that is unsatisfactory I shall have the opportunity at a future date to join my right hon. and hon. Friends who may wish to table an amendment in future. Let us hope that that will not be necessary.

Mr. Alexander Eadie (Midlothian)

Many right hon. and hon. Members here today are probably more knowledgeable than I am about agriculture. But, like my hon. Friend the Member for Rother Valley (Mr. Barron), I intervene largely as a result of two constituents who have visited me at my surgery. They are tenant farmers, and they are worried about milk quotas.

This is a debating Chamber. Having listened to the debate so far, I can to some extent understand the dilemma in which the Government find themselves. But the Government must recognise the changed circumstances. Although the Minister said that he could not obtain agreement and therefore had to take the middle road in his formula, the strength of the debate—at least as I have judged it so far—is that the right hon. Gentleman seems blatantly to be giving more preference to the landlords than to the tenant farmers.

If there is any doubt about the feeling that exists and the political time bomb that the Government are trying to tackle here, it is probably best illustrated in an NFU document, which says that the strength of feeling amongst tenant farmers on this issue is enormous.

On Radio 2 this morning I heard somebody say that the Government are beginning to lose touch with the people. I have a shrewd hunch that in coming forward with this new clause and schedule the Government have to some extent lost touch. The Minister has admitted his difficulty in not obtaining agreement between the NFU and the landowners and that the formula is complicated. However, I judge that in that complicated formula he is giving blatant preference to the landowners rather than dealing with the problem of the tenants.

My hon. Friend the Member for Pontypridd (Mr. John) got it right when he said that percentage is everything. Of course percentage is everything. Based on that are some of the judgments that we can make about future opportunities for farming. If the landowners are favoured too much the opportunities for young people to enter farming in future will to some extent be jeopardised.

I believe that the Government are treating this important aspect shabbily. We are told that we are doing something on Report which should have been done in Committee and that, if we do not like it, perhaps when it comes back from another place we may have another bite at it. Then the Minister says that he is prepared to consider certain propositions. He is prepared to do that after, as I understand it, the Bill has been driven through the Lobbies tonight. That is a shabby way to deal with the Bill and a most unsatisfactory way for the House of Commons to deal with this important issue.

I have received a letter from the Scottish NFU on the milk quota landlord-tenant sharing arrangement. It says that the alternative new clause prepared and supported by the Scottish and English NFUs will be available on a certain date—which it gets wrong, but that is not its fault—and urges all Scottish Members to support that alternative new clause. The letter goes on to say:

we believe this is essential because of the current intention to put forward legislation for Scotland only in the House of Lords at a later stage in the Bill's progress. Again, I think it is rather shabby that the House of Commons is not to have the opportunity to consider that aspect of the legislation. We have to leave it to the other place to decide what is going to happen, and then it will come back here. If the argument is to be about the landlord and tenant arrangements—I do not wish to cast any aspersions on anybody—I have little confidence in the other place being able to come up with legislation that will be beneficial to all concerned.

Mr. Alexander Pollock (Moray)

The hon. Gentleman will be aware that a number of people have advocated a greater amount of time to allow wiser counsel to prevail in consultations with the various bodies in an attempt to find a solution. This was very much the point made by the hon. Member for Caithness and Sutherland (Mr. Maclennan). Is the hon. Gentleman aware of the terms of the letter written by the Minister of State, Scottish Office, yesterday? He said: The position in Scotland is that, while we accept the principle of waygoing tenants' right to compensation, we have not as yet reached a final view on the arrangements to be introduced for Scottish tenants. Surely, against that background, it is useful for us to wait and see what may emerge from the other place.

Mr. Eadie

The hon. Gentleman makes a fair point. He has an advantage over me. I have not seen the letter to which he refers. I make no complaint about that, but I think he will have to take on board the point that I have tried to make. Have we more confidence in the House of Commons than in the other place when it comes to being able to deal with the issue of landlords versus tenants? Therefore, although he makes the point that there is difficulty in making arrangements, I will quote the relevant paragraph from the Scottish NFU. which the hon. Gentleman will have had the advantage of seeing. It says:

We are extremely pessimistic of the possibility of Scottish legislation providing any significant improvement in the terms of allocation of quota between landlord and tenant, unless the weaknesses of the Government's intentions are adequately exposed in this week's debate. First, the weakness in the Government's handling of this legislation is exposed. Secondly, the shabby way in which it is intended to try to drive this new clause through the House of Commons also exposes the Government's weakness. I shall have no inhibitions about opposing new clause 4. If it is said that this is a non-political point and if there is a spirit of neutrality on both sides of the House, I hope that the Government will see fit to withdraw their proposal and allow further consultation to take place. I shall then be able to go back to my constituents and meet my constituency branch of the National Farmers Union and tell them that the Government are serious about wanting to be fair as between landlord and tenant in relation to milk quotas.

7.15 pm
Mr. Nicholas Winterton (Macclesfield)

I shall be quite brief, because many of the arguments have been rehearsed already in this debate. I believe that the method that the Government have chosen to introduce this very important new clause on Report highlights the dangers, injustice and stupidity of adopting this course of action. We are discussing a highly complicated and very sensitive matter—the future livelihood of people who have invested a whole life's work in the dairy industry in this country.

I would reply to those who criticise me for what I am about to say by stating that this situation has been forced upon the dairy industry, both landowners and tenants, by the Government. The dairy industry as a whole did not seek the imposition of milk quotas, nor did the landowners or the tenant farmers engaged in dairy farming. Surely, on an important matter such as this, we in this House should bring justice to a situation which has been causing increasing anxiety, worry and problems to the dairy industry ever since the imposition of the dairy quota.

I would say to my right hon. and hon. Friends on the Front Bench that the Government can criticise the Opposition, and vice versa, but I give the Opposition credit on this score: when, in the 1970s, I served on the Committee on the Agriculture (Miscellaneous Provisions) Bill they introduced an important new clause on the succession of tenancies. We strongly opposed it in Committee, but we did have the opportunity of opposing it, of putting down amendments, in the sure knowledge that we would then have a full debate on Report before the Bill went to the other place, so that all the problems of that new clause and all that went with it could be adequately discussed in the House.

What is more—this has been highlighted by some of my hon. Friends and by Opposition Members who have spoken in the debate—that gives the outside organisations, the tenant farmers, the NFU, the Tenant Farmers Association, the Country Landowners Association, the valuers and the professional bodies involved, every opportunity of presenting their case, their concerns and their criticism to hon. Members, who then, when we come to the debate, can reach a decision in knowledge and not in ignorance.

One of the reasons why I shall support my hon. Friend the Member for Cornwall, South-East (Mr. Hicks) in the Division Lobby tonight is that I believe that he has put forward a more just way of solving this problem than have the Government. There may be criticisms which my right hon. and hon. Friends on the Front Bench can level at the new clause but I believe that, on balance, in the words of the NFU brief, he is seeking to deal with "a typical situation" and a 50–50 situation to start with is an equitable one. To start with any less than that is to show bias towards one party as against the other, and I do not believe that the House seeks to do that.

I make this point very clearly to my right hon. and hon. Friends on the Front Bench. I have many tenant dairy farmers in my constituency. I have two or three substantial landowners. The difference between the landowners is very marked. Some are excellent in their dealings with their tenants and provide massive investment in the land. Here we have a situation which could adequately be dealt with under new clause 6. The quota allocation starts on a 50–50 basis, and if there is any dispute between the tenant and the landowner it goes to arbitration and the quota allocation can be reduced from, say, 50 to 20 for the tenant, while the landlord has 80, or vice versa. But it starts on an equitable basis, and if the House is not prepared to provide that it is nonsense to debate this situation tonight.

I have grown up with the agriculture industry. I have no vested interest. My father's family were auctioneers, valuers and estate agents of 150 years' standing. When one has grown up with the dairy industry in particular, one understands the commitment, not only to the land, but to the job that is being done. It is not just a five-day-a-week job; it is not a job from 9 to 5. When one is dealing with livestock, it is 24 hours a day, seven days a week, 52 weeks a year.

From the representations that have been made to me by the chairman of the Cheshire NFU, who is a tenant dairy farmer from Lower Withington in my constituency, and the arguments that he and many other tenant farmers have put to me, I believe that there is a case that deserves to be heard. I do not like to have to decide on such an important matter in this House when the first I knew of what the Government were doing was when a new clause was put down last Friday which, sadly, I did not see until Monday of this week.

Mrs. Kellett-Bowman

I only want to observe that when my hon. Friend saw it on Monday it was incorrect and it was therefore more misleading than ever.

Mr. Winterton

My hon. Friend makes a valid point. There have been only 72 hours, therefore, in which to hold consultations and reach a decision.

My hon. Friend the Member for Cornwall, South-East presented a very fair case. It convinced me far more than did the case presented by my right hon. Friend the Minister of Agriculture. My right hon. Friend is not in his place at the moment. He has had a difficult job to do, and many hon. Members are disappointed that the National Farmers Union and the Country Landowners Association have been unable to reach a decision on such an important matter. Would it matter if there were a further delay for two or three months? I do not believe that it would.

We shall have to vote on Government new clause 4. There will be no opportunity to vote on the merits of new clause 6. I shall vote against my party, not because I think that it is seeking to do wrong, but because it has not taken on board all the views that should have been considered when dealing with such a complex matter. The NFU feels very strongly about this matter. It believes that tenant farmers are very anxious and angry.

My hon. Friend the Member for Milton Keynes (Mr. Benyon) said that we must not discourage young people from entering the farming industry. Although it is not mentioned in its brief, I am sure that the NFU is more than aware of this. In the late 1970s, during the proceedings on the Agriculture (Miscellaneous Provisions) Bill 1976, many Conservative Members stressed the need to bring new life and young people into farming. This priority was highlighted time and again. The House should give more than just fair weight and a fair wind to the views of my hon. Friend the Member for Cornwall, South-East. I shall vote for the spirit of his amendment when I vote against the Government in the Division Lobby.

Mr. Richard Livsey (Brecon and Radnor)

Before I deal with new clause 4, I, too, should like to congratulate the Minister of State and his wife, who have done so well in producing their child so soon. I sympathise with the Minister of Agriculture, who has been suffering from influenza this week. Although he is not in the House, I am glad that his voice held out long enough to explain the complexities of new clause 4. It was extraordinary that he had to plead for silence in order to explain its complexities. If he found it difficult to explain the new clause, how are right hon. and hon. Members expected to understand it, and how can those outside Parliament be expected to accept it? The unacceptability of new clause 4 is to be found in the first line of paragraph 6(1) of the new schedule and in the calculation of quota in paragraph 6(4).

The definitions of standard quota depend on a formula that is to be put forward in a statutory instrument. A formula that is based upon 4,500 litres per cow and upon a stocking rate of 1.9 cows per hectare and which also takes account of rental value of the land, does not stand up to examination. The Minister says that the formula allows for flexibility, but I believe that it is set in concrete. The attraction of new clause 6 is that it is much more open-ended. It provides a much fairer basis for arbitration.

If the Minister's fonnula were used for a standard quota, in certain circumstances a tenant could be left with almost nothing. The legislation must be seen to be fair. This proposal is not the same as that of February. The formula is inequitable in its approach to the farmer on marginal land when compared with, say, grade 2 land. There are 37,000 dairy farmers in England and Wales. Many of them are farming on marginal land, not on high quality land. The Minister's formula will militate against those farmers who, because they are farming on marginal land, already operate at a disadvantage.

The Minister referred to the position before the introduction of milk quotas in 1984. Production was then 10 per cent. higher than it is now. This formula means that the tenant's quota will now be even lower. The Minister's arbitration proposals are very restrictive and will probably tie the hands of the arbitrator. The Royal Institution of Chartered Surveyors is critical of this proposal. A tenant could end up with only 25 per cent. of the quota, which would be inequitable. The hon. Member for Milton Keynes (Mr. Benyon) said that if new clause 6 were agreed to, it would result in a tax on landlords. However, he neglected to say that, because the quota is attached to the value of the landlord's land, its value is greater. Therefore he does not lose to such a great extent.

Mr. David Heathcoat-Amory (Wells)

The hon. Gentleman may know that in Somerset his party has made great play of the need to retain county council farms in public ownership in order to give opportunities to new entrants, yet he is supporting an amendment that would have the affect of increasing the compensation paid by landlords to existing tenants at the expense of incoming tenants. Therefore he is supporting the erection of a new barrier against new entrants. Is he able to explain this paradox in Liberal thought, or is he happy about a policy that pulls in both directions at the same time?

Mr. Livsey

No. I am looking for an equitable solution to the problem, for a solution that is fair to everybody. New clause 6 introduces equity and proper arbitration. Every point is taken into account, particularly arbitration in the case of county council smallholdings. We believe that that is a fairer starting point.

New clause 6 has the support of many members of different parties, and I feel that it is important to have cross-party support on this issue because we shall have to live for a very long time with the solution that is chosen. Governments of different colours will have to live with it and administrate it.

7.30 pm

It would be better for the Government to accept a clause acceptable to the broad view of hon. Members with farming interests. If we fail to secure consensus, I do not think that we shall be able to carry the proposal forward. If the Minister is to impose a scheme that leaves the tenants with, on average, 25 per cent. of the quota, he will be presenting a formula that hon. Members will not accept for very long.

We wish to include Scotland in new clause 6. There have been strong representations from Scotland on the clause, supported by many of my hon. Friends such as my hon. Friend the Member for Gordon (Mr. Bruce) and my right hon. and hon. Friends who represent the Borders. New clause 6 is supported as well by my hon. Friends the Members for Yeovil (Mr. Ashdown) and for Truro (Mr. Penhaligon).

The worry about incomers has been stated. I have a great deal of sympathy with the arguments about young farmers coming into the industry, the value of the quota and the barrier that that could present to them getting into farming. We need to address ourselves to that problem.

Mr. Colin Shepherd (Hereford)

Will the hon. Member therefore not just buck the issue but address himself to it now? It is fundamental to the industry's future structure and we cannot leave it to be dealt with on another occasion. Will he deal with it now?

Mr. Livsey

I shall deal with it. I believe that arrangements should be put in train for the milk marketing boards to have available a reserve of quota to cater for these circumstances. We cannot in this brief discussion go into the details of such a scheme, but I would suggest that in the future we look to such ideas as a means of resolving these problems.

On the Continent younger farmers can borrow at far lower interest rates than is possible in this country. We need to examine that facility so that quota is available at more preferential rates. This vast subject needs to be opened up on another occasion.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. John Selwyn Gummer)

The hon. Gentleman has mentioned a matter of great importance to the House, which is the problem of possible barriers against new people coming into the dairy industry. Is he suggesting that we should reduce the quota available to those who are already in the industry, in order that the Milk Marketing Board might hand it out to newcomers because that is the only way in which spare quota can be found? Or, is he suggesting that there should be some sort of buying-in arrangement? If so, who would finance that? Does he not accept that the incoming tenant will always have to pay what the outgoing tenant gets?

Mr. Livsey

Additional quota could be found for entrants into the industry. The situation is not as the right hon. Gentleman has described. I think that it will be possible to provide quota in future.

We are discussing a reduction of 3 per cent. in the quota under the outgoers scheme. Clearly, people are going out of production. Quota will be available in the future, and some of that could be put in reserve.

Mr. Maclennan

Does my hon. Friend not also recognise that, if the outgoing tenant is not to receive a fair share of the quota, it is a positive disincentive to him to move out, and consequently make the enterprise available to an incomer?

Mr. Livsey

I agree with my hon. Friend. I ask the Government, in the interests of the industry, to withdraw new clause 4 to allow us to vote on new clause 6. Hon. Members from both sides have demonstrated a degree of unity on new clause 6, which does not exist on new clause 4.

Mr. Charles Morrison (Devizes)

Even though I am chairman of the all-party group on population, I congratulate my right hon. Friend the Minister of State on his happy event.

Today, we are concerned with surplus milk production. Like my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) I think it is regrettable that the National Farmers Union and the Country Landowners Association were unable to reach a reasonable agreement after many weeks of discussion. I appreciate their difficulties, but it seemed that they might have been able to give and take enough to ensure that a reasonable compromise between their varying interests was achieved. Not only would it have been far better if they had done that themselves, but it would have removed the difficult situation now facing my right hon. Friend, whereby he thinks that he has to impose a solution on them.

At the moment I am not sure that we shall get the right answer to the problem. I wonder why we have not been presented with an enabling clause, rather than precise proposals, which would have allowed further discussion to go ahead on the basis of the proposal of my hon. Friend the Member for Cornwall, South-East (Mr. Hicks).

Both proposals have their advantages, but it seems to me that, given the short time available for consideration of these proposals, it is likely that we shall not get the right answer tonight.

I share the concern expressed by my hon. Friend the Member for Milton Keynes (Mr. Benyon) about the problems of new tenants. That is one of the reasons why I think it is wrong tonight to come to a final decision. The problems to which he referred are very genuine indeed.

I was pleased to hear the comments of my right hon. Friend the Minister about the calculation of the standard quota. He intends to do his best to meet the points made in that regard by the National Farmers Union.

I am concerned most about compensation. As we know, it is possible for a landlord to obtain 100 per cent. of the compensation. The same should be true for the tenant in certain, albeit rather exceptional, circumstances. Let us take, for example, a tenant farmer on the Wiltshire downs who many years ago took an arable farm and decided to have a Hosier milking system, using a mobile Hosier bay. Let us assume that he wishes to give up. So far as I can see, there is no reason why he should not return to his landlord an arable farm, which is what he took. Every aspect of the dairy investment would have been paid for by the tenant farmer. What conceivable argument could there be to prevent that tenant getting 100 per cent. compensation?

Mr. Douglas Hogg

In those circumstances the tenant would already have a claim for improvement under the Agricultural Holdings Act 1948.

Mr. Morrison

That has nothing to do with the quota. If I am wrong, my right hon. Friend the Minister of State will correct me.

My hon. Friend the Member for Horsham (Sir P. Hordern) has whispered in my ear another example of a third generation tenant farmer of a third generation landlord. If the landlord has done nothing to assist the tenant farmer, what conceivable argument is there for that tenant farmer not getting 100 per cent. compensation? Because my right hon. Friend's proposals do not seem able to meet that case, and because on the other hand the proposals of my hon. Friend the Member for Cornwall, South-East seem to have the flexibility and, indeed, the relative simplicity that are required, as of now I propose to support my hon. Friend's new clause, if I have the opportunity to do so.

I have not thought this through, but in regard to appeals, might it not be possible to have a system whereby the most exceptional cases of the type that I have described are referred under a special provision to the Agricultural Lands Tribunal? I do not know whether that would cope, but it might be a way round the difficulty that I have described. I should like to think that my right hon. Friend will be able to answer adequately my points, but as of now I doubt it. For that reason I intend to support my hon. Friend the Member for Cornwall, South-East.

Mr. Allen McKay (Barnsley, West and Penistone)

Like my hon. Friend the Member for Rother Valley (Mr. Barron), I do not have a brief from the NFU or from the Country Landowners Association. All I have is a letter written on behalf of tenant farmers in my constituency. They think that they are getting a raw deal. They may be third and fourth generation tenant farmers who have put a lifetime of work on farms which have been built up over the generations. Those tenant farmers have worked many hours and have put buildings on the land. At some time they will get compensation for those buildings, but if there is to be compensation for milk quotas, they think that they should get the reward for the work that they have done.

I accept the argument about the incoming tenant farmer. I recognise the problems about encouraging people to come into the industry. The Government propose to pay compensation to a person who has not even started to put in any effort. They say that they will pay compensation to someone who has done virtually nothing.

What about the landlords? Who is the landlord? There are many absentee landlords. In my area the landlords used to be the Fitzwilliams, the Straffords, the Wortleys and the Wentworths. They looked after their tenant farmers. The landlords do not live in the area any more. In many cases they are companies owned by shareholders, and they never appear on the land. The landlord's responsibilities are carried out by an agent. My tenant farmers wonder why those absentee landlords should be compensated for the work that the farmer and his family have put in for many years.

7.45 pm

Why are we giving compensation for quotas? As I understand it, quotas came into being under an EEC ruling. Because there is over-production of milk, the Government had to decide how much should be produced on each farm, and on which farms it should be produced. The quota is a licence to produce a certain quantity of milk. It is we who are putting a valuation on the quota. A goodwill arrangement is being created. It is not an outgoing quota. I could understand it if compensation was to be paid to a farmer who was being forced out of business, rather than retiring or going out of business voluntarily, because the Government did not want his milk any longer. What we are talking about is goodwill. We should consider the analogy of the goodwill of a shop. Compensation for goodwill goes not to the person who owns the shop but to the person who has built up the business in the shop. I recognise the difficulties which we are running into.

I am concerned that this will not be the last time this will happen. We are talking about milk production, but what will happen if there is a surplus of potatoes or cereals? Will the EEC say that there must be cuts in production and that we have to introduce quotas for them. If so, the Government will come to the House with legislation and we will have the same argument again.

This is a classic example of a matter that should have been discussed not on the Floor of the House but in a Special Standing Committee which could have gone into detail on all the pros and cons. When the Minister replies, he may be able to tell us why we have got into difficulty. In the past, when a tenant farmer left his farm, there was an auction and he got his compensation from the materials which he sold and for the buildings which he left on the land. For the first time we are introducing the goodwill aspect into farming. The farmer will be selling not something tangible but a licence which has been issued by the Government to produce a certain quantity of milk. That is the danger in the Government's proposal.

Mr. Douglas Hogg

It is unfortunate that we are discussing such a complicated matter at this stage of the Bill. In effect, we have before the House a very detailed draft which should be debated as it would be in Committee, but we cannot do that. In essence, we are talking about the principle of the new clauses. Therefore, I share the disquiet expressed by many hon. Members about the way in which we are being asked to consider the matter for the first time.

The House is considering two principles which are enshrined in the two new clauses put forward separately by my right hon. Friend the Minister and by my hon. Friend the Member for Cornwall, South-East (Mr. Hicks). They are designed to achieve different things. Surely we should now be trying to determine the underlying principle which we should apply to the proposal for compensation. If we can identify the principle that we should apply, we can decide which of the new clauses is more consistent with that principle.

There are comparable situations from which we can gain guidance and I should like to suggest two. There is the procedure under the Agricultural Holdings Act 1948 whereby the outgoing tenant has a claim for improvement on the termination of the tenancy. Secondly, there is the situation that arises in the context of business tenancies under the Landlord and Tenant Act 1954, part II, where again a tenant has a claim for compensation on the termination of the tenancy. It is important to determine what the tenant in those two cases is seeking to recover. He is not just seeking to recover a lump sum because he is leaving the premises. He is not entitled to that. He is entitled to claim compensation only for improvement. The principle upon which that is assessed is the betterment of the landlord's premises, the improvement to the landlord's premises which is attributable to the work or the investment of the tenant.

Mr. Maclennan

I realised from his earlier interventions the line that the hon. Gentleman would follow. He is missing the point that this is not a proper analogy. Effectively, the tenant has freely entered into a contract, a lease, the terms of which and the law surrounding which are clear to him. The situation is now different. The creation of quota is the creation of an asset, and if the owner of the asset is not properly compensated as a result of what the Government are doing, the Government are effectively expropriating the tenant or, for that matter, the proprietor.

Mr. Hogg

I do not agree, for two reasons, one general and one specific. My general reason is that this is not a capital asset in the conventional sense. It is much more analogous to the possession of a shop which has a specific planning use prescribed for it which is more advantageous than another kind of planning use. In any event, if the hon. Gentleman looks at the Agricultural Holdings Act which was introduced by the Labour Government in which he was a Minister, he will see that the same system of betterment was applied to improvements carried out prior to 1968. That of course is analogous to the present situation.

We should try to determine the relevant principle, and it seems to me that the relevant principle, deduced from comparable situations, is that the tenant has a right to claim compensation to the extent that his work and his investment has improved the assets of the landlord. I do not accept that the tenant has a right to claim compensation or financial recognition or a lump sum beyond the level of that recognition. If one applies that principle lo the two new clauses, I suggest that one will see that the Government's new clause is preferable.

New clause 6 is advanced by my hon. Friend the Member for Cornwall, South-East and is not directed towards providing financial recognition for betterment. It is doing something else. It is saying that an outgoing tenant has some form of proprietorial interest in milk quota irrespective of the contribution that he has made to improve the landlord's asset. I do not accept that analysis. New clause 6 also had the pragmatic disadvantage mentioned by my hon. Friend the Member for Milton Keynes (Mr. Benyon) and by the Minister that, if we adopt new clause 6, we are taking capital out of agriculture and are likely to impose a burden on incoming tenants. That is a pragmatic disadvantage, although it is not as serious as the disadvantage of principle to which I have referred.

Mr. Maxwell-Hyslop

My hon. Friend has overlooked the point that was also overlooked by the Country Landowners Association. There is quota on a farm that has quota only because the tenant was producing milk on the crucial date. If he had not been producing milk on that crucial date, there would be no quota and the owner of the land could not let it to anybody or take it in hand and produce milk on it. Secondly, the quantum of that quota is related to what the tenant was producing in the base year. It is the tenant who creates the quota, not the landlord. It is true that it could be said that it could not be done without the landlord, but it is also true that the tenant could not have done it if his parents had not given birth to him. It is the tenant who creates this valuable, negotiable, rentable and saleable asset.

Mr. Hogg

My hon. Friend is not wholly right. Both parties created the asset.

Mr. Nicholas Winterton

No—the Government created the asset.

Mr. Hogg

Many parties created the asset.

Mr. Winterton

No, the Government.

Mr. Hogg

The Government created the asset in one sense and the tenant created it in the sense put forward by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) and the landlord created it in yet a third sense. It is a fact of history which came about through a combination of circumstances. We still have to analyse the principle on which the compensation is recoverable. I believe that the principle is betterment and enhancement. That is a difference of principle between us and reasonable men can differ about that. We need to identify why we differ about that and I submit it is because our purpose and objective are different. If that is right, one turns to the Government's proposal.

I agree with my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) that there are problems about the Government's new clause 4. I agree with him that the new clause does not accord sufficient recognition when dealing with standard quota to the problems of marginal land, and to the problems that would flow from low input farming—a policy often advocated by Ministers.

I put those criticisms to the Minister, but he is right in introducing a clause that is designed to confine compensation primarily to betterment and enhancement over and above what would otherwise be the case. That is the correct approach. I recognise that a number of my hon. Friends do not agree with me, but that is perfectly understandable because in a sense we are debating a principle. Once the principle of betterment is accepted, the Government's new clause 4 is to be preferred to that of my hon. Friend.

Dr. Roger Thomas (Carmarthen)

When the milk quotas were introduced two years ago, three of the areas hardest hit were south-west Wales, Cornwall and Devon. But that is not the reason why the farmers of south-west Wales are disenchanted with clause 4 and happy with clause 6. The hon. Member for St. Ives (Mr. Harris), in an intervention, said that this matter should be before the House in the form of an entirely new Bill and go through all stages, especially Committee, when the nuts and bolts and intricacies of the matter could be examined in far greater detail.

It is a great disservice to the farming community, especially to tenant farmers, that this matter has been brought in at the tail end of an important Bill. Many hon. Members wish to participate in the debate. We are also trying to get the Bill through in a hurry. Many of those who spoke from the Government Benches tried to extricate the Minister from the hole that he has been digging for himself. After the Minister of State has replied, there should be some means to enable us to wipe out what has happened tonight.

This is an important debate. It may have been repetitious, but that has been because the same valid points have been raised. Time and again hon. Members have pointed to the advantages of new clause 6 and the disadvantages of new clause 4.

8 pm

I represent a dairy farming area, where there are many marginal farms. Marginal farms will do particularly badly out of the complex regulations involved in new clause 4. We should stick to the principles of new clause 6. At least that starts from a 50–50 base line for the tenant and landlord. From there, the figure could move up or down according to arbitration. New clause 6 has been criticised on the ground that arbitration will take a long time and that many cases would have to go for adjudication. But surely that would be excellent. After all, there would then, at the end of the day, be fairness.

I hope that the Minister will recognise that hon. Members on both sides of the House are unhappy. The feelings of the farming fraternity have filtered through to the House in an almost unprecedented manner. However, I do not want to detain the House, as the Opposition feel that there are many other important provisions that should be debated at length. I refer, in particular, to new clause 1 which mentions a consumers' committee to look after the interests of the consumer. That is an important new clause, and we would like to reach it.

I come from an area that has suffered greatly from milk quotas, and we do not wish to suffer any more. I make one party political point. When the hon. Member for Ynys Mon (Mr. Best) speaks, he will be able to confirm that the Conservative party's popularity plummeted in April 1984. If new clause 4 is virtually steamrollered through the House tonight, so late in the passage of the Bill, the Conservative party will see its support virtually destroyed in rural areas.

Mr. Corrie

I am well aware that the new clauses and the schedule do not cover Scotland, but I am sure that they will be used as the basis for any legislation that comes up in the other place. I am equally sure that, because of EEC legislation, Scottish provisions could not be very different, or there would soon be complaints from English farmers that might end up in the European Court. I know that my colleagues in the Scottish Office have been desperately trying to obtain some agreement between the SLF and the NFU in Scotland, but have not yet succeeded. I hope that they will continue to discuss such matters with them in the hope of reaching some agreement.

My right hon. Friend the Minister cleared up several points that had been worrying me, and I thank him for that. The sad thing about the debate is that if we had had time to thrash out the schedule in Committee we could probably have reached a consensus. However, if my right hon. Friend the Minister really meant it when he said that his mind was still open, it may yet be possible to improve the schedule slightly in the other place.

Mr. John Home Robertson (East Lothian)


Mr. Corrie

I assume that it is possible to do something in the other place, and I look forward to seeing what happens there.

Mr. Home Robertson

Does the hon. Gentleman want a peerage?

Mr. Corrie

No, I want to talk about the Bill. Is the hon. Gentleman offering a peerage?

We all want a fair and reasonable divide between landlord and tenant, depending on the input from each party. I agree that that should not be based on any percentage figure. In any discussions, no two cases will be the same. The mess that we find ourselves in shows what happens when one tampers with production. As has been said, we may have to face the same problems over cereals. Quotas have undoubtedly created a new asset. Hard-pressed farmers will see a little relief as they go out of farming if they can make use of this compensation. I assume that if there were a new EEC outgoers scheme legislation would be needed to cover that in the case of any tenant farmers going out of milk production, but not out of the farm. However, I shall not go into that, as I would be out of order if I were to do so.

At present a tenant has no rights whatever, and the landlord has a 100 per cent. right to the quota compensation. I cannot agree with all my hon. Friends, as I believe that it would be unfair for either side to obtain 100 per cent. compensation. It does not matter how much the tenant has put into the land. Indeed, many tenants have put in an enormous amount of capital. But the landlord has still provided the land on which he farms. The problem raised by the new clauses and the schedule is that we are trying to find a basis of negotiation for possibly hundreds of completely different cases. It is extremely difficult to sort out hectarage and litreage production on a wide variety of land types and to come out with a fair result, especially when the standard quota is as high as 4,500 litres.

Very few of the farmers in marginal land areas—this is true of my area—will get anywhere near excess quotas. Thus, I feel that the basis of the standard quota and excess is perhaps not the right starting point. I shall cite three cases from my constituency, where each of the farmers has 700,000 litres of quota. Farmer A has 100 pedigree cows. He feeds them hard, because he wants good pedigrees, and he averages about 7,000 litres. Farmer B farms well, but traditionally. He never forces his cows, and averages about 5,000 litres with 140 cows. Farmer C has a hard marginal farm, where he raises beef calves from his dairy side. He runs 155 cows, but he manages an output of only about 4,500 litres. Farmers B and C are not bad farmers. They are good, traditional farmers on the sort of land that they are farming, yet the possible compensation differences between the three farmers could be enormous.

Mr. Maxwell-Hyslop

Has my hon. Friend noticed that the difference between farmers B and C is less than the 20 per cent., which under the Minister's formula, would trigger a differential standard yield?

Mr. Corrie

If a fanner was down to 20 per cent. below those levels, he probably should not be farming anyway. His output per hectare would not make the unit viable.

Mr. Pollock

My hon. Friend will recall that our right hon. and noble Friend the Minister of State, Scottish Office, has implied that the Scottish arrangements have yet to be finalised. In the light of the examples that my hon. Friend is giving the House, does he believe that there is any possibility that tenant farmers in Scotland will benefit beyond the two thirds currently being made available in England and Wales?

Mr. Corrie

I cannot say what will happen in the other place, but if any legislation passed by this House benefited farmers in Scotland more than those in England, I believe that we might be taken to court under EEC legislation for enacting unfair legislation. I may be wrong about that, and if so perhaps my right hon. Friend the Minister will correct me at the end of the debate.

In 1983–84 a young farmer took over a tenancy partnership with a landlord in the constituency. The landlord had no interest whatever in putting a dairy unit on that farm. He said that the young man could go ahead if he wanted to. The young man spent between £70,000 and £80,000 on putting up buildings, installing equipment, and erecting a dairy. He was lucky enough to get a good quota. He is bound to go out of that farm in 1994. Last Thursday a solicitor's letter arrived saying that, although the landlord had not previously been interested in that farm's milk output, under legislation that might come forward now he would, of course, claim his compensation. That young man who invested £80,000 on the assumption that he would ultimately get some return on it will be much worse off when the time comes. Does my right hon. Friend think that the present legislation will give that young man a fair return on the money that he invested? My right hon. Friend said earlier that the maximum that could be obtained was probably about 66 per cent.

I accept that at the end of a tenancy the landlord may find that he gets a bill for a considerable sum of money, and £30,000 has been mentioned. In my area, where there are big dairy farms, it would be much more than that. At that point he has three choices. He can go out of dairy farming, pass on that cost to the incoming tenant, which would be a heavy burden, or charge the tenant a higher rent to cover the interest on the quota that he had bought out. There is no doubt that the land value is increased as long as the quota stays with the land, so that most landlords would want to keep the quota with the land.

I am not happy with what has come out of tonight's debate. I think that we have it so nearly right that, with proper discussion, we could have got something that pleased every hon. Member.

I wish to raise two small points. First, I understand that if a tenant buys out quota, 100 per cent. of that will be his when he goes out and the landlord will not have access to any of it. Secondly, I understand that if there is no statutory successor there is no compensation for the estate. I feel that that is wrong. If a man borrows a lot of money, puts it into a tenant farm, builds up the dairy herd and his unit and then dies, his dependants find that there is no compensation for what he has done, and this makes an enormous difference to his estate in the final reckoning.

The real sadness, as has been said, is that the organisations in agriculture outside the House could not agree among themselves and that it has been necessary to introduce legislation at all. Once again the legislators have to take the difficult decisions and be got at from both sides because they cannot agree among themselves.

Dr. Marek

If anything can be learnt from today's debate, it is that the subject has been introduced too late on Report. It should have been introduced in Committee, where we would have been able to intervene in each other's speeches more often, to speak more than once and to challenge or test the hypotheses that have been put forward. The hypotheses have been interesting and some of the thoughts, speeches and points in the debate have taxed my mind, and I shall have to think about them very carefully.

I am not sure whether I am completely right in what I am about to say. Indeed, I am not sure whether hon. Members who have spoken have been completely right in their points all the time. The tenor of the debate has been that new clause 4 is not correct, that the Government have not got it right and that something ought to be done about it. I hope that the Government will take this on board as many hon. Members have made the point.

If the Government are sincere in trying to do their best for industry and to get general agreement between the CLA and the NFU, they will take this seriously. If, on the other hand, the Government are seeking to serve their own people—those who belong to the CLA and those landowners who sometimes do not have to do anything for a living—they will do nothing; they will leave it alone and try to use their majority to force through the new clause.

The hon. Member for Grantham (Mr. Hogg) made a series of interesting points. I thought that, by and large, he was wrong, especially when he talked about the quota not being a capital asset. I think that it is a capital asset, although not in the way that one would normally imagine. The hon. Gentleman gave an example about planning. If planning permission is granted by a council, it is not always given to the landlord of the building; sometimes it is made personal or there is a section 52 agreement. One can give other examples. When intoxicating liquor is sold in a public house, one person is licensed to sell it and the licence is granted to him, not to the public house or the company or brewery that owns the public house. One can then argue whether that capital asset falls into one category or another.

I believe that in 1984 the Government created a capital asset to be divided between the landlord and the tenant. There is no a priori reason why this should be given to the landlord as opposed to the tenant or to the tenant as opposed to the landlord. Hon. Members may imagine that I am going to argue for a 50–50 distribution and then consider the individual cases and determine them in the light of the circumstances of each case. Indeed, that is what I am going to do.

The Secretary of State said that some tenants would get up to 66 per cent. of the benefit of the quota. I find that difficult to believe. When the fraction of the tenant's standard quota is being worked out, somewhere in the denominator of that fraction will be the rental value of the land that is being used for dairy cows. That rental value will be very high, thus making the fraction very small. I do not believe that tenants will get up to 66 per cent., and, judging by what other hon. Members have said, I do not think there is much confidence in the Minister's argument.

8.15 pm

The argument is very complicated, and the Minister has tidied up all sorts of arithmetic, figures and divisions. I believe that he places a value in the land itself. It is at this point that I believe a political difference arises between Conservative and Opposition Members. In my view, there ought not to be a value in the land. There ought to be a value in the land if it is being used properly, and I hope that some Conservative Members can agree on that. If a landlord is misusing land or not using it at all, no benefit should accrue to the landlord.

Some Conservative Members attributed charitable motives to the Government and said that they were trying to do a good job, but the Government must prove this. I am a little more cynical. I think that the Government are trying to protect their vested interests and the landowners—in particular, those who do not use their land at all.

The hon. Member for Devizes (Mr. Morrison) gave one excellent example, and I am going to give another. If a landowner—he need not be a member of the CLA; it could be some finance house in the City—happened to own an old quarry which had been filled up with rubbish with a layer of top soil, so that it was completely useless, and rented the land to a tenant farmer to see what he could do with it, and if that tenant farmer built up his dairy herd and put the land into good repair, then having paid for all the buildings and equipment, I submit he ought on retirement to have 100 per cent. of the quota. I cannot see any reason why he should not have 100 per cent.

Equally, if a landowner had a farm that was a going concern, composed of grade 1, grade 2 land, with no problems, and he provided the cows—I know that this is a little hypothetical and not quite how things are usually done, but I am talking in extremes, and most cases fall between the extremes—and everything else for the tenant, who did nothing but take income from rent, the tenant should have no part of the quota at the end of the day because the quota would have been supplied by the landlord. The average situation is somewhere between the two, and equity is that the division should be 50–50. If the landlord and the tenant each puts in 50 per cent., however one defines it—and here the CLA and the NFU should be considered together—then each should get 50 per cent., but that is not the effect of the new clause.

A specious argument was put forward by the hon. Member for Milton Keynes (Mr. Benyon). He said that something extra should be given to the landlord, because a tenant farmer on retirement takes money out of the industry. On the other hand, one can have a landlord who says, "I have had my income from all these tenant farmers and now I am going to retire to the south of France," and he, too, moves out of the industry. If there is to be equity in these matters, what is good for one is good for the other. There can be arguments both ways.

Next there is the problem of new entrants with which the Government must deal. I can see nothing in the Bill that will help that situation. That will require the provision of money.

We need more time, although not too much, because tenant farmers are retiring all the time. The Government should withdraw the new clause. There should be urgent discussions between the CLA and the NFU in order to reach agreement and to make sure that, when the new clause is reinserted in another place, it will generally be seen to be fair to the tenant farmer and to the landlord. The new clause does not achieve that. Unless I get an assurance from the Government, I intend to vote against the new clause.

Mr. Christopher Hawkins (High Peak)

My right hon. Friend has been told that his formula is too complex, but in my view it is far too simple. Several hon. Members have mentioned a number of other factors that should be introduced when deciding on compensation, but introducing them would inevitably make the formula more complex.

At present, it is nothing more or less than a valuation formula which compares the proportion of the total value of the farm that is due to the tenant's efforts with the proportion due to the assets of the owner. I agree with my hon. Friend the Member for Grantham (Mr. Hogg) that that is a sound basis for the new clause. The formula may be standard and simple, and it may give a rough and ready breakdown of the contributions of the landlord and tenant to the value of the farm, but under the proposed formula that can only be done well on average, as the performance of tenants is compared with an average yield, with no regard to the difficulty of achieving that yield in different areas.

The standard quota of 4,500 litres per cow may be achieved in the lush pastures near this building, with very little effort indeed, but in High Peak, which my right hon. Friend has visited recently, a tenant might have to be almost superhuman to achieve such a yield, given the quality of the land, the height above sea level and the climate.

It is unfair that the standard quota does not vary from area to area. It should at least be lower in the upland areas. That should be considered. If the new clause is supported, could not a separate figure be included in the statutory instrument for upland areas, marginal land and other areas? If not, I hope that the other place will make changes along these lines.

Mr. D. E. Thomas (Meirionnydd Nant Conwy)

This debate has clearly shown the disastrous consequences of the quota system in general. It has also demonstrated the problems that arise within the agriculture industry when this House intervenes because the parties—in this case the landlords and the tenants—have been unable to reach agreement.

It is unfortunate that there has been a failure of agreement. I am not blaming the Department, because I am sure that it wished that such agreement had taken place in England and Wales. However, we must look at the ways in which the Government have tried to intervene in a system that has been created by the European Community and by the Government's implementation of the quota system. We must look at that, not only for its immediate effects on the dairy sector, but because of its potential effect if quotas are to be introduced into other sectors of the industry.

In the area that I represent, I am particularly concerned about the sheepmeat sector. Similarly, other sectors of the industry could be subject to quotas. If we set out the relationship between landlord and tenant on the basis that the Minister is proposing, we shall create a precedent for the quota system in other sectors of the industry Fcr those reasons, we must firmly reject, as nearly all hon. Members who have spoken have done, the scheme proposed by the Minister.

I endorse what other hen. Members have said about the timing of the presentation of the new clause. After all, the Standing Committee discussed this subject for a long time, and there was plenty of opportunity then for the Government to introduce a new clause, which we could have debated in full. I do not want to create any acrimony, because we had an extremely harmonious Standing Committee—perhaps too harmonious, but the fact that such a new clause was not introduced in Committee casts aspersions on that Committee.

The fact that a tenant milk producer has no right over the quota once he ceases milk production is illogical. At present, the entire capita] value rests with the landlord. That illogicality has arisen because of the way in which the quota has become a transferable commodity.

There has been some discussion about what the quota can be compared with. Should it be compared with a mineral right, or with a form of planning permission? I prefer to see it as a unique creation of the nature of the quota system itself. When a quota has become an exchangeable commodity and a value in itself, that must obviously create serious problems for those whose only value is derived from production.

We are all agreed, as are the parties outside the House, that it is unsatisfactory that a tenant milk producer should have no control over quota at the end of a period of agricultural operation. But the Minister's proposal is equally unsatisfactory. Rather than giving the tenant no control at all, the formula is totally weighted against the tenant. Indeed, it is weighted to a new concept in landlord-tenant relationships. The normal concept, as I understand it, is that the tenancy is based on the usual forms of good husbandry and on the existing legislation covering landlord-tenant relationships, under which the tenant is expected to reach a certain standard of agricultural production. Nowhere is this related to a standard of production that is reasonably to be expected over an annual period. This is a new concept—the concept of a standard quota and a level of production that a tenant producer ought to have achieved.

Although the Minister has explained the history of it, it is unsatisfactory that a concept devised by valuers should become an obligation on tenants. It is a totally artificial concept.

I am particularly concerned about this concept as it will apply to the marginal dairy areas. The Minister has not addressed himself sufficiently to this issue. In such areas he allows a variation of the standard quota level if production can be expected to differ by more than 20 per cent. from the norm. That again is an arbitrary figure. What are we to do—I know that Conservative Members agree with this—with the huge numbers of producers who fall between the norm and 20 per cent.? The Minister must address himself to that issue.

Increasingly, there is serious debate within the agriculture industry and this House about a lower intensity system of production. As we move towards the increasing costs of concentrates and inputs, any system in agriculture should not discriminate against those who are working for a low intensity system, yet a competent tenant farmer with a low intensity system of milk production will be discriminated against under the present arrangements. If we are looking to move towards more organic and low input farming, this is the last thing that we should institutionalise in any system of milk quota. I ask the Minister to reconsider this, because it seems to me a major anomaly in his proposals.

In the new clause tabled by the hon. Member for Cornwall, South-East (Mr. Hicks) we at least have a basis which is more equitable, but even this does not go far enough. I am sure that the Minister will be able to produce technical reasons why what is proposed is not entirely acceptable to him. If so, that is a much clearer argument for him, even at this late hour of 8.29 pm, to withdraw his amendments and reconsider them. After all, if he was able to bring forward his revised proposals at such a late stage, surely it is possible for him to withdraw his clause and give us the opportunity to consult further, so as to achieve a more equitable scheme on the lines of the simpler one proposed in new clause 6. Under this new clause there is no arbitrary classification, so it is a much fairer system for both landlord and tenant.

8.30 pm

This debate is typical of the history of the implementation of the milk quota system. From its inception we have had anomalies, and we still have them. We still have individual farmers who do not have milk quotas because they were not in production on day one, although they have invested a massive amount. We have anomalies between areas, and between marginal producers and those who farm better quality land. The whole business of quotas is an example of how not to pursue our agricultural policy. We must work to limit production, but not by methods such as this.

Mr. Maxwell-Hyslop

I am grateful to my right hon. Friend for grasping the nettle and deciding to legislate. It had become apparent that without that impetus agreement at national level between the National Farmers' Union and the Country Landowners Association was unreachable. If anyone doubts that, he has only to read the national brief sent to Members by the CLA, in which it referred to the proposal as a capital levy and said that nothing should be paid to tenants except under a few very limited conditions. Without the impetus of the knowledge that the Minister had decided to legislate, agreement was out of reach because there was no incentive for the CLA to reach it. Hence my congratulations.

I believe, however, that the time has now come, when this debate reaches its end, when my right hon. Friend should seek your leave, Mr. Deputy Speaker, and that of the House to adjourn this debate for two weeks. I shall explain why. As recently as 11 o'clock last Thursday, his own private office was unable to tell hon. Members when the Minister's amendments and new clauses would appear on the Order Paper. Those who had to go down to their constituencies early on Friday morning, as many of us with large constituencies have to, had to leave the House that week not knowing the Minister's proposals. I make no complaint of that. My complaint is that, since the amendments and new clauses were, in effect, being seen by those hon. Members for the first time this Monday, it was wholly unreasonable to expect us to legislate on that basis only two days later. That then became three days later.

The programme pressures which were impelling the Minister into doing that and which were not of his making have now eased dramatically. There must have been a very large slot in both Houses allocated to the Shops Bill, and with the defeat of that on Monday the pressure ought to be off my right hon. Friend. It must be crystal clear to him that, despite his best endeavours, he has not yet got it right in a number of respects.

It is not enough to look at the elegance of the formula. One has to anticipate its consequences. They are that the representative tenant in milk production will get only about 25 per cent. of the value of the quota. If that is so, then in the judgment of many Members my right hon. Friend has got his formula wrong.

It is not enough just to fiddle the standard yield, in which determination the House can play only a trivial part, because it is to be done by negative resolution statutory instruments. That means that it is unamendable. We know that there are many statutory instruments against which the House wishes to pray for which there is no time or which, when the evening comes, overrun. So if it is to be done by statutory instrument at all, it should be done by the affirmative resolution procedure so that there has to be a debate. Under the formula which my right hon. Friend has written into his new schedule, however, whatever one does to the standard yield one still cannot get a high enough percentage for the tenant where that is the just and proper thing to do.

I am glad that my hon. Friend the Member for Milton Keynes (Mr. Benyon) momentarily appeared in the House, satisfied himself with his own argument and disappeared, because it revealed the gaping hole in the CLA case, which is this: without the tenant's milk production on the critical date there would have been no quota. It was the tenant in milk production who created that quota. That is what the CLA at national level—as opposed to local level in Devon and doubtless in many other counties—has failed or refused to recognise.

I hope that he did not mean it, but my right hon. Friend certainly gave the impression that he thought that the National Farmers Union was careless of the interests of new entrants. That is not my experience of the National Farmers Union at Devon county level—and it is the largest branch in the country. In discussion with members about milk quotas, it recommended that, when we brought in a system of transferring quotas, 10 per cent. of the quota transferred should be taken into a pool specifically designed for hardship cases and new entrants. That is the answer to the false dilemma put by my hon. Friend the Minister of State when he challenged the hon. Member for Brecon and Radnor (Mr. Livsey) to say where he would get the spare quota from. Devon county has already suggested where it should come from. So have many other NFU branches. They say that it should come from the 10 per cent. tax on transfer of quota.

This shows that the Devon county branch and, I am sure, many other branches of the NFU have given thought to the interests of new entrants. I am glad to say that it demonstrates that the Minister's assumption that the National Farmers Union is careless of the interests of new entrants is poorly substantiated by the facts.

Another fallacy put out by my hon. Friend the Member for Milton Keynes is that substantial compensation for milk-producing tenants will force landlords to take the land in hand. I would have thought that the logic was the exact opposite, that if they had to pay the compensation if they took it in hand, and could pass the duty of paying the compensation on to a new tenant if they get it again, then the larger the compensation to be paid the greater the incentive to the landlord to relet rather than to take it in hand. I wish that my hon. Friend were here because it is only fair that he should have the opportunity to answer the accusation that there is a gaping hole in his logic. However, it is not my fault that he is not with us.

I intervened in the speech of my right hon. Friend the Minister to ask—and he gave no satisfactory reply—why a 20 per cent. threshold should be considered right now when a 15 per cent. threshold was considered right under the milk quota regulations for triggering the special hardship quota because of, for example, the sickness of animals, exceptionally bad weather, the illness of the farmer or other specific grounds. Presumably my right hon. Friend must have considered 15 per cent. to be right because he wrote it into the regulations.

Many of us are extremely apprehensive about the yawning gap whereby the arbitrators will be debarred from arbitrating, even on the basis of my right hon. Friend's formula. He was right to say that I have pressed on him the designing of a formula that would achieve, as far as possible, consistency in arbitration, throughout the United Kingdom. Unless there is consistency, by definition there will be injustices. New clause 6, which is the considered opinion of the NFU—which has seen, albeit at very short notice, the Minister's new schedule—provides the fairest approach.

None of those who have signed their name to new clause 6 claims that it is perfect. There is a great deal in my right hon. Friend's new clause that could sensibly be attached in another place to the end of new clause 6. Alternatively, my right hon. Friend could accept my advice and ask permission of the Chair and the House to adjourn the debate for a fortnight when it is concluded—not now—and then bring forward a new amendment. It would be sensible to attach to new clause 6 many of the provisions relating to sub-tenancies, Crown land and many other matters that are so excellently drafted in the Government's new clause.

The trouble is that, for procedural reasons, if we deal with the matter tonight—which I do not advise—either new clause 4 must be withdrawn or it must be defeated in the Lobby because otherwise we shall not have the opportunity to put the question on new clause 6.

I hope that I have demonstrated to my right hon. Friend that hon. Members are trying to be reasonable. They are trying to understand his difficulties as well as the difficulties of the industry. They give him due credit for grasping the nettle and deciding to legislate in the Bill—something for which many of my constituents have asked—and avoid delay so that people do not go out of the industry deprived of all compensation. However, it is even more important to get this right than it is to deal with it three weeks earlier or three weeks later.

My substantive plea to my right hon. Friend is that now that the events of Monday have given the Government the opportunity to take that course—I made this point on the business statement earlier this week, so it should come as no surprise—the Bill should be postponed so that he can think about what will have been said by the close of the debate, discuss it with the bodies with which he tells us he has been in deep discussion, and come up with the best answer and with a procedure that will he as near analagous as circumstances permit to our having had a Committee stage and then a Report stage. I believe that that is in everybody's interests, including those of the Government.

8.45 pm
Mr. Anthony Nelson (Chichester)

I, like other hon. Members, have tried to follow the debate closely. I have sought to divine the preferable course of action and decide whether to support new clause 4 or new clause 6. I have found it exceedingly difficult to decide exactly what my course should be. I see arguments both ways. I do not doubt the intention of the signatories to either new clause to seek an equitable and durable solution that will gain the greatest credence and support on both sides of the House.

As many hon. Members have said, my right hon. Friend was placed in an extremely difficult dilemma which, to some extent, has presaged the difficult time problem with which the House is faced. My right hon. Friend was fair in writing to a number of hon. Members with a particular interest in these matters, especially those with dairy farmers in their constituencies, setting out his intentions before the detail of the new clause was tabled. My right hon. Friend has sought to recognise a legitimate interest of landlords as the providers of the constituent part of the asset.

As the debate progressed, I have found myself considering those arguments in relation to particular cases in my constituency, where many dairy farmers, tenant farmers and landlords have been to see me on this matter. I have reached the conclusion that there is a case for the land to be considered part of the asset, even though largely I accept that the asset is wholly derived from the windfall of the imposition of quotas. Indeed, we are talking about an artificiality built upon an artificiality. The inevitable implication will be both capricious and inequitable. The drafting of any new clause must be oriented towards reducing to the minimum the capricious nature of that impact and the inequities that will result.

Although I recognise that the asset derives largely from the imposition of the quota system, I am bound also to consider the many cases in my constituency where the landlord provides the land. That land is suitable for dairy farming, has always been farmed in that way and is let on the basis that it will be farmed as dairy land. I find it difficult to accept that such a landlord might not he entitled to any proportion of the quota under the terms of new clause 6. Unless he had provided assets such as machinery, buildings and so on, he might be deprived of any interest. Therefore, I see strong arguments in favour of the Government's new clause.

I am also influenced by the problems of newcomers, about whom much has been said. I have conflicting views because I recognise that new clause 6 may have a more prejudicial impact on newcomers than new clause 4. On the other hand, I must question the extent to which I should be worried about that. The problems that newcomers will face, which undoubtedly will be considerable, are a product of all the anomalies, artificialities, quota and apportionment. At the end of the day, what is wrong is not the impact on the newcomer because it will cost him a great deal. The problems are not the result of the new clause; they are the result of the imposition of the quota system. It is an inevitable consequence, and we must face the fact that there will be difficulties.

One difficulty will be that of the incomers. My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) mentioned ways of solving the problem. Perhaps in time, when quotas prove not to be immortal, those problems will go away. I would prefer not to be faced with the decision this evening as to what course to follow.

If possible, we should have a new clause 5 which would find some common ground, for I fear that there will be difficulties with the Government's new clause as well as with new clause 6. I am especially worried about the way in which the tenant's fraction has been defined. The fact that it will be assessed principally on the basis of the marginal improvement in rent will not necessarily reflect equity, for the basic rent which a tenant pays may not be a precise definition of the extent to which, at any moment, the landlord has put assets in or has an interest in the quota and the tenant has at the same time. Therefore, any appreciation of the rent and any formula based on that appreciation may be wholly capricious in determining what I assess will be the most important element of the compensation which the tenant will receive—that is, the tenant's fraction of the standard quota—apart from consideration of excess, which may have a capricious and similarly inequitable impact.

My right hon. Friend will be the first to accept that there will be problems with the imposition of the proposal. Therefore, I am driven to the conclusion that there are faults with new clause 4. Although it has much to commend it, there are problems with new clause 6, and that is why I would prefer to adopt the course of action described by my hon. Friend the Member for Tiverton. A little more time should be given to hon. Members like me to obtain more representation instead of having to rely on the hurried phone calls and telegrams which I have received from my dairy tenant and landowning constituents. There should be more sober and careful assessment of the way forward.

Knowing the way in which Governments work, I suspect that that is not on the cards. Ministers want to get their business through, and if they have to give way tonight they will see it as a defeat or a concession to the House, or bringing into doubt a central element of the Bill. They should not see it in that way. The Bill might enjoy the good will of many hon. Members later if we had more time and if some of our fears could be satisfied, which they have not been this afternoon.

For that reason, I hope that my right hon. Friends will' accept the course of action urged upon them. If they fail to do so—this may be an incentive for them to do so—I shall be driven to the conclusion that I should resist new clause 4 and should give preference to new clause 6. But that would be my fallback position against my preference that the Government should defer this matter.

Sir John Farr (Harborough)

I hope that my hon. Friend the Member for Chichester (Mr. Nelson) will forgive me if I do not follow him too exactly. I wish to speak more broadly on new clause 6.

I was disappointed with the arguments of my right hon. Friend the Minister of Agriculture, Fisheries and Food in pointing out why he did not think this was an especially good new clause. He said that the supply of tenants might dry up if the incoming tenant's share of the quota became larger, as would be the case if our new clause were accepted. I assure my right hon. Friend that the supply of incoming tenants will never dry up.

My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) said that, in addition, there would be a 10 per cent. pool, or levy, for special hardship cases for incoming tenants. That will be available to help to ease the financial problems of an incoming tenant. I am far more concerned with our new clause, which broadly lays down that the quota should be divided 50–50 and that the outgoing tenant has proper recognition of the money, effort and the lifetime of work that he has put into the enterprise that he will be leaving. That is one reason for new clause 6.

I am suspicious of the new clause, because it talks about a standard quota. It takes up seven and a half pages of the Amendment Paper and is extremely complex. The new clause tabled by my hon. Friend the Member for Cornwall, South-East (Mr. Hicks) and others is much simpler. It covers just more than one page, and it works on the basis of a 50–50 split, which we believe is an equitable basis. I am told that when one has mastered the standard quota system laid down by the Government the value to be attributed to the tenant in many cases could be only 25 per cent. That will often produce cases of deliberate and unacceptable hardship and unfairness.

I join my hon. Friend the Member for Tiverton in calling for a chance to talk about the proposal. My hon. Friend has been lucky enough to receive representations from his constituents. My constituents are not fully aware of the consequences of what the Government are trying to do. By telephoning the NFU and the CLA today, I have obtained their views on the Government's proposals and new clause 6. I see no hurry for this measure. We have all the time in the world now that the Shops Bill has fallen by the wayside, and the right and proper way for a good, cautious, sensible Conservative Minister to proceed is to get a response from the people engaged in the industry and to allow Members of Parliament to receive representations from their constituents. He could then proceed in a more cautious and sensible way.

My right hon. Friend is proposing to impose upon the industry this frightful new additional complexity of a standard quota. I understand that it is the production level that an efficient producer should have reached, yet the figures on which standard production levels are based are not included in the schedule. The schedule calls for the restriction of a tenant's share of standard quota to the ratio of the rental value of his improvements to the rental value of the farm. This may often give the tenant only 15 to 20 per cent. of the average standard quota. Even if the tenant was solely responsible for building up the quota, it could often be little higher than 30 or 40 per cent.

I have heard of several cases of considerable unfairness. One is a small to medium specialist dairy holding with buildings, most of which are provided by the landlord, where the tenant practises an efficient, low-cost forage system with output below the standard quota. This would qualify for little or no compensation under paragraph 5(c) of the schedule. In addition, a viable dairy farm created wholly by the tenant's investment and expertise from bare land, with no investment by the landlord, would not qualify, even with the standard quota, plus the value of output in excess of standard quota for more than about one third of the total value of the quota.

9 pm

It appears to me that the proposals in the Minister's new clause and new schedule are not only hasty, but ill-conceived and unfair. I join my hon. Friend the Member for Cornwall, South-East in criticising the CLA and NFU for not coming to an agreement, helping the Government and removing the burden of making the decision from the Minister's shoulders. I regret, in particular, the fact that help was not provided in a far more forthright and ready manner by the CLA. The Milk Marketing Board opposes the Government's schedule as being unfair, and, as has been pointed out, that view is of great significance, because the MMB has no axe to grind. We know that the NFU is opposed to the Government new clause, and that the CLA is, too. We have heard about the agreement reached by the CLA and the NFU in Devon.

The three counties branch covering Leicester, Rutland and Northampton, has also reached agreement on the matter. I am informed by the secretaries of the NFU branches in Leicester, Rutland and Northampton and the three counties CLA that the agreement was sent to Swallow street, headquarters of the CLA, 10 days or a week ago as soon as the terms of the agreement were known. More remarkably, not only was there agreement between the CLA and the NFU in the three counties, but after a two-day conference representatives of the Tenant Farmers Association, the valuers organisation, the estate agents and even the National Union of Agricultural and Alllied Workers, as represented by the Transport and General Workers Union, also gave their agreement.

They all gathered together to discuss the Minister's proposals on sharing out the quota and to try to provide an alternative proposal that could attract their united agreement and be put to the Minister. They reached complete unanimity. The basis of the agreement sent to Swallow street a few days ago was that the quota should be distributed on a shared basis and that valuers should help to decide any difference. The formula should be such as to make possible a ratio of one to 99 in favour of either landlord or tenant. After a full day of conference, that is the basis that was agreed on. It is far more sensible than some of the ideas contained in the seven or eight pages of the schedule with which we are struggling tonight.

I shall support my hon. Friend on new clause 6. I hope that my right hon. Friend, who is a sensible man, will heed the message, that there has not been enough time. If the three counties branch can get together with representatives of the unions and everyone concerned and reach agreement, the CLA at national level should be told to pull its finger out.

Mr. Jim Spicer (Dorset, West)

First, I commiserate with my right hon. Friend the Minister who has come straight from his sick-bed tonight. It was brave of him to do so. Secondly, I congratulate my right hon. Friend the Minister of State on a happier event—the birth of a daughter. We all congratulate him on that.

There are three things that most farmers and, I think, landlords say that they want on this issue. First, they want agreement. Secondly, if they cannot get agreement immediately, they would like to see most of the issues dealt with by arbitration. Thirdly, they want as much flexibility as possible. With that starting point, surely it is not beyond the wit of man to arrive at some conclusion. As has been said tonight, it is quite disgraceful that, given those three points, the CLA and the NFU could not sit down and thrash this out, as they have been able to do in some areas. I will not say which.

My right hon. Friend must intervene, but he cannot be all things to all men. It is unbelievable that this storm has built up purely and simply because he was told by everyone that he must intervene, and now that he has done so, nobody likes it. We should all be ashamed of that disgraceful position.

I agree with hon. Members who have said that the schedule is complex. I left the House last Thursday night and went to my constituency. I recovered from the Shops Bill on Friday night at a local church, and on Saturday morning this storm broke on me. I was shooting in the dark and that is wrong. I did not see the schedule until I arrived at the House on Monday. That is bad, particularly as the schedule is so complex. At first sight, the schedule seems too restrictive. I must say how grateful I am to my right hon. Friend the Minister for the way in which in his opening speech he seemed to make it clear that there was much more flexibility involved than I had thought.

Did my right hon. Friend say that if there is no initial agreement, either on the standard quota or on other related matters, decisions could be left to arbitration? That is an important point because if that is the case, it is a big step forward. For the reasons that have been mentioned by other hon. Members I do not like the fixed figure of 4,500 litres. If one imposes such a restriction on the low input farmer and the farmer with low-quality ground, one imposes a restriction on the poorer parts and gives more to the richer parts. That must be wrong in essence.

All hon. Members have cited examples, and it is much better to do that than to read through the seven and a half pages of the schedule. I shall cite a simple example. In 1971 a good farmer moved to a grazing farm and decided to go into dairy farming. The landlord was not interested in the farm being anything other than a grazing farm. The farmer put every single ounce of work and equipment into that farm. If anyone suggests that the farmer- should do anything other than hand it back as a grazing farm, he is wrong. I cannot accept the figure of two thirds being the absolute maximum because such a person should receive more than that. Equally, if he has not done the job properly, he should receive far less. I hate the idea of any restrictions being involved.

We all understand the need to encourage new tenants to come in. We understand, too, the restrictions that may be placed upon them when they come in, in terms of the massive burden of cost resulting from the high pay-out on the quota by the landlord, which the tenant must then recoup. We must not make too much of that because, try as we will, the number of tenanted farms that come on the market each year is relatively small. However this matter is dealt with in future, my guess is that the chances of getting more tenant farmers coming forward will decrease rather than increase. Most farmers know that, looming over them, is a general election, with the awful, incredible thought that the Labour party could win, and we know what would happen then.

Mrs. Kellett-Bowman

Like nearly all other hon. Members who have spoken in this debate today, I am sadly torn between the amendments before us. Ever since quotas were introduced, I have been urging the Minister—and since he is my next door neighbour I can get to him readily enough—to find a fair solution to the question of the allocation of the capital value of a quota between a landlord and a tenant. We have all acknowledged in the House tonight his considerable efforts to persuade the CLA and the NFU to come to an amicable arrangement. I can well understand his extreme exasperation that they have failed to do so and his determination, in the absence of such an agreement, to put forward his own solution.

My right hon. Friend has said, with his usual modesty, that such a solution will not suit everyone. He is absolutely right. The only problem is that I have yet to find anyone that it does suit. There is always a slight disadvantage when one has to try to explain these matters to one's constituents. There are so many imponderables facing us in the seven and a half pages of the schedule. Discussion on the matter yesterday was very much hampered by the fact that one of the main amendments was so badly garbled on the paper before us at the time as to be literally incomprehensible. My right hon. Friend's private office was kind enough to send across to me a photostat of the correct version, but by then it was too late for proper discussion. The last train to my part of the world leaves at 7.15 pm, so that my people had gone before I obtained it.

It is desperately important, as speaker after speaker has said, that we get this matter right from the beginning, because we are unlikely to get another bite at the cherry. Many farmers in my constituency would prefer discussion on the matter to be postponed. Several hon. Members have suggested that and have requested a separate Bill to be introduced to deal with the share-out of the value and nothing else. We could then really get down to the nitty-gritty and properly consider the details in Committee, rather than try to deal with the matter in half a day on the Floor of the House.

As my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills) said, we may be putting at risk any tenant who may be retiring shortly or the widow of any farmer who may not continue to run the farm. In his eagerness to get something onto the statute book I am sure that my right hon. Friend had in mind protecting this group of people. I should therefore be reluctant to have nothing in this Bill, but I am bound to say that, if we have to have something, I should prefer new clause 6.

I shall listen carefully to the winding-up by our rather jubilant Minister of State, and I hope he will say whether the standard quota is taken before the 10 per cent. cut, as put to him by the Leader of the Opposition, and give us some concrete examples of the likely share-outs. If he has time, he may like to expand a little further on the effect of the measure on marginal land farmers and low input farmers, and on how it will relate to the various breeds of cattle. Unless these answers are good, I cannot imagine that many of the hon. Members who have spoken in the debate will vote for new clause 4; rather, they will opt for new clause 6.

Mr. Keith Best (Ynys Môn)

I realise that any expression of contentment that I may have detected as I rose to speak is more in realisation of the fact that I am the penultimate Back Bench speaker in the debate than in anticipation of what I may say. I congratulate my right hon. Friend on having tried to find a solution to this imponderable and difficult dilemma with which he and the House are faced because there is no agreement between the organisations that are largely responsible for maintaining and promulgating the ideas of agriculture. That is a sad reflection, but it is not so much a reflection upon them as an acknowledgement of the difficulty of the matter with which we grapple.

I am much persuaded by the arguments of those hon. Members who have sought to persuade my right hon. Friend that a further look at the matter would be advantageous. It is desperately important that we get this right. The matter has raised tremendous controversy. I can only hope that, after the Shops Bill, the bombing of Libya and now compensation for tenants, we never have another week like this in the House of Commons, although I suspect that we may well do so.

9.15 pm

My right hon. Friend will know that Wales is the land of the small farmer. He knows that well because he has had close family connections with my constituency. Wales is also the land of the tenant farmer. Wales may be the land of the small farmer but it is also the land of the loud farmers' voice, and my young English colleagues will know that that voice is amplified twofold because we have not one farmers union but two.

There is profound disquiet at these proposals in Wales because of how they may affect poor tenants. Wales, as I said, is a land of tenant farmers and they tend to be poor. Herein lies our great problem of trying to achieve an equitable compromise between the rights of the outgoing tenant and not inhibiting the incoming tenant.

I recognise that some tenants have put far more than others into the milk quota over a long time. A formula which has a fixed element, whether it is 50–50 or 25 per cent. coming to the tenant, is not an equitable way of dealing with the wide variation that must exist in everyone's contemplation. Indeed, many examples have been brought before the House today.

One must also have regard to the poor tenant who wants to come into agriculture and who will be inhibited or prevented from doing so if he has to find an enormous sum in order to buy in effectively because of the amount of compensation that has been paid to the outgoing tenant. That is important in Wales.

I want to hear my right hon. Friend's views on marginal land. That has been mentioned by many hon. Members tonight. It is particularly significant that several hon. Members from Wales have spoken in the debate tonight and all have mentioned marginal land. A large part of my constituency of Anglesey is marginal land but there is a significant argument, which I have advanced, that the whole of Ynys Môn should be regarded as a marginal area. Indeed, I am sure that the hon. Member for Caernarfon (Mr. Wigley) would support me in that view. It is poor land and the farmers work it extremely well. It is a constant source of amazement to me that they extract what they do from such poor quality land.

If my constituents find that they will be discriminated against by the formula in new clause 4, that will be a matter of grave concern and dissatisfaction which agriculture cannot afford at this time, after all the tribulation through which it has been.

I shall listen carefully to my right hon. Friend and I hope that he will say a lot about the flexibility that will be possible within the existing formula, and particularly how those on marginal land wilt be safeguarded. I hope that we may look at this again but at the moment I am more persuaded by new clause 6 than by new clause 4 unless he can persuade me to the contrary.

Mr. Nicholas Baker

I certainly cannot complain that my right hon. Friend the Minister has brought forward the proposals very speedily and without leaving us much time, because I am one of those who said that, in view of the lack of ability of the Country Landowners Association and the National Farmers Union to agree—which I deplore as much as anybody who has spoken in the debate—it was necessary that he should do so. Perhaps one of the reasons for the length of the debate—five hours is quite a long time to discuss the subject—is that many tenant farmers in our constituencies have got or been given the wrong end of the stick about some of my right hon. Friend's proposals.

I start from the position that the quota is a right in land, rather like a mineral right, and is therefore something in which a landlord has an essential and basic interest, albeit at a relatively low level. Above the landlord's basic level, the rest should be capable of apportionment between the landlord and the tenant.

The reason why I put my name to new clause 6 was partly to ensure that it was debated and partly because, looking at the different kinds of valuation, I favoured the input basis of valuation, which is looking at what both sides have put in by way of investment in buildings, equipment and so on, rather than what I call the output basis, which is the one adopted in new clause 4, which is based really on the rent that those buildings and parts can attract.

However, I see some severe problems with new clause 6. It is not clear to me how the landlord's interest is to be recognised and it does not seem to me to address the problem of valuation, which is bound to be complicated. Arguments that it is complicated are really a statement of something that cannot be avoided.

On my right hon. Friend's clause, I too would like to hear more about the lowering of the 20 per cent. variation level. I would regard that as rather high and would hope that it would be possible to have greater flexibility. I should like to see a greater differential between the maximum and the minimum which a tenant can obtain as a share of the quota. I have some qualms about the fact that it is for the Minister to decide what the standard quota is.

I look forward to hearing what my hon. Friend the Minister of State, the new father of the House, has to say.

Mr. Home Robertson

I think that a lot of us had hoped that this debate would have been completed some time ago, but I join other hon. Members in congratulating the Minister of State on the birth of his baby daughter. We wish his wife and daughter well and we wish the Minister of State himself many long, sleepless nights when he will be able to reflect not only on the consumption of milk but also on milk quotas and other such matters.

As the hon. Member for Ynys Môn (Mr. Best) said, this has not been a very happy week for the Government. They started getting themselves into trouble over the Shops Bill, they got a lot of people into considerably more serious trouble midweek over the bombing of Libya, and, to go from a very serious matter to what many people might think is a rather peripheral matter, I fear that they may have got the question of tenants' rights with respect to the milk quota wrong too.

I awaited with bated breath to hear what the hon. Member for Dorset, West (Mr. Spicer) would say when he rose to be the last speaker on the Government side. I wondered whether he would perhaps give some support, or even wholehearted support, to the Government, because we have gone through the five hours of this debate without any hon. Member giving unequivocal support to the Minister. [Interruption.] The hon. Member for St. Ives (Mr. Harris) is saying that the hon. Member for Milton Keynes (Mr. Benyon) was supporting the Government, but he was going in the opposite direction by saying amazingly, that it was too generous to the tenants. So absolutely nobody is happy with new clause 4. The Government have got themselves into a spot of bother.

There is considerable merit in the constructive suggestion of the hon. Member for Tiverton (Mr. Maxwell-Hyslop) that the Government should go away and think about this and return with a better-thought-out proposal upon which there might be consensus. Manifestly, there is no consensus for the present package.

It has been made very clear during the debate that this issue is important to the dairy industry. It is extraordinary that so many right hon. and hon. Members have referred to it. They have obviously been lobbied very strongly by their constituents. That is not surprising. According to my information, 40 per cent. of the dairy farms in this country are tenanted farms. It is therefore a matter of considerable importance to a high proportion of those who make their living from the dairy fanning industry. There is evidence that two weeks ago the National Farmers Union may have been surprised by the strength of feeling among dairy farmers. The original formula suggested a 70–30 split in favour of the landlord. The NFU found that it was under pressure at that stage. The Government find that they are under pressure this evening over a different kind of formula.

Whether we like it or not, the milk quota is a unique capital asset. I do not want to dwell upon the Minister's past unhappinesses, but he will be aware that the Government blundered into this in 1984. It would be inappropriate to go into the circumstances, but it is worth recalling that this is a temporary five-year quota scheme that is supposed to disappear in 1989. I very much doubt whether it will disappear then, because we are writing on to the statute book another eight pages that are based upon the perpetuation of this scheme. The quota could attract a value of as much as £50,000, which somebody might buy or sell, on even a comparatively small farm. Therefore, it is difficult to imagine that the quota will disappear. We do not necessarily suggest that it should disappear, hut it is time to dispel some of the fictions about the scheme.

It is unfortunate that what began as a short-term black market is about to be enshrined in statute. A black market in the quota has been operating in one way or another. We want the system to be flexible. It is right that the quota should be able to be moved from one unit to another, but when quota began to be purchased and leased we found that people were getting into trouble. In the Farmers Weekly of 7 March there is an article which reads: Hundreds of speculators now have milk quotas, even though they have no intention of becoming dairy producers. Many of them have never been producers and their speculative holding is upsetting many producers who are short of quota and cannot afford to buy more. Some landowners are keeping quota just to protect the value of their land. Not surprisingly, the Milk Marketing Board is worried about this. It means that a quota that ought to result in the production of milk is not being used.

It might have been better—I say this, admittedly, with the benefit of hindsight—if the quota had never become a tradeable commodity and if any quota that was relinquished, for whatever reason, could have reverted to a quota bank for redistribution on a fair basis. That would have overcome the problem facing incomers to dairy farming, to which a number of hon. Members have referred. However, that has not come to pass and it is no good complaining about the background to the problem. We must confront the problem and do something about what I acknowledge is an urgent matter. Given that this commodity has a value, it is urgent that there should be a fair distribution of its value and that something must be done about the problem.

No right hon. or hon. Member who has taken part in the debate has expressed confidence in the new clause. The House is being bounced into taking a decision on a very substantial package. It will be possible to amend it only in the House of Lords. I wonder how many tenant dairy farmers will be content that their prospects under this system will be settled for them by the House of Lords? It will not be easy for the tenant dairy farmers lobby to get a fair hearing in that forum. The question of the Scottish dairy farmers will be dealt with in the House of Lords. The Minister may suggest that it would be possible for this House to deal with whatever comes back from the House of Lords as Lords amendments, but that is unamendable, and something which we will have to take or leave. It is clear that the package is not fair, but we are thankful for small mercies in that the Minister has recognised that the tenant is entitled to a share of the valuation.

9.30 pm

Under new clause 4, the bulk of the standard quota will belong to the landlord, and the tenant will have to rely mainly on the excess for his share of the valuation. No account has been taken of the 10 per cent. cut in production which was taken when quotas were introduced. Nothing is being done to avoid a penalty being imposed on non-intensive producers, nor on marginal land farmers. About 25 per cent. of the valuation will go to the tenant, in spite of the fact that in many cases the tenant may to a large extent have built up the value on which that figure is based by his own investment and by his own efforts.

New clause 6 provides a basis of a 50–50 share-out. That is a basic calculation which may vary according to the inputs of the two parties. It seems to be a fair way of approaching this point. That is why I strongly advise my hon. and right hon. Friends to reject new clause 4 so that the House can vote on and accept new clause 6 in due course. I put it to the hon. Member for Wealden (Sir G. Johnson Smith), who seemed to suggest that there was some way of fudging this issue and hoped that there would be an easy way out of it, that that will not do. If the House does not reject new clause 4, we will be saddled with this proposal, which has been seen to be loaded too heavily in favour of the landlord. We should not take that option. We should vote against new clause 4 and accept new clause 6.

Mr. Gummer

May I thank the Members of the House for their generous congratulations which were addressed to me but which I know are to go to my wife. Whether or not I should pass on to her the kind remarks of the Member for Torridge and Devon, West (Sir P. Mills), which referred to her in what I must say were rather bovine words, I do not know. Perhaps she will not read that particular part of Hansard. I must say to the hon. Member for Brecon and Radnor (Mr. Livsey) that the way in which he suggested that this was a somewhat early arrival was, it seemed to me, part of a deep party political purpose to undermine the confidence of the strict Baptists in my constituency about a matter on which they place a considerable amount of weight. I know it was a slip of the tongue, and that was the only slip involved.

My hon. Friend the Member for Cornwall, South-East (Mr. Hicks) introduced his new clause in a way which I think commended itself to the House. I hope that he will be helped by the answers which I give, not only to him, but to other hon. Friends and hon. Members as I go through this. There have been some very direct questions asked, and I shall have to answer them.

I do say that it is natural that the clause which has been put down by my right hon. Friend is one which does look more complex than his own, but that is partly because it covers a whole range of areas which need to be covered and which, his, I think, does not. My hon. Friend has accepted that to some extent: I do not think that there is division between us on it.

This is a complex matter, not just because it is an argument about who owns the quota or an argument between landlord and tenant. It is an argument, first, about the ownership of quota, dependent upon the circumstances which, as every hon. Member has agreed, differ widely; indeed, they might be said to differ from farm to farm and from relationship to relationship. Further, it is an argument between outgoing tenants and incoming tenants. I do not think that any hon. Member can forget that in seeking an equitable solution we cannot ignore the fact that in almost all cases—certainly in almost all cases which involve one tenant going out and being replaced by another tenant—the actual cost of the compensation to the tenant who goes out will come from the pocket of the tenant who comes in. That must be taken into account in the discussions.

In reply to the hon. Member for Brecon and Radnor, I would say that it is possible to postulate a scheme which would enable help to be given in the limited number of hardship cases. However, we are not talking about a limited number of hardship cases but about every case in which one tenant succeeds another tenant and in which there is a pay-out on the value of the quota. In every case that we are talking about, we are discussing a quota on which people who were in dairying before never expected to get any pay out. What tenants expect at the end of the tenancy is to be paid for improvements. A description of that was given graphically by my hon. Friend the Member for Grantham (Mr. Hogg).

I remind those of my hon. Friends and Opposition Members who talked about hardship to the tenant that no tenant will suffer hardship because in every case in which there is a payment the tenant will be paid something which he could not have expected to get up to now. I hope that hon. Members realise that if we do not make a change, there will be no payment to tenants in these circumstances. Therefore, it is unfair to suggest that the Government have not had the tenant's interests considerably in mind in the drafting of the new clause.

The argument has been fiercely fought. I hope that hon. Members who were present listened carefully to the assertions of my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) and of my hon. Friend the Member for Milton Keynes (Mr. Benyon). In their speeches they made a statement which showed that they had taken a particular view about where the overwhelming weight of the value of the quota should be placed.

In this short debate I do not wish to stand on one side or the other. To argue that we have got it wrong because those two views are still unreconciled is to ignore the fact that the two views are unreconcilable because they take a wholly different view of the nature of the quota. Because the people representing those two views have not been able themselves to reconcile them, the Government are put into the position of producing an answer. I do not think it stands up for the hon. Member for East Lothian (Mr. Home Robertson) to say that that in some way casts doubt upon the strength of the position put forward because people still wished that their view had triumphed and that the other view had not been taken into account. That is the situation in which we find ourselves.

My right hon. Friend has been right, first, to seek to answer the question; secondly, to put down the new clause; and thirdly to say to the House that any delay means that tenants will leave without compensation, which must be damaging if hon. Members think that they have any rights in the matter. Given the short time that hon. Members have had to debate the matter, I accept that we must try to pay close attention to the points that have been made.

I can answer directly the question asked by the hon. Member for Pontypridd (Mr. John). He asked whether the 10 per cent. was taken into account. It was, and that is the reason why the standard quota is lower than the average quota. It was said from the beginning that the problem with the average quota is that it depends upon the quotas that were granted. Those quotas were diminished, in some cases by 10 per cent., and that was because of the arrangements made at the time by the Government. One could say that all this should be left to a valuer and that there is no reason to have this difference put into the Bill. However, there is a good reason for it.

Once we get into the business of trying to value quota that might have been given, we are in great difficulty. That is because we would be asking the incoming tenant not only to pay for the quota which has been granted and which he might be able to use to gain the money to pay compensation through the landlord, but also to pay compensation for quota that had not been granted. Therefore, he would not have the benefit of that quota to enable him to gain the return to pay his ingoing premium or his extra rate.

I have made a note of the points made by my hon. Friend the Member for Torridge and Devon, West (Sir P. Mills). He asked about the definition of the standard quota and then spoke about the 20 per cent. I shall come back to that in answering the points made by my hon. Friend the Member for Tiverton, his neighbour. On the matter of marginal land and low-input and low-output farmers, the present clause covers the problems my hon. Friend placed before us. We are determined that the clause should solve these problems and I give the undertaking that we shall watch carefully to see that it does what we want it to do, which is to provide a fair share of the quota to people who are in either of those positions. I hope that meets the needs which have been rightly mentioned by hon. Members who represent such constituents.

I think the House recognised that the points raised by my hon. Friend the Member for Milton Keynes (Mr. Benyon) represented a totally different point of view from that which was presented by other hon. Members. The hon. Member for Caithness and Sutherland (Mr. Maclennan) made the point that there are two totally different views about this and said we could not take any credit for our view. I should like to remind him of what The Scotsman said in an article on 12 April. It said: This failure to satisfy either the landlord or the farmers' organisations is an indication that it may not be a bad formula after all. I am sorry that that has to be said but I fear it may be true. There is a real lack of understanding on both sides of the other side's position. The two sides are far apart and it would be wrong of us to believe that merely by putting this off for another two weeks we would be able to give an answer which would satisfy people more than this, although I hope that we will use that time to look carefully at the points raised by hon. Members on both sides of the House.

An hon. Member asked about taxation. Some hon. Members defined this quota as a practical gain and payments for that will be subject to capital gains tax in the normal way. The hon. Member for Rother Valley (Mr. Barron) said that he was looking for a fair deal on retirement for the tenant. I hope that the House will accept that that is not what we are seeking, because the tenant receives part of his deal on retirement in the form of the payment that he receives for the improvements that he has made and, of course, through the arrangements that he has made for his retirement. Until very recently there was no question of a capital payment being made. That has come about because of the so-called creation of an asset.

9.45 pm
Mr. Nelson

Does my right hon. Friend accept that the extent to which such dairy farmers have been able to provide for their retirement during their working lives has been limited by the imposition of quotas? That is why the apportionment of such quotas on retirement is relevant.

Mr. Gummer

I am sure that my hon. Friend is right about apportionment being relevant. But it was suggested that that was all that we were talking about. I am sure that my hon. Friend will agree that in some cases the operation of quotas has not resulted in a lowering of the income in the way suggested, but that in many other cases, it has done so. There are some people who, by reducing their inputs and by accepting the lower outputs, have found that they have a higher margin than beforehand.

This matter is not easily approached. Indeed, the hon. Member for Rother Valley seemed merely to restate that tenants were good and landlords were bad. But we will not get anywhere if hon. Members adopt that sort of approach.

Mr. Barron

Does the right hon. Gentleman accept that if a tenant has worked hard to build up his yield and his quota, he should be able to get something for it? Sometimes tenants build up their yields not with the aid of landlords but despite them.

Mr. Gummer

I quite agree, and that is why we are here today and why the Government have tabled the new clause. It saddens me that he and the hon. Member for Barnsley, West and Penistone (Mr. McKay) suggested that we were not trying to find an answer. We are all trying to find an answer, and we are trying to make sure that it is right. But we will not get much further unless hon. Members accept that.

My hon. Friend the Member for Wealden (Sir G. Johnson Smith) asked about share farmers. That is different, because most share farmers have specifically entered into their particular arrangements in order not to be subject to the landlord-tenant arrangements that are part of our statute law. Consequently, they have made arrangements as to what the apportionment of their inputs and outputs should be. This is not the relevant legislation for dealing with that—if there is a relevant statutory place for it, which I doubt. I hope that my hon. Friend will listen carefully when I answer the point about 20 per cent. that was raised by my hon. Friend the Member for Tiverton, as I believe that that will cover his point.

Mr. Christopher Hawkins

Perhaps my right hon. Friend will clarify the capital gains position. I accept that a capital gain should be taxed as such. But would it be taxed as a capital gain falling all in one year when it is paid, or could the capital gain be spread from the day that the tenant started his tenancy? Alternatively, would the capital gain be treated as starting the day that the quotas began? If my right hon. Friend cannot answer that point now, will he make a statement later?

Mr. Gummer

I should be happy to write to my hon. Friend on that point. It is, after all, a technical and complicated matter.

We listened carefully to the remarks of the hon. Member for Midlothian (Mr. Eadie). However, he underestimated the real problem of dealing with the balance between the outgoing and incoming tenant. We were opposed to quotas initially, but we cannot ignore them. We must get the balance right.

My hon. Friend the Member for Macclesfield (Mr. Winterton) spoke as enthusiastically as I would about the work that farmers do. But I very much disagreed with him when he questioned whether it mattered if we delayed. It does matter, because even a short delay would mean that some people who were entitled to perhaps a considerable part of a quota would in fact get none. We think that would be a mistake.

The hon. Member for Brecon and Radnor explained the complexities of the clause. I think that he underestimated the fact that the clause is based largely on what we understood was the view that the NFU felt was acceptable or would be acceptable to it, so it cannot be quite as unjust as some hon. Members have suggested, but we understand the problems. He got the stocking rate wrong because it is nearer 1.31 cows. I assure him that the views about which we are talking were well canvassed not only with the Royal Institution of Chartered Surveyors, but with the Central Association of Agricultural Valuers, both of which have given us advice. We have acknowledged this all along.

There is a very real problem in trying to shrug off the difficulty for the incomer merely by suggesting that one can deal with the hard cases. By increasing the amount of quota value to be paid out to the outgoers, one is setting a higher price for everybody who wants to come into dairying. Those of us who believe that one problem with farming is that it is increasingly difficult to enter because that is the nature of the control over surpluses would be very concerned not to push the problem aside. While I in no way wish to be party political, I think that on that occasion the hon. Gentleman showed a paucity of knowledge about the matter because tenants who are going to come in know perfectly well that they will not be covered by any scheme involving 10 per cent. tax on those who are able to find a way of transferring their quota, because at present there is no system of flexibility of quotas to enable that to be done. Therefore, I think that the hon. Gentleman is avoiding the difficulty, because as usual he wants to be all things to all men. One cannot deal with the outgoers in the way that he wants without affecting the incomers, and that must be faced.

I hope that I can give my hon. Friend the Member for Devizes (Mr. Morrison) some help. We did not have an enabling clause because we felt that it was important, if it was to last for as long as it looks as if it may have to, that over time there was seen to be an equity of compensation. If one were to leave it so vague, it would, first, be contrary to the advice that we received from the valuers because it would make for more expensive, protracted and general valuations; and, secondly, one would not achieve equity over time. Although there is, of course, the opportunity to appeal to the county court against what has been decided; I will look at his proposals about appeal to the agricultural land tribunal. I do not think that is the right place, but I will look at it.

I do not believe that one can have 100 per cent. compensation for the tenant. I believe that even if in the smallest way land has been used for dairy production, some small compensation must be available to the landlord. However, I must tell my hon. Friend the Member for Milton Keynes that I am not in favour of the proposition that the tenant who has reduced the value of his landlord's land, having taken over a dairy farm, should pay some sort of direct compensation on outgoing. That seems to be to be the exact corollary of 100 per cent. for the tenant in some cases, and therefore we have set our sights against both of those conditions.

I turn next to the points made by the hon. Member for Cunninghame, North (Mr. Corrie). [Interruption.] Hon. Members who have not been present in the debate may think that the points raised by those hon. Members who have been present are unimportant, but specific questions have been asked, the House is concerned that we should get this right and those questions must be answered.

My hon. Friend the Member for Cunninghame, North presented three different cases and asked about the difference in compensation. I believe that the compensation would be radically different in each of those cases. I hope that we shall be able to increase the flexibility and make sure that the valuer is able to take even more into account. We shall see whether the new clause covers this point to the extent that my hon. Friend would wish.

The hon. Member for Wrexham (Dr. Marek) is not here—

Mr. Tony Banks (Newham, North-West)

He is lucky.

Mr. Gummer

The hon. Member for Newham, North-West (Mr. Banks) has not been here at all for the debate, and we have all been very lucky. He ought to be here, because he now has no work to do on the GLC.

The hon. Member for Wrexham suggested that the Government tabled the new clause to protect the landlords' interests. That is manifestly untrue. Had we wanted to do so, we would have tabled no new clause, and consequently tenants would have got nothing.

My hon. Friend the Member for High Peak (Mr. Hawkins) referred to the less favoured areas. I shall take that point seriously. He was right to make it, and I shall see whether it can be put right if it is not right already. I believe that it is, but I shall see whether we can help.

The hon. Member for Meirionydd Nant Conwy (Mr. Thomas) asked us to withdraw the new clause. We cannot do so because we believe that would damage his tenants, and I am sure that his tenants would not want to get no support at all.

My hon. Friend the Member for Tiverton asked me to look at several matters. I cannot put off this decision—

Mr. Maxwell-Hyslop

Why not?

Mr. Gummer

I hope that my hon. Friend has listened to what I have said. We differ on this matter. I am on one side and he is on the other, and I am afraid that I cannot help him.

However, I can help in relation to the 20 per cent. I am perfectly prepared to look at it again. My hon. Friend said that this would be less helpful than it ought to be, and I shall see that we do something about it.

If I have not covered other points that have been raised it is because they are detailed and I shall have to deal with them at a later date—[Interruption.] If hon. Members wish to hear more, they will no doubt sit throughout the rest of the proceedings. This is the best way of dealing with a problem in respect of which we cannot satisfy two wholly divergent interests—those of the incoming tenant and those of the outgoing tenant. That is what this is really about, and I believe that the Government have produced the best answer.

Question put, That the clause be read a Second time:—

The House divided: Ayes 210, Noes 142.

Division No. 145] align="right">[10 pm
Alison, Rt Hon Michael Biggs-Davison, Sir John
Amess, David Blackburn, John
Ancram, Michael Bonsor, Sir Nicholas
Atkins, Rt Hon Sir H. Boscawen, Hon Robert
Atkinson, David (B'm'th E) Bottomley, Mrs Virginia
Baker, Rt Hon K. (Mole Vall'y) Bowden, A. (Brighton K'to'n)
Baldry, Tony Bowden, Gerald (Dulwich)
Batiste, Spencer Boyson, Dr Rhodes
Bellingham, Henry Braine, Rt Hon Sir Bernard
Bendall, Vivian Brandon-Bravo, Martin
Bennett, Rt Hon Sir Frederic Bright, Graham
Benyon, William Brinton, Tim
Best, Keith Brittan, Rt Hon Leon
Biffen, Rt Hon John Brooke, Hon Peter
Brown, M. (Brigg & Cl'thpes) Jones, Robert (Herts W)
Browne, John Jopling, Rt Hon Michael
Bryan, Sir Paul Joseph, Rt Hon Sir Keith
Carlisle, John (Luton N) Key, Robert
Carlisle, Kenneth (Lincoln) King, Rt Hon Tom
Carlisle, Rt Hon M. (W'ton S) Knight, Greg (Derby N)
Carttiss, Michael Knight, Dame Jill (Edgbaston)
Chalker, Mrs Lynda Knowles, Michael
Chapman, Sydney Lang, Ian
Chope, Christopher Lawler, Geoffrey
Churchill, W. S. Lawson, Rt Hon Nigel
Clark, Dr Michael (Rochford) Leigh, Edward (Gainsbor'gh)
Colvin, Michael Lilley, Peter
Conway, Derek Lord, Michael
Cope, John Lyell, Nicholas
Cranborne, Viscount McCrindle, Robert
Critchley, Julian McCurley, Mrs Anna
Currie, Mrs Edwina MacGregor, Rt Hon John
Dicks, Terry MacKay, Andrew (Berkshire)
Dorrell, Stephen MacKay, John (Argyll & Bute)
Dover, Den McNair-Wilson, M. (N'bury)
du Cann, Rt Hon Sir Edward McNair-Wilson, P. (New F'st)
Dunn, Robert Major, John
Dykes, Hugh Malins, Humfrey
Eggar, Tim Malone, Gerald
Emery, Sir Peter Marlow, Antony
Evennett, David Mather, Carol
Eyre, Sir Reginald Maude, Hon Francis
Fallon, Michael Mawhinney, Dr Brian
Favell, Anthony Mayhew, Sir Patrick
Fenner, Mrs Peggy Mellor, David
Forman, Nigel Merchant, Piers
Forsyth, Michael (Stirling) Meyer, Sir Anthony
Forth, Eric Miller, Hal (B'grove)
Fowler, Rt Hon Norman Mills, Iain (Meriden)
Fraser, Peter (Angus East) Mills, Sir Peter (West Devon)
Freeman, Roger Mitchell, David (Hants NW)
Fry, Peter Moate, Roger
Gardner, Sir Edward (Fylde) Montgomery, Sir Fergus
Garel-Jones, Tristan Moore, Rt Hon John
Goodhart, Sir Philip Morris, M. (N'hampton S)
Goodlad, Alastair Morrison, Hon P. (Chester)
Gow, Ian Moynihan, Hon C.
Grant, Sir Anthony Murphy, Christopher
Greenway, Harry Neale, Gerrard
Griffiths, Peter (Portsm'th N) Needham, Richard
Ground, Patrick Neubert, Michael
Grylls, Michael Newton, Tony
Gummer, Rt Hon John S Nicholls, Patrick
Hamilton, Hon A. (Epsom) Norris, Steven
Hamilton, Neil (Tatton) Onslow, Cranley
Hanley, Jeremy Oppenheim, Phillip
Hargreaves, Kenneth Osborn, Sir John
Harris, David Ottaway, Richard
Haselhurst, Alan Page, Richard (Herts SW)
Hawkins, C. (High Peak) Parkinson, Rt Hon Cecil
Hawkins, Sir Paul (N'folk SW) Patten, J. (Oxf W & Abgdn)
Hayes, J. Pawsey, James
Hayhoe, Rt Hon Barney Peacock, Mrs Elizabeth
Hayward, Robert Pollock, Alexander
Heathcoat-Amory, David Portillo, Michael
Heseltine, Rt Hon Michael Powell, William (Corby)
Hickmet, Richard Powley, John
Higgins, Rt Hon Terence L. Price, Sir David
Hind, Kenneth Proctor, K. Harvey
Hogg, Hon Douglas (Gr'th'm) Rathbone, Tim
Holland, Sir Philip (Gedling) Rees, Rt Hon Peter (Dover)
Holt, Richard Rhodes James, Robert
Howard, Michael Rhys Williams, Sir Brandon
Howarth, Alan (Stratf'd-on-A) Ridley, Rt Hon Nicholas
Howarth, Gerald (Cannock) Ridsdale, Sir Julian
Howell, Rt Hon D. (G'ldford) Roe, Mrs Marion
Hubbard-Miles, Peter Sainsbury, Hon Timothy
Hunt, David (Wirral W) Shaw, Sir Michael (Scarb')
Hunter, Andrew Shepherd, Colin (Hereford)
Hurd, Rt Hon Douglas Shersby, Michael
Jackson, Robert Silvester, Fred
Jenkin, Rt Hon Patrick Sims, Roger
Jessel, Toby Skeet, Sir Trevor
Johnson Smith, Sir Geoffrey Smith, Sir Dudley (Warwick)
Soames, Hon Nicholas Viggers, Peter
Spicer, Michael (S Worcs) Wakeham, Rt Hon John
Stevens, Lewis (Nuneaton) Walden, George
Stewart, Allan (Eastwood) Walker, Bill (T'side N)
Stradling Thomas, Sir John Wardle, C. (Bexhill)
Sumberg, David Watts, John
Tebbit, Rt Hon Norman Whitfield, John
Thompson, Donald (Calder V) Whitney, Raymond
Thompson, Patrick (N'ich N) Wood, Timothy
Thorne, Neil (Ilford S)
Thurnham, Peter Tellers for the Ayes:
Townend, John (Bridlington) Mr. Tony Durant and
Tracey, Richard Mr. Mark Lennox-Boyd.
Adams, Allen (Paisley N) Heffer, Eric S.
Anderson, Donald Hicks, Robert
Archer, Rt Hon Peter Home Robertson, John
Ashby, David Howells, Geraint
Aspinwall, Jack Hoyle, Douglas
Atkinson, N. (Tottenham) Hughes, Robert (Aberdeen N)
Banks, Tony (Newham NW) Hughes, Roy (Newport East)
Barnett, Guy Hughes, Sean (Knowsley S)
Barron, Kevin John, Brynmor
Beckett, Mrs Margaret Kaufman, Rt Hon Gerald
Bennett, A. (Dent'n & Red'sh) Kirkwood, Archy
Bermingham, Gerald Knox, David
Bidwell, Sydney Lamond, James
Blair, Anthony Leadbitter, Ted
Bray, Dr Jeremy Leighton, Ronald
Brown, Gordon (D'f'mline E) Lewis, Terence (Worsley)
Brown, N. (N'c'tle-u-Tyne E) Litherland, Robert
Brown, R. (N'c'tle-u-Tyne N) Livsey, Richard
Brown, Ron (E'burgh, Leith) Lloyd, Tony (Stretford)
Bruce, Malcolm McCartney, Hugh
Buchan, Norman McDonald, Dr Oonagh
Campbell-Savours, Dale MacKenzie, Rt Hon Gregor
Carlile, Alexander (Montg'y) Maclennan, Robert
Clark, Dr David (S Shields) McNamara, Kevin
Clarke, Thomas McTaggart, Robert
Clay, Robert McWilliam, John
Clelland, David Gordon Madden, Max
Clwyd, Mrs Ann Marshall, David (Shettleston)
Coleman, Donald Maxwell-Hyslop, Robin
Cook, Frank (Stockton North) Maynard, Miss Joan
Cook, Robin F. (Livingston) Michie, William
Corbett, Robin Mikardo, Ian
Corbyn, Jeremy Millan, Rt Hon Bruce
Cunliffe, Lawrence Miller, Dr M. S. (E Kilbride)
Dalyell, Tam Morris, Rt Hon J. (Aberavon)
Davies, Rt Hon Denzil (L'lli) Morrison, Hon C. (Devizes)
Davis, Terry (B'ham, H'ge H'I) Nellist, David
Dewar, Donald Nelson, Anthony
Dixon, Donald Oakes, Rt Hon Gordon
Dobson, Frank O'Brien, William
Dormand, Jack O'Neill, Martin
Dubs, Alfred Orme, Rt Hon Stanley
Dunwoody, Hon Mrs G. Parry, Robert
Eadie, Alex Pendry, Tom
Evans, John (St. Helens N) Pike, Peter
Ewing, Harry Powell, Raymond (Ogmore)
Farr, Sir John Radice, Giles
Field, Frank (Birkenhead) Randall, Stuart
Fields, T. (L'pool Broad Gn) Raynsford, Nick
Fisher, Mark Richardson, Ms Jo
Flannery, Martin Rogers, Allan
Forrester, John Rooker, J. W.
Foster, Derek Ross, Ernest (Dundee W)
Foulkes, George Ross, Stephen (Isle of Wight)
Freud, Clement Rowlands, Ted
Gardiner, George (Reigate) Sheerman, Barry
Garrett, W. E. Sheldon, Rt Hon R.
Gilbert, Rt Hon Dr John Shore, Rt Hon Peter
Hamilton, James (M'well N) Silkin, Rt Hon J.
Hardy, Peter Skinner, Dennis
Harman, Ms Harriet Smith, C.(Isl'ton S & F'bury)
Harrison, Rt Hon Walter Soley, Clive
Hart, Rt Hon Dame Judith Strang, Gavin
Haynes, Frank Thomas, Dafydd (Merioneth)
Heddle, John Thomas, Dr R. (Carmarthen)
Thompson, J. (Wansbeck) Winnick, David
Tinn, James Winterton, Mrs Ann
Torney, Tom Winterton, Nicholas
Wallace, James Young, David (Bolton SE)
Wardell, Gareth (Gower)
Wareing, Robert Tellers for the Noes:
Wigley, Dafydd Mr. Ron Davies and
Williams, Rt Hon A. Mr. Allen McKay.

Question accordingly agreed to.

It being after Ten o'clock, further consideration of the Bill stood adjourned.

Ordered, That, at this day's sitting, the Agriculture Bill may be proceeded with, though opposed, until any hour.—[Mr. Mather.]

Bill, as amended (in the Standing Committee) again considered.

New clause 4 added to the Bill.

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