New Clause

HC Deb 23 July 1986 vol 102 cc514-9

Mr. Gummer

I beg to move, That this House doth agree with the Lords in the said amendment.

Mr. Deputy Speaker

With this it will be convenient to discuss Lords amendment No. 10, after clause 11, insert the following new clause—

'Rent arbitrations: milk quotas . —(1) Where there is a reference under section 12 of the Agricultural Holdings Act 1986 (arbitration of rent) in respect of land which comprises or is part of a holding in relation to which quota is registered under the Dairy Produce Quotas Regulations 1986 which was transferred to the tenant by virtue of a transaction the cost of which was borne wholly or partly by him, the arbitrator shall (subject to any agreement between the land-lord and tenant to the contrary) disregard—

1. (a) in a case where the land comprises the holding, any increase in the rental value of the land which is due to that quota (or, as the case may be, the corresponding part of that quota); or
515
2. (b) in a case where the land is part of the holding, any increase in that value which is due to so much of that quota (or part) as would fall to be apportioned to the land under those Regulations on a change of occupation of the land.

(2) In determning for the purposes of this section whether quota was transferred to a tenant by virtue of a transaction the cost of which was borne wholly or partly by him—

1. (a) any payment made by the tenant in consideration for the grant or assignment to him of the tenancy or any previous tenancy of any land comprised in the holding, shall be disregarded;
2. (b) any person who would be treated under paragraph 2, 3 or 4 of Schedule 1 to this Act as having had quota transferred to him or having paid the whole or part of the cost of any transaction for the purposes of a claim under that Schedule shall be so treated for the purposes of this section; and
3. (c) any person who would be so treated under paragraph 4 of that Schedule if a subtenancy to which his tenancy is subject had terminated, shall be so treated for the purposes of this section.

(3) In this section— quota" and "holding" have the same meanings as in the Dairy Produce Quotas Regulations 1986; tenant" and "tenancy" have the same meanings as in the Agricultural Holdings Act 1986. (4) Section 95 of that Act (Crown land) applies to this section as it applies to the provisions of that Act".

Mr. Gummer

Hon. Members may recall from our previous consideration of the Bill the provision which would enable tenants to claim compensaton at the end of their tenancies in respect of the milk quota attaching to that land. The existing provisions in clause 11(2) were intended to ensure that the prospect of compensation for the tenant in respect of milk quota should not affect the rent of the holding. It was suggested in another place that although the provision contained in clause 11(2) was fine so far as the quota allocated by the Minister was concerned, it would not be fair to apply it to the quota that the tenant effectively acquired through a land transaction and transferred to the holding covered by the tenancy. This is transferred quota in the Bill's terminology.

We recognised that this was a point for which we should make provision. If a tenant has paid for quota it is reasonable that it should be treated similarly to a tenant's improvement and disregarded in assessing the rent. Amendment No. 10 does this.

Subsection (1) of the new clause, which is amendment No. 10, makes it clear that transferred quota acquired by the tenant is to be disregarded at a rent review. A tenant will not be charged rent on it because it will be treated in a similar way to a tenant's improvement. The original intention of clause 11(2) is preserved in the new clause by saying that transferred quota is to be disregarded. Subsection (1) makes it clear that quota allocated by the Minister is not to be disregarded. Thus, the fact that a tenant may be eligible for compensation in respect of allocated quota when eventually he gives up the holding will not affect the rent payable in the meantime.

Subsection (2)(a) of the new clause makes it clear that if an incoming tenant has made a payment to the landlord on taking over a holding to which quota is attached, this does not count as the acquisition of transferred quota. That is because it would not be appropriate for this legislation to intervene in private agreements involving a quite different type of transaction into which the two parties freely enter.

Subsection (2)(b) and (c) of the new clause also make it clear that the statutory successor or assignee of the original tenant who was there when the quotas were bought in and the head tenant of an original sub-tenant are to be treated in the same way as the original tenant. If the original tenant paid for the quota in connection with a land transfer, then his entitlement not to be assessed for rent on the transferred quota will pass to his successor. Hon. Members may recall this concept is similar to that already contained in the compensation provisions where the entitlement to compensation passes from the original tenant to the successor. This is to clear up what might otherwise have been an anomaly.

Mr. John

Although the major milk quota debate is to take place later, perhaps I could raise one point at this stage about greater flexibility, because I know that flexibility is the main aim of all hon. Members when dealing with milk quotas. As the Minister will know, because I have raised it with him, I am extremely worried about the sort of case where the tenant has made an exceptional contribution, such as the provision of fixed equipment or buildings, towards the building up of the milk business.

Although one cannot formally amend the Bill, special consideration should be extended to people in this special category. That could be done by the Minister making it clear that they merit special consideration. Perhaps he could also tell the arbitrators or the arbiters in Scotland of that fact so that when arbitrations come before them. they will be guided by what the House feels to be the case: that where a tenant contributes substantially towards the building up of a milk business that should merit special consideration.

Mr. Maclennan

Although I accept that the proposal to require the transferred quota to be disregarded by the arbiter is sensible and a distinct improvement, the clause draws attention to the anomalies that are created by the concept of quotas allocated or transferred and excess and standard quotas. Although the clause is a modest improvement towards safeguarding the tenant's rights, I agree with the hon. Member for Pontypridd (Mr. John) and I hope that we can return to the matter and discuss it at greater length in the debate on quotas.

Mr. Gummer

rose—

Mr. Deputy Speaker

Does the Minister have leave to address the House again? I take it he does.

Mr. Gummer

I agree with the hon. Member for Pontypridd (Mr. John) that it is most important that people understand exactly how they stand about quotas. I say to the hon. Member for Caithness and Sutherland (Mr. Maclennan) that any system that seeks to approach what is a matter of real disagreement—not just between tenant and landlord but between incoming and outgoing tenants—is bound to encounter difficulties. There is no way of getting over the difficulty that, for the landlord, the quota results in an increase in value but not necessarily, indeed rarely, does it result in any money in his hand. The money in his hand, if it is to be passed out to an outgoing tenant, must be gained from someone else, and the other person who can give it to the landlord will be the incoming tenant. Therefore, there is a real interest division between the incomer and the outgoer.

2 am

In those circumstances, we cannot avoid having a situation and a system which needs careful explanation and consideration, and that is what the area has been given. I know that the hon. Member for Pontypridd is concerned that there should be no misunderstanding. Therefore, I accept that there are cases where the tenant has taken over a non-dairy holding—for example, what really turns out to be a greenfield site—and through his own hard work and by investing his own money turns it into a flourishing milk enterprise. That puts him in a different circumstance from many others. In those circumstances the landlord has contributed virtually nothing except the land itself. I think that all hon. Members will agree that in such a case the arbitrator should take full account of what the tenant has done, so that the tenant will be credited with much the greater part of the quota.

I happen to be confident that the Bill, as amended in another place, will achieve that effect. Two distinct mechanisms operate to that end. First, there is the calculation of the standard quota. That calculation is now formulated in such a way as to make it clear that the tenant is to get full credit for management practices, such as milking three times a day or feeding high levels of concentrates — practices which will have boosted production in the base year above what one would normally expect. Quota earned by those practices will be excess quota—quota in excess of the standard quota for the holding—and the tenant will get 100 per cent. of the value of that quota.

Mr. Keith Best (Ynys Môn)

My hon. Friend will know that in another place my noble Friend Lord Stanley, a constituent of mine, moved an amendment which he later withdrew which was very much related to the disparity between the 500 litre difference between less favoured areas—marginal land—in Scotland, and that in England and Wales. The reply of my noble Friend Lord Belstead was to the effect that that would be a difference of no more than one fifth of 1 per cent. Can my hon. Friend confirm that that is the case? If the difference is so minimal why is it necessary to continue to have this difference of 500 litres?

Mr. Gummer

I am sure that my hon. Friend would not expect me to do other than to support that which my noble Friend said in the other place. To the best of our knowledge, the figures that he gave are correct.

There are differences between England and Wales and Scotland. We have sought to try to recognise those and my hon. Friend will be presenting to the House some of the changes which we have in mind which have gone through the other place in that respect. I hope that my hon. Friend will listen carefully to them. I am sure that he will see that, because the circumstances of land tenure are different, because the distribution of land on which dairy herds are found is different, because the proportion of LFAs which have dairy herds on them is different, the circumstances may be said to be completely different.

As is the custom in these matters, the proposals to deal with the problems are different to meet different circumstances. It does not help to suggest that we should not treat Scotland in the way in which we have done in the past, because the law in Scotland is different from that in the rest of the United Kingdom and it is also true that the circumstances of dairying are different.

That is not the only way in which we are trying to meet the demands which the hon. Gentleman put. There is a calculation of a tenant's fraction which is the tenant's share of the standard quota—in other words, that which is not affected by the excess quota calculation about which we have talked. That is simply the tenant's share of the total annual value of the holding, including the land, buildings and fixed equipment.

In a case where a tenant has taken over a greenfield site, the tenant's share will be high because of the basis of that calculation. All the buildings and fixed equipment will be his, so the full annual value of those will go into the calculation on the tenant's side. On the landlord's side there will be just the land. The annual value of the land is shown by the rent, which one would expect to be relatively low in the type of case that I am discussing. So the tenant's fraction of the standard quota will be substantial. When one adds it on to the excess quota, the tenant will be getting, under the Bill as it now stands, a very high proportion in total of the full value of the quota.

But I have been disappointed by a tendency in certain quarters to minimise the value of the quota compensation provisions. I have even heard it suggested that there is a de facto maximum cut-off for the tenant's fraction, and that valuers will never award more than a certain percentage. I heard that again about two days ago when I was speaking in Lancashire. But that is not so. There is nothing implicit or explicit that would warrant such an interpretation. I have taken the point, and I am determined that that interpretation should not be made.

It is important to be clear. To put people's minds at rest, I intend to write to the Royal Institution of Chartered Surveyors and to the Central Association of Agricultural Valuers, putting it on the record that there is no cut-off, and that valuers are free to award as high a tenant's fraction as they consider appropriate. I hope that I have reassured the House that the Bill leaves arbitrators free to give full credit to the tenant, who has effectively done everything with the exception of providing the land.

Mr. William Cash (Stafford)

I am extremely glad to hear that. Recently I had a meeting with my branch of the NFU at which those concerns were raised. People encountered considerable difficulties when the original milk quota round was going on, over the manner in which the tribunals adjudicated. Some people felt that it was unfair. Will the Minister influence as much as possible the Royal Institution of Chartered Surveyors and others to ensure that those who are appointed are properly and fully qualified to deal with the questions, have the relevant skills—

Mr. Deputy Speaker

Briefly, please.

Mr. Cash

—and are in a position to judge the outcome fairly on behalf of both parties.

Mr. Gummer

I am sure that my hon. Friend is right, that we naturally want to eliminate any sense of unfairness. However, he would probably agree with me that in so contentious a matter, where there is considerable concern among landlords and their incoming or outgoing tenants some will always feel hard done by. The same is true of the original allocation of quotas. It is most important that every effort should be made to ensure that there is no reason for that, although it may still occur. I hope that the House will accept that by agreeing to do this, I shall meet the particular concern that has been raised.

Sir Paul Hawkins (Norfolk, South-West)

I am a member of the Royal Institution of Chartered Surveyors and was an arbitrator for many years. The arbitration procedure is fair. People who are fully qualified are chosen to do the work. The unfortunate thing about the whole quota system is that the incomer—probably a younger man who has to go into the holding—is often forgotten. The more the outgoer has to receive, the more the ingoer faces. The incomer is often far worse off, because he has a very heavy burden in the amount of ingoing that he has to pay for everything else. I hope that that is borne in mind.

Mr. Maclennan

rose—

Mr. Deputy Speaker

I thought that the hon. Gentleman had already addressed the House once.

Mr. Maclennan

I have not addressed the House on this amendment.

The House will have listened carefully to the Minister's words, which were clearly designed to reassure the industry—

Mr. Deputy Speaker

Order. I recollect that the hon. Gentleman has already spoken once to this group of amendments. He can only address the House once on this group of amendments.

Mr. Maclennan

With respect, I have not addressed the House. The Minister has tried to put the industry's anxieties to rest. For the avoidance of doubt, Mr. Deputy Speaker, there are a number of issues which the Minister raised which are certainly germane to a later—

Mr. Deputy Speaker

Order. The hon. Gentleman can address the House only once on an individual amendment or a group of amendments when we are discussing Lords amendments. It was within my clear recollection that he had addressed the House once on this group. If he insists that my memory is in doubt, I shall have to accept that.

Mr. Maclennan

I am sure that your memory is extremely good, Mr. Deputy Speaker, and at this time of night it is possible that mine is faulty.

Question put and agreed to.

c514
1. VALIDATION OF APPLE AND PEAR DEVELOPMENT COUNCIL ORDERS. 305 words