HC Deb 23 July 1986 vol 102 cc542-7

Lords amendment: No. 38, in page 19, line 2, leave out paragraph 6 and insert— 6. — (1) Subject to the following provisions of this paragraph the standard quota for any land for the purposes of this Schedule shall be calculated by multiplying the relevant number of hectares by the prescribed quota per hectare; and for the purposes of this paragraph—

  1. (a) "the relevant number of hectares" means the average number of hectares of the land in question used during the relevant period for the feeding of dairy cows kept on the land or, if different, the average number of hectares of the land which could reasonably be expected to have been so used (having regard to the number of grazing animals other than dairy cows kept on the land during that period; and
  2. (b) "the prescribed quota per hectare" means such number of litres as the Minister may from time to time by order prescribe for the purposes of this subparagraph.
(2) Where by virtue of the quality of the land in question or climatic conditions in the area the amount of milk which could reasonably be expected to have been produced from one hectare of the land during the relevant period ("the reasonable amount") is greater or less than the prescribed average yield per hectare, then sub-paragraph (1) above shall not apply and the standard quota shall be calculated by multiplying the relevant number of hectares by such proportion of the prescribed quota per hectare as the reasonable amount bears to the prescribed average yield per hectare; and the Minister shall by order prescribe the amount of milk to be taken as the average yield per hectare for the purposes of this subparagraph. (3) Where the relevant quota of the land includes milk quota allocated in pursuance of an award of quota made by the Dairy Produce Quota Tribunal for England and Wales which has not been allocated in full, the standard quota for the land shall be reduced by the amount by which the milk quota allocated in pursuance of the award falls short of the amount awarded (or, in a case where only part of the milk quota allocated in pursuance of the award is included in the relevant quota, by the corresponding proportion of that shortfall). (4) In sub-paragraph (3) above the references to milk quota allocated in pursuance of an award of quota include references to quota allocated by virtue of the amount awarded not originally having been allocated in full. (5) In this paragraph—
  1. (a) references to land used for the feeding of dairy cows kept on the land do not include land used for growing cereal crops for feeding to dairy cows in the form of loose grain; and
  2. (b) references to dairy cows are to cows kept for milk production (other than uncalved heifers).
 (6) An order under this paragraph may make different provision for different cases. (7) The power to make an order under this paragraph shall be exercisable by statutory instrument and any instrument containing such an order shall be subject to annulment in pursuance of a resolution of either House of Parliament.".

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 take the following Lords amendments: No. 39, in page 20, line 9, leave out in connection with the production of cow's milk and insert for the feeding, accommodation or milking of dairy cows kept on the land". No. 40, in page 20, line 17, leave out from "improvements" to end of line 18 and insert "to, or tenant's fixed equipment on, land used for the feeding, accommodation or milking of dairy cows kept on the land in question". No. 48, in page 25, line 47, at end insert— (1A) In this Schedule references to land used for the feeding of dairy cows kept on the land and to dairy cows have the same meaning as in paragraph 6 above.".

Mr. Gummer

The House will want to pay a little attention to this group of amendments. Hon. Members may recall from discussions on 17 April that the level of standard quota is at the heart of the calculation of compensation which may be payable.

There are those who have produced all sorts of ways of trying to make a fair arrangement between landlord and tenant, between outgoer and incomer, but we have tried to find the fairest method. In doing so we discussed a number of disadvantages and I assured the House that I would seek to meet some of the concerns which existed.

One of my hon. Friends was concerned to suggest that in marginal land, particularly in his county, the arrangements might not be satisfactory for tenant farmers. So we have tried to meet some of those considerations. Not least, we have removed the 20 per cent. restriction on variations in the standard quota about which so much concern was expressed, particularly by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop), who is not here this evening only because of his illness. He would want me to say that he is pleased with the changes.

My hon. Friend has an eagle eye, so I know that the House will appreciate his view. He has pointed out that we have tried to meet the issues that he raised. For practical reasons, we have concluded that the area of land to be taken into account in the calculation of both the standard quota and the tenant's fraction will be limited to the land used by dairy cows alone, excluding the land used by followers. The calculation of the standard quota should therefore reflect the yield achievable on that basis.

3.15 am

Similarly, when it comes to the tenant's fraction calculation, the tenant's share would be assessed on the basis of the improvements that he has made that relate to the dairy cows. The landlord's share would be based on the rent paid for the land used by the dairy cows. Followers will be excluded from the calculations at all stages.

Hon. Members will note that there is a change to the definition of dairy cows. In case any hon. Member is worried about that, I had better make it clear that it is not merely that they are not bulls. The new definition is purely intended to improve the clarity of drafting. It takes account of the dictionary definition of a cow as any female bovine animal. We want to make it clear that uncalved heifers are not included. Although the reason for that involves a tiny detail, it means that the tenant is not disadvantaged, which might happen, by a distortion in the calculations.

As I have said, we have removed the 20 per cent. restriction on variations in standard quota. We have already announced that, in setting the figures in this subordinate legislation for the prescribed quota and the prescribed average yield per hectare, we intend to use 8,000 and 9,000 litres respectively. The difference between those two figures reflects the cut in production following the introduction of quotas. It means that the prescribed quota figure will normally be some 11 per cent. below the yield that would be reasonable for the holding, having regard to the quality of the land and the climatic conditions.

We have also announced that we intend to set lower figures for the less favoured areas. Here we intend to prescribe quota per hectare of 7,000 litres for disadvantaged land and 6,000 litres for severely disadvantaged land. Concern has also been expressed by hon. Members on both sides of the House on two other points. First, it was argued that tenants who had received an award of development quota should not be penalised simply because that award had not been allocated in full. Secondly, there was concern that tenant's compensation should not be reduced as a result of any future general cuts in quota. Both those points are covered by the amendments.

Amendment No. 48 extends the definition of land used for the feeding of dairy cows kept on the land and the definition of "dairy cows" contained in the new paragraph 6, so that they apply to paragraph 7 of schedule 1 as well. As I have said, the intention is that in the calculation of the standard quota and the tenant's fraction, land used by followers should be excluded. The purpose of the amendments is to meet many of the concerns that have been expressed.

I hope that the House will accept that, even though we have been unable to go as far as some wanted us to go, we have corrected those things that people thought might create a distortion in the equity that we sought to achieve. I remind that House that every penny paid to the outgoer is in the end paid by the incomer. There is a balance to be struck between those two sides. Hon. Members have suggested that tenants are somehow being done down, but both incoming and outgoing tenants are affected by what happens to others, If we want young people coming into our dairy industry, we must not set the price of entry too high, as that would gravely damage the landlord-tenant system.

In sorting out some of the anomalies that might otherwise arise, I believe that it would have been wrong for us to go any further towards making it expensive to go into dairying. That would have done something that this Government have always set their face against. It would have increased the difficulties for those entering farming, thus making it a much more enclosed and separate part of the economy. None of us wants that.

Mr. John

There is a simple answer to the agonising of the Minister of State and the hon. Member for Norfolk, South-West (Sir P. Hawkins). It is the creation, quite uncovenanted, of a capital asset out of a milk quota that is causing tension between the incoming and outgoing tenant, and I think that on reflection it will be acepted that that should never have been allowed to happen. I do not think that any of us anticipated the result.

As the milk quota is, in theory, a temporary phenomenon that is to be reviwed in 1989, a Labour Government would undertake to review whether the capital trading in milk quotas should continue. A surrender and redistribution of the quota to where it would be most needed, and where it would do most good, would be a far better concept for the incoming tenant as well as for the outgoing one. Compensation is called for by the initial mistake, and it is the Government who made the mistake. It is they who have created the capital asset.

Having made those comments in the same non-controversial manner as the Minister of State adopted, I accept that this is a series of amendments which slightly assist the tenant farmer, and for that reason we would not dream of opposing them, but it is not only the NFU and the Scottish NFU which have said that the Government take too rosy a picture of the tenant's share. The examples that have been given do not match some of the percentage predictions. On 27 June Farming News described Lord Belstead's conclusion and produced some figures which showed that his figure of 19,000 was only a quarter share of the total compensation payable in his example.

We are talking about an average share for tenant dairy farmers of 30 per cent. of the quota value, which I do not think is fair or just. As the Ministry's own research booklet observes, the stocking rate per hectare for cows means that if the grass is left without treatment—it is the tenant who treats the grass with nitrogen—the cows will not provide any milk and they will be only partly maintained. That is the real argument in favour of the tenant having a much larger share of the value of the quota, and the Opposition believe that that share should have been achieved.

Mr. Livsey

The guts of the compensation arrangement for tenant farmers in respect of milk quotas will come in the form of a statutory instrument, and the Minister of State has outlined some of the Ministry's thinking on the subject. We still do not know exactly what the stocking rate will be, but perhaps it will be 1.8 cows per hectare. It is clear that more information is to come. When the statutory instrument comes before us, we shall be able to judge precisely the deal that tenants and landlords will have on the standard quota.

I believe that insufficient will be left for the tenant. Although the Minister has said that the tenant's share may be higher than 30 per cent., my hon. Friends and I still need to be convinced on that score. The way to overcome the concerns of many hon. Members about the incoming milk producer and the cost of the quota is to create a pool of quotas, or to have a quota bank of the sort that exists in Canada, where special amounts of quota are put aside for the purposes of incomers. It has been said already that the Government created the value of the quota in 1984.

Arbitration on quotas should be much more open-ended. A more even start, with a 50:50 shareout, providing fair valuation should take place with regard to landlords and tenants, incorporating valuation methods that are accepted across the industry, this would be far more equitable. It can be argued that the energy requirements of cows for maintenance, growth and pregnancy can be produced from unfertilised grass. In applying fertiliser and feeding the cows properly, the tenant creates the additional milk production, which has additional value. That is the crux of the argument about why the tenant should have more of the quota value.

I regret very much not having been a member of the Committee, because that would have been an advantage and would have contributed to my input in the debate. I merely add that my hon. Friend the Member for Yeovil (Mr. Ashdown) wishes to protest by proxy, because he was here for two hours of the debate—

Mr. Deputy Speaker

Order. It is very late, and I do not think that we should start, at this hour of the morning, referring to what other hon. Members might have said had they been here. I hope that we can stick to the matter before the House.

Mr. Livsey

I accept that, Mr. Deputy Speaker. I say merely that this series of amendments could have gone further for tenant farmers.

Mr. Gummer

rose—

Mr. Deputy Speaker

Does the right hon. Gentleman have the leave of the House to speak again?

Hon. Members

Yes.

Mr. Gummer

The quota has a value not because the Government created it but because the European Community argues that the quota cannot legally be taken away from the land: the land is tied to the quota and the quota to the land. Opposition Members are not right on that. What we know now — it is important—is that if there were a Labour Government, the tenants would get nothing, because it would all be taken away from them. Under the proposal, every tenant gets something that he would not have expected to get when he went into the tenancy. The intentions of Opposition Members, we have now discovered, have been wholly unacceptable. They complained that the tenants would not get enough, when they intended to give them nothing whatsoever. I hope that tenants are perfectly aware of that. Quotas would have no value, and they would not get that from a Labour Government.

Mr. John

Is the Minister of State rehearsing for the role of Mr. Facing Both Ways? He was crying over the plight of the incoming tenant a moment ago, and now he is complaining that he will not have to pay more. If he says that the outgoing tenant will not have compensation, by his own argument that will help the incomer. As he is so concerned about newcomers to farming, he cannot argue the case both ways.

Mr. Gummer

The hon. Gentleman has spent three or four months complaining that the outgoing tenant has not been getting enough. Now he tells us that if there is a Labour Government, the outgoing tenant will get nothing whatsoever. I hope that the National Farmers Union knows what the Labour party would do and will therefore again make sure that there is not a Labour Government to implement such a nonsensical scheme.

Question put and agreed to.

Subsequent Lords amendments agreed to.