HL Deb 17 February 1959 vol 214 cc275-82

3.19 p.m.

Order of the Day for the House to be put into Committee read.

Moved, That the House do resolve itself into Committee.—(Earl Waldegrave.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD MERTHYR in the Chair.]

Clause 1:

Schemes for grants for increasing efficiency of small farm businesses

1.—(1) The appropriate Minister may by a scheme or schemes made under this section with the approval of the Treasury provide for the payment of grants to any person for the time being carrying on a small farm business of any such class or description as may be specified in the scheme in connection with the carrying out of a programme for increasing the efficiency of that business, being a programme of a duration of not less than three years submitted to and approved by that Minister for the purposes of the scheme; and any such scheme shall— (a) so define the classes or descriptions of farm businesses in respect of which grants may be made under the scheme as in the opinion of the appropriate Minister to secure that such grants will only be made in respect of a farm business capable of yielding an adequate return to any person carrying it on with reasonable efficiency and as a full-time occupation;

LORD WISE moved, in subsection (1), after the first "grants" to insert "or loans". The noble Lord said: On behalf of my noble friends, I wish to move the first Amendment on the Order Paper. This Amendment was fairly widely debated in another place, but we on this side of the House are anxious that the Government should reconsider the position which they took up in those particular discussions. We are convinced that in addition to grants to small farmers the question of loans is important, as in order to carry out what the Government wish—namely, to improve their holdings and their productiveness—many of these small farmers would be far better off in the long run if at the commencement of the proceedings they not only obtained their small grant from the Government but also were in a position to obtain loans to implement what they were hoping to carry out.

There are one or two points that I should like to make in regard to this particular Amendment. In dealing with it I shall have to refer to what was said by the Minister and others in another place. I want to make it clear at the outset that this Amendment only provides, as indeed Clause 1 provides in regard to the operation of grants, that the Minister may make a scheme or schemes. There is no obligation on the part of the Minister immediately to put into operation either the payment of grants or the making of a loan. It is within his province, as the Bill becomes an Act and as it proceeds in operation, to decide what grants should be made. If our Amendment is accepted he can do exactly the same with loans which he wishes to make. There is no specific time limit and I state that the Minister will be able to carry this proposal into operation at any time while this particular Act is on the Statute Book.

Now I want to refer noble Lords to paragraph 13 of the White Paper which deals principally with the Government's view on the provision of loans to small farmers. If noble Lords will look at paragraph 13 they will see that the Government are talking about the serious objections which would be open if loans were made to small farmers. It seems to me that the objections stated in paragraph 13 are most flimsy and that they can easily be refuted. The Government are rather secret in that particular paragraph arid are not very open in putting forward their many objections. The first objection seems to be that repayable advances which would be at normal rates of interest would not give small farmers sufficient help and encouragement to make the necessary changes in their farm practice. Surely the small farmer is entitled to some consideration from the Government and should not be thrown upon the ordinary market for the provision of loans which may help him.

The next objection is that the granting of loans to the small farmer would add to Exchequer commitments in regard to agriculture. Surely that is not the case. It is not the case in regard to grants that there is any additional Government commitment. As we know, the payment of grants is to be taken into consideration at the next February Price Review, and so far as the Government are concerned there is no commitment in that respect. Neither would there be any commitment in regard to the provision of loans. Loans would be repayable in the ordinary way. There might be a few defaulters who could not repay their loans, but, in the main, there would be no commitment whatever on the part of the Government in the making of loans. Otherwise we might seriously criticise some of the loans which in other directions are already made by the Government. I expect it is the experience of the Government in regard to those loans—there are many to which I shall refer in a moment—that repayment has to be waived and is never made.

So far as the Government is concerned the nest objection given in this paragraph is that they were hoping that the small farmers would, by grants, be made creditworthy, and worthy of an advance which might be made at normal rates by people outside the Government. So far as I am concerned that does not hold water. Surely the prerequisite to the granting of a loan at the beginning of the operation must be that it is considered by the farmer to be necessary to help in the expansion of his smallholding.

I want now to refer to one or two of the objections which the Minister himself has made in another place. He does not want any failures in regard to the repayment of loans attributed to any advice which his officers may have given to the smallholder. It seems to me to be ridiculous that he should be so sorry for the officers under him if they should make a mistake in suggesting that a loan should be made to a small farmer who subsequently defaults. The Minister also suggests that money should not be lent to a farmer who may not wish to incur a loan before his farm has become more productive. It is obvious that if a small farmer is in the position that he does not want a loan, or could wait a short time for a loan, he would not apply for it until he was in a position to know that he could repay the money to the Government. I suggest to your Lordships that all businesses, great or small, have in the first instance been started under a loan system. Many of the great businesses of to-day are still carried on by means of loans.

Then the Minister says that his advisory officers are not trained to assess creditworthiness in a farmer. Surely the practical experience of his officers makes them the best people in the world to decide whether or not a small farmer has credit-worthiness. They know his farm, they know his ability, they know his energy and all about him. Under our Amendment, if the Minister does not wish to do so, the officers should not carry out the assessment as to whether or not the small farmer is credit-worthy. But I can assure that any practical man of experience, as the noble Earl will know, who walks round and takes stock of a farm will soon be able to assess whether or not that particular tenant or owner is creditworthy and should be granted a loan. Again in respect of that particular objection of the Minister, surely Government loans in the ordinary way to other people or to housing or other authorities, as in banking and private life, are made generally upon the report of a local official. That is either accepted or rejected by the people in high authority up above.

Another point upon which I disagree with the Minister is this. He says that the small farmer should be considered credit-worthy when he has increased his productiveness, but suggests that when that happens the small farmer should go to his bank manager or to the Agricultural Mortgage Corporation and negotiate for a loan from them. That may be all right, but of course if he goes to the bank manager he will probably not obtain his loan on the same terms as those on which the Government are able to grant loans: he will have to pay the recognised rate for bank overdrafts, which in the long run is assessed on a compound interest basis. And, so far as my information and knowledge goes, the Agricultural Mortgage Corporation are concerned mainly with property and not with the practice of agriculture.

May I come back for a moment to the question of normal rates of interest. It is well known that the Government are in the market to borrow money from small lenders at a low rate of interest, whether through the Post Office, Defence Bonds or any other form of Government loan. Loans are made to other industries. In another place, while I was there, we arranged for loans to fisherfolk for the purchase of boats and equipment. I have no information about the rate of interest at which the Government lent that money, but I suggest that it was not at anything like the bank interest rate. Smallholders have been granted loans by the Government. At present, loans are being made by the Government for industrial development all over the country, in distressed areas and otherwise. There are also housing loans and loans in great amount to local authorities for the various operations which they carry out; and there are loans for the much-abused steel industry. At what rate of interest, I wonder, are those loans being made.

VISCOUNT ALEXANDER OF HILLSBOROUGH

The most favourable Government terms.

LORD WISE

I am certain that there is a need for these particular loans. We ask for this only because we are anxious that the smallholder should not only have a minimum of assistance, as he is at present obtaining from Her Majesty's Government through this particular Bill, but rather should be given some greater incentive to make his farm productive. We have always heard that capital is required in the agricultural industry. Here is an opportunity for Her Majesty's Government to help those who, in many respects, now and in the future, will not be able to help themselves. I deplore the fact that the small farming industry is not considered by Her Majesty's Government to be credit-worthy; and I think it is up to the Government to put aside their fears in that respect.

The Minister says he has tremendous faith in the small farmer. Let him put his faith into operation and do something to make us believe that he is sincere. So far as I can see, the present attitude of Her Majesty's Government shows complete lack of confidence in the ability of the small farmer to do his job and pay his way, and I feel that it is of no use for Her Majesty's Government on every occasion to flatter the farmers in their efforts to increase production—in this case the small farmer—and at the same time to curb their means of progress. I beg to move.

Amendment moved— Page 1, line 7, after ("grants") insert ("or loans").—(Lord Wise.)

3.36 p.m.

THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE)

I confess I am somewhat confused. I listened carefully to what the noble Lord said when moving his Amendment, and had he been moving an Amendment asking for grants and loans, the intention of his Amendment being to increase the amount of money that was to be made available under schemes for farmers, I could have understood it. Apparently the noble Lord does not challenge at all that the limit that a farmer can get under the scheme is £1,000 and that we propose to give that to him free. The noble Lord thinks it would be to the advantage of the farmer not to get that free but that rather we should ask him to pay it back later. I confess that I do not follow at all that form of reasoning.

I was glad to be reminded, as I am sure all your Lordships were, of the detailed statement of why we turned down loans in favour of free grants, which appeared in paragraph 13 of the White Paper, and the reasons given by my right honourable friend in another place in support of that argument. I really do not think I have much to add to those points. There is no secret about this. We believe that the alternative of providing loans is not so efficacious and favourable to the small farmer as giving him a free grant. We have looked at this question more than once, as the noble Lord has said. We have discussed it since the White Paper and it has been discussed in another place; and we still feel that it would be both undesirable and unnecessary to make provision in this Bill for loans—and the terms of the Amendment are not "and loans" but or "loans."

I can only repeat that it is our belief that these small farmers are of the type of men who normally are not used to getting assistance in the form of loans, and they feel that a loan would hang over their heads. In that context it does not matter whether the loan is at a low or a high rate of interest. The fact remains that the principal would have to be repaid. It cannot be too often emphasised that in this Small Farmers Scheme we consider that the advice will be as important as the extra cash. We do not want small farmers to hold back from taking advantage of securing expert advice and new business planning for their farm—and thus enabling themselves to increase their efficiency—because of their reluctance to borrow. We feel that they would look upon it as a kind of "string," and say, "You are prepared to give us a grant and to help us with advice but we shall have to pay all that loan back with interest."

We do not want small farmers to have that disincentive. We believe that to offer the loan first and to give the advice afterwards would be to put the cart before the horse, and that until the small farmer begins to get the benefit of the improvement which his new programme will bring him, he will hesitate to accept the burden of a loan because he will be uncertain whether or not lie will be able to keep to the terms and time of repayment. It is not a great disincentive, but it is a disincentive as opposed to the alternative of a free grant with no strings attached which he does not have to pay back.

It is a real point that loans such as this would be difficult to administer We have, or we are going to have, a heavy burden placed on our field officers who are doing this work. It makes extra work, and it is no good denying it, if they have to go around assessing credit-worthiness, acreage, livestock numbers and so on. We think it would make the burden intolerable from that point of view alone, even if it were desirable from the point of view of the farmer. These officers of ours really do not have loan expertise. They are not bank managers; they have not been trained in that work. It would be an added difficulty it would add to delay; and we do not want our civil servants to be administering this kind of credit-loan scheme, even if we thought it was more efficacious to the farmers than the free grant, which we do not.

That brings me to the last point. The noble Lord said, "You say you have faith in this scheme, and you cannot have any, because you have not any confidence that the farmers will pay this money back. That is why you are not giving a loan." That is not the point. We have faith in this scheme. We want them to get this advice and to get this programme going to enable them to get a free grant of up to £1,000, which is a considerable sum. Then if they need more finance they will be—and I see nothing wrong with this argument—in a more credit-worthy situation to borrow money through the normal channels. I must ask your Lordships to resist this Amendment, which I think would be a retrograde step.

House resumed.