FARM AMALGAMATIONS AND BOUNDARY ADJUSTMENTS SCHEME 1967 (Hansard, 26 October 1967)

§ LORD NUGENT OF GUILDFORD
My Lords, I should like to thank the noble Lord, Lord Beswick, for explaining to us the intention and meaning of the two Agricultural Orders now before us. I would observe that Lord Shackleton's intervention on the Government's intention to continue with the application to enter the Common Market adds some point to the debate on these Agricultural Orders in relation to farm amalgamations. In fact, this country on the whole has with regard to farm structure been well placed in competition with other European countries. It will matter a great deal, if this application to enter succeeds, that we should retain and preserve the advantage we now have on 1787 farm structure against the day when we are in open competition with the other European countries who go to make up the Common Market.
For this reason I welcome the Government's general intention to assist the amalgamation of farms on the one hand, to build them up into bigger and more economic holdings, and on the other hand to assist the outgoer who wishes to leave his farm. We are moving towards modern mechanisation and improvements in technology, both in livestock and in crop growing, with the bigger the unit the lower the unit cost. Therefore there is a better prospect for both the farmer and the farm worker to get a decent living out of the farm, and at the same time to produce food at lower prices. So the general trend here is, I am sure, generally acceptable to everybody.
These Orders have been described as a modest incentive—and I agree with that—both in giving grants for the amalgamation of farms and in the payment to outgoers. Here I have to recognise that it has probably been traditional for farmers to tend to retire to a smaller farm as a sort of pension job, and there to remain for the rest of their lives, which often, and I hope usually, are very long ones. But this is not entirely in the best interests of getting the biggest production out of our farms.
I observe that the trend towards amalgamation over recent years has been proceeding fairly well, as a result of the natural economic forces. In 1953 there were some 380,000 farms registered in England and Wales, and in 1964 there were 323,000 farms registered in England and Wales on the farm returns. So there has been a reduction in the total number over this period of some 15 per cent.; that is to say, a rate of reduction of over 1 per cent. per annum. In this context I should like to ask the noble Lord—if he would be good enough to answer a few questions at the end of the debate—what acceleration of this rate of amalgamation he expects to happen as a result of these two Orders, say, over the next ten years, and what he expects to be the annual cost of administering these two Orders.
Here I would ask the noble Lord about an even more important point, and it is 1788 this. Is the noble Lord, Lord Beswick, satisfied that the additional incentive which these two Orders will provide will be strong enough to offset the influence of this Government's fiscal measures to break up the bigger farm holdings? Farmers are now generally aware of the drastic effect—and I emphasise the word "drastic"—of the new long-term capital gains tax on farm holdings which pass at the death of the occupant. With the continuing inflation and rise of land values, the incidence is going to be so great that most farms will have to be split up on the death of the present occupant, in order to meet the capital gains tax, plus the estate duties.
The noble Lord may be aware that at the last Oxford farming conference this was the chief topic of discussion among the leading farmers of this country, and it is causing a great deal of anxiety. I need hardly add that nothing could be more damaging to the future prospect of the cheap and plentiful production of our farms, especially in these days of technological advance, than splitting up big holdings into a larger number of small ones. I would ask the noble Lord whether he would pass that thought on to his colleagues and ask them most urgently to reconsider it. I would also add that my Party has pledged itself to repeal the folly of this long-term capital gains tax.
Turning to the terms of the two Orders, I must thank the noble Lord for the explanation he has given us of a number of points in them, but I am sure he will not take it amiss if I observe that these Orders are pretty complex—especially the two taken together—and for the laymen, among whom I would include myself, a child's guide will really be most necessary if farmers are to understand how they are to qualify for either of the grants. May I ask the noble Lord whether, if such a child's guide will be made available, he can assure us that there will be examples to show how it works? May I also ask him whether he can tell us when such a publication could come out? In particular, I should like to thank the noble Lord for explaining the meaning of paragraph 7 of the Order relating to payments to outgoers, dealing with the income test—that is, the means test—which I found difficult to understand, although I understood the trend of it. Would the noble 1789 Lord make sure that this, in particular, is explained in the laymen's guide that comes out?
A rather more substantial point arises on the qualification in paragraph 3(2) of the same Order on the eligibility of proposals. That limits the holdings which qualify to those where the greater part of the feeding stuffs required by any livestock kept on the unit is grown there". This qualification would appear completely to exclude the specialist livestock holding, either of cattle if they were kept intensively, or of pigs or poultry. Of course, there are many small farmers up and down the country, especially on the less good land, who have relied on keeping perhaps 1,000 hens or 10 breeding sows in order to bring in the greater part of their income. These farmers are now feeling the pressure of reducing profit margins and are progressively being pushed out of business. On those holdings, of course, the livestock are mainly dependent on bought feeding stuffs, as opposed to feeding stuffs produced on the holding.
These small farmers are undoubtedly desperately in need of the outgoers' grant which is described here and, in the main, it would probably be desirable that these small holdings were given up and amalgamated with neighbouring holdings, in order to produce more economic holdings. I should like to ask the noble Lord whether it is the Government's intention that this type of specialist producer, who is mainly dependent on bought feeding stuffs, is to be excluded from the benefit of these grants. If that is the Government's intention I think we ought to know it. But I would most cogently ask the noble Lord to ask his right honourable friend the Minister to reconsider this point.
Finally, I should like to mention a matter which has received a good deal of comment in the farming world, and that is the effect of Schedule 3 of the 1967 Act which requires repayment of grant if the amalgamated holding is either sold or split up within 40 years. I believe the Minister has undertaken to consider sympathetically an application if a sale is needed in order to meet the estate duty or capital gains tax. We welcome such words from the present Minister, who is known to be sympathetic to the farming 1790 world, but a successor might not be so sympathetic. Therefore, would it not have been better to put some such discretion specifically into the Order, in order to make plain that such discretion would be used in reasonable circumstances? With those few comments, may I say that I welcome the general principle of the Order and hope that your Lordships will give it your assent.

LORD HENLEY
My Lords, I, too, welcome this Order but perhaps in a rather qualified way. I feel that it is a good try to solve a rather intractable problem, but I am not terribly hopeful that it will work. I believe we all thought twenty years ago that the natural economic trends would work rather faster than they have done, so this is one of the methods we ought to try. Nevertheless, as the noble Lord, Lord Nugent of Guildford, has said, this incentive is working directly contrary to the present fiscal policy, which is another reason why I am not sure that the scheme will work.
One of the factors which makes for the intractability of this problem is the inflexibility of our law on land tenure, and I hope that when we come to reexamine some of the problems of the Agricultural Holdings Act—which we probably will do in the next two years—this sort of problem will be given great attention. Nevertheless, as I say, I welcome the Order. It is a good try and one which ought to be made, and whereas the natural economic forces sometimes cause great hardship to certain individuals, with regard to this Order there is, at least, every hope that that will not happen, and that people whom one wishes to leave an industry will leave it, not in pain and bitterness, as it were, but advantageously, not only to the industry in general but also to themselves.

§ LORD WALSTON
My Lords, I should like to associate myself with the welcome given by noble Lords opposite to these two Orders, though perhaps with rather more enthusiasm than that evinced by the noble Lord, Lord Henley. The noble Lord, Lord Nugent of Guildford, mentioned the economic aspects of these Orders, which are important. There are also, of course, the social implications which I think are possibly even more 1791 important in certain areas of this country. For my part, I think it is particularly gratifying to see this practical application of genuine Socialist planning, both for economic efficiency and for the welfare of human beings, coming from the Ministry of Agriculture at this time.
I should like to ask for amplification from my noble friend on one particular point, even though, I am afraid, it exhibits my own ignorance or inability to understand the words of the Order. As I understood him in his remarks, he said that before the spouse of an occupier, on the death of the occupier himself, was able to claim any grant under this Order he or she would have to have been in occupation for two years. Reading paragraph 5(b) of the Farm Structure (Payments to Outgoers) Scheme, that does not, as I understand it, seem to be the case. It looks to me—and, if I may say so, this seems to me the commonsense interpretation—as if, should a farmer die tomorrow and his widow wish to avail herself of the provisions of this Order, she would be able to do so at once and would not have to remain there for two years before she was entitled to do that. As I say, that seems to me the common-sense application, and it is, I believe, what the Order means. But possibly I misunderstood my noble friend in his remarks, and therefore I would be most grateful if he could clarify it for us.

§ LORD BESWICK
My Lords, may I first of all thank noble Lords who have given a general welcome to these two Schemes? A number of very relevant questions have been asked. If I am not able to answer them all in detail, I shall certainly get the answers to them and let the noble Lords concerned know. I was asked whether it was possible to have a "child's guide" to these Schemes. My understanding is that there is an explanatory leaflet already in the Library, and that it has already been distributed; but if that is not adequate, possibly the noble Lord, Lord Nugent of Guildford, will let me know in what respects he thinks it falls short of what is desired, and I shall certainly put the point to my right honourable friend. I agree with the noble Lord—and I think everybody accepts this—that the Schemes are diffi- 1792 cult, are a little complicated, and that if they are to achieve the result which we require it will be absolutely essential that those who are concerned and are likely to benefit should understand what the possibilities are.
I was asked about the rate of amalgamations, and the noble Lord himself gave some figures as to the reduction that has already taken place in the number of smallholdings in this country. It is estimated, as I understand, that something like 3,000 small and medium-sized farms are amalgamated in the United Kingdom each year now. Not all of those, of course, are permanent amalgamations. Sometimes the extra land is only rented. The object of the new Scheme is to speed up this trend; and, although it is too early to make any reliable estimate of the rate which will be achieved, the expectation is that the existing rate of some 3,000 a year might be doubled in the next year or so. That, of course, is only a reasonably intelligent guess, but that is the expectation.
The noble Lord had some words to say about the fiscal measures of the present Government. I suppose that his general welcome to the Scheme and his general kindness on these matters would not prevent him from having some "dig" at the Government, especially so soon after Brighton. However, I do not believe that any facts can be produced to show that the capital gains tax has had effect upon amalgamations; and, in any case, as the noble Lord will know, I think there are provisions, there are reliefs, by which, in the event of an estate having to be broken up, payment of tax on gains can be spread over a period of, I believe, something like eight years. So I should have thought it was inconceivable that there would be a capital gains consideration which would involve the breaking up of an estate into the kind of fragmented parcels that we are talking about under this Scheme.
The noble Lord also asked me about the cost of the Scheme. It is expected that, when it is running, possibly over the next three or four years, the cost will be of the order of £15 million to £17 million a year. The administrative cost within that figure, it is estimated, will be about £500,000 a year. I was asked by my noble friend Lord Walston about the surviving spouse. I am sorry if I did not 1793 make this more clear, but as I understand it the surviving spouse must have been on the holding, or have been entitled to be there, for at least two years. But these two years may, of course, have been before her husband's death.
I was asked a very important question by the noble Lord, Lord Nugent of Guildford, about the qualification of a smallholding, in connection with the provision that the greater part of the feeding stuffs required for the stock kept on that land must also be grown on the land; and he felt that this might exclude some very deserving smallholders. I can probably explain this point better in this way. Paragraph 3 provides that, in order to qualify for grant, the uncommercial unit being relinquished must be capable of providing employment for at least 100 days a year: and what I have to emphasise is that it does not necessarily follow that the unit must at present provide this number of days' employment. If I may quote a few examples, the present scale allows 12 standard man-days for each dairy cow, four standard man-days for each breeding sow, and one standard man-day for every five hens. So a holding would be regarded as capable of providing at least 100 days employment a year if, under the farming system suitable for the district, it could, for example, keep 9 dairy cows or 25 breeding sows or 500 hens, and grow the greater part of the feeding stuffs required. But the capability to do this is what is important.
Another example of a smallholding which could satisfy the test would be a unit of 400 hens on 12 acres, of which 9 acres were capable of growing barley. I say capable of growing barley, but there may well be a situation in which a greater part of the land was used for keeping the poultry and a lesser part for producing the feeding stuffs. But the land must have this potential to provide half the feeding stuffs. The kind of holding which may well be ruled out by this qualification is what one might call the factory farm, on which there is very intensive farming of stock with feedstuffs entirely brought in from off the farm. It is this type of factory farm which it is thought is not the sort to be encouraged to amalgamate by these two Schemes.
My Lords, I think that this covers the questions I have been asked. If on 1794 reading Hansard I find that I have overlooked any, I shall write to the noble Lord concerned. In the meantime, may I thank the House for the welcome given to these Schemes.