§ 3.20 p.m.
§ The Minister of State, Scottish Office (The Earl of Mansfield)
My Lords, I beg to move that this Bill be now read a second time. The purpose of the Bill is to introduce changes in the law governing the relationship between agricultural landlords and tenants in Scotland; changes affecting the procedure for determining rent in rent review cases which go to arbitration and the arrangements for succession on the death of a tenant. The House may find it helpful if I briefly describe the background to the Bill.
As your Lordships may be aware, there has been a gradual decline over a considerable period of time in the number of farms available to let. This decline was noted by the committee under the chairmanship of the noble Lord, Lord Northfield, which reported in 1979 on its inquiry into the acquisition and occupancy of agricultural land. I should like to pay tribute to the noble Lord for his personal contribution to that far-reaching inquiry. I am sure that the majority of noble Lords here will agree with the view of the Northfield Committee that there is a good case for retaining and encouraging a healthy and reasonably large let sector.
In Scotland over the past 10 years, the percentage of total area of agricultural land held under the traditional landlord/tenant system has dropped from 36 to 31 per cent. Both sides of the industry in Scotland, the Scottish Landowners' Federation and the National Farmers' Union of Scotland, were of course aware of, and concerned about, this decline, and with every encouragement from this Government and at my instigation they entered into discussions 188 with a view to considering what action might be taken which would be acceptable to both sides of the industry.
These detailed discussions led to agreed joint proposals presented to my right honourable friend the Secretary of State in February 1981. Clearly provisions for succession to tenancies and arrangements for determining rent levels on arbitration are sensitive issues in which there are differing views relative to landlords' and tenants' interest. The fact that joint proposals in this sensitive field were agreed by both sides of the industry is a measure of the responsible and statesmanlike way in which they approached the exercise and I should like to take this opportunity of paying tribute to the union and the federation for the spirit of co-operation in which they carried out this difficult task.
On receipt of the joint proposals, which I of course welcomed, I immediately met both sides of the industry and set up a working party under the chairmanship of my department with a remit to examine and establish the precise intention of the proposals on rent and succession with a view to translating these into amending legislation. The working party, which included representatives of both sides of the industry, met on six occasions and reported at the end of 1981 when there followed a round of consultations on the report with a wide range of interested bodies in Scotland. Comments on the recommendations were discussed at a meeting of the reconvened working party in June 1982 when final agreement was reached with both sides of the industry on the legislative changes necessary to implement the intentions of the joint proposals.
I now turn to the Bill. The legislative changes affecting rent and succession are provided for by way of amendments to the provisions in the principal Act, the Agricultural Holdings (Scotland) Act 1949, and the clauses of the Bill follow the order of sections in the 1949 Act.
Clauses 2 and 5 deal with the determination of farm rents on arbitration. Under existing legislation, the criterion for determining rent on review by arbitration set out in Section 7 of the 1949 Act, as amended by Section 2 of the Agriculture Act 1958, is the level of rent a particular holding would be likely to attract if available to let in the open market and the means of establishing what that level might be in comparison with similar holdings which have actually been let in the open market. For a variety of reasons, very few farms are now offered to let in the open market and, accordingly, there are situations in which rent offered may be unrealistically high because a particular would-he tenant is prepared, for one reason or another, to offer an abnormally high rent, possibly even including an element of "key money" to secure the holding.
It is considered appropriate to modify the existing statutory formula to allow arbiters, where appropriate, to take into account other factors than open market rents to correct for any element of "key money" in the open market comparable. Clause 2 therefore provides that while normally the criterion for determining rent on review will remain as at present—that is, comparison with the open market—in future, an arbiter who considers that the available evidence 189 about a comparable open market rent is insufficient or insufficiently reliable to enable him to determine the review rent on straight comparison, shall be able to take into account other factors defined in the new subsection (1A) to Section 7 of the 1949 Act introduced by Clause 2—factors which as already explained will enable him to discount any element of "key money" in the open market evidence.
The new factors are fourfold: first, open market comparisons outwith the surrounding area; secondly, entire range of offers made for comparable subjects; thirdly, sitting tenants' rents fixed by agreement for comparable subject in the surrounding area; and fourthly, current economic conditions in the relevant sector of agriculture.
Clause 2 also reduces the period between rent reviews from five to three years. At this stage I should explain that during the course of the proceedings of this Bill in another place, concern was expressed to me by both sides of the industry that Clause 2 of the Bill, as drafted, might not achieve one of the main aims of the Bill, namely, that in rent review cases, an arbiter should have regard to factors additional to open market rents in the surrounding area where these rents were unrealistically high because of scarcity of subjects to let. Similar concern lay behind an Opposition amendment to Clause 2 at the Report stage in another place.
It has always been the Government's intention in this Bill to provide that the arbiter must look to factors other than evidence of open market rents for comparable subjects in the surrounding area where he is of the view that such evidence as there is is "insufficient or unreliable" and it was envisaged that this phrase would encompass situations in which there was a scarcity of subjects to let. We acknowledge, however, that it is vitally important to ensure that the wording of the proposed new statutory formula for determining rent on rent reviews by arbitration is the correct one since this formula will affect the whole of the let sector in Scotland.
In the circumstances the Government gave an undertaking at the Report stage in another place to re-examine the wording in detail and, if necessary, to present an amendment for the consideration of your Lordships at the Committee stage in this House. Our re-examination of the wording is in hand and I shall report the outcome to the House when it is in Committee on the Bill.
Under existing legislation in rent review cases, there is no right of appeal by either party against an arbiter's findings of fact, or against the level of rent he finally determines, although there is an appeal on questions of law. An arbiter's decision in any particular case can be of vital importance to the livelihood of a tenant or, indeed, a landlord, particularly since rents can now involve considerable sums of' money. In present circumstances, we consider it appropriate that the important question of level of rent should be subject to review. Clause 5 of the Bill therefore provides for a right of appeal by either party to the Scottish Land Court, on questions of law or fact, against an arbiter's award in a statutory rent review case, and associated with this a provision that the arbiter shall be required 190 to explain in writing the reasoning behind his decision. The clause also details procedural requirements as regards the arbiter's award and arrangements for appeals.
The provisions in the Bill relating to succession to tenancies and security of tenure are contained in Clauses 3 and 4. In Scotland, as your Lordships may know, a tenancy does not automatically end on the death of a tenant and can normally be bequeathed or transferred by the executor if there is no will or if the bequest is for any reason invalid.
The existing legislation differentiates between near relative successors and non-near relative successors. Where a non-near relative has succeeded to a tenancy on the death of a tenant, the landlord can, if he wishes, gain repossession of the holding by serving an incontestable notice to quit on the successor within certain time limits; and the existing provisions contained in Section 6(3) of the Agriculture Act 1958 are re-enacted in Clause 3 of the Bill, in a simplified form.
Where, on the death of a tenant, the successor is a near relative, statutorily defined as a surviving spouse or child including an adopted child, that near relative successor has considerable security of tenure and the landlord can only regain possession of the holding if he can prove to the Scottish Land Court, following service of a notice to quit, that he should get repossession of the tenancy for specific reasons defined in statute. These are that the successor has neither sufficient training in agriculture nor experience in farming to farm with reasonable efficiency; that the holding is not sufficiently large to provide full-time employment for more than two men and the landlord requires it for the purposes of amalgamation; or that the successor already has an agricultural holding of his own prior to the death of the tenant. Existing tenants have an expectation that these statutory provisions will apply to their near relative successors for unlimited generations and the Government consider it appropriate that this expectation should be safeguarded in the amending legislation—a view shared by both sides of the industry in Scotland. For tenancies let before 1st January 1984, the existing provisions shall continue to apply to future generations of near relative successors, provided of course that there is no break in that succession. Clause 4, as read with Cases 1 to 3 in Part I of Schedule 1 to the Bill, re-enacts the provisions of the existing relevant statute—that is, Section 18 of the Agriculture (Miscellaneous Provisions) Act 1968—in a simplified form.
For existing tenancies, therefore, the statutory provisions relating to rights of succession and security of tenure remain exactly as they are under existing legislation, and the reason for re-enacting these provisions in this Bill is to bring together as a matter of convenience in one piece of legislation the main statutory provisions relating to succession to tenancies in Scotland. The relevant sections of earlier Acts are repealed.
So far as new tenancies are concerned—that is, tenancies created on or after 1st January 1984—the Bill in Clause 4, as read with Cases 4 to 7 in Part II of Schedule 1 to the Bill, adjusts slightly in favour of the landlord but only in that it enables the landlord to 191 regain possession where the tenant is clearly not suitable. Both sides of the industry—landlords and tenants—share this view and are agreed that the balance should be adjusted in this way in favour of the landlord by widening the grounds on which a notice to quit may be served on a near relative successor to a new tenancy. The new circumstances are set out in Cases 4 to 7 of Part II of Schedule 1 to the Bill and are briefly that a successor does not have sufficient financial resources or relevant training or experience to farm the holding with reasonable efficiency, or that the successor at the date of the notice to quit occupies other agricultural land capable of providing full-time employment for himself and at least one other man. In these cases the onus of proof before the Scottish Land Court, following the service of a notice to quit, will shift from the landlord, as at present, to the tenant. Where a notice to quit is served on the grounds that the holding is required for an amalgamation, the onus of proof will remain with the landlord as under the existing law.
For new tenancies, therefore, the Bill does not introduce any dramatic change in security of tenure for near relative successors but adjusts the position slightly in favour of the landlord, though, I would emphasise, only so far as the continued good farming of the holding requires.
There is no question of providing an instant solution to the problem of the decline in the let sector which has taken place over a period of time under successive Governments. We consider it important, however, to take steps towards halting this decline and encouraging the traditional landlord/ tenant system. We also consider it important that any changes in this sensitive and complex field should be acceptable to both sides of the industry, as indeed the measures in this Bill are. I beg to move.
§ Moved, That the Bill be now read a second time.—(The Earl of Mansfield.)
§ 3.35 p.m.
§ Lord Ross of Marnock
My Lords, we should be grateful to the Minister of State for his explanation of this Bill. It is a limited Bill. I do not agree with the Minister in another place, who said that it was an historical Bill—unless, of course, every Bill is a piece of history. However, it is one as regards which I have an interest to declare. I think I shall be the only one without a real estate interest in the case of this particular Bill.
The whole of Clause 1 tells us that in this Bill the principal Act is the Agricultural Holdings (Scotland) Act 1949. I was on the committee of that Bill. This Bill also affects the 1958 Act, and I was on the committee of that Bill, too. Then there was the 1968 Act. There, I was the author of Part III of that Act, which applied to Scotland. In fact, both of the latter two Bills which I have mentioned were United Kingdom Bills. Now we have this Bill.
My main interest is the wellbeing of Scottish agriculture and of the agricultural population of Scotland; that is, the farmers and the whole community. There is no doubt that in my lifetime—and this was brought out by the Northfield Committee—the proportion of let or tenanted farms in Scotland has gone down from 192 about 88 per cent. to 31 per cent. By now it is probably down to about 30 per cent. The Northfield Committee suggested that in another 40 years it would be down to half of that—probably about 16 per cent. It represents a complete change in the whole structure of landholding and farms in Scotland. Indeed, it concerned the Labour Government because it was the Labour Government that set up the Northfield Committee in 1977. I am surprised, first, that it has taken so long to get important, if limited, legislation: and, secondly, I am equally surprised that it is so limited.
I have here the report. Your Lordships will see that it is a very considerable report with a considerable number of recommendations about which we have heard nothing but which are probably equally important to the problems that we could be discussing today. I should like the Minister to give us an indication whether there is any other legislation coming forward to be put on the statute book in relation to this.
I almost feel that I have strayed into a not very well attended meeting of the Scottish Landowners' Federation—and no doubt they will all be members of the NFU. Therefore, I can well understand how they got together and came to an agreement. I do not disagree with the entire balance that has been reached. It is a very astute balance, coming down, of course, on the side of the Scottish landowners. We shall probably be hearing about the Labour Party's ideas for land, which arc not related to this Bill at all and are not related entirely to the Northfield Committee. But the Northfield Committee tackled this point with a wide range of recommendations in relation to let land and land that is let in some form or another outside the agricultural holdings statutes, and even recommended that there should be a measure of state ownership of land. They mentioned particularly the Highlands. They mentioned new powers that should have been given to the Highlands and Islands Development Board. I should have loved to hear something about that in the Minister's Second Reading speech on this Bill, but we heard nothing at all, either in the other place, or here.
We must bear in mind that security of tenure in relation to let farms in Scotland is way beyond what has ever been known in England. We have had this measure of security of tenure since at least 1923. That was hardened up in the 1949 Act, and in 1958 the Tory Government took it away, and even the "near relative"—who, when the father died was probably looking forward to taking over a farm which had been in the family for generations and generations—was subject to eviction; and eviction did take place. That was why in 1968, after a considerable contest with my agricultural colleagues in England—and I see that they have both left the field—
§ Lord Ross of Marnock
My Lords, my noble friend Lord Bishopston was not there in 1968. That was why in 1968 we managed partly to restore the position in Scotland. It is what is happening to that position about which I am concerned in this Bill. The Government start with the aim of trying to increase the number of 193 let holdings in Scotland. Quite frankly, I do not think that that will work. I am very glad that they have not gone right back to the 1958 position. With the help of Norman Buchan, the Member of Parliament who was the Scottish Minister on that particular Committee, we retained that security of tenure for existing tenants. But now we have a new position. In Scotland we have two classes of tenants, with two different measures of security. In the long run I do not think that that will be for the good. I do not think that it is the kind of compromise for which everyone would have hoped and, recollecting the support that I received from the National Farmers' Union in 1968, I dare say that they would have been unhappy if they had decided to leave Scotland alone in that respect.
But the basis of the Bill is the importance of the let sector. As the law stands, it has considerable merit in that it imports the advantage of continuity and efficiency deriving from the tradition of the son being brought up on the farm, having a detailed knowledge of it and inheriting the tenancy on his father's death. There is every incentive for the tenant's family to put the maximum skill and effort into farming the land efficiently and, as a result, everyone concerned—the landlord, the tenant and the community at large—benefits from the arrangements. Those are not my words; they are the words of the Government Minister in the other place. If it is as good as that, why interfere with it? But no, the bargain was made and the balance was struck.
But I am concerned—and I hope that the Government are concerned—at what has been happening. I say that this will not work, that we will not get that increase. I doubt whether we shall even stem the decline in the number of let farms. When the landlord gets vacant possession, what will he do? If the present trend continues, he will take the land in hand and farm it himself as part of an estate business. He may sell it to a pension fund. That is happening in the Aberdeen area of Scotland to a greater extent than in other parts of Scotland, and the figures are all in the Northfield Committee Report. He may let it to the highest bidder, and here we come to the question of how the highest bidder gets it. There is no doubt that premiums or key money are being involved more and more in respect of this because of the scarcity of land to let. I do not say that it happens in every case, but it has been happening, and in a particular case it can inflate the rent for existing tenants.
At present in respect of a succession to tenancy the question of training and experience in farming arises; but when the landlord lets with vacant possession, or indeed when he sells to anyone, the question of the person buying or the person who gets the let having experience does not even arise. The only question that arises is money, which gives rise to exploitation of the land. Remember, the state has a considerable interest in the land. The state has put millions and millions of pounds into the health of the land—certainly since 1945. So we are right to examine what is being done and should not just leave it to a get-together of the National Farmers' Union and the Scottish Landowners' Federation.
I think that the NFU was concerned about whether or not the question of key money is properly covered. 194 I am very grateful to the Minister for telling us that he is still examining it, although he has been examining it for some time now. I do not know when the Committee stage of the Bill will be, but it could even be next week if the Prime Minister decides to have an early election. So I ask the Minister not to dally with his consideration and to come back with the right answer, or it may well be that this Bill will be delayed. When we may be on the eve of an election, I fear that the Government will refuse amendments, because if they accept amendments, the Bill will have to go to another place, which means more time lost. But we must get it right and we must keep the bargain with the farmers.
I should like to comment on the mood of draftsmen. Here we have a simple Bill of seven clauses. Clauses 1, 6 and 7 do not really matter. Clause 1 is the interpretation clause; Clause 6 refers to repeals; and Clause 7 tells us when the Bill will commence. The substantive clause is Clause 4. But to make any sense of the Bill you have to read Clause 2 with Clause 5, and Clauses 3 and 4 together, or Clauses 2 and 5 with the one schedule that really matters. I admire present-day draftsmen for their ability to render the simplest of Bills obscure, complex and virtually unintelligible. I know that the noble Lord, Lord Burton, will read this Bill like a book. Like me, he has been interested in this for a long time. But legislators should be given a little better guidance than they get, even from the Second Reading speech of the Minister. I defy anyone who is not concerned with this subject, and even many of those who are concerned with it, to read this Bill and understand it.
We have the 1949 Act; we have the 1958 Act; we have the Succession (Scotland) Act, which followed from the McIntosh Report on Succession. I believe that that took about 13 years before it was put into legislative form in 1964. I was on the Committee of that Bill too. Now we have this Bill. Will there be some measure of consolidation, or have the Government decided to wait because they have something else in mind in respect of agricultural holdings? It is only fair that we give people a proper indication, so that they can read a statute through and know just exactly how they are involved.
I turn first to rents. I disagree with the change from five years to three years. That rents must be reviewed every three years does not show a great deal of confidence in the Government's ability to keep inflation down. Of course there is only one reason for it, and that is to increase the rents. That has been their experience over a long time. If English Peers are concerned about the fact that it was five years in Scotland and three years in England, there always has been a difference between Scotland and England, in this respect. It goes way back even before the 1958 Act, and the Government did not change it in 1958 because they realised that the traditions were different there.
Certainly there has been a speeding up in respect of inflation over recent years, but we are told now that it is going to be relatively easy; that in fact the problem has been solved. I should like to get the justification for this change from five years to three years. It is not long enough to allow any farmer to do any serious planning in respect of it. When you consider many other aspects of legislation, the Government are certainly not 195 prepared to act when the period is longer than three years. When were valuations in Scotland last brought up to date? It is going to be about eight or nine years before they are brought up to date. They have a considerable effect. This is one of the points I shall be taking up in Committee in that respect.
I welcome the fact that the Government are now by statute instructing arbiters where there is dispute. We should appreciate that most of the rents and rent reviews are settled by agreement between landlord and tenant. But in those cases where they are not it is unfair at the present time where there virtually is no open market, and where a farm has been let with special circumstances applying to the person who is taken over, that that should be considered adequate, as it is at present, for fixing new rents for farmers in the surrounding area, and that there is no appeal in respect of fact. When they have taken it to the land court, the arbiter is announced, be makes his decision, comes down to the place and gives his award, and the facts may be completely wrong and there are plenty of grouses on the part of the tenant, but nothing can be done outside a question of law.
If the noble Earl likes to go to the files of the Scottish Office for the year 1978ߝ79 he will find letters from one William Ross, MP for Kilmarnock, in respect of certain cases which took place around that particular area. A large number of farmers received letters about an increase in their rents—astounding increases to them. That was based on a farm in the area which had changed hands for very special circumstances indeed. The adviser from the National Farmers' Union produced another farm, but the farmers were told. "No, it cannot be done. It is outside the area". I am glad in that respect that a widening range of comparisons can now be taken where there is no really open market in the immediately surrounding area.
I remember that particular case because one of the things I was told by the farmers was that the arbiter visited when they could not see a farm: there was snow covering all the ground, and it lay there for a fortnight. The arbiter made his judgment about comparability in respect of a particular farm. But there was no appeal. I am glad now that there is an appeal in respect of facts as well as law. That is one good aspect in the Bill that I certainly applaud. I shall be happy in respect of this provision if we get that amendment which ties the matter up.
The other point is about possession. It is not as bad as I thought it might have been. But it leaves aside all the other questions in respect of whether we should redefine the meaning of near relatives. Is the reference to the Succession (Scotland) Act of 1964, as amended, a reference to the fact that an illegitimate child was given rights in respect of inheritance? It is mentioned in Clause 4.
When we come to the other questions affecting let farms and the decisions of landlords to let, the Government were asked by the Northfield Committee to monitor what was happening in respect of sales to overseas buyers, and that has been happening in Scotland. They were asked to monitor—they did not wish to stop—sales to institutions, to pension funds, and the rest of it, because many of them put in tenants rather than put in managers. Thirdly, they were asked to have a look at partnerships.
196 I was impressed by a speech made in the other House by Mr. John Conic. He was subject to a partnership agreement in which he had no security at all, and one day was told that the partnership was at an end. It is a pretty phoney partnership when that happens; when one person is really being exploited by another. I know that it does not happen in all cases, but from some of the speeches we had in another place it must have angered people who entered into them in a real business and fair co-partnership sense. The Government were asked to look at these matters by the Northfield Committee. So far as I know they have done nothing. These are all important from the point of view of stopping the decline in tenant farms in Scotland.
The other aspect that the Northfield Committee discovered was that there was scanty statistical information about the whole field. They asked for land registration. It might be embarrassing if we had complete land registration in Scotland. People would know who owned the land in Scotland, and would not leave it to the likes of Mr. McEwan in Perthshire—
§ Lord Ross of Marnock
Oh, he was wrong? My Lords, of course he was wrong, because some of the information was not available. Mind you, we have plenty of information that is available—I could gladly spell it out—covering the whole of Scotland. But should we not have more statistical information in respect of agricultural holdings? Then it may well be that we should be in a better position to legislate and to see exactly what should be done.
The Bill is limited. The balance which has been struck is in favour of the landlord. However, I am not surprised that there is a sigh of relief among the tenant farmers that the 1968 Act was left alone so far as existing people are concerned, but it is bad that in future we are going to have two types of land holding for let land, with it being easier for the land owner now to get vacant possession.
I do not think the Committee stage will be a long one; but it will be an important Committee stage. I hope that the Government will be able to tell us how often and how long they have looked at the Northfield Committee, and whether they have any other ideas in respect of legislation for any of their other important suggestions and recommendations.
§ 3.58 p.m.
§ Lord Mackie of Benshie
My Lords, I listened to the noble Lord, Lord Ross of Marnock, detailing his part in the changes which have come about. But we have got it wrong so often that I am glad that at least this new Bill is based on some form of agreement. Whatever good intentions the Labour Party had in 1949, they produced a curious situation. They produced a closed shop for farming, and produced a privileged section of tenants who hung on, and the landlords often suffered. Not that my heart bleeds much for the landlords, but they are human beings and they deserve the same consideration as other people. The landlords were done down right, left and centre by the legislation, and many tenants grew extremely rich 197 on taking advantage of the legislation which was enacted.
What happened to the farm servant? What happened to the fellow who used to work his way up, work a small farm and become a farmer? He had no chance; farming was left as a closed shop. Whenever the landlords had a farm in their possession, either they sold it or they took it in hand. The effect of the policy, which was supposed to be good for Scottish farming and good for the tenant farming system, has been appalling. The result is that there are vast areas affected in Scotland. For example, in Angus alone, I can show your Lordships one estate farming 4,000 acres with eight men and eight large tractors. That is the lot. There are no tenants there whatsoever. That is all because of the type of legislation we have had. It has been one-sided and has taken no account of the social considerations.
The legislation we have in Scotland, to which the noble Lord referred, consists of long leases and the ability to bequeath the lease to anyone, not just to relatives. The beqeathing of a lease was a fair working system. If that system had been continued with some improvements, such as those over death perhaps, it would have been far better for the country as a whole than the present system and the state we are in where one has to be enormously rich—a football pools winner or the son of a rich farmer—before one can take over a farm. This is an unhealthy state for farming.
I welcome the Bill. It has flaws in it as obviously all Bills have, but it does not try to reverse a decision in favour of one side or another. It tries to reach a measure of consensus and that must be good. For that reason I welcome it. I agree with the noble Lord that it is a smallish Bill, but it is an improvement. Along with it has to go a big change in the law on taxation. It must be profitable for a landlord to let a farm and good for him in the long term. It must be profitable for him to let farms in family-sized units instead of in big units. We now have to think of the life of the countryside. We are no longer like the EEC trying to amalgamate farms to get people off the land. There are 12 million people unemployed in the EEC and many of them have come off the land. We have to forget about land purely as a commercial factor and let the free play of the market work. That is not good enough; it is much more than that. We have to look carefully at any legislation if we are to encourage the traditional system, which was a good system in Scotland. It must be more profitable for the landlord and safer for him to let land than to farm it himself or to sell it. On all hands it is agreed that it is a system that can provide a ladder, and does so. If we are trying to preserve that system then I welcome the Bill.
The noble Lord, Lord Ross, implied that many people here have an interest. When he said that he looked hard at me with that piercing gaze. I admit that I have an interest in that I have been a landlord, a tenant and an owner-occupier, all three—and sometimes at the same time. But the point about the Bill is that it is a trade-off. I welcome the rent provisions. It is extraordinary that when the market is closed for land, somebody with a scheme to grow strawberries or roses or some obscure but valuable 198 product will pay a lot for a farm; but if another man starts growing that product he will knock the bottom out of the market. That is typical of what has been happening. Traditional farmers have had to pay the high rents which were achieved in the open market because of the scarcity value. Then those rents were applied in arbitration to the people farming on the normal system; farming well but not the high specialist system of farming. If that were multiplied, conditions of surplus would occur which drive prices down.
I am sorry that the old formula has been rejected (which I thought was a good one) of the rent that a prudent farmer would offer a prudent landlord, or that a prudent landlord would take from a prudent farmer. It was not a bad formula if it was allied to the open market. I was very glad to hear the Minister say that an amendment would be brought forward because the Bill as it stands does not alter this situation and it will need amendment. At present, the arbiter is bound to take the open market rent, if there is an example in the area. That will certainly have to be altered.
The change from five years to three years will be welcome. I do not have the same optimistic view of the future of farming that some people have. I think the tenants of Scotland will be able to get their rents down every three years instead of having to wait five. I do not look to great advancing years in farming with surpluses in every part of the world. I welcome the three-yearly period. I think it will be useful and better.
I do not think the matter of succession has done a great deal of good to the farming industry. I do not believe it has done what it was meant to do. It is all very well for the farmer's eldest son; but if the farmer has two sons—which many farmers have, or, indeed, daughters who may wish to farm (not wishing to be sexist)—their chances of getting a farm will be very much reduced. Nevertheless, I agree with the noble Lord, Lord Ross, that to have two systems will be somewhat complicated. This Bill is welcome. It is welcome more as a step in the right direction, but it is a step that I welcome.
§ 4.7 p.m.
§ Baroness Elliot of Harwood
My Lords, I should like to congratulate the noble Earl, Lord Mansfield, and the Government on bringing this Bill forward. Admittedly it is limited, but it deals with a subject that is highly controversial, or has been in the past. The result of the Bill will be to take much of the controversy out of the subject. I congratulate the noble Minister on the way in which he introduced the Bill, and on the Bill itself.
I should like to say to the noble Lord, Lord Ross of Marnock, that I am a member of both the National Farmers' Union and of the Scottish Landowners' Federation. I have never found that to be very controversial. Both organisations, on the whole, are fundamentally anxious that farming—the land and the community that lives on the land and farms it—should have every possible help and benefit. I agree with the noble Lord, Lord Mackie of Benshie. I do not like these huge areas owned by companies or insurance companies unless they are prepared to let the land to people who will treat their work as part of the community and not only as something from which 199 they hope to make a lot of money, and who do not really care very much about the areas in which they live. That is a wrong point of view, and I hope that the Bill will help in that matter and will concentrate, as it does, on the importance of both sides of the industry and of the industry itself.
I agree that fair rents for sitting tenants are very important. I am in favour of excluding that element of premium or key money to which the noble Earl, Lord Mansfield, referred. That is a good provision, and we should support that amendment to the existing legislation.
The second point relates to new leases to be given to successors of tenants. It is right that such people should have to prove that they are proper persons and have some agricultural knowledge. The reasons which are outlined in the Bill, although they may not be perfect, at least deal with both the landlord who has a farm to let and with the tenant who wants to remain in it or whose son or whose relations want to continue. I think that that is fair, provided that the person who succeeds is a good person, a good farmer and one who will use the land to the best advantage. I also agree that it is a good thing that in the case of a controversy the land court decision should be subject to appeal. I understand that that has not been allowed previously, and I think that it is only fair.
I agree that the question of revising rents from five years to three years is also only fair. I do not agree with the noble Lord, Lord Ross, who thinks that this is too short a period. Things happen quickly these days; and changes in agriculture also happen very quickly. There is a lot to be said for reducing the limit from live years to three years. It is fair to both sides. An appeal from the arbiter's decision on a point of law is also right. The working party suggested that the right of appeal to the land court on a point of fact will also go to law. I think that that, too, is fair. This would happen if the Secretary of State appointed the arbiter. If the landlord or the tenant do not want the appeals procedure, then they can agree to an arbiter.
These are all good points, which I think will help in this very difficult subject, because there is no doubt that there has been controversy in the past. I live in an area where there are several very big, old and well-managed estates. On the whole, the tenant and the estate owner have had a very happy relationship for a good many years. I think it is important that that should be preserved. Also, I feel that it is only fair that the landlord should be able to get his property if he wants it desperately for a son or relation. This Bill, agreed as it is between both sides, between the Scottish National Farmers' Union and the Scottish Landowners' Federation, shows that there has now been an agreement which will help both sides and also the industry. I support the Bill strongly.
§ 4.13 p.m.
§ Viscount Massereene and Ferrard
My Lords, I wish to declare the usual interest regarding agriculture, in that I have tenants and I am a member of the various landowning and countryside organisations. I remember speaking on the 1968 Bill and saying that this would cause the drying up of tenancies in Scotland and that, for any young man coming out of an agricul- 200 tural college and wishing to become the tenant of a farm, it would be difficult to get one. I said that it would be practically impossible. And, of course, so it has proved. As the noble Lord, Lord Ross, well knows, the reason was that the then Labour Government turned farming tenants into what could almost be called a new hereditary class—into a closed shop, as the noble Lord, Lord Mackie of Benshie, said—because, provided that they kept on breeding and they had therefore reasonably near relatives, they could keep on farming the farm for a thousand years, or two thousand years. There was no end to it.
But I regret the damage which has been done to the old landlord-and-tenant farming system in Scotland, because the majority of the landowners were very good to their tenants. I remember how, in the Western Highlands in Mull, once or twice, when there had been a bad winter—and, of course, the rents were pitiful—my father would not take the rent at all. Now, if the state had owned that farm—and, of' course, the state is an absentee landlord and a very ruthless one—I am quite sure that it would have had that tenant out. But I must not dwell on that too much.
I made a few notes while other noble Lords were speaking. I. too, welcome Clause 2, which is associated with Clause 5 regarding arbitration. I think it is an excellent idea that the arbiter will now have to put in writing his findings, the reasons he has given, for making the new rent. I understand that one can appeal against the arbiter's ruling to the Secretary of State or to the land court if one decides to use that particular route. I also understand that one does not have to abide by that but can use the old system. I should have thought that every sensible tenant and landowner, if unable to come to a private agreement, would use the new system as set forth in the Bill.
It is really hopeless to assess new rents on comparable farms which are let on the open market. The system in the 1968 Act, which, to a certain extent, ran through the original Act, completely dried up the supply of farms available for letting on the open market. I think that I should now say that I agree wholeheartedly—as, I am sure, do noble Lords opposite except for the noble Lord. Lord Ross—with the reduction of the period of rent review from five years to three years. Of course, there is the question of inflation and also the question of higher and higher subsidies for farmers and, therefore, higher and higher gross profits. Therefore, I think that five years is far too long and that a fairer period in which to go to arbitration would be three years. I think it is fairer for the tenant and the landlord. True, the tenant will have to pay an increased rent, but as I have said, owing to inflation and subsidies, he will have far greater gross income.
I have known cases where the landlord has been far poorer than the tenant. Not so long ago in the Western Highlands there were tenants who had, say, 2,000 ewes, and those tenants were paying rents which would hardly have rented a council house. They were pitifully low. Scotland is so varied in its agriculture. One can take the land south-east of Edinburgh, for example, with probably the best arable farms in the world. It is very difficult to make comparisons.
I should also like to go for a moment on to Clauses 3 and 5 regarding successors. I am worried about one 201 point. I am rather on the side of the tenant here; in fact I am always on the side of good tenants because it is a well tried system. But what happens if the tenant dies and he leaves a widow and a young son? I may not have read the Bill as fully as I ought to have done. It refers back to the 1949 and subsequent Acts. What happens in such a case presumably is that if the young boy wants to follow in his father's footsteps—though, of course, not all boys do—there ought to be some provision so that eventually he is able to do so and farm where he was brought up.
The other point I am not quite sure about concerns adoption. That can be abused. I heard of a tenant who was paid a large sum of money to adopt a child who could eventually take over the tenancy. Apart from that, there are no doubt questions of adoption where it would be perfectly fair for the adopted child eventually to take on the tenancy.
The noble Lord, Lord Ross, made one or two remarks—I realise that I must finish quite soon because I have been speaking for seven minutes—and referred to state ownership. He said, quite rightly, that the state has put millions and millions of pounds into the Highlands. That is quite true; but the state has also lost millions and millions of taxpayers' money through putting that money into the Highlands, and I should like him to bear that in mind. However, I agree with the noble Lord regarding the drafting. For the ordinary layman like myself who is not a lawyer, it is gobbledegook. It is extremely complicated and it would take you a very long time, with all the previous Acts before you, to fathom it correctly. It ought to be put into far simpler English.
I welcome the Bill and I think it will increase tenants. The fear of the noble Lord, Lord Ross—and of course he has a point here—is that some landlords, when they get a farm hack, will sell it to the highest bidder. Certainly some will. I would point out that what the Department of Agriculture has now done in Scotland for its own farm tenants is to allow them to buy their farms at a third under market price; and I fear that the majority of those tenants will sell their farms extremely quickly and make a very nice profit. The trouble is that they may well sell to the wrong people. I am all against these pension funds, consortia and big companies buying land in Scotland, but especially in the Highlands. I am also against foreign companies coming in—
§ Viscount Massereene and Ferrard
My Lords, I do not count the English or the Irish; but we have quite a number of foreigners now buying farms in the Highlands. That also, I fear, will break down the old landlord-tenant system which has served Scotland very well. I have spoken long enough and, on the whole, I should like to welcome the Bill. I think we shall have quite an interesting Committee stage, but, generally speaking, it is a good Bill.
§ 4.25 p.m.
§ Viscount Thurso
My Lords, there is an old but true maxim that hard cases make had law, and it is perhaps 202 a pity that the noble Lord, Lord Ross of Marnock, did not think of that before he fathered the series of measures for which he has claimed such happy paternity this afternoon, because there is no doubt that the instructions—
§ Lord Ross of Marnock
If I may intervene, my Lords, I fathered only one and it was only part of the 1968 Act. It has been continued within this statute; so the noble Viscount should vote against it if he feels that way.
§ Viscount Thurso
My Lords, I beg the noble Lord's pardon but I thought I understood him to say that there were at least two other measures which he helped to bring before another place. I may have misunderstood him and I will look carefully at Hansard to make sure whether I got it wrong or right. However, as I was saying, it was hard cases which produced the original legislation and destroyed a system which had worked remarkably well for a very long time. What I worry about particularly is the effect the Agricultural Holdings Act has had upon the farming ladder. It is exceedingly difficult for a young man who is not already in a farming family, or very rich, to get his foot upon the bottom rung of the farming ladder. There just are not the let farms available. The conditions which allow him to do so just are not available.
The noble Lord, Lord Ross of Marnock, referred to a suggestion in an excellent report by the noble Lord, Lord Northfield, that the Highlands and Islands Development Board should have more powers to help in this matter. But from recent personal experience I am not terribly encouraged in the belief that the Highlands and Islands Development Board might be able to help in this connection.
In the summer of last year one of my tenants—the tenant of a hill sheep farm—gave me notice that he wished to quit at the November term on health grounds and because his daughters did not wish to succeed him in the farm. A young man whom I employed as a shepherd approached me and said that he would like to leave farm service and go into farming itself. He said he would like to embark upon the farming ladder and asked whether I would consider him as a tenant. He is an excellent young man with an excellent wife and a small family. He was an ideal person to go into this farm, but unfortunately he was not rich. Although I was prepared to temper the terms of his lease to a shorn lamb, it was almost impossible to find him finance. The Highlands Board, at first blush, said: "Yes, we will lend you money and give you grants and so forth". But they were still arguing about what they could or could not do in early November, when he was due to do an entry at the November term. Had it not been for myself, who lent him some sheep, and for the Mart, who lent him money to buy further sheep, the young man would never have got started. To place your hope in the Highlands and Islands Development Board to start young people up the farming ladder is to place your hope in a mirage.
There is no doubt that it is the tenanted farm which can allow young people of this kind to get started; but what has happened to the tenanted farm since the original Agricultural Holdings (Scotland) Act? It has 203 begun to disappear as we know it, because it just does not pay an ordinary landlord to go on owning tenanted farms. He is much better, if he gets one vacant, to sell it or to take it in hand; and so it disappears, as we have seen over the years. It is for that reason that I welcome this measure, because it will be a little more possible to enter into arrangements which will make it economic for people to go on owning tenanted farms and offering them for rent.
I do not fear the insurance companies and the big business people—the pensions funds—who buy land as investments, provided that there are legislative provisions which allow them to offer it upon a sensible basis to let, because they are then doing that useful service which has always been the landlord's traditional service, which is to provide the fixed capital and allow the farmer to provide the stock and the working capital. This is the way in which the smaller farm can be financed and the way in which the smaller farm should be financed.
I do not think that this Bill will put right overnight all the things that are wrong with the system of farm tenure in Scotland, but it is certainly moving in the right direction to correct at least some of the things that have gone wrong, and to make it possible for some of the people who ought to be in farming to be there. It is on those grounds that I, too, welcome this measure.
§ 4.33 p.m.
§ Lord Stodart of Leaston
My Lords, as my noble friend Lady Elliot remarked at the beginning of her speech, the subject of agricultural holdings, and particularly the tenure of them, has for as long as I can remember been an extremely contentious subject in Scotland. Just mention security of tenure to me on a moonlit night, and I can hear the sound of hooves and a gentleman whom. I suspect, some noble Lords may remember by name, Captain Arthur McDougall of Blythe, galloping across Lauderdale, shouting imprecations at every landlord in sight, with the great geniality for which he was known.
For reasons to which I shall come in a moment, I must confess that I find it hard to work myself up into a state of enormous enthusiasm for this Bill, and I shall not be in the least surprised or affronted if, in his reply, my noble friend says that I have been guilty of damning it with faint praise. I just cannot see being achieved what the National Farmers' Union of Scotland describe as the express aim of the Bill, which is to encourage landlords to make more farms available to let; and I think that I am not misquoting the noble Lord, Lord Ross of Marnock, when I say that he, too, doubted whether this would happen. There will be so little difference after the Bill is enacted that I do not see it happening.
But having poured what I fear my noble friend can only regard as somewhat lukewarm water on his Bill, I must very sincerely and warmly congratulate him, if not on producing some kind of consensus between the Scottish Landowners' Federation and the National Farmers' Union certainly on harnessing them, for when the 1968 legislation was passed (in which I, too, was rather heavily involved) one could hardly say that relations were warm between those two bodies.
204 Legislation on Scottish land tenure has travelled a very long road, and it is quite interesting to note that in this year of 1983 it is exactly 100 years since an Agricultural Holdings (Scotland) Act first made it possible for the remainder of an agricultural lease to be bequeathed. Before that, there was no such possibility. As has been mentioned, there have been many milestones along the road—some slightly more prominent than others. One might describe some as kilometre posts rather than milestones. There was legislation in 1949, 1958 and 1968, and this present legislation merits some consideration, for it is from what happened then that the proposals now before us stem. What was then described as "strong pressure" from the National Farmers' Union encouraged the then Government to bring in the legislation which exists today.
As a result of that, as noble Lords know, not only can a husband or a wife, or a son or a daughter, real or adopted, be named as heirs, but these near relations of future generations are given the same rights. Of course, it does not follow that these heirs will be successful. As my noble friend has said, they have to satisfy various qualifications, with the possible involvement of the land court. But what I remember arguing strenuously in 1968 is that that move would inevitably reduce the number of farms which landlords would be prepared to offer to let, and that it would become much more difficult for a young man to get into farming. I make this point not only because a young man is keen to farm but because I have always believed that it is essential to bring new blood into farming, just as in every other industry, for the invigoration of it.
As I said, when all this was going on the National Farmers' Union and the Scottish Landowners' Federation were very far from seeing eye to eye. I must tell the noble Lord, Lord Ross of Marnock, that I am one of those who does not fall into the category into which he grouped us. I have been a member of the National Farmers' Union for a very long time. I have never been a member of the federation. But in 1968 I found myself in the position of arguing strenuously against the National Farmers' Union and in favour of the federation. However, I found then that warnings to the National Farmers' Union about the inevitable reduction in farms to let fell on totally deaf ears. The National Farmers' Union thrive on controversy, and I am sure they will not mind my pointing out that the pressure which they exerted then has produced precisely the wrong result.
My noble friend has pointed out the decline in the number of farms to let during the last 10 years, and the NFU are now expressing anxiety. They say they believe in the system, and they want to do something to halt the decline. I do not minimise the advantages of amending the rules which bind an arbiter when he is adjudicating a rent; nor do I minimise the advantages of changing the rent review period from five years to three, or tackling the vexed question of so-called key money. But none of these changes will do anything to satisfy the express aim of the National Farmers' Union to produce more farms to let. The rules for succession to tenancies, which I still regard as basic to the problem, are to be amended only in the very slightest of ways.
205 Since 1968 something has been happening which the advocates of that particular legislation—surely not the political advocates—can have neither envisaged nor desired. Since 1968 landlords have been playing a much more active and general part as partners. The partnership system was born out of a determination by all concerned, both landlords and would-be tenants, to avoid the restrictions that were imposed by the 1968 legislation. According to Mr. MacKay in another place, this system has been on the increase as the landlord-tenant system has declined. It is now a regular feature of many estates, at the expense of the traditional system. Share farming is in its infancy, but I am quite certain that it will grow. Both systems will ease the way into farming for many young men.
As the noble Viscount, Lord Thurso, pointed out, finance is by no means a small or minor problem. Having looked at my own valuation figures for 1968, it appears that the costs of going into a farm today are up by between five and 10 times. The irony—which I hope the noble Lord, Lord Ross of Marnock, will appreciate—is that the junior partner (if one may so describe him) in either system, partnership or share farming, who would formerly have been a tenant will not have the security which he had before the last milestone on this long road was passed.
§ 4.43 p.m.
§ Lord Burton
My Lords, I, too, must declare an interest as an agricultural landlord and also as an agricultural tenant. I must declare a further interest as a member of the SLF executive and a member of the NFU area committee. As such, I welcome this modest alteration to the agricultural law of Scotland. All parties seem to acknowledge the need for young men to be able to get a foot on the farming ladder. This is obviously of the greatest importance if our great and efficient agricultural industry is to thrive. One of the best methods of securing this foothold, we are told, is to be able to procure the lease of a farm so that the landlord provides a large proportion of the capital required.
Latterly, however, the letting of agricultural property, particularly of the poorer ground and more especially in Scotland, has been a most unattractive investment. Not only has the return on capital been very low compared with modern interest rates, but Scottish landlords have been subjected to certain disadvantages compared with England's. As a landlord in both countries, I know that, among other things, the level of Scottish rents is way below those which are the rule in England. Indeed, the Highlands of Scotland have been subjected to certain disadvantages, even compared with other parts of Scotland. For example, our ancestors granted leases to smallholders who became crofters. These tenants are now fragmenting highland estates by exercising their right compulsorily to acquire their holdings for nominal capital sums. Indeed, they are some of the very few individuals who have the right compulsorily to acquire somebody else's property.
Now, however, the Opposition is threatening further compulsory acquisition of tenanted land. This must inevitably be a great deterrent to any landlord to let his land, if he can avoid doing so. Indeed, the noble Lord, 206 Lord Ross of Marnock, issued further threats today and gave no apology for the 1949 Act, the 1958 Act or the 1968 Act. I agree with the noble Viscount, Lord Thurso. I thought the noble Lord had given himself credit for these Acts and that he had fathered them, but I am prepared to accept that this is not the case.
§ Lord Ross of Marnock
My Lords, does the noble Lord expect that I would ever take credit for a Tory Act of 1958 which took away altogether security of tenure?
§ Lord Burton
My Lords, the noble Lord said that he was on the committee, and because of what he said I thought that he had had a great deal of influence on these Bills.
§ Lord Burton
The fact is that these Acts have caused a drop in agricultural lets from 36 per cent. of holdings to 31 per cent. or, as the noble Lord, Lord Ross of Marnock, said, from 80 per cent. to 30 per cent. Whatever the percentage, there has been a marked drop in agricultural tenancies in Scotland. Therefore, Scottish landowners, not surprisingly, went to the National Farmers' Union to try to get some proposals introduced. This Bill is the result. Regrettably, the proposals put forward by the Landowners' Federation have been very much watered down. Indeed, I very much doubt whether these proposals will provide the incentive for more land to become available for let. I was very pleased to hear my noble friend Lord Stodart of Leaston agree with this. He was more forceful than I intend to be. I rather hope that I am wrong, but time will tell.
My fear is that this Bill will not produce more agricultural leases. A farm which I own will become vacant next May and I am in a quandary about what to do with it. The moment I sign a lease I shall probably reduce the value of the property by 50 per cent. I do not believe that this can be good for agriculture.
I was pleased to hear my noble friend the Minister say that some changes might be made to Clause 2. I am not very happy with the clause as it stands at the moment and I hope that it will be possible to alter its wording. My noble friend the Minister may be pleased to hear that on 19th May when the Committee stage of the Bill is to take place there is to be an SLF open day. Therefore, I apologise in advance for the fact that I may be unable to be here for the Committee stage. Clause 2(b)(iii) requires examination, particularly as regards the reference to the goodwill between landowner and tenant.
The noble Lord, Lord Ross of Marnock, complained about the lack of statistical information concerning agricultural holdings. The noble Lord's complaint puzzles me. I have been a farmer for some years and twice a year I have to fill in a very large form which gives all the acreage or, perhaps I should say, hectare statistics. That change, incidentally, caused some confusion; one had to translate the acres into hectares. One is required to give details of all the cropping. An enormous amount of statistical information is available to the Ministry of Agriculture, so I 207 cannot understand what the noble Lord is complaining about.
I should like to thank the noble Lord, Lord Mackie of Benshie, for having said so clearly what I should have liked to say about the Bill. I agree, perhaps surprisingly, with everything that he said about it. I welcome the Bill on the basis that half a loaf is better than no bread at all and I thank my noble friend and the Government for it. All I would ask the Government to do, if they can, is to try to ensure that this legislation is dealt with expeditiously, so that if there is an election in the near future it is not scuppered. My noble friend the Minister must be well pleased with the welcome which his Bill has received.
§ 4.50 p.m.
§ Lord Rugby
My Lords, would it not be true to say that agriculture has developed over the past 40 years into an enormous asset-stripping exercise, in which the amalgamation of land has virtually prevented any young man from getting his foot on the ladder at all? This is because the arbitration system that has existed has worked totally in favour of the landlord and totally out of favour of the tenant. It is a well known fact that anybody who wishes to dispute an arbitration claim dare not do so because he is told straight away that the arbitrator will be upset and will only increase the arbitration figure against him. Consequently, one has the situation of people accepting almost anything that is put on front of them rather than face that music.
There is also the problem of the young man wanting to come into farming. He does not have any experience, and so he is ruled out straight away. He has no capital, and so he is ruled out straight away. It is an enormous tragedy of agriculture today that, with these asset-stripping exercises and amalgamations into bigger and bigger units, a young man simply does not have a chance of coming in.
§ Lord Drumalbyn
My Lords, if the noble Lord, Lord Rugby, will forgive me, what does he mean by "asset stripping" in this sense? Does he mean that part of the assets are disposed of? If that is so, to whom are they disposed? Does he mean that they are being disposed to farmers—to tenants?
§ Lord Rugby
My Lords, I believe that it is perfectly true to say that these big institutions and financial houses come in very largely from the point of view of using the land as a method either of safeguarding capital or of improving their capital position. That is what I am really saying.
A new situation is arising in agriculture today which is almost a sinister one. It is the fact that there are a number of charities which are in fact religious cults buying land. I have seen a very large spread of religious cults actually buying land and bringing in their followers to act as the workers on that land, which is free labour, and no doubt they are given the benefits of charity tax avoidance. They amalgamate land and set up young men working on the land in a religious context rather than in a farming context. This is happening in quite a big way.
When one is now legislating for agriculture, one has to advise people who are on the arbitration side of 208 these various problems that they should consider very much the point that a young man with limited capital and requiring experience, and who has a young family, should somehow get a starter farm; and that that should be part of the calculation.
§ 4.54 p.m.
§ The Earl of Mansfield
My Lords, I welcome the way in which this Bill has been received by noble Lords, with the possible exception of the last speaker, the noble Lord, Lord Rugby, but I shall think about what he said while I am on my feet. Nobody pretends—and least of all do I pretend—that this Bill is other than a fairly modest legislative change. Certainly, nobody pretends that it will lead to a significant increase in the number of farms becoming available to let.
Many noble Lords pointed out that we are facing a long-term problem and that there can be no overnight solution. But this Government consider it important to take the initiative in this matter with measures that have the support of both sides of the industry in Scotland. If I have a criticism of the speeches of noble Lords this afternoon, it is that not enough credit has been given to the fact that the two sides of the industry—and traditionally, at least in Scotland, landlords and tenants are not supposed to be even on speaking terms—did sit down and thresh out over a great number of meetings a package they thought was fair and beneficial in the circumstances.
The noble Lord, Lord Ross of Marnock, who says that he has the welfare of farmers at heart, sneered at that and said, in effect, there was some kind of cosy NFU/SLF agreement with the balance of advantage to the Scottish Landowners' Federation. He does not have the welfare of farmers at heart—and certainly he does not understand them—if he can possibly imagine that Scottish farmers could have something like that put across them—particularly when this package went back to every single branch in the country for their comments and agreement, or disagreement.
Another point we have not touched on very much is that fiscal matters have deterred and continue to deter landlords from making land available to let under the traditional landlord and tenant system. The worst of the lot of course was the capital transfer tax introduced by the then Socialist Government. That vindictive tax had a number of important effects: it stopped private planting in the forestry sector almost stone dead, and it dried up what lettings there were, so far as farm tenancies were concerned, almost overnight. It is a measure of this Government's concern that in successive Finance Acts we have introduced a range of important taxation reliefs for agricultural land. I shall briefly remind the House of those reliefs.
Generally speaking, we have lessened the burden of capital transfer tax and capital grants tax. The special position of tenanted agricultural land was recognised in the 1981 Finance Act by the introduction of relief for the first time on that land for CTT purposes at the rate of 20 per cent. In his last Budget Statement, my right honourable and learned friend the Chancellor of the Exchequer announced that this rate of relief for let land was to be increased from 20 per cent. to 30 per cent., and indicated that this should help to mitigate one of the factors reducing the number of farms 209 available for letting—and both sides of the industry in Scotland agree with this view.
The recent Budget Statement also included a proposal to allow farmers to pay CTT by interest-free instalments over 10 years rather than eight years, which is the situation at present. There were also in the proposals those which would allow tenant farmers who were required to live on their land to purchase a house off the farm to the benefit of tax relief on the mortgage. In previous Finance Acts, provision has been made for the value of the tenant's interest in an agricultural holding in Scotland to be left out of account in assessing capital transfer tax on the death of the tenant and the removal of the provision under which the Inland Revenue could claw back the CTT charge if the successor to a tenancy disposed of it during his lifetime.
These taxation reliefs are a positive expression of the Government's concern about the decline in the tenanted sector. All this I believe is welcome to noble Lords on the Liberal Benches. As we are now adopting, even in this House, a slightly higher political profile than is our wont, I found myself in possession of a document entitled Liberal Country—which is not, surprisingly enough, an organically-produced margarine but a manifesto for rural Britain by a number of Liberals. I see that this form of relief, basically speaking, is agreed to in that document.
As the noble Lord, Lord Ross of Marnock, said, consideration of the Northfield report has played a very large part in the thoughts behind this Bill. The publication of the report in May 1979, shortly after the then Government fell, must have come as an unwelcome shock because a lot of the old nostrums were rejected, and rejected without any equivocation, by that committee. Examples were the general nationalisation of agricultural land; legislation to regulate farming partnerships; quasi-tenancies and similar arrangements, which were held not to be justified; and an all-embracing rural land authority, which the Labour Party had proposed, was rejected.
So the noble Lord, Lord Ross, on the one hand says that this is a Bill which does not go very far and at the same time complains that we should have gone very much further in carrying out a number of Northfield recommendations. When he complains that the period between rent reviews—not arbitration, as my noble friend Lord Massereene said, I am sure by a slip of the tongue—was reduced from five to three years, that is directly consistent with Northfield; that is what he said and recommended.
§ The Earl of Mansfield
Well, my Lords, I am not going to exchange semantic waffle with the noble Lord at this stage.
§ The Earl of Mansfield
My Lords, I was reminded, while the noble Lord was speaking, of seeing in yesterday's Hansard, at column 126, that when his 210 noble friend Lord Longford had been speaking for some considerable time on relationships between the third world and the USSR, he said on looking at the annunciator, "I cannot have been speaking for 22 minutes", and his noble friend Lord Bishopston, speaking from the heart, said, "No, it only seems like it". I think the noble Lord. Lord Ross, was actually 25 minutes this afternoon.
I am not going to be tempted to go down the interesting by-ways of the Highlands and Islands Development Board and its powers and functions. One of my regrets during the last four years has been that nobody from the Benches opposite has seen fit to ask, even by way of Unstarred Question, what should happen to the board and its powers. That is one of the many things in regard to which I have experienced disappointment. I am also not going to go down the by-ways of some other agreeable matters which have been raised.
The importance of this measure is that the changes do have the support of both sides of the industry. When some noble Lords, such as my noble friend Lord Stodart and my noble friend Lord Burton, say in effect that the Bill is not leaning far enough in favour of the landlord—that is what it amounted to, because my noble friend says the Bill is ineffective and what he means is that it would not be ineffective if it was more favourable for landlords; there is no other construction that one could put on it—and the noble Lord, Lord Ross, says that the Bill is rather too much in favour of landlords as opposed to tenants, this exemplifies what I mean: this Bill has the favour of both sides of the industry.
The point was taken about land registration, and with that I couple sales of land to institutions and foreigners, not counting the English, Irish and other lesser breeds. The Government have considered this matter of land registration. There is need for adequate information. The cost of introducing an elaborate system which would provide the sort of information that I think noble Lords would like simply would not be justified. Statistics have improved and my department has been monitoring (if that is the word) the records of purchases of this type. I can say this. The latest figures available indicate that in the three years 1979ߝ81 there was a total of 65 sales of agricultural land to financial institutions. I emphasise agricultural land and not land for forestry. And the land remains in agricultural use after the sale. The area involved was approximately 19,000 hectares. So over those three years about 10 per cent. of the agricultural land changing hands in Scotland has been sold to financial institutions, which represents, I submit, only a small proportion of the total agricultural land in Scotland, because of course only a small proportion changes hands each year.
So far as foreigners are concerned, in the period 1979ߝ81 there were 20 sales of properties to foreign nationals with some agricultural interest. Most of it was poor quality land, probably for sporting purposes, and it certainly lay outside the main agricultural areas. It was used for sporting purposes such as deer-stalking. The activities of foreign nationals since 1981 seem to have been very much less than in the years immediately preceding Northfield, probably because of the escalation of the price of land in Scotland.
211 At this point, I can confirm that adopted children and illegitimate children, arising by way of succession in respect of persons dying on or after 25th November, 1968, are for the purposes of this Bill "near relatives".
As I have said, we are working to make Clause 2 of the Bill better, if it does need to have improvements, and that will no doubt come forward in Committee. I am conscious that there are points which have been made to which I have not replied. I think they are Committee points. An example is the widow and orphan point brought up by my noble friend Lord Massereene; we can go into that in Committee.
The noble Lord, Lord Ross, complained because he did not like the way in which the Bill was drafted nor indeed the language. In fact it is in some ways a consolidating measure. One is always in the difficulty, particularly where one is regulating the legal rights as between one class of citizen and another, that if one tries to be precise and not leave room for dispute and litigation one has to be very careful about the choice of language. On the other hand, by being careful you do not provide the kind of statute which is everybody's bedtime reading. We struggle to take a line down the middle. I think that that is quite enough from me by way of winding up. I commend the Bill to your Lordships.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.