§ 4.19 p.m.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)
My Lords. I beg to move that this Bill be now read a second time. The primary aim of the Bill is to take action to arrest the decline in the tenanted sector of agriculture. Over the years, tenant farms have been of very great importance to British agriculture, but fewer new lettings are now to be found. Today, tenancies represent less than 40 per cent. of all farmland compared with 90 per cent. at the 713 turn of the century. With that decline have occurred lost opportunities for those who, without much capital but with energy and skill, were able to get a foothold on the farming ladder.
Many of your Lordships who have considerable experience of these matters—in that respect, I welcome particularly the fact that we are to hear the maiden speech of the noble Lord, Lord Howard of Henderskelfe—will know that there have been various reasons for this erosion, but to my mind there can be little doubt that the 1976 Agriculture (Miscellaneous Provisions) Act, which introduced the three generation succession, has a good deal to answer for. The disincentive of that Act for the letting of land was, and remains, all too obvious.
However, looking back at your Lordships' debates in 1976, I was interested to read that the young farmers' clubs also took a stand against that legislation seven years ago. They did so, of course, because they realised that the 1976 Act would make it virtually impossible for those who had trained for agriculture to get a tenancy unless they were the son or the daughter of a tenant farmer. Thus when the committee under the chairmanship of the noble Lord, Lord Northfield, in its Report on the Acquisition and Occupancy of Agricultural Land, recommended that the Government ought to open discussions with the industry to find ways of providing better entry opportunities, my right honourable friend Mr. Peter Walker, who was then the Minister of Agriculture, responded by emphasising to the NFU and the CLA that amendments to the existing legislation would need to be based on proposals agreed by the industry as a whole. Their discussions were lengthy and detailed and it says much for the patience and dedication to their tasks of the Presidents of the NFU and the CLA that two years later they were able to present a package of proposals. On this side of the House, we promised in our General Election Manifesto to legislate on those lines at an early opportunity, and this Bill fulfils that pledge.
The Bill contains two main changes, a new rent formula and the abolition of rights of succession for new tenancies. These two changes are directly linked. The scarcity of new lettings has meant that a true open market no longer exists and therefore the present rent formula, which is based on open market value, carries with it serious problems for arbitrators, landlords and tenants alike. We believe that, by providing a fairer and more practicable basis for the assessment of rents, confidence will increase in the basis upon which arbitrations are to be decided. At the same time, freed of the prospect of one tenancy leading to a succession of tenancies which can last for well over 100 years, it is our hope that in the future landowners will increasingly offer farms to rent.
Clause 1 of the Bill deals with arbitration on rent. It replaces Section 8 of the Agricultural Holdings Act 1948, as amended by Section 2 of the Agriculture Act 1958. The main change is to replace the open market letting value criterion prescribed in the 1958 Act with the more closely defined criteria set out in the new formula. The nub is in subsections (3) and (4) of Clause 1, which require the arbitrator to take into account all relevant factors and in particular the terms of the tenancy, the character and situation of the 714 holding, the productive capacity of the holding and the current level of rents for comparable holdings, discounting the element of scarcity and the paying of key money.
I should make it clear that it is not expected that the new formula will have a marked effect on the current level of rents. Certainly that was the view of the working party consisting of the NFU, the CLA, the Royal Institution of Chartered Surveyors, the Ministry of Agriculture, and the Welsh Office Agricultural Department, which reconvened in 1981, after the package had been agreed, to consider the nuts and bolts of bringing the argicultural holdings legislation fully up to date. They reported in May of this year. I repeat that the purpose of the new rent formula is to give arbitrators a realistic basis for assessments, which the present formula cannot do, and to instil confidence again in the basis of the rental system.
Clause 2 repeals the three generations succession provisions of the 1976 Act in relation to all new tenancies (other than succession tenancies). There is no retrospection, and tenancies in existence when the Bill comes into force will be unaffected. But for future tenancies the law will return to the basis of lifetime security of tenure.
Clauses 3 to 6 contain several improvements to the existing law which, in the main, have been worked out in the original package agreement and were studied again and confirmed in the working party to which I referred. Clause 3 makes a number of improvements to the working of the present law on statutory succession which will still affect tenancies concluded before the present Bill comes into effect. In particular, perhaps your Lordships may wish to have attention drawn to subsection (2) (b), which clarifies the law regarding the eligibility of widows, and subsection (3) of Clause 3, which incorporates a new definition of "commercial unit'' for the purpose of determining eligibility.
Clause 4 provides two further exceptions to the rule that at least 12 months' notice must be given when serving a notice to quit. The first exception will help a tenant who wishes to quit a holding where the rent has been increased. The amendment will enable him to serve not less than six months' notice to quit after the rent increase takes effect, so that he has to pay the higher rent for one year only. The second amendment will help landlords to obtain early repossession where a tenant is farming badly. It will give the agricultural land tribunals discretion, where a certificate of bad husbandry has been issued, to shorten the period of a notice to quit in order to prevent deterioration of the holding.
Clause 7 is of a rather different character in that it will transfer from the agriculture Ministers to the president of the Royal Institution of Chartered Surveyors the responsibility for the appointment of arbitrators when the parties fail to agree on an appointment. The fee that the president may charge for this service will be prescribed by the Minister in regulations which will require the approval of both Houses of Parliament. Many of your Lordships will be familiar with the system of a panel of qualified agricultural surveyors, compiled by my noble and learned friend the Lord Chancellor, from which arbitrators are 715 drawn. I would emphasise to the House that this panel will continue in existence. We believe that it is entirely appropriate that the RICS, rather than the Government, should be responsible for appointments from this panel. Indeed, this is already provided for in the statute where Crown land is involved. However, so that the industry is not confronted with too many changes at once, Clause 7 will come into force by appointed day order. It is our intention that this should not be earlier than a year from Royal Assent.
Finally, Clause 9 gives effect to a great many miscellaneous amendments, contained in Part II of Schedule 1, and to the repeal of spent provisions, set out in Schedule 2. We believe that these amendments will improve the working of the existing legislation and reflect the experience of the farming industry, the land agency profession and legal experts over the last 20 years or so. They implement the recommendations of the working party, and I should like to take this opportunity to thank those from the industry and from the professions who, through their participation in the working party, have provided such great assistance to the Government in drawing up and refining all these detailed but necessary amendments.
Although this Bill is not lengthy it is quite a complicated example of the parliamentary draftsman's art. If it would be welcome to your Lordships I would hope to make Notes on Clauses available in the Printed Paper Office in the near future.
There are two other aspects of the NFU-CLA package which do not feature in this legislation. The first concerns short-term lettings and licences granted at the Minister's discretion under Section 2 of the Agricultural Holdings Act 1948. My right honourable friend the Minister of Agriculture has already indicated his agreement to an increase from three to five years in the period for lettings or licences granted under Section 2 in order to give an inexperienced tenant a period of trial before concluding a full tenancy or where a landlord's son or daughter is expected shortly to take over a vacated holding. But this increase in the period of these tenancies can be implemented by administrative arrangements when the Bill has been enacted, and this we intend to do.
The second aspect of the NFU-CLA package which does not appear in the Bill concerns the industry's representations on taxation. I must say in all friend-liness to noble Lords opposite that one really needed to look through a powerful telescope to be able to discern the Labour Government's encouragement for the letting of land when viewed against the background of the possibility of a wealth tax, the reality of penal taxation, and the threat of nationalisation. For the present Government's part we have tried to give some encouragement, and I think we have had some success. The extension of capital transfer tax agricultural relief to tenanted land which happened in 1981 and the increase in the rate of this relief in this year's Finance Act, coupled with the ability to pay the tax over 10 years in interest-free instalments, should provide a positive encouragement to the letting of land. We will, of course, need to consider what more can be done, but this is essentially a matter for my right honourable friend the Chancellor of the Exchequer within the requirements of his overall fiscal strategy.
716 The agreement between the NFU and the CLA forms the cornerstone of this Bill, and I know that your Lordships, with the particular knowledge of this subject which the House possesses, are going to give this measure close study. Our aim is to achieve a step in the right direction after a period of a disastrous decline in tenancies, and because it is based on an agreement the Bill is not a radical measure. It does not, for instance, change the security of tenure provisions retrospectively. But in dealing with the sensitive relationship between landlord and tenant we have sought agreement and at last we found it in the NFU-CLA package. Through that agreement we hope to achieve a revision of the law which will mark a step forward, which through agreement will give more confidence for the letting of land and greater opportunities for starting a career on the land. That is our hope, and that is why I commend the Bill to your Lordships' House. I beg to move.
§ Moved, That the Bill be now read a second time.—(Lord Belstead.)
§ 4.34 p.m.
§ Lord John-Mackie
My Lords, first I should like to apologise for my state of health, which is a combination of a bad cold, the decompression of a plane when I landed at Inverness. followed by a Highland wedding. The noble Lord, Lord Belstead, in his usual charming and almost non-controversial way has done a good job in introducing this Bill. This landlord-tenant legislation is very important indeed. It is an important subject, but I doubt whether this Bill is going to do the necessary things that they would like. Somebody called it "pretty poor". I am not sure where the quotation comes from—"a poor thing, but mine own". It is not only a poor thing but it is not his own. It is a CLA-NFU Bill. However, let us see what we can say about it. First. like I am sure everybody else, I am looking forward to hearing the noble Lord, Lord Howard, make his maiden speech. It is not often that one gets the opportunity to make a maiden speech as early as he is doing on a subject he knows very well. I am sure that we all look forward to what he has to say.
The noble Lord was a bit deprecatory about the 1976 Act. We should take a little look at the history of this Act, and he might take a slightly different view as to why we, as a Labour Government, brought in the succession clauses. Back in 1967 there was a bad case of a widow with two sons who had worked with their father and improved a marginal farm in the Highlands of Scotland, and she was put out. Pressure from the NFU—and I emphasise the NFU—of Scotland made the Secretary of State get a clause put in an English Bill which was going through the Commons at the time, led by my noble friend Lord Peart, to stop this sort of thing. I understand that the same kind of thing happened in Wales in 1976, and again the pressure came from the Farmers' Union of Wales. from the English and Welsh NFUs, and the tenants were given the same right of succession as in Scotland. That was pressure from the NFU, and that Bill was carried and came into being at the end of 1976 and the beginning of 1977.
No sooner was there a change of Government than in 1977 the NFU started negotiating with the CLA, and after what was described as protracted 717 negotiations the package was agreed in, I think, May 1981. I do not think there has been enough evidence in that time to warrant such a change of mind. To take the CLA's own figures, taking into account that the big surge of farms going to owner-occupiers did not start until about the 1920s, the difference between the percentages for the last seven years compared with the last 50 years is minimal. I carry a little calculator in my pocket, and I worked it out that it was 1.1 against 0.9. In my opinion, that is not significant enough for the major change that the Government are trying to make today.
No legislation was brought in by the 1979–83 Government. The excuse in the Ministry of Agriculture's hand-out was that there was no time. That was not the excuse given by the Minister of the day. He said he would not bring in the legislation without a promise that the next Government—which at that time looked like being a Labour one—would not change it. Now times have changed, and I am tempted to go into what has happened with the various see-saws of Government popularity and Opposition popularity. I could make great play of it, but I shall merely point out to noble Lords that a week is a long time in politics.
In the CLA document there is hint of pressure that I do not like too much. I should like to quote it. In paragraph 12 on page 4 they say:The value of the clause implementing an Agreement within the Industry, backed by both tenants and landowners, is that it should he allowed to fulfil its purpose. It will he appreciated that a threat to repeal these provisions aimed at encouraging new lettings would destroy the chance of new life being breathed into the system, and with it the chances of new entrants getting tenancies".I feel that it is a slight threat—there is a hit of pressure there—to suggest that that might be the case. No political party, neither the one here nor anywhere else, would give promises of the kind asked for there four or five years before an election. Certainly not this one. Anything could happen in that time.
If I may, I will digress for a moment. The NFU is worried about the situation in the tenanted section. The situation in the owner-occupied section is, in my opinion, far worse. Farms are being amalgamated all over the country, particularly the medium to small with larger ones. Only this morning, on "Farming Today", a Northumberland farmer of 400 acres said that his was the only individual farm left in that district. That just shows what is happening all over the country. I mentioned that in a previous debate, about a year ago in this House. The NFU and the CLA turned down the Northfield Report's suggestion that such farms should be taken into some sort of public ownership. One could read the Northfield Report to see what was said exactly. I am not sure whether the noble Lord, Lord Walston, who has some radical ideas on this, will mention it, but I shall not pursue it today.
The Bill has been brought forward by the Government, who have a huge majority. If they want it they can get it in whatever shape they wish, but it is the duty of a responsible Opposition to try to improve legislation, and this piece certainly requires it. Many of the minor items which the noble Lord. Lord Belstead, went through we agree with—the tidying up of various items—except that we are not happy about the change made by Clause 7, and in Committee we shall have a 718 closer look at that. We did not think the noble Lord's reason was very convincing, and we can see no reason for removing from the MAFF to the RICS. We shall have to look at that more carefully in Committee. It suggests, as the noble Lord said, two major changes, neither of which we think will work. In fact, one major landowner thinks the clause on rents will cancel the objective of the other.
I quote now from the Church Commissioners, who say:We welcome any moves to halt the decline in the landlord/tenant system in agriculture and so help maintain the industry as a whole. We are, however, convinced that, far from creating more farms to let, legislation based upon this package will result in even fewer farms being let because, as it stands, the package involves in the calculation of rent an unjustified distortion of the basic open market principles of supply and demand".That has been backed up along the same lines by a considerable number of other bodies and individuals.
As we all know, the whole subject of the landlord/tenant relationship is important and difficult. The statute book is littered with legislation over the years. Since the war we have had the 1948 Act. the 1958 Act, the 1968 Act and the 1976 and 1977 Acts. I have them all here. I have been studying them, and am no lawyer. Here we have another proposed in 1983. I suppose it will be 1984 before it becomes law. Surely the Government should try to put on to the statute book an Act that will stand the test of time considerably better than the past five have stood it. I do not think they can do that without a lot of amendments and without considerable concessions to the Opposition on this Bill.
Let us consider some of the problems other than rents and less security of tenure. There is the question of fixed tenancies versus life tenancies. If the main object of Clause 2 is to allow landlords to get possession of their land at more frequent intervals, then life tenancies will almost ensure that such a tenancy is given to an older man, defeating the object of bringing younger men into the business. That is only natural, and I do not think anybody would question that.
There is the question of unfairness to a landlord in that if he must sell let land he has to do so at a discount which is too large. I note that one of the chartered surveyor companies makes this point, and I should like to quote it because it is very strong indeed:What is required is a balanced and carefully thought out group of amendments, with all party support, to the main part of the Bill designed to reduce the valuation differential between vacant and let land. This should create more flexibility for owners of land whilst retaining reasonable protection for tenants".This is a difficult problem. However, it could be solved, and. personally. I feel it might satisfy many landlords without altering the succession clause in the 1976 Act; but I shall be interested in what other noble Lords have to say on that.
Then there is the question of full repairing and insuring leases. In my opinion, this is just a case of landlords abrogating their responsibilities. I hate to think of what some tenants may be faced with at the end of tenancies. These leases, quite frankly, should not be allowed. In most cases the rents being paid today give the landlord a bigger share of the profitability of the farm than the tenant. I saw some figures recently which showed that the landlord was 719 receiving more than the farmer and his employees. If any of your Lordships have read the NFU memorandum sent to us, that is borne out by the figures; so I see no reason for landlords neglecting their correct obligations.
There is the problem of finding some inducement to maintain the supply of small and medium-sized farms—the noble Lord emphasised this—and of not having landlords taking the easy way out by attaching them to a larger farm or amalgamating with another to make a so-called "viable unit". There was a case literally next door to my farm in Essex where this happened. A 200–acre block of land with a house and some buildings came up to let. The agents thought that it would make life easier—and they admitted it—just to let it to the neighbouring farmer, who was also their tenant. That meant a 200–acre holding, suitable for someone just starting, as the noble Lord said, at low capital cost to get in, being let and becoming part of the 500–acre holding next door.
Along with this there is the situation with county council smallholdings—the first rung on the ladder for many—which are being sold. Councils may not be the proper landlords for the holdings if, when financial difficulties arise, as they are arising at present, they are the first things to be sold. Such holdings could be incorporated in a scheme such as Lord Northfield recommended in his report, which was agreed by the majority of his committee.
Then there is the question of partnership and of the various methods of getting round the succession problem. This will have to be looked at carefully. There is a strong case for allowing a farmer to pass on the succession before he dies or retires. This is strongly argued by the Tenant Farmers' Association, and, although I was not too keen on it to begin with, I am now in agreement. There are various retirement plans. There is one that would include a pension plan incorporated in the rent. There is much to be said for legislation here. The question of taxation cannot arise under the Bill, but no doubt we shall hear something about tax and the noble Lord the Minister can pass it on to the Chancellor.
Before I turn to the question of succession again, I might point out that, with more frequent changes of tenancy, the first people to suffer are the employees of such a farm. If a tenancy changes hands, invariably all the staff go. In Scotland it is called "a clean toon". That is something to be deprecated. In the case I mentioned on my doorstep of the 200–acre farm, one employee was given notice straight away to quit his house; because when a small farm is amalgamated with a larger one, the acreage can easily be absorbed, but not the workers. There is little doubt that frequent changes of tenancy in larger units can have a devasting effect on the workforce and the rural economy.
On the vexed question of succession, the first thing we must remember is that there is no more land available for tenancies and that any new tenancies must come from land held in hand by private landlords and some institutions, or from the owner-occupied section by way of sale and leaseback. All the various institutions, old and new, including the Church estates, pension funds, and so on. are in the business of letting land; and, in my opinion, they have 720 no reason to fear succession so long as the successor pays a proper rent, looks after the farm and they act as responsible landlords.
So we are left with the private landlord who may be running his estate in various ways—as a trust for his family or as a limited company, and so forth. What has he to fear from succession? It is the fact that he cannot get possession for a long period. What does he want possession for? To let it again? If the successor is a good tenant, what is the difference between him and a new tenant? Does he need to raise money? I have dealt with that point earlier. Or is it because he holds the land in perpetuity and hates anyone else having a bit of it for that period of perpetuity? I think my grammar may be a little wrong there but I hope that your Lordships will get the point.
I am surprised at their attitude. I have heard many a landlord being proud of the fact that he had tenant families over three or four generations. In my own family we had four generations on the Haddo estate in Aberdeenshire. What has caused this change? I do not know. I have often thought about it. I wonder whether the departure of the old private estate agent—or factor as we call them in Scotland—and his replacement by estate agent companies has anything to do with it. They have a natural interest in plenty of changes.
I do not think that the private landlord has a strong case against succession except when he has to sell for financial reasons—and this could be put right. As a party, we see no reason for altering the succession clauses in the 1976 Act. I note in the CLA brief (again, in page 4) that they say that many landlords have disclosed a strong desire to let land in many cases and that some landowners have publicly identified land that they intend to let when the opportunity occurs. Others have expressed a similar intention to the CLA. All I should like to see is that today they will stand up and be counted. As I said earlier, the Bill needs a lot added to it to become an effective instrument in landlord and tenant legislation. We will do all we can to that end. I only hope that the Government will co-operate.
§ 4.53 p.m.
§ Lord Walston
My Lords, this Bill has had a long gestation period, starting with consultations between the NFU and the CLA and continuing with discussions within the Ministry of Agriculture. At length, the gestation has come to an end and the birth has taken place. But, my Lords, the birth is a mouse; it is no more than that. The noble Lord, Lord Belstead, in his most persuasive speech, as we expect from him, told us that the primary aim of this Bill is to arrest the decline of the tenant farmer. If that is the primary aim—and I accept that it is—then I must say quite frankly that it has failed. I condemn the Bill not because of its commissions—for, after all, there are few commissions in it—but because of its omissions. This was a wonderful chance that the Government had to tackle this very serious problem; and I agree entirely with the noble Lord, Lord Belstead. that it is a very serious problem. The Government have had this chance and they have thrown it away.
Let me deal first with one or two points in the Bill before going on to what I hope are somewhat more 721 constructive suggestions. Starting with Clause 3, here I am in agreement with the Bill. I think it is right that there should be an end to the three-generation security. I am sorry that I had to disagree with my erstwhile noble friend Lord John-Mackie over this hut I would agree when he points out, very rightly, that the three-generation security has not resulted in a steep decline in letting land. As he has said, it has been going on ever since the First World War and it has been going on at an accelerating pace. Although since 1976 or 1978 the increase has been slightly faster it is only part of the general trend which has been going on. Therefore I would not lay the blame on security which has been offered by the present Act; but, for all that, I think it is right that it now be abolished. I think that the one-life tenancy is reasonable and fair to both sides.
I would also support the suggestion which the noble Lord. Lord John-Mackie, touched upon that there should be the opportunity for term tenancies of a shorter period, freely arranged between landlord and tenant, maybe for seven years, maybe for 14 or for 21 years. It will suit some landlords; it will suit some tenants. I do not think that they should be precluded from making that sort of open arrangement if they so wish. In conjunction with the term tenancies, I strongly support some form of statutory, obligatory retirement pension for the tenant farmers; and, with the analogy of retirement pensions for any employee in almost all forms of work today, a contribution from the tenant farmer himself (which must be of a minimum amount but which he can increase if he wishes) and a contribution from the landlord which would be a proportion, perhaps 1 per cent. or 2 per cent., of the gross rent he receives. So that at the end of the period of the rent—which may be at 65, the retirement age of the farmer, or it may be at some earlier age if he wishes to have a term tenancy and the landlord wishes that—he would have some capital to fall back on, something with which to buy himself a house.
Let us remember that he will be moving out of the farmhouse, and one hopes that there will he something to supplement his old age pension. If he has been a good and fortunate farmer, he might possibly even have some savings, too. That is something to which I think far more thought should he given and to which I wish this Bill and those who are responsible for it would have given thought in the preparatory stages.
As far as the criteria for assessing rents are concerned, on the face of it. to discount scarcity value seems a reasonable thing to do. But, on more serious and closer consideration, I cannot support it anything like wholeheartedly.
In the first place, I do not think it is feasible. How can one isolate scarcity value from all the other values? And what form of scarcity is one talking about? Undoubtedly, there is a particular scarcity value if a farm comes up in the middle of the Quorn country. There are not many of them and a hunting man may be prepared to pay a considerable premium for that reason. If a farm comes up in Norfolk, Suffolk, or even Cambridgeshire, in the middle of the partridge country, people will pay a premium for that. If a farm comes up within commuting distance of London other people will pay a premium for that. Those are all scarcity values but not of just narrow land but of the 722 various factors which go towards making people wish to farm. With great respect to the noble Lord, Lord Cledwyn, and to the noble Viscount the Leader of the House, such scarcities do not exist to such an extent either in the Lake District or in Wales.
I do not see how in fact this can be implemented but, even if it could be, it would not have any very great effect because, after all, it would not affect first lettings, which are the ones where scarcity value comes in, because there is no arbitration on first lettings at all. It could only affect an arbitration in an area—and arbitrations take place very rarely, as your Lordships will know—where there has been a recent letting. I believe there are very few landlords—the noble Lord, Lord Middleton, may confirm this—who go all out for the highest rent they can get either on first letting or on rent reviews. What they want is a rent which will give them as good a return as they can get in the long term but which enables their tenant to farm well and to maintain his holding, which is the landlord's property. I think this in itself is a non-starter.
Also I do not see the logic when, as the noble Lord, Lord Belstead, has told us, the primary object of this legislation is to encourage tenant farmers and to encourage landlords to let to tenants. Anything which may reduce the amount of rent which the landlord will get is not the sort of encouragement which I should have thought noble Lords opposite and their friends would consider to he a very effective form of encouragement. Therefore, on balance I think that Clause 1 in regard to the assessment of rents criteria is in need of amendment.
Moving on to Clause 7 and arbitration, I cannot really see any need for change under the present system. The actual person who is going to be appointed as arbitrator will probably not change whether he is appointed direct by the president of the Royal Institute of Chartered Surveyors or appointed by the Minister, who undoubtedly will consult the president of the Royal Institute and will probably follow his advice. The actual effect will be minimal but the effect on those going to arbitration, and particularly the tenant farmer, will be significant because he will feel that here is somebody. who is normally on the landlord's side of the fence, who is going to appoint the arbitrator, whereas if it is the Minister he is clearly an impartial person.
Let us come to some of the more constructive things that can be done. It is not easy to think of them but there are some. First, I would suggest there are the fiscal incentives. The noble Lord, Lord Belstead, has mentioned some of the incentives, and for those I am grateful. Some advance has been made but it is not enough to encourage any serious increase in lettings. I would suggest that there are certainly three things which are worthy of very serious consideration. The first is that rents should he treated as earned income and not as unearned income and that such relief as is available to earned income should he available to landlords—and I will return to this in a moment—who act as landlords. They should get such income relief as is available, which includes relief from VAT. As farmers, if they put up new buildings or do repairs they do not have to pay VAT, whereas the landlord at present does. I think that both those relatively small items would make the job of being a landlord more 723 attractive and that it would not be very difficult for the Treasury to agree to them.
What is far more controversial is that there should be some further measure of relief from CTT for the landlord on the lines of relief for works of art of national importance, because I think we ought to look on our agricultural land as something of national importance, and particularly the system of tenant farming. If a system could be evolved whereby there was partial relief, if not total relief, from CTT so long as the land was unsold and so long as it remained tenanted. there would be a very considerable incentive to landlords actually to rent their land rather than to sell it with vacant possession or to farm it themselves.
Let me now come to a further suggestion; and here I want to make it quite clear that, although I am speaking from the Alliance Benches, this is not something on which we have yet agreed a complete policy; these ideas are very much my own and must not be taken as the official policy of the SDP. My main suggestion is that the Government should set up a national land trust, analogous to the present National Trust. It would have the power to raise money from the public and to borrow from the Treasury—money with which to buy land from willing sellers. But it would he restricted in its use of land to letting the land to tenant farmers. It would not be able to hang on to the land until it became vacant and then sell it at a capital profit as institutions and private owners frequently do—and who can blame them? It would not be enabled to farm land itself, other than for short periods in between tenancies. It would thus ensure that such land as is already tenanted would remain tenanted in perpetuity and it would, I hope, acquire an increasing amount of land over the years, thus bringing it back into the tenanted land sector instead of having it inexorably go more and more into the owner-occupancy sector.
This trust could also—and here I echo the words of the noble Lord, Lord John-Mackie—take over the county councils' smallholdings if they really have to sell them. It is a disaster and, if I may say so, verging on the hypocritical for the Government to say they wish to increase the sector of tenanted land and at the same time encourge and persuade one of our larger landowners, in the shape of the county councils, to dispose of their land with vacant possession to owner-occupiers. This land, or what is left of it—and fortunately a great deal of it is still left—must be preserved, and preserved in such a way that it will always form the bottom rung of the farming ladder. That is the second thing it could do.
I would also suggest to your Lordships that a national land trust would be far and away the best organ for preserving our environment. Old-fashioned private landowners have done a magnificent job over the centuries in creating the environment which we all love and want to see maintained. Modern landlords—and again I cannot blame them—are moving away from that. Institutional landlords, pension funds and so on, have their responsibility to their investors. They have their responsibility to their shareholders and to their future pensioners. That is what they must look at first; and the preservation of the environment comes a very poor second. Private 724 landlords still exist who wish to do this, but financial stringency, the need to have their children educated. the pressure of their heirs to get their hands on some capital, and so on—all these things militate against the private landlord's doing what in his heart of hearts he would like to do. But if this land were owned by a national land trust it would have obligations not only to its tenants,. and not only to pay the rent to those who have provided the money, but also to preserve and enhance the environment and the whole of the rural community for future generations.
So I very strongly urge your Lordships to think seriously about this method of dealing with the problem. Do not just put it aside saying, "Oh, nationalisation by the back door. We must stick to private ownership". I beg your Lordships not to be doctrinaire about this, but to look at it, in the words of the noble Lord. Lord Belstead, as a means of encouraging tenant farming, which most of us believe is the best form of farming in this country, and also as a means of preserving our whole rural economy which is so much at risk at the present time.
Having said that, we will support this Bill from these Benches. We will try to improve it in Committee—and it can be improved, but only in minor ways because it is not a big enough Bill in itself. My final word is that this is a great opportunity which the Government have lost.
§ 5.11 p.m.
§ Lord Howard of Henderskelfe
My Lords, the brevity which is understandably required by your Lordships of a maiden speaker precludes me from touching, other than very briefly, upon the contents of this Bill and its provisions, and it certainly prevents me—perhaps, fortunately—from entering upon any long dissertation about the history and the future of the landlord-tenant system. Furthermore, it is now some 12 years since I ceased to have any direct connection with the organisations and political side of agriculture, though of course I have continued to be involved in the practical side, both in farming myself and in letting land to tenants. Since then I have been engaged in various other activities, some of which have kept me rather busy.
I therefore did not imagine that my first words in your Lordships' House would be on a Bill such as this, which is likely to have a considerable effect upon the future structure of the agricultural industry. But from 1964 onwards—and that is rather further back than most people realise—I was chairman of the CLA's own working party on the Agricultural Holdings Act and the amendments which we thought were desirable to it. I then spent seven more years in discussions with the NFU, with professional bodies and eventually with the Ministry on the amendments which we believed to be necessary.
I must therefore at once welcome a Bill which, at long last, incorporates a number of minor, though important, amendments which we thought were necessary then to rectify either defects in the original legislation or anomalies which arose due to the interpretation by the courts of the provisions of these Acts. So the fact that the Bill has taken 12 years to come before us does not make it any less welcome, and I do not believe that your Lordships will need to spend 725 a lot of time at a later stage on detailed discussion of the latter part of the Bill. Therefore, as has already been demonstrated, attention will inevitably be concentrated on the earlier parts, particularly Clauses 1, 2 and 3, and perhaps on some of the details in the clauses which follow them.
Clauses relating to the succession of tenancies are an endeavour to put right, in some measure, the actual harm that has been done by the 1976 Act—harm which results largely in the destruction of the confidence of landowners in the future of their holdings—whereas the clause relating to rents arises more from anxieties about what might happen in the future, and deals more with hypothetical difficulties than with those about which evidence has so far surfaced.
The Bill has been portrayed by its supporters as one which will arrest, or perhaps even reverse, a trend which has now lasted 70 years towards a diminution in the amount of land available to let on ordinary agricultural tenancies. This diminution in land will, I fear, continue, and I think that the ideals behind it are illusions which might not he realised in practice.
I think that it would be helpful here to distinguish between the attitudes of private and institutional landowners. The private owner has become increasingly reluctant to let farms in the past 20 years, partly owing to the penal fiscal provisions which accompanied the letting of agricultural land in this way, and even more of course to the implementation of the 1976 Act. Increasingly, land which came in hand for any reason has been sold with vacant possession, or has been let subject to other arrangements, such as partnerships and so on.
Many of these problems could be overcome—as has been suggested more than once—if future legislation could provide for fixed-term tenancies. That is the normal practice in many countries and it gives a degree of certainty to both sides which would actually encourage new lettings. Nobody but a lunatic private landowner would let a farm at the present time. If they could have the certainty which is provided by a fixed-term tenancy then I believe that the need for landowners to he regarded as inhabitants of mental hospitals would he removed.
Institutional landowners were, and are, in a somewhat different position. Many of them are not subject to taxation and their interest is in long-term investment. They are therefore, I think and believe, less worried about the provisions relating to succession to tenancies. Many of them are, however, deeply concerned by Clause 1 of the Bill, as indeed are private landowners who still have many tenants who have been in occupation for 10, 20, 30 or more years and whose future rental settlements will be affected by the provisions of this Bill.
It would not be proper for me to explore in detail—dare I call them this, in what are supposed to be entirely non-controversial words?—the defects of this clause, though I believe that parts of it are incomprehensible and probably impossible to apply in practice. But I stress that its passage into law is likely to make institutional landowners—particularly those who have large portfolios of let land, such as the Church Commissioners and the Oxford and 726 Cambridge colleges—reconsider their investment policy for the future to the undoubted detriment of the landlord-tenant system.
The basic problem arises from the fact that the whole massive superstructure of agricultural holdings legislation has been erected on a base of assumed annual tenancy-a fiction which ceased to have any reality 35 years ago. I am not for one moment suggesting that we should return to the pre-1948 position, but I believe that we have over the years erected a superstructure upon a foundation which is no longer capable of bearing the weight which is imposed upon it.
Ideally, we should enact those provisions which are set out in the schedules and elsewhere upon which there is general agreement, and we should then try to rethink ab initio the way in which land is held and let to tenants in this country. I shall be told that this is not a practical possibility; that we have had various committees sitting on this matter and they could not produce any truly agreed answer. Nevertheless, I think that that hard thinking has to go on. I am convinced that your Lordships' work in Committee can result in a greatly improved Bill which will be of benefit to the agricultural community as a whole. I should particularly welcome an improvement to this, because I believe that the landlord-tenant system still has much to offer.
I trust that your Lordships will not think that I have been too controversial in what I have said, nor that I have, in uttering these warnings. implied any cricitism of those who have laboured so long and hard to bring this Bill forward. I hope that what I have had to say will be taken as a constructive attempt to achieve the objectives of all concerned: to update and continue a system which has been of inestimable service to the industry and the nation as a whole.
§ 5.20 p.m.
§ Lord Nugent of Guildford
My Lords, I have the privilege of being the first to congratulate the noble Lord, Lord Howard of Henderskelfe. I feel that most of us will know him much better as Lord Howard of Brideshead. Nevertheless, I congratulate him most warmly on his extremely interesting and highly expert speech. I am sure that my noble friend Lord Belstead will have taken note of it, because we in the agricultural world know of the long and distinguished service of the noble Lord in the Country Landowners' Association and other agricultural bodies. We know also that he speaks with great authority from his long experience at Castle Howard and, indeed, throughout the whole industry. We look forward to hearing the noble Lord frequently in the future. I cannot help but remember Pope's famous words:What can ennoble sots or fools or cowardsAlas! not all the blood of all the Howards".But the noble Lord's advent in this House certainly adds nobility to it, and I am sure that everybody along with me welcomes him.
The Bill is, as my noble friend has told us, a measure to restore the strength of the landlord-tenant structure. It is based on the very long and hard fought agreement made between the Country Landowners' Association and the National Farmers' Union in which the noble Lord, Lord Howard, had some part in the early stages, 727 so I certainly support the broad intention of the Bill. The landlord-tenant structure, as has been acclaimed from all sides, has served our country well economically, socially and, I warmly agree with the noble Lord, Lord Walston, environmentally. My word! we do owe a debt to the landlords over the centuries for the general structure of our countryside, which is largely due to the wise planning and wise policies in past centuries of the landlords of this country.
The fact is that it is now under threat of extinction. The trend downwards has gone on year after year. The figure given in the NFU brief, that no less than 90 per cent. of tenanted land now falling vacant is not relet, tells the whole story. Therefore Clause 2 of the Bill, which reduces the security of tenure from three generations to one, will remove a powerful disincentive for landlords to relet. That is to say, it will restore the law to the position before the passing of the Agriculture (Miscellaneous Provisions) Act 1976.
I was surprised that the noble Lord, Lord John-Mackie, felt able to support the 1976 Act so warmly. I recollect that this particular provision in that Act came in by a side wind from the Back Benches in another place and was not on the face of the Bill when it was first introduced, so evidently Ministers had not thought that it was a wise thing to do. But once there, of course, passions were aroused and it was impossible to remove it. The noble Lord should therefore be thanking us for correcting what was evidently an aberration by his predecessors.
Since 1976 the supply of tenancies has become even smaller. Heaven knows! it was small enough before. This is a very serious matter for the industry. Farms to let are needed by young men who want to start in farming. The capital cost of starting in farming today is so gigantic that if a young man can rake together the cost of the equipment and the live and dead stock he will have done pretty well; but if he has to find the cost of purchasing the freehold as well, there are very few who can possibly do it. It is true that the NFU supported the 1976 Act, presumably because they thought it was for the benefit of farmers' sons, but I am glad to say they have had a conversion and now see the error of their ways.
However, my young friends in the Young Farmers' movement hotly opposed the 1976 Act. I do not doubt that they warmly welcome this Bill because at least it lets a glimmer of light into the rather dim prospect for those youngsters coming into the industry, especially those who are not the sons of farmers. I am not saying for a minute that this is going to bring a flood of tenancies on to the market. It is not. But it will help; and maybe it will help to reverse the decline.
So I turn to Clause 1, which is the most controversial clause, as I see it: the new basis for rental valuation. Never have I had such a flood of advice from professional bodies as I have had on this particular clause. Far from reading it, I can hardly lift it. Today arrived a new brief from the Royal Institution of Chartered Surveyors which complicates slightly what I was going to say. As they were members of the working party which drew up the agreement, it seemed to me that they supported the basis which is in the Bill, but it turns out now, according to the brief which arrived 728 today, that they are rather anxious about it and would prefer to see something on the lines of the Agricultural (Scotland) Holdings Act. No doubt my noble friend Lord Belstead will have taken note of that, along with a good deal of other advice which has been flooding in to him.
In looking at the valuation, I agree that there is weight in some of these comments. I take note in particular of what the Church Commissioners have to say, for they have some 500 farms to let. It is not unlike what the noble Lord, Lord Walston, wants with his National Land Trust. The Church Commissioners are doing it already. But let that pass. The fact is that in the world of property deals, as all noble Lords and, I am sure, the professionals in serried ranks behind me will agree, the difference between buying and selling is anything up to 30 per cent., sometimes more. So a compromise is always needed to reach agreement. Therefore, when we reach the Committee stage of the Bill, I hope that that tradition of the professional world will be maintained and that a little compromise and give and take will be forthcoming to assist my noble friend Lord Belstead who will be handling this difficult matter.
I would say just this to my noble friend: if the new system of valuation proposed in Clause 1 results in rent levels unsatisfactorily low for landlords, the result will be, despite the benefits of Clause 2, even less farms than there are now. So my noble friend must take note of this point. While I realise, as I am sure we all do, that this is an agreed basis and that it is tremendously to the credit of the CLA and the NFU that they have got something about which they can agree, I hope there will be enough "give" in it for my noble friend to have a little discretion in hammering out in this noble House the final answer.
Finally, let me add my word to what has been said by other noble Lords: that over the whole private landlord and tenant relationship hangs the excessive fiscal burden which the landlord still carries, to the prejudice of a free supply of farm tenancies. Until this is substantially relieved there is not much prospect of a reverse of the trend so that more farm tenancies come back into the market from private landlords. Therefore, I do ask my noble friend to use his considerable influence to bend the slightly intransigent ear of the Chancellor of the Exchequer in this direction: some relief here is very much needed. I have much pleasure in supporting the Bill and giving my noble friend every encouragement to put it on the statute book.
§ 5.30 p.m.
§ Lord Stodart of Leaston
My Lords, I am in the happy position of quite properly being enabled to second the plaudits which my noble friend Lord Nugent of Guildford gave to the maiden speech of the noble Lord, Lord Howard of Henderskelfe. As someone has already said, no more suitable subject could have suggested itself to one of his great experience. He will understand what I mean when I say that one of the great things in vogue today, in all sorts of aspects, is nostalgia. The music shops and the book shops are full of it, and my nostalgia goes back to a period which he has mentioned of 12 years ago, when he and I used to see a great deal of each other in the 729 department (and, I believe, even in the room) which my noble friend Lord Belstead now occupies. So it is with particular pleasure that I welcome his joining us.
Other than the NFU and the CLA, organisations which have written to me about this Bill seem to concentrate on two points. They say that to remove the succession laws would be of minimal benefit. They say that it will be far too slow and will create two kinds of tenants—and how, without indulging in retrospective legislation, could one do otherwise? They say that the rent formula is pretty useless and that the open market value is just about the only way. They say with a fair amount of unanimity that, therefore, this Bill will achieve virtually nothing.
I take a much more favourable view than that, although I am somewhat cautious in forecasting a swift re-introduction of the farming ladder as we used to know it, but for different reasons from those which I have mentioned. Farms have been getting larger, and therefore scarcer, for a variety of reasons: economic, viability—call it what you will—and political reasons, if that is the right term to describe the encouragement given under statute not very many years ago to amalgamations. Thus, open market rents would, in my view, totally undermine the stability which has been such a feature of agriculture for the past 35 years.
Arbitration, I am quite certain, one must have. I am bound to say that the wording of some parts of Clause 1 strikes me as being pretty loose, and I suspect that it will have a very rough time, if not here then in another place, because it talks of an arbitration having to take account of the extent to which—and I am quoting—a competent tenant practising a system of farming suitable to the holding could reasonably be expected to profit from farming the holding".There are many farms now where one sees winter barley growing on high, exposed ground where cattle and sheep grazed in large numbers not many years ago. Is that,a system of farming suitable to the holding",or is it one encouraged by the imbalance that exists today between crop and stock?
Nor, I am bound to say, do I like the proposed change in the personnel of arbitrators. I cannot imagine that the department will save much money by this little instance of that ugly word "privatisation". I can only think that my noble friend Lord Whitelaw and his star chamber must be squeezing the Ministry of Agriculture mercilessly. I cast no slur at all on the Royal Institution of Chartered Surveyors, but the reputation of arbitrators in England and Wales and of the official arbiters in Scotland is so high that I feel it is just a pity for England and Wales to fall out of line on this.
But Clause 2, which abolishes statutory successions, for me is the focal point of this legislation. One has only to look back to the debates in 1976 to learn what your Lordships thought the effects of introducing statutory succession to tenancies would be. Repeatedly the point was made that if an owner was going to be parted from his land for up to 100 years, that was bound to discourage lettings; young men would be denied entry into the farming system because there would be hardly any farms to let. At that time there had been a fair number of tenancy successions. I say 730 with great distress that I believe the pressure for the 1976 Act derived not only from Wales, as has been mentioned, but also from those who farmed, probably, on the south side of the River Tweed and who gazed hungrily at the rights which existed on the other side of that river to bequeath leases to a near member of the family, and for that to be repeated over and over again.
As a result of that—and we were told this in May when there was a Scottish Bill not unconnected with the subject matter of this Bill—the percentage of the total area of agricultural land held in Scotland under the traditional landlord/tenant system had dropped over the past 10 years from 36 per cent. to 31 per cent. To be fair, one cannot say that that is entirely due to succession. There has been a switch from tenancy to owner-occupation which has been going on for longer than I can remember. But surely this makes it all the more important for there to be enough tenanted farms available for young men to get into. So, pure logic surely dictates that if there are to he more farms to let, the succession laws must be changed.
The end of succession as proposed in this Bill may start that off, and it is an essential feature. All the same, I join with others in begging the Government to set their hands to doing just a bit more to ensure much greater success. I totally agree with those who have said that financial considerations are a very considerable factor. I agree with the noble Lord, Lord Walston, that fiscal changes are very badly needed for landlords. I accept from my noble friend Lord Belstead that a bit has been done; but putting it broadly—and the noble Lord, Lord Walston, made one or two specific points—I would say that, taxation-wise, they should be treated in exactly the same way as owner-occupiers.
If then a rash of let farms were to appear, which I do not think likely, as my noble friend Lord Nugent asked, could young men easily lay their hands on the capital they would need to go into them? No longer does the figure of pre-war days which I recall apply, when it cost £60 an acre to go into a farm. I suspect you would probably have to multiply that by very nearly ten today. Therefore, I suggest that help from the Government, which would cost very little, perhaps in guaranteeing the borrowings of farmers, thus enabling them to secure lower charges by the banks, is a possible means of assisting them. I have already suggested this to my noble friend.
If these further steps are not taken, then I can only see the alternative of new relationships between landlords and tenants, and new systems, which are already being devised, being on the increase. They have already begun, since 1968 in Scotland and since 1976 in England and Wales. I do not believe that partnerships, as we understand them today, and share-farming were heard of before those days. Today they form a minor industry for consultants and specialist advisers, born out of a determination on the part of young men to take new blood into farming, despite the obstacles put in their way by politicians. And the irony is that the junior partner, or the one with the smaller share, has, I suspect, less security of tenure than he had before the 1976 Act with all its restrictions was passed.
It may seem that I am heavily biased against the tenant farmer. I am not. I know what I can only 731 describe as the anguish of going out of a farm after being on it for 25 years. For purely family reasons, of which I had no room for complaint and of which I was fully aware, I had to leave the farm I had farmed from the time I was 18 until I was 43. The fact that another farm, I knew, was going to be available for me within two years made little difference to the anguish, because I believe the farmer's roots go down, perhaps understandably, much more deeply into the soil than do the factory owner's into his concrete. Therefore, while I recognise the anguish of a family who at the end of a tenancy have to go, I believe that it is in the interests of the industry that this should happen, because without new blood coming in the farming industry would not keep up the momentum which it has acquired during the last few years. It is largely for this reason that I give a welcome to this Bill and wish my noble friend success with it.
§ 5.44 p.m.
§ Lord Northfield
My Lords, if the noble Lord, Lord Howard, will accept a slight sense of fun in what I intend to be a sincere compliment to him on his maiden speech, let me say that he was indeed controversial in what he said. I heard him say, I think during the early part of his remarks, that he thought this Bill would have a profound effect on the agricultural industry. I think he will find he is in a minority in the House in this, and it was indeed a very controversial statement to make. We shall look forward to hearing his justification of it when we come to Committee, and to hearing him again on many future occasions.
As may be the case with some other noble Lords, this Bill made me take down from the shelves, blow off the dust, and re-open the report of the committee of inquiry which I had the honour to chair, the Northfield Committee as it came to be called. I wanted to check the ideas in the Bill against my committee's analysis and recommendations about agricultural land. Frankly, when one does that the verdict must be, as Lord Walston and others have said, that this is a very modest Bill. Some would go so far as to say it is mean and almost counterproductive. I would go one stage further and say that it may in some of its overpraised provisions raise quite unjustified hopes on the assistance the Bill will give to prevent the decline of the tenanted sector. Indeed, in some respects it may do harm in that regard. So we have a lot of work to do in Committee.
I remember with affection the work we did on the Wildlife and Countryside Act and I am looking forward to similar sessions with all the patience of the noble Lord, Lord Belstead, to restrain and guide us. The opportunity will not recur very often. We do not often have the chance to do something under a Long Title as broad as this: A Bill "to amend the law with respect to agricultural holdings". That is a wide-open invitation to all of us to have some ideas about improving this Bill in Committee.
May I take the two issues very briefly, the one about rents and the other about the succession of tenancies. All the experience we had as a committee of inquiry was that the discussion about agricultural rents is bedevilled by at least three factors. The first is that farmers and the NFU do not accept that, given the rate of inflation of the last 10 years and many other factors, 732 rents were too low and a lot of catching up had to take place. This was inevitable, and given the rate of inflation in other people's rents I think farmers probably shouted before they were unduly hurt.
The second point is that I think that farmers—and this occurred so many times during our inquiry—want all the benefits of the free market system but do not want any of its disciplines, its rigours and its dangers when it might hurt them. That is true of all of us in our various professions and commercial activities, but we must as a legislative chamber recognise it when we see it. It is indeed the case that the freedom in rents that there ought to be is one of the disciplines, one of the rigours, and indeed one of the dangers, that go with a private enterprise system, and it is often a spur to efficiency. We must never lose sight of that and pretend that you can have a free market system without some of these disciplines.
I must reflect that we would not be doing this sort of thing, eliminating scarcity value and looking at earnings; we would not be legislating about it; we would leave it to the free market when we come to other scarce means of production in our society. Farms are scarce and this leads to this proposal. But so are, for example, shops in prime sites: but we do not go round legislating and saying that we must eliminate scarcity value and stop people from getting their fingers burned by offering too much rent, or having a bad effect on their neighbours when their rent reviews come up. We leave this to arbitration, to fights, to the commercial disciplines of the free market system, and we must beware of treating farmers too differently from other people.
Finally, farmers do not face up to the fact that the supply of land cannot be increased, and that once agriculture, as it is in this half-century, is protected and prosperous, it is inevitable that land prices, rents and other factors of that kind will all tend to exaggeration at times and will also be at times a harsh discipline. So we cannot look back to the 'thirties. It is a new period in which these things are more inevitable than they have ever been.
With that in mind I would say about the proposals on rent that the Bill goes slightly further than we proposed. We agreed that there was a problem with the key money and rents, with high tender prices, and so on. We suggested, as a committee, that yes, arbitrators should be instructed to look at this, but we were very careful in the wording that we used. We did not put it equal to all the other factors, as this Bill does. It writes into legislation as a must that the arbitrators must take a lot of account of this factor. On page 257 of the report, having said first of all that the first thing to nail to the mast is that the free market rent should be the criterion wherever it is possible, we go on to say:We propose that where the market is not sufficiently wide to constitute a true open market arbitrators should be instructed to take into account what would be reasonable for an efficient farmer to pay on a system of farming suitable for the holding, and that in these conditions their awards may reflect this as well as any open market evidence which may be tendered. Such a basis would embrace the concept of fixing rents at levels acceptable to a willing landlord and a prudent tenant and we should like to see arbitrators given fairly wide discretion in their interpretation".We looked for something less binding and less obligatory in a way that this factor was disregarded—this factor of high tendered rents, key money and all 733 the rest. I suspect the Bill may have gone slightly too far in departing from the suggestions which we made. It could have a deleterious effect and possibly we end up with a system of two kinds of rents and over-protection which the free market system does not justify. I am sure that we can sort this out in Committee.
I come now to what I believe to be the more important part about the tenant succession. This is the only other matter on which I want to say something. Here the figures have to form the backbone of any examination of the problem. There is much unjustified hope that there can be large numbers of tenancies for new entrants to the industry. That is just not possible on the figures. I suggest that noble Lords examine the calculations which we made. We took it that there are about 150,000 holdings of a viable size. If one then assumes that a man's lifetime on a farm is 25 to 30 years—a generation of 25 to 30 years—and divide that into the 150,000 one obtains a figure that 5,000 or 6,000 farms may become vacant in any one year through death and retirement. That is a simple calculation that anyone can make—that there are 5,000 or 6,000 possibles.
But then one must start the deduction from the 5,000 or 6,000. In any one year 1,500 of those can go in amalgamations and not to new entrants. Another great chunk of the 5,000 or 6,000 goes to people who are heirs, because many of the farms are now owner-occupied. Finally, there are many people, certainly under present legislation, with successional rights that reduce the figure even further. One arrives at the figure that the maximum number of possible new opportunities in any one year is about 1,000 to 1,500. We are turning out more than that in new farm students every year with all their qualifications. There will be a continual panic about shortage and a continuous feeling that there is not enough room for the new entrants. The frank position is that we cannot make any more land and we cannot make people die quicker. The figures are simply that there will be a shortage and we shall have a lot of frustrated and angry young people who cannot get into this newly prosperous business.
I come to the second point about tenant succession. I start, as does the report, from being passionately in favour of the landlord/tenant system. We must look as I believe the noble Lord, Lord Walston, did at the inexorable decline of tenancies in this century. In 1914, 88 per cent. of the land was tenanted. We calculate that this is now down to 35–40 per cent. and on our best projections it will be down to 15–25 per cent. when we get into the next century. So we are not likely to stem this century-long decline by something as small—I shall be as uncomplimentary as possible—as this Bill. It is a long-term decline and is a move towards owner occupation which is quite reasonable and understandable: it occurs in home ownership as well as in farm ownerships and in many other circumstances.
But when one gets down to the sort of figures we are likely to have in the early part of the next century, most of the tenanted sector—at least half of it—will be owned by the colleges, the Church and the pension funds. The private landlord, even on the best projections, will be very much in the minority, owning 734 perhaps only 10 per cent., but I would not like to commit myself to an exact figure. We have to beware, again, of stoking up the feeling that there will be a lot of private landlords with a lot of farms making great decisions on whether to make them available to young people who want to enter farming. That will just not be true on the figures and the projections.
Thirdly, as many noble Lords have already said, the problems of tenure are mainly fiscal rather than problems of succession. Again, the noble Lord, Lord Walston, said that. Here we are up against a dilemma, a very real dilemma. I want to say a particular word about the solution suggested by the noble Lord. Lord Walston. Given that we favour the preservation of private landlords, as I do, to the modest extent that is likely, because of my passionate belief in the landlord-tenant system, the problem we face is that if we look at fiscal amendments and fiscal concessions to them, how far can we really go in preserving islands of immensely valuable individual ownership in order to prevent a decline in what is going to he a rump—10 per cent. or so of the land that still is in individual ownership?
What price are we prepared to pay in preserving islands of private individual ownership for what will be a very marginal effect on the number of tenancies? That is a very real problem we must all face. Conservative Chancellors have to face it as will Labour Chancellors. But we cannot do it in the ways that are being suggested. Why should we give immense concessions to the owners of private agricultural land? I often said in the committee of inquiry that when one looks at the future prosperity of Britain we ought to be giving concessions to the private owners of factories more than to the owners of private land. They will probably be a great deal more important to the future of this country, but one taxes them with all the rigours of CTT and warrant all the possible reliefs available for the private owner of agricultural land.
When we come to the suggestion made by the noble Lord, Lord Walston, I thought that we had reached the climax of this sort of suggestion. He said why not go so far as to relieve them from CTT on private land ownership in the way that we give relief from CTT on works of art. Really! what a suggestion, if I may say so to the noble Lord. Works of art do not produce any revenue. They do not produce income. They are not investments in the absolute sense of the word that someone can own, live on and make a business out of. It will open an enormously wide door if we say that we can relieve landlords of agricultural land of taxation, and CTT in particular, in the same way as we relieve people who own works of art. Again, I come back to all the instances in other parts of our lives where ownership is performing as good a function or perhaps an even more important function for the future survival and prosperity of this country. What will all the others say who own assets of that kind?
Judged against that, I believe that the ending of the three generations will have only a minor effect on the situation, given the figures that I have outlined. Since it will begin to bite in any form only in the next century, it may be too late as many private landlords will have disappeared. I come back to the suggestions in my report. I hope that we can have a look at them at Committee stage. They have all apparently been 735 buried and forgotten. Many of them would do a good deal more to preserve the tenanted sector than anything in this Bill.
What about our recommendation that the right of succession should be limited to one commercial unit and not several? That would make a lot more farms available within the limited numbers I am talking about. Why has that never been examined? As other noble Lords have said, why not encourage early retirement and give pensions that would help handovers and enable farmers to hand over at the age of 65 under an agreement with the landlord? What about improving the right of the landlord to get certificates of had husbandry? They are often needed in order to prevent present succession being so automatic. In some cases the position is not tough enough on the tenant successor.
What about our suggestion for fixed term tenancies which has been aired a little this afternoon? I come again to the suggestion of the noble Lord, Lord Walston, of a land trust: what about our proposal that something like the Crown Estates commissioners should have the opportunity to take over more land when they can—perhaps some of it accepted in lieu of death duties or other forms of taxation—and make a tenanted sector for farms something above the size of smallholdings? That is the missing rung of the farming ladder today. What about our proposals for a check on overseas purchasers so that we are ready if this becomes a rampage in the coming decades? I can reel off more of the suggestions. There are a whole lot more that we should look at. There are much more effective ways to help preserve the tenanted sector.
I come finally to a point that is in my committee's report, although I do not for one moment claim that it was part of the unanimous recommendations. Landlords talk about holding land in trust for the nation. I have said this so many times: the right way to behave as trustees is to do what many enlightened landlords are doing more and more—to surrender the principle of individual ownership and make the land into a form of charitable trust. It could enable them to make sure that their heirs can be trustees in perpetuity so that they can manage the trust: and it would let the income from the land go back to the sort of thing it did originally in mediaeval and later periods, when through trusts the profits from the land would be available for good causes, such as education. But few landlords seem to know about such a possibility. That by my definition is holding the land in trust for the nation.
That suggestion is very similar to the idea of the noble Lord, Lord Walston, for a national land trust. Landlords can do it individually. Some are doing it. They do not need to surrender all the land. They can keep their home farm and make a prosperous living out of what they retain while surrendering the remainder of the estate to a charitable trust which the family will in effect control. That is the most honourable way to fulfil the obligation of trusteeship on behalf of the nation. I commend it to your Lordships as one of the real things that we should be pressing in our society today. It would be on all fours with the ideas of the National Trust to which landowners have handed over houses in the past. Let that extend to the land as well in the coming generation.
736 I do not either welcome or disapprove of the Bill. I regard it as a very small measure. I hope that we can make it a much bigger one when we get to Committee.
§ 6.4 p.m.
§ Lord Stanley of Alderley
My Lords, although I am not strictly in order to congratulate my noble kinsman Lord Howard of Henderskelfe on his maiden speech, I think I am entitled to do so because for a very long time my father was his guardian and trustee. My noble kinsman tried so hard to be uncontroversial but he supported short-term tenancies and disliked the 1976 Act and perhaps Clause 1. It looks as though I and he will have the same sort of stormy relationship that our forebears had. I do not know what duty the noble Lord, Lord Howard, owes to his guardian's son. I feel sure that there should be a duty on the noble Lord at least to follow me into the same Lobby. If not, no doubt the Chief Whip would support me in an amendment to the fifth commandment.
I should like to make it clear that I, in common with all farming organisations—and I should think all noble Lords—am dedicated to the continuance of the working family farmer. His viability is vital to the well-being—social, moral and economic—of our country. However, like the noble Lord, Lord Northfield. I welcome this Bill more in hope than in expectation that it or any amendment to it will radically alter the immediate outlook and prospect for the landlord or tenant. I know that it is strange for us to agree. I do not believe that it is feasible or practical to legislate against economic forces in a Bill such as this, although help could be given by altering the fiscal systems. Here again, alas, I have sympathy with the remarks of the noble Lord, Lord Northfield.
In 1976 I, in common with the noble Lord, Lord Peart, and his colleagues, reluctantly supported the hereditary clause, much to your Lordships' irritation and in particular that of my noble friend Lord Middleton. I still believe that it was correct so to do, first, for the rather bad reason that the Government were determined to put it through: and. secondly and more importantly, that it would—indeed did—have a restraining effect on the land speculation characteristics very much prevalent at that time among the institutions. I believe that the 1976 Act did just that. It did at least ensure that some tenants remained and it warned the institutions of the danger of playing fast and loose in the countryside, a point that was emphasised by the Northfield Committee.
Now the economic situation is changing, the institutional landlords are less in evidence as land speculators and, much to my surprise and delight, not all traditional landlords have been exterminated. By and large, they have the long-term interests of the countryside at heart. I believe that some are anxious to let their land, particularly those who find it difficult to make their "in hand" farming pay. If the economic climate for farmers gets worse—and I believe that it will—this Bill will encourage landlords to let more of their land.
Your Lordships should remember that it has never been easy to enter farming. There will still be an overwhelming advantage for those who have been bred and born to it. As one who came in from the 737 outside, I believe that there is no harm in that. If I had taken the advice of the noble Lord, Lord Howard of Henderskelfe, I should not have come in. I have to remind your Lordships that the tenant's capital today is not £600 an acre. For a 250–acre farm it could well be in excess of a quarter of a million pounds. Finding such capital is much easier for the child of an existing tenant, and no legislation will change that. I hope therefore that those who worry about the loss of the hereditary clause of the 1976 Act—such as the Farmers' Union of Wales—will take some comfort in the economic advantage that will encourage the child to take on the tenancy. It is for these reasons that I have misgivings—sad though that is—at proposals to bring in new blood.
Many of your Lordships will have read the brief sent out by the Church Commissioners and the Association of Land Owning Charities. I am sure that your Lordships will ignore some of the less charitable and unsubstantiated remarks made about both tenant and indeed landlord in their briefs, which, I venture to say, are out of character, not only with those organisations but also with your Lordships. However, as I understand it, their argument is that Clause 1 in the new rent formula will result in rents coming down to an economic level, rather than the level caused by scarcity. If these organisations are saying that rents should be set at a higher than economic level, it reflects little credit on their responsibility to the rural scene, the new entrant, or any form of conservation, and it sounds to me as though they want to return to the Middle Ages; not that I should mind that much.
The effect of Clause I will be to ensure that the procedure adopted by most reasonable landlords—I have been a tenant of an Oxford college for 30 years, and they have been reasonable—will now be the law. Also it will ensure that the productivity of the land will be taken into account, so that rents on the best land will probably increase, and those on the poor land may well reduce. I do not think that my old friend the noble Lord, Lord Walston, has read Clause 1 very correctly, but no doubt we shall return to that when we reach the Committee stage.
I believe that the 1948 Act giving the tenant security of tenure was one of the really enlightened pieces of Socialist legislation from the point of view of both the humanitarian aspect and the long-term health of British agriculture. Therefore I am totally opposed to the suggestions made by my noble kinsman Lord Howard, and, I think, by the noble Lord, Lord Walston, for any form of short let to take place. I believe the argument that without term leases more partnerships will be formed to be, quite frankly, misguided. I can see no difference between a short let or a partnership. Both are unattractive socially and agriculturally, and, I may say, from a conservation point of view as well.
Widen the scope of the Bill, say some. I believe that to be dangerous in the extreme. Life is a compromise, or it should be, and if your Lordships try to widen the Bill, you may well wreck it completely.
It is therefore with these thoughts in mind that I view the Bill and any amendments that your Lordships may wish to make. But I would once again remind your Lordships that we should be very careful not to 738 suggest amendments that could wreck the hours—indeed years—of work that many unpaid and dedicated elected members of the National Farmers' Union and the Country Landowners' Association have put into reaching this agreement. It is agreement among not just the hierarchy of those organisations, but the grass roots as well. They have taken hours discussing it with them and. despite the cries of woe from some people, there is general agreement from the vast bulk of the agricultural industry. Without their hard work, dedication, and constructive suggestions there would be no Bill before your Lordships today. Maybe that is what some of your Lordships want—in which case, back to the 1976 Act.
§ 6.14 p.m.
The Earl of Caithness
My Lords, I would join with other noble Lords in welcoming the speech of the noble Lord, Lord Howard of Henderskelfe. I very much look forward to the Committee stage, when I hope he will be much less controversial than he was today. I am neither a landlord nor a tenant, nor indeed an owner-occupier of farm land. I am a member of the CLA, and have very close ties with the NFU. I am a chartered surveyor. My interest is agriculture, and I dislike quite a lot of this Bill.
The Bill is in roughly two parts. First, there are those clauses which have been agreed by all the relevant parties to the industry and concern important non-controversial amendments to the existing legislation, most of which have been waiting about 18 years to come on to the statute book. Secondly, there is the controversial part of the Bill, that being the CLA-NFU package on rent which is so fundamental to any tenancy and succession and which has been agreed in secret by only part of the industry and therefore needs to be looked at very carefully.
As we all know, the participants to the package were only a few of the very senior members of the CLA and NFU. The CLA represents only some of those who let land, and I do not suppose that the NFU claims to represent the majority of tenants. Therefore, it may be said that both bodies are dominated by owner-occupiers, and partly as a result of this there has been the emergence of the Tenant Farmers' Association, but as yet there is no landlords' association, although that could be a possibility. These two reputable bodies do not represent the entire industry, and account should have been, and should be, taken of the views of the other parties.
It appears that the institutions—in its wider sense—own about 10 per cent. of the let land in England and Wales, and that is something in excess of I million acres. They were not consulted. Indeed, the Church Commissioners were not asked for their comments until August of this year. The RICS was not consulted unitl a late stage, and then on the rent formula only. The approach was in total confidence and with the rent formula as a virtual fait accompli, and the advice given at that point was ignored.
I should like to suggest to my noble friend Lord Belstead that he draws to the attention of our right honourable friend the Minister of Agriculture a remark that he made while in Opposition. I quote from part of the debate on the Agriculture (Miscellaneous Provisions) Bill on 5th May 1976, 739 when another place was considering an amendment put forward by the RICS. In Hansard at col. 1428 my noble friend will find the words:I say only that I wish that in Committee the Government had paid a good deal more attention to the view of the RICS. If they had, this would have been a far better Bill".The former Minister decided to pay little heed to the RICS in this matter, and from the indications that I have received the present Minister, now that he is in office, is paying equally little heed to their advice. It is time that he did.
Much has been said about the position of the RICS. Let me make it clear that this body welcomed the agreement between the NFU and the CLA. After years of misunderstanding and hostility most would welcome a peace treaty. On the question of the rents, apart from other aspects of the package, the RICS has always favoured an open market basis for rental negotiation and never agreed the proposed form of words. The RICS confirmed its views to the noble Lord. Lord Northfield, to the CLA, to the NFU, and to the Minister, and again in its recent document, published in May of this year, entitled Contractual Relationships in Farming. Doubtless there will be attempts to make the RICS the whipping boys, for can one see either the NFU or the CLA accepting the blame if this Bill fails?
Was the Central Association of Agricultural Valuers consulted?—no, except again at a late stage and at presidential level, and with the package in a non-alterable form. However, both these bodies are intricately involved with agriculture and have the advantage of being unbiased. Little account seems to have been taken of the report carried out by the noble Lord, Lord Northfield. His committee was very thorough, if nothing else, and carried out an intensive analysis of the landlord and tenant system. The committee's advice and knowledge could have been very useful.
The events to date bring to mind a simile, entirely non-personal, but colourful, of a Mafia boss who, having called in two of his henchmen, agrees a policy that is to be steamrollered through against all opposition and without consultation. That is not good for the agricultural industry.
So let us look at the reasons for this Knightsbridge treaty. In my view it all stems from 1976 when the NFU, against considerable and knowledgeable advice, was trapped into supporting tenancy succession. May I remind your Lordships that at the time the NFU said that succession would strike a fair balance. That decision has caused the agricultural industry a great deal of problems. From then on a deal with the CLA was always on the cards and the NFU later realised that it now had a trump card to play as a Conservative Government would not legislate without a CLA/NFU agreement. The CLA members were upset at the total lack of consultation over succession and concerned about it effects.
Having refused to discuss the problems with the RICS in 1978,the two sides got together a year later without any written terms of reference from the Minister or between themselves. The NFU was ready to do its U-turn on succession (only three years after having backed it through Parliament) and the cobbled 740 together compromise was to forsake an established system of rent negotiation based on the open market. Expediency rather than the practical needs of the industry seems to have carried the day. What possessed the Minister to abdicate his responsibility by telling only the CLA and NFU to come forward with a package, I do not yet know. But that is history and we must try to clear up the mess. Changes must be made but the details can wait to a later stage.
The present system of rent reviews has served the country well for 25 years. This is agreed by the NFU and the CLA but their concern, particularly the NFU's, is for the future. I have carried out many rent reviews for and against both private landlords and institutions but have never yet gone to arbitration. According to the Ministry rent inquiry, in respect of the 9,011 farms with a change in rent between October 1981 and October 1982 in England and Wales, 99.5 per cent. of the rent reviews were settled by agreement. The package rent formula, if it was not meant to be serious, would be hilarious due to its imperfections. There have been some improvements but still not enough. As it is, it will cause strained relationships between the parties, a huge increase in the number of arbitrations and uncertainty leading to a static or lower rent. The consequence will be fewer farms to let, for without a sensible return there is no reason for a private or institutional landlord to invest in agriculture. That will be the final nail in the landlord-tenant coffin.
Some noble Lords will recall the 1948 Act. In the 10 years following that Act, as it was impossible to define the three words "rent properly payable", there was an era of uncertainty and virtually static rents leading to a reduction in the number of farms to let. Is that any basis for changing the existing formula? Surely not. Are rents too high? I do not believe so. If they were, there would be more arbitrations and no demand for tenancies. An institutional landlord recently let a farm and the person chosen as tenant was 27th in the list of tenderers, and there were many below him. I know of only one instance where a farmer tendering for a farm has gone bankrupt. That was on a farm in Devon let by the War Department: they let it to the highest tenderer, whose offer was unsustainable. The very great majority of landlords, if they let a farm, will only let to a farmer who can not only justify his rental offer but prove that he can sustain it. Furthermore, I know of no tender rent that has been reduced at the first review.
With regard to succession, the infamous 1976 Act has perturbed a great many people. This is confirmed by looking at the figures. I disagree with the figures of the noble Lord, Lord John-Mackie. I see an increasing rate of loss of tenanted land from an average of 2.8 per cent. per annum between 1950 and 1960 to an average of 4.3 per cent. per annum between 1976 and 1981. It is clear from further analysis that the 1976 Act has substantially accelerated the rate of loss. This was something that many of us warned the NFU and the Labour Government would happen. So there is a case for altering the law relating to succession but not as a quid pro quo for altering a sound basis of rental value. The Government have shirked from grasping the nettle of retrospective legislation on succession. Instead, from now on all tenancies, if any, will not give security for successors.
741 A totally inequitable situation will arise. If we project our thoughts forward 20 years—the timescale for the next major Bill for the industry—will the Government of the day tolerate a situation where a few tenants say that the system is unfair and that they have no security of tenure, whereas the pre-1983 tenants have? One is creating two classes of tenants which will be divisive and lead to pressure to simplify the situation by allowing succession to all. I foresee security being given to all tenants but no alteration to the rent clause.
The situation may need improving. But if the Government are prepared to give time for agricultural legislation, let such time be constructive. The decline of the landlord and tenant system is a far more complex matter than just rent and succession which have become its scapegoats. There are so many other aspects that could have been considered by a proper advisory body to the Minister, in particiular the fiscal and tax implications. Tenancies have a value. So why cannot they be assigned as they are in the commercial world? If I have a lease on a house, flat, office or factory, I can assign it for a premium if the market is there. So why not in agriculture as well? This might enable a freer flow of tenancies. This, together with numerous other ideas that noble Lords have brought forward, could have been properly considered by all and appropriate recommendations introduced. The Bill, as so many noble Lords have already stated, and as, I am sure, more will state, is a missed opportunity.
My last criticism of the Bill is political. It relates to the present rent formula which includes the words "open market rent". I am distressed that this Government, of all those in the recent past, will legislate against an open market rent formula—surely, one of its main principles. Introducing a fair rent clause for some of its most ardent supporters is illogical. Maybe it is one of the few open markets that some farmers have to face, but that is no excuse to change it. At the moment, there is a scarcity of farms to let. But what happens when there is an excess of farms to let? The open market rent will go down. It is easy to draw a comparison with the rented housing market where a fair rent was introduced and has had a totally negative effect in trying to encourage potential landlords to let. Furthermore, how can any Government in May of one year pass a Bill on agricultural rents in Scotland and include the words "open market", while only six months later they start to legislate for England and Wales with a view to expressly excluding those words? That is a worse, more dramatic U-turn than the NFU has done on succession.
There have been a number of changes to the concepts of the 1948 Act, all of which have had deficiencies. The need for amendments was soon apparent. If we get this Bill wrong, it may be many years before it can be amended. We cannot afford such uncertainty as followed the 1948 Act, particularly as I believe that the present law generally works well. The noble Lord, Lord Belstead, when introducing the Bill, said that it will encourage landlords to let land. But the evidence is against that. There has been a growing trend in the reduction of tenanted land from the turn of the century right through to the present day. Going back to the pre-1976 situation will not encourage more letting of land. To help convince me of this, I 742 have asked many of the Bill's advocates, other landlords and owner occupiers, some of whom are members of the CLA and the NFU, whether, as a result of this Bill, they will let their farm or more land. In every case the answer has been, "No".
The Government indicated in the Queen's Speech their intention to bring forward legislation to make more tenancies available in England and Wales. We still await that legislation, for without it and its radical reform the landlord-tenant system, as we know it, may well degenerate eventually into a core of tenants comprising a handful of octogenarian successors of successors with curiosity value only.
§ 6.27 p.m.
§ Lord Northbourne
My Lords, we have a long list of speakers and I shall be brief. Like the noble Earl, Lord Caithness, I am a chartered surveyor. I have grown up with the landlord and tenant system. I agree that it has served agriculture well. I am afraid that, if Clauses 1 and 2 are allowed to go through in their present form, not only will they do nothing to stimulate lettings but they will do precisely the opposite. I should like to examine these two clauses.
The problem with Clause 1 is that it is very badly drafted. I do not think that there is any objection to bringing the productivity of the holding into the argument. The valuer does two things. First, he looks at the holding and tries to quantify what the profit before rent will be, what surplus that holding, properly farmed, can generate, and then he considers how that surplus should be distributed between the landlord and the tenant. When he looks to quantify the surplus, he obviously takes into account the fact that a thoroughly competent tenant must be involved, and also various things that are mentioned in the Bill—for example, the character and situation of the holding, its productive capacity, its fixed equipment and other available facilities. He also takes into account the soil, climate, layout, topography and drainage and so forth. When he has arrived at that figure, it sets the ceiling to the rent that can possibly be paid on that holding on an ongoing basis, and therefore to the rent that a prudent landlord will accept, or a prudent tenant will offer.
The process of allocating that surplus is more difficult. It must depend partly on the terms of the tenancy and partly on the contribution made under the tenancy by the two parties. But, at the end of the day, it has always depended on the market. This is where we run into a difficulty under the Bill. It has traditionally depended upon what a prudent tenant will offer and what a prudent landlord will accept. The Bill invites the arbitrator to consider a market without scarcity.
§ Lord Northbourne
Yes, my Lords, it instructs the arbitrator to consider a market without scarcity. What is a market without scarcity?—it is an impossible concept. What I hope that clause may mean is that the arbitrator should ignore the very high key money bids which are made for certain new tenancies. But, if that is what the clause means, surely we should make it say so? 743 As regards the succession provisions, I do not have anything very important to say except that I do not think that they will have the desired effect. It seems to me perfectly reasonable that a landlord should object to having his farm let for three generations, because such a situation deprives him of the flexibility of being able to sell it if he needs to do so, or of having his own son or nephew farming it. It ensures that the tenant will, for a very considerable part of the time, be over retiring age and therefore less efficient than perhaps he might be. Moreover, there is no real provision in the Act to ensure, stringently, the quality of the tenant. I personally regard landowning as a trust for future generations. I would not under any circumstances let land under these conditions, if I had any to let.
If the objects of the Bill are to be achieved, then much more radical legislation is needed. Some noble Lords have referred to the possibility that tenants should retire at 65 with provision for pension and housing with the possibility of repossession by landlords at the end of each retirement so that they could sell or occupy the farm themselves with the possibility of assignable leases, and with the possibility of term tenancies. If the NFU were really dedicated to the idea of revitalising the landlord and tenant system, they would be howling for this type of reform.
I believe that careful amendment of the rental clauses of this Bill can make it acceptable to institutional landlords. I do not think that any kind of reform will make it acceptable to private landlords. I shall support the Bill, but I must confess that I think the landlord and tenant system in this country is doomed to extinction.
§ 6.32 p.m.
§ Lord Sandys
My Lords, it is a pleasure to take part in this debate and to follow the noble Lord, Lord Northbourne, particularly because the house which he occupies in Kent is one which my family occupied in the 17th century. We build on each other's work and I am delighted to know that the noble Lord is following practices in Kent with which I certainly would entirely agree.
It is a great pleasure to participate in a debate in which the noble Lord, Lord Howard, has made his distinguished maiden speech. I served for some years on the CLA committee when the noble Lord was president and I well remember that period as one of great fruition. I wish to make a very brief speech. There have been 10 speakers before me and there are 14 to follow. I wish to devote most of my speech to the matter of succession. This Government will be interested to know that this particular area which is dealt with in Clause 3 has provoked a great deal of thought. The eligibility to succession has definitions, and in existing legislation a "commercial unit" is defined as a holding which is capable of being worked by an input of 600 or more man days.
The new definition departs from that quite a long way and is rather different. To quote from the Bill, the criteria refers to:the aggregate of the average annual earnings of two full-time, male agricultural workers aged twenty or over".At this stage I will do no more than put down a marker about that particular aspect of the succession eligibility. We shall be bringing forward an 744 amendment or amendments at a later stage and I feel it prudent to advise the Government at this early stage of our intentions.
What of the future? That is the principal matter. No noble Lord so far has particularly referred to the diminishing supply of land, except the noble Lord, Lord Northfield. I should like to draw your Lordships' attention once again to the work of Dr. Alice Coleman of' King's College, London, concerning land use. Her report, which we debated some years ago in your Lordships' House, drew attention particularly to the diminishing supply of agricultural land which varies considerably but which is in the approximate region of between 60,000 acres and 70,000 acres a year. No wonder this diminishing supply, which is due to the incursions of many valuable things in our national life but perhaps none so valuable as farming, is an important part of the total argument—the background if you like—to the Bill.
In closing my brief remarks I should like to refer to a paper delivered by this country at the Stockholm Conference in 1970. It was one of four British contributions and it was called Sinews fir survival. The chairman of the working party in those days was Sir Ralph Verney. His very well chosen words from an author who was well known and loved in this country—J. R. Tolkien—from the book The Return of the King, is singularly appropritate in this case when we are considering the future. I shall read your Lordships the words printed on the front page of that report. It says:It is not our part to master all the tides of the World, but to do what is in us for the succour of those years wherein we are set, uprooting the evils in the fields that we know, so that those who live after us may have clean earth to till. What weather they shall have is not ours to rule".
§ 6.37 p.m.
§ Viscount Massereene and Ferrard
My Lords, I should like to begin my remarks by apologising to your Lordships. When I inquired this morning I understood that this debate would conclude a lot sooner than is now apparent. From the number of speakers on the list it will probably continue until about 9 o'clock. Unfortunately, I have made an important appointment and if the debate continues until 9 o'clock—and I shall speak for only three minutes—I shall not be here for the winding up. Therefore, I apologise to your Lordships.
I should like to follow the point made by my noble friend Lord Sandys about the amount of agricultural land being taken up for other purposes. The noble Lord is quite right in that respect; but there is another aspect to be taken into account. I understand that in the 1920s there were about 400,000 farms in this country; today there are only 200,000. That situation is due to the fact that farms have become far bigger. It is a fact, too, that the larger the farm—if it is under correct management—the more efficient it will be. However, the old landlord/tenant system under which there was a large number of small farms, was extremely satisfactory from the social point of view. The average private landowner knew all of his tenants. It was an extremely amicable arrangement. We have just heard that arbitrations over rent arose in only 1 per cent. of cases—99 per cent. were settled perfectly amicably.
745 However, I give the Bill guarded support. I hope it will do something to increase the number of farms to lease, but I have my doubts. We have already heard about scarcity value. Scarcity controls the price of everything. For instance, if you did not have a scarcity of diamonds, if they were as common as coal, apart from their industrial use they would have far less value than coal because polished glass would be almost as good as an adornment.
The new formula where scarcity value has not to he taken into consideration will not work. What is going to happen? With reference to the institutions such as the charities and pension funds, they have to invest their money the best way they can, and presumably they are therefore looking for a good return on their money. If they do not get a good return on their money out of land they will sell that land and it will probably fall into the hands of big companies or consortiums who will not let that land but will farm it. You will therefore get even less land available for tenancies.
Certainly you cannot blame the landowner, the landlord, for not letting land if it is tied up for three generations, two successions, a hundred years. I think it was the noble Lord, Lord Walston, who said that in effect if a landlord had a good tenant he need not worry about taking over the farm again. But of course if he has sons who want to farm it is extremely hard on him that he should have his land tied up for a hundred years, so that even if his family want a career in farming they cannot farm their family land.
As I said that I should be extremely brief I shall not continue. I should like to end by saying that this Bill will have an interesting Committee stage, and I shall be taking part in that. I should just like to apologise again that I cannot remain to the end of the debate. I always remain to the end of debates where I speak, but this is an occasion where I find it very difficult to do so.
§ 6.43 p.m.
§ Lord Rugby
My Lords, we have had the 1948 Act, we have had the 1976 Act, and now, superimposed, we have the Agricultural Holdings Bill, which is trying to readjust a serious imbalance in the industry resulting directly from the operation of those preceding Acts. The Bill as put forward is, to say the least, difficult to understand, especially to farmers, who will, I think, be totally bemused by it. I doubt that arbitrators will fare much better.
The objectives are twofold, as I read it: first to achieve more lettings; and secondly to make it possible for more entrants to get their feet onto the farming ladder, not only by abolishing statutory succession but also by index-linking rentals to a hypothetical capability of a Mr. Average rather than to the Mr. Economic Whizzkid so useful to estate agents in their triennial rent demands, and enabling them to repossess and amalgamate farms into virtual collectives.
For more than 30 years we have on the farms been subjected to concentrated economics but, like statistics, they portray only a part of the truth, which is generally the truth which happens to suit the convenience of those who gain from it. May I, with some trepidation and at risk of sounding slightly offbeat, put forward another approach to rentals based on a personal experience. This also aims at what might 746 be called an index-linked approach to rent, but linked to a unit of production rather than to the hypothetical capability of one farmer as compared with another in order that one can be used, as it were, against the other to pressurise a rent increase.
No doubt there are many noble Lords who remember the days when the texture of land was quite simply graded as three-horse, two-horse, and one-horse. In other words, stiff land, medium land, or light land, bringing to the mind instant evaluation by its image. As a datum line for assessing rents I believe that a somewhat similar method could be put to use. In the 1950s I rented land—some of it pretty marginal—for £3 an acre. The value of a finished lamb at that time was about £4. Today a finished lamb is about £35, and were that farm still intact I would guess that its rent would be somewhere between £30 and £35 an acre. In other words, there is a strong correlation between these two commodities over a long period of time.
My suggestion is that land could he quite simply indexed to a unit-of-production scale. It would work like this: starting with average or medium land, that would be classified as single lamb land, if you like. The value of that average would be compiled from market returns. From this datum line, land could be graded upwards, say, 1¼, 1½, 1¾, to double lamb quality, or down the scale to ¾, ½ ¼, or zero. Each year at Michaelmas the appropriate index figure could be given out by the Minister—that is, the annually adjusted single lamb market value. Upon that figure all rents would be adjusted for the following Michaelmas one year in advance of their application. This would provide a self-regulating mechanism easily understood by all, and competing with inflation.
By and large, such a system would offer an immutable yardstick doing away with triennial rent increases—unless, of course, impinged upon by extraneous pressures such as development, opencast, urban harassment, planning blight, when the farmer could appeal for a downgraded assessment by arbitration. In cases where the landlord encashes land for development or real estate value—one must remember that nowadays the big institutions and the charities can do this without having to pay tax, and therefore snowball their land to a very large extent—then, quite rightly, the farmer who is fully committed to his land and his livelihood should be compensated out of that windfall value in order to rehabilitate himself and his family.
My Lords, immense damage has been visited upon rural communities by the wholesale misapplication of these economic theories. It is my profound hope that this Bill can restore the balance. It is urgently needed, but I suggest that it is a bit too complicated. Therefore, I am trying to put forward a slightly different approach to achieve an aim which I believe is a worthy aim. It is a small pebble thrown into a pool, and perhaps the ripples might find their way to Committee at a later stage.
§ 6.49 p.m.
§ The Marquess of Salisbury
My Lords, before saying anything I think I should declare an interest in the matter under discussion. The noble Lord, Lord Rugby, started his speech by saying that the problem we faced was largely a question of balance. This is very 747 much the case. The whole situation of rented land has got far from a true balance. But there are many reasons for this, and I should like to mention a few of them.
Security of tenure has increased to such a point that it is now not attractive for a landlord to relet should he have the opportunity of obtaining vacant possession. For one thing, the land is worth about half of what it would be if he had it in his hand; for another, he may be forced to realise it in view of the heavy capital taxation that may come his way. He is certainly not going to be attracted by the idea of reletting and having to sell, say, double the amount of land to meet his tax bill. This is the sort of problem with which a landlord is faced. It is worth noting that in commercial property the tendency is for well-let buildings to sell much better than ones with vacant possession.
One must ask oneself why there is such a discrepancy. I think the answer is that there has been great interference by the Government in the normal exchange and sale of agricultural land, which does not exist in the commercial world. In other words, the situation has been distorted. This distortion in land values has again operated against the prudent landlord's intention to relet, should he have the opportunity of vacant possession. The intrinsic value of the land—what it is worth, what it can produce—is no longer a cardinal factor in the sale value of that piece of land.
I should perhaps give one example of what I mean. It is possible for a sitting tenant to buy his holding. If he has the chance he can afford to pay a considerably higher price than it would fetch in the open market. Yet, having purchased it, the next day he can pass it on and still make a substantial profit or, if he preferred, he could sit on it, but he has increased his assets enormously in the process. That sort of transaction has nothing to do with farming or with the value of land. That is what I mean by distortion. There are many other examples, and no doubt Jour Lordships know of others.
Another factor is the shortage of available land. Much has been said about that already, so I shall not pursue it. I should like to suggest that the resulting high value of land, arising from this shortage, has reached such a level that it is probably no longer economic, and in the circumstances the assumptions which I suspect are behind the Bill may no longer be valid in the foreseeable future. For one thing, the costs of farming continue to rise, but we have had ample warning that the EEC intends to vary its arrangements for CAP. As I understand it, this will cause a drop in farming profits which must surely percolate through to the capital value of land.
Originally (this has been touched on already) the Labour party's proposals for dealing with land—notably the commitment in the last manifesto to nationalise let land—are not very conducive to a landlord reletting with that uncertainty hanging over his head.
On the rental side, the level of rents is such that a landlord can do better for himself by taking in hand land when it becomes available rather than reletting it. That has been the experience of most landlords. If that is so it leads one to suppose that the level of rental is, 748 on average, too low. I know that the opposite view has been expressed this evening, but I think that would be the general experience. A low return on letting of land may be acceptable while the capital value, the basic asset value, is rising as has happened over the past decade. But should that cease to be so it is no longer a very acceptable basis.
I think this will come to mind particularly in considering the position of the institutions. As has been pointed out, they are one of the biggest landlords letting land, as many of them are in the business to make a profit. If they are trustee-owned or if they deal with pension funds that' have an obligation under their deeds to make the maximum profitable use of the funds available. Should the increasing capital value of land cease, it is hardly likely that the return on let land will meet the criteria. There are already signs that the value of let land is beginning to fall and this may accelerate the process. In one way or another we are facing a falling off in the available stock of land to let. So far as I can see, this process is bound to continue. It is against this background that consideration of the Bill should take place.
In view of the points that I have tried to make, there is nothing in the Bill that will resolve any of the problems for providing more land to let. It assumes that it is desirable to retain the landlord and tenant system, which has been the foundation of farming in the past. This may be so. Under present conditions it is a system that is clearly an advantage to the tenant. He does not have to meet the heavy outgoings of the landlord on which a very low return is payable. But from the landlord's point of view, it cannot be acceptable for him to maintain let property if the rents are comparatively low and the outgoings are fairly high and thus the net return is low. There are two alternatives. The first is that the rent must rise to make his situation more attractive. This particularly applies to the institutions, as has been pointed out. The second is that the landlord must be able to continue to rely on the rise in the underlying value of the land, which I suspect is no longer there.
I would ask why special provisions should be made for tenant farmers. It is unique in business, commerce or industry. A firm is often taken over or amalgamated with another. The outgoing owner either stays on in a managerial capacity or he leaves. This is the way the business works. Economics guide the matter. I do not see why a different system should apply to farming. We are back to the suggestion that farming is a way of life. Surely what matters is that the industry should be conducted in the most efficient way possible.
Over the past few years the landlord and tenant system has not stood up particularly well to the stresses that have faced it. We know that there will be a lower stock of land. Is it really realistic to suggest that the Bill can make any contribution to that situation? It has probably come far too late.
I should like to say a word briefly about the rent formula, which has already been touched on. We all know that it is vague and imprecise. Many valuers suspect that it is unworkable. One went as far as to say that it was,based on fallacious economics and a departure from the trust in free market principles which the Government has tended to present as what distinguishes it from its predecessors".749 That may be putting it too strongly, but I feel that there is a foundation of truth in it. It goes on to say, in connection with the proposals to disregard scarcity value, that they are,like telling a man to ascertain the temperature by taking a reading on a thermometer but disregarding the extent to which that reading is distorted by heat"—strong words, but I think there is something in them.
Why do we need this new formula when only a few months ago in the Scottish agriculture Act a new formula was introduced which appears to have been well-received by all concerned? Surely, it would be better to have one system covering the whole country rather than to introduce two. For these reasons, it is unlikely that the Bill will increase the number of agricultural tenancies, but it does one other peculiar thing. Under the provisions for the length of tenancies, some tenancies are three-generation tenancies and some are to be limited to one. This is going to create two different sets of values for similar land and, in view of the three lives, this is going to go on for some considerable time. Is that really a very wise provision? It is just another case of legislation distorting the value of land.
Finally, may I draw your Lordships' attention to the question of profitability. Little has been said about that tonight. This is surely at the heart of the matter. What the package between the NFU and the CLA is all about is who will share what of the gross proceeds of farming and the holding of land. It may be that the farmers' union have been a little too "grabby". In the past they have always accepted any offer that Government legislation has offered them to increase the length or the stability of their holdings. It is quite clear that the expected advantages have not materialised. I suspect that exactly the same thing is going to happen in this case. I would say to your Lordships that I do not believe that this Bill will carry out the expectations that have been made for it. Rather, I think it will have the opposite effect.
§ 7.2 p.m.
§ Earl Peel
My Lords, I appear to be in a minority on both sides of the House in actually congratulating the Government on having introduced this Bill, although I have to admit that I see it as one step in achieving the ultimate aim which I believe is the main purpose behind the Bill—that is, as noble Lords have said, to try to rectify the damage that was brought about by the 1976 Act and to try to make more holdings available, or should I say to increase the percentage of holdings, the percentage of units, and to increase or get back the confidence between landlords and tenants. As many noble Lords have said, there can be no doubt that the 1976 Act was a bad Act for both sides of the agricultural industry. Besides the excessive infringements it imposed upon the liberty of private ownership—a fact that I feel sometimes is forgotten in these debates—it has resulted in a reduction in the supply of land available for letting and has curtailed the opportunities for new entrants into the industry. As noble Lords have said, it must go in conjunction with other Bills for having produced this situation.
Obviously, depending upon the side from which one is to consider this Bill, there are sections which will 750 appear not wholly satisfactory. However, I feel sure that it must be considered as representing agriculture as a whole and I am sure that the Minister was absolutely right not to attempt legislation until a workable agreement had been produced by both sides of the agricultural industry, thus displaying the mutual confidence necessary for such legislation to be effective in the future.
My Lords, we now have the results before us, and I believe that we should all be most grateful for the determination and dedication that have been shown by the NFU, the CLA and the other bodies that were involved during the course of the consultations. They have come up with the ingredients for this Bill, and, I believe, have responded particularly well to the call for co-operation. I should like to make reference to my noble friend Lord Middleton in his then capacity of President of the CLA. I believe that he has worked as hard as anybody in achieving this package, as it is now called. I, personally, should like to offer him my congratulations for having played such a major part in all of this.
Considering the general level of support that had been expressed from, I believe, all sides of the industry for the package, it is rather surprising that recent criticisms have emerged with such vigour. Many of these we have heard in this House during the course of this Second Reading. They appear to revolve principally around the proposed changes in the system of arbitration for rent. Concern has been expressed that this will result in lower awards with a less economic return and, consequently, less likelihood of more tenancies being created. As I see it, the fundamental change in the present system of arbitration is to eliminate the scarcity element—the key money, the premium, as noble Lords have referred to it—when an arbitrator is assessing the system. I believe that the old system was not necessarily conducive to good farming or to producing a harmonious relationship between landlords and tenants.
There appear to be conflicting views as to whether the new formula for assessing rents will result in an increase, a decrease or, indeed, a retention of present levels. I feel that it is unlikely that any major reductions will be forthcoming. I have seen evidence recently, on some holdings where new tenancies are about to become created, of applicants having come forward offering rents up to 50 per cent. higher than the old rent and these rents have been supported by 5–year budgets verified by either farm consultants or banks. These figures apart, I believe the formula for the assessment of future rents to be fairer, more workable and clearer from the arbitrator's point of view, although, I admit, not necessarily perfect. Certainly some of the wording at this moment I should have thought needed change. If we regard these changes as an opportunity for landowners to have more say as to the destiny of their land by the creation of one-generation tenancies and, in the process, hopefully, we help the industry at large, then, I believe, it must be a step in the right direction.
I would briefly make reference to one specific section of the Bill. I should be most grateful to my noble friend on the Front Bench if he could clarify the Government's position on this. Clause 2(2)(c) 751 presumably gives the landowner the opportunity to contract out of the new legislation relating to lifetime tenancies only and to create tenancies of more that one generation if he and the tenant so wish. In such a case, presumably, the arbitrator when assessing the rent will take into account the substituted Section 8(3)(a) of the 1948 Act referred to in Clause 1 of this Bill: that is, "the terms of the tenancy". If I read it correctly, this would result in a figure over and above that which the arbitrator would otherwise have reached when assessing that rent. If this is so, then presumably this will go some way to satisfying those landowners who regard the economic return as being of greater importance than the creation of a single-generation tenancy.
The preservation of the fabric of the rural community must he paramount in our thinking, and I believe that this Bill should go some way towards having its desired effect in creating more tenancies and therefore more farmers on the land or, at the very least, preventing further reductions in the overall number of tenancies. But there are two other factors, both of which have been mentioned already, and which I should like to reiterate if I may. One is the question of the fiscal incentives. Much, I know, has been done by the present Government to help in this direction, but I believe it could he taken a stage further in connection with capital taxation, income tax and VAT. Secondly, and perhaps above all, there are the rather irresponsible, if I may call them such, remarks of members of the Labour Party in connection with the nationalisation of tenanted land. This, 1 believe, perhaps more than anything, is undermining the system and, now that we have co-operation between the landlords and the tenants, I hope very much that the Labour Party will take what I regard as a more responsible view in looking at the industry in the future. Quite frankly, the remarks that have been made along these lines really make nonsense of the remarks of the noble Lord, Lord John-Mackie, about the landlord and tenant relationship.
If we could get these three,combinations—that is, this present Bill, plus an assurance from the Labour Party on no land nationalisation and a regard for this new package, plus the fiscal incentives which I hope the Government will consider—then I do believe that we should have a foolproof system for seeing the landlord and tenant system working to the best benefit of the agricultural industry. Even so, I believe that this Bill by itself is a major improvement. It is a joint package on behalf of the whole industry and I hope that, as such, noble Lords will feel able to support it.
§ 7.13 p.m.
§ Lord Hylton
My Lords, I have a weary list of interests to declare. My family and I own tenanted farms in Somerset and Surrey: and, further, I am a trustee of a charitable trust owning other let farms in other counties. I am a farmer and a chartered surveyor—qualified but not practising—and a member both of the CLA and the NFU. But I hasten to add that neither of these bodies consulted me for a moment during the preparation of the famous package. I agree very much with the remarks made by the noble Earl, Lord Caithness, both about the consultation and the process of preparation of this Bill.
752 As has been pointed out already, we are talking tonight of about 35 per cent. of the farmland of England and Wales. Several noble Lords have pointed out that there are three main factors which govern the availability of farmland for rent. These are: security of tenure, the process of rent fixing and the tax treatment of both capital and income arising from let farms. The noble Lord, Lord Howard, in his admirable maiden speech, quite rightly pointed out that these three factors affect different classes of owners in different ways.
Since 1976 we have been saddled with security of tenure for up to three generations. That Act was retroactive in its effect. There was no compensation for the very considerable damage done to owners and I said on Second Reading at the time that the Bill would cause very considerable uncertainties and be generally unhelpful. I think that has been borne out by what has been said tonight. I would only add, on a personal note, that as a result of that Act I find myself farming 700 acres or so in partnership, which probably would not otherwise have happened. Part of that land would probably have been let had it not been for the 1976 Act.
This Bill does nothing to abolish the retroactive provisions of 1976. It means, I know, that new tenancies in future will last for only one life, but the result will be that we shall have two classes of tenant, as the noble Earl, Lord Caithness, pointed out. This mix will be somewhat worse than the mix which we have in your Lordships' House between hereditary and life Peers. I fear that there will be considerable friction, jealousies and animosities, and that is something which we should try to avoid. Furthermore, it will take, I think, at least 60 years before these anomalies concerning tenancies correct themselves by the process of people dying off.
I turn now to the rent formula question. We are being returned to the formula of 1948, with variations; but we have to remember that the 1948 formula gave the most frightful problems to arbitrators. They really could take almost as many views as there were arbitrators. In this Bill the new formula takes one and a half pages to explain what it means. I suggest that Clause 1(4) is about as obscure as it is humanly possible to draft something. Clause 1(3)(c) may in future be quite a heavy brake on any tenant who is prepared to go in for any innovation—and innovation is what the farmers of England have been most successful at over many hundreds of years.
The new formula introduces many matters of opinion rather than fact: that is something to be regretted. I feel very strongly that we should get back somewhat closer to the 1958 formula. There are at least three possibilities, some of which have been touched on. We could adopt wholesale the formula set out in the Agricultural Holdings (Scotland) Act of 1983, which begins from the open market value but tempers this by referring to current economic conditions in relevant sections of agriculture. Alternatively, if we do not like that approach, we could take the formula put forward by the Agricultural Law Association. I have not yet seen this one but I understand it is very much clearer than that proposed in the Bill. Then, as my noble friend Lord Northbourne suggested, we could incorporate words 753 referring to a prudent landlord and a prudent tenant. We could also write into the Bill something to do with a sustainable rent—something which could be sustained over a period of years without damaging the underlying land or assets. Any one of these formulas would, I believe, meet the genuine and understandable fears of tenants that key money and premiums will distort rent levels in the future.
I come now to certain other miscellaneous points that have been touched on. If possible, I should like to see written into a tenancy agreement that the tenant shall retire at 65, or whatever the normal retiring age happens to be at the time. I agree very much with the noble Lord, Lord Walston, on this matter and I also agree with his proposals for fixed term leases. These might be for seven years or more. I understand they have the support not only of the RICS but also of the young farmers' clubs. They seem to me to be particularly suitable for bare land and for situations where an owner or his family wish to farm their land at a later date which may he known in advance.
I should like to mention Clause 7 which, as has been said, transfers the appointment of arbitrators from the Minister to the President of the RICS, and here I quote the comment of the NFU in their brief. They say:It is a fact that the vast majority of tenant farmers would view a transfer of these functions to the President of the RICS as making the arbitration system further biased against them.I hope that the Government will take this comment extremely seriously.
This Bill is, in my view, a disappointing one. I feel that it can be very much improved in Committee, and I hope that the Government will take extremely seriously everything that is being said tonight.
§ Lord Stanley of Alderley
My Lords, before the noble Lord sits down, may I ask him this question? He made the rather surprising statement at the beginning of his speech that he was never consulted over the package. Was it never discussed at his branch level two or three years ago?
§ 7.21 p.m.
§ Lord Gisborough
My Lords, I must also declare an interest. Like the noble Lord, Lord Hylton, I have taken land into partnership in recent years, rather than letting it. As most of us know, the landlord-tenant system has stood the test of ages and has proved highly satisfactory. The landlord has generally invested, improved and repaired, all for a very low return on capital and in exchange has had the privilege of ownership. Not always, but certainly in the past 20 years, he has seen his capital appreciate in notional value. Meanwhile the tenant has paid a rent representing a fraction of the cost of servicing a mortgage for the purchase of his farm, and been able to devote his funds to the production and earning capacity of his stock. Over the past 20 years, he has missed out on the notional capital appreciation of the land. In previous ages, he has avoided a reduction in his capital by falling land values. The same could occur again.
As has been mentioned so many times in this debate, this happy partnership was severely damaged by the 1976 Act. The socialists got it wrong again and, against all the advice they received, they created the three generation tenancies. Their good, bland 754 intentions to help tenants had exactly the reverse effect. Since then, hardly any land—except perhaps that owned by institutions—has been put on the market for let. That Act created over-security, scarcity and higher rents. I have figures from one of the institutions—I do not know whether or not they are right—showing that between 1978 and 1981 rents increased by 85 per cent., while farm incomes rose by 5 per cent. That can only be an extremely unhealthy state of affairs, particularly in the long-term.
The noble Lord, Lord John-Mackie, said he thought that the progress to owner-occupation had slowed down. Certainly, there are many fewer lets going on now. Amalgamations, yes, and particularly amalgamations for farmers who are without children. The noble Lord asked why succession was objected to. It is perfectly correct that a great number of estates took great pride in giving their tenancies to the sons of their previous tenants. But some sons—in my experience, one in 20—are not suitable and an estate owner would be irresponsible, if he had the option, to give a tenancy to such a son. So he must have the resource to refuse that tenancy if he wishes. He must also have the resource to amalgamate a farm when, because of modernisation, modern times, prices, machinery and so on, that farm becomes uneconomic in size and perhaps not worth letting by itself. Above all else, owners do not wish to tie up land, depriving not only their sons but their grandsons, because they will have no control.
The first provision of this Bill is the rent formula and there has been very much criticism of this from the professional bodies. With the exception of the total disregard for scarcity value, I believe that this formula could be made to work. The Bill just attempts to formalise factors that are actually used in practice to assess rents, and it is up to the professionals to suggest other factors, if there are more factors that should be taken into account. The open market is virtually non-existent and the present system seems to result in key money, which surely cannot be desirable. There is a great fear of a decrease in rental values; but I believe that this will not occur to any great extent.
Futhermore, I do not think that the supply of farms to let depends primarily on the rent obtainable. I believe that it depends primarily on whether a farm is suitable for investment, because it is owned by an investment company or an institution, or on whether it is far from a landowner and he does not wish to farm it. If it is close to the house and will form part of his unit he will farm it himself, and I do not think that the rent is the first consideration in deciding what he will do. Furthermore, I do not necessarily think that high rents are even particularly desirable, nor do I believe that high capital values are very desirable. They attract enormous problems of CTT and they also attract the institutions. I should be happier to see private owners owning the countryside rather than institutions.
The countryside relationship is one of landlord and tenant. It has almost been a way of life and has attracted a great degree of benevolence throughout the ages. I do not think that owners should be too commercially minded, as if they were buying and selling commercial property or always going for the highest rents, which, to some extent, an institution must do. The rent 755 formula has been criticised by comparing it to the fair rents problems of flats in the rented sector, but I think that there is no comparison. Land is finite, whereas flats may be built, replaced and redeveloped. There can be under-supply or over-supply, but flats can be built and they are not finite. So I do not think that it is reasonable to compare the two.
However, it is wrong to disregard the scarcity problem and this gives rise to reasonable concern. Without any scarcity, one could go back to the 1930s and the tenants could claim that they should go in without any rent at all, because people were hard-pressed to find others who would go into the farms. That could happen, so that you would have zero scarcity. Therefore, it must be wrong totally to disregard scarcity. At the same time, it is equally wrong to give it undue consideration. So there should eventually be some phrase in the Bill on the lines that scarcity should be considered, but not given undue consideration.
With regard to succession, this Bill is the result of the NFU/CLA get-together and I think that the NFU have done extremely well to retain their three generations. But they have had this for only six years, and while it may well be that during those six years certain farmers have taken action—or failed to take action—to protect their sons, I cannot believe that many of them have taken action on behalf of the third generation—their grandsons. It would be perfectly reasonable to try to get this reduced to two generations.
As it is, it will create two sets of farm tenants. In 40 years, as has been said over and over again, people will be crying out that it is a gross inequity and that the Government must change the law, so that those with single tenants are equal to those with protected tenants. If the socialists get in power they will probably do that for them, so we need to know whether the socialists will go back on this Bill, in the most unlikely event that they again form a Government.
The 1976 Act also gives succession not only to members of the family but to, for example, a farmworker who has lived with the farmer for a number of years and has run the farm. The farmer could give that farmworker the right to succeed. I believe that that is correct. But if the succession is allowed to remain for three generations, it should be confined to genuine members of the family, a son and a grandson.
Clause 7 seeks to take away the appointment of arbitrator from the Minister and give it to the president of the RICS. This gives concern to the NFU. Obviously it is important that the arbitrator should have the full confidence of farmers and the NFU. Perhaps the appointment should remain a matter for the Minister. If arbitration is passed to the RICS it will take time for the arbitrators to be accepted as fair arbitrators by the farming community. Against that, the new formula for computing rents may give confidence and be of help.
Paragraph 8(4)(g) of Schedule 2 needs careful thought. If a farmer changes his system, the landlord will be unable to charge a higher rent in due course. In other words, in the event of a farmer taking a sheep farm on a low rent, with low production, perhaps over three generations (when we are talking about 75 years) 756 new machinery and new technology will be introduced which will enable that farm to grow corn or some other crop which has not yet been thought of, yet the rent must for ever remain the value of that land for sheep farming. In future, horn may even exceed corn, when the reverse process would take place. Horn might then become more profitable than corn. Again, the landlord would be stuck to the rent of the system of farming when the farmer took over the farm.
If this paragraph is to stay as it is. I believe that the landlord must have an opportunity to revise his acreage rent schedules from time to time or to insert, particularly in the case of agreeements reached before the 1978 Act was passed, a prohibition on changing the farming system without the revaluation of rent. These old agreements were for one generation only and were made before they were broken arbitrarily by the Government, which made the change to three generations. The landlord needs and deserves protection. It is wrong that the landlord should be held for three generations to a rent for a method of farming which in 100 years' time could be years out of date. This paragraph will encourage landlords to forbid improved farming systems where they are in a position to do so.
The Bill makes an effort to reduce legal anomalies. It includes a large number of amendments to the existing law which are very welcome. The Bill is in general to be welcomed. It attempts to clear up the damage caused by the 1976 Act. However, even if it gets all-party support, I am not at all sure that it will help to provide any more lettings. Furthermore, more fiscal support will undoubtedly be necessary and will have to follow, as has been mentioned by so many speakers. I believe that the most necessary change is to CTT. Estates, like farms, have to be of certain size in order to be efficient. If they are reduced in size they cease to be efficient. When they are cut to the bone such items as management, forestry and amenities suffer. The Bill is, at least, a "try".
Finally, I should like to pay great credit to my noble kinsman Lord Middleton who, as chairman of the Country Landowners' Association, did so much work over the last few years in getting together with the NFU to enable all this to happen.
§ 7.34 p.m.
§ The Earl of Radnor
My Lords, I shall not detain your Lordships for long and will not say anything about the last part of the Bill. I shall look forward to my noble friend Lord Belstead's notes. I am pleased to hear that he felt the drafting might for idiots like me be rather difficult to understand. Instead, I shall keep, as practically every speaker has, to the two salient clauses and to the availability of farms to let in the future if the Bill becomes an Act more or less as it stands now.
In passing, I should perhaps declare an interest. I am involved in farming in a number of ways. I am a landlord and have farming tenants from whom I derive a profit, or at least money. I am also the head of a farming company of some size which rents land. I am also—this should not be disregarded as an alternative; however. it has been put on one side to a certain extent—a partner in three different situations and have found that this has worked extraordinarily well. Like term tenancies, I do not believe this is ever likely to be 757 a real answer to the problem. We are dealing with a real problem, however, and this should not be disregarded. Term tenancies, too, have their place but they do not last quite long enough for the gentle pace, if I may put it that way (which has nothing to do with efficiency), of farming.
A number of alternatives, if that is the right word, have been suggested, some more radical than others, one or two of which I should like to mention. The noble Lord, Lord Northfield, has just returned to his seat. In his peroration he said that we should turn ourselves into charities, if we are in a position to do so, and enjoy the general ambience of the situation: run the home farm and let the rest to somebody else. That is a very good idea but, like so many of these ideas, it does not take into account human nature. I do not believe it will happen. People are not so unambitious as all that. They are, I am afraid, rather greedy on the whole. I am told that the territorial ambition of the English male is secondary only to sex. I do not know whether or not that is true.
Nor do I think that the idea of the noble Lord, Lord Walston, about avoiding capital transfer tax in the same way as is done with pictures would really work. It sounds a very good idea but it would need to be looked at in great detail. So far as the noble Lord's idea of a trust funded partly by the Government is concerned, the noble Lord said that he did not think that this was back-door nationalisation. But that is exactly what I would say it is. So I would tend to discard that idea, although it might produce more tenancies.
May I, for a moment, go back over ground which many of your Lordships have already traversed this evening. The trouble, it appears, began in 1976. And trouble indeed it was. I regret to say that I never came to a debate in your Lordships' House and therefore am absolutely indictable, but there is no doubt that Part II of the 1976 Bill caused what can only be described as a complete dearth of farms for letting. It is absolutely understandable that this should have been so. It was very sad for the young farmers we want to come into the industry. It is vital that we should get young farmers—not necessarily the sons of farmers and not necessarily, because it is very pertinent to succession, people who have been brought up on dad's farm. That is very often the worst way to train a farmer. But it was sad for them. I noticed that some noble Lords said that at that time the young farmers' clubs were, very understandably, against the Bill.
It was also sad for the landlords. Probably a large number of them would very much like to let farms, but because of the tremendous drop in the value of their assets should they do so they, against their best inclinations and wishes, farm the land themselves. What is more, they are not necessarily the best people to be farmers; they probably fulfil the role of landlord far better.
In passing, I should like to look for a moment at the other consideration; namely, the rent question, and see what its influence has been on the number of farms to rent coming on to the market. I must admit that, in my experience, it is not a very big influence at all. I think the key to the succession is not market value or this not very precise formula which has been produced but is succession: it is that which causes the trouble.
758 Having gone that far, and pinpointed a degree of trouble, it seems rather superfluous to go looking around for strange answers. I thought that the noble Lord, Lord Hylton, was going to come to the point, but he just got to the starting gate and then shied away. If he really believes—and everyone has been praising the let sector, and I am not really commenting on that because everyone seems to agree that it is a good thing to have farms let—and if we agree that the Agriculture (Miscellaneous Provisions) Act 1976 caused all the trouble: and if we agree that the trouble is, first, the three-year succession and, in a minor way, the rent situation, then I can only suggest that we regard all these other suggestions as peripheral and turn around that which is said in the 1976 Act.
It seems to me entirely logical: very unpopular, I am sure, in some quarters but not so unpopular in them all. By that I mean that the succession clause, instead of dealing with new tenancies only in this Bill, should deal with all tenancies if—and I make that perfectly clear—one wants more farms on the market.
If not, then one can play around; but, quite honestly, I believe that there will be very little difference. The time scale, as many noble Lords have pointed out, will be so long for this to work through the pipe-line. Add that to the remarks made by the noble Lord, Lord Northfield, about the shortage of farms and the rather depressing sum he worked out on his calculator. If one really wants farms to come on to the market, one has to get rid of the three year succession in its entirety.
For myself, I would do anything to get rid of the way in which it is apparently suggested that rents should be decided upon. We heard the noble Lord, Lord Mishcon, say in an earlier debate on the Occupiers' Liability Bill that it is the duty of Parliament to be precise. I heard him say that quite distinctly. I cannot think of anything more imprecise than the formula in this Bill. Somebody in the end had to say that; perhaps somebody has said so already and I was not taking any notice. If more farms are wanted to be let, then succession has to go in its entirety.
§ 7.44 p.m.
§ Lord Burton
My Lords, I also should like to warmly congratulate the noble Lord, Lord Howard of Henderskelfe, and I think that I agreed with all he said. May I first declare an interest—not as an English landlord, as some of your Lordships might expect, for I do not own any land in England. But am a tenant farmer in Staffordshire paying a rent of more than £32,000 per annum with a rent review due shortly. Therefore, I have a considerable interest in this legislation.
I am sure we all hope that this Bill will help to create a more favourable climate to encourage landlords to let more farms. Indeed, my noble friend the Minister said that this was the intention of the Bill. There can be few who disapprove of the principle that by providing a large proportion of the capital required, the landowner can help the young tenant farmer up the farming ladder. However, as with the Scottish Act passed earlier this year, I fear that the changes proposed will not go far enough to encourage owners of land to let. It would be interesting to know whether or not the Scottish legislation has had any effect in this respect so far; perhaps it is too early for any change in 759 the trend. I have a farm in Scotland becoming vacant in May. What am I to do with it?
§ Lord Burton
Exactly, my Lords. There is little doubt, as several noble Lords have indicated, that would be madness to re-let it, even with strong hopes for concessions in the Spring Budget.
I believe I am right in saying that the letting of a vacant farm drops its value by about 50 per cent. overnight. Until the scales have been tilted far enough to change this, we can scarcely seek an improvement in the number of farms to let. Possibly one of the largest deterrents is the threat of the Labour Party to nationalise let land, as my noble friends Lord Salisbury and Lord Peel have just said. The noble Lord, Lord John-Mackie, mentioned a case of eviction in Scotland causing the NFU to press for security of tenure. This happened, I regret to say, in my own NFU branch area. That branch, I can assure your Lordships, now realises that a mistake was made and that the pendulum has swung far too far, particularly on security of tenure. There are a number of young farmers in the area who would like to get farms and who know that by this legislation, they are now unable to do so.
However, although there are many good points in this Bill which one welcomes, unfortunately there are some had ones. As several noble Lords have indicated already, perhaps the worst point is the arbitration proposals. I must put it to my noble friends on the Front Bench: have they no confidence in their own Bill? Certainly it would appear that the NFU have no confidence in it. Surely the attempt to get away from open market rents as the yardstick for fixing rents is that there are so few farms becoming available to let. As a result, those farms that are available stand at a premium. But surely one of the main objects of the Bill is to cultivate confidence so that farms will become available to let.
Have the Government and the National Farmers' Union no faith that this will be the case? If they have confidence, then let us drop the proposals in Clause 1. Several noble Lords have produced sound reasons for changing the clause—the most worrying of which, apart from the increased costs of an arbitration, would be the increased doubt and lack of clarity to the arbitrator, producing friction between landlord and tenant.
It is only months since the Government produced legislation for Scotland. Are the Government now saying that what they gave us in Scotland was wrong? With the Occupiers' Liability Bill which we discussed earlier this afternoon, my noble and learned friend the Lord Chancellor told us that we have waited 23 years for England to come into line with Scotland to improve on that Bill. Is that to be the case in England with this Bill also? After all, why should the principles which govern the rules of arbitration in Scotland be different from the rules for England? There are fewer farms to let on the open market in Scotland than there are in England. Therefore, if the argument against open market rents is applicable to England, it is even more applicable to Scotland.
760 However, the Government in their wisdom produced proposals for arbitration in Scotland, and they appear to have been widely acceptable. Surely they should now change their minds on this clause and use words similar to those in the Scottish Act for this Bill. The Scottish wording may not be perfect—indeed, I believe that there is room for improvement—but what is vital is that arbitrators know where they stand; that there is a minimum of ambiguity; that one arbitrator cannot interpret the law in one way and one in another way. Indeed, if the proposed wording of this Bill were to be implemented, there is already a divergence of views within the Royal Institution of Chartered Surveyors as to what effect it would have. Some say that it would increase rents and others say that it will make them drop: still others say that there will not be much change. What is certain is that there will be uncertainty—there already is uncertainty among the experts.
The Government are obviously worried about making changes to an agreement reached between the Country Landowners' Association and the National Farmers' Union, the argument being that if those bodies are agreed, then it will be harder for a future Government to change the legislation. But there have already been changes. Several of those who negotiated the agreement are no longer in office. In a few years, it is probable that none of the negotiators will be in office. As a member of the Scottish National Farmers' Union and the Scottish Landowners, I feel that we should not take sides with one party or another, but that we should be seeking the legislation which will be most beneficial to the land. Many experienced and highly reputable bodies have made representations on Clause 1. It would be a grave mistake for the Government to ignore them. I therefore hope that the Government will look very carefully at Clause 1 and I hope that they will come forward with an amendment on Committee.
§ 7.51 p.m.
§ Viscount Davidson
My Lords, it is almost 12 years to the day that I made my maiden speech in your Lordships' House on 16th November 1971. The occasion was the Second Reading of the Agriculture (Miscellaneous Provisions) Bill of that year. In introducing that Bill the late lamented Lady Tweedsmuir of Belhevie said that it was the first time for nearly 20 years that an agriculture Bill had started in your Lordships' House. Today we have the next one.
In that debate 12 years ago we were discussing among other things the eradication of brucellosis and the introduction of the metric system into agriculture. These are now both faits accomplis. Today we are discussing the introduction of a Bill which will implement a package of measures relating to farm tenancies which has been agreed between the National Farmers' Union and the Country Landowners' Association. Twelve years ago such an agreement would have been inconceivable, but if it had been conceived I am certain it would have been welcomed with open arms on all sides.
Today, however, we find that there is opposition to such an idea from certain quarters. That opposition 761 stems mainly from landowning institutions and the estate agents who manage their estates and negotiate their rents. What I cannot understand is why they are now making such a fuss about this Bill when two years ago the Royal Institution of Chartered Surveyors not only said that they were delighted that there was an agreement between the NFU and the CLA but pronounced the rent formula to be workable and agreed that the actual effect on the number of farms to let or on the level of rents would he minimal. What has happened since, then, for the institutions and their agents to change their minds and decide to mount an opposition to this Bill, which I would remind your Lordships stems for an agreement between the National Farmers' Union and the Country Landowners' Association representing the vast majority of agricultural landowners and tenants in this country? It is to this opposition that I would like to address my remarks during the rest of, I hope, a very short speech on this occasion.
I have never been convinced that the ownership of agricultural land by institutions is a good thing for either the land or the countryside. The argument is propounded that they bring much needed capital into agriculture. Is it really needed? Where is the evidence that agriculture is that short of capital? This argument I believe to be fallacious. What they are doing when they buy agricultural land is investing a proportion of their accumulated funds in an asset which they hope will provide a guaranteed capital growth over a period of years. At the same time, they are prepared to accept the low return on their capital which other owners of agricultural land have always been willing to accept. By such an investment they have very sensibly provided their investors or shareholders with a better balanced port folio for their funds. But, naturally, being managers of financial funds first and foremost, it is possible that the yield from their investment has not come up to expectation, and it is of course in their interest that the return should not remain static but should grow from year to year.
The Estates Gazette of 15th October lets the cat out of the bag when the leader writer states:There is every possibility that if the package becomes law rental increases will slow down—informed opinion puts the reduction at 20 or 25 per cent".All I can say to that is, So what! Apart from that, it is in total contradiction to the view expressed by the Royal Institution of Chartered Surveyors only two years ago. Anyway, as every debit must have a credit, presumably if this anticipated reduction in the institutions' income comes about their tenants will be that much better off, which in my book provides a strong argument in favour of this Bill.
However, apart from the financial side, there is another aspect which concerns me about ownership of agricultural land by institutions. They are by their nature absentee landlords. They may employ a resident agent or estate agents to manage their land and negotiate their rents. But they cannot, and do not, have the same personal attachment or commitment to the land, to their tenants or employees, and to the country and village life which is felt by the private landowner or owner-occupier who lives and works on his farm or estate. Farming is both a way of life and a business, and it would be a sad day if the latter took 762 priority over the former and upset the balance which makes our countryside so unique.
I have only two more things to say. First, it has always seemed quite extraordinary to me that a Labour Government, while strongly disapproving of the hereditary system in principle, should have legislated in 1976 to bring it into existence for farm tenants. But then I suppose that one should never be too surprised at anything the Labour Party does, and I welcome the reform of this particular piece of legislation.
Secondly, the fact that the Country Landowners' Association and the National Farmers' Union have actually agreed on a compromise package on farm rents—and I would like to add my congratulations to those expressed to the leaders of both sides of the industry—is little short of a miracle. Whether a miracle in itself is a sound basis for legislation is quite another matter, but at least it is a good start, and we should welcome it as such.
§ 7.56 p.m.
§ Viscount Mountgarret
My Lords, I think I should start by following the example of my noble friend Lord Burton by declaring an interest, in that I, too, am a tenant of a decent-sized acreage. I am in the unique position of being probably the only tenant who had a rent review twice in one day, once in the morning before lunch and once in the afternoon after lunch. So I have quite a vested interest in this Bill.
I think it was fairly agreed by most of the agricultural industry that the passing of the 1976 Act was disastrous and not conducive to the good of the industry as a whole. We have waited a long time before there has been the opportunity to unscramble many of the provisions made in that Act, and here we are today with the opportunity to do so, thanks to a considerable amount of hard work by a great number of people.
Unfortunately, it may be a case of too little and too late, because landlords, landowners, have really come to live with the provisions of the 1976 Act and this is a bit like trying to close the stable door when the horse has bolted. They have learned to acclimatize themselves to the provisions of that Act and to realise that other action can be taken by them to preserve their not inconsiderable financial interests. I am somewhat dubious, however enthusiastic I should like to be, that this Bill of itself can arrest completely the flight from providing tenanted land, much as 1 regret it, because I feel that the relationship between landlord and tenant was something of which we all were very proud and was the envy of so many other countries.
The real cause of the unavailability of tenanted land is of course fiscal legislation. My noble friend Lord Belstead did mention in his introduction of this Bill that Her Majesty's Government have done a very considerable amount to alleviate many of the more penal aspects of fiscal legislation which dictate against the letting of land. Regrettably—and I think my noble friend himself realises it too—there is still much more to be done. I just cannot understand how any person in their right mind is going to deliberately let a farm of x number of acres when if he farms it himself any profit or income he derives therefrom will be treated as earned income, whereas if it is let the profit is unearned income and therefore taxed at a higher rate. Also, on 763 capital taxation and on tenanted land there is a 20 per cent. alleviation on capital transfer tax provisions whereas on in-hand and owner-occupied farms it is at present 50 per cent. On that sort of basis I cannot see why anyone should particularly want to enter into a new tenancy.
I am sorry that the noble Lord. Lord Walston, is not in his seat, because I do not want to say something which might appear to be rather discourteous to him, but I think I am right in saying that he did suggest that he wanted to have some kind of national land bank which would buy land, presumably with vacant possession value, and then let it to tenants. The idea is marvellous, but where will the money come from? Will it be from the taxpayer? That is a classic example of the equivalent of a nationalised organisation buying something at a high price and the next day finding that it is worth only half of what it was. That is not an economic proposition.
Turning to the Bill itself, on Clause 1 there are one or two points which might be considered. Subsection (10) (d) in the new Section 8 reads:any increase or reduction of rent agreed … in consequence of any increase or reduction in the size of the holding".This will have a direct effect, as it does now in fact, on the date on which the arbitration decision begins. What I am saying is that if a tenant wishes, or there is need, to change the size of the agricultural holding during the term of the tenancy or the three-year rent period, there is not only a real danger but a fact that it puts the tenant's rent review in baulk. It makes it very difficult for a landlord to redesign his property, even in a small way and even if it is in the interests of good estate management. Is there some way in which that could be modified, without any change in the holding of a tenant and without running the risk of putting the rent in baulk?
On the definition of "tenant's improvements" under new Section 8A, the Bill clearly states what "tenant's improvements" means. However, I am slightly concerned, though I may be quite wrong, that it does not include the words "with the landlord's permission". Am I to understand that a tenant under this definition can make any improvement or change in his buildings, or whatever, without the landlord's permission and yet have it classified as an improvement so that the landlord is therefore financially liable to pay the tenant on giving up the holding? If so, that is a very dangerous position, because one can have, for example, a very wealthy tenant who can afford to add a substantial building and a somewhat impoverished landlord (although that might sound Irish) who simply cannot afford to pay compensation to the tenant who is quitting. If that is the case it needs looking at very carefully.
Continuing in the same new Section 8A, subsection (3) refers to the definition of tenant's improvements, and clearly states:whether or not that expense has been or will be reimbursed by a grant out of moneys provided by Parliament".However, in subsection (5) (b) of new Section 8, relating to the arbitrator taking into consideration the landlord's improvements, the Bill states that,in so far as the landlord has received or will receive grants out of moneys provided by Parliament".764 those will be taken into consideration. I do not know whether that is quite right. I may have misread the clause, but I do not see why, if the landlord improves something, the grant received shall be taken into account but, if the tenant impoves something, it is not. That is not equitable.
In Clause 2, on the question of the date on which these provisions come into force, I must strongly support the noble Lord, Lord Hylton, and the noble Earl, Lord Radnor. It does not seem to be right that the provisions relating to this Bill, when enacted, should only be on tenancies granted after the passing of the date. In 1976, when the party opposite produced its Bill, the succession of tenancies applied to tenancies that were in existence. In fact, that was a retrospective idea. It virtually tore up the agreement made freely between the landlord and tenant and that is fundamentally wrong. I do not wish to be discourteous to the party opposite, but it has a little habit of tending to make legislation retrospective and perhaps we on this side of the House tend to be not quite so heavy-handed. However, unless the Bill is made the equivalent of retrospective on the same terms as the 1976 Bill, we could land ourselves in an unenviable situation. We should have two classes of tenant and it could create a considerable amount of ill will. Perhaps my noble friend Lord Swinton could comment on that when replying.
I have one or two small points relating to Clause 2. Subsection (2) (d), uses the words:the holding … which comprised the whole or a substantial part of the land comprised in the holding.I am somewhat unhappy at the idea of leaving someone else to decide what a substantial part of the holding is. Can we not, as legislators, be slightly more definite? Would it not be better to say what we mean? Is it 60 per cent.? Do we mean 75 per cent. or 80 per cent.? Or is it undesirable to be definitive on this point? I do not know.
§ Lord Mackie of Benshie
My Lords, is not the noble Viscount making Committee points on the Second Reading of a Bill?
§ Viscount Mountgarret
My Lords. I am sorry if I am out of order and I thank the noble Lord for putting me in order. I take the noble Lord's point and move to Clause 7. I add my support to those noble Lords who have said that they disagree with the principle of giving the President of the RICS the power to provide the appointment of an arbitrator. That is not the right thing to do, in principle. It could be seen to lend itself to a certain degree of partiality, and perhaps the Government would look at this point again. If it is a question of economy, or whatever, I cannot believe that it will add that much to public funds. If so, why not make the fee payable to the Minister as opposed to the President of the RICS?
My noble friend Lord Peel referred to the attitude of the party opposite, and I should like to voice my support. The Bill will succeed. I am sure, with various rough edges taken off it, but only if one can feel that one has the confidence and support of the party opposite—which may not entirely support it wholeheartedly—and if it does not continue waving 765 the flag of nationalisation and so on, because that totally undermines all confidence. May I say that that is the attitude that has gone on in British politics for a long time? There seems to be a big divide between the two sides of the House. To have a country run on the basis where one party does this and the other immediately says that it will tear it up when it comes to power leads to a complete stop-go policy and undermines all confidence. I wish that we could try to get together on many aspects of our affairs.
I think that considerable thanks are due to my noble friend Lord Middleton for the hard work he has put into getting the Bill before your Lordships' House today. It is also pleasing to see the noble Lord, Lord Howard of Henderskelfe, here for his maiden speech. He was perhaps a front-runner at the start of such a Bill.
§ 8.10 p.m.
§ Viscount Dilhorne
My Lords, I hope that I shall not detain your Lordships long. First, I apologise most sincerely for being unavoidably absent, because of another engagement, when this debate opened and, I am afraid, throughout most of its course. I hope that I shall not fall into the trap of repeating what other noble Lords have said, because that is boring. I hope on good grounds that I shall not do it: looking through the list of speakers who have preceded me I believe I am the only barrister speaking who does not really know anything about agriculture—indeed the only barrister, anyway, who is speaking on this Bill.
My purpose is simple. First, I hope that I shall bring some new thought to the Bill; secondly, I wish to express concern, quite impartially, about the effects of the Bill on what is a hopeful and happy marriage between the NFU and the CLA. My concern is based purely on a legal point of view and it is about the form in which the Bill stands, if it is enacted. I shall try to limit my references to sections of other Acts to the minimum. Although I appreciate that most of your Lordships carry these matters clearly in your heads, it would be repetitious to do so.
First I should like to go to Section 8 of the Agricultural Holdings Act 1948 as it now stands. Provision is there made for either the landlord or the tenant of the agricultural holding to require that the question of what rent should be payable be referred to arbitration. Under that section once the rent is fixed it cannot be varied during the three-year period which commences at the expiration of the period about to end. There is nothing new in this Bill to alter that. The basis in that Act as it stands is that the rent properly payable was to be the rent at which the agricultural holding might reasonably be expected to be let in the open market by a willing landlord to a willing tenant.
Open market valuation is applied under Section 34 of the Landlord and Tenant Act 1954. That section makes provision for the determination of a new rent to be payable under a business tenancy. As such it deals with what can in practice be the most frequent source of dispute. It does so in a simple and easily understood manner. Incidentally, in the near 30 years of life of that section there has been little litigation. By contrast, Section 70 of the Rent Act 1977 (which provides for determination of fair rent and which forms the core of 766 the provisions for regulated tenancies of a dwelling-house) has proved highly contentious to both the landlord and the tenant and has been the source of much litigation.
The proposal contained in this Bill is to move away from a market rent basis (as contained in Section 34 of the Landlord and Tenant Act 1954) to a different basis which involves discounting scarcity value. It is a moving towards a Section 70 type formula with this, if I may say so, rather indigestible ingredient of scarcity value being introduced. This seems a very odd change to make at this stage of property legislation, bearing in mind your Lordships' experience in relation to security of tenure and the control of rents. It is certainly agreed by a large number of professional persons that the Section 34 formula operates fairly between the landlord and the tenant; whereas it is also agreed that Section 70 does not always operate fairly. Perhaps a better way of putting that is to say that in many cases it operates unfairly. My concern is that this provision will lead a well intentioned marriage into a load of litigation which can never be beneficial to either party but only to those involved in the practice of that profession.
I return briefly to open market value, where I propose to be marginally less impartial. My criticism and concern about the scarcity exclusion ingredient is simply that it knocks out a basis of valuation that is widely accepted, widely understood and well used. It is also used in the compulsory purchase of properties. The only examples of other systems are all outside the field of commercial lettings and in the residential lettings field. The essence of letting on a commercial basis, as opposed to a dwelling on a non-commercial basis, is surely that agricultural tenancies are a business. In essence what I am saying is that I am fearful that this provision will lead to expensive arbitrations and court cases which will benefit nobody. I put this totally impartially: there is therefore a very heavy burden placed on any person who wants to get rid of this system. Great thought is required before it is abolished.
I am concerned about another matter in the Bill. A different formula is contained in the amendment to Section 8(4) of the 1948 Act which provides that:In determining… the current level of rents for comparable lettings the arbitrator shall take into account any available evidence with respect to the rents…which are…likely to become payable".This provision aims at basing a valuation on what people tender. That seems very dangerous, for the bases upon which offers are made are infinitely variable. With respect, it is only safe to look at completed transactions to which parties are bound. Further, this requirement is potentially unfair to tenants by taking into account bids made without any intention to be bound. From my slight experience of valuation cases, I believe that bids are often made which are ill judged. When the bidder considers his action more fully, often the bid is not completed. Such bids could be taken into account in the terms of this proposed legislation.
My next point is a short one. The provisions of the proposed Clause 1 apply whenever the lease was created. When arbitration takes place in the first three years after enactment there will apply a basis of ren 767 formula different from that which applied when the parties first entered into the contract. This is really the imposition by the state of a new term into a contract freely entered into between parties. I would suggest that it is therefore in effect retrospective in respect of one of the main terms of the contract over which the landlord will have no control.
If we look at Clause 2 of the proposed Bill which abolishes the statutory rights of succession to agricultural holdings in respect of new tenancies, we see that it is not retrospective. It seems not only rather unfair but also inconsistent that in the circumstances the rights of the landlord should be cut down retrospectively. On the one hand they should suffer, while on the other hand there is not retrospection. It seems a strange provision to make, and I bring it out at this stage in today's debate only so that when we reach the Committee stage the matter can perhaps be considered in fuller detail.
On the basis that is proposed the consequence is that the landlord of a periodic tenancy cannot put up the rent without regard to the provisions. I say only that it is theoretically possible for the landlord to enter into a fixed term tenancy. What I am saying is that this Act (if such it is to be) is not comprehensive because on a fixed term tenancy it would be possible to put up the rent and, I understand, to disregard, again theoretically, the provisions of the Bill.
Finally, I would welcome the transfer of the function of appointing the arbitrator to the president of the Royal Institution of Chartered Surveyors from the Ministry of Agriculture, if it is so called these days. My Lords, thank you for listening to me.
§ 8.23 p.m.
§ The Earl of Onslow
My Lords, it is extremely difficult to follow a speech such as that which we have just heard. Apart from one minor note-losing incident, which is something that we all dread, it was one of the must lucid and clear expositions of a complicated rent situation that I have ever heard. I would declare an interest, in that I myself farm. It is interesting to recall that when my grandfather died in 1945 most of the land I now farm and which was then our estate was tenanted, except. I think, about 80 acres. I would suggest to your Lordships that the decline in both the privately let sector and the institutional let sector has come about by means not only of the 1976 Act, but also of the 1948 Act. If, as noble Lords have said, one then piles on the fiscal inequalities, one gets, I suggest, a decline which is practically irreversible.
I thought that the noble Lord, Lord Northfield, spoke with great authority from the Labour Benches in favour of Liberal free trade in land. His argument, it seemed to me, was concise. He seemed to show that the private landlord, for whom and on behalf of large numbers of your Lordships, with complete integrity and honesty, are speaking—because this is something that you know about—is a dying breed.
I think it very important from the point of view not only of agriculture, but also the social cohesion of the countryside, that there should be more tenanted farms. How we bring that about I do not know. I must congratulate my noble friends on the Front Bench upon producing a very small step in the right direction. 768 I am afraid to say that I congratulate them only on that; I cannot congratulate them on producing a major step.
It seems to me that to ask for some of the fancy ideas. such as trusts, no capital transfer tax on land, or the abolition of unearned income in relation to increments on rent involving private landlords, is really asking too much. That is not because I do not think it is right—I think that it is right—but rather because I think that our tax, social security and capital taxation systems are in such a muddle at the moment, producing anomalies in wage-earning and pensions. All these factors produce anomalies piled on enigmas. piled on riddles, piled on muddle, and piled on fat fees for lawyers and accountants.
If only we could get to the root of that problem, so that the letting of land would be just as profitable as the farming of land, we might see a change, and it would be possible to have smaller farms. It would be smaller farms—80 to 100 acres, or 200 acres—which would give more life to the countryside.
If one goes to East Anglia, Wiltshire, or some of the grain-growing areas, where there are large areas of landholdings owned by the institutions, one finds dearth and death in the countryside. That is had for us, bad for the farmers, bad for the population of the countryside, and it is something which we ought to try to get right. I suggest that that should be tackled on the fiscal side and by trying to make land letting more profitable.
Certainly if I were old and doddery. I might want to let my farm for five or 10 years until my son, who is now aged 16, was old enough to take over. If something were to happen to me now, if I were to have a stroke or something of that kind and become incapacitated, there would be a very strong case for letting my farm because I should not be capable of running it. But I should want my son to be able to take over. This is a natural thing in regard to land. Some of your Lordships have said that there is a feeling about owning land which is quite different. One has roots in land which one does not have in concrete, one of my noble friends said. There is something spiritual about owning land; at least that is how I feel about it, and I suspect that several others of my noble friends do, too. That was the first point that I wanted to make.
The second point that I was going to make has also been raised by my noble friend Lord Salisbury, in pointing out what is obviously going to arise: that is, the two levels of rent causable by the Bill. I would suggest to your Lordships that there would be not two levels of rent, but four. A first generation tenancy granted last week has three generations to run-100 years. That kind of tenancy must be worth much more to the tenant than is a second generation tenancy. I say that because, if the second generation tenancy was granted before the 1976 Act and the tenant died in, say, 1978 and his son was quite an old man, there would be less time to run on such a tenancy until the land could be reclaimed. That tenancy must be less valuable than the first one. I would also suggest to your Lordships that the new tenancy of one generation only will also he less valuable than a tenancy which is running under the 1976 Act. So therefore there is a possibility of four levels of rent.
769 I believe that the Bill states that the tenant may turn a new tenancy into a succession tenancy. To do that, presumably he is going to have to pay more rent. Why cannot a three-generation tenant say "Ah, but I should like to pay less rent, so please can I opt out of my three-generation tenancy into a new one-generation tenancy?" I hope that my noble friends Lord Belstead and Lord Swinton can look at these things to see if they can come up with the answer to this point, which I consider quite important.
I come back to my potential incapacity and the term tenancies which the NFU, I know, strongly opposes because it says that all landlords would immediately let only term tenancies. At the moment, no landlords are letting anything. It seems reasonable therefore to quote the noble Lord, Lord Middleton, when moving an amendment to introduce term tenancies in the Agriculture (Miscellaneous Provisions) Bill 1976, when he said:Such a clause as this is necessary to rescue the landlord/tenant system once family inheritance is introduced. (Official Report, 17/6/76; col. 1414.)I know that it is totally unfair to quote words back at people when they have carried out so much work to produce this compromise, upon which I, like other noble Lords, must obviously congratulate him. I would suggest, however, that there is the possibility of putting into the Bill a provision for term tenancies that would not come into law until it could be enacted by a positive Order in Council and an order by the Minister. Furthermore, to meet the NFU's fears that only term tenancies would be lettable, it would be reasonable to say that once a piece of land had been let on a term tenancy, which could be in multiplications of five years or what you will, then, once that term tenancy was ended, it would have to be let on a lifetime tenancy afterwards. That would guarantee some sections of the 1948 Act and introduce the term tenancies which several of your Lordships say would release land for letting. Several of your Lordships spoke strongly in favour of it in 1976. Large numbers even voted for it. It would be not only boring but possibly rather unkind to read out all the names, including Lord Sandys and Lord Ferrers, who voted for it. I should. however, like the Government to listen, and possibly say something in the reply to the debate.
§ 8.33 p.m.
§ Lord Middleton
My Lords, at this hour and at this stage of the Bill, just about everything that could have been said about the measure and about land tenure in general has been said. I shall therefore confine myself to picking up some of the criticisms that have been made. I take first the point of my noble friend Lord Onslow. I did move that amendment about term tenancies. As he knows very well, agreement within the industry on that point was not possible.
I should like to begin by referring to what the noble Lord, Lord John-Mackie, said about succession. The noble Lord went back into history in justifying the introduction of the succession clauses into the 1976 Bill. He referred to two cases of hardship to tenants, one in Scotland and one in Wales. Of course, they were deplorable cases. But hard cases make bad law. I remember saying in the House in 1976 that it seemed to me that by attempting to alleviate hardship for a few 770 farmers—hardship that so far as we knew no one had attempted to quantify, although we hear now that there were two cases—there would result greater hardship to many in the long term.
It gives me no satisfaction that just what I and noble Lords at the time, not only on this side of the House, although we were on that occasion sitting on the Opposition Benches, predicted would happen, did happen. It did not require a genius to foretell that the landlord-tenant system, under the combined effect of the succession provisions and other pressures, would collapse. Inevitably, after 1976, owners were extremely reluctant to let, as so many Lords have remarked. Only institutional owners, not affected by taxation or so much by succession, continued to offer tenancies. Intense competition among aspiring tenants for a limited number of lettings led to inflated rents being offered for new tenancies. So the farming community came only too quickly to regret the 1976 Act. Young farmers, unable to get a start in farming, felt a keen sense of frustration and hardship, as was so easily predictable. It was not just the rungs that were removed from the farming ladder. The whole ladder had been swept away.
Out of all the many points made today, I should like to concentrate on six issues that seem to have been the main strands running through the debate. First, I should like to refer to the role of the CLA and the NFU mentioned by my noble friend Lord Caithness and, if I may so so, not all that politely. The landlord and tenant system had to be rescued and this could only be done by amending legislation. Here, it may perhaps be appropriate to remind your Lordships that the committee of the noble Lord, Lord Northfield, reporting in 1979, after stating the case for retaining a healthy let sector, recommended in, I think, paragraph 642, that:Ministers should confer with the interests concerned, i.e. the CLA and the NFU, with the objective of agreeing and implementing amendments to legislation as soon as possible.The very fact that the committee of the noble Lord, Lord Northfield, was set up to look at farm structure and tenure in 1977 only one year after 1976, is a significant indication of how quickly things had gone wrong after the 1976 Act. The previous Government needed no convincing that something had to he done. They insisted that any proposals that they might put to Parliament should have the full backing of the industry. So, in 1979, Mr. Peter Walker asked the CLA, representing the owners, and the NFU, representing the tenants, to sit down together and try to agree how to do it. As we have heard several times today, agreement was finally reached in spring 1981 and the joint recommendations made to the Government form the basis of Clauses 1 and 2 of the Bill.
I should like next to refer to the rent formula that has been spoken about a great deal today. I join other noble Lords in congratulating the noble Lord, Lord Howard of Henderskelfe, on his maiden speech. The noble Lord referred to the new rent formula in Clause 2 and the concern of institutional owners about it. The noble Lord, Lord Northfield, referred to the open market discipline. I was delighted to hear him extol that free market. There was criticism of the recent formula from my noble friend the Earl of Caithness, and the House has just heard a most learned speech from my noble friend Lord Dilhorne. 771 For the past 25 years, when landlords and tenants have failed to agree on rent, an arbitrator has been called in. He has to act, as my noble friend reminded us, in accordance with Section 2 of the 1958 holdings Act, which says that:the rent properly payable …shall he the rent, having regard to the terms of the tenancy, at which the holding might reasonably be expected to be let in the open market".The effect of the 1976 Act was to dry up the supply of new lettings. The intense competition among would-be tenants for those which were offered produced offers of new rents well in excess of the current level of rent for sitting tenants. So an open market barely existed and what there was was distorted. When, therefore, an arbitrator was called upon to adjudicate a proper rent for an already tenanted farm, his task became virtually impossible. Various devices were employed in order to conform with the 1958 Act, but in the back of their minds arbitrators took into account the various factors which for centuries have determined farm rent.
Arbitrators have acted in a commonsense way, although not lawfully; and the general level of rents has advanced in a way that has so far been fair both to landlord and to tenant. That says a lot for the good sense of owners and tenants and the professional men who perform the arbitrations, but it says nothing at all for the current state of the law in circumstances which are quite different from those obtaining 25 years ago.
There is a clear need for the law to be changed because current arbitration practice is in danger of breaking down as soon as an arbitrator—and so far it has not happened—is challenged in the courts. That really would put the pressure on rents: in future they would have to be assessed at the level of the inflated offers to which I have referred, without any account being taken as to whether farmers could support them.
We should try to understand the concern which this has caused within the farming community. It proved extremely difficult to agree a rent formula and finally the one which we see in Clause 1 of the Bill was recommended after an opinion was given by a distinguished practitioner that it was workable. It provides that an arbitrator should take all relevant factors into consideration including the current level of rents and current offers; the nature of the holding: its productive capacity and so on. Surely this is not so very far from the proposals made in Lord Northfield's report which he has quoted to us. I think his proposals are contained in paragraph 733 of his report. However, I take the point that the first matter in his Committee's recommendation was that an arbitrator should look at the open market. The emphasis in the Bill is slightly different.
Reference has been made to the Scottish rent formula. It is being urged that the rent formula contained in the recent Agricultural Holdings (Scotland) Act 1983 should he substituted for the one in Clause 1 of this Bill. I naturally listened with great attention to my noble friend Lord Burton. The advice which I have had is that the Scottish rent formula is not clearer than ours and may very well give arbiters in Scotland considerable difficulty. I do not want to make Committee points tonight. I would merely say that the attraction of the Scottish Act to the critics of the 772 formula in this Bill, is that it starts off with the open market. But after that, just as our Bill does, the Scottish Act goes on to say that where there is insufficient open market evidence, or where the open market for rents in the surrounding area—an area which is not defined—is distorted by scarcity, then the Scottish arbiter has to discount the element of scarcity. Another factor he has to take into account is the current economic condition in the relevant sector of agriculture. That could mean anything to anybody. I would not wish to he a Scottish seed potato grower being assessed in a bumper year. So perhaps we should not get too carried away by the rent formula over the Border.
I do not think it has been mentioned tonight, but the rent formula of the Agricultural Law Association is another formula that was suggested as recently as last September. That, too, would provide that evidence of rents in the open market has to be modified by scarcity. On the face of it, it sounds very like Clause 4 in the Bill that we are discussing. Under the suggestion put forward by the Agricultural Law Association, an arbitrator would also have to have regard to all the circumstances, in particular the nature and size of the holding, its earning capacity and so on.
The true position—is it not?—is that finding a really good rent formula is exceedingly difficult. I look forward at a later stage to one being produced that pleases everybody. The one in the Bill has the merit of support by the landlords' and the tenants' organisations and by the valuers. Up until recently it had the support of the land agents, but those who work for some of the institutional clients are now unhappy. It is most important that the institutional element in landowning should not feel that the rent proposals are unfair to them or that their rental income is in danger. If they do feel that, then I hope that they will produce something better by the Committee stage of the Bill. But it must be something that the other interested parties—private owners. farmers' organisations, professional bodies and the Government—can accept as being perfectly fair to landlord and tenant, and a formula that is workable.
Another matter which has been raised tonight and to which I should like to refer is the suggestion that as a result of the Bill there will be lower rents. My noble friend Lord Nugent expressed his fear about this situation and the noble Lord, Lord John-Mackie, quoted the Church Commissioners, who have said that they agree with most informed commentators that a lower rate of rental growth will result from the proposed rent formula. That view is being backed up at the moment by some of the leading agents. A correspondent in The Times even suggested that the whole object of the Bill was to lower rents. My Lords, it is not. The object of the rent formula is to make it legally possible for arbitrators to eliminate key money from open market evidence and to fix realistic rents for sitting tenants. There are other professional views.
§ Lord Walston
My Lords, I thank the noble Lord for giving way. As I understood him, he said that the object of the Bill was to enable arbitrators to abolish key money in open market rents. I do not quite follow how arbitrators come into open market first lettings in any way. Perhaps the noble Lord could expand on that a little.
§ Lord Middleton
My Lords, we are talking about arbitrators arbitrating between a landlord and a sitting tenant. In that event, the Bill says that he must disregard what in verbal shorthand we call "the key money element" which is appearing in offers, because offers are included in that clause.
There are other professional views apart from those of the informed commentators. There is the view of the professional bodies who told the Ministry of Agriculture in 1981 that the effect on the level of rents would be minimal. I myself have heard a President of the Land Agency and Agriculture Division of the Royal Institution of Chartered Surveyors say that it was his opinion that the effect would he to raise the level of rents. In the face of uncertainty and divided counsel, I believe that our best course is to rely on the method that is now actually being practised by experienced arbitrators. It is a commonsense way. Neither party is complaining that it does not work fairly. So let us agree to give it the legal backing provided by Clause 1 of the Bill.
I should like to deal with the point that was raised by my noble friend Lord Caithness—that the institutions and agents were kept in the dark. I have heard it said as late as August this year that there was lack of consultation and information. I really must say, following what my noble friend has said and in order to put the record straight, that this House would rightly be doubtful about any proposals to amend the law and change current practices that were made without professional advice. I must, therefore, say that the rent formula was of course devised with expert advice, notably from the Royal Institution of Chartered Surveyors. Furthermore, before the package agreement was sealed, an eminent arbitrator was consulted and he advised the CLA and the NFU that the new rent formula would enable arbitrators to assess rents in the way they were endeavouring to do already, that it was workable, and that it would have no significant effect on rent levels either up or down.
As soon as the package containing the rent formula was agreed the Royal Institution of Chartered Surveyors issued a press release in May 1981 to the effect that they welcomed the agreement, and they urged the Government to legislate on it. My noble friend Lord Davidson has referred to this. Shortly afterwards the three professional valuation bodies were asked to advise the Minister of Agriculture on the effect of the formula. There was a meeting in June 1981 at which there were present the CAAV, the ISVA and the Royal Institution of Chartered Surveyors. They were represented by the then president and also the past president of their Land Agency and Agriculture Division and their advice was given, I understand, after a meeting of the committee of that division. I am given to understand that at that meeting in the Ministry the professionals were asked for an assessment of the effect of the proposed new rent formula, and it was unanimously agreed that "the actual effect on the number of farms for let or on the level of rents would be minimal".
If it took two years before some member of the RICS and their clients were fully informed about very important proposed legislation, then I am sure it would be quite wrong for me to make any comment about both the internal communications within such a 774 highly responsible, respected professional body and the lack of its communications with clients.
The Earl of Caithness
My Lords, I am grateful to the noble Lord for giving way. I do not know, because I was not at the meetings. What I said earlier was as a result of discussions with the RICS. The noble Lord has raised a point in a minute prepared by the Ministry. I also raise a comment from that minute in which it says:In particular the RICS felt it most important that the element of the open market rent was retained".
§ Lord Middleton
My Lords, I am grateful to my noble friend for that information. My information is that they were very much in favour of the proposals. Another point that is crucial, and one that has been raised several times tonight, is, will the Bill, if it is enacted, create more tenancies? During my presidency of the CLA it was made clear to me that we had members who wanted to let their farms, and who would do so given reasonable encouragement.
During the negotiations with the National Farmers' Union the CLA did a survey of its landlord members. From that it was clear that the two chief disincentives to the creation of new farm tenancies were, first, taxation which put the owners of let land at a disadvantage compared with owner-occupiers; and secondly—and I should like to say this particularly to the noble Lord, Lord John-Mackie—the succession provisions of the 1976 Act which meant loss of control over their own land, which once let could remain tenanted, as we have heard from my noble friend Lord Belstead, for up to three generations, something like 100, 120 years. Some encouragement has already been provided by the Chancellor of the Exchequer, but there is more to be done. The succession problem is being tackled in this Bill. If Parliament passes this Bill substantially in its present form, then that will certainly restore much of the confidence that was destroyed through (if I may say so) inept legislation.
Owners will feel that a measure which has, as this one, the firm backing of the farming industry stands a better chance—and here I agree with my noble friend Lord Peel—of immunity form the party-political ping-pong that bedevils so much rented housing legislation. We know that many owners want to let, and will let, and will still prefer a tenancy agreement to some of the other forms of joint venture that are being arranged. We can be absolutely certain of one thing, and that is that if nothing is done private owners will not let.
I was, of course, most interested in the expert views of my noble friend Lord Dilhorne on which I am certainly not qualified to comment in depth. Superficially, therefore, I would venture to say that if there is a scarcity of commercial property, you can always build more. You cannot create any more land. So I feel that the two forms of property are not perhaps on quite the same footing. I hope that he will help us with his advice in Committee.
In conclusion, much reference has been made to taxation and the tax disincentives to letting land, and I referred to it just now. The last Government, as my noble friend Lord Belstead reminded us, took specific steps towards encouraging the let sector by providing in the 1981 Finance Act and the 1983 Finance Bill that for CTT purposes the owner of let land and the 775 owner-occupier should be treated equally. That was a useful shot in the arm. There are other disabilities in the field of CGT, VAT and income tax which remain.
It is therefore very important, if the let sector is to be resuscitated, that the Treasury continues to remove tax discrimination against owners who let. The Government by means of this Bill are giving a shot in the other arm by aiming to repair at least some of the damage inflicted in 1976. They fully understand the value to agriculture of a thriving let sector. This is indeed an urgently-needed and worthwhile rescue operation. No industry can survive without young blood coming into it. We have some superb aspiring young farmers. They should be given every possible opportuntity to prove their worth as tenants.
§ 8.57 p.m.
§ Lord Mackie of Benshie
My Lords, I shall not detain your Lordships very long. Some of you may have been able to eat. I have been able to snatch one small whisky and three biscuits. Perhaps some of you may think that is good for me, but nevertheless I feel that we should proceed. I am summing up on behalf of these Benches, and the main theme that runs through every speech is that we must do something to get more land to let. The other theme is, of course, that this is a small step. It is condemned by some as being far to small, but others say it is a step in the right direction, and I think that that is correct.
There is no doubt that we must legislate for the land and for the countryside. The noble Lord, Lord Middleton, put it extraordinarily well. He said that you cannot subject something to open market forces when it is absolutely finite. You cannot manufacture more; you cannot import more. You can import food if you want to, but you cannot import land. Above all, you cannot import the people. We all know what has happened in the countryside. Some landlords in Scotland—and I do not blame them, and some of them make an excellent job—have taken land in hand to the extent of live, six, seven farms, and these farmers disappear. They farm in grain, and of course they empty the countryside of real people, although some pleasant, retired people may occupy the farmhouses and indeed some of the cottages. However, you cannot run rural life, you cannot run the land, and you cannot run the people, by the simple method of devil take the hindmost and let us see what happens.
We look at Europe and see today 11 million unemployed, and we have taken 11 million people off the land. They do not entirely correlate, but these are the facts. We must welcome the Bill as a step forward, and we must applaud the fact that all round this Chamber noble Lords have said that the tenancy, the step on the ladder, must he restored, although they are doubtful whether this will restore it.
I think that we have to look at many things. The present tendency towards the large farm which cannot be brought back is justified on the grounds of efficiency, but I know of no study which has shown that more is produced off large farms or indeed that these large farms make any more profit or are any more efficient per acre than the small or medium-sized farms. The Government should look at many other things in this Bill. They should look at county council 776 smallholdings. With land at its present price there is pressure on county councils or regional councils—whoever owns them—to sell these off whenever they can simply to realise capital in a squeeze.
The noble Lord, Lord Gisborough, said that the high price of land was of no interest to him. This is true of the majority of people who have an interest in preserving the land, handing it on and who regard it as a trust. They are not interested in having an enormously high portfolio or saying that they are worth an enormous amount of money because all that brings is problems. This has been exacerbated by our present system, by scarcity, by high interest rates and many other matters. The present legislation, which we are amending slightly, has been responsible for many of the ills that have affected our industry and have caused the high prices and increasing interest rates, have forced up production, have forced up inputs and have put a great deal of money into other pockets—into the manufacturers of enormous tractors' pockets instead of into the pockets of people on the land.
We must look at the subject as a whole and I think the Government are failing to do that. We must also think too of what the factors are in the attitudes taken up on the Bill. I agreed wholly with the noble Viscount. Lord Davidson, in his attack on the factors of the chartered surveyors. I enjoyed greatly the speech of the noble Earl, Lord Caithness. I thought from his point of view that it was an excellent speech. He put the view of the chartered surveyors extraordinarily well and promoted their self-interest in a splendid way. But they are the worst people in the world! To coin a phrase, some of my best friends are chartered surveyors. Their self-interest, of course, is in promoting the price of land, the size of rents and getting people to buy. If they are more successful in forcing up the rents, they get more cusomers among the institutions and others. Although excellent and serving a splendid purpose. I have no doubt, I do not think the Government should listen to them. I think they would he far better to listen to the CLA whom I was astonished to find are enormously sensible. In fact, I say to the noble Lord. Lord Middleton, that that is not true. I was not astonished at all. There is no question that the present consultations and the resulting move are things that we must advance.
There are many points which we shall bring up in Committee. I will say no more than accept that this is a good small step. I hope that everyone, particularly those Members sitting opposite—will push the Goverment into expanding the Bill into something much more useful. It would be much better to do it now than to wait for another 12 years before a Bill comes to this House on agriculture. There is much we can do; and the first and best thing we can do—and we shall all do it from all I have heard—is to sweep away this ludicrous provision for the Royal Institution of Chartered Surveyors to select the arbiters. I have never heard anything quite so stupid. In its document the CLA condems it and says that it is wrong. I cannot understand why the NFU agree with it, and if this is an agreed document I trust that as a first step to many amendments the Government will accept one reverting the choice of arbiter to the Ministry of Agriculture.
§ 9.6 p.m.
§ Lord Prys-Davies
My Lords, we have had a long and fascinating debate which has inevitably concentrated on Clauses 1 and 2. May I first hasten to pay my tribute to the noble Lord, Lord Howard of Henderskelfe, on his maiden speech. We know of his distinguished public service. That is appreciated on all sides of the House. We thank him for a thoughtful speech.
I should like to begin by acknowledging that there is a great deal of common ground. There is much in this short Bill that is valuable, non-controversial and beyond criticism. I welcome in particular a small but important amendment. I welcome the relaxation of Section 18 of the 1976 Act to enable a working wife applicant, who has worked as hard as any farmer's wife, to be able to apply for succession. This removes an obvious inequality and inequity. But, on the other hand, we will have to consider carefully the proposal that arbitrators are to be appointed by the president of the RICS instead of the Minister. I understand that this proposal appears to have beeen something of an afterthought, almost a footnote. We have heard from noble Lords that there is concern among the unions and among the professions about this piece of privatisation. I have a feeling that the Minister has not yet convinced the House that this proposal has been well thought out.
There are a number of omissions from the Bill. My noble friend Lord John-Mackie has listed three or four important omissions, and I have no doubt that we shall come back to them at Committee stage. My noble friend Lord Northfield, in a fascinating speech, directed our attention to a number of omissions. I should like to have the advantage of reading the Official Report of the debate but I am sure that there again there are constructive thoughts which may find their way—and ought to find their way—into legislation.
Before I come on to Clauses 1 and 2, we must from this side of the House say something about the criticism that has been voiced by some Members of your Lordships' House—a criticism and unease about the lack of adequate consultation which preceded the Bill. I take the point that the noble Lord has given us the history of the discussions but there is also a feeling within the industry that they should have been more extensive and more representative; that did not adequately cover all interests and all levels within the industry. When Governments in a democratic society bring forward legislation affecting an industry, they usually do so after exhaustive consultations with all concerned within the industry. In the case of this Bill, I am told by many people who have been affected or will be affected by the Bill that they consider the consultations were too restricted or took place too late. Indeed, by today, an atmosphere has been created that the CLA and the NFU—obviously two extremely important associations—having agreed to this package, this is how it is going to be, and that only within certain narrow parameters may one criticise. I would only say that such an approach, if it be true, is making a mockery of the consultative procedure.
§ Lord Stanley of Alderley
My Lords, is the noble Lord aware that discussion on this Bill took place at 778 branch level in the National Farmers' Union over a long period of years, not only two years ago when they started? But it was again sent back to branch level, right down to the bottom branch level.
§ Lord Prys-Davies
My Lords, I was making the point that the consultation had been too restricted to the CLA and NFU. It may be that, within the NFU, the consultation went from presidential level to the grass roots; but the basic point that I was making was that it was too restricted.
Let me turn to the two major worries of almost all Members. Basically, will this Bill deliver the goods? The professed aim of the Bill, we have been told time after time, is to make more farming tenancies available in England and Wales. There is, obviously, unanimity and support in this House for that professed aim. All Members have spoken in the debate in very clear language of their support for this objective.
Yet all this is not easy to reconcile with the fact that the let sector has been steadily diminishing at a substantial rate since the beginning of the century. The Minister. I believe, described it as having been a disastrous decline. I have looked at the statistics which have been made available to me, and in no single decade of this century has this trend—this movement away towards home ownership—been halted or dented, let alone lost. That is in the whole of this century. I believe that this historical perspective shows that it will be a formidable task to arrest the decline, let alone reverse it.
I believe that to pretend otherwise, as my noble friend Lord Northfield has explained to the House, is to encourage false hopes. It is to encourage hopes which cannot be achieved. Yet, if I understand the Minister, the Bill will do this: and we are told this will be achieved by Clause 2, which abolishes for new tenancies the right given by the 1976 legislation to claim to succession.
§ Lord Gisborough
My Lords, I thank the noble Lord for giving way. If he is correct on this matter, could he tell us why he thinks so many people have entered into management arrangements in lieu of tenancies over the last four years?
§ Lord Prys-Davies
My Lords, I was speaking of the century, not of the last four years. The point which has been made by speaker after speaker has been primarily because of the operation of fiscal policies by successive governments. We on these Benches value the right given to a qualified person to claim succession. It was introduced by a Labour Government in 1976 and we stand by that principle—a principle which is as true and valid today as it was in 1976. There is no reason why we should give way on this principle. Good husbandry of the soil is not something built up over a few years of activity. It requires the patient activity of generations—long-term investment—to put heart into the soil. That is why we think it important to the economy and to the rural scene of England and Wales that tenant farmers who put their energies and capital into the land should be encouraged to do so in the sure knowledge that only in very special circumstances can their families, who have also farmed the land, lose their occupancy of the farm.
779 We do not require a great deal of foresight to anticipate one sure consequence of Clause 2. That is, as and from 1984 there will be two classes of tenancies within the same industry—the pre-1984 and the post 1984—with the pre-1984 continuing to enjoy the existing rights to apply for succession; and the post-1984 tenants, who will be deprived of such right. That in itself is a substantial adjustment in favour of the landlord but it will be in due course an irritant to new tenants. I think I agree with one or two noble Lords opposite, who said that it could lead to discontent, grievance and a sense of injustice. That will in due course lead to a demand for parity of treatment for the two classes of tenants. Clause 2 is therefore almost designed to lead to further corrective legislation.
It has been asserted by the Minister that if Clause 2 is enacted, more land will become available to tenants. As I understand it, that is based to some extent on a survey conducted among members of the CLA. But one cannot help feeling that prejudices may have been confirmed by such soundings rather than evidence objectively looked at.
There are two reasons why we consider that Clause 2 will not produce the desired results. First, there is no evidence—although I acknowledge the evidence of the noble Lord, Lord Hylton, which went the other way—that the 1976 legislation which introduced the principle affected the decline in the let sector in any material respect. I have studied the statistics published by the RICS, and in the five years from 1970 to 1975 the number of rented holdings fell by about 3,000 per annum. In the four-year period from 1977 to 1981. the reduction was at the same rate of about 3,000 per annum. This comparison suggests very strongly that the 1976 succession provisions made no material impact.
The second reason why the Bill will not bring about the professed aim is that the Government and the CLA have both overlooked the likely consequences of the new rent formula, which will tend to reduce rents.
The noble Viscount, Lord Dilhorne, has explained the historical development of the rent formula since 1948, and I shall not go over that ground. But we have heard, time after time, that the Government, with the support of the CLA, propose to remove the open market element from the rent formula and will instruct the arbitrators to have regard to about a dozen factors in building up the rent to which a landlord is fairly entitled.
In 1983, a Conservative Government who are more firmly wedded to the principle of the free play of market forces than any predecessor Government in living memory acknowledged that in dealing with agricultural land—the oldest thing on earth and the supply of which is diminishing—the open market value offers no true guidance as to its value. I do not think that we on this side of the House can oppose the underlying principle of the new formula, but before we welcome this sign of conversion on the part of the Government we must be satisfied that the rent formula will work without too much litigation and that it will lead to an increasing supply of let land. However, as the noble Lord, Lord Northfield, warned us, there are no reasonable grounds for believing that it will, in fact, lead to an increase of let land.
780 It is the judgment of many organisations which are qualified to express an opinion—organisations which are involved with agriculture, but which were not consulted or were consulted inadequately or late in the day—that this Bill will not lead to more tenancies becoming available, because the rental levels will tend to fall. Given, therefore, the evidence from these informed sources—the Association of Landowning Charities, the Church Commissioners, the RICS. the Tenant Farmers' Association. the Farmers' Union of Wales. eminent firms of surveyors in the City of London—the Minister owes a duty to the House to explain fully why they are mistaken in their judgment and why the Government are right and almost everyone else is wrong.
I am sure that when the House is in Committee it will wish to give detailed attention to the new rent formula, in the light of the advice which has been tendered by noble Lords this evening and in the light of advice which has been tendered by professional organisations. and, notwithstanding what the noble Lord, Lord Middleton, said, it may also want to he satisfied as to why the principles of the Scottish formula cannot be applied in England and Wales.
But I accept that we need to work very carefully over the five pages of Clause 1. There are phrases that need to be clarified and there are terms that need to be redefined, but I am sure that the Minister will have taken very careful note of the detailed questions which have been asked and to which we shall return. I also wish to make the point that has been made by my noble friend Lord John-Mackie that, if legislation is to succeed, it must also be supported by a battery of fiscal policies so that it will pay an ordinary landlord to own tenanted land.
I am coming to my close. I respect the National Farmers' Union, which has achieved a great deal for tenant farmers. I appreciate the standpoint of the Country Landowners' Association in the interests of its members. The NFU has been concerned about rising rents. The CLA was shocked by the retrospective operation of the 1976 Act. But we cannot go along with all the details of this Bill merely because it is a bargain which has been negotiated and agreed by these two powerful bodies. The proper farming of the soil is something more than a private contract between landlord and tenant.
It has been rightly said in your Lordships' House this evening that the landlords and the tenants are trustees of the soil, in a moral sense, for the country at large. I am not a farmer, nor a tenant farmer, nor the landlord of a farm, but I was brought up in a rural village in the County of Gwynedd, whose stability was based on the landlord and tenant system. My concern is for the rural community and its social cohesion and the well-being of agriculture. By today, most of the individual farms in the community where I grew up have disappeared. Steadily over the last 30 years they have been repossessed by the landlord. Farm has been amalgamated with farm to form very large units, and all too often the farmhouses which were the homes of tenant farmers who tilled the soil and tended their flocks have become holiday homes. The rural community has been destabilised and there is dismay, unease and, in parts of the country, some talk of militancy. The professed aim of this Bill is laudable, 781 but in our view it will not succeed because there is probably a basic incompatibility at its roots and it will not, therefore, bear the required fruit.
§ 9.27 p.m.
§ The Earl of Swinton
My Lords, my first and very pleasant duty is to congratulate the noble Lord, Lord Prys-Davies, on speaking from the Front Bench opposite, and how very glad we were to hear his lovely, lilting Welsh voice coming across to this side of the House. My second task—equally pleasant—is to congratulate the noble Lord, Lord Howard of Henderskelfe, upon his maiden speech. Much tribute has been paid to it. I can just say, as one Yorkshire-man to another, "Well doon, lad."
This debate is evidence of the keen interest of noble Lords in this Bill and in what it is setting out to achieve. Many, if not all, of your Lordships have drawn attention to the importance of the tenanted sector of agriculture and to their concern—which is widely shared—that its further decline should be prevented. This is the Government's concern also. We want to infuse new life into the tenanted sector. This is why we are introducing this Bill, based squarely on the provisions of the NFU/CLA agreement.
A large number of both specific and general points have been raised in this debate, and I shall do my best to answer them. However, I hope noble Lords will excuse me if I overlook some of them at this late hour. Unlike the noble Lord, Lord Mackie of Benshie, I have not had a large whisky and small biscuits, or large biscuits and a small whisky—I forget which it was—so I hope noble Lords will forgive me if I write to them on points that I miss.
The issue which has generated wide interest—and indeed which is clearly worrying some noble Lords—is the effect of the new rent formula. I understand this concern. I think I understand it even more, having listened to the debate this afternoon. But let me make it quite clear that it is not our intention—nor was it the intention of the NFU and the CLA—to introduce changes which are likely to have any significant effect on current levels of rent. Nor are we contemplating changes which are designed to instruct arbitrators to arrive at rents radically different to those which are currently being assessed.
Let me explain this point in a little more detail. Because of the lack of new lettings, there is really no true open market—on which the present rent formula is based—which arbitrators can draw upon. I was grateful to my noble friend Lord Gisborough who emphasised that point. Is it right and sensible for arbitrators, in assessing rents for sitting tenants, to have to rely solely upon the rents offered, including any key money element, for those very few tenancies which do become available on the open market? This is, in strict law, what arbitrators are required to do at present. But, as sensible people, they tend also to have regard to more pragmatic considerations, such as, for example, what the holding will produce in the way of profit.
What we are trying to do with this rent formula is no more than to put this practice on a sound statutory basis. Those who seek the maintenance of the present 782 formula would have us run the risk of creating a major crisis in relations between landlord and tenant if for any reason arbitrators were forced to apply the current formula to the letter. This would not be in the long-term interest of either landlord or tenant, or of agriculture generally. There are those who argue that the new formula will reduce rents. There are also those who argue that it will raise rents. Our belief is that it will be broadly neutral in effect. This is also the view of the NFU and the CLA.
We believe also that the new formula will be a workable one. This certainly was the view of the RICS in 1981 when they welcomed the NFU/CLA agreement. It is also the view of the other two professional associations concerned: the Central Association of Agricultural Valuers and the Incorporated Society of Valuers and Auctioneers.
A number of noble Lords have said that they would prefer the new rent formula contained in the Scottish agricultural holdings legislation. My noble friend Lord Middleton has spoken on this matter and I do not need to elaborate on the points he has made. The industry in England and Wales do however prefer the formula contained in this Bill and we must pay very close regard to this. I should also like to emphasise that the Scottish formula does itself require arbitrators to make an assessment of the extent to which the market is distorted by scarcity and, where necessary, to discount it. The concept of discounting a scarcity element, which is one of the elements of the new England and Wales formula that has been subject to a lot of criticism, is not therefore one which is entirely new to agricultural holdings legislation.
Perhaps I might now answer a number of questions. The noble Lord, Lord John-Mackie, and his noble kinsman the Lord Mackie of Benshie, mentioned the possibility of some form of limitation on the size of farm. I believe that that would be a very blunt instrument, particularly if any limit were applied rigidly across the whole country, for there would be major practical problems in defining what a reasonable limitation would be and how it could be enforced. What would be its practical consequences? It would be likely to restrict the efficient management of certain units and create inflexibility. We would need to consider the idea very carefully before going beyond the methods which are already contained in the capital grants schemes.
The noble Lords, Lord John-Mackie, Lord Mackie of Benshie and Lord Walston, mentioned the sale of county council smallholdings. It is Government policy to leave decisions to local authorities as to whether or not they wish to sell smallholdings. It is not a matter on which central Government put pressure on county councils, and they will no doubt take full account of agricultural considerations in reaching their decisions. The noble Lord, Lord Walston, mentioned the possibility of a national land trust. I was very interested to hear that suggestion; but, like my noble friend Lord Mountgarret, I wondered where the large amounts of money would come from which would be necessary to make the trust effective. I cannot see that this idea would be a substitute for the landlord/tenant system. We need to encourage existing landlords to let their land, and that is the purpose of the present legislation.
783 The noble Lord, Lord Howard of Henderskelfe, mentioned fixed term tenancies, and other noble Lords did, too. To introduce provisions for fixed term tenancies would be a highly contentious change—unlike the noble Lord's maiden speech. Many would argue that it discourages long term planning and investment in a farm and would he detrimental to the best interests of the industry. I cannot see any support coming from the Government for this proposal.
§ The Earl of Onslow
My Lords, can my noble friend say why the Conservative Party has changed its mind on this issue when it actually moved amendments and supported amendments to that effect with the 1976 Agriculture (Miscellaneous Provisions) Bill?
§ The Earl of Swinton
No, my Lords. My noble friend Lord Caithness mentioned the fair rents legislation and tried to compare our formula with that. We do not consider it relevant to compare the rent formula in the Agricultural Holdings Bill with the position under the fair rents legislation. In particular, we would not expect to experience the same difficulties as under the fair rents legislation since the earning capacity concept of an agricultural tenancy will provide an important objective assessment of a holding's rental value. A similar measure is not available in the residential letting sector. The noble Lord, Lord Hylton. asked me about short-term tenancies, but I think he has gone home and so I will write to him on that.
My noble friend Lord Peel, in an excellent speech, asked me this—I think I understood it rightly: Does an agreement to let succession apply under Clause 2(2)(c) count as a term of tenancy which will affect an arbitrator's assessment. I am advised that a statement under Clause 2(2)(c) that succession is to apply will not be a term of the tenancy as such, but rather a separate statement of the intentions of the parties as to succession. It will, therefore, not be a matter which an arbitrator should consider as a term of the tenancy. This is desirable because otherwise tenancies subject to succession under the 1976 Act, which tenancies will not contain such a statement. would attract different rental values from tenancies granted under Clause 2(2)(c); this would not be consistent. Also succession is speculative and an applicant may be refused a tenancy by the Agricultural Land Tribunal. This would therefore be a difficult matter for the arbitrator to assess in rental terms.
Various noble Lords. and I think in particular my noble friends Lord Radnor and Lord Mountgarret, as well as noble Lords opposite, asked: will not new provisions on succession create two classes of tenants, those with succession rights and those without, and whether we should therefore make the whole Act retrospective. Of course, it is true that there will be two classes of tenants, but the Government's aim is to avoid provisions which are retrospective in their effect. Many tenants may already have based their financial planning on existing rights of succession so we are proposing a limited measure which will apply only to new tenancies and which will therefore not be retrospective.
784 My noble friend Lord Mountgarret asked for an explanation of subsection. (10)(d) in new Section 8 in Clause 1. I think this is very much a Committee point, and if I may I will write to him with those details. Similarly, I will write to my noble friend Lord Dilhorne. I have got a note here to read out to answer his question, but as I do not understand a word of it myself I am not going to do battle with my noble and very nearly learned friend this evening: I will not get involved in that at this time of the night.
I know that it is usual, and indeed right, that when I speak from this Dispatch Box I speak as a Minister, a member of the Government. But I wonder if your Lordships would bear with me if I said something from personal experience, because I feel very strongly about this matter, and it is a theme which has been expressed by many Members of your Lordships' House. though perhaps they have not gone into the detail into which I would like to go. I do not wish to appear as some sort of modern Lord Bountiful; I think noble friends who know me will know that that is probably the last thing I am. But when I grew up on the Swinton estate we had a policy that, in the normal run of things, where children of tenant farmers showed themselves interested in the farm and capable of farming, it was automatic that they succeeded to those farms. In fact, for tenants who had more than one child, and again if the children showed an interest in agriculture, we tried to find another farm where the younger sons could take over and farm in their own right.
In December 1972 we prepared a report and it came out with a very clear policy, which was, first, to amalgamate farms and provide good buildings for good tenants. I hastily inform the noble Lord, Lord John-Mackie, that this was not to produce great units but rather to amalgamate some of the smaller units and encourage the good farmers by giving them good buildings and plenty of land. Secondly, the policy was to increase the in-hand farm to make it a viable unit. Thirdly, it was to identify future suitable starter units, which were smaller farms, where we could encourage young people who wanted to get a foot on the farming ladder. In fact, in April 1974 two suitable farms came in hand and I had what I considered to be the ideal size unit which I was farming and which then represented 8.9 per cent. of the agricultural land of the estate.
In September 1974 my grandmother died and I became tenant-for-life of the estate. Subsequently, this led to a dramatic change in policy, because of the uncertainty created by my grandmothers death, and my trustees decided, with the full backing of their advisers and. I may add, myself, that a policy should he followed that no further farms should be let. This was due mainly. I must admit—and I say this to the noble Lord, Lord Prys-Davies—to the 1976 succession legislation. However, it was also influenced by the fact that there was no capital transfer tax relief for tenanted land and by the threat of nationalisation of tenanted land which was then hanging over us, and still is.
I suppose I was fortunate that by September 1980 a number of tenanted farms had come in hand and this is all land that would have been amalgamated or relet. I can say absolutely categorically that I did not want to farm it and would much rather have made new tenancies of it. The noble Lords says that he can 785 produce statistics to show that the legislation did not alter matters, but in my case it did and I cannot believe I am unique in that. In fact, it meant that I was farming about 25.79 per cent. of the agricultural land compared to the 8.9 per cent. which I had considered perfectly adequate and a reasonable unit only six years before.
The effect this had on me was one of enormous unpopularity. I was unpopular, obviously, with the tenants because they thought that these were farms they would get themselves, or that their families would get. I was unpopular with my farm staff, which considered that the whole undertaking was far too big. It was too impersonal and they were spending too much time travelling between scattered units because, as your Lordships will understand, as the land came in hand it was not necessarily adjacent to other pieces of land. Far more important than that, it was highly unpopular with me because not only was I losing the goodwill all round me but I was also losing a substantial amount of money as I could never make the damned farms pay. I am sure that one of the reasons was because of the amount of travelling that I have just mentioned. So, as I said, I simply cannot believe that my experience is unique.
I agree with what many noble Lords said about why landlords have been reluctant to let land. One important reason has been the fiscal bias against letting as opposed to taking land in hand. The Government have already taken major steps to correct this through the changes in the CTT arrangements mentioned earlier by my noble friend Lord Belstead. As to further changes, that is, of course, a matter for my right honourable friend the Chancellor of the Exchequer, but, in reaching his decision, I am sure he will pay very close attention to what has been said here today by many distinguished noble Lords on all sides of the House. I sincerely hope that he will read the debate and take note.
The other main disincentive to landlords—particularly private landlords—to let land is the excessive security of tenure granted to tenants as a result of the succession provisions contained in the 1976 Act. Many landlords are happy to give lifetime tenancies to those who have proved themselves to be competent in farming, but they are naturally reluctant to commit themselves in this way for a further two generations. We therefore believe that the changes in security of tenure which this Bill introduces for new tenancies will indeed encourage landlords, and particularly private landlords, to let more land.
The modest changes that we will be introducing administratively in the arrangements for ministerial approval under Section 2 of the 1948 Act will also help in this direction. I do not claim that there will be a flood of new lettings once this Bill has been enacted, but it will have a beneficial long-term effect. This is also the view of the NFU and, more particularly, of the CLA, which recently drew attention to landlords' renewed interest in new lettings arising from our intention to introduce this legislation.
In conclusion, let me say that above all else we want this legislation to work. It therefore needs broad industry support and, indeed, inter-party support as well. This is why the Government have been so 786 insistent on the need for the NFU and the CLA to come forward with agreed proposals. This they did, after long and detailed discussions. I should like to congratulate both organisations and their leaders for this considerable achievement, which has enabled us to proceed with this legislation.
The NFU and the CLA have recognised—as we do—that it is no use our enacting legislation now which subsequently becomes a political football. We want something which, because it enjoys wide support, will achieve the permanence necessary to enable it to work. The relationship between landlord and tenant is a long-term one and the problem which the tenanted sector is now facing needs long-term solutions. I firmly believe that the legislation we have before us today will provide this type of solution.
§ On Question, Bill read a second time, and committed to a Committee of the Whole House.