Agricultural Holdings Bill [H.L.]

HL Deb 22 November 1983 vol 445 cc195-232

House again in Committee on Clause 1.

The Earl of Caithness moved Amendment No. 11:

Page 2, line 17, at end insert— ("( ) the effect on the earning capacity of the holding where the occupier of that holding or occupiers of adjacent holdings have entered into agreements such as those under sections 39 and 40 of the Wildlife and Countryside Act 1981.").

The noble Earl said: I referred briefly to this amendment when moving Amendment No. 7. I therefore do not want to cover the same ground again, but I should repeat that the object of the amendment is to encourage both landlords and tenants to think on a broader base than just the agricultural one. Many of your Lordships will be aware of Clauses 39 and 40 of the Wildlife and Countryside Act 1981, but, for those who are not, I would summarise them as follows.

Clause 39 relates to management agreements with owners and occupiers for the purpose of conserving and enhancing the countryside and promoting its enjoyment. Clause 40 covers experimental schemes with the Countryside Commission. Obviously it is much easier to undertake such agreements with owner occupiers than it is on tenanted land, and there is no provision at the moment to take account of such an agreement in a tenancy. When it comes to the crunch, one is forced back onto the productivity of the land for agriculture only, and this is often against the interests of conservation. A fairer balance needs to be created which is of benefit to both the landlord and the tenant, the result of which could be taken into account at the rent review.

I appreciate that this amendment may be defective in its drafting. If it is, we can deal with it at a later stage. Thus, I hope that my noble friend on the Front Bench will not use this as an argument to cloud the principle behind the amendment. I beg to move.

Lord Stanley of Alderley

I do not see the point of this amendment. I am not against the underlying principle but the amendment seems to me to be unnecessary. First, this is likely to be taken into account in any tenancy agreement. What is more important, Clause 1(3) of the Bill says, "take into account all relevant factors". Surely that solves the problem.

Lord Gibson

I put down my name to this amendment because of the principle that, if a tenant is to accept specific responsibilities for conservation which are liable to reduce the earning capacity of his holding, those responsibilities should be compensated for by a lower rental. It is one which the National Trust, of which I am chairman, has been applying in a great number of cases where it requires tenants to give conservation a priority that may affect the earning power of their holdings. The National Trust has a great deal of experience of trying to combine conservation with good husbandry. It has nearly 200,000 acres of agricultural tenanted land, which is about two-fifths of its total holding. On its total holding there are some 400 sites of special scientific interest, so it is a matter of great importance to the National Trust.

Of course it is true that when the holding is the subject of a management agreement under the Wildlife and Countryside Act 1981 the loss of earning capacity can be fully offset by payment under that agreement. However, as I understand it, this amendment refers to that Act only as an example. In cases arising under other Acts—the 1948 Act and the 1969 Act—the compensation payable may well leave a gap between the full potential earnings of the holding and the actual earnings under the agreement. It seems to me that in such cases it is important that the arbitrator should be instructed, in the Bill we are now considering, that the rental should reflect the constraints of conservation. This amendment safeguards the tenant's right to have his duty in respect of conservation so reflected.

At a later stage, when your Lordships come to consider the notices to quit part of the Bill it will be important to give both the tenant and the landlord the right to insert conservation responsibilities into tenancy agreements without such responsibilities necessarily being nullified by the rules of good husbandry where the two come into conflict. But that comes later in the Bill—in Amendments Nos. 47, 48 and 57. I mention it now only because it is the other aspect of what I believe to be the necessary safeguards for conservation in the relationship between landlord and tenant. These two aspects of that relationship ought to be seen as complementary one to another.

Lord Middleton

I am sure it is right that the earning capacity, if it is to be affected at all, should be taken into consideration where conservation measures are in force, but one of the decisions of the National Farmers' Union and the Country Landowners' Association was to insert the words, "take into account all relevant factors", which I believe is absolutely right. I believe it to be a strong part of this part of the Bill. I agree with my noble friend Lord Stanley of Alderley that surely this is one of the relevant factors, but there must be a limit to the number of particular factors which are going to be spelled out—the four main factors are spelled out—otherwise one would go on for ever.

Lord Belstead

The reference in the Bill to "take into account all relevant factors" ought to cover this matter, but I should like to say immediately that I think my noble friend Lord Caithness and the noble Lord, Lord Gibson, are on to an important point. I agree with other noble Lords that in the case of such a matter affecting the productive capacity of the holding it should be taken into account. But there are many elements that go into the assessment of productive capacity: the quality of the land, the availability of equipment, the structure of the holding, the availability of marketing facilities, the availability of services, climatic conditions and so on. Where there is a management agreement or a scheme for conservation, as provided for in the Wildlife and Countryside Act or other legislation which affects the capacity of the holding to produce, then this, I agree, should be taken into account. But I really do not believe that it is a particular factor of general application in assessing the rent.

I would trust that compensation under management agreements is acceptable to the recipients, but, if not, the tenant would raise the matter in stating the particular case of his farm. As that would, I trust, very rarely happen, I hope that this amendment will not be written into the Bill as being a particular factor which should always be taken into account.

The noble Lord, Lord Gibson, made the point that he has in mind legislation which trenches on to this matter other than the legislation which is mentioned in the amendment. I should like to look at what the noble Lord, Lord Gibson, has said on that matter. For the moment, I believe that this ought to be a matter for the arbitrator's judgment when it is necessary and when it is stated in the case. I repeat, I hope, in the general run of things, that the compensation which is paid under the legislation—and I have promised that I will look carefully at the legislation that has been referred to—will be acceptable to the tenant.

Lord Mackie of Benshie

Can the noble Lord the Minister say what will happen to the landlord? Surely the landlord, if he were to take a lesser rent, would be entitled to some compensation as well?

Lord Belstead

Is that not a matter of whether it is written into the tenancy agreement or not?

Viscount Ridley

I hope that my noble friend the Minister will not dismiss this amendment too quickly as it has a very important part to play in the conservation field. At the moment, the agricultural industry is under considerable pressure for its failure to comply with certain parts of the Wildlife and Countryside Act. Anything that this Committee can do to write into the Bill safeguards for that Act must be a good thing. I believe that it requires a special amendment as was put forward in the name of my noble friend Lord Caithness. I hope that my noble friend the Minister will look carefully at this matter and be prepared to be open-minded when it comes back to us at Report stage.

Lord Bishopston

We welcome the Minister's willingness to look at this matter but I thought that he gave it a little less than enthusiastic support. The agricultural industry has accepted, in the interests of conservation, the restrictions of wildlife and countryside legislation and that certain practices should not be pursued which would be detrimental to conservation interests.

The amendment moved by the noble Earl, Lord Caithness, and the noble Lord, Lord Gibson, warrants an enthusiastic look at this matter by the Minister. As we are all aware, the industry has accepted certain restrictions in the interests of conservation. If details of the basis of arbitration are to be put into Clause 1, then the recognition which the industry gives to conservation and wildlife should have a proper place in the matter which concerns us today.

Lord Sandford

I also wish to express the hope that my noble friend the Minister will take the amendment seriously and look into this matter carefully. Several noble Lords made the point earlier today that what we have before us now is a Private Member's Bill promoted by the NFU and the CLA and it is our job to ensure that the public interests have been taken fully into account. It is not in the interests of the public that all the land of this country should be managed so as to maximise agricultural production and to maximise yield from that land for the benefit of the landlord and the tenant—although, of course, we all wish them well. In many parts of the country the public interest lies in a quite different direction. It does not lie in the ever-increasing production of more foods which are already in surplus. It does not lie in further diminution of the landscape. It does not lie in keeping the public clear so that more crops can be grown and livestock reared on the same acreage.

It lies in a whole number of different fields. One of them, for instance, is that no further jobs should be shed from the countryside but other jobs should be found. It lies, as has been said already, in the better conservation of the countryside—the flora and the fauna. It lies in greater opportunities for the public to obtain recreation in the countryside. And it lies in the direction of further diversification of the existing enterprises on the farm base.

That is not the context in which this Bill is drawn. If the public interest lies in any of those directions—and it does not do so on every farm but it does on quite a few—then I submit that my noble friend's amendment (and perhaps even something drawn a bit more widely) is entirely appropriate if this is to be called a Public Bill and not a Private Member's Bill, which it is at the moment.

Lord Belstead

I will certainly look at what has been said, because this is an important matter for many of the reasons which my noble friend Lord Sandford produced. I do not agree with my noble friend—unusually, because generally I have agreed with his remarks over a long period in this House—about his assessment of the type of Bill this is. The Bill has made it possible for the Government to bring forward Government legislation. If it had not been for that agreement, we would not have got that far. It is a Government Bill none the less; and I am becoming even more aware of that as we go through what is quite a long Committee stage with the help of your Lordships.

I am resisting this amendment at the moment, not because of the case but because I do not believe that it is a particular factor of general application that ought to go into the list of four considerations which the arbitrator must take into account. When I said that, I tried to support my argument by expressing my hope—and indeed it is the Government's intention—that for management agreements, the compensation paid should be acceptable. I believe it is fair of me to say that my right honourable friend the Secretary of State for the Environment has made funds available in order to be able to support the comments I have just made at this Dispatch Box.

The noble Lord, Lord Gibson, has drawn the Government's attention to the fact that this matter goes wider than just Section 39 agreements. I have promised that I will certainly look at it from that point of view as well. I will not give a commitment that I will come back with an agreement that his proposal is the way forward—or, as my noble friend Lord Sandford most persuasively said, that we should go even wider. But I promise to look at this matter; and this is an instance where I ought to give an undertaking to write to my noble friend Lord Caithness and to the noble Lord. Lord Gibson.

The Earl of Caithness

I am grateful for the support of my noble friends Lord Ridley and Lord Sandford. I am making rather better progress than I made with Amendment No. 7, which was very similar; we are really beginning to make headway. To my noble friend Lord Stanley of Alderley, I will say that only last week we were both on the same side; saying how good the farmers were at allowing access. I would have thought this was an occasion when he could encourage me, but I believe we are not in dispute over this.

My noble friend Lord Belstead has slightly confused me because on Amendment No. 5, moved by the noble Lord. Lord Northfield, I gained the impression that he wanted as clear as possible an indication in the Bill of the factors which the arbitrator should take into account. Here is an item which I and many other noble Lords consider is of importance. So to avoid any dispute in the future and to save any misunderstanding throughout the country, surely this is something that should be included in the Bill, if my noble friend is to be consistent. However. I am grateful for his assurance that he will look at this matter again. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 12 not moved.]

8.49 p.m.

Lord Northfield moved Amendment No. 13: Page 2, line 22, after ("rents") insert ("which the tenant has tendered or agreed for part or parts of his existing holding. The arbitrator may also take into account rents").

The noble Lord said: This amendment may look small and innocent on paper but I suggest that it has a small stick of dynamite in the middle of it. Perhaps I should explain what I mean. By way of introduction, I may tell the noble Lord, Lord Belstead, and other noble Lords that one of the interesting experiences we had when collecting evidence for the Northfield Committee inquiries was that farmers always blamed the institutions for the rise in land prices. Indeed, I think that was why the committee was set up in the first place.

When we held hearings throughout the country, as we did at the time—very well attended they were and great fun—we were at great pains to point out to farmers that the cause of high land prices in most areas was nearly always the farmers themselves who were bidding for the farm next door. I remember one region of the country where farmers were absolutely adamant that it was those wicked financial institutions who were bidding up the price of land. When we made some inquiries we found that no institutions were active in that region at all and all the land price increases had been caused by adjoining farmers rushing to buy pieces of land that became vacant. There is no harm in that. It is just that one became slightly suspicious of farmers' views about who causes high prices.

One has to apply that same sort of experience to this amendment. What the amendment would do is to say that, if a tenant has an existing holding on which his rent is to he assessed for increase, what shall be taken into account, as opposed to what should be left out, is what he has freely tendered and agreed in order to get hold of some neighbouring land to enlarge his farm. Is not that perfectly fair? Will we not otherwise get into a situation where the farmer will have it both ways? It is a perfectly legitimate business operation and I am not complaining about that. I complain about the blame he attributes to other people for it. We will have the situation where the farmer can say to himself, "I can bid up. I can offer key money and high tendered rents for a piece of land because I can average it out over my holding as a whole, knowing full well that what I bid for that adjoining piece of land will be disregarded when the arbitrator comes to assess the rent increase on the land on which I am already a tenant." That is quite monstrous, if I am right. I hope that the noble Lord, Lord Belstead, can tell me that somewhere in the Bill. or in other legislation, my fears are set to rest and that tenants cannot have it both ways—bidding up neighbouring lands and sitting on a protected rent on the piece of land that is rent controlled, in effect, by the terms of the Bill.

That brings me back to the central point that has occurred throughout my committee's hearings and is partly endemic in what we are discussing tonight. The real fact is that the more we get away from the open market assessment as the basis of what we are doing, the more hideous are the pitfalls and dangers we run into. This is a supreme example of what looks like an innocent part of the Bill which, if left unamended, would be extremely unjust and leave many people having the best of both worlds, able to cause a mischief on an adjoining piece of land and then being protected from their own mischief on the land they are already sitting on. I beg to move.

Lord Stanley of Alderley

May I point out here that I hope my Amendments Nos. 19 and No. 22 will in fact deal with this problem; but I should prefer to speak to those amendments when we reach them.

Lord Belstead

I think that what my noble friend Lord Stanley says may well he the case. Also, I wonder whether the case which the noble Lord, Lord Northfield, is making is not, in fact already covered by the wording in subsection (4). I think those are the only two things which I ought to say for the moment about an amendment which I confess I found difficult to follow until the noble Lord explained its intention. I do not want to appear obstructive but the Government will want to think more carefully about those two points—whether the case is not already covered by the wording of subsection (4) and whether we shall in any case cover it when we reach Amendment No. 19.

Lord Northfield

I am not sure that the noble Lord is right. Perhaps I may explain. Subsection (4), as drafted, states: In determining for the purposes of subsection 3(d)— that is, the current level of rents— of this section the current level of rents for comparable lettings the arbitrator shall take into account any available evidence We then jump to the end of the paragraph— but shall adjust that level for the purposes of that paragraph by discounting"— In other words, as far as I read it, the whole of that early part of subsection (4) is qualified by the last few words in it; namely, that the arbitrator shall disregard element of rents in (a) and (b) which are key money. Therefore, I cannot see that subsection (4) does anything to meet my point, unless the Minister can guide me further. If not, I suggest that he should perhaps agree that this point must be looked at or it will be a disgraceful way to leave the Bill.

Lord Belstead

I am sure that what the noble Lord has said is right and I apologise that I had not picked up that point. I am sure his interpretation of the effect of the words to which he has drawn my attention is correct. I know that we will be looking at the appreciable scarcity element of the Bill between now and Report. I said as much when I was replying earlier to amendments. I also think we ought to consider whether the noble Lord, Lord Stanley of Alderley, is right in saying that the matter would he covered in his own amendments. I hope that on those grounds the noble Lord will be prepared to withdraw the amendment. If it is not covered, I shall gladly look at it further.

The Earl of Onslow

May I put this point? Let us assume for the sake of argument that a farmer, as described by the noble Lord. Lord Northfield, bids for, say, a 50 acre farm which is next door to his own and comes up for rent, and that he bids a very high tender price for it. That rent tender is then reflected in his own next rent review! That is what I understand the noble Lord, Lord Northfield, is suggesting the Bill should do.

Lord Northfield

On his existing holding.

The Earl of Onslow

The existing holding rent will be affected by the tender rent of the 50 acre farm. However, the rent of the next door farmer, who has also exactly the same size farm as the man who has done the tendering. will come very much out of alignment with the man who has done the high tendering. Who loses out, then? It is the landlord. Is it fair that the landlord should lose rent because a chap next door has bid some funny money for a small piece of farm? I have only just thought of that and I have a suspicion that my noble friend Lord Belstead has not thought of it before. It is an interesting point.

Lord Northfield

The noble Earl is quite right. This shows the folly of interfering so far in the operation of the open market. Noble Lords on both sides of the Committee have been saying this all day. If you go so far and put great binding rules on the arbitrator, goodness knows what hideous complexity and contradictions we shall get into, We can only hope that by the time the noble Lord, Lord Belstead, has had what I would guess will be several days of consultation between now and Report he will be able to satisfy us on a number of these points. I am extremely grateful to the noble Lord. I think that we have made enormous progress on this small but important amendment. I feel very happy about the outcome with the kind undertaking that he has given. I have great pleasure in asking leave of the Committee to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 14 not moved.]

The Deputy Chairman of Committees (Lord Ampthill)

Before calling Amendment No. 15, I should inform the Committee that I cannot. if it is agreed, call Amendments Nos. 16, 17 or 18.

8.59 p.m.

Viscount Mountgarret moved Amendment No. 15: Page 2, line 31, leave out paragraph (a).

The noble Viscount said: We have rehearsed some of the arguments relating to this amendment in the lengthy and most useful debate that we had on Amendment No. 1 earlier this afternoon. I want to bring to the attention of the Committee again the very serious feeling that many of us have over the reference in the Bill to the word "scarcity" and the scarcity of land available for letting. The noble Lord, Lord Walston, put this most clearly in his speech on Amendment No. 1. If one were to follow his argument through, it could well be argued that the value of rented land could be reduced to absolutely nil. I appreciate that that is probably over-simplifying the matter and over-egging the pudding. Nonetheless, I think that it is an unfortunate piece of drafting. I hope very much that we can try to do better.

I hope without being too repetitive I can refer again to the suggested amendment that the Royal Institution of Chartered Surveyors would like to have considered. I find myself very much in agreement with it. It has been brought to the attention of noble Lords on page 2 of the memorandum. I see no point in taking up the Committee's time by repeating it word for word. It seems to sum up the situation reasonably well. The suggested amendment might form the basis of a formula at any rate for my noble friend the Minister seriously to consider in an attempt to improve this part of the Bill.

The other reason why I think that this paragraph is rather unfortunate is that it is obscure. Phrases such as "appreciable scarcity" or, the number of persons seeking to become tenants", seem incapable of having any real meaning. They could give further rise to argument, dissent, and so on if matters of arbitration hanging on those phrases were to come to a court. We should be careful to try not to have such loopholes which may make life difficult in the future.

I am led to believe that a number of chartered surveyors have already expressed concern. They ask what it all means and how should they interpret it. If at the outset there is considerable concern, it does not bode well for the future. Perhaps my noble friend the Minister might feel able to take some of these remarks on board and reconsider this part of the Bill. I beg to move.

Lord Mackie of Benshie

I am interested in the amendment. If I may say so with the utmost respect, it seems to show that the noble Viscount, Lord Mountgarret, has no real appreciation whatsoever of the difficulties that face the Government and all of us in framing this legislation. He takes one point—that of making more land available for rent—and says that if we do what he suggests we shall make more land available forrent. If you made every Viscount a Duke, and if he let more land, or if you gave him a subsidy of £1,000 for every acre he let, of course more land would be let. But the whole point about the Bill is that we are taking into consideration the appreciable difficulties—the social situation and the economic situation—which more practical people, with enormous respect, are trying to deal with. If you simply miss out this part of the Bill, as the noble Viscount suggests, you do not do anything to deal with the very real problems which have arisen and which are being coped with by the CLA and the NFU over a long period of hard and practical negotiations. To put it mildly, I oppose the amendment.

The Earl of Kinnoull

I spring to the defence of my noble friend Lord Mountgarret, not because he intends to suggest that we should not cover scarcity. The RICS has put forward some words—unfortunately he did not read them out, and I do not have them in front of me—which really cover it. My noble friend also implied—and this is undoubted fact—that this is the most appalling mumbo-jumbo that has ever been devised; it really is. When my noble friend the Minister comes to reply, I should specifically like him to give us a case which is the difference between "scarcity" and "appreciable scarcity".

Viscount Mountgarret

May I determine whether I am out of order to clear up a point at this stage?

Noble Lords

No.

Viscount Mountgarret

I was trying to save time, but since we want to know what we are talking about I shall read out for my noble friend Lord Kinnoull what the RICS suggests. It may also help the noble Lord, Lord Mackie of Benshie. The suggested format, or underlying theme, for replacing this paragraph—it need not necessarily be verbatim—might be based in the following way: Where the evidence to the arbitrator is in his opinion insufficient to enable him to determine the rent properly payable, or he is of the view that the open market for rents for comparable holdings in the immediate surrounding area is distorted by scarcity of available holdings, then subsection (2) of this section shall be the rent which he would expect to be paid in a market which was not affected by such distortion, having particular regard to such of the following factors as he considers relevant". I hope perhaps that is far enough to go. The RICS is trying to bring in and recognise the point about scarcity at the moment. There is an immediate problem. If there were to be more let land available on the market the teething problems to which I have already referred this afternoon would not arise.

I go on to say that the RICS appears very much indeed to understand the difficulties facing the Government and the draftsman. Although it might appear to criticise the Bill, it is done constructively and not malevolently. We come back to what we have talked about before—the possibility of considering a format more in line with the Scottish formula as a possible starter.

Lord Middleton

Would not the noble Viscount agree that the Scottish formula includes the word "scarcity"?

Viscount Mountgarret

I am afraid that I do not know the answer to that question; it might well do so.

The Earl of Swinton

This amendment is in clear conflict with the objective of the new rent formula, which is to deal with the present problem that scarcity of holdings leads to rent tenders significantly higher than rents being paid by sitting tenants for similar farms. I should like to confirm what my noble friend Lord Middleton has just said; that is, that the Scottish formula provides for the scarcity element to be discounted.

The amendment would undermine the whole objective of the proposed new rent formula, which is to provide a statutory basis for arbitrators' current practice by providing a sound basis for determining rents. I am sure that it is generally recognised that the very real shortage of holdings leads to rent tenders being made and accepted which are substantially higher than rents being paid by sitting tenants. The Government certainly wish to take steps to encourage landowners to let farms, but an escalation of farm rents which could be the result of this amendment is not a means that the Government wish to adopt.

My noble friend Lord Kinnoull asked me to define "appreciable". If he has the patience to wait until we reach Amendment No. 17, I think that I shall be able to give him an enormously satisfying answer to that point. In the meantime, I hope that my noble friend Lord Mountgarret will feel able to withdraw the present amendment.

Viscount Mountgarret

I thank my noble friend Lord Swinton for his answer, and I appreciate what he has said. I also hope that perhaps other amendments which have been put down and which have been canvassed this afternoon will to a certain degree take care of the intention behind my amendment, and I shall look forward to their outcome. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn,

[Amendment No. 16 not moved.]

9.10 p.m.

Lord Prys-Davies moved Amendment No. 17: Page 2, line 32, leave out ("appreciable").

The noble Lord said: I beg to move Amendment No. 17, which would leave out the word "appreciable". The use of the word "appreciable" requires a comparision to be made with scarcity. The arbitrator will not discount simple scarcity. Indeed, he will not discount the difference between scarcity and appreciable scarcity, but he is under an injunction to disregard appreciable scarcity, and it appears to us that this comparison between scarcity and appreciable scarcity could lead to a load of litigation.

At what point does scarcity become appreciable? That is very difficult to answer. For example, is it to be classified as appreciable when the rent has been driven up by scarcity to 10 or 15per cent. above the current market level? Possibly not. On the other hand, what if the rent has been driven up 50 per cent. above current market level? Probably, almost certainly, that could be appreciable. That would be evidence of appreciable scarcity. But on figures of that kind the area in between 10 to 15 per cent. and 50 per cent. is a grey area, a debatable area, and a fruitful source of litigation.

In the view of those of us on these Benches, if the arbitrator concludes on any broad view that there is a scarcity of let holdings, then the scarcity value, however he arrives at that judgment, should be disregarded, and it should not be possible to appeal against his judgment on the grounds that appreciable scarcity has not been established. So I propose that the word "appreciable", which would be nothing but a source of litigation, should be left out. I beg to move.

Lord Mackie of Benshie

This is a very interesting amendment and we have been promised a complete and interesting reply. I cannot understand myself all the time being driven to the defence of the Government—

Several noble Lords

Oh!

Lord Mackie of Benshie

My time will come, no doubt. In the meantime, I must say that my noble friend Lord Walston put the point rather well when he said that one must have some scarcity, otherwise one would never get any rent at all. It is a question of defining what is a normal scarcity involving people who want to tackle a reasonable problem of paying a decent rent and making a worthwhile living, and the kind of scarcity which drives people to compete for farms, to a ridiculous extent, for all kinds of other reasons.

I personally do not see any better solution than to say an "appreciable" scarcity. Of course, we appreciate that scarcity must come into it, but I think that, considering the praise heaped on valuers and arbitrators today, they can surely appreciate what "appreciable" means.

The Earl of Swinton

I am most grateful to the noble Lord, Lord Mackie, for once again coming to the support of the Government. The noble Lord tells us that, like a leopard, he will turn his spots soon. I hope that the transition is later rather than sooner, because he is doing great work from the Front Bench where he sits.

It goes without saying that if there was no scarcity of holdings available to let, rents would be very low indeed because, by implication, there would be little effective demand for agricultural tenancies. At the other extreme, very high rents become payable when the number of applicants far exceeds the tenancies available.

The word "appreciable", I am advised, would exclude de minimis scarcity. It means something less than substantial but is intended to be a pointer to the arbitrator not to be influenced by insignificant scarcity. Scarcity must therefore be qualified, and "appreciable" seems to be as good a word as any. The noble Lord, Lord Prys-Davies, said that it would give rise to litigation. I can assure him that "appreciable" has been used as a qualifying adjective in statutes in a number of instances. I quote just a few. Section 62 of the National Parks and Access to the Countryside Act 1949 refers to "no appreciable area of such land". Section 36 of the Control of Pollution Act 1974 refers to an authority under that Act considering that a discharge will have "no appreciable effect". Section 3 of the Endangered Species (Import and Export) Act 1976 refers to animals unlikely to survive for "any appreciable time".

There are thus a number of precedents for use of "appreciable" to indicate a quantity that exceeds the minimal. The arbitrator is obliged by subsection (4) (a) to discount scarcity. To do this, he needs guidance as to the level. The word "appreciable" is included for that purpose. I hope therefore that the noble Lord, Lord Prys-Davies, will recognise the need for some such qualification and will accordingly withdraw his amendment.

The Earl of Onslow

In his defence of the word "appreciable", my noble friend said that in two other Acts "appreciable time" and "appreciable area" were quoted. Both time and area are finite things. Scarcity is not finite. Surely that is the difference between the use of the word "appreciable" in this case and the word "appreciable" in the other two Acts.

The Earl of Swinton

I also quoted Section 36 of the Control of Pollution Act 1974, which refers to something which will have no appreciable effect. I should have thought that there was little difference between effect and scarcity.

Lord Prys-Davies

As a matter of interest, there come to mind further uses of the term "scarcity" in various legislation. There is reference to "substantial scarcity of accommodation" in the Rent Acts. In the 1953 Act on rating, we have "marked scarcity". Here, for the first time, we have "appreciable scarcity". I shall not press the point any further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

9.18 p.m.

The Earl of Caithness moved Amendment No. 18: Page 2, line 32, after ("scarcity") insert ("or appreciable surplus")".

The noble Earl said: On Amendment No. 5, my noble friend Lord Belstead said that I had answered my own question. But, at the same time, with due respect to him, I think that he contradicted himself. My noble friend said that unless the arbitrator was told what to take into account, there would be variations throughout the country and that this would not be a good thing. This amendment is to try to stop, if possible, variations in the future.

The principle behind the amendment is to rectify a blatantly one-sided agreement. If a tenant can claim there is scarcity of farms to let and have that taken into account in a rent review, it is surely equitable for a landlord to take into account a surplus of holdings to let when considering a rent review. I am still not sure what constitutes scarcity or surplus of farms to let as much depends on where one starts in considering that question. If lawyers are to have plenty of work to do, as I am sure will be the case, those acting for the landlord in this instance should be given some of the work.

This is a question of a fair balance. If your Lordships say that there will never be a surplus of farms to let again, I would only say that there are many noble Lords here today who will recall the days when there was a surplus of farms to let and a little reading will confirm this. I appreciate that it is difficult to foresee this happening again in the present climate, but I believe that it is possible, and that, probably, it will happen again. It should therefore be taken account of in the Bill which, after all, is about the future. The present rent formula works well. That is admitted by all. It is the fear that it might not work well in the future that has led to this Bill. My amendment is merely a further contingency plan for the future. I beg to move.

Lord John-Mackie

I should like to say a few words on the point made by the noble Earl, Lord Caithness, about the possibility of there being a surplus of farms to let in the future. He mentioned that people would remember the days when that was the case. I am one of those who remembers those days and I hate to think that there will ever come a time again when landlords, particularly in East Anglia, go down on their knees to Scottish farmers to come down and have a year's free rent if they take over a farm.

In view of the present world situation with the enormously increased population, and so on, I do not think that such a situation will ever arise again. However, if the noble Earl, Lord Caithness, wants to make sure of everything and to put this into the clause, then I see no harm in doing so; and I am sure that the noble Lord. Lord Belstead, will see that there is no harm in putting it in. But God forbid! that it should ever arise again.

Lord Gisborough

I should like briefly to support the amendment. It is only fair that if we put in the scarcity, we should also put in the surplus. We must remember that as regards the farms which were let pre-1976 we are talking about a period of perhaps 100 years, and during that 100 years anything could happen. Indeed, the one thing we can be quite sure of is that things will happen which we cannot now foresee.

Lord Coleraine

My noble friend's amendment seeks to say that in certain circumstances a tenant farmer should pay more than the market rent. That seems to me so far against the whole feeling of the Bill that I do not think that this is a harmless amendment and in my view it is one that should be resisted.

Lord Belstead

I am grateful to my noble friend who has just spoken because as much as I should like to assist my noble friend Lord Caithness, this amendment is attempting the impossible. If there is an appreciable scarcity of lettings, it is possible to prevent that being reflected in appreciably very much higher rents by saying that the appreciable scarcity element ought to be discounted. There may well be disagreement about the desirability of doing this, and we have heard some of that expressed in your Lordships' House today. But it is an exercise which can be accomplished.

However, if there is an appreciable surplus of lettings, rents might fall, and I cannot envisage how an arbitrator could be instructed to discount for a fall in rents. I suppose he could be told to stick something on to the assessment. But the fact is that a surplus is really an element of rent which does not exist—at least it does not exist in the sense that it can be dealt with in that way.

With respect to my noble friend, I really do not think that the amendment, as presently drafted, makes sense at all, although I absolutely understand the case which he is making. It is both on drafting and practical grounds, which I have attempted to deploy in my few remarks in reply, I feel that with regret I must resist the amendment.

Lord Mackie of Benshie

May I for once assist the noble Earl, Lord Caithness? It is possible that a man might want to stay in a farm when he could quite happily, in a period of surplus, move at a lower rent to another farm. In that case it would be quite reasonable for the landlord—if the man felt that he could pay the rent and wanted to stay there—to go to arbitration and say that he should pay rather more. I must say that the noble Earl, Lord Caithness, has a point here. I can see cases where both arguments might apply. In the other case, nobody need make an offer for a farm if he does not want to stay there.

Lord Belstead

I do not want to appear unhelpful and I do not disagree with the noble Lord, Lord Mackie, when he says that there may be a point here. But there needs to he a very radical rethink as to the way in which my noble friend drafts the amendment. I am in a position where I cannot help my noble friend Lord Caithness regarding that matter because I feel that the concept of the amendment is so foreign to what we are attempting to do in subsection (4) that my noble friend must deal with the matter himself. If my noble friend would like to talk to me—or me to him—between the two stages of the Bill, I should be very ready to do so. But I repeat: if the concept which the noble Lord, Lord Mackie, has put forward in a helpful way were to be achieved, it would need to be tackled in a very different way from the way in which it has been tackled in the present amendment.

The Earl of Caithness

I am grateful for the support of many noble Lords; but I must admit that I am disappointed by my noble friend. I really thought that we might get a better response on this amendment. I think he is telling me, "Fine, let us have an open market rent until we get scarcity, so if there is a surplus of farms we will be on open market rent and the rent will go down. If there is a scarcity of farms, had luck, landlord, you have problems." I do not think that that is fair.

For instance, if my right honourable friend the Chancellor of the Exchequer at the next Budget says, "Right, I will bring in a package of measures to encourage landlords to let land, the income will be treated as earned income, and you can claim back VAT on repairs and such things, and there will be an improvement in CTT", there will he many landlords who will let land, and there will be more land on the market than tenants can absorb. My noble friend says, "Fine, we now go to the open market because there is no scarcity". But the productivity of the land has remained the same. Why should we penalise the landlord? The tenant can make the same profit off the land, but there happens to be a surplus to let. That surplus will be absorbed, but it might take time to absorb it.

I think that I have a point here. If my noble friend believes that the amendment is drafted badly, I should appreciate some help. Perhaps he would like to draft it for me, because that would solve many problems. But surely the principle is there.

Lord Belstead

Perhaps I may intervene again. Once again, my noble friend has answered his own question. He says that when there is a surplus it is hard luck on the landlord. But with respect to my noble friend, I think he has overlooked the fact that we have paragraphs (a), (b), (c) and (d) of subsection (3) of Clause 1 on page 2 of the Bill, and in those circumstances where there is a surplus of tenancies on the market, the productivity capacity of the holding will be taken into account. I have no doubt that this will be to the benefit of the landlord, which proves the encompassing wisdom of the new formula.

The Earl of Caithness

I do not want to prolong this debate, but I do not think that that actually covers the point I am making. However, I think we should press on. I should like to take up my noble friend's kind invitation to discuss this with him and I shall certainly do so. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

9.28 p.m.

Lord Stanley of Alderley moved Amendment No. 19:

Page 2, line 36, at end insert— ("( ) any element of the rents in question which is due to the fact that the occupier of, or a person tendering for, a comparable holding occupies other land in the vicinity of the holding that may conveniently be occupied together with that holding; and").

The noble Lord said: If I start by saying that the noble Lord, Lord Northfield, drew some of my fire on this amendment, I hope he will remember that the last time we engaged in a question of firearms, at the end of the day we came to a very happy solution. I shall take five minutes to try to explain this amendment because, like the noble Lord, Lord Northfield, I happen to believe that it is very important for two reasons. First, many Members of your Lordships' Committee, and indeed people outside, have said that this Bill will do nothing for the newcomer to farming. On Second Reading I said that the existing farmer will always have an advantage.

However, the purpose of this amendment is to make sure that the potential newcomer is not particularly disadvantaged by the Bill which, as it stands, I believe he is for the following reasons. There will be no control on what rent is offered on an original letting. Bearing in mind that after three years—and this is the point that the noble Lord, Lord Northfield, made—the tenant is entitled to go to arbitration for a fair rent based mainly on the productivity of the holding, there will be an even greater incentive to offer key money for the first three years. When the rent arbitration included the key money factor (which it does at the moment) it was difficult after three years to go to arbitration, for the tenant had already made a stick to beat his own back by offering a high rent three years previously which could be used in evidence as the open market rent, which restrained that new tenant from offering excessive key money. Now that factor will be removed, as his original key money rent will be discounted by Clause 1 and the arbitrator. The effect of this will be that Clause 1 will favour the existing tenant next door, or indeed owner-occupier next door, and therefore cause even larger holdings and amalgamations.

For instance, an established tenant aged, say, 30 could work out what the value of the next door holding would be to him over his life expectancy of, say, 35 years. Having estimated what economic rent he will have to pay in three years'time—that is his first arbitration—he will offer huge key money for the first three years. He will be able to do this better than anyone, for the economic rent of the next door farm will be much easier for him to pay than for a newcomer. I could give a perfect example of this in 1976. As a potato grower in 1976 will know, that year prices went through the roof. What better way of getting rid of a tax liability than offering excessive key money for a neighbouring farm?

My amendment, coupled with that tabled by my noble friend Lord Kinnoull to Clause 1(6)(a) is designed to rectify this, so hindering larger farmers from getting larger, and at the same time discouraging excessive key rents. Moreover, it will ease the problem for the tenant who does not wish to expand. My Amendment No. 19 will mean that the arbitrator will not take into account the higher rents that a neighbouring farmer will be able to pay when judging a similar farm next door.

The second string to my bow is to support the amendment tabled by my noble friend Lord Kinnoull to Clause 1(6)(a) which will make it possible for the arbitrator, as he does under today's law, to take into account the original rent offered. So if I, as the neighbour, offer a fantastic key rent he will again be making a stick to beat his own back. I hope that this amendment, joined with that of my noble friend Lord Kinnoull, will commend itself to your Lordships.

Lord Northfield

Could the noble Lord say to which amendment he is speaking?

Lord Stanley of Alderley

It is Amendment No. 22. They are trying to achieve a fair balance between the newcomer, the existing tenant, and the farmer who wishes to expand. My second reason is a personal one. Many of your Lordships think that whenever I, or indeed my noble friend Lord Middleton, get up our amendments originate from Knightsbridge, and therefore they are suspicious of them. May I, with the humility of 30 years of marriage, tell your Lordships that this amendment originated from my wife, who suggested that I take the beam out of my own eye before I tried to take the mote out of Clause 1—or at least words to that effect. I beg to move.

Lord Walston

I would hate the noble Lord, Lord Stanley of Alderley, to take my name in vain, and it may surprise him to hear that I agree with him in this matter. He has made out a good case, and I would reinforce it somewhat by saying that the tenant, or the farmer, say, of a neighbouring farm is always in a position to tender more, whether it is for purchase or as a tenant, for the neighbouring farm, because he does not have to put up any more capital, or only a small amount of capital, for the equipment with which to farm his farm. He already has, as the noble Lord pointed out. a good base of profit—possibly one could say a good tax base—which makes taking on an extra 50 acres, 100 acres. 150 acres attractive. It is sound economics for him to tender more for that farm than it would be for any farmer not so well placed and coming in from outside. It would be very wrong and unjust if an arbitrator were to hang on to that particular rent offered for that particular and unusual situation and use that as a reason for putting up the rent in an arbitration case on a neighbouring farm. I hope that the noble Lord, Lord Belstead, will be able to tell us at least that he will consider this very carefully and accept some of its merits.

Lord Northfield

I found this discussion fascinating. I was grateful for the olive branch that the noble Lord, Lord Stanley of Alderley, offered me. It is not the first time that in the end we have agreed on something after starting with a disagreement.

It was difficult to follow the noble Lord's complicated introduction, but if I understood the earlier part of what he said, he was adding an example to the one that I gave. I gave an example which the noble Lord, Lord Walston, has been discussing: that is, offering key money for the next door farm and remaining with a protected rent on the original holding. The noble Lord, Lord Stanley, is now adding to that the complication that I had thought of, of the farmer offering key money on the original holding, then finding himself protected against that mischief when rent reviews come along. I had not thought of that variation. It adds to my case that this whole business of the extent to which a farmer-tenant creates this distortion in the market then profits from it not being taken into account later. All this needs desperately to be examined and put right at a later stage of the Bill.

Lord Mackie of Benshie

I support the amendment proposed by the noble Lord, Lord Stanley of Alderley, but in justice we should produce a new clause which says that anyone who offers key money should have that taken into account positively in favour of the landlord when he asks for a rent review.

Lord Northfield

That is what the amendment does.

Lord Mackie of Benshie

That was the point the noble Lord. Lord Northfield, was making. Perhaps the noble Lord, Lord Belstead, would like to add to his trouble by considering that.

Lord Belstead

I shall consider what the noble Lord. Lord Mackie of Benshie, has said afterwards, but for the moment I am attracted to this amendment. I agree with my noble friend Lord Stanley of Alderley that it would be better to discount proximity in relation to the rents of comparable holdings than to do so in relation to the subject holding. Where the subject holding itself is concerned it occurs to me it is quite correct that a rent should reflect the fact that it can be farmed more productively by a tenant who also has other land in the vicinity, but this will be provided for in the assessment of the productivity capacity of the holding under paragraph (c). Therefore I accept this amendment from my noble friend and the amendment linked with it.

However, I notice from the Marshalled List that the amendment is starred, which means that it is an amendment which is either new or has been altered. To those of us who work in Government departments anything which is new or has been altered has to be treated with very great care. Therefore, perhaps my noble friend will allow me to look with some care at the wording here and to be in touch with him about what we feel is the correct wording for the next stage of the Bill. I should be grateful if, pending that, he will withdraw the amendment. We accept the amendment in principle.

Lord Stanley of Alderley

I am grateful to my noble friend. The only thing is that I have gone down one stage further with my wife. Perhaps he will he able to sort that out later. I thank him very much for that concession.

I was not entirely clear about what the noble Lord, Lord Northfield, was saying. What I am trying to propose in Amendment No. 19 is that if I, as an expanding and greedy tenant, offer high key money, my neighbour who does not want to expand to the same extent, does not get—I was going to use the word "clobbered", but I believe that is unparliamentary language—does not get landed with the same high rent that I can offer. That is the point I was trying to make. I hope that answers the noble Lord, Lord Northfield. If it does not, he will have to return to it at Report.

I should like to thank the noble Lord, Lord Walston, for his help. I think that the principle is agreed across the Committee. I am grateful to my noble friend Lord Belstead for taking it away and looking at it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 20 not moved.]

9.44 p.m.

Lord Renton moved Amendment No. 21: Page 3, line 3, after ("tenancy") insert ("but including improvements executed or equipment provided by him during a tenancy or tenancies preceding the current tenancy").

The noble Lord said: I beg to move Amendment No. 21. Under the present law, only the rental value of improvements made and fixed equipment provided during the current tenancy can be disregarded in determination of rent by the arbitrator. But, as a result of a case in 1956, the same kind of works done by the same kind of tenant during his previous tenancy of the same land cannot be disregarded. Noble Lords may be as puzzled as I was as to the situation which can arise through somebody having a previous tenancy of the same land. But, when one thinks it through—to the best of one's limited ability in my case—one has to bear in mind that there may have been a surrender of a tenancy followed by a re-grant and repossession. That is where this situation could arise.

This injustice of not disregarding improvements made in a previous tenancy of the same land used to occur in the case of business premises. But this was put right by an amendment made to Section 34 of the Landlord and Tenant Act 1954 by Section 1 of the Law of Property Act 1969. Therefore, we have an anomaly. What can be done now for business premises cannot be done for agricultural land. This amendment is intended to remove that injustice in relation to farm tenancies. I would hope and believe that every one of your Lordships, and especially my noble friend Lord Belstead, would welcome this amendment.

Lord Gisborough

Can the noble Lord explain whether in this case "previous tenancy" could refer to one of the previous tenants in a line of succession? As I understand it, the amount of improvement provided by the tenant could be disregarded in the case of a tenancy prior to 1976 for perhaps 50 to 100 years and, I should have thought, over three generations. I should have thought it would be quite impossible to carry through an ignoring of the grant for that sort of period.

Lord Renton

The amendment is not intended to refer to previous tenancies held by predecessors in succession, but only to the current tenant.

Lord Walston

May I ask the noble Lord for a further clarification? Arbitration normally takes place when there is a rent review during an existing tenancy after a three-year period. If there is disagreement, it will go to arbitration. Would what has happened during the previous three years or six years or nine years fall within the ambit of this clause? Would that be considered a previous tenancy; or is it part of the same tenancy which is continued?

Lord Renton

The noble Lord, Lord Walston, has raised a very narrow and subtle point. I only hope that my understanding of it is right. The position with regard to a current tenancy, that is to say, a tenancy which is the subject of a fresh rent review but without changing the tenancy, is already dealt with. What the amendment is intended to do is to refer to a previous tenancy, albeit on the part of the same tenant.

Lord Belstead

In consideration of the amendment tabled by my noble friend Lord Renton, I should like to draw your Lordships' attention to the definition of "tenant's improvements" and "tenant's fixed equipment" in the new Clause8A (3)(a) and (b). These are intended to mean that they include any improvement carried out on the holding or fixed equipment provided by the tenant. They are not limited to any particular tenancy agreement.

However, having said that, I think that my noble friend may have hit on a shrewd point and I think the noble Lord, Lord Walston, may be on to the same point as well. There may be a doubt as to the extent of the protection which a tenant receives in respect of improvements he has carried out during the existence of an earlier tenancy. This is a question I should like to have time to consider further, to see whether any amendment is required. I would ask my noble friend whether he would consider withdrawing this amendment. It may he that we need to do something here and that my noble friend's amendment needs some satisfaction, but we really must have a little more time in order to study it.

Lord Renton

Again I am most grateful to my noble friend. Before seeking to withdraw the amendment, I should just mention that I was advised by real experts in this branch of the law that the amendment was necessary to remove the injustice which I have mentioned. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Howard of Henderskelfe moved Amendment No. 22: Page 3, line 12, leave out from ("holding") to ("and") in line 15.

The noble Lord said: I beg to move the amendment standing in my name and that of my noble friends. I am sorry that the noble Lord, Lord Northfield, has had to leave the Chamber temporarily because I think this is yet one more example of the curiosities that can arise from the complexity of this legislation and the way in which it seeks to guide arbitrators. We believe the effect of the clause as it stands, without the deletion of the words which we suggest, can result in certain cases in land being reduced to virtually nil value.

I think we are all of us aware of cases where a charity own a certain amount of bare land in a village: it may be five or ten acres. It may be entirely surrounded by one farmer's land and there may be no access to it other than over that farmer's land. But its ownership is in different hands and the effect, as we understand it, is that the arbitrator has to disregard in effect the value to the neighbouring farmer of that land being in the middle of his; so that again it has a nil value. That is a kind of de minimis case and all your Lordships could imagine similar cases where there could be a much larger piece of land which is situated in this way. We are suggesting that we should delete the reference to land in the vicinity of the holding that may conveniently be occupied together with the holding". We are saying that should be disregarded and the value of the land should be assessed in the ordinary way. The hour is getting on and I therefore do not propose to speak at any further length about this amendment.

I beg to move.

The Earl of Kinnoull

The problem which my noble friend has described so clearly is one to which I hope my noble friend Lord Belstead will give very sympathetic consideration. My noble friend Lord Stanley said on Amendment No. 19 that these were problems of a similar nature and, as I understand it, Amendment No. 22 relates to the case of the 100 acres in the fenland surrounded by one dominant landlord. That land should be let to that one dominant landlord at a special rent, because it is of more value to him, and that should not he taken out by the arbitrator. The amendment of my noble friend Lord Stanley covers the case of three major landlords and one small tenant, where one of the major landlords rents a piece of land adjoining the tenant's and pays key money—that funny term—and that case should not be held up as an example to this one small tenant. I hope that that is correct.

The Earl of Caithness

I rise to support this amendment. My noble friend Lord Kinnoull has dealt with the problem of bare land. I would inform the Committee of an instance in the Cotswolds, where I let a farm for a private landlord to an existing tenant who had some heavy land at the bottom. He wanted some light land—some "brashy" land as we call it in the Cotswolds—to put his cattle on in the winter. We deliberately let him the "brashy" farm to increase the income of both units. If that is now to be excluded, the Government are enacting retrospective legislation which will impinge greatly on a number of landlords who have carried out a similar exercise in order to try to improve a tenant's income.

Lord Walston

I am not sure that I have it clear in my mind what are the implications. But, as I understand it—and I hope that noble Lords will correct me if I am wrong—it means that, if a farmer is already a tenant of an existing farm, for which he is paying rent of perhaps £40 an acre, and a neighbouring farm comes up—for which he can afford to pay £60 because he already has the equipment and so on—then, when the rent review for the first farm comes up and it goes to arbitration, the arbitrator is not to be allowed to take into account the fact that the farmer has recently tendered £60 for the adjacent farm. If my understanding of that is correct, then I certainly support this amendment. But if perhaps I am wrong, one of the noble Lords who are proposing it will point that out to me.

Lord Stanley of Alderley

I am now getting in a muddle. I thought that this part of subsection (6) (a) meant exactly what the noble Lord, Lord Walston, said, except the opposite way round. If I may put it in this way, he said that if I am the neighbouring tenant and I tender £60 an acre for land that is obviously worth £40, then, when it comes to the three-year arbitration period, the arbitrator will have to take into account the fact that I originally offered £60, so that I shall be hoist with my own petard. That is what I hoped this amendment meant and that is why I spoke to it with my own Amendment No. 19. If it does not mean that, then we shall have to start again.

Lord Walston

I am afraid that I did not make myself clear, because I am not suggesting that when the three-year lease of the second farm comes up for renewal it should be reduced because the tenant offered too much, but, that, when the three-year period of his original farm comes up, the rent that he offered for the second farm should not be taken into account.

Earl Waldegrave

Must we not keep in mind all the time the effect that this will have on the third party? Is this the comparable rent which the arbitrator will have to take into account on the next door farm?

Lord Stanley of Alderley

This was the point of my Amendment No. 19: no, he will not. But he does take it into account in the case of the person who tenders to try to grow bigger.

Lord Middleton

I am sure the noble Lord, Lord Howard of Henderskelfe, is right to take out the bottom half of paragraph (a). I believe that my noble friend Lord Stanley of Alderley is coping with it in the right way.

Lord Howard of Henderskelfe

It is nice to have the support of the noble Lord, Lord Middleton.

Lord Mackie of Benshie

As I understand it, the amendment brings a kind of justice to people occupying adjacent land who offer exaggerated rents and keep it out of the hands of people who want to start to farm. The amendment ensures that they will pay dearly for paying an exaggerated rent because the land is next door to them. In that case, I would support the amendment because it does what I would like it to do: it makes more land available for other people.

The Earl of Onslow

If we may come back to the point I tried to raise on the amendment moved by the noble Lord, Lord Northfield, if a farm's rent is affected by a high tender rent, but the farm next door is basically exactly the same, why should that farm not pay the same rent as the other farm? It seems extraordinary that for an identical farm a rent should be paid to the same landlord which is totally different.

Lord Howard of Henderskelfe

Could I have one more go at this because everybody, including myself, seems to be getting into a frightful muddle about what this is all about? I am trying to think in simple terms, not in terms of tenders and the rest. I am thinking of the case where in fact and in practice a small piece of land which is contiguous to your own is worth more to you than to anybody else in the neighbourhood. Therefore you are willing to offer more for it. Our amendment seeks to say that the arbitrator should not ignore that fact of life when he values the farm as a whole, in particular the piece of land which is contiguous to yours. As the Bill stands at present, the arbitrator has to ignore that fact of life and imagine that the land is some 20 miles away and has got nothing to do with you.

Lord Northfield

I hesitate to intervene, but this is exactly what I said on Amendment No. 13. This is the whole purpose of that amendment. The beginning of subsection (4) sets out in one simple sentence that the arbitrator shall take into account exactly what the noble Lord has just said; namely, the fact that the tenant has himself tendered and agreed a high rent for adjoining or nearby land. We reached that point, I hope, on Amendment No. 13. The noble Lord, Lord Belstead, said that it looked as though we had a point and that he would take it away and look at it. I suggest that he should take away all these suggestions and ask how can we make a creator of mischief in the sense we are talking about—that is, one who tenders rents which are too high—pay some price and not be protected from what he has done himself on any existing rents? Then we shall all be happy. If the noble Lord would do that, I think we should make progress.

Lord Mackie of Benshie

We are all agreed, are we not, that his next door neighbour should not pay the price for that man's greed?

The Earl of Onslow

Why should he not pay the price for that man's greed? The person who does pay the price is not the next door neighbour but the landlord who has two assets. Or let us assume, for the sake of argument, that it is a charity for waifs and strays which owns some land. Should that charity for waifs and strays have its charitable income reduced? That is in effect what would happen if you automatically muddle about by forcing the rent of one farm up and forcing the rent of another farm down. In exactly the same circumstances, the waifs and strays can suffer.

Lord Northfield

That is basically the stage we were at earlier. If one interferes with the free market and creates a set of protected rent controlled tenants, as this Bill does, you will find exactly that kind of anomaly all the way through. That is the problem with this Bill as it is drafted. That is why the free market must come in in the first place as the basic norm, and then we should be aware of and should be careful about the qualifications we place on the operation of the free market.

Lord John-Mackie

We seem to have established what the noble Lord, Lord Howard of Henderskelfe, meant by his amendment; but what we have not established is whether it is a good thing or a bad thing. This situation arises in many cases. It arose in my own case—on a 200-acre plot of land between me and my neighbour. I happen to know what he paid for that land but I do not think that should affect my rent when the time comes—which is very shortly; Friday, in fact! This is an important point. The noble Lord, Lord Howard of Henderskelfe, is quite right in saying that this aspect should be taken into account, and I am very much in favour of his amendment.

Lord Belstead

I have already said on Amendment No. 19 that we will consider it most sympathetically but that I wanted to look at the wording. It was on those lines that my noble friend Lord Stanley of Alderley withdrew his amendment. I should like to give exactly the same undertaking on this amendment—particularly as we are sympathetic to the point which has been made by the noble Lord, Lord Howard of Henderskelfe.

I am not entirely sure that we are helping the noble Lord, Lord Northfield, though. As I promised to look at what he said before, I will of course do so—but I have not promised to do so sympathetically. I must make that clear. We will look with great sympathy at what has been said and I wish only to look carefully at the wording to see whether, when it is brought back, the wording of this amendment is right or whether something else should be used.

Lord Howard of Henderskelfe

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

10.3 p.m.

The Earl of Caithness moved Amendment No. 23:

Page 3, line 19, at end insert— ("( ) In determining the rent properly payable in respect of a holding the arbitrator, having taken into account all relevant factors, shall apportion sixty per cent. of the resultant surplus to the landlord and forty per cent. thereof to the tenant.")

The noble Earl said: We have now reached a rather important part of the Bill; the end of the points which the arbitrator must consider when assessing the rent of a holding. Having taken into account all the relevant factors, what is he to do? Today he would go back to his base line and consider the open market. But in future he will not be allowed to do that. He cannot take into account competition. So he goes back to the Act. Having re-read the Act, he finds no help there. He is in a vacuum and he is trying to reach a fair compromise. Some noble Lords will say, "Do not worry; he can refer to comparable rents". I am not sure that he can.

Let me take this example. In 1982 there were only 119 farms in Suffolk, Norfolk and Cambridgeshire of between 250 and 625 acres which had rent reviews. Let us look forward to 1994 when another rent review will be due for the same farms. How many tenanted farms will there be then? Let us start with 1976. In that year, there were about 74,381rented holdings. In 1981, there were 58,284 rented holdings. That was a loss of 16,097 holdings in five years; thanks to the 1976 Act—NFU sponsored. That equates to a loss on the 1976 figures of about 4.3 per cent. per annum. Over that 12-year period to 1994, when the next rent review occurs, it means that the holdings will have dropped from 119 in that vast area of East Anglia to a mere 57—by over 50 per cent. given that same rate of loss. I do not think the Bill will alter that rate of loss.

What happens if all the tenants gang together? They could say, "Right, we will appoint one firm of solicitors to act on our behalf. We will not agree any rents privately with the landlords. We will go to arbitration on the whole lot." The arbitrator is faced with no comparables for that year. The noble Lord, Lord Prys-Davies, wants to contain comparability to the locality. Let him contain it to the locality. That will mean that the arbitrator cannot go out of East Anglia to get a comparable. So he is stuck. He is certainly not allowed to take into account the open market or any competition, so how is he to determine the rent of a holding? Does he look at the last accounts of the farmer to see how much he needs to live on? I venture to suggest that that would be highly dangerous. Having taken away the arbitrator's guidance to determining the apportionment of the surplus. we must reinstate something else.

The percentage of surplus to he distributed has changed over the years as a result of a number of factors. In 1965 it was nearly 60–40 per cent. of net farm income in favour of the tenant. In 1970 it was approximately 70–30 per cent. in favour of the tenant, but in 1980 it had changed to approximately 60–40 per cent. in favour of the landlord. What the correct formula is I do not know, because it will change as do the seasons. But we must give the arbitrator a guide because at the moment he is left in a vacuum that goes back to the point of the noble Lord, Lord Northfield, that once one disturbs the open market one has created a mess. Can we please help the arbitrator now? I beg to move.

Lord Walston

I have the greatest respect for the noble Earl, Lord Caithness, but this amendment is completely unacceptable. I would use stronger language if it were not for my respect for the noble Earl.

I do not think the amendment is workable, and even if it were workable I do not believe it would be right or just. My mind goes back very many years, to the years after the war, when I was involved to a certain extent with land reform in Italy. There, as many of your Lordships will know, they had, and still have to a large extent, a system of share cropping. Unfortunately the share cropping had got completely out of hand, with the result that the landlord would frequently take 60 or 70 per cent. of the profits of the land, although he provided nothing but the land, whereas the share cropper—the tenant—was left with 30 or possibly 40 per cent., having put in a great deal of work, taken a lot of risk and provided the oxen that ploughed the land, the seed, and so on.

This is not something on which one can lay down what the percentage should be. It entirely ignores the basic concept of the landlord-tenant system. Under our system, traditionally—I think it is correct and one which I understand we all support in this Chamber—the landlord is, as it were, the holder of the debenture. He has a more or less fixed interest return on his capital. It is a very low interest return given the present capital value of the land. and traditionally also a relatively low return. But he does have the advantage, especially in times of inflation, of a growing capital asset. The tenant does not have that advantage. The tenant takes the risks and the tenant normally requires and receives a very much larger proportion of the final out-turn than does the landlord. He has the equity share. But from time to time, year by year, he may get a very small return on his capital. He may even get what is. I believe, now called a negative return—which in the old days we used to call a loss—on his investment. That is the essence of the landlord-tenant system.

Nobody can say what the expected profit is. It depends on God more than anything else. It also depends on the skill and luck of the farmer, the ability of the seed breeder, and so on. To attempt to determine in legislation what proportion should go to the landlord and what proportion to the tenant strikes at the very roots of the system that we are now trying to defend. I very much hope that this amendment will receive minimal support.

Lord Prys-Davies

I find myself very much in support of what the noble Lord, Lord Walston. says. The amendment contemplates that the surplus can he divided between the landlord and the tenant in accordance with a pre-determined formula. Experience shows that that is not the case. A pre-determined formula should not be allowed to govern the distribution of the surplus. What is required is not a fixed, pre-determined formula but a conclusion that is fair as between landlord and tenant, having regard to their circumstances and their individual effort.

It was pointed out long ago by a philosopher that the degree of precision such as is assumed in the amendment is not attainable. I think what Aristotle said was that the degree of precision that is attainable depends on the subject matter. Here is a subject matter that varies from one part of the country to another, from parish to parish and from individual to individual. A pre-determined formula would therefore be inapplicable.

The Earl of Swinton

The statistical farm management approach to rent fixing is certainly adopted in some countries. I understand that it is practised in France. I think that the noble Lord, Lord Walston, mentioned Italy. I am not sure about that. But it is certainly not featured in any statutory rent formula in this country—not the 1948, the 1958 or the Scottish 1983 formulas.

The amendment tabled by my noble friend Lord Caithness seems to introduce a quite novel concept into the rent formula. Under the new subsection 8(3) the profit from the holding is only one of the relevant factors to be taken into account in determining the rent. This amendment seems to mean that the rent would be fixed by a straight arithmetical apportionment between landlord and tenant. This would be an entirely new approach to rent determination in this country. It would in effect exclude comparability with other rents and the historic practice of the parties attempting to strike a bargain.

In the negotiations I am sure the tenant has in mind his idea of the proportion of his farm profits which he would expect to keep. I am also pretty sure that, given that the tenant bears the risks of farming—as the noble Lord, Lord Walston, said—and does the work, his expectation would probably be higher than the 40 per cent. suggested. But it would not be helpful to attempt to write any figures into the formula and certainly not to turn it into an arithmetic farm management exercise. I hope that my noble friend will feel able to withdraw his amendment.

10.14 p.m.

The Earl of Caithness

When I moved the amendment I said that I did not know what the right formula was. I thought that the noble Lord, Lord Walston, might come up with a solution for me. I am sad that he did not. The point that I am trying to get across is that we have created a vacuum in which the arbitrator cannot make a decision. He has not been told how to calculate the rent. He is told the relevant factors, but the basis—which at the moment is open market—is excluded. Having got a vacuum, all I was trying to prove was the point that you put him in that situation; there may not be comparables because the rented sector has so diminished. How is the arbitrator to assess the rent? What is the fair compromise? I had hoped that noble Lords would have come up with some ideas to try to solve the problem. I should like to ask my noble friend, my noble kinsman, Lord Swinton, how would he apportion the rent? Let us put my noble friend in the position where there are no comparables because there is a limited tenanted market. How is one to assess it given no base line?

The Earl of Swinton

I should like to reply to my noble friend and, I must say, "near kinsman", because I do not think that marriage counts. I think that this is where the skill of the arbitrator comes in. After all, he is now arbitrating and technically is breaking the law when he is doing it; and he is making a jolly good job of it. I do not see why he is not going to continue to do that after the Bill becomes law.

The Earl of Caithness

As many arbitrators have said to me, if the Bill goes through unamended, it will make the arbitrator's job extremely difficult and much harder. I hope that my noble friends on the Front Bench will take this point into account when reconsidering the whole of Clause 1. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 24: Page 3, line 37, leave out (" ("the new holding")") and insert ("becomes severed and the new holding")

The noble Earl said: This is merely a drafting amendment, which I believe will make the Bill more readable to the layman. I beg to move.

Lord Belstead

I have great pleasure in saying to my noble friend that the amendment makes the Bill much more readable, but I have to say to him, without pleasure, that I am afraid his amendment does not work. The subsections would refer to a tenancy of an agricultural holding being severed; but it is the freehold interest, not the tenancy, which is severed where part of the freehold is sold off. Also, my noble friend's amendment entails a reference to "the new holding" commencing. instead of the tenancy of such a holding commencing.

While I freely admit that the present wording in the Bill appears cumbersome, it does the job. I do not propose to explain to your Lordships what is the job, because subsections (8) and (9) are a little complicated, though I shall explain it if pressed. Because that is so, and because my noble friend's amendment, with the best of intentions and more elegant wording, nonetheless does not do the job, I think perhaps it would be best if I asked him to withdraw it.

The Earl of Caithness

If the amendment does not do the job that it was intended to do. I certainly shall withdraw it; but this provision is very difficult for a layman to understand. However, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 25 not moved.]

The Earl of Caithness moved Amendment No. 26: Page 4, line 37, at end insert ("or of fixed equipment")

The noble Earl said: This is a small amendment to add the words "or of fixed equipment". It is often the case that changes take place in the nature and constitution of fixed equipment between the three-year period of rent reviews. It is surely equitable that if one is to disregard any change of rent due to alteration in the size of a holding, then one should also exclude a new start period for any change of fixed equipment during any three-year period. I beg to move.

The Earl of Swinton

I am glad to say that I bring rather more good cheer to my noble friend and near kinsman. To a certain extent his objective would seem to be covered in subsection (10)(b), which provides that increases in rent as a result of landlord's improvements shall not count for the purposes of the three-year interval between rent reviews. As drafted, my noble friend's amendment would appear to encompass decreases as well as increases in rent. I accept that there is logic in that, and if my noble friend will agree to withdraw the amendment. I shall consider the matter with a view to introducing a suitable amendment at a later date.

The Earl of Caithness

I am very grateful to my noble friend and near kinsman. I have made a lot of progress recently. I shall certainly withdraw the amendment, and I look forward to hearing what my noble friend has to say at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 27 not moved.]

Viscount Mountgarret moved Amendment No. 28: Page 5, line 19, leave out ("(whether or not that expense has been or") and insert ("(disregarding any expense that").

The noble Viscount said: In moving the amendment, I hope to try to seek to remove what I think might be an injustice or an inequality. I believe that I am right in saying that this clause is similar to the 1948 Act. It seems to me to provide an opportunity to regulate what I think is an inequality. On page 3, subsection (5)(b) clearly states that grants from public funds are to be disregarded in relation to any increase in the rental value of a holding which has been paid for by the landlord. This is perfectly correct. There is no question about it. However, it seems to me to be rather strange that in this paragraph the value of any tenant's improvements, it appears, can include sums that have been, or will be, reimbursed from public funds. I accept fully that I might have misread or misinterpreted the clause but, if I have understood it correctly, I would have thought that the matter might be looked at. I should be grateful to know what my noble friend has to say.

Lord Belstead

I can assure my noble friend Lord Mountgarret that the provisions of Clause 1 regarding improvements are in principle the same as in Section 8 of the 1948 Act. The point is that in a rent arbitration landlords' improvements must be dealt with differently from tenants' improvements. Tenants' improvements are disregarded. A tenant would not pay a higher rent on account of his own improvements, so the grant aid element is irrelevant. But the arbitrator must take account of landlords' improvements and determine the rent accordingly. But for this purpose the grant aid element is disregarded.

The new subsection 8(5) therefore provides that the arbitrator shall disregard any increase in the rental value due to tenants' improvements—that is in line with existing law—and the grant aid element only of landlords' improvements. The definition of tenants' improvements in the new subsection 8A(3)(a) makes clear that it is irrelevant whether or not grant aid has been paid. In view of this explanation which rests on the simple principle that this really is a repeat of Section 8 of the 1948 Act, I hope that I shall have satisfied my noble friend.

Viscount Mountgarret

I am grateful to my noble friend. I beg leave to withdraw the amendment.

Amendment. by leave, withdrawn.

Lord Gisborough moved manuscript Amendment No. 28A: Page 5, line 34. leave out paragraphs (a) and (b) and insert ("that that practised on any significant scale on comparable holdings").

The noble Lord said: I apologise for not being able to put down this amendment earlier. The object is to secure information on subsection (4)(a). Where a farm is let on one system—perhaps of sheep on grass—it appears from this subsection that the rent will be assessed on that grass for ever more if the improvements are made by the tenant. for example, if the tenant was subsequently to plough up the grass and make it a much more profitable form of farming. This would not take place if every other farm did the same, but he might be the only one able to do it in that area.

Were this to take place with a farm that was let prior to 1976 and where the first generation is farming, one must expect that that system of farming and rent assessment would continue for perhaps 100 years. One could therefore get the situation, in 100 years' time, of the grandson of the tenant and the grandson of the landlord negotiating rent on a system based upon 100 years before. If one can imagine that this was the law in 1900, one might now be negotiating on grass farms where the war had intervened and land had been ploughed up together with the introduction of new crops like rape. In the future, all these stories of carbon dioxide, which is going to warm up the land, might be realised. One might find that there are vineyards growing in certain farms. Yet for the whole of that time the rents will be assessed on the type of farming taking place at the time the farm was let, if the tenant did the improvements.

I hope that I have got this wrong, but if I have got it right then it ought to be changed. There must be some provision to revise acreage schedules and to reassess the systems over a period. I beg to move.

Lord Belstead

The Committee may be a little in the dark because I am not sure that your Lordships know what the amendment does. The amendment is as follows: Page 5, line 34, leave out paragraphs (a) and (b) and insert 'than that practised on any significant scale on comparable holdings' In the short time available to me to examine the amendment. I think that my noble friend may have covered the thought which is contained in subsection (4)(b); but he does not, I think, in his wording really attend to the thought in subsection (4)(a). I must confess that. from my noble friend's explanation, I am also not entirely sure whether the amendment is necessary at all for the simple reason that it seemed to me that surely each time in succession tenancies when there is a new succession, this matter would be looked at again. Nonetheless, I should like to read what my noble friend has said and to reflect on the matter. Indeed, I think that this is something upon which I ought to write to him. If my noble friend would be content to withdraw the amendment, which has been put down in manuscript, on that basis I would then be very happy to proceed along those lines.

Lord Gisborough

I am most grateful to my noble friend and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

10.27 p.m.

Viscount Dilhorne moved Amendment No. 29: Leave out Clause 1 and insert the following new clause—

"Determination of rent of agricultural holding.

(1. The following section shall be substituted for section 8of the 1948 Act— 'Determination of rent of agricultural holding.

8.— (1) The rent payable under a tenancy in respect of agricultural holdings granted by order of the Court shall be such as may be agreed between the landlord and the tenant or as, in default of agreement, may be determined by the Court to be that at which, having regard to the terms of the tenancy (other than those relating to rent) the holding might reasonably be expected to be let in the open market by a willing lessor, there being disregarded—

1. (a) any effect on rent of the fact that the tenant has or his predecessors in title have been in occupation of the holding,
2. (b) any goodwill attached to the holding by reason of the carrying on thereat of the business of the tenant (whether by him or by a predecessor of his in that holding),
3. (c) any effect on rent of an improvement carried out by a person who at the time it was carried out was the tenant, but only if it was carried out otherwise than in pursuance of an obligation to his landlord and during the current tenancy, and
4. (d) improvements by the landlord out of grants of moneys from Parliament.

(2) Where the rent is determined by the court, the court may, if it thinks fit, further determine that the terms of the tenancy shall include such provision for varying the rent as may be specified in the determination.'.")

The noble Viscount said: I shall be very brief—for which your Lordships will no doubt be enormously relieved. There are two procedural matters that I wish to mention. First, I want to amend by draft of this clause if I have the chance to do so. The word "court" is perhaps inappropriate. What I am really aiming at is a formula based on Section 34 of the Landlord and Tenant Act 1954, replacing subsections (3), (4), (5) and (6) of the new proposed Section 8, and to assimilate the basis of valuation to that which operates under Section 34 of the Landlord and Tenant Act. I am submitting this because I think that it is the clear way out of all our troubles. I may have great difficulty convincing the Committee that that is so, but nevertheless I believe it myself.

There are four points to be made about this basis of valuation. The first point is that the formula under the 1954 Act is well tried. It has operated well for nearly 30 years. It is the only major instance in the wide area of statutory intervention in the law of landlord and tenant which has been freed of any major criticism by the landlord or the tenant.

The second point is that it has generated very little case law which shows that it is clear, and it is successful in its operation in contrast to the fair rents and the ignoring of scarcity provisions in the Rent Act 1977. My third point—and I hesitate to use the words but I hope that this short utterance of mine will allay some of the fears that people have about open market value—is that the concept of open market value is one which is entirely familiar to valuers; it is something which they can find by the established procedures of looking at comparable transactions.

In contrast to this, no one has ever explained how a valuer is to make a deduction for scarcity or, under this proposed provision, the even more difficult concept of appreciable scarcity. I find myself considerably in harmony with the noble Lord, Lord Prys-Davies, on the other side. It is necessarily a subjective judgment suitable for a philosopher or perhaps a theologian, but unsuitable for a valuer or a tribunal.

The fourth point is this. The aim of this legislation seems to be to make farms available to let. In my humble submission, this will never be achieved while legislation artificially depresses rents below their true market value and so encourages landlords not to have, or to get rid of, tenants, rather than letting their property.

The melancholy state of the market for private rented residential accommodation under Section 70 of the Rent Act 1977 proves this point and, in my submission, makes it abundantly clear. The effect of those Rent Acts has been—and this is also abundantly clear—that there is no property to let. It would be tragic if the same effect were to be applied to agricultural property.

When I first moved this amendment I said—and I will repeat it—that I would submit a more precise draft for the Report stage. However, I hope that the concept of what I have said is clear. I beg to move.

Lord Walston

The amendment proposed by the noble Viscount has great attractions. It is short; it is concise; it is simple, and even for a layman it is relatively easy to understand. All those are very strong arguments in its favour, especially when compared with the pages through which we have waded this afternoon and this evening. But for all that I think that it is an abominable suggestion. I think that it will have the most appalling effects upon the landlord-tenant system and upon farming as a whole.

The noble Viscount has told us that the concept of scarcity or appreciable scarcity—I did not write down his exact words—required a subjective judgment which was suitable perhaps for philosophers or for theologians, but was not suitable for valuers. I would suggest that valuers are very different people from lawyers and perhaps they are more akin to philosophers or theologians. I think that they are perfectly capable of making a judgment as to scarcity and appreciable scarcity, and of evaluating that when they come to the question of what the rent should be.

If I understand this correctly—and I must confess once more that I always find great difficulty in understanding anything that is written by lawyers or parliamentary draftsmen—the amendment says that the agreement: may be determined by the Court to be that at which, having regard to the terms of the tenancy (other than those relating to rent) the holding might reasonably, be expected to be let in the open market by a willing lessor"— and then there is virtually a full stop. There is no question of a willing tenant, a willing lessee. at all. Therefore, that would remove entirely any security of tenure to the farming tenant, because it could well be that the willing lessor would only willingly let his farm at a rent which was completely uneconomic for the tenant to pay.

So, at the end of the three years, having agreed the rent, it comes up for review, there is a dispute, it goes to the court or possibly to some tribunal, as the noble Viscount has told us, and they have to be guided by this. They ask, "What will a willing lessor let his land at?" The only way to arrive at that is to ask the lessor himself, "What is the rent you will take?" It puts the privilege, if that is the right word, entirely in his hands.

If in fact he wants to get rid of his tenant, he will say, "The lowest price I will take is £250 an acre", or something which it is completely impossible for the tenant to pay. Therefore, security of tenure disappears completely. The noble Viscount shakes his head, but, as drafted, surely that is what it must mean. Perhaps the noble Viscount would like to explain where I am wrong.

Viscount Dilhorne

I am grateful to have an opportunity to explain to the noble Lord, Lord Walston. I said at the beginning of my short speech that, as drafted here, of course the noble Lord is right, but as I said this only really replaces subsections (3), (4), (5) and (6). The arbitration provisions should stand, as indeed they stand under Section 34 of the Landlord and Tenant Act. If a landlord exercised extreme demands of that sort, there would always be recourse to arbitration or to the Lands Tribunal, which is another matter on another clause.

Lord Walston

I am grateful for that explanation. But if there is recourse to the Lands Tribunal, or whatever it may be, some guidance must be given to the Lands Tribunal as to the basis on which they are to assess a fair rent. Now, is that fair rent going to take into account any of the things we have been discussing here—what other people pay, what the scarcity value is, what the demand is, and soon? How is it to be assessed? Before we can pass judgment on this and make up our mind, we must be told a great deal more about it than in his concise speech the noble Viscount told us.

Lord Middleton

We had a most interesting and expert speech on the Second Reading from the noble Viscount, and now we have this interesting new formula. Agricultural holding law has built up in a reasonably satisfactory way and following a different path from that of the law of landlord and tenant in relation to business premises. That was true until the passing of the 1976 Act, and it is the more injurious parts of that Act that we are now trying to amend, and we are also trying in the Bill to put right some minor anomalies and difficulties which have arisen in agricultural holdings law where it has not stood the test of time.

My noble friend Lord Belstead used a domestic analogy earlier this afternoon in referring to this formula. If I may, I shall use a more clinical one. What bothers me is that the noble Viscount. Lord Dilhorne, through his amendment is attempting, by trying to bring in the 1954 Landlord and Tenant Act, a transplant operation which, as has so sadly happened with all too many transplants. I fear might not prove compatible.

10.38 p.m.

Lord Belstead

I am sorry that I cannot give more comfort to my noble friend. The fact that it sweeps away the arbitration system which has served us well. incidentally for I think six more years than the—

Viscount Dilhorne

With respect. no. I am sorry to interrupt my noble friend. I said at the beginning of my speech, and repeated to the noble Lord. Lord Walston, that I am not sweeping away the arbitration system. All I am doing is to amend subsections (3), (4), (5) and (6). The arbitration stays, the court goes. That I would redraft for the Report stage. if it meets your blessing. I said that with apologies at the start.

Lord Belstead

I am sorry to misrepresent my noble friend, but it is not quite as simple as that. As my noble friend Lord Middleton said, it would he transplanting what in fact is legislation for the court into what has been for so many years, successfully, legislation for the arbitration system. My noble friend and the noble Lord, Lord Walston, have both shown that it is unlikely that this would succeed.

There are two things which I would say quickly. I beg my noble friend to have regard to the very great difficulty that there is at present with the open market rent formula for arbitrators, as the matter is seen by the Government. This has been discussed at length today and I shall not go over the ground again except to say that it cannot be wished away. Something must be done about it. The Government have tried to do something about it in the subsections that the amendment would sweep away. I think that my noble friend will not be entirely surprised when I say that that does not meet with a very friendly response from me.

The other thing I ought to say is that I know my noble friend holds very strongly that the fair rents legislation has not stood up to the comparatively brief test of time which it has had. I can quite understand why he says that. The basic reason for it is that the fair rents legislation is not backed up by any good grounds for giving a view, whereas in the Bill there will be the grounds of productivity and the other grounds set out in Clause 1. Therefore I do not think, with respect, that it is comparing like with like when one compares the rent Acts with this Bill. I am sorry not to give a welcome to the amendment, but as it stands I do not think it will do and, even if it undergoes surgery, I do not think it will do either.

Viscount Dilhorne

In asking leave to withdraw the amendment, it seems to me that it is the best thing that I can do at this stage. I hope that my noble friend will reconsider this amendment before the Report stage. However, I should like to make it clear that I shall return to this amendment at the next stage. and if necessary I shall ask your Lordships to divide on it.

Amendment, by leave, withdrawn.

On Question. Whether Clause 1 shall stand part of the Bill?

10.42 p.m.

The Marquess of Salisbury

I do not wish to detain your Lordships for long at this late hour, but there are one or two comments that I should like to make. I put down my objection for two reasons; first, because I did not think that the Bill would achieve the object that it set out to do, that of creating more tenancies, but rather the reverse. Secondly, I did not like the proposals in this clause for the new rent formula.

I should like to repeat a point that the late Lord Blakenham made clearly when moving the Second Reading of the 1958 Act. He said that surely the existing tenant of a farm can reasonably be asked to pay the rent which a new tenant coming in to the farm would pay. The existing tenant rightly enjoys security of tenure. but most people will agree I think that security should not mean the right to farm at a rent below the market level. That is the point I wish to make. It is regrettable that the Government have changed the stance that they took up in 1958.

As to the standards by which rents are to be judged, I was much comforted by the remarks that were made both on Second Reading and on various amendments by the noble Lord, Lord Northfield. I feel sure that he has taken the right line on this matter. I do not wish to pursue that any further except that I strongly support what he has said on these various occasions.

At present we are talking about problems which arise on very few occasions: I think on Second Reading, my noble friend Lord Caithness said about 0.5 per cent. over one year, although it has been suggested this evening that were this formula to go through there would be an enormously increased number of arbitrations. This, in itself, is a reason for not pursuing it.

It seems to me that what we ought to be doing is to establish a yardstick—and I think that Lord Northfield put it very clearly—on which to take a line and that the arbitrator should be given a great deal of latitude in trying to work it out. We are talking about an inexact science, if that is the right expression to use. It is extremely difficult to lay down a legal formula on which this can be based. It seems to me that the valuers have done an excellent job over the past years since the 1948 Act came into action. Would it not be wiser to let them carry on?

The one problem that seems to have arisen on this issue is that the valuers have made sense of the arbitrations they have had to make but have frequently not carried out their duties as laid down by the law. Is there not a great deal to be said for leaving the existing system but trying to find some formula which would allow them to use their discretion without breaking the law and without breaking also the system which we have used over the past years?

It is for those reasons that I wish to speak at the moment. I do not want to press on any further because the noble Lord, Lord Belstead, has said that he and his Minister will be looking further at this matter. But I do hope he will be able to come up with a formula which is acceptable to your Lordships; because it is quite clear that the proposals in the Bill, as put forward now in Clause 1, do not meet the case.

Lord John-Mackie

The noble Marquess has made a much better job of supporting my Amendment No. 4 than I did. I do not know why he did not come in at that time and support it; because he said exactly what I should have liked to say, but he said it much better. I have gone through many Bills in another place but I have never been in a situation where the Government have made so many promises to look into, to come back, to deal with, and so on with various amendments which have all been withdrawn. I hope that the noble Lord is not going to make the Report stage a very difficult one for us all. We look forward to it. I can only hope many of the things he has taken aboard he will carry and will satisfy the various noble Lords who have put them forward.

Lord Mackie of Benshie

I should like to say once again that the Government have done rather well in Clause 1. They have agreed to look at some of the suggestions brought forward but they have not agreed to look at them all—I was happy to see that the noble Lord did not promise to look at specific suggestions of the noble Viscount, Lord Dilhorne, in which he raised the great success of commercial building in this country, which has resulted, as far as I can see, in the most expensive hotel bedrooms in the world in London and a vast Government programme of building factories and a number of other features of state interference with the private system which do not appear to me to constitute an ideal world. I was glad to see that the Minister did not promise to look sympathetically on that.

On the other practical suggestions put forward, he has agreed to look while not promising in any way to "wear" them if he finds them disagreeable. This is a sensible way for the Government to proceed and a very sensible way for the House of Lords to proceed, as against the battles that we have in another place. Given all the curious factors, the formula put forward is workable in my view and I support Clause 1.

The Earl of Kinnoull

I should like to add my support to my noble friend Lord Salisbury in echoing what I think has been the message in the last seven hours of this amazing debate: that to get away from the market value is a very dangerous path to take. Lord Northfield has said it six times today and six times I felt that the whole Committee listened to him. The noble Lord, Lord Mackie, has been so consistently supportive of my noble friend that I almost wonder whether he will be replying with my noble friend at the next stage!

I should like to ask my noble friend, and to seek his patience in doing so, one small point. Seven hours ago I moved Amendment No. 1 and coupled it with Amendment No. 16. Six and a half hours later, Amendment No. 16 came up and I missed the opportunity of moving it. I am sure that my noble friend had a very good reply. It was in fact a vital amendment and I would be most grateful if my noble friend could find it now and just put on record what reply he would have given. In order to give him a little more time, I would say that it is the one where the "prudent tenant" test ought to be taken before the valuer considered the outrageous or appreciable scarcity value that we were discussing at some length.

Lord Belstead

I should like to reply to my noble friend Lord Salisbury in the spirit in which he moved this short clause stand part debate at the end of what has been a long Committee proceeding. As I understood my noble friend, the spirit of what he was saying was that he was concerned; he wanted to find the right answer; he was not satisfied with the formula as it stood but he was prepared to see at the next stage of the Bill whether we could get the answer right. That is what I think my noble friend was saying.

If I may reply in the same way, although it is true that there has been a great deal of debate about Clause I today. I think on one thing almost every speaker has been agreed: something needs to be done about the unsatisfactory state of the law about arbitration. It simply is not giving a safe statutory basis to the perfectly sensible decisions which are being reached by arbitrators when it is necessary for parties to resort to arbitration. This cannot be laughed off or wished away, and it cannot be put off indefinitely. I think it is fair to say that this is something which is recognised again and again in your Lordships' House, and indeed it was recognised in the Northfield Report which was published in 1979.

To sweep away Clause 1 completely would simply restore the status quo, which could be challenged at any time in the courts. We have before us eight different formulas, which have been put forward in one way and another. Indeed, one of those formulas is the very important one put forward in Amendment No. 1 and of which Amendment No. 16 formed a part. I would simply say to my noble friend Lord Kinnoull that, in exactly the same way as 1 undertook to consider Amendment No. 1, we will consider Amendment No. 16 along with it, because it forms a most important part of that amendment.

This brings me to my final words. I think I ought to remember what it was that I did say in replying to Amendment No. 1 and Amendment No. 16 so that I do not mislead your Lordships. If your Lordships will forgive me, I think I said that we should now try to see whether we can gain any greater measure of agreement before the next stage of the Bill. I cannot, and I will not, promise that this can be done; but we will certainly try.

Clause 1 agreed to.

Lord Denham

I think we have probably gone as far as we can usefully go today. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to: House resumed.

House adjourned at five minutes before eleven o'clock.