HL Deb 23 February 1984 vol 448 cc849-66

3.15 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)

My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales that they, having been informed of the purport of the Agricultural Holdings Bill, have consented to place their prerogative and interest, so far as they are concerned on behalf of the Crown and the Duchy of Cornwall, at the disposal of Parliament for the purposes of the Bill. My Lords, I beg to move that this Bill be now read a third time.

Moved, That the Bill be now read a third time.—(Lord Belstead.)

On Question, Bill read a third time.

Clause 1 [Determination of rent of agricultural holding]:

Lord Stanley of Alderley moved Amendment No. 1: Page 2, line 10, at end insert ("and earning capacity")

The noble Lord said: My Lords, with your Lordships' permission I beg to move Amendment No. 1 and also to speak to Amendments Nos. 2 and 3. Amendment No. 2: Page 2, line 15, after ("capacity") insert ("and earning capacity") Amendment No. 3: Page 2, line 16, after ("capacity") insert ("and earning capacity")

I warned the House that I might return to Clause 1 on Third Reading if, after taking advice, I was still unhappy. The omission of ally reference to "earning capacity" leaves me still unhappy. My noble friend Lord Belstead at col. 1035 of the Official Report for 7th February said: by simply remaining silent on profit…we have prejudiced the interests of none and preserved the interests of all"—

A perfect description, if I may say so, of the tightrope that my noble friend has had to walk. So I fear that I have to give him a little push and tell him that, by relying on the word "productivity" only, he has prejudiced my interest. For I am advised that as the clause stands, if the prices of farmers' products fall, the arbitrator could argue that because the productivity of the farm had not altered, there would be no case for a rent revision.

I hope that the Government accept the principle that, should profitability fall, rents should take account of such a fall. Certainly they did so ill the original clause, for if we look at paragraph (c) we find that it reads: a competent tenant practising a system of farming suitable to the holding could reasonably he expected to profit front farming the holding".

I am therefore somewhat at a loss as to why the Government have in fact changed their minds on this matter.

I would accept that there is an element of the Sword of Damocles in my case, in that if a tenant does not farm well, or he does not farm as well as his competent neighbour, he will be in trouble. But I am more than prepared to accept that. I must tell your Lordships that my noble friend Lord Belstead was kind and generous enough to explain the problem as regards my amendment. Quite why he should do so I do not know, considering how unpleasant I have been to him on occasions throughout our discussions on the Bill.

I know that my noble friend thinks that his word "productivity" covers my point. But I have to tell him again that I am advised that it does not do so. It may be too late for my noble friend to do much in your Lordships' House, but I ask him to say that the Government will look again at this point before it comes back to us. I do not believe that I or my noble friend Lord Belstead are apart on the principle—at least, I hope that we are not—and it is merely a matter of getting the correct words. I believe, however, that my noble friend's wording is seriously wrong. I beg to move.

Lord Bishopston

My Lords, I rise to support the noble Lord, Lord Stanley, in his amendment. The noble Lord made reference to the Report stage of the Bill when he said that the Minister said in Hansard at col. 1010, on 7th February: we have not reproduced the reference to profit from farming the holding". He then said: In the discussions on the rent formula … it was pointed out to us that the words which we included in that formula, 'could reasonably be expected to profit from farming the holding', could be regarded as precluding the arbitrator from considering … any other profit produced by the holding from non-farming activities. The noble Lord, Lord Renton, who played a prominent part in the proceedings on that occasion, said, at col. 1015: I am so glad that the references to profit have been cut out: that would have taken up an awful lot of time at every arbitration without getting anyone anywhere". That statement may appear to be against the argument which the noble Lord and I are deploying, but the noble Lord went on to question the meaning of Clause 1(c), as it was saying: But what would 'productive capacity' do? Of course, those are the words to which we seek to add in the Bill. The noble Lord went on to say: That is mentioned in line 9. I suggest that there is a nice little pot of gold for professional people in that concept". I want to quote what the noble Lord went on to say; it is rather a long quotation, but it will help to explain the sense of what the noble Lord was saying. He said: There will be endless argument as to the facts, as to what is the productive capacity of a particular holding, and endless arguments in law as to my noble friend's definition of 'productive capacity', and even more perhaps as to the way in which that definition affects the amount of rent to be fixed by the arbitrator in the particular case. At col. 1016 (and I hope that I do not quote him out of context) the noble Lord urged noble Lords to consider the simple alternative to the Government's amendment, and concluded by saying: In spite of his valiant efforts to get it right, it really will not do as it stands". The amendment which the noble Lord has moved is one of very few amendments before the House on Clause 1. There is certainly nothing from the Government as an alternative to satisfy the misgivings of the noble Lord, Lord Renton, and indeed the noble Earl, Lord Onslow, at col. 1020 of the same date, said that he could not follow the Minister's case on profitability and he referred to his personal experiences on his farm. He said: Its productivity was very good indeed, but we could not make a profit. If the word 'profitability' is not included, I can imagine a farmer producing his books to an arbitrator and saying. 'Look at the past three years and see how low my profits have been, or, Took at my losses'; and the arbitrator saying 'I am sorry, old boy, but it is not in the Act that I take any account of that. It is just too bad' ". At the Report stage debate on the Bill my noble friends and I, supported by a few others, tabled an amendment on the basis that we should take into account not only productivity but also profitability. After debate, the House decided that that amendment should not be made. The Minister having taken out any reference to "profitability" in the Bill as it came to your Lordships' House, we are now left with the reference to "productivity", and not "profitability".

I submit that the case made by the noble Lord, Lord Stanley, is a moderate one and it seeks to include a word which is a reference to earnings. That, of course, could mean that the arbitrator would have regard to earnings, which could be on the profitable side or, indeed, on the loss-making side. On the last occasion when we debated the matter it seemed extraordinary that noble Lords, many of whom are concerned with landlords and tenants, should have had so little regard to these aspects.

Much has been said here and outside in the NFU and the Country Landowners' Association and, indeed, by the professional bodies about getting the right formulas for arbitration for the arbitrator to take into account. I shall not refer back to some of the speeches on Clause 2, where the industry makes concessions with regard to the 1976 Act. However, it means that Clause I is the essence of the Bill. The noble Lord the Minister has quite rightly very often reminded us that the need to get more people into the industry and to provide more tenancies is a key point of the Bill and the justification for it.

Albeit this is a joint package of the two organisations and takes into account other discussions, the Bill contains very little which will give your Lordships any satisfaction that this measure, which has been a long time coming to fruition—probably two years—will result in a great flood of people into new tenancies.

I shall not go into other aspects of the Bill which have been debated and voted upon in your Lordships' House. But on a number of occasions my noble friends and I—and, indeed, noble Lords opposite—have made suggestions as to how more people could gain entry into the industry. I submit that this amendment will help the viability of the industry to be taken into account when arbitration is called for, and it may also encourage more people to enter the industry with the greater opportunities which it provides. With those words. I am pleased to support the amendment moved by the noble Lord, Lord Stanley of Alderley.

The Earl of Caithness

My Lords, I would sympathise with my noble friend Lord Stanley on this amendment. In fact, it is remarkably similar to one which I moved in Committee. However, I moved it in Committee for a very different reason. In his opinion "earning capacity" includes profit. I wanted "earning capacity" included to broaden the base of the rent as a result of a court case of Tummon v. Barclays Bank Trust Company Ltd., and I wanted all the non-farming activities that could be undertaken on a farm to be taken into account.

However, having discussed this at length in Committee and my noble friend the Minister having spent a great deal of time discussing it with me between the Comittee and Report stages, I have come to the conclusion that the words are not necessary. I think that I was under the wrong premise at the Committee stage; I think that my noble friend is under the wrong premise now. I believe that this matter is taken care of in the Bill with the revised wording that my noble friend has arranged for Clause 1.

Lord Belstead

My Lords, I have listened with great care to the case put forward by my noble friend Lord Stanley and indeed by the noble Lord, Lord Bishopston, for this amendment. I really am worried about the effects that this amendment might have. I certainly understand that it is only equitable that changes in profitability ought to be reflected in rents which are decided and I am most anxious to show my noble friend and the noble Lord opposite that there is nothing between the Government and noble Lords as regards the intention of the amendments.

However, there are two real dangers in trying to put this amendment into the rent formula at this very late stage of the Bill. As I see it, the first danger is that, as drafted, this amendment might mean that the words "earning capacity" would apply only to the earning capacity from farming the holding, since the rent formula goes on to refer to "a system of farming suitable to the holding". There would, as a result, be a real risk that the formula would then be interpreted as excluding any other earning capacity from non-farming activities even though such earnings undoubtedly ought to be, and of course at the moment are, a relevant factor in rent arbitration. If this happened, then the sort of considerations that my noble friend Lord Caithness put forward as being relevant considerations would be relevant considerations no longer. That is the first danger.

The second danger is that there might be an alternative interpretation flowing from this amendment which might not be entirely what my noble friend Lord Stanley would want. Since "earning capacity" in the amendment is not defined, it could, if the fears I have just expressed were unfounded, be taken to include all non-farming earning capacity whether or not that capacity was currently being realised by the farmer. For example, if there was scope for obtaining additional income from caravan sites or farm shops, but this was not being realised by the farmer concerned, would not this be capable of being taken into account anyway for rent purposes? Under the existing law this danger does not occur, but the words "earning capacity" might introduce an undesirable degree of uncertainty, which would not, I believe, be what my noble friend Lord Stanley would want at all.

Your Lordships may say, "It is all very well putting forward the difficulties, but what is the answer?" I suggest to the House, as I ventured to suggest at the last stage of the Bill, that there is no necessity to do anything. In other words, this amendment is not necessary. In converting productive capacity into a cash figure for the purposes of determining rent, as he certainly must do, the arbitrator will, in effect, have arrived at earning capacity. My noble friend Lord Stanley strongly made the point that high productivity may not necessarily result in high earning capacity. It is a good point, and I take it, hut I do not think it affects the argument. The arbitrator must necessarily convert productive capacity into a cash figure in order to arrive at his rent decision. This must be a reflection of the income which the holding can produce in the hands of "a competent tenant practising a system of farming suitable to the holding".

I have had a firm endorsement from the Royal Institution of Chartered Surveyors of the rent formula as it stands as being most certainly workable. I hope your Lordships at this late stage may take the same view, but most of all I hope I may have convinced my noble friend and the noble Lord, Lord Bishopston, that the effect of the amendment is to be found in the rent formula as it stands, and that therefore this amendment is quite genuinely not necessary.

Lord Bishopston

My Lords, before the noble Lord sits down, may I briefly refer to his comment that he thought that this was rather a late stage to put in these changes? Perhaps I may draw the noble Lord's attention to the original state of the Bill when it came before your Lordships' House. In Clause 1, paragraph (c) had a reference to arbitration, and stipulated that the extent to which a competent tenant practising a system of farming suitable to the holding could reasonably be expected to profit from farming the holding", must be taken into account. The word "profit" was in. The noble Lord has taken it out and now says it is too late to make reference to it. We are not asking for profitability to be mentioned. We are asking for "earning capacity", which is a halfway stage, and which I should have thought the Minister might even yet have some reason to consider.

Lord Stanley of Alderley

My Lords, I am glad that I am not apart in principle from my noble friend in thinking that some form of profit should be thought of when rents are being decided. However, I could not go along with his argument. He argued one way for five minutes, and then the other way for five minutes. May I take the last five minutes and his caravan case, and, I hope, destroy that? My noble friend was arguing that because my neighbour had a caravan site and could afford a rent of £100 I also should have a caravan site and afford a rent of £100. That perhaps rather simplifies his argument, but, first, I am not sure that we want a lot of caravan parks, and, secondly, here you are completely ruled out by the fact that, as my noble friend said himself, it is "a competent tenant practising a system of farming suitable to the holding". So that caravan park might not be suitable for my holding. There was another point that my noble friend missed, and that is that in Clause 1 the terms of the tenancy have to be considered. If I want a caravan park—and here I come back to my noble friend Lord Caithness, who has suddenly changed his mind because he finds that my amendment is not so attractive for him as it was before—and I have permission from the local authority to have it, then I go to my landlord and it goes in the terms of the tenancy. Therefore, there is no question in my mind of me without a caravan park being compared with someone with a caravan park. One could say exactly the same with such items as self-picks, and all the rest of it, so you cannot do that. That is where the flaw in my noble friend's argument lies. However, I hope that when the Bill reaches another place they will look carefully at this matter, because we are not apart in principle.

Lord Belstead

My Lords, with the leave of the House perhaps I may add one last thing. Of course, we shall continue to look carefully at this. I give my noble friend that assurance. I have tried to be open with the House during the various stages of this fairly short but quite complicated Bill, and I say quite openly to your Lordships that when Christmas was over we took the Bill away, and one of the things we looked at was whether it was possible to have in the text profitability on the one hand and earning capacity—which was the way that my noble friend Lord Caithness had raised it in the month of December—on the other.

I was advised, for the reasons that I have sought to deploy today, that it was difficult to put the concept of earning capacity in the Bill, if for no other reason than because it might mean that somebody would be assessed on capacity which they were in fact not realising. Therefore, with a certain amount of reluctance, I felt that the best thing to do on behalf of my right honourable friend was to suggest that we should not have explicitly in the Bill a reference to profit or to earning capacity, because on the one hand the question of profitability was covered for the reasons that I have sought to explain—because the arbitrator will perforce have to convert the productive capacity of the holding into a cash figure in arriving at what the rent properly payable is—and on the other hand earning capacity will be covered in "all relevant facts".

I believe that that is still the case, but of course I take the point of my noble friend and of the noble Lord opposite that this has to be looked at very carefully indeed, particularly as there is not a disagreement about ends—only about means. If my noble friend feels that the time taken on Third Reading to at least go over that ground again has not been wasted, may I assure him that the Government do not either?

Lord Stanley of Alderley

My Lords, I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 2 and 3 not moved.]

3.39 p.m.

Lord Northfield moved Amendment No. 4: Page 2, line 31, after ("shall") insert (", except in respect of land farmed with the holding,")

The noble Lord said

My Lords, in this amendment and in the next two amendments, we are dealing with a fairly narrow part of the Bill. We are dealing again with rental determination by an arbitrator and with the extent to which the arbitrator should take into account rentals of comparable holdings. The Bill, as drafted, says that the arbitrator, in looking at this wider evidence of comparable holdings, should disregard all elements of rent which show evidence of appreciable scarcity. What my Amendment No. 4 would do is to say that he should continue to disregard elements of scarcity on other people's holdings but, where he, the farmer, has been paying extra rent to get extra land and is willingly paying that higher rent, the arbitrator should take that into account. It should no longer be disregarded.

We have been over this narrow point once or twice in earlier proceedings on the Bill, and first the noble Lord, Lord Belstead, agreed to consider it. Then, as he knows, he wrote to me about it and I regret to say that he had my presentation wrong. He had not understood what I was saying. So I thought it well worth while trying once again to persuade him that there is merit in this point.

Let us consider a farmer who has the subject holding and bids an extra rent to get hold of extra land on some other tenancy. This is a frequent occurrence. What the Bill would do as it stands is to tell the arbitrator that he must take no notice whatsoever of the extent to which the farmer has hid up the prices to get hold of this extra land when he comes to reconsider the rent of the subject holding. Throughout the Bill all sides of the House have been trying to say to the Government, please let us get as near to reality, as near to what market forces will properly determine, as we can. Please let us try to avoid the sort of artificiality in the rentals of farms that we see in housing today, possibly for very good reasons, but which we know is inappropriate in farming and which we know from experience of housing is difficult to get rid of once it is there. Let us try continuously to avoid the situation where in 10 years' time we have islands of rent-controlled farms and other islands of free rentals in the market, and the situation, as I have put it, where the farmer can sit on his rent-controlled farm and go busily and happily around bidding up other pieces of land to get hold of them.

Perhaps I should put it another way to the noble Lord. If an arbitrator is considering a farming business—which is partly what he has to do at least; we have been over the ground of what he has to do, which is to decide the earning capacity of a farm—surely he should be able to take into account the fact that the farmer has bid up to the rent of the adjoining land so that he can average rents out all over. He is perhaps paying £35 on his subject holding and he may have bid £75 to get hold of some extra land. He thinks that by and large, averaged out between the two, the subject holding and the extra land, at £55 he can make it pay. Why should that not he considered by the arbitrator? It is a pointer to the earning capacity of the holding and to the earning capacity of the extra piece of land, but under the Bill as drafted he would have to discount that £55 completely, probably back to about £35. Why should he? It is total artificiality.

Here is the farmer demonstrating that he can pay more. He knows that he can in a free market, perhaps by making extra effort or doing something else, bring in greater profitability. I do not see why the arbitrator should not take that into account. The arbitrator should be able to say that he thinks on the whole that because the farmer is expecting to pay an averaged-out rent over the holding of £55 he should take that into account in considering the rent of the subject holding.

I press this amendment on the Government. Without it the Bill will make even more artificial a situation which is already giving a number of us some fear about what we shall think in 10 years' time when we look back at the effects of the Bill. I beg to move.

Lord John-Mackie

My Lords. I think that my noble friend has a point, but we would have grave difficulties in putting this into the Bill. He mentioned the farmer "rushing around"—I think that was the expression he used—in all directions looking for land to farm on which he thought he could make a profit. A few sentences later he said, "adjoining land". There would be a strong case for putting something in to the Bill that adjoining land farmed with a holding should be taken into consideration, but I do not think one could include land far away on a different farm altogether. If my noble friend would agree to that we might support the amendment. but to try to do it on the scale he was suggesting might be difficult.

Lord Stanley of Alderley

My Lords, I believe that the noble Lord. Lord Northfield, is totally wrong. He will remember that I moved an amendment—and that is where his comes from, I might remind him—that would penalise the tenant who went next door, or owner-occupier, and hid up highly this next door land. Now the noble Lord wants to get hold of my cake—or, to be more truthful, my wife's cake—and say that not only will he be penalised on the part he is bidding for but on the farm itself.

I suggest that the noble Lord has not thought the matter through. What about the owner-occupier? He could do the same. I suppose it is all right for him. Anyhow, just for a change, I will try to help my noble friend the landlord. What happens if there is a little piece of land in the middle which nobody wants except this one tenant? This is the point that the noble Lord, Lord Howard of Henderskelfe, made in Committee if I remember rightly. That land would be worth nothing. That is totally unfair on the landlord. I do not want to do all their work for them, but I will give them a helping hand just to show that there is no ill feeling.

I believe that the noble Lord has over-iced my cake. He has it wrong. Let us look at agistment rents. Why do farmers pay high rates for agistment? In order to make their holding more economic. No, my Lords, the noble Lord is totally wrong.

Lord Mackie of Benshie

My Lords. I can see the sense of the amendment of the noble Lord, Lord Northfield, and what he is trying to do is obviously to stop the chap who has a hunk of land who bids a high rent for every other little bit round about, and averages it out with his own holding and thereby prevents many other people from getting land. The objective is perfectly sensible, but as I see the amendment it would apply to the whole of the present holding. As the noble Lord, Lord Stanley of Alderley, said, it would not stop the owner-occupier from bidding in the same way.

I wonder whether the Government would consider that aspect to see whether some formula could be found to penalise someone who could hid for a lot of land at high rents and, in three years' time, apply for arbitration. Under the present system could he apply for arbitration in three years' time and have the whole thing reduced to the level of his own? That appears to he the danger which the noble Lord, Lord Northfield, is trying to avoid. It would be helpful if the Minister could give us his interpretation.

Lord Thorneycroft

My Lords, after deep thought as to how to meet all the objections, I supported the Government on the main amendment which they put down at the Committee stage. With great respect to my noble friend Lord Belstead—who I admire very much and who has made great efforts to help the House—I must tell him that I supported the Government not because I thought the amendment was a brilliant contribution to the subject, but because I thought that nothing could be more awful than what was in the original Bill.

What was in the original Bill stems from the Government abandoning market value as a test. Under market value the subtle influences of earning capacity, of profitability, of some degree of scarcity in certain circumstances, are all brought into account between willing lessors and willing lessees. This is the way a market works. Once one attempts to go away from that and starts to define the almost indefinable, the Government get into the very greatest difficulty.

I have immense sympathy with all the amendments that have been put down. I see the argument that one could say that this might he a little better or that might be a little worse, but I myself feel, while really disagreeing wholly with what the Government are attempting to do here, that it would really be better to stick to the words in the Bill as presented by my noble friend Lord Belstead. There is one comfort. I think that this will have hardly any effect on the rents that are paid, and no effect whatever on the number of farms available.

Lord Belstead

My Lords, one of the great pleasures of dealing with this Bill has been the kindness of your Lordships—and how nice to receive the enthusiastic support at this late stage of my noble friend Lord Thorneycroft! The noble Lord, Lord Northfield, has explained the objective of this amendment, and the noble Lord has discussed it with me outside your Lordships' House. I would say in passing, if I may, that I think it could be that it is defective in drafting. I do not say that to be difficult, but I say it because I think that when one looks at the amendment it is not entirely clear which holding is being referred to so far as the drafting is concerned.

Nonetheless, the noble Lord has made it absolutely clear what is the intention of the amendment. It is really quite rigorous. What is at issue, and what concerns me, is that it would put the tenant who has recently bid successfully for another comparable holding in a quite different position from any other tenant, actual or potential. The amendment would, in effect, discriminate against the tenant, however small, who might wish to expand. That is a matter which I think should give us cause to pause. Indeed, my noble friend Lord Stanley and the noble Lord, Lord John-Mackie, have very much said this. It is, of course, tenants and would-be tenants in general who, in their anxiety to obtain holdings knowing that these high initial rents can effectively be amortised over the lifetime of the tenancy, will bid for higher pieces of land. But this amendment would mean that the tenant with an existing holding—I repeat, however small—would be much more severely treated in that his sitting-tenant rent would, at arbitration, be adjusted in the light of what he had hid on the open market for another hit of land.

However, I do have to take head-on the question which the noble Lord. Lord Mackie of Benshie, and the noble Lord, Lord John-Mackie, put to me, which arises from the illustration which the noble Lord, Lord Northfield, gave about averaging. Let us be clear about this. If a farmer has two holdings together and, together, they are worth about £55 an acre, then, of course, at arbitration the productivity of the subject-holding will he assessed as being about £55 an acre and not at some lower figure which was the original assessment for the original bit of the subject-holding. Let us he quite clear about that.

Nonetheless, if there is any residual point there which we ought to look at I promise both noble Lords that we shall do so. But I think, with respect, that this amendment—and some would call it rigorous—I would call very uncharacteristic of the noble Lord, Lord Northfield, because it is, perhaps, really unfair to certain tenants. I think it is right that we should have given it a good airing, as we have, but I do hope that the noble Lord, Lord Northfield, will feel that it is not necessary to press it.

Lord Northfield

My Lords, I shall not press my amendment. This discussion will, I hope, be looked at in another place—because I still think there is merit in the case—and the amendment perhaps redrafted in the form suggested by my noble friend Lord John-Mackie. I am not absolutely sure that it needs redrafting because it has to be a comparable holding so that, even if it is slightly distant, it would still fall within the general terms of that part of the Bill. Nevertheless, I think it might well be redrafted and pressed in another place and come back to us.

I am sorry to say that I thought that the noble Lord, Lord Thorneycroft, was going to say, "I have only supported this dreadful Bill with great reluctance; and anything which makes it slightly better ought to be accepted". He could equally well have twisted the concluding part of his remarks in my direction as well as in the direction of the noble Lord, Lord Belstead. Nevertheless, I fully understand his view that, perhaps on balance, he wants to leave this part of the Bill. Very well; I hope I may tempt him with the next amendment, which is perhaps even more explicit and perhaps even more sensible, if I may say so. Meanwhile, I beg leave to withdraw this one.

Amendment, by leave, withdrawn.

3.55 p.m.

Lord Northfield moved Amendment No. 5: Page 2, line 32, after ("question") insert ("which he considers excessive and").

The noble Lord said: My Lords, I do not know what the noble Earl. Lord Kinnoull, thinks, but I would suggest that it might be convenient to the House if we discussed Amendments Nos. 5 and 6 together. I see the noble Earl nodding, so perhaps we could have a general discussion on the two amendments and then decide which one might be better.

The situation is quite ironic, in one sense. Again, we are dealing with the determination by arbitrators of rents and the extent to which an arbitrator should take into account the rentals of comparable holdings. The Bill as drafted says that he must disregard rents which show, in the case of these comparable holdings, evidence of appreciable scarcity. The ironic thing is that at Report stage I myself moved to substitute "substantial scarcity" for "appreciable scarcity". I withdrew my amendment after widespread support in the House at that time because the Government were apparently hostile, and I therefore thought that we should ponder a little more before Third Reading. The noble Earl, Lord Kinnoull, is now fathering that very same amendment, and I have moved on to one which I hope might be slightly more acceptable. The lengths to which we go to try to tempt the noble Lord, Lord Belstead, to support us occasionally have to be seen to be believed.

I thought that after we had not made much headway at Report on the word "substantial" I might try something which I had recommended to the Government all the way through the Bill; namely, that we should start from first principles and ask ourselves, "What are we actually trying to do?" As opposed to this rather sordid deal between the NFU and the CLA, let us ask what we are really trying to do in the Bill. What we are trying to do is to get the arbitrator to disregard what we have called silly rents, fancy rents, ridiculous rents, that arc being set.

When I used the word "substantial", it attracted a lot of support in the House. It made it more like an instruction to disregard something silly and exorbitant. That was the meaning of the word "substantial" as opposed to "appreciable". I had very good support from the noble Earl. Lord Caithness, who told me that he had seen lawyers, including QCs, and surveyors, and every one had come up with differing answers as to the meaning of the word "appreciable". I had the great support of the noble Lord, Lord Howard, who told us that he did not know what "appreciable" meant but he had a fair idea of what "substantial" meant.

Then I had overwhelming support from the noble Earl, Lord Onslow, who put it graphically to all of us. He said—and this is in column 1054 of the Official Report of 7th February: I believe that 'substantial' is better than 'appreciable' because it means a big scarcity that we must ignore. That is what we want to ignore. We do not, really want to ignore a medium sized scarcity. That is what we are trying to say". He has got it absolutely right. We do not want to ignore rather minimal scarcity or low-grade scarcity; we want to avoid substantial scarcity in looking at these comparable holdings, and at the ridiculous rents that have been offered.

Then we had the crowning accolade for the formulation of something like this from the noble Lord, Lord Belstead, himself. I want to refer to what the noble Lord said at Report stage on 7th February. At column 1036, in replying to an early debate—a very important debate on the whole of the principles of Clause 1—he asked, "What are we trying to do?" He did not put it in exactly those words, and I could perhaps quote them. But he said that what is involved here, what we are talking about, is "disregarding excessively high tender rents". Was he trying to persuade us? Was he trying to carry us along unnecessarily? Did he mean that? Was he just trying to get our support for the amendment? Was it a slip of the tongue? I take that at its face value. He meant that what we are trying to do in this part of the Bill is to get excessively high tender rents disregarded. So I say, why not put that into the Bill? That is the first principle and that seems the right way to go about it.

The difficulty that arises is that the noble Earl, Lord Swinton, then got up and said something totally different. We now have a conflict between the two Ministers on the Front Bench as to what we are actually trying to do in this Bill. It is very amusing indeed to look at in retrospect, because the noble Lord, Lord Belstead, was saying that we want to discourage all these high excessive rents while the noble Earl, Lord Swinton, at the bottom of Column 1054 said something quite different. He said in effect: "We are not really doing that at all.- This comes out in his words. He said that "appreciable", means something less than substantial but is intended to be a pointer to the arbitrator not to be influenced by insignificant scarcity. So what is being recommended there is very, very minimal excess of rents, whereas the noble Lord, Lord Belstead, earlier on the same day was saying: "No, it is not that at all. What we really want to do is to discourage the highly excessive rents."

I am with him; and all those noble Lords who have been trying to get him to agree that what we are trying to do is to leave the market to operate as far as possible in these matters are with him all the way. I should like now to hear the resolution of the conflict between the noble Lord, Lord Belstead, and his colleague the noble Earl. Lord Swinton. Do the Government want to outlaw really excessive rents or to outlaw them all the way down the line to a small degree of scarcity, as the noble Earl indicated?

In that issue, amusing though I made have made it, there lies a great difference. Let us take one example on the ground. Suppose we have farmers on a £35 rent now and suppose that a realistic rent might be £45 in today's circumstances: what does the Bill mean should be disregarded in the way of high tendered rents on comparable holdings—£55, £75, £95? I guess that most of us would say the arbitrator should disregard £95, look with slight suspicion at £75 and should probably think of something between £65 and £75 to be taken into account. My guess is that the Government, on the definition of the noble Earl, Lord Swinton, would be saying that "appreciable scarcity" did not mean that at all.

My Lords, do let us get this clear. We have at the moment two conflicting explanations of what the Government are aiming at. I hope we can persuade the Minister that it is proper to have an explanation of which version they are seeking today. I beg to move.

The Earl of Kinnoull

My Lords, it may be convenient if I speak in support of the noble Lord's amendment and say that I support his principle entirely. Indeed, I think the great majority of your Lordships are behind the noble Lord's aim. The scarcity formula in the rent provision of this Bill has been discussed, debated and criticised on every occasion so that my noble friend is well aware of our feelings, although I slightly doubt whether there is this mythical conflict which the noble Lord, Lord Northfield, indicated. I am sure that my noble friend will clear that up in a moment.

I am very deeply concerned about the scarcity formula in this Bill, because it creates almost the maximum uncertainty as to how rents will be assessed in the future. It leaves arbitrators to interpret, as the noble Lord has said, an artificial formula among the number of other considerations which have to be taken into account. Indeed, it will leave the arbitrator to decide what discounts he sees tit. It would not be beyond the wit of arbitrators to find that in differing areas and with differing people one will have a pattern of inconsistent results and that is the very thing we should be trying to avoid: in fact it would be the very last thing that the NFU or the CLA would wish to see.

The scarcity formula was originally devised, as the noble Lord, Lord Northfield, said, for good and agreed purposes: to pluck out and dismiss on rental evidence the wholly uneconomic key money transactions that make a nonsense for any practical farmer. I believe that, as the Bill is drafted, arbitrators in future will give undue weight to this formula because it is a new concept and it will put a duty on the arbitrator—one laid on him by Parliament—to discount rentals and to leave it to the arbitrator to decide how much. I think it is very sad that we may get a situation in which the high hopes that my noble friend floated on the Second Reading—that this Bill will breathe new life into the landlord and tenant system—may be wiped away by this provision and indeed young and hopeful future farmers may be denied the very first rung of the farming ladder that they so wish to climb.

I do not intend to move my amendment. As the noble Lord, Lord Northfield, has rightly said, there was his amendment at an earlier stage. I do not intend to move it, because, if my noble friend is not persuaded by the noble Lord, Lord Northfield, then I really think it should be a matter for the other place to look at. It would be wrong to get the Government on a hook by a Division and hooked into being completely against amending this formula. I would hope that my noble friend, having listened patiently in all the stages of the Bill to all the arguments about this clause, will feel able to take the matter back to his right honourable friend and say: "Look at it again".

Lord John-Mackie

My Lords, as your Lordships will know, we were very much against this page and a half of verbiage, instructing arbitrators what to do; but if it is there and if we are to have words at all, I wonder why "discounting" was used in the first draft and, I think, in the second draft as well, and now we have the word "disregard". I should like to know the difference between the two, because they have been bandied up and down in the Bill. If we are to have a word on the scarcity, we would prefer "appreciable". I agree with the noble Earl, Lord Onslow—he is not in his place at the moment—that "substantial" is stronger than "appreciable" and we do not want a stronger word. I think that my noble friend's word "excessive" is stronger still; so, while disagreeing with the whole thing, if we are to have a word, we should prefer "appreciable".

Lord Mackie of Benshie

My Lords, I should like to point out to my noble kinsman that the noble Earl, Lord Onslow, is in a different place at the moment although perhaps not in a different position. I do think we have rather got to the stage of angels dancing on the points of pins. Really, the instructions are sufficiently clear to the arbitrator that he has now got to take into account the scarcity value, and whether it is "appreciable-, "substantial" or "excessive" is in fact in his own mind. Even the noble Lord's amendment says, "which he considers excessive". Obviously we depend enormously on the arbitrator himself and on his understanding. I think the general tenor of the word "appreciable" is satisfactory, and I must say that I think we are here trying to define too much how the arbitrator ought to use his judgment.

4.11 p.m.

The Earl of Onslow

My Lords, may I say very briefly that "appreciable", "substantial" and what the noble Lord, Lord Northfield, suggested are very different. Unless we instruct the arbitrators carefully, they will not know what to do. It is known perfectly well that what is said on the Floor of the Chamber does not have any effect on Acts of Parliament. It is what is actually written into Acts of Parliament that is important, not what I or what the noble Lord, Lord Mackie, says, much as we would like it to be the case. What matters is what is said in the Act of Parliament and the word "appreciable" in an Act is not sufficiently clear.

Lord Howard of Henderskelfe

My Lords, I had not intended to intervene in this little semantic argument and this dancing on the head of pins, for which I am not best fitted physically. But I am very interested to be reminded that the noble Earl in winding up used the words "not insignificant", because the word "significant" in place of either "appreciable" or "substantial" is precisely what I suggested, not in a formal amendment but in a more private discussion with the noble Lord who is in charge of the Bill, and he rejected it as being a further interference with the formula which could only lead to further trouble. May I therefore suggest that he might like to look again at exactly what his noble colleague on the Front Bench replied in an earlier debate, in terms of the word "significant"?

The Earl of Caithness

My Lords, this amendment affects the paragraph in the Bill which gives me most concern, and many of us have spent months trying to persuade my noble friend the Minister and the National Farmers' Union that account should be taken of our fears and that this clause should possibly be reworded, but without losing its principle. Alas, to date our efforts have not been successful and it worries me greatly that the NFU cannot even accept this minor amendment. I hope that I am proved wrong in due course, but I believe that this paragraph, more than any other in the Bill, will be the one that leads to a reduction in rent. If it does, it will be a serious blow not only to landlord/tenant relationships, but to its very structure.

In yesterday's Financial Times we saw again that, according to the June 1983 census, the Ministry of Agriculture reported that last year there was a further decline of rented land of 1.5 per cent. The whole landlord/tenant system is increasingly threatened, and if this paragraph makes matters worse the whole country will know that the National Farmer's Union and the Tenant Farmers' Association have done an excellent job in further featherbedding their own existing tenants to the detriment of newcomers and the whole system. I earnestly ask them and my noble friend to think again and respond more positively to our concern.

Lord Stanley of Alderley

My Lords, I should like to say that all three of my noble kinsmen are wrong about the word "substantial", but we covered this matter before and I do not intend to go over it again. I would put one hurdle in the path of the amendment of the noble Lord, Lord Northfield. I believe that it will complicate a complicated clause. We all say that the clause is complicated, but he is putting in words such as, in the opinion of the arbitrator which he considers excessive". so the poor arbitrator, in his own opinion, would have to consider what he considers excessive and what he considers appreciable. We are getting very semantic and I follow the noble Lord, Lord Mackie of Benshie, here.

The noble Lord's amendment will give no clear direction to the arbitrator: and here I hope that I carry my noble friend Lord Thorneycroft and my noble kinsman Lord Onslow, who want to make the position clear. He would make it less clear. In conclusion, may I say to my noble friend Lord Caithness that I thought he told me that the National Farmers' Union and the Tenant Farmer's Association were legislating and they should not. But he is legislating.

Lord Northfield

My Lords, before the noble Lord sits down, he has misread the Bill. It does not say "in his opinion" anywhere, so that confusion does not arise.

Lord Belstead

My Lords, we have laboured hard and long over this rent formula and I thought that on Report your Lordships decided we had got it about as good as we could, with the very great help of an original amendment put down in Committee by noble Lords who included my noble friend Lord Kinnoull. If an amendment were put forward on which your Lordships' House was substantially agreed—and I think that the area of disagreement on this very interesting amendment is more evident than the area of agreement—then the House would need to look very closely at it again. If an amendment were put down which could he said to represent some great advance, I know that the House would immediately look at it again very closely.

Although the noble Lord, Lord Northfield, has contributed so much to the consideration of this whole area of legislation, and, in particular, to the proceedings on this Bill, with respect to him I do not think that this amendment can be said to represent an improvement. First, what does it actually mean? The amendment would require the arbitrator to disregard comparable rents which he considers to be excessive.

But excessive in terms of what? After all, a drop of whisky is nectar to some, but may be considered excessive by the confirmed abstainer. A speech which is the pride and joy of he who has composed it, may be considered excessive to the ears of others.

Such a subjective judgment will not do and I do not think it compares very favourably with the objective test which we have in the formula of "appreciable scarcity". The purpose of the discount for appreciable scarcity is to instruct arbitrators, in setting rents for sitting tenants, to disregard the key money element in comparable rents. But if we were to say that rents for sitting tenants ought to disregard comparable rents which are excessive, it could well be argued that no rent is excessive if it has enabled the tenant to secure his holding in the first place.

The noble Lord, Lord Northfield, chided my noble friend Lord Swinton and myself for appearing to disagree. All I can say is that we are firmly agreed on the explanation which I have just given of the effect of appreciable scarcity. If, by any chance, we were not too sure, we could look at the robust common sense of the noble Lord, Lord Mackie of Benshie, who in Committee simply said that arbitrators can surely appreciate what "appreciable" means when they see it. The requirement that, in looking at comparable holdings, an arbitrator should discount only for appreciable scarcity is, I therefore suggest, an objective test and—I must say this now to my noble friends Lord Caithness and Lord Kinnoull—wholly reasonable.

In essence, both of my noble friends were expressing anxiety that undue weight will be given to the appreciable scarcity test. All I can say to that is that the Scottish legislation has in exactly the same way a scarcity discount in it, but without the word "appreciable". So our wording is somewhat stronger and will, I hope, therefore appeal to my noble friends and to the noble Lord. Lord Northfield. I hope that the formula also appeals still to the House and that your Lordships will feel it is best to leave the rent formula as it is.

Lord Northfield

My Lords. I am not at all happy and I join the noble Earls, Lord Kinnoull and Lord Caithness, in saying that I am sure we shall see trouble as a result of the drafting of the Bill in its present form. I will simply repeat what the noble Earl, Lord Swinton, said at col. 1054: The word "appreciable", I am advised, would exclude de minimis scarcity".—[Official Report, 7/2/84.] That is all. The rest of us have been saying we should be going a good deal further than that: that all we should be excluding are the stupid key money tender rents. The noble Lord, Lord Belstead, used that phrase again today. "What we are trying to exclude", he said, "are key money rents". With respect, key money rents are not de minimis scarcity. There is still conflict between what the noble Lord has just said and the definition given by the noble Earl, Lord Swinton, in col. 1054 of Hansard for 7th February. We have not heard the last of this. I am sure that it will reverberate when somebody tries to execute it after the Bill becomes law.

Finally, I take the point made by the noble Earl, Lord Kinnoull: that perhaps we had better leave it. If we were to be defeated today in a division, it might, as he said, put the Government "on the hook". I hope that we can persuade Members in another place to explore even further the clear conflict between de minimis scarcity on the one hand and high tender rents—excessive rents, as I have called them—on the other as to the true meaning and true intent of the Bill. In the meantime, with enormous regret and with a good deal of disappointment, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 6 not moved.]

Lord Stanley of Alderley moved Amendment No. 7: Page 2, line 39, after ("of") insert (", or a person tendering for,")

The noble Lord said: My Lords, I hope that the Government will accept this amendment. I beg to move.

Lord Belstead

My Lords, I have very great pleasure in accepting this amendment.

On Question, amendment agreed to.

Lord Belstead moved Amendment No. 8:

Page 5, line 34, at end insert— ("( ) Where the tenant has held a previous tenancy of the holding, then—

  1. (a) in the definition of "tenant's improvements" in subsection (3)(a) of this section, the reference to any such improvements as are there mentioned shall extend to improvements executed during that tenancy; and
  2. (b) in the definition of "tenant's fixed equipment" in subsection (3)(b), the reference to such equipment as is there mentioned shall extend to equipment provided during that tenancy;
excluding, however, any improvement or fixed equipment so executed or provided in respect of which the tenant received any compensation on the termination of that (or any other) tenancy.").

The noble Lord said: My Lords, Amendment No. 8 fulfils an assurance I gave on Report to my noble friend Lord Renton to clarify the position regarding tenants' improvements on a rent review. My noble friend had drawn attention to a small defect in the law and I am glad that this has enabled us to propose that we put it right.

The effect of the amendment is to make clear that an arbitrator, in determining the rent properly payable under the new Section 8, should disregard any increase in the rental value of the holding which is due to improvements executed by the tenant or fixed equipment provided by him not only during the current tenancy, as is provided for already, but also during any previous tenancy of the same tenant. This is subject to the proviso that the tenant has not received compensation in respect of the improvement or equipment on termination of a previous tenancy.

Your Lordships may think that this is a fairly remote point. I think it is. But there is the possibility of the same tenant having a previous tenancy of the same holding when there has been a surrender of a tenancy followed by a re-grant and repossession—for example, when an old tenancy agreement is brought up to date or when the boundaries of a holding are changed for some reason. That is the effect of the amendment. I beg to move.

The Earl of Caithness

My Lords, may I thank my noble friend for moving this amendment. It is of great help in clarifying the situation.

Lord Middleton

My Lords, I am sure that this amendment will be acceptable to the House, but before that is determined and before we leave Clause I may I say that Clause 1 of the Bill, as originally drafted, received a good deal of criticism. The noble Lord, Lord Thornycroft, has forcefully reminded us of that. We have spent very nearly an hour discussing Clause 1 on Third Reading. Since the clause was discussed at great length in Committee on 22nd November last the Government have amply fulfilled their promise to search for a revision of the rent formula which could have a greater measure of agreement. Again I can only congratulate the noble Lord, Lord Belstead, and his department upon achieving what I believe to be the desired result, after thorough consultation. It is never easy—indeed, it is probably impossible—to make everybody happy. As I said at Second Reading, it is exceedingly difficult to find a really good rent formula, because what is needed is a rent formula which is acceptable to all sides: landlords, tenants, arbitrators, land agents, institutional clients and the Government. I believe that with the amendments which have been made to this clause by the House as a result of those consultations, we have now got a formula in which all concerned can have confidence.

Lord Bishopston

My Lords, I rise to say that we are pleased with the noble Lord's amendment and the flexibility which he has shown. From time to time there have been criticisms of the various amendments to Clause 1, which we hope the Minister will take into account. While I am on my feet, may I say that when speaking to Amendment No. 1 earlier today I quoted remarks which I attributed in error to the noble Earl, Lord Onslow, who was not then in the Chamber. Those remarks should have been attributed to my noble friend Lord John-Mackie. I apologise to the noble Earl for attributing to him the comments which I made about the speech immediately following his, which is reported in Hansard at col. 1020 on 7th February. These comments, of course, still apply. I thought I had better put the record straight while we are dealing with Clause 1.

Lord Belstead

My Lords, may I thank both noble Lords for what they have said. May I also thank my noble friend Lord Caithness who handled the amendment we have just taken, I think from my noble friend Lord Renton, at the previous stage. All I would add is, yes; I have detected one or two criticisms of the rent formula in Clause 1. That is why I am particularly grateful to my noble friend Lord Middleton for putting the matter in context. I believe, as my noble friend has been good enough to say, that it represents a real step forward.

On Question, amendment agreed to.