COMMONS AMENDMENTS (Hansard, 2 July 1984)

§ Lord Belstead
My Lords, with the leave of the House, I beg to move that the House doth agree with the Commons in their Amendments Nos. 1 to 3 en bloc. Amendments Nos. 1, 2 and 3 introduce specific reference to "earning capacity" in relation to the productive capacity of the holding, but without preventing an arbitrator from taking account of earnings from non-farming activities as a relevant factor. This in no way changes the terms of the rent 78 formula adopted by your Lordships' House on Report, but clarifies the position in relation to earning capacity.

§ Lord John-Mackie
My Lords, your Lordships will know that when the Bill was first brought before us it contained this provision. I do not know the nature of the persuasion or the blandishments that came from behind the noble Lord, but they succeeded in removing the provision. I have here about 36 columns of Hansard containing argument that seeks to bring it back in again. When one thinks of the amount of time, paper and everything else that has been spent to put back something which the noble Lord took out, it seems to be slightly ridiculous. However, that was what was required in the agreement between the NFU and the CLA. I should have thought that to leave it out and to say nothing about earnings would have simply broken the pact that was made between the two bodies.
Perhaps I may show how necessary it is to include this provision. At the Report stage in another place it was said that because of the milk quota a situation could arise today in which a landlord who has let a farm as a dairy farm is told by a tenant, "I have been very badly hit by this milk quota and will not manage to make a profit in milking cows, so I want to go out of dairy farming". If the landlord refuses that request, a very difficult situation will arise. Not many cases such as that will arise, but they could. It is absolutely essential that this provision is included, and we are glad that ultimately the Government gave way and put it back in the three amendments which the noble Lord has just moved.

§ Lord Northfield
My Lords, when Ministers have to eat their words it is very often astonishing how they lack any sense of contrition. I suppose they always say, "It only goes to show how much we have listened to your Lordships". But in this particular case the change of mind has been quite dramatic. This issue was raised by the noble Earl, Lord Caithness, on 22nd November in the Committee proceedings. At col. 1 7 I of Hansard he said: The Bill should make it clear to all laymen that in assessing the rent to he paid the arbitrator must look not only at what the farm is doing in the hands of a competent tenant but what it might do in the hands of a similarly skilled farmer who might farm it in a more profitable manner". The noble Earl was talking about the earning potential of the holding when he made that speech; but the noble Lord, Lord Belstead, said, "This is terribly dangerous heresy; it is radical nonsense." He said that this would leave it open for the rent to be assessed on the basis of the farmer using extreme methods—he used the phrase "any methods"—which would make the farm more profitable.
Of course, that is precisely what it will do. It will introduce more of the free market, which the noble Lord has been resisting throughout. I am astonished that my noble friend Lord John-Mackie is so fond of this. It will bring into the rent assessment the issue of what the farmer could do if he wished, if he had more capital, or whatever, to make the farm more 79 profitable. That issue must be taken into account when assessing the rent.
The noble Earl, Lord Caithness, was strong in his recommendation. It is sad that he has been nobbled and made a Minister so that he cannot be present tonight to say how delighted he is that his Minister is now accepting what he turned down at the Committee stage of the Bill. Even the Liberal Benches and the Social Democratic Benches, which are now deserted, were united in opposing this issue at the Committee stage. Perhaps I may quote what the noble Lord, Lord Walston, said at col. 173 of Hansard on 22nd November. The noble Lord said: I think that it would be very wrong to have rents assessed on some theoretical potential which a well equipped, highly skilled and specialist tenant could make use of". With great respect, that is what the amendment will now do. These issues on what the farm can produce with a suitable system of farming, undefined—because the new Section 8(4), set out in Clause 1, says: practising a system of farming suitable to the holding", which might be more intensive than the present tenant's farming method—must be taken into account in fixing the rent. How right this amendment is! And with great respect, how wrong the noble Lord, Lord Belstead, was to resist exactly this amendment when it was moved at the Committee stage by his noble friend.

§ Lord Middleton
My Lords, earning capacity is expressed in these amendments as being related to the productive capacity of the holding, and it is particularly defined in Amendment No. 3. As we have just been reminded, the question of earning capacity was discussed in the House at the Report stage, and the view was then taken that it was not necessary to include it in the Bill. However, I can see that there might be cases when the full productive capacity of a farm might not be capable of being realised through, for example, the operation of some quota mechanism. There might be a farm with a good potato-growing potential but where the tenant could not obtain a basic acreage allotment from the Potato Marketing Board, and in that case the earning capacity might not match the productive capacity of the farm. Therefore, my own view is that this amendment is acceptable.
In speaking just now to these amendments, my noble friend the Minister satisfied me on the question of unrelated earnings, but I should be very grateful if my noble friend would clarify this point and perhaps emphasise it for me. It would be perfectly possible for there to be a holding with an earning capacity not directly related to its productive capacity. The holding might be situated near a popular tourist resort, and there might be a good earning potential from, for instance, the provision of holiday accommodation. Surely that must be relevant to the rent assessment. However, from the wording of the first three amendments, at first sight, it seems that that should be disregarded by an arbitrator. That cannot be intended. I would assume that such a factor as I have described could be caught under those very useful words "all relevant factors", if not under the words: the character and situation of the holding (including the locality in which it is situated)". 80 I wonder whether my noble friend could give me that assurance.

§ Lord Belstead
My Lords, this part of Clause 1, which gave rise to many hours of debate by all of us who are taking part in this final stage of the Bill, once again brings us back to a short but important exchange of views. With respect to the noble Lord, Lord Northfield, whose expertise on these matters has been of the very greatest help in getting this Bill into shape, and with whom I usually agree, if he would look back over the previous proceedings in this House he will see that the alteration which he ascribes to the changes which the Bill has undergone in another place really has not quite had the effect that the noble Lord said it would. In other words, I am saying that when the Bill left this House it was perfectly possible for the productive capacity of the holding to be taken into account. The change which was made, and the amendments with which we are now dealing, include earning capacity as well. In another place right honourable and honourable Members felt that that change clarified the position relating to the rent formula.

§ Lord Northfield
My Lords, if the noble Lord would be kind enough to give way, perhaps I may ask him to look at Amendment No. 7, which was moved by the noble Earl, Lord Caithness, on 22nd November last, which was: leave out ("productive") and insert ("potential productive and earning")". That is exactly what the amendment before us wishes to do, and it is one which the noble Lord turned down.

§ Lord Belstead
My Lords, if the noble Lord looks back at those very long debates, I think he will find that at that time my noble friend Lord Caithness was trying to include earning capacity in all its various facets. That brings me to the point which has been made by my noble friend Lord Middleton, because my noble friend is concerned that, in putting (as another place has done) earning capacity into the Bill and tying it to the productive capacity of the farm, that may throw some doubt upon the position of earning capacity when it is related to non-farming activities.
The reply which I want to give to my noble friend Lord Middleton is that, although the related earning capacity in these amendments does not include earnings from non-farming activities—for instance, tourism—activities of this sort would (as my noble friend has quite correctly divined) be one of the relevant factors which the aribtrator would be bound to take into account. The rent formula, as it is now amended, therefore spells out only the specific relevant factors which apply in every case. The effect of the formula, as amended, enables actual earnings from non-farming activities to be taken into account as relevant factors. I am very glad to have the opportunity to clarify that once and for all.