HL Deb 22 July 1986 vol 479 cc167-86

6.5 p.m.

Lord Belstead

My Lords, I have it in command from Her Majesty the Queen and His Royal Highness the Prince of Wales to acquaint the House that they, having been informed of the purport of the Agriculture Bill, have consented to place their prerogatives and interests, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.

Clause 14 [Compensation to outgoing tenants for milk quota: Scotland):

The Minister of State, Scottish Office (Lord Gray of Contin) moved Amendment No. 1:

Page 11, leave out lines 23 to 34.

The noble Lord said: My Lords, I think it would be helpful to the House if, along with Amendment No. 1, we considered Amendment No. 3. These amendments parallel for Scotland amendments relating to England and Wales tabled by my noble friend Lord Belstead and agreed by the House at Report stage; time did not permit appropriate Scottish amendments to be tabled at that juncture. The most significant amendment, No. 3, is a new clause, a Scottish equivalent of Clause 15. Amendment No. 1 is consequential upon the insertion of this new clause.

If I may remind your Lordships, the issue here is to ensure that transferred quota acquired by the tenant dairy farmer will be disregarded at a rent review under existing land tenure legislation; that is to say, it is to be treated in a similar way to a tenant's improvement—the tenant will not be charged rent on it. If a tenant has paid for quota through a land transaction and effectively transferred that quota on to the tenancy, it is only right that it should be regarded in the same light as a tenant's improvement and disregarded in rent determinations. This is provided for in subsection (3). This subsection also achieves what subsection (2) of Clause 14 was intended to achieve, but in a different way. By providing that transferred quota is to be disregarded, subsection (3) makes it clear that allocated quota is not to be disregarded. This means that a tenant's potential eligibility for compensation in respect of allocated quota when the lease terminates will not affect the rent payable. This preserves the original intention of subsection (2) of Clause 14, and Amendment No. 1 therefore proposes the removal of that subsection.

Subsection (4) of the new clause makes it clear that if an incoming tenant has made a payment to the landlord on taking over a holding to which quota is attached, this does not count as the acquisition of transferred quota. Subsections (5) and (6) ensure that the successor or assignee of the original tenant will be treated in the same way as the original tenant in respect of transferred quota. Subsection (7) applies the clause to Crown land. I beg to move.

Clause 15 [Rent arbitrations: milk quotas]:

Lord Belstead moved Amendment No. 2:

Page 12, line 31, at end insert— (" (4) Section 95 of that Act (Crown land) applies to this section as it applies to the provisions of that Act.").

The noble Lord said: My Lords, this is a technical amendment. It applies Section 95 of the Agricultural Holdings Act 1986, which relates to Crown land, to rent arbitrations in respect of land to which milk quota is attached. I beg to move.

Lord Gray of Contin moved Amendment No. 3:

After Clause 15, insert the following new clause:

("Rent arbitrations: milk quotas, Scotland.

.—(1) Paragraph 1 and the other provisions of Schedule 2 to this Act referred to therein shall have effect for the interpretation of this section, as they do in relation to that Schedule.

(2) This section applies where an arbiter or the Scottish Land Court is dealing with a reference under—

  1. (a) section 6 of the 1886 Act;
  2. (b) section 32(7) of the 1911 Act;
  3. (c) section 7 of the 1949 Act; or
  4. (d) section 5(3) of the 1955 Act,
(determination of rent) and the tenant has milk quota, including transferred quota by virtue of a transaction the cost of which was borne wholy or partly by him, registered as his in relation to a holding consisting of or including the tenancy.

(3) Where this section applies, the arbiter or, as the case may be, the Land Court shall disregard any increase in the rental value of the tenancy which is due to—

  1. (a)where the tenancy comprises the holding, the proportion of the transferred quota which reflects the proportion of the cost of the transaction borne by the tenant;
  2. (b) where such transferred quota affects part only of the tenancy, that proportion of so much of the transferred quota as would fall to be apportioned to the tenancy under the 1986 Regulations on a change of occupation of the tenancy.

(4) For the purposes of determining whether transferred quota has been acquired by virtue of a transaction the cost of which was borne wholly or partly by the tenant any payment by a tenant when he was granted a lease, or when a lease was assigned to him, shall be disregarded.

(5) Paragraph 3 of Schedule 2 to this Act (insofar as it relates to transferred quota) shall apply in relation to the operation of this section as it applies in relation to the operation of that Schedule.

(6) This section shall apply where paragraph 4 of Schedule 2 to this Act applies, and in any question between the original landlord and the head tenant, this section shall apply as if any transferred quota acquired by the sub-tenant by virtue of any transaction during the subsistence of the sub-lease had been acquired by the head tenant by virtue of that transaction.

(7) Section 86 of the 1949 Act (Crown Land) shall have effect in relation to this section as it does in relation to that Act.").

The noble Lord said: My Lords, I beg to move Amendment No. 3 formally.

Clause 17 [Designation and management of environmentally sensitive areas]:

Lord Belstead moved Amendment No. 4:

Page 14, line 23, leave out ("are") and insert ("is").

The noble Lord said: My Lords, this amendment is designed to correct a grammatical error. I beg to move.

Lord Belstead moved Amendment No. 5:

Page 14, line 24, at end insert— ("(5A) The Minister shall not make an agreement with any person under subsection (3) above in respect of any land unless that person has certified to the Minister—

  1. (a) that no person other than he is the owner of the land; or
  2. (b) that he has notified any other person who is an owner of the land of his intention to make an agreement under subsection

(3) above in respect of the land; and in this subsection references to the owner of the land are to the estate owner in respect of the fee simple in the land or, in Scotland, the absolute owner of the land within the meaning of section 93 of the Agricultural Holdings (Scotland) Act 1949.").

The noble Lord said: My Lords, during debate in Committee and at Report stage a number of your Lordships expressed concern over the arrangements between landlords and tenants in the designation of environmentally sensitive areas. My noble friends Lord Peel and Lord Radnor moved amendments on this matter. There is a wide and most welcome consensus among representatives of landlords and tenants that there should be a proper procedure here. At Report stage, therefore, I undertook to consider whether this consensus might be sealed by a reference on the face of this clause.

The amendment that I have tabled attempts to reflect this. Broadly speaking, it requires a tenant to certify that the landlord has been notified before an environmentally sensitive area agreement can be made. I am advised by lawyers that the word "certified" is the most appropriate in this instance. What we shall do in practice is to require the tenant to give a declaration on the application form that he has sent a copy of the agreement to the landlord and indicated his intention to join. In our literature we shall urge tenants to discuss the agreement with the landlord if their tenancies make this appropriate. I hope your Lordships will feel that this amendment moves a considerable distance in the direction which my noble friends have urged. I beg to move.

Lord Middleton

My Lords, as my noble friend Lord Belstead has reminded us, he gave an undertaking to the noble Earl, Lord Peel, that if tenants have not notified their landlords they will not have their application for inclusion in an ESA accepted. At Report stage, my noble friend said he was prepared to consider whether the Government might write that requirement into the Bill. That is what has been done. Clause 17 is thereby much improved. I am most grateful to my noble friend for doing that.

Lord John-Mackie

My Lords, I take the words of the noble Lord, Lord Middleton, and if the noble Lord, Lord Belstead, says that the lawyers are satisfied then I believe we are, too.

The Earl of Radnor

My Lords, perhaps I may be allowed to add my thanks to my noble friend for being as good as his word and for writing this provision into the Bill. It is an extremely important one. As I said previously, the creation of these ESAs must be smooth and their running must be smooth. I could not possibly see, without some sort of assurance such as this being written into the Bill, that that would necessarily happen. Now I think, or at least I hope, it will, and I am grateful. I know that goes for my noble friend Lord Peel as well.

Lord Belstead moved Amendment No. 5A.

Page 14, line 26, leave out ("and") and insert ("or").

The noble Lord said: My Lords, I must apologise for the fact that this amendment was put down yesterday. It was observed only at the last minute. It is a purely drafting amendment. I beg to move.

Clause 23 [Short title, commencement, consequential amendments, repeals and extent]:

Lord Belstead moved Amendment No. 6: Page 19, line 17, leave out ("and 14") and insert ("to [Rent arbitrations: milk quota, Scotland]").

The noble Lord said: My Lords, this amendment is consequential on the introduction of Clause 15 and the new clause, Amendment No. 3 on the Marshalled List, which my noble friend Lord Gray of Contin has moved. They deal with rent arbitrations where milk quota has been acquired by the tenant. The effect of this amendment is to provide for the appropriate agriculture Ministers to introduce the provisions contained in these clauses from a date which is to be laid down in an order. Your Lordships will recall that the Bill already provides for the end of tenancy quota compensation to be introduced by order. I think that this amendment completes the matter. I beg to move.

Lord Belstead moved Amendment No. 7:

Page 19, line 38, leave out ("and 17(12)") and insert ("11, 17(12) and 21"),

The noble Lord said: My Lords, this amendment ensures that there will be no legal impediment to the consolidation of any marketing schemes which extend to Northern Ireland. I beg to move.

6.15 p.m.

Schedule 1 [Tenants' compensation for milk quota]:

Lord Stanley of Alderley moved Amendment No. 8:

Page 23, line 41, at end insert— ("In prescribing the average yield per hectare to apply within Less Favoured Areas the Minister shall set the same figure for each type of Less Favoured Area within the United Kingdom.").

The noble Lord said: My Lords, at Report stage we discussed the reasons why the Government were intending to put a lower standard quota on Scottish less favoured areas than those in England and Wales. Your Lordships may remember that I was not satisfied with the reply given by my noble friend Lord Belstead. Since then, having read and studied Hansard, I have become aware that every other noble Lord who spoke either failed to appreciate the problem or was concerned about it. Since then, my noble friend Lord Belstead has very kindly written to me on the subject. But I am sorry to have to tell him that I am none the wiser; hence this amendment, for even if I do not get the answer I want I believe it is the duty of your Lordships' House to try to clarify the matter.

The question I have to put to my noble friend Lord Belstead is: why is it intended—I emphasise the word "intended" because I fully realise the final figure will only appear in the regulations—that Scottish less favoured areas should have a starting point 500 litres lower than English and Welsh ones? My noble friend implied when he spoke at Report stage that this figure was only a starting point. It was a starting point for arbitrators as a guide. They could vary the final settlement either way, according to the conditions on the farm. If the Scottish farm were similar to the English and Welsh one, the end result would be approximately the same. I have to ask my noble friend: why only approximately? Why not the same? Does that mean that because the starting figure is different there would be a likelihood of a different result?

Let me give the House an example. There are farms in Northumberland in less favoured areas that adjoin those across the Border. Can my noble friend Lord Belstead say that if two farms, one on either side of the Border, are similar the tenant will be awarded the same standard quota? If that is the case, why the difference of 500 litres between Scottish LFAs and English and Welsh areas? Frankly, I cannot see my noble friend saying that they will not have the same judgment, for that would be blatantly unfair. The question I want answered is: if there are in Scotland farms identical to those in Wales or in England will the standard quota allotted be identical in each case? If the answer is yes—which from reading the remarks made by my noble friend Lord Belstead at Report I believe it should be—will my noble friend consider very carefully before the regulations are laid, wording those regulations so that they make it absolutely plain to the arbitrators that the judgment and the result must be exactly the same? From what has been said so far and what is in the Bill, it is not clear to me or to those who advise me that this is the case. I beg to move.

Lord Belstead

My Lords, my noble friend has explained clearly in his brief remarks on this amendment that what he is concerned about is that the setting of figures for the standard quota for the milk arrangements in the less favoured areas in Scotland and the setting of figures for less favoured areas in England and Wales will lead to a preferential position so far as concerns Scotland. In setting the average figures to be used for the purposes of calculating the standard quota, we feel that we must look at the average yields achievable in those areas; so, my right honourable friend the Minister of Agriculture, Fisheries and Food in England and the Secretary of State for Scotland have looked at the average yields per hectare in the original less favoured areas in England and Wales and in Scotland respectively.

They have also looked at the average quality of land in the original Scottish less favoured areas and, quite clearly, it is lower than in the original less favoured areas in England and Wales. In prescribing figures, we need to look at the average for the areas concerned. As I sought to explain to your Lordships during the Report stage debate, the prescribed figures are only there to give a starting-off point to the arbitrator, if an arbitrator has to come in, in order to help the parties in their discussions or the arbitrator, about the standard quota for a particular piece of land.

However, we recognise that there may be farms in England or Wales which have land which is of the same quality and has similar climatic conditions to land in Scotland. I have to say that, despite the concerns expressed by my noble friend, I do not believe that the prescription of different figures on either side of the border for the original less favoured areas will cause inequities. My noble friend put to me a direct question. He said that if there is land on one side of the border, for instance in the South-East of Scotland, and that there is land on the other side of the border in the North-East of England, could I give him an assurance that, on the figures which we say we have in mind—because they will be figures which will be put into subordinate legislation—the same farms will be treated in the same way?

Outside this Chamber, I have been through figures informally with my noble friend Lord Stanley. I am sure that my noble friend will check me if I am not correct in this, but I think that it is fair to say that the answer to my noble friend's question is that, on the figures that we have in mind to put into subordinate legislation, the similar farm on the Scottish side of the border would come out one-fifth of 1 per cent. in favour. When you consider that the less favoured areas in Scotland are many miles, in some cases many hundreds of miles, north of the less favoured areas in England and Wales, I do not think that one-fifth of 1 per cent. in favour of Scotland is unreasonable on the figures that we are intending to put forward.

So I say to your Lordships that the effect of the formula in all cases is going to be to give the producer—whether he is in the hills in Wales or in England or in Scotland—a standard quota which will be over 11 per cent. lower than the yield one would reasonably expect from his farm. And that is going to be good for tenants, because let us remember that if tenants have a quota over the standard quota they are going to get 100 per cent. of everything over the standard quota; so that it is going to be good for all tenants in the whole of the British Isles that the standard quota is going to work out at more than 11 per cent. below what one could reckon ought reasonably to be produced on a farm. Even though I am proud to be working in the Ministry of Agriculture, Fisheries and Food on the English side of the border, nonetheless I do not think it is unreasonable that one-fifth of 1 per cent. should be the slight amount in favour of similar farms with similar yields on the Scottish side of the border.

Lord Mackie of Benshie

My Lords, I am simply wondering whether the Scottish Minister thought that one-fifth of 1 per cent. was enough of a difference for all these hundreds of miles further north.

Lord Gray of Contin

No, my Lords. I certainly do not but I am prepared to settle for it.

Lord John-Mackie

My Lords, surely if there is a difference as small as that, would it not satisfy the noble Lord, Lord Stanley, if you just made it the same?

Lord Stanley of Alderley

My Lords, I should like to thank my noble friend for that explanation. I have to admit that I have difficulty in finding fault with the scheme if it really is one-fifth of 1 per cent. I hope that those noble Lords who come from Scotland will not think I am being somewhat suspicious that I am being "ripped off", as they say, by them. But, to be serious, if my noble friend intends to make the regulations such as to make identical farms in England and Wales against those in Scotland have a difference of only one-fifth of 1 per cent., then, yes, I have reluctantly to concede the point on this. But of course we have not seen the regulations yet and it is up to my noble friend to make sure that this is so when the regulations are produced for us, as I know he will. With that, I beg leave to withdraw this amendment.

Amendment, by leave, withdrawn.

Lord Mackie of Benshie moved Amendment No. 9:

Page 24, line 27, leave out ("the sum of that value and").

The noble Lord said: My Lords, we have tried to improve this Bill in a number of ways and have failed. This is really a last attempt to introduce an element of fairness into the splitting of the value of the quota. I accept that the CLA and the NFU have failed to agree so that the Minister has had to step in and impose a formula. Unlike Solomon, he did not suggest halving the baby down the middle and giving half to each. He cut off a toe and offered it as the tenant's fraction, or at least that is how it appears to a lot of people.

What the tenant's fraction does, if I might explain it once again, is to take the rental value—and this is important—of the tenant's improvements, whether they be buildings or machinery or equipment, and make that the numerator, the top figure. Then it takes the sum of those values and adds it to the rental value; and makes that the denominator. In most cases, it will not make a tremendous amount of difference because where you have a landlord who has supplied the buildings, kept them up and so on, the adding of the sum of the tenant's rental values to the fraction will not make a great deal of difference.

Where it makes an enormous difference is where the tenant has done a tremendous amount of work. The noble Lord, Lord Mottistone, brought up a personal case that he knew of. In a case like that, where the tenant may have built all the buildings, then it is up to the arbiter to put a value on the land and a value on the buildings and to say which value is the greater or the lesser. I think it pretty well inconceivable that an arbiter looking at a figure like that could say that, in fact, the rental value of the buildings for 100 cows was greater than the rental value of a 150-acres pasture to carry 100 cows. I think that an arbiter obviously has to use his common sense, and the provision in the Bill is for arbitration. These are lines to guide the arbiter.

When you add that sum then, of course, it makes a complete nonsense of any decent regulation or decent calculation of the values attributable to the tenant and the landlord. It at once reduces it enormously. I must say that most tenants have a suspicion that this is why it was done. It appears to me to be entirely wrong that in a case like this, where a great deal of money has been put in, the value should be deliberately reduced; and that is what happens by adding it to the landlord's input by way of rent. There is no shadow of doubt that that is what it is for and that is what it does.

What we have to ask ourselves is: is that a fair way to split the value of the quota? The quota has a value; and I maintain that what is proposed is not fair, and it is seen as not fair by a great many people in this country. I think it is an enormous pity that the Minister did not accept a 50–50 split and also that the CLA, the SLF and the NFU did not agree on a figure. What we now have to do in Parliament is to decide what is a fair way to calculate the fraction.

My position is a perfectly simple one: it is grossly unfair in a great many cases to add back the value so as to lower the value of the fraction to the tenant. That is putting it as simply as I can, and obviously I shall be very interested to hear the arguments adduced by other noble Lords against this simple amendment and also the arguments of the Minister. I must say that in simple fairness it appears to me that this amendment is a good one, and one which will be seen and approved by most of the people who are interested in this subject. I beg to move.

6.30 p.m.

Lord John-Mackie

My Lords, as your Lordships know, we argued this point about fairness to the tenant for a long time during the Committee stage and again on Report. I do not feel, for once, that I can improve on the arguments of my noble kinsman. He has put the case very well, and I think it is a very strong case. As he said, it is a pity that agreement could not have been reached between the CLA and the NFU. I spoke to the noble Lord, Lord Middleton, and asked whether they would not agree on 60–40, but he was not keen on that. He thought the Government's plan would be fair enough. I am afraid I do not agree with him, and so I should like to support the amendment of my noble kinsman. I hope the Minister will see the justice of it because when one does a lot of calculations—and I have a pile of them which have been made by various people—there are occasions when calculations can be very unfair indeed to the tenant.

Lord Walston

My Lords, I do not believe that the Third Reading of any Bill is the time to rehash all the arguments that have taken place during the Committee stage and on Report. I shall not attempt to do that, and I am sure your Lordships would not think well of it if any noble Lord were to do such a thing.

This amendment of my noble friend Lord Mackie of Benshie is similar to some amendments we have already discussed. It is very modest in form and I think it will go some way towards improving a situation which even the noble Lord, Lord Belstead, cannot really feel is completely satisfactory. We all agree that it is a very complex matter, and I am afraid that the result in this Bill has left many people dissatisfied. If the Government felt it was possible to agree at this late stage to this very modest amendment, some of that dissatisfaction would be removed and some of the inequity in the present arrangements would be, if not put right, at any rate ameliorated. Therefore I very much hope that the noble Lord will be able to tell us that he can accept this amendment.

Lord Middleton

My Lords, I do not think that noble Lords will be too disappointed if this amendment provides them with the last occasion on which they can discuss compensation for milk quotas this Session, and indeed perhaps beyond this Session. I thought the House had decided, after many different methods had been proposed, debated and rejected, that the Government's way of calculating the amount of compensation payable to a retiring tenant for his milk quota was the best way, or at any rate the least unsatisfactory way. That is the method set out in Schedule 1 to the Bill.

However, now we have another suggestion; and certainly the noble Lord, Lord Mackie of Benshie, is being consistent in striving to obtain greater compensation for the tenant who has provided and paid for much of the fixed equipment with which his milk quota has been built up. I am of course in sympathy with what the noble Lord is trying to do, and the way he proposes to do it in this amendment is very ingenious.

Without going into complicated details of Part II of Schedule 1, it is probably enough to say that what is called in the schedule the tenant's fraction forms a significant part of the compensation payable in various circumstances. As the noble Lord, Lord Mackie of Benshie, has reminded us just now with great clarity, the tenant's fraction is calculated according to the rental value of the tenant's input by way of improvements and fixed equipment.

This amendment seeks to alter the arithmetic so that more weight is given to that tenant's input. I am sure that this is not the time for yet another debate about who gets what, but I think it must be said that if you try to put figures into the noble Lord's proposal, you arrive at sums of compensation which must surely go a long way beyond what has been intended by the Government even in their most generous mood and, indeed, go well beyond the kind of 50-50 share-out that has formed the basis of several previous amendments.

I am very much in favour of the tenant being compensated for his investment in dairy equipment, and indeed that was one of the objects of the amendment which I proposed in Committee and of which your Lordships did not approve. But I am not in favour of the tenant being compensated for the same improvement twice. I believe that could happen if a tenant became entitled to compensation under this amendment and also under the normal compensation provisions of the 1986 Act. Furthermore, according to my calculations, it would be possible, where a tenant had provided virtually the whole of the dairy buildings and equipment, for him to receive under this proposal anything up to twice the total value of the quota.

The noble Lord proposed at an earlier stage half the value of the quota as a fair portion for the tenant and, on a previous occasion, he also proposed that valuers could, where a tenant has invested heavily, increase the 50–50 ratio in favour of the tenant. But to go from 50 per cent. to 200 per cent. seems to me to be stretching compensation beyond the bounds of generosity and indeed beyond the bounds of the fairness for which the noble Lord has just told us he is searching.

In an extreme case—and such cases do occur—where a tenant has invested heavily, allowing for reasonable and realistic up-to-date costs for buildings and equipment, I calculate that under the noble Lord's proposal a tenant's compensation could work out at as much as £770 per acre. That approxi-mates to the present average value per acre of a let farm, and I wonder whether many landlords would desire or indeed be able to raise the money for what would amount to buying back their farm in such a case. This part of the Bill, surely, is about compensation for milk quotas and not about leasehold enfranchisement. I therefore hope that the Government will resist this amendment.

Lord Mottistone

My Lords, perhaps I may intervene because the noble Lord, Lord Mackie, kindly said that this came out of a speech I made earlier about a friend of mine on the Isle of Wight who has this problem. I was very impressed that my noble friend Lord Middleton said he was in sympathy with the tenant getting his fair share.

I shall not add to what has already been said; suffice it to say that my friend advised me that I should support the amendment. In his case, where he has provided a very large amount of the new equipment, if not all, he estimates that he would get about 80 per cent., which he reckons is about his fair share. I suspect that my noble friend Lord Middleton must have been pushing the point into a very special case to find his 200 per cent. But it all stems from that. Whether it is 80 per cent. or 200 per cent., it is quite clear that the Bill as it stands at the moment will not give him a fair share. For that reason, I strongly support the noble Lord, Lord Mackie of Benshie.

Lord Stanley of Alderley

My Lords, it goes without saying that I support the amendment, and I shall not bore your Lordships as to why I do so. But if some of your Lordships, and indeed my noble friend Lord Belstead, feel that this amendment tips the balance too far in favour of the tenant, as my noble friend Lord Middleton felt it did, I would say that by accepting it we would give the other place a chance to discuss it. Quite frankly, the other place has not had a chance to discuss in full this whole clause which deals with milk compensation. I believe that it should be given this opportunity. I hope therefore that your Lordships will see this as a way of giving the other place the opportunity even if it wishes to moderate the actual details of the amendment of the noble Lord, Lord Mackie of Benshie. I support it.

Lord Belstead

My Lords, as your Lordships may remember, having established the standard quota for a farm—and your Lordships agreed to amendments which moved a small but significant distance in favour of the tenant in doing that at previous stages of the Bill—there is then a need to establish what share of the value of that standard quota is attributable to the tenant and what share of that standard quota is attributable to the landlord. In assessing that, the starting-off point is the total theoretical rental of the farm—what it would have earned in 1983 if all the facilities had been provided by the landlord.

If, for example, the tenant's improvements were worth £2,000 per annum and the rent paid for the land used by dairy cows was £8,000, the total theoretical rent would be £10,000. One then expresses the tenant's improvements as a percentage of that total. In the example I have just given, the tenant's improvements would represent 20 per cent. The tenant contributed 20 per cent. and the landlord 80 per cent., so the tenant's fraction in that case is 20 per cent.

The noble Lord, Lord Mackie, and my noble friends Lord Middleton and Lord Stanley of Alderley say that that is not enough. But let us look at what the amendment does. The amendment of the noble Lord, Lord Mackie of Benshie, does not compare the tenant's contribution with the total theoretical rent of the holding. Instead of sharing the value of standard quota proportionately according to the respective contributions of the tenant and landlord, the noble Lord, Lord Mackie, wishes to give the tenant a share equal to his contribution as a simple percentage of the landlord's. This principle, with very great respect to the noble Lord, is really indefensible when one comes to look at what it comes up with by way of results.

Before I give the fairly startling results, as a matter of principle, if two people contribute equally to the creation of an asset one would not expect one of them to obtain the whole value of the asset when it is sold. Yet that is the principle on which this amendment is based.

Perhaps I may stand by that by giving figures. Let us take a case where the value of the tenant's improvements is £5,000 and the value of the land used for the dairy cows—because that is all we are allowing for in the Bill—is £5,000. Both parties will have contributed equally to the build-up of the quota. Under that example, I say to my noble friend Lord Mottistone, the tenant would get 50 per cent. But under the amendment of the noble Lord, Lord Mackie, the tenant would get 100 per cent; he would get the lot. In certain cases this formula would produce an even odder result. It could in fact mean that in some circumstances the tenant's fraction would turn out to be more akin to the kind of thing which my noble friend Lord Middleton has been putting forward and would become more than 100 per cent. In those cases we would find the landlord having to pay a tenant compensation equalling the value of the quota.

I ask whether that is right. It would be a major swing in favour of the tenant. What we have tried to do in this Bill—and not just the Government but your Lordships as a whole; many of your Lordships not agreeing to it but nonetheless accepting it—is to make a quite significant though modest move in the direction of the tenant in the arrangements which this Bill puts forward for paying for the first time capital sums to tenants who are milk producers when they retire or leave their holdings. But where two people, the tenant and the landlord, had contributed equally to the creation of the asset and at the end of the day one of them, the tenant, was to be able to claim the whole of the asset, would not be reasonable and such an amendment would not be seen to be reasonable revising work.

Lord Mackie of Benshie

My Lords, a great deal of ingenuity has been employed in playing with the figures. I accept that you might have a case where the tenant gets the lot. He cannot of course get 200 per cent. The noble Lord, Lord Middleton, would without doubt agree with me that you cannot get that amount.

In the first case put forward by the noble Lord the Minister, he referred to the value of the tenant's improvements. This is the value put on by an arbiter or arbitrator who knows the position. He is not going to put on ridiculous figures. Even if a tenant has built all the buildings the arbiter will look at what the land is worth. Buildings without land are not worth anything. But if he has built all the buildings he has without doubt put up the value of the land and he has put up the rental value of the land as well. No arbiter would ever put the value of the buildings at a greater value than the value of the land. That is the cause of everything and supports the cows which give the milk which gives the value of the quota.

We are talking about sensible people looking at practical situations. We are not talking about the theoretical ones. In the very sensible first case the Minister gave he said the value of the tenant's improvements was £2,000 a year and the value of the land was £8,000. that would make the tenant's fraction one-quarter. That, in my view, would not be sensible. It would not be sensible because I do not think it would be enough—it should be 50–50. But at one-quarter it is not overgenerous if he has put in £2,000 a year as against £8,000. It appears to me to be a good example of exactly what I am talking about and is much fairer than the other way.

I do not think you will ever get a 200 per cent. case. Remember that we are talking about an arbiter looking at the values. We are not talking about a theoretical case; we are talking about an arbiter looking at it. I think that my amendment makes it fairer. It may not be perfect but it certainly makes it a fairer division. The Minister's first example shows perfectly clearly that that is a fair way to do it. Therefore, I am afraid that I must ask the opinion of the House.

6.50 p.m.

On Question, Whether the said amendment (No. 9) shall be agreed to?

Their Lordships divided: Contents, 69; Not-Contents, 112.

Addington, L. Lloyd of Kilgerran, L.
Airedale, L. Longford, E.
Amherst, E. Lovell-Davies, L.
Birk, B. McIntosh of Haringey, L.
Bottomley, L. Mackie of Benshie, L.
Brooks of Tremorfa, L. McNair, L. [Teller.]
Caradon, L. Mais, L.
Cledwyn of Penrhos, L. Mottistone, L.
Dean of Beswick, L. Parry, L.
Donoughue, L. Phillips, B.
Elwyn-Jones, L. Pitt of Hampstead, L.
Ewart-Biggs, B. Ponsonby of Shulbrede, L.
Falkland, v. Prys-Davies, L.
Gallacher, L. [Teller.] Ritchie of Dundee, L.
Glenamara, L. Rochester, L.
Graham of Edmonton, L. Seear, B.
Grey, E. Serota, B.
Hampton, L. Shepherd, L.
Hanworth, V. Silkin of Dulwich, L.
Harris of Greenwich, L. Simon, V.
Hatch of Lusby, L. Stanley of Alderley, L.
Hayter, L. Stoddart of Swindon, L.
Heycock L Taylor of Blackburn, L.
Howie of Troon, L. Taylor of Gryfe, L.
Hunt, L. Taylor of Mansfield, L.
Irving of Dartford, L. Tordoff, L.
Jeger, B. Underhill, L.
Jenkins of Putney, L. Wallace of Coslany, L.
John-Mackie, L. Walston, L.
Kagan L Whaddon, L.
Kennet, L. White, B.
Kilbracken, L. Williams of Elvel, L.
Kilmarnock, L. Willis, L.
Kirkhill, L. Wise, L.
Llewelyn-Davies of Hastoe, B.
Alexander of Tunis, E. Cork and Orrery, E.
Ashbourne, L. Craigavon, V.
Bauer, L. Davidson, V.
Belhaven and Stenton, L. De La Warr, E.
Beloff, L. Denham, L. [Teller.]
Belstead, L. Derwent, L.
Bessborough, E. Drumalbyn, L.
Blake, L. Elles, B.
Boardman, L. Elliot of Harwood, B.
Brabazon of Tara, L. Elliott of Morpeth, L.
Broadbridge, L. Elton, L.
Brougham and Vaux, L. Ferrers, E.
Broxbourne, L. Forbes, L.
Butterworth, L. Fortescue, E.
Caithness, E. Fraser of Kilmorack, L.
Cameron of Lochbroom, L. Gardner of Parkes, B.
Campbell of Alloway, L. Gisborough, L.
Campbell of Croy, L. Glanusk, L.
Carnegy of Lour, B. Glenarthur, L.
Carnock, L. Gray of Contin, L.
Clinton, L. Greenway, L.
Constantine of Stanmore, L. Gridley, L.
Grimston of Westbury, L. Newall, L.
Hailsham of Saint Norfolk, D.
Marylebone, L. Onslow, E.
Harmar-Nicholls, L. Orr-Ewing, L.
Henderson of Brompton, L. Pender, L.
Hives, L. Plummer of St. Marylebone,
Home of the Hirsel, L. L.
Hood V. Portland, D.
Hooper, B. Portsmouth, E.
Hylton-Foster, B. Radnor, E.
Kimball, L. Rankeillour, L.
Kings Norton, L. Renton, L.
Kinloss, Ly. Renwick, L.
Knollys, V. Rochdale, V.
Lane-Fox, B. Romney, E.
Lawrence, L. Russell of Liverpool, L.
Layton, L. Saltoun of Abernethy, Ly.
Lindsay, E. Sanderson of Bowden, L.
Lindsey and Abingdon, E. Sandys, L.
Long, V. Selkirk, E.
Lucas of Chilworth, L. Skelmersdale, L.
Lyell, L. Strathcarron, L.
Mackintosh of Halifax, V. Strathcona and Mount Royal,
Macleod of Borve, B. L.
Mancroft, L. Sudeley, L.
Marshall of Leeds, L. Suffield, L.
Maude of Stratford-upon- Swinfen, L.
Avon, L. Swinton, E. [Teller.]
Merrivale, L. Trumpington, B.
Mersey, V. Ullswater, V.
Middleton, L. Vaux of Harrowden, L.
Milverton, L. Vickers, B.
Montgomery of Alamein, V. Vivian, L.
Morris, L. Windlesham, L.
Munster, E. Ypres, E.
Murton of Lindisfarne, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.58 p.m.

Schedule 2 [Tenants' compensation for milk quota: Scotland]:

[Amendment No. 10 not moved.]

Lord Belstead

My Lords, I beg to move that this Bill do now pass.

I shall say just a few words on the Bill, not actually commensurate with the amount of work which has been done, because in thanking noble Lords in all parts of the House for their work on the Bill I have to admit that we have made 60 amendments to it. Although it is true that many of the amendments are of a drafting or contingent nature, the presence of six new clauses and one new schedule testifies to the scrutiny which your Lordships have given to the Bill.

Perhaps the most important part of our work has been that on the clauses and schedules governing claims for payments made by outgoing tenant dairy farmers. This is a new and difficult subject, as we know from the exchanges we have just had on the last amendments, but it is an important subject for those concerned. The Bill will make it possible for sums of money—and although there are differences in your Lordships' House about the size, they can be significant sums—to be paid to outgoing tenants in respect of their contribution to the quota attached to their farm; and it will be the first time that such payments have been possible. My noble friend Lord Gray of Contin has moved amendments which apply the same principles to Scottish agriculture and Scottish land law, and has made such modifications as were needed to provide for environmentally sensitive areas in Scotland.

Perhaps I may just mention Clause 19 of the Bill. This was an important environmental clause. It came to your Lordships' House already in the Bill, though in fact it is in the Bill because of an initiative from the noble Baroness, Lady Nicol, who raised the matter in debate long before this Bill was actually drafted and introduced. During our long debates my noble friends Lord Peel and Lord Sandford have pressed the point that it should be possible for farm capital grants to extend to farm-based ancillary businesses. As I explained to your Lordships, the original proposal which my noble friend put forward carried some difficulties for the Government, but I am glad that in the Bill we have been able to meet the point of my noble friend, which I believe is right in the climate of seeking greater diversification for farm businesses.

We have now also written into the Bill statutory provision for the continuation of ADAS. I should like to testify that this was due not least to pressure from the Front Bench opposite—the noble Lord, Lord John-Mackie, spoke on this matter—and from other noble Lords such as the noble Lords, Lord Walston and Lord Mackie of Benshie, and many of my noble friends. So we have put into the Bill a statutory provision for the continuation of the advisory services.

We have also written in provision for the monitoring of environmentally sensitive areas, which was not there when the Bill came to your Lordships' House, and today we have put in statutory notification to landlords when a tenant wishes to make an environ-mentally sensitive area agreement. This Bill has received very thorough scrutiny in your Lordships' House. I thank your Lordships for that and I commend the Bill to the House. I beg to move.

Moved, That the Bill do now pass.—(Lord Belstead).

Lord John-Mackie

My Lords, the noble Lord, Lord Belstead, put it in a nutshell when he said that we had passed 60 or 70 amendments—I forget the exact number. Of course many of those amendments were drafting amendments. When such a number is mentioned it looks as though we have managed to amend the Bill to a considerable extent, but I do not think that the picture is quite so rosy as that figure would suggest and as the noble Lord makes out. However, we are all entitled to make the best use of figures that we can, and the noble Lord is very good at doing it.

The noble Earl, Lord Ferrers, who was in his seat not long ago and whom we are glad to see back obviously much better after his unfortunate and extraordinary accident, appealed to the House to obey the convention and not to table a lot of amendments at Third Reading. So far as I am concerned, we adhered to that; but I should just like to say a few words on the Question that the Bill do now pass.

I have three points to make, the first of them on Clause 1. Naturally, we welcome many of the provisions—if of course they materialise. We tried to get "shall" instead of "may", but the word is still "may", and I think that "may" will be found all the way through the Bill. A lot of the work of course is done by regulation. In due course we shall welcome in many of the regulations some of the figures about which we were arguing earlier.

I must admit that I am still worried about ADAS. I have spoken to many people before and since the Report stage and there is no question but that the morale in ADAS is not at all good. All of them are very worried, as can well be imagined in a body that has existed for so long, and the work of which has been much appreciated, and which has built up a tremendous spirit between itself and the farming community. I have made many friendships—and not only in Scotland, where the advisory service is somewhat different and is attached to the colleges; the people with whom I have had contact in Lincolnshire, Essex and, for that matter, Hertfordshire have been tremendously enthusiastic. The sudden change comes at a very curious time in our agricultural affairs and it is something which is hitting the morale of this excellent body.

They are worried about charging. This measure has suddenly been thrust upon them and they now have to ask farmers to pay for their service; but it is not so much the question of charging as the way in which the charge is to be made. As noble Lords will know, I put down an amendment to try to get the Government to place a levy on fanners through the various bodies by which levies can be applied—and there are plenty of them—so that the costs could be spread and it would not seem all that much to pay. ADAS would have been able to go to any farmer, and any farmer could have asked ADAS to come, knowing that there was an overall charge and individually they did not have to pay. That would have done much to satisfy the men in the field in ADAS.

Then there is the question of the cost. It is all very well saying, "What is the £35 an hour?" I know that travelling time is not charged, but at that rate the small farmer, and particularly the smaller fanners who need this advice and have appreciated it as a free service over the years, will give a lot of thought to it before asking anyone to come along and give advice, however necessary it may be. Quite frankly, I am worried about this change at a time when farming is not in a good way. I thought the noble Lord, Lord Stodart. was about to nod his head, but he has changed his mind.

There is no doubt about it: we are in a difficult situation, and we will be for quite a while until things can settle down. It does not seem to me to be a time to make such a major change in our advisory services. I know that my noble kinsman will say something about the situation in Scotland, which I think is just the same. I can only hope that the new subsection (3), which the Minister included at Report stage, will live up to expectations. I do not quite understand why he had to use the word "organisation" instead of "ADAS". However, we accepted his explanations in good faith at Report stage and I hope that subsection (3) will fulfil our hopes.

I need not waste any time on Clauses 2 to 12. Like any other Government Minister, the noble Lord took the opportunity to tidy up a number of loose ends. Opportunities do not always come along to do that in a Bill.

My second point relates to Clauses 13, 14 and 15 and to the schedules. We have already spoken about this matter during the debate on my noble kinsman's amendment, but I should like to make the point that was brought up at Report stage by the noble Earl, Lord De La Warr. The more I speak, think and read about this situation, the more I begin, like him, to regret that the nettle was not grasped early on in the proceedings when quotas first came in. Whether quotas will actually stop in 1989 I do not know, but that is the plan. Most of us think that it could not possibly be achieved in that time, but one never knows. That would be the time to take the opportunity to see whether we could change back to the system in which the MMB have their quotas and there is no question of adding a value to the land, which is something that has created so many difficulties. I do not think a lot of quotas have actually been sold, because selling a parcel of land with quotas is a difficult procedure; but some have been sold. If farmers have done that, they should know the situation and can arrange to have that amount of money written offby 1989. They have been warned, and I feel that they have only themselves to blame if they pay high prices for quotas.

However, I should just like to say that, as we all know, the NFU are not happy about the situation in the Bill as regards the tenant. The TFA are not happy and the MMB are not happy. There is a certain silence from the CLA which perhaps indicates that they are happy, and if that is the case, it is not good, in my opinion, that there should be such a divide in the industry. But we have failed to get together, and we shall have to wait to see how the provision works.

My third point is on the environmental issue. At the Report stage we had quite a long discussion on the question, which was raised by the noble Earl, Lord Onslow, of landscape conservation orders. The noble Earl, Lord Ferrers, pointed out (at col. 107 of the Official Report) the number of bodies, orders and what-have-you in this area. We have national park orders, SSSIs, areas of outstanding natural beauty, the new ESAs, landscape special development orders in national parks and then we are asked to have LCOs. We have two ministries, agriculture and environment, then we have the Nature Conservancy Council and the Countryside Commission and on top of all that we have goodness knows how many voluntary environ-mental bodies.

They are worthy people. I know a lot of them and am friends with them. There are the Friends of the Earth, the CPRE, the RSPB and the Ramblers Association to name but a few. Friendly I may be with them, but they give me the impression that they are baying for farmers' blood on the question of the environment, and we have to watch the situation very closely.

The Bill opens up the question of grants and advice for farmers. Clause 16 talks about: the conservation and enhancement of the natural beauty and amenity of the countryside (including its flora and fauna and geological and physiographical features)". That is a fair mouthful.

The greatest amount of lobbying was on the milk quota, but the next best was on environmental points. I have an enormously thick file about what we should do in regard to the Bill one way and another. Let me repeat what I have often said before. The prime duty of agriculturists is to produce food, and environmental considerations must fit into that. I emphasise that as firmly as I can. It is quite extraordinary that today there is a presumption, because of the publicity given to surplus food production in the CAP in Europe, that food production is no longer important. We have that right, left and centre in the press and generally going about one's business. That attitude should be defeated.

In a world which still has about 800 million people on a diet which is far below that needed for good health—and half that number are likely to be on a starvation diet—it is a dangerous presumption that food production is no longer important. After all, in this country we produce only 80 per cent. of the food that we eat.

From my experience of going about meeting farmers and seeing farms, I should say that 90 per cent. or more of our farmers look after the environment perfectly well; but it can be an expensive job and farmers naturally welcome grants that may come through the Bill. However, I make the reservation again that food production comes first.

This Bill has taken a long time to get through both Houses. It spent three months' gestation somewhere in the ministry and was brought back with the matter of the quotas filling the gap in the middle and that has been what most of the argument has been about. Farmers are uncertain about the legislation and it is important that it should be enacted as soon as possible. Michaelmas is approaching and a lot of tenancies may be changing hands. It is vital that farmers quickly know the worst or, one hopes, the best. Will the Minister please take note of all those points? However, in the meantime, we shall let the Bill go through.

7.15 p.m.

Lord Mackie of Benshie

My Lords, I agree with all that my noble kinsman has said. I do not know whether either Minister read the article in the Financial Times this morning by that distinguished and experienced agricultural journalist and practical farmer, John Cherington. He used a most significant phrase. He spoke about consulting the remnants of the advisory service. That is a throw-away line.

It is significant that, while we have been discussing the fine points of the new legislation, the Government by their attitude and the uncertainty that they have spread in the farming community have destroyed the advisory service—and I use the word "have" advisedly. They are in the process of destroying the college services in Scotland. If the Minister wishes, I can give him exact figures of what is happening in my area.

This Bill, on which we have spent so long and on which we congratulate ourselves, can do little harm, I suppose, if the Government change their attitude. But if they want to restore the advisory services, their attitude must change. There is nothing in the Bill to stop that; but my goodness, they must do something soon!

The Plant Breeding Institute, which is famous well beyond the bounds of this country, produces 90 per cent. of our new wheats. It is in a state of total uncertainty. Without doubt, the commercial firms not only in this country but in Europe and America will be looking at those highly skilled people. If the Government take the first clause and see about the provision of services and goods connected with agriculture, and if they change their attitude, they may be able to undo some of the enormous harm that they have already caused.

I approve of the marketing levies, which are quite useful; but they must be backed up by a belief in the industry that the Government are serious about using them both to market and to maintain advisory services.

The position in milk and cereals is still desperate. We still have enormous surpluses. The Government have to take national measures to replace the cropping of the land which must come out of cereals and must come out soon. We already have 5 million tonnes in intervention stores. What there will be after harvest I do not know. But sure as fate, the whole situation will blow up. We have nothing definite—but we could have under the Bill—by which farmers can replace those crops in surplus. The intentions under the Bill need to be put into practice very soon, or else we shall have an even bigger mess than we have at present. If noble Lords doubt me about the mess, let them look at the number of farms for sale and the figures for losses in the north-east of Scotland last year.

We have produced a Bill. It might be said that we have been fiddling while Rome burns. I cannot view the Bill with any great pleasure.

Lord Forbes

My Lords, I should like to join with other noble Lords in congratulating my noble friend Lord Belstead on the way that he has handled the Bill. He has bent over backwards, sideways and forwards to answer the many points that have been raised on all sides of the House. In general I welcome the Bill and wish it a speedy passage. Much will depend upon what Ministers make of the powers that have been given to them by the Bill. I am uncertain as to whether charging for some of the advisory services will bring about the results that the ministry wants. I am in no doubt that the advisory services will continue to be as helpful to farmers in the future as they now are.

I suspect that when advice is being given, advisers will introduce the topic of conservation and that the farmer will obtain the advice that he wants. I doubt whether the ministry will obtain the cash saving that it expects. My fear is that in the future that will lead to people asking, "Why stir up a hornet's nest for so little?"

There is then the question of compensation for milk quotas. Those are extremely complex measures. All that one can predict with certainty is that whenever those measures are used, arbitrators and valuers will have a field day.

As usual, when legislation is complex there will always be a good spin-off for the legal profession and accountants. It is difficult to foresee what will be left for the poor tenant or landlord at the end of the line. The Bill contains conservation measures. Whether farmers will indulge in conservation will depend, not on what is in the Bill, as the noble Lord, Lord John-Mackie, pointed out, but on whether farming is profitable. Free advice or the offer of grants will have no effect while farmers' livelihoods are still at stake.

The future of our rural areas depends upon the ability of British agriculture to flourish. I hope that the Bill will help that because today much of British agriculture is in considerable trouble. If that goes on, not only the rural areas but the rural population will be affected.

Lord Stodart of Leaston

My Lords, I have never concealed my distaste from the outset for the schedule which I think will be the notorious feature of the Bill. It must be the longest schedule ever written. I counted the 10,000 words which were needed to explain something. It surprises me that both my noble friends, to whom lucidity is paramount, require so many words to explain what they have both told us is a fairly simple matter. In one of the national newspapers today, I read that my noble friend Lord Belstead, at some function in the West Country over the weekend, had been congratulated before he had made whatever observations he was going to make. The least I wish to do is to congratulate him on and thank him for his tolerance of all the pinpricks that he has endured from at least one of those behind him.

Lord Belstead

My Lords, I should like to thank all noble Lords who have taken part in different stages of the Bill. There are noble Lords in the House this evening who have instituted interesting and important debates who have not spoken on the Question. That the Bill do now pass. Some of your Lordships have; and contributions have come not least from the noble Lord, Lord John-Mackie, on the Front Bench opposite and the noble Lord, Lord Mackie of Benshie.

I hope that the noble Lord, Lord Mackie of Benshie, will forgive me if I pick up one point that he made. He was critical, and I understand why, of the challenges which face the advisory services at present. It is important that I should put on the record the fact that Clause 1 gives the advisory services wider powers and statutory provision for their continuation. The advisory services in England and Wales have well over 4,000 men and women on the staff.

My noble friend Lord Forbes, speaking of the future of the advisory services in the context of charging, was right when he said that he reckoned that the advisory services would continue to be as helpful to farmers as they now are. I genuinely believe that.

I am sure that the noble Lord, Lord Mackie of Benshie, will not think that I was merely trying to have the last word when I felt that I should say that on behalf of the Ministry, because I believe it to be the case. I beg to move that this Bill do now pass.

On Question, Bill passed, and returned to the Commons with amendments.