The Tenant Farmer

HL Deb 18 April 1990 vol 518 cc11-40

3.6 p.m.

Lord Stanley of Alderley rose to call attention to the problems affecting the tenant farmer; and to move for Papers.

The noble Lord said: My Lords, I must say that I am not particularly happy to move the Motion because, although the subject is certainly not party political, it can cause the odd difference of opinion within the agricultural industry. I am therefore grateful and relieved to know that it is my noble friend Lady Trumpington who will sum up the views of your Lordships.

This is a specialised subject. Reading through the list of noble Lords who are speaking today, I am more than conscious of the fact that every single one has great specialist knowledge. Like me, each speaker will have to declare an interest. I start by declaring my interest in that I was a tenant farmer of New College Oxford for some 30 years. I am still a partner with my son in that farm, but I am now an owner occupier. Therefore my farming experience and my problems, satisfaction and occasional pleasure gained from farming have been those of a working farmer. No doubt noble Lords will accuse me of being tenant friendly. However, to balance the books I should say that I spent all my Christmas holidays as a child in one of England's most beautiful houses to which was attached many thousands of acres of tenanted land.

What are the problems facing today's farming tenant? They are, of course, the same as those that face the whole of British agriculture. British agriculture is in a desperate financial crisis. The particular difficulty that faces the tenant is that because he has to make a living out of farming and because he has to pay a rent his problems are greater than those of most other people. In my case my rent in 1988 represented the single most expensive charge to my account, whereas in the 1950s, 1960s and 1970s it did not.

I mention that because any alteration in future tenancy legislation must ensure that the tenant is no worse off financially and that his slice of the cake is not diminished. The trouble is that today the cake is non-existent for either landlord or tenant. That really is the nub of the problem. The only possible cake lies in any development value of the land which goes of course to the landlord, often to the severe detriment of the tenant. I wonder how many landowners with farms in hand could earn enough money to support a family if they had to pay present day rents. Most fail to make money when they pay no rent and put in their own money, charging only a nominal interest for that money. That is not an option, however, for the working farmer tenant.

This is not the time to spell out the reasons for the crisis—and I use the word advisedly—in British agriculture. I know that your Lordships appreciate the problem. However, until the farming industry, the public, the clearing banks and the Government truly accept the position we shall make no progress whasoever towards solving the problem. The ironic fact is that it has in part been caused by the British farmer's efficiency, much admired by all until a few years ago.

Certainly the problem will not be solved by encouraging the tenant to be less efficient. Such a recipe, apart from destroying what is left of the farmer's self-repect and pride in his job, would encourage foreign imports to the detriment of our balance of payments, and the price of food to the housewife would increase. Moreover, in today's economic climate it is impossible for any tenant to devote money to improving the environment. I have yet to find any alternative diversification scheme which is economically viable for a tenant paying today's rents and interest charges.

That in a nutshell is the position of today's tenant. If noble Lords feel that I am landlord-bashing, that is not the case. I realise that even with the present uneconomically high rents landlords do not make enough to service their farms as most would wish.

Having dealt briefly with how the economic problems affect today's tenanted sector I move on to ask what is the future—and perhaps whether there is a future—of the landlord-tenant system. The system has been responsible for the youthful enterprise and vigour that were so admired and has given an example to this nation of what constitutes a day's work, albeit for only a quarter of a day's pay. The trouble is that the system is dying on its feet for a number of reasons, some of which I have already mentioned, and because of the reluctance of landlords to let through the fear that they cannot repossess the land should they need to do so.

I therefore believe that if we are to revitalise the landlord-tenant system we should look again at the legislation to see whether it can be improved. I am pleased to note that my honourable friend the Under-Secretary of State did not rule out possible legislation when he referred to the matter on 16th February this year in another place. I hope that your Lordships will come forward this afternoon with some compromise options. It will not be possible to spell those out in detail but I hope that all noble Lords will agree that those on all sides of the argument should be flexible in their approach and prepared to discuss all the options.

I start by suggesting that all future tenancies —and any legislation should not be retrospective —should include a retirement clause. That would make tenants think about making provision for their retirement, which sadly the majority do not. I used to think that the retirement age should be 65. Now that I am 63 and have just finished lambing 1,300 ewes I think that it should probably be 60. But that is a matter of detail. I hope that my noble friend Lord Monk Bretton will refer to that point because he brought the subject before your Lordships in 1983–84.

Secondly, I believe that the industry should try to solve the problem of the type of fixed-term tenancy. As your Lordships know, I have always been bitterly opposed to fixed-term tenancies for a number of reasons, the most important of which are fear of eviction and the long-term process of agriculture. Perhaps I should call it the nature of agriculture, although nowadays farmers are not allowed to believe that they know anything about nature.

It is for those reasons, and others, that I cannot accept complete freedom of contract. I know that it is the CLA's first option. Complete freedom of contract might bring more land on to the market. However, the quality of the agreement, and more important the quality of life of the tenant and his life after eviction, would be totally unacceptable in today's more caring society. Moreover,] know that total Freedom of contract is not acceptable to the other parties in the matter. I believe that it should not be the step that your Lordships recommend today It would sink the boat and any further discussion on the future of the landlord-tenant system.

Of all the suggestions put forward for a type of fixed-term tenancy I believe that the one called an extended agricultural tenancy has the most merit and deserves thought, albeit with modification. In brief, it would allow the landlord and tenant to negot ate a tenancy of 10 years with a renewal clause allowi ng extension of the tenancy for further periods. At the end of that period the landlord would be able to regain possession if he could satisfy certain limited grounds. Those limited grounds would have to be consi(iered carefully.

I hope that the CLA, the NFU and the Tenant Farmers' Association will discuss that scheme. I believe that all parties should appreciate that, if a short-term fixed tenancy is to be created, the rent must be fixed so that the tenant is able to borrow money and save enough for the day when he vacates the holding. A longer period than the statutory 12 months should be allowed for the tenant and landlord to make other arrangements.

The first two points apply to lifetime tenancies. However, as those tenants apply for a longer period there is a better chance, God willing, to ride temporary downturns in farming profitability. I accept that short-term tenancies will probably create exploitation of the land and short-term lets may well go to established farmers or established tenants. However, surely that is better than having no let at all.

I believe that traditional landlords, such as the Oxbridge colleges and many of your Lordships, would prefer a lifetime retirement tenancy. The land would be better farmed and looked after and the relationship between landlord and tenant would be a very much happier one—as it certainly was in my case. There is no doubt in my mind that lifetime retirement tenancies are the ideal. Any alteration in legislation to allow shorter-term lets should favour and encourage those longer tenancies.

I should have liked Sub-Committee D to study the problem but unfortunately it is outside its terms of reference. However, I hope very much that all your Lordships will agree that the matter must continue to be discussed. Any discussion on the landlord-tenant sector should take account of two points: first, that the present financial position of the tenant is precarious to say the least, and, secondly, that any new arrangement for short-term tenancies should be the exception rather than the norm and that the rent formula should favour lifetime retirement tenancies.

I hope that your Lordships and my noble friend Lady Trumpington will agree with that line of thought, or at least some of it. I hope that my noble friend will be prepared to offer the services of her Ministry to encourage a solution. I do not think it responsible to sweep under the carpet the financial problems of the existing tenant or the future of the landlord-tenant system, for I am convinced that the pendulum will swing again and the country will one day again be short of food. Many of us can remember those days. The country will need the expertise, the hard work and the effectiveness of the landlord-tenant system, which has served this country so well. I beg to move for Papers.

3.20 p.m.

LordJohn-Mackie

My Lords, I am much indebted to the noble Lord, Lord Stanley of Alderley, for raising this subject, which, as he emphasised in his last few sentences, is very important. There was no collusion between us over the debate, but the noble Lord has said just about everything that I intended to say. I shall try to say it as differently as I can, but that will be a little difficult.

First and foremost, like the noble lord, I must declare an interest. I am a tenant farmer with a three-generation lease. My young,er son, who manages the farm, is already agreed in principle as my successor and he has two sons to follow him, if necessary. I agree with the noble Lord's point about rent and with his point that, on a rented farm today, one must try to diversify into something that will raise money to pay the rent. My son and I have raised sufficient money to set up a riding centre and stables, which are doing quite well, but it took a great deal of capital to begin with. As the noble Lord, Lord Stanley, said, it is not as easy for a tenant farmer to raise money as it is for an owner-occupier.

My family has a long history of tenant farmers on both sides. Both my mother's and my father's people were tenants of the Haddo House estate of the Aberdeens in north-east Scotland. The farm in which I was born is how a fourth-generation tenancy without any legal requirement to put in an heir. The noble Lord, Lord Stanley, mentioned the rapport in the old tenancies between the landlord and the tenant. In 1923 or 1924 the Government introduced rural housing subsidies. My father built four houses on that farm. When he had finished he went to Lord Haddo, who was then the landlord, and said, "Look, we need to do something about who owns these houses. You've paid about a third, I have paid about a third and His Majesty has paid about a third". Lord Haddo immediately replied, "We'll cut out His Majesty straightaway". That was a nice gesture from the landlord.

The situation today is different because, in my opinion, landlords do not have the same rapport. They do not take an interest. The interest is through agents. There is no local factor. That makes quite a difference to the rapport between the farmer and his landlord.

When considering tenancies, one must remember that in almost every case the farm is the farmer's home. That is most important. At present my home is a nice house on the farm in Essex and I do not want to leave it, save feet first. Many farmers would feel strongly if they had to leave and look for another house. I recently chided the Tenant Farmers Association on that point and suggested that it wanted to push farmers out into council houses, but it strongly denied that that was the idea.

Because of that aspect, I very much favour life tenancy. There is no doubt that a farm is better looked after under a life tenancy. Like the noble Lord, Lord Stanley, I can imagine nothing worse than short-term tenancies. I believe that there is a suggestion of five-, 10- or 15- year tenancies. Let us take the case of a young man with, for example, a 10-year tenancy and no guarantee of continuing thereafter. He will use up the fertility of the farm and suck the land dry. That is the natural thing to do. He will not build up the land in the course of a short-term tenancy. The maintenance will be the minimum necessary to satisfy a full repairing lease. Any development to improve buildings or fixed equipment will be absolutely nil over a period of five, 10 or 15 years. I cannot emphasise that point too strongly.

The same would apply to retirement tenancies. Landlords may be tempted as well as anyone else. It will be difficult to resist the temptation to give the tenancy to as old a farmer as can be found so as to obtain a short-term tenancy by that method. If landlords are in the business of letting farms, surely it is an advantage to have a long-term tenancy with the usual proviso of rent reviews.

We all want to see the tenant farmer system continue, but, when one looks at the graph of its decline, one sees that it is practically a straight line from about 1910 to the present day. There has been a gradual falling away of tenant farmers. There are virtually no points at which one can say that the fall has been the result of legislation. I believe that figures show that, a good few years after the 1976 legislation, fewer than 30 per cent. of farms covered under the legislation were carried on by a son or relative. The fuss about it was therefore not warranted.

The main reasons for that fall have been the breaking up of estates after the two wars and the temptation in the last 15 to 20 years for landlords to sell farms when they became vacant because of the ridiculously high price that land has reached. One cannot blame them. The noble Lord, Lord Stanley, mentioned the price of land 10 or 15 years ago and the price today. Any farm that comes on to the market is almost bound to be sold. I cannot see the problem being solved until the price of land and the rental value become more comparable and reach a stage at which institutions such as the Church, the Crown and even private individuals will invest in land and obtain a reasonable return.

I see that my time is just about up; as a matter of fact, it is up. I could expand on the issue, but I shall leave it at that for noble Lords to consider.

3.28 p.m.

The Duke of Somerset

My Lords, as a landlord with several let farms, I have been dismayed to observe the gradual decline over the years in the availability of this excellent system of tenure. As British agriculture faces the increased competition of the single European market and of the slide towards world prices and the various directives from the Commission, it is a shame that the industry cannot agree on a formula to arrest that decline and so share on broader shoulders the responsibility of returning to a vigorous and prosperous agriculture.

It is the usual situation of two extremes with the need being to agree at a middle point. Generally speaking, landlords favour complete freedom of contract and tenants fear eviction as a result of that. Is there not a meeting point between those two opposing views? I believe that everybody involved in the system, certainly the Tenant Farmers Association, wants to encourage the system to continue and to rejuvenate. It has great merits. Primarily it gives farming opportunities to the younger generation and those who do not have the resources to buy a farm. The landlord provides the farmland and buildings and the tenant provides the working capital and stock. As we have heard, through many generations tenants pass on the farms to their sons, and that is an important asset to an agricultural estate.

The first and most important point to be made is that there should be no retrospective legislation so that existing tenants will be unaffected. Any new tenancy entered into would therefore be one in which both sides were fully aware of the position as regards length of security as well as the other usual terms.

There appears to be a demand for tenancies but landlords are often unwilling to relet because of the lifetime commitment that is now demanded. In view of the extreme swings of the pendulum found at general elections in the United Kingdom, it is a brave person who will make a financial commitment for 30 or 40 years into the future. It must be possible to find a halfway house.

One or two suggestions have been made: a fixed term tenancy or retirement tenancy and, at the other extreme, freedom of contract. With regard to the first, the noble Lord, Lord Stanley, outlined a system which seems worthy of close consideration. Retirement tenancies—in effect, also fixed term—seem to be of fairly limited use when dealing with a hopeful young tenant in his twenties, for the reason that I have already outlined; namely the commitement of 30 or 40 years until his retirement. Nevertheless if that could be agreed it would be a useful step forward.

The option of freedom of contract is, I am afraid, opposed by the NFU, the TFA and the CAAV because the very short tenancies that might result could lead to evictions. Perhaps one could impose a minimum term, say 10 or 15 years. One would thus have a mixture of all three options. I can see that being very useful to a man of 50 who wants his son to continue in business at the original farm when he himself wishes to continue farming and earning until his retirement 15 years hence. So long as the term was understood and planned for at the beginning and when it came to dealing with tenants' improvements, I can see very few difficulties arising, if I rr ay slightly disagree with the noble Lord, Lord John-Mackie.

If the Government can see the benefits of the landlord and tenant system, they ought to legislate. Perhaps the noble Baroness the Minister will tell the House whether the Government have such plans. It would help our tried and trusted system to rejuvenate and the industry would have a stronger arm to battle with in European agriculture.

However, existing tenant farmers often have more pressing worries which normally include finance. The tenant farmer does not have access to the capital value of the farming land and is less able to borrow for expansion or diversification or to restructure by a strategic capital sale or development. Many people would argue that not having access to today's interest rates is a positive advantage. On the other hand, where the landlord obtains development permission for non-agricultural use, the compensation formula, which was fixed in 1968, does not always recognise the true economic loss that the business suffers. I hope that most landlord and tenant relationships are good enough to overcome the hurdle, but that is not always the case, especially where the land has been bought with development specifically in mind.

Many farmers are trying to diversify. According to the way in which the agreement is drawn up the tenant may require his landlord's consent, for instance, to plant trees under the set aside scheme. Some operations merely require the tenant to inform his landlord of his intentions. Many tenants would ask for a greater measure of freedom in business. It must be in the landlord's interest for the tenant's enterprise to thrive. However, I believe it important that any change that will affect the landlord's long-term interest and the letting value of the holding should require his consent. That must include work where trees are planted and perhaps golf courses or any concrete structures—work that is mostly permanent.

Tenants are a vital and hardworking sector of our agricultural industry. It is important that their problems are recognised as much for our rural society as for our food producing industry and, not least, for the landlords, who do not wish to be out at 5 a.m. milking cows on their own land.

3.36 p.m.

Lord Walston

My Lords, we are grateful to the noble Lord, Lord Stanley of Alderley, for enabling us tc discuss this important matter. He challenged us, or suggested that we should declare an interest. Sadly, I now have no interest to declare having retired from farming. But in my time I have been a tenant farmer, a landlord and an owner-occupier. I straddle the three different methods of farming.

Like the noble Duke, I am a strong believer in the landlord-tenant system. I view with grave disquiet and unhappiness the decline that has taken place over the years in the number of tenancies and in the growth of owner occupancy. I believe that there are two absolutely different functions in farming. One is the ownership of land, which requires various skills, experience and capital; the other is the farming of land. Occasionally they are well mixed but it is rare to find somebody who is capable of doing both adequately and well. Therefore, we must attempt to revive our landlord-tenant system.

I am sorry to say that I do not now believe that the proposals put forward by the noble Lord, Lord Stanley, are workable. First, there was the short-term tenancy and the tenancy until retirement, whether at 60 or 65. I should be inclined to say that 80 is a better age at which to retire. But whatever the age may be it does not lead to the best type of farming. I am sure that the noble Lord will remember the old farming saying that while you live as if you die tomorrow, you farm as if you live for ever. If one knows that there is a term to the tenancy within another few years, one cannot farm as well as when one knows that one is there for life and with luck one's heirs may be able to continue. Therefore, to my mind the old-fashioned form of landlord-tenant relationship is the best. For various reasons—and there is no time to go into them—that is rapidly disappearing. How can we reverse the trend?

I should like to make one suggestion. It is based on the very happy experience that I had for a good many years as a commissioner of Crown estates. There the landlord-tenant system worked, and works, at its best. The landlord does his job; the tenant does his job. The tenant knows that he can go on indefinitely so long as he is capable of farming well and that there is a very good chance that the landlord will allow his son, if he is properly qualified and does the job well, to carry on after him. It is not a question of waiting for the tenant to die, rubbing one's hands and saying, "That is good. I can now dispose of my farm and sell it with vacant possession at an inflated price." One cannot blame people for doing that; the private landlord may be, and often is, tempted to do so. The Crown estates and other such organisations are not so tempted. The Crown estates are debarred by statute from investing in anything other than small-weight government securities and land—albeit urban as well as agricultural land.

I put to your Lordships the idea that it might be worth the Government considering—I put it no more strongly than that —setting up a body that one could call the national trust for estates or the national estates trust. It would not deal with historic houses and such matters, handled so well now by the National Trust; it would concentrate on our agricultural estates. It could be debarred from investing money in anything other than agricultural land but would be entitled to buy land at the going rate perhaps with powers of pre-emption when an estate came on the market. I refer more particularly to estates rather than individual farmers although they would not be ruled out. By degrees thereby, over the decades, the amount of land available for tenancy would be increased, as would the number of tenant farms.

A system of really good estate management would evolve such as is practised today on the best estates in the country—and there are still some of them—but without the nagging temptation to take the attitude, "When I die, or when this farm becomes vacant, it is my duty to sell it and gain the profit that I can from it;" or to look upon the capital as being needed for other purposes such as education of children, or whatever it may be, and that it would therefore be bad business not to cash in.

If one takes away that temptation, as one would by a form of national trust for our agricultural estates, over the years there would be an increase in the amount of land available for tenant farming. There would be increased opportunities for the young; new entrants into the industry as tenant farmers. Today it is virtually impossible for that to happen. We would slowly revert to the heyday of the landlord/tenant system but without the drawbacks which one has to admit it has in certain cases with the arbitrary decisions that the landlord could take to the detriment of his tenants.

My suggestion therefore is this. If one were able to achieve agreement between the National Farmers Union, the CLA, the tenant farmers, and so on, to some form of alteration of the present landlord/tenant system, we should be fooling ourselves if we thought that that was going to make any significant difference. If we are sincere, as I believe we all are, in saying that we want a viable form of modern-type 18th and 19th century landlord/tenant system —by creating a large national estate (call it, if you wish, nationalisation by the back door, but it would be in a purely voluntary form with no compulsory purchase) over the decades we should return to the advantages which in the old days placed British agriculture at the top of the league for agricultural advance throughout the world.

3.44 p.m.

Baroness Elliot of Harwood

My Lords, I too should like to thank the noble Lord, Lord Stanley, for introducing the debate. I make only a very short intervention.

As noble Lords know, I am a farmer and have in the past had a single tenant. I now farm all the land because the tenant has given up. The subject has been a difficult one for many years. Up to now tenant farmers have had complete authority when renting a farm and landlords have been unable to change this unless the tenants wish to leave and give notice.

In the past when some landlords had a great many farms to lease, the system worked quite satisfactorily, and can still do so. However, recently the conditions of farming all over the world, and in this country in particular, have changed and are still changing. Many landlords do not wish to let land indefinitely. I am one who has had a small experience of this: on my estate one farm was let for two generations to the same family and although I wanted the farm for a nephew I could not get it back until one day, without any notice, I had a letter from the tenant saying that he wanted to give up and move elsewhere. That was a great relief and I got the farm back. It is being farmed by my nephew today. The tenancy had lasted for over 80 years. I do not think that that is a good way of organising farms today. We talk of freedom of choice in many industries. I should have thought it possible to allow tenant and landlord to make an agreement mutually satisfactory to both sides and including if needed, options to give up or to continue. Let us suppose that some event alters the situation: the tenant dies or does not wish to continue. It should be possible to make a clause in the tenant's contract to allow the landlord to take over the farm again, either for himself if he so desires or to relet. That would have to be part of the original tenancy agreement. Under the 1947 Act I do not think that that is possible at present.

I believe, as we all do, in the system of landlord and tenant. It is one of the ways of encouraging new entrants into the agricultural industry. I know of several cases where the tenant has been so successful that in the event the landlord has sold the farm to him, again by agreement, and the tenant is now a successful farmer.

My hope is that if alterations can be made they will be by agreement on both sides and will result in improvements for both sides and will help our great industry of agriculture. Today it is even more important than it ever has been. Certainly in the light of the European situation we are just about the best farmers in Europe. I therefore hope that we shall be able to achieve some arrangement which will be satisfactory to both sides.

3.48 p.m.

The Earl of Swinton

My Lords, I also should like to thank my noble friend Lord Stanley for introducing this important and topical debate.

If I described a well farmed, attractive, environmentally-friendly countryside with a more than reasonable return for the farmers who produced it and, in the case of tenanted farms, perhaps some small reward for the landlord, noble Lords might say that I had a pie-in-the-sky idea of what the country was like. However, perhaps I may use a phrase much loved by the noble Lord, Lord MoUoy: that is what the great British public would like. It would appeal to the Greens and to the great bulk of people who go into the countryside. I hope that that is what we can achieve again.

I am sure that the landlord and tenant system has much part to play in producing a countryside such as I have described. It could, and indeed should, provide that. We only have to look in this day and age at some of the country's great estates to see what well farmed and attractive landscapes they provide. I believe that they should have the opportunity to do so again in the future.

This debate relates to the difficulties facing tenant farmers. In my opinion, the main difficulty relates much more to the state of British agriculture at the moment than to the future of the landlord/tenant system. My noble friend Lord Stanley referred to that point at the beginning of his speech and I echo everything he said. When one looks at falling incomes, increased costs, high bank interest rates and an unfavourable valuation of the British green pound, the difficulty is obvious. I become annoyed when I hear people say on television that they will strike because they have been offered a rise of less than the current rate of inflation. In practical terms farmers are worse off than they were five or six years ago and incomes have been lowered. That is a far greater problem than the landlord and tenant system.

I declare an interest, as have other speakers. I am lucky enough to be a tenant for life of a lovely estate in Yorkshire. It stretches from good arable land on the banks of the River Ure to moorland at 2,000 feet and everything in between. It is a microcosm of farrr ing. During the past few years a number of my tenants have found themselves in economic difficulties. It is interesting to note that it is not the high side farmers on the poorer land who are in trouble but those down on the better arable land. They borrowed money when interest rates were high and invested in machinery but found the falling price of grain going against them. I do not say that the hill farmers are having an easy life. However, they tighten their belts and tend not to have to pay anyone else because theirs is a family business. They do not spend much money and they survive. They do not find themselves with their backs to the wall. Even these people, however, now find it almost impossible to make a living of any kind—or at least not what Members of your Lordships' House would describe as a living. It would be easy for me to tighten my belt considerably more but it is not easy for them.

I speak from the heart in saying that, although in this country we are used to the image of the feather-bedded farmer crying wolf, that is not the case at present. A few days ago I spoke to one of my senior tenants. He is a much respected man whose farrr. has been in his family for many generations. He has many cousins and relations farming in the area. He told me that both his sons, now in their mid–20s, are studying at evening class; one is taking accountancy and the other electrical engineering. I replied that that was useful because both subjects can be of help on a farm. He said, "No, they aren't doing it for that reason but because by the time they come to take over the farm there won't be a farm left". By comparison the problem of the landlord and tenant system is fairly insignificant, although the situation is not good at present.

I was impressed by the point made by the noble Lord, Lord Walston, about landlords being bad farmers. I know that I am one, as are a number of my friends. Following the latest legislation they took back the land and tried to farm it, but they caught a considerable cold as a result. My policy has been to relet the land. I am amazed to see people prepared to enter into a tenancy in the present climate. I wish them luck but I should not like to be in their shoes. It is important that we should establish a better relationship and that landlords should not take back land and try to farm it. As was said by the noble Lord, Lord Walston, some are successful, but in my opinion they are the minority.

I was cheered to hear the words of my noble friend Lord Stanley at the beginning of the debate. Again I declare an interest because, like other Members of this House, I am a member of the CLA and NFU. I was slightly dispirited to read their briefings for the debate. The CLA stated that it wanted only the freedom of contract as regards tenancy but the NFU said, "That will be over our dead bodies". My noble friend Lord Stanley has given us hope that a way forward can be found.

I cannot see an easy solution to the problems of agriculture in general in this country. I do not have the time nor should I like to try to give the answer. However, I wish to draw to the attention of my noble friend on the Front Bench an imaginative proposal from the Countryside Commission. It is for a single scheme of farm support to promote—and again I must use the awful expression—environmentally friendly farming. There is a future in that and if my noble friend has time to look at the proposal she will not be wasting her time.

I hope that the NFU and the CLA can talk together with the Government. I further hope that in future we shall again see in this great country of ours the kind of countryside that I described at the beginning of my speech.

3.55 p.m.

Lord Middleton

My Lords, I join other speakers in congratulating my noble friend Lord Stanley on bringing the matter to the attention of your Lordships. The chief problem facing tenant farmers is that there is little land available for rent. As the noble Lord, Lord John-Mackie, reminded us, the tenanted sector is becoming smaller. In 1908 the proportion of tenanted land by area was 88 per cent. but it is now only 36 per cent. Therefore, during the past 40 years efforts have been made to support the landlord and tenant system. However, it is my view that the efforts have been unsuccessful because successive governments believed that that support could be given by legislative control.

By 1950 the proportion of tenanted land had dwindled to 62 per cent. By 1976 it was down to 44 per cent. The then Labour Government attempted to arrest the decline by giving increased security of tenure. The 1948 Act had given the farmer the right to a life tenancy. The 1976 Act provided for three life tenancies in succession. What was predicted by those of us who participated in the passing of that legislation in fact occurred. Landowners, faced with losing control over their land for up to three generations—and that could be a century—were unwilling to create any new tenancies. Sitting tenants and their descendants remained happily in possession but opportunities for new entrants completely dried up.

At that time one of my friends promulgated a law; that the effect of most legislation is directly opposite to the intentions of those who promote it. Of course, that was said tongue in cheek but it was true of the 1976 Act which received enthusiastic support from the National Farmers' Union. By the late 1970s it was obvious to everyone, including the NFU, that far from stabilising the landlord and tenant system the opposite had happened. The then Minister of Agriculture, Mr. John Silkin, set up a committee of inquiry under the noble Lord, Lord Northfield. It examined the landlord and tenant system and took a good look at the institutions which were buying up the land only to move out when the going got rough. Its report was favourable to both but it coincided with the change of government in 1979.

Meanwhile, my party had agreed that new legislation was required to pull the landlord and tenant system out of what appeared to be a terminal decline. However, it insisted that any new Agricultural Holdings Bill could be based only on a consensus within the industry. I had grave misgivings because I believed that it was most unlikely that any effective measures would emerge from what I considered to be an abrogation of government. There was bound to be a divergence of views making it difficult to find a formula which would reconcile the interests of the two parties.

I was heavily involved in the negotiations leading to an agreed compromise in the terms of what was to become a new Agricultural Holdings Bill finally enacted in 1984. I backed the Bill strongly because, for all its faults, it was better than nothing. More importantly, there was a faint chance that something better would emerge once it became obvious that it would not produce many more farms for rent.

It is for "something better" that my noble friend Lord Stanley is groping. He is right to do so and he is right to be worried. However, I fear that his prescription may not be effective. The mistakes of 1976 and 1984 seem not to have been taken on board. My noble friend Lord Stanley seeks yet again for some kind of consensus. That is a very attractive concept but I have worries.

Mr. Richard Ryder, who was then at the Ministry of Agriculture, speaking in another place on 24th April last year said: If the tenanted sector is to be revitalised, we must find ways of making the letting of land more attractive to landowners".—[Official Report, Commons, 24/4/89; col. 781.] He went on to say that there must be clear prospect of the legislation being of worthwhile practical effect and that there must be some sign of agreement in the industry. I am not quite sure what that means. If it means another attempt to achieve unanimity, we went down that road in 1984.

Of course, no one wants legislation which is unacceptable either to owners or tenants but if any government really want to revive the system, they must be prepared to take a firm line. As someone said recently, half-way house legislation is a waste of time.

How should the problem be tackled? I see from the brief which I have from the CLA—and my noble friends Lord Swinton and Lord Stanley have referred to this—that it is asking for complete freedom of contract between landlord and tenant for any new tenancies. The parties to a new tenancy agreement could agree any terms they wished, presumably including the various options put forward by my noble friend Lord Stanley.

That makes very good sense to me and I agree with the present CLA president when he said at a recent conference: There are those who will be alarmed by a call for such freedom to negotiate". He went on to say: I do wonder why. Landlords asking unreasonable conditions will get no tenants; unreasonable tenants will get no farms. The crucial question is whether it will satisfy Mr. Ryder's criterion of effectiveness.

The results of a survey carried out by the CLA are interesting. The introduction of retirement tenancies, advocated by my noble friend, would result in 27 per cent. of land that would not otherwise be let by landlords being relet. Therefore, there is something to be said for that idea. More significantly, it was found that given freedom of contract landlords would be likely to relet 59 per cent. of land which would otherwise not be let. It has been calculated that over five years that would result in a 10 per cent. increase of land in the tenanted sector. I believe that that would be worth going for.

When my noble friend kindly wrote to me about this debate he told me that total freedom of contract would be rejected outright by the National Farmers' Union and the Tenant Farmers' Association and he said that again this afternoon. I hope that I am wrong in fearing that once again the farmers' representatives may be preparing to shoot themselves in the foot. They may do well to compare the landlord-tenant system in West Germany and Belgium where landlords have the confidence to let with that in Holland where restrictive legislation similar to ours is in force. In Germany and Belgium, the system is thriving. In Holland, it is virtually extinct.

4.3 p.m.

Lord Wise

My Lords, I am sure that we are all grateful to my noble friend Lord Stanley for initiating this debate because it is opportune. The number of agricultural holdings has been declining steadily for many years. I venture to suggest that the main reason for that is purely economic although there are many contributing factors.

Although the number of holdings has decreased, the size of holdings has increased. Again that is purely economic because larger holdings tend to be more viable. It makes sense economically but it is unfortunate because as holding sizes increase, it follows that fewer and fewer are available to rent.

As my noble friend Lord Middleton said, legislation over the past 40 years, especially the 1984 Act, has given tenants security of tenure. Indeed, it has given tenants' relatives a statutory right to apply to accede to the tenancy on the death ! of the sitting tenant. As my noble friend says, it is a possible contributory cause to the decline in the number of farms available for rent. I would not wish to see that changed. I believe that it is fair that if a son has worked all his life on his father's farm he should not lose his livelihood in the event of the death of his father.

Nevertheless, in certain circumstances I feel that there is a case for short-term tenancies. For example, if an owner-occupier for some unfortunate reason becomes incapacitated, he may have a son at school or college and it could be expedient to let the farm to a neighbouring farmer until the son was old enough to take over. That would be a good thing. However, as matters stand the farmer must be very careful because there is a grave danger of a full tenancy being created. Therefore, in certain circumstances and only in those circumstances short-term tenancies could be reasonable and sensible.

On the question of tenants' compensation for dispossession, I can well understand a landlord's frustration when he wishes to embark on some lucrative development project on his own land and then is fought tooth and nail by the tenant who is obviously fighting for his very livelihood. The present compensation terms are completely inadequate. If they were more generous, surely agreement would be reached more easily.

I believe that a set of guidelines on this question would be a good thing. I know that it would be very difficult given the vastly differing complexities of each individual case, but set guidelines could be a base on which negotiations could then proceed.

As we have already heard, the landlord-tenant system has served the industry, and indeed the nation, well for generations. It has been a means of giving young people with limited financial means the opportunity to enter farming. I must admit to being somewhat apprehensive as to its long-term continuation in the present manner. As we all know and have heard, there is a continuing decline in the availability of land to let, for whatever reason, which may have to be arrested by some change in the present law. However, I hope that all the problems—whether as regards compensation, the tenant diversifying into other spheres or even tenure—can be resolved by discussion and agreement among all the parties—the CLA, the Tenant Farmers' Association and everybody else. If consensus could be reached it would be better than government legislation. We must somehow keep open the opportunities for young farmers to farm as they wish.

4.9 p.m.

The Earl of Radnor

My Lords, I too am very grateful to my noble friend Lord Stanley for bringing this matter to the attention of your Lordships. On his suggestion, I declare an interest in that I am tenant, landlord, manager and partner, if that has any relevance, in parts of Wiltshire. I also follow my noble friend in saying that the troubles of the tenant farmer are to a very large extent shared by any farmer these days.

It is an extraordinarily difficult time for farming. Incomes are dropping; a stabilising position has been established whereby overproduction in the country as a whole is penalised in the income of the individual. There is no doubt that every farmer, be he tenant or owner-occupier, must look to his laurels quite carefully and concentrate upon the usual business remedies—if they are applicable to farming—beyond the stage of looking to his costs, marketing and output.

There has been thrown out somewhere in this debate, I suspect at the beginning, the suggestion that landlords charge, shall we say, a rather large rent. I use that description rather than the word "exhorbitant". But that suggestion must not be allowed to pass without comment. Legislation is quite clear on the point. Rents are reviewed every third year. My impression, both personal and from looking around me in the countryside, is that at present rents have reached a plateau; they are not increasing and on occasions are decreasing. I think that that is a fair and reasonable description.

There is no doubt that some farmers are finding difficulty and within the three-year period are applying to discuss the rent further. On that point I entirely agree with the noble Earl, Lord Swinton. In my experience it is the good farmer on the better land who is having difficulty. He has been a leader in the past when times were good and has borrowed too much from the bank. The banks must bear a certain measure of guilt for the situation. But it tends to be the better farmer who always believed that the boom times would continue for ever who is having difficulties.

I sense that that is not what this debate is concerned with. It is concerned with the fact that fewer young people are coming into farming and using that bottom rung of the ladder—perhaps a smallish farm on an estate —to get a start. The reason for that goes back to the very high price of land and the fact that there is tremendous security for tenants. We already have a ridiculous situation in the United Kingdom where some tenants have security for three generations and others for the whole of their life. As far as I can see such situations are just not reflected in the rent at all. But that is by the way.

It is assumed that the tenanted sector is necessary. The noble Lord, Lord John-Mackie, pointed out that there has been a gradual depression of lettings from 1910 up to the present. It has in no way been evident to me that efficiency in farming has gone down in the same way, and I see no reason why an owner-occupier should not be at least as good a farmer as a tenant. However, I admit that it would be a very good thing to have a few more people entering the industry.

A number of alternatives have been put forward to accomplish that. I shall take the short-term tenancy and freedom of contract suggestions first. Matters move slowly in the country. Seasons come round slowly. Rotations, if anybody uses them these days, are long—the Norfolk fourcourse is one of the shortest in Wiltshire. We had one of seven or eight years. Therefore it is quite wrong to think of bargaining over a period such as 10 years.

What has not been mentioned in the debate so far are the complications of dilapidations, the house in which you live and other such matters. Everyone knows of the difficulties at the end of a tenancy and how they can strain relationships. Tenants in the old days used to bid high for their farms because of key money, and unwise young men will now be bidding high and coming unstuck in a very short period. In my mind, therefore, I dispose of both those alternatives.

The 65-year retirement proposition will simply be a temptation to employ people aged around 60 and will not help the situation. It is all that has been suggested so far. Nobody suggested partnerships, which I shall not have time to go into but which I think offer an alternative.

Before I sit down, I think it was Lord Melbourne who said when in doubt do nothing, and if you have to do something, do as little as possible. That is my suggestion on this subject.

4.16 p.m.

Lord Monk Bretton

My Lords, I too should like to say how grateful I am to my noble friend Lord Stanley of Alderley for initiating this debate. I was also pleased to hear that the Minister had indicated that he intends to look again at the problems of tenancies and how they are progressing. I must endeavour to declare a rather complicated interest. I belong to a land-owning family but I am in fact a tenant within the family with all the professionals continuing to say "He has got to pay an arm's length rent". I therefore understand some of the farming problems—indeed I do—touched upon by my noble friend Lord Stanley.

In 1984 I moved the Tenant Farmers Association amendments on tenancy to retirement age. I make no apology now for having done so because in my view those amendments should have been accepted. I remain convinced that that was the only proposal which would have made the 1984 exercise produce something effective. I agree with my noble friend Lord Middleton regarding the inadvisability of again repeating an exercise of that kind. However, there must be a reasonable degree of consensus because if the tenancy legislation is altered I do not believe we want it to become a political football; that would be a serious tragedy for us.

Before I go on to other matters I should like to say a word regarding retirement tenancies. First, it now seems that they have become the lowest common denominator of consensus opinion, which was not the case in earlier days. I am sorry that the noble Lord, Lord John-Mackie, was thoroughly discouraging about them today. In those days, though he saw objections which most people today do not worry about so much, he was more receptive of the idea.

If we have great trouble in reaching a consensus the retirement tenancy proposal remains very much better than nothing. My noble friend Lord Radnor said that sometimes there is a great deal to be said for doing just a little. If matters are like that, I would not decry government efforts to try to bring it about. Although it would not arrest the decline in the let sector it would at least stem the tide a little, and that is always something. We have to remember how much the let sector does in providing opportunities and in helping the finance of farming.

For the landowner, the virtue of retirement tenancies is a greater degree of certainty—agreed on a long term—as to when the tenancy ends. I emphasise that certainty is of very great importance to those who are letting land. Retirement tenancies also enable us to escape from the political problems which lifetime tenancy has produced. I refer particularly to the octogenarian tenant supported by a son who unfortunately experienced difficulties in finding another tenancy when the octogenarian died. That produced a demand for succession and succession proved to be the last straw in the hope for survival of the landlord-tenant system. I venture to suggest that retirement tenancies would to some extent stem the decline.

I agree that if we want more land available quickly for letting it must come from the owner-occupied sector. It cannot come from the landlord-tenant sector unless one interferes with the existing succession tenancies. I believe that nobody wishes to do that. Certainly I do not.

The CLA is right to cast doubt on the owner-occupiers' likely reception of the tenancy-to-retirement-age proposals. They do not think that the proposals go far enough. The owner-occupier sector appears to be looking for something like a maximum 10-year term. Therefore, there is a gap to fill. It is a difficult subject. The CLA is right that to get results, or more land into the letting sector, one must be I bold. However, I doubt whether its proposals for freedom of contract will wash without a minimum term of years at least.

It is interesting that the RICS farm tenure survey shows a high degree of tenant farmer support for freedom of contract; virtually as high as for retirement tenancies. I find that to be surprising. Possibly, it is a straw in the wind. At any rate there must be a minimum term of years. I refer particularly to the efforts of the five land agents—sometimes known as the "famous five" and sometimes the "infamous five". If various people are of such different opinions, they will be somewhere near the mark. I believe that is the only other line of thought.

I have to bring my remarks to a conclusion quickly and I am sorry that I have to rush my speech. The proposals of the five land agents are worth considering if we are to bring more land into the let sector, which might be of great assistance and provide opportunities for farmers in the future.

4.26 p.m.

Earl Waldegrave

My Lords, I, too, declare an interest; perhaps more than some people because I was born in 1905 and spent my early life in my father's house which was a parsonage. He was the younger son. My grandfather died after the battle of the Alma and my father never saw him and, therefore, neither did I. I lived in the parsonage and was told that one day I would succeed to a small agricultural estate in Somerset and that that is what I should think about. That is all I have thought about ever since and I am still very confused!

My qualification, if I may put it so, is that for four years I held the job now held by my noble friend Lady Trumpington, but that was a long time ago. It is interesting to realise that agricultural land, or farm land—the problem is mostly economic, which we have not really faced today —did not rise to the dizzy heights of £100 an acre until 1960 when I was sitting in the place now occupied by my noble friend Lady Trumpington. In 1971 the price rose to £300. By 1978 it was £1,000 and by 1983 it had reached £2,000 for purely and solely agricultural land. I do not propose to enter into the realm of statistics as I am not good at arithmetic, but I find those to be staggering figures.

My noble friend Lord Stanley opened the debate—and we thank him for bringing this subject befon; us today—by saying that agriculture is in a crisis. It is in a crisis and during my involvement with agriculture I have seen it go through other crises. In my own small way as a farmer I am just getting out of a crisis. I happen, by one means or another to have a large milk quota and that is probably the only part of farming which is profitable today. How long will the milk quotas last and how long are such advantages to be available for some of us? Real farmers are having a terribly bad time and that i:; the reason why there is such a big decline.

I was interested to hear my noble friend Lord Swinton describe his great estate in the North—as I have heard him do on the Front Bench on previous occasions—and what a family party it was, and how much he liked to see tenants coming on. I have always believed that that is the right way for the old estates to be managed. After all, if you have been born in a farmhouse and your father was a tenant he was on the second level in the old village life, in the old community, which I am afraid can never return. It may continue in some of the more remote districts of the country, but I do not think it can survive very much longer in a district such as that in which I live, which is quite close to the great new conurbation of Bristol —14 miles from Bristol, 14 miles from Bath, five miles from Keynsham, Shepton Mallet and other great places where there are many cottages.

I find it interesting that nobody on the Benches on the far side has asked what all this landlord and tenant business and all this agricultural change means. to the workman. Probably the landlord lost his town property long ago, as did my family. Our little coalmine ran out before I was born so we had to live on the estate, and we depended on our tenants. We did not know how to farm. I was taught how to farm and as a schoolboy was sent to learn to milk a cow instead of going to Switzerland to ski. Nowadays the farmers who own their land send their boys to Switzerland, or the public education authorities send the boys to Switzerland; but I still do not go there.

The real problem is that everybody who has said that the old tenancy system must survive by some means or other—and they said there were various means of doing it—has forgotten that the old system of country life, village life, community life, was completely different 50 or 60 years ago, when the landlord and tenant system was flourishing. The landlord did not want to farm his land. He perhaps had a big castle or at least a big house, and he was on the top level. His younger brother was possibly a parson, and perhaps his nephew would one day succeed to the estate. They were interested in sport and the social life and perhaps in being Members of this House. Not all landlords were Members of this House, but all landlords had money from somewhere else when they built their castles and set up their community estates.

I do not believe that we can return to that. If a landlord learns that land is worth £2,000 an acre he surely feels he must cash in on that and send the proceeds to the City. Although there is need for fewer cottages because of the machinery that has come along, a farmer does have to buy the machinery. He never had to buy the cottages, which were rent and rate free. Some of us are in rather a mess now concerning what to do with our rent-free cottages. It is sensible to sell them to people who are going to work in the neighbouring town. I remember selling a cottage for £40 which had the roof nearly off, but I heard of somebody the other day who sold for £100,000—which was rather more—a tumbledown barn which had planning permission to be turned into a fine house. On cannot blame a landlord for cashing in on such things.

I have not heard in this debate how we can get back to the system where the landlord was the top structure, where the tenant looked after the land, which the landlord did not want to because he wanted to go into politics or go about his business, and there were large numbers of workmen because there was no machinery. My father never owned a motor car, but we did have a dog cart even though we were not in a very rich living—£80 a year.

I have to end on a pessimistic note. I do not see how we can revive the landlord and tenant system unless we go back to the old country system that has surely gone with the passing of time. There is one thing which I think we might consider; that where the man who is farming has to spend his capital on machinery and equipment he should own his land. Where there is rough, difficult or far away land, and the land is worth more than the tenant's capital, then there is a good case for a landlord; but it must be on that basis.

4.35 p.m.

Lord Burton

My Lords, I had not intended to speak but some points have arisen in the debate which I should like to mention, as speakers have been commendably short and well within time.

A good farmer would normally have security. Unless the landlord had good reason for terminating or failing to renew a lease he would feel it better to keep the devil he knew than the devil he did not. Therefore, tenants such as those of my noble friend Lord Swinton would probably go on for many years. Indeed, a number of them must have been there before the current legislation came into being, though I agree that for the good of the land the lease must be for a reasonable length of time.

I should like to draw attention to the fact that the law of tenancy in Scotland is very much worse than it is in England, and if the Government are going to amend the rules I hope they will look urgently at the Scottish legislation because matters are not so satisfactory there. Long-term or even secured tenancies are all right if they are given to a good or even reasonable tenant, but I can think of at least two farms where the tenants have become alcoholics. Then one is in trouble because until such time as the farms are ruined and the farmers have become bankrupt there is no way of getting rid of them. Clearly that is not good for the land or the landlord, and in fact it is not good for the tenant.

4.37 p.m.

Lord Mackie of Benshie

My Lords, this has been a very interesting debate. I will not congratulate the noble Lord, Lord Stanley, on introducing it, but I will congratulate the Government on having the courage to turn him loose on a subject as important as this. For me it has been extremely frustrating because, first of all, my noble kinsman told the story I was going to tell about my father (I cannot say "our father" because that sounds like the Lord's Prayer), and then the noble Earl, Lord Swinton, told the joke against himself, which I had stored up, after he referred to the tightening of belts.

I suppose that I too should declare an interest. My father started his two sons and three daughters not on rented farms but on owner-occupied farms. As the third son I had to become a tenant, which I suppose is quite right, but as I had a very good farm in Strathmore I did not mind a little bit.

I think we have reached a degree of consensus in the debate, with a degree of disagreement as well. The system is worth preserving. I was very interested in the speech of the noble Earl, Lord Waldegrave. He said that the old system could not return unless one had the social system with it, but the fact is that we still have nearly 40 per cent. of the land on the landlord-tenant system. That is a large proportion and, as has been said, a valuable proportion, which I think can be increased. It is a good division of responsibility when you think of the landlord owning the land, supplying the capital and getting a modest return on it, and the tenant supplying the working capital, which is now considerable—at least £300 an acre to go into a farm. Even if tenancies are available, farming is an expensive business for a young man to go into. We should recognise that, particularly, as has already been said in the debate, when returns are so small and so insecure. We should recognise in looking at the system that if a tenant is to farm well and do the land some good he needs security. By security I do not mean stagnation, which is what the present system tends to lead to.

I have great admiration for the noble Lord, Lord Middleton. While I think he is right to urge the Government to adopt a consensus approach and then to take action, he is quite wrong to say that a freely negotiated contract will do. In every field of commercial life there is legislation to protect people against unfair contracts. In farming, one is dealing with a passion for land. Both the people who buy it for enormous sums—more than £2,000 an acre—and those who rent it do so with a totally non-commercial view of the future. Young men who want to farm will be led into foolish agreements in their great desire to have the land. In Scotland in the past—in the era to which my noble kinsman referred—legislation affected the bargains. The system was made up mostly of 14-year leases—sometimes they were for 19 years and sometimes for 21 years —with a break at seven years. But the terms of compensation were laid down.

I disagree with my noble kinsman on another point. One can legislate a little against bad farming. Fixed-term rotation built up the fertility of Aberdeenshire from the blasted bog it started as and kept the land in good heart. In England in the 1930s the place was full of buttercups and there were meadows all over the place. In Scotland the long lease system and the virtue of the Scots meant that the quality and standard of farming were kept up. If we look at anything we must look at the security of long leases. The retirement provision might be a step forward and would bring more land onto the market. We should look at the long lease system with legislation about the terms of compensation where a tenant dies at or just before the end of his lease. But one cannot have new legislation in this business without laying down terms.

Several new factors have already been touched on. I refer to the high price of land and to the high price of houses. The Government should be looking at those points. It is ludicrous that people should still be paying £2,000 an acre for land. When one bears in mind the high interest charges it becomes even more ludicrous. To make that the equivalent of money in the City, one would need to pay a rent of around £300 an acre. As that is more than the gross income of most farms, it becomes totally uncommercial.

Taking all these factors into consideration, we should be looking at serious discussions about the long lease system with protection and legislation to ensure not only that the tenant is protected but that the landlord is protected against his land being despoiled. It would be a great step forward for a change if the Government would consider this seriously and sensibly and do something to protect the landlord and tenant system which has served this country well, and particularly well in Scotland.

4.45 p.m.

Lord Gallacher

My Lords, we are grateful to the noble Lord, Lord Stanley of Alderley, for introducing this important subject and for the dispassionate way in which he did so. This is an important subject, and in our view it needs to be discussed in a wider context than that provided by the Agricultural Holdings Act 1984 and related legislation. As we see it, there are three major questions: first, the Government's present economic policies and their effect on farming in particular; secondly, the effect of changes in the common agricultural policy with special regard to tenants; and, thirdly, changes in the pattern of ownership of farm land, especially those which have taken place since the report in 1979 of my noble friend Lord Northfield. These three questions are basic to the problems.

In our view the Government are now reaping the harvest of seeds sown in the 1980s when illusions of economic well-being provided a basis for expansionist policies culminating in the sharp application of brakes from mid-1989 to date. As yet there are no signs of a let-up. The use of a high bank rate to the exclusion of all else is particularly severe on the tenant farmer who rents because he cannot afford to buy and who must, like most farmers, borrow working capital whether for the growing or the breeding seasons. Dear money in the United Kingdom as well as green rates in equities puts British famers at a double disadvantage; that is to say, they have high costs and receive low prices by comparison with their Continental competitors. There has been no response to pleas for easement. Indeed, the joint stock banks are too busy making provision for doubtful debts overseas to listen to farmers at home. We should also say here that the effect of interest rates on rent reviews must be considerable. If I were a landlord I should certainly, when leviewing the rent of a tenant farmer, be taking account of the fact that the overdraft rate is of the order of 18 per cent.

The common agricultural policy is undergoing structural change. This will continue as member states restrain growth in the Community budget. United Kingdom farmers, including tenants, do not qualify as small in the Community's definition of that word. Thus present and future economic Community help is likely to pass our farmers by if the target is the small farmer. The Commission favours early retirement for small fanners to permit opportunity for younger men, diversification and amalgamation of holdings. This has implications for tenants, but so far the Department of Social Security has been unwilling to vary its general rules about the retirement age for state pensions. So little has come of Community proposals in the United Kingdom, which in any case has a derogation from a directive equalising retirement ages by 1993.

The cumulative effect of structural change in the common agricultural policy threatens tenant farmers not least because of some of the complications flowing from it—for example, the attachment of the value of milk quotas to land. Landowners are now seeking alternative uses for land which will give them a better return. Set-aside, for example, is for some a less pleasing environmental prospect than a well maintained golf course. If local authorities will grant planning permission for a golf clubhouse and related development to replace farm buildings, one can see applications for possession by landlords under Case B of Schedule 3 to the Agricultural Holdings Act 1986. A Private Member's Bill currently in another place seeks to put right a position arising following a Court of Appeal decision under Case B which allowed a private landlord to recover possession of a farmhouse sub-let by the tenant for residential purposes to persons employed outside agriculture and required by the landlord for his own non-agricultural use. This may not of itself be greatly significant but in a period of change all decisions are important.

The Northfield Report was concerned with changes in patterns of farm land ownership following acquisition by pension funds and other large investors. The report found no detriment to tenants at that time but no government investigation of the position has taken place since then. In our view this Government seem curiously reluctant to instigate any inquiry. But if there is to be a change in the landlord-tenant law in the near future, an up-date of the Northfield Report is an essential preliminary.

To be fair, it should be said that Her Majesty's Government appear sympathetic to changes in the law. Reference has already been made to the statement made by the Parliamentary Secretary, Mr. David Maclean, in another place on 16th February. He said: I also want to make it clear that on this occasion, as opposed to the early 1980s, we shall not let the lack of total consensus stop us. I know that in the early 1980s, before we came forward with the Agricultural Holdings Act 1984, my predecessors took the view that unless there was complete unanimity in agriculture and all unions could agree on a proposal, we should not legislate. Now we shall not let a lack of total consensus stop us from legislating. The difficulty would be to find a legislative slot if we came up with a solution that was acceptable to many in agriculture and to the House. It would, of course, be helpful if we had all-party agreement on what needed to be done".—[Official Report, Commons, 16/2/90; cols. 622-3.] In our view, that is a significant statement and one to which no doubt the noble Baroness will refer when she replies to the debate. Paradoxically, all-party agreement may be easier to achieve than a common view of desirable changes in present law from the National Farmers' Union, the Country Landowners' Association and the Tenant Farmers' Association. Their views about alternatives to the status quo show wide disparity. That fact has been fully emphasised in today's debate.

Timing is of the essence in this matter, but apart from changes brought about as a result of the CAP there are indications that those who rent farm land may wish to consider alternatives, including disposals. For example, certain county councils are looking at the farm land that they rent to see whether they would be better off by selling. Pension fund trustees may also be in the mood to realise gains rather than retain assets in an industry offering reduced opportunities for capital gains.

As noble Lords who read the financial press will know, builders have been reducing the value of their land banks in their balance sheet to the detriment of the profit and loss accounts. In our opinion all that bodes ill for the tenant farmers and especially young persons who would like to start out on their own and who are well qualified to do so. If the Government care to take the initiative in this matter seeking all-party support we on this side of the House will respond and favour the kind of inquiry suggested by other speakers in today's debate.

In our opinion the Ministry of Agriculture, Fisheries and Food has given an indication of its willingness to respond positively in England and Wales. We welcome that indication. However, in the light of other speeches made during the course of the debate we must not forget the Scottish dimension. The debate has been most useful and we look forward to hearing the Minister's reply.

4.53 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington)

My Lords, it is some years now since we have had a wide-ranging debate on landlord-tenant issues. I do not think that I need to declare an interest as it is some time now since my father farmed or since I was a landgirl. However, I hope that the three years I have spent at MAFF have brought me up to date on such matters. My noble friend Lord Stanley of Alderley timed today's debate well in view of the current discussions within the industry on possible ways of revitalising the tenanted sector. I have listened to your Lordships with great interest.

Incidentally—stop press—the Bill of the honourable Member for Montgomery, the Agricultural Holdings (Amendment) Bill, completed its Committee stage, with government help, this morning in another place. During the past 80 years or so the proportion of agricultural land which is rented has decreased from approximately 90 per cent. to about 37 per cent. in 1988. Those figures more or less agree with those of my noble friend Lord Middleton. The main factors contributing to the decline—my noble friend Lord Waldegrave mentioned some of them—have been: first, socio-economic factors such as the redistribution of wealth, economic depression and changes in class structure; secondly, the effects of capital taxation; thirdly, the value of vacant land; and, finally, the legislation giving increased security of tenure to the tenant.

At this point I should like to mention compensation where land is taken for development. It is a matter to which the noble Duke, the Duke of Somerset, and the noble Lord, Lord Mackie of Benshie, referred. It is important to remember that the landlord is the owner of the capital asset.

He should be entitled to realise it if there is a suitable opportunity. If landlords were deprived of that right, there would be another disincentive to fresh lettings. Compensation is clearly a contentious issue. I recognise that there is concern that the level of compensation provided for in the Agricultural Holdings Act is unsatisfactory, but no formula will satisfy everyone. Further, landlords can always offer more than the statutory minimum —and I know that some of them do so. The main problem for those losing land is the difficulty of finding new land to rent. We must not do anything which would make landowners more reluctant to let. The first priority must be to find ways to encourage landlords to let their land.

I return to the different factors in the matter. Such factors have assumed importance at different times. However, the results of last year's CLA landlord-tenant survey suggest that the agricultural holdings legislation is now the key obstacle. Financial and estate management considerations, the political risk and taxation are seen as being of less importance.

I think it is fair to say that much of the agricultural holdings legislation has its origins in the 19th century, at a time when the majority of tenants were likely to be relatively uneducated and would not be expected to take professional advice. One of the main aims of the legislation was therefore to protect the weaker party. This concept was carried through into relatively recent legislation and was taken to an extreme in the Labour Government's misguided 1976 Act which provided for two-generation succession. I do not need to remind your Lordships that a tenant farmer embarking on a career in 1990 is very different from his counterpart of a century ago. Like any good farmer, he must be a businessman who takes professional advice as a matter of course and is therefore much better placed to look after his own interests.

I do not intend to venture into the CAP, as suggested by the noble Lord, Lord Gallacher. However, I should remind him that, as my noble friend Lord Middleton implied, the tenant farmer is in a precarious position in some other EC countries. With regard to the CAP, I merely say that it is vital to get the overall framework right. That is precisely what we have been doing with respect to the CAP. I believe that we have turned the comer. We are of course pressing for all we are worth in Brussels for a substantial devaluation of the green pound, insisting upon more than the Commission has proposed.

Your Lordships will remember that we had hoped that the Agricultural Holdings Act 1984 would stem the decline in the tenanted sector. Unfortunately, although it has proved to be a step in the right direction, it has not had the desired effect. It has only slowed the decline in the tenanted sector not reversed it. The Central Association of Agricultural Valuers' annual tenanted farms surveys show that since 1984 there have been more relettings than in preceding years, but the overall decline has continued.

The CAAV's recent surveys also show that, while many landowners are unwilling to enter into lifetime tenancies under the Agricultural Holdings Act 1986, they are prepared to use a range of short-term arrangements, partnerships and Gladstone Bower lettings of more than one but less than two years. That suggests to me that there are a significant number of landowners who do not want to farm their land but will only give up direct control of it if they can retain a much greater degree of flexibility than is offered by the 1986 Act.

I am conscious that some people question whether there will be a viable tenanted sector in the future, or indeed whether that matters. I should like to make it clear that we consider that the tenanted sector makes a vital contribution to the agricultural economy. We all worry about the future of agriculture and in particular the position of young people going into farming. My noble friend Lord Wise mentioned the would-be young farmers. They are the lifeblood of the industry. They are the ones who will ensure that it continues to adapt to the challenges that it faces, as it has always done in the past.

I regularly visit agricultural colleges and I ask students if they have jobs to go to. The answer is usually that they do but that opportunities for those whose parents do not farm or whose farms are too small are very limited. Their position is made much more difficult by the lack of land to rent. It is very important that a solution is found to this problem. The Government are concerned therefore that the current legislation seems to be strangling the sector. Change is necessary to cope with the demands of the 1990s. We are looking at the options and want to hear the industry's views.

For that reason I very much welcome the debate within the industry on ways of revitalising the tenanted sector. It is encouraging that there is now a general agreement that some change is required. But, as your Lordships are aware, there is as yet no agreement concerning the wide range of proposals under consideration. These include retirement tenancies, fixed term tenancies, either for any term agreed by the parties or for a minimum term of between 10 and 25 years, and complete freedom of contract.

The noble Lord, Lord Walston, has introduced another idea, though I do not believe that his proposal is practicable. I hope that the industry's discussions will gain new impetus as a result of our debate today.

As regards the extended agricultural tenancy which was mentioned by my noble friend Lord Stanley of Alderley, the five land agents have obviously done a great deal of work. Their proposal for an extended agricultural tenancy provides an interesting contribution to the debate about the future of the tenanted sector. I shall certainly look forward to hearng the industry's views on that and on other proposals.

The noble Lord, Lord John-Mackie, referred to tenants' homes. I want to make it clear that I am very sensitive to the question of how the farmhouse should be treated if there is a move to shorten term tenancies. I mentioned this to the Tenant Farmers' Association when I met its members recently. I am sure that the industry will be addressing this issue very seriously. I shall certainly be urging it to do so.

I am in the process of meeting the various groups with an interest in the issue and I make it clear to then: that we are looking for effective solutions to the problems. To be acceptable to us any proposals must genuinely address the problem and increase the amount of land available for letting. Furthermore, it would be obviously desirable for the industry to reach as much agreement as possible within itself.

However, I agree with my noble friend Lord Middleton. I assure him that we are willing to discuss proposals with the industry without waiting for a complete consensus. I am delighted to take the opportunity to emphasise these points to noble Lords today. I am sure that noble Lords will agree that we cannot justify using parliamentary time for measures which will be of only very limited effect: effectiveness is the key issue.

Before I reply to other points made by your Lordships, I want particularly to assure all existing tenants that no one is suggesting that their tenancies under the 1986 Act would be affected by any new system which may be introduced. I hope that this statement reassures the noble Duke, the Duke of Somerset.

My noble friends Lord Stanley of Alderley and Lord Swinton referred to farm incomes. They rose last year by 16 per cent. If I were to stress that figure to the House and if I had built my speech on it, I might have misled your Lordships into thinking that the picture is a rosy one. I did not because it is not. Last year's rise represents only a slight recovery from the significant fall in 1988. It also hides considerable differences between sectors and individuals. I shall not disguise the fact that for many of our tenant farmers these are not easy times, with incomes under considerable pressure.

However, I do not believe that our farmers should despair. I am equally sure that all is not gloomy. The Government are firmly committed to the industry and well aware of its difficulties. We are continuing to provide very significant levels of support. Indeed, in the last year we have done several things to increase the help we give, in particular to those most hard pressed. For example, we have raised HLCA payments for hardy breed ewes. HLCA payments for those facing natural handicaps now amount to £125 million a year. Other measures have included raising BSE compensation to 100 per cent. and the suckler cow premium to the maximum permissible rate.

My noble friend Lord Swinton compared the position of arable and hill farmers. There will be a wide range of circumstances depending on the type of enterprise and its location. Government policy is to create a situation where market forces play a full role. However, we recognise the problems of those facing natural handicaps; for instance, through the HLCA system.

My noble friend spoke about the Countryside Commission and its idea for environmentally friendly farming. I understand the commissions' desire to encourage environmentally friendly farming. I am sure that many farmers, be they tenants or owner-occupiers, are keen to continue in their role of custodians of the countryside. Farming remains the greatest user of the land. The Government are already doing a great deal in this area through carefully targeted schemes such as the environmentally sensitive areas scheme.

My noble friend Lord Stanley of Alderley spoke about the economic position of tenant farmers. He suggested that tenants are in a worse position than owner-occupiers. However, thougth to a limited extent the economic position of tenant farmers depends on a different set of factors than those for owner-occupiers, the two groups have much in common and it would be wrong to separate them. Differences in income levels and trends are usually much more striking between the different types of farm—for instance, dairying and cereals—than between tenants and owner-occupiers. Indeed, figures for England from the Farm Business Survey suggest that farm incomes have been fairly similar overall on tenanted and owner-occupier farms since the mid-1980s. Morever, latest results showed incomes to be slightly higher on tenanted than on owner-occupier farms.

Most cost items are common to both tenants and owner-occupiers. Each has to buy feed, fertilisers, seed, machinery and other inputs; each needs to employ labour and each needs to pay interest on borrowings. In fact the latter cost is often much more keenly felt on owner-occupied farms because borrowings are usually greater.

One cost item which is unique to tenanted farms is of course rent. This, however, is a matter for negotiation between the landlord and the tenant. One would obviously expect farm rents to reflect economic conditions in the industry, but since rent reviews normally take place at three-yearly intervals, rent movements may lag behind changes in the circumstances of the industry. However, latest information from the rent inquiry suggests that on average farm rents rose by only just over one-half a per cent. overall in 1989 or just over 2 per cent. on those farms where there was an increase.

Turning to capital, naturally, as I am sure noble Lords will recognise, a tenant's business is worth less than that of an owner-occupier because there is no land or buildings within the business assets. However, borrowings are also lower on tenanted farms. If one subtracts the borrowings from the assets of the business, the resulting net worth figure averages around £100,000 in England. I appreciate that there is much variation around this average, but borrowings exceeded assets on only 1 per cent. of those farms in 1989. For 60 per cent. or so borrowings were less than a quarter of their assets. The financial position of most of these businesses is, I would suggest, fairly secure.

Looking to the future, it is difficult to predict developments, but the major factors affecting farm incomes are likely to bear upon both tenanted and owner-occupied farms. For both groups and for all types of farms there is a wide range in farm performance depending upon a number of factors, not least the skill of the individual entrepreneur. For the future, farmers, both tenants and owner-occupiers, must be willing and able to make the most of the opportunities that are available to them.

Lord Raglan

My Lords, before the noble Baroness sits down, she mentioned that she was going to listen to various representations about forms of tenure and so forth. However, neither she nor any other noble Lord today has mentioned share farming, in which there is a great deal of interest and which might be more universal as a form of contract if potential owners and tenants were more sure of the law in respect of such contracts. Will the Government look into the matter and consider share farming as one of the provisions for which they may legislate?

Baroness Trumpington

My Lords, as part of the exercise I am willing to look at anything, but I do not believe that share farming would solve the tenancy problem. However, those who are involved in that kind of farming would find it worthwhile to put their two bits in with everyone else in an attempt to obtain some form of agreement which would permit us to bring forward meaningful legislation.

5.12 p.m.

Lord Stanley of Alderley

My Lords, I believe that I have a moment or two left as I spoke for less than my rationed time at the beginning of the debate. I thank all noble Lords who have spoken in the debate. If the problem could be put before noble Lords alone, I believe we could achieve a consensus. I shall mention a few points on which we were in agreement. We were all in agreement on the excellence of the landlord-tenant system and the financial position of the industry. If my noble friend Lady Trumpington is worried about that, I would commend to her the recent papers of Professor Nix and Dr. Murphy on the dire state of the industry.

We were all agreed on the inability of the tenant farmer to save enough for retirement, on the difficulty of compensation and on the fact that the landlord should of course take the first cut. We were all agreed that we should try to produce legislation to help landlords let land. We also agreed that it was not necessary to have 100 per cent. consensus, although we could possibly reach some consensus.

I was delighted to hear my noble friends Lord Swinton, Lord Radnor and the Duke of Somerset say how much they valued the long let system. Certainly most of us agreed with the traditional landlord system of one let. However, I am somewhat doubtful about the surveys. It seems to me that they are of the kind that would ask me whether, for example, I preferred one chocolate or a box of chocolates. I would reply that I would prefer to have three boxes of chocolates. I feel that that may be the nature of such surveys.

Finally and most importantly, I was delighted to hear the final remarks of the noble Lord, Lord Gallacher, on the willingness and encouragement of the Opposition to look at this problem with an open mind. I also noted that my noble friend Lady Trumpington is charging round young farmers and others and will continue to do so. I hope that we shall achieve some consensus on this matter as both Front Benches are agreed on the important issues. That is not altogether a common occurrence. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.