§ 7.38 p.m.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Baroness Trumpington)My Lords, I beg to move that this Bill be now read a second time.
1067 The main purpose of the Bill is to deregulate the Agricultural Mortgage Corporation and the Scottish Agricultural Securities Corporation. It also contains certain other financial provision. But before I go into those in more detail, I should perhaps add that the Bill is hybrid. That is because the deregulation provisions will make one change to both corporations' memorandum of association. This change is purely consequential to the main deregulation provisions. It has the full support of the corporations and their shareholders and it does not affect any other private interests. In all other respects this is a straightforward public Bill although we have obviously complied with the relevant standing orders for private business. I hope that clarification is helpful.
The Agricultural Mortgage Corporation and the Scottish Agricultural Securities Corporation were set up in the inter-war years to provide farmers with long-term credit. Both corporations have always been registered limited companies; but because they were established with Government support, certain statutory restrictions were imposed on their activities and on the type of loans they could offer. These restrictions are simply not appropriate in the very different farming conditions of the 1990s. When we consulted the industry last year about the future of the AMC, the response was firmly in favour of deregulation. Equally important, both corporations are very successful organisations which no longer need Government help or the controls that inevitably go with it.
That raises the important question of how deregulation will affect their future activities. I repeat what was said about that when the Bill was considered earlier in another place because that statement was discussed very carefully with the corporations' shareholders and it fully reflects their views.
The AMC itself intends to remain firmly in the business of providing long term loans to the agriculture industry. That forms the basis of its current, very successful operations and is where its expertise lies. But deregulation will allow the AMC to be more flexible—for example to lend on security other than land, to help farmers finance diversification projects and to offer loans outside England and Wales. The AMC will also be able to consider joint ventures with organisations providing other financial services if that would offer the farmer a better overall package. So while we believe that deregulation will help the AMC to adapt to the needs and challenges of the coming decade, we are satisfied that in the main the AMC will continue to do what it has always done best —to provide medium and long term loans to the agriculture industry.
I now turn to the AMC's shareholders—the Bank of England and five of the major clearing banks—because they will have an important role in helping to make the transition to deregulation as smooth as possible.
The Bank of England and the AMC's other shareholders do not in any way guarantee the AMC's borrowings, but their involvement has clearly been a major factor in building up the confidence on which 1068 the AMC has successfully developed its business over the past 60 years. The shareholders are determined to ensure that the move to deregulation goes smoothly and efficiently.
The Bank of England is particularly concerned to see that the changes sought by the commercial bank shareholders and the AMC are made in an orderly manner and readily recognises that it has a special and positive role to play in ensuring an orderly adjustment to the new market situation. The Bank will only dispose of its shareholding when it is satisfied that this adjustment is assured. While we cannot commit the Bank of England, we would expect that to take a number of years.
The position of the clearing banks is a little different. Over the years they have increasingly entered the markets in which the AMC operates and they and the AMC now compete to provide a similar type of service to the agricultural industry. So it makes increasingly less sense for the clearing banks to continue to hold an investment in what is a competing company.
At the same time, the clearing banks are genuinely anxious to ensure that the move to deregulation goes smoothly and efficiently. Apart from any wish to protect their own investment, the AMC's customers are their customers too. So while there is likely to be some disinvestment, the clearing bank shareholders have assured us that it will happen in an orderly way. Precisely how and when will, of course, be a matter for discussion between the AMC and the clearing banks, but we are certain that the AMC will be able to attract new capital. It is a very successful organisation and it can, and should, stand on its own reputation like any other very successful private company.
The SASC is owned by three Scottish clearing banks, which are fully involved in the formulation of its current and future plans. Unlike the AMC, the SASC only lends at a fixed rate of interest and so it is not in direct competition with its shareholders, whose lending is predominantly at a variable rate of interest. For the future the SASC's primary objective will be to provide a first class service to the Scottish farming community through its competitive mortgage facilities. We understand that there are no plans for any of its shareholders to sell their holdings.
Clause 1 of the Bill will repeal the legislation which enables agriculture Ministers to lend money to the two corporations and sets out the conditions which they must satisfy to qualify for financial support. The clause also makes some minor consequential repeals. Existing mortgages and debentures issued by the AMC and the SASC will not be affected by any of these repeals.
The repeals will be brought into force by commencement orders. This will ensure that the repeals affecting the AMC are not implemented until the outstanding government loan has been repaid. In practice it will probably be possible to make the necessary orders later this year.
Clause 2 will allow agriculture Ministers to recover the costs involved in supervising Community carcass grading schemes. A system of pig carcass grading was introduced in all member states on 1st January 1989. 1069 Beef carcasses will be subject to a mandatory grading scheme from 1st January 1992 and we are currently consulting the industry on the detailed arrangements. The Commission also has plans to introduce a scheme for lamb. Grading can be carried out either by the slaughterers or by the Meat and Livestock Commission on their behalf but in either case it is supervised by our fatstock inspectorates.
Our intention is to recover the total costs of this supervision in Great Britain from 1st January 1992, which i the date on which beef carcass grading will be introduced. We shall of course consult the industry before any charges are introduced and in fact Clause 2 specifically requires us to do that.
Clause 3 provides the statutory authority to make national payments under the Community's suckler cow premium scheme. This scheme was introduced in 1980 tc help maintain the incomes of specialist beef producers at a satisfactory level. Producers who keep suckler cows for rearing calves for beef can qualify for a headage payment from the European Agricultural Guarantee and Guidance Fund. Member states also have the discretion to top up this Community premium with an additional national payment and the United Kingdom has always done so. Because these national payments are discretionary they cannot be authorised by regulations made under the European Communities Act 1972, which would be the normal way to do it. At the moment, the authority for payment therefore rests solely on the annual appropriation Acts. We fully accept that this is not a satisfactory state of affairs and Clause 3 is intended to put that right.
The clause enables agriculture Ministers to make regulations providing for the payment of the national premium under the Community scheme. The regulations may also set out appropriate conditions for such payments. I emphasise that the operation of the scheme will not be affected in any way. The national payments will simply be put on a clear and appropriate statutory footing.
Turning to Clause 4, I have taken a particular interest in the New Forest since taking on Ministerial responsibility for forestry matters in England. Last year, at Lyndhurst, I presided over the launch of the Government's response to a report into the future of the New Forest. I am very much aware, therefore, that the New Forest Verderers form an integral element in the administration of the forest. The Verderers' present-day functions include important responsibilities relating to the conservation and recreational use of the forest, which attracts a positively enormous number of visitors each year.
To help meet the administrative cost of these responsibilities, in 1973 the Treasury agreed to the Forestry Commissioners making an annual grant to the Verderers from the forestry fund. Clause 4 will simply put this grant on a firm statutory footing. We are not talking of huge sums of money. The grant has never exceeded £10,000. But without some support the Verderers cannot respond effectively to the growing pressure on this very lovely and important part of our national heritage.
1070 Finally, Clause 5 deals with the geographical extent of the Bill. Since carcass grading and the suckler cow premium scheme are devolved matters, the Bill does not extend to Northern Ireland. However, there will be separate parallel legislation on these matters.
Clause 5 also provides for the commencement of Clause 2. As I have already indicated, the Clause 1 repeals will be brought into force by order and Clauses 3 and 4 will come into force immediately the Act receives the Royal Assent. That is normal practice where the payments concerned are already being made under the authority of the appropriation Acts.
This has perforce been a long speech to explain a short but useful Bill. I commend it to the House.
§ Moved, That the Bill be now read a second time. —(Baroness Trumpington.)
§ 7.52 p.m.
§ Lord GallacherMy Lords, I thank the noble Baroness for explaining the Bill clearly and in detail. I also thank her for her kindness in sending notes on the Bill's clauses. Like the dedicated people that we are, we have read them with considerable assiduity. Between the two explanations we are reasonably clear about what the hybrid measure is about. We support the provisions of the Bill in all respects as we did in another place. However, I wish to ask several questions about Clauses 1 and 2, although not necessarily to be answered this evening as some are of a technical nature.
Clause 1 converts the Agricultural Mortgage Corporation in England and Wales and the Scottish Agricultural Securities Organisation into bodies unsupported by Her Majesty's Government. Former support was of a limited kind. Nevertheless, in the mind of certain members of the public both bodies were government backed. In effect that gave added security to lenders. That was never so but it was thought by some to be so.
As the Bill gives both bodies greater freedom, including wider lending powers, can the Minister say whether there exists in either body any scheme for the protection of depositors which is comparable to those in existence for bank and building society depositors? If not, are any such schemes contemplated when changes take place in the Memorandum and Articles of Association of both bodies?
Does the Bill's special proposals to continue present exemptions under Section 16(i) of the Consumer Credit Act 1974—an exemption also enjoyed by banks and building societies—confirm that the AMC and the SASC are regarded by the Treasury as being of equivalent status to banks and building societies? In another place the Minister spoke of powers to offer loans outside England and Wales. In how many other countries does the AMC intend operating once the Bill has been passed?
On the face of it the proposals in Clause 2 to allow Her Majesty's Government to recover costs incurred in supervising the statutory grading of carcasses to European Community standards are innocuous. However, the notes on Clause 2 lead me to think that there are several matters to be discussed with representative organisations to cover pigs, for which a 1071 charge is already being made, and cattle, for which a charge will be introduced on 1st January 1992, as well as any future scheme for sheep. The variability factors about charges contained in Clause 2, such as throughput exemptions, give cause for interest if not concern. When discussions with the industry are concluded, I hope to the satisfaction of all, will the Minister be prepared to give details about those charges in a press release or in answer to a Written Question?
Clauses 3 and 4 relating to suckler cow premium and grants by the Forestry Commission to Verderers in the New Forest respectively are in the nature of bookkeeping amendments. Bookkeeping was never my strongest subject; in fact after such a distance of time I can remember only that one debits the receiver and credits the giver. Therefore I take the assurances that the Minister has given about Clauses 3 and 4 as being guaranteed and in those circumstances I have nothing further to say about them.
We support the Bill. It is modest but important and I hope that it has a speedy and successful passage through your Lordships' House.
§ 7.56 p.m.
§ Lord Mackie of BenshieMy Lords, I too thank the Minister for sending us the fascinating notes on clauses. We too support the Bill but I should like the Minister to explain a number of issues. I understand from her full explanation that the AMC and the SASC will be commercial organisations and that government restrictions will to a great extent be removed.
One of the great virtues of the AMC and the SASC has been that they have lent at fixed rates and at fixed profit margins. I hope that their new scope will not mean that they will follow the clearing and commercial banks into a form of usury and encouragement of spending. That has resulted in what were previously respectable banks putting up notices in their offices to encourage people to take out new loans at what appear to be modest rates of interest in order to go on holiday and so forth. However, when one examines the APR the interest rates amount to 29 per cent. or 30 per cent. I hope that their plans do not include such lending in the pursuit of profit following the less respectable and less useful financial organisations which lend money.
The recovery of fees does not appear to promise a great deal of money to the Treasury. Clause 2(4) states:
Before making any decision as to the total fees to be recovered under this section or the method of apportioning them between the persons liable to pay them the Minister shall consult".I hope that the Minister will take note of the fact that the farmer's obligations should end at the farm gate. Already there are disputes in Scotland about who should pay certain fees in respect of slaughtering, and that is unfair.
I was amused and delighted to note that the Government have admitted that they have been a little out of place in paying the extra money for the suckler premium and are correcting that in the Bill. It was nice of the Government to have paid the money. I hope 1072 that they will continue and make the national contribution the maximum that they can under the EC regulations, because the keepers of suckler cows need it in these times.
Lastly, as regards the Verderers, that is an example of Treasury kindness which one does not often see. However, perhaps the noble Baroness will explain to me the procedure as regards the right to turn out pigs in the pannage season. Perhaps she will tell me how much extra food they have, how much they put on per day, how much the pigs like being turned out in the pannage season and what the pannage season is. I should be very grateful for that information, as I am sure would other noble Lords.
§ 8 p.m.
§ Baroness TrumpingtonMy Lords, I am grateful to both noble Lords for what they have said and for their general welcome for this short Bill. On Clause 1 the noble Lord, Lord Gallacher, raised the question of whether there is any scheme for the protection of depositors. The answer is, no. The AMC and SASC do not currently take deposits from members of the public. If they decided to do that, they would need to seek the necessary authorisation under the Banking Act 1987.
The noble Lord followed that up by asking in how many other countries the AMC will operate. As far as I know it has no immediate plans to operate in any country outside the UK.
I believe that the final question of the noble Lord, Lord Gallacher, was whether the Government will give the details of the results of consultation on carcass classification. The answer is, yes.
Turning to the noble Lord, Lord Mackie of Benshie, he maintained that a farmer's responsibility should end at the farm gate. Charges will be levied on slaughterhouses and not on farmers as such. Whether slaughterhouses choose to pass on those charges to the farmer is a matter for their commercial judgment. Their ability to do so will depend on the state of the market. Farmers benefit from the information provided, because the classification is an indicator of quality.
As regards whether the suckler cow premium is being paid at the maximum rate, the rate for the 1991–92 scheme has not yet been set. It is currently being considered and an announcement will be made in due course. Under the 1990–91 scheme the maximum rate of premium allowable under Community rules was paid in the less favoured areas but a slightly lower rate was paid elsewhere.
I omitted to mention that the noble Lord, Lord Gallacher, asked me about consumer credit exemption. The Bill will allow the Secretary of State for Trade and Industry to exempt the AMC and SASC if he considers them appropriate organisations after deregulation. That will effectively place them in the same position as banks and building societies.
I shall have to write to the noble Lord, Lord Mackie, about the pigs. When I was in the New Forest, there were sheep everywhere but I did not see any pigs. However, I shall have great pleasure, as I always do, in writing to him.
§ Lord Mackie of BenshieMy Lords, perhaps the noble Baroness will give us some information about the son of new lending to be undertaken by the AMC and SASC.
§ Baroness TrumpingtonMy Lords, it is rather early days for that. As I said in opening, it is a question of the existing shareholders doing their thing and the AMC taking on its own life as an independent body. Therefore, I do not wish to answer that question at this stage. I commend the Bill to the House.
§ On Question, Bill read a second time and committed to a Committee of the Whole House.