Lords Sitting of 12 December 1994

Preamble
The House met at half-past two of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Worcester): The CHAIRMAN OF COMMITTEES on the Woolsack.

School Inspections
Baroness David Baroness David asked Her Majesty's Government:
Whether they expect to meet their targets for the inspection of primary and special schools.
Lord Lucas: My Lords, the legislation provides for the independent external inspection of all maintained schools over a four-year cycle. In this, the first term of the primary and special school inspection cycle, the number of contracts let has fallen some way below expectations. Her Majesty's Chief Inspector announced on 8th December a package of measures designed to remedy that shortfall. The Government attach importance to achieving the four-year inspection cycle and are keeping the situation under close review.
Baroness David: My Lords, I thank the Minister for that very informative Answer. It is quite clear that my Question was well targeted. Apparently, inspections for 1995 were going to be about 1,800 below target and the cycle would have been seven and half years rather than four years had not some plans been hastily made. Will the Minister say who will be doing the inspections? Am I correct in my understanding that a good many of the inspectors were trained to inspect just secondary schools and not primary schools? Will that affect the quality of the inspection that is provided?
Lord Lucas: My Lords, the quality of the inspection remains of prime importance. The Government will do nothing which will put that in jeopardy. By and large the inspections will be provided by those who are already trained as inspectors. Ofsted has set out a number of measures to encourage those who have been trained and who have not yet come forward to undertake inspections, to do so. To a certain extent some temporary help will be provided by Her Majesty's inspectors themselves. But under no circumstances do we envisage half-trained or untrained people undertaking inspections.
Lord Pearson of Rannoch: My Lords, does my noble friend agree that it is rather bizarre to hear implied criticisms of this nature coming from the Benches opposite, bearing in mind the colossal damage that socialist ideology has done to the British education system since the last war? Does he further agree that, whatever teething problems our new inspection system may have, it is a huge improvement on the previous situation, whereby only 100 primary schools were inspected annually, and that therefore the average primary school was inspected just once in every 190 years?
Lord Lucas: Yes, my Lords, we believe that it is a great improvement on what went before. In general, we are very pleased with the results that the system is producing. We are disappointed that the number of
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inspections to date is falling below target. But we are determined to make sure that we catch up again over the next few years.
Lord Morris of Castle Morris: My Lords, does the Minister appreciate the fact that the Government removed from local education authorities at 1990–91 prices approximately £75 million to fund the new inspection service? Given that quite clearly Ofsted is unable to implement successfully an inspection policy, should not at least a proportion of that money be returned to local government so that it can be properly funded for inspecting schools, which it does remarkably well?
Lord Lucas: My Lords, that is complete nonsense. The money is in Ofsted to undertake the inspections and the inspections will be undertaken. I quite agree that the local education authorities are now beginning to do an excellent job in helping primary schools. One of the reasons why Ofsted is finding that inspectors are not coming forward to do its inspections is because local authorities at last are devoting more of their resources to helping their own primary schools. We feel that is an excellent development.
Baroness David: My Lords, can the noble Lord say whether there is to be a cut in the money available for inspections? According to the Budget Statement on DfE expenditure plans, there was a £13 million cut in expenditure for Ofsted, which is a 12½ per cent. cut. Can he explain that?
Lord Lucas: My Lords, I do not have that particular figure in front of me. I can tell the noble Baroness that the Budget allows for an increase in total Ofsted expenditure from £98 million in 1995–96 to £121 million in 1997–98. That does not represent a cut. Her Majesty's Chief Inspector is quite satisfied that he has the resources necessary to complete the inspection cycle and all the other work that he undertakes.
Baroness David: My Lords, will the noble Lord accept that I obtained those figures from a reliable source? Will he write to me and explain why those figures appeared in the Budget statement if they are not correct?
Lord Lucas: Certainly, my Lords.

County Hall
2.36 p.m.
Lord Plummer of St. Marylebone Lord Plummer of St. Marylebone asked Her Majesty's Government:
Whether they will ensure that the work currently being done within the County Hall on London's south bank to turn the building into a high quality hotel is carried out in accordance with the planning consent which has been given.
Lord Inglewood: My Lords, Parliament has determined that it is the responsibility of the appropriate local planning authority to ensure that the work is done in accordance with the relevant planning and listed building

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consents. English Heritage is satisfied that the work being carried out to the Riverside building is in accordance with listed building consent.
Lord Plummer of St. Marylebone: My Lords, I thank the noble Lord for that Answer. Does he appreciate that County Hall occupies a prime location in the heart of the capital and should not be allowed to lapse into an eastern bazaar? Is he further aware that the Secretary of State for the Environment has published a consultation paper, Quality in Town and Country, and intends to issue guidance to planners requiring them to consider the quality of architecture and buildings, especially in prime locations? In an interview, he added:
"What might be acceptable in a run of the mill area might not be acceptable in a fine location".
Is he aware too that the London Borough of Lambeth is the planning authority and cannot even manage its own affairs? Does he agree that special attention ought to be given to that building of special importance?
Lord Inglewood: My Lords, as my noble friend will be aware, the comments which he attributed to the Secretary of State referred to planning policy. It is indeed the case that the Riverside House part of the County Hall complex is an important building. It is in a conservation area and is grade 2 star listed. In order for any change to be carried out to that building which is not in accordance with existing planning permissions and listed building consents, further planning permission and listed building consent would be required. So far as I know, no such application has been made. Were that to happen on such an important site, as my noble friend pointed out, the Secretary of State would have to consider whether he would call it in.
Lord Jenkins of Putney: My Lords, is the noble Lord aware that the building was originally built for the purpose of housing London government? Is he further aware that it would be very good if that building could be recovered for the purpose for which it was originally designed? Is he still further aware that an administration which will follow the present one—perhaps a wider administration—will seek to recover the building for its original purpose?
Lord Inglewood: My Lords, I am indeed aware that County Hall was built as the seat of a pan-London authority. I myself do not claim to have any great connection with it, but my mother was a member of the old LCC for four years between 1949 and 1952. I was born in 1951. So I dare say that I could be said to have played a part in it myself. Parliament determined that the GLC should be abolished and therefore it was. Obviously, it is open to any future parliament to take whatever decision in the future that it thinks best. But the House can rest assured that so long as we on these Benches remain in power the eventuality of that happening is both far distant and unlikely.
Lord Jenkins of Putney: My Lords, is the noble Lord aware that when he was only a twinkle in his father's eye I was actually a member of the London County Council?
Lord Beloff: My Lords, does my noble friend agree that the story of the relationships between the London
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Residuary Body and the Japanese entrepreneurs has been a total disaster? Is it not possible to go back to the far more appropriate scheme of turning this building over to the London School of Economics to give us a major educational edifice on this prime site which would be a credit to the entire country and a magnet for London?
Lord Inglewood: My Lords, as I am sure my noble friend is aware, the terms of reference under which the London Residuary Body operates are determined by statute. It was made quite clear that it was the function of the LRB to dispose of any land held by it which was not required by it for carrying out its functions at the best consideration that could be obtained unless the Secretary of State directed otherwise. The best consideration that could be obtained for the County Hall site included the sale of Riverside House to Shirayama. In those circumstances, bearing in mind the previous planning history which included an action in the High Court, I really do not think it would have been proper for the London Residuary Body to have done anything other than it did.
Baroness Seear: My Lords, is the Minister really saying that the best consideration always means the best financial consideration and that no other considerations have to be taken into account when making such a change? Will he pass on to his noble friend Lord Plummer, who made references to Lambeth, the fact that Lambeth is changing very fast, with a sixfold increase in Liberal Democrats on Lambeth Council?
Lord Inglewood: My Lords, I thank the noble Baroness for her comments. I am sure that my noble friend Lord Plummer will have heard her observations on the borough. On the question of the best consideration, it would have been extremely difficult to find a convincing and watertight case which would have justified not selling the County Hall site as it was sold.
Baroness Hollis of Heigham: My Lords, following the shambles of the Shirayama deal, will the Minister now agree at least to set up a committee of inquiry to examine the future, as the noble Lord, Lord Plummer, so rightly said, of one of London's most important buildings? Can an acceptable scheme be commercially viable after two such schemes have now collapsed? Should, instead, the building be used for higher education, as the noble Lord, Lord Beloff, suggested, or should it instead become a home for the dozen or so London-wide quangos that replaced the GLC together with the many voluntary and charitable bodies which are looking for a home in London? There are very many options which would bring the building back into public use. Will the Minister now agree to a committee of inquiry to consider them?
Lord Inglewood: My Lords, the important point which I think the noble Baroness has overlooked is that the building does not actually belong to the Government. The building is owned by Shirayama, which is entitled to own the building. It is entitled to occupy and carry on activities in that building in accordance with listed building consent and planning permission; there is no evidence to suppose that there

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have been any problems. In the circumstances, it is rather difficult to see how the kind of proposals being advocated by the noble Baroness could be properly implemented.
Lord Mellish: My Lords, is the Minister aware that this is a particular site? It is not just another site. This is County Hall, which is revered and loved by many Londoners. Is it not a fact that this building ought to be a symbol of local government and all that it represents? It does not matter which party is in power. Surely against that background for the Minister to get up and talk the way he has and waffle the way he has is of no consequence at all.
Lord Inglewood: My Lords, the planning permission which I understand Shirayama is currently proposing to implement was granted by the London Borough of Lambeth. It was preceded by another planning permission which was granted by the Secretary of State after two inquiries. That was upheld following an action in the High Court. That is the legal position. Any British citizen who owns a building and has planning permission for it—and not only British citizens but anyone within the realm of Britain—is entitled to implement it.
Lord Molloy: My Lords, is the noble Lord aware that many people believe that the GLC was destroyed because of the audacity of the overwhelming majority of Londoners to remain constantly loyal to the Labour Party and always vote Labour, which I can well understand was not liked by the Conservative Party? The Conservatives could never defeat Labour so they thought that they would get rid of the Greater London Council hall. Is the Minister further aware that many London authorities of all political persuasions believe that there ought to be somewhere where they can meet, if only for a few times a year, to discuss problems which affect them all? Will the Government consider that plea and save perhaps a small part of this famous hall for that very worthwhile purpose?
Lord Inglewood: My Lords, we on these Benches understand all the noble Lord's comments about people's feelings. Nonetheless, it was Parliament that ended the GLC—
Noble Lords: It was a government Bill!
Lord Inglewood: My Lords, it was a government Bill but it was Parliament that ended the GLC. Therefore, it is for Parliament to put it back if it wishes to do so.
Lord McIntosh of Haringey: My Lords, I do not think the Minister should rely on Parliament in that way. After all, the same example applies to the poll tax and to the privatisation of the railways. However, is it not the case that the financial consideration to which the Minister referred as being the prime concern of the London Residuary Body has patently not worked and that after all these years we have a building which is still not occupied, and does not seem likely to be occupied, by its legal owners? Under those
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circumstances, is it not proper for the Minister to reconsider not only the rights but the obligations of those who have bought the building?
Lord Inglewood: My Lords, the noble Lord seems to have a much clearer idea of the intentions and activities of the owners of the building than almost anyone else in the capital city. If he can advise us on that, no doubt we shall be interested to hear from him. However, at the same time—I go back to my earlier point—we are in the position that the building is occupied legally and the activity that is being carried on inside it is being carried on entirely within the law.
Lord Sefton of Garston: My Lords, does the Minister agree that in retrospect perhaps it would have been much better not to have sold the building but to have used it to house government offices rather than pay £100 million more for the monstrosity at Vauxhall Cross in order to house MI5?
Lord Inglewood: My Lords, as far as I know, no suggestion was put to the London Residuary Body that County Hall should be used for office purposes and no offer was made.

International Year of the Family
2.48 p.m.
Lord Northbourne Lord Northbourne asked Her Majesty's Government:
What action they propose to take in response to the, Agenda for Action published on Thursday 8th December by the United Kingdom Committee for the International Year of the Family.
The Parliamentary Under-Secretary of State, Department of Health (Baroness Cumberlege): My Lords, my right honourable friend the Secretary of State for Health launched a major initiative on 8th December to promote better support for parents in response to the Family Agenda for Action. The initiative covers better co-ordination of government policy, collaboration with the voluntary sector through informal meetings and development projects, a research theme on bringing up children and supporting families, and a survey of parents' concerns.
Lord Northbourne: My Lords, I am grateful to the noble Baroness for that reply. I do not think anyone could doubt her commitment and that of her right honourable friend to supporting families in their role as educators and carers. However, will she accept that there are at least six other Departments of State whose decisions impact on the functioning of families? Can she give a commitment that her right honourable friends who are responsible for those departments are also committed to putting the well-being of families at the heart of policy-making, as recommended in the Agenda for Action of the IYF?
Baroness Cumberlege: My Lords, the noble Lord, Lord Northbourne, is absolutely right. It is fair to say that nearly every government department touches on this issue. That is why the Cabinet and its main committees

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will always need to bear this in mind and supply the necessary perspective from day-to-day. We have now decided that Ministers shall meet periodically to look at the impact of government policies as a whole on the family.
Lord Ennals: My Lords, is the Minister aware that on Friday the committee about which the Question is tabled, together with the United Nations Association, the British Refugee Council and other organisations concerned with the family, presented to the Prime Minister a petition containing a very large number of signatures, and that that petition sought to ensure that those who have permission to remain, through the Home Office, will be able to have family reunification? Has the Minister a comment to make on that proposal which is part of the action plan?
Baroness Cumberlege: No, my Lords, that is left for another colleague in the Government.
Lord Renton: My Lords, is my noble friend aware that all families are much happier when every child in the family is a wanted child? Therefore, will she help to ensure that family planning services and advice within the National Health Service are available to all parents and potential parents, including teenage girls?
Baroness Cumberlege: Yes, my Lords, I can give that assurance to my noble friend. The prevention of unwanted pregnancies is one of the Health of the Nation targets.
Lord Stoddart of Swindon: My Lords, does the noble Baroness really believe that the Government have given a good example to the rest of the world in their policies regarding care for the family? Is she aware, and will she confirm, that the Government have cut the value of the married couple's tax relief by 40 per cent. over the past 18 months? Is she further aware that the Government continually refuse to allow personal tax allowances to be transferred between spouses? Will she also confirm that families in this country have been badly hit, and will continue to be so, by the reduction from 25 per cent. tax relief to 15 per cent. for mortgages? Finally, is she also aware that families have been further hurt by an increase of 1 per cent. in interest rates over the past six months?
Baroness Cumberlege: My Lords, the Government have a whole range of initiatives which strengthen family life. The Children Act 1989 was a charter for children. Child benefit remains a cornerstone of our family policy. The Child Support Act reinforces the principle of parental responsibility. The National Health Service and community care Acts support the care of frail and elderly people within their own families. The adoption White Paper seeks to give adopted children the same prospects as other children and the childcare disregard was introduced in October 1994 for people on low incomes claiming benefits. We have a proud record in this field.
Baroness Faithfull: My Lords, is my noble friend aware—I am sure she is—of the research carried out
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by the Joseph Rowntree Trust and Great Ormond Street Hospital, which reflects that children are influenced by their parents and that their behaviour is dependent on either the happiness or unhappiness of their parents? Does she not agree that at the moment the social services are spending a great deal of time on child support work, but very little time on helping parents? Does the Minister agree that that may be due to lack of resources or to other factors? Does she further agree that it is important that parents—and thus the children—should be helped?
Baroness Cumberlege: Yes, my Lords. I believe that bringing up a family is one of the most difficult things that any parent or individual has to face. The maximum support that can be given is important. However, I believe that the family is essentially a private affair. Although it may need help—which is another aspect—the privacy of family life needs to be respected as well.
Baroness Jay of Paddington: My Lords, is the Minister aware that Agenda for Action contains some quite specific proposals? Can the Minister respond to some of those in addition to the general points which she has made? They include reinstating benefits for 16 to 18 year-olds, establishing a legislative framework for family leave and abolishing fault as a ground for divorce? These are specific proposals in the Agenda for Action. How do the Government react?
Baroness Cumberlege: My Lords, there will be a full response, which I shall be happy to give to the noble Baroness in due course.
Lord Monkswell: My Lords, the Minister listed a range of matters which she said supported the family. My understanding of that list is that each one of those items is targeted at individuals, whether as children, parents or mothers and fathers, but that none of them is targeted as regards support for the family. Will the Minister answer the question that my noble friend Lord Stoddart asked, which identifies the action that the Government could take to support the family?
Baroness Cumberlege: My Lords, the reform of family credit supports families. In October 1994 there was the offset of childcare costs against earnings, which supports families. A range of things support the family.

Homeless People: London Area
2.55 p.m.
Lord Dean of Beswick Lord Dean of Beswick asked Her Majesty's Government:
Whether they are aware of the recent reports from charitable organisations indicating that the number of homeless people in and around London could be as high as 100,000.
Lord Inglewood: My Lords, the report to which the noble Lord refers was produced by a body called Health Action for Homeless People to inform the Thames regional health authorities of potential demand on their services. Its methodology is flawed in a number of respects. Many of the people described by the report as

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homeless are in fact properly accommodated. The Government are tackling the problem of homelessness and the Rough Sleepers Initiative in central London has reduced the number of people sleeping rough in the capital by three-quarters.
Lord Dean of Beswick: My Lords, is the Minister aware that I do not accept for one moment the Answer to my Question, which is based on a report from a responsible body? Is he further aware that the report states quite clearly that more than 100,000 people are sleeping rough or living in temporary hostels around London, according to figures shown today, but that the true number of those without a place to call their own is thought to be twice as great because of hidden homelessness? Is the Minister aware that that shows a gross deterioration in the situation over the past three to four years? Is the Minister also aware that in the Budget last week the Chancellor of Exchequer cut funding to the Housing Corporation so much that it can only budget for 15,000 starts in contracts which can be let in the next 12 months? Ministers at the Dispatch Box have promised me over the years that the target for Housing Corporation and housing association housing was to be 65,000 a year, but that figure is now to be reduced to 15,000. These figures can only get worse. What are the Government going to do about it?
Lord Inglewood: My Lords, as I said in my earlier reply, I do not accept the gloss which the noble Lord has put on the report. The noble Lord then criticised the Government for cutting back in the Budget on moneys for the Housing Corporation. In an era of difficult times,, difficult decisions have to be taken. We have to try to find accommodation for people and one of the ways of doing so is by building more houses. We hope that over the next three years 180,000 additional lettings will be created. In addition, we have to see how the existing housing stock can be more efficiently used. There is plenty of potential there to make sure that for many people with housing problems their circumstances could be improved.
Baroness Hollis of Heigham: My Lords, is the Minister aware that charities, such as Centrepoint, and the London local authorities estimate that there are probably about 140,000 single homeless people in London? Above all, there are the very young 16 and 17 year-olds and the mentally ill who face the failure of our social security system and of care in the community. When the Minister says that the response we need is to provide more houses, how does he reconcile that with the fact that the DoE permitted London boroughs last year to build just 250 council houses to meet the needs of about 200,000 homeless people?
Lord Inglewood: My Lords, before answering the question, perhaps I may congratulate Centrepoint on its 25th birthday, which I understand is this week. The noble Baroness refers to various statistics which have been produced by Centrepoint and others as regards homelessness in London. It is clear that while the problem is serious—and, as I said, the Government are addressing it—it is extremely difficult to analyse the problem. It is pretty certain that, looking back over the
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past few years, the nature of the problem has changed. With initiatives such as the Rough Sleepers Initiative, we are trying to tackle the issue in the right way. The figures that the noble Baroness gave do not help to solve the problem. As I said earlier, we must try to identify the problem precisely because if we do not we shall end up wasting large amounts of public resources and not benefiting people.
The Lord Bishop of Worcester: My Lords, although I welcome the progress that has been made by the Rough Sleepers Initiative, does the noble Lord accept that a core of young people and, indeed, children remain homeless? The Children's Society report, Running the Risk, states that 10,000 young people will lose complete contact with their families. Can the noble Lord tell me why the Rough Sleepers Initiative is to be disbanded in March 1996?
Lord Inglewood: My Lords, the Rough Sleepers Initiative was established for a six-year period and is due to end in March 1996, as the right reverend Prelate said. Over that period more than £182 million has been spent in endeavouring to tackle the problem that we are describing. One aspect of that programme was to build a capital reserve of about 3,300 units of accommodation. At the end of 1996, we shall have to look forward to decide what is appropriate for the future. The department is already having informal consultations with those involved in the outreach organisations to see how we can proceed. One thing is for sure, there is now a capital reserve of 3,300 units which did not exist before the initiative began. Inevitably, future provision will take a different form.

Business
3.2 p.m.
Lord Strathclyde: My Lords, at a convenient moment after 3.30 p.m., my noble friend the Leader of the House will, with the leave of the House, repeat a Statement that is to be made in another place on the European Summit.

European Communities (Finance) Bill
Brought from the Commons endorsed with the certificate from the Speaker that the Bill is a Money Bill; read a first time and ordered to be printed.

House of Lords' Offices: Select Committee
The Chairman of Committees (Lord Boston of Faversham): My Lords, I beg to move the first Motion standing in my name on the Order Paper.
Moved, That the Earl of Gowrie and the Lord Renfrew of Kaimsthorn be appointed to the Select Committee on House of Lords' Offices in place of the Lord Dainton and the Lord Gibson.—(The Chairman of Committees.)
On Question, Motion agreed to.

Deputy Chairmen of Committees
The Chairman of Committees: My Lords, I beg to move the second Motion standing in my name on the Order Paper.
Moved, That the Viscount St. Davids and the Lord Taylor of Blackburn be appointed to the Panel of Deputy Chairmen of Committees in place of the Baroness Llewelyn-Davies of Hastoe.—(The Chairman of Committees.)
On Question, Motion agreed to.

Agricultural Tenancies Bill [H.L.]
3.4 p.m.
The Parliamentary Secretary, Ministry of Agriculture, Fisheries and Food (Earl Howe): My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Earl Howe.)
On Question, Motion agreed to.
House in Committee accordingly.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Clause 1 [Meaning of 'farm business tenancy']:
Lord Carter Lord Carter moved Amendment No. 1:
Page 1, line 11, leave out ("or the notice conditions").
The noble Lord said: In moving Amendment No. 1, I should like to speak also to Amendment No. 8, which is consequential upon it. The purpose of the first group of amendments is to discover what the Government intend by the phrase "farm business tenancy" and what they see as the true nature of such a tenancy. We believe that the notice procedure that is set out in the Bill opens the way for so-called "farm business tenancies" to be used for lettings of farmland which may be non-agricultural in character.
Assuming that Clause 1(2) (a) is not amended—we shall come to that later—a farm business tenancy may be created when "part" of the land is farmed. There is no qualification as to how large or small that part of the land should be, although we have tabled an amendment to deal with the definition of "small" as mentioned in the Bill. Presumably in court it would be argued that that part of the land should be sufficiently large to ensure that the property retains the character of an agricultural holding, but that is not stated in the Bill.
We shall deal later with the definition of "farming of land" that is given in Clause 36(2). That subsection states:
"References in this Act to the farming of land include references to the carrying on in relation to land of any agricultural activity".
Presumably that means that "farming of land" is not exclusively an agricultural activity. It would be left to the courts to decide whether "estate management" in a broader sense is part of farming. Our concern is that the provisions might allow commercial leisure activities and developments, sporting facilities, timber growing, turf cutting, set-aside and, at the outer limits, sand and gravel extraction.
The question that we have to consider is whether it is intended that the creation of a farm business tenancy is a means of avoiding the creation of a business tenancy under the Landlord and Tenant Act 1954. We think that that is the Government's intention. If that is the case, it is important to have it on the record.
Let us consider the example of a tenant who is anxious to build a golf course. He negotiates a farm business tenancy at the insistence of the landowner for the acreage that he needs, with 20 acres of adjacent land being included in the letting. Both serve Clause 1 formal notices on each other. At the beginning of the tenancy, the farm is primarily agricultural in its use, but once the tenancy is up and running that is no longer a requirement. I understand that the Government's intention is, "Once a farm business tenancy, always a farm business tenancy". In the hypothetical case that I have just quoted, to keep himself within bounds, the tenant continues to use the 20 acres for agricultural purposes. He thus satisfies the business conditions although it is arguable that he may not even need to do that. The tenant then gets planning permission and develops a golf course and leisure complex on the land.
I am sure that the Committee will understand that our amendments seek to discover the Government's intention behind the words "farm business tenancy" and the true nature of such a tenancy. Once both landlord and tenant have agreed that such a tenancy should exist, can anything change the tenancy or will it always be termed a "farm business tenancy"? I beg to move.
The Chairman of Committees: As the noble Lord, Lord Carter, has spoken also to Amendment No. 8, it might be for the convenience of the Committee if I were to indicate to your Lordships at this stage that, if Amendment No. 8 is agreed to, I cannot call Amendments Nos. 9 to 11 inclusive.
Earl Howe: Clause 1 defines two possible types of farm business tenancy, a tenancy which allows for the possibility of farm diversification through an exchange of written notices between the parties, and a tenancy which does not because such notices are not exchanged. In the first case, it is the written notices which guarantee that, provided the tenancy begins its life as at least a mainly agricultural business and provided that at least some of the land is farmed, in the conventional sense, for a trade or business throughout the term of the tenancy, no matter what the balance of farming and non-farming activity is on the holding as time goes on, the tenancy will remain a farm business tenancy in law, with all that that implies in terms of the safeguards and other provisions that are contained in the Bill.
If, on the other hand, whether through inadvertence or otherwise, the parties fail to exchange notices at the outset, the tenancy may still qualify as a farm business tenancy but both parties run the risk that at some point a substantial diversification on the farm would render the tenancy subject to legislation other than this if ever its status were challenged.
I appreciate that this is intended as a probing amendment and I trust that what I have said clarifies the points of uncertainty which the noble Lord raised. We regard the notice conditions as important for providing

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the parties with the necessary option to ensure that, providing the tenancy continues to satisfy the business conditions, it will remain a farm business tenancy throughout its duration even though there may be major diversification into non-agricultural enterprises. The industry organisations have all along attached great importance to such a provision so that the parties will know where they stand.
If the provision were deleted, the tenancy might at some unpredictable point during its life become subject to other legislation, most probably the Landlord and Tenant Act 1954. That could result in, for example, the tenant losing his right to compensation for improvements made, or the landlord losing his right to regain possession at the end of the term. It is clearly unsatisfactory for such a change to occur accidentally. The likely effect of that would be that landlords would seek to safeguard their legal position against that happening in some other way.
Unfortunately the most obvious way would be to impose many more restrictions in tenancy agreements which would prevent tenants from diversifying their enterprises and thereby ensure that the holding remained agricultural in character. That would clearly act as an obstacle to the diversification that we wish to encourage. Were the amendment to be carried, which I know is not the noble Lord's intention, that would be undesirable. I hope that what I have said has been of help to the noble Lord.
Lord Carter: I am grateful to the Minister. He must not assume that I am not going to divide on the amendments. It was more than a probing amendment"- The Minister referred to the industry group. We shall be referring to it on a number of later amendments. I shall deal with the views of the industry group when we come to the debate on Clause 1 stand part.
It is important that we now have on the record that the Government—I understand the Government's philosophy on the Bill—believe that the exchange of written notices is crucial so as to give certainty to the parties. The point that I have been trying to explore—we have now flushed out the argument—relates to the surrounding rural community. The Minister said that so long as some of the land remains agricultural—whatever the balance between the farming and non-farming activity—then, as I said, once a farm business tenancy, always a farm business tenancy. I should be interested to know what groups outside the House such as those interested in conservation and rural structure, for instance, feel about that.
The Minister said that a failure to exchange notices puts the business at risk. The parties would have to go to court to see whether it is a farm business tenancy or is caught by the Landlord and Tenant Act 1954. I understand the reasoning behind the Government's philosophy. The industry group is concerned about diversification, but in the Government's anxiety to achieve that effect, I wonder whether they have thought about what would happen were a farm to change its nature substantially and affect the surrounding rural community. The two parties could then sit back and say, "It is OK. The law says we have a farm business
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tenancy, even though not much farming is going on. There is a bit of farming but lots of other things as well. The Government have said that they intended to encourage diversification and so long as the parties to the contract are happy. That is enough". We do not believe that it is enough. We shall wish to return to this matter on Report. I felt it important at the outset to get on record—perhaps the Minister wants to intervene.
Earl Howe: I am grateful to the noble Lord. Perhaps I may clarify one or two further points. He said that our position was that once a tenancy became a farm business tenancy it would always remain so. That is the case, of course, provided that notices were exchanged in the first instance. If they were not exchanged, then, as I said, the parties run the risk that the tenancy falls out of this legislation into some other legislation.
With regard to the point that the noble Lord was just making, of course nothing in the Bill overrides planning legislation. It is up to the local community to put its stamp of approval on any diversification proposals should those proposals require planning consent. That is an important point that I should make.
Lord Carter: That is helpful. It means that the Government are relying on the lawyers to get the notices right in the first place and then the planners to look after the rural community. I understand the point that the Government make. I understand why they have it in the Bill. As I said, it is important to get on record the philosophy lying behind it. I shall read with great care what the Minister said. At this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
3.15 p.m.
Lord Carter Lord Carter moved Amendment No. 2:
Page 1, line 15, after ("or") insert ("the main").
The noble Lord said: It may be for the convenience of the Committee if I speak also to Amendments Nos. 3, 4, 5, 6 and 7, which deal with the same point. We turn now to the business conditions as opposed to the notice conditions. As presently worded, the business condition requires that part only of the land need be farmed. The arguments on these amendments will sound repetitive because the same argument will occur on all of them. Technically, as I said on the previous group of amendments, that could be a small area of a substantial acreage, the remainder of which is used perhaps by a golf course.
The main part would probably be interpreted by the courts as meaning more than half the land. There should be no problem with the change proposed in Amendment No. 2 for those who are coupling the business conditions with the agriculture conditions because the character of the holding must, as the Bill provides, be primarily agricultural.
If the amendment were to be accepted there is a problem which I shall reveal to save the Minister telling me about it. The problem will come when the business conditions are coupled with the notice conditions, because under those, while the tenancy must be

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primarily agricultural at the beginning of the tenancy, it need not remain so, as the Minister confirmed on the previous amendment.
There is an argument that if, say, more than half the land area is put to a use other than farming, a separate business tenancy should be created to cover that activity, which will then be subject to the Landlord and Tenant Act 1954. It would be undesirable were the farm business tenancy to be used in rural areas as a cloak to avoid the consequences of affording the tenant the protection of the 1954 Act. That is the important point that lies behind the wording of the Bill and the amendment. Throughout all our amendments, we shall be seeking to improve security and protection for the tenant.
At present it is possible for a business tenant to waive some of the protections, as we know, but only on a joint application by both parties to the county court or the High Court under Section 38(4) of the Landlord and Tenant Act 1954. That facility was added to the business tenancy legislation following a recommendation from the Law Commission.
We then turn to the problem of using the word "land" as opposed to "holding". Amendment No. 3 proposes to leave out "land" and insert "holding". Under the Agricultural Holdings Act 1986, as I understand it, non-agricultural activities—those which do not affect the character of the tenancy—need have no connection with the agricultural business carried on by the same person; for example, bed and breakfast or farm shops which sell produce other than that grown on the farm in question.
In the latest version of the MAFF proposals for consultation, No. 4 mentions bed and breakfast but then emphasises activities on the holding. That has led to some confusion as to whether we should be talking about the land or the holding. There is need for clarification to discover which non-agricultural activities would come within the business tenancy and which would fall outside. If they fall outside, does the Landlord and Tenant Act 1954 then come into play?
We have discussed already the effect of a change in the non-agricultural activity, the shift of emphasis in the tenant's enterprise, and so forth. In Amendment No.3 we seek to find out whether it would be better to say "holding" instead of "land".
Amendment No. 4 proposes that the word "farmed" should be left out and that "occupied" should be inserted. That is a point I discussed with the Minister when we had a helpful meeting between Second Reading and Committee. It is important to get on the record what is the Government's thinking on this point, because we are informed that if the word "farmed" is used rather than "occupied", horsiculture and the keeping of horses are excluded from a farm business tenancy. Opinions on that vary, but I am told that if we were to say "occupied" rather than "farmed" the confusion that exists on that point would be dealt with.
Amendments Nos. 5 and 6 are in the name of the noble Lord, Lord Stanley of Alderley, and I shall leave him to speak to them. As I understand it, those amendments redefine the business condition which
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forms part of the definition of the new concept. The amendments provide that so long as the land was farmed immediately after the commencement of the tenancy it does not matter if the business ceases subsequently to be agricultural. These amendments have been grouped together because they are related. However, the Committee will understand our anxiety about the change in the nature of the tenancy after it has been agreed by the landlord and tenant that the farm business tenancy exists.
Amendment No. 7 deals with the problem of "farmed" and "occupied". The three central issues are to insert "the main" part of the holding; the preference for "holding" instead of "land"; and the preference for "occupied" instead of "farmed". Perhaps the Minister can explain why the Government have adopted their wording, which we are advised is, to say the least, ambiguous. I beg to move.
The Chairman of Committees: The noble Lord, Lord Carter, has spoken to Amendments Nos. 6 and 7. I wish to indicate to the Committee that if Amendment No. 6 is agreed to I cannot call Amendment No. 7.
Lord Stanley of Alderley: Amendments Nos. 5 and 6, which stand in my name, are similar to others in the group. Their intention is to clarify the position and I begin by referring to what was said by my noble friend Lord Howe in respect of Amendment No. 1. He referred to "some of the land", which immediately raises a query. What does that phrase mean? In my opinion it creates an ambiguity. Secondly, if the tenant oversteps his mark there is a case that his tenancy might become invalid. My amendment is proposed in order to clear up that matter.
If, when the tenant takes on the tenancy, he wishes to diversify outside the terms of the farm business tenancy my amendment proposes that he should be allowed to do so. As the Bill stands, the tenants must continue to farm as laid down in Clause 1(2), which states that all or part of the land must be farmed. Unless my amendment is accepted there will be a muddle, as has been pointed out. That could cause problems for a tenant who found a successful form of diversification, which is exactly what we have been implored to do by every party for the past five or six years. If the tenant found something that was successful he might be in trouble. The key principle of the Bill is to allow tenants to diversify when they get the chance.
I accept that in order to remain within a farm business tenancy a tenant could perhaps keep a small part of the land in agriculture. However, that too creates an ambiguity and is apocryphal. The farmer could act bogusly and have four chickens, which would be ridiculous and a cause for litigation.
Finally, the noble Lord, Lord Carter, referred to the 1954 Act. My amendment would solve that problem. The 1954 Act would not apply because a farm business tenancy would apply throughout, however much a farmer would wish to diversify.

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My amendments are supported by the CLA, the NFU, the Young Farmers, the RICS and CAAV.
Lord Middleton: It is desirable that a farm business tenant should be able to diversify into other lines of rural businesses. As we have heard, such a business might take up part of his land. If that is the case, under the Bill the farm business tenancy persists under the agreed terms. If, however, the business takes up the whole of the land, as might be the case, under Clause 1(2) it ceases to be a farm business tenancy. The rights of the parties would then be governed by a code of rules which were not contemplated nor intended to apply to a tenancy agreement.
I support my noble friend Lord Stanley, whose amendment I prefer. It would allow full diversification and still maintain intact the terms of the original tenancy agreement.
Earl Howe: I am grateful to Members of the Committee who have spoken in support of one or other set of amendments. In particular, I was interested in the arguments put forward by my noble friend Lord Stanley in support of his amendments. I can see that where the farming element of the business had become small, it would give landlords and tenants greater certainty that the tenancy would not accidentally fall out of the farm business tenancies legislation. I also recognise the logic in allowing a tenant whose non-agricultural activities are thriving but whose farming enterprise may, perhaps, be failing to diversify completely, provided that that is permissible under his tenancy agreement.
At the same time, there are arguments against that. It could be argued that the present condition in Clause 1(2) is hardly onerous; it simply requires at least part of the land to be farmed for the purposes of a trade or business. I can see nothing wrong in principle about that. It seems somewhat difficult to justify a farm business tenancy continuing to be treated as such when there is, in fact, no farming.
Nevertheless, Members of the Committee have indicated a measure of support for the principle behind these amendments and therefore, with the agreement of the Committee, I ask for a little more time to reflect on the implications of what my noble friend in particular has proposed.
Perhaps I may address a couple of the queries posed by the noble Lord, Lord Carter. He asked whether it would be better to refer to "holding" as opposed to "land". I am advised that there is no substantive difference in the context of the Bill. "Holding" is defined later in the Bill as the land comprised in the tenancy and "land" in law includes the buildings on the land.
The noble Lord also asked about the meaning of "farmed" and whether it excludes horsiculture. I am advised that "farmed" may include horse grazing but not horse keeping. Perhaps that distinction will be followed up at a later stage. Any activities outside farming that could be undertaken on a farm business tenancy could include any non-agricultural activity; for example, food processing or bed and breakfast. It includes any form of diversification. On the other hand, the use of the word "occupied" would allow the tenant to go 100 per cent. non-agricultural instead of keeping four chickens, as my noble friend put it. That is precisely why we do not want
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a farm business tenancy to act as a cloak for a business tenancy. It is also why we have insisted in the Bill that at the outset a farm business tenancy should be wholly or mainly agricultural in character and that as a minimum condition farming must continue on part of the holding throughout.
Between now and the Report stage the Government will consider whether an amendment along the lines proposed either by the noble Lord, Lord Carter, or by my noble friend Lord Stanley is likely to be helpful to business enterprises and, if so, what precise change to the business conditions in Clause 1(2) would best achieve that result. I hope that in the light of that explanation the noble Lords will feel content not to press their amendments.
Lord Carter: I am sure that the equine community will feel an immense sense of relief at the connoisseur's distinction between horse grazing and horse keeping. We look forward to discussing the matter at a later stage and I am sure that I shall have to seek advice on it.
The discussion has been helpful; we now understand that the Government are anxious to promote diversification. However, when the Bill refers to part of the land being farmed the crucial question is: how much? I suspect that in the end that may well be an area on which the courts will have to decide as to the meaning. As the noble Lord, Lord Stanley, said, you may keep a few chickens and sheep and then you can do what you like with the rest of the farm, subject to planning. I believe that 80 per cent. of our land mass is rural. I am sure that the Government expect that an increasing proportion of it will be let under farm business tenancies. It seems that they are extremely relaxed about the matter. Many people outside are not relaxed and we may wish to return to the subject on Report.
If the Government refuse to define what they mean by "part of the land"—and again we shall return to this point—there are no criteria in the Bill as to what will constitute a good farm business tenancy other than the definition of rent, the period of notice and compensation. They are all important matters, but during our farming lives we are used to Acts of Parliament defining the matters which should be included in an agricultural tenancy and the areas that a good agricultural tenancy should deal with. We shall return to those issues on later amendments. As I say, at a later stage too we may try again to define what is meant by "part of the land" because we believe that that could open the door to all kinds of abuse.
It is helpful to hear the Minister confirm with regard to holding of land that there is no need to make the change which we suggest. As I say, we may have to explore those matters again on Report.
3.30 p.m.
The Earl of Kinnoull: Would not the tenancy agreement spell out how the land would be used? When one talks about "part of the land", surely that gives a very welcome flexibility, which the industry wants. Surely the written tenancy agreement would spell out those matters.
Lord Carter: It would be nice to think that that was the case. It would be helpful were the Bill to require that. When I move amendments to that effect later on, I shall

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look to the noble Earl to support our amendments because that is what we propose but is not at present a requirement of the Bill. It is entirely up to the landlord and the tenant. There may even be an unwritten agreement, which is another point with which we must deal. It will be an extremely interesting situation where there is an unwritten agreement and only part of the land is used for farming. That could lead to a great deal of litigation. However, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 5 to 8 not moved.]
Lord Gallacher Lord Gallacher moved Amendment No. 9:
Page 2, line 1, at end insert ("which may be a statement included in an instrument signed by the landlord and the tenant confirming the terms of the tenancy and which takes effect from the same date.").
The noble Lord said: In moving Amendment No. 9, I shall speak also to Amendment No. 88 with which it is grouped. Amendment No. 88 is further on in the Bill in Clause 36 but I shall refer to it in dealing with this amendment.
The purpose of the amendment to Clause 1 is to clarify aspects of the notice conditions. First, it would confirm that the written notices referred to in the subsection could form part of the tenancy agreement, thus reducing any risk of doubt about the parties' later intentions.
Secondly, it is not infrequently the case that the drawing up of a tenancy agreement may follow some time after the tenancy has commenced. The amendment allows the parties to contract in to the notice conditions in those circumstances.
The third purpose of the amendment is to probe the question of when the tenancy is deemed to have. commenced. Clause 36(3) states that:
"A tenancy granted pursuant to a contract shall be taken … to have been granted when the contract was entered into".
However, as it is not necessary for tenancies to be in written form—a point that has already emerged in the course of our discussions—does the tenancy commence from the time at which the oral agreement may have been made?
The four industry organisations, which will figure prominently in our deliberations both today and tomorrow, believe that it is desirable to have as much Certainty as possible about those matters and, therefore, it should be made clear that the provision in Clause 36(3) concerning tenancies granted pursuant to a contract applies to a written contract. The second amendment achieves that. I beg to move.
Earl Howe: As the noble Lord, Lord Gallacher, has explained, the two amendments are concerned primarily with the notice conditions. The first amendment to Clause 1(4), as I understand it, is intended to enable parties to incorporate the notice in the tenancy agreement itself. Although I see the attractions of that approach, the purpose of the notice is to draw attention to the type of agreement into which the parties will enter. We have adopted that approach both to protect the tenant and to protect the landlord. If a tenant is unsure what is meant by a farm business tenancy, he has the opportunity to take advice and find out what the implications are. I am not
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convinced that that would be achieved by a clause in the tenancy agreement. We feel that it is important that the parties should both state their intentions clearly and do so explicitly for the avoidance of doubt.
Neither am I convinced that the parties should be able to contract in to the notice conditions at some later date. The whole idea is that the notice conditions must be complied with before the tenancy is granted. That is what the Bill provides. Again that is necessary for the avoidance of doubt as to the nature of the tenancy entered into.
I see no need to amend Clause 36(3) to refer to "written" contracts. Under the subsection as drafted, where a tenancy is granted pursuant to a written or oral contract, the tenancy is taken to have been granted when the contract was entered into. That reflects the fact that both written and oral contracts to grant a lease are enforceable in law. I hope that in the light of that explanation, the noble Lord will agree to withdraw the amendment.
Lord Gallacher: I am grateful to the noble Earl for his response. He wishes to draw the attention of the parties to what is in the agreement. For that reason, he says that the tenant can seek advice. It may be that in the light of his remarks on this side of the Committee we shall have to do the same.
The noble Earl does not like the prospect of the parties not contracting in until later. That also is something which we shall need to discuss.
Although the noble Earl's reply was adequate, I confess that I am still puzzled with regard to the necessity or otherwise of the agreements to be in writing either at the time or subsequently. Nevertheless, I shall read his remarks and in so doing I shall take account of his observation that there is no need for Clause 36(3) to take note. That may affect our attitude on Report, but in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Inglewood: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

European Council, Essen
3.38 p.m.
The Lord Privy Seal (Viscount Cranborne): My Lords, with the leave of the House, I shall now repeat a Statement made in another place by my right honourable friend the Prime Minister on the European Council at Essen. The Statement is as follows:
"With permission, Madam Speaker, I should like to make a Statement on the European Council at Essen which I attended with my right honourable friends the Foreign Secretary and the Chancellor of the Exchequer. The Council's conclusions have been placed in the Library of the House.

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"The European Council achieved five key British objectives: strong support for the peace initiative in Northern Ireland, including additional funding of £240 million; commitment to an intensified fight against fraud and mismanagement; solid progress on subsidiarity—and it is agreed that next year the Council will complete its review of the existing Community statute book; priority for labour market flexibility and deregulation to make Europe competitive and create jobs; and a strategy to prepare for accession to the Union of the six central and eastern European associate members.
"At the request of the presidency, I briefed the European Council on the peace process in Northern Ireland. There was unanimous agreement to a Commission proposal to provide an extra £240 million over three years to help urban and rural regeneration in Northern Ireland and the border counties of the Republic. I am grateful for the strong support that President Delors has given to Northern Ireland.
"I raised the subject of fraud, waste and mismanagement of the budget following the Court of Auditors report. I said that the European Union would not enjoy popular support unless it took vigorous action against those abuses. I made a number of proposals which were agreed by the Council. Those were as follows. The Council must ensure that reports from the Court of Auditors are rigorously scrutinised and followed up. Each member state must report to ECOFIN on what it is doing to combat fraud in its own country. Agreement should be reached rapidly in Brussels on measures now under discussion. These include a British proposal put forward by my right honourable friend the Home Secretary which would oblige member states to co-operate and act effectively to fight criminal fraud against the EC budget. Finally, the new powers given in the Maastricht Treaty—as a result of British initiatives—to the Court of Auditors, the European Parliament, the Commission and the Council should be used to the full.
"I made clear that the taxpayer's money must not be misused. The fight against fraud, waste and mismanagement will remain high on our agenda. That view was strongly endorsed by the Commission and a number of member states.
"The European Council confirmed again that subsidiarity—the principle of minimum community interference—must be a guiding principle of the European Union's future work, as agreed at Edinburgh. I am encouraged that so far in 1994 there have only been 42 Commission proposals for significant legislation compared with 185 in 1990. But the new Commission must keep up the fight against unnecessary interference.
"Discussion of the economy focused on the need to create jobs. Yet again the policies that we have been following in this country were widely accepted to be right for the European Union. We agreed that Europe must be more competitive. We agreed on the need for more flexible working arrangements, for the reduction of labour costs and for better education and training.
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"There was nothing in our discussion to suggest that socialism had triumphed over market liberalism. The reverse is plainly the case.
"The European Council added three new priority transport projects to the list of TransEuropean Networks agreed at Corfu. Four out of the 14 are United Kingdom projects: the Channel Tunnel Rail Link, the West Coast Main Line, the rail route from Cork to Lame and the Holyhead to Felixstowe road link.
"The Essen Council effectively rejected the long-debated proposal for a European Union-wide carbon energy tax. It supported instead the approach which Britain has advocated all along: a flexible framework allowing those member states which wish to introduce a carbon energy tax to do so. We will not wish to do so.
"Enlargement of the European Union has long been a British objective. At the Edinburgh and Copenhagen Councils the decision in principle to open membership to the six countries of central and eastern Europe was taken. At Essen, leaders of the 15 European Union states, including Austria, Finland and Sweden, met their central and eastern European counterparts. Agreement at the Council on a strategy to draw the six associate members closer to the Union was another important step to help prepare for their eventual accession.
"On Bosnia, there was strong support for the UNPROFOR commanders and the work being done by the brave men and women who they lead. They are saving lives and bringing better living conditions to many parts of Bosnia than would otherwise be possible. We agreed that UNPROFOR must be allowed by the Bosnian-Serbs to get on with its job without obstruction and should stay, provided the risks were acceptable. It was our unanimous view that the enforced withdrawal of UNPROFOR could have disastrous consequences—above all, for the people of Bosnia. But we agreed that we needed to plan for all eventualities and to keep in close touch with other troop contributors and interested governments.
"The European Council gave strong backing to the Contact Group's efforts to achieve a negotiated settlement. The immediate need is for a durable ceasefire as a prerequisite to a successful negotiation.
"Finally, over dinner the heads of state and government had an informal discussion about the future development of the European Union, taking account of the need for further enlargement. That was the first such wide-ranging discussion that I can recall, and it was very welcome. I emphasised the Community's achievement in helping to bring 50 years of peace and prosperity to Western Europe. In squabbles over other matters that priceless achievement is often overlooked. I also commented that 40 years ago the founders of the Community had a broad vision of their objectives many years ahead and that those objectives had already been exceeded. Within a few years we shall have about 20 members and some time later perhaps as many as 27. The Union is changing beyond recognition. I said that it was time to rethink the Union's future constructively,

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and I set out the need for realism in the period ahead. That is essential if the European Union is to regain popular support.
"I do not underestimate the difficult tasks that the Union faces. But I was greatly encouraged by general acceptance of the need for flexibility and substantial changes so that the European Union can successfully meet the challenges ahead".
My Lords, that concludes the Statement.
3.47 p.m.
Lord Richard: My Lords, I am grateful to the noble Viscount the Leader of the House for repeating the Statement made by his right honourable friend the Prime Minister in another place.
On reading the communiqué of the summit, it seemed to me that, on the whole, it was a workmanlike rather than a dramatic one. For example, no major new initiatives were taken and there was no new grand course set for the development of the European Union; indeed, it was more a matter of building upon what had been achieved in the past in the hope that further progress would be made in the future.
At the outset I am bound to say that, on reading the communiqué and then the Prime Minister's Statement (which I received about five minutes before it was repeated in this House), parts of them seem to describe two different meetings. Faced with his own party in the other place, I can well understand that the Prime Minister may feel the necessity, so to speak, to gild one or two of the lilies or dress up some of the more difficult parts of the report.
I turn, first, to the section dealing with jobs and job creation. As regards what the Prime Minister said to the House of Commons and what the report actually says, the two are so diametrically opposed that I must tell the noble Viscount that when I was jotting down a few notes after reading the communique regarding the section dealing with employment—that is, not what the Prime Minister said—I actually wrote down the words:
"Glad to see that the Government now endorse a more interventionist approach to investment, training and job creation".
I urge noble Lords to read the communiqué and not to rely on the one sentence that appears in the Prime Minister's Statement.
In the employment section the communiqué says that it was agreed:
"The measures should include the following five key areas:
Improving employment opportunities … by promoting investment in vocational training.
Increasing the employment-intensiveness of growth…more flexible organisation of work … a wage policy which encourages job-creating investment … and … the promotion of initiatives, particularly at regional and local level, that create jobs".
It continues:
"Particular efforts are necessary to help young people … who have virtually no qualifications, by offering them either employment or training … The fight against long-term unemployment must be a major aspect of labour-market policy … Special attention should be paid in the difficult situation of unemployed women and older employees".
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What the Prime Minister said about all that was:
"Yet again the policies that we have been following in this country were widely accepted to be right for the European Union".
With great respect to the noble Lord the Leader of the House, what the Prime Minister said about that aspect of the communiqué is, frankly, a travesty of what seems to have been agreed. May I say a word about Northern Ireland—
Noble Lords: Oh!
Lord Richard: My Lords, all I have is the communiqué. There is no point in Ministers shouting at me. I have the communiqué, which I have read, and I have what the Prime Minister said about it. All I am saying to the House and to Ministers, and particularly a Minister who may have been present, is that the two do not match up.
I hope I may say a word about Northern Ireland. The fact that the Community is to produce £240 million for Northern Ireland is extraordinarily welcome. It is interesting to note, too, that a good bit of intervention is called for if the £240 million is to be forthcoming. It is to provide support,
"in the areas of urban and rural regeneration, employment, cross-border development, social inclusion and investment promotion".
Is that money to be genuinely additional; in other words, do the Government have to put up their £240 million before the Community produces its £240 million? I am delighted to see the nods on the Government Front Bench. The only trouble is the noble Lord the Lord Privy Seal is nodding his head up and down and the noble Baroness, Lady Chalker, is nodding her head from left to right. It happens in all governments but no doubt before the noble Lord the Lord Privy Seal gets up, perhaps someone can tell him whether the Government have to put up £240 million of their own money in order to get the £240 million from Brussels. If they have to match the Brussels contribution, can we have an assurance from the Government that they will match it? I pause for nods but there are none forthcoming. How wise!
I hope I may say one or two words about eastern Europe. I think the steps that have been taken at the summit were useful steps towards preparing for further enlargement. It is clear that no serious negotiations will take place with anyone until after 1996. I suppose, frankly, that that is right. The communiqué refers to the three Baltic states and to Slovenia. It seems that the objective is to bring those four also into the negotiating process for enlargement. Does that mean that we are now contemplating, and seriously envisaging, the possibility of an extra 10 members of the European Union, the six East Europeans plus the three Baltics and Slovenia, by a date towards the end of this century, and if so, what do the Government think that will do to the Maastricht timetable for a common European currency and for greater integration in Europe?
I now wish to say a word about Bosnia. It is an unhappy story in which confusion of aims has produced confusion of policies. I think there is very much a feeling—it does emerge from this special communiqué on Bosnia—that things are slipping in a way which

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makes them increasingly uncontrollable. I welcome the declaration and agree that UNPROFOR should remain so long as it is doing a helpful job. I recognise indeed that our troops there are becoming increasingly vulnerable. Can we be assured that economic and political pressure on the Serbs, both in Serbia and in Bosnia, will be kept up, and that there is now unanimity in the European Council on the next steps to be taken?
I said that much had been left over until after 1996. Do the Government recognise that this will no longer be a conference solely about the updating of Maastricht or the implementation of what was then agreed? It is beginning to assume a much greater importance with the increased possibilities of further enlargement by the end of the century. I think we have to get the institutional framework right if that enlargement is to succeed. I hope the Government are giving that some very serious thought indeed.
Finally, I wish to say one word about the president of the Commission, M. Delors. The communiqué was generous in what it had to say about his 10 years as president of the Commission. I think it was somewhat ungracious—if I may say so—of the Prime Minister not even to mention it in the course of his Statement. Whatever one thinks about the policies of M. Delors, he has pursued his vision with consistency, with determination and with a very considerable degree of success. I think it would have been better had the Government recognised that this afternoon in the Statement.
3.54 p.m.
Baroness Seear: My Lords, we on these Benches wish also to thank the noble Lord the Leader of the House for repeating this Statement. The fact that the press regarded it as a rather dull summit is all to the good. It is nice when they cannot find anything particular to snipe at. We also are glad to see that the European Community is prepared to provide an additional £240 million over three years for Northern Ireland. However, I, too, would like the confirmation for which the noble Lord, Lord Richard, asked, as to how this stands in relation to what the British Government will have to produce.
I would also like to suggest that the people who have been sniping so hard at the additional payment to be made to the funds of the European Union should take note of the fact that we are getting an additional £240 million for Northern Ireland. That must be very welcome and a fairly good exchange for the extra £90 million that we are committed to paying.
Of course we welcome the attack on fraud. We in this House have a good record of having revealed and opposed the fraud that is taking place in the Community. Those on all sides of the House, the pro-Europeans and the anti-Europeans, are, I think, agreed that fraud is intolerable. Can the noble Lord tell us what means are being adopted to check up on what happens? We have heard acceptable statements about the unsuitability and the intolerable behaviour of people who carry out fraud, but we want to know what methods will be used to make sure that it stops, because that is the only thing that will make any difference.
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I was interested in the enthusiastic support for subsidiarity. I see that the Prime Minister defines it as the,
"principle of minimum community interference".
I believe it is also frequently referred to as being decisions made at the lowest level at which they can effectively be undertaken. Has it escaped the Government's attention that this definition of subsidiarity, which we all support, is entirely compatible with federalism as understood everywhere except in the United Kingdom? It is interesting that the so-called federalists, who are indeed federalists, in the rest of the Community accept subsidiarity as much as it is accepted by Her Majesty's Government because they have a better understanding of what federalism—as we in our party have always understood it —in fact means.
Like the noble Lord, Lord Richard, we are, of course, very concerned about the increase in jobs and what that will really mean in terms of extra funds that may be forthcoming. To be fair to the Government they have of course always recognised that it was necessary to put more money into education and training. They have put a great deal more into education and training than have any Labour government that I can recall. We are glad to see that this is supported by the Commission and hope that the Government will take it up vigorously.
Additional money, which would of course also create jobs, is, I notice, forthcoming for the Channel Tunnel rail link. Does this mean that, with good fortune, we shall no longer have the same opportunity that President Mitterrand pointed out for admiring the Kent countryside on the way to the port, and if so, how quickly will this take place? Many Members of your Lordships' House had the pleasant experience of travelling in the tunnel and it is delightful to be able to get to Paris in three hours. However, we would have a much better journey if we could get to the Kent coast rather more swiftly than we did on the occasion to which I refer. Perhaps some of that money could be used to make a high speed link, which we have wanted to see for so long, really work.
Regarding the future of the European Union, of course we welcome the fact that enlargement is being accepted. We welcome the new additions to the Union and support entirely the move towards further enlargement. However, that must mean that we need to take a very good look at the institutions of the European Union. The language problem alone is horrific, when one thinks of all the possible permutations and combinations of languages which will be required. The dominance of the interpreters will increase to an intolerable degree unless something is done. However, that is only one aspect of the reform of the institutions which should be undertaken in anticipation of enlargement. Can we be told what is likely to happen in that regard?
There is also the question of Bosnia and the disturbances in the countries of the former Soviet Union. I have to refer to them in that way because I am quite unable to pronounce the names of the areas in which military action is taking place. Does that not underline the importance of much greater co-ordination on defence and foreign affairs in the European Union as a

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whole? If there had been better co-ordination we might have made a better job of dealing with the problems in Bosnia. We must anticipate that there will be problems of that kind in the future and consider how, as a union, we address the issues with which we are confronted. Up until now it has been too little and too late because we have not had the institutions and the machinery to deal with the problems as they arose.
We on these Benches very much support the continued presence of the UNPROFOR troops and the continuation of the humanitarian work in Bosnia. Having seen some of the work at first hand, I can say that it would be deplorable if we were unable to continue to give that help. We should not forget that there are probably hundreds of thousands of people alive today who would be dead if that help had not been given and who will probably die if the support is discontinued.
Viscount Cranborne: My Lords, I am very grateful for the kind words of the noble Lord, Lord Richard, and the noble Baroness, Lady Seear, about the generality of what was achieved at Essen. The noble Baroness said that dullness could be a good thing. If she means by that what the noble Lord, Lord Richard, identified as a workmanlike performance building on what has already been achieved, I agree with her. These are matters of considerable importance. It is as well that we make sure that we have foundations in place before erecting substantial structures above the ground which, if built on poor foundations, might all too easily collapse. Therefore, I take what the noble Lord and the noble Baroness said as general approval for what may be seen as a somewhat dull performance.
However, I take a somewhat different view from the noble Lord, Lord Richard, with the greatest reluctance, in relation to the contrast which he affected to draw between the communiqué and the Statement which I have just read out. It is worth pointing out to the noble Lord that virtually all of the themes which only three or fours years ago were seen as purely British preoccupations now appear, from what was agreed at Essen, to be in the very mainstream of European thinking or, to coin a phrase, at the heart of Europe—liberalisation; freeing up markets; reforming welfare systems; and above all (and I say this with the greatest respect to the noble Lord) reducing the cost of jobs.
Essen fully recognised that fighting unemployment means making labour markets work effectively. Indeed, the Council called for more work in areas such as improved vocational education. Even though the noble Lord, Lord Richard, did not recognise that, I am extremely grateful for the kind remarks of the noble Baroness, Lady Seear, on the subject. It is a matter to which I referred during the course of the debate on the humble Address a few days ago.
As regards Northern Ireland, I am delighted that both the noble Lord and the noble Baroness welcomed the promise of money. I am able to give the noble Lord the reassurance he seeks. The funding agreed will be genuinely additional money from Community funds and genuinely additional money in terms of Government
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spending. It is in addition to current government budgets for Northern Ireland. I hope that that will reassure the noble Lord, Lord Richard.
So far as concerns the noble Lord's remarks about the Baltic states, I believe that we can conclude from the proceedings at Essen that the Baltic states have taken a step on the road towards membership. Both he and the noble Baroness referred to the importance of looking at the Union's institutional arrangements in the light of the substantial increase in the number of members which the negotiations foresee. Those are not only the three members from EFTA but also a possible six members from Central and Eastern Europe. If the Baltic states are to join those countries in the Union, clearly the dangers to which the noble Baroness drew attention should be at the forefront of our minds. I certainly do not dissent when she makes that point.
There was an expectation, which in the event was not realised, that Bosnia might easily elbow out all other matters, however important, during the course of the Essen conversations. That did not happen, and that was right. Nevertheless, Bosnia occupied a great deal of attention, and rightly so. The noble Lord, Lord Richard, asked whether pressure on the Serbs—both the Belgrade Serbs and the Bosnian Serbs—would be kept up. The answer is clearly yes. The noble Lord will be aware that my right honourable friend the Foreign Secretary and his French opposite number, M. Juppé, have been at the forefront of the pressure on Mr. Milosevic. Indeed, in the Statement which she repeated in your Lordships' House last week, my noble friend Lady Chalker drew attention to a glimpse of hope from the delegation of Bosnian Serbs from their so-called capital, Pale. That gave some hope that cracks are beginning to appear there. Nevertheless, it would be unwise to pin too much hope on those developments.
We should remember what the UNPROFOR forces were sent to Bosnia to achieve. Initially their only objective was to deliver humanitarian aid. I certainly welcome the remarks of the noble Baroness drawing attention to the remarkable job which the UNPROFOR forces have achieved in delivering aid, and, as she so rightly said, saving hundreds of thousands of lives in the process. However, I believe that your Lordships would wish me to underline the fact that the safety of our own troops is nevertheless paramount. If it becomes impossible for us to continue to carry out the task which the United Nations has given the UNPROFOR forces, then it will be up to those providing those forces to decide whether they can continue to do that job. At the moment the judgment is that the job is still doable, or substantially so, and we are all too aware of the possible consequences of withdrawal. However, I can assure your Lordships that contingency plans are in place in case withdrawal becomes necessary.
The noble Baroness, Lady Seear, mentioned fraud. All I add to what she said is that this conference has been a considerable breakthrough from the point of view of Her Majesty's Government. It is a question in which I know that many Members of your Lordships' House—I am glad to see the noble Lord, Lord Bruce of Donington, sitting in his place—have taken a considerable interest and, if I may say so, rightly too.

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The noble Baroness asked me what specific initiatives the United Kingdom managed to secure. I put the issue in that way quite deliberately in view of our own position on the matter.
We have seen several United Kingdom initiatives coming to fruition. In particular, the Essen conference called on the Court of Auditors fully to exercise powers that we ensured were put in place at Maastricht. It also called for the anti-fraud proposal on criminal aspects of fraud to be agreed by June next year. We secured all our objectives; and I can assure your Lordships that there will be no retreat in this battle. I am delighted to say that everyone at Essen was committed to ensuring that full use was made of the Treaty provisions. I believe that your Lordships will ensure that I and my noble friend will keep your Lordships fully informed on this important matter in the weeks and months to come.
The only other matter on which I wish to comment, with your Lordships' permission, is that of subsidiarity, raised by the noble Baroness, Lady Seear. I am well aware that federalism can mean different things to different nations, in particular in western Europe. Nevertheless, it is fair to say that we have taken a substantial step towards achieving a high degree of unanimity in the course of the Essen conversations for our own objective for a co-operative Europe of nations rather than the united states of Europe, which so many of us in this country have feared for so long.
Lord Boyd-Carpenter: My Lords, it seems clear from the Statement that the meeting was a considerable achievement, not to say triumph, by our own Prime Minister, who seems to have achieved a good many important national objectives. I know that my noble friend will understand when I say that to many of us the fact that the Prime Minister has had that success is a very cheering and encouraging factor on which we would wish, very respectfully, to express our congratulations to him and to the Government.
I have only a few brief questions to ask. First, is it not a matter of great congratulation that £240 million has been obtained to help the position in Northern Ireland? That is a considerable achievement and will do a great deal of good.
My noble friend was less precise regarding new members of the Community. Apart from the three which are now definitely joining, and Norway which we hope will do so sooner or later, what are the other states under consideration? He referred, I believe, to half a dozen. It would be interesting to know what are those states, obviously without my noble friend committing himself. That seems to me fairly important.
Finally, the noble Lord, Lord Richard, sought to rebuke my noble friend, for not referring to M. Delors. As M. Delors is going, it is probably tactful not to say what one thinks of him. I think that on this subject silence is golden.
Viscount Cranborne: My Lords, I am grateful to my noble friend for what he said, in particular for reminding me that I did not respond to the comments of the noble Lord, Lord Richard, about M. Delors. I believe that we can all agree with the noble Lord that M. Delors has shown consistency, single-mindedness and determination
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during the tenure of his presidency, and that M. Delors is a Christian gentleman. We have had our differences with him in the way in which we saw the European Community developing, but we certainly wish him well in what appears to be a well-earned retirement—that is, if he does not change his mind.
I should like to point out that my right honourable friend the Prime Minister signed the communiqué to which the noble Lord referred. Since the noble Lord will have read the communiqué, he will know that all the European Union leaders subscribed to the thanks which the communiqué expressed to M. Delors for his year as President of the Commission.
I am particularly grateful to my noble friend Lord Boyd-Carpenter for his analysis of the achievements of our right honourable friend. For reasons best known to the yellow press, my right honourable friend has had something of a difficult time in public prints lately. I only hope that they will give honour where honour is due. My right honourable friend's very remarkable capacity to negotiate under the most difficult conditions has been evidenced time and again during his premiership, whether in Northern Ireland, Maastricht or in other European fora. It is entirely appropriate for my noble friend and myself to pay tribute to that skill and perhaps to speculate that another Prime Minister would not have brought home the bacon in quite the same way. My noble friend is perfectly right: in particular the Northern Ireland financing is a considerable achievement.
My noble friend asked what other states are in view. There are the six associate members known as the CEE. That is, the Visegrad Four, plus Bulgaria and Romania. On top of that, there is discussion for Malta and Cyprus to be part of the next round of negotiations. I understand that that status, which was agreed at the Corfu Summit, was confirmed. I hope that that answers my noble friend.
Lord Bruce of Donington: My Lords, I regret that I cannot entirely share the unadulterated enthusiasm of the noble Lord, Lord Boyd-Carpenter, on the results of the Essen conference. I should have thought that they contain nothing which gives rise to the jubilation better expressed as game, set and match.
As the noble Viscount has been good enough to mention, I have a particular interest in the whole question of fraud and irregularity. I have not had the opportunity yet of seeing the Statement. However, I gather from the noble Viscount that there was wide agreement at the Essen conference as to the increased and more effective steps that are to be taken within member states to prevent fraud and irregularity and to enforce the law within each individual country; and the Commission concurred.
I regret to say that it is quite evident that the Government have not read the report of the Court of Auditors covering the year 1993. There are precedents for Ministers of high office not reading important documents. In particular, I refer to the Treaty of Maastricht which was not read at the time by the Chancellor of the Exchequer, as the noble Viscount will recall. The report mentions the necessity for preventing

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fraud within individual member states. Incidentally, it does not state whether the institutions of the Community are to be regarded as part of the state of Belgium for the purpose of enforcement of the law in Belgium and the entry of police into the Commission premises. It would be interesting to know that.
However, one matter is quite clear. The Government have not assimilated the fact that the main part of the 1993 report of the Court of Auditors dealt with the very serious shortcomings of the Commission itself. There has been no indication from the Government that the stringent criticisms that have been made over the past 10 years by the Court of Auditors, and reiterated with even greater emphasis in the more recent report, have been understood, assimilated, or even supported by Her Majesty's Government. I therefore hope that by the time the European finance Bill comes before your Lordships' House, on, I believe, 9th and 10th January, Members of the House will have assimilated the contents of the report. I assure the noble Viscount that many of us in all parts of the House are quite determined that the Commission shall be forced to take the action which has been pressed upon it for many years by the Court of Auditors, but which has not so far been forcefully supported by Her Majesty's Government.
Viscount Cranborne: My Lords, until the noble Lord uttered the last few words of his intervention, I thought for one glorious moment that I should be able to agree with almost everything he said. If I may say so, he is less than fair to Her Majesty's Government, particularly in view of the assurances which I gave his noble friend Lord Richard. The United Kingdom has been at the forefront in making sure that fraud has leapt to the top of the agenda in the administration of European matters. The Court of Auditors was given power by the much derided Maastricht Treaty, which was derided by the noble Lord himself. The Essen summit called on the Court of Auditors fully to exercise those powers, as I made clear a moment ago. He will know as well as I do that tackling fraud is a battle which will never come to an end. It is up to us to ensure that we put the machinery in place which will tackle it effectively. Time will be the judge and I am reassured that the noble Lord himself will be up there in the front line with us making sure that fraud is tackled in the way that he and I want.
The Earl of Lauderdale: My Lords, instead of a five-minute speech I should like to ask my noble friend a simple question. Is there any further news of the dissidents, representing about a quarter of the membership of the Karadzic Assembly of Parliament at Paleé, who came to Belgrade last week and declared their support for peace?
Viscount Cranborne: No, my Lords, I can assure my noble friend that I have nothing to add to what my noble friend Lady Chalker said last week. However, if there is any change I am sure that my noble friend will come to the House and inform it.
Lord Stoddart of Swindon: My Lords, I should like to ask the Minister three questions. First, in relation to
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fraud, there were reports last week that there was under consideration a proposal that members of all police forces in the European Community should be allowed to cross borders to make their investigations. I hope that the Minister will be able to assure me that that is not true and that the Labour Government—I am anticipating matters, I am sorry—the present Government will not in any way agree to it.
Secondly, I note that the Commission will contribute £240 million to Northern Ireland over three years. I make that £80 million a year. Does that mean that our estimate of our net contribution of £3,500 million a year for the next three years will be reduced by £80 million for each of those years?
Finally, on the matter of subsidiarity, can the Minister assure me that the Government are more concerned about it than they appeared to be when they answered questions last week on the British double-decker bus? Can the Minister assure me that the Commission will now ensure that it will not bring forward the kind of regulations and directives that would force Britain to phase out double-decker buses or do anything else quite so stupid?
Viscount Cranborne: My Lords, taking the last question first, I can assure the noble Lord that the aim of any directive should be to have an open European market in all buses and coaches, including double-deckers. That will not only increase our chances of preserving a valued symbol and an extremely efficient form of transport in this country but it will also enable us to have a better chance of exporting such vehicles abroad, including to the countries of Western Europe. I believe I can give the noble Lord the reassurance that he needs on his question.
As regards crime, the noble Lord will be well aware that there are already a number of proposals in place which will be further explored, particularly during the coming French presidency, to try to ensure that there is co-operation between nations on crime, as opposed to the supranational arrangements which the noble Lord fears. I am also sure that we shall be able to keep him informed on the matter, as negotiations develop.
As regards the money for Northern Ireland, I do not believe I have anything to add to what I have already said. I can reassure the noble Lord and others who asked about it that this is new money both from the Government's point of view and from the point of view of the European budget.
Lord Cockfield: My Lords, on Northern Ireland, will my noble friend confirm that it was Jacques Delors who took the lead in the Commission and the Council in pressing that the £240 million should be given to Northern Ireland?
Secondly, will he also confirm that, on fraud, the most interesting point in the communiqué, if one reads it carefully, as the noble Lord, Lord Richard, encouraged us to do, is the admission there that fraud is primarily the responsibility of the governments of the member states? When we come to debate the issue—as I hope we shall—I propose to prove that point. Is it not the position that in an incautious remark on Radio 4 recently, the president of the Court of Auditors said that

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80 per cent. of the fault rested with the governments of the member states, not the Commission at all? All the Commission does is to reimburse the member states for what those member states have spent. If we are going to shoot somebody, ought we not to start by shooting the right person?
Perhaps I may raise a third point. I am greatly in favour of further enlargement of the Community. Will my noble friend confirm that, before that enlargement can take place, it will be necessary to have a total reconstruction of the finances of the Community? That reconstruction will necessarily carry with it a root and branch review of many of the policies of the Community, including the common agricultural policy.
Viscount Cranborne: My Lords, I am grateful to the noble Lord, whose expertise in such matters is very much greater than mine. I can confirm that the Essen conference received an initial proposal from M. Delors that the Commission should provide the money which I have described. We are duly grateful to him for his help in that.
As regards fraud, I very much look forward to my noble friend's speech. I can confirm to him that, as I understand it, the communiqué makes the references which he described.
On enlargement, I can also confirm that there will need to be a reconstruction of many policies before an enlarged Community can hope to work effectively. That point was made by both the noble Lord, Lord Richard, and the noble Baroness, Lady Seear. One aspect, if not the most important aspect, of that reappraisal will be a further look at the common agricultural policy.
Lord Monkswell: My Lords, I too thank the Leader of the House for repeating the Statement made in the other place. I was particularly glad to hear the references to the Channel Tunnel rail link and the west coast main line. The noble Lord, the Leader of the House, will be aware that many Members of Parliament of both Houses have for a number of years pressed for the modernisation and improvement of these essential elements of infrastructure to enable the manufacturing heartlands of Birmingham, Manchester, Liverpool and Glasgow to get their products into the centre of the European market. We are glad that the Heads of Government of the European Union nations believe that these transport infrastructure elements are essential parts of the trans-European network. Bearing in mind those factors, I ask the Government what efforts will be made to ensure that these projects are brought to an early conclusion. The delays up to now have been scandalous. What urgency do the Government now place upon these public infrastructure projects?
Viscount Cranborne: My Lords, I am very glad that the noble Lord welcomes the construction of the Channel Tunnel rail link. Much of the speed that he desires is in your Lordships' hands with the introduction of the Hybrid Bill on this subject in your Lordships' House in the coming Session.
Lord Shaw of Northstead: My Lords, does my noble friend recall our recent debate about the report of the Court of Auditors and the frauds mentioned therein?
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Does he also recall the significant difference between what came out of that debate—namely, that the Council took absolutely no notice of what the Court of Auditors said—and what happened at the latest meeting of the Council? Is it not a fact that the change has come about through the efforts of the Prime Minister in insisting that the role of the Court of Auditors be improved? Further, is it not true that the noble Lord, Lord Bruce of Donington, is a little ungenerous in not seeing any improvement? He sought immediate perfection, which is never possible. This is a big improvement.
I raise one query. The Commission now fully backs the move to settle these frauds and deal with them. However, I notice that the Statement states that a number of Members of the Council also gave support. Are there other members who are not so forthcoming in their support, and are those members significantly related to where the inquiries are most needed?
Viscount Cranborne: My Lords, I agree with the first part of my noble friend's question. However, I would not dream of commenting on his second question.

Agricultural Tenancies Bill [H.L.]
4.33 p.m.
House again in Committee on Clause 1.
Lord Northbourne Lord Northbourne moved Amendment No. 10:
Page 2, line 6, at end insert:
("(iii) in any case where a residence forms part of the tenancy, containing a statement that at the end of the tenancy any residence occupied by the farm business tenant must be vacated, and setting out such arrangements, if any, as have been agreed between the parties with a view to ensuring that alternative accommodation will be available to the tenant and his family at the end of the tenancy.").
The noble Lord said: With so many leaving the Chamber it is depressing that your Lordships think that agriculture is so much less important than the European Union. I rise to move Amendment No. 10 and beg leave to speak at the same time to Amendment No. 11. I believe that on all sides of the House and industry the object of the Bill is to achieve something together. What we are trying to achieve is that landlords should be willing to let their land, thereby enlarging the size of the tenanted sector; in other words, we want to make the legislation work.
I suggest to your Lordships that the family home has been at the crux of the problems relating to agricultural tenancy legislation over the years. The family home is an emotional problem. It was suggested to me recently by the noble Lord, Lord Stanley of Alderley, that it would be on the day that the first family was evicted from its fanning home under this Bill that the effectiveness of this legislation would break down. I suggest that it is in the interests of both landlord and tenant to try to minimise the trauma that will arise at the end of an agricultural business tenancy.
The noble Lord, Lord Carter, in his amendment relating to whether or not Clause 1 should stand part addresses this question. However, I respectfully suggest to him that he addresses it in a way that is not in the spirit of the Bill, or indeed in the spirit of what has been

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agreed between the various sides of the industry. My amendment is much more modest. It simply seeks to ensure that the landlord and tenant, on the day they go into disagreement or shortly before, have sat down and thought about it. I have suggested that they should be required to give notice, or that there should be an acknowledgement and acceptance within the text of the tenancy agreement, that the effect of this Bill is that when the tenancy comes to an end the tenant will have to quit the main residence.
I believe that when the two parties sit down to consider this matter they will realise that it will be a bad moment for both of them unless they think constructively on what can be done about it. I hope that a good landlord will say to a tenant, just as a good employer says to an employee, "What about pension arrangements? Have we got something sorted out for the time when you will not have this source of income any more?"—or, in the case of a farm business tenancy, "this house".
If a landlord values his reputation he does not want to have a tenant who has made no provision for the future when he comes to the end of the tenancy. I suspect that intelligent landlords and tenants will sit down together. The landlord may say, "I want you to undertake to take out a pension plan, and perhaps I will give a modest rent remission in consideration of your doing so"; or the landlord may contribute a small part to the cost of such a plan. Alternatively, he may pay the outgoings on a mortgage for another house to which the tenant can move, as very often happens in the case of a farm manager today.
The implication of my amendment is that the notice condition will become mandatory for all farm business tenancies that involve the tenant living in a house, the tenancy of which he will have to give up at the end of that tenancy. I recognise that the objection to this is: what happens if the landlord and tenant do not reach such an agreement? The danger is perceived to be that the tenancy will then fall back as a tenancy under the Landlord and Tenant Act. I am not absolutely clear why that will be so awful, but if it is awful perhaps we can word it in another way so that there is some other sanction. However, what I seek to achieve is that landlord and tenant should specifically be encouraged to sit down to think about the problem right at the beginning, before it arises.
Lord Carter: This amendment is very helpful in introducing the important subject of a tenant's home as part of a tenancy. We feel that our Amendment No. 13, which defines a residential farm business tenancy, is perhaps a better way to deal with it. Certainly, the noble Lord, Lord Northbourne, in introducing this matter has for the first time in our discussion of the Bill raised the central issue of the tenant's home.
As I and others have said at Second Reading, a tenanted farm is not just a means of earning a living; it is often the home of a family. If, as I am sure the Government intend, there are a number of what I call decent long-term arrangements under farm business tenancies, there may be a situation where people obtain
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tenancies in their early 30s which perhaps go on for 10 or 15 years. In their late 40s, having established themselves in the area, the farmer may be chairman of the parish council, his wife a school governor and the children educated in the village. Their home is there. For some reason or other they find that the tenancy is coming to an end and they are out of a house. There is also a problem as to what happens in amalgamations.
Where there is an oral but not written tenancy agreement, unless there is a provision of this kind in the Bill to look after the home I believe that the tenant will be even more exposed than he already is, because this relies upon an agreement in writing which will have to be implemented. We shall return to the arguments for and against having an oral or written tenancy. If there is an oral agreement, how is the tenant protected when there is no statement anywhere about what should happen to the family home?
The noble Lord's amendment relies on well-meaning attitudes of landlords. Those of us who have been, sadly, involved professionally in tenancy succession cases over the years know just how tough some landlords can be when it comes to obtaining occupancy of a farm to get it back. I have a fear that some landlords would not be too keen on having to provide alternative accommodation.
It is important to remember that we are not dealing with office blocks but with people's homes as well as their livings. Although it is well meant, encouragement is not enough. At a later stage of the Bill, with our Amendment No. 13 we will perhaps want to obtain the support of the Chamber for an amendment which will mean that a tenant who moves in and whose home is a part of the tenancy will be protected when that tenancy comes to an end.
Lord Stanley of Alderley: I thank the noble Lord, Lord Northbourne, for raising this subject. I did so at Second Reading. I entirely agree with him that, if there are some hard cases of eviction after, say, some 15 years of being in a house, we shall return to the dramas that occurred in 1970 and 1976.
I do not know that the noble Lord's amendment is correct—he himself is not sure either—but it is a matter that we should follow up. I speak now off the top of my head but, if the landlord at the initial stage cannot provide, or hope to provide, alternative accommodation, could not low cost housing be provided, or the local authority enter into some form of covenant, or whatever, to provide for it? I am glad that the issue has been aired.
Lord Carter: There will be occasions when the landlord does not have alternative accommodation to offer and one can understand that. In moving the amendment the noble Lord, Lord Northbourne, made the point that if that were the case and the parties sit down and discuss the matter, there could perhaps be a financial arrangement whereby the tenant farmer would have a sum of money when the tenancy ends or in one form or another is helped to buy another house. That is the other way to do it.
The Earl of Kinnoull: I should like to support the noble Lord, Lord Northbourne. This is not a perfect

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amendment, as I am sure he will agree. The amendment which the noble Lord, Lord Carter, is about the move—I am not sure whether we are discussing it at the same time—comes back to what the industry agreed. It breaks the flexibility, the achievement of which was so heavily fought for. It took four years for the industry to agree on this matter.
One recognises the problem, but the noble Lord, Lord Carter, is simply lifting out of the 1986 Act, the 1976 Act and the 1948 Act, what are called the deadly sins. If the tenant had not committed one of those deadly sins, he was there for life. That must destroy the whole industrial agreement. I hope that some agreement on the amendment of the noble Lord, Lord Northbourne, can be sought, to show that both parties, landlord and tenant, have in fact addressed the problem.
The noble Lord, Lord Carter, is acknowledged as a great expert outside the Chamber—he was on the Northfield Committee—and is one of the leading experts in the Chamber. If he were advising the landlord, he would simply say to him, "Well, apply for a shorthold tenancy for the house and therefore escape this problem." I do not say that that is the way to solve the problem and I am not sure whether my noble friend can offer any support at all in the spirit of the noble Lord's amendment.
Lord Carter: I am extremely grateful to the noble Earl for his reference to my expertise. Of course, I defer to him in his superior knowledge of the seven deadly sins. The point of my intervention was not to say that there should be lifetime tenancies. That is an entirely different point. I am sure that we all want to ensure that where the home is central to the tenancy, there must be some means—perhaps in the way suggested by the noble Lord—to require the landlord and tenant to consider the matter. I should like to make the requirement a little stronger, but that is the nub of the argument.
4.45 p.m.
Earl Howe: I should like to thank the noble Lord, Lord Northbourne, for introducing the amendments so clearly. I recognise that he and other noble Lords who have spoken in support of them want to ensure that tenants are fully aware from the start that they will have to vacate the house at the end of the tenancy. That is the point of the amendments. It may also be sensible in some cases for the parties to make advance arrangements for rehousing the tenant, if the landlord has a house available and wants to commit himself at that stage. If the tenancy was for a long term—say, 15 or 20 years—such a commitment might not be appropriate.
However, I am not convinced that it is necessary to make that proposal part of the notice condition. I should certainly not want it to be a mandatory requirement to exchange notices where the tenancy includes a residence. Where would that place people who, by oversight, failed to exchange notices—a problem that was identified by the noble Lord, Lord Northbourne, himself. If the tenancy was not a farm business tenancy the tenant might, for example, lose his rights to compensation for any improvements.
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It is essential to keep the notice as simple as possible. If the notice is to be effective in ensuring that a farm business tenancy which complies with the necessary criteria at the beginning of the tenancy is to remain a farm business tenancy, the parties must exchange valid notices. We do not want the notice provisions to contain traps for people. That is why we have made them as simple as possible. The notices must identify the holding and make it clear that the person giving the notice—both parties have to give one—intends the tenancy to be and to remain a farm business tenancy. Surely no one will give such a notice without finding out what a farm business tenancy is and what are the implications of it.
A tenant will, therefore, be aware that he or she will have to quit the whole holding, including the house, at the end of the term. In my view there is no need for any additional provisions. I am sure that it is not in the best interests of either party, either the tenant or the landlord, to complicate the notice by adding extra provisions, even with the best of motives, as I accept the noble Lord has. Therefore, I hope that he will feel able to reflect on what I have said and withdraw his amendment.
The Earl of Kinnoull: Would my noble friend consider a printed notice where—as there is with shorthold tenancies—the back of the notice has an explanatory point stating the rights of the tenant and the obligations of the agreement? Would he consider that such information should perhaps be printed on the back of any notice that may be served?
Earl Howe: My noble friend may be right that on shorthold tenancy agreements that is generally the case. One could argue that a mechanism or a form of words along the lines that he suggested would represent good practice. But, as I said, I am inherently suspicious of the idea that we should complicate the Bill any further at the moment. I shall reflect on all the points that have been made.
Lord Northbourne: Before the noble Earl sits down, I am not entirely sure that he has dealt with my second amendment, which relates to the fact that the residential tenancy would have to be a tenancy where the notice condition applied. My argument is that the letting of a residential tenancy is so important that it should not just be done by Bill and Charlie over the gate and not be recorded in writing.
Earl Howe: I believe I said that I would not want it to be a mandatory requirement for the parties to exchange notices where the tenancy included a residence. What happens if they fail to exchange notices, either by inadvertence or for another reason? That would place both parties in a terrible trap through no fault of their own.
From what the noble Lord said, I think he will agree that his idea merits further thought. However, I do not wish him to take any comfort from that in coming back at a later stage. I feel quite strongly that, while the intentions behind the amendment are perfectly valid, it would be a mistake to build this kind of provision into the Bill.
Lord Northbourne: I am grateful to the noble Earl. I shall not press the amendment but I feel that this issue

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needs considerably more thought. I do not feel happy about the idea of it being possible to create a long tenancy with residential implications merely by word of mouth. With the proviso that I shall probably come back and perhaps would like to discuss the issue with the noble Earl, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 11 not moved.]
Lord Carter Lord Carter moved Amendment No. 12:
Page 2, line 16, at end insert:
("() Once notice has been served under subsection (4) above, the tenancy shall be a farm business tenancy for the term of the tenancy, whether or not the character of the tenancy continues to be wholly or primarily agricultural.").
The noble Lord said: We can deal with this amendment reasonably briefly because we have already covered the ground to some extent. The amendment concerns the character of the agricultural tenancy. We now have it on record that once a farm business tenancy, always a farm business tenancy, and that as long as the changes are within the terms of the notices which are changed the nature of the tenancy can change fairly drastically without altering its status as a farm business tenancy. This is a probing amendment because it uses the words "wholly or primarily". We want to get it quite clear on the record that, whether the character of the tenancy continues to be wholly or primarily agricultural, it will be a farm business tenancy more or less whatever happens.
The character of the tenancy may change substantially. There may be a golf course or a nature trail and the farm may become a mere adjunct to a boarding house or a bed and breakfast establishment. We are not here dealing with office blocks. As I said on the previous amendment, 80 per cent. of our land mass is rural. I am sure the Government hope that a good deal more of that 80 per cent. will become tenancies under the Bill. If there is an increase in tenancies, there could be a dramatic change in the nature of our countryside directly as a result of the Bill. We want to have it on the record that whether it is wholly or primarily agricultural, does not matter. Whether the character changes, once a farm business tenancy, always a farm business tenancy. Groups outside the House which are interested in conservation and in our rural structure will be very interested to hear the noble Earl's reply on this point. I beg to move.
Earl Howe: I recognise that this is intended as a probing amendment. I am pleased to be able to tell the noble Lord that the Bill as drafted already achieves precisely the result that he appears to be seeking. Under Clause 1(1) the tenancy continues to be a farm business tenancy if it meets the notice conditions and the business conditions. It does not have to comply with the agriculture condition as well. Therefore, once the notice conditions are met—that the notice has been validly served and the tenancy is primarily or wholly agricultural at the beginning of the tenancy—it does not matter whether the character of the tenancy continues to be primarily agricultural thereafter. This is precisely the point of exchanging the notices before the tenancy
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begins. It is true that the tenancy must continue to meet the business conditions, but those do not impose an onerous requirement. They require only that some part of the land comprised in the tenancy is farmed for the purposes of a trade or business. That is very far from saying that the character of the tenancy must be primarily agricultural. I hope that the noble Lord will be sufficiently reassured by my reply to withdraw the amendment.
Lord Carter: We now have it very firmly on the record that the Government have succeeded in bringing forward an Agricultural—I emphasise the word "Agricultural"—Tenancies Bill in which a farm tenancy, to use the words of the Minister, does not have to comply with the agricultural conditions. The case rests. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 1 shall stand part of the Bill?
Lord Carter: I certainly do not wish to repeat the arguments used in the Second Reading debate; but as Clause 1 is central to the operation of the Bill, we now have a chance before we move into more detailed consideration to reflect on where we are and where we are likely to go. The point which primarily concerns this side of the Committee—indeed, almost solely as far as I can make out—is the danger that the Bill and its move towards simplification, deregulation, and so on, will tend to throw out the tenant with the bath water. That is our feeling.
I wish to introduce a brief quotation which was sent to me by the Farm Tenancies Action Group, whose motto is "Fighting to give tenant farmers a fair deal for the future". The quotation is as follows:
"It takes years (sometimes generations) of patient and self-abnegating toil and investment to put heart into soil, to develop and gain the advantage of suitable rotations of crops, and to provide proper drains, hedges and ditches. Even to build up a herd of dairy cattle, between whose conception and first lactation at least three years must elapse, takes time and planning, whilst to disperse the work of a lifetime of careful breeding is but the task of an afternoon by a qualified auctioneer. Even within the space of a single year the interval between seed time and harvest, between expenditure and return, with all the divers dangers and changes of weather, pest or benignity of climate is sufficient to put an impecunious but honest cultivator at risk without adding to his problems any uncertainty as to his next year's tenure".
Those are the words in 1978 of the noble and learned Lord, Lord Hailsham of Saint Marylebone, who was speaking in his judicial capacity, I suspect upstairs, in a legal case. But the quotation puts the case extremely well.
Our detailed consideration of the Bill between Second Reading and today has confirmed our doubts. Perhaps I may deal immediately with the industry agreement which is continually referred to. I would suggest to the Minister in the friendliest way possible that it is not always the case that the leaders of an organisation or even a political party necessarily represent the views of all its members. Indeed, it is the case that even at the top of an organisation there are differences of view which are sometimes expressed on the television screen. Therefore, I hope the noble Earl will not make too much

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of the fact that, because there is an industry agreement, everyone in the industry necessarily agrees with the point.
I have already said that the tenant farmer action groups, the Farmers' Union of Wales and individual farmers have all expressed their anxieties about the possible results of the Bill if it becomes law. It is interesting to consider what might be described as almost the change of stance within the industry over a very short period of time. Only two or three years ago influential people in the industry were looking for a minimum fixed-term tenancy—we do not have that; they were looking for adequate compensation provisions to be part of the statutory framework—that has been achieved; they were looking for compensation for disturbance—which perhaps is in the Bill or perhaps not; they were looking for the 1986 Act rent formula and not the open market that we have. This has all changed within only two or three years.
They wanted clear statutory obligations for maintenance and repairs—it is unclear whether those are in the Bill; they wanted a statutory first option for the sitting tenant to accept the revised terms of rent at the end of his tenancy—they do not have that; and they also wanted a special provision to give some security for the tenant of a farmhouse. As we have just heard, they do not have that, either. We shall have to deal with this whole question at later stages of the Bill; but we are now discussing, as it were, the heart of the Bill and the definition of the tenancy—the whole business of the written and the unwritten agreement.
I know from discussions with the Minister that this is intended to be helpful and that the department would see the unwritten agreement, if it were not covered by the Bill, as a way around the Bill. The department believes that people would enter into unwritten agreements just to get around the Bill. That is unlikely. But if the unwritten agreement were excluded, presumably the tenant or the landlord would have to rely on the common law. They might be in a farm business tenancy; they might be under the Landlord and Tenant Act. Indeed, this point is made in paragraph 8 of the detailed proposals put by MAFF on the consultation.
I am interested to know why the Government rejected proposals by the Agricultural Law Association, which recommended that all agreements should be in writing. It is a small point but this is a good chance to raise it. Can a fixed-term tenancy of five years or more be underwritten under Section 52 of the Law of Property Act 1925?
The other argument for the Bill is that it will increase the number of new entrants into farming and a tenancy. We all know that young people have the quality of supreme self-confidence. They are sure that they will succeed and often the age of 40 seems so far away as not to be worth bothering about. In my professional experience I have seen too many examples of youngsters who have taken on a share or a partnership agreement on penal terms. They are taking a frightful risk with their health, to say nothing of their finances, just because they must farm. There is a real danger that we
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might see imprudent bidding for further term tenancies from that class of would-be farmer under the Act. I do not believe that there is any protection against that.
The central question is this: would most landlords let to these young tenants anyway? I believe that most agents and landlords would let to the devil they know. It would be the established farmer, eager to expand, who would bid for and get the neighbouring farm on some sort of term.
I referred to industrial organisations. For some time there were those who were promoting the idea of retirement tenancies. Those tenancies are certainly not in the Bill. They are a form of a term tenancy without a lot of disadvantage. They recognise the landowner's need to have a definite date for the end of the tenancy. A start was made with that in the industry only a year or two ago and it has changed quite dramatically.
If the slate is to be wiped clean—and this Bill certainly does that—the question to be asked is this. Why do the Government need, in the national interest, to have any involvement in the details of the legal relations between landlord and tenant? I am not saying they do not. But it is interesting briefly to explore why over a long period of years there has been intervention by government in the legal relationship between the landlord and the tenant of agricultural land. We can argue that it is for the protection of the supply of food; to ensure that natural resources are being used to the best advantage; in order to maintain the economic well-being of rural communities; and to remedy social injustice. I believe that the matter of the food supply can be left to the common agricultural policy and GATT, not the landlord and tenant legislation.
We shall have amendments later to deal with the resources. This Bill might militate against the best use of national resources in terms of conservation, and we shall deal with that. Concern for the environment is a compulsory element in the policy considerations of any western government and will remain so for many years to come. But, as I said, the landlord and tenant system is not the vehicle to enforce environmental policies. We do not want a Bill which makes that any harder, and this one may well do that. If short-term tenancies seem to result in farmers taking less care of the countryside or overfarming the land, there is certainly justification for government intervention in the relationship between landlord and tenant.
We all know that the rural community is not structured as it was when the first agricultural tenancy protection laws were passed at the end of the last century or as the situation was in 1947. Your Lordships will remember that it was a Labour Government who introduced for the first time security of tenure for tenants and the subsequent Acts of Parliament. I do not believe that we should surrender to the notion that the way should be cleared for the easy and swift growth of the mega-farm. I know that a great number of noble Lords opposite will agree with that. Despite the steady decline in the numbers of those engaged in the industry, agriculture is still a source of income for a substantial proportion of our rural population. That income is best

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protected by supporting the existence of a middle range of farms, which have been so heavily under threat in recent years and which will remain so.
I have dealt with the point about, the flow of new entrants. There will be some well-intentioned landowners who will set part of their estates aside for letting to young new entrants. That will be an act of philanthropy. Higher rents, more capital input and better farming practice will result from a let to a neighbouring established enterprise or to a mature farmer who brings equipment and know-how from a previous farm. Furthermore, the whole concept of the farming ladder is seriously flawed for all but a minority, as several reports on council smallholdings have shown. We believe that the landlord and tenant relationship does have a relevance to the economic and social well-being of rural areas. The fact that this Bill leaves unmolested the existing arrangements under the 1986 Act is welcome.
I now return to the point of social injustice. I have said throughout, at Second Reading and in all the amendments which we are dealing with, that we are out to increase the security of the tenant. In many other areas of law such as consumer protection, the sale of goods, company law, housing and in business tenancies the state intervenes to ensure that the party in the weaker bargaining position is not commercially abused. I ask: why should farm business tenancies be an exception?
We are in agreement on all sides over the importance of providing incentives for landowners to let farms. The tenant must have sufficient security to enable him to earn a decent living. The right balance has to be struck between the power of the landlord and the tenant. All of us engaged in the industry know that the playing field is not level at the moment and that the scales are not even. The landlord has an advantage because there is a substantial number of farmers who would like to get into tenanted farming if at all possible. We have to make sure that the tenant farmer is protected under statute.
I have already said that farming is a long-term enterprise, particularly in the case of a traditional livestock farm. One has to plan ahead and make considerable investment in stock, machinery and quota rights. With short-term lets tenants will face constant uncertainty and they will be unable to plan ahead.
I remind the Committee of a point I raised at Second Reading. The RICS survey showed that 50 per cent. of both the occupied and the bare land units were expected to be let within the first two years of the five-year term or less. As I said then, that is short-termism with a vengeance. I believe that the established farmer will gain. The result will be fewer farmers, larger holdings and not much hope for the young farmer or new entrant to gain access to the industry.
If it proves possible to let farms and land on a short-term basis, we fear that land may be exploited for short-term gain which would result in long-term detriment to the land. I refer the Committee to the quotation from the noble and learned Lord, Lord Hailsham, with which I started.
In conclusion, I believe that the industry group which I have referred to, and which I am sure will be referred to again, is well intentioned but misguided. If this Bill
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becomes law I believe that there may be a re-ordering of the existing arrangements as regards the share farming and the contract farming, the Gladstone v. Bower arrangements and the rest of it. These are not the new lettings that we all want to see. I do not believe that they will come about. I believe that there will be a tendency to have fewer and larger farms. Our concern about the rural structure persuades us that Clause 1 should not stand part of the Bill.
Lord Middleton: I try not to make Second Reading speeches in Committee, but the noble Lord has referred to what is known as "the industry agreement". Perhaps I may say this very briefly at this point. I shall not weary the Committee again when the same argument applies in amendments which are to follow.
This Bill aims to save the landlord and tenant system from terminal decline. One of the main causes of this decline was very well put by my noble friend the Minister at Second Reading. It is the tangle of legislation which has grown up around farm letting. The whole point of this Bill is to cut away that tangle. Subject to certain safeguards, it allows landlord and tenant to negotiate their own terms. This is not a measure which has been put together in haste. For several years the main components of the farming industry have worked together and have finally agreed the best way to reform the system. This Bill embodies its conclusions very precisely.
The noble Lord, Lord Carter, has put his case so well that I am sorry to have to say this. I am surprised that the Opposition feel that they are in a better position to find a solution than the Tenant Farmers' Association, the National Federation of Young Farmers' Clubs, the National Farmers' Union, the Country Landowners' Association, the Royal Institution of Chartered Surveyors and the Central Association of Agricultural Valuers.
Members of the Committee opposite have produced some useful proposals for amending this Bill which I shall support in due course, but they have tabled amendments, including the next one, where the criticisms which I have just voiced apply. I have promised not to repeat them. I think that I understand why the noble Lord is opposing Clause 1 standing part of the Bill. It must, however, be part of the Bill. It is the foundation of the Bill and without it the Bill is nonsense.
The Earl of Kinnoull: I am confused and concerned about the second Second Reading speech of the noble Lord, Lord Carter. The noble Lord's first Second Reading speech was much better because at that point he supported the principle of the Bill and recognised the importance of freeing the agricultural industry and allowing more tenancies. I think that he said that the number of tenancies had dropped by 25 per cent. since he served on the Northfield Committee. The noble Lord must have been very young when he served on that committee because it sat 15 years ago.
When replying to the previous amendment, the noble Lord said that he rested his case on that amendment on the fact that the Government were introducing a form of

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business tenancy which may not have any relationship to agriculture. I think that that is what the noble Lord said. I wish that agriculture were so simple.
What the Government have done—what the industry wanted—is to try to frame something that will last at least 10 years and look to the future. They have sought to answer the questions, "What is agriculture? Where is agriculture going?" The noble Lord did not address those questions. I hope that he will because in my view in many places arable and livestock farming depends entirely on CAP payments. We know perfectly well that in two or three years' time those payments will be renegotiated and may well decrease because of the increased number of states in the European Union. Therefore, the Government are rightly supporting efforts to find other uses for agricultural land. Therefore, it is appropriate for the Government to design a farm business tenancy that will include those other uses. If they did not do that, the Government would have to amend the Bill within a few years. Therefore, I think that the noble Lord, Lord Carter, was wrong on that point.
Earl Howe: I am grateful to my noble friends for restating so clearly why the Bill and this particular clause are so central to the Government's objectives for agriculture in this country. The noble Lord, Lord Carter, told us a number of things that he does not like about the Bill and said how he would tackle the problems differently. We heard, for example, that he appears to be against any form of farm diversification, which is something for which the Bill explicitly allows.
Leaving aside the peripheral matters such as the lists of covenants which the noble Lord wants to introduce and to which we shall come in a moment, in my view there is no substance to his proposals. In most cases he is harking back to the prescriptive and, I would say, over-regulatory approach of the 1986 Act. The noble Lord seemed to be overlooking the simple fact that that approach has been tried and has been found singularly wanting. What we need is a fresh approach with more of the flexibility that other commercial sectors enjoy and from which they benefit.
In other areas the noble Lord's proposals are out of tune with what the industry wants. I reiterate what my noble friends have said—the noble Lord, Lord Carter, apparently keeps trying to avoid the fact—which is that the Bill has the wholehearted support of all the main industry organisations, with the notable exception of the Farmers' Union of Wales. A year or two ago the idea of achieving consensus among the industry organisations seemed a tall order. Now, however, the noble Lord seems to criticise us for not having the unanimous support of every farmer in the country as well as of the main organisations. Achieving unanimity in a large and diverse industry such as agriculture is an unrealistic prospect. Nevertheless we have a remarkable degree of agreement. That is why we regard our proposals as soundly based and believe that they will stand the test of time.
The noble Lord, Lord Carter, still clearly favours some statutory minimum term or even some form of retirement tenancy. I shall not repeat all the arguments
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which we heard on Second Reading, but I must try once more to persuade the noble Lord of the error of his ways. There is no point in putting bars on the windows when the landlord does not need to walk in the front door. Letting land is a voluntary activity. If the minimum term was longer than the landlord wished to offer, there would be absolutely no reason for him to take on that obligation unwillingly. That is the central difficulty that we are now facing in agriculture.
The commercial sector manages perfectly well without a minimum term. To the extent that agriculture may require a longer-term perspective—I accept that it often does—it will be in the landlord's interest as much as in the tenant's. That is no doubt why the RICS survey found that over half of the equipped farms surveyed would be let for 10 years or more. It is much better that the agreement should be based on mutual trust rather than on legal compulsion. It is worth reminding ourselves that about 75 per cent. of all new lettings, such as there are, are for very short periods. The industry has come to see that the tenanted sector is gradually being suffocated by restrictive legislation and that it needs the oxygen of reform. That is why the industry supports the Bill and opposes a minimum term. That is why Clause 1 is central to the Bill and its aims. I very much hope that the Committee will support it.
5.15 p.m.
Lord Carter: I did not expect to convince the Minister or Conservative Members of the Committee. I turn first to the point that was made by the noble Lord, Lord Middleton. He said that the industry agreement has been worked out and has not been made in haste. I made the point that there has been a substantial change of stance within at least three of the organisations representing the industry in less than three years. There has not been a long period for consultation since within a very short period of time there has been a substantial change of stance. I could make the slightly flippant point about this being an industry agreement and say that a good rule in politics is that the establishment is usually wrong.
However, we are anxious to let the industry know what it has been let in for. That is important for farmers outside this House. Even if they do not read Hansard, the debate will be reported in the farming press and elsewhere. Throughout the Bill's passage through this House, and I suspect in another place, we shall be trying hard to make sure that the industry knows just what the industry agreement will produce. I apologise if my speech moving that Clause 1 should not stand part of the Bill sounded like a Second Reading speech. Clearly, Clause 1 is the heart of the Bill. I accept that, which is why I thought it important to take a few moments to explain why we are so concerned about the operation of the Bill.
I must advise the noble Earl, Lord Kinnoull, that all that I have done is to congratulate the Government on the fact that, in the Minister's words, "A farm tenancy under this Government does not have to meet the agriculture condition". That seems extraordinary. If a farm tenancy meets the notice of business conditions, it does not have to meet the agricultural condition. I hope

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that all noble Lords opposite who support the Bill are aware of the implications of that. It is an important point. As I have said, it is a matter of some congratulation that the Government may have achieved the agreement of the industry group to that situation, which seems extraordinary.
The Earl of Kinnoull: If one reads Clause 36, one sees what "agriculture" means. In my view, when one has widened the definition of "agriculture", that allows one to come back to the wider farm business tenancy.
Lord Carter: We have tabled an amendment, which the Government may or may not like, which seeks to improve the definition of "agriculture" which has been inherited from the 1947 Act in successive Acts of Parliament.
In fact, the noble Earl has conceded the point that I was seeking to make. The provisions do not have to meet the agriculture condition. I repeat that if a farm tenancy meets the business condition, it does not have to meet the agriculture condition in the Bill. That seems extraordinary. If I had to guess, I would say that much of the change of stance to which I have referred relates to genuine concern about tenants' compensation. Perhaps there was some trade-off. I do not know: I was not a party to the negotiations.
We are not against the diversification of farm activities. What I was anxious to point out was that a farmer can diversify his activities as much as he likes and can end up with just a few sheep and chickens, but he will still have a farm business tenancy under the terms of the Bill.
The Minister pointed out fairly that there has been a substantial reduction in the number of farms available to let. This is not the Bill to discuss taxation; but my view is that it has a great deal more to do with taxation than with agriculture and tenant law.
I was interested in the Minister's reflection that he thinks that in agriculture the landlord and tenant should have the same freedom as they have in other areas—that is, with commercial property the tenant has the right to renew. We have some amendments down to that effect. If the Minister feels like that, I shall look forward to having his support on the matter.
I realise that were the Committee to reject Clause 1 and accept our Motion that it should not stand part of the Bill, we could all go home earlier. Although that would be desirable, I have no intention of dividing the Committee on this point. We now have clearly on the record in all our discussions on Clause 1 where the Government stand. Farmers outside this place will be interested to read that.
Clause 1 agreed to.
Lord Gallacher Lord Gallacher moved Amendment No. 13:
After Clause 1, insert the following new clause:
Meaning and effect of "residential farm business tenancy"
(".—(1) A tenancy is a "residential farm business tenancy" for the purposes of this Act if it is a farm business tenancy under which the tenant is occupying living accommodation provided by the landlord within the terms of his agreement with the tenant.
(2) A residential farm business tenancy which is current immediately before the term date shall not come to an end on that date except by being terminated in accordance with this Act and if not so terminated shall be deemed to continue until so terminated.
(3) Where by virtue of subsection (2) above a tenancy is continued after the term date, the tenancy shall continue at the same rent and in other respects on the same terms as before the term date.
(4) The landlord may seek to terminate a tenancy to which this section applies by agreement in writing with the tenant following the service of notice in accordance with section 6 of this Act.
(5) If agreement between the landlord and tenant cannot be reached in accordance with subsection (4) above before the term date, the landlord may apply to the court for an order granting him possession of the tenancy.
(6) On an application by the landlord the court shall grant an order terminating a residential farm business tenancy and giving the landlord possession of the land and buildings only if they are satisfied that one or more of the following grounds applies:

(a) that the tenant has attained the age of 65 and suitable alternative accommodation is available for him, or will be available for him at the date on which the landlord is seeking to possess the holding;

(b) that the tenant of the holding was not fulfilling his responsibilities to the farm in accordance with the rules of good husbandry, including the conservation of flora or fauna, features of geological interest and the protection of buildings or other objects of archaeological, architectural or historic interest located on the holding and that a certificate to this effect has been issued by the Minister;

(c) that the tenant has been given a reasonable opportunity to remedy a breach of a term or condition of the tenancy and has failed to do so;

(d) that the tenant has failed to comply with any term of the tenancy as to payment of rent or rates or as to insuring or keeping insured any premises;

(e) that the land and residential buildings comprising the holding are reasonably required by the landlord for his own accommodation and agricultural use or the accommodation and agricultural use of any son or daughter of his who is over eighteen years of age;

(f) that the tenant is a person who has become insolvent;

(g) that the person who was the tenant (or sole surviving tenant) has died;

(h) that planning permission has been obtained for the development of the land or for a change of use to a use other than as agricultural land.").

The noble Lord said: The amendment seeks to add a new clause to the Bill after Clause 1. It introduces and defines the concept of a residential farm business tenancy. We have, in a sense, already touched on the problem when considering Amendments Nos. 10 and 11. I noticed with interest that the Minister admitted that there was, if not a problem here, an issue that merited further consideration. He has promised to give that consideration, which we welcome.
The clause is set out in full detail on the Marshalled List. It begins, I hope, with an effective definition of a residential farm business tenancy, and the circumstances in which a tenant is occupying living accommodation provided the landlord can agree upon such a tenancy in conjunction with a tenant. Subsection (2) provides:
"A residential farm business tenancy which is current immediately before the term date shall not come to an end"
under the clause we seek to add—
"… except by being terminated in accordance with this Act and if not so terminated shall be deemed to continue until so terminated".

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Under subsection (3) we refer back to subsection (2), and make provision for the continuance of the tenancy after the term date at the same rent and in other respects on the same terms as before the term date.
Subsection (4) gives the landlord power:
"to terminate a tenancy to which this section applies by agreement in writing with the tenant following the service of notice in accordance with section 6 of this Act".
By subsection (5):
"If agreement between the landlord and tenant cannot be reached in accordance with subsection (4) above before the term date, the landlord may apply to court for an order granting him possession of the tenancy".
Finally, under subsection (6), we set out in some detail the conditions which the tenant will have to satisfy, or—putting it another way around—the conditions, the breach of which, will compel the court to grant an order terminating the residential farm tenancy, and giving possession of the land and buildings if one or more of the breaches of the tenancy agreement apply. I shall go through the breaches to which the clause refers. Under sub-paragraph (a):
"that the tenant has obtained the age of 65 and suitable alternative accommodation is available for him, or will be available for him at the date on which the landlord is seeking to possess the holding;"
Sub-paragraph (b) imposes a condition of good farming, something upon which my noble friend Lord Carter has placed great emphasis, and the absence of which from the Bill as a whole is disconcerting at least to us if not to farmers in general. Sub-paragraph (c) would give possession where the tenant:
"has been given a reasonable opportunity to remedy a breach of a term or condition of the tenancy and has failed to do so".
Sub-paragraph (d) would apply when the tenant has failed to pay his rent or rates, or keep the premises ensured in accordance with his agreement. Sub-paragraph (e) would be available to the landlord when he wished the holding (the land and residential buildings) for his own use or for the use of his son or daughter over the age of 18. Sub-paragraph (f) relates to that horrible but increasingly common situation where the tenant is a person who has become insolvent. Sub-paragraph (g) provides for the landlord to take possession where the tenant (or sole surviving tenant) has died; and sub-paragraph (h) takes care of the position where a planning application for change of use has been successful. In all those cases, the court would be obliged to grant an order terminating a residential farm business tenancy under the terms of this new clause.
We must address the problem of the farm tenancy. I recalled, as I listened to the debate on Clause 1 stand part, in an earlier translation trying to persuade small shopkeepers that it was no bad thing that the building societies and estate agents were beginning to dominate the high streets of this country. I told them that the alternative probably was that they would be unable to find a tenant when they wished to sell their freehold. We now have the position where a walk along some of our best high streets can be a disconcerting experience. All the indications are that the number of empty shops may increase rather than decrease.
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I blame no one in particular for that. It is the evolution of retailing and business in general which can never be forecast accurately no matter who is doing the forecasts. One would have expected the building societies to know their requirements; but they are rapidly reappraising them. Equally, one would have expected estate agents, sometimes supported by building societies, to know their requirements. They too are following a similar example.
I mention that by way of supporting the details of the clause, because, despite all that has been said about the flood of agricultural land for letting on business tenancy terms which is expected after the passage of the Bill on 1st September next year, I am not wholly convinced. Much of that is in the lap of the gods and unpredictable. What we must do in looking at the problem is to recognise that hardships could arise—severe hardships at that—and the amendment seeks to ameliorate, if not to eliminate, those hardships. I beg to move.
Lord Middleton: My Lords, we should take a close look at the effect of the amendment, which is that a tenant of a holding with a farmhouse can refuse to accept a notice to terminate a farm business tenancy at the term date. The landlord can apply for a court order; but the court cannot grant an order under the amendment for surrender of the land and buildings —not just the house—if the tenant is under 65, unless he has committed one of the tenants' sins which are listed under sub-paragraphs (b) to (h). If the tenant is over 65, then an order can be made only if he has alternative accommodation.
I am well aware of the sensitivity of the farmhouse issue. No one in farming is unsympathetic. I listened with great interest to what the noble Lord, Lord Northbourne, said, and I agreed with much of what he was saying. But life moves on. If we are to continue to have tenancies, under the new arrangements some of them will be for less than a lifetime. I am sure that the Tenant Farmers' Association, the young farmers clubs and the NFU saw clearly the implications of shorter tenancies on the housing of their families when they worked out the Bill's shape.
The Bill brings farming more into line with other rural businesses. No village pub keeper at the end of his tenancy would expect to remain living in the pub, denying the living quarters to his successor. One can also think of police and clergy houses in rural areas in similar situations. We must be hard-nosed about the issue. We should be wary about altering the Bill as is proposed so as to discourage farm letting with a farm house. No lettings, no houses in the first place.
5.30 p.m.
The Earl of Kinnoull: I am not sure whether the noble Lord, Lord Gallacher, has tabled a serious amendment or whether it is for discussion purposes only. If it is a serious amendment—and I am not trying to be offensive—it is the most terrible among the 95 that appear on the Marshalled List. It goes to the kernel of the agreement of the industry, which is security of tenure. It took three or flour years for the industry to

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reach that agreement and in my view it would be a backward step if the Committee were to accept the amendment.
Under subsection (6) of the amendment the noble Lord has listed eight deadly sins, not seven as in the 1986, 1976 and 1948 Acts. He has introduced a further deadly sin; that when one reaches the age of 65 one must retire. The landlord can serve a notice, go to court and at the age of 65 one must retire. That is a monstrous suggestion. It also adds to the point that landlords will be encouraged to take on tenants who are over the age of 60. They will not be encouraged to take on young farmers, which is what we want. The proposal is a backward step.
The noble Lord, Lord Carter, suggested that perhaps taxation was behind the Bill. I do not believe that to be the case; I hope that inheritance tax will find its way as has been suggested. The Bill is about security of tenure. The noble Lord was right to say that it should be pointed out to the industry what it might be taking on, but I feel that the industry is already well aware of that. There has been enough discussion about the Bill outside this Chamber and it has been welcomed generally.
Lord Carter: The noble Lord mentioned my name in regard to taxation. I said that taxation is outside this Bill and that has as much to do with the reduction in lettings as does the 1986 Agricultural Holdings Act and the Act that preceded it. It is not a point that we can discuss under this Bill, and to blame the reduction in lettings entirely on the weaknesses of existing legislation, which needs to be improved by this legislation, is not the entire case. I believe that taxation plays a big part.
Lord Stanley of Alderley: Following on the remarks made by the noble Lord, Lord Carter, perhaps I may say that if we were allowed to deal with taxation in the Bill we would not need to have the Bill. I entirely support what was said by my noble friend, and I must say to the noble Lord, Lord Gallacher, that this is a wrecking amendment. However, the noble Lord raised one good point and I hope that my noble friend Lord Howe will think seriously about it. It related to what was said by the noble Lord, Lord Northbourne, on Amendment No. 10, which dealt with housing. I hope that my noble friend will give serious consideration to the matter, reminding the industry about the housing problem. However, I fear that Amendment No. 13 is a wrecking amendment.
Earl Howe: I have listened with great interest to the debate. I am sure that we all realise that the loss of a family home is a very sensitive and potentially emotive issue. The landlords who contemplate letting farms which include a farmhouse will be well aware of that. We have debated the amendments tabled by the noble Lord, Lord Northbourne, which gave rise to some interesting discussions. Views clearly differ on the best way of tackling the issue. Should it be a matter for the individuals concerned or should there be prescriptive legislation?
The noble Lord, Lord Gallacher, advocated a protectionist approach in the belief that it would be advantageous to the tenant. I agree that such an
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approach may benefit those few lucky tenants who manage to obtain a residential farm business tenancy. However, it would not benefit tenants in general or help us to revive the tenanted sector. Sadly, as I have already said, the Labour Party seems unable to learn from experience. Excessively protective legislation works to the disadvantage of the people whom it is designed to protect. That is so well illustrated by the agricultural holdings legislation that I must confess I find it surprising that the Labour Party wants to go down the same path.
The effect of the amendment would be that all land agents, advisers and landowners would look for ways of avoiding its restrictive provisions. Depending on circumstances, they might opt for share-farming arrangements or contract farming. Alternatively, they could split the house and the land, letting the land on a farm business tenancy but letting the house on an assured shorthold tenancy so that they could regain possession at the appropriate time. Some might simply sell their farmhouses and let the bare land to neighbouring farmers. That is just what we see happening at present. Given the fears that have been expressed about fragmentation of farms, I wonder whether Members of the Committee opposite really believe that to be desirable.
We and the main industry organisations representing tenants as well as landlords take the view that tenants are businessmen who are capable of making important decisions. The conditions under which they occupy their homes are clearly of prime importance to them. It is not something insignificant that they are likely to overlook. Farmers managing on Gladstone v. Bower tenancies and other such short-term, insecure arrangements are in that position at present—or in a worse position. In the Bill we have ensured that they will have at least 12 months' notice when a tenancy is to end. That will give them time to make alternative arrangements—much more time than the two months which assured shorthold tenants in the private residential rented sector are entitled to, and possibly more than they need.
As Members of the Committee are aware, one of the main objectives of the legislation is to encourage lettings so that it will be easier for people to move and to find a new farm to rent. I am convinced that this is the best approach, and I hope that the noble Lord, Lord Gallacher, will accede to the overwhelming balance of opinion within the Committee and withdraw his amendment.
Lord Gallacher: I am grateful to all Members of the Committee who have taken part in the discussion, even though the anticipated rejection of the new clause took me a little by surprise. I refer to the severity of the shots that were fired. We see this as in no sense a wrecking amendment. On Second Reading we said that to the best of our ability we would seek to improve the Bill. While an improvement of this kind may not be directly discernible, it has the merit of alerting the public in general, and would-be farmers in particular, to what could be the reality of a situation in which they move into a farm business tenancy under the terms of the Bill.

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In the light of the criticisms, and if none of the grounds for repossession outlined under subsection (6) is appropriate, one is tempted to ask what ground for repossession is left. Surely the answer must be that there is none. That appears to us to be a dangerous situation. To dream up grounds such as the landlord disliking the tenant does not strike one as being a serious attempt to improve a parliamentary Bill in Committee.
The noble Lord, Lord Middleton, suggested that we needed to be hard-nosed about the issue. He mentioned pub tenants and the police. There are categories of people who are in similar positions on retirement. However, the police, as a result of the structure of their salaries, are well able within reason to make provision. Where they are not, local authorities are often inclined to help. The police are county council servants and local authorities are inclined to view sympathetically the service that they have received from the police. At the end of a tenancy, the agricultural workers of a farm will have greater security in a service cottage—we know them as tied cottages—under the Rent (Agriculture) Act 1976 than is to be offered to farmers under this Bill.
The noble Earl, Lord Kinnoull, came at me with regard to the fact that I had postulated a retirement age of 65 in subsection (6) (a), but the subsection refers to 65 and "suitable alternative accommodation". I know that the noble Earl's experience of repossessions is probably now a lot more extensive than it was when he first took an interest in the building society movement; but it is a harsh process and nobody should be under any illusions about that. Whether it is a thrusting young farmer filing his petition in bankruptcy or an elderly farmer being turned out because his fixed term tenancy is at an end does not in any way diminish the harshness of that process.
We have tried to be constructive. The Minister made a jibe that it is a protectionist approach. Farming and agriculture in this country have been protected substantially. No one denies that. The 1947 Act was the work of a Labour Government. I admit that it implemented promises made to farmers for their magnificent efforts to feed the nation in wartime. But nevertheless, those promises were kept. On this side of the Committee, we do not apologise for protecting farmers. Neither do we apologise for tabling an amendment of this character.
We realise that there could be difficulties, and fragmentation is one of those difficulties. We realise also that agents may seek ways in which to seek to escape the implications of the clause, if it were added to the Bill, by diverting the farmhouse tenancy away from the farming land arrangements. Nevertheless, it is worth the Committee's consideration and if it is not to be considered seriously by this Committee in this House at this time, I should be a very disappointed man. Nevertheless, I seek the Committee's leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 agreed to.
Lord Carter Lord Carter moved Amendment No. 14:
After Clause 2, insert the following new clause:
Covenants deemed to be included in oral farm business tenancy
(". In any oral agreement between a landlord and a tenant for the letting of a farm business tenancy the covenants listed in Schedule (covenants deemed to be included in oral farm business tenancy) to this Act shall apply unless the parties agree to the contrary in writing.").
The noble Lord said: In moving this amendment, I shall speak also to Amendment No. 89, which is consequential.
With these two amendments we come to an interesting discussion on the question of oral agreements. I must admit that, when I first looked at the Bill, I was surprised that there was no requirement for a farm business tenancy to be in writing. I understand that the Government felt that they had a good reason for that on the grounds that if they did not include oral agreements within the scope of the Bill, attempts would be made to get round the Bill by having oral rather than written agreements. When the Minister replies, perhaps he will deal with this point. If, under the Bill, the landlord and potential tenant must exchange a notice in writing, is it then the Government's view that they will then attempt to circumvent the Act by having an oral agreement? I just cannot understand the logic of that.
We have tried to provide that if there is to be an oral agreement there should be a number of covenants listed in the schedule which will be,
"deemed to be included in oral farm business tenancy … [which] shall apply unless the parties agree to the contrary in writing".
It is rather odd to agree to the contrary in writing in an oral agreement but I am sure that the Minister understands the point that I am trying to make. I assure him that this is a probing amendment with regard to the whole question of oral agreements. It is extremely important that the Committee should understand what are the Government's intentions in that regard.
Obviously, one looks at the usual covenants and I am sure that Members of the Committee who are involved in those matters will recognise that the covenants on the part of the landlord and tenant are standard. We are trying to tease out the reasons why the Government decided not to require a farm business tenancy to be in writing; in other words, that an oral agreement will come within the ambit of the Bill.
The Minister replied to a question that I put to him on an earlier amendment. In its response to the Government's proposal document, I believe that the Agricultural Law Association stated specifically that it felt that it was wrong for those new tenancies not to be in writing and suggested that oral agreements were likely to be used only for short-term lettings on bare land, and that anybody going about the matter properly would have written agreements in any event.
As I say, we are probing the Government on their reasons for including oral agreements in the provisions of the Bill. Why have the Government promoted the view that after 1st September next all tenancies, whether written or oral, which fall within the definitions of Clause 1 will be farm business tenancies? We suggest for the sake of good order and good practice that if there were to be such oral agreements there should be a

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schedule in the Bill which sets down the minimum covenants that one would expect on the part of the landlord and tenant. I beg to move.
5.45 p.m.
The Earl of Kinnoull: I welcome the amendment. I believe that it adds greatly to the Bill. In practical terms, I feel that the unwritten tenancy would be for very short periods. There are too many dangers involved in it for both parties and I hope that the written tenancy will be the one that goes forward on all occasions.
The noble Lord, Lord Gallacher, mentioned building societies. Building societies have shown great sympathy in very unhappy circumstances, much more so than banks. I am glad to say also that they do not lend on farm land.
Lord Northbourne: I support the amendment, although perhaps not in its finer detail. It seems to me to be absolutely wrong that anything but a tenancy of bare land for relatively short periods should be an oral tenancy. We are talking about responsible landlords and tenants. We must expect them to put down clearly what is their intention. I do not know whether the particular headings are correct in the amendment proposed by the noble Lord, Lord Carter, but I support the principle.
Earl Howe: I am grateful to the noble Lord for explaining his amendment. It is somewhat odd. As the noble Lord explained, it refers to a schedule of landlord and tenant covenants, one of which purports to reflect the provisions of the Bill and the rest of which the noble Lord has presented as a set of uncontroversial ground rules which should be applicable to any farm business tenancy agreement, in particular an oral agreement.
I differ with this approach. First, in so far as the suggested covenants reflect the provisions already contained in the Bill, they must be unnecessary. But more importantly, it is no part of a deliberately simple and streamlined Bill to write in provisions about deemed covenants for oral agreements. It is for the parties to decide what conditions and arrangements should apply in respect of their agreements, whether written or oral in nature. It is not for the Government to do so. The whole point of the Bill is to allow the parties to an agreement maximum freedom to decide on the terms which suit them best.
Of course I accept that this is a probing amendment, but it would go further than even the over-prescriptive 1986 Act currently provides. Section 2 of the Law of Property (Miscellaneous Provisions) Act 1989 provides that a contract for the sale or other disposition of an interest in land must be in writing. Short leases are excluded from that provision. A short lease is a lease for a term not exceeding three years at the best rent that can reasonably be obtained without taking a premium.
That is the general law in relation to the requirement that leases must be in writing. There can be no special features of farm business tenancies which would justify them receiving special treatment. We cannot require that farm business tenancies have to be in writing because some, whether accidentally or deliberately, will not be.
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The Agricultural Law Association's ideas relate, I venture to say, to the ideal world from which agriculture, as we all know, unfortunately differs.
Therefore, I hope that that explanation helps the noble Lord and with those thoughts in mind, I hope that he will feel able to withdraw the amendment.
Lord Northbourne: Before the noble Earl sits down, perhaps I may ask for further clarification. I did not jot down the particular reference but I believe he said that the general law provides that any tenancy of three years or longer must be recorded in writing. Does that include farm business tenancies?
Secondly, reference was made to what happens if someone forgets to record a farm business tenancy in writing. But what happens if someone forgets to record a tenancy in writing under some other provision?
Earl Howe: I made clear that there could be no special features of farm business tenancies which would exempt them from the requirements of the general law. Therefore, a farm business tenancy would be subject to that rule. As to what the situation would be if a lease was not in writing, I believe that would be a matter for the court to decide if it came to a challenge. Clearly, both parties would be taking a risk that the tenancy might not for some reason or other fall under the provisions of the Bill. However, I shall take advice on the precise legal position and, if I can clarify the matter, I shall write to the noble Lord.
Lord Carter: We are certainly learning as we go along. The amendment was intended to be a helpful probe. But, again, I have been slapped down and reminded about simplicity. I have been told that we should leave it to the parties to sort out the matter. The Government are clearly washing their hands of all responsibility and leaving the matter to landlord and tenant. They are in full deregulation mode when they address the Bill.
I listened to the noble Earl saying that all was for the best and that all will be for the best in the best of all possible worlds when the Bill becomes law. He makes Dr. Pangloss look like a beginner. But, again, the Minister is very concerned about our approach which he described as "over-prescriptive". However, I should like to remind Members of the Committee that it was the Labour Party which introduced security of tenure for the first time in the 1947 and the 1948 Acts. It was the Labour Party which, rightly or wrongly, introduced a succession of tenancies in the 1976 Act: but it is a Conservative Party which abandoned those protections with the 1984 and 1986 Acts.
The Minister keeps saying—and I am grateful to him for putting it on the record again; indeed, from our point of view, it is most helpful—that they see no special features in farmland and that it is up to the parties themselves. In other words, the landlord and tenant can agree what they like. As long as they fulfil the notice and the business conditions, they do not even have to fulfil the agricultural conditions. Our probes are certainly bringing out a view of the Bill which I am sure will be very interesting to the agricultural industry. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carter Lord Carter moved Amendment No. 15:
After Clause 2, insert the following new clause:
Model clauses
(". —(1) The Minister shall, after consultation with such bodies as appear to him to represent the interests of landlords and tenants of agricultural holdings, make regulations prescribing terms as to the maintenance, repair and insurance of fixed equipment and the respective covenants to be observed by landlord and tenant (in this Act referred to as "the model clauses").
(2) Regulations under this section may make provision for any matter arising under them to be determined by arbitration under this Act.
(3) The model clauses shall be deemed to be incorporated in every farm business tenancy except in so far as they would impose on one of the parties to an agreement in writing a liability which under the agreement is imposed on the other.").
The noble Lord said: In moving the amendment I shall, with the leave of the Committee, speak also to Amendment No. 87, which is consequential. I believe I know the answer that I am likely to receive from the Minister; but at least I can have another try.
We come now to our old friends the model clauses, though in fact I prefer to call them the model heads of agreement. I understand that discussions are taking place within the industry, with the RICS and others—I also hope that the other organisations in the industry group are involved—regarding the models under the tenancy agreements which we all hope we shall be able to take off the shelf and use when the Bill becomes law.
However, we feel that the matter cannot be left to the good will of organisations outside the House without the protection of statute. Therefore, we have drafted a proposed new clause, which states:
"The Minister shall, after consultation with such bodies as appear to him to represent the interests of landlords and tenants of agricultural holdings, make regulations prescribing terms"—
and the Minister will be absolutely right if he says that it is a prescriptive amendment; I say that to save him from so doing—
"as to the maintenance, repair and insurance of fixed equipment"—
the thing that we are all familiar with under the 1986 Act—
"and the respective covenants to be observed by landlord and tenant".
Amendment No. 87 has been tabled for clarification. It states that:
(""Minister" means—

(a) in relation to England, the Minister of Agriculture Fisheries and Food, and

(b) in relation to Wales, the Secretary of State.").

We now know that it is likely that a number of tenancies will be made without a written agreement. The comprehensive background structure of the 1986 Act is to be removed, as is the Government's intention. We believe that it is desirable that the parties to those agreements should have some precise understanding of the division of responsibilities between them for the maintenance, repair and insurance of fixed equipment.
Over the years, we have all agreed that the landlord and tenant system is an excellent example of the division of responsibility for the provision of capital. As regards the covenants between the landlord and the
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tenant under the 1986 Act and those that precede it, we know that the landlord and tenant system is a good example of the division of responsibility in practice. In that sense, it has worn well. However, we now know that the Government do not believe in that being prescribed in any way and that, so far as I understand it, they do not believe that the Bill should include any definition of the respective responsibilities of landlord and tenant. We are trying to put that right with the amendment.
From our professional experience, we know that the whole area within tenancy agreements can lead to frequent misunderstandings and disputes unless the position is made clear from the start. It is not a wish to prescribe; it is a wish to try to get the landlord and the tenant something to fall back on and to work from, and to bring the government into play by giving them the responsibility to make such regulations.
We know that parties are free to negotiate their own variations of rights and obligations independently from the statutory recommended clauses. But the effect of the model clauses is to prevent difficult disputes arising with the bad feeling that they can generate between the parties and the costs that they can incur in going to arbitration or to court. We are all familiar with the model clauses that have been developed under the Agriculture (Maintenance, Repair and Insurance of Fixed Equipment) Regulations 1973 which have been amended over the years. We believe that they could well form the basis of any order made by the Minister.
We suggest that the Government should consult with the industry group which has been continually referred to as well as the RICS and that they should then make the regulations which would help to prevent much litigation. That is an important point, not just in relation to this amendment but also in connection with many others. When the Minister says, "Leave it to the landlord and tenant", I believe he is really saying that we must leave the matter to the courts. That is what will happen in the new free-wheeling air that we shall have which will surround the whole of agriculture and the landlord and tenant system. A number of solicitors who specialise in this area of the law have been talking to me. They are licking their lips in anticipation of the kinds of cases that they will be able to bring. The purpose of the amendments is to try to avoid that situation. I suggest to the Government that they do have a responsibility to prescribe. I make no apology for saying so. I beg to move.
Lord Middleton: The noble Lord, Lord Carter, is quite right. There should be very precise terms in any new tenancy agreement as to who carries out the repairs and what repairs need to be done. However, I believe that the answer he will receive from the Government is that the proposal to introduce model clauses goes outside the industry's agreement and is not consistent with the object of the Bill; namely, to allow freedom of contract. If that is the reply, I shall support it.
The Earl of Kinnoull: I have not had the advantage of seeing the notes that the noble Lord, Lord Carter, supplied to some Members of the Committee when tabling the amendments. As regards the amendment, I

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have not quite understood whether the noble Lord is suggesting that the model clause should be mandatory and override the terms of a written agreement. If that is so, I could not support it. On the other hand, if the purpose is to fill a gap for, say, a tenancy of over two years, then I believe his proposal may have some merit on the grounds that it is a fall-back situation. In other words, rather than go to the courts to try to unravel the legal complications in a landlord and tenant dispute, one actually has a model clause to fall back on thus saving on costs.
6 p.m.
Earl Howe: Perhaps I may point out a small feature of detail regarding the amendment. Whether intentional or not, the amendment does not deal adequately with any holdings other than those which were wholly agricultural in nature. However, more fundamentally, I am not convinced—as, no doubt, the noble Lord suspected—that the right way to deal with matters such as parties' respective responsibilities in respect of a diversified holding is by regulations in the way that the noble Lord proposes.
The agreement signed by the CLA, the NFU, the TFA and the NFYFC last December, was perfectly clear. Those organisations will work with the professions to agree model clauses which are specifically adapted to the special needs of farm business tenancies. They will be recommended to members for use on a voluntary basis. I believe that that is a very practical way forward. There really is not a likelihood of a free-for-all or a bonanza for banisters, as the noble Lord seems to fear.
I would never seek to slap down the noble Lord. I am sorry if I appeared to do so a moment ago. However, I suggest to him that the best interests of those who enter the new world of farm business tenancies are not served by making regulations as to who is to oil the gate hinges, clear the ditches and insure the milking equipment. As the noble Lord, Lord Northbourne, said during our debate on Second Reading—a point I myself have made this afternoon—the Bill treats farmers and tenant farmers as grown-ups, able to negotiate with the help of professional advisers proper agreements for their tenancies. If it is any assistance to the noble Lord, I would say that there is no need for the wheel to be re-invented during the apportionment of responsibilities for agricultural matters because the regulations which apply to 1986 Act tenancies will continue to exist in respect of those tenancies. Parties will be able to incorporate into their tenancy agreements as much or as little of the content of those regulations as they choose. Even where they are keen to diversify, they will have a good basis on which to begin to negotiate. For all those reasons I hope that the noble Lord will feel that this has been a useful discussion but will nevertheless feel able to withdraw his amendment.
Lord Carter: I am grateful to the Minister for mentioning, as he said, a point of detail. The noble Earl will know that in these cases one has some help in drafting amendments but they are not perfect and they are intended to tease out the Government's arguments, in so far as they exist. I am beginning to think, every
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time I hear reference to the industry agreement, that I am almost hearing a mantra. The NFU, the TFA, the Federation of Young Farmers' Clubs and the CLA are referred to. I am slightly tempted to add, "And Uncle Tom Cobbleigh and all", but I must not do that.
The noble Lord, Lord Middleton, also referred to the industry agreement. But who makes the law'—the industry agreement or the Government? We are saying here that this matter is the Government's responsibility. The Government cannot shuffle off and say there is an industry agreement. Perhaps I should not say this, but I would be surprised if in other cases where there has been agreement within an industry—not within agriculture—this Government have always accepted the view of that industry. Agriculture seems to be very much a special case. I could cite many examples where an industry has been united in dislike of a government's proposals and the government have still gone ahead with them. But in agriculture obviously we can see that it is the other way round.
If I understood the noble Earl aright, he said that under the 1986 Act tenancies the 1973 regulations which are in existence would still apply. Was he implying that those could then be picked up if the parties wished and used in the farm business tenancy? I would assume that they could be. This raises an interesting point to which we shall return. I hope the Committee will think this matter through. If this Bill is successful and there are many of these farm business tenancies, there will also be the 1986 tenancies in existence, particularly succession tenancies, which will still continue for a long time. We are probably only into the first generation of succession tenancies, if at all. Therefore there will be an interesting situation in the agricultural land market, or in the tenanted sector, when arbitrators are looking for comparable rents and all the rest of it. That is a point that I flag up in passing and that I believe we shall deal with on a later amendment, or perhaps at Report stage. I believe that the Government in their overwhelming rush to simplify this matter and not to overprescribe are to some extent avoiding their responsibilities.
The model clauses could be adjusted by the parties if necessary. They were intended to be a help. It seems that the Government do not wish to have any responsibility at all. It is implied throughout that there is a level playing field between the landlord and tenant. As I have said, this is an example of a deregulation mode in full swing—if a mode can be in full swing. However, that does not reflect reality. There is not a level playing field. Every one of us engaged in the industry knows that the scales are weighted against the tenants because there is a larger supply of farmers who wish to rent land than there are farms to let.
The Government will say that this Bill is intended to put that right. However, on this point I would remind the Committee that the tenanted sector is an odd market in many ways. We have to look back only a few years to the period when farm incomes had fallen to their lowest level in real terms, I believe, since the end of the war. There was a situation then when, for almost the first time in my experience as a professional, tenants were serving notice on landlords to review the rent in the hope of achieving either a rent freeze or a reduction

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in rent. At the same time there were landlords who were not serving notices to review the rent in the hope that, in the absence of a review, the rent would be frozen and there would not be an application for a reduction. But at the same time, if there was a farm to let, there was a long list of farmers who wished to rent that farm. We had a situation, therefore, where farm incomes were at their lowest level in real terms since 1945 and where existing tenants were looking to secure a reduction in their rent or a rent freeze, but they hoped a reduction. At the same time, if there was a vacant farm up for let, there was a big supply of farmers who were willing to pay some extremely high rents in the circumstances.
This is an odd market and we feel in that situation the Government have a responsibility. We shall return to that point on a number of occasions in the Bill. The Government in their wish to wash their hands of this matter, to leave it to the parties concerned and to rely on the industry agreement, are failing in their responsibilities. However, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Gallacher Lord Gallacher moved Amendment No. 16:
After Clause 2, insert the following new clause:
Agreement in writing
(". —(1) Where in respect of a farm business tenancy—

(a) there is not in existence an agreement in writing embodying all the terms of the tenancy, or

(b) such an agreement in writing is in existence but the terms of the tenancy do not make provision for one or more of the matters specified in Schedule (Matters for which provision is to be made in written farm business tenancy agreements) to this Act—

the landlord or tenant of the holding may, if he has requested the other to enter into an agreement in writing embodying all the terms of the tenancy and containing provisions for all of the specified matters but no agreement has been reached, refer the terms of the tenancy to arbitration under this Act.
(2) On any such reference the arbitrator in his decision—

(a) shall specify the existing terms of the tenancy, subject to variations agreed between the landlord and the tenant;

(b) in so far as those terms as so varied neither make provision for nor make provision inconsistent with the matters specified in Schedule (Matters for which provision is to be made in written farm business tenancy agreements) to this Act, shall make provision for all of those matters in terms agreed between the landlord and the tenant or in default of such agreement as appears to the arbitrator to be just and reasonable between them; and

(c) may include any further provisions relating to the tenancy which may be agreed between the landlord and the tenant.

(3) The decision of an arbitrator under this section shall have effect as if the terms and provisions specified and made in the award were contained in an agreement in writing between the landlord and the tenant and having effect (by way of variation of the agreement previously in force in respect of the tenancy) as from the making of the award or, if the award so provides, from such later date as may be specified in it.").
The noble Lord said: Amendment No. 16 is concerned—the Committee will be surprised to learn—with agreement in writing. With this amendment I shall also speak to Amendment No. 90, with which Amendment No. 16 is grouped. Amendment No. 90, for the information of the Committee, contains the schedule to which Amendment No. 16 refers. That schedule is printed on page 14 of the Marshalled List.
Amendment No. 16 provides that:
"(". —(1) Where in respect of a farm business tenancy—

(a) there is not in existence an agreement in writing embodying all the terms of the tenancy, or

(b) such an agreement in writing is in existence but the terms of the tenancy do not make provision for one or more of the matters specified in Schedule …

the landlord or tenant of the holding may, if he has requested the other to enter into an agreement in writing embodying all the terms of the tenancy and containing provisions for all of the specified matters but no agreement has been reached, refer the terms of the tenancy to arbitration under this Act.
(2) On any such reference the arbitrator in his decision—

(a) shall specify the existing terms of the tenancy, subject to variations agreed between the landlord and the tenant;

(b) in so far as those terms as so varied neither make provision for nor make provision inconsistent with the matters specified in Schedule … to this Act, shall make provision for all of those matters in terms agreed between the landlord and the tenant or in default of such agreement as appears to the arbitrator to be just and reasonable between them; and

(c) may include any further provisions relating to the tenancy which may be agreed between the landlord and the tenant.

(3) The decision of an arbitrator under this section shall have effect as if the terms and provisions specified and made in the award were contained in an agreement in writing between the landlord and the tenant and having effect (by way of variation of the agreement previously in force in respect of the tenancy) as from the making of the award or, if the award so provides, from such later date as may be specified in it.")".
We believe that the combination of this new clause, plus the detail set out in the schedule—which is Amendment No. 90 —will rectify what we regard as a deficiency and indeed an omission in the Bill, and we recommend that it be given the serious consideration of the Committee and if possible the approval of the Minister. I beg to move.
Earl Howe: The advantages of a prescribed list of criteria to be included in farm business tenancies have been described most eloquently by the noble Lord. However, I am afraid that, despite his eloquence, he has not convinced me that the disadvantages of the proposed amendment are outweighed by the alleged benefits that he adduces. The 1986 Act attempted something similar.
Schedule 1 to the 1986 Act contains a relatively short and simple list of matters which are relevant to most agricultural tenancies. As noble Lords may know, Section 6 of that Act gives either party the right to demand arbitration in the case of an oral tenancy or a written tenancy which does not embody all the terms of the tenancy or does not provide for all the matters listed in the schedule. Clearly, the 1986 Act was drafted in anticipation that some tenancy agreements would not be entered into with professional assistance and that some matters might be overlooked. That might on the face of it seem to be a reasonable idea, but the trouble is that some matters listed are now out of date. For example, the liability to rates has been replaced by a liability for council tax and business rates.
Even a simple list like that has given rise to problems. The amendment proposed by the noble Lord has not even the virtue of being a simple list, and yet it fails completely to address the needs of a diversified farm

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business tenancy. Goodness knows how quickly it would date if one attempted to make the list comprehensive.
There is, however, an alternative and much more attractive approach. The RICS is preparing guidance for the industry for matters to be included in a tenancy agreement. That guidance will be available for everyone to see. It can be updated as necessary and will provide much needed flexibility. I also suggest that that guidance will have more likelihood of reaching the intended beneficiaries than a schedule to an Act of Parliament. In the light of that explanation I hope that the noble Lord will not wish to pursue the amendment.
With the leave of the Committee, perhaps I may return to an issue relating to oral tenancies which the noble Lord, Lord Northbourne, raised a moment ago when he asked me what would be the standing in law of an oral agreement which purported to be for more than three years. I am advised that that lease would be of no effect, so that the courts—as I correctly surmised—would have to resolve the precise legal position. But if the tenant were in occupation, the likely position is that he would be found to have a periodic tenancy, namely an annual or quarterly tenancy, or a tenancy covering some other period, depending on the rent being paid. The important point is that the fixed term would be ineffective. I hope that that information is of some assistance.
Lord Gallacher: I thank the noble Earl for his reply. It consoles me a little. To that extent, although I do not intend to press the amendment, that information may be of use to us in considering whether to take further action on the thrust of the amendment at a later stage of the Bill.
The noble Earl said that the amendment fails to face the needs of a farm business tenancy. He then went on to say that the RICS guidance for tenants would be preferable to a schedule to the Bill. Defective as the schedule may be—and that depends on the eyes of the beholder—if it were in the Bill, at least the information would be available.
We have yet to see the important guidance for tenants to be produced by the RICS. We have been told that the Bill has had a gestation period, to include industry representations, of some four years. It would help this side—call us the wreckers if you like—to give up our erring ways at some stage in the passage of the Bill if before Report stage we could see the guidance for tenants which the RICS is preparing. On the assumption that that is possible, we shall consider it sympathetically. It may deter us from hurling ourselves yet again at the barricades when we come to the Report stage of the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.15 p.m.
Clause 3 [Compliance with notice conditions in cases of surrender and regrant]:
Lord Carter Lord Carter moved Amendment No. 17:
Page 2, line 36, leave out ("or") and insert ("and").
The noble Lord said: We are not clear why the Government have provided in Clause 3(1) (b) that either the condition in subsection (2) or that in subsection (3) will apply. We do not understand why the party should not be required to satisfy both conditions rather than either one or the other. The purpose of the amendment is to ask the Government the reason for that provision. I beg to move.
Earl Howe: I believe that I can assist the noble Lord. Under Clause 3(1) (b) it is provided that either the condition in subsection (2) or the condition in subsection (3) must be met. Subsection (2) covers the case in which some minor variation is made to the area of land comprised in a new tenancy but no change is made to the term date. Subsection (3) covers the case where the term date is earlier for the new tenancy than it was for the old one. To replace "or" with "and" as is proposed in the amendment would require both conditions to be met. I suggest that that is unnecessary. It would deprive the parties of the ability to agree on minor changes to the boundary of the holding, for example, unless they also agreed an earlier termination date for the tenancy. I am sure that that is not what is intended, but perhaps the noble Lord meant the amendment to be read with Amendment No. 20, which we shall come to in a moment. However, I hope that what I have said is of assistance for the time being.
Lord Carter: I am grateful to the Minister. I agree that it would have been easier if we had grouped the amendments. The amendment has been tabled in a genuine attempt to seek the reason for that provision. The Minister has given a satisfactory answer. It was extremely helpful, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carter Lord Carter moved Amendment No. 18:
Page 2, line 43, leave out from ("are") to ("the") and insert ("less than 10 per cent of').
The noble Lord said: The purpose of the amendment is to make the Government explain what they mean by "small". The Minister will remember the exchange we had in 1993 on the Agriculture Bill when I tabled an amendment which referred to the "small farmer" and the noble Earl rebuked me and said that I should be politically correct and refer to the "vertically disadvantaged farmer".
In this amendment we refer to small changes in area. Solicitors and barristers outside the House foresee a great deal of litigation over that question. To be helpful, we have suggested instead:
"less than 10 per cent. of'.
I am sure that the Minister will not like that and will have an alternative. However, the amendment has been tabled in a genuine attempt to discover what the Government mean by "small" in connection with changes in area. I beg to move.
Earl Howe: I listened with interest to what the noble Lord had to say on this somewhat technical point. Our intention in this clause is to enable a landlord to give a tenant the use of an extra piece of land, perhaps a field, without losing the protection which had been gained by

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complying with the notice conditions. That is necessary because the addition of land to a holding results, in law, in the surrender of the existing tenancy and the regrant of a new one. Parties who had exchanged notices and whose initial tenancy fully met the notice conditions might not realise that it was necessary to exchange notices again. Furthermore, they might not be able to comply with the notice conditions if the tenant had diversified to a significant extent. Therefore, Clause 3(4) makes it unnecessary for that to be done as it states that the new tenancy shall be taken to meet the notice conditions.
As the noble Lord pointed out, the Bill refers to a "small" area of land. The noble Lord would prefer that to be more precise and to specify less than 10 per cent. of the size of the holding. I see that that approach has the merit of certainty, but it also has the disadvantage that if parties inadvertently added marginally more land to a holding, a court would have to conclude that Clause 3(2) did not apply. I see merit in the flexible approach that we deliberately adopted in the present draft of the Bill. It may be a matter on which we can reflect and debate further at a later stage. However, for the moment I hope that what I have said will be of assistance to the noble Lord in deciding whether to take the matter forward.
Lord Carter: I am grateful to the Minister. His reply was helpful. However, if there is to be uncertainty, that will lead to litigation. I believe that there is a chance that there could be considerable debates in court about what is meant by "small". It would be helpful if between now and Report and Third Reading the Government can think of a better way of addressing the problem which gives more certainty. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Gallacher Lord Gallacher moved Amendment No. 19:
Page 2, line 44, leave out ("and") and insert ("or").
The noble Lord said: Clause 3, to which the amendment refers, lays down the circumstances in which the exchange of notices provided in Clause 1 will carry forward to cover the surrender of an old tenancy in favour of the granting of a new one. Subsection (2) of the clause imposes a condition that the land must be the same land,
"apart from any changes in area which are small in relation to the size of holding and do not affect the character of the holding".
Clearly it is desirable to allow some limited flexibility in that situation. However, it is suggested that the present wording is too limiting, as any changes would have to be both small in terms of the holding size and not affect the character of the holding. It is in the interests of all parties that there should be rather more scope within the law to interpret "small" and "character" by making them alternative. That would be achieved if the amendment were to commend itself to the Committee. I beg to move.
Lord Middleton: The amendment allows a little more flexibility where the exchange of notices prior to an old farm business tenancy is to be carried forward so as to cover the grant of a similar new tenancy for
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virtually the same parcel of land. The noble Lords, Lord Carter and Lord Gallacher, may be surprised to hear that I support them.
Earl Howe: I have listened with interest to the points made in Committee. It may help if I explain briefly the intentions underlying Clause 3. It is to enable the parties to agree on small changes in the area of land comprised in the tenancy—for example, where a landlord wished to give the tenant the use of an additional field which is small in relation to the size of the holding and does not affect the character of the tenancy. The addition of land to a holding results, in law, in the surrender of the existing tenancy and the regrant of a new one. Parties who had exchanged notices and whose initial tenancy fully met the notice conditions might not realise that it was necessary to exchange notices again, since they might not even know that they had a new tenancy. Furthermore, even if they did realise this, they might not be able to comply with the notice conditions if the tenant had diversified to a significant extent by the time of the regrant. Clause 3(4) makes it unnecessary for them to do this as it states that the new tenancy shall be taken to meet the notice conditions. In other words, it rescues those parties from a trap into which they might accidentally fall simply as a result of a very minor change in the area of the tenancy.
The noble Lord's amendment would enable parties to add a significant amount of land to a holding, provided that it did not alter the character of the holding. That is one effect of the amendment. Alternatively, they could add a small area of land which might have on it a substantial non-agricultural enterprise which would totally alter the balance of the tenant's entire business. My view is that in either of those circumstances there would be a substantial and fundamental change to the agreement into which the parties had originally entered and they would not be falling accidentally into a trap from which they needed to be rescued by this clause. They would be making a deliberate and substantial change to the tenancy and the correct course, if they wished to be covered by the notice conditions, would be to sign a new tenancy agreement. I must emphasise that this clause is intended to deal only with minor changes which the parties may make to the tenancy, resulting either deliberately or accidentally in a new tenancy.
I believe that the principle underlying the clause should be allowed to stand unchanged. I hope that the noble Lord will feel that that explanation is helpful and will be able to withdraw the amendment.
Lord Gallacher: I am grateful to the noble Earl for the explanation he has given. I was under the impression that the amendment was of minor consequence. However, the noble Earl said that the Bill as drafted provides for only minor changes whereas the proposed amendment might allow major changes to take place in a variety of ways which he outlined. In those circumstances, it would be sensible for me to withdraw the amendment and to take counsel of my advisers in the matter. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carter Lord Carter moved Amendment No. 20:
Page 3, line 3, leave out ("earlier") and insert ("not later than").
The noble Lord said: With this amendment, we move into deep semantic waters. I am advised that "not later than" is more accurate than "earlier". There seems to be considerable concern throughout the agricultural industry. I shall be grateful if the Minister will explain why the Government have chosen "earlier" rather than "not later than". I beg to move.
The Earl of Courtown: The amendment goes part of the way to clarify the position relating to notices. However, there appears still to be some confusion in the clause.
Clause 3(3) states that the term date of the new tenancy will be earlier than the term date under the old tenancy. Clause 3(5) defines "the term date" as,
"the date fixed for the expiry of the term".
That seems to mean that the new tenancy must end before the old tenancy. I shall be most grateful if the Minister will clarify that point.
Earl Howe: I hope that I can clarify for the Committee what underlies this part of Clause 3. I believe that the amendment may be based on a misunderstanding. The point is that under Clause 3(1) (b) it is provided that either the condition in subsection (2) or the condition in subsection (3) must be met. As we have already discussed, subsection (2) allows for minor changes in the area of land comprised in a new tenancy but no change to the term date. Subsection (3) allows for the tenancy to be ended earlier—that is to say, when the new agreed term date is earlier than it was for the old tenancy. There may be circumstances in which the parties may wish to bring forward the termination date for the tenancy. The case where there is no change in the term date—that is the point of saying "not later than"—is already dealt with by subsection (2). That is the situation where the parties simply wish to make a minor change to the area. There is no need to make an amendment to subsection (3) in order to allow for that.
I realise that it is a complex area. However, I hope that I have explained the intention underlying the clause. It is purely and simply to enable the parties to bring forward the termination date for the farm business tenancy and to substitute an earlier date than the one upon which they had agreed earlier. That is why we believe it is better to say "earlier" rather than "not later than".
Lord Carter: I am grateful to the Minister for the explanation. It is a tricky point. There was some interest—I will not say concern—as to why the phraseology in the Bill was as it is. However, I am sure that all those concerned will read the noble Earl's remarks in Hansard with interest. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Gallacher Lord Gallacher moved Amendment No. 21:
Page 3, line 4, at end insert ("and that at the beginning of the new tenancy the character of the tenancy remains primarily or wholly agricultural.").
The noble Lord said: The amendment will ensure that either there is a very long let, or that the use of the land must be reconverted to agriculture, or that the parties enter into a business tenancy. It may be that in such circumstances a business tenancy would be more appropriate. In order to ascertain the views of the noble Earl on the matter, I beg to move.
Earl Howe: I am a little surprised by the amendment. Its effect would largely be to defeat the purpose of the clause. We are dealing here with the situation in which the parties agree to substitute an earlier term date in their tenancy agreement for the one on which they originally decided. They might agree to do that, for example, if the tenant knew that he wished to move on in two years' time to another holding. Rather than wait and agree a surrender at that time, the parties may decide to vary the tenancy agreement so that they both know where they stand.
In such cases, it would be pointless to require them to satisfy new conditions when the new tenancy is, in effect, a continuation of the old one but simply terminating sooner. If the tenant had, in fact, significantly diversified his enterprise in the meantime the holding might not satisfy the condition envisaged by the amendment. That would mean that by simply altering the term date the parties had forfeited the protection that was provided by the notice conditions in the first place.
I do not believe that that can be what the noble Lord wishes to achieve by the amendment, although he may have worthy motives in putting the amendment down. I hope that in the light of that explanation he will reconsider and withdraw the amendment.
Lord Gallacher: I am grateful to the noble Earl for pointing out an aspect of the effect of the clause which I must confess had escaped me when I first read it. In the circumstances, I think that I can best serve the wishes of the Committee by seeking leave to withdraw the amendment. I shall study carefully what the noble Earl said and, if necessary, bring it back in a revised and perhaps more limited form at the Report stage of the Bill; that is if we still deem it necessary to proceed along this line at all. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 3 agreed to.
6.30 p.m.
Clause 4 [Agricultural Holdings Act 1986 not to apply in relation to new tenancies except in special cases]:
Lord Stanley of Alderley Lord Stanley of Alderley moved Amendment No. 22:
Page 3, line 20, after ("granted") insert ("on an agreed succession").
The noble Lord said: I also wish to speak to my Amendment No. 27, which is grouped with Amendment No. 22. The amendment is technical in that all the parties, including the Government, agree that succession rights under the 1986 Act should remain. The amendment ensures just that.
However, it would be cumbersome and bureaucratic in future to have tenancies granted under the 1986 Act as well as those granted under this Bill. Amendment No. 22 ensures that after 1st September 1995 all new tenancies should be farm business tenancies under this Bill though, of course, tenancies existing under the 1986 Act would remain—as has already been brought out—until they become extinct. We hope that thereafter there will be only one system.
A landlord and tenant might wish to agree to a long tenancy allowing for succession. In that case, they may do so under this amendment by having a farm business tenancy. As we discussed, that has many advantages over the 1986 type of tenancy. It has diversification, environmental covenants and, most important of all, better compensation arrangements for the tenant. To keep the noble Lord, Lord Carter, happy, the amendment is supported by what I might call the "Gang of Six". I beg to move.
Lord Carter: I hope that the Gang of Six is a little more successful politically than the Gang of Four! My name and that of my noble friend Lord Gallacher are attached to Amendments Nos. 23 and 28. As the noble Lord, Lord Stanley, said, we are dealing here with the same technical point.
Amendment No. 23 proposes to marry with the "rollover" provisions in the 1986 Act. If there is a voluntary grant of a tenancy to a close relative of the retiring or deceased tenant, then even though express references to Part IV of the 1986 Act are not inserted in the new tenancy it would preserve the succession rights of the new tenant. There is a similar "rollover" position regarding the established succession rights under the 1986 Act and it would be illogical for them not to be the same under the new Bill.
Amendment No. 28 proposes to add the words "close relative" after "agricultural holding" and it refers to the same point. The preservation of security for an existing tenant on an express surrender and regrant is as important as where there is a surrender and regrant by operation of law inadvertently. If the Government's intention is that all tenants with existing protected tenancies should not inadvertently lose that security after the passing of the 1995 Act, then I am advised that the wording in the amendment is necessary.
On the general point, I was advised by Mr. Andrew Densham —who is well known for dealing with this area—that the intention is that all existing tenancies should be unaffected by the new Bill and that certainly no existing tenant with full security should inadvertently lose that security. Similarly, all accumulated succession rights are to be preserved, but the Bill as drafted does not achieve that end. It only addresses the situation where, inadvertently by operation of law, an existing tenant surrenders his tenancy on a regrant. There are numerous examples where existing tenants, on agreeing in co-operation with the landlord to a new tenancy on modern, up-to-date terms (often for the benefit of the landlord) may inadvertently find themselves thereafter without security. We all know that that is not the Government's intention. It is a technical point which, I am sure, is a matter for the lawyers. However, that is
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the advice which we have received and it is important that the Government make it clear. If these amendments are not perfect then perhaps the Government will agree to consider the matter before the Report stage.
Lord Middleton: It is essential that a tenant's succession rights under the 1986 Act should be protected, as proposed by my noble friend Lord Stanley. I support my noble friend that there is much to be said for drawing a line under the 1986 Act so that, except where the existing succession rights persist, we do not have a situation where, running side by side, two tenancy systems would remain: one under the 1986 Act rules and the other under the farm business tenancy rules.
My noble friend's amendment would effectively draw a line and prevent the perpetuation of all unsatisfactory elements of the 1986 Act. It would not, however, prevent the parties to a farm business tenancy agreeing to whatever terms they wished; for example, in regard to succession rights.
The Opposition amendments to Clause 4 have the same laudable object of preserving the rights of succession tenancies, but they go too far towards perpetuating the 1986 tenancies. The noble Lord, Lord Carter, will not like me saying this, but they go well outside the joint industry agreement. I greatly prefer my noble friend's amendment.
Lord Carter: I am surprised by that intervention from the noble Lord, Lord Middleton. I can understand the CLA thinking like that, but I would be amazed if the NFU, the TFA and the National Federation of Young Farmers' Clubs did not agree fully to protect all the succession rights that are in the 1986 Act. Indeed, the Government had the chance to remove those rights by acting retrospectively, but they chose not to do so. I should like it now to be confirmed that that is so.
I thought that this was a technical discussion, but as we proceed through Committee we learn more and more. I am sure that it would be for the reassurance of the industry if the Government would confirm that they have no intention of weakening the succession rights under the 1986 Act for those who have them.
I quoted the legal advice which I received from a leading practitioner in the field that the Bill does not do that, and we hope that that was inadvertent. I hope the Minister will now confirm that all those with succession rights under the 1986 Act will have them preserved and that their rights will not be weakened, as the noble Lord, Lord Middleton, suggested. If there is an inadvertent weakness in the drafting, I hope that the Government will undertake to put it right.
Lord Middleton: I did not mean to infer that the succession rights would be weakened. As I understand it, the amendments would strengthen them.
Lord Carter: As we are in Committee, it is important to get it right. I shall have to read Hansard, but I thought that the noble Lord said that he wished to bring to an

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end the 1986 Act and only have the farm business tenancy, but the two will exist side by side for a long time yet.
Lord Middleton: All I was trying to say was that there was no wish to perpetuate the 1986 Act for ever. My noble friend's amendment would draw a line, but that would not mean to say that the parties could not have what might be called 1986 arrangements in future agreements if they wanted to.
Lord Carter: I shall be very surprised if there are that many landlords around who will be letting succession tenancies under farm business tenancies.
Lord Middleton: I shall be surprised, too, but there is nothing to prevent them from doing it.
Earl Howe: We have had a very interesting exchange. I am grateful to my noble friend Lord Stanley for introducing his amendment so clearly. I am also grateful to the noble Lord, Lord Carter. I was also interested by the observations of my noble friend Lord Middleton. I believe that we shall be coming to amendments that deal more specifically with the desirability of the continuation of the 1986 Act in various guises.
I hope that my noble friend will not mind my revealing that the amendment is derived from an earlier draft of the Bill prepared by the Government. Your Lordships will realise that it is a rather complex area. We are all exhorted to make legislation simple. Therefore, we decided to replace this complex provision with a much simpler one. In our view Clause 4(1) (c) of the Bill is adequate. We consider that it allows statutory succession by agreement, although we recognise that in theory it will also allow parties to opt in to the 1986 Act by offering a tenancy subject to the succession provisions. We considered it so unlikely that a landlord would offer a tenancy with explicit succession rights to a tenant who did not already possess such rights that it was unnecessary to include a complex provision to prevent that from happening.
However, in view of the doubts that have been expressed today as to whether Clause 4(1) (c) of the Bill will permit statutory succession by agreement, I am willing to give further thought to the provision and to my noble friend's amendment. For the record, I confirm that it is intended to protect succession rights that exist under the 1986 Act. We believe that the Bill does this, but clearly there is a difference of view. I hope that in the light of my undertaking my noble friend and the noble Lord, Lord Carter, will agree to withdraw their amendments.
Lord Stanley of Alderley: I am more than happy to withdraw this amendment. We are all agreed on the principle of what is sought to be achieved. It may be that I do not agree with my noble friend on the Front Bench that the Bill is drafted in such a way that, first, it will preserve the rights of existing 1986 Act tenants and, secondly, allow any future tenancy to come only under what will become the 1995 Act. In passing, succession rights for tenants under the 1995 Act will be rare but I
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do not entirely disregard them. If we cannot tackle the overriding problem of tax, it is a way to devalue land which perhaps some landlords will wish to do for inheritance tax purposes. Meanwhile, I beg leave to withdraw the amendment.
Lord Carter: Is the noble Lord saying that the Bill provides a loophole for tax avoidance?
Lord Stanley of Alderley: The noble Lord puts words into my mouth. I have no intention of replying to such a mischievous question.
Amendment, by leave, withdrawn.
[Amendment No. 23 not moved.]
Lord Carter Lord Carter moved Amendment No. 24:
Page 3, line 22, at end insert:
("() is granted by a written contract of tenancy indicating (in whatever terms) that the 1986 Act is to apply in relation to the tenancy; or").
The noble Lord said: This amendment runs on from the previous discussion. The present wording of Clause 4(1) (c) allows the parties to contract into a new succession tenancy but not a new life or retirement tenancy. It seems to us that, if the parties wish to do that and have the protection and prescription of the 1986 Act, they should be allowed to do so. I expect that the Minister will reply that if they wish to do so they can write the 1986 Act into their agreement under farm business tenancies. I would need advice as to whether that would be so. What we suggest is that, if it is logical to allow the parties to contract into a new succession tenancy, they should also be allowed to contract into a new life or retirement tenancy. If the Government reject that, I believe we can read into it that they cannot do anything about succession tenancies except by acting retrospectively but have determined not to allow the 1986 Act to be extended in other cases.
It also brings into question the important matter of smallholdings. Smallholdings are now caught by the Bill. They were deliberately excluded from the 1986 Act in the schedules etc. The provisions of the 1986 Act as they relate to tenants of smallholdings are close to the profile of tenancy protection which a lot of people believe meets the needs of the coming years. We argue that in the case of smallholdings a higher standard of social responsibility is expected from public authorities than from a private landowner.
We in the Labour Party do not believe that a tenant should have his security of tenure destroyed. Therefore, it is logical to do our best to protect any class of tenant which can be easily identified. Smallholders are a special class of tenant who do not need to be drawn into the proposed legislation. I shall be interested to hear from the Minister why the Government have not continued the special status of smallholdings which they were given under the 1986 Act. The industry did not want it, and for once we would like to hear the Government's opinion. It is a clearly defined class. The maximum size of a smallholding is 900 standard man-days, but most of them are well below that. By definition, the people who occupy them tend to be those who have little personal capital to back them. The chance to accumulate capital from the income of such

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holdings and to move on is limited, and there are statutory limits on the degree of expansion that the tenant can undertake.
The option for an efficient smallholding tenant at the end of a short let would often be to become a farm worker or to leave agriculture. To move on to farm another holding in his own right would be more difficult now than when the smallholdings scheme was first conceived at the beginning of the century or even in 1970 when the present statutory arrangements for smallholdings were introduced.
The control by smallholdings authorities of tenancies is already greater than that of normal agricultural landlords under the 1986 Act. An extremely helpful letter has been received from the property services department of Norfolk County Council. The county land agent deals with a number of matters related to smallholdings. He states:
"I should like the flexibility to be able to continue to relet statutory smallholdings [and] 'County Farms equipped holdings' under the 1986 Act and an amendment to this effect would be very helpful".
The object of this amendment is twofold: first, to ask the Government why they have not included a provision which decides the succession of tenancies, which they more or less have to agree to unless they intend to act retrospectively. Secondly, to ask why they have concentrated upon that and not written in an express provision that if the landlord and tenant wish to have the protection of the 1986 Act for a life or retirement tenancy they cannot do so but they can do so if they write the Act into their new farm business tenancy. We feel that it would be easier if they could just lift the 1986 Act directly into their farm business tenancy, particularly in the case of smallholdings. I understand that the smallholdings authorities would welcome an amendment which in effect reproduced what happened under the 1986 Act.
It would be helpful if the Minister could explain the reasons why the Government did not choose that route. I beg leave to move the amendment.
Earl Howe: The noble Lord, Lord Carter, has explained that this amendment will enable parties to opt into the 1986 Act. I recognise the force of some of his arguments. But I have to say that it would be strange for us to introduce a new framework of law from 1st September 1995 and at the same time leave the old legislation open alongside it.
There is general recognition throughout the industry that the 1986 Act is far too rigid. Farmers and landowners need the flexibility to adapt to changes in policy and market conditions or, if they want to, to make their farms more attractive to wildlife. It is most unlikely that any landlord would choose to sign up for the 1986 Act even if he had that option.
But, as my noble friend Lord Middleton pointed out a few moments ago, it is much better to close it off in order to avoid having two different systems of tenancy law running on indefinitely in parallel. A point to bear in mind, as the noble Lord himself indicated, is that if the parties wish to enter into a tenancy with a similar
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degree of security, they are well able to do so within the new legislation by including the relevant provisions in their tenancy agreement.
The noble Lord spoke in particular about smallholdings. The 1986 Act does apply to tenants of smallholdings. The statutory succession provisions do not apply because it was not considered appropriate. As he well realises, smallholdings are intended to provide opportunities for young farmers on the first rung of the ladder.
Following from that, the noble Lord asked why, if it was logical to let people contract into a succession tenancy, they should not contract into the 1986 Act generally. To abolish succession rights will involve retrospection, which we, and I hope the party opposite, do not wish to happen. So we have to allow parties to grant such tenancies by agreement where succession rights exist—we think it unlikely that anyone will use that option where such rights do not exist.
However, the position on the 1986 Act is different. Existing tenancies are not affected but all new tenancies will be farm business tenancies. As I indicated, that is a cleaner and neater arrangement than having the two systems running in parallel.
Lord Carter: I am grateful to the Minister for giving a clear statement about what the Government think about the 1986 Act, which was passed only eight years ago. One talks about closing off the 1986 Act and not making it indefinite, but it will be around for a very long time. We are only just about into the first generation of successors and there is a second generation of successors to come. So the 1986 Act will be around for a very long time. At a later stage of the Bill we may wish to use the opportunity of this Bill to repair a number of omissions in the 1986 Act itself.
Certainly, when I was on the Northfield Committee from 1977 to 1979, just after the 1976 Act came in, there was concern about the effect of the Act on future lettings. I remind the Committee of a point that was put to that committee in evidence. I believe that it came from the ministry, in fact. The 1976 Act, with succession of tenancy, saved as many tenancies as were going to be lost by what was happening with the taxation system in effect. At that time certainly there was an argument in the department that the 1976 Act could be seen as a means of protecting tenancies. It is likely now that the let sector is larger than it otherwise would have been because of the effect of the 1976 Act. It is an interesting point. We have all discussed the reduction in the size of the let sector and whether it is down to 35 per cent. or, as I would suggest, even less. It is a matter of simple logic that without the 1976 Act it would have been even smaller. That was certainly the view of the department when the Northfield Committee took evidence between 1977 and 1979.
We shall wish to return at a later stage of the Bill to the virtues of the 1986 Act, which the Government themselves enacted only eight years ago. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 25 not moved.]
Lord Gallacher Lord Gallacher moved Amendment No. 26:
Page 3, line 31, at end insert:
("(e) is granted to a person who immediately before the grant of the tenancy held a previous tenancy from the person granting the new tenancy in relation to which the 1986 Act applied and that previous tenancy has been surrendered or terminated.").
The noble Lord said: In moving this amendment I shall speak also to Amendment No. 29 with which it is grouped. There is some anxiety that less than scrupulous landlords may place pressure on tenants to accept arrangements which deprive them of the right to succession and the full protection of the 1986 Act. One such method could be to move the tenant from one farm on the estate to another, which is possibly held out to be on better land.
It may be to the tenant's advantage to make such a move, but it must be clear that he does so with his eyes open. The need for him formally to state to the agricultural land tribunal that his preference is fully exercised should act as a deterrent to the landlord who is considering using his influence over the tenant to induce a course of action which could be to the tenant's detriment.
If this amendment is accepted, a consequential amendment to the 1986 Act will be needed to place an obligation on the agricultural land tribunal to issue such certificates. I beg to move.
Earl Howe: I listened carefully to the argument presented by the noble Lord which, I take it, is based on the assumption that existing tenants will not want to accept farm business tenancies as a substitute for the tenancies that they already have.
I do not see the need for arrangements such as those proposed. A landlord can offer a tenant a long fixed term farm business tenancy, without break clauses, and can include, by agreement, many of the provisions from the 1986 Act. The tenant might well be better off legally than he is at the moment, and if the landlord agreed, the tenant would have much greater scope for diversification. If, on the other hand, a tenant did not like the terms that he was offered, he could refuse to surrender his 1986 Act tenancy. The parties would in fact be in a bargaining position. If the tenant found the landlord's initial offer unacceptable, he could say so, at the same time putting forward his own proposal. Eventually a compromise acceptable to both would no doubt be found.
I suggest that that is a much better approach than involving the agricultural land tribunals. They will not have a place under the new legislation. I hope that the noble Lord will find those remarks helpful and, as a result, will feel able to withdraw the amendment.
Lord Gallacher: I am grateful to the noble Earl for the remarks which he has had to make in respect of this amendment. We were advised that the possibilities which were envisaged in the amendment could exist. It
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was to guard against that—if not their existence then the possibility of their becoming established —that the amendment was tabled.
The noble Earl said that the parties are in a bargaining situation. They certainly are. But in his opinion is it a bargaining situation in which both sides are absolutely equal? I am not a farmer and do not know what in general are the relationships between tenant farmers and their landlords. Nevertheless, the possibility of undue influence —which I think is at the heart of this amendment—does exist; and if it exists, the amendment would provide some defence against it.
The noble Earl also said that what is in the Bill is better than using the agricultural land tribunal and in fact no future is envisaged under this Bill for the tribunal. We are somewhat disappointed by that response, which will not surprise the noble Earl. Nevertheless, we shall look at what he said very carefully to see whether we are guarding against a contingency which is unlikely to arise or whether, in some revised form, an amendment of this character ought to be retabled for the Report stage of the Bill. Meanwhile, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments No. 27 to 29 not moved.]
Clause 4 agreed to.
Clause 5 agreed to.
Lord Inglewood: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

CBDE Porton Down
6.59 p.m.
The Countess of Mar The Countess of Mar rose to ask Her Majesty's Government whether they are satisfied that the departments responsible for the Chemical and Biological Defence Establishment at Porton Down have shown a proper degree of responsibility for the health and safety of volunteers engaged in medical research.
The noble Countess said: My Lords, may I say how grateful I am to the noble Lord, Lord Henley, to the Chief Whip and to the usual channels for enabling me to change my Question at such short notice? I have given the noble Lord the Minister notice of the ground I intend to cover. He has kindly written to say that he will not respond to any questions which fall outside the scope of the Question I have tabled on the Order Paper. In return I would ask him to note that my Question relates to "the departments responsible" and that questions are addressed to Her Majesty's Government and not to a particular Minister. I will understand if he does not have all the answers to my questions tonight, and that he will write to me.
Noble Lords can hardly fail to be aware that for the past two and a half years I have been trying to persuade the Government to take measures to prevent any further damage to human health from exposure to organophosphates. It is my understanding that the only

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tests on the effects of this group of chemicals on humans have been carried out at the Chemical and Biological Defence Establishment at Porton Down. Inquiries to manufacturers of organophosphate pesticides have revealed that, while they have made tests on animals, they regard tests on humans as too dangerous.
From a series of Questions for Written Answer, I have established that the tests done on human volunteers at Porton Down are categorised as biomedical research and that they are ethically conducted. The principles upon which those ethics are based are enumerated in the 10 principles of the Nuremberg code. After the discovery of the horrific experiments conducted by German physicians and professors during the Nazi regime and the doctors' trial at Nuremberg, the judges, concerned that never again should humans endure such suffering in the name of science, wrote the code into their final judgment. The Nuremberg code has become the cornerstone of the Declarations of Helsinki in 1964, 1975, 1983 and 1989. On 6th February 1990 the Committee of Ministers to Member States concerning Medical Research on Human Beings adopted Recommendation No. R(19)3. This incorporated the principles of the Declarations of Helsinki. I have established that Her Majesty's Government accept all the principles of the recommendation, that they apply equally to civilian and service volunteers and that the scientists at Porton Down are bound by their principles; or are they?
My information would indicate that at least four of the principles are not adhered to. It may be helpful if I detail those principles. Principle 2.1 states:
"In medical research the interests and well-being of the person undergoing medical research must always prevail over the interests of science and society".
Principle 3.1 begins:
"No medical research may be carried out without the informed, free, express and specific consent of the person undergoing it".
Principle 3.2 states:
"The person who is to undergo medical research should be given information on the purpose of the research and the methodology of the experimentation. He should also be informed of the foreseeable risks and inconveniences to him of the proposed research".
Principle 13.1 states:
"Potential subjects of medical research should not be offered any inducement which compromises free consent. Persons undergoing medical research should not gain any financial benefit. However, expenses and any financial loss may be refunded and in appropriate cases a modest allowance may be given for any inconvenience inherent in medical research".
And principle 14 states:

"1. Persons undergoing medical research and/or their dependants should be compensated for injury or loss caused by medical research.

2. Where there is no existing system providing compensation for the persons concerned states should ensure that sufficient guarantees for such compensation are provided".

These principles leave no room for doubt or misinterpretation. Why then am I concerned? The organophosphates currently used in agriculture were developed from extremely toxic organophosphates developed first by the Germans prior to and during World War II and later by the British and other nations for chemical warfare purposes. These so-called nerve
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gases were tested on human volunteers at Porton Down. Some were exposed directly and others through protective clothing which was being tested. There is a group of 300 men, at least one of whom was not a volunteer, who underwent experiments with nerve gases between 1951 and 1977. Never were these men told what the chemical was or of its effects. Many were misled to the extent that they believed they were testing a cure for the common cold and that any effects would be minor and temporary. In retrospect, they all believed that these were the acute effects of exposure to organophosphate nerve gas, and in many cases they were severe and prolonged. Not one of these men has been followed up by Porton Down or the Ministry of Defence, and when they have asked for help the shutters have been pulled down. One remarked to me:
"It was as if we had never been near Porton Down".
They were offered inducements in the form of extra pay, very tempting to the poorly paid National Service conscript, or extra leave. This practice continues today. I have an advertisement headed:
"41/94 Volunteers for studies at Chemical and Biological Defence Establishment Porton Down (R)".
It states:
"Volunteers could earn pay up to £250 (less tax) or in special cases more for a 3 week study and proportionately less for shorter studies".
There is no mention of refund of expenses or an allowance for inconvenience.
There is no doubt that these men are chronically sick. As I have said, they believe their illnesses are due to exposure to nerve gas. They have no means of establishing the truth because neither Porton Down nor the Ministry of Defence will admit they exist. During the screening of a film entitled "The Secrets of Porton Down", broadcast on 11th October 1994 on Channel 4 Television, the Director General of CBDE Porton Down was asked about follow up tests on volunteers. He said:
"There is no evidence to suggest that there is a need to call back volunteers on a regular basis".
When pressed, he said:
"It's a question of what is the best and most appropriate use of resources and one endeavours to use resources to best effect to ensure that our armed forces have effective protective measures. There are a lot of things that you could carry out research on but it would be wasting the Government's money to put effort into things that have little prospect of any benefit to those concerned".
So much for principles 2 and 13!
May I ask the noble Lord the Minister whether the Government really believe that these men, who innocently volunteered to undertake tests which one was told,
"wouldn't harm a mouse",
have been treated in accordance with the principles of the Declarations of Helsinki and Recommendation No. R(90)3? If not, would he please take urgent action to enable them to be recompensed?
There is another group, possibly a very large group, of servicemen and women and members of the ancillary services who are receiving short shrift from the Ministry of Defence. These are the men and women who served in the Gulf in 1990 and 1991. They may not be classed as volunteers in the strictest sense, but some of the

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medication administered to them at the time of Operation Granby was developed and tested at Porton Down and in two instances was unlicensed in the United Kingdom. These people received vaccines of two types of anthrax, botulinus toxin, bubonic plague (which was unlicensed), cholera, hepatitis B, polio, typhoid, whooping cough and yellow fever, all within about four days. They were also ordered to take 30 mgs of pyridostigmine bromide, also unlicensed, every eight hours for all the time they were in the Gulf. This drug is a carbanate, closely related to organophosphates. It has been used successfully to treat patients with myasthenia gravis, a neurological disease when given in much higher doses. It enhances the release of acetylcholine, one of the chemical messengers in the blood. I understand that this drug, known as nerve agent pre-treatment set or NAPS, was only tested on volunteers for two to three days and was designed for use in acute situations. A former senior scientific officer at Porton Down has described the prospect of prolonged use as "terrifying". It is known that when too much pyridostigmine bromide is given to a healthy person a cholinergic crisis is precipitated. This is the acute effect of poisoning. Nobody knows what happens when the drug is administered at a low level over a long period of time, but it is suspected that the neuromuscular junctions become modified and do not return to normal when the drug is no longer taken.
Most of the troops took NAPS on a regular basis for two months, but some members of the Royal Fleet Auxiliary Service who arrived in the Gulf in September 1990 took them for much longer. Their officers were in almost daily contact with the MoD asking whether it was all right to take NAPS for so long. They received no advice. There has been no research conducted on the effects on the human neurological or immune systems of a combination of vaccines with NAPS in the contaminated stressful situation which prevailed in the Gulf. Many of the members of the armed services who left for the Gulf in complete fitness have since their return fallen ill with a wide spectrum of symptoms, many familiar to sufferers from exposure to OP sheep dips. I understand that fully informed consent was not obtained from the troops prior to the administration of the medication and that they were given no opportunity to refuse. They were simply marched into a room and ordered to roll up their sleeves. They were aware that refusal would result in disciplinary action.
Why is it that the American Department of Defense has acknowledged that its troops, who saw action in the same theatre of war and received a similar spectrum of vaccines and NAPS, are suffering an unusual amount of illness after their Gulf service? They have given their sick veterans ex gratia payments and have set up a full epidemiological study to investigate cause and effect. Our Ministry of Defence says that very few Gulf servicemen and women have come forward for medical examination and the few who have, although they are ill, are not displaying any unusual signs or symptoms—certainly nothing which could be called a Gulf syndrome.
I know that many of the men and women affected have not presented for examination because they are career personnel and are afraid that their future prospects will be blighted. They are, nevertheless, extremely worried about their health and, following reports from America and Canada of babies conceived by the wives of Gulf servicemen after the conflict who are showing a higher than normal incidence of deformity and congenital illness, they are worried for their families. There has been no teratogenetic research done on the medication given to the troops.
The chairman of the Senate Committee on Veterans' Affairs, Senator Jay Rockefeller, said last week:
"On far too many occasions the Pentagon has shown a reckless disregard for the health and wellbeing of service members. Soldiers who are exposed to dangerous substances without their knowledge or consent become veterans who do not receive the medical care and compensation to which they are entitled".
I believe that that statement applies equally to our troops.
I know that the conflict in the Gulf presented dangers never before encountered by any troops. I know too that the action taken at the time to protect them was taken in the belief that it was in their best interests. What I find unacceptable is the flat refusal of the Ministry of Defence to admit that there may be something wrong and their failure to conduct a proper study of those who are ill.
I ask the noble Lord the Minister to ask his right honourable friend the Secretary of State for Defence to arrange for the publication of Regimental Part I Orders ordering personnel to submit for medical examination without fear of prejudice. If that is done the extent of the problem will be known and measures taken to treat and compensate those affected.
I now come to the point which caused me to alter the subject of my Unstarred Question. In a Question for written Answer I asked whether the results of the research into the chronic effects of long term, low level exposure to organophosphate sheep dips conducted by the Department of Occupational Medicine at Birmingham University on behalf of the Health and Safety Executive would be published. The reply from the noble Lord, Lord Inglewood, was:
"The findings of the project are being analysed and the results will be submitted early next year to a scientific journal for publication".
It is my understanding that the research project was completed in June 1994.
Two hundred sheep farmers who had been exposed to organophosphate sheep dips were compared with a similar number of quarry workers matched for age, sex and region. The researchers looked at the neuro-psychological effects and the neurological effects, using standard tests. Three of the neuro-psychological tests have been analysed statistically. They show significant evidence of deterioration among the farmers. In one of the three tests there was a dose response relationship which is extremely significant because it eliminates other causes. Despite their lack of sophistication, the neurological tests demonstrate significant differences between the farmers and the controls.
It is inconceivable that such important evidence should be withheld pending publication in a scientific journal. Never before have the representatives of workers' organisations on the Chemicals in Agriculture Committee been denied access to this kind of information once it is held by the Health and Safety Executive. This research ties in with that done at Edinburgh University upon the effectiveness of the recommended protected clothing. Their conclusion was that the clothing was impractical, especially during the summer, and that dippers were exposed to significant amounts of chemicals.
This is an occasion when the scientists should put aside the privileges associated with publication in a scientific journal in the greater interest of humanity. The implications behind the results of these studies are enormous. There are over 430 organophosphate compounds in use in agriculture, horticulture, for pest control in commercial and domestic premises and in human and veterinary medicine. I have reports of illness from people concerned with all these. With a few notable exceptions, the medical profession has shown an abysmal lack of expertise, or even interest, in patients who have been exposed to organophosphates. In too many cases I have heard first-hand stories of doctors and consultants laughing at their patients if mention is made of OPs. They simply do not believe that such toxic chemicals would be let loose on the general population and prefer to send the patient to a psychiatrist or psychologist, often to the detriment of the patient's health.
I believe that the effects of chronic exposure to organophosphates have been suspected for a long time. The Department of Health adviser to the Ministry of Agriculture, Fisheries and Food—an expert on organophosphates and a former Porton Down scientist—said in front of a room filled with farmers that he knows that there is long term damage and that he does not need persuading. Why will he not say so publicly?
We have three groups of people who would appear at first sight to have nothing in common. I hope that I have demonstrated that there is a thread which draws them all together. Each group is suffering ill health which is chronic and untreatable by orthodox medicine. Each group believes that they know the cause of their illness but no one will listen to them or do anything about it. Why should these sick people have to take recourse to the courts, with all that that involves, in order to gain compensation which is rightly theirs in the case of the Porton Down volunteers and the Gulf servicemen and women and, in the case of the others, should be recognised by the governments which have licensed the pesticides responsible?
The noble Lord the Minister has listened to me very patiently. I am grateful. I ask him to take the action necessary to ensure that all these victims are recognised and compensated. I also ask him to ensure that her Majesty's Government review the whole procedure for licensing chemical pesticides and medicines and that they consider introducing experienced lay people to the licensing committees.,
I realise that I have asked questions which may be beyond the wording of my Question. I am convinced that the questions I have asked tonight are vitally important. I shall be grateful to the noble Lord if he will provide the answers. Finally, perhaps I may remind him of Toyber's dictum:
"Absence of evidence is not evidence of absence".
7.17 p.m.
Earl Attlee: My Lords, I am grateful to the noble Countess for introducing this important Question. Before starting I should declare my interest. As a serving officer in the TA, I use NBC protection equipment designed and tested at Porton Down. In war I may be expected to use the nerve agent pre-treatment sets (NAPS) to which the noble Countess referred. She is quite right to address these matters and to ask the most searching questions of the Minister.
My understanding is that NAPS have been used for short periods by Porton Down staff when handling nerve agents. This was to provide temporary increased protection when carrying out slightly hazardous procedures. The noble Countess is quite right to ask about the long-term use of NAPS. It is known that many soldiers in the Gulf conflict stopped using NAPS because of the side effects which were not very pleasant.
It is quite difficult to discover any information, even on the military net, about the problems which the noble Countess has raised. As I do not "need to know" there would be something wrong if I could find out. It is important that our hard won knowledge of NBC matters is kept to us and our allies only.
The MoD constantly trawls for volunteers at Porton Down. Frequently, approaches are made to candidates on NBC courses. The regular soldiers that I meet are rather reluctant to volunteer. Those that have volunteered may not be in a position to give the information for the reasons that I have already given.
I do not know much about Porton Down, but I would suggest that there are two broad areas of military interest. The first is the study of NBC agents and, in particular, methods of design, production, delivery and, most important, protection. It is important that we know how to produce NBC agents so that we can deter first use by an enemy and also detect a potential enemy's means of production.
The second broad area is that of NBC protective equipment. Our NBC protective equipment is some of the best available in the world. It is relatively easy to make individual protection equipment (IPE) that is impregnable or very lightweight and comfortable. The difficulty is to design IPE that provides full protection and is robust enough for the battlefield. Soldiers have to be able to continue to operate in a contaminated environment, so the equipment has to be breathable and not so heavy that the heat build-up is intolerable.
The equipment that is designed at Porton meets those requirements very well and the establishment continues to improve it, so much so that British IPE was very attractive to other allied soldiers in the gulf. Furthermore, I contend that Saddam Hussein was deterred from using chemicals to any great extent

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because his staff would have advised him that we had the means to protect ourselves and that we knew as much about chemical weapons as they did.
As I said, the noble Countess is right to ask such questions and the Minister should answer them as best he can. I should like to ask the Minister what extra pay and allowances (over and above normal rates of pay) ate available for servicemen who volunteer for the tests. If the Minister cannot answer that question now, perhaps he could write to me.
7.21 p.m.
Baroness Jay of Paddington:My Lords, I am grateful to the noble Countess for tabling this extremely significant Unstarred Question. I hope that the noble Earl, Lord Attlee will forgive me if I do not follow him on the military details that he raised. My concern is with the broader health issues which the noble Countess mentioned. I am sorry to hear that her initial response from the Minister has been that some of the questions that she raised range so much more broadly than the terms of her original Question on the Order Paper that he may find it difficult to reply. I do not think that that should prevent us re-emphasising some of the issues to which the noble Countess has rightly drawn our attention with her usual comprehensive approach to these extraordinarily difficult subjects and the great authority that she has built up as a result of studying these matters over a long period.
The question which the noble Countess asked at the end of her remarks is perhaps the most important. I refer to the publication of the academic research that exists on organophosphates. Obviously, it is completely inappropriate, not to say scientifically unethical, for that material not to be publicly available if it has the impact on public policy which the noble Countess suggested. I feel strongly that the noble Countess is right in saying that in this instance the scientific concern about keeping something for the research journals should be overridden.
The noble Countess explained in some detail the ethics of human research guidelines which are familiar to all of us who have been involved in this area in one way or another. Of those ethical guidelines, four are probably of paramount importance in this connection. I refer first to the questions: Has the well-being of the person concerned in the research been considered paramount? Has consent really been freely given? Have there really been no inducements to take part in that research? Have those who have taken part in the research truly understood the purpose of that research? As the noble Countess explained, all of those aspects are enshrined in clear international guidelines, but common sense tells us that they must be susceptible to a little bending when one is dealing with research in a military situation.
The next question is whether those who have taken part in the various experiments that have been outlined are indeed chronically sick or have suffered only temporary side-effects. I am interested in the letter which the chief executive of the Chemical and Biological Defence Establishment at Porton Down, Dr.
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Pearson, wrote to my honourable friend Dr. David Clark when he asked a Question in another place on an issue which the noble Countess did not raise but which recently has gained a lot of publicity. I refer to the work and studies involving LSD at Porton Down. In his letter addressed to Dr. Clark on 21st November, just last month, the chief executive said, referring to the points which he was making about LSD:
"In addition, over the past 40 years there is no evidence that service volunteers have had any deterioration in their health as a result of their participating as a volunteer in a study at CBDE".
The examples that were given by the noble Countess show that that cannot be the entire truth. When the Minister replies, I should be grateful if he could expand on the statement that was made by Dr. Pearson only last month in reply to my honourable friend.
The noble Countess also referred to the so-called "Gulf War syndrome". She explained in some detail—this was re-emphasised by the noble Earl—the particular problems which arose for troops in that conflict. Again, we have to ask questions about whether those people are chronically sick, whether that sickness can be attributed to what was happening in the Gulf and whether there is, in a sense, an abrogation of responsibility because it is difficult to carry out epidemiology on people who are now dispersed in many walks of life in different parts of the world.
Surely we need a thorough "look-back" exercise by the Ministry of Defence. I hope that such an exercise would be in collaboration with the Department of Health. We need to know precisely what is happening. It has been suggested that an independent scientist should be appointed to look into the situation of the troops and veterans who report suffering from Gulf War syndrome. We need to try to sort it out between those two departments.
It is interesting that the United States Department of Defence has recognised the problem. It has given compensation and has erred on the side of generosity. Perhaps the Minister will explain why the British Ministry of Defence has taken such a different point of view.
As the noble Countess said in conclusion, in the absence of absolute proof about something that has been going on for over 40 years—that is what the chief executive said—it is difficult to be precise about exactly what causal effects follow one another. The sadness for those of us who are very much newcomers to this subject is to feel that there is a sense in which everybody in the department of defence at Porton Down is being extremely reticent about something which may have been regarded originally as a question of military security, but which has now become a question that is much more related to health.
7.27 p.m.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley): My Lords, I appreciate the noble Countess's anxieties following my letter to her today in response to her letter of last week that she was worried that I was trying to dodge the issues and was not going to respond to some of her points. I think that is the implication. I assure the noble

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Countess that I am in no way trying to dodge the issues, as I think she put it, on the basis that they went beyond my department. I appreciate the fact that I am responding on behalf of Her Majesty's Government; but I think that I also have a duty to respond to the question on the Order Paper. I know that the noble Countess sent me notice of questions that went way beyond that on the Order Paper; but it is my duty to respond to the Question that she has tabled. I might touch in passing on some of the other points that she raised, and no doubt other points that she made can be considered in due course. I want to make clear that I am certainly not trying in any way to dodge the issues.
It might help if I start by explaining a little about what the Chemical and Biological Defence Establishment—the CBDE—is and does, and what its function is. As the noble Countess knows, it is an agency of my department, the Ministry of Defence. Its role is to ensure that our Armed Forces have effective protection against the threat which chemical or biological weapons may pose. That threat is very real, as the noble Earl, Lord Attlee, made quite clear. Everyone should bear that in mind. It was very real in the Gulf and it is still a very real threat. It is therefore essential that we have effective protective measures against that threat. Without such protective measures, there is little point in going on. It is a threat of continuing anxiety. A significant number of states are thought to be seeking such weapons.
It is clear that the way ahead is for a web of deterrence which comprises effective protective measures, thereby reducing the utility of chemical or biological weapons, and broad arms and export controls, which Her Majesty's Government will continue to pursue.
Obviously, as part of this programme it is necessary to use service volunteers, first, to assess the ability of service personnel to function with new equipment and procedures; to develop medical countermeasures to protect service personnel; and to evaluate the effects of very low and medically safe concentrations of chemical warfare agents on the ability of unprotected personnel to operate normally.
The studies involving service volunteers began in the 1920s and now involve between 100 and 200 volunteers each year. The purpose of the volunteer studies programme is to ensure that any protective measure is acceptable from a military point of view and—this is important—is safe before it is recommended for introduction into service. Such measures need to be evaluated first in the safety of a laboratory or hospital environment, with full medical and scientific back-up at hand.
The principles of how volunteer studies are to be conducted are enshrined, as the noble Countess made clear, by international agreement in the Helsinki Declaration. Further detailed guidance and rules are provided by the Royal College of Physicians in London. I reject the noble Countess's allegations that we do not respect the principles of that declaration, and I shall deal with that point in due course.
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The programme is supervised by an independent panel of experts who form the CBDE ethics committee. The role of that committee is to ensure the safety of the subjects and to safeguard the scientific staff who carry out the human studies from criticism which may be informed or otherwise. They evaluate each protocol in advance and give their approval only where they are satisfied that there will be no harm to the health of the volunteers. All human studies at CBDE are conducted with volunteers drawn from the three armed services, who apply in response to requests officially promulgated months in advance. They are free to withdraw from a study at any time without having to give any reason. The procedures, the expected effects and all possible risks are discussed with them in lay terms by an officer in advance and at each stage of the tests. The noble Countess referred to that point, and if she has allegations that matters are otherwise, I should be more than happy to look at those allegations; I have none.
In studies involving the taking of a drug, half of the volunteers will take medication containing the active drug and the other half will take medication consisting of an inert substance. All medication will look alike, with its identity disguised from both subjects and the scientists until the study is finished. This is a placebo-controlled randomised double-blind study procedure which is widely accepted as best practice in this field.
Typically, volunteers come to CBDE for two week periods. That length of time may, for instance, be required for the intensive tests of sustained physical and mental work carried out in individual protective equipment under controlled climatic conditions representative of cold or hot areas of the world in which they may be sent to operate In the future. Effects caused by a drug under study are recorded carefully. Aspects of mental performance such as memory, the speed and accuracy of mental arithmetic, manual target tracking and dexterity, and the ability to remain alert and notice small change are measured repeatedly in performance tests. Where possible, the efficiency of the volunteer is also measured in carefully controlled military exercises. As the effectiveness of a drug to protect against agents of chemical warfare cannot be studied on man, the final choice between several possible drugs is made on the basis of their acceptability and freedom from side effects.
In response to a question from the noble Earl, I should say that volunteers are recompensed for the inconvenience at a rate of £1.66 per test, which amounts typically to a little over £200 for a two-week study. The payment is subject to tax. The noble Countess cannot allege that that is a denial of the principles of the Helsinki Declaration; and it is not an excessive inducement to take part in those tests.
On arrival at CBDE Porton Down, volunteers are given a full medical examination. They have the study explained to them in lay terms by an officer who is not involved in the study. They are advised that they may leave at any stage without any explanation, and at the end of the study they are given a further medical examination to ensure that they have suffered no harm. In addition, there is no history of service doctors in their

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units seeking advice from CBDE Porton Down on any subsequent illnesses that may have been reported by volunteers who have been exposed to any agent.
That is the principle of informed consent by which we abide and by which we shall continue to abide. We shall continue to say to veterans that if they wish to go to their GP, the CBDE and the Ministry will release their medical records to assist in the investigation of their cases, as appropriate. Information is provided to medical practitioners so that they can judge whether any of the experiences throughout the individual's service career has any relevance to their current medical conditions. That information will be released, if necessary.
Unless the noble Countess can provide me with individual cases, there is no evidence over the past 40 years to suggest that service volunteers who have participated in studies at the CBDE Porton Down have suffered any harm to their health, or that any of them were not volunteers, as the noble Countess alleged. If she can produce evidence to suggest that they were not volunteers, I shall be more than happy to look at it.
I should add that the MoD is grateful to all service personnel who have served as volunteers in studies at CBDE Porton Down, as their participation has been vital in ensuring that members of the Armed Forces are provided with the most effective protective measures possible against a threat that chemical or biological weapons may be used against them. Such studies are vital to the defence of the realm, and we are grateful to those servicemen who have helped achieve the high standards of protection that are available for the members of the UK Armed Forces.
Perhaps I may say a word or two on the allegations about Gulf War illness. There is no medical or scientific evidence of any mystery illness linked to Gulf War service. All those who suffer have been found to suffer from recognised conditions. There is no known medical evidence of long-term reactions to vaccines when administered together or over a short period of time.
Further, we have received notification of 420 potential claims in respect of the alleged Gulf illness. They detail a wide variety of symptoms, the vast majority of which are common among the general population. What I can say—this has been repeated by me, and by my honourable and right honourable friends in the other place—is that all claimants have been encouraged through their solicitors to come for medical assessment by military medical specialists. Less than half have so far accepted that offer. I have to refute flatly the allegation made by the noble Countess that the MoD has refused to do anything.
I shall say a word or two about the report referred to by the noble Countess from the US Senate produced by Senator Rockefeller. It is a highly selective report in that it chooses to ignore the outcry—his was mentioned by the noble Earl—that would have resulted in the US and the UK if Iraq had used its nerve agent and our troops had not been given medical protection from NAPS. That drug—I am not sure that I can pronounce the name as well as the noble Countess—pyridostigmine bromide, was licensed to my department in August 1993 by the
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Medicines Control Agency under product licence No. 4537/003 for the use in the pre-treatment of service personnel at risk from poisoning from organophosphorus nerve agent. I believe that if we had not made use of that the problems might have been considerably more difficult.
As I said earlier, in the final analysis there has been no evidence during the past 40 years to suggest that service volunteers who participated in studies at Porton Down have suffered any harm to their health. If the noble Countess wishes to produce evidence, I shall be prepared to look at it. I believe that the safety of service volunteers is deemed to be of paramount importance and no study will take place without the express approval of the independent ethics committee. Her Majesty's Government are satisfied that the Ministry of Defence and the Chemical and Biological Defence Establishment at Porton Down have shown a high and proper degree of responsibility for the health and safety of volunteers who have participated in studies at Porton Down.
Baroness Trumpington: My Lords, I beg to move that the House do adjourn during pleasure until eight o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.41 to 8 p.m.]

Agricultural Tenancies Bill [H.L.]
House again in Committee.
The Earl of Kinnoull The Earl of Kinnoull moved Amendment No. 30:
After Clause 5, insert the following new clause:
("Tenancies for less than two years: termination
. A written agreement for a farm business tenancy for less than two years shall terminate by the effluxion of time alone.").
The noble Earl said: I suggest that this is a cheerful amendment to which to return after the dinner break, following the technical morass in which we have been struggling.
This proposal was made to me last week by an experienced practitioner and I then tabled the amendment. Under Clause 5 the Bill proposes that notices of termination of leases for periods longer than two years should be at least 12 months. It is silent on leases of two years and under. The amendment seeks to spell out what I think is intended because, having looked at the helpful Notes on Clauses which my noble friend has given to me, they reaffirm the proposal by using almost the very words of the amendment. Therefore, the issue is whether the termination of short leases should be spelt out or whether it should be left for lawyers to tell us later that silence is golden. I beg to move.
Lord Carter: One is inclined to support an amendment on the grounds that it would be nice to have an Act of Parliament which refers to the "effluxion of time". I wonder whether it is the intention of the Conservative Party that this Parliament should terminate by the effluxion of time. That seems to be what it has in mind.

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The noble Earl has made an interesting point. I rather wondered about the amendment when I saw it on the Marshalled List, but I see the point which is being made. It will be interesting to hear the Minister's reply.
Earl Howe: I believe that I can help my noble friend and the Committee. It is already the case that farm business tenancy agreements for fixed terms of less than two years will indeed end by effluxion of time. Tenancies from year to year will be subject to a minimum of a year's notice, as is the case under the Agricultural Holdings Act 1986. Shorter periodic tenancies, however, such as quarterly or monthly tenancies, will be subject to common law and will require the appropriate period of notice to end them; for example, a month's notice to end a monthly tenancy. I hope that my noble friend will be sufficiently reassured to withdraw his amendment.
The Earl of Kinnoull: I am grateful to my noble friend. I merely wonder whether something should be put into the Bill for those who perhaps do not understand what is either common law or previous law. However, I am happy to accept my noble friend's assurances. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 agreed to.
Clause 7 [Notice required for exercise of option to terminate tenancy or resume possession of part]:
Lord Gallacher Lord Gallacher moved Amendment No. 31:
Page 4, line 21, leave out subsection (3).
The noble Lord said: The effect of Amendment No. 31 would be to deal with Clauses 5, 6 and 7, which are concerned with ensuring that tenants will have at least 12 months' notice before a tenancy ends. Given the nature of farming, that period is clearly very important in allowing a satisfactory arrangement of affairs.
However, Clause 7(3) disapplies that policy in relation to leases attached to a person's life, whether landlord or tenant. Under the subsection, the Law of Property Act 1925 would operate in relation to that type of lease by converting it into a lease for 90 years on the death of the person in question, but subject to a notice period of just one month.
It is contended that it is not desirable to permit a situation to arise where a tenant could be obliged to quit a holding with only one-twelth of the minimum period applying to other agricultural tenants and dependent on what may be a sudden and unforeseeable death. While in practice it does not seem likely that there will be many leases tied to the lifetime of a person in that way, the Bill should provide protection against that unfortunate set of circumstances occurring. I beg to move.
Lord Middleton: I suppose that there may be farm tenancies which take the form of leases for a person's life. If that person dies, the lease would convert to a 90-year lease under the Law of Property Act 1925 unless one month's notice is given. That is far too short
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a period and quite out of line, as the noble Lord, Lord Gallacher, said, with the provision for 12 months' notice contained in the Bill. I support the amendment.
The Earl of Kinnoull: Before my noble friend replies, perhaps I may ask him what happens if the tenancy is not tied to the life but the tenant dies.
Earl Howe: This is a very technical amendment and, I have to say, relates to a hypothetical situation which may not in practice be encountered. Nevertheless, I thank the noble Lord, Lord Gallacher, for explaining the issues so clearly. The aim of the amendment is to ensure that in cases where a tenancy is subject to Section 149(6) of the Law of Property Act 1925, and the tenancy is terminated by either party following the death or marriage of the tenant, at least 12 months' notice must be given.
I am advised that at present it is very rare for agricultural tenancies to be granted under the provisions of Section 149(6) of the 1925 Act, but it is, I suppose, possible that it may be used in the future. In those circumstances, where the parties were entering into a tenancy which one at least would hope to be of fairly long duration, it must be assumed that they would take proper legal advice. A lawyer would be able to advise them that if they opt for a tenancy for life, it would be converted by Section 149(6) of the Act to a fixed term tenancy of 90 years, as my noble friend pointed out, determinable on death by a very short notice period, whereas if the landowner granted a long tenancy with a break clause which could be triggered by the tenant's death, the normal period of at least 12 months would have to be given. The parties would then be able to make an informed choice.
There seem to me to be two reasons for allowing those arrangements to apply, without overriding them. First, it may suit the parties to arrange for a tenancy to terminate as rapidly as possible following the death of the lessee, rather than requiring a further 12 months to elapse. Secondly, that section of the Law of Property Act 1925 applies to all types of tenancies when they are drafted in those terms, not just to agricultural ones, and there seems no particularly compelling reason to make an exception, given that such agreements are apparently very rare.
I thank the noble Lord, Lord Gallacher, for raising this issue. In the light of my explanation perhaps he will reflect on the matter and withdraw his amendment.
Lord Gallacher: I am grateful to the Minister for his response. I am equally grateful for the support expressed by the noble Lord, Lord Middleton, and for the query raised by the noble Earl, Lord Kinnoull. As has been suggested, I shall reflect on the matter. Proper legal advice from the country lawyer is, I suppose, obtainable at a price. Nevertheless, I believe that we have at least aired the question. I shall read carefully what the Minister said and also ask those who advise me whether, in the light of that advice, they wish to pursue the matter either in its present form or in another form at the Report stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 7 agreed to.
Clause 8 [Tenant's right to remove fixtures and buildings]:
The Deputy Chairman of Committees (Viscount Allenby of Megiddo): It may be for the convenience of the Committee if I inform those present that, if Amendment No. 32 be called and agreed, I cannot call Amendment No. 33.
Lord Gallacher Lord Gallacher moved Amendment No. 32:
Page 4, line 33, leave out from ("time") to ("and") in line 34 and insert ("before the expiry of two months from its termination").
The noble Lord said: The amendment seeks to have the right to remove exercisable only while the tenant is in possession and to have an exception relating to fixtures in respect of which he has, according to Clause 8(2)(c), "obtained compensation". The date of termination and his departure from the holding may predate the agreement with the landlord on the level of compensation or its payment. The situation would be made more critical if the matter had to be referred to arbitration.
Further, the building or fixture may be in use right up to the last day of his occupation of the farm, possibly in connection with the care of livestock. The tenant should be given a reasonable period after the date of his departure to another farm, to which he is able to transfer the building or fixture in one operation. That is the substance of what I wish to say in support of the amendment. I beg to move.
The Earl of Kinnoull: I should like to express my support for the amendment. I believe that a two-month period is perfectly reasonable. It follows on from the 1986 Act. Therefore, it would be most reasonable. I hope that my noble friend will feel able to give the amendment a warm response.
8.15 p.m.
Earl Howe: The common law provisions regarding tenant's fixtures are complex and of little assistance to tenants of agricultural holdings. That is why Section 10 of the 1986 Act provided specific rules to deal with their needs. However, even those rules have not proved entirely satisfactory where one tenancy ends and another one is granted between the same parties.
Clause 8(1) of the Bill, therefore, gives a right to a tenant in possession to remove any fixture affixed by him, as well as any building erected by him, on the holding irrespective of whether the affixing or erecting were done during a previous tenancy agreement between the parties. Although the idea of providing a time limit after the end of a tenancy during which a tenant may remove his fixtures has some superficial attraction, it would in fact considerably narrow down the rights given by Clause 8, which are not time limited, where the tenant remains in possession as tenant. Clause 8(1) reflects the position at common law that a tenant continues to have the right to remove non-agricultural trade fixtures and ornamental fixtures so long as he is in possession of the holding as tenant. At common law
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he retains that right either by remaining in occupation as a tenant, whether or not the landlord has specifically agreed—that is known as "hold over"—or as a tenant with a new lease. Accordingly, the clause reflects our understanding of that position.
The Committee should bear in mind the fact that the notice provisions of the Bill ensure that both parties know at least a year in advance that a tenancy is due to end. I believe that that period of time gives every opportunity to settle arrangements over fixtures and buildings which a departing tenant wishes to remove. Therefore, a further two months from the end of the tenancy is, I suggest, simply not necessary in those circumstances. With that explanation, I hope that the noble Lord will be content to withdraw the amendment.
The Earl of Kinnoull: Before the noble Lord responds, can my noble friend say whether the landlord has the right to acquire a fixture which is under valuation, as I believe is the case under the 1986 Act?
Earl Howe: The Bill as drafted will ensure that, where a tenant has carried out an improvement at his own expense on the holding and has obtained the landlord's consent in doing so, the tenant will be entitled to compensation at the end of the tenancy at a value to be determined which will reflect the value of such improvement. However, that is slightly different from the question posed by my noble friend.
Where, for example, an improvement has been carried out and no consent was granted then in normal circumstances the tenant would be allowed to take that asset away with him at the end of the tenancy. I suggest that in most cases there will be an agreement between the landlord and the tenant as to what should happen to the asset; in other words, whether it should stay on the holding or whether the tenant takes it away. If it stays on the holding, the tenant will seek to ensure that he obtains consent from the landlord so that he is entitled to compensation at the end of the day. There are various permutations involved. I believe that the Bill ensures that there is fair redress for the tenant and, indeed, fairness also for the landlord.
Lord Carter: I believe that the noble Earl asked whether the landlord had the right to acquire. We are talking about tenants' fixtures and not tenants' improvements. I do not believe that the landlord has the right to acquire in the sense that the two parties would have to come to an agreement if the landlord wished the fixture—not the improvement—to be left behind. I do not think that the landlord has the right to ask for it. I believe that the tenant and the landlord would have to agree with each other. If the tenant does not agree, I suspect that he can take the fixture away.
Earl Howe: As I said, Clause 8(1) of the Bill gives a right to a tenant in possession to remove any fixture affixed by him, as well as any building erected by him, on the holding irrespective of whether the affixing or erecting were done during the tenancy just passed or during a previous tenancy. I believe that I have covered my noble friend's point, although I was seeking to

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elaborate slightly on the matter by referring to improvements. I am sorry if I confused the issue by so doing.
Lord Gallacher: I am grateful to the noble Earl for the information that he has given the Committee on such an important matter. I am also grateful for the questions that have been asked arising from my moving of the amendment. I accept what the Minister said about the complexity of common law and also his criticism that the 1986 Act is not particularly satisfactory as regards the matter, so that any reliance upon it is unlikely to give the consolation that I was seeking.
I also noted what the noble Earl said about Clause 8(1) of the Bill which refers to the,
"Tenant's right to remove fixtures and buildings".
By some miracle that I cannot explain, even before the noble Earl drew my attention to them, I underlined the vital words in Clause 8(1),
"after the termination of the tenancy when he remains in possession as tenant (whether or not under a new tenancy)",
and so on. I believe that that is germane to what the noble Earl said. However, all I can do at this stage is to ask leave to withdraw the amendment. I shall take it away and try to understand it in the context of what I now know. If I fail to do so, which is highly probable, I shall seek again the advice of my unpaid legal adviser. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carter Lord Carter moved Amendment No. 33:
Page 4, line 34, leave out ("(whether or not under a new tenancy)").
The noble Lord said: The amendment deals with a phrase which appears in brackets in Clause 8(1)(b); namely,
"(whether or not under a new tenancy)".
We are advised that those words are unnecessary. To use a word that the Minister often uses when responding to my amendments, we believe that they are otiose. It would be helpful if the Minister could explain why they have been included. As I said, we have been told that they are not needed. I beg to move.
Earl Howe: This amendment would delete words which are intended to do no more than clarify the scope of a tenant's right to remove fixtures and buildings after the end of a farm business tenancy. In this respect, Clause 8(1) reflects the existing position at common law as regards the removal of non-agricultural trade fixtures and ornamental fixtures after the end of a tenancy.
The circumstances in which a tenant remains in possession as tenant may vary. He may remain in possession after the end of the tenancy for a short period on sufferance (that is, without the landlord's assent or dissent) without paying rent. This has been called an "excrescence on the term". He may remain with the landlord's agreement if there has been an unavoidable delay in moving to another holding. A new tenancy may be granted under other legislation—for example, if the holding was no longer primarily or wholly agricultural in character at the time the farm business tenancy ended, so that a new tenancy could not pass the essential tests prescribed by Clause 1 of the Bill. And, of course,
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parties may have agreed to a further farm business tenancy immediately after the previous tenancy ended. The omission of the words in brackets in Clause 8, page 4, line 34 would not alter the effect of the clause in any way, but would arguably make the provision less clear. That is why the words are there. With that explanation, I hope that the noble Lord will feel able to withdraw the amendment.
Lord Carter: I think the reply of the Minister means that the words are fairly otiose instead of actually otiose. I shall treasure the phrase "excresence on the term" and look forward to using it on a number of parts in the Bill which have been drafted by the Government. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carter Lord Carter moved Amendment No. 34:
Page 4, line 39, leave out paragraph (b).
The noble Lord said: This amendment seeks to clarify the situation where there has been a fixture fixed or a building erected instead of some fixture or building belonging to the landlord which the tenant does not have the right to take away but where that fixture or building—I believe this is a fairly rare case—would have a greater value to the tenant than the original. The only example I can think of quickly—it is not a very good one—is in Wiltshire, where a milking parlour is now being used as a "tele cottage", believe it or not. That is not a very good example because one can hardly take a "tele cottage" away. However, I believe the point that has been made to us is that there will be cases under this subsection where a tenant is not allowed to remove the fixture or building because it replaces a fixture which belonged to the landlord. Nevertheless the fixture or building that the tenant leaves behind will be of greater value to the landlord than the building or fixture it replaced, if the Minister can follow me.
This is not a major point but it has been suggested that paragraph (b) should be omitted. This is a probing measure to determine what the argument is. I do not think there is a right to compensation for fixtures or buildings, only for tenants' improvements. I am talking about a tenant's fixture. I know that the Government would like to see the back of the 1986 Act. Under that Act one can make a deal with the incoming tenant for the value of the fixture. This matter is a little unclear and I suspect it is fairly rare that a fixture or building will have a greater value to the landlord than the original, but the tenant may not receive the compensation he should receive for the greater value of his replacement fixture or building. I beg to move.
The Earl of Kinnoull: I suspect that these kinds of cases, particularly that of the "tele cottage" would be rare. However, I suspect my noble friend might say that the common law, dated 1830, comes into this. I believe it would be exceptional for a tenant not to reach agreement with a landlord on this matter. I thought the noble Lord was thinking of a case where an agreement had been made between a landlord and a tenant, for

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example, as regards altering the rent, if there were some benefit to the landlord. However, I am not happy about that.
Lord Carter: Perhaps this matter I am discussing is not so rare. Perhaps a tenant might replace an old cart shed with a modern tractor shed and the landlord knows that he could turn that building into a building for use by rural industries and it could be used for light industry after the tenant has left. That would not be a rare situation. I am concerned about whether the tenant gets a fair return in that situation. He cannot take the building away and as it is not a tenancy improvement I do not believe it will be caught by the compensation rules in the Bill. In those circumstances the landlord will obtain some value from the fixture or building that is left behind and it will increase the value of his holding. However, the tenant may not receive the compensation that he should receive.
Earl Howe: There is a common law rule in property law that, where a tenant substitutes a non-agricultural trade fixture for one belonging to a landlord, that fixture cannot be removed by the tenant as of right. I am advised that this point of law was decided in 1830 and still holds good today, as my noble friend was kind enough to point out.
Clause 8(2)(b) follows the same common law rule. The central point is that the replaced asset belongs to the landlord and not the tenant. Parties might well provide in their tenancy agreement a clear division of responsibilities for these matters. The simpler rules on a tenant's fixtures and buildings set out in the Bill in effect give a tenant the choice of removal of a fixture which is his, or receiving compensation for it at the end of the tenancy, assuming that written consent to a tenant's improvements has been given. It is clearly equitable to limit that choice only to the tenant's own assets. Nor would it be desirable to enable a tenant to, let us say, demolish a landlord's fixtures or buildings—perhaps as many as he liked—replace them and then have a right to remove those replacements at the end of the tenancy. I do not think that that would be equitable. I hope that that explanation will satisfy the noble Lord as to why this provision is in the Bill.
Lord Carter: I am grateful to the Minister for his response but I believe we may have to return to this matter. He said that it is the non-agricultural fixtures which are picked up by the common law. I gave an example, which I do not believe is unusual, of a tenant who replaces a fairly elderly building —we all have them on our farms—and he erects a pretty good new building as a replacement for that landlord's building. There has been no written consent for this and therefore it is not an improvement. The tenant has just replaced the building. The landlord knows that he can then obtain the planning permission to convert the building for use for light industry, for example. It seems a little unfair that the tenant—if I understand the Bill correctly —will have to leave the building behind and not receive any compensation. I am not talking about an improvement but a tenant's fixture. It seems a little hard that the
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tenant cannot receive any compensation for replacing a landlord's building. We may have to return to this matter.
Earl Howe: There could well be an improvement where, let us say, a dilapidated building is replaced by a new building. It need not necessarily be regarded as a repair, although I dare say that, if it were, that would be covered in the tenancy agreement as regards how it should be treated. If the tenant obtained the landlord's consent, he would be entitled to compensation, assuming that there were a difference in value between one asset and the other. The trap that he should not fall into—if I understand the clause correctly —is replacing the landlord's asset with a new one and failing to get the landlord's consent, because then he renders himself liable to be out of pocket if he is not careful enough with the expenditure that he incurs.
Lord Carter: I am not sure that he needs the landlord's consent for a tenant's fixture. However, I believe we have explored the point enough. I should like to read what the noble Earl has said, and perhaps take some advice on this. Perhaps this is a slightly wider point than I suspected when I first raised it. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 8 agreed to.
8.30 p.m.
Lord Gallacher Lord Gallacher moved Amendment No. 35:
After Clause 8, insert the following new clause:
Assignment of a farm business tenancy
(". Where a farm business tenancy is assigned by the tenant in accordance with the terms of his lease the assignee shall assume all of the rights and obligations of the tenant under the lease in relation to the landlord and no claim may be made by the landlord against the tenant for any cause of action arising in respect of the tenancy after the date of the assignment.").
The noble Lord said: The noble Earl will recall that, in speaking on the Second Reading of the Bill, I raised with him the question of privity of contract, pointing out at that time that, although this was a matter much talked about by government, there was no promise in the gracious Speech as regards a Bill dealing with privity of contract, although the pressures for such a Bill are building all the while. The Government have stated that they are sympathetic towards such a Bill, but so far they have not been able to find time to introduce one.
My noble friend Lady Nicol recently received a Written Answer to a Question on the subject which referred only to what we already know: the Government agree that a Bill is desirable and would like to introduce one, but do not know when they will be in a position to do so.
In the light of that situation I decided to table the proposed new clause which appears before the Committee this evening and which I suggest should be inserted after Clause 8 of the Bill. Although I do not anticipate that the Minister will tell me that a Bill is under way, it may be of value in the exploratory examination of this Bill if we expose for the benefit of the Committee and the readers of Hansard the state of play as regards privity of contract.
Under the law as it stands, a lease is a contract dealing with property. A landlord enters into a contract with a tenant at the beginning of a lease, granting him certain benefits over the land and requiring the tenant to give certain undertakings in respect of the property (called covenants). The contract between the landlord and the tenant is not terminated by the tenant assigning his benefits to an assignee, subject to similar undertakings to those he has made to the landlord. The contractual relationship between himself and the landlord continues and he remains potentially liable for any breach of the covenants, including a failure on the part of the assignee to pay rent.
In legal terms, privity of contract is a relationship which exists between the immediate parties to a contract which is necessary to enable one person to sue the other for a breach or non-performance.
Privity of estate exists between lessor and lessee, lessor and assignee (but not lessor and sub-lessee), tenant for life and a remainderman or reversioner.
An original lessee is always liable under privity of contract to the lessor on the convenants of a lease, but under the privity of estate an assignee is only liable and entitled to the benefit of the covenants so long as he holds and until he further assigns the lease, because at the moment of assignment there ceases to be any privity of estate between him and the lessor.
The present law leads to injustice in so far as the tenant is responsible for the actions of the assignee and subsequent assignees with whom he has no legal relationship and of whom he possibly has no knowledge. From the point of view of the landlord wanting to claim his right against the original tenant, there are all the practical problems of tracing and notification to him of the death of the tenant.
This is a live issue for retailers, as I know. The Government have taken soundings, and a Private Member's Bill was introduced in another place but failed because it ran into stiff opposition from what I would describe as property interests. In placing this particular Bill on the statute book I believe that it is important that privity of contract should be given an airing in this Chamber in order that those who may be affected by it are aware of it and that in practice it raises new complications which are perhaps less well known in the world of agriculture. For that reason, I beg to move.
The Earl of Kinnoull: The noble Lord, Lord Gallacher, always raises interesting points. Privity of contract is a live issue. Certainly in my experience in commercial property it is a live issue. It would be difficult to judge where one could possibly start in order to be fair to both sides when so much has been lost in times of recession.
I believe that its application to farm business tenancies is slender. I should like the assurance of my noble friend that if an agreement is couched in terms
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providing that there should be non-assignment of a lease the tenant could in no circumstances apply to an arbitrator or court to have that changed.
Lord Stanley of Alderley: I should like to follow those remarks with a simple point that I hope my noble friend will be able to answer.
As I understand it, one could enter into a 10 year tenancy, for example. Perhaps for health reasons one might wish to surrender that tenancy after, say five years. I want to know what happens then. Would I, as the tenant, be obliged to continue paying rent and fulfilling the terms of the contract I had entered into until the end of the 10 years? I hope that that ties in with the idea of privity. Could I get out of that agreement with my landlord if he did not want me to? It might well be that he would be only too glad to see the back of me, but if he wanted to keep me as tenant could he make me continue to pay the rent and, what is more, continue to farm when I might not be capable of doing so?
Lord Carter: Another point arises, which occurred to me as my noble friend moved the amendment. I believe I am right in saying that unwritten agreements have the power of assignment under the 1986 Act, and when they are reduced to writing that power of assignment is usually removed. I believe that that is the case. I have known situations where an unwritten agreement under the existing law assumed the power of assignment which was removed when the tenancy was reduced to writing.
That may not be a correct point in law. However, I believe that the Government have said that they accept unwritten agreements as coming within the farm business tenancy. Would the same rules concerning assignment apply to unwritten agreements under the farm business tenancy as I believe apply under the existing law? If that is the case then privity of contract with assignment could be important.
Earl Howe: I should like to thank the noble Lord, Lord Gallacher, for introducing this complex subject so clearly. It is an underlying principle of the law of landlord and tenant generally that, unless the parties to a lease agree otherwise, when they enter into covenants under a lease such as the covenant to pay rent they are undertaking to perform those covenants for the whole term of the lease and may therefore be called upon to do so in the event of default by an assignee. That principle applies to all tenants who assign their tenancies, whether those are agricultural, commercial or residential.
We have all heard of unfortunate cases where elderly people find themselves responsible for the rent which the current tenant, some way down the chain of assignment, has failed to pay. However, while I sympathise with the motives behind the amendment, and I believe that it is good that we should air the subject, I do not consider it appropriate to try to tackle a highly technical subject in legislation dealing with just one type of tenancy. The Government intend to introduce reforms in relation to privity of contract and estate but in doing so would wish to cover all tenancies.

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There are also some difficulties with the noble Lord's amendment in respect of policy and technical detail. As it stands, the amendment does not reflect the policy of the Law Commission accepted by the Government; namely, that the parties to a lease should, in general, cease to have any rights of liabilities under the lease once they have parted with their respective interests except where it is objectively reasonable for some degree of liability to continue.
In particular, the Law Commission recommended that it should be possible for a condition of assignment that the assigning tenant should guarantee performance of the lease covenants by his assignee. With all due respect to the noble Lord, the amendment does not address that issue. Nor does it recognise that landlords also may be bound by privity of contract in the event of assignment of the reversion.
On a technical point, the amendment makes no provision for the consequential effects of abolishing the privity doctrine on the wider law of property; for example, the far from simple issue of its interface with the Law of Property Act 1925.
I should also stress that continuing liability under the privity doctrine is not inevitable. Tenancies under this Bill will, of course, be new tenancies whose terms will be open to negotiation. It will be open to any prospective tenant to seek to exclude the effect of the privity doctrine by express provision in the lease, or to include provisions such as break clauses to allow flexibility to terminate the tenancy early and with it any continuing liability, although that will require at least 12 months notice. It will also be open to tenants to sublet rather than assign, and thereby retain control should the subtenant run into difficulties, or to negotiate surrender of the lease rather than assignment when the time comes to part company with the landlord. A number of those ideas might be helpful to my noble friend in the context of the question that he put to me. I hope that, in the light of that explanation, the noble Lord will agree to withdraw the amendment.
To be absolutely clear, as drafted, the Bill leaves the question of assignment to the tenancy agreement. The tenant has the right to assign unless the tenancy agreement forbids that. Therefore an arbitrator would not be expected to override such a prohibition unless there were a provision that consent should not be unreasonably withheld, as is proposed in Amendment No. 91.
If that is not too complex an explanation, I hope that the noble Lord will be content.
Lord Carter: I should be grateful if the noble Earl will write to me on the point that I raised, as it were on the hoof, about the unwritten agreement with an implied right to assign; and how that will be caught.
Earl Howe: Yes, I shall gladly do so.
Lord Gallacher: I am grateful to the noble Earl for his reply. It offers some consolation to the wary and a warning to the unwary. That was one of the considerations that I had in mind when I tabled the amendment.
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With a Law Commission Bill available for legislation, it is a great pity that the Government cannot find time to take that Bill on to the statute book in what is a relatively uncrowded parliamentary Session. Quite apart from the immediate farming interests, as the noble Earl said, there is a strong property interest. The noble Earl, Lord Kinnoull, confirmed that with regard to retailing in a recessionary situation. While we are not over the moon, as the noble Earl has observed, as to what the Bill will do for agriculture, we have no wish to see it producing casualties on a grand scale, with even more serious situations developing because tenants had not been wary enough when first agreeing to a lease to make appropriate provision in the event of difficult times being encountered.
As the noble Earl would expect me to say, I shall study carefully what he said. I shall bring it to the attention of the parties which have been in touch with us on the point. Although we may not return to it, I am not without hope, given the undoubted influence of the four industry organisations which are behind the Bill, that additional pressures may be placed on Her Majesty's Government to take in hand the Law Commission Bill on the subject. The sooner that legislation is on the statute book, the better it will be for traders everywhere. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9 [Application of Part II]:
8.45 p.m.
Lord Gallacher Lord Gallacher moved Amendment No. 36:
Page 5, line 24, after ("which") insert ("does not preclude a reduction and which").
The noble Lord said: The amendment provides unequivocally that agreed variations of rent in a farm business tenancy may not incorporate formulae which produce upward only changes in rent. It was agreed in the joint industry agreement that it should not be possible to insert upward only rent reviews into farm business tenancies under the legislation. The amendment ensures that downward variations in rent could not be precluded from farm business tenancies. For example, a formula which linked rent to an objective index of costs would be admissible, since costs and prices may fall as well as rise. However, a formula which determined that any variation of rent will be based on the existing rent plus a charge upwards would not be permissible.
The amendment helps to achieve the industry's objective of market realities and that those market realities should be more faithfully reflected in future tenancy arrangements. I am sure that that step towards market realities will commend itself without reserve to the noble Earl. I hasten to sit down in order to hear what he says in response. I beg to move.
Lord Middleton: As the noble Lord, Lord Gallacher, reminded us, the industry is agreed that under a farm business tenancy rents should be able to be lowered as well as raised at a rent review. That can occur under current legislation and by Clause 13(1) of the Bill, which gives the right of an appeal to an arbitrator who can decrease as well as increase a proposed rent review.

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If I have worked the matter out correctly, the amendment works like this. As the Bill stands, arbitration can be sought under Clause 10 unless the provisions of Clause 9 apply. Clause 9(b) (ii) provides for agreement where rent can be varied by a specific formula. That would preclude reference to an arbitrator because Clause 10 could not apply. The noble Lord's amendment seeks to ensure that such a formula can provide for a reduction and that there must not be an upwards only review. If such a review provides for increase only, then Clause 10 would apply and arbitration could be sought.
I agree with what the noble Lord seeks to do. If the amendment achieves that objective, as I believe it does, I support it, even though to some extent it limits the freedom of choice enshrined in the Bill.
Lord Stanley of Alderley: Since we are referring to rents, perhaps I may raise a parallel problem. It is a matter that I warned my noble friend I would raise.
I am concerned that, under the 1986 Act and the provisions of the Bill, rentals could be artificially inflated. With regard to the debate on Clause 1 stand part and Amendment No. 15, the noble Lord, Lord Carter, stated that the playing field is not level. It is not level; God knows why. More people wish to farm than there is land for them to farm. Perhaps when they reach my age they will realise the folly of their ways. But that is the situation: it is not a level playing field. The reasons why rentals could be inflated relate to the scarcity of land compared with the number of applicants, existing farmers being able to tender high rents for nearby land, and existing farmers being able to tender high rents in order to make economies of scale. Indeed, I have done so.
Those factors have shown themselves in particular in agistment rents and must influence the landlord in asking for, and the tenant in having to accept, higher rents when negotiating rentals under the 1986 Act. With regard to the 1986 Act, I accept that a tenant may take his landlord to arbitration. However, most tenants prefer not to do so and are inclined to accept a higher rent than they can economically justify over the whole holding. Even if the case goes to arbitration, the arbitrator must be guided by Schedule 2 to the 1986 Act. I do not think that I need spell out all the provisions, although my noble friend may do so when replying. However, I do not believe that those provisions have the effect of keeping those artificial rents down to a common economic rent over the whole holding. I hope that I have explained the position clearly.
I hope my noble friend will assure me that my fears are unfounded. I believe that we shall have high rents. I can see my son and myself, being existing farmers, tendering very high rents if it is an area that we specifically want and for all the other reasons that I have outlined. I hope that those high rents that we might be able to afford on a limited piece of land will not have an artificial knock-on effect on further rents under 1995 legislation. But, more important, I hope that they will not encourage even higher pre-1995 rents—that is, 1986 rents—which might have a knock-on effect on the 1986 rents in an arbitration. I do not for one minute grudge
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the landlord the high rents for extra people. Good luck to him if he can get them. But I do not wish to see them reflected across the whole industry because it would not be possible to withstand that.
Lord Carter: A second point arises on this, but before I deal with it I wish to reflect on the remarks of the noble Lord, Lord Stanley. It would be interesting if arbitration were applied to farm business tenancies. We know that there has to be the open market rent which the arbitrator looks at, and we shall come to amendments on it. Will the open market rent which the arbitrator considers include the market in reviews under the 1986 Act? That is a different class of tenant. It is an interesting point to which we may return when we come to rent reviews.
There is another point. We moved the amendment to Clause 9(b) (ii) which concerns the specified formula, but Clause 9(b) (i) refers to,
"by or to a specified amount",
and if it is greater than the rent for the ingoing tenant, then it is an upwards only review. That is not what people want, and for once we can call in aid the industry agreement.
Earl Howe: Clause 9 provides an option for the parties to agree on a fixed rent, with no reviews during the tenancy, or to agree to adjust the rent by or to a specified amount, or by applying an objective formula to adjust the rent. So the clause in effect implements the provisions of the industry agreement of last year.
The idea behind the provision is that the parties should be free to agree on the level of rent and a method of adjustment, provided it is clear to both sides what they are signing up to. Some people may prefer a fixed rent, just as some house purchasers opt for a fixed mortgage interest rate. Others may favour a stepped rent, for example, with certainty as to what the level of rent will be in any given year. Others may wish to fix the rent by reference to a percentage of turnover of the farm business. These are adjustments which give an unambiguous result by applying the terms of the tenancy agreement.
As I said, the clause effectively implements the industry agreement. As the noble Lord, Lord Gallacher, explained, the industry organisations now wish to clarify the provision in order to ensure that downward variations in rent could not be precluded by whatever formula was used to adjust the rent. They argue that this would help to achieve the underlying objective: namely, that market realities should be better reflected in rents paid under farm business tenancies.
I am sympathetic to the arguments and the Government are willing in principle to give effect to the industry's wishes on the point. However, we should like to consider whether we can improve on the wording proposed in order to achieve that result and, if we can, to table an amendment at Report stage. I hope, therefore, that the noble Lord will be happy with that and will agree to withdraw his amendment in a moment.
My noble friend Lord Stanley raised a general question about rent. I am grateful to him for giving me notice of the points he wished to make. It is, I suppose,

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inevitable that the laws of supply and demand will always be of some significance in agriculture, as elsewhere in the commercial business world. Agriculture continues to be an attractive way of life for many people, despite my noble friend's doubts. The capital costs of buying a farm make that means of entry impractical for all but a few people. Those who get the rare chance of a tenancy under the 1986 Act will bid high to secure the opening, with the knowledge that at worst they will have three years before a rent review pegs back the rent to a realistic level.
When the Bill is enacted, scarcity value will not be a factor with tenancies under the 1986 Act because, save for the few exceptions dealt with in Clause 4, no new tenancies can be granted under it. An arbitrator proceeding under Schedule 2 to the 1986 Act is required to disregard any element of rent which is due to scarcity. Further, he may only consider evidence as to comparable rents from 1986 tenancies alone. To that extent, I do not think that there will be knock-on effects arising from the Bill for rent reviews determined at arbitration.
My noble friend's anxiety lies, I think, with the related earnings capacity aspects of rent where a tenant wishes to acquire nearby land which will be run with his own farm. Paragraph 2(b) of Schedule 2 to the 1986 Act defines the term "related earnings capacity" in respect of paragraph 1 of the schedule. What is being decided is the actual farming potential of the holding and the amount of income that can then be gained from it. Where a tenant acquires land nearby to his holding, paragraph 3(b) of the schedule requires the arbitrator to disregard any element of rent attributable to that factor. So I do not believe that paragraph 2 of the rent schedule has the meaning which my noble friend may fear that it has. The thrust of the second schedule to the Act is to narrow down, so far as possible, the rent which is fair for the actual land comprising the holding itself, setting to one side associated but not directly relevant factors. I hope that those remarks will be helpful to my noble friend.
Lord Gallacher: First, I thank those Members of the Committee who have spoken in favour of the amendment and most of all the noble Earl for what he said about it. In the light of his statement and his willingness to look at the principle underlying the amendment and perhaps bring forward an amendment of his own which may implement that principle in accordance with the representations made to him by the industry organisations, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carter Lord Carter moved Amendment No. 37:
Page 5, line 28, after ("is") insert ("stated").
The noble Lord said: We can deal with this amendment extremely briefly. I am advised that for the avoidance of doubt and for clarity the word "stated" should be introduced into the last line of Clause 9 so that it would read,
"but otherwise is stated to remain fixed",
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rather than the words in the Bill. Having moved a previous amendment on the ground that something was otiose, I now wish to introduce this amendment for the avoidance of doubt and for clarity. I beg to move.
Earl Howe: I can deal with this briefly. The amendment is unnecessary. Clause 9(b) begins with the words "provides that". If one follows the grammar through, that achieves the result which the amendment seeks. What the amendment would do is to create an ungrammatical sentence because it would effectively state:
"provides that the rent is … but otherwise is stated to remain fixed".
The sense of the clause is that it provides that the rent is to remain fixed, not that it is stated to remain fixed. I hope that when the noble Lord comes to read Hansard he will see that the grammar is correct as the Bill stands and does not need to be elaborated.
Lord Carter: It makes a change, instead of being accused of being otiose, to be accused of being ungrammatical. I shall have to refer this to those who thought the point was important and shall repeat to them clearly what the Minister said. Now that I read the wording, I believe he is correct, so I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 9 agreed to.
Clauses 10 and 11 agreed to.
Clause 12 [Appointment of arbitrator]:
Lord Gallacher Lord Gallacher moved Amendment No. 38:
Page 7, line 2, at end insert:
("(2) The list of arbitrators from which the President of the RICS makes his selection under subsection (I) above shall not include land agents in the full time employment of land-owning persons, corporations and trusts.").
The noble Lord said: I hasten to say that the amendment is not intended to reflect on the impartiality of the professionals. It is meant to ensure that no suggestion of professional experience or interest could cloud or cast doubt on the fairness of any award. We see that as something which is worthy of consideration in such a Bill and I look forward to hearing what the Minister has to say about a limitation of the kind which is included in Amendment No. 38. I beg to move.
The Earl of Kinnoull: The noble Lord, Lord Gallacher, is always so charming in the way that he puts amendments. When I first read it, I thought that it was possibly a serious slur on the fairness of arbitrators. As a surveyor, I spring immediately to the defence of the President of the Royal Institution of Chartered Surveyors. The system under which arbitrators are chosen is very careful. The president produces his list, which is approved by the Lord Chancellor. Each year the arbitrators go through training courses. There is no question but that they are very well qualified. I have never known a case that has been referred either to the Lands Tribunal or the courts for judicial review on the basis that an arbitrator has been incompetent. I believe that arbitrators do a tremendous job, which is very technical, for farming and agriculture and for landlord and tenant. I for one am proud of what they have been

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able to do. I believe that to put in this provision, even with the gentle wording of the noble Lord, Lord Gallacher, is bound to cause an awful upset within the profession. It is a slur on those who act for one side of farming and who apparently will not be able to detach themselves in the appropriate manner as they do.
The Earl of Courtown: I agree with what my noble friend has just said. One could just as easily say that agents who acted only for tenants should not be included.
Earl Howe: I should like to associate myself with the remarks of both my noble friends. I too am tempted to be beguiled by the way that the noble Lord, Lord Gallacher, moved this amendment. But the way it reads suggests that there are those who are under the misconception that land agents, particularly those employed by landowners, corporations and similar bodies, are bound to be landlords' men in some sense. That is not the case. No doubt many of them are experienced members of their profession, and that is likely to be a very good qualification for an arbitrator. Anyone who accepts an appointment as arbitrator is well aware that he must act impartially. If he fails to do so not only will he be guilty of professional misconduct but his award can be set aside by order of the court.
If this amendment were to be pursued, it would bar from acting as arbitrators a number of experienced and well qualified people who might be members of the Lord Chancellor's panel. I do not believe that that is in the interests of landlords or tenants, and I hope that the noble Lord will feel able to withdraw the amendment.
Lord Gallacher: I note what has been said about the amendment. I accept that it is a somewhat difficult amendment to table, and perhaps an even more difficult amendment to move. At times I have been an arbitrator, and I hope that in spite of a professional qualification I have always discharged my duties in the interests of both parties. I cannot say that they have always felt that, but nevertheless I have tried to do it. In the light of what has been said, I accept the assurances that have been given. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9 p.m.
Clause 12 agreed to.
Clause 13 [Amount of rent]:
Lord Carter Lord Carter moved Amendment No. 39:
Page 7, line 10, leave out from ("let") to ("taking") in line 11 and insert ("by a prudent and willing landlord to a prudent and willing tenant").
The noble Lord said: In moving Amendment No. 39, I wish to speak also to Amendments Nos. 40 and 41. On reading the amendments, your Lordships will appreciate that they deal with the fixing of rent. I do not think that the noble Earl will be enthusiastic about them, and I expect the industry agreement to be quoted at me. The wording has been adapted from Schedule 2 to the 1986 Act. We have omitted the more precise definitions. It seems that the Government and industry organisations in agreeing the package are firmly committed to the open market principle. I believe that we should take a
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little time to see why they have reached that conclusion, what they mean by the open market and what is likely to happen.
We feel that neither the Government nor the industry group should be able to push this through without having to justify their position to Parliament and to the many farmers outside Parliament who will be interested in our deliberations. The wording of Clause 13 of the Bill has been taken from Section 2 of the Agriculture Act 1958. The main purpose of that section was to place a sitting tenant in exactly the same bargaining position vis-à-vis the level of rent determined in arbitration as a new tenant of the holding, with account being taken of the sitting tenant's improvements. We know that after only a few years of operation the open market approach was totally discredited and rejected by both landowners and tenants. We understand that the industry group argue that the circumstances are now different from those that applied after the 1958 Act. For the life of me, I cannot see why. I wonder whether this is another of the trade-offs that we have already seen. We shall be coming to the trade-offs on tenant compensation. Perhaps this is the other trade-off, which is a return to the open market concept.
For many years landowners have complained that they are not getting a fair return on capital and that rents have not risen in line with increases in farm profits. It is not entirely clear how they arrive at that conclusion or how a fair return may be estimated. In the past the shortcomings of the notion of a fair return have been analysed by, for example, the NFU, who have used the following arguments. Owners of farmland here and in Europe expect to receive a lower return on their capital than for an equivalent amount of money invested elsewhere in the economy. That is partly because history has shown that agricultural land is a useful hedge against inflation, and the analogy often used is that of gilt-edged securities. The dividend paid is low but the investor has the security and the prospect of future gains on sale. Another argument advanced in the past by the NFU and others is that the ownership of rural land is seen to carry a social prestige. Rural landowning is a bundle of human attributes, including the amenity value of a house in the country and a role and recognition in the rural community.
It is also well known that substantial capital gains are to be made if a development value can be realised. Often hope value is built into the investment. This is particularly strong in the purchase of farmland on the urban fringe. Another argument advanced by the NFU for the low return on agricultural land is that valuable sporting, timber and mineral rights are attached to many purchases of farmland. Therefore, income is not purely a matter of what can be extracted from agricultural letting.
These factors account for the difference between the capitalisation value of farmland and the higher value that that land will achieve on the open market. I suppose that, when the rental return is described as unfair, the question to ask is: unfair in relation to what? Other investments do not seem to bring with them the same range of benefits.
During the passage through Parliament of the 1958 Act, the CLA was far from happy about the use of the "open market" test without the discounting of "scarcity value", as referred to in earlier amendments. This practice was first advocated by the CLA in a booklet on agricultural rents published in 1957. The effect of the 1958 Act was to give rise to a steep increase in rents demanded.
The farming organizations—not the CLA, but the others—were then united behind the principle that rents should relate to the amount that a reasonably efficient farmer, making full use of the land and fixed equipment, could be expected to pay—that is, that the rent should be an economic one. It is interesting to know why there has been a change, and what are the trade-offs which have been achieved to make it worthwhile. It is important that those outside this Chamber who, if they do not read Hansard, will read reports in the agricultural press, should be clear exactly why the industry group reached its conclusion and accepted the "open market" yardstick which in the past it deplored.
We know that there is not an open market in tenanted farms. We know about the level playing field or its absence between landlord and tenant and we do not need to repeat it. We know the way in which the scales are weighted. As I said before, there is a curiosity in the market in farmland: if a commercial property is let on a good covenant to a substantial tenant over a long period of years, it has a higher value than a vacant property. Exactly the reverse happens with agricultural land: land which is let on the long term will have a lower value. The famous vacant possession premium has a lower value than the vacant land. That is partly a factor of legislation and taxation.
As I said at Second Reading, I understand why the landowning interests in the group are interested in the Bill. It will mean an increase in the value of the land which they let. I can understand why the Government are interested in the open market. It is a part of their ideology and it is understandable that they want to apply it. In fact, I do not believe that there is an open market. The tenants who apply for farms will quickly find that out. The demand will exceed the supply and rents will go up. We are not talking about shirts and socks or office buildings; we are talking about our rural landmass and the way in which it is handled; we are talking about people's homes and livings which are attached to farm tenancies.
For all those reasons, we feel that it is important that when the rent is considered by the arbitrator—we have put together a number of amendments and if the Government were minded to accept them I should be happy for them to redraft them, although I do not believe that they will accept them —there should be emphasis on the prudent and willing landlord and the prudent and willing tenant, as opposed to the willing landlord and the willing tenant. I do not believe that anyone could object to the insertion of the word "prudent", unless the Minister will tell me that it is otiose. We have emphasised the character and the situation of the holding, including the locality in which it is situated; the productive capacity and all the things
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which one would expect to be taken into account, such as its related earning capacity; and the current level of rents for comparable lettings, excluding any consideration of scarcity; also, the earning capacity of the holding—this is the crucial point—to ensure that the rent payable is one which can be generated from the farming of the holding in question.
We are coming to the end of today's proceedings, and I do not wish to detain the Committee. But this is a crucial debate, which goes to the heart of the system that the Government propose. I entirely understand why the Government take the line that they are pursuing. They have persuaded the industry group that the open market is the way to deal with the matter. I am surprised that the three members of the group have fallen for that approach. I wonder whether those members realise what they have agreed to, just to have an Agricultural Tenancies Bill in front of Parliament with the provisions that it contains. We shall have to think about this matter very hard.
To save the Minister time, let me say that I expect him to reject these amendments. I should be surprised if he did not do so. We shall certainly wish to return to the matter and make it absolutely clear outside this Chamber what "open market" means. It means higher rents—I am quite certain of that, because of the situation; the landlords will not mind that. It means under this Bill that let land will start to claw back on the vacant possession premium; the landlords will not mind that, either. I want to be absolutely sure that everyone understands the meaning of those simple words "a willing landlord to a willing tenant" in the "open market" (which I do not believe exists) and what the effect will be on farm rents. Everyone must understand the cost to farmers who are facing the policies that we all support in relation to the reform of the CAP and who wish to bring the farm gate prices down to more realistic levels related to world prices. If that happens, we are told that there will be a knock-on effect, with pressure on farm costs. Working against that will be the results of this Bill, which will drive up that most crucial cost for the farmer; namely, the rent of the land that he hires from the landlord.
For all those reasons, this is an important subject. We shall wish to return to it both inside and outside this Chamber. I beg to move.
The Earl of Kinnoull: This is an important debate and the noble Lord, Lord Carter, is very experienced in this field. However, I am not sure that he recognises one point. He seems automatically to assume that the open market system will increase rents dramatically, irrespective of the returns in farming. I am not sure whether that is realistic. I am sure we all hope that the Bill will work because it has many very good points. Fundamentally, it is good for farming. If the Bill works, then under the arbitration system there will be open market rents. There will be plenty of examples which the arbitrator can use. It will not be artificial; it will be real. Whatever one might say, farmers are not fools. Young farmers, particularly, are not fools. They will not bid for something in the open market in order to start

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on the ladder knowing that they are buying real trouble. I do not share the noble Lord's automatic fear. I respect it, but I do not share it.
9.15 p.m.
Lord Carter: It may be helpful if I respond to that point immediately. Let us look at what happens when one is preparing a budget to help someone to tender for a farm. I have prepared many such budgets as I am sure have other Members of the Committee. One works out what the applicant can afford to pay and then one asks him how much more he is prepared to pay in order to get the farm. Often the figure will be perhaps one-third above what one has shown on the budget is the economic rent for the farm. I can see noble Lords opposite nodding. They know what goes on. That is exactly what happens. Under the 1986 Act at least there are these other factors to be taken into account. But that will not happen under the Bill. The open market will be the open market. I ask the noble Earl whether he knows of a market where demand exceeds supply and the price goes down.
Lord Stanley of Alderley: I wonder whether my noble friend can answer one question on this amendment. It is a simple point. Perhaps I should know the answer. Will the open market take into account variation in land? I can see a situation whereby land is let in an area for X rent and then another piece of lower quality land becomes available. Will the fact that it is not of the same quality be taken into account? I am not sure whether that point is taken into account.
Earl Howe: I have listened very carefully to the noble Lord, Lord Carter, on all three of the amendments. Amendment No. 39 would in its main effect require an arbitrator to determine rent on a basis very little different from that set out in the 1986 Act. At the risk of boring the noble Lord, I would remind him that the industry agreement on tenancy law reform is quite clear that the arbitrator must assess the rent on the basis of the open market value which would be agreed between willing parties. That is what we have given effect to in the Bill.
Clause 13 requires the arbitrator to assume a willing landlord and a willing tenant. It is true that the word "prudent" is omitted. However, the vital test in determining the rent at which a holding might reasonably be expected to be let is that all relevant factors must be taken into account. The Bill quite rightly leaves it to professional judgment as to which factors are relevant to a particular rent review and to what extent a holding can generate sufficient income to enable the rent to be met. Prudence is a great virtue; virtue is a grace; and I am confident that arbitrators are fully seized of the need for prudence in running a sustainable business. Equally—I think this answers the noble Lord's anxiety on the amendment —Clause 13(2) already implicitly provides the means for prudence to be a relevant factor, among many others, in the arbitrator's task.
Many of the same arguments apply to Amendment No. 40 with all the various factors that it lists. It is professional judgment which should determine what factors are relevant to a particular rent review, not a
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predetermined list such as this one. The Government have sought to put the prescriptive approach of the 1986 Act into the past and to provide leaner, fitter legislation which will best serve the long-term interests of the agricultural industry. Noble Lords opposite sometimes appear determined to change only a few words in the 1986 Act and call that the Agricultural Tenancies Bill. Such an over-prescriptive approach will simply not do. How can any professional arbitrator fail to take account of the character and situation of a holding or its productive capacity if required by Clause 13(2) to take into account all relevant factors? The simpler, deregulatory provisions of Clause 13 provide what the industry itself has told us that it wants to have as regards rent. The professional interests clearly support the Bill's approach to rent and see no particular difficulty in carrying out their responsibilities under it.
Finally, turning to Amendment No. 41, Members of the Committee will not be surprised to hear me say once again that rent arbitration should not be subject to prescription. Again, there is nothing in this amendment which is not covered by the requirement in Clause 13(2) that all relevant factors must be taken into account, including in every case the terms of the tenancy agreement. The clause as drafted reinforces the point that in every rent review the arbitrator must take into account the terms of the tenancy, with the exception of any terms about the manner in which the rent is determined as these are over-ridden by Part II of the Bill.
Amendment No. 41, tabled by the noble Lord, in fact has the effect of restricting rather than extending the list of factors to be taken into account because the amendment requires rent to be generated by the farming of the holding and omits any reference to non-farming activities. To take an obvious example, the noble Lord's amendment would not allow the arbitrator to take into account any revenue generated by a caravan site, by a pony trekking enterprise, or by something of that sort. Clause 13 as drafted does do that. One of the advantages of the clause, as drafted, is that it gives an arbitrator the flexibility to take into account both the earning potential of farming and also of any non-agricultural activities which the tenant is permitted to carry out and on which he is engaged at the time of the rent review.
With that, I hope that the noble Lord will recognise that Amendment No. 41 is inherently unsatisfactory, quite apart from its broader demerits, and that these amendments will not find favour on this side of the Committee.
The Earl of Kinnoull: Before the noble Lord responds, perhaps I may refer to his question about advising a young farmer to go into a farm, work out all the calculations and then add another third in order to get the farm. That may be so for someone coming into the industry, but here we are dealing with an arbitrator with a landlord and tenant in an existing place. With all his experience, I do not believe that the noble Lord can point to an example where a farm had gone for an extraordinary price in order for that young farmer to get into the farm and that an arbitrator would be swayed by

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that. That would not really be the open market price, but an exceptional one. Arbitrators are very experienced people.
Lord Carter: I am extremely grateful to the Minister and other Members of the Committee. I am reminded of a remark which was made, when I was on the Northfield Committee, by the senior partner in a well-known firm of land agents. He pointed out that the arbitrator is extremely sophisticated, expensive, and has the ability to divide by two.
I expected the response which I received and I was grateful for it. The Minister has a point about all the relevant factors. It will be interesting to read Hansard because we know from the Minister what all departments say in the course of the Bill, which can be looked at. I believe that arbitrators and those who advise, will be looking to see what the Government believe are relevant factors such as earning capacity and the local situation.
I still remain of the view that there will be plenty of willing landlords because there usually are if Christmas comes early. I am still concerned that arbitrators will be looking at what is described as the "open market rent". What they regard as a relevant factor would be a matter of argument between the two sides, between the landlord and the tenant and the arbitrator.
I believe that there will be upward pressure on rents, as there is already, in regard to farming in certain sectors. That may well change. I still believe that the scarcity of farms will be such that it will mean that the need for some form of prescription will be necessary if the tenant is to be protected.
I am not surprised that the Government do not like this approach. All their concern is for simplification and I am a little anxious that the tenant is being thrown out with the bath water. We shall read with care what the Minister has said and we may wish to return to this in a different way at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 40 and 41 not moved. ]
Lord Gallacher Lord Gallacher moved Amendment No. 42:
Page 7, line 18, at end insert ("and did not amount to a premium or equivalent,").
The noble Lord said: One of the intentions of the industry agreement in relation to rent-setting is to ensure that any premium that may have been paid by the tenant, whether as a straightforward payment or by some other means of investment and improvement, should not lead to an increase in the rent. In other words, the tenant should not be subject to double taxation, which means paying a premium for an improvement to the holding and subsequently having to pay a higher rent which reflects the increased rental value which the improved holding commands.
It is essential for tenants' confidence in the new law that they should be safeguarded on this point. It is in order to give tenants that confidence that we have tabled the amendment. I beg to move.
Lord Middleton: I understand and sympathise with the concern that the tenant should not have to pay a premium or provide a fixed equivalent for a tenancy and then pay a higher rent because of its effect on the value of the holding. I should have thought that this is another case where the point is covered in Clause 13(2) which states that "all relevant factors" are to be taken into account.
Earl Howe: I am grateful to the noble Lord for moving this amendment and to my noble friend for his remarks.
I agree that, where a tenant has been obliged to make improvements to the holding under the tenancy agreement and has received no benefit in return, this amounts to the equivalent of a premium. As many noble Lords will know, the industry agreement stated that any premium or equivalent would be taken into account when an arbitrator determined the open market rent at a rent review. I take this to mean that where a tenant had paid a premium or equivalent to obtain a tenancy, he would not then be penalised throughout the tenancy by having to pay a higher rent.
The desired result is achieved by the requirement in subsection (2) of the clause that the arbitrator should take into account all relevant factors, as my noble friend pointed out. Where the tenant has paid an actual premium—in money terms—the arbitrator will have to inquire into what benefit the tenant received on account of the premium. It may be that the tenant received benefits such as grazing rights on other land which account for the premium; or it may be that some, or possibly all, of the premium was reflected in a reduced rent. So where the tenant does not receive a benefit, the arbitrator applying the rent provisions as drafted here will have to determine such a rent as might be expected to be paid at the review date by a tenant paying a premium. He would need to assume that that premium was the equivalent at the review date of whatever premium was in fact paid by the tenant at the outset of the tenancy.
Where, instead of paying a premium in money terms, the tenant undertakes to make an improvement—say, the building of a barn—the same principles will apply. The tenant will in effect be let the land and the barn, but he will be out-of-pocket for the cost of the barn just as if he had paid a premium. At the review date the arbitrator will have to determine what benefits, other than the use of the barn, the tenant received for his outlay. If he can find none, he must assume that the burden of the cost of the barn was reflected in a reduced rent. In such a case the arbitrator will determine a new rent for the land, including the barn, likely to be paid by a tenant taking a lease on terms which include an obligation by him to make these improvements. Again, the arbitrator would take equivalent cost at the review date of whatever the cost of the barn was when it was

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erected. So by looking at all relevant factors the arbitrator will have arrived at the result that is sought by this amendment.
I trust that that somewhat complicated explanation will satisfy the noble Lord that this amendment is not needed in order to achieve the desired result in accordance with the industry agreement.
9.30 p.m.
Lord Gallacher: The Minister said that the matter was somewhat complicated. That is the truest statement he has made this evening. I shall study carefully in the sober cold of morning what he has had to tell me. I shall take what he has had to tell me to those who asked me to put down the amendment. I shall ask them whether they are satisfied, in view of the unstinted testimonial paid to arbitrators by other speakers this evening. If they are, the Minister will hear no more from me. If, on the other hand, they are not, I shall be back to speak to him on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Carter Lord Carter moved Amendment No. 43:
Page 7. line 31, at end insert:
("() On any reference made in pursuance of a statutory review notice, the costs payable by the tenant to the arbitrator shall not exceed 20 per cent of the annual rent due under the tenancy.").
The noble Lord said: The amendment deals with the vexed question of the costs of arbitration. We all know that as professionals we often have to advise tenants, although they might appear to have a good case, not to go to arbitration because the costs of arbitration will swallow up any benefit they might achieve from the results of the arbitration. There has been a case recently in the North West where the costs of the arbitration were £150,000. That may be exceptional, but I have been involved in arbitrations and it is an expensive business. In some cases it tends to be a bit of a threat in the landlord's hand to imply, "Of course you can go to arbitration, if you like. I can stand the cost, can you?".
That is not fair. The amendment is not perfect by any means. It is an attempt to flush out the point about the cost of arbitration and to ask the Government whether they are happy with the situation. I suppose that the Minister will tell me that there is an open market in arbitration as there is with anything else. That is not the case. Arbitrators are appointed. They work to a fixed scale fee. The arbitration often drags on and the tenant may find himself in for a pretty big bill. Most tenants are poorer than most landlords. That does not apply in every case, but in most.
We suggest that one way around the difficulty—it is not the only one—would be to say that, if the reference is made in pursuance of a statutory review notice, the cost to the tenant should be limited to 20 per cent. of the annual rent. One could perhaps find other ways of doing it. I should like to get on record the Government's view about the costs of arbitration and whether they agree that on the whole the tenant, in terms of costs, is
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at a disadvantage, and whether they are prepared to take any steps to see whether the cost to the tenant could be limited. I beg to move.
Earl Howe: I find what the noble Lord said very interesting. I was rather surprised when I saw the amendment. It seems to stem from the assumption that, where there is a dispute about rent, the tenant is always right and the landlord always wrong. I have to say that I find that implausible.
Everyone knows that arbitration is relatively expensive. It is bound to be, because arbitrators are experienced members of their profession and they have to be paid for the time they spend on a case. Parties, knowing that, should go to arbitration only if it is absolutely necessary. They should always try to reach agreement first. They should also take steps to limit the costs so far as they can. I understand that the RICS has produced guidance on that point.
In an arbitration, the usual practice is for the costs to follow the award. The amendment would not change that. But it may be that the noble Lord intends such a change, so there is a likelihood that whatever the outcome the landlord would have to pay the greater share of the arbitrator's costs. I consider that to be unacceptable. I do not find any attraction in that idea. It would be inherently unfair. I hope that the noble Lord will feel able to withdraw the amendment without further ado.
Lord Carter: I am not surprised that a member of the Conservative Party has to defend the rights of impecunious landlords. It is an important point. As I said, there are weaknesses in the amendment but it was tabled in order to draw attention to the problem. We will look again at the matter to see whether there is another way. Of course, I do not accept that the tenant is always right and I agree with the Minister in that respect. We are anxious to find a way to restrict the costs of arbitration, but perhaps we cannot do that in this Bill. I argue that as regards arbitration the landlord is in a stronger position than the tenant. Normally, his pockets are deeper but perhaps we can think of another way to resolve the issue. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 13 agreed to.
Clause 14 agreed to.
Lord Inglewood: I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

London Local Authorities (No. 2) Bill [H.L.]
Reported from the Unopposed Bill Committee with amendments.
House adjourned at twenty-five minutes before ten o'clock.