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Agricultural Holdings Bill Hl

Volume 445: debated on Tuesday 22 November 1983

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3.12 p.m.

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.—( Lord Belstead.)

My Lords, I have given the Minister notice of what I intend to raise, and I am advised that the best time to raise the matter is now. The Opposition have no wish to oppose the Motion that we go into Committee, and. indeed, we are anxious to get on with the Bill; but I think that it would be for the clarification of the situation and for the benefit of noble Lords if I were to draw attention to the fact that a letter has appeared in The Times today from the President of the Country Landowners' Association. Before I proceed, perhaps I might declare an interest in this Bill as I am a member of the Church Commissioners and also a member of the Council of the National Trust. both positions being of no financial benefit to me although in other ways they are of great interest. I speak not for them but as a member of Her Majesty's Opposition.

When the Minister moved the Second Reading of the Bill a week or so ago he told the House. at column 713 on 8th November:
"Thus when the committee under the chairmanship of the noble Lord, Lord Northfield, in its Report on the Acquisition and Occupancy of Agricultural Land, recommended that the Government ought to open discussions with the industry to find ways of providing better entry opportunities, my right honourable friend Mr. Peter Walker, who was then the Minister of Agriculture, responded by emphasising to the NFU and the CLA that amendments to the existing legislation would need to be based on proposals agreed by the industry as a whole".
He went on to say:
"Their discussions were lengthy and detailed and it says much for the patience and dedication to their tasks of the Presidents of the NFU and the CLA that two years later they were able to present a package of proposals".
I believe that the House accepted the position of there being some agreement.

Since then noble Lords on both sides have made reference to this package, and, of course, it means that we have a package which is in the Bill. Yesterday, 37 noble Lords were sent a letter from the Country Landowners' Association which says in paragraph 3 on page 1:
"Clause 1 aims to implement the solution agreed between the CLA and NFU".
But the important point is:
"As the present Bill gives effect to the CLA/NFU Package Agreement and has only been obtained because the two bodies have agreed and have adhered to their agreement, it will be recognised that neither body can, without dishonour, promote amendments to this clause without the approval of the other".
Noble Lords will accept that that applies to the whole Bill, which is this package.

Today there is a letter in The Times—and I am in no way suggesting that there is anything sinister in this; I merely ask for the Minister's clarification—from the President of the Country Landowners' Association which says:
"There has been criticism of the agreement made by the National Farmers' Union and the Country Landowners' Association, both in your correspondence columns and in the House of Lords, and, in particular, criticism of the new rent formula. It is, however, the stark truth that if the NFU and CLA had not reached agreement, there would not now be an Agricultural Holdings Bill before Parliament."
The suggestion is that if any amendments are made to the Bill it will violate the package.

I think it would be helpful if the Minister, with his usual co-operation, would say what other bodies have been consulted about the Bill, because the Association of Landowning Charities, whose members include the Church Commissioners, the university colleges of Oxford and Cambridge and many other land-owning charities, has expressed views on amendments which, in their view, are necessary to the Bill. It may well be that noble Lords who are members of the CLA and the NFU, which are two very proper and honourable bodies, may feel some diffidence in changing the Bill at all if it violates this agreement.

I think that the noble Lord the Minister will say that, once a Bill is before Parliament, it is for Parliament to take such action as it wishes; but it would be useful to have assurances on that point. In case anyone should think that the Bill is perfect and no amendments are necessary, at column 715 of the Second Reading debate on 8th November the Minister himself said:
"Although this Bill is not lengthy it is quite a complicated example of the parliamentary draftsman's art".
According to the Marshalled List today, apart from the drafting many of us think that the Bill could be improved by amendments. I think it would be helpful if the Minister would give assurances to the House that we all have freedom to improve the Bill as we see fit, even though it was the basis of an agreement between the Ministry (and, indeed, the Government) and the two bodies concerned.

My Lords, as this is a matter of order, I felt it appropriate that I should respond to the noble Lord myself. I am grateful to the noble Lord for his courtesy in having informed my noble friend the Minister of State that he was to raise this matter. Equally, I accept that it is an important matter to be raised. As the noble Lord declared an interest, perhaps I should say that, in a private capacity, I am a member of both the CLA and the NFU, but I do not think that that affects my position as Leader of this House or, indeed, as a member of the Government in any way.

I understood my right honourable friend the previous Minister of Agriculture, who is now the Secretary of State for Energy, to have said that he would not bring legislation before Parliament—and I emphasise the word "before"—unless there had been an agreement between the bodies concerned. However, of course, that was as far as his responsibility could go. Once the legislation comes to Parliament, it must be a matter for Parliament to decide on that legislation. I do not think that my right honourable friend the Secretary of State for Agriculture could conceivably have meant anything else, and I know that he did not. In no way could I be Leader of this House if it was not open to this House to amend any Bill coming before it in any way it thought fit. I give that absolute assurance to the noble Lord and, indeed, to the whole House.

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 1 [ Determination of rent of agricultural holding]:

3.19 p.m.

Page 1, line 21, at end insert—

("( ) For the purposes of this subsection the rent properly payable in respect of a holding shall be the rent at which the holding might reasonably be expected to be let in the open market by a prudent and willing landlord to a prudent and willing tenant, and which the tenant could reasonably he expected to sustain.".

The noble Earl said: I beg to move Amendment No. 1, standing in the names of the noble Lords, Lord Howard, Lord Northfield, Lord Northbourne, and myself, and to speak to Amendment No. 16 at the same time.

Amendment No. 16: Page 2, line 31, at end insert ("causes them to exceed what a prudent tenant could reasonably be expected to sustain and which").

It would be hard for my noble friend Lord Belstead to complain of any lack of interest or enthusiasm to participate in this Bill. So far, we have had 20 speakers on the Second Reading and now we have 29 amendments just on Clause 1. Perhaps it is just as well that the agricultural holdings legislation tends to crop up only about every 20 years. I just hope that by the end of the Committee stage of this Bill we are not only better informed, but have successfully unravelled some of the tortuous and seemingly unworkable provisions of parts of this Bill.

I start by stating that neither Amendment No. 1 nor Amendment No. 16 has been put down in any spirit of confrontation with Her Majesty's Government, the CLA or the NFU. The whole Committee, I am sure, would wish this Bill to achieve its stated objective, to arrest the decline of the landlord and tenant system, and indeed to infuse new life into that system. It is a worthy aim, and an aim that needs not only support from this Bill but the fiscal support we hope will come in the future, and indeed the continued confidence, that vital confidence, of the long-term private and institutional landlord.

The history of the agricultural rental formula has been a somewhat strange one. In 1948, valuers were instructed by Parliament to adjudge a rent simply as that properly payable having regard to three points: that is, the tenant's improvements; rate relief; and dilapidations. It was indeed a loose instruction by Parliament, which worked extremely well because valuers are sensible, practical people. In 1958, Parliament changed those instructions to a more specific starting point. This was, as the Committee will know, the starting point of the open market rent into which a willing landlord and willing tenant would enter, but disregarding any scarcity or key money factors which might throw up quite an unjustified paradox.

This formula, too, worked, despite its shortcomings, not because of Parliament's wisdom but because again valuers are practical people and pay heed to the factors that could distort a rental value and make it unviable. They have acted, as I think my noble friend Lord Middleton said on Second Reading, quite happily outside the strict interpretation of the formula set in 1958.

It has indeed caused, so far as I know, no legal fuss, no litigation and no great friction, yet clearly, as the remarkable Northfield Committee report recommended, it should he corrected. I have no quarrel with that at all. The 1983 rental provision formula is a culmination of two years of intense wrestling with the problem between the NFU and the CLA. It is a quite radical formula in a number of points.

It first abolishes the very starting point which valuers use, the open market rent, and replaces it with nothing as a starting point. Secondly, it calls for a valuer to make three valuations: a productivity valuation, which he has done in the past; a profits valuation, which he has never done; and a comparable lettings valuation, which he has done in the past. But it gives no guide as to what the valuer should do with his valuations, or what happens if those valuations are all for different figures. In the words of a Queen's Counsel this morning to me, it creates a maximum area of vagueness. Those are hardly encouraging words.

Lastly, this is a radical clause. It is so drafted as to span over five pages and 1,342 words, and it replaces previous rental formulas that were precisely expressed in just half a page. The rental valuation formula is not the easiest subject to grasp, understand, or debate, but the truth is that, despite the assurances of Her Majesty's Government and my noble friend on Second Reading, the CLA and the NFU. there are those who feel that the rental levels could well be seriously damaged and indeed injuriously affected.

It is the view of certain important landowning bodies, including the Church Commissioners, the Oxford and Cambridge colleges, and the City institutions that the present formula is hopelessly vague in interpretation, is liable to endless litigation, and casts a serious doubt of uncertainty on the very future of rental levels. They feel strongly about this, and I am sure that every Member of the Committee will have received letters indicating this. Their unhappiness is backed up by long experience in land ownership, and should not be dismissed lightly.

This is not a landlord bashing tenant argument. It is simply that if this formula should disturb or depress the levels of rental, then the very hope of future capital coming into the landlord and tenant sector could be severely jeopardised, and of course we have to remember that this is the very objective of this Bill. These are not empty worries by those who have stated them. They are practical worries that Parliament might misconstrue a complex subject formula which could do more damage and harm than any critics of the CLA and NFU package would dare to hope. An infusion of blood into the life of the landlord and tenant system could turn into a mass of blocked arteries.

Amendments Nos. 1 and 16 seek not to throw out the CLA-NFU package but to retune it in two vital ways. Amendment No. 1 seeks to restore the valuer's starting point, the open market value, but then to temper it to what a prudent and willing landlord and a prudent and willing tenant would accept and agree, and with the added safeguard of what a tenant could afford to pay, in the view of the valuer, given the circumstances of his farm. In other words, it provides all the safeguards against distortion of the open market value with the words "prudent" and "sustain", and restores to the valuer the point at which he should start his valuation.

I appreciate that to the NFU the words "open market value" are like a redrag to a Jersey bull, but it is a fear that arises from a genuine misunderstanding. The valuer will use it anyway, so why should Parliament fudge the reality? It is a vital amendment, and one which could restore confidence—a confidence which needs to be restored. Amendment No. 16 is another vital tuning amendment. It comes under subsection (4)( a), where the valuer must discount any appreciable scarcity factor from the rent. Subsection (4)( a) is a most difficult formula to interpret, but I would submit that if this amendment is accepted it will fortify and clarify these difficult words. In the amendment the valuer is directed to discount not only appreciable scarcity but also whether the level of rent is higher than the tenant can afford. It is an amendment which I hope can receive support and sympathy from the Committee.

Finally, I would repeat that neither of these amendments is a wrecking or hammer blow to the package. They are a fine tuning made necessary to avoid the dangers of some possible damaging effects that the present rent formula could unintentionally produce in the future. I commend it with all my powers of persuasion to the Committee. I beg to move.

During the debate on Second Reading I expressed the hope that if the critics of the Bill were unhappy about the rent formula which is in the Bill they would produce a better one. Today we are to consider what amounts to no fewer than three new formulae and many minor amendments to the one that is in the Bill. The first that we are being asked to look at concerns the two amendments to which my noble friend Lord Kinnoull has spoken. Although I do not think that the amendments of my noble friend and others are acceptable exactly as they stand, I believe that they are amendments that make up a rent formula which might be modified so that all interested bodies could agree to it.

My noble friend has just told us that the words "open market" tend to alarm members of the National Farmers' Union. The instructions to the arbitrator in the Bill avoid the words "open market" yet he is instructed in the Bill to take into account the current level of rents and he must consider the level of rents being tendered and also all the available evidence which is being described in Clause 8(4). In effect, therefore, he has to look at the market. In any case the words "all relevant factors" must surely include it. The arbitrator then has to look at the effect on the market of the shortage of farms coming up for letting. So much for the Bill.

My noble friend Lord Kinnoull and the other noble Lords who have put their names to his amendments, clearly believe that the NFU's fear is groundless, so what Amendment No. 1 does is to use the words "open market", but it then becomes a hypothetical market because it is qualified by certain phrases.

There is a strongly held professional view that the market should be the primary yardstick for fixing rents, but where the market is limited and not truly open other tests should be used in addition. That is the view taken by the Northfield committee. The noble Lord, Lord Northfield, reminded us of this very clearly during the debate on Second Reading when he said that the first thing to nail to the mast is that the market rent should be the criterion whenever possible. His report recommended that where the market is not sufficiently wide, other factors should be considered—factors which are spelled out in the Bill.

As I pointed out on Second Reading, this is just what arbitrators are doing. In practice, though not lawfully, they discount the element of key money in offers for new tenancies and they take into account all or some of the traditional factors. I am quite sure that there is very little between the views of the National Farmers' Union and the suggested amendments to the rent formula in the Bill which are being put forward by my noble friend. Both are agreed about the objective to be achieved, which is to give statutory backing to the current practice so that rents remain fair to both owner and tenant. I cannot believe that the words "open market" need prove a stumbling block.

I believe that the wording in the Bill will do what is wanted. I am supported in this view by the agricultural valuers organisations. However, it is extremely important that the views of the institutional owners, who now own about a quarter of the tenanted farmland in England and Wales, as well as the views of their agents should be taken into account. Broadly speaking it is their views which are being expressed in these two amendments.

We shall wait with interest to hear about the formula which is based on the suggestions of the Agricultural Law Association, which I believe my noble friend, Lord Renton, will be moving. If I prefer what I may call Lord Kinnoull's amendments, it is because I believe they come nearest to meeting objections from both sides of the argument. As my noble friend reminded us today they deal with the fears of tenants by introducing the concept of prudence into the open market. I understand from those chartered surveyors who were opposed to Clause 1 that the additions to subsection (4) (a) dealing with scarcity would make the difficult task of eliminating scarcity something that they feel they could surmount.

It seems to me that the amendments of my noble friend Lord Kinnoull, suitably redrafted and perhaps modified after discussion, are those which stand the best chance of obtaining the support of owners, both institutional and private, of the farmers' organisations and of the professional bodies. That general acceptance is, I am sure, essential to obtain the final approval of the Government. I hope that my noble friend will not press his amendment to a division at this time because I believe the matter should be looked at carefully. If he withdraws his amendments, I hope that the Minister will look carefully at them and consider them as a basis for Clause 1 in a way that all interested bodies could agree to.

I am grateful to my noble friend Lord Middleton for giving a trailer for my Amendment No. 3. I go along with him in feeling that we should not have a division upon this or upon any of the amendments to Clause 1 today. I think we want what my noble friend, Lord Belstead, having been in the Foreign Office, will understand; we want a "valuable exchange of views". The Foreign Office uses that expression generally when nothing has been decided. I do not think that we ought to be precipitate about deciding these difficult matters today.

As to Amendment No. 1, moved by my noble friend Lord Kinnoull, its brevity and simplicity and the direct way in which it deals with the problem is helpful. However, the difficulty that I feel is that it is an attempt to make the best of a bad job which is to amend what I regard as an entirely satisfactory solution, the unsatisfactory formula contained in Clause 1. Indeed my noble friend Lord Kinnoull in referring to subsection (4)(a) hit the nail on the head, because the formula depends more upon the study of comparable lettings when rents are being fixed. In the somewhat fossilised circumstances of land tenure created by the 1976 Act, comparable lettings will not he very easily found. Therefore, by accepting Amendments Nos. 1 and 16, and leaving "comparable lettings" in the Bill, I feel that we would all be making a very grave mistake. I like to think that when I come to move Amendment No. 3, I shall be providing a formula which contains the virtues of what is in the Bill and in the other amendments, with the vices of none of them.

3.40 p.m.

One of the two main difficulties that the Committee is in is that the noble Lord, Lord Belstead, when introducing this Bill said (in column 713) that the Minister had emphasised to the NFU and the CLA that amendments to the legislation,

"would need to be based on proposals agreed by the industry as a whole".
I think the difficulty that we are in is that they were not based on them but that the Government swallowed them hook, line and sinker. We are all now trying to establish what the parliamentary base should be. I respectfully submit to the Minister that it really was the job of the Ministry of Agriculture to have done this right in the first place. It should have been taken in that way, rather than simply taking the full package and putting it into legislation.

There is a second problem which will arise throughout the Bill. I hesitate to quote from my own committee's report, but it is fundamental to say this at the beginning of all these debates. We said (in paragraph 733):
"We do not think that rents should be considered in isolation from other proposals about letting generally: and we therefore think that rents should be included in the consideration of the balance between landlord and tenant inherent in a general review of agricultural holdings legislation".
In other words, we were saying very clearly, "Please do not legislate rents in isolation. There is a whole package of other recommendations which win be needed to get the balance right". The second failure of the Bill, therefore, is that it does practically nothing about a whole list of these other recommendations—something which we now have all got to try to do, in a fairly amateur way of drafting, in order to do the Government's job for them in putting the rent situation into proper balance. I make that remark at the beginning as a small complaint that we are in these difficulties which the Government have created for themselves.

The second thing is that the noble Lord, Lord Middleton, really cannot have it exactly as he said it. He said that, after all, the market forces situation, the basis of the market for rental evaluation, is part of the relevant factors. He said that a few minutes ago. The problem is that this Bill, as drafted, actually deletes that in earlier Acts; so that everybody is going to assume that this is being deliberately jettisoned. That is a failure. It is important to bring back those words. I refer to our Recommendation No. 47 where we say:
"While the open market should remain the basis of rent determination, we would see value in allowing additional evidence to be introduced when no true, open market can be said to exist".
It is important to get back to that because it seems to me to be agreed on all sides of the Committee.

Again, the noble Lord, Lord Middleton, cannot have it all his own way by saying that he simply got the agreement of the Association of Agricultural Valuers. The RICS, on the other hand, deliberately condemns the present drafting and says that the open market assessment must be brought back in. I have with me the piece of paper which no doubt has reached most Members of your Lordships' House. I think we really have to start with the fundamental view that we should stick to the open market valuation as the basis for rent determination and make exceptions to them—not, I hope, mandatory exceptions which go all the way through this Bill in the CLA and NFU package but permissive ones which the arbitrator can take into account as he thinks appropriate. This, again, is part of our recommendation.

Finally, as we go through the Bill, beginning today, I hope that we shall think of those wider considerations which my committee pointed to as the basis for rent assessments. We must get agricultural holdings legislation generally in line rather than deal today solely with rents.

As this looks like being a fairly lengthy debate on the first amendment, perhaps it might be convenient if the House were to resume for the Statement. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to: House resumed.