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Lords Chamber

Volume 445: debated on Tuesday 22 November 1983

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House Of Lords

Tuesday, 22nd November, 1983.

The House met at a quarter-past two of the clock: The LORD CHANCELLOR On the Woolsack.

Prayers—Read by the Lord Bishop of Hereford.

Lord Fanshawe Of Richmond

Sir Anthony Henry Fanshawe Royle, KCMG, having been created Baron Fanshawe of Richmond, of South Cerney in the County of Gloucestershire, for life—Was, in his robes, introduced between the Lord Home of the Hirsel and the Lord Rawlinson of Ewell.

Lord Carmichael Of Kelvingrove

Neil George Carmichael, Esquire, having been created Baron Carmichael of Kelvingrove, of Camlachie in the District of the City of Glasgow, for life—Was, in his robes, introduced between the Lord Pitt of Hampstead and the Lord Ross of Marnock, and made the solemn Affirmation.

Agricultural Marketing

2.43 p.m.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government to what extent they have fulfilled the undertakings given on 7th February by the Minister of State during the Committee stage of the Agricultural Marketing Bill, "to adopt a flexible approach" in assisting those co-operatives which sought to take over the Land Settlement Association's marketing functions.

My Lords, we have fulfilled the undertakings given by my noble friend Lord Ferrers. For the new co-operatives of former Land Settlement Association tenants, deferred terms are available for the purchase of packhouse buildings, and we have recently introduced arrangements for selling packhouse buildings at a concessionary price where the co-operatives are unable to afford the market price. All the co-operatives are able to use packhouse buildings under temporary rental agreements until they have purchased the packhouse, or made alternative arrangements.

My Lords, I am grateful to the noble Lord for that Answer; but I am bound to ask him whether he is aware that the information that he gives is quite contrary to the information which I have? Is he aware, for example, that in one particular case of which I have knowledge a packing shed valued by an independent valuer at £30,000 is being offered to the growers by the Government agent at £65,000? Surely this cannot be construed as being reasonable or flexible.

My Lords, as my original Answer made clear, we have recently introduced arrangements for selling packhouse buildings at a concessionary price where the co-operatives are unable to afford the market price. It may be that those people who have been speaking to the noble Lord have not done so within the past few days. We wrote to the co-operatives about these arrangements two weeks ago.

My Lords, will the Minister acknowledge that in this context the co-operative idea is a valuable one and deserves every encouragement? To the extent that it is within his power, will the Minister take steps to see that the crucial early stages of the transition take place without any punitive financial considerations or burdens being imposed on the growers' co-operative? In order to iron out any difficulties, will the Minister agree to see the chairman of the growers' co-operative as early as possible?

My Lords, if I may say so, I do not think that that is necessary. I am very pleased to be able to say that growers on all estates—I emphasise, on all estates—either have, or will have, access to co-operative organisations. Growers' co-operatives exist on seven of the estates, and established co-operatives are being used on the other three.

My Lords, may I ask the Minister whether he is aware—as I am sure he is—that the co-operatives are still being set up, or tenants on some of the holdings are still seeking to set them up? The problem that they are encountering is that they cannot find money to take over the packing sheds and the propagation departments, and they are suggesting—and I have letters to this effect—that the prices are much too high. In one case there is a figure of £30,000 for a packing shed and £150,000 for the propagation facilities. That is too big a sum for the tenants to find, and I wonder whether, in addition to what he has already said, the Minister will check back to make sure that the facilities are being offered at a proper price and to see whether the aspect of depreciation on the buildings is also taken into account in fixing the price?

May I also ask the Minister—

My Lords, of course I entirely understand the concern which the noble Lord is expressing. But I think that I ought to repeat that the communication about concessionary prices was sent to the co-operatives two weeks ago, and I hope that this will put the matter on an acceptable basis.

My Lords, will not the noble Lord agree that there has been much disquiet and unhappiness among the growers since the Government took their decision? Will he confirm that? Is he aware that I received information that some members of the staff who have given loyal service over a very long period have been evicted from their tied cottages without being given the opportunity to stay on to find alternative accommodation? Can the noble Lord say to what extent that is true?

So far as the packing stations and the propagating centres are concerned, to what extent does the noble Lord believe that the prices which are being offered are fair in all the circumstances? Can he say whether there has been an independent valuation, and whether time has been given to the growers to make a purchase on the basis of an independent valuation?

My Lords, with respect to the noble Lord, whose experience of this matter of course goes back very much further than mine, so far as his earlier supplementary questions are concerned, I believe that there is here a good deal for those who are tenants. They are being offered their holdings, if they wish to buy, at tenanted value, which can mean up to a 50 per cent. reduction in price, which is more than some council house tenants, for instance, are being offered under different arrangements. If a tenant does not wish to buy his holding, he does not need to do so; he is under no pressure to do so. He can continue as a tenant.

Regarding the staff, again their houses have been offered to them on a scale according to the time that they have been working for the LSA, at discounts which, if I may say so on behalf of the Government, I consider to he generous. I am not aware of any evictions. This is of course a matter which I take very seriously indeed, and I shall immediately check on what the noble Lord has said.

The noble Lord asked me a third point which, I am sorry. I cannot recall—

My Lords, it was the question of whether there has been an independent valuation.

My Lords, of course we are at all times advised by our professional advisers, and when we feel that we need to do so, we turn also to the district valuer.

My Lords, the noble Lord has twice asserted that he has recent information; I think he said that he had been in contact with the people concerned two weeks ago. But is the noble Lord aware that I was in contact with them four days ago and that the information that I have been given is completely different from that in his possession? Therefore I wonder whether in the circumstances, after reading his answers, he will agree to see the growers concerned if the chairman of the growers' co-operative feels that there is a case for discussion.

My Lords, of course I should never decline on behalf of my right honourable friend to see anybody who wishes to come and speak at the Ministry of Agriculture, provided that matters are arranged in the proper way. However, at the risk of wearying the House. perhaps it would be for the convenience of the noble Lords, Lord Beswick, Lord Collison, and Lord Cledwyn of Penrhos, if I were to say that following what was called the Eden Report, arrangements have recently been agreed to sell packhouse buildings to estate co-operatives at a concessionary price. In order to benefit from this offer, the co-operative must be able to demonstrate to the Minister's satisfaction that the co-operative could not afford the market price. The report envisaged that each grower would contribute to the purchase on the basis of £2,000 each, with the amount varied according to the throughput of growers in the co-operative and the amount that they could afford. This offer is also subject to a 15-year restriction on resale. It is those details which have been communicated to co-operatives within the past fortnight.

My Lords, at the risk of wearying the House, may I ask whether the Minister would confirm that much of this equipment that they talk about is equipment that the growers, the co-operatives, had themselves paid for previously in the shape of establishment charges, so he is making no concessions to them?

My Lords, will the noble Lord allow me to ask another question in order to avoid my getting up again? I, too, have been informed that the prices being charged for the holdings are in excess of the real value and are in excess of the prices at which they would be sold on a tenanted valuation. Should not the members of the staff be offered the opportunity to buy their homes on the same sort of terms as are offered to certain local authorities, which are at considerably reduced rates?

My Lords, on the first question, I think I should write to the noble Lord. Lord Collison. It was a little difficult for me to assimilate it. On the second point that the noble Lord put, I can only repeat that I believe the discounts offered, which have been on a sliding scale up to £7,000, have been realistic and generous. In answer to the noble Lord, Lord Beswick, growers' charges over the years have included an element covering the costs of the buildings and machinery provided by the Government. The charges made are therefore similar to rent, and have been looked at in that light.

School Governors' Meetings: Student Participation

2.53 p.m.

My Lords, I beg leave to ask the first Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what steps are being taken to encourage local education authorities and governing bodies to allow students to attend governors' meetings as observers.

My Lords, the attendance of observers is a matter for individual governing bodies. The Government see no need to press the case of any particular category of person.

My Lords, is the Minister aware that these days a greater number of students and young people are more articulate and inquisitive than ever before, and that they are anxious to take part in the meetings of governing bodies?

My Lords, the noble Lord referred to students. In further education, there are students on the governing bodies of polytechnics and the majority of other establishments. So far as the younger students, pupils, are concerned, there are opportunities outside the governing body for the student-pupil voice to be heard in committees and elsewhere. In many secondary schools, for example, there is a school council.

My Lords, is the Minister aware that in certain schools, one of them in north London—a large comprehensive school, of which I had the privilege to be chairman of the governors for some years—it has been found that the inclusion of pupils as observers at the governors' meetings is not only useful to the pupils as an exercise in democracy but is also of great value to the governors themselves? While no one is asking the Government to lay down any laws, can the Government not be a little more forthcoming in encouraging this development among pupils in schools as distinct from further education institutions and suchlike?

My Lords, I think the very fact that there were students who came to hear the noble Lord, Lord Hatch, as chairman of the governors of the school means that any school in the country could do likewise.

My Lords, would the Minister not agree that much educational opinion holds that it is the business of governors to govern and of students to study?

School Governors: Rights And Responsibilities

2.55 p.m.

My Lords, I beg leave to ask the second Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what steps are being taken to make governors aware of their rights and responsibilities in the governing and running of schools.

My Lords, these matters are for local education authorities and voluntary bodies. Detailed information on the provision made is not collected. However, the indications are of an increase in the efforts to ensure that governors are well versed in their responsibilities. As a contribution towards this, the Department of Education and Science sponsored an Open University course on "Governing Schools" which is being widely used.

My Lords, is the Minister aware that most governors do not know that they have exceedingly great responsibilities under the 1944 Act and that they can do all kinds of things under the Act of which they are not aware? I am asking the Government to make governors aware of this. It is not being done by local authorities.

My Lords, I would certainly not care to argue with the noble Lord, Lord Taylor, about anything to do with governing bodies. The noble Lord knows a lot more about them than I do. But my impression is that much is being done in the way of training. Six thousand students have completed the Open University course, to which I referred, since its inception in April 1981. Many sets of materials have been purchased by local education authorities and other agencies for use in existing or new training programmes. I know also that a number of authorities are running courses for new governors, as are some of the voluntary bodies.

My Lords, is the Minister aware that local authorities are keen to run these courses in many cases but find it rather difficult because of the cut-back in educational expenditure?

My Lords, yes; I think that that is probably the case. But if people are keen to learn to be governors, they will not necessarily want to pay for the privilege of learning.

My Lords, is the noble Lord aware, and if he is not aware will he make himself aware, of the fact that any good chairman does not talk as much as he listens? May be that is not the philosophy of the party opposite. But a good chairman is a good listener. Would the noble Lord agree that one of the responsibilities of the governors of a school is to encourage and make facilities for the pupils of that school to pass through the transition period into adulthood in a full and democratic manner, rather than in the authoritarian manner that has been expressed from behind him?

My Lords, I think that if the noble Lord listened a little more he would realise that we have passed on to another Question since the one that he asked.

My Lords, will the Minister circulate all governors on the virtues of brevity?

My Lords, do not the answers that the Minister gave earlier refute the absurd statement by the noble Lord, Lord Beloff, that the duty of governors is to govern and that the duty of students is to study, bearing in mind the importance the Minister attaches to the governors studying their own responsibilities?

Acid Rain: Effect On Woodlands

3 p.m.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what steps have been taken to assess the present and potential damage to our woodlands caused by "acid rain".

My Lords, there is no evidence at present that woodlands in the United Kingdom are being adversely affected by acid deposition but the Government are keeping a close watch on the situation. There is regular monitoring of the health and growth of many tree species by the Forestry Commission. The potential effects of acid deposition on woodlands are being investigated in a number of Government funded research projects by the Forestry Commission, the Natural Environment Research Council and the Department of the Environment.

My Lords, I thank the Minister for his informative and reassuring reply to all woodland owners in this country, either state or private. Has his attention been drawn to the article in Saturday's Financial Times reviewing the German woodlands, in which it states that it was like visiting a graveyard? Has his attention been drawn to the report of the Swedish Forestry Association to the effect that there is serious damage to the woodlands of Sweden and that they attribute this to some extent to aerial pollution from the United Kingdom? Has the noble Lord's attention also been drawn to the fact that the Bonn Government have now instructed all new power stations to install equipment to reduce the carbon dioxide emissions because of their serious effect on German woodlands? Will the noble Lord keep an eye on the potential danger to British woodlands in this respect?

My Lords, I am very grateful to the noble Lord, Lord Taylor, for the topicality of his Question. I have not seen the Financial Times article to which he referred, but I have seen the other reports which he also mentioned. Of course I am fully aware of the situation in Germany at present. But it is generally accepted that acid precipitation is a factor, and only a factor, in the acidification of fresh waters and that there is little evidence so far of damage to trees by acid rain. This, as I am sure the noble Lord and the House will well know, was accepted by experts at the Stockholm Conference in 1982. Beyond that I am the first to agree that not everything in the garden is beautiful and the Government, as I said in my original Answer, will keep close watch on the situation in this country.

My Lords, can my noble friend say whether there is any truth in the report that the area of Scotland worst affected by acid rain is the South West, and that the prevailing winds there are westerly, which tends to contradict the Swedish allegations?

:Yes, my Lords, in the South West of Scotland the prevailing winds are westerly, but it is not necessarily the wind-borne deposition that is in question; it is quite possible that the rain could come from the United States or wherever. The important point is that it is not the direct rainfall that is in question, but the effect of the rainfall on the soil.

My Lords, would the Minister not be prepared to ask the Forestry Commission, who are very knowledgable on these matters, to submit reports from time to time when they feel that there is an increasing danger of acid rain on the forests of our country?

My Lords, as I said in my original Answer, the Forestry Commission are already undertaking a study of this matter. When it is completed they will of course inform the department, and I have no doubt that there will be an opportunity to report the results of that study to the House.

My Lords, we are all very sensitive about the question of trees since the Dutch elm disaster of the last 25 years. We want to take the matter seriously but we must not be overwhelmed by the various articles and so on. I was in Bavaria a year ago, and I wonder whether the Minister is aware that in that country I was tackled by a lady who blamed this country for the acid rain in Bavaria. I asked to see the forests that were affected but they could not identify them. However, that is not to say that we should not be careful. I know that the commission are doing a great deal to keep an eye on the situation. but we must keep the matter in perspective.

My Lords, I am very grateful to the noble Lord from the Opposition Front Bench. Of course we must keep the matter in perspective. One of the interesting facts that I have come to learn in studying this question is that although the United Kingdom emissions of sulphur dioxide have fallen by about 30 per cent. since 1970, no corresponding reduction has been observed in the acidity of rainfall.

My Lords, are the Government aware that the situation is extremely grave, because once you can see evidence of damage from acid rain on trees it is already too late to save the trees? Are the Government also aware that one of the problems in demanding damages for acid rain is in trying to prove whose acid is in the rain that is doing the damage?

My Lords, as regards the last point raised in the noble Lady's supplementary, I of course agree that it is impossible to identify which particular country's acid is in the deposition that affects a particular area of the country. But as I said a short time ago, there is no evidence that acid rain perse affects the trees. Evidence is beginning to emerge that the effect is soil borne and it is that matter that is being studied so closely.

My Lords, would not my noble friend agree that, apart from trees, acid rain is very harmful to aquatic freshwater life? Is my noble friend aware that, on my land in the West of Scotland I have a Norwegian firm called Norsk who have a large salmon breeding establishment? Every month they monitor the water, and the acidity is increasing. Is my noble friend aware that I understand that in Dumfriesshire, the Galloway country, there are several lochs where all life has disappeared? Is he further aware that in Sweden which has 90,000 lakes, 30,000 are now completely dead due to acid rain?

My Lords, one of the factors of acid rain is that it is particularly damaging in certain geological areas where the soil is already acid—in other words, it will make more acid. However, if the acid rain falls, for example, on the South Downs, the natural alkalinity of the soil will neutralise the effect of the rain. So it is particularly serious in those parts of the country which my noble friend knows so well. I am well aware that in these particular sensitive areas it has led to fish losses. It is one thing to establish the fact that it has happened; it is quite another thing to estabish how best to deal with it. I am advised that liming, for example—which to my layman's mind would seem to be the logical answer—in fact does not work.

My Lords, could we have an example of this acid rain? Perhaps some could be put in the Library so that we know what we are talking about.

My Lords, I do not think that that would be appropriate. Perhaps aluminium rain from your Lordships' ceiling might have a more devastating effect.

My Lords, would the noble Lord agree that the number of questions and expressions of concern in your Lordships' House this afternoon on this subject shows that there is no room whatever for complacency; that the relatively low level of recorded damage attributable to acid rain in this country is probably due to insufficient research, and that there really is an urgency to put this research in hand? Would the noble Lord also agree that the five-year programme of research which I understand is being initiated by the Royal Society does not indicate a state of urgency? Will the noble Lord accept that I am very glad to hear what he has said about the Government's initiative in inquiring into this matter to establish the facts as regards the damage which has possibly been created by the CEGB and the NCB?

My Lords. if I have been complacent in my answers today I can only apologise. I was at pains—but perhaps I failed—to point out that the Government do view this matter with great seriousness and have asked for a report, which is partially Government-funded, from the Warren Springs Laboratory. Moreover, we are, of course, fully committed to working with other signatories in the United Nations Economic Commission for Europe Convention on Long-range Trans-Boundary Air Pollution in tackling this problem. But, as I said earlier, it is one thing to identify the problem and to get the exact scientific reasons for it: it is, regretfully, quite another thing then to decide, on further scientific evidence, on how you cope with the problem. This, of course, will also have to be studied. Preliminary studies are already taking place towards this end.

Business

My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Lyell will, with the leave of the House, repeat a Statement which is to be made in another place on the review of tourism policy.

It may also be for the convenience of the House if I announce that dinner will be available at the usual time of 7.30 this evening. The Committee stage of the Agricultural Holdings Bill will be adjourned at approximately 7.30 p.m. for about one hour. During this adjournment the debate on the 6th Report of the European Communities Committee on the quota arrangements for the carriage of goods by road will be taken.

Agricultural Holdings Bill Hl

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.

Tourism: Policy

3.45 p.m.

My Lords, with your Lordships' permission I will repeat a Statement made in another place by my honourable friend the Minister of State in the Department of Trade and Industry. The Statement is as follows:

"With permission, Mr. Speaker, I should like to make a Statement about the Government's review of tourism policy, instituted in July of last year by the then Parliamentary Under-Secretary of State for Trade. I am grateful to all those who contributed, including right honourable and honourable Members of this House.

"Tourism is undoubtedly one of our most important industries. In 1982 its turnover, at some £8½ billion, almost matched that of the United Kingdom motor industry and it employed around 1 million people across the country. The Government recognise the great economic and employment potential of tourism and are determined to encourage the industry's development.

"The review, which was concerned primarily with the activities of the British Tourist Authority and the English Tourist Board, and with the relationships between all the tourist boards, also produced many proposals for improving United Kingdom tourism generally. Details of same, and of how they will be pursued, are in a paper which I have placed in the Vote Office. They include improving hotel standards, new training initiatives, proposals for computerised reservations systems, signposting policy, revitalising the traditional resorts and dealing with the tourism needs of London. The review has also pointed to other tourism issues which are the responsibility of other departments. I intend to invite them to consider further action.

"The Government's main instrument for encouraging tourism is the statutory tourist boards. In recognition of the widely accepted view that the boards need to improve their own co-ordination, the Government have decided that new organisational arrangements are required.

"I am therefore inviting the British Tourist Authority to transfer wherever possible its remaining United Kingdom activities to the national boards, so that it may concentrate on its prime responsibility: to promote Britain overseas. I am asking the BTA and the ETB to seek shared accommodation, to merge certain common services and, in consultation with the Scottish Tourist Board and the Wales Tourist Board, to eliminate duplication in their publication programmes. The review has shown that a revised approach is also needed to planning the British Tourist Authority's overseas promotions so that full account is taken of the requirements of England, Scotland and Wales in the main marketing programme. My right honourable friend the Secretary of State for Wales has announced separately improvements agreed with the British Tourist Authority for the promotion of Wales overseas.

"None of these important changes requires legislation. However, the Minister of State at the Scottish Office last week introduced in another place a Bill containing proposals for limited overseas promotion by the Scottish Tourist Board which will require some amendment to the 1969 Development of Tourism Act.

"Sir Henry Marking, the present Chairman of the British Tourist Authority, has agreed to leave his post at the end of March 1984, some five months before the end of his appointment, to permit a new chairman to begin carrying through these changes at the BTA as soon as possible. I should like to record the Government's sincere appreciation of Sir Henry's tireless and valuable work as a promoter of tourism. As the successor to Sir Henry at the British Tourist Authority, my right honourable friend is appointing Mr. Duncan Bluck, currently chairman of Cathay Pacific Airways and of the Hong Kong Tourist Association, with effect from April next for a period of three years.

"The Government believe rationalisation of the British Tourist Authority and English Tourist Board activities could best occur under a single chairman. My right honourable friend therefore intends to ask Mr. Bluck to serve also as chairman of the English Tourist Board when Mr. Michael Montague finishes his current term there. Mr. Bluck will examine possibilities for further collaboration and the possibility of a merger of the two bodies.

"Mr. Montague, who has also done much valuable work at the English Tourist Board, will play an important role for the rest of his term in helping to bring the two boards closer together. I have asked him additionally to report to me urgently on how the non-statutory regional tourist boards might take on additional responsibilities, particularly in marketing. The important role of the regional boards in English tourism has been emphasised by this review.

"I place great importance on attracting private finance to tourism and I am therefore pleased to be able to inform the House that the English Tourist Board has been instrumental in setting up a new equity fund for tourism, financed by the private sector but with access to advice from the boards. Full details will be announced at a later date. In the meantime, however, I plan to maintain grants for Section 4 expenditure in England at about the current level over the four years to 1986–87 giving a total of some £35 million for the period.

"These moves towards closer co-ordination, clearer objectives and better use of resources by the boards should be to the benefit of the tourism industry. But the review confirmed that the main task of realising tourism's potential for growth must rest with the industry itself."

My Lords, that concludes the Statement, and I might add that copies of the supplementary paper referred to in the Statement are available in the Printed Paper Office.

3.52 p.m.

My Lords, may I thank the noble Lord for repeating the Statement made by his right honourable friend in another place. May I say first of all that the tourist industry will welcome the fact that the Statement has been published. The industry has been on tenterhooks to a greater or less extent since July 1982, when the former Parliamentary Under-Secretary instituted this review and promised a Statement within three months of the institution of the review. In fact, as your Lordships will see, it has taken almost 18 months for the Statement to see the light of day, and the fact that it has been published will allay a great deal of uncertainty which has been felt in the industry and within the statutory boards during that period of time.

I think the first question one asks oneself is: Has the Statement been worth waiting for? Certainly it includes some constructive proposals, but one is bound to ask whether they are the right ones. One will need to study the Statement in detail and to look in particular at the papers which have been placed in the Printed Paper Office before one can come to a final conclusion on this. I have certainly been a constant critic of the duplication of the activities between the various statutory boards and regional boards, and if the proposals do away with some of that duplication, to that extent they will certainly be very welcome.

I noted with interest that the Statement has avoided the need for any substantial amendment to the 1969 Act, by using the device of appointing the same person to be chairman of the British Tourist Authority and of the English Tourist Board. Can the noble Lord say whether it is proposed that Mr. Bluck will be a full-time chairman? One would have thought that a full-time appointment would be necessary, bearing in mind that he will be doing a job which Sir Henry Marking currently does in four days a week and which Mr. Montague does in three days a week. Therefore a full-time chairman would seem to he very necessary.

Also, can the noble Lord tell your Lordships what salary is envisaged for this new supremo chairman of the two hoards? Previously the salaries of the chairmen of the national boards have been very much—what shall one call it?—at second-rate nationalised industry salary level. Therefore I wonder whether the noble Lord could give us some indication on that matter.

Last week the noble Lord, Lord Gray of Contin, introduced a Bill into your Lordships' House to enable the Scottish Tourist Board to market overseas, as was mentioned in the Statement. This proposal, of course, to enable the Scottish Tourist Board to market overseas arose out of the devolution Bill, which did not in fact come into force because of the referendum not gaining a sufficient percentage of votes, I also noted that the Secretary of State for Wales is shortly announcing improvements for the marketing of Wales overseas. Could the noble Lord give your Lordships some idea of whether the Secretary of State for Wales will be announcing similar arrangements for marketing Wales overseas as are envisaged for marketing Scotland overseas by the Bill that was introduced into this House last week?

It would seem overall that we are moving towards a situation of three national boards: the Scottish board, the Wales board and the English board/British Tourist Authority, and that each of the boards will in time be doing their overseas promotion. Could the noble Lord say whether he thinks that is possibly the long-term aim contained within this Statement?

The noble Lord paid tribute to the work of the regional tourist boards. One of my concerns about their work is that over the past few years the grant paid to the regional tourist boards in England by the English Tourist Board has grown smaller in percentage terms each year, with a greater percentage of the Government grant to the English Tourist Board being used by the English Tourist Board itself. One would hope that the financial arrangements—and the noble Lord in repeating the Statement talked about the Section 4 arrangements, but not about the general support for the work of the statutory boards and the regional boards—would ensure that a greater amount of Government money is available for the work of the regional boards, and that there is some alteration in the split of the grant between the national boards and the regional boards.

The noble Lord also mentioned the question of tourism in London. I regret I have not had the opportunity of looking at the paper he has placed in the Printed Paper Office. Could he tell us whether there are any new financial arrangements proposed for the London Tourist Board?

Finally, the noble Lord mentioned the question of the establishment of an equity fund for tourism. I am not quite certain how large this fund is intended to be. I think your Lordships would like to know a little more about it, and in so far as this fund may encompass the idea of joint marketing activities between the private sector and the national boards, I am sure that would be a success. But if it is a fund to which the private sector is to contribute, leaving the national boards to spend as they will, then I do not think the same success would attend an activity in those senses.

Again, I thank the noble Lord for repeating the Statement. I hope that its contents will be something which will benefit the tourist industry as a whole, because I think we are all very much aware that it is one of our most important industries.

3.59 p.m.

My Lords, on behalf of my noble colleagues on these Benches, may I thank the noble Lord for repeating the Statement which has been made in another place. We are particularly grateful that the role of tourism and its importance in the economic affairs of the country has been recognised. We shall be interested to see these other measures which are in the paper which has been placed in the Printed Paper Office. I wonder whether they include rate relief or low interest loans to small hotels, and so forth, for some of the statutory improvements which are imposed upon them from time to time. I wonder whether the review, which points to the other tourism issues which will be the responsibility of other departments, deals with questions of regional airports and transport generally. I am interested to see the transfer of powers to Wales and to Scotland and I particularly welcome the transfer of powers to Scotland to promote overseas.

I do not propose to debate this subject at this stage, because I do not think that that would be appropriate in the consideration of a Statement. But I should like to ask the Minister how it is that he hopes to reconcile the merging of the British Tourist Authority with the English Tourist Board, and then giving separate powers to the Scottish and Wales Tourist Boards, with the job which it is stated at the beginning is the job of the British Tourist Authority—that is, to co-ordinate all of them. I do not see how an authority which is meant to co-ordinate three independent and equal authorities can satisfactorily merge itself with one of them. It seems to me a very curious Statement at that point and I should like a little more explanation of how the Government think that that will work.

The final point which I should like to draw to the attention of your Lordships is the importance of attracting private finance to tourism. I should like it said that most of the finance which goes into the promotion of Britain at home and overseas comes from private sources. It comes from the hotels and the tourist organisations and enterprises of the country. By far the greatest part of the money spent on tourism comes from the tourism industry. I hope that this will be recognised and that the Government will give help where help is needed to measures which are already being taken by the tourist industry to promote tourism overseas. I thank the Government for realising that tourism's potential growth is a matter for the tourist industry, but please continue to help them.

My Lords, may I swiftly thank the noble Lord, Lord Ponsonby, and the noble Viscount, Lord Thurso, for their very forthright welcome of the proposals in the Statement. The noble Lord, Lord Ponsonby, is a professional in this field and therefore his comments, his perspicacity and his questions are of particular value. We hope that, after the gestation period, this Statement will remove some uncertainty. Indeed, we trust and hope that the proposals are the right ones. We also hope that they will reduce unnecessary duplication.

The noble Lord, Lord Ponsonby, asked me a number of questions to which I hope I have the answers. If I miss any or do not cover them in sufficient detail, I promise to write to him. The noble Lord asked me about the appointment of the new chairman, Mr. Bluck. I understand that it will be part-time only. Secondly, the noble Lord asked me about Mr. Bluck's salary. I have to tell him and your Lordships that this is currently under negotiation. Thirdly, the noble Lord asked me about Wales and the Wales Tourist Board. I am able to put his fears at rest. My right honourable friend the Secretary of State for Wales made an announcement in the form of a Written Answer in another place last week.

The noble Lord also raised the question of Section 4 assistance. Of course, any sums which are forthcoming under Section 4 over the next four years will depend, to a large extent, on how many applications come forward. As the noble Lord will appreciate, this will not necessarily be the same amount every year; and, indeed, the provisions will be approved each year in Parliament. But if we gave a somewhat broader indication of any of our intentions over a longer period, that would enable both the industry and the English Tourist Board to plan their development strategy. We hope and trust that that will be more satisfactory.

The noble Lord asked me about regional tourist boards. I can tell your Lordships that, if regional tourist boards take on any additional responsibilities, it will be very important to consider their financial arrangements for them, and we shall take great care to do that. The noble Lord raised the further point of the equity fund. I hope that he, as a professional and someone with knowledge of the industry, may be able to await the publication of fuller details which, maybe, I or one of my noble colleagues will give to your Lordships later.

I thank the noble Viscount, Lord Thurso, for his welcome for these proposals. As a good Scot, he raised the suspicion, about which I also felt a gentle tremor before I studied all the details, that there might be grounds for thinking that the English Tourist Board would be obtaining an unfair advantage through merging with the British Tourist Authority. Of course, the noble Viscount will appreciate that the role of the British Tourist Authority is—and we intend it to be—to promote Britain overseas. Any of us who travel overseas find Scotland, England and Wales promoted very vigorously under those three headings, but of course under the overall umbrella of the British Tourist Authority.

The noble Viscount also mentioned private finance and, of course, we remember that. We salute all those who invest in the tourism industry, which is of such value. The noble Viscount raised a query about the merger of the British Tourist Authority and the English Tourist Board. I would stress to him that this is not a merger. We are intending to bring them together physically, but it is not the British Tourist Authority's role to co-ordinate the work of the national boards. I am delighted to add a touch of humour to the lengthy deliberations to which I hope we shall be coming very soon. As regards the powers of the Scottish Tourist Board, these are intended to supplement the work of the British Tourist Authority and they will be undertaken in consultation with the British Tourist Authority.

My Lords, can the noble Lord say when he expects that these changes, mergers or not, will be completed?

No, my Lords. I shall inquire and write briefly and swiftly to the noble Lord.

My Lords, I thank my noble friend for repeating the Statement. May I ask him whether he agrees that the greatest boost which the Government could give to the tourist trade would be a reduction in VAT, especially as regards overseas visitors? May I also ask my noble friend to confirm that the original intention of the tourist board was to close some of the information offices in our channel port towns? I shall quite understand if he cannot answer now, but can he say whether that policy has now been reversed?

My Lords, in reply to my noble friend's last question, I do not think so. If I am wrong, I shall certainly write to my noble friend. As regards my noble friend's main proposal about a reduction in VAT for overseas visitors, I shall certainly pass on his forthright point to my right honourable colleague in another place. My noble friend is, perhaps, seeking special treatment for Scotland or the Isle of Mull, but I will pass on his comments anyhow.

My Lords, may I ask my noble friend one short question, which should have a very easy answer? Having been president of one of the regional boards at the very beginning of this organisation, I am naturally interested. May I ask whether or not there is to be any change in these local boards?

My Lords, I do not think that there is any change in the composition or the functions of the local regional boards. I presume that my noble friend is referring to England.

My Lords, would my noble friend bear in mind that those of us who have been concerned with tourist boards for many years and who will welcome measures to prevent duplication in this country will find it very puzzling that now there is to be total duplication abroad, since it must only fragment the efforts of this country to sell Britain abroad if there are four boards all trying to do so?

My Lords, I have stressed, and I stress once again to my noble friend who is pre-eminent in England and, I hope, pre-eminent in the efforts of the British Tourist Authority, that the function of the BTA will be to co-ordinate the efforts of England and also, I hope, of Scotland and certainly of Wales. My noble friend will know when he goes overseas that it is the function of the BTA above all to stress, "Come to England", "Come to Scotland" and "Come to Wales".

My Lords, when we discussed this problem some years ago in the House the noble Lord, Lord Montagu of Beaulieu, the noble Earl, Lord Amherst, and I moved an amendment which was accepted, whereby each of the national boards had equal membership on the BTA. In that way the national boards controlled the overseas marketing of the BTA. I should have thought that that might be a more sensible solution than the one which the noble Lord has suggested.

My Lords, I shall bear in mind the suggestion of the noble Lord, Lord Ponsonby. If I have anything to add in reply, perhaps I may write to him.

My Lords, for the purposes of clarification, may I ask the noble Lord whether there is to be any fundamental change in the position of the Scottish Tourist Board? There have been suggestions of one sort or another but in some cases they lacked precision as to what was intended.

My Lords, I wonder whether I may ask my noble friend to have patience. As I am sure he is aware, a Bill which is before your Lordships received its First Reading last Thursday. I would not wish to comment at the moment on the actual details of the Scottish Tourist Board. I wonder whether my noble friend could contain himself until we debate this matter at Second Reading.

My Lords, on the question of overseas expenditure, may I press the noble Lord to say whether the advertisement of England, Scotland and Wales will be separate or under one umbrella? It is very important to know the answer to this question not only in New York but throughout the world. Can the noble Lord indicate whether there will be a concerted effort to advertise Great Britain as a whole, although the tourist boards here now enjoy devolved powers?

My Lords, I repeat what I said in my earlier answer: we understand that the main function of the BTA will be to co-ordinate the efforts made to sell Wales, Scotland and England. I hope there will be no fragmentation. As I said earlier, I understand that it will be under the umbrella of the BTA. Indeed, the noble Lord used that term.

My Lords, will the English Tourist Board have the power to sell England overseas?

My Lords, I understand that the position is as I have spelled it out three times: that it will be under the aegis and umbrella of the BTA.

Agricultural Holdings Bill Hl

4.14 p.m.

House again in Committee on Amendment No. 1.

I am advised that the machinery of Clause 1 as drafted could well afford a disincentive to letting. No doubt many of your Lordships have received the same advice. Your Lordships have no doubt seen the letter in The Times signed on behalf of Cluttons and five others where it said that the declared intention of the Bill is to encourage landowners to let more farms. In our opinion, it will have precisely the opposite effect. Is not this a serious cause for concern, coming as it does from such an eminent source?

The fear of this appears to be reflected not only in Amendments Nos. 1 and 16 but also (although one must not anticipate) in Amendment No. 3 which stands in the name of my noble friend Lord Renton. I am wondering whether my noble friend the Minister can give some form of categoric assurance in his reply to allay these manifest fears? The landowning charities regard Amendments Nos. 1 and 16 as vital to their continued involvement in agriculture. Ought not further consideration to be given to this matter before any Division is taken'? I respectfully support what my noble friends Lord Kinnoull and Lord Renton have said in this regard.

I should like to support my noble friend Lord Renton who said that this Committee stage should be a valuable exchange of views. I hope to put before your Lordships what I believe to be the tenants' views, although I would not for one minute say that every tenant, like every land agent, would agree with my views. The problem is that there is no such thing as an open market. I believe therefore that the amendment which is before us is based on a mythical hypothesis.

May I pick up one or two points made by my noble friend Lord Kinnoull. He stated that the old rent formula caused no great friction. That is not so. I speak with feeling, as a tenant. It may not have caused friction with the land agents but it was a worry to us every three years. So do not let us try to pretend there was not friction; there was. And there were great, great worries.

May I say to my noble friend that I was basing that supposition on the fact that there were very few arbitrations.

Of course there were very few arbitrations. We were too frightened to go to arbitration. This is what we are trying to grasp in Clause 1. My noble friend says that the new formula is too long and complicated and too difficult to interpret. I am surprised that he says this. Chartered surveyors are highly intelligent and well-trained people. I ask my noble friend: why make it more complicated by his amendment'? The noble Lord, Lord Nonhfield, did not think that Clause 1 (3)— "take into account all relevant factors"—made good the loss of the open market. I ask him, and I am sure he will tell me the answer when he has given it some thought, to look at subsection (3) (d) which states, "the current level of rents for comparable lettings".

We then turn to what is a willing and prudent tenant and what he will offer. It is a point to which I shall return and upon which I hope I shall get the support of the whole of your Lordships' Committee when I come to my Amendment No. 19. The tenant could be prudent and the bid he puts forward could be sustainable in a number of instances. He could gamble on inflation. Who in your Lordships' House has not gambled on inflation in the past 10 years? He may need to expand his holding. He may only just be able to keep 40 cows, yet he knows that he has to keep 100. Agistment rents—of which I have some experience on both sides of the fence—are a perfect example of people offering uneconomic rents. Finally—and there are many other factors—he might have a son whom he wants to assist. With all these factors, he could still be prudent and he could still be willing—and so could the landlord be prudent and willing. And so, perhaps, could he sustain—but it would not be fair to compare the rent that he is offering with others.

I believe therefore that the words "open market" are dangerous. In fact, I would say that they are unacceptable to me as a tenant. You may say that I am being frightened and that the clause will make no difference—and I am sure my noble friend will say that. If it makes no difference to include the words "open market" then let us, for the sake of peace, have them out.

The noble Earl, Lord Kinnoull, also made the point that the Oxford and Cambridge colleges support him. Before your Lordships speak on behalf of everybody, I ask you all to try to do that which I hope I did at the start of my speech, when I said that I speak on behalf of myself; and I believe that I speak on behalf of most of the tenants. But I can assure your Lordships that you will not get every Oxford and Cambridge college bursar agreeing with one another. If you do, it will be the first time and the last time in history that they ever agree on anything at any time.

Those who support the package as it stands are the Central Association of Agricultural Valuers and also the Incorporated Society of Valuers and Auctioneers. So do the Tenant Farmers' Association. That is an organisation with which I have some contact as they are my neighbours but of which I am not a member. I believe—and I suspect that the opposition will raise this point—that the Farmers' Union of Wales also support it. Certainly in my own county they support this package.

Parliament has an absolute right of course to decide what it wants to do over this clause. I am not objecting to that. I entirely take the point made at the beginning of this debate by the noble Lord, Lord Bishopston. But I want the Committee to be aware that if the words "open market" at the beginning of this amendment go in, you will not in my opinion have the support of the tenants. All right, you need not have their support—that is your right and it is Parliament's right. But do not be misguided for one minute that you can include that phrase and get the good will of the tenants.

I am very glad that I gave way to the noble Lord, Lord Stanley of Alderley, because he has said most of the things that I was going to say and has said them extremely well. Any formula one may produce will be difficult. If one talks about prudent landlords, then a prudent landlord might be a fellow who takes all that he can jolly well get—that might be considered extremely prudent. A prudent tenant might have any view under the sun. He might say, "I can afford this for three years and I am going to get a jolly good farm". Whatever the formula, it has to be interpreted in a sensible way by the arbiter.

I much prefer the words in the Bill because they give more guidance. The noble Lord, Lord Middleton, said that in the past the arbiters had discounted to a large extent the extreme open market formula simply because there was no open market; that it was in fact an extremely closed market and key money was common. It is also a fact that if one looks at the rise in rents over the past few years, it bears no relation whatever to the profitability of farming. In fact, profitability has been going down while rents over the past five years have risen by about 85 per cent. I would not guarantee that figure but rents have risen very largely and the profitability of farming has been going down. So I prefer the formula in the Bill, although I know it is difficult.

I was astonished that the noble Lord, Lord Middleton—whom I have come to regard as enormously sensible—suggested that if the Government can find a formula to suit every single influential body in the country, they might take it. I implore the Government not to try, otherwise we will be here for a month of Sundays. There are some very sensible amendments towards the end of the Marshalled List—particularly those which have the entire agreement of the CLA and the NFU, which are to be moved by my noble friend and myself, which the Government might well take.

I should like to support this amendment. I turn to two particular points—one of them raised by my noble friend Lord Stanley of Alderley who said—as usual—that there is no open market. I believe that there is an open market. It might be restricted, but whatever one values or sells, one goes to the open market. If one were to value your Lordships' House, one would start off with the open market and then take into account all the other relevant factors. Then one would come back to the open market. That is the way one values. If there is a restricted market, do not let us forget that it was the NFU in 1976 who further restricted the market by asking us to support succession of tenancies—which some of us did not do. If the tenants wish to be further mollycoddled, let them be so at their own risk because they will lose the goodwill of the landlords.

The noble Lord, Lord Mackie of Benshie, said that rents had increased at a quicker pace than net farm income over the past few years.

With respect, I said that rents had increased while net farm income had decreased.

Yes, that rents had increased faster than net farm income, but at the same time net farm income had reduced.

My point was that rents had increased by 85 per cent. and farm income had decreased.

So that the gap had widened. The noble Lord may recall—as I am sure he will—that in 1965 rent as a proportion of net farm income was about 40 per cent.; but in 1973 it was about 30 per cent. We did not hear much from the tenants during those years.

Every arbiter to whom I have spoken has said that the proposed Bill will make it more difficult to determine the rental value of a holding. I will quote an eminent arbiter, who wrote:
"Two things are clear. Awards will be no more predictable, and the arbitrator's job will be no easier".
My Amendment No. 23 is designed to help the arbitrator, but the amendment we are now discussing is more satisfactory. When I come to Amendment No. 23, I shall also talk about comparable holdings because I do not believe that covers the open market. It keeps the basis of assessment much the same as it has been since 1948 but with the aim of excluding from consideration what one might call "the froth on the top" of the tender rents.

My noble friend the Minister has kindly made available Notes on Clauses. I may refer the Committee to page CL1/3 and, in particular, to paragraph 3, where your Lordships will find these words relating to the 1948 Act:
"However, it gave the arbitrator no guidance on the level of the rent properly payable which he was required to determine in respect of that holding. This submission created difficulties and was rectified".
And so it goes on. It was rectified in 1958. This Bill gives the arbitrator no guidance on how to determine rentals. It only tells him the factors he should take into account. We must not fall into the same trap as we did in 1948. for what is left of the landlord/tenant system will not wait another 10 years for another Act to rectify our errors.

I believe it is important that we should obtain maximum agreement, if it is possible, for any amendment. My noble friend Lord Middleton challenged those who criticised the CLA/NFU agreement to find a better rent formula. I believe that we have done so, and I believe it is supported by the bulk of institutional landlords, and by a lot of private landlords. I know it is supported by members of the NFU and by tenants because I have talked to them—maybe not to all, but certainly to some.

I suggest to my noble friend Lord Kinnoull that we do not press this amendment today but give my noble friend the Minister a little more time to call in all the sides with an interest in this matter for further discussion. When we return to this at a later stage, any party who has not come back to the table to discuss Clause 1constructively in order to improve it (and it does need improving) can be fairly criticised for putting the preservation of a small number of its membership in front of the good of agriculture.

I support my noble friend Lord Caithness and I ask my noble friend Lord Kinnoull not to press the amendment to a Division. We have heard many views, and if the Minister feels that he can leave the door open with all the negotiating parties perhaps my noble friend Lord Kinnoull will not press his amendment to a Division.

May I follow my noble friend Lord Caithness and ask: what is the purpose of the Bill? My understanding is that the main purpose is to endeavour to get more tenanted land on the market. Therefore, I feel it is essential, and a prerequisite, that the term "open market" and the open market rent should be retained and put into the Bill, so that when in the future there are more agricultural lettings available on the market the term "open market" will have more meaning than it appears to have at the moment.

The other question I have is: Just how does the Committee wish us to proceed? I wonder whether we are at times going off on a tangent on this admirable amendment, which I entirely support. Are we to refer to other amendments which are to be moved later by several noble Lords? Are we in danger of repeating ourselves ad nauseam? Are we to discuss the whole business of trying to find a better rent formula, as suggested by my noble friend Lord Middleton, at this stage, or as and when individual amendments are reached? We ought to be told how we are to proceed. We need guidance. For example, I could make some remarks now to my Amendment No. 15, but I am not sure whether this is the right moment.

4.33 p.m.

Perhaps it would be to the convenience of your Lordships if I intervened briefly now. The Government find themselves in a difficulty in answering the amendment of my noble friend Lord Kinnoull and the noble Lord, Lord Howard of Henderskelfe. There are several different formulae for rent that have been placed before the Committee on the Marshalled List. The noble Lord, Lord Middleton, who I normally believe implicitly in all that he says, says that there are three different formulae, but for once I take issue with him; I believe there are five. First there is the formula currently in force. There is the formula which we have in Clause 1 of the Bill. There is the formula of my noble friend Lord Kinnoull, together with the noble Lord, Lord Howard of Henderskelfe. There is also the amendment of my noble friend Lord Renton. That is four. Then there is the amendment of the noble Viscount, Lord Dilhorne. Indeed, there is also a sixth; namely, the Scottish rent formula which, with admirable insularity, your Lordships have not turned towards in these debates.

Very briefly, because this is only meant to be an intervention, of these I think it is fair to say that the formula in force at the moment is inadequate in the Government's view because it does not coincide with the current practice of arbitrators. That is why the formula in the Bill has been proposed. It will ensure that current practice is given the required statutory cover. Both the amendment of my noble friend Lord Kinnoull and that of my noble friend Lord Renton would retain some of what is already in Clause 1 but would introduce new provisions which depart significantly from the agreement reached between the National Farmers' Union and the Country Landowners' Association.

My noble friend Lord Dilhorne will, I hope, forgive me for mentioning his amendment, as he has not yet spoken to it, but it provides a most interesting and different approach. It would replace the present rent formula and the present arbitration procedure as well. Some people would say that that was throwing the baby out with the bath water, but I am sure that with his customary persuasion my noble friend will convince us that that is not the case and that there is much to be said for his formula. As I said, there is also the Scottish rent formula which we must keep in mind.

There is, therefore, a wide range of different options for your Lordships to consider. However, I am sorry to say that from the speeches I have heard so far there is no agreement on any satisfactory alternative to the formula currently in the Bill. The formula in the Bill carries with it considerable support, and my conclusion is that we should not lightly cast it aside. I realise, of course, that concern has been expressed. Indeed, we heard it from my noble friend Lord Campbell of Alloway. All I would say at this stage is that if the Committee can create a greater measure of agreement, possibly by incorporating features from the two amendments now before your Lordships, well and good. If there is a prospect of that as a result of this debate the Government will naturally agree to go away and give further consideration before Report. However, I feel that in offering to look again at the detailed wording, if that is the conclusion we ought to come to at the end of the debate on this amendment, the Government must make it clear to your Lordships that we cannot just cast aside the broad measure of agreement which was worked out after such lengthy negotiations and which commands a very considerable measure of support.

I shall end there. I shall go on listening very carefully to what is being said, and in a little while I shall certainly try to respond as helpfully as I can to the more detailed points. However, I thought it right to show your Lordships that the Government do not have a closed mind but are very mindful of the difficult agreement which was reached and which made possible the bringing forward of Clause 1.

Has my noble friend seen the letter in The Timestoday from the president of the Country Landowners' Association, which indicates quite clearly that she has an open mind?

What the noble Lord, Lord Belstead, has just said bears out what my noble friend Lord Northfield said earlier; that the Government have created for themselves considerable difficulties not unconnected—in spite of what the noble Viscount the Leader of the House said—with slavishly following the NFU/CLA package. I also have considerable sympathy with the point raised by the noble Viscount, Lord Mountgarret. What are we discussing now? Are we discussing the amendment of the noble Earl, Lord Kinnoull, or the whole of Clause 1? I understood that we were discussing Amendment No. 1, but I admit the debate has gone very wide.

I also have considerable sympathy for the noble Lord, Lord Renton—the noble Earl, Lord Caithness, made the same point—about not deciding today or next week, but to collect all what is said today—and it will be a long session—and come back, presumably on Report or Third reading, with something that would be acceptable. But there will need to be considerable collusion—I use the word in the best sense—in the House before that could take place. It would be very difficult. However, I can see the noble Earl's point very well indeed from what has been said up to now.

Referring to Amendment No. 1, and Amendment No. 16 which the noble Earl, Lord Kinnoull, is to move later, without going into detail—the noble Earl went into considerable detail—I feel that his main point concerns the market value. He says that there must be a starting point and that the market value must be the starting point in any discussion. It is very difficult to get the open market value. One can think of difficult areas of the country. In some areas I doubt whether a farm has been let for years. As many noble Lords have stressed, it would be very difficult to get a market value to lay down for an arbitrator to deal with. I am not convinced that that is the best starting point.

After all, we have the starting point of the rent that is there now. I think that my noble kinsman got mixed up with fixing a rent at the beginning of a tenancy and reviewing one. All the time we are talking about reviewing rents and not fixing them at the beginning of a tenancy. I should have thought that the rent being paid was as good a starting point as any. We should look at that. As has been said, it is easy to work out inflation over a period. The period is about four years between when the notice to quit is given and the rent is decided on. I should have thought that that is a better starting point than the market value.

Having listened to what was said, the noble Lord, Lord Middleton, made a plea that a compromise should be reached, if the noble Earl, Lord Kinnoull, did not press the amendment to a Division. I presume that what he means by a compromise is to give the NFU time to get agreement between the two parties on a compromise. The noble Lord and everyone else in the CLA and the NFU lay great stress on the fact that there must be this agreement. Again, if the noble Lord, Lord Renton, wants to wait, he will have to wait for the CLA and NFU to agree.

We cannot agree to the phrase "open market" in the amendment but we could support Amendment No. 16. That is our position from this side of the Committee—

Before the noble Lord completes his final sentence, could he indicate whether in his view the new proposition of the market rent being the rent which is four years old is likely to hold back, decrease, increase or keep current rental values the same? It is an important point.

I think that it is an important point. I shall expand on it at some length later, if I may. If the noble Earl does not mind, therefore, I shall not expand on it at the present moment.

4.43 p.m.

The noble Lord, Lord Stanley of Alderley, declared his interest as a tenant. If I were to declare my interests they would be rather better balanced. I am a landlord, a tenant, a farmer, a chartered surveyor, a member of the CLA and a member of the NFU. I hope that I can speak impartially.

The noble Lord, Lord Belstead, said that the object of the clause was to give statutory backing to the current practice of agricultural valuers. I would suggest that in its present form it does not do that and that it is extremely unclear. The purpose of the amendments is precisely to give that effect to the clause. I should not for a moment suggest that the amendments are a perfect piece of drafting. It would doubtless have been better to go right back to the beginning and draft the clause all over again. Having said that, however, it seems to me that the amendments make a significant improvement to the clause.

I should not myself emphasise, as has the noble Lord, Lord John-Mackie, from his side of the Committee, the phrase "market rent", but rather the words "prudent" and "sustain". If one considers the implication of those words in the context of market rent, one sees that they cut out a great many of the dangers which are feared by the tenants' side. In the first place they exclude the lunatic fringe—the people who offer excessive key money simply to obtain a holding. The words imply that the profitability of the holding will have been taken into account and that the fixed equipment and all the other relevant factors will also have been taken into account. On the other side of the equation, they ensure that only a fair rent will be accepted. The concept has the great advantage that it is familiar to all the parties—landlords, tenants, valuers and arbitrators.

It is perhaps worth considering what an arbitrator does. First, he will consider the productive capacity of the holding. Let us take a simple example. Suppose that he comes to the conclusion that the productive capacity of the holding is £100 an acre. Then he has to take into account the essential expenditure of the landlord in order to put that holding in a condition to let or in a condition to let to make it that productive. Let us say that is £20 an acre. Then he has to consider the essential expenditure of the tenant: let us say that is £30 an acre. That means that the landlord cannot really charge less rent than £20 an acre or reasonably charge more than £70 an acre. It is on the £50 in between that the market value comes in. There is only one other way to decide how that £50 should be divided between landlord and tenant. That is the way which I think that the noble Earl, Lord Caithness, is to suggest in an amendment, which is that of that £50 a fixed proportion would go to the landlord and a fixed proportion to the tenant. The view of those of us putting forward this amendment is that market value, subject to safeguards against distortion, is a very much better yardstick than any other for the apportionment of that available surplus.

Most noble Lords who have spoken have asked to be excused from having an interest. I do not have quite the same interests as the noble Lord, Lord Northbourne, although I am a member of the CLA and of the NFU; I used to be a landlord and am now a tenant. I have another and perhaps unique interest to declare. I had the duty to introduce from the Front Bench of this House in 1958—some 25 years ago—the tiresome words "open market" about which we are now all arguing, for precisely the same reasons that this Bill is now before your Lordships: that the arbitration procedure laid down by the 1948 Act was not working in the way laid down in the Act, although for entirely different reasons. We were not then able to blame a Labour Government's introduction of too secure a tenancy: the 1976 Act. But, if I can remember back 25 years, we were frightened about the tenant occupier's rent being distorted if the arbitrator had to rely entirely on the prudent landlord and the willing tenant. We were bothered whether that was quite sufficient.

I remind your Lordships that in 1958 we had never heard of the word "inflation". In those days most of our estates were let. Certainly most of my small estate was let. We were proud to have the sons and nephews of previous tenants as tenants. As the noble Earl, Lord Swinton, who replied for the Government at the end of the Second Reading debate, told us, right into the 1970s he was farming only 8 per cent. of the Swinton estates and is now farming 25 per cent. I think that that is right; the noble Earl will correct me if I am wrong. I understood him to say that he did not want that to continue and would like to see ways to bring it to an end. On my own much smaller estate I certainly should. We once had sons and nephews succeeding as tenants.

In the 1958 Act, innocently I suppose, we introduced the words "open market" in Clause 2 into the middle of, I think, Clause 8 of the 1948 Act. There it stayed. There have been very few arbitrations and even fewer challenged in the courts. But if more arbitrations began to take place and they were challenged in the courts, if we stick to the 1958 amendment of the 1948 Act, we should now find that the arbitrators were not acting within the law. That is why I think it so right that the Government should have introduced this Bill.

I believe that we have learned here one lesson; namely, do not let us every 25 years first put in and then take out the words "market value". It seems to me that this is rather a barren exercise. The words are now out, so far as this Bill before us is concerned; let us leave them out. They have, informally, come to be understood as being present by arbitrators. I am not a chartered surveyor, but I followed with great interest what was said by the noble Lord, Lord Northbourne, who I think really got to the nub of the matter. We must try to get back to a definition of a prudent and willing landlord—though what landlord now can be willing?—and a prudent and willing tenant.

Therefore I believe that we should support the Government in this matter and try to adjust the clause a little, if we can; but do not let us try to force in the words "open market". I believe that if they were now introduced, they would have a very bad effect on good relations in the agricultural industry. After all—if I may add just one more point—though I am not myself a trained valuer, I believe that with the best will in the world, in a very small market it is terribly difficult for any valuer to state a value about which he can go to law. How many times do we see in the fine art world that at Christie's or Sotheby's an estimate of what a work of art will fetch is given in good faith by the auctioneers. Then, if the object is put on the market, and it is very rare, and there are very rich people about, it will attract an astonishingly different price. That kind of value must not be used to force rent rises on sitting tenants once every three years. That is what the tenants fear might happen.

So I feel that we must go a little wider than we have been asked to go, and I hope that tonight we shall come to a conclusion about this question and take a vote. I think it would be rather a pity to put it all back and hope that before the Committee stage is resumed the CLA, the NFU, the surveyors, Uncle Tom Cobbleigh and all will have found a better formula.

4.53 p.m.

We have had a fascinating discussion, since I believe that all noble Lords who have spoken are agreed in their objectives, and all noble Lords who have put down amendments want to achieve the same result. So we are discussing not what should be achieved, but how it should be achieved. I would suggest that there are a certain number of factors which we ought to keep in the forefront of our minds. First, we must realise that there are very few arbitrations. Virtually every rent review is arrived at by mutual agreement between landlord and tenant, or the agents, without recourse to arbitration. Therefore we are talking about a very small number of cases occurring every year.

Secondly, noble Lords have, quite rightly, mentioned the existence of the premium paid by new entrants into the industry in order to obtain a tenancy; what can loosely be called "key money". We all know that it exists. But this, too, is not common, because there are very few new lettings every year, and there are even fewer new lettings in those areas where rent reviews are due, and still fewer where there are to be arbitrations. Therefore the actual number of cases affected by this question is minimal. That does not mean to say that the matter is unimportant. We must of course deal with it, but it should not be exalted into something which will affect the entire level of rents throughout the whole countryside.

I believe, too, that we are all agreed that in arriving at rents after arbitration, discussion, and rent review, or at any time, other than when there are new lettings, it would be wrong to take into account the key money. It is something that we cannot legislate against. We may deprecate it, but it is there. But it is wrong to take it into account and have it affect other lettings.

I would also suggest to your Lordships, as certain other noble Lords have already done, that it is quite impossible to place a value on anything without taking into account scarcity. If there is no scarcity, one can almost say there is no value. If there is a vast surplus of any given commodity, be it land or lollipops, and if nobody wants it, the land or the lollipops have no value whatsoever. It is only when they become scarce that they begin to have some value, and the more scarce they are, the greater is their value. So it is impossible to ask an arbitrator to arrive at a value without taking into account scarcity.

I further believe—and the noble Earl, Lord Waldegrave, has, quite rightly, pointed this out—that hitherto arbitrators, being sensible men, have ignored the key money factor, but they have paid due regard to scarcity and to many other factors: the profitability of the farm, the long-term desirability from a landlord's point of view of having one tenant or another, and so on. It may well be that in so doing they have acted illegally. Fortunately for them, and fortunately for all of us who are tenants, landlords, or whatever it may be, so far nobody has taken an arbitrator to court in order to test whether he has acted illegally. But I think that it is quite reasonable that in a Bill of this kind provision should be made to make it absolutely certain that if the arbitrator continues to act as he has done in the past, paying due regard to all the relevant factors, including scarcity, but excluding key money, he should not render himself liable under any legal provisions.

A whole series of amendments has been put down to remedy this situation. We have read them all, we have thought about them, we have studied the documents that we have received, but, other than in regard to Amendment No. 1, we have not as yet had the opportunity of listening to the persuasive arguments of those noble Lords who are putting forward the amendments. So I would suggest to your Lordships' Committee that our best course here is to listen to all the arguments which are to be put forward, as well as consider those which have been put forward, for all the different amendments, without having a vote on any of them. Having heard the arguments about them all, we should then make up our minds about which amendments we individually consider to be the best way of achieving our agreed aims, and at Report stage, if we cannot reach a consensus, we can, if necessary, have a Division. I think that it would be unfortunate and would place us all in a very difficult position if at this stage we have to decide on any one or other of the amendments without having heard the arguments for all of them.

I should like to take up one point that the noble Lord, Lord Walston, made and ask members of your Lordships' Committee not to be too misled—and I do not at all mean that in any derogatory way. The noble Lord yet again made reference to the fact that there are very few arbitrations and that therefore we are appearing to talk about a very small number of eventualities. I would suggest very strongly that if the Bill goes through in the manner in which it is drafted, in particular in regard to Clause 1 and the rent formula, the number of arbitrations will be far greater. I say that because I do not see how any tenant could possibly willingly agree with a landlord across the table on the basis of the reference and the power being given to the arbitrators. I feel that that would be a minefield and would mean a joyride for barristers, attorneys, and so on. Please do not be misled into thinking that arbitration is something that is of very minor consequence!

I am sorry to continue this. I should perhaps declare my interest. It may be thought that I am a landlord. In fact, I am a tenant, and a tenant of my two-year old grandson. His trustees, in reverse order, are his father and, as senior trustee, his grandfather. They are very tough. You can therefore work out precisely what my interest is.

I am extremely glad that my noble friend Lord Belsteadblew a breath of fresh air into this matter by reminding us that the 1958 method of arriving at rents is widely disregarded. In fact, I would go further and say that it is almost totally disregarded by both arbitrators and valuers when they get together. They take into account many factors which this Bill, as it is at present drafted, brings to our attention, complicated as this may be. I believe it to be a reality that valuers, when they are discussing rent, tend to do so either leaning over a gate or in a pub with glasses of beer in their hands. It is important that we should take account of this, because, when we finally decide which way we are going, we must be sure that the solution arrived at is one that valuers are seen to use instead of taking no notice of the criteria as they now stand.

I will not take up the time of the Committee but the points that have just been made are quite important. My noble kinsman seemed to correct me on one point. The point that I was making is that made by the noble Viscount, Lord Mountgarrett, and others. It is that tenants are much more willing to settle under the system now for a rent which they may think is out of the way or too much because the open market rent is held open. It can be interpreted as the rent that has just been paid for the only farm to come into the market for the past 10 years. That is why so many rent reviews are settled without arbitration. It is because of the open market formula that can be used in a wholly uneconomic way against the tenant.

5.3 p.m.

I do not think that I can add to the expertise and experience which have been voiced in the last 1½ to 2 hours on these two amendments. However, I can perhaps add one further word and first stake out what I believe to be the common ground. This is that a new rent formula should provide a sound and comprehensible statutory basis for the current practice of arbitrators. One may ask why, if this is the objective, we need to do anything at all. Of course, the answer is, as my noble friend Lord Middleton put it so clearly during Second Reading, that current arbitration practice would be in danger of breaking down if an arbitrator were to be challenged in the courts. My noble friend Lord Waldegrave has underlined that danger in the speech that he made on the amendments today, while the noble Earl, Lord De La Warr, said very much the same thing.

I should like to further underline what has been stated. The committee of the noble Lord, Lord Northfield, predicted that by the year 2020 the let sector would, so it computed, if things went on as they were, probably fall to about half the size that it had been shortly before the Northfield Committee reported in 1979. So something had to be done. In line with the Northfield Committee recommendation, the CLA and the NFU, with the encouragement of the Minister at the time, my right honourable friend Peter Walker, met to try to hammer out amendments to tenure legislation. As your Lordships know, that went on for two years, but, in the end, they reached an agreement. Part of the agreement is to repeal the 1976 Act, which we shall come to on Clause 2.

On the clause with which we are now dealing, the intention is to introduce a new rent formula to make it legally possible for arbitrators to disregard the distortion of key money from the evidence of the open market and to be able to fix realistic rents for sitting tenants based on a statutory formula which would not make arbitrators liable to legal challenge. In truth, the elimination of the effect of key money and the legal basis for the fixing of realistic rents is surely arbitrators' current practice. They are to be applauded for it. If I am right that we all share that objective, I feel that it is not beyond the wit of man to try to find a solution which achieves as great a measure of agreement as possible.

I make no secret of the fact that the Government were hoping that the formula contained in Clause 1 achieved that objective. Worked out by the CLA and the NFU, accepted by the Incorporated Society of Valuers and Agents and the CAAV, and confirmed by the RICS over two years ago as being workable, the formula represents a key element in the Bill. It would be wrong and, indeed, it would mislead your Lordships if I did not say that. Nevertheless, your Lordships will forgive me for repeating that I accept, having listened to the debate, that there are a number of interests which have strong reservations about the new formula. I realise that in particular they would like to see a specific reference to the open market and that they are concerned about the wording of the provision relating to the adjustment of comparable rent on account of scarcity.

Perhaps I may submit something to your Lordships which I think has not so far been stated. I do not believe that the Bill and the point of view put forward so persuasively in these amendments are so far apart in their objectives as this debate may have suggested. The reason I say this is that the Bill would in practice require arbitrators initially to take account of the open market. The noble Lord, Lord Walston, in his speech on Second Reading, asked about a farm in very good hunting country that has a scarcity value because a lot of people want it for that reason, or a farm in the noble Lord's own home area and mine, perhaps in very fine shooting country, which, again, people would want. The noble Lord gave a third example of a farm within easy travelling distance of one of the great metropolitan areas or of London which was again desirable for that reason. Of course, we see in the rent formula that the arbitrator shall take into particular account,
"the character and situation of the holding".
Indeed, noble Lords opposite will be attempting in a little while to improve that paragraph by saying that it should refer to "the locality" to spell out exactly what the noble Lord, Lord Walston, was after in Second Reading, in showing that open market ought to be taken into account as a start in a formula that is put in the Bill. When one looks at paragraph (d), one sees that,
"the current level of rents for comparable lettings"—
that is comparable lettings anywhere—
"as determined in accordance with subsection (4) of this section",
shall be taken into account.

However, I must not mislead the Committee. It is true that when we get to subsection (4)—and I admit it absolutely freely—the Bill says that there must be a reduction, in looking at the comparable holdings, for appreciable scarcity—not "scarcity", but "appreciable scarcity". That is a matter which I feel I must mention to your Lordships.

Let us look at Amendment No. 16, which appears in the name of my noble friend. It is proposed by my noble friend Lord Kinnoull and by the noble Lord, Lord Howard, that there should be an element of tempering of rents of comparable holdings to the extent that they may exceed a rent which:
"a prudent tenant could reasonably be expected to sustain".
So, without trying in any way to pull the wool over anybody's eyes, I really do not think that the Government's position and the position which is put forward in the amendments are so far apart that the two points of view cannot be bridged with goodwill and with trial.

There is one difficult point which I must answer and which was raised by my noble friend Lord Campbell of Alloway. My noble friend Lord Campbell and my noble friend Lord Kinnoull in opening raised the question of the possibility of the Bill having an immediate effect on rents. With respect, I would question that assumption. Indeed, from listening to the noble Lord, Lord Mackie of Benshie, perhaps I ought to make the point that I recently received a very long and closely argued letter from one of the great universities of this country, which made the point that rents were too low and historically had for some time been too low. I know that the noble Lord and other noble Lords may have argued that they have been too high. If my correspondent on that occasion was right, then Clause 1(3)(c), which refers to the "productive capacity of the holding", will take care of that for the first time by putting into law the requirement that the productive capacity of the holding must be taken into account.

I must say that I am rather concerned that the amendments which we are considering at the moment would define the rent properly payable by reference to the open market in a way which would seem to relegate to a secondary position the productivity and earning capacity of the holding. I say that because I believe that this is a point which will cause quite a lot of trouble with substantial sections of the farming community in this country. Incidentally, Amendment No. 16, which deals with an alternative method of adjusting for appreciable scarcity, is something which need not perhaps present quite the same problems—certainly it is something which we should consider very carefully.

Where does that leave me? It leaves me with the six formulae which I ventured to read out to your Lordships' Committee when I intervened a little while ago. In fact, I got that wrong. There is a seventh formula, because the later amendment of my noble friend Lord Caithness seeks to have the rent formula based on a proportionate 60:40 basis. Seven formulae take a certain amount of putting together.

I would, therefore, ask your Lordships not to press these amendments at this stage, in order to give us a little time to see whether it is possible to incorporate the sense of some of what your Lordships have proposed, without at the same time destroying the work which has been done to make it possible for the Government to bring the Bill before your Lordships at this time. I hope that perhaps my noble friend and the noble Lord, Lord Howard, might consider withdrawing the amendments now and letting us see whether we can gain any greater measure of agreement before the next stage of the Bill. But I must be honest with your Lordships: I cannot and I will not promise that we can do this; but I do promise that we will try.

Before the noble Lord sits down, will he say that in those discussions he will take into account the Scottish legislation which, after all, has been urged on many of us as a model which might be followed?

I think it is generally recognised that the amendments which stand in the names of other noble Lords and myself—Amendments Nos. 1 and 16—are neither probing nor wrecking amendments: they are genuine attempts to improve the Bill which is before us today. They apply, of course, primarily to settlements which are proposed and reached by valuers with tenants because, as the noble Lord, Lord Walston, has reminded us, there are very few arbitrations indeed in the agricultural field. One particular professional told me the other day that in the last 6,000 settlements which he had made with tenants, he had six arbitrations. On my estate we have had one arbitration in the last 30 years, not because the tenants are afraid of the arbitrators but because the valuers tend to get it right. That means that in practice these instructions, these parameters, are addressed to valuers and will be the basis of the settlements which are reached for rents in the future.

In our view, while not seeking to disturb in general terms the package which has been reached, we believe that there is one absolutely central flaw in it—namely, that it does not have an objective. In days long ago when one was required to produce an appreciation of military matters, the objective was the most important factor which one had to consider. It is a question of the cart without the horse, or however you wish to describe it. What we are doing here is trying to tell people how to do something without telling them what they are trying to achieve. In seeking to insert the words which are in our amendment, we are trying to say what they are trying to achieve, which is an open market rent agreed between a willing tenant and a willing landlord. The terms in the amendment—which I have not repeated accurately—are terms of art well understood by all valuers. They are not new; they have worked for 25 years, pace the noble Earl, Lord Waldegrave. They have worked perfectly well. They are terms of art. "Prudent" and "willing" are terms which are capable of no misinterpretation.

It should be even less agreeable to the present Government to remove from the Bill the words "open market", which have been employed for the last 25 years, in view of their approach to the market in general. We understand that they believe in the free market, in the market pressures. Why should these not operate just as much in agriculture as they do in any other field? I have not noticed tenants complaining about the open market in cattle when they send their cattle to market. Oh no! It is perfectly all right then. It is only when it is introduced into the definition of "a rent properly payable" that it becomes something which is anathema to all. We are told that this cannot really continue. The noble Lord, Lord Middleton, described it as "hypothetical"; and it was described as a "mythical hypothesis"—I am not quite sure what that is—by the noble Lord, Lord Stanley of Alderley.

Valuers, above all people, are capable of valuing the unique. They do it all the time. They are always being faced with cases where there is nothing comparable and they have to pluck out of the air a value which will be acceptable to both sides. They have done it for years and I am sure that they will go on doing it for years into the future. So what the present terms of the Bill tell us are the parameters—the matters which are to be taken into account in assessing the rent properly payable—are, in fact, the glosses which help the experienced valuer to arrive at the figure.

All the things that have been mentioned this afternoon have to be taken into account. Whether it be the profitability of the farm, the apportionment of that profitability between one party and the other, or whatever it may be, all are taken into account. All we have tried to do is to insert a single objective so that the valuer can be sure about what he is trying to achieve and can then apply all these other matters to it.

If, in fact, the Government, with their belief in the open market as a proper source of pressure, can be persuaded to introduce a formula which is suitable and can come back to us with it—a formula which the Government must decide, not some conference or pressures between one body and another (for, after all, it is a public Bill which is before us and not a private Bill)—I am sure that all noble Lords on all sides of this Committee who have expressed anxiety about the legislation as it now stands, will happily accept such a formula. It may not be completely and generally acceptable to everyone, but if it is expressed clearly and without any shadow of doubt, and does not involve the need for a great many visits to courts at great expense, then I am sure we shall all welcome it.

In the hope that the noble Lord, Lord Belstead, will be able to do this—in fact, in the firm assurance that he will do so—and not merely convene a further meeting of the parties concerned, I beg leave to withdraw the amendment which stands in my name and the names of my noble friends.

Amendment, by leave, withdrawn.

5.22 p.m.

The noble Lord said: I must apologise to your Lordships for not declaring my interest as every other noble Lord has done. I am a tenant farmer. I am actually eighth in a long line of John Mackies, dating from about 1660, who were tenant farmers in the North-East of Scotland. However, I have broken that tradition and am now a tenant farmer in Essex.

I move Amendment No. 2, which is, of course, a paving amendment for Amendment No. 4.

Amendment No 4: Page 2, line 2, leave out from ("factors") to end of subsection (6) on page 3 and insert ("provided by the landlord and the tenant.").

I should like to raise a point that was raised on Second Reading by the noble Earl, Lord Onslow—who is not in his place at the moment—when he twitted his colleagues for changing their minds since they spoke on the 1976 Act. I think that he was being unfair. The noble Earl, Lord Swinton, put him in his place very sharply by saying, "No". But I think it should be made plain that today we are discussing a Government Bill and if possible the Opposition want to improve the Bill, but that in no way commits them to anything that may happen nearly 10 years hence. It is unlikely that, if the next Bill is in 10 years' time, I shall be saying anything about it. So whatever I say, I do not want to commit my party in any way in our efforts to improve the Bill. Before I came to this House I had listened to several debates and was always impressed by the tremendous knowledge and the way in which it was put across in this House. In my two-and-half years here I have been considerably more impressed by how that knowledge is used to improve Bills and to help in every way, and it is done with much less noise and fuss than is the case next door.

I see that the noble Baroness, Lady Elles, is in her place today. Perhaps I could give an illustration of what I have just said. A report was produced on olive oil. When speaking on this report, most noble Lords admitted that there was very little knowledge of olive oil in this House. Then up stood the noble Baroness, Lady Elles, who announced that she has an olive grove in Tuscany, grows olives, and produces oil. That is an illustration of the knowledge available here and how nicely it can be put across. As a result of that, I thought it was my duty to pay close attention to all that was said during the Second Reading debate on this Bill and to take due account of what noble Lords said in making up my mind and the minds of my colleagues as to what attitude we should adopt to the Bill. Although I have this noted down, I do not want to go into the detail of what every noble Lord said on Second Reading.

At col. 714 the noble Lord, Lord Belstead, said:

"They reported in May of this year. I repeat that the purpose of the new rent formula is to give arbitrators a realistic basis for assessments, which the present formula cannot do, and to instil confidence again in the basis of the rental system."

I believe that the noble Earl, Lord Kinnoull. has pointed out that there are 29 amendments to this clause, so that pretty obviously suggests that it does not do that. At col. 721 the noble Lord, Lord Walston, makes the very real point about the isolation of scarcity values. The noble Lord, Lord Howard, who has just spoken, makes a point at col. 725 about the defects in the clause. A few minutes ago he referred to arbitrators plucking ideas out of the air to help them reach a decision.

At col. 727 the noble Lord, Lord Nugent, suggests that the Scottish formula would be better than the English one, and I believe that the noble Marquess, Lord Salisbury, made the same point. The noble Lord, Lord Stodart at col. 729 made the point that it is a pretty loose formula and it would be very difficult for an arbitrator to do anything about it. My noble friend Lord Northfield referred, in his report, which he quoted on Second Reading, to the wide interpretation that there can be of any of these things. He said:

"….and a prudent tenant, and we should like to see arbitrators given fairly wide discretion in their interpretation."

I could not agree more.

The noble Lord, Lord Stanley, made the point at col. 737 that reasonable landlords have carried out what we all want without any help from arbitrators and they should make that law. The noble Earl, Lord Caithness, in quite a long speech on Second Reading, pointed out how many imperfections there were in the Bill. At col. 742 the noble Lord, Lord Northbourne, made the point that the Bill is badly drafted, and I think that he has made an effort to improve the drafting.

At col. 745 the noble Lord, Lord Rugby, simply said that the whole thing is difficult to understand, and the noble Marquess, Lord Salisbury, (who does not want the clause at all), also made the point about the Scottish interpretation. At col. 752 the noble Lord, Lord Hylton, made the point that it was very obscure indeed. At col. 755 the noble Lord, Lord Gisborough, said:

"Therefore, it must be wrong totally to disregard scarcity. At the same time, it is equally wrong to give it undue consideration. So there should eventually be some phrase in the Bill on the lines that scarcity should be considered, but not given undue consideration."

I just wonder how one interprets that. The noble Earl, Lord Radnor, was worried about the impreciseness of

the whole thing; and the noble Lord, Lord Burton, at cols. 759 and 760, suggests that we follow the Scottish Act. The noble Marquess, Lord Salisbury did the same.

I was discussing this over a cup of tea with the noble Viscount, Lord Dilhorne. I pointed out to him that we should like to simplify things as much as possible—and I hope he will not mind me misquoting him a little as he is not in his place—and he said that if we did that there would be little scope for legal argument, which I thought was a nice way of putting "looking for a job". I must admit that his Second Reading speech is difficult for a layman to follow. although the new clause that he wishes to put in has something to commend it.

The noble Earl, Lord Kinnoull, in his speech earlier today made the point of the good sense of arbitrators. That is something we have to look to. The noble Lord, Lord Middleton, at col. 771, said:

"Arbitrators have acted in a commonsense way, although not lawfully; and the general level of rents has advanced in a way that has so far been fair both to landlord and to tenant. That says a lot for the good sense of owners and tenants and the professional men who perform the arbitrations, but it says nothing at all for the current state of the law in circumstances which are quite different from those obtaining 25 years ago."

He really wants something on the same lines giving the arbitrators the same freedom, which means that they are going to be unlawful again but in a different situation. If he reads carefully what he said, that is what he is suggesting.

I have put these points to the Committee because they give the picture of how mixed up this is and the great difficulties in it which my noble friend Lord Northfield and others have mentioned. The noble Earl, Lord Waldegrave, made the point that there was considerable confusion of thought on the subject. Therefore, in discussing this with my colleagues we decided that it would he better to simplify the whole thing by the amendment we have put down.

If noble Lords would care to look at the amendment, they will see that we start by missing out the first line in subsection (3) and start as follows,

"In determining the rent"—

and so on—

"of a holding on any such reference the arbitrator shall take into account all relevant factors"—

and this has been emphasised by many noble Lords—the factors provided by the landlord and the tenant, and then we miss out the whole of the instructions to the arbitrators.

As one noble Lord has said, if we have such faith—and we have faith in arbitrators; they have done a good job for us in the past—why should we take a page and a half to tell an arbitrator how to do his job? That is what we have done. So far as I can ascertain no noble Lord agreed with it at all—there are many amendments—and it would be better to leave the matter to the good sense of the landlord and the tenant.

Landlords are not going to kill the goose that lays the golden eggs, and the tenant is certainly not going to give up his farm. They will put their points. As landlords deal mostly through agents, I advise a tenant to have an agent to help him. I made a grave mistake in thinking that I was as clever as the landlord's agent in fixing a rent a few years ago, and I advise a tenant to have an agent to put the points if he goes to arbitration. The arbitrator then decides and fixes the rent.

There have been considerable worries—and the noble Earl, Lord Kinnoull, quizzed me on this earlier—as to the effect that any package would have on rents. Several of the charities which own land have been worried that rents will fall. I personally do not think so. I do not think that there will be a surge either way, because it will be a small number of decisions that will be made. I cannot see that there will be any overall change quickly. Like my noble kinsman, I think that a lot of rents are too high and that the landlord is getting a bigger share of the production of the land than the man working it. I have seen some figures to suggest that he is getting more even than the farmer and his men. That may be, but what I feel is that there may be a rise in the better land prices. The prices in grade 2 or grade 3 land may be static, or perhaps they will fall. I think prices will be fairly static in hill and marginal land. I do not think there will he a surge either way, and I do not think that these bodies need have any great fear at all.

We have put down this amendment to try and simplify this Bill, and to get over the myriad of difficulties that noble Lords expressed at Second Reading and in a wide-ranging debate on the Earl of Kinnoull's amendment. Therefore, I beg to move.

I do not intend to go through all of the speeches which were made at Second Reading; but it was good of the noble Lord to remind us of what Members said. Unless I misunderstand this amendment, the noble Lord is plucking out all the relevant factors that he described should be considered by an arbitrator and taking us back to the 1948 Act, leaving it to the arbitrator to decide one way or the other. I have a feeling that we have gone a little beyond this at this stage, but I should like to ask the noble Lord—because it is relevant still to what we were discussing a few moments ago—what evidence he has, and why he feels, that the charitable bodies and the institutional investors fear the rents going down. What gives him the confidence to say that there will he no change?

One must appreciate that the charitable associations have advisers and take careful financial decisions. Will the noble Lord advise the Committee whether he has any evidence to support his general view, and whether he has any evidence to support the view, as his noble kinsman has said, that rents are too high? I am not sure that there is any evidence to support this. Are farmers going into bankruptcy? Where is this evidence? I think that the noble Lord should support these sweeping statements that he makes.

Regarding the size of rents, that is purely a personal opinion as to the share of the production of the land between landowner and tenant. I know what my profit per acre is or in some cases my losses per acre—and I know that I am still going to pay my rent irrespective. I feel that since 1976 anyway the tenant has had the great advantage over the succession, and the landlord has had an advantage economically, and it has obviously to swing slightly the other way if the Bill is passed with the CLA-NFU package.

It is that package that the noble Earl's friends—if the charity people are his friends—are worried about. If noble Lords would accept our amendment where the arbitrator and the system at the present moment carry on with fixing rents, there would not be any great swing at all. That is my argument for that.

I should like to support the noble Lord, Lord John-Mackie. I know that I will irritate the NFU and the CLA by doing so, but that is too bad. The more I have considered this part of the Bill the more ludicrous it becomes, because it is impossible to legislate for all the circumstances and factors which an arbitrator must take into account. I just do not think it is possible.

Furthermore, we could be legislating today for what is important now, whereas in 10 years' time there might be something of critical importance which an arbitrator should consider but which is not mentioned in the Bill. Why do we not leave it so that an arbitrator has to take into account "all relevant factors"—full stop? Then we can allow the landlord and tenant to sort matters out at arbitration, if that is where they want to go.

Before the noble Lord decides what he will do with his amendment, whether to withdraw or to press it to a Division, may I press on him to withdraw it? Let us amend the Bill at this stage and at later stages, then, if it is the mood of the House, let us take out everything we have amended. If it is put back, as I am sure it will be in another place, at least it will be put back in an amended form and we shall have had the opportunity of discussing it. If he presses it and wins the vote now, we will not have had the opportunity of discussing quite a number of useful amendments.

I rise to oppose the amendment. It is a little too simple to stand the test. One of the things that produced the open market formula was the fact that previously the plain instruction to an arbiter to arbitrate was not producing a fair result from the landlords' side. Inevitably if one gives no instructions what happens is that the arbiter simply says, as is so often done in wage negotiations to the great disadvantage of this country as a whole, that he will try to fix something in between. One is then running to and fro to reach a compromise, which may be entirely and completely wrong and will depend on the landlord going low and the tenant going high.

Furthermore, it is the job of this House, which, as my noble kinsman said, contains an incredible amount of expertise, not to shirk giving some guidelines for the arbiters to go on. The formula as it is laid down in the Bill is not perfect. Nothing is ever quite perfect in everybody's eyes, but it gives a basis to go on and it removes what several noble Lords have said is a source of grievance and worry; that is the interpretation of the open market formula as simply one of being the best rent that can be obtained. While I should love to support my noble kinsman, the amendment is a little too simplistic and I think the Committee should give advice to the arbiter from this enormous accumulated wealth of experience here.

I am grateful to the noble Lord, Lord Mackie of Benshie, because the proposed amendment of the noble Lord, Lord John-Mackie, would leave the arbitrator to determine what factors were relevant from among the statements of case. This would sweep away any basis for assessing rents. The noble Lord, Lord John-Mackie, said on the previous amendment that he would be against the open market formula and it would omit those factors which have been laid down ever since 1948 as not to be taken into account in rent assessment. Those would be swept away by the amendment as well. There would be no guidance for the arbitrator and there would be no guarantee of any consistency between one arbitration and another for landlord and tenant. For those reasons this is most unacceptable to the Government.

We on this side of the House welcome the movement away from the open market. I am not so sure that the criticism which has been levelled at Clause 1 is always right. I acknowledge that difficulties will always arise when one attempts to codify in too much detail the guidance to be given to the arbitrator. On the one hand, there is value in detail; it makes for certainty: but on the other hand it can make for inflexibility. As the noble Earl, Lord Caithness, said, one cannot always legislate in one's code for all positions.

Having listened to the debate, it appears to me that one can move in one of three ways. We could abandon the formula set out in Clause 1 and adhere to this narrow basis of the open market. Although that formula has some support in the House it appears that many noble Lords have deep reservations about it. The next formula is the one enshrined in Clause 1 and the option could be that we work to improve the formula in Clause 1, either by making it more precise—because it is thought to be too vague—or making it, at times, less precise because we think that would be of assistance to the arbitrator.

Notwithstanding what the noble Lord the Minister has said, there is the third option; the one advanced by my noble friend Lord John-Mackie. That is to leave it to the parties to submit to the arbitrator all the elements which they consider to be relevant in determining the rent of that particular holding, leaving it to him, the professional qualified arbitrator, to exercise a broad judgment as to the merits.

We have been told that that is over-simplification, but the 1948 basis was a fairly broad basis, leaving it very much to the arbitrator to attach what weight he considered proper to the elements or the arguments which had been advanced. The sense of our amendment is that we leave it to the arbitrator to exercise a broad judgment having regard to the arguments which have been advanced.

I accept the valid point made by the Minister that we should go further and stipulate that the arbitrator ought to disregard certain factors. That is the imperfection in our drafting. We have raised this third option; we have had regard to what the Minister has said, that the Government will reconsider Clause 1 in the light of the arguments which have been advanced. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Before calling the next amendment, I have to point out that if Amendment No. 3 is agreed to I shall be unable to put Amendments Nos. 4 to 19 inclusive.

5.48 p.m.

Page 1, line 22, leave out subsections (3) and (4) and insert—

(" ( ) For the purposes of the foregoing subsection the rent properly payable for the holding shall be the rent at which the holding might reasonably be expected to be let in the open market by a willing landlord to a willing tenant, the arbitrator—
  • (a) having regard to all the circumstances (other than personal circumstances) and in particular
  • (i) the size, nature and situation of the holding and its productivity and earning capacity,
  • (ii) the terms of the tenancy (other than those relating to rent),
  • (b) assuming—
  • (i) that the number of persons seeking to become tenants of similar holdings is not substantially in excess of the number of such holdings which are available for letting,
  • (ii) that the tenant has complied with his obligations under the tenancy which are not inconsistent with his responsibility to farm in accordance with the rules of good husbandry,
  • (iii) that the tenant is reasonably skilled in husbandry, and
  • (c) disregarding—
  • (i) any effect on rent of the occupation of the holding by the person who is in occupation thereof,
  • (ii) any effect on rent of the proximity of the holding to other land occupied by the tenant,
  • (iii) any increase in the rental value of the holding which is due to improvements which have been executed thereon:
  • (a) in so far as they were executed wholly or partly at the expense of the tenant (whether or not that expense has been or will be reimbursed by a grant out of moneys provided by Parliament) without any equivalent allowance or benefit made or given by the landlord in consideration of their execution and have not been executed under an obligation imposed on the tenant by the terms of his contract of tenancy, or
  • (b) by the landlord, in so far as the landlord has received or will receive grants out of moneys provided by Parliament in respect of the execution thereof, and,
  • (iv) any element in the rent of other holdings cited in evidence as comparable which in the opinion of the arbitrator is attributable to the fact that the number of persons seeking to become tenants of similar holdings was substantially in excess of the number of such holdings which were available for letting.").
  • The noble Lord said: I think I can ease your Lordships' minds because I shall in due course beg leave to withdraw the amendment, so the dire result which has been mentioned will not arise. This amendment has been conceived and drafted by members of the Agricultural Law Association, a group of people skilled and experienced in this branch of the law. I am not a member of the association and it is many years since I did some of this work. Although it is the longest amendment on the Order Paper, I hope that I can move it quite briefly and I do not think that it will lead to a long debate in view of the discussions that we have already had.

    May I remind your Lordships that under the present law in England and Wales the rent payable is to be the market rent. We know that because of the effect of the 1976 legislation the reference to market rents has become less realistic than it used to be, as has been made clear by several speeches in our earlier discussions. But surelyone of the objects of the Bill, the next provisions of the Bill especially, should be (and, as I understand it, is intended to be) to open up markets to some extent. They can never be opened up to the extent that used to exist; but it will have some effect.

    The Agricultural Law Association feel that the new formula in Clause 1 is too tightly drawn. I must say that I agree with them. As has already been pointed out by my noble friend Lord Kinnoull, the provisions relating to comparable lettings will certainly give rise to difficulty. They will give rise to difficulty in finding the evidence and the wording of that part of Clause 1 will, as he has said, give rise to questions of interpretation. Therefore, I am putting forward what I hope your Lordships, and especially my noble friend Lord Belstead, may find is a more realistic, more flexible formula. It starts with a requirement to consider the open market rent and, to that extent, it achieves the purpose of Amendment No. 1. Although he is not in his place at the moment, I thought that the noble Lord, Lord Howard of Henderskelfe, touched on a very important point when he stated that, where necessary, we should state the objective—the objective of arbitrators in this case—and the purpose of our legislation.

    Both Amendment No. 1 and the first five lines of this amendment do just that. They start:

    "For the purposes of the foregoing subsection …".

    I would commend that method of drafting, as I have done before, to my noble friend. This, therefore, starts with a purpose, which is to consider the open market rent as between a willing landlord and a willing tenant. That perhaps is the most important part of this amendment.

    May I now go to the very last part of it because that also is very important. That achieves the same purpose as the amendment of my noble friend Lord Stanley of Alderley. It says, in effect, that the arbitrator shall discount the scarcity factor. It is perfectly fair to say that Clause 1, as drafted, also does that; so that we are on common ground there.

    Now, having stated the advantages of the start of the amendment and the advantages of its conclusion, and having pointed out the common ground that there is on both, I think I can deal fairly briefly with the other points mentioned in some detail in the amendment. In the first subsection—which would become subsection 3( a)—the arbitrator is required,

    "having regard to all the circumstances (other than personal circumstances) and in particular—
    (i) the size, nature and situation of the holding and its productivity and earning capacity"—

    and that short phrase covers a number of points already in subsection (1). It continues,

    "(ii) the terms of the tenancy (other than those relating to rent)"

    have then to be considered. I need not read out what arises under heading ( b) of my first subsection because

    your Lordships can see that. I should have thought that these are points which are beyond dispute and, again, are common ground. Then there are the various disregards which, as I understand it, do not introduce any controversial new element.

    Although this is the longest amendment on the Marshalled List, I would hope very much that in further consideration of the matter it will be found to be sound in law, well drafted—and I can say that because I myself took no part in the drafting—and to contain matters which are common ground between so many of your Lordships. In those circumstances, I think that I need say no more than that I beg to move.

    I regret to tell my noble friend, after the help I received last week on another matter, that I am not very keen about this amendment. Needless to say, I am not keen about the words "open market" in the first five lines for all the reasons that I gave earlier. I shall not delay the Committee on anything else. But I shall be interested in an explanation of heading (b) (iii):

    "that the tenant is reasonably skilled in husbandry".
    I think there is great scope there for quite a lot of argument.

    I am glad that the noble Lord, Lord Renton, has moved this amendment rather than remaining silent and letting it be absorbed in the discussions which the noble Lord, Lord Belstead, has undertaken to have between now and Report stage. It enables us just to show to the Government at least one shot in combining the sort of things that many of us on both sides of the Committee would like to see. After all, this starts with the principle taken by the noble Earl, Lord Kinnoull, as a starter; namely, that the normal rent shall be that of the open market. Then it shows how, with clever drafting, one can provide modifications to that basis to take account of problems and distortions in the market. To that extent, I think that it is a good thing that the noble Lord, Lord Renton, has put this amendment on the Marshalled List. I hope that it will be actively taken into consideration by the noble Lord, Lord Belstead, between now and Report stage.

    It also enables me to say one other thing: that if he will look at Scottish legislation (which I raised with the noble Lord, Lord Belstead, at the end of his remarks a few minutes ago) he will find that that too is very much on similar lines. That, too, takes account of the open market and then detracts from it according to the needs of the situation and the distortions in the market. I return to a point I made at the beginning; namely, that it is quite extraordinary that the Government produced this Bill without taking wider considerations into account.

    During the preparation of this Bill the Government were actually putting through the Scottish legislation with the alternative formula in it. It is extraordinary that one hand did not seem to know what the other was doing. What happened was that the discussions between the NFU and the CLA were reaching their conclusion when the Scottish Bill was produced. Those discussions between the NFU and the CLA, as I understand it, simply failed to take account of the alternative, compromise way of doing it which the Government were then proposing in the Scottish legislation.

    We really must return to this. Why should there be all that difference, anyway, between the law on both sides of the Border? Yes, there will he some difference; and the noble Lord, Lord Mackie, will get up and point out the differences. But I am talking about differences of principle rather than of degree. Why is it the case? I hope that the noble Lord, Lord Belstead, will tell us that the Government apparently never took into account the Scottish legislation when they were drafting this particular Bill. I am hoping that, by the time we get to Report stage, it will be the Scottish legislation plus the amendment of the noble Lord, Lord Renton, plus that of the noble Earl, Lord Kinnoull (which is very similar to the opening part of Lord Renton's amendment), and that that will really make the running in the new re-draft. What a relief it will be to get away from the simple NFU-CLA package and begin to start from legislative principles all over again and try to get it right.

    I have one other point to make. I read with great interest a report on tenant rent legislation by Messrs. Cluttons. They have enormous experience; as they say, they have conducted over 6,000 rent reviews on behalf of clients since 1958 and have had to go to arbitration on 15 occasions, They are some of the most experienced people in the business and, if I may say so, they were extremely helpful to the Northfield Committee and to other professional bodies of a similar sort. In the middle of their submission on this kind of legislation—this is headed "Agricultural holdings and opinions on the proposed legislation"—they said something which I find very interesting. May I just quote a couple of sentences?—
    "If a landlord were to accept the highest tender regardless of the competence or the personality of the applicant and then apply that same level of rent to his sitting tenant, it would be manifestly unfair. But over the great majority of tenanted land the opposite practice has applied. Landowners have been careful to select good tenants, capable of paying the rent which they have tendered and still make a worthwhile profit. And in applying that level of rent"—
    and here is the crux of the matter—
    "to their sitting tenants they have made allowance for the fact that any tenant, however competent, must be given time in which to change or improve his farming system so as to be able to afford to pay an open market rent".
    This is very true, and this is why it is important to keep the open market rent as the real basis. What tendered rents sometimes do is to enable landlords to realise a better rent than they have been getting so far which can be achieved by people who are particularly efficient, and then to take a steady view—and here I quote again—about
    "how any sitting tenant, however competent, must be given time in which to change or improve his farming system so as to be able to afford to pay an open market rent".
    In my view, that is a perfectly proper way in which to proceed. It is the basis, in my view, or one of the bases, for the assessment of rent in the very difficult market situation we are in; and it underlines that we must never lose sight of the principle of the open market rent being the basis of it all.

    I should like to support the noble Lord, Lord Northfield, in what he has said about the Scottish formula that has recently been approved by Parliament. Why is it not good enough for England? There are, anyhow, difficulties over the Border. The United Kingdom is small enough as it is, and if we have different formulae North and South of the Border that will cause more complications. A further point is that this Bill represents an NFU and CLA package. Surely it would be far better if it were a pure Government Bill and the Government made up their minds what they want to do about it.

    I feel that a number of things have been said that I might comment on. One is that it is perfectly right and proper that there should be differences both in principle and practice between Scotland and England. We went to great trouble to put the Bill through for devolution in Scotland, and there is a great desire for the Scots to remain Scots and for many of their laws and practices to continue as they have been before; and they can do it without injuring the unity of the United Kingdom in any way. Indeed, diversity need not be a bad thing.

    I must say also that the firm mentioned by the noble Lord, Lord Northfield, have been obviously immensely persuasive. They have persuaded him that they have a perfect system; that there is a perfect crowd of landlords whom they advise and they will have the happiest set of tenants anywhere if they follow the formula which they have put into practice obviously for their own reasonable benefit and for the benefit of the landlords they advise. But in fact we also have another side of the question which has been put by the NFU, and I do not think it is a bad thing for a Government to take cognisance of the wishes of the people who are involved in the two sides of the industry. I think it is an excellent thing on the part of this Government actually to consult the people who are affected by the legislation.—

    I think we are getting into another curious argument here, but I believe the Government have done the right thing in consulting and indeed in going to great lengths to make two parties agree. I think that is a proper function of Government, and they have done well in this case.

    The whole point of the amendment of the noble Lord, Lord Renton, is that it puts the open market first. The instructions are quite straightforward: that it has to be the open market rent, first of all, between a willing landlord and a willing tenant. That is precisely what the NFU have been objecting to. In the case of an agreed package, it appears much more reasonable to put the same principle into Clause 4—not subsection (4) of the first clause—instead of at the head of the Bill in opposition to the agreement reached between the CLA and the NFU. So in this instance I must support the Government and say that the formula in the Bill is a much better one than the emphasis placed in the amendment of the noble Lord, Lord Renton.

    May I fully support my noble friend Lord Renton 100 per cent. in this amendment, and also the noble Lord, Lord Northfield, in his remarks about the Scottish formula. Previous speakers have declared an interest and I suppose I ought to follow their example by saying that I, too, like many others of your Lordships, am not only a landlord but also a tenant. I have one son and shall probably have a grandson like my noble friend Lord De La Warr—but I have not reached that stage yet, or rather my son has not. So I hope I can speak impartially and not from a standpoint of vested interest.

    The amendment of my noble friend Lord Renton follows the strong suggestion put forward by the RICS, which I believe most of your Lordships who are taking part in this debate will have received. I do not think it will serve any great purpose if I read part of it because it may easily be obtained by anyone who wishes, if they have not read it already.

    I believe I am right in saying—and I hope that my noble friend Lord Belstead will correct me if I am wrong—that in his earlier remarks he said that this package deal over the formula for rents had been broadly agreed by both parties, including (I think he said) the RICS. If that is what he said. I would with the greatest respect suggest that he may be incorrect here, although I have been advised privately that the RICS in their views and recommendations in the paper to which I have referred are very much divided in their feelings on this particular matter. All I can say to that is that the number of chartered surveyors to whom I have spoken in the comparatively short time between Second Reading and Committee stage have been in agreement with what has been put forward. So I am not quite sure where my adviser has got his information from, but I am sure he may well be correct. I feel that the RICS are not happy with the apparently agreed formula for rents and—I believe quite rightly—they wish to delete Clauses 3 and 4 of this Bill.

    My noble friend Lord Renton has made suggestions and may I suggest that, gently, in his most persuasive way he asks the Government most seriously to accept his amendment. I believe that it will achieve the object which we ought to try to achieve, of keeping the open market letting clause in this Bill. I am afraid that I disagree here with my noble friend Lord Waldegrave. We should see that we get more lettings on the market where the open market rental value will come into play. I think it is recognised by everyone that there will be short-term teething problems with this Bill when it gets off the ground, which I seriously hope it will. But the measures suggested by my noble friend Lord Renton recognise and take care of the short-term problems which I hope will diminish as further lettings come on to the market.

    Finally, I must take gentle issue with my noble friend Lord Stanley of Alderley. He has pushed fairly firmly, as have other noble Lords, the point about the position of the tenant in all these matters. It is entirely right to respect the tenant, to think of his wishes, and so on. However, at the end of the day we are trying to achieve a situation where more land will be available for letting on the open market, and it is the landlord who will make it available if he can and if it is financially attractive to him.

    Therefore, I ask the Committee very seriously to consider the landlord a little more than we appear to be doing at the moment, because without the landlord's agreement to these packages and formulae there is no conceivable way in which landlords will put their heads on the chopping block and put more land on to the open market. I am sorry, but that is a fact. They will not do it and this must be very carefully considered. Having said that, may I support this amendment. I hope that my noble friend Lord Renton will use his ingenious persuasion to get the Government to go along with it.

    6.13 p.m.

    May I make one very short point about the Scottish situation which has been mentioned? The two pieces of legislation differ in one very substantial way, and my belief is that this Bill, which we are now discussing, will very largely succeed as a result of the implementation of Clause 2. Clause 2 does not feature in the Scottish legislation, and therefore it seems to me that there are likely to be more farms coming on the market in England and Wales than there will be in Scotland. More landlords in England and Wales will, as my noble friend has just said, be prepared to put their heads on the chopping block.

    This being so, it seems to me highly desirable that the terms of the arbitration should be as precise as possible, and this is why I demurred on Second Reading at the wording proposed by the Government that consideration should be given to,
    "a competent tenant practising a system of farming suitable to the holding".
    I think that it leaves one open to the most tremendous argument and discussion, just as do—I say this with the greatest respect to my noble friend Lord Renton—the words,—
    "that the tenant is reasonably skilled in husbandry".
    I would not really begin to know how to go about defending or accusing someone of having that virtue or not.

    I suppose that, having a farm in Scotland, I shall be accused of being biased; but, as in many other cases, I find the things which the Scottish lawyers say are, on the whole, pretty good and I commend to my noble friend the Minister that he should pay considerable attention—as he has promised to do already—to the drafting of the Scottish Bill.

    I do not propose to follow the point on the Scottish law; but may I ask the Minister, when he replies on this amendment, to confirm that if it is passed or if it is withdrawn to be used as a basis of negotiation, it will leave intact something in the 1948 Act which is of extreme importance. I read from the Notes on Clauses:

    "By virtue of Section 77 of the 1948 Act these arbitrators are not subject to the general law on arbitration but are governed by provisions of the Sixth Schedule to the Act. This is a simplified code specially drawn up to provide a very informal arbitration procedure for agricultural landlord and tenant matters"—

    Will my noble friend allow me to intervene? I think he will find that the point will arise on a later amendment.

    I thank my noble friend very much. But even if the point does not arise on this amendment, I still think it is very important for it to be retained in any new legislation. It will defuse a lot of the fears and problems which will arise if we go into a more legalistic situation. It has been stressed this afternoon—and the noble Lord, Lord Walston, and my noble friend Lord Belstead mentioned it earlier—that there have been few arbitrations up to now; and few, if any, arbitration cases have been taken to the courts, but they may occur in future.

    There are two things which will defuse an anxious situation more than anything else. First, those words in Section 77 of the 1948 Act should remain for the kind of arbitration that we shall have. Secondly—and surely we have a lot of ex-diplomats on the Cross-Benches who can help us here—we want to get round this very explosive term "open market". They are words which, as they skim through the clause, people on one side of the Committee and on one side of the landlord and tenant situation will see, and they will say "Open market! It will not do. No!" We have to get around those anxieties. That is why I think that the clause should be withdrawn now, but those two points should be taken into consideration.

    I very much agree with the last speaker that the words "open market" must find their way out of the clause. I should very much like to pay my respects to the wording offered by the noble Lord, Lord Renton, subject to the words "open market" being deleted from the clause. It could give us a formula which would be fair to landlord and tenant, and I agree very much with the noble Lord, Lord Stanley, that it must be seen to be fair to both parties.

    There are just four comments which I should like to make on the formula. It appears to me that there are three possible omissions from the formula which one could look at at a later stage. It does not direct the arbitrator to have regard to the productive capacity of the holding, and one would have thought that the parties ought to be able to produce evidence as to the productive capacity of the land. Again, it does not direct the arbitrator to disregard any effect on rents which is due to any allowance or reduction in consideration of the charging of a premium, although I appreciate that in Clause 1 "premium" is not defined. Those are two omissions.

    On the other hand, I very much prefer the reference to the tenant "reasonably skilled in husbandry". Like the noble Lord, Lord Stanley of Alderley, I find that to be a concept which I can understand. It is very much easier than that of a "competent tenant". We are all familiar with the concept of a reasonable man and of a reasonable tenant. I have also a preference for paragraph (c)(iv) of this amendment which echoes, I believe, a similar provision in one of the Rent Acts relating to residential properties where we speak of the number of tenants being substantially in excess of the number of the holdings. I should have thought that "substantial" is an expression which has been construed by the courts on many an occasion. Therefore I would much prefer Lord Renton's paragraph (c)(iv) to the suggested wording in Clause 1.

    Having acknowledged the virtues of the clause, I still believe that as it stands it has the central weakness that it is still fastened to the 1958 concept of the open market.

    6.22 p.m.

    I am most grateful to my noble friend Lord Renton for putting down this amendment, because it has led to an extremely interesting debate. As one would expect from an amendment put down by my noble friend, it is drafted with great skill and is most attractive in that way. It represents a fundamental revision of the rent formula which is put forward in the Bill, although reproducing some of the existing features in a different order and in a different form. As my noble friend said, it is identical to a formula which I believe was proposed by the Agricultural Law Association in 1981.

    As I said just now, there are some important differences between my noble friend's formula and the one contained in the Bill. The principal difference is that the rent properly payable would be defined, according to my noble friend's formula, in terms of the open market as between (my noble friend emphasised this) a willing landlord and a willing tenant. The productivity and earning capacity of the holding would be, so it would appear, relegated to secondary importance.

    So far as the productivity and earning capacity of the holding is concerned, I was grateful to my noble friend Lord Stodart of Leaston for saying roundly—I think it needed saying—that this Bill will have the shining merit of repealing the relevant part of the 1976 Act, which I believe (and which I know the Northfield Committee believed and my noble friend Lord Swinton when he wound up the Second Reading debate believed) has not been to the advantage of lettings in England and Wales. It does need to be repealed, but we come to it in Clause 2. I was grateful to my noble friend for what he said.

    As to the advantages of' the way in which productivity is dealt with in the Scottish formula, of course I take the point which my noble friend Lord Stodart made that, seen from North of the Border, Scottish legislation looks the best that one could possibly have. But my noble friend will forgive me for reminding him that at Second Reading my noble friend Lord Middleton was somewhat critical of this part of the Scottish formula. In particular, Lord Middleton said that the reference in the Scottish formula to the "current economic conditions in the relevant sector of agriculture" rather than to the productive capacity of the holding did not appeal to him. If your Lordships will forgive me, I do not want to enter into a general debate on the merits of the Scottish formula which do not arise directly from my noble friend's amendment, but I ought to say that the industry in England and Wales have looked at it and do not find it, as things stand at the moment, to be better. We are in the difficult position that the Scottish legislation has been on the statute book only for a short time, so it is difficult to prove or to disprove the matter one way or the other.

    It is very important to underline that my noble friend's amendment goes on to discount from the open market for substantial scarcity. He feels that this is better set out in his amendment than it is in the Bill. I am not absolutely certain about that, but perhaps I have become familiar with the wording in the Bill. I should like to study the wording of my noble friend's formula. It is enormously important to try, among other things, to achieve clarity in whatever legislation we finally put on the statute book, if for no other reason than to keep the number of arbitrations to the admirably low figure at which they have run in years gone by. In this respect I should like to assure my noble friend Lord Waldegrave that the new rent formula contained in the Bill and the amendment of my noble friend would not change the current arbitration procedures of the 1948 Act, although I am bound to say that my noble friend Lord Dilhorne wishes to do so by putting forward Amendment No. 29.

    It is, therefore, in that general light that I feel the Government ought to have regard to the amendment of my noble friend Lord Renton in trying to find their way through the thicket of different and competing formulae which we have for the future. If my noble friend feels it right to withdraw the amendment, I assure him that we shall study it very closely—it has not been on the Marshalled List very long—for the next stage of the Bill.

    I am extremely grateful to my noble friend Lord Belstead for the open-mindedness which he has shown and for his willingness to consider this matter further. I am also grateful to the other noble Lords—eight of them—who have spoken in this short debate. I am especially grateful to the noble Lord, Lord Northfield, and to my noble friend Lord Mountgarret for the support they have given to the terms of the amendment. I must confess that when I moved the amendment it never occurred to me that I should find myself caught up in the Scottish situation, although I have a family interest in land on the other side of the Border. I had not declared this interest, because the Bill will not prevail, so far as I know, on the other side of the Border. In considering this amendment further I very much hope that my noble friend will consider it as a separate matter from the very interesting Scottish issue.

    In conclusion, may I make two brief comments. First, my noble friend Lord Stanley of Alderley and my noble friend Lord Stodart of Leaston have complained of the prospect of an arbitrator having to assume that a tenant is reasonably skilled in husbandry. It may have been overlooked, especially by my noble friend Lord Stanley of Alderley, that the Bill refers to a competent tenant practising a system of farming suitable to the holding. I should have thought that the term "reasonably skilled in husbandry" was a very suitable paraphrase of those longer words in the Bill.

    My last point is this. I believe it is very important to stress it, and I do so in the presence of the noble Lord, Lord Howard of Henderskelfe. He made the very important point, as I did in opening the debate on this amendment, that we have to help the arbitrator by stating the objective of all the detailed guidance we are to give him. Therefore, as in Amendment No. 1 so in this amendment, it was right to state at the outset the purposes of the foregoing subsection; that is, in fixing the rents. Whatever else may happen from moving this amendment—and I hope that much else may happen—I hope that that is a point of which the Government will not lose sight. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    [ Amendment No. 4 not moved.]

    6.31 p.m.

    moved Amendment No. 5:

    Page 2, line 3, at end insert ("he may consider")

    The noble Lord said: This amendment can be dealt with briefly. The existing drafting of Clause 1(3) at the bottom of page 1 of the Bill states:

    "Subject to subsections (4) to (6) of this section, in determining the rent properly payable in respect of a holding on any such reference the arbitrator shall take into account all relevant factors, and in particular"—

    and the factors which then follow are, if you like, mandatory following the introduction of that subsection. What has come out of much of the debate this afternoon is that the job of an arbitrator is an extremely difficult one. The factors are complex, situations vary, and his judgment has to take into account many varying circumstances—not only in respect of the holding but also in respect of the particular type of agriculture, the degree of scarcity of the land, and the problems of defining what is a good farmer and what is a bad farmer. It is, I suggest, essential not to bind his hands too much.

    The Northfield Report was very clear about this point. It stated in paragraph 733, sub-paragraph ( b) that,

    "Such a basis would embrace the concept of fixing rents at levels acceptable to a willing landlord and a prudent tenant"—

    and that, of course, is part of the subsection governed by the introduction I read out—

    "and we should like to see arbitrators given fairly wide discretion in their interpretation of this".

    It occurs to me that it is best to leave this kind of factor as guidance to the arbitrator and not make it mandatory. Instead of spelling out no less than 11 factors which are mandatory on the arbitrator—as I believe the Government are doing—we would do much better to say that he "may" take into account all relevant factors and then just illustrate the kind of matter he may consider in defining what for him, in those particular circumstances, and of all the variations which can occur, appear to be the relevant factors.

    Later, when we come to the remainder of Clause 1, other amendments I have put down would again change the word "shall" to "may" when it comes to the way in which the arbitrator is to act. All the way through, I return to the point which I know influenced my committee a great deal after hours and weeks of hearing evidence from people who came to see us about issues such as this one. It was, that the arbitrator must not be bound too much. He must be free to take into account the kind of factors I read out a moment ago from Cluttons as to the way in which we approach something nearer an open market level. He must take all those factors into consideration and we must trust his judgment—but, having given him guidance.

    I shall be content if the noble Lord, Lord Belstead, in his response to this amendment, will accept that this amendment, too, will be taken into account in the further discussions he has undertaken to have. I regard it as being somewhat important that we move away from tight instructions to more general guidance for the arbitrator, for one final reason in particular. It is, that once these rules are set down they will not only form the basis for arbitration but will form also the basis on which voluntary agreements between tenants and landlords are reached.

    In those circumstances, we want to leave room for negotiation and room for various factors to be taken into account without there being too much legalistic phraseology, and thus allow reasonable interplay between the two parties in reaching an amicable solution. I beg to move.

    I am sorry to introduce a controversial note because I believe that the Committee is very ready to accept the advice of the noble Lord, Lord Northfield, on many aspects of the Bill which is now before the Committee. But I really do think that this amendment would be an invitation to inconsistency in the basis of rent arbitration.

    I put it to the Committee that the arbitrator would have no yardstick for the scope of his assessment. Landlords and tenants would be unsure of the results of arbitration; at least, they would be unsure of the basis upon which arbitrations were taking place. Although I listened to the noble Lord when he quoted from paragraph 733—and he did, of course, quote it with absolute accuracy—I was surprised that he placed emphasis on the permissive nature, as he interpreted it, of that paragraph. After all, the noble Lord and his committee recommended that where a true open market exists, then it remains the correct basis for determining rents, but where it is not so arbitrators should also take into account productivity; and that this would,
    "embrace the concept of fixing rents at levels acceptable to a willing landlord and a prudent tenant".

    But the noble Lord the Minister should read on, because in the middle of subparagraph (b) it states that in those conditions the awards "may reflect" this—not "shall" or "should"—as well as any other open market evidence. We were very careful to use that word "may", to try to show that after considering all these matters awards "may"—not "shall"—reflect the situation.

    That is precisely where I disagree with the noble Lord, Lord Northfield. If this is to become permissive for one arbitrator to take into account but not another, where on earth is the landlord or the tenant to find himself? The noble Lord reminded us—as he had every right to do—that it is important to encourage voluntary agreements. But if landlords and tenants are not to be sure in one part of the country what is to be the basis of an arbitrator's assessment compared with another part of the country, it is very unlikely that landlords and tenants will continue to reach voluntary agreements in the very high numbers that they have in the past. They will be uncertain and they will tend, perhaps paradoxically, to go to arbitration because of the uncertainty of the whole basis of the matter.

    We are not trying in this Bill to tightly tie down professional men. I will not weary the Committee by reading at any length from page 2 of the Bill, but I would just say that the arbitrator referred to at the top of page 2 is required to take into account all relevant factors. In particular, these four factors are underlined as being required to be taken into account anyway. I do not think one can say that that is removing the professional skill from those upon whose judgment at the end of the day the whole arbitration system relies. If we follow the amendment which the noble Lord, Lord Northfield, has put forward, it will be impossible for landlords and tenants to be sure in one part of England or Wales what the basis of arbitration is compared to another part. I am sorry to be unhelpful, but on those grounds it would not be possible to include Amendment No. 5 in any consideration of the Bill for the future.

    Could my noble friend help me? What if we discover something in five years' time that we all consider is vitally important and we have not listed it here? I am thinking in particular of Subsection (4). I have an amendment down for discussion later which deals with a surplus of farms to let. That possibility is not listed here, but if this Bill works wonders, and with a lot of help from the Chancellor landlords are encouraged to let land, there might be a surplus. However, that is not in the Bill. I know that it is covered under the heading "all relevant factors" and that will probably be the argument used against me, but so is everything else that an arbitrator has to take into account. It is all relevant. I do not believe he should be restricted, in the main, to what is here when there could be future matters that would concern us.

    May I put a question to the noble Lord, Lord Northfield, which is based on the same aspect? On the one hand the valuer or arbitrator "shall" take into account "all relevant factors." Among the relevant factors is (a), (b), (c) and (d). So why is the noble Lord pressing that the arbitrator "may" take into account those factors when in fact it has already been agreed that he "shall" take into account "all relevant factors"?

    I am only trying to loosen up on the guidelines given to the arbitrator and not as drastically, with great respect, as indicated by the noble Lord, Lord Belstead. Just as "all relevant factors" applies to these parts of the clause, so it would apply in his case where he says there would be variations all over the country. If the arbitrator did make irresponsible or capricious decisions, on my formula he could be held responsible and wrong under the words "all relevant factors". So, with great respect, the noble Lord exaggerated the reply.

    We have an open disagreement. The fact is that the real world is much more complicated and much more difficult and needs a great deal more latitude than the noble Lord really accepts in these very difficult matters of rent settlement.

    This is not the point at which to press this amendment. I shall return to it when we see the new formula which is worked out after various consultations. In the meantime, I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    moved Amendment No. 6:

    Page 2, line 6, leave out ("and situation") and insert (", situation and locality").

    The noble Lord said: This amendment may conveniently be taken with Amendments Nos. 10 and 14 because the same arguments apply.

    Amendment No. 10: Page 2, line 16, after ("lettings") insert ("in the locality").
    Amendment No. 14: Page 2, line 26, after ("holdings") insert ("in the locality").

    The purpose of these amendments is to ensure that the arbitrator is referring, for the purposes of the new section, to agricultural holdings in the locality in which the farm is located. It should be clear that he must address himself not to an average farm of that kind but to the individual farm in the same locality. It may be a matter of English or of substance but the word "situation" which is used in the subsection may merely refer to a type of farm—perhaps a hill farm or a lowland farm. If we introduce the word "locality" into the new section then it becomes abundantly clear that we are referring to a farm in the geographical locality in which the subject farm is located.

    This is particularly important in the context of Amendments Nos. 10 and 14 because in those amendments the arbitrator would be making a comparison with comparable farms in the locality. In this situation general figures for farm rents all over the country could otherwise be submitted to the arbitrator and that would be far too general and would be of little or no use. I beg to move.

    I find myself in a difficulty here because I was preparing to accept Amendment No. 6 until I heard the noble Lord, Lord Prys-Davies, couple it with Amendments Nos. 10 and 14, which, when the time comes, I shall oppose. In the meantime, I hope a general atmosphere of goodwill will spread from these Benches to the Benches opposite. I am sorry that it is I who am accepting this amendment and not my noble friend Lord Belstead who has done all the hard work so far.

    The word "situation" as it appears in subsection (3)(b) of the new Section 8 is intended to include "locality". I have sought further advice as to whether the term might be interpreted in such a way and I am advised that there may be advantage in widening this reference. We shall be happy to consult noble Lords opposite to produce an amendment at a later stage to cover the point. Meanwhile, I hope noble Lords will feel able to withdraw the amendment. However, I must give notice that I shall not accept Amendments Nos. 10 and 14.

    Amendment, by leave, withdrawn.

    moved Amendment No. 7:

    Page 2, line 7, leave out ("productive") and insert ("potential productive and earning").

    The noble Earl said: This is a simple amendment to leave out the word "productive" and insert the words "potential productive and earning". There are two aspects to this amendment. The first is purely agricultural. I understand that the parliamentary draftsman has advised the Minister that the words "productive capacity" take into account, in law, the word "potential". It is not clear to me that that is its meaning. The Bill should make it clear to all laymen that in assessing the rent to be paid the arbitrator must look not only at what the farm is doing in the hands of a competent tenant but what it might do in the hands of similarly skilled farmer who might farm it in a more profitable manner.

    Tenants must be encouraged to improve their holdings and to realise their potential. The green revolution that has transformed farming in the past 20 years will be eclipsed by the changes in the next two decades. For example, genetic engineering although still in its infancy has enormous potential. It is possible that we could soon have nitrogen fixing cereals which are totally frost resistant and could yield 10 tons to the acre without detriment to the soil. The land is capable of growing the crops, but is the tenant capable of doing so? If he is not, does that mean he is not competent or that he is just uncompetitive?

    The second aspect of the amendment is to broaden the scope of matters that can be taken into account in a rent review by enabling the arbitrator to consider the earning capacity of the holding. I refer noble Lords to the county court case of Tummon v. Barclays Bank Limited. This related to a caravan site built at the expense of the tenant. It was held however that the landlord was entitled by increased rent to the latent value of the holding resulting from the suitability of the farm for that enterprise and its planning consent.

    We can all think of other non-agricultural uses for a holding. Although this amendment is similar to another of mine, Amendment No. 11, it is more extensive. It aims to take into account at a rent review all agreements made between the landlord and tenant: for example, the use of part of a field as a picnic site for part of the year or the advantage of farm gate sales to the occupiers of a caravan site on an adjoining holding. It seems illogical to me that where a landlord has said, "Here is my holding. You can farm and manage it to the best of your ability", the same landlord should not share in all the benefits that the tenant can accrue from that holding. Similarly, if there is a particular ancient earthwork that is visited regularly by a number of people, and that leads to access and trespass problems, that too should be taken into account in assessing the rent.

    It is much easier for an owner-occupier to handle such matters than a landlord and tenant who are tied at present by the agricultural productivity of the holding. It is time, for the sake of the countryside and for all those who enjoy it, to move to a broader base of rent assessment. I beg to move.

    6.52 p.m.

    I think that there are grave dangers in the case put forward by the noble Earl, Lord Caithness. "Productive capacity" is a nice phrase and it is true that the other phrase means the same sort of thing; but the examples that the noble Earl quoted were quite extraordinary. A picnic site may be producing revenue and the holding next door may open another picnic site. Immediately the revenue is halved. A farmer may, for example, have a "pick-your-own" site and another strawberry patch may be set up on the next-door holding; again the productive capacity of the farmer may remain the same but the sales capacity will not remain the same. The profit of both may go down the drain.

    Young men with immense ability in a specialised field may come to an area, take a farm and, for example, go for the canning of peas, the production of strawberries or a large acreage of fruit, and pay a high rent. The basis for assessing the rent of a whole district cannot depend on the productive capacity and the rent paid by a specialised farmer with great ability in marketing. I accept that the words suggested may mean the same, but the argument that rent should be based on productive capacity in a specialised field is very dangerous.

    May I ask the noble Earl, Lord Caithness, a question? Perhaps only a particular occupier possessing certain special skills and possessing a holding in the area can turn the potentiality to account. Because this individual has the special skills which will enable him to turn the potentiality to account, does the amendment mean that he has to pay an additional rent?

    If there is latent value of the enterprise of the tenant, there is a latent value to the landlord. The answer is yes. Why not?

    While it is intended that the productive capacity of the holding should be assessed objectively—and that is a thought which we hope is conveyed by talking about "a competent tenant" rather than "the tenant"—it would be unfair, we believe, to base the assessment of productivity at the extreme of the holding's potential, since this might assume the use of highly capital intensive methods which may not be available to the sitting tenant. Subsection (3)(d) has been carefully constructed in order to avoid conveying the impression that it should be so assessed.

    If I may try to meet the point of my noble friend Lord Caithness, we do however have that assessment as taking account of the productive capacity of the holding and the extent to which a competent tenant, practising a system of farming suitable to the holding, could reasonably be expected to profit from farming the holding. I hope that this may go some way to meet my noble friend's wish to look at what a holding can produce either now or in the future without stretching that concept to the extreme by saying that the potential under any methods—which would be undefined—should be the criterion of productive capacity. That would worry me and it would worry the Government.

    I think that what we have put into subsection (3)(d) is fairer. It gives the flavour of both looking at the present and at the future. I hope to that extent I have come some way to meeting my noble friend's wishes in his amendment.

    I should have thought that the noble Lord the Minister and the Government have got this just about right. I agree with my noble friend Lord Mackie of Benshie that it would be very wrong to base rent upon productive potential. In the first place it is a completely unknown factor. In the second place, as the noble Lord, Lord Belstead, rightly points out, much of an enterprise's productive capacity depends on how much capital the tenant has and is prepared to put into his farm—whether he is able to put in an irrigation scheme, whether he has the money to do so, and so on.

    I think that it would be very wrong to have rents assessed on some theoretical potential which a well equipped, highly skilled and specialist tenant could make use of. On the other hand, one does not want to base rents purely on the pedestrian type of farming which may have been practised indefinitely for generations and where the tenant does not want to move at all. We have to hold a balance between these. In this respect at least I think that the Bill has the balance about right.

    I am grateful to my noble friend Lord Belstead for his reply; but he seemed to devote his reply to the agricultural aspect. I should be grateful if he could comment on my thoughts for expanding the rent to a broader basis and taking into account the earning capacity of the holding.

    If I may say so, the productive capacity of the holding as it is set out in subsection (3)(d) also can be taken to subsume what the holding's capacity is to earn. I do not want to appear difficult, but I should have thought that we were splitting hairs here.

    I do not want to split hairs on this. The point that I am trying to make is that I want the broader base. If we go back to the 1948 Act, I am advised at the moment that the productive capacity of the holding is an agricultural definition rather than anything else.

    To deal with the point raised by the noble Lord, Lord Mackie of Benshie, if he wants to grow strawberries when his next-door neighbour is growing strawberries, there might be a market to sustain both. If his next-door neighbour has started growing strawberries and the noble Lord wishes to grow them, and the market does not take into account both, he did not do his research properly in the first place. I admit that the first person will be a little disappointed that he has competition, but I am sure that the noble Lord, being the Scot that he is, will not stay in growing strawberries for long in those circumstances.

    I did not want to take the amendment to the stage where we had to consider every aspect of the potential earning capacity or indeed the potential productive capacity. That is qualified later on in the clause. All I am trying to do is to get a broader base on which rents can be assessed, because there has already been a county court decision on this matter, in which, as a result of a caravan site put in at the tenant's expense, with facilities and a road, the latent value to the landlord could be taken into account in a rent assessment.

    I do not believe that as it stands the Bill clarifies this point. I shall withdraw my amendment, take it away, and have a look at it. I hope to have a word with my noble friend Lord Belstead between now and the next occasion, because I believe that there is here a point that we ought to pursue further in the interests of clarification, since we shall not get another chance probably for 20 years. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    7 p.m.

    moved Amendment No. 8:

    Page 2, line 9, leave out from (" holding) ") to (" and ") in line 14.

    The noble Earl said: I beg to move the amendment standing in the names of my noble friends and myself. The purpose of the amendment is simple. In Clause 1(3), the Bill sets out the relevant factors which the valuer and arbitrator should take into account. These include the terms of the tenancy, the character and situation of the holding. the productive capacity and the profitability of the holding, and comparable lettings. I would submit that four out of those five factors are very constructive and sensible. However, in regard to the profitability test, the Bill states:

    "and the extent to which (in the light of that capacity) a competent tenant practising a system of farming suitable to the holding could reasonably be expected to profit from farming the holding".

    I would submit that that is somewhat strange wording. First, who is to judge who is a competent tenant? Is the noble Lord, Lord John-Mackie, a competent tenant? Before he jumps to his feet, I would immediately say that he is. But who is to judge this emotive term?

    Secondly, I would suggest that the reference in the Bill to,

    "a system of farming suitable to the holding",

    raises an emotive subject. Finally, the test of profitability is a wholly new concept in agricultural valuations. It is very commonplace in regard to bingo halls and supermarkets, but it has never before been applied to farming, and, knowing the notorious unprofitability of farms so far as the taxman is concerned, I doubt whether it has any value at all. I beg to move.

    I very much agree with the amendment which the noble Earl, Lord Kinnoull, has moved. He is quite right: who is to judge who is,

    "a competent tenant practising a system of farming suitable to the holding",
    who,
    "could reasonably be expected to profit from farming the holding"?
    I think that any arbiter would find great difficulty in interpreting those words, and I have much pleasure in supporting the noble Earl in his proposal to delete them from the Bill.

    I rise to support my noble friend Lord Kinnoull, since I believe that, as it now stands, the wording of the clause would lead to an increase in disputes between the landlord and tenant. I believe that the wording of this part of the clause and that of subsection (4)(a) will lead to a considerable amount of extra business for that well-known firm of lawyers, "Messrs. Rent Reductions". My noble friend has put the case well, and I think that it deserves much support, because, if there is any acrimony, or increased acrimony, between the parties, it can lead to only one thing: fewer landlords and fewer tenants.

    I, too, wish to lend my support to the amendment and to what has been said. There is a problem in defining in legal terms a proper system of farming. I am sure that barristers and perhaps even the Government will say that this is an understandable and acceptable piece of phraseology, but it opens the field for too wide a discussion.

    There is also the reference to a suitable level of profit, and we all know that there are ways and means of reducing one's so-called profit on paper if it is deemed to be necessary and is a prudent thing to do. It is probably wrong to have this kind of expression in the Bill. These are factors which are at present taken into account by arbitrators, and I do not think that it would be wise to have this kind of dubious phraseology inserted in the Bill. I hope that perhaps we may improve the Bill by accepting the amendment.

    Is it perhaps strange that this is one of the few pieces of the Bill that I understand very clearly? If we go to farming advisory companies or to ADAS, they will tell us what kind of a profit we should make on a piece of land. They will show what should be the gross margin, given a certain amount of equipment, et cetera. I do not think that this particular part of the clause creates all that confusion—at least not in my mind.

    I think that the clause would be better with the amendment. The first paragraph of the subsection really covers the matter arid relates to a factor which any experienced valuer or arbitrator would take into account. I do not see that the words which it is proposed to delete add anything to the clause. Possibly they dot the i's and cross the t's, which, I would agree with the noble Lord, Lord Northfield, we do not want to do too much in the Bill. We want to leave it to the discretion of the arbitrator, bearing in mind the enormously variable circumstances which we all agree exist in different farms and in different areas, localities, holdings, situations and all the other circumstances that we have been discussing. So I support the amendment on the grounds that it will slightly strengthen the intention of the Bill. and it will certainly not in any way detract from what the Government are trying to do.

    I, too, should like to agree with my noble friend Lord Kinnoull with regard to the amendment, simply for the very good reasons which he and a number of other noble Lords have put forward. It seems that the wording is superfluous to the Bill. It seems also that it would lead to imprecise decisions and woolly thinking all round, and I think that we should be far better without them.

    If I understand your Lordships, there is not disagreement on the desirability of having in the Bill the criterion of the productive capacity of the holding; though before one of your Lordships takes me up on that I should add that I realise that that view has not received universal support. But, as I understand the thrust of the debate, the point that we are discussing is not whether there should be a reference in the Bill to the productive capacity of the holding, but whether there should be the further words,

    "a competent tenant practising a system of farming suitable to the holding could reasonably be expected to profit from farming the holding".
    Those basically are the words which the amendment of my noble friend and the noble Lord, Lord Howard, would seek to delete.

    My noble friend Lord Radnor says that the words would lead to uncertainty. But the question which arises in my mind is how, if the words were not included, would the arbitrator know what criteria to take into account? Not for one minute do I mean that the arbitrator is not thoroughly skilled in knowing what he feels he should perhaps take into account. But how should we be sure that in one part of the country an arbitrator might not take into account the fact that a tenant should be highly skilled, while in another part of the country an arbitrator might consider that the tenant should be an average kind of tenant, while in yet another area a different level of skill might be assumed? Should the arbitrator assume that the holding is being suitably farmed? Or can the arbitrator take into account farming practices that may not be entirely appropriate to the holding? We come back to the difficulties that arose on the amendment of my noble friend, Lord Caithness, that we might, if we were not careful, be talking about extending the productive capacity of a holding to something that was highly capital intensive and that was really unfair, arguably, to the tenant.

    It is worth noting that the concept of how a competent tenant practising a system of farming suitable to the holding would farm and assessing the consequences of that is not new. It is to be found in Section 48 of the 1948 Act, where, in order to measure compensation for improvements, the section requires compensation to be equal to the increase attributable to the improvement in the value of the holding having regard to the character and situation of the holding and the average requirements of tenants reasonably skilled in husbandry.

    To point up the point rather better, one has only to look at paragraph 733 of the report of the noble Lord, Lord Northfield. The noble Lord will forgive me if sometimes I call him aid and sometimes I do not. Paragraph 733 contains the recommendation of a new possible way forward with the Northfield Committee, in that important report, using very much the same words which are to be found in paragraph (c), except that the noble Lord and his Committee use the word "efficient" instead of "competent".

    There is one last point that I ought to make. Some of your Lordships earlier—I think it is important to have this exchange of information in Committee—were advocating the Scottish formula. The Scots turned their mind to how they would assess productive capacity. They came up with the criterion of the current economic conditions in the relevant sector of agriculture. All that I would say at this stage is that my noble friend, Lord Middleton, was critical, in an amusing way, during Second Reading, of that particular formula. This brings us back therefore to the point that I believe we may have very well got the right formula in paragraph (c). I am absolutely certain that, if we do not include a description of what we mean by the earning capacity, it will put an arbitrator in a very difficult position. Of course, I shall look carefully at what has been said. I would ask noble Lords also to look carefully at what I have sought to put before the Committee. If we go on here, we really shall he in some trouble.

    I am an unrepentant and unreconstructed Englishman in this matter. I do not wish, in the least, to adopt any Scottish provisions. We have here a statement about the holding and its productive capacity, and we then go on to talk about what the competent tenant might do with it. It seems to me that these two things are so different that they ought not at any rate to be included in the same paragraph at this stage of the proceedings. They should be separated.

    The competence of a tenant and the way in which he might farm a holding has nothing to do with the productive capacity of the holding. The valuer can look at a holding without any tenant being there at all. This could happen between tenancies when someone has perhaps died. The valuer can say that the holding, with the fixed equipment upon it, can be farmed in a particular fashion—I agree that there must be a reference to that—so that he can assess the rent. However, in view of what has been stated about looking at this matter again, I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    7.15 p.m.

    moved Amendment No. 9:

    Page 2, line 9, leave out from ("holding)") to ("and") in line 14 and insert ("and the extent to which (in the light of that capacity) a thoroughly competent occupier practising the most profitable system of farming suited to the holding could reasonably be expected to profit from farming the holding;")

    The noble Lord said: I should explain that I very much support the views of the noble Lord, Lord Northfield. I had hoped that the noble Lord, Lord Belstead, would also do so. I feel that a certain measure of discretion should be left to arbitrators, who have a great deal of wisdom in this sphere. If the noble Lord, Lord Belstead, feels that a close definition of what the arbitrator has to do has to be set down by Parliament, I submit that we have to get it exactly right. I suggest that this clause fails to do so, or at least leaves a substantial area of uncertainty. I approve of the principle that an arbitrator should take account of the profitability of a holding. This is in line with the practice of arbitrators at present and it is the practice of good landlords.

    The wording of the clause at the moment is not absolutely clear. It refers to a system of farming suitable to the holding and, as several noble Lords have remarked, it refers to a competent tenant. Taking first the system of farming, there are often several systems of farming suited to a holding. It is possible to use a holding for different systems of farming. A dairy farm, for example, can be used for raising single suckler beef. To do so is demonstrably less profitable. I should like to quote a few figures. I have taken these figures from a report of the University of Newcastle-upon-Tyne on the profitability of farming which happens to be for the year 1980 to 1981. That was the report that happened to be to hand. I could possibly demonstrate the same result from many other sets of figures. I have taken the figures for management and investment income. I am sure that some noble Lords will take me up on this. The figures can be adjusted. I have adjusted them, and I will discuss the adjusted figures with anyone who is interested. The results are the same, or comparable. A dairy farm is shown as yielding a management and investment income of £138 per hectare whereas a livestock farm yields only £28. In this particular year, the sample of arable farms yielded only £18. That is a very significant difference.

    The comparison that arises from these figures is the difference between the total sample of farms—there were 20 to 25 in each sample—and the premium farms which were the best six farms in each sample. Here, we have figures in the dairy sector off 138 for the sample and £290 for the premium farms; in the livestock sector, £28 for the whole sample but £73 for the premium farms; and in the arable sector, £18 for the whole sample but £84 for the premium farms. These figures suggest that we have to define clearly what we mean by a suitable system of agriculture. We have to define clearly what we mean by a competent tenant. There is clearly an enormous difference between the performance of the average tenant and the performance of the competent tenant and between different systems on the same holding.

    In this amendment I have substituted the word "occupier" for the word "tenant" in line 11 because use of the word "tenant" coupled with the word "profit" in line 13 begs the question of what rent it is assumed is being paid. It is fair to say that another way of dealing with this ambiguity would be to revert to the word "tenant" in line 11 and to add the words "if no rent were payable" after the word "holding" in line 14.

    The productive capacity of a holding will only be realised by a thoroughly competent farmer who adopts a system of farming that optimises the productive potential of the holding. It is precisely this potential productive capacity that the clause, as amended, is intended to instruct the arbitrator to seek out. I beg to move.

    I would like to oppose this amendment, for exactly the same reasons as I opposed the amendment of the noble Earl, Lord Caithness. There are too many superlatives. Indeed, "a thoroughly competent occupier" is a little difficult to define. I do not know the difference between a competent and a thoroughly competent chap. I know a number of competent people, but I know very few thoroughly competent people. They are the type of people who do a great deal of harm to everyone by their thorough competence. If we could achieve a level of competence it would be quite sufficient. Again, I would use the arguments which I put forward previously. It really is a doctrine of perfection to say:

    "practising the most profitable system of farming suited to the holding".
    It is too much. It is a little too ideal for practical purposes, and for those reasons we oppose the amendment.

    I should like to ask for elucidation from my noble friend. In a way it stems from the previous amendment but it is, of course, the same point. Was my noble friend saying in reply to the previous amendment that he would consider the Scottish wording for the "competent tenant" section? Secondly, was he saying that in the 1948 Act the principle of profitability, the test of profitability, was actually included? If he was saying that, then I have been thoroughly badly advised this morning by someone who I thought was a leading counsel on this law.

    My noble friend Lord Swinton is replying to this amendment but I think I ought to say that I did not say either of those things.

    There has been a great deal of debate in the farming press and else whereas to what kind of tenant should be assumed to be farming the holding for the purpose of the objective assessment of its productive capacity. After much discussion the joint Ministry of Agriculture, Fisheries and Food/NFU/CLA/RICS Working Party agreed that the tenant should be assumed to be slightly above average, and the word "competent" was chosen to reflect this. There was a similar extended debate concerning the system of farming on which the assessment was to be made. Here the working party agreed that it should be one "suitable" to the holding.

    The noble Lord, Lord Northbourne, would "up" the standard by making the tenant "thoroughly competent" and the system of farming the "most profitable". In my view, and in the view of the working party on which both sides of the industry and the professions were represented, the standard we have set is fair and reasonable and I would not wish to make it higher. In fact, I think I can do no better than echo the words of the noble Lord, Lord Mackie, that it just will not do. I hope that the noble Lord will withdraw his amendment.

    I intend to withdraw the amendment, but I would like first to say that I still contend that the word "suitable" is very unsure in this context and I do not think that the noble Earl, Lord Swinton, has done anything to allay my fears in this context. There are often several suitable systems of farming for a holding and some are more profitable than others. I very much hope that the Government will take this fact into account when they are redrafting the legislation. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    7.23 p.m.

    [ Printed earlier.]

    The noble Lord said: Amendment No. 10 refers to paragraph ( d), which instructs the arbitrator to have regard to:

    "current levels of rent for comparable lettings".

    I support this amendment for the same reasons as I supported Amendment No. 6. It is not quite clear to me why Amendment No. 6 should be acceptable, but Amendment No. 10 not acceptable. However, it appears to me that unless the comparison is restricted to holdings in the locality of the subject farm, then the door will be wide open for evidence about farm rents up and down the country—indeed in all parts of the country—to be introduced and to influence the award. I beg to move Amendment No. 10.

    I did give the noble Lord, Lord Prys-Davies, warning that I should not be willing to consider this amendment any further. The difference between this amendment and Amendment No. 6 is quite easy to understand. Amendment No. 6 would simply expand the existing wording which obliges the arbitrator to take into account the character and situation of the holding. He would have to take into account:

    "the character, situation and locality of the holding".
    We hoped, as I said, that "locality" was covered by "situation". In fact, because we are not certain of that, we are taking the matter back to have another look at it.

    When we come to Amendments Nos. 10 and 14 we embark on quite a different ball game. The key to whether the arbitrator should take into account evidence of other rents being paid is whether those rents are in respect of "comparable" holdings. The amendment would restrict such evidence on comparable holdings to those in the locality. It might be quite difficult to define what "the locality" meant in this particular situation. I really can see no reason why, if a comparable holding is truly comparable—that is, it is similar in all important respects to the subject holding—the arbitrator should not take account of the evidence of the rents being paid. They would apply regardless of whether or not the comparable holding was within the locality, however one might attempt to define that. I hope that the noble Lord will withdraw the amendment.

    I would have thought that, although we are comparing a hill farm with a hill farm, or a lowland farm with a lowland farm, the rents do vary up and down the country for the same type of holding. Nevertheless, I will not press the amendment. I beg leave to withdraw the amendment.

    Amendment, by leave, withdrawn.

    I think that this might be a convenient moment to adjourn the Committee stage for dinner. I suggest, for the convenience of your Lordships, that we do not resume the Committee until at least half past eight. I beg to move that the House do now resume.

    Moved accordingly and, on Question, Motion agreed to.

    House resumed.

    Quotas For The Carriage Of Goods By Road: Ecc Report

    7.28 p.m.

    rose to move, That this House takes note of the report of the European Communities Committee on Quotas for the Carriage of Goods by Road (6th Report, 1983–84. H.L. 40).

    The noble Lord said: My Lords, I beg to move that this House takes note of the report of the European Communities Committee on Quotas for the Carriage of Goods by Road. The Motion deals with what you may feel is a rather narrow issue, intrinsically of interest to only a section of British industry. But it has what I might call a strong extrinsic interest, because agreement in the Community to a liberalisation of the quota system, which I shall briefly describe, would be a move towards greater freedom of trade and towards a Community transport policy, a policy which the Treaty of Rome imposes on the Community but which, so far, is sadly lacking.

    The Select Committee on the European Communities published the report at the end of September. The relevant documents of the Commission are quoted in it, and Sub-Committee F of your Select Committee, which conducted the inquiry resulting in the report, had the advantage of oral evidence from the Director General of the Transport Directorate of the European Commission. We also had oral and written evidence from our own Department of Transport, the Road Haulage Association and the Freight Transport Association, and written evidence from British Rail.

    The quota system originated in the restrictions most European states imposed in the 1930s on road competition with railways. The system has developed in such a way that today road haulage traffic is regulated by bilateral agreements between this country and 25 other European countries, including all the EEC member states. In only three cases, however, are the agreements restrictive. These are the agreements with France, Germany and Italy. These countries still appear to believe that they are protecting their railways by restricting road haulage traffic. Typically, in the agreement between the United Kingdom and one of these countries, say, Germany, the Germans issue annually for distribution to British road haulage firms permits for a number of return trips between the United Kingdom and Germany, and we issue the same quota for distribution to German firms. The British road haulage contractors receive their permits by application to the United Kingdom Department of Transport.

    In addition, the United Kingdom disposes of a small number of permits granted under the Community quota. These allow the authorized vehicle an unlimited number of journeys during the year. These of course, are especially valuable because they allow the holder to make unrestricted journeys within the European Community.

    In practice the system is immensely complicated, as noble Lords who have studied the statistics, the concessions, and the exemptions detailed in the report will have discovered. The only member states who wish to retain it are the ones I have mentioned. The conclusions of the Select Committee are unequivocally stated in paragraph 43 of the report.

    First, we state that restrictive quotas for road haulage cannot be reconciled with the free trade principles of the Treaty of Rome. Unfortunately, the legal position is sufficiently ambiguous to deter any challenge to the quota system in the Court of Justice. Secondly, we believe that quotas may frustrate exporters when economic recovery comes: there will not be sufficient permits to go round. Thirdly, the system discriminates against progressive hauliers seeking to enter the international field and protects established operators—the people who are already there.

    Fourthly, we conclude that quotas have not been effective in improving railway finances and, fifthly, that they distort competition among road hauliers themselves. They do not necessarily exclude the cut price operators from competition with responsible firms and to do this—and I hope we shall—we should adopt strict methods ensuring that only professionally qualified hauliers operate. Finally, the report concludes that quotas should be abolished as soon as possible.

    It is quite clear that in this conclusion we are in line with the Transport Directorate General in the Commission. In one of their documents they described the quota system as "costly, cumbersome and economically inefficient". Furthermore, while the report was being prepared, the Commission published in June a new proposal for liberalising the quota system. This proposal provides for significant increases in the quota of permits issued by the Commission itself—an automatic increase every year for five years derived from the percentage growth of international road haulage traffic in the previous year multiplied by five, and distribution of the increases among member states, taking into account their gross national products and their shares of the market.

    The Commission propose from 1989 the abolition of fixed quotas of EC permits and the distribution of unlimited numbers to established hauliers of good repute. Clearly the Commission's ultimate goal is the complete abolition of the quota system, the goal envisaged by your Select Committee.

    This proposal has been put by the Commission to the Council of Ministers. That there will be bitter opposition was evident from the proceedings of a meeting which the noble Lord, Lord Underhill, and I attended in Brussels at the end of September—a meeting of the Transport Committee of the European Parliament with representatives of the transport committees of the Parliaments of member states. I recited there the conclusions of the report before you and the noble Lord, Lord Underhill, and I urged that liberalisation of the quota system would be a practical and an inexpensive step towards a common transport policy. The leader of the French delegation found this unacceptable—it would apparently have the gravest effects on industry in some French regions, and would increase unemployment. The Germans appeared to support this and the Italian vice-chairman of the committee was unequivocally opposed to any change. The Dutch however sided with us, and we had valuable support from Mr. Moreland, a prominent United Kingdom member of the European Parliament's Transport Committee. We must now await the views of the Council of Ministers, though the likelihood of their being decisive is small.

    I am sorry that I cannot look forward to early improvement in the quota arrangements, but we must fight on, because if the Community fails to move forward on this narrow front, the prospects of its advancing on a broader front towards a transport policy are poor indeed. In that somewhat pessimistic mood, I beg to move.

    Moved, That this House takes note of the Report of the European Communities Committee on Quotas for the Carriage of Goods by Road (6th Report, 1983–84. H.L. 40).—( Lord Kings Norton.)

    7.36 p.m.

    My Lords, I wish to thank the noble Lord, Lord Kings Norton, for his excellent summary of the report, for the comprehensive nature of the report, and also for enabling me to take part in the work of Sub-Committee F on this transport issue. At present Community permits cover only a very small part of the United Kingdom haulage to the Continent; most is on bilateral agreements. In fact, only some 8 per cent. of the total international haulage throughout the Community is by Community directives.

    As the noble Lord has already stated, Community permits allow unrestricted picking up and setting down of loads in any EEC country. This could help in obtaining return loads from a third country. Therefore, an increase in Community permits is obviously an advantage. The impression left—at least with me—by various witnesses is that generally the present quota system presents little problem to our exporters and hauliers. However, there is concern about the extreme bureaucratic nature of the procedure, and the Department of Transport's evidence is that many people have to use ingenuity and flexibility to get by.

    The noble Lord referred to the original position of the railways in going for a quota system. The committee comments in paragraph 29 that it is impossible to state precisely how far, if at all, the quota system helps railway finances. As noble Lords heard, the committee concluded that quotas have been ineffective as a means of protecting the railways. But similarly in paragraph 34 it is stated that it is even more difficult to judge how effective the quota system is in protecting the environment.

    Although the quota system may present no real problem for Britain—at least in the present economic climate—I considered it right to have regard to whether other member states may consider quotas to be advantageous to their own railways and to their environment. Therefore, it is to be regretted that no witnesses were able to give firm information, and also it was not possible to persuade representatives, particularly from the three states affected, to come before the committee.

    I was grateful for the opportunity to attend the Transport Committee of the European Parliament to which the noble Lord, Lord Kings Norton, has referred. In the course of that meeting I said that it would be helpful if the representatives from the countries concerned could give information about the effect of quotas on their railways and the environment, but I regret that this information was not forthcoming.

    Our previous Community directive provides for various exceptions from the permit system. These include carriage of goods by own account—that is in vehicles conveying goods of the trader concerned. The Transport Department and Commission witnesses both told the committee that some 40 per cent. of own account lorries run empty on return journeys. That is obviously wasteful. It was suggested that relaxation in the quota system could lead to many of these traders changing to use professional hauliers.

    This leads to the important divergence of view given to the committee between the Freight Transport Association, who represent own account operators and the users of road haulage—that is, the exporters—and the professional hauliers, as represented by the Road Haulage Association. Strong criticisms of the present system made by the FTA are set out in paragraph 24 of the report. The association regard any form of permits as a barrier to trade, and support an increase of Community permits only as a step towards the ultimate objective of total abolition of road haulage quotas.

    On the other hand, the Road Haulage Association state that there is no evidence of exporters being frustrated by lack of permits. They made it clear that in the past they had favoured a liberal approach to the question of quotas, but now consider, as traffic has shrunk because of the recession, that the quota system should be tightly administered. They argue that the quota system should be used to prevent disastrous cost cutting and lowering of standards, which is happening because of the present availability of permits.

    The Road Haulage Association claim that many of those now engaging in international road haulage are not qualified to do so, and even suggest that some are acting illegally. They urge also that it is essential that regulations on international haulage must be completely harmonised and fully enforced in all countries. Sub-Committee F recommend that more direct means other than a quota system should be used to maintain proper professional and social standards in the industry.

    That important qualification helped in enabling me to support the general conclusions of the committee's report. No system should debar innovators or newcomers, nor provide a haven for the established road hauliers. But standards of social conditions and safety must be retained and cowboy competition be avoided. For that reason I am pleased that following this report Sub-Committee F is now considering the question of social regulations for road transport, which I believe goes hand in hand with the report now before your Lordships.

    7.43 p.m.

    My Lords, I too should like to congratulate the noble Lord, Lord Kings Norton, on his introduction of this debate, and also on the conduct of their affairs by his committee. I should also like to congratulate my noble friend Lord Brookeborough as the only other person taking part in the debate apart from myself who is not a member of the committee. I always think that it is rather heartening, if I happen to be on a committee, if outsiders join in. I apologise, I forgot the Minister. I must never do that again.

    I must also declare an interest in that I look after exports for two food-processing trade associations. In that capacity I welcome the report. Also in that capacity I have had much experience of hidden barriers to trade, of which this is one. One of the most depressing things that I have discovered during the past 2½ years is that not only are there barriers to trade in third countries like Japan, for example, against which we struggle with our best efforts, but also there are a staggering number of barriers to trade within the Community. I do not know whether your Lordships saw a most interesting article in The Times last August or September, during the Recess, by Mr. Moreland, whom the noble Lord, Lord Kings Norton, mentioned. He went across Europe in a lorry and he wrote of all the problems he had. Most of them I have come across in some other way, but he made the position most graphic, and I thought that that was excellent.

    Another excellent thing is the organisation called Kangaroo, which was started so far as we are concerned by Basil de Ferranti, a Member of the European Parliament, and some of his European colleagues, with the specific object of cutting down the barriers within what is supposed to be a common market. It is an absolute negation of that. It is particularly disappointing and shaming that three of the major founder members of the Common Market are the three greatest offenders in this particular area that we are discussing tonight. I find that absolutely disgraceful.

    Unfortunately, the noble Lord, Lord Greenhill, has just left the Chamber, because I was going to mention that his committee's report on the internal market set our minds in this direction to start with. We shall be seeing other examples of it in the report of the noble Viscount, Lord Rochdale, on competition policy, which we shall be debating on Thursday. At every turn we find these Community obstructions. For those reasons I particularly welcome the conclusion of the report as summarised in paragraph 38, and would give particular support to the disclosure that it adds unnecessary costs to industry, and that it discriminates against new services. Those are two particularly important points.

    In this country we depend absolutely on exports to survive. If we cannot export competitively in the world today then we shall go financially bust. No doubt there will be many interim stages, and this is one of the ways in which we are particularly discriminated against. It is also the case that it offers the railways doubtful protection, and has doubtful environmental benefit. I cannot think of any environmental benefit in trying to have quotas. It probably makes it worse because the lorries have to clutter particular places in a way they would not do if they were streaming along the roads. It also distorts competition among hauliers. I thoroughly endorse all those points which the committee unveiled in its inquiries.

    For those reasons I agree with the new Commission document, COM(83)340, of 8th June, to which the noble Lord, Lord Kings Norton, referred, and agree therefore with its suggestions to increase or expand the Community quotas with a view to abolition after five years. But it is depressing to hear what the noble Lord, Lord Kings Norton, and the noble Lord, Lord Underhill, had to say of their visit to the Commission to find a firm barrier, as it were, put up to the abolition of this harrier by, in particular I think the noble Lord said, the French delegate.

    It really seems strange that these quotas were invented 50 years ago, back in the 1930s. The change in the transport pattern of the world not only in road transport but in air transport has put the railways into a quite different framework within the overall transport position. To be so pigheaded, old-fashioned, stupid really lets down the Frenchmen who are normally so intelligent, bright, and tell us how to behave—vive la France, all that sort of thing. They are doing themselves and their reputation untold harm by being so old-fashioned and slow. It needs to be got through to them in some way or other.

    There is one thing that crosses my mind before I sit down. I know I am allowed to speak for only seven minutes. I wonder whether this is not totally contrary to the Treaty of Rome, Article 85, on competition, and whether perhaps a way through this barrier is to challenge the French, the Germans, and the Italians in the European courts under Article 85. Whether that is done by an individual company or on the inspiration of the Government through one of their many own account lorries does not matter, but it would be worth doing. That is one thing that I might like to add to the report.

    7.50 p.m.

    My Lords, it is always a pleasure to sit on any committee under the chairmanship of the noble Lord, Lord Kings Norton. He conducts his committee through very complicated documents with briskness and efficiency and always comes to a firm conclusion. The report on the carriage of goods by road is no exception.

    The introduction of quotas in restraint of trade is always defensible at the time. Quotas can be an effective and respectable way of easing the path of change, preventing change from being so abrupt as to impose undue hardship on the interests affected. Quotas can also give time for unforeseen effects of change to be assessed and for judgments on future policy to be made more rationally. But no quota system should go unchallenged for any great length of time. There is always the danger that bureaucratic inertia and sectional interest will keep quota systems alive, even if only just alive, when their useful life span is over. This is the situation which would seem to apply today in the quota arrangements for road transport among the countries of the EEC.

    Quotas in the transport industry have a long history. As paragraph 9 of the committee's report records, licensing systems to limit the growth of road haulage and to temper the competition offered to existing railway networks were introduced in most European states during the 1930s.

    Some 35 years later, in 1968, the United Kingdom felt able to abolish all quantitative controls on domestic haulage. But at the sable time as domestic road traffic was freed from the restrictions controls were imposed in reciprocal arrangements on road trade with other countries. This was to take account of the development of ferry roll-on/roll-off facilities which opened up road trade from and to our ports. As the noble Lord, Lord Kings Norton, said, there are currently in existence bilateral arrangements with 25 countries including all EEC members. It is true that by degrees restrictions have been removed and quotas now only apply with three of the EEC members—the Federal Republic of Germany, France and Italy. But these are the large national economies in the Common Market.

    The administrative arrangements to deal with the quotas still existing are modest in scope and seem to be efficient in administration. But they represent a cost, albeit small, and entail a lack of flexibility and a quick response to special needs which can be a hindrance to the efficient management of international road transport. Moreover, quotas make it less easy for new entrants to engage in trans-frontier business and can slow down innovation. Over time various exemptions and concessions have been given in respect of the bilateral quotas still remaining. The Community itself disposes of a number of permits which allow an authorised vehicle an unlimited number of journeys. These permits presently cover only a small percentage of inter-Community road traffic—about 5 per cent.—and it is the objective of the Commission's proposals which the committee was considering to increase this. The Commission's aim is that these permits would ultimately replace bilateral arrangements completely. The period envisaged for this change was five to eight years.

    At present levels of trade between the United Kingdom and the rest of the Community, the committee found that the existing quota arrangements were not any serious hindrance. Neither, as far as the committee could determine, did they have any residual justification. The existence of the quotas does not have any meaningful effect on the railway systems the quotas were intended to shield. The choice of road or rail for goods transport is determined by relative economies and convenience. The existence of quotas has not distorted this choice.

    There was no evidence that abolition of quotas would lead to any further transfer of rail traffic to road. Nor did the volume of trans-frontier traffic put an unacceptable burden on the roads of Common Market countries. There is certainly a case for countries which have an appreciable degree of through traffic to have some compensation for wear and tear on their roads by third parties. Various simple ways could be devised to deal with this and produce suitable compensatory arrangements.

    The summary of the conclusions of the committee in paragraph 43 of the report sets out clearly the case for abolition of quotas as soon as possible. This goes further than the Commission's own proposals. This is not surprising. The Commission is cautious on transport matters. It has experience of a record of dilatoriness on the part of the Council of Ministers in accepting proposals on transport coming to them from the European Parliament. The frustration of the European Parliament at this dilatoriness culminated a year ago in Parliament instituting proceedings against the Council in the European Court of Justice, challenging the Council's failure to adopt a Community transport policy.

    Bilateral quotas are certainly not in harmony with a Community transport policy. The Commission's proposals are, of course, a step in the right direction. But the committee felt strongly, and I hope your Lordships will feel with good reason, that a bolder step is necessary. Quotas should be abolished much faster than the Commission envisages. We trust that Her Majesty's Government's Ministers will support our views in the Council of European Ministers.

    7.56 p.m.

    My Lords, we might have expected that this restrictive system of quotas for the international carriage of goods by road would have been swept aside during the 26 years that have elapsed since the Treaty of Rome came into force, as one of the basic principles of this treaty was the freedom to provide services.

    The noble Lord, Lord Kings Norton, has clearly explained that, contrary to the Treaty of Rome, this has not happened. In the United Kingdom the direct administrative cost of the present quota system is estimated at £l million a year. That is of course passed on to the consumer. This system increases delay at the frontiers and frustrates the organisation of transport operations. Thus, a company might have a local haulier to do its domestic distribution, but cannot use that haulier for international distribution because he does not have a Community permit. The company will experience difficulty finding a Community permit holder for their number is strictly limited. The United Kingdom has only a mere 436 permits out of the 4,038 issued.

    Quotas protect established operators from competition thus enabling them to increase their charges. Under the quota system many vehicles are obliged to complete their return journey empty while, if unrestricted, they would be able to carry return loads which would decrease the number of trucks on the road.

    The noble Lord, Lord Kings Norton, referred to the policy paper published by the Commission in February this year which included specific proposals for improving the quota system, followed by a proposal in June this year to abolish all quotas, which would be achieved by a transitional period of five years during which the Commission quota would increase each year at five times the annual rate of traffic increase, plus a further optional three years during which the quota would increase at 10 times the annual rate. However, Lord Kings Norton expressed the opinion that an early improvement in the quota arrangements is unlikely. I submit to your Lordships that that will largely depend on the degree of pressure exercised by Her Majesty's Government.

    I also suggest that fair competition between road and rail transport could best be obtained by payment of transit dues on international road transport. Thus, road and rail transport would both pay for their infrastructure but road traffic would be freed from quotas and other administrative obstacles.

    7.59 p.m.

    My Lords, I, like other noble Lords, would like to congratulate the noble Lord, Lord Kings Norton, on his presentation of the report. I should also like to thank my noble friend Lord Mottistone for his reference to me. Instead of giving way as rapidly as they did on the importation of UHT milk from other parts of the world, I should like to encourage the Government to follow the example of other countries to challenge under Article 85 restrictive practices on transport.

    I am a member of the European Communities Committee and I approved the production of this report. Therefore, I have to accept some of the responsibility, although not quite Cabinet responsibility, for everything that is in it. I must therefore accept some responsibility for what I shall now describe as the inadequacies, as I discovered afterwards, of the evidence which was presented to the committee. The noble Lord, Lord Kings Norton, has implied that the discussion on this subject was rather a narrow issue. I am afraid that I agree with other noble Lords that this is not a narrow issue at all. It is a most important issue. If the EEC means anything at all, it means free flow of trade without any inhibitions or restrictions.

    Up to now, general principles have been discussed; but I want to raise a particular issue where I feel that the evidence that was presented to the committee was lamentably deficient. The particular issue that I want to raise is this. Northern Ireland is the only part of the United Kingdom which has a land frontier. Therefore, it has freight traffic rolling over it and it has to cope with the bureaucracy and restriction which exists. However, there is no mention of Northern Ireland in the evidence by the Minister and his department. Yet the frontier at Newry-Dundalk, which is our main frontier in Northern Ireland and our main road frontier in the United Kingdom is—and let us make no mistake about it—a scandal and a disgrace to the United Kingdom and the United Kingdom Government. And that is understating the situation which exists there.

    Paragraph 9 of our report says that United Kingdom quotas are too small; and the implication is that it is because we have a sea journey. What about Northern Ireland? It has two sea journeys. There is not a mention of that at all. There are 436 United Kingdom quotas. There are 10 for Northern Ireland. Yet the evidence presented by the Minister's department makes no mention of that. Even the Road Haulage Association, which is a national road haulage body representing all parts of the United Kingdom, has made no representations on the problem of the haulage industry of Northern Ireland. It is equally deficient.

    The Ministry of Transport deals with the transport of the United Kingdom, the transport of Great Britain and Northern Ireland; and the Road Haulage Association is a private body which still represents the whole of the United Kingdom. The Road Haulage Association say that delays on the Continent are nowhere near—and I am cutting out a whole lot of their comments—the delays on the return from the Continent. Not a word about the Northern Ireland industry and the delays that they have to suffer on their border!

    What is the position on the Newry-Dundalk border? First of all, do not imagine that this post is an isolated case miles from anywhere. Not at all. It is right in the suburbs of Newry. There are no facilities whatsoever for the lorry drivers, and precious few for Customs officers. There is no parking. The morning I went there at 8 o'clock—and they open at 8 o'clock—there were 70 lorries waiting there with a howling south-westerly wind and the rain driving horizontally down the road. There was no canteen for the drivers. They had been waiting for hours. They had got up at unsocial hours. There were no lavatories. And this in a suburb of Newry. What do you think happens? The gardens of those houses were used as lavatories. Surely something should be done about that. Up to 80 lorries are always waiting at the border. They have a two-hour or two-and-a-half-hour delay at Newry followed by a one-hour delay at Dundalk. Part of the delay at Dundalk is due to the fact that our Customs officers, the British Customs officers, release a batch of up to 20 lorries at a time. They arrive at Dundalk in a batch and have to be dealt with. The result, quite honestly, is a war between the lorry drivers and the Customs officers. There is great bad feeling. I want to make it quite clear that I do not blame either the Customs officers or the drivers. If you produce bad facilities, you will get bad tempers. You cannot expect somebody to produce clean milk out of a dirty dairy; and that is what is happening at Newry-Dundalk. The post is open from 8 a.m. until 5 p.m.; and, because of the "war", the time is absolutely rigid, there is no give and take at all. The post should be open from 6 a.m. to 10 p.m.

    My Lords, you may be told that security is the excuse; but with a border post in the centre of one of the main towns of Northern Ireland, some three or four miles back from the border totally surrounded by friendly houses, that is no excuse at all. You might wonder whether this is an isolated post with not much trade from the United Kingdom going in. The facts are that there are some 150,000 movements a year through that border post. All are delayed for three hours. I will not complicate the issue with statistics but the unnecessary cost to Northern Ireland and to jobs is somewhere around £400,000—which dwarfs the other figures in relation to the size of Northern Ireland. It is a colossal cost.

    I find that there is a reluctance on the part of the Government even to call the frontier between Northern Ireland the Irish Republic a frontier. I think that the Northern Ireland Office itself is ambivalent in its position on that. We have discussed France and Italy. Let us clean up our own back yard before worrying about Italy or anywhere else! Nothing would be cheaper to create jobs in Northern Ireland than to clean up this particular matter. Something must be done now. I look forward with great confidence that the Minister will tell me that it will be done and will be done at once.

    8.7 p.m.

    My Lords, may I, too, congratulate the noble Lord, Lord Kings Norton, and his colleagues on their succinct presentation and the quite clear conclusions of their inquiry on the international road haulage quotas in the Community which we are discussing this evening. May I also be so bold as to congratulate him on the succinct and very short manner in which he was able to present to your Lordships the real findings of that committee. I think that this report is a most useful and very independent contribution to transport policy. I should say here and now that I and my colleagues think that their conclusions are right.

    Having said that, your Lordships will appreciate that my intervention tonight will be brief, because the Government accept so much of what is said in the Select Committee report. The Government believe in the free operation of the freight transport market within a framework of fair competition. We do not think that any of the interventionist practices now occurring in certain countries in Europe are either desirable or effective in their objectives. In road haulage, we abandoned any attempt to restrict capacity internally in 1968 by which time (noble Lords will probably recall) the whole system was in almost total disarray. We certainly cannot go along with recent suggestions that bilateral quotas protect the United Kingdom transport industry. They do not.

    The way to protect the United Kingdom transport industry is to enforce the quality-control legislation that we already have and to ensure as far as possible that permits are in the hands of hauliers who will use them. We have taken steps to do just that.

    Unhappily, certain European countries continue to maintain their internal restrictions on road haulage capacity, and the reasons are given quite clearly in paragraphs 28–37 of the report. We, like the Select Committee, do not believe that quotas are an effective means even of achieving these objectives, but others are not convinced. Naturally, states which apply internal restrictions on road haulage capacity have to apply them externally as well. It is thus that, ever since international road haulage from the United Kingdom became technically possible in the late 1960s, we have been arguing for a more liberal approach. The United Kingdom international road haulage industry has now become very significant, not only as a service to trade but in its own right. It earns around £80 million in foreign exchange every year. A number of noble Lords. including the noble Lords, Lord Kearton and Lord Kings Norton, together with my noble friend Lord Mottistone, have said that it is important that this trade is not obstructed by non-tariff barriers like quotas.

    The Government's scope for action is twofold. We meet regularly with states with whom we have restrictive bilateral agreements, and we try to get them to increase the quotas. Since the Select Committee inquiry we have had some success The French agreed to a 12 per cent. increase in September for this year and. provisionally, for 1984. The Italians agreed to an 18 per cent. increase. We meet the Germans in February next year and we would expect there to get some agreement because we have already indicated to them that an increase in the quota is essential. So forceful was that indication that they have permitted us to over-use the quota this year to avoid our running out of permits altogether. Demand for ail these permits continues to outstrip supply.

    My noble friend the Duke of Portland made a very good point this evening when he outlined the difficulties faced by the hire and reward operators, which rather forced the own-account operators into a field into which they are not particularly anxious to go because, with no backloading, it was a particularly expensive business.

    If I may, I should like now to turn for a moment to a point which was brought out during the course of the Committee's inquiry but which in fact has not been specifically mentioned this evening by noble Lords. There has been criticism of us—the Government and, more particularly, my department—for not enforcing permit restrictions and other regulations against foreign hauliers. It is said that they are getting away with more journeys than our own people as a result. I cannot agree with the assertion that we do not enforce permit restrictions. Customs officers are under standing instructions to stamp permits as appropriate when vehicles arrive. Of course one has to admit that the odd one will get through, but my, information is that the job is done well and systematically. It is true that Customs officers do not have the power to prohibit entry or levy on-the-spot fines. They do, however, report incidents to the department, and 233 such offences were notified through the department to foreign Governments in the past six months as a result. Currently we are discussing with Customs and Excise how we can make this operation more effective. Our own efforts on weight checks and drivers' hours continue to be increased. Our authorised traffic examiner strength has gone up to 235; and of course we have the co-operation of the police and trading standards departments. For what it may be worth, I can tell your Lordships that in October I observed such a check being carried out, and I was very impressed by the technical standard of the officers doing the check.

    Returning to the particular matter in front of us, we are especially concerned about the proposals of the Commission, which came out perhaps a little too late for the Select Committee but which were in substance foreseen by the Commission last February. Those proposals were outlined in their evidence to the inquiry. As the noble Lord, Lord Kings-Norton said, the proposals envisaged a transitional period of five or eight years. during which quotas and permits would be gradually increased according to known criteria. Then quotas would be abolished altogether and replaced by permits issued to firms with three years' domestic experience.

    Perhaps I may break away from my notes at this point and say that the noble Lord, Lord Underhill, referred particularly to the "cowboy element", or the less legitimate operators, in the haulage field getting the business. The noble Lord I am sure will recall the increased powers which the licensing authorities have in this country to determine fit and proper persons to undertake haulage business when they apply for their licence: and added to the three-year domestic experience qualification, I personally can see no difficulty in the legitimate trade taking that business which will be available to it when quotas are removed, thus eliminating any "cowboy element" that they might fear at this time.

    We firmly support the principles of these proposals, although of course we have made some detailed comments about them in the Commission. That the proposals are being resisted by some member states particularly in so far as they deal with the full liberalisation in the longer term is understood; but we shall continue to press our support for them. The proposal is to be discussed again on 1st December at a meeting of the Council of Transport Ministers.

    My noble friend Lord Mottistone, in his very supportive speech this evening, suggested that perhaps this was not a good enough course to take. He suggested that perhaps we should challenge this matter in the courts. Indeed, he even suggested that perhaps some operator might wish to do that. I say to him that if we can achieve that which we all wish to achieve by discussion and negotiation with our partners in the Community, even though it may take a long time, that may be a rather more satisfactory way of achieving the same objective. Nevertheless, I can understand his interest, particularly when he declared his own interest in exporting, in perhaps achieving results that much faster. That, as I say, we can understand.

    So there is a meeting on the 1st December and there is a further meeting on 20th December at which the Council of Transport Ministers meet. We shall make our position quite clear then and also of course at any other ministerial meetings; and we shall take any other opportunities which may occur. I do assure the noble Lord, Lord Kearton, who raised this point, together with my noble friend the Duke of Portland that certainly we will pursue this most strongly.

    The noble Lord, Lord Underhill, suggested—and if I misunderstood him I hope that he will correct me—that the permit system did not cause concern to the haulage industry. It is my understanding that the lack of permits within the system is causing a good deal of concern to the industry. Certainly inquiries at our offices in Newcastle suggest that there are a lot of good and able people who want to get into the business and cannot get permits. The noble Lord mentioned, as did my noble friend the Duke of Portland and, I think, the noble Lord, Lord Kearton, the question of the own-account vehicles returning empty. This is a wicked waste of money, effort, total resource, environmental and any other—

    My Lords, will the noble Lord allow me to intervene? The reference which I made was to paragraph 7 of the memorandum of the Road Haulage Association and the noble Lord the Minister may refer to that after the debate.

    My Lords, I am obliged to the noble Lord for reminding me of that. If the RHA felt that, certainly evidence in the department does not suggest that they are entirely correct. If I may make one mention of the speech of my noble friend Lord Mottistone, when he referred to invisible barriers to trade he was, of course, quite right. That is contrary to the spirit and the intent of the treaty. This is one of the points which my right honourable friend will have very much in his mind when he goes into these discussions.

    I have to answer at some length my noble friend Lord Brookeborough. I was rather sad that he should start his speech by saying that the situation on the Newry-Dundalk border is scandalous and disgraceful. He asked later: Are the Government too reluctant to recognise the border? We accept that the facilities at Newry are not all that they might be. The post was built in 1960 when conditions were very different. But I am informed by the Property Services Agency that they are at present engaged in seeking a new site and there are a number of alternatives. We attach high priority to this project.

    However, I am afraid that some of the figures given by my noble friend this evening were not entirely correct. I am told by the customs authorities today that the Newry post is open from 8 a.m. to 9 p.m. I do not mean that the post is open today from that time: I was told today that those are the hours when the post is open. It is indeed very rare that 70 or so lorries are waiting. It is usually not more than 30—

    My Lords, may I interrupt my noble friend? He is correct in saying that very often the post is open from 5 p.m. to 9 p.m., but it is as a result of requests put in 48 hours ahead, and any trader who does not put in a request 48 hours ahead finds a closed post. There is that rigidity. A trader cannot arrive on the chance of finding the post open, because somebody else has made a request, and get through. The fact is that rigidity is there. The post is closed at 5 o'clock—not one minute after—and any trader who arrives after that, irrespective of whether the post is manned, does not get through if he has not made a request 48 hours before. This does not apply at any Continental post.

    My Lords, I am obliged to my noble friend for the information that he has given me. It is somewhat contrary to my understanding of the matter and I can promise him that tomorrow morning I will certainly look further into it. If I am wrong I will of course apologise to him, but I do not believe that I am wrong. Going back to the days when I was in the haulage business, I recall that if a despatcher does not know what time his lorry will get to a certain place he is a had despatcher.

    Finally, perhaps I may say that the Government do not share the pessimism with which the noble Lord, Lord Kings Norton, closed his remarks. We are determined to see greater freedom of movement of goods and services in the Community. We agree with the Select Committee that the present arrangements are incompatible with the Treaty of Rome. They distort competition, providing an unnecessary barrier to trade. While, of course, we have to take note of what other member states say in attempting to reach a satisfactory solution, we are determined not to lose sight of our ultimate purpose, which is the abolition of restrictions such as those that we have been discussing this evening.

    8.25 p.m.