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Queen's recommendation having been signified--

Motion made, and Question put forthwith, pursuant to Standing Order No. 52(1)(a),

Mr. Deputy Speaker (Mr. Michael Lord): With permission, I shall put together the motions relating to delegated legislation.

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

Constitutional Law

    That the draft Producer Responsibility Obligations (Packaging Waste) (Amendment) (No. 2) Regulations 1999, which were laid before this House on 25th November, be approved.--[Mr. Touhig.]

Question agreed to.

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Question agreed to.

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Tenant Farming

Motion made, and Question proposed, That this House do now adjourn.--[Mr. Touhig.]

Mr. Deputy Speaker (Mr. Michael Lord): Order. Will hon. Members leaving the Chamber please do so quickly and quietly? We must begin the Adjournment debate.

10.28 pm

Mr. David Drew (Stroud): It is fortuitous that this Adjournment debate should follow the statement on rural development regulation made earlier today by my right hon. Friend the Minister for Agriculture, Fisheries and Food.

As my hon. Friend the Parliamentary Secretary will know, this is the second debate--in as many years--that I have initiated on the subject of tenant farming. In November 1997, I focused predominantly on county council smallholdings. I want to broaden the debate today to discuss the plight of tenant farmers more generally, but I shall make some remarks about the county council smallholding sector, as we have not made as much progress as we might have done.

In my previous debate, I noted the grave circumstances of many county council tenants, with falling incomes and a declining asset base. It gives me no pleasure to say that today we face an even more difficult situation. The recent Deloitte and Touche report shows an industry in sharp decline, with almost all sectors in crisis. It is easy to focus on all the problems. I do not want to exaggerate them, but it is important to understand the problems of the tenanted sector. My hon. Friend the Minister will sympathise and will do what he can to get redress for those concerned.

I have drawn heavily on the experiences of my friend John Warfield of Welches farm, Standish--a dairy farmer on part of the Gloucestershire county council farm estate. John has regularly shared with me the problems of being a tenant farmer and told me how difficult it is to break out of the cycle of despondency and despair that affects farmers in general and tenants in particular. I have also drawn on the views of George Dunn, the chief executive of the Tenant Farmers Association, and Ken Oliver, the chairman of the National Farmers Union tenants committee, who are doubtless well known to my hon. Friend the Minister.

Although the tenant farming sector has been declining in importance until recently, it still represents about 30 per cent. of the productive land area. It relies on its stock and working capital for its assets base as the value of the land, including the house, and the fixed capital normally rest with the landlord. I do not have to remind my hon. Friend that the value of livestock and other working capital has greatly plummeted in the past couple of years in particular, whereas land and buildings have tended to maintain their value. Compared with their owner-occupier neighbours, tenants are more exposed to the current problems. It is also a worrying trend that many tenants are cashing in their investments early to see them through these difficult times. For many, the decision is between security for today and security for the future. I worry tremendously for them when they come to the end of their tenancy agreements.

Although the major clearing banks have been supportive of agriculture through these difficult times, they are looking carefully at the risk to which they are

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exposed in lending to tenanted holdings or servicing existing debt. Once again, tenant farmers are at the forefront of the problems, because they have no capital other than that which they have invested in the farm buildings and stock. I spoke to the manager at one of the major clearing banks in my area. He explained how closely they were monitoring the situation. At least there is an understanding of the nature of the problems. I welcome the fact that bank managers have an opportunity that they did not have previously to use their local knowledge and understanding.

One way out of a difficult situation is to take on extra land. That should be possible through the operation of farm business tenancies, which allow tenants to spread fixed costs and make smaller units more viable. Tenants face major disadvantages, because they are unable to tender the rent levels that owner-occupiers pay for extra land offered by landlords. Although farm business tenancy rents are beginning to fall, they are still unrealistically high. That is due mainly to the fact that the number of farmers seeking to take on extra land exceeds the land available and the landlords willing to let it.

It is clear that new entrants have difficulty in getting started. One disappointing aspect of today's announcement is the lack of a retirement package. That does not help the situation. I understand what my right hon. Friend said and I am sure that he is interested in working on that, but we are talking about a difficult industry and many issues need to be dealt with to get it right.

On land prices, I have advanced the view before in this place that it is highly unlikely that agriculture land values will fall by much, if at all. This is because, in our small island, such values will be affected by their opportunity cost and what alternative uses land might be put to. Given that the main alternative use is development, it is therefore highly unlikely that the land price will fall unless we drastically toughen the planning system. Nevertheless, that brings opportunities, because it means that the land is available. What better use could be made of that land than to offer it to tenanted farmers? I would always advocate that point of view, and hopefully I would get support in so doing.

So far, I have painted a gloomy picture, and I cannot pretend otherwise. However, it is important to look at the opportunities--as well as the many threats--and the way in which the Government can help to develop these opportunities. We have had an important announcement today, and I think that everyone present would welcome the nature of it and the completely different direction in which we are now moving.

I want to make two pleas in welcoming today's proposals. I have touched on one, which is that we still need to make every effort to come up with a retirement package--not just for existing farmers, many of whom want to leave the land, but to allow new people to come on to the land. Apparently, it is difficult to achieve that at this time through rural development regulations, and my right hon. Friend the Minister was honest and open about the fact that he cannot pretend that he can achieve that within a foreseeable period. I have grown used to him pulling rabbits out of the hat, and would hope that some further prestidigitation is possible.

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The Government rightly talk about the need for restructuring, and the rural development package will allow us to achieve that. However, there is another factor on which I wish to dwell--whether it is the Government's intention to modulate farm support to fund the different elements of the rural development regulation package.

The Minister will be aware that it is much more difficult for farm tenants to engage in some of these schemes because of the lack of economies of scale, and so on. I presume that the Minister will have some comments to make about the way in which we can help tenants--particularly in areas such as the movement to organic farming, or how they can make better use of countryside stewardships. It is not just up to the Government--it is also up to individual landlords to make those changes feasible.

I am sure that my hon. Friend the Minister will realise that concern has been expressed about some of the other changes that are taking place, particularly with regardto the integrated administration and control system renegotiations, which are coming in at short notice, and the change in subsidies for beef cattle. Concern has been expressed to me by tenants about the way in which we are apparently moving over to six counting days, as that will be difficult to manage. We have to be aware that that may do the opposite of what we want it to do--it may lead to even more intensification and short-termism.

I want to deal with the subject of less-favoured areas. Concern has been expressed by the tenanted sector over the switch from headage-based support to area-based support in hill areas. I know that the Tenant Farmers Association in particular is not pleased with the scheme, but sees it as inevitable and something that it will learn to live with. The main concern is that tenants will lose more of their capital base. As I understand it, theTFA scheme--proposed as a compromise following consultation--provides that producers should be able to take a capital payment at the beginning of the five-year period of the scheme, allowing them to look at possible avenues for restructuring or other activities to make their income base more viable for the future. I would welcome the Minister's views on those proposals.

Farm business tenancies have clearly offered more land for letting than was coming forward under the previous legislation on agricultural holdings. However, as I have indicated, there are problems which need to be addressed, and I understand that the Government are committed to a review of the operation of farm business tenancies in the autumn of next year--the fifth anniversary of the Agricultural Tenancies Act 1995. I hope that the review will include the imbalance in negotiating power between landlords and tenants, the unviably high rents, the restrictive clauses included by landlords in FBTs, which were meant to provide greater flexibility to tenants than the old legislation, and the relatively short average length of letting under FBTs.

There is a further major problem with the FBT legislation, which was intended to ensure that, under the 1986 Act, tenants would not be affected by the change in the law. I have become aware of situations in which tenants on 1986 Act tenancies may lose that status because of small changes or good estate management. I am informed that section 4 of the Agricultural Tenancies Act 1995 covers those situations in which a new tenancy falls to be regulated not by the 1995 Act, but by earlier legislation, including the Agricultural Holdings Act 1986.

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When there is a change to a 1986 Act tenancy because new land is added, a joint tenancy is created, so the landlord is keen to provide the tenant with a bigger holding; but I gather that, under a case B notice to quit and other circumstances, the tenant can be disadvantaged. The loopholes must be closed in an amendment to section 4 of the 1995 Act.

Gloucestershire is very dependent on the dairy sector. Tenants are worried about the threat of the loss of milk quotas, which the official Opposition welcome, as I am sure the Government will in theory. The problem is that, in the short term, tenants will lose a source of collateral for the banks, and because, although land price rises compensate owner-occupiers, no such benefit accrues to them.

My hon. Friend the Minister will be aware that county council smallholdings are an important part of our farming economy, covering more than 300,000 acres.

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