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3.48 p.m.

Lord Carter: My Lords, I begin by thanking the Minister for his usual lucid explanation of what is a fairly technical Bill; and say from these Benches how much we look forward to the maiden speech of the noble Earl, Lord Yarborough. Also, like the Minister, I declare an interest as the owner-occupier and tenant of agricultural land. I thank the Minister for confirming that, as in so much else that this Government do, they are taking a giant leap forward with complete freedom of contract into the mid-19th century.

I say at once that this is a very important Bill so far as agriculture is concerned. Opportunities to review agricultural holdings legislation do not arise very frequently. It is therefore very important that we make sure that the Bill meets a genuine need and will result in an improvement on the present situation.

It is a fact on which we can all agree that there is a marked decline in the let sector of agricultural land. I entirely understand how the figure of 35 per cent. that was quoted by the Minister for the amount of rented farmland is arrived at. But I have always suspected that the true figure is considerably less than 35 per cent. The recent RICS survey New Farms and Land, 1995-1997 estimates a figure of 27 per cent. for land in England and Wales, let on a full agricultural tenancy with no share in ownership. But even that figure may overstate the position as I believe that it includes what I would describe as arranged tenancies; for example, if land is let to a partnership where the landlord is effectively a partner, so that termination of the partnership ends the tenancy, even though the landlord in that partnership may be acting through a company or whatever. At a guess, it may be that the true figure for land let on a fully secure lifetime tenancy at an arm's length rent and with no aspect of arrangement is perhaps not much more than 20 per cent. to 25 per cent. of farmland in England and Wales.

It is generally agreed that the decline of the let sector has not been good for farming and steps should therefore be taken to stop the decline and, if possible,

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reverse it. It is also felt that the traditional division between landlords' and tenants' capital and their responsibilities has worked well for farming and that, if farming is to have the new blood that it needs, there must be a way in that does not require substantial investment in land. I happen to believe that the whole proposition is debatable. I am sure that the arguments both for and against will be fully rehearsed as we go through the Bill.

The Labour Party has a good record on improving the situation for tenants. As the Minister said, the 1947 and 1948 Acts gave farm tenants security of tenure for the first time and the 1976 Act provided for succession of tenancies. The Conservative Party, for entirely understandable, historical reasons--which is a polite way of saying that most landlords vote Conservative--has tended to move in the opposite direction. The 1984 Act ended tenancy succession and the Bill that we are considering effectively ends the lifetime security of tenure for all lettings after 1st September 1995, except for the very special and what I suggest are likely to be the very rare cases, where the landlord agrees to such a provision in the farm business tenancy.

We therefore looked at this Bill with great care and regretfully concluded that it will not provide the security of tenure for tenants that we should like to see. I am sure your Lordships will agree that a tenanted farm is not just a source of income; it is a home for the farmer and his family. We would all agree that the family farm has an important role to play in the stability of our rural structure. We should like to see a Bill that would encourage that. I have to say that in our view this Bill does not do so.

Your Lordships will also be aware of the old saying, "Live as though you are going to die tomorrow; farm as though you are going to live for ever". In other words, have a care for the land and leave it in good heart. Model tenancy agreements, with which we are all familiar, include provisions relating to good husbandry. The RICS survey, to which I referred earlier, showed that the agents surveyed confirmed that the great majority of units that they expected to let within the first two years of the legislation becoming operational would be on five-year agreements. That is short-termism with a vengeance and shorter than some agricultural rotations.

Much has been made of the fact--indeed, the Minister mentioned it--that the industry, however defined, has agreed to these proposals. The working party of the National Farmers Union, the Country Landowners' Association, the Tenant Farmers' Association and the National Federation of Young Farmers' Clubs have worked hard. They are to be congratulated on that. Indeed, knowing many of them, as I do, as friends and colleagues, I am sorry that we cannot give them the unequivocal support from these Benches that they would like. They will be aware that support for their views is not unanimous within the industry.

A number of tenant farmers' action groups have expressed their concern. The Farmers' Union of Wales, for example, is strongly opposed. I am sure that my noble friends Lord Cledwyn and Lord Prys-Davies, will deal adequately with those matters when they come to

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speak. At this point, I must say that there is considerable attraction in the concept of retirement tenancies as proposed by the Farmers' Union of Wales.

It is quite clear that landlords like the proposals in the Bill. Anything which shortens tenure increases the potential value of their land. The CLA publication Land Statistics, 1993 shows that the average price of vacant possession land sold in England in 1993 was between £1,400 and £1,500 per acre. The average sale price of let land in the same period was about £900 per acre.

It is, and has been for a long time, a feature of the agricultural land market in the UK that vacant land has always been worth more than let land, usually at least 50 per cent. more. It is interesting that, on the other hand, a commercial property let on a long lease on a good covenant is worth more than a vacant property. Most land agents with whom I have discussed the matter are of the view that land let on a good covenant on a farm business tenancy for five to 10 years, reverting to the owner at the end of the tenancy, will have a value of not much less than vacant possession value. That may have been a factor at the back of the CLA's mind when it supported the proposals.

The other factor which cannot be ignored in the whole matter is taxation. Much has been made of the fact that current inheritance tax rules militate against the letting of land. That is probably so. In the Labour Party we have already made it clear that we are prepared to consider the possibility of equalising inheritance tax relief between let land and owner-occupied land, but only in a way which would be financially neutral to the Treasury; in other words, this is a matter for consultation and is not a commitment. If we were to do that--if any government were to do it--and use scarce fiscal resources to provide taxation relief for the owners of let land, it seems to me to be entirely reasonable that those owners should show their commitment to the business of letting land by having proper tenancies with long tenure.

The Minister has already given the House a full explanation of the Bill so that I shall merely indicate those areas where we feel that it needs amending either because of faulty or ambiguous drafting, or as a result of the omission of important items. I suppose that the biggest surprise in the Bill is that it is silent about the criteria to be met in drafting a farm business tenancy. Beyond definition, rent review, notice to quit and compensation, the Bill gives no direction regarding those matters which a modern agricultural tenancy should include. So far as I can see, these new farm business tenancy agreements do not even have to be in writing. There is no mention of quotas or set-aside--two matters which are central in considering the tenure of agricultural land nowadays. We shall be tabling amendments to set out the criteria which must be met if a tenancy is to be agreed under the Bill.

Another matter that I should like to see in the Bill in relation to the farm business tenancy, particularly if there are to be such short-term arrangements, is some requirement on both landlord and tenant to agree what happens to the housing of the tenant at the end of the short tenancy. As I said, a tenanted farm is not just a business, it is also a home for a family.

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I have also been advised that there is a technical flaw in the drafting of the Bill, so that in certain circumstances an existing tenant with full security could inadvertently lose that security. I believe that this is a technical matter. I am sure that it was not the intention of the Government. We shall be discussing the matter with the Minister and tabling amendments to redress the situation, if indeed it exists.

There is no mention in the Bill of conservation or of good husbandry. Again, we shall address that omission either on the face of the Bill, or perhaps by proposing a code of practice or an obligation on the Government to provide guidance on these and related matters.

I entirely understand the free market ideology with which the Government approach this matter. I understand and expect that the Government's reply to all these observations will be that under freedom of contract the landlord and tenant can agree more or less what they like. If the scales were equal between landlord and tenant, that might be so; but they are not. We believe that it is important to ensure that tenants receive proper protection under statute if they enter into a farm business tenancy.

The feature of the Bill which does meet with our full approval is the proposal dealing with compensation for tenants' improvements. For too long tenants have been at a great disadvantage when it came to dealing with compensation for improvements. The Bill puts that right for new farm business tenancies. It would be nice to think that we could use the Bill to end the injustices to existing tenants and we may wish to investigate that matter when we consider the Bill in detail.

To conclude, I am fully aware that the Bill is seen by many in the agricultural industry as a step forward. I am not sure that all those involved have thought the matter through as they should. In their anxiety to improve on the existing situation they have acquiesced in the introduction of a new system of letting which is likely to do little more than regularise the present mish-mash of share farming, contract farming, and the Gladstone v. Bower arrangements mentioned by the Minister when he introduced the Bill.

There are many areas which we shall need to consider. I referred to the RICS survey, which indicates the amount of land that agents may be prepared to let, largely from the existing sector, in the first two years. But the great imponderable is the amount of land that will be offered for farm business tenancies after 1st September 1995 from the owner-occupied sector, which may wish to take advantage of the new arrangements.

I believe that the amount of land offered will be much less than the Government expect unless we can amend the Bill either here or in another place to make letting more attractive to both landlord and tenant. I can see the attractions for the landlord in the proposals in the Bill. But how many current owner-occupiers will be encouraged to let their land as a result of the Bill? Will they face a halving in their relief from inheritance tax? How many current contracting or share farming agreements will be regularised as a result of the Bill? They will not be new lettings, but merely a reordering of the existing situation. The key question is: how many new lettings will be encouraged with full and good

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security of tenure for farm tenants under the provisions of the Bill? We do not believe that there will be nearly as much land as the Government and others expect.

It is fair to say that this House is particularly well equipped to examine this Bill and improve it. We shall certainly do our best from these Benches to play a full part in that process.

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