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4.34 p.m.

Lord Stanley of Alderley: My Lords, in common with other Members of your Lordships' House, this is the third time that I have taken part in a Bill to revitalise the landlord and tenant system. I believe that this Bill

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will help. It comes, as my noble friend Lord Howe said, with the wholehearted support of the industry, although I accept the point that was made by my neighbour the noble Lord, Lord Cledwyn, that there is great sensitivity in Wales about the landlord problem. It may be that my family is at the back of that.

However, I have to repeat what I said on 20th July 1976 in col. 59 of Hansard. At that time I said that the only way really to help the tenant, particularly the young one looking for a long-term tenancy, was to stop penalising the landlord on the taxation front. I accept that since 1976 the 15 per cent. investment income surcharge has been lifted and that most new institutional landowners, whom I disliked intensely at that time, have gone, most of them, I am pleased to say, having lost a lot of money. However, inheritance tax relief on owner-occupied land is at 100 per cent., whereas on tenanted land it is at 50 per cent. Therefore, any prudent landlord will think very carefully before saddling his children with that extra liability. So if we really want the tenanted sector to flourish, we must make the tax equal between owner-occupied and tenanted land. I accept that the Government may not want to do that because they believe that it would cost the Treasury more.

I must declare an interest. I and my family before me have been landlords for many centuries. I am also an owner-occupier but, more importantly, I am a tenant and my heart has been, and still is, in the practice of farming rather than in landowning, so I go along with the idea of evening out the tax burden which would be at the expense of the owner-occupier--in other words at my expense--rather than the Treasury.

The Bill could cause some problems, but I am sure that they will be raised in Committee. Indeed, noble Lords have already referred to some. I refer, first, to the problem of scarcity value causing uneconomically high rents. That point has been made by my noble friend Lord Howe, the noble Lord, Lord Carter, and obliquely by the noble Lord, Lord Northbourne.

I am also worried about subletting and am concerned that we consider how we should deal with the value of improvements. The noble Lord, Lord Northbourne, said that he would look at that from the point of view of the landlord. I strongly suspect that I shall look at it from the point of view of the tenant.

I refer finally to housing, which has been mentioned by the noble Lord, Lord Carter. Although I was sorry that the noble Lord was so critical of the Bill--it was obviously painful to him to take such a line--I fear that his hair will turn grey before the Bill leaves the House. As I have said, I am concerned about the problem of housing, which was also raised by the noble Lord, Lord Northbourne. I imagine that a tenant could be evicted after, say, 10 or 15 years when he has a wife and two children. Unless we give some thought to that, I fear that we could well return to another 1976 Act, which was caused by some of these problems, but which as I am sure your Lordships will remember was either preceded or followed (I cannot remember which) by the 1976 Tied Cottage Act. It might be worth your Lordships rediscovering that Act. Indeed, I have got it out of the attic.

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That fear will encourage landlords to let to existing well-established farmers rather than younger ones, but there is nothing new in that. It has always been true that the only way into farming is patrimony, matrimony or parsimony. You can never get away from those three. I got in on matrimony, by the way.

So far as it goes, I welcome the Bill. I realise that my noble friend the Minister will rebuke me, and say that I should know that I should not deal with matters such as taxation and housing; but he knows me well enough to be aware that I do not pay a great deal of attention to some of the rules by which he tells me I should abide. I have to point out that after 18 years neither Socialist nor Conservative governments have grasped the vital tax nettle. Politicians may now be so far away from practical farming that they do not know what a nettle is or what it can do to stifle growth.

4.40 p.m.

Lord Middleton: My Lords, I join with other noble Lords in congratulating my noble friend Lord Yarborough. He has the great advantage of firsthand knowledge of that marvellous farming county, Lincolnshire. I only hope that the length of this afternoon's debate will allow time for those beautiful Brocklesby foxhounds to be fed this evening, but I am sure that that has been taken into account.

It must be plain by now that the object of the Bill is to launch a rescue operation for the agricultural landlord and tenant system in England and Wales. As to the questions: first, why should it be rescued; secondly, what economic or social benefits does the system provide; and, thirdly, why does it have to be rescued now?--the first and third questions have been answered clearly by my noble friend Lord Howe. As to the second question, I say merely that the fundamental problem for British agriculture is the availability and cost of capital. Under the landlord-tenant system, the part played by the owners of agricultural land in the provision of the industry's capital requirements is a very significant one.

That was acknowledged by the committee of inquiry under the chairmanship of the noble Lord, Lord Northfield, which was set up by the party opposite in 1977. We have already heard a quotation from the consequent report from the noble Lord, Lord Carter. The noble Lord, who was a member of that committee, will remember the section dealing with the contraction of the let sector. I quote from paragraph 579 of that report:

    "We attach very considerable importance to its retention ... we want to see a continued variety of forms of tenure: by its very existence, it supplies an important part of this and has a major role to play in British agriculture.

    "We therefore conclude that there is a good case for retaining a healthy and reasonably substantial let sector".

A farm tenancy provides a farmer with the opportunity to borrow from a landowner on very favourable terms the land and fixed equipment through which to earn his living. He can go into business unencumbered by a massive bank loan to acquire land. Someone has said that if the system did not exist, it would have to be invented. Yet, as has been pointed out, that admirable system is in decline. It may not continue

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to exist. By the Bill the Government are attempting, quite rightly, to reinvent it. The system has been in decline throughout this century.

As my noble friend the Minister reminded us, at the beginning of the century the proportion of tenanted land by area was about 80 per cent. of all farmed land. When I entered your Lordships' House 23 years ago, that proportion was 50 per cent. The reasons for that change are well known, and I do not have to rehearse them.

The growth of owner-occupation was a healthy trend, and the balance of about half the land farmed by owner-occupiers and half by tenants seemed about right. Since then, well-intentioned legislation and taxation, through policies where good intentions were less obvious, have accelerated the decline. The proportion of land farmed by tenants is believed by the noble Lord, Lord Carter--I believe that he is right--to be about 25 per cent. But the worrying thing is that only a small proportion of that 25 per cent. is due to new lettings.

I referred to legislation. My noble friend the Minister has rightly called it a tangle. The 1976 Act was a killer in that respect, as those of us who opposed its passage in the House said that it would be. The supply of land to let dried up. But that piece of folly was not the only cause of the fall in the number of farms offered by owners for renting. Despite some alleviation by this Government, fiscal disincentives discouraged owners from letting. Some young owners have found it more profitable to farm land themselves than to let it. As my noble friend Lord Stanley reminded us, the institutions which rushed in to invest in tenanted land rushed out again when the going got rough. Other ways of organising land ownership and management have been devised.

All those factors, plus a good deal of prodding in which I was closely involved, persuaded the Government to produce the Agricultural Holdings Act 1984--another attempt to cure the patient by legislation. I had grave misgivings. The Act was based on a not very satisfactory compromise within the industry arrived at with enormous difficulty. I feared that it would not be effective in producing more tenancies. However, I supported the Bill in the House because I felt that any measure which might possibly prop up the system was better than nothing. I felt too that there was a faint chance of something better turning up.

After a bit of a lurch backwards over legislation to compensate tenants for their milk quotas, 10 years later the Government have produced something better--much better. Ten years is a long time to see what is needed and to act upon it, but in that time there has been a vast amount of legislation of a much higher priority. I suppose it has probably taken all that time to get all the parties in the industry to agree. That they have done so, and are backing the Bill, is a matter for congratulation to their leaders. I am bound to say that I am disappointed by the lukewarm attitude of the party opposite, despite the agreement and enthusiasm of all interested parties.

This is the last chance to save the system from terminal decline by means of legislation. It could be called a deregulation measure, because it gives parties to a future arrangement between landlord and tenant a

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chance to break free from all previous legislation. Except in regard to compensation for tenants' improvements, the parties can negotiate virtually any terms that they wish. I see nothing threatening in that. I last spoke on farm tenancies about four years ago on a Motion tabled by my noble friend Lord Stanley, and to which he has referred. At that time I quoted the then president of the CLA who said:

    "There are those who will be alarmed by a call for such freedom to negotiate. I do wonder why. Landlords asking unreasonable conditions will get no tenants. Unreasonable tenants will get no farms".

Those words should perhaps guide us during the Bill's passage. But this measure alone will not save the landlord-tenant system in agriculture. Fiscal disincentives remain. So the complement to the Bill must be reform of the fiscal regime to bring the tax treatment of let land, as my noble friend Lord Stanley said, into line with owner-occupied land. I am not sure that I agree with him as to how that should be done, but we can look at that matter later. That would then release the potential for continued expansion in a revitalised rented sector. Nevertheless, this Bill is an essential first step. It is in itself a breakthrough and I congratulate the Government on its introduction and offer the Bill my wholehearted support.

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