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Viscount Mountgarret: I should like to speak on the subject of quota generally. I sympathise with the noble Lord, Lord Carter, in that there is a danger that the Bill will put some tenants on a different footing from those under the 1986 Act. Indeed, it would be surprising if the legislation did not alter in some way—and rightly so, I believe—existing agreements held under the 1986 Act.

However, I turn now to the quota system. My noble friend and I have had correspondence on the matter. As I understand it—and no doubt my noble friend the Minister will correct me if I am wrong; and if I am wrong, I shall be very unhappy—the quota system not only for milk but also for sheep farming, and so on, is rather tied to directives received from Brussels. There is not much that we can do about that as the quota belongs to the producer and not to the landlord. Under the new Bill, landlords will be perfectly entitled to discuss with their prospective tenants any terms that seem to both of them to be a satisfactory way of proceeding with the farm tenancy.

Among those terms could be, although I do not say that it should be, the fact that it was deemed expedient that any tenant who was in possession of quota, be it for milk, livestock or any other quota which might be instituted, could be regarded, for example, as a tenant "fixer" (for want of a better word) so that he was compensated by the landlord when the tenancy was terminated in the same way as any tenant's improvements were met by the landlord. Therefore, any incoming tenant in the normal way, as happens now, would pay for certain improvements and so on, including quota. In other words, one could affect quota belonging to the land rather than to the actual producer as is the case at present. But if, as I understand it from my noble friend with whom I have been in correspondence, it is possible under the new tenancy terms of the Bill to have an arrangement whereby quota—be it milk or livestock—could be agreed between a landlord and tenant as regards how it should be treated, then I do not see that problems would arise.

Earl Howe: I am grateful to the noble Lord for taking the three amendments together, although I realise that they raise three distinct issues. I can assure the noble Lord that the Government have no wish to duck this or, indeed, any other issue. I hope that I can assist the noble Lord and my noble friend Lord Mountgarret in what I am about to say. However, I should point out to my noble friend that the issue is rather more complex than he suggested in his remarks.

Where there is milk quota on a holding held under an existing tenancy, the tenant is entitled to compensation at the end of that tenancy under Section 13 of, and Schedule 1 to, the Agriculture Act 1986. That is for an existing tenancy. Where, after the creation of a farm business tenancy, the tenant takes steps to obtain milk quota for the holding, which then becomes attached to the holding, he will be eligible for compensation under Clause 16(1) of the Bill provided that he has obtained

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his landlord's consent for providing the quota. In this case, Clause 16(3) ensures that the relevant provisions of the Agriculture Act 1986 "shall not apply" in order to avoid the tenant becoming eligible for compensation under those provisions also. Thus it would not be appropriate to delete Clause 16(3), which is what Amendment No. 51 would do.

However, it has been suggested, as the noble Lord, Lord Carter, explained, that where an existing tenancy with milk quota is replaced by a farm business tenancy, Clause 16(3) might exclude the possibility of the parties agreeing that compensation for quota under the old tenancy should be assessed in accordance with the provisions of the Agriculture Act 1986. That is not the case. Parties are free to agree compensation for quota acquired during the Agricultural Holdings Act tenancy, using whatever basis they believe to be appropriate. However, Amendments Nos. 52 and 53 go further and would allow the parties to use the Agriculture Act provisions, even in respect of quota obtained during the farm business tenancy by the tenant at his own expense or by his own effort. In those cases, compensation would be available under the Bill and there seems no reason why the parties should be able to substitute some other basis of compensation.

Milk quota will count as an intangible advantage if supplied by the tenant. So he will be eligible for compensation under the Bill for any such quota that he has provided during the farm business tenancy which obviously remains attached to the holding at the end. The noble Lord referred to Euro-holdings. I shall have to take advice on that as I am not well versed in the matter. Perhaps the noble Lord would care to write to me with further details as I did not note closely enough the point he was making. I recognise that any issue concerning milk quotas always raises legal complexities. I hope that the noble Lord, Lord Carter, will feel able to reflect on what I have said. Between now and Report stage perhaps we can have some discussions which will assist him further.

Lord Carter: I am extremely grateful to the Minister, and to the noble Viscount, Lord Mountgarret, for the point he made about sheep quotas. The amendments we are discussing concern milk quotas but as we are in Committee I suppose we can go a little wider. This is, I believe, a classic example of where the landlord and tenant would not be able to agree something which is not allowed by European law. The European law states that the sheep quota belongs to the tenant. We have had some discussion on that matter in this House. The Government were caused some embarrassment by their own Back-Benchers on a certain Motion if I remember. Even if the landlord and tenant agreed to share the sheep quota, I do not think they would be allowed to do so. That is the point. I see that the Minister is nodding. Therefore it is not correct, as has been said, that the Bill gives the landlord and tenant the freedom to agree between themselves what might seem to be equitable if that runs foul of the European regulations. The same applies to the point I made about the Euro-holding on which I shall write to the Minister. As I said, the point

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was put to me by a leading practitioner and expert in these matters. He believes that the example I gave poses a real problem.

As the Minister said, the two parties are free to reach an agreement. However, what we are concerned about is the situation where they do not reach an agreement because they forget about it or where perhaps there is an unwritten agreement—we referred to this yesterday—which falls within the Bill. A situation may arise where the parties concerned have not dealt with the matter and have to enter into negotiations. We are trying to establish some machinery by which they are reminded about this valuable asset. It is probably one of the most valuable assets on the farm in some ways, excluding the land. As I said, we would like there to be some machinery to remind them to deal with the matter when they come to negotiate their agreement.

I like the idea of the milk quota being an intangible advantage which, by European law, is attached to the land. That is a curious quirk of the European and the British law. Here we have a description of an intangible advantage. How can an intangible advantage be attached to land because it is under European regulations? That is another reason why I think we shall have to return to this issue at a later stage of the Bill. I shall certainly write to the Minister, as he suggests, on the technical point. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 52 and 53 not moved.]

Clause 16 agreed to.

Clause 17 [Consent of landlord as condition of compensation for tenant's improvement]:

Lord Gallacher moved Amendment No. 54:

Page 8, line 24, at end insert ("save that, unless expressly provided in the written terms of the tenancy, the tenant shall be entitled to claim compensation for such tenant right matters as necessarily relate to the uses permitted under the tenancy without such consent.").

The noble Lord said: The effect of Amendment No. 54 is to drop the absolute requirement for written consent for compensation for tenant-right matters such as growing crops, manurial values and such like. It presumes that uses permitted for the farm imply consent for normal operations which currently warrant compensation. The amendment creates a general head of claim for valuers to seek compensation as warranted by the circumstances of each case.

The structure of the Bill requires written consent for any tenant's improvement to be compensated. While appropriate for major improvements involving significant investment and substantial changes in the character of the holding, there is no separate provision for growing crops and other matters for which compensation would currently be paid and for which tenants would expect to be compensated in future. This needs to be remedied on the face of the Bill both as a practical question and for the reputation of the reforms.

The amendment does not seek to replicate the detailed structure of the present law on tenant right but to provide a head of claim for valuers to interpret as

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appropriate in the circumstances based on the activities implied by the permitted uses of the holding. It is not seen as necessary to define tenant right since this will depend on the circumstances and the evolution of the industry. As an example, there are already areas where deer farming is not fully covered by the present detailed law. Thus it is not seen as appropriate to refer back to the detailed provisions of the current legislation.

Farmers have been accustomed for a great many years to claiming end of tenancy compensation for tenant right, first as a matter of custom and then, for the last century, under the law. It will not feel natural to seek written consent for the growing of crops which may be left behind. Owners may feel it rather odd to be asked for it. The effect of the Bill's wording is that, especially on units without written agreements, the tenant may lose the value of crops he leaves behind. As knowledge of this spreads, so tenants will tend to do less towards the end of the tenancy so reducing economic potential. That would be an entirely counter productive development; the amendment, we believe, would remedy it. I beg to move.

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