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Lord Gallacher moved Amendment No. 9:

Page 18, line 12, after second ("a") insert ("written").

The noble Lord said: My Lords, Amendment No. 9 was tabled to give the noble Earl, Lord Howe, the opportunity of returning to a subject which we discussed at Report stage and which he promised to look at again in the light of what was said at that time.

Clause 36 (3) provides that,

Our advice is that, if there was a contract before 1st September 1995 for a tenancy which is granted after that date, the tenancy will be governed by the Agricultural Holdings Act 1986 and will not be a farm business tenancy.

Contracts for leases of three years or under do not need to be in writing—Section 2(1) of the Law of Property (Miscellaneous Provisions) Act 1989. It may therefore be that a landlord or tenant could find that they enter into a contract without being aware that they had done so or of the consequences. If the contract is in writing, then the parties will probably have applied their minds to what they were doing and therefore the accident would not happen. If they did not, there will be clear evidence that there is a contract and therefore the Agricultural Holdings Act 1986 will apply.

When that information was given at Report stage, the noble Earl told the House (at col. 924 of Hansard) that he did not wish to set traps in the new legislation and he thought that Clause 1(4), read with Clause 36(3), was satisfactory. However, in view of the unease expressed by myself at that time, the noble Earl said that he was prepared to look again at the matter and if necessary return with a government amendment at a later stage. My purpose therefore in moving Amendment No. 9 is

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to ask whether, in the week that has elapsed since we last met, the noble Earl has had time to look again and can give the reassurance that we are seeking this afternoon. Failing that, perhaps he will regard it as an ongoing item which will be taken by the Government to another place so that when the matter is raised there at an appropriate stage, either an amendment can be tabled or the necessary reassurance given that the insertion of the word "written", which is the object of Amendment No. 9 to Clause 36(3), is unnecessary. I beg to move.

Earl Howe: My Lords, the noble Lord, Lord Gallacher, will know from our discussion at Report stage that we want to avoid legal traps in the new legislation. Such traps have bedevilled the tenanted sector for far too long. The noble Lord has a serious point which we are studying with care.

We are still considering what amendment might be made to the Bill. Although the noble Lord's concern may be well-founded, I am advised that this particular wording may not do the job required, and that possibly some changes elsewhere may be needed instead. I am sorry that I am therefore not able to add a great deal to what I said last week. However, I hope the noble Lord will accept my further assurance this afternoon that this particular problem is being seriously considered and that this will persuade him to withdraw his amendment.

Lord Gallacher: My Lords, I am grateful to the noble Earl for his comments and for his assurance that Her Majesty's Government are still considering this matter because of its importance. I take his point with regard to the wording as it stands; that it is perhaps not of a nature that will solve a problem if a problem exists. I fully understand also that in the week that has elapsed since we discussed the matter there may not have been time for the legal advice which the noble Earl requires to come to hand and therefore he is not able to say definitively what the Government's position on the amendment would be.

I leave the matter there in the knowledge that the Bill will go to another place. I shall certainly make it my business to ensure that the matter is raised appropriately in another place. Having said that, I beg leave to withdraw Amendment No. 9.

Amendment, by leave, withdrawn.

Earl Howe: My Lords, I beg to move that the Bill do now pass.

The noble Lord, Lord Beaumont of Whitley, remarked at Second Reading, I think with a touch of irony, how pleasant it was to be dealing with a government Bill which was largely popular and agreed by the industry to which it relates. I have to say that from where I stand it makes my task a great deal more congenial, also!

It is also my pleasure very genuinely to thank the noble Lords opposite—particularly the noble Lords, Lord Carter and Lord Gallacher—for the amicable and constructive spirit in which this Bill was considered. If I may go so far as imputing motives to the noble Lords, I hope it is because they recognise that with this Bill we genuinely want to take real steps to revive the agricultural tenanted sector. The reason that I have had

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to resist certain amendments which they proposed is that we felt that they would detract from that overriding objective. Nonetheless, I am pleased to have been able to accept a number of amendments that they proposed, particularly the ones which had the support of the industry group. And throughout our debates I tried hard, though I am not certain that I succeeded, to avoid using the word "otiose" when resisting amendments proposed by the noble Lord, Lord Carter.

I should also like to thank the many noble Lords from all sides of the House who have contributed to our debates during the Bill's successive stages. As the House will understand, there are too many names to mention them individually, but if I were to single out one name it would be that of my noble friend Lord Stanley of Alderley whose knowledge and persuasiveness have, as ever, been of great value. I hope that he and all of your Lordships will agree with me that, in keeping with the best traditions of this House, the Bill will be leaving for consideration in another place in even better form than that in which it arrived.

I should now like to pick up two or three themes that have emerged during your Lordships' consideration of the Bill. First, noble Lords opposite have commented several times on the fact that the Bill will permit much greater diversification away from primary agricultural use on a holding. Indeed, at Report stage the noble Lord, Lord Carter, I believe, referred to this as extraordinary. The fact is that diversification is an increasing feature of the rural economy but, whereas under the present law it is necessary for the parties to set up a separate commercial tenancy covering the non-agricultural enterprises, the benefit of the Bill is that it will allow scope for such enterprises to flourish within a single farm business tenancy. We see nothing extraordinary about that; indeed, it is one of the features of the Bill that the tenant organisations most strongly support.

Secondly, we have heard a lot about the perils of unwritten agreements. I have made clear in response to the noble Lord, Lord Carter, that such oral agreements are only valid for tenancies not exceeding three years' duration and for periodic tenancies. If we were to exclude these tenancies from the scope of the legislation, we would leave the parties in a state of great legal uncertainty. At the same time, we might provide a method for unscrupulous landlords to seek to avoid the provisions of the Bill by letting exclusively on oral agreements. We therefore decided to set a framework which accommodates oral agreements whilst in no way wishing to encourage the use of such agreements.

Thirdly, a recurring topic has been a concern expressed by my noble friends as well as by noble Lords opposite, about the hazards of leaving many matters to be settled between the parties in their tenancy agreement. I plead guilty to this charge. In my defence, I quote George Bernard Shaw, who said:

    "Liberty means responsibility. That is why most men dread it."

In this area we believe freedom is essential. Landowners and farmers need to be free to negotiate agreements to suit their own circumstances, within a legal framework that provides safeguards for their basic rights. I am sure that it is true that many people may be apprehensive about this. However, the main industry organisations

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realise that the time has come when agriculture needs the extra freedom that other business sectors enjoy, and believe that their members are ready to accept the extra responsibility that goes with it. That is where the guidance currently being prepared by the RICS in consultation with others, will, I hope, prove helpful to those facing this new responsibility.

I do not believe that this Bill could be described as a "courts' charter", as the noble Lord, Lord Carter, would have it. In essence, the parties will need to adhere to the tenancy agreement that they have signed; and where there is a dispute, the matter can be referred to arbitration. But I believe that because the Bill does not seek to deal with every detailed aspect of the landlord-tenant relationship, there will be correspondingly less scope for disputes to arise.

Most of all, our hope, as I said earlier, is that the Bill will convince landlords that a new climate has dawned which is favourable towards letting of land, and that new entrants will benefit accordingly. The latest CAAV annual survey which was published last week reaffirms once again how desperately this reform is needed. It showed a further decline in letting of full tenancies and a further increase in short-term arrangements. Excluding succession tenancies, these short-term lettings now outnumber lettings on full tenancies by a ratio of more than 5:1.

I hope that when the Bill comes to be considered in another place the party opposite will show awareness of both the substance and the spirit of the debates that we have had in your Lordships' House. And I hope that they will feel able to be equally constructive in order to help us to achieve that underlying objective. It is clear, for example, that a statutory minimum term would nullify the beneficial effect of the Bill. That is why none of the main industry organisations apart from the Farmers Union of Wales support that proposition. But another equally important aspect is that landowners should not have to fear future retrospective legislation. Just as we have resisted amending the 1986 Act with retrospective effect, I would call upon the party opposite to pledge not to introduce any future legislation on this subject with retrospective effect. In my view, such a pledge would be the single biggest contribution that they could make to allow tenants to derive full benefit from this Bill.

I have one very important point to make in conclusion. At Committee stage, the noble Lord, Lord Carter, referred to the fiscal disincentive to the letting of land. If I recall rightly, he expressed the view that the decline in the number of farms available to let had more to do with taxation than with the present legislation. He implied that removing this disincentive would do more for the tenanted sector than would this Bill. I did not agree with that view, but I am delighted by the fact that my right honourable friend the Chancellor of the Exchequer was able to announce last Friday that the 100 per cent. relief from inheritance tax which applies to owner-occupied agricultural land is to be extended to the agricultural value of land comprised in new tenancies that are granted on or after 1st September 1995. An amendment to the Finance Bill is expected to be tabled shortly. Without doubt this will enhance still

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further the major beneficial effect that this Bill will have on the letting of land once it comes into force. By making this change the Government have underlined their commitment to the agricultural tenanted sector. This is excellent news which I hope will be greatly welcomed on all sides of your Lordships' House. I commend the Bill to the House.

Moved, That the Bill do now pass.—(Earl Howe.)

4.45 p.m.

Lord Carter: My Lords, I would like to begin, as always, by thanking the Minister for handling this Bill with his usual courtesy. That is not just a form of words. It is a technical Bill, and he has handled his brief with his usual lucidity. I believe that we have all enjoyed the work that we have done on the Bill. I am also particularly grateful to him and his officials for the meetings which I have had, together with my noble friend Lord Gallacher, outside the House to discuss the Bill at its various stages. It has been extremely helpful to us on this side of the House.

In particular, I would like to thank my noble friend Lord Gallacher who has shared the burden with me on the Front Bench. He has his own very effective approach in the handling of a Bill. It has certainly worked because I believe that all the amendments which have been accepted by the Government, at least in principle, were moved by my noble friend. Noble Lords will be aware that on the opposition Benches we do not have the resources which are available to the Government. Therefore, I have to say a particular thank you to our researcher, Mrs. Clare Cozens, who has been of enormous help to us in preparing for the various stages of the Bill.

I must also say a word about TRIG, the Tenancy Reform Industry Group, the Country Landowners' Association, the National Farmers Union, the Tenant Farmers' Association and the Federation of Young Farmers' Clubs. I believe that they can be fairly described as the corporate midwives of the Bill. This is the first occasion on which I have been involved with a Bill where the Minister needed a nod from below the Bar as well as the usual briefing from the officials in the Box. I hope that this is a new doctrine where the Government listen to the views of industry. I shall not use the word "slavishly"—but certainly they listened on almost every occasion they were called in aid. I hope that that will now extend to all the other policies which the Government intend to introduce. The privatisation of the railways springs to mind. I hope that they will listen to what people in the industry say and will follow the excellent example of the department of agriculture and apply the doctrine to all their other policies.

Obviously, the Tenancy Reform Industry Group has worked extremely hard. There are some in the industry—and I am with them—who feel that some may have striven a mite too hard to go along with the Government's deregulatory and free market enthusiasm. They would be churlish not to note that the Country Landowners' Association, I am sure, is pretty pleased with the outcome of the Bill.

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I think that we can all agree on one thing: it is absolutely imperative that when the Bill becomes law, all parties (and particularly tenants) must take proper advice before entering into farm business tenancies. I entirely accept what the noble Earl said, and that it is up to the landlord and tenant to reach an agreement, but I am convinced—I know that the Government will agree—that the guidance notes which are to be prepared by the RICS and discussed with the industry will be of vital importance. The Government have not taken on the responsibility of giving them any form of statutory power, as we asked them to do, but we know that the RICS and other groups will work very hard on this matter. That is important if the Bill is not to turn into a lawyer's paradise. I do not think that it will. Indeed, there is a good hope that it will not if all of us in the industry can get the message across that the guidance notes are extremely important. This is a whole new area. Both landlords and tenants must take advice, look at the guidance, and make sure that they are forewarned, and can thus avoid, the pitfalls that still exist, some of which we have touched on in our discussions.

The Minister mentioned the news over the weekend about relief from inheritance tax. I refer to what I said at previous stages about the effects of such taxation; but, as I have been anxious to point out, it is the way in which it is done that is so important. I should have been surprised if the Minister had not mentioned the new proposal to give 100 per cent. relief from inheritance tax for agreements reached after 1st September. Obviously, we shall have to see details of the amendments to the Finance Bill. I have seen only the press releases; but my first reaction—I stress that it is only a first reaction—is that the Government are showing a very odd sense of priorities. We have heard a great deal about the pressures on public expenditure. We know that local authorities are having to slash their community care budgets. We know that all the tax increases that the Government have introduced are equivalent to 7p on the basic rate, yet it seems that the Government can still find the wherewithal to give substantial tax relief to a not particularly impecunious section of the community.

As I have said, it is the way in which it is done that is so important. As I understand it, there will be relief of 100 per cent. on all let agricultural land on agreements after 1st September 1995. That means all those agreements and existing reliefs on owner-occupied land. The danger is that agricultural land could become a tax haven. We shall have to look very hard at the proposal. I am sure that when that amendment to the Finance Bill is tabled in another place, my colleagues there will be anxious to return to the point that we may be turning agricultural land into a tax haven. We must consider the effect of that on the price of land as well as all the other factors that will flow from it. When we form the Government, I am sure that my colleagues at the Treasury will wish to look at that very hard.

To repeat what I said on Second Reading: major agricultural tenancy Bills come but rarely. We have made no secret of the fact that we should have preferred a rather different Bill with more security for the tenant; but saying that does not in any way reflect on the Minister and the way in which he has handled the Bill.

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We shall now await with interest the changes to the Bill that may be made in another place. There will be several and although they are largely technical, they are nevertheless important and need to be carried forward to be dealt with there.

We must all hope that once the Bill becomes law, it will achieve the Government's objective, which we all share, which is to increase the supply of agricultural tenancies, particularly to new entrants to the industry.

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