Determination of Rent of Agricultural Holding

Orders of the Day — Agricultural Holdings Bill [Lords] – in the House of Commons at 8:30 pm on 6th June 1984.

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Mr. Mark Hughes:

I beg to move amendment No. 1, in page 2, line 10, at end insert 'and the earning capacity'.

Mr. Deputy Speaker:

With this it will be convenient to take the following amendments: Government amendments Nos. 2 and 3.

Amendment No. 4, in page 2, line 18, after 'holding', insert 'and "earning capacity" in relation to the holding, means the net annual income which the holding is capable of generating (taking account of current economic factors and marketing and production constraints outside the control of the tenant)'. Government amendment No. 5.

Mr. Hughes:

I thank the Minister of State for the. amendments that he has tabled, which are grouped with my amendment. We had a long debate in Committee on the need to insert the words "and the earning capacity" into the rent formula. Everything that has happened in the dairy industry since the Bill went into Committee shows why it was essential to do so. The Opposition pressed the Government — with assistance, to be fair, from Conservative Members—to reintroduce earning capacity as part of the rent formula, when it had been removed for no good reason in another place. Therefore, we are grateful that in amendments Nos. 2, 3 and 5 the Government are reintroducing those words.

Even at this 11th hour and 59th minute, the Minister should recognise that the wording of amendment No. 4 regarding the meaning of "earning capacity" is better and more applicable than the wording of Government amendment No. 5. Amendment No. 5 states: 'related earning capacity' means the extent to which, in the light of that productive capacity, a competent tenant practising such a system of farming could reasonably be expected to profit from farming the holding. I am sorry, but I am not satisfied that the sudden imposition of dairy quotas is covered by that definition in as satisfactory a way as under amendment No. 4.

Therefore, while we must welcome the Government's sudden flush of reasonableness in accepting "earning capacity" in clause 1, I ask the Minister just to make certain that his definition is the right one. We are satisfied beyond doubt that amendment No. 4 makes better sense than amendment No. 5. We do not wish to press amendment No. 1 to a vote, but I seek your advice, Mr. Deputy Speaker, about whether, were the Minister to reject amendment No. 4, we would be able to press it. I am satisfied that it would make better law if we chose amendment No. 4 rather than amendment No. 5.

Photo of Henry Bellingham Henry Bellingham , North West Norfolk

The removal from the first draft of the Bill of the words profit from farming the holding provoked much criticism on Second Reading and in Committee. Therefore, I am grateful that the Government have kept their word and participated in this group of amendments. The uproar in the industry on all sides led to a lengthy debate, and at the time I did not see the reason for removing those words. I support the amendments. I agree with the hon. Member for City of Durham (Mr. Hughes) that the wording in amendment No. 4 is clearer than that in amendment No. 5. I would not go to the stake about it, but it is clearer in a number of important aspects, and I urge my hon. Friend the Minister to consider that.

I applaud my hon. Friend for getting this part of the rent formula right. It is a package which depends on the rent formula and the succession clause. He has the rent clause formula right, but it is sad that he has not got the succession clause completely right. He could have done so by accepting new clause 2, but I shall not talk about that as it would be out of order.

The debate on new clause 7 will not go away, nor will the debate on fixed-term tenancies. It will increase the flow of let land on to the market. I urge my hon. Friend to listen to the National Federation of Young Farmers Clubs, the Country Landowners Association and the many people in the industry who are talking more and more about the advantages of fixed-term tenancies. That debate will not disappear, and I urge him to consider it at a later stage.

9 pm

Photo of David Maclean David Maclean , Penrith and The Border

I am delighted to support the Government on this group of amendments. It is essential that the term "related earning capacity" or something similar is put back into the Bill. Like my hon. Friend the Member for Norfolk, North-West (Mr. Bellingham), when I first saw the amendments I instinctively thought that the wording of amendment No. 4 was much clearer in meaning and concept than the Government's amendment No. 5—it worries me when I am in complete agreement with the Opposition. Will the Minister assure the House that, in the final analysis, after legal verbiage is cut away, amendment No. 5 means exactly the same as amendment No. 4? If that is the case, I heartily congratulate the Government. I hope that my hon. Friend will address himself to that point.

Photo of Mr John MacGregor Mr John MacGregor Minister of State (Ministry of Agriculture, Fisheries and Food)

We had long debates in Committee about these words and I gave a clear commitment in response to the debate, which I did willingly.

The three Government amendments introduce a specific reference to earning capacity in relation to the productive capacity of the holding, without preventing an arbitrator from taking into account earnings from non-farming activities as a relevant factor. I shall explain the amendments in more detail to make clear beyond doubt the Government's interpretation of the change and how the problems have been overcome.

In determining the rent properly payable in respect of a holding, one especially relevant factor which the arbitrator must take into account under clause 1(3) will be the productive capacity of the holding and its related earning capacity. Amendments Nos. 3 and 5 define these terms. The earning capacity specifically relates to the holder's productive capacity. Under its terms it will include potential farm earnings within the limit of these definitions. That is fair.

The related earning capacity does not include earnings from non-farming activities such as tourism. Where such earnings exist they would be one of the unspecified relevant factors which the arbitrator would be bound to take into account. We cannot start listing in the clause possible relevant factors because that would immediately raise doubts about which other factors might or might not be regarded as relevant for determining rent. The rent clause, therefore, spells out only specific relevant factors which apply in every case. The effect of the amended formula enables actual earnings from non-farming activities to be taken into account as relevant factors.

I can give my hon. Friend the Member for Penrith and the Border (Mr. Maclean) the assurance he seeks. I sought guidance and advice from experts on these matters. I am advised that amendment No. 4 does not add anything to the amendments I propose. Both the National Farmers Union and the Country Landowners Association declared themselves content with the wording we have adopted. The points referred to in brackets in the Opposition's amendments are integrated in our amendments. For example, quotas affect earning capacity, and therefore where quotes exist, as they do in the dairy sector, they would be taken into account as a factor of earning capacity.

I am advised that there is no need to be specific. If one starts to specify particular factors, others are left out. The hon. Gentleman probably thinks that he has thought of everything relevant, and perhaps he has. However, five years from now, there could be a problem when another factor becomes relevant. There is always a risk when one specifies particular factors and leaves others out. There is an inclination to think that the others are less important and less material, and that they should perhaps be disregarded.

On that basis, I hope that the hon. Member for City of Durham (Mr. Hughes) will be content that my amendments match the commitments I gave in Committee and meet his points.

Mr. Mark Hughes:

I beg to ask leave to withdraw my amendment, and I support the Government's amendments.

Amendment, by leave, withdrawn

Amendments made: No. 2, in page 2, line 11, after 'holding', insert 'and its related earning capacity'.

No. 3, in page 2, line 14, leave out '"productive capacity", in relation to the holding'

and insert ', in relation to the holding—(a)"productive capacity"'.

No. 5, in page 2, line 20, at end insert ';and(b) "related earning capacity" means the extent to which, in the light of that productive capacity, a competent tenant practising such a system of farming could reasonably be expected to. profit from farming the holding.'.—[Mr. MacGregor.]

Photo of Mr John MacGregor Mr John MacGregor Minister of State (Ministry of Agriculture, Fisheries and Food)

I beg to move amendment No. 9, in page 4, line 23, at end insert— '(10A) Where under an agreement between the landlord and the tenant of the holding (not being an agreement expressed to take effect as a new contract of tenancy between the parties) provision is made for adjustment of the boundaries of the holding or for any other variation of the terms of the tenancy, exclusive of those relating to rent, then, unless the agreement otherwise provides—

  1. (a) that provision shall for the purposes of subsection (8) of this section be treated as not operating to terminate the tenancy, and accordingly as not resulting in the commencement of a new contract of tenancy between the parties; and
  2. (b) any increase or reduction of rent solely attributable to any such adjustment or variation as aforesaid shall be disregarded for the purposes of paragraph (b) of that subsection.'.

Mr. Deputy Speaker:

With this it will be convenient also to consider Government amendment No. 10.

Photo of Mr John MacGregor Mr John MacGregor Minister of State (Ministry of Agriculture, Fisheries and Food)

I am pleased to be able to bring these amendments before the House in fulfilment of my undertaking in Committee to my hon. Friend the Member for Milton Keynes (Mr. Benyon). These amendments go beyond the specific point raised by him, which was about the effect of the boundary changes on the triennial rent review, and cover other variations in the terms of the tenancy which could pose a similar trap. It could be, for example, the introduction of a conservation covenant with a consequential reduction in rent. I am sure that we would wish to encourage the introduction of conservation convenants and, therefore, it is right to remove a possible obstacle such as the one I have just described.

Amendment No. 9 provides that adjustment of boundaries or any other variation in the terms of the tenancy, except those relating to rent, will not for the purpose of section 8(8) of the Agricultural Holdings Act 1948 constitute a new contract of tenancy, and a variation of rent on those grounds will not trigger the start of a new three-year rent cycle.

Amendment No. 10 removes new section 8(11)(d) which becomes superfluous. I am grateful to my hon. Friend for raising the point.

Photo of Mr William Benyon Mr William Benyon , Milton Keynes

I should like to say how grateful I am to my hon. Friend the Minister for fulfilling his pledge. I firmly believe that the amendment covers the point that I made in Committee.

Amendment agreed to.

Amendment made: No. 10, in page 4, line 37, leave out from '1977' to end of line 43.—[Mr. MacGregor.]