Financial assistance: agricultural tenancies

Agriculture Bill – in a Public Bill Committee at 4:00 pm on 20th November 2018.

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‘(1) Where in respect of a tenancy of an agricultural holding a tenant is restricted by the terms of the tenancy agreement in respect of any activity for which financial assistance has been granted under or in connection with this Act, or any environmental land management scheme established in connection with the provisions of this Act, the tenant may serve notice on the landlord to request consent for that activity.

(2) A landlord must respond to a notice served under subsection (1) within one month.

(3) If the landlord does not respond to a notice served under subsection (1) within one month, consent for the activity within the notice from the tenant will be deemed to have been given.

(4) Any objection by the landlord to a notice served under subsection (1) may be referred by the tenant to arbitration or expert determination under a mechanism to be established by regulations made by the Secretary of State.

(5) Regulations under subsection (3) shall be subject to the affirmative procedure.

(6) “Financial assistance” under subsection (1) shall be taken to include (amongst other things)—

(a) any payment of financial assistance under section 1,

(b) any payment under the basic payment scheme, within the meaning of section 4,

(c) any delinked payment within the meaning of section 7, and

(d) any other form of financial assistance which may be given under this Act.’—

This new clause would enable a tenant to challenge a restriction in the tenancy agreement regarding the receipt of financial assistance under the terms of the Bill.

Brought up, and read the First time.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

I beg to move, That the clause be read a Second time.

We come to the end—almost. We shall say a few pleasantries in a minute or two, but this is an important new clause. That is because—I make no apology for putting some pressure on the Government here—the Tenancy Reform Industry Group, or TRIG, negotiations that took place almost two years ago now happened against a background of the Government making some rather nice noises about the importance of tenant farming and tenant farmers in particular. The Government have since gone quiet. There have been some noises off of late, with the Government saying that they intend to revisit the issue, but the Minister could make those noises more overt in his response, so that we know exactly where we are going.

The new clause provides a mechanism to ensure that tenant farmers are not disenfranchised from access to the new financial support mechanisms contained in the Bill. The tenancy sector of agriculture is responsible for farming about a third of agricultural land in England, and is a substantial part of farming business. There are about 13,000 wholly tenanted farm holdings, 41,000 predominantly tenanted farm holdings and 35,000 partly tenanted farm holdings. They are therefore an important part of the agricultural sector.

The tenancy sector has a greater preponderance of livestock—dairy in particular—upland and small-scale farming than in the wider agricultural sector. Furthermore, for those individuals who start in farming, most will start as tenant farmers, unless they are fortunate enough to inherit their father or mother’s holding. Often, however, it is not passed on to them so they become tenants of their family’s estate. Most farmers, when they start, are tenant farmers.

There are two principal types of tenancy agreement: those under the Agricultural Holdings Act 1986, which confers security of tenure, a regulated rent and in some cases a right of succession; and those known as farm business tenancies under the more recent Agricultural Tenancies Act 1995, which provides for a significant degree of freedom of contract so that there is no fixed term and no significant regulatory provisions on rent. I alert the Committee principally to that second one at this stage.

Although farm business tenancies have largely been welcomed, and overall have worked reasonably well, of late there has been a tendency for shorter FBTs, which are completely outwith the ability of new businesses to cope or to function effectively. Some FBTs have been for as short two years, and anyone who knows anything about farming knows that people cannot do anything in two years.

That is why we make no apology for raising the subject at this late stage. It is important for us to look at agriculture where it is not functioning as well as it could and should be. Those of us who represent rural or semi-rural constituencies know that that has been highlighted by the Tenant Farmers Association and the NFU, which want to make us recognise that basis of the TRIG reforms—which is what some of us thought that the Government would bring forward but have not yet happened. The Minister can do his best to allay our fears that the opportunity to look at that important sector will be dismissed, or at least missed. It is not just what is in the Bill that matters, but what could be in the Bill.

I hope that the Government will recognise how much of an awakening there is, and that those who operate as tenants want some clarity about how the changes will occur and how the new regime will affect them. If they are not mentioned in the Bill, which they are not in any substantive way, people will start to get worried. A tenant farmer, like any other farmer, will want to take advantage of the new payment system, because they are losing out on the basic payment. Some of them have been entirely dependent on that for their existence, but they do not know how they will move to a new form of payment.

We had a big debate on de-linking, which was seen as an opportunity to get people off the land who wanted to leave. As I have said on several occasions, I have always been in favour of a formal retirement scheme. We will not have that, but de-linking offers people the opportunity to leave the land. People who then come on to the land have to be treated fairly, however. If they are not, they will not stay and the average age of the farming profession will rise even further from 59 or 60, depending on who we believe.

There is still some concern that the 1986 landlords, in particular, will use their leverage in having to give consent to secure unreasonable demands from tenants, including loss of security, unsustainable levels of rent or other unwarranted commitments. Those of us who know a bit about dilapidations will know that that is usually one of the dividing lines when someone wants to leave their holding, because the landlord can hold them to ransom in a sense. I am principally concentrating on the farm business tenancies, which were the basis of the TRIG discussions.

I hope that the Government are listening and that they recognise that the new clause has not been tabled for anything other than a good purpose. It refers to a single sector of farming, but a very important one. Unless we can use the Bill to reform what is wrong, we will not have the opportunity to do so again, other than on Report, on Third Reading, in the other place and maybe back in this place if there are Lords amendments. It would be nice to think that we were taking note of the important issues here, however, which is why we tabled new clause 31.

By their nature, these people are not always in the best financial straits, so it is important for them to know what they will have to do to get the state’s support in the form of the environmental payments. That is why the Tenancy Reform Industry Group was looking for legislative change, and it has to be legislative change, because the two forms of tenancy agreement are based in legislation. As those questioning us will ask, if we do not change it here, where do we change it? It is very important that it happens.

I hope that the Minister will respond and recognise that TRIG should be faced up to in the Bill, and that it is right and proper that a consultative process such as TRIG has an outcome. It should improve the status of tenant farmers to allow them to become more sustainable and resilient, and allow people to come on to the land who otherwise could not, in the knowledge and security that the tenancy arrangements are right and proper.

In passing, Sir Roger, I would like to thank you and Mr Wilson for the way in which you have chaired the Committee. You have got us through it—some of us thought that might not be possible—even though we lost one session through agreement because the Government were doing some rather strange things. They seem to be doing the same today—we thought we would be voting at 4 o’clock. I only wish we had had so much acquiescence in this Committee and things had gone our way a bit more, but hope springs eternal and perhaps those things will come back at later stages.

I thank my hon. Friend the Member for Darlington, who did a sterling job to get me out of the mire on more than one occasion, my Whip, my other hon. Friends and all hon. Members. I always think a Bill Committee is rather like a family—we have our differences of opinion, we were thrust together by no choice of our own, but we managed to make some progress, albeit not as much as we wanted.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

In a second—just let me finish my peroration.

I thank Rob Wakely, who did a sterling job to keep us on the straight and narrow, and Jessica Cobbett from my office, who helped me on more than one occasion. I thank the civil servants, who have done a really good job, and the Minister. I feel sorry for him, because he will have to start all over again tomorrow with the Second Reading of the Fisheries Bill. As much as we think we have done our bit, he still has to do his.

I give way to the hon. Member for Brecon and Radnorshire.

Photo of Chris Davies Chris Davies Conservative, Brecon and Radnorshire

I thank the hon. Gentleman for giving way. I have nothing to add—I am just enjoying intervening on him.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

If nothing else, that gave me a chance to rest my voice.

This is an important Bill. We got it through in time—it is a good job we left enough. Although I am using this opportunity to thank everyone from both the Opposition and the Government, I hope that, to finish with, we will hear some good noises about tenancy reform. People will be watching, listening or reading even at this stage because their livelihoods depend on that, so the Minister should listen and, if nothing else, accept this final new clause.

Photo of Philip Dunne Philip Dunne Conservative, Ludlow

On a point of order, Sir Roger. Will you advise me how I can add my thanks from the Government Back Benches to Opposition Members for the good natured way in which the Committee has functioned? On virtually every clause and amendment thus far, there has been a sense of consensus across the Committee that this is an important Bill and we need to get it right. I would also like to add my thanks to the 27 individuals who came to give evidence in our opening sessions last month and the countless more organisations outside this place with a committed interest, whatever their standpoint, to ensuring that the Bill sets out a new agricultural support framework that lasts for generations to come. I look forward to the Minister’s echoing those remarks.

Photo of Roger Gale Roger Gale Conservative, North Thanet

That is not strictly a point of order for the Chair, but the hon. Gentleman has already made it. There are a few formalities to complete. We had better get through those or we might be congratulating ourselves a little too early. Let us put new clause 31 and the Government amendment to the long title to bed and see where we go from there.

Photo of Jenny Chapman Jenny Chapman Shadow Minister (Exiting the European Union)

Inspired by my hon. Friend the Member for Stroud, I want to put on the record my thanks to you, Sir Roger. We would very much appreciate it if you passed on our thanks to Mr Wilson, too.

I thank my hon. Friends, who all made substantial contributions to our proceedings. I have led on Bill Committees in the lead-up to Christmas where there has been lots of online shopping going on around the room, but that was not the case this time. Of the Government Members, I particularly thank the hon. Member for North Dorset for his good natured and at times very amusing contributions, and the right hon. Member for Scarborough and Whitby for his repeated challenge on the withdrawal agreement. All I say to him is that if he and his colleagues are banking on Labour Members coming to the rescue in the first week of December, they should not count their chickens.

I thank the Minister, who has conducted himself impeccably throughout all this. It cannot be an easy task. All the pressure has been on him, and he has dealt with everything with good grace. I do not think that he has declined a single intervention the whole time. He has our respect for that. I must also put on the record my thanks, respect and admiration for my hon. Friend the Member for Stroud. His knowledge of the sector is far greater than mine. As a townie who does not represent a rural or semi-rural constituency but who likes her food, I have learned an awful lot. I also need to thank James Metcalfe, from my office.

We do not like the Bill at all. We think it is far too vague and does not provide the clarity that we want. Having said all that, this has been a hopeful process, and I think we have left the Minister with a better knowledge of our position than when we started. We look forward to some changes at future stages, as has been hinted at a couple of times throughout our proceedings. Overall, I thank colleagues for the way that we have conducted the Committee. I obviously say that I support new clause 31, otherwise I suspect that my speech would be completely out of order.

Photo of Roger Gale Roger Gale Conservative, North Thanet

I think it probably was anyway.

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

New clause 31 is an important clause and an important point to end on. As the hon. Member for Stroud knows, our view is that changes to tenancy law go beyond the scope of the Bill, which concerns future agriculture schemes. However, he also knows that I take the issue very seriously.

While we do not want to throw the baby out with the bathwater when it comes to tenancy law, because the introduction of farm business tenancies was an important innovation and has brought more land to market, there are undoubtedly some problems with the way that both Agricultural Holdings Act tenancies and the farm businesses tenancies under the 1995 Act operate. That is why, around 18 months ago, I commissioned the Tenancy Reform Industry Group to do a detailed piece of work on what changes to tenancy law we ought to consider, in particular to address productivity and support structural change in the industry. It came back with a package of proposals, as the hon. Gentleman said.

Probably chief among the proposals was the idea that an Agricultural Holdings Act tenancy could be assignable, so that an older farmer who wanted to retire but did not have children to inherit the tenancy would have some kind of right to assign the tenancy at open market values to a third party or, indeed, to enter into surrender negotiations on the tenancy with their landlord on that basis. The Law Commission recommended reform of the rules of forfeiture for farm business tenancies many years ago, and tidying that up remains unfinished business.

Also included in those proposals was a recommendation for a provision to vary restrictive covenants within Agricultural Holdings Act tenancies. Farming practices have moved on, and having certain covenants that prevent modern investment on farms, or that might stand in the way of the type of environmental schemes envisaged in the Bill, are problematic. There should be a process for looking at that.

To end the Committee on a positive note, I can reassure the hon. Gentleman that we have by no means forgotten that package of measures. My officials are currently working on a draft consultation on tenancy law and some of those changes, which we intend to publish in the new year. The outcome of that consultation will inform a future piece of legislation on tenancy reform.

The consultation will probably look at one or two other areas where we believe changes are required. For instance, article 31 of the Agricultural Tenancies Act 1995 restricts the ability of landowners to issue tenancies on their land unless they have permission from a lender, who might have a charge over that land. That overturned decades of practice, where there was a presumption in favour of a landlord being able to grant a tenancy because the land needed to be farmed. We believe that that particular provision, article 31, needs to be looked at again.

We are also considering a call for evidence on the repossession of agricultural land. At the moment there is a gap in the law. Farm businesses tend to have their assets owned by individuals. Currently, if a bank wished to repossess a residential property, it would have to go to a court to get a possession order. There is no such requirement with agricultural land. A bank can simply seize land and auction it without any recourse to the courts. It is an outdated approach, and we are therefore considering amendments that would require a possession order from a lender before they could seize the land.

Photo of Martin Whitfield Martin Whitfield Labour, East Lothian 4:30 pm, 20th November 2018

Would that include the valuation of land by banks when they repossess, and the other professionals that are involved in taking over the land—it is not repossession at the moment—in that sequence of events?

Photo of George Eustice George Eustice The Minister of State, Department for Environment, Food and Rural Affairs

A possession order would require a bank to justify its action to a court before being able to take anyone’s land. There have been a number of issues with secondary lenders, and mainstream banks, moving aggressively to seize and auction land, and selling it in a reckless way that is against the interests of the landowner and their creditors because they have that charge over the land. That area needs to be looked at.

With the confirmation that we have not forgotten those areas, and that we are looking at a consultation, I hope that the hon. Member for Stroud will not feel the need to press the new clause to a vote.

It has been a pleasure to serve under your chairmanship, Sir Roger, and that of Mr Wilson. We have had a good-natured debate on new clause 31 and all the other amendments and clauses in the Bill. We have done a thorough job of examining every clause and amendment in great detail. I thank every member of the Committee for giving up their time and diligently intervening and contributing to the discussion.

I also thank my officials in DEFRA, who have worked incredibly hard. The Bill is the first substantive piece of legislation on agriculture that we have had since 1947. It has been a huge piece of work. Finally, and by no means least, I thank the Clerks. We particularly tested their patience when changing the plan for evidence sessions at the beginning, but I hope that we have been less difficult since then. We are grateful for the time and effort that they have put in.

Photo of David Drew David Drew Shadow Minister (Environment, Food and Rural Affairs)

On that note, I particularly thank Mr Fox, who has been so helpful to Rob, who has done the Opposition work in detail. It is important that we put that on the record. Without the Clerks, Bill proceedings would not go very far, or if they did, they would go in completely the wrong direction. I also pay due regard to the many contributors to the evidence sessions, which were illuminating, and those who have given us ideas and interesting amendments. Some of them caused us a few sleepless nights in deciding whether to table them. They were all suggested in the right spirit, to try to improve the legislation.

Clearly the Government have a different view to the Opposition about how the legislation will progress, but we will see whether we can further improve it on Report, on Third Reading and in the House of Lords. It is good that the arguments have been had. Others will read them and see whether the proposals can be introduced in a different way, if not necessarily one with which the Government will wholeheartedly agree. However, given what happened today with the Finance Bill, we live in hope, and in the expectation that a degree of consensus is breaking out across the House. That is the way that good Government can operate.

On tenancy reform, I was pleased by what the Minister said. New clause 31 was a probing amendment, and the Minister knows where it was coming from. Changes are needed in this area. I hear what he said about repossession, which has always been a bone of contention in wider agricultural areas, because people do not necessarily just think in terms of those directly affected. It can unhinge a wider part of the countryside when people think that what has happened has not been done in the right way. It is important that we heard what the Minister said, and that we see some progress on that.

Without more ado, we have managed to complete consideration within the timeframe thanks to the good chairmanship of our two Chairs. I will not press the new clause to a vote, but I hope that, now it is on the record, we will hear early in the new year what form the necessary legal changes, which will presumably be made through secondary legislation, can take. We will of course scrutinise them in the right way and hope that they improve what is happening out there. We need good tenants with good tenancy legislation. British farming will be stronger because of that. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Amendment made: 43, in title, line 14, after “Agriculture;” insert

“to make provision about red meat levy in Great Britain;”.—(George Eustice.)

An amendment to the long title is required to cover the content of NC4 which is not covered by any of the other specific limbs of the current text.

Photo of Roger Gale Roger Gale Conservative, North Thanet

As everybody else has been mostly out of order for the last half an hour, I too will say a few words. Mr Wilson and I would like to express our thanks to the Clerks, the Hansard writers, who work extremely hard, and of course to the Officers of the House who look after us. Without all those people, our work would be much harder, if not impossible.

Finally, I thank the Committee for the courtesy and good humour with which proceedings have been conducted. At a time when courtesy and good humour are at something of a premium in other parts of the House, it has been a pleasure to come into an oasis of tranquillity in Committee Room 12 and see people behaving properly, as colleagues ought to behave.

Bill, as amended, to be reported.

Committee rose.