Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I am grateful for this opportunity to comment on the tremendous work that the noble Baroness, Lady Rock, and her team have done on the tenant farming sector, which plays such an important part in the agricultural provision of the country.
The Statement, given in the other place on 24 May, draws on the government response to the Rock review, which was published in October last year. The review itself was extensive and covered every area of the way that agriculture is conducted by tenant farmers, from relationships with landlords to tax systems. Tenant farmers are now firmly at the centre of the agriculture industry. I am delighted that Defra has proposed setting up a tenant farmers’ forum; that is excellent news. Tenant farmer voices need to be not only heard but listened to.
I read the Rock review, the government response and the Statement, and thought that the Statement was very thin on the detail of the government response and the review itself. The review splits its recommendations into two parts: those requiring immediate action and those taking place over a longer timeframe.
There are aspects of the government response that were good. First, the Government are ensuring that the various ELMS are easily accessible and open to tenant farmers; that is essential. Recommendation 1 gives details of how this could be achieved, including by ensuring that landlords are not able to block tenant applications. However, in terms of the SFI, it is true that tenant farmers have not rushed to take part. Can the Minister say what the Government are doing to rectify that situation?
Secondly, the Government are ensuring that Defra communicates with the tenant sector and that funding schemes are easily accessible to tenant farmers; that is important. Doing this through the farm tenancy forum is also important. Thirdly, they are continuing to invest in farm infrastructure through the farming investment fund by means of grants to farmers, foresters and growers, which will include tenants. Science and technology are moving at a pace; it is vital that tenant farmers have access to resources to invest in innovation. Is the Minister able to say how much of the £168 million in the FIF has been allocated to the tenant farming sector, and is this likely to be sufficient to make a real difference to the tenant farmer?
Other aspects of the response were not so encouraging. Requiring a longer period for implementation is the proposal in recommendation 6 for the appointment of a tenant farmer commissioner. This role would ensure that government policy is tenant-proofed. The commissioner would be able to examine and strengthen any dispute resolution processes. That was met by Defra with a call for evidence over the summer months. This seems to have been in response to industry lobbying with differing views, possibly from the landlord sector. That was disappointing, so I would welcome the Minister’s view on the appointment of a tenant farmer commissioner.
There were also a large number of recommendations, where the government response was to
“work with the … Farm Tenancy Forum”.
While that is exactly what they and the forum should be doing, it seems to me that the Government were pushing a disproportionate amount down to the forum. It would be better if they made a much more positive response to the individual recommendations in the Rock review in the first place.
The chapter on tax contained a number of recommendations, including recommendation 62:
“Reform Stamp Duty Land Tax to end discrimination against”
farmers. The government response to this and to recommendations 56 to 58 was to explore the potential for relief on tenancies of eight years or more and to work with the forum on solutions. Again, that was not as encouraging as it might have been.
In the other place, the previous Secretary of State raised the issue of the Law of Property Act 1925 and the Agricultural Holdings Act 1948, whereby landowners had a right to rent out their land. However, following lobbying by the banking industry, that was taken away through Section 31 of the Agricultural Tenancies Act 1995, which requires that they now need permission from a bank. The question was asked whether the Government had considered repealing Section 31. The Minister’s response was to look into the matter and get back to the right honourable Member. Given the length of time that has elapsed since the Statement was first debated, can the Minister update the House on whether this is likely to be considered?
Tenants, and farmers in general, are bogged down in measuring and monitoring what they do. Recommendation 68 calls for Defra to
“systematise the measurement, monitoring and collection of data on tenants and their involvement in schemes”.
This is not rocket science and it will make a tremendous difference to tenants and other farmers. The Government’s response was quite long and ended with:
“We will keep this question under review as part of our monitoring, evaluation and learning work, to ensure we have all the necessary evidence to inform ongoing policy review and development”.
So that was a no. The Government are obsessed with monitoring and evaluation; as the saying goes, you do not fatten a pig by continually weighing it. The noble Baroness, Lady Rock, has taken an enormous amount of time on this review and produced some workable recommendations which would enhance the lives and viability of tenant farmers. I am disappointed by the government response.
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
I thank both noble Baronesses for their welcome for the review, which I entirely share. I should refer noble Lords to my entry in the register: I am not just a farmer but a member of the Royal Institution of Chartered Surveyors.
I pay a real tribute to my noble friend Lady Rock for what she has done to ensure that tenant voices are heard at this key moment in our agricultural transition. It was entirely right of my right honourable friend George Eustice to commission her. The team she had around her did an enormous amount to help Ministers on policy, but also to give a voice to a very important part of our agricultural sector.
From day one of the agricultural transition, we have worked with tenant farmers as we have codesigned our farming schemes, utilising their input through our tests, trials and pilots to develop schemes so that they are accessible to all. But we are grateful to the review for highlighting some areas which we have taken action to ensure are accessible to tenants. We recognise how critical the tenanted sector is to a successful agricultural transition. When we commissioned the tenancy working group to carry out this comprehensive review, we were absolutely clear from the start that tenants must continue to be a very significant part of the occupation of land and the production of high-quality food in this country.
I will address the various points that the noble Baronesses raised, but not in any order—I hope they will forgive me. On the farming investment fund raised by the noble Baroness, Lady Bakewell, we have made productivity and capital grants, such as those available through the farming investment fund, available to both landlords and tenants.
There are over 70 recommendations in this review and many we have already delivered on, such as the very important point about sustainable farming incentive standards. We have three standards that were launched a year ago: they are the standards on arable and horticultural soils, improved grassland soils and moorland. We have announced six new standards for this year, which include hedgerows, integrated pest management, nutrient management, arable and horticultural land, improved grassland and low-input grassland. We want to make sure that tenants can access those, in many cases without landlords’ consent. That is an absolutely key point, but other measures are also available to them in such areas as countryside stewardship.
Some of the Rock review recommendations have widespread stakeholder support. There is less consensus on others and we want to make sure that we are getting it right, so asking for a call for evidence on whether having a tenant farming commissioner is right seems a good process to undergo before appointing one. However, we are open to the idea; I want to reassure noble Lords on that.
The noble Baroness, Lady Hayman, asked about the Farm Tenancy Forum. The current Tenancy Reform Industry Group is an ad hoc organisation that meets on an irregular basis to resolve particular issues. The Farm Tenancy Forum will meet quarterly; it will be co-chaired by my right honourable friend Mark Spencer, the Farming Minister; and it will have a remit to find solutions to various issues relating to the tenanted sector and feed back real-world experience and insight on progress. We are inviting industry organisations that represent tenant farmers, agricultural landlords and professional advisers who work in the sector to be members of this group. The forum will build on the valuable work the Tenancy Reform Industry Group delivered over many years. To explore the issue of a tenant farming commissioner in more detail, we will make an announcement this summer at the completion of the call for evidence.
We recognise that, in many cases, tenants and land agents—and I speak as somebody who qualified as a land agent—work collaboratively. The vast majority of the relationships between landlords and tenants is good. There are some bad cases, and the report highlighted the actions of some advisers that need to be addressed. I am pleased that the Royal Institution of Chartered Surveyors is looking at a new code of practice. That will build on work that has already been done by the CLA and the Central Association of Agricultural Valuers to make sure we are getting that right.
The government response recognises that the issue of restrictions in farm business tenancy agreements needs to be examined further to see whether those are a widespread barrier to tenants accessing new schemes. We have to remember that if we make dramatic changes to policy, we could stop the access to farming by this key group of people, because the incentives to landlords to let land will not be there. That has happened in other countries, and we want to make sure that the vibrant tenant farming sector exists because landlords are incentivised to let land and, once they have let it, farmers can get on and farm it, secure in the knowledge that they are going to be able to access the schemes and know they are not going to have what is known as unreasonable land resumption, which is basically the ending of tenancies.
I can speak from first-hand experience about the importance of the term of years of tenure. The report makes some really interesting comments about trying to incentivise landlords to give longer tenancies, and some of the tax reforms announced by the Chancellor—the Government are seeking evidence on them before making a change, and it comes under the Treasury and not Defra—are the sorts of things we will be promoting. What is clear is that as you get to the end of a farm business tenancy, the tenant has less and less incentive to invest—in buildings, in the natural capital that he or she is seeking to exploit—and nobody wins. To give them some sort of surety was one of the best points that was made in the review.
The noble Baroness, Lady Hayman, asked about new entrants, something vital to me and to us in Defra. On the one hand, we have given the exit scheme to allow farmers to exit their holdings with dignity and support from the Government. At the same time, we are putting in £1 million for access to special benefits by tenants as part of the development of the new entrant support schemes. We will involve tenancy industry bodies such as the Tenant Farmers Association to be part of the stakeholder advisory group. We will share data on the number of tenants that have signed up to the pilots, use the feedback we get from tenants to embed tenant farmer thinking back into policy design, and look to the extent to which new entrant support scheme pilots support people to gain new tenancies.
The biggest barrier to somebody succeeding in farming and getting through the door is a shortage of capital or skills. If you assist a new entrant in setting out a business case for a tenancy that comes available, how to talk to a bank and how to do a cashflow, their skills and enthusiasm will take on the rest. We have seen this happen, and I applaud so many good landlords for doing it. That is the experience of the Duchy of Cornwall, the Crown Estate and many others. Clinton Devon Estates is a great example of a really enlightened policy of trying to encourage new people into farming and bringing in new ideas, which is absolutely vital.
I am conscious that this is a long Answer; I was asked a lot of questions. On the tax recommendations, as I said, at the Spring Budget we launched a consultation to explore the extension of inheritance tax relief to include land in environmental land management schemes and ecosystem service markets. The consultation also explores the option to limit inheritance tax relief to let land out for a minimum of eight years. Since publication of the review, HMRC has updated its inheritance tax manual to help clarify the tax treatment of agri-environment schemes.
On the point about technology and the collection of data, this is not particular to tenant farmers: it is absolutely vital across the farming sector. Technology is our friend here. Someone with the scars on their back of IACS, going round with a measuring wheel and arguing on the phone with Defra—or MAFF, as it was then—about whether you had one-metre or two-metre margins, can now do it from satellite data or with their mobile phone. The collection of data has to be easy and sensible, and we need to incentivise people to do it. That will assist in so many areas of the governance of farming, not least the availability of land for tenant farmers. We want to make sure that that is happening.
The Earl of Caithness (Con)
My Lords, I welcome the Statement. I, too, thank my noble friend Lady Rock for her report. I do not agree with all of it—I expect that none of us does—but I agree with its general thrust.
I was interested in what my noble friend the Minister said about the farm tenancy forum. I am slightly worried that it will become a talking shop. How will it work with the proposal for a tenant farming commissioner? There will be a clash, and one will get a bit sidelined.
Woodland is an important but hugely tricky area. Woodland is generally excluded from an agricultural tenancy, but hedgerows are not, and the hedgerows are as good at absorbing carbon as the woodland. I hope the Government will be able to devise a way forward whereby tenancy agreements can be altered to allow tenants to have bushier, wider hedgerows and plant trees in them without breaking their tenancy agreement.
Can my noble friend explain a bit more about what the RICS exercise is all about? I declare an interest as a former agent. There are indeed some bad agents, but there are bad landlords and bad tenants, and some pretty awful politicians. It happens in every trade, and I was slightly disturbed by my noble friend Lady Rock’s generalisation about how bad agents are. Agents only do what the landlord or tenant tells them to do. This will be particularly concerning in future as more and more firms that have absolutely no interest in agriculture buy up land in order to get carbon credentials into their portfolio and instruct their agent to do exactly what they want. Some accountant in Croydon will be crunching the figures and, unless the agent performs, he will be sacked. Can my noble friend tell me a little more about that?
Underlying the whole of this landlord-tenant relationship is the worry about what a future Government would do. The Labour Party, and indeed the Government, with the levelling-up Bill, are committed to buying land from landowners at below market value. If that continues, landlords will be very wary of letting any land to tenants in future.
Lord Benyon (Con)
I am grateful to my noble friend. One of the greatest criticisms of the Tenancy Reform Industry Group—I pay tribute to the many hours many people sat on that organisation—was that it was a talking shop. People did not feel they were being listened to, and it was a way of getting off their chest concerns they knew existed. We want to make sure that the new forum is not that; that it is executive and has a snap to it. As I have said, it will meet every quarter and the Farming Minister will be one of the co-chairs. Its remit and the determination to keep it close to Ministers shows that it will be more than that.
My noble friend makes valid points about trees and hedgerows. We have published guidance on how tenants can approach tree planting and woodland schemes such as the England woodland creation offer, and we have made sure that both the tenant and landlord will need to agree to any EWCO proposal on tenanted land. I do not think that is wrong—it is absolutely right that if a major change in land use is being promoted, the landlord’s interests matter. If they do not, it will be another incentive for landlords not to let land, or indeed to bring to an end a letting arrangement when a farm becomes available and take it in hand. We want to make sure we are still providing the incentives.
My noble friend is entirely right about hedgerows. That is why we have published our new hedgerow standard as part of the new six standards for the sustainable farming initiative. But he is absolutely right that a hedge no higher than this table does not really achieve very much in terms of carbon and biodiversity. If it is much wider, much higher and preferably has an unploughed, unfarmed cultivated headland, it will be immensely more important.
My noble friend is absolutely right, of course, that a lot of agents are excellent people—I think I was when I was one—but we should not create legislation around trying to put everybody in the same boat as the bad ones. Agents are undoubtedly advising their clients as to what is best for them to secure their interests for the future and the future generations of their family. That is why we want to see the kind of changes we are making to inheritance tax, which give the incentive to landowners, on the advice of their agents, to do the right thing and encourage that. I have received inspiration from my colleague, the Minister. I might have misled the House. He is not the co-chair but, importantly, he will attend every meeting of the tenants’ forum.
Lord Cromwell (CB)
My Lords, I did not intend to speak this evening, but apart from sharing the noble Lord’s scars of IACS from the past—he has my profound sympathy—I declare my interest as a shareholder in the family farming company. I will make two points. One is that well-intentioned changes can produce unintended consequences. I am not going to get into the details of hedgerow widths or heights tonight, but simply say that history shows us you cannot force landlords and tenants to have a happy, long-term relationship. It is based on trust, performance and mortality—people die, people get ill and things move on. You cannot oblige people, any more than you could in any other relationship, to stay together if it is not working.
Secondly, on introducing taxation in this form, if you make it obligatory to have an eight-year tenancy or you do not get tax relief, the answer will not be eight-year tenancies; it will be no tenancies, because no landlord in their right mind will be tied down in that way. They will simply take the land in hand and contract-farm it. We have had tenants farming with us for whom we have run back-to-back short-term tenancies for years and years, because we have a relationship of co-operation and trust. However, if the law obliges us to enter a multiyear relationship in which they can change the land use entirely, those tenancies will simply come to an end. The tax system should not interfere in what are fundamentally human relationships between people trying to work together in their mutual interest.
Lord Benyon (Con)
The noble Lord speaks an awful lot of sense. To an extent, it is impossible for government to be perfect here because, as he says, we are dealing with human relationships. Government should create the right incentives. We are talking about a business relationship. There are so many different types of tenure in this country—owner-occupier, tenancies under the Agricultural Holdings Act 1986, farm business tenancies under the 1995 Act, graziers, contract farmers, share farmers and multiple graziers on commons. The complications of trying to create a farming support system that can be accessed by them, particularly in areas such as Countryside Stewardship, are really difficult, but it is vital that they are there.
The noble Lord is absolutely right that, if we get this wrong and government tries to impose things that the market does not want, we will end up getting the worst of all possible worlds—people we want to see on the land not on the land. We want to make sure that we keep this vibrant, diverse form of occupation and use of land, which requires landlords and tenants to work together for their mutual benefit and for the societal benefit of us all, through the use of our vital natural capital, which will deliver many more wider societal benefits.
The Earl of Leicester (Con)
My Lords, I declare my interests as a landowner with a number of tenants, as a farmer and as an agricultural contractor. I too welcome the excellent Rock review, but I quite understand the Government not accepting all 70 recommendations. Some of the proposals in the review have the potential to harm confidence in the tenancy industry. While they may enhance the interests of existing tenants, they would reduce the land available to new tenants. We must remember that tenancy is not the only entry into agriculture; there are share farming arrangements and a lot of young people start off as contractors and build up as they increase their capital. Can my noble friend elaborate on inheritance tax and on how longer tenancies, with regard to planting of trees et cetera, might affect inheritance tax for landowners?
Lord Benyon (Con)
I thank my noble friend; his experience is really important in this debate.
I do not know that any report that has so many recommendations has been accepted in full by any Government, but we think the vast majority of these recommendations are really good. Some of them, such as the inheritance tax point, is one where we think we need to do more work. Government does not exist in an ivory tower; that is why we commissioned this call for evidence, which closed on Friday. We want to explore more ways to encourage more landlords and tenants to consider a longer-term tenancy agreement while retaining the flexibility that farm business tenancies currently provide.
As we transition to new farming schemes, there will be more certainty and encouragement for both landlords and tenants to enter into longer-term tenancy agreements and we are designing our new schemes to be accessible to as many farmers and land managers as possible. As I said earlier, at the Spring Budget the Chancellor launched this consultation to explore the extension of inheritance tax relief to include land in environmental land management schemes and this consultation will also explore the benefits and impacts of the Rock review recommendation to limit inheritance tax relief to land let out for a minimum of eight years and analyse further what impacts that would have on the length of a tenancy agreement. A number of noble Lords made the very good point that if one goes about this in the wrong way, one achieves a perverse outcome, which is that fewer landlords are incentivised to let land and we suffer because our tenure becomes less diverse and less accessible to new entrants.