Tenant Farming

Debate between Nusrat Ghani and Antoinette Sandbach

Tuesday 10th May 2016 Westminster Hall

[Nusrat Ghani]

My hon. Friend is absolutely right. I will come on to that point later. Flexible tenancies and good relationships between landlords and tenants are absolutely key.

The big problem for tenant farmers is that the negotiation of tenancies is key, but they have little leverage over it. Farming is a long-term process that needs capital investment, patience, good soil management and the ability to balance the profitable years against the bad. Most recently, that problem has affected farmers in the dairy industry.

[Antoinette Sandbach (Eddisbury) (Con)]

One of the big issues obstructing young entrants into the market is the longer tenancy agreements. Does my hon. Friend agree that shorter agreements allow new entrants—particularly those under 40—into market?

[Nusrat Ghani]

My hon. Friend makes an interesting point. Tenancies need to be flexible but, if a tenant farmer wants to explore their industry and their business, they need the opportunity to extend their tenancy. Farmers can struggle if their tenancies are short; those things are not facilitated by short-term tenancies. I referred to the Government’s welcome move to extend tax averaging from two to five years, but it is odd that that example of good Government policy is undermined by and inconsistent with tenancy terms, which are, on average, shorter than the period allowed for averaging farm profits. Similarly, many tenants cannot even begin to think of the Government’s 10-year countryside stewardship scheme. What is the point when they cannot guarantee being there for the length of the scheme?

At the moment, landlords can offer short terms for high rents at little risk to themselves, but they leave the tenant in endless uncertainty and hold back investment and long-term sustainable land use. Such tenancies can be particularly difficult for livestock tenant farmers, who see limited returns. I spent a morning with my constituent Elizabeth Buchanan of Black Ven Farm in Nutley, testing for tuberculosis—I assure hon. Members there is no TB on her farm—and she said to me:

“It encourages short-termism of the worst sort.”

I tried to get other quotations from tenant farmers in my constituency, but they were concerned that raising them in the Chamber might reflect badly on their landlords. That is an issue as well.

Some have argued that legislation to impose long-term security on tenancies is the answer. As a free-market Conservative, I do not wish to see that kind of imposition, but we should not be afraid of providing incentives for longer-term tenancies. Landowners get 100% agricultural property relief from inheritance tax if the person who owned the land farmed it themselves, or if it was used by someone else on a short-term grazing licence, or if it was let on a tenancy that began on or after 1 September 1995—after the introduction of the farm business tenancy. For all other landowners, the level of relief is set at 50%.

What if we restricted the 100% relief to landlords who let their land for five years or more, or perhaps even 10 years or more? There are obviously disadvantages for landlords in doing that, despite the advantages for the tenants, so we could offer them something in return. For example, we could give landlords who are willing to let for a longer term the ability to declare their income as trading income for tax purposes and easier mechanisms for ending tenancies if there is a breach of contract. Other alternatives include reforming stamp duty land tax, which currently disincentivises landlords from offering long-term tenancies, to end the discrimination against such tenancies.

The Conservative party, which I and the Minister are proud to be members of, often talks about its long-term economic plan. Will the Minister tell us what discussions he has had with tenant farming representatives and the Treasury on the possibility of making the changes I have suggested? How will those issues be dealt with in his Department’s upcoming 25-year food and farming plan? Let us make the long-term economic plan a reality in the farming industry and incentivise long-term tenancies to promote investment and economic security.

I am delighted to be a parliamentary representative for the Conservative rural affairs group, alongside my hon. Friend the Member for Taunton Deane (Rebecca Pow). I recently spoke to Richard Haddock, who has just departed as chairman of the group. He said that we must work harder

“for the working farmer, not the landlords, because the landlords have the asset of the land and can borrow against it. If a tenant farmer wants to diversify, he does the work and takes the risk, but the landlord still takes the cut.”

The farmer increases the value of the landlord’s asset, but is often cheated out of many of the rewards that are owed to him.

A couple of weeks ago, the Prince’s Countryside Fund released new research showing that half of UK farmers no longer make a living from farming alone. They have to diversify to make their businesses sustainable, but diversification is a risk. Why would they take that risk if they do not know how long they are going to stay on their land and are at risk of eviction once their tenancy lease is up—especially if the landlord takes a cut from the diversification enterprise?

--- Later in debate ---

[Antoinette Sandbach (Eddisbury) (Con)]

I draw hon. Members’ attention to my entry in the Register of Members’ Financial Interests, which indicates that I am both a landowner and a farmer. I held the shadow rural affairs brief in Wales for four years and now represent my wonderful constituency of Eddisbury, which has a high proportion of dairy farms.

The important word that my hon. Friend the Member for Wealden (Nusrat Ghani) mentioned was “flexibility”. I am sure that she will remember the days of the Agricultural Holdings Act 1986, when tenancies were inheritable from generation to generation. As someone who was involved with an Agricultural Holdings Act tenancy and saw the lack of investment—the second-generation farmer in that case was not farming the land at all; in fact, he had full-time employment elsewhere—I am sure that my hon. Friend would not want to see the abuses of the system that occurred under such tenancies.

It was for that reason that flexibility in farm business tenancies was introduced. That flexibility led to an additional 100,000 acres of land coming up for rent. That is important; in fact, from my experience in the last five years, the biggest constraint on tenants has been rent levels. That has been the biggest pressure on the system, not the length of tenancies. In fact, a very short tenancy can offer flexibility to someone who wants to expand for the short term or to a landowner or neighbouring farmer who has spare capacity because of either disease or a change of farming method. Such tenancies allow people to offer land to a neighbour on a short-term basis and give the system important flexibility.

In my experience, many landlords, if they are asked by tenant farmers, will actually sign the indemnities that allow those tenants to claim under the higher level stewardship scheme, on the basis that they will be reimbursed. It then becomes the landlord’s risk, but if they have a good relationship with the tenant, they are likely to do that. My hon. Friend’s speech did not recognise that there is a difference between good landlords and bad ones. A farmer who is interested in their land, who wants flexibility and who wants to encourage people to come forward will want a good relationship with their tenant. That is the best way of producing a good outcome for both the tenant and the landlord.

That is the very flexibility in operation in the farm business tenancies system. For example, a farmer may die, his widow may not have short-term arrangements in place and the children may have to return to take on the farm. The flexibility in the farm business tenancies system allows that approach; it is not there in the kind of long-term tenancies that my hon. Friend proposes.

[Nusrat Ghani]

My hon. Friend is absolutely right: people tend to come to us as Members of Parliament with problems rather than to say that things are going well. I have some fantastic landlords in my constituency, but I held a number of meetings at which tenant farmers said they felt they did not have the right support to negotiate longer-term tenancies; they felt uncomfortable about raising that. I am here today because they do not have the time, capacity or energy to lobby that the big farmers would.

[Antoinette Sandbach]

I would advise those tenants to speak to the Tenant Farmers Association, which is effective at representing its tenant farmers, as well as to the NFU and other organisations, who also provide effective representation.

I plead the cause of young farmers in particular. It is a big risk for a landowner to take an unproved tenant under 40, who may not have had their foot on the ladder before, on to their farm for a 10-year tenancy of the type that my hon. Friend argued for, but it is vital to encourage younger entrants to come forward. They have bright ideas and they want to progress, but that is a risk. The danger of the course of action that she proposes, with longer-term tenancies, is that innovation and support is stifled because the risk is too great. A 10-year commitment is also a great risk for the tenant, who will have that liability for 10 years.

My hon. Friend is in effect arguing for better representation in negotiations rather than reducing flexibility in the system. I say to the Minister that for tenant farmers in my constituency the real pressure in the system comes from the level of rents and, in particular, what has happened to dairy prices. I certainly saw livestock farmers priced out of the market when milk prices were high because high levels of rent were being asked for relatively small parcels of land, which prevented some getting on to the ladder in the livestock sector. I experienced that in north Wales and there are also high levels of rent in Eddisbury. That, rather than flexibility, is the real issue.

Diversification has risks associated with it, but again a good landlord will want to encourage a positive relationship with their tenant and the tenant will want to have a positive relationship with their landlord. When that works, there can be some really good, productive, experimental diversification programmes.