Tenant Farming

Nigel Huddleston Excerpts

Tuesday 10th May 2016 Westminster Hall

[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?

[Nigel Huddleston (Mid Worcestershire) (Con)]

In my constituency, like my hon. Friend’s, many farmers are making huge strides in diversifying their incomes, whether through farm shops or holiday lettings. Does she agree that the short-term nature of some tenancy agreements inhibits such planning and diversification? Should the Government provide incentives for longer-term diversification in farms?

[Nusrat Ghani]

Absolutely. My hon. Friend is reading my mind—I hope to go on to that. For tenant farmers to diversify, which they have to in order to keep their business thriving, they need some assurances that they can reap the rewards of their investment in the land they take care of.

Will the Minister outline what steps the Government are taking to ensure that farmers have an incentive to diversify, so that they and the rural economy can benefit from new initiatives and enterprise? Also, how is he communicating the 25-year food and farming plan to local authorities, so that they may support tenant farmers and local businesses to survive?

In Sussex, in particular, the problem many tenant farmers face is that there is simply not enough land available to them. They want to expand, invest and diversify, but they cannot. Often, that is because they are out-competed by developers, who simply have more financial leverage with landlords. Understandably, those landlords are looking for the most profitable way in which their land can be sold. The most profitable way for the landlord, however, does not necessarily mean the most profitable way for the rural economy. Will the Minister describe the action the Government are taking to ensure an increase or, at least, to prevent a decrease in the availability of land to tenant farmers?

President Eisenhower of the United States once said:

“Farming looks mighty easy when your plow is a pencil, and you’re a thousand miles from the corn field.”

He was right, of course—it is easy for us consumers to take those who are striving in green fields for granted, and to expect a steady supply of meat, vegetables and dairy products at respectable prices. The food security of our country lies on their shoulders, and the role of farmers in Sussex and elsewhere in keeping food on our table in an unstable world is vital.

In January, my hon. Friend the Member for St Ives (Derek Thomas) led an important debate on food security in this Westminster Hall Chamber. He highlighted how, as the world’s population grows and with increasing unrest and conflict, as well as what may be considered fractured relationships between Russia, China and the United States, the ability of some regions to produce food that can be turned into affordable imports for us in Britain is not guaranteed. He also made the valuable point that every tonne we import is a tonne less that is available to other nations, which might not have the ability to produce as we can. So we must empower our farmers to produce, and not limit their capacity by withholding land, saddling them with excessive regulation or disincentivising them from diversifying and investing.

Views on the European Union within the farming community are mixed, but in my opinion the EU does itself no favours when it issues regulations about crop rotation and the size of a hedge to recipients of the basic payment scheme. Such regulations all cost time, money and effort, and do not help British farmers—already adhering to high standards—to achieve a competitive edge, especially when the basic payment scheme payments are delayed, as they have been. Furthermore, landlords are known to take advantage of the basic payment scheme: if they know what the farmer is receiving, they can put their rent up accordingly, meaning a higher charge for the farmer before they even start producing.

Today, I have focused on tenancy security, but tenant farmers face many challenges—tax issues and incentives, tenancy succession, encouraging new entrants with loan schemes, and the arbitration process are all causes for concern. Time does not allow me to speak about those concerns in any great depth, but they and the interests of tenant farmers should be heard. I am grateful for the opportunity to have contributed in a small way, and I hope that other Members will do the same now and in future.