Tenant Farming

Nusrat Ghani Excerpts

Tuesday 10th May 2016 Westminster Hall

[Nusrat Ghani (Wealden) (Con)]

I beg to move,

That this House has considered tenant farming.

It is a great pleasure to serve under your chairmanship, Mr Hollobone. I am grateful for the opportunity to lead this debate.

As hon. Members know, tenant farming is an agricultural system in which a landowner contributes land and perhaps some capital and management, and the tenant contributes labour and the remaining capital and management. It is an important part of the agricultural industry. In my county of East Sussex, it is estimated that there are more than 35,000 hectares of tenanted land. One in three farms throughout the country are tenanted, and between 20,000 and 25,000 farmers are wholly or mostly reliant on tenanted land.

Two organisations fight the corner of tenant farmers—the Tenant Farmers Association, whose national chairman, Stephen Wyrill, is in the Public Gallery, and the National Farmers Union. I thank both for their assistance in preparing for this debate. The Government are also proud to fight the corner of tenant farmers. They have a proud record of putting in place policies to help the farming community. I want to note two in particular: first, my right hon. Friend the Chancellor’s announcement that farmers will be able to average their income over two to five years for tax purposes, which is very welcome and helps rural businesses to survive in difficult seasons; and, secondly, the recent decision by the Department for Environment, Food and Rural Affairs to agree to move forward on recommendations to draw up a mental health strategy for the farming industry in Britain. Farmers can face immense strain, as they have to contend with the difficulties of business and climate, and they often work very long hours in isolation. It is right that proactive measures are put in place to ensure their mental wellbeing as they cope with those pressures. I congratulate the hon. Member for Upper Bann (David Simpson) on his leadership on that issue.

There is always more to do, and that is the case with tenant farming in particular. Over the past couple of years, one theme that has emerged consistently in my discussions with tenant farmers across Wealden and the organisations that represent them is the length and security of tenancies. The Agricultural Tenancies Act 1995 introduced farm business tenancies to the industry. The measure marked perhaps the most comprehensive deregulation of the agricultural let sector in its long history. Farm business tenancies are extremely widespread, although there is scepticism in the industry about whether they have helped or hindered. High rents, limited security, stretching repairing obligations, which are key to keeping businesses thriving, and other liabilities are commonplace and do little to limit the stress and instability that naturally come with farming.

The majority of tenancies run for fewer than five years, and independent surveys report that the average is less than four years. That does not give tenant farmers the security they wish for.

[Scott Mann (North Cornwall) (Con)]

Does my hon. Friend agree that agricultural landlords should develop lasting relationships with tenant farmers through long-term flexible tenancy agreements in areas such as North Cornwall and Wealden?

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[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?

[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.

[Mr Philip Hollobone (in the Chair)]

The debate is due to finish at 4.30 pm. The recommended time limits for the Front Benchers’ speeches are five minutes each for the Scottish National party and Her Majesty’s Opposition, and 10 minutes for the Minister. Two Members are standing and have caught my eye, the first of whom is Jim Shannon.

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[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.

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[Nusrat Ghani]

I thank the Farming Minister for his response. I thank my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston) for talking about diversification. Farmers do much more than till the soil on their land, and they have to diversify their businesses. I also thank the hon. Member for Strangford (Jim Shannon). I do not think that a debate could take place in this Chamber without his support or intervention, and his passion was a delight to hear. To my hon. Friend the Member for Eddisbury (Antoinette Sandbach), I say that I am not proposing that we legislate for longer- term tenancies. What I want us to do—I think that the Minister alluded to this—is to incentivise landlords to offer longer-term tenancies, and make it easier for tenant farmers to try to negotiate those better deals. Quite often we talk about the importance of food security, but we do not offer support for the farmers who are providing that.

I thank the Minister for his comprehensive response. I now need to move on and speak to the Treasury, but my local tenant farmers will be reassured by some of his comments today. I would also like to place it on the record that I have been a Member of Parliament for about 11 months and every time I have approached the Farming Minister, he has made himself available. We have had two very large meetings with the Conservative Rural Affairs Group, and he is due to meet members of the East Sussex farming business community, who will no doubt pick up all the points that he has not covered in this debate. I hope that they will challenge him and push him even further.

My final point is that I come from a delightful constituency, with a huge number of landlords and tenants farming, but I feel that there is some nervousness about raising the concerns of tenant farmers who are not new entrants into the market. They are not young people; they have been farming for quite a while and they struggle to move their business from site to site. I would like to work with the Minister on ensuring that we can provide them with as much help as possible.

Question put and agreed to.

Resolved,

That this House has considered tenant farming.