My Lords, I beg to move that the draft Agricultural Holdings (Fee) Regulations 2022, which were laid before the House on 20 October, be approved. I declare my farming interests as set out in the register and point out that I am a member of the Royal Institution of Chartered Surveyors. I speak for England only. However, I highlight that we have worked closely with the Welsh Government on this instrument, and the same composite instrument was debated and approved by the Senedd on 22 November.
This Government believe in a vibrant and flourishing tenant farming sector. We believe that it is vital for the future of agriculture. A third of farmland in England is tenanted, with 14% of farms wholly tenanted and 31% of farms with a mixed tenure—that is, both owning and renting land. This variety in land tenure and the ability to rent land on a flexible basis is important as it enable tenants and owners to grow and adapt their farm businesses. It also provides a route into farming for new entrants, bringing new skills and ideas into the sector.
Many tenants and landlords work collaboratively and progressively to resolve issues that may arise during their tenancy agreement. However, sometimes, that is not possible. In those cases, our agricultural tenancy legislation enables either party to the tenancy agreement to apply to a professional authority to appoint an independent arbitrator to help resolve a dispute. It also enables the professional authorities to charge a small statutory fee to cover the administration costs of delivering an arbitration appointment service.
The current fee that can be charged for the appointment service was set in 1996 at £115. Inflation since then means that this level of fee no longer covers the costs incurred by the professional authorities in delivering the arbitration appointment service. The purpose of this instrument is to update the statutory fee on a cost recovery basis to £195 in line with His Majesty’s Treasury’s guidance, Managing Public Money. The increase was supported by 73% of the respondents to the Government’s consultation on this issue.
My Lords, I welcome the content of these regulations and thank my noble friend for presenting them. I pay tribute to the work of my noble friend Lady Rock and all those who contributed to the review that she conducted.
It is a little disappointing that my noble friend says that we will have a response only “in due course”. We owe it to the tenanted sector to have a response in real time and a date when that might be due. I regret that I cannot remember whether it is Agricultural Holdings Act 1986 tenancies that are for one year only or more, but I know that the Tenant Farmers Association has expressed concern that where a tenancy agreement is for only three or five years, it is simply not long enough for tenant farmers to make the required investment.
This is an issue very close to my heart. I grew up in an tenanted area in the Pennines where there are smallholdings—mixed farms with not a great deal of land. At one stage my brother and I farmed two fields, but I could not stand the excitement so he now farms them in his own right. My late father is no longer there to look after all the admin for us, so my brother is in sole charge as the owner of those two fields. These smallholdings are very dependent on spring lamb and stall cattle, that is bringing young beef on and fattening them up. Marts such as at Middleton-in-Teesdale, Kirkby Stephen, Thirsk and Skipton are very dependent on this.
I argue that, if anything, there will be more call on these advisers. I accept that there has not been a review for five years. It could be argued that the fee is almost double, but I think it is a reasonable level. No one has corresponded with me to say that they will not be able to pay this.
I understand that 60% of all land in England is farmed by tenant farmers. Certainly in North Yorkshire, where I was an MP for 18 years, 48% of the farms are tenanted. This is a very big sector, so I would like to press my noble friend by asking whether the fees will cover all eventual disputes in this area. For example, will they cover potential eviction from the tenanted farm if the fee could be used to be represented in an arbitration procedure?
My Lords, I thank the Minister for his introductory remarks on this statutory instrument. The essence of the instrument is to increase the fee charged when a dispute arises around a tenancy agreement between a landlord and an agricultural tenant. This is then referred to the Agricultural Holdings Act 1986 for arbitration where the fee is charged.
I note that the requisite fee has not been increased since 1996 and agree that it is necessary to set it at a realistic level. I also agree with the regulations and, I assume, the fee being on a cost-recovery basis, to be reviewed every five years. This seems sensible. The previous fee was £115; however, the proposed fee of £195 seems to have been set in 2019 by Defra. If that fee is intended to be on a cost-recovery basis, it is already three years out of date and inflation has not stood still in the intervening years.
The consultation undertaken by Defra received a favourable response, with 73% of respondents agreeing to the update and the proposed fee. The Explanatory Memorandum refers in paragraph 12 to the impact as “a relatively small increase”. This is somewhat true in that £195 is not a huge sum but it is, nevertheless, a 70% increase on the fee previously paid. If the fee were to go up by 70% every five years and be linked on a cost-recovery basis, those involved might not be quite so keen to agree to it.
Given that some holdings will have cross-border implications, can the Minister say whether the devolved Administrations are likely to be charging the same level of fee for arbitration as England? I was not entirely sure from his remarks whether that was the case. If not, and there is a difference in fees, that would cause some problems.
Lastly, like the Minister and the noble Baroness, Lady McIntosh of Pickering, I refer to the Rock review on farm tenancy. There is evidence that in some cases the slow rollout of the sustainable farming incentive grants has led to tenants being refused permission by their landlords to apply for this scheme. This may cause an increase in the numbers coming forward for arbitration. Can the Minister tell the Committee how many cases of arbitration there were last year and how many there have been this year? Are there sufficient staff in the arbitration service to deal with increased demand, if that should prove to happen?
My Lords, I thank the Minister for his introduction to what is, on the face of it, a fairly non-contentious amendment to the fees paid for the appointment of an arbitrator to resolve disputes or make certain records about agricultural tenancies under the Act that we have referred to. Other noble Baronesses have talked about the increase in the fees and whether it is still appropriate considering when it was set, so I will not go into detail about that.
I want to focus on the concerns raised by the Tenant Farmers Association about the increased costs that are in this SI, and about tenancy arrangements more generally. The TFA has said it is worried there has been a lack of contact between it and Defra, and the Secretary of State, around the report on the Rock review. The noble Baroness, Lady McIntosh of Pickering, has referred to this. She asked a question yesterday in the Chamber and the Minister basically gave the same response as he has today, which is that the Rock report is very interesting, the Government are benefiting from it, it is being reviewed and had lots of recommendations, and that they will report in due course. I think what we would all like to see is a little more information about what that looks like going forward. Clearly, it is a very important report.
I am sure the Minister will know George Dunn from the Tenant Farmers Association. He has raised some real concerns. If the Minister will bear with me, I would like to go through them because his response to these concerns is important. George Dunn says the TFA is objecting to these proposals, and he cites the recommendations of the Rock review, which expresses concern about the way in which agents operate in general and how arbitration is in need of oversight and reform. The report also highlights the need for a commissioner or ombudsman to oversee the operation of arbitration and the Tenant Farmers Association’s view is that this needs to be implemented, preferably before or alongside any decision to increase the appointment fee. I would be interested in the Minister’s response and comments on that proposal.
I am grateful for the noble Baronesses’ views on this instrument. I believe we all recognise the importance of the tenant farming sector and the need for tenants and landlords to have access to independent arbitrators to resolve any disputes when they arise. I also believe that it is right for the professional authorities delivering arbitration appointments to be able to recover their costs through an appropriate statutory fee. The improvements this Government have made, including widening the choice of professional authorities that tenants and landlords can go to and the introduction of a regular review clause, will drive continuous improvement in delivery of the service going forward.
I am actually someone who has attended one of these tribunals. I was a trainee at the time. It was in Wales. I remember being struck by one thing: the complete breakdown of the relationship between the landlord and the tenant. That is very rare. Mostly, there is a good working relationship. Where disputes occur—even the best relationships can be tested at times of rent reviews and suchlike—there needs to be a mechanism in place for this.
The only issue on which I differ from my noble friend Lady McIntosh is her feeling that we should have somehow given our response to the Rock review by now. That review has taken many months and was published just over a month ago. The Farming Minister, Mark Spencer, and I have spent many hours going through its nearly 80 recommendations. We also have officials working through them. I do not want to prejudge, but noble Lords will be pleased to know that many of them have “agreed” next to them, while there are also some where we need to do some more work. But with all that is going on—and to do my noble friend Lady Rock and her review panel justice—it is not possible just to publish a response that does not respect the work that has gone into the review and thoroughly respond to the important points it makes.
Motion agreed.
Committee adjourned at 5.44 pm.
Although I recognise that this increases costs for tenants and landlords, it remains a relatively small statutory fee that is necessary to sustain the continued delivery of an important independent appointment service. The costs of running the service include staff time to assess each application for the arbitration skills and knowledge required to make a relevant match with a suitably qualified arbitrator, as well as conducting the necessary checks for any conflicts of interest to ensure independence.
This instrument also updates the regulations in line with changes we made in the Agriculture Act 2020 to include a wider list of professional authorities that can now offer an arbitration appointment service. This now includes the president of the Central Association for Agricultural Valuers and the chair of the Agricultural Law Association, alongside the president of the Royal Institution of Chartered Surveyors. This means that tenants and landlords now have more choice between different service providers, which will help to drive continuous improvement in the provision of an efficient and quality service.
In addition, this instrument includes a new duty to review the regulations every five years. Reviews will be carried out in consultation with industry to check that the level of the statutory fee is appropriate and in line with cost-recovery principles.
I am aware of the recently published report on tenant farming led by my noble friend Lady Rock. It includes recommendations on the operation and oversight of dispute resolution. I thank my noble friend and members of the working group for producing this report. I welcome it and its focus on supporting a vibrant tenanted sector. The Government are considering its recommendations and will publish a formal response in due course.
I also highlight that the professional authorities delivering arbitration appointments have responded positively and proactively to requests for improvements. For example, the Royal Institution of Chartered Surveyors is in the process of implementing the recommendations made in the recent review by the noble Lord, Lord Bichard, to improve governance structures, deliver greater independence of its regulatory functions and focus on its public interest remit. In addition, the professional authorities delivering arbitration appointment services have transparent and high standards of professional conduct that they expect their arbitrators to comply with.
I hope I have assured noble Lords of the need for this instrument, which will ensure that tenant farmers and landlords continue to have access to the appointment of an independent arbitrator when they need it, funded by an appropriate statutory fee on a cost-recovery basis. I beg to move.
Similarly, the landowner may seek to take back the farmland if they wish to plant trees, for example. I know that my noble friend and the department are very keen on that but, from what we have seen in Cumbria and Wales, it is not always ideal to be taking land that has been actively farmed—particularly when our food supply chains are under pressure of being in an emergency situation, as we hear this morning, with the NFU calling on the Government to take urgent action in that regard.
My heart goes out to tenant farmers at this time. The fees proposed in this statutory instrument are affordable given the increase that the Government are seeking. I welcome the fact that there could be a five- yearly review; I think I saw that in paragraph 7.6 of the Explanatory Memorandum. Can my noble friend say in precisely which circumstances the fee would be applied and assure us that the tenants will have recourse to a professional authority in the circumstances that I outlined?
I believe that this is the right way forward and I support this SI.
George Dunn also says that the increase in the fee would land much better with his members if they had some sort of indication or assurance that Defra would be taking seriously the recommendations set out in the Rock review about the appointment of a commissioner or ombudsman with a role to look at the operation of arbitration. In addition, he comments that most of the costs associated with the accreditation, assessment, training and continuing professional development of arbitrators fall to the arbitrators themselves. He believes that the cost of using arbitrators already reflects increasing costs, as the arbitrators pass on those costs to the parties involved in the process. I hope that is clear. What is unclear is what costs RICS and others incur in the appointment process, because none of that is on the record.
It would be very helpful, ahead of any formal response to the Rock report, to know that Defra and the Minister were listening carefully to the concerns being expressed by the Tenant Farmers Association, so that we can work with it going forward to ensure this process works as it should and is effective. At the end of the day, that is what we want it to be.
To answer my noble friend’s other point, this instrument relates principally to the Agricultural Holdings Act, which is a succession tenancy law. There are of course many other types of tenure that can be the subject of disputes, such as farm business tenancies. My noble friend is entirely right that the best type of tenure is a long-term tenancy where there is a commitment to invest and improve. In extreme cases, some short-term tenancies have the effect of little or no investment and a lot of extractive activities, so the natural environment and natural capital involved in the farm are depleted. In most cases, longer-term tenancies are better, but we want to create flexibility for certain circumstances where, for whatever reason, for the landlord or the tenant’s advantage, there is the possibility of short-term arrangements.
Of course, there are many other types of tenancy; my noble friend referred to her family but it could be a grazing tenancy or many others. On our uplands we see how farmers work together with commoners’ rights, which also need to be respected. My noble friend is absolutely right that small farmers need to be supported. I believe passionately in that; I want to see coming through our transition in agriculture a real attempt to understand that small can be beautiful. Small farmers can adapt in a way that some bigger farmers cannot. Some of them will be able to access government support when they were not able to do so before. People who were not able to use the basic payment scheme will be able to access our environmental land management schemes.
My noble friend Lady McIntosh asked about the cases that could be taken to such an arbitration. I remember from my chartered surveyor training something called the “seven deadly sins”. One of them was the failure to pay rent. Another was poor husbandry, which is incredibly difficult to prove. There are a number of other issues that could go to arbitration. The Royal Institution of Chartered Surveyors reports that it receives an average of 195 requests for the appointment of an arbitrator each year. When you think how many thousands of tenants and farmers there are in this country, that is a very small percentage, but it is vital that they have access to a good arbitrator. About 25% of those requests come from tenants, and about 75% from landlords.
The Government recognise that farming is often a long-term business. We are interested in exploring ways of encouraging more landlords and tenants to consider longer-term tenancy agreements. I applaud organisations such as the Duchy of Cornwall, which, by and large, gives 20-year farm business tenancies; that kind of commitment is very valuable. As we transition to new farming systems, there will be more certainty and encouragement for landlords and tenants to enter into a longer term agreement.
There is also a role for industry leadership and best practice guidance in setting out the options and benefits for tenants and landlords of longer term arrangements. A tenant of a small family farm can request the appointment of an arbitrator for all circumstances, such as notice to quit on land resumption, where they have a case to dispute that, as well as for other matters such as tenancy compensation, maintenance and rent reviews. The thorny issue of tenant rights when a tenant vacates land is also sometimes the subject of dispute.
I think 70% over nearly 30 years is probably affordable. We will review it every five years, and I hope it will be considered on a cost basis. We came to the figure working with the CAAV, RICS and the Agricultural Law Association; we did not pluck it out of thin air. It is important that we keep this as a cost-recovery activity for the small number that use it. The noble Baroness, Lady Bakewell, made the point that it is three years out of date. After nearly 30 years, I do not think it is an unreasonable figure; in five years’ time, we shall see what it is like and how this is working.
I turn to the points very properly made by the noble Baroness, Lady Hayman. First, on lack of contact with the Tenant Farmers Association, nobody has more respect for George Dunn than me. The Tenant Farmers Association operates out of a village next door to where I live. He is somebody with whom I have had the pleasure of working. His contribution to the Rock report and to the welfare—mental, financial and in business terms—of tenants over many years is exemplary. It was a great pleasure to go to an event at the Farmers Club to celebrate a milestone in his commitment to the Tenant Farmers Association.
When we respond, soon, to the Rock review, I hope that he will feel that we have considered the points that he makes. I will not pre-empt that response by saying where we are on issues such as a commissioner. We will not agree on everything, but I state absolutely that it is the Government’s intention—the intention of my colleague Mark Spencer, the Secretary of State and me—that we see a vibrant tenanted farmers’ sector. As I said in the House yesterday, without it, the only way that people can get into farming is by buying land or inheriting it. We think it is vital that we see new entrants being able to get access to farming businesses. We have developed our exit scheme for those who want to exit the farming industry with dignity, and we are also working on a new entrants scheme, which will encourage skills, support and the availability of land for new entrants.
We hope to create more mobility within the sector; we can do that only if we have the right systems in place, the right tenure and, as and when issues result in dispute, a proper mechanism for their resolution. We think that that lies within this SI; it is a small part of it. We will be working with noble Lords as we develop the thinking in the Rock report and other measures in environmental land management to make sure that we are supporting farmers—owner-occupiers, tenants and the large number who are both. We have to recognise that they all have a place in our farming system. With that, I commend this instrument to the Committee.