Agricultural Holdings (Fee) Regulations 2022

Baroness McIntosh of Pickering Excerpts

Tuesday 6th December 2022 Grand Committee

[The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)]

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.

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.

[Baroness McIntosh of Pickering (Con)]

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?

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?

[Baroness Bakewell of Hardington Mandeville (LD)]

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?

I believe that this is the right way forward and I support this SI.