HOUSE OF COMMONS
First Standing Committee on Delegated Legislation
DRAFT AGRICULTURAL HOLDINGS (FEE) REGULATIONS 1996
Tuesday 30 January 1996
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The Committee consisted of the following Members:
Chairman: Mr. Donald Anderson
Ashby, Mr. David (North-West Leicestershire)
Jones, Mr. Martyn (Clwyd, South-West)
Batiste, Mr. Spencer (Elmet)
Knapman, Mr. Roger (Stroud)
Boswell, Mr. Tim (Minister for Rural Affairs)
Leigh, Mr. Edward (Gainsborough and Horncastle)
Campbell-Savours, Mr. D. N. (Workington)
Lester, Sir Jim (Broxtowe)
Coombs, Mr. Simon (Swindon)
Madel, Sir David (South-West Bedfordshire)
Corbett, Mr. Robin (Birmingham, Erdington)
Pickthall, Mr. Colin (West Lancashire)
Corston, Ms Jean (Bristol, East)
Stevenson, Mr. George (Stoke-on-Trent, South)
Fenner, Dame Peggy (Medway)
Tyler, Mr. Paul (North Cornwall)
Golding, Mrs. Llin (Newcastle-under-Lyme)
Hendry, Mr. Charles (High Peak)
J. D. W. Rhys, Committee Clerk
Hodge, Ms Margaret (Barking)2 3 First Standing Committee on Delegated Legislation Tuesday 30 January 1996
[MR. DONALD ANDERSON in the Chair]
The Minister for Rural Affairs (Mr. Tim Boswell): I beg to move, That the Committee has considered the draft Agricultural Holdings (Fee) Regulations 1996. The purpose of the regulations is to increase from £ 70 to £ 115 the statutory fee for the appointment by the president of the Royal Institute of Chartered Surveyors of agricultural arbitrators, or persons to make a record of the condition of an agricultural holding. The draft regulations were laid before the House on 17 January and were considered and passed by the Joint Committee on Statutory Instruments on 23 January. A compliance cost assessment of the impact on the agricultural industry of the proposed fee increase was placed in the Library of the House on 17 January. It may be helpful if I first explain to the Committee that agricultural tenancies entered into before 1 September 1995 are subject to the provisions of the Agricultural Holdings Act 1986. The effect of that consolidating Act is that tenancies which began under previous legislation, such as the Agricultural Holdings Act 1948, fall within its scope. Tenancies under the 1986 Act are tenancies from year to year with lifetime security of tenure for the satisfactory tenant farmer. For tenancies created before 12 July 1984, two successive generations of close relatives may succeed to the tenancy. Under the provisions of the Agricultural Holdings Act 1986, certain types of dispute between landlord and tenant—most notably those concerning rent, the amount of compensation payable at the end of a tenancy and the terms and conditions of a tenancy agreement—can be referred by either party to independent arbitration. If parties cannot agree on a suitable arbitrator to settle the dispute, either party can, under the 1986 Act, apply to the president of the RICS for him to appoint one on their behalf from a panel of suitably experienced persons drawn up by the Lord Chancellor. The Act also provides that when parties cannot agree on a person to make a record of the condition of a holding, applications may also be made to the president of the RICS, although such applications are extremely rare. Similarly, under the Dairy Produce Quotas Regulations 1994, if parties cannot agree on a suitable arbitrator to determine apportionment of milk quota between all those with an 4 interest in a producer's holding, parties may apply to the president of the RICS for him to appoint an arbitrator to determine apportionment. Section 22 of and schedule 11 to the 1986 Act, provide that each application to the president of the RICS for the appointment of an arbitrator must be accompanied by a fee, prescribed by regulation. The Dairy Produce Quotas Regulations 1994 state that the fee for the appointment of arbitrators by the RICS to determine apportionment of milk quota shall be that which is prescribed for appointments under the 1986 Act.
Mr. David Ashby (North-West Leicestershire): Who keeps the money? Is it kept by the Royal Institute of Chartered Surveyors or the president?
Mr. Boswell: I am sure that it does not go into the president's private pocket. It is used to meet the costs of running the arbitration selection service which the Royal Institute of Chartered Surveyors conducts for us. In a previous debate, my hon. Friend the Member for Medway (Dame Peggy Fenner)—I am pleased to see her here—explained some of the costs which would have applied under the old arrangements, when the Ministry of Agriculture, Fisheries and Food did the job. That state of affairs was more expensive than the system that has operated under the Royal Institute of Chartered Surveyors for the past 10 years. I hope that that clarifies the point.
Mr. Ashby: I see that the regulations are to come into force on 1 March. Can we be sure that the president of Royal Institute of Chartered Surveyors will not hold up or question applications in order to get more money? Is that possible?
Mr. Boswell: I think it highly unlikely that he would do so. He is a professional, and the service has been conducted to the satisfaction of all parties during the time in which the Royal Institute of Chartered Surveyors has been responsible for it.
Mr. D. N. Campbell-Savours (Workington): I think that the Minister said that it costs less now. Am I misquoting him?
Mr. Boswell: May I clarify that point? If the hon. Gentleman wants to return to his question, he may do so. I said that the cost of the administration by the RICS, when the transfer was made under the tutelage of my hon. Friend the Member for Medway, was marginally less than our estimate at that time of what the cost would be if we had continued to administer the system through the Ministry of Agriculture, Fisheries and Food. As I recall—I have not the decimal point—the cost, had we retained the system under MAFF, would have been more than £ 73, whereas the actual statutory fee was set at £ 70. I hope that that clarifies the point.
Mr. Campbell-Savours: Is not the reality that many of those who are now in dispute actually appoint 5 lawyers? Lawyers can often demand fees of thousands of pounds to resolve difficulties that land agents previously resolved.
Mr. Boswell: If I may go on to the rest of my speech, I want to state that the fee is for the appointment of an arbitrator; it is not the fee paid to the arbitrator for conducting the arbitration. The Committee may be interested to learn that, in a previous capacity, I was a member of an agricultural land tribunal in the early 1980s. At that time, for the avoidance of doubt, we received no fee whatsoever for our services. On occasion we heard learned counsel, who were brought in at great expense, and I have to say that professional persons—be they land agents, professional arbitrators, lawyers, or otherwise qualified persons—do not necessarily come cheap. Their fees reflect the work that they perform. I shall now complete my analysis of the current situation. The current fee of £ 70 is prescribed by the Agricultural Holdings (Fee) Regulations 1995 and has been in place since 1 January 1986. That is the date on which the function under the 1986 Act of appointing arbitrators, and persons to make a record of the condition of a holding, was transferred from the MAFF to the RICS. The RICS agreed to hold the fee at the same level for at least five years from the date on which it was introduced. It estimated that 1,000 applications would be dealt with each year. Ten years on, because of increased costs being incurred by the RICS in providing the service, it has applied for an increase in the fee to £ 115, based on the average of about 550 applications a year. The intention is that the new fee will take effect from 1 March this year, as was mentioned by my hon. Friend the Member for North-West Leicestershire (Mr. Ashby). I should explain to the Committee that the fee paid to the president of the RICS is to cover the costs of making the appointment. The costs of the arbitration itself are an entirely separate matter and they may vary from case to case, depending on the complexity of the issue and the evidence adduced by parties in support of their case. A highly skilled professional service cannot be cheap. It is worth comparing the proposed fee with the fee for the appointment of commercial arbitrators by the RICS, which is currently £ 140 excluding VAT. The fee that we are discussing will be £ 115, and no VAT will be chargeable because it is a statutory obligation on the president of the RICS. I should also make it clear to the Committee that the statutory fee does not apply to applications made to the RICS for the appointment of an arbitrator under the Agricultural Tenancies Act 1995, which applies to agricultural tenancies entered into on or after 1 September 1995. That fee is not subject to statutory control, since the 1995 Act allows the president to determine a reasonable fee.
Mr. Campbell-Savours: How much is he charging them?
Mr. Boswell: I think that the essential point, if I read the hon. Gentleman's mind, is that the president 6 of the RICS has indicated that his interpretation of a reasonable fee for applications under the 1995 Act would be the same as that under the 1986 Act which we are now formally discussing because it is under statute. Officials in the Department have discussed the proposed fee in detail with officials at the RICS and have carefully examined the case that they presented. We have not taken it at face value. We have examined it. I am satisfied, having gone into it, that £ 115 is a fair and reasonable fee.
Mr. Martyn Jones (Clwyd, South-West): When the Minister was discussing a suitable figure with the RICS did he take into account the fact that the RPI has risen by 53 per cent. in the intervening period and the RICS is asking for a 64 per cent. increase in its fees?
Mr. Boswell: I took into account the fact that the figures were broadly in line. The RICS gave us an undertaking to hold the fee for five years in relation to the new proposals for the figure of £ 115 and so I satisfied myself that it was meeting its costs. Indeed, it originally applied for a somewhat larger figure and we satisfied ourselves that £ 115 was a fair and reasonable fee. I may add that this is only a small proportion of the professional fees that are likely to be incurred under a professional arbitation. It is of course open to parties to reach agreement and if they can they may either appoint a person themselves or go for a mediation procedure. But this is the fall back which arises under statute. We certainly satisfied ourselves that the costs to the RICS of providing the service have increased considerably since the fee was set in 1986, exceeding normal levels of inflation. Finally, the agricultural industry organisations have been consulted on the proposed increase; it was clearly right that that should happen and it has been widely accepted. Certain reservations that were expressed have been withdrawn. With that in mind, I have pleasure in commending the draft order to the Committee.
Mrs. Llin Golding (Newcastle-under-Lyme): May I first say, Mr. Anderson, what a pleasure it is to have a cousin in the Chair. I am sure that you will remain completely impartial. The tenant farmer is very important but is often forgotten. Indeed, there are more than 300 tenanted farms in Staffordshire, which is a lot of farms. It is the tenant farmer or the landowner who must pay the increased fees proposed in the regulations. Unless provision has been specifically made in the contract between the tenant and landowner for disputes to be settled by the president of the Central Association of Agricultural Valuers—and that is rare—the position under the Agricultural Holdings Act 1986 is that the Royal Institution of Chartered 7 Surveyors has a statutory monopoly on the appointment of arbitrators where landlord and tenant cannot agree an arbitrator. That monopoly also applies to disputes under the Dairy Produce Quotas Regulations 1994. From the point of view of the chartered surveyors it is a nice little earner—if the increase goes through they get about £ 63,000 a year for just creating a list and picking names off it—but from the point of view of the tenant farmers it is a source of great irritation. That is why the tenants committee of the National Farmers Union is opposed to paying the increase. It is not the size of the increase that troubles them. The issue for them is that they are being forced by the Government to deal with a closed shop, and one which is shrouded in secrecy. The tenants would like the freedom of choice. The Minister should be able to understand and sympathise with that. If they cannot have that, the tenants want to pay much less to be provided with the name of an arbitrator, to whom, after all, as my hon. Friend the Member for Workington (Mr. Campbell-Savours) said, they, or the landowner, must pay substantial sums, possibly running into thousands of pounds. Tenants would also like more openness in the manner in which the arbitrators are appointed. For the tenants, this is a closed shop which lacks transparency. The NFU would like to know how the Royal Institute of Chartered Surveyors selects arbitrators, what qualifications and training those arbitrators have and the criteria used for determining who are chosen as arbitrators. I understand that the list of arbitrators is held in the Lord Chancellor's office, but there is no readily available public information about how it is made up. I should be pleased if the Minister would tell me how people get on the list and how individuals are chosen from the list when an arbitrator is required. It is of course imperative for the parties to have confidence. The procedures for selection must be clearly seen to be impartial. The NFU itself would like the Central Association of Agricultural Valuers to be involved in statutory appointments and for its members to be included on the list. In other words, they do not wish to be subject to or pay for a secretive regime, which worries them. They are clearly right to demand a more open and frank approach. The tenant farmers are good citizens and they are entitled to a charter.
Mr. D. N. Campbell-Savours (Workington): May I put an original thought to the Minister? We are spending our time discussing an issue that is clearly important to some people and less so to others, depending on where they are within the industry. Would not it be better, if the Government are genuinely keen to pursue the principle of deregulation, simply to apply an increase according to 8 the retail prices index to all orders of this type across all Departments? I do not know how many regulations would be removed from the list—possibly hundreds for all I know. There may be all sorts of organisations turning up in Parliament asking for little measures such as this to be pushed through when the whole lot could be dealt with by an indexation measure. Perhaps the Minister will comment on that proposition.
Mr. Boswell: Perhaps I can add to the personal note struck by the Committee by reminding you, Mr. Anderson, that my wife was born in your constituency and has close associations with it. We may curry favour here equally, but none of us shall receive it. The debate has been good natured and interesting. The hon. Member for Workington made an interesting suggestion, and I shall ensure that it is drawn to the attention of my right hon. Friend the Chancellor of the Duchy of Lancaster, who deals with the citizens charter. Certain difficulties occur to me. If regulations are subject to large variations, it might be appropriate to change them more frequently than is the case with the regulations before us. As I have said, the RICS has agreed to freeze the fees. It may be better to have reasonable certainty than constant adjustment. I accept the hon. Gentleman's suggestion in the spirit in which it was made and I shall pass it on.
Mr. Campbell-Savours: The matter is not the responsibility of the citizens charter Minister. The Deputy Prime Minister is directly responsible for deregulation policy.
Mr. Boswell: I shall bring it to his attention and I am grateful for that correction. I share the sentiments of the hon. Member for Newcastle-under-Lyme (Mrs. Golding) about tenant farmers. I have had the privilege of representing them both politically and for the National Farmers Union. They are an important body of people who are sometimes neglected. I know that some of them sometimes have difficulties in dealing with landlords. That is incontestable. However, the best security for tenant farmers is the approach that we adopted in the 1995 legislation, which is that of the open bargain freely made with provision for such necessary safeguards or dispute resolution as may be agreed between the parties. That, to adopt the phrase of the hon. Member for Workington, is a measure of deregulation and applies to farm business tenancies under the new Act. The regulations are a reflection of the 1986 legislation, which consolidates the post-war regime and requires us to set a statutory fee for the service. The hon. Member for Newcastle-under-Lyme asked why we did not take the opportunity of, to use her phrase, demonopolising when the 1995 Act was going through Parliament. The Minister of Agriculture, Fisheries and Food, in moving that Act, made it perfectly clear that it was not his intention to interfere with the provisions of the 1986 Act in any material respect. It would have been a breach of those 9 provisions if we had made a retroactive alteration about the appointment of arbitrators under a statutory fees procedure. That is precisely why we did not do it. Equally, we would need to amend the legislation to facilitate the change that the hon. Lady suggested. I take issue with her on two points. The first is the implication that—she did not use the phrase, but I think that it is a reasonable summary of her concern—the arbitrators appointed under the procedure are in some sense landlords' narks or persons who will take a view that is not friendly to tenant farmers. There is no reason why that should be the case.
Mrs. Golding: I did not imply that. I said that the procedure was so secretive that no one would know whether they were landords' narks.
Mr. Boswell: I shall come to the second point, about appointments, in a moment. It is open to the president of the RICS to appoint such people from the panel as he feels are fit and appropriate. They may not even have to be from the institution itself, but they would have to be appropriately qualified. I noted the hon. Lady's concern about the manner of appointment. That is an entirely proper concern for the NFU tenants committee or others to take up if they wish. If they do so and they are concerned about openness, there are two proper avenues that they can follow. One is to go to the RICS and ask to know more about how it selects. The other is to approach my right hon. and learned Friend the Minister of Agriculture, Fisheries and Food and the Lord 10 Chancellor's Department. The Department holds a list of some 350 specialists. Neither I nor the RICS have any control over the formulation of that panel, which is the responsibility of the Lord Chancellor, as is the case for the appointment of judges and various other procedures. It is for that Department to satisfy itself and to be responsible for drawing up an appropriate panel. I have no evidence of any serious structural problem or of a great volume of complaint about the operation of the arbitration system in practice. Quite reasonably, hon. Members of all parties have expressed some concern about the cost of professional arbitration. It is expensive, and I understand their worries. It may be possible to obviate that if people are willing, for example, to agree on a cheaper mediation procedure or on the appointment of a single person to resolve their dispute, but if they require arbitration—which is their right—and cannot reach agreement, a suitable person drawing on a suitable panel must make an appointment, and that will incur certain costs. We are satisfied from the investigation that we have made that the present structure and its costs are reasonable. For that reason, I commend the regulations to the Committee.
Question put and agreed to.
That the Committee has considered the draft Agricutural Holdings (Fee) Regulations 1996.
Committee rose at six minutes to Five o'clock.
THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:
Anderson, Mr. Donald (Chairman)
Coombs, Mr. Simon
Fenner, Dame Peggy
Jones, Mr. Martyn
Lester, Sir Jim
Madel, Sir David