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Madam Deputy Speaker: Order. Time is up.
8.23 pm
Mr. Peter Viggers (Gosport): Nearly all those damaged by the BSE tragedy either have a breadth of business that enables them to mitigate their loss, or will be eligible for compensation. I want to speak briefly about a small sector of the meat processing industry that has neither of those advantages. It has nowhere else to turn, and it is not currently eligible for compensation. I refer to the cow head deboning companies, of which there are about 12 in this country. Their business has been eliminated by the Specified Bovine Material Order, which came into effect on 29 March this year. My constituency contains one such company, Pinnacle Meats. It employs some 25 people. If I refer to that company, it is because it is typical of the dozen or so companies that make up the industry.
Pinnacle processed about 300,000 cow heads a year, and provided an essential, steady and reliable service for abattoirs. The process of deboning involved the removal of the cheek meat, most of which went into beefburgers, sausages, meat spreads and so on, but which was quite a delicacy. Pinnacle exported 10 tonnes of cheek meat a month to France, a business worth about £15,000 a month.
The industry has always been controlled in terms of health and hygiene, as part of the food sector, but in recent years BSE problems have caused MAFF and the European regulators to impose a strict and specific series of controls. When the trade was permitted, before March, cow heads were collected from abattoirs under strictly controlled temperature conditions; at every stage, temperature and cleanliness were vetted and recorded. The quality of meat was graded on arrival at the deboners' premises, and there were controls to ensure that the paths of the raw material and the product did not cross. Everything was recorded by a process control report, which was checked, regularly and irregularly, by MAFF officials. Record keeping by the companies had to be meticulous, and available for inspection at all times. There was a daily audit of stocks.
The premises and companies had needed an EC cutting plant licence since 1992, and a cattle head deboning licence from MAFF since August 1995. I am told that this is the only part of the meat trade that required a special licence of that nature.
Such were the controls on the business that companies in the trade needed to buy special equipment. Pinnacle Meats moved to new premises in 1992 in order to build a purpose-related plant, at a total cost of about £300,000. The floor had to be epoxy resined; also needed were special wall cladding, metal detectors, code-printing weighing scales, vacuum-packer conveyor systems and a scissor lift to enable the product to be loaded directly into a specially designed bay.
The whole of that business has now been destroyed by the order to which I referred earlier. It is now deemed that the whole of the heads of cattle constitutes specified bovine material. It is not the head meat itself that is thought to be dangerous; imports are still allowed. What is feared is the risk of contagion at abattoirs. No one suggests that anyone in the cow head deboning industry has been at fault in any way.
The worth of the industry has been assessed at about £11 million. I refer to a compilation by Price Waterhouse of the total value of the industry that has been wiped out. There has also been an informal valuation of the cost of
meeting the European regulations at about £2.17 million. It may be asked why the head deboners do not turn to other business. The answer is that they cannot. They were small, specially designed meat processors, working with special equipment and able to stay in business only because the margins on that modest business were higher than in the rest of the meat industry. Head deboners worked on a margin of about 10 per cent., whereas the margins of the rest of the meat processing industry are tiny--typically 0.5 per cent. to 1 per cent. The plants can tolerate that because their turnover is huge.
It would be impossible for the head deboners to turn their hand to less specialised fields, because their equipment is unsuitable. For instance, Pinnacle has a blast freezer with a capacity of 30 tonnes a week, which is minuscule by the conventional meat processors' standards. The deboners are out of business, and it is impractical for them to switch to another part of the meat industry. Their only hope is compensation.
Typically, the companies are family owned, and in most cases the proprietors have borrowed against their houses to buy the equipment that is needed to meet the European regulations. Therefore, now that they have been driven out of business, they face ruin and bankruptcy. It is grossly unfair that such hard-working people, who have done nothing wrong, should face such problems.
There are possibilities of compensation. A legal claim is possible under article 1, protocol 1, of the European convention on human rights. I am informed that Lord Lestor, who is a QC, has advised that the companies have a good case for compensation but that it would take years to be heard. Objective 5a of the European Union structural funds, which is used to speed up the adjustment of agricultural structures, may be invoked. The UK, with impeccable timing, decided in 1994 that it would contract out of that objective with effect from 31 March this year. There is no reason why the UK cannot make a further request to opt back into it.
The question is asked whether compensation would set a precedent. The Library, with its usual skill, has produced the answer that the only precedent of companies being driven out of business by a Government order were those producing oral snuff and repeater rifles, although they were only a small part of the overall business. I do not know of a case in which an industry has invested to meet tight Government criteria, only to be wiped out overnight by a Government order. It must be possible to devise a compensation scheme that does not set a precedent for others.
Mr. Cynog Dafis (Ceredigion and Pembroke, North):
The hon. Member for Gosport (Mr. Viggers) mentioned just one category of the industry that has suffered the terrible side effects of the BSE crisis. I can think of a number of examples in my own constituency. A producer
Welsh farmers are deeply unhappy. They are sceptical of the Florence deal and of the cumulative negotiations of recent weeks. What estimate has been made of the impact on the dairy industry in south-west Wales--it used to be called Dyfed--which is an enormously important milk area? What estimate has been made of the impact of the slaughter of a large number of milking cows in the accelerated scheme? Those animals will be at the peak of their production at the time they are slaughtered. What estimate has been made of the future for milk production? What percentage of the dairy herd is likely to be lost? What effect will there be on the milk processing industry and associated activities?
I hope that I am right in assuming that the Secretary of State for Wales has commissioned a study of those issues and will give urgent consideration to reconstructing dairy herds and rebuilding the processing industries. Will compensation amount to the replacement value of herds, not just the market value? Will there be a payment for commercial loss? That is the only basis on which farmers can reconstruct their herds. South-west Wales has already seen the closure of the Whitland creamery as a result of the disgraceful decision by Dairy Crest to make that facility available for sale. That closure is costing about£1 million a year in transport to carry raw milk out of the area. It would be intolerable to lose more processing capacity as a consequence of the accelerated slaughter scheme, on the basis of an eradication programme for which there is no scientific evidence.
The second aggrieved group are producers of beef under 30 months old. The Government's recent decision to reduce the supplement for cattle more than 30 months old to 15p a kilogram has been justified by the disparity between the total payment producers are receiving and the market price for beef animals younger than 30 months. The Farmers Union of Wales and other organisations argue, with every justification, that the remedy is to raise receipts from animals under 30 months by producing a deficiency payment scheme. Current losses are severe and, unless something is done, many producers will be driven into bankruptcy. We cannot afford a loss of holdings and a permanent reduction in the number of farmers. I shall not go into all the arguments why such a loss cannot be suffered at this time, but I do not accept the fashionable view that a further reduction in the agricultural population is inevitable and even necessary.
The third aggrieved category is a small sector in the Welsh livestock industry, whom we hope will qualify for the quality beef assurance scheme. How many producers will qualify for that scheme in Wales? The number affected is relatively small, but the injustice of their predicament should be addressed. That question raises the wider issue of the tragedy of the 30-month rule, which will provide an incentive for intensive patterns of beef production at the expense of extensive production when the industry ought to be moving in the opposite direction. The BSE crisis has demonstrated the perils of intensification and the relentless drive to increase productivity per animal and per worker at any cost--growth for growth's sake. The Countryside Commission was reported in the Financial Times as saying that the BSE crisis could force many smaller beef farmers out of business or that financial pressures could force them to produce more intensively. The commission stated:
The Royal Society for the Protection of Birds stated in the same article that the crisis could put back its campaign to encourage mixed farming if farmers abandon the livestock sector. It is suggested that the Government intend to find the £1 billion or more required to pay compensation by cutting environmental programmes. I am sure that the Government will grasp the opportunity to deny that benighted approach. We should be encouraging what the French call biological farming, which takes the form of low-input, extensive and sustainable patterns of agriculture.
For environmental reasons, and bearing in mind the problem of feeding an expanding global population, with little prospect of doing so at this time of increased food production, the conversion of grain into meat through intensive systems should be discouraged. The production of meat from grass should increasingly be seen as the norm and something for which to aim. One tragedy of BSE is that it is likely to bring about the opposite effect.
I have appreciated the intervention of the Welsh Office and Welsh Office Ministers in ensuring that certain abattoirs have been brought into designation for the 30-month scheme. That is an important intervention. Some abattoirs in my constituency were facing ruin but are now active and have the prospect of survival to fulfil an important function in the future.
"The farming landscape will become more homogeneous as fields are ploughed up instead of grazed."
The commission added:
"We are very concerned that marginal land currently grazed by cattle may be abandoned."
One consequence would be significant environmental loss.
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