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Mr. Deputy Speaker (Mr. Michael J. Martin): With permission, I shall put together the motions relating to delegated legislation.

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

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    That the draft Legal Advice and Assistance (Scope) (Amendment) Regulations 1998, which were laid before this House on 19th October, be approved.

    Contracting Out

    That the draft Contracting Out (Functions in Relation to Insurance) Order 1998, which was laid before this House on 22nd October, be approved.--[Mr. Jamieson.]

Question agreed to.


Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),

Agenda 2000: Financial Aspects

Question agreed to.




    That Mrs. Margaret Hodge be discharged from the Liaison Committee and Mr. Malcolm Wicks be added to the Committee.--[Mr. Jamieson.]

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Salmon Farming (Scotland)

Motion made, and Question proposed, That this House do now adjourn.--[Mr. Jamieson.]

10.21 pm

Mr. James Wallace (Orkney and Shetland): I am pleased to have the opportunity to raise on the Adjournment of the House the subject of the Scottish salmon farming industry. I am very pleased that the Under-Secretary of State for Scotland, the hon. Member for Western Isles (Mr. Macdonald), who is Minister with responsibility for the highlands and islands, is present to reply to the debate because, between our two constituencies, we supply a substantial proportion of Scottish-produced farmed salmon.

The debate is an opportunity to emphasise the importance of the industry to Scotland as a whole, and to the highlands and islands in particular. In spite of many adversities confronting the industry, it has been one of Scotland's economic success stories. A recent Scottish Office and Highlands and Islands Enterprise survey shows that about 6,500 jobs in Scotland depend on the salmon farming industry--about 2,000 on farms and another 4,500 jobs upstream or downstream, in such industries as feed, supply and repair of cages and, obviously, the important salmon processing industry. The salmon farming industry has a turnover of about £260 million, and I am sure that the Minister would readily acknowledge that it is an industry that creates and sustains employment in many parts of the highlands and islands where there are no alternative forms of employment available. The industry is very important, so it is important that the House has an opportunity--albeit late in the evening--to discuss it.

The industry has not had to look far to find troubles and adversity. Those of us who have been in the House for some years remember the cyclical nature of the market and how, at this time of almost every other year, in the period leading up to Christmas--one of the busiest times for the salmon farming industry--there was a crisis, amidst allegations that the Norwegians were dumping cheap salmon on the European market.

Eventually, the allegations of dumping by the Norwegians were referred to and investigated by the European Commission, and the claims were held to be well established. That led to a negotiated agreement between the European Union and Norway, which effectively imposed a minimum import price--not a quota, which many in the salmon farming industry had wanted. There were mixed views at the time about how effective the minimum import price would be. I spoke to one producer today who said that its existence prevented a free fall in the price earlier this year, for which he was thankful.

This is probably the first opportunity that the House has had to hear from a Minister about the Government's assessment of the effectiveness of the regime and the agreement reached between the European Union and Norway in May last year. Under that, there are individual agreements between the EU and a number of Norwegian exporters. It is possible for the EU to take action against those breaching the rules, including the imposition of a tariff on exports to the EU.

On 31 August this year, there was a report in The Herald quoting the Official Journal of the European Communities, which identified three violations of the

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agreement. As I have informed the Minister, there have been recent reports in Norwegian newspapers of Norwegian exporters coming to arrangements with Danish importers to try legally to circumvent the rules. Information on those allegations has been given by the Scottish Salmon Growers Association to the Commission.

I hope that the Minister will not only providethe Government's assessment of the effectiveness of the agreement reached last year, but will tell us what the Government do to monitor the effectiveness of the arrangements. Can he reassure the House that at all times, particularly in the light of the most recent allegations, they will press the Commission to monitor the situation and take effective action where any breach of the agreement is found?

I understand that import prices are to be averaged out over a quarter, and that they must average at the minimum import price or above. The last quarter of this year has started in October and the early weeks of November with volumes from Norway reducing the price well below the minimum import price. Doubts are being expressed whether between now and 31 December, prices can be sufficiently above the MIP to average at the MIP or above. What sanction will there be if, come February, it is found that the average price for this quarter--which is one of the most important times for the industry--was below the minimum import price?

The Norwegian Government undertook some self-restraint with respect to feed quotas. They announced for this year an increase in feed quota of 2.3 per cent., whereas the volume sold is up by 12 per cent. In spite of a weak market in Europe and the problems of the markets in Norway and Japan, a 10 per cent. increase is proposed by the Norwegian Government for 1999. That would lead to a substantially bigger volume coming on to the market. What representations have the Government made to the Norwegian Government about such an increase in their feed quota?

The MIP was fixed in May last year in ecus. At that time, the value was £2.75 per kilogram, whereas it is now £2.25 per kilogram. The strength of the pound has therefore led to a 20 per cent. loss of revenue for salmon producers. Do the Government intend to seek a revaluation or a change in the minimum import price to reflect the loss of value in real terms because of the strength of the pound in the intervening 18 months?

One of the other difficulties facing the industry has been the outbreak of infectious salmon anaemia--ISA. That was first reported in the west of Scotland in May. There was a confirmed case in Shetland in August. Can the Minister tell the House how many cases have been confirmed and when the last one was confirmed? There is a perception that the disease has been brought under control, but one hopes that one is not speaking too soon. An update would be useful.

Mrs. Ray Michie (Argyll and Bute): My hon. and learned Friend is aware that in my constituency, salmon farming is extremely important. A number of producers have had to destroy all their stock because of ISA. Does he agree that the Government could give some help and restore confidence to the industry if they examined the

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1993 EC legislation which provides for a 50 per cent. contribution to the cost of compensation, particularly for the smaller independent fish farms?

Mr. Wallace: My hon. Friend makes an important point about compensation. There has been a huge loss to the industry as a result of having to slaughter stocks. Indeed, there has been the immediate slaughter of stocks because ISA is a so-called list 1 disease. I want to emphasise--I hope that the Minister will do so as well--that there is no evidence that the virus associated with ISA has any effect on humans and that there is no risk to human consumption. Nevertheless, it has a pernicious effect on the fish and has led to slaughter. This has meant that producers have been faced with huge losses. Undoubtedly, claims for compensation are inevitable.

Earlier this year in the Court of Session, following an outbreak of viral haemorrhagic septicaemia on the island of Gigha in the constituency of my hon. Friend the Member for Argyll and Bute (Mrs. Michie)--a list 2 disease--it was found that the failure by the Secretary of State to provide for payment of any compensation where slaughter orders were made was illegal. I know that that outbreak can be distinguished because it involved a list 2 disease, but it is an important point that the fish were slaughtered on the orders of the Scottish Office. In the circumstances, the case for some element of compensation is strong.

Looking to the future in terms of insurance and compensation, it is obvious that there is a need to attract insurers into the market. As someone put it to me, "You will not get someone to insure a house when it is on fire." It is important that the problem is brought under control and eradicated. It is important also that those who are engaged in insurance see the problem as an insurable risk.

My understanding is that the industry has indicated a willingness to work with the Government and to make a contribution towards future insurance and compensation packages. However, the Government must shoulder their share of responsibility and likewise indicate a willingness to make a contribution. A joint Government and industry working group has been considering how interim cover arrangements can be put in place until such time as the disease becomes an insurable risk. That has happened in Norway and it is now possible to insure against ISA at affordable premiums. Is the Minister able to report on the progress of the joint Government and industry working group? Does he accept that in such situations, the Government have a role to play in shouldering some of the burden until it is commercially viable for insurers to offer insurance and for the industry to be able to afford the premiums?

That development in turn will require the consideration of some technical measures. In Norway, ISA is an insurable risk, but there has not been total eradication. However, the number of outbreaks has been reduced to such a low level that the insurers have been persuaded that it is a market in which they can become involved. There must be a good understanding of the technical and scientific issues that are involved. How, for example, did ISA get to Scottish waters? How does it spread? What is being done--perhaps the Minister can tell us--to advance technical and scientific knowledge of this disease?

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Will the Minister think about more flexibility?I understand that under European Union rules, the fish have had to be slaughtered immediately. That means that a substantial volume has been slaughtered in a relatively few weeks whereas in Norway, it has been possible, when outbreaks have occurred, to slaughter over a period of months. That means also that there has been a more managed eradication which has had less impact on the market. As the fish have been slaughtered immediately here, there is no opportunity to mitigate loss through allowing for further growth. That makes insurance a less attractive proposition.

Many small producers who have not been affected directly by ISA in their own salmon farms have felt the effect of the disease because salmon that has been slaughtered has been put on the market in substantial volumes, which has driven the price down. This has meant that there has been a requirement by banks for many smaller producers to advance more collateral against borrowings. That has put great pressure on smaller producers and obviously inhibits the development of the industry. For these reasons, we want to be reassured on the technical measures that the Government are pursuing to try to ensure that there is a better understanding of the disease and that it can be contained in future.

Another issue that arises from ISA is the substantial investment--some £1 million--that was required in Shetland to install at very short notice blood water treatment equipment at salmon processing plants. The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food, the hon. Member for Scunthorpe (Mr. Morley), was in my constituency earlier this month and received some representations on that matter. I know that his visit was much appreciated.

Those arrangements had to be implemented swiftly, and financial instruments for fisheries guidance grant applications have now been made. I do not expect the Minister to tell me this evening that they will be successful, but I urge him to look on them favourably and sympathetically because they respond to an immediate problem and are an investment in the industry's future.

The industry welcomes the transfer of responsibility for planning arrangements from the Crown Estate Commissioners to local authorities. In Shetland and parts of Orkney, works licences are already issued by local authorities, but new arrangements would have to be made in the highlands, Argyll and Bute and the Western Isles. Local authorities will need to pool their resources because the number of applications will be relatively small and each local authority could not be expected to have its own marine expert. Some certainty is required about the transfer time and the arrangements that will be made in the interim, because primary legislation will be needed and that might have to await the Scottish Parliament. Clearly, salmon farmers wishing to develop, expand or set up new sites need to know the position in the meantime. Guidance on that from the Minister this evening would be welcome.

On the bureaucracy faced by the industry, I am advised that the Veterinary Medicines Directorate is slow in processing licensed medicines for salmon. While Norway has eight licensed sea lice treatments, the United Kingdom has only one and a half. I queried how we manage to have a half and was told that hydrogen peroxide cannot be used in the summer because of water temperature, so it is available for only six months of the year. The Ministry

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does not seem to have enough push to deal with those matters within the European Union. The industry would welcome some assistance on that front.

In conclusion, we cannot underestimate the important role of salmon farming and agriculture in rural development. There are short-term problems, but also long-term opportunities. In the future, there will be a global demand for agricultural products. Scotland's assets include natural resources; a human skills base--many jobs now have increasingly skilled components; niche marketing skills; proximity and access to European markets; a strong domestic market, with an 11 per cent. increase to September this year; and an end product that commands consumer support. Although the industry has had some development grants, it has reached its present state without subsidy. It wants to ensure that it is up to date and takes on the best in terms of environmental assessment and environmental management systems. Westray and Hoy in Orkney now have organic salmon farms. Thus the industry is taking a long-term view and it wants reassurance tonight that the Government support it.

This may be the last time that the House of Commons debates the Scottish salmon farming industry, because next July responsibility for it will transfer to the Scottish Parliament. That Parliament will recognise an industry that is important for Scotland and offers great opportunity for development in Scotland. This evening, we want some support and reassurance that the Government will help to see it through its current difficult times.

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