IV. CONCLUSIONS AND RECOMMENDATIONS
55. Most British farmers are realistic about the
extent of the help they can expect from the Government. It may
be Government policy that has played its part in the strengthening
of sterling, but farmers accept that the strong pound is, for
the time being, a fact of life. Given the impact of this on subsidies
and prices, as well as the continuing problems of the BSE crisis,
we think that farmers are right to expect the Government to treat
them sympathetically. Where decisions have to be taken - whether
about, say, cattle passport charges or support for the rendering
industry - they should, fit into a longer-term strategy which
assists the transition to a successful, market-focused beef industry.
Reform of the CAP and a continuing strong pound will bring serious
challenges to our beef farmers, whatever the future of the export
ban. There can be little doubt, given the declining long-term
trend in consumption of beef and red meat in general, and the
direction of reform of the beef regime set out by the European
Commission in Agenda 2000[121],
and analysed by this Committee in an earlier Report[122],
that the industry will have to restructure to recover full economic
viability. We concede that valuable time and money that could
have been spent on restructuring the industry has been wasted
for lack of a clear Government long-term strategy which would
have assisted farmers to recognize the need for change. Our concern
is, quite simply, that the industry could become too enfeebled
to be able to restructure itself rationally. In this respect,
the crisis in the beef industry demands a response from the Government
which may be in conflict with what would be desirable for the
industry in the long-term. The necessary restructuring of the
UK beef sector must take place in parallel with restructuring
in other EU member states: if wholesale restructuring were to
take place in the UK alone under the present abnormal circumstances,
the legacy of the BSE crisis would be a much-shrunken UK industry,
with a high proportion of UK beef consumption met by imports.
56. However, once the industry is through its
present serious difficulties, its future will be bright. We wish
to see a prosperous and thriving UK beef industry, and we have
confidence in the resolve of the industry to re-establish itself
as a leading force in global markets. We believe that the industry's
economic revival should be built on the following foundations:
- the world-class quality, safety and traceability
of its products;
- consolidation of its strengths, including
the comparative advantages of the UK industry, and the favoured
market status of the breeds of cattle run on UK farms;
- Government assistance for industry initiatives
to improve marketing and management skills in the farming community;
- a willingness on the part of producers to
relinquish their reliance on market support, whilst acknowledging
that, if the environmental services and safeguards the UK consumer
has come rightly to expect are to be fulfilled, they must be paid
for by Government;
- and a desire to set high standards in animal
welfare across the industry.
We believe that if the industry takes account
of these goals, and, assuming that the BSE crisis and export ban
can be resolved, the industry will resume its major importance
in the UK farm sector and will once again make a significant contribution
to the UK balance of trade.
57. Our other principal conclusions and recommendations
are as follows:
The Government's policy on support for the beef
industry
(a) We recommend that the Government
should review its plans for expenditure on BSE in the next two
financial years in the light of the prevailing circumstances of
the beef industry. In this review, the Government should seek
to ensure that support reflects the balance of difficulties between
the beef and dairy sectors (paragraph 31).
The Over Thirty Months Slaughter Scheme (OTMS)
(b) We consider that the Government should
now explicitly link the phasing-out of the OTMS to the Date-Based
Export Scheme, and push this matter up the agenda of its discussions
within the European Union. We also consider that, in any further
revisions to the structure of compensation payable under the scheme
which may become necessary for budgetary reasons, the unfortunate
discrimination against specialist beef producers which has arisen
as a result of the 560kg weight limit should be redressed. Indeed,
we see no reason why there should not be a differential in compensation
rates in favour of beef breed cull cows (paragraph 36).
Calf Processing Aid Scheme (CPAS)
(c) We support the Government's decision to
align compensation rates for dairy and non-dairy breeds under
the CPAS. Our principal concern about the operation of the scheme
is that the UK is bearing the brunt of an EU-wide need to reduce
beef over-production, to an extent which may compromise the future
prospects of the UK beef industry when conditions approaching
normality return. The scheme is also, of course, highly distasteful
and for that reason is likely to lose what public support it has
(paragraph 38).
Selective slaughter
(d) The Government has made modest progress
on the selective slaughter scheme, and we look to the Government
to maintain its efforts (paragraph 39).
Other support for, and costs to, the industry
(e) Many of the extra costs faced by the UK
industry are not shared by their EU competitors. MAFF's inability
to supply more than sketchy information on the arrangements made
in other member states, specifically on charges for SRM controls
and cattle traceability systems, leads us to the conclusion that
Ministers cannot have been able to assess the effects on the UK
industry's competitiveness of their decisions in respect of these
matters. This is of serious concern to us, especially in the industry's
current difficult circumstances. The Government should prepare
a comparative analysis of charges levied across the EU and use
this data both to inform UK decisions on charging, and to drive
its negotiations at EU level on the framework for charging within
the EU. The aim should be a genuinely level playing field (paragraph
40).
(f) Given that the circumstances which initially
gave rise to the rendering subsidy have not materially changed,
the Government should review the decision taken by the previous
Government to terminate the subsidy. We recommend that the Government
maintain a degree of financial support for the rendering industry
until market conditions for beef by-products have become more
favourable (paragraph 41).
Traceability
(g) We wholeheartedly support the present
Government's actions in introducing a computerised Cattle Tracing
System (CTS), building upon the existing cattle passports database
(paragraph 43).
(h) We agree with the Government that a computerised
cattle traceability system will be of substantial commercial benefit
to the industry in the long term, and we accept that the running
costs of the system should probably be met by producers in the
medium term. At the same time, we consider that there will be
administrative and veterinary and public health advantages to
the Government. The Government should therefore bear the start-up
costs of the CTS and phase in charges to farmers for the running
costs as the financial position of beef farmers improves. We expect
the Government to compare the CTS costs with those of the equivalent
system in Northern Ireland, and to keep these costs to an absolute
minimum. We recognise that there are considerable logistical and
administrative difficulties in transferring passport data on to
the British Cattle Movement Service (BCMS) data base (paragraph
44).
Promotion and assurance schemes
(i) We agree with the Government's basic position
that "expenditure on promotional campaigns is solely for
the meat industry". However, this position may have to be
modified when the export ban is lifted to assist the UK beef industry
in the difficult task of regaining sales in its previous export
markets outside the EU (paragraph 45).
Labelling
(j) We welcome the rapid introduction of the
Beef Labelling Scheme by the Government. However, we see it as
a partial solution to current difficulties on the home market
and one which may not prove helpful to the UK industry's efforts
to re-establish its exports to other European countries once the
export ban is lifted (paragraph 46).
22 December support package
(k) Although this aid package has been correctly
targeted to suckler producers, the cornerstone of the UK's beef
industry, we are puzzled by the Government's reluctance to seek
the full £77 million for beef producers, given the industry's
current serious problems. The effect of the Commission's refusal
to accept additions to HLCAs has been to rebalance the package
away from hill producers to a flat rate of £44.20 payable
on all suckler cows: this may even be preferable to the distribution
of aid originally envisaged by the Government. We are concerned,
however, that farmers might not receive aid under the package
until Easter 1998. It is essential that this aid reaches producers
as soon as possible. Should circumstances be the same at this
time next year, the Government should be sympathetic to the plight
of the industry (paragraph 48).
HLCAs
(l) If HLCA rates are to be frozen, then
an alternative strategy is required to provide financial security
and stability for hill farmers. As has been well-documented by
the Minister himself, hill farm incomes are in long-term crisis.
Continuing the policy of gradually diminishing income support
payments will not provide a solution (paragraph 49).
Export ban
(m) The Government has diligently and conscientiously
observed its part of the bargain under the Florence Agreement,
and is entitled to expect the European Union to do the same. It
would be wholly unacceptable if evidence arose that the validity
of the Date-Based Export Scheme (or, indeed, the Export Certified
Herds Scheme) was being assessed by the European Union on any
grounds other than scientific and technical ones. We commend the
Government in imposing unilateral SRM controls on imports from
1 January this year, and we would support the Government in similar
further unilateral action justified by scientific evidence, if
necessary (paragraph 52).
Restructuring
(n) We welcome the Government's willingness
to utilise the EU early retirement scheme to enable restructuring
of the beef industry to proceed on a planned and rational basis,
but we are sceptical of the scheme's suitability when transposed
to the agricultural situation of the UK. In particular, we note
the considerable disparity in farm size structures between the
UK and other EU member states, which places great constraints
on the size of retirement payments which could be disbursed by
MAFF under the scheme's outline provisions. There does not appear
to be sufficient flexibility in the EU scheme. Should it prove
possible to devise a suitable scheme for beef producers, we stress
that it should take into full account the need for the UK beef
industry to be environmentally sustainable, as well as economically
sustainable, into the future (paragraph 54).
121
Agenda 2000: For a stronger and wider Europe COM(97)2000
Commission of the European Communities, 16 July 1997 Back
122
Second Report from the Agriculture Committee, 1997-98, CAP
reform: Agenda 2000, HC 311 Back
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