Select Committee on Welsh Affairs Fourth Special Report



APPENDIX

RESPONSE TO THE WELSH AFFAIRS COMMITTEE REPORT - THE PRESENT CRISIS IN THE WELSH LIVESTOCK INDUSTRY

Introduction

1. The Government welcomes the report of the Welsh Affairs Committee on the present situation in the Welsh livestock industry. Agriculture is extremely important to the economy and character of rural Wales and we recognise the difficulties that farming is facing at this time. The Committee's report makes a valuable contribution to the current debate on the way forward for the livestock industry. In particular, the Welsh Office welcomes the Committee's endorsement of its view that the long-term way forward for the Welsh livestock farmers is to produce premium products which command premium prices.

2. The need for UK farming to adapt in response to increasingly competitive commodity markets is widely recognised; and the Welsh Office is working hard to establish a viable long-term future for Welsh agriculture. In the meantime , the Government has already taken steps to respond to the situation. Details are contained below in the Government response to the report's main recommendations.

Response to Recommendations

The UK approach towards the EU Early Retirement Scheme must address the specific needs of Wales by lowering the age profile of our farmers as opposed to enlarging the holding size (paragraph 8).

3. Following consultation with the industry, the Government announced on 29 July that it would not at this stage introduce an early retirement scheme for farmers in the UK. While the response to the consultation showed clear support for the principle of an early retirement scheme, the limitations imposed by the current European Union rules were regarded by the majority of respondents as inappropriate to the UK and a major bar to uniform and effective uptake. The Welsh Office hopes that the Agenda 2000 rural development proposals will provide the flexibility to introduce a scheme better adapted to circumstances in Wales.

The Welsh Office should act without delay to provide emergency assistance to enable livestock farmers facing bankruptcy to survive the present crisis (paragraph 9).

4. The Welsh Office understands the pressure for short-term action to help livestock farmers, as well as for developing effective long-term strategies. Expenditure on subsidy payments to livestock farmers in Wales in 1997-98 was £79 million for Sheep Annual Premium, £22.8 million for Suckler Cow Premium, £22.3 million for Beef Special Premium and £31.5 million for Hill Livestock Compensation Allowances. In addition, the Government announced in February 1998 a package of agrimonetary compensation for livestock farmers, worth £85 million across the UK. The Welsh share was £12.2 million. The Government also announced on 25 February further assistance worth £70 million to meet the costs of implementing controls on specified risk materials, and to meet the start-up costs and first year running costs of the new computerised cattle tracing system. On 8 October 1998, legislation was introduced allowing whole sheep carcasses to be exported once again to France thus aiding trade in draft ewes. Private Storage Aid has also been granted to help stabilise market prices in the sheep sector. The value of Sheep Annual Premium will be substantially higher in 1998, and this will offset to some degree the fall in market prices. The Government is keeping the case for further assistance under urgent review, in the light of competing priorities.

It is essential that any further measures introduced to protect the consumer do not add further to the industry's costs (paragraph l0).

5. The Government will continue to work on the principle that protection of the consumer is accorded top priority. Measures which are necessary to protect the consumer and which are scientifically justified will be introduced as and when required. The Government will consider carefully how the implementation costs of any such measures would be met on their merits and in the context of the measures being introduced.

We feel strongly that there are grounds for the Office of Fair Trading to examine the nature of the retail meat supply chains in order to establish whether and in what form vertical restraints exist (paragraph 13).

There is a very strong case, we believe, for an independent study of the retail pricing of meat products, perhaps as part of a wider examination of the Office of Fair Trading, to establish what level of wholesale and retail costs are now being passed on to the producer by the supermarkets (paragraph 20).

In view of widespread concern, the role of the supermarkets and the retail pricing of meat requires independent study, we suggest by the Office of Fair Trading (paragraph 40).

6. The Welsh Office understands the concerns that have been expressed about costs and pricing within the food chain, and about the potential for supermarkets to have a significant influence on the food chain from production to supermarket shelf. It is for the Director General of Fair Trading, in the first instance, to consider whether there is evidence of any breach of competition law in this, as in other areas of the economy. The Director General of Fair Trading announced on 30 July 1998 that the Office of Fair Trading (OFT) will conduct an investigation into the profitability of the major supermarkets in the grocery sector, referring specifically to the Committee's report as one factor in the decision to hold an inquiry. The Government will consider the position further in the light of the OFT's findings. Separately to this, the Minister for Agriculture has initiated high-level discussions with supermarkets on how an effective partnership might be fostered between them and livestock farmers.

There has been some suspicion that beef has been imported into Britain for slaughter and then sold under the label of British beef. We have been assured by retailers that "British" does mean reared in Britain, not simply slaughtered or packaged. There is a case for making labelling much more explicit (paragraph 25).

7. Under Council Regulation 820/97, a system for the labelling of beef and veal was established in the EU. It is designed to give consumers reliable information about the beef they buy. The detailed rules of the Beef Labelling Scheme laid down in Commission Regulation 1141/97 came into force on 1 July 1998, and aim to ensure that claims made on labels of individual pieces of fresh and frozen beef have prior Government approval. The accuracy of claims on origin, rearing and slaughter are checked by independent verifiers. Under the Scheme, the term "British" must only be applied to beef from animals born and raised and slaughtered in Britain.

8. The scheme also applies to imported beef and control procedures are in place to ensure that such beef complies with the UK's beef labelling requirements. Local authorities have the power to require any beef which does not comply with the regulations to be removed from sale and re-labelled. Fines may be imposed on those in breach of the rules under the Scheme.

9. The Government has also taken action to ensure that meat imports comply with the UK's stringent controls. The decision to introduce unilateral controls in the wake of slow progress in Europe will ensure that meat imports undergo checks at designated Border Inspection Posts.

Labelling of manufactured meat products ought to show clearly the country of origin of the meat that they contain (paragraph 28).

10. The Government believes that consumers have a right to expect all food placed on the market to be safe, of high quality, and properly and fairly described. Labelling rules, which are already quite comprehensive, are set at European Community level. The labelling of most food in the UK is governed by the provisions of the Food Labelling Regulations, which implement the EC Food Labelling Directive. All foods to which the regulations apply must be marked or labelled with the name of the food and other important information. In addition, the Food Safety Act 1990 makes it an offence to falsely describe food or to mislead the consumer about the nature, substance and quality of food. Foods may be labelled voluntarily with their country of origin but if an indication of origin is provided it must be true and not mislead the consumer.

11. Under current EC regulations, the country of origin labelling for manufactured meat products is left to the discretion of individual manufacturers. The EC is due to review the Beef Labelling Scheme next year and the UK Government, along with other member states, will have the opportunity to consider whether the scheme should be made compulsory and extended to other types of meat and meat products.

It is imperative that the Welsh food strategy maximise the potential for organic and sustainable production (paragraph 33).

12. The Welsh Office wholeheartedly supports this. As part of the development of the food strategy, the Welsh Office and the WDA have established an industry-led working group, to guide the development of an action plan for organic food production and processing in Wales. Sustainable and organic production will also be a key theme in the development of companion action plans by similar groups for the lamb and beef, and dairy sectors.

The manufacturing and catering sectors are markets that farmers - and their representatives - can no longer afford to ignore. These sectors should specifically be targeted as a market for Welsh meat (paragraph 35).

13. Agreed. This will be taken into account by the industry working groups as they develop action plans for the lamb and beef, dairy and organic sectors.

The lack of a large-scale freezing facility for lamb in the UK needs to be remedied. Opportunities clearly exist for freezing lamb at times of surplus production. Wales should be leading the UK in this (paragraph 36).

14. The Welsh Office will ensure that the lamb and beef working group considers this recommendation.

There is scope for farmers in rural areas to form co-operatives, closely related to local meat packaging plants to produce locally branded products. The new WDA should play a leading role with farmers in establishing such initiatives (paragraph 37).

15. The Welsh Office believes that collaboration between farmers is important to the successful development of added-value food supply chains in Wales. The Welsh Office and WDA will encourage the industry working groups for the lamb and beef, dairy and organic sectors to consider how such collaboration can best be promoted.

The new Welsh Development Agency should be given clear responsibility for developing the food industry in Wales (paragraph 39).

16. Agreed. The Secretary of State for Wales announced on 20 July that the WDA would, from 1 October 1998, assume responsibility for supporting the development of the food industry in Wales. From this date, the WDA has also taken over the functions of Welsh Food Promotions Limited. The Welsh Office will provide the WDA with designated funding on food related activities. The WDA will ensure that the full range of its economic and business development activities are applied, where appropriate, in the food sector. It will have a dedicated food team, headed by a Food Director, and will work, through the regional divisions and the regional economic fora, to co-ordinate local action in support of the food industry.

The Welsh Office must develop a strategy for meat which assists farmers to market their produce effectively and to developing innovative enterprises within Wales which add value to the meat produced and create rural employment (paragraph 39).

17. No one knows the problems and opportunities better than those in the industry, and only a strategy which is owned by the industry will command the support necessary for successful implementation. The role of the Welsh Office and the WDA is to help the industry formulate an effective strategy, and support its implementation. The Welsh Office and the WDA have therefore established an industry-led working group for the lamb and beef sector, and will be working with it to develop an action plan for the sector which has widespread support.

In the longer term, Government aid should be directed to assist the development of the meat industry, not to maintain production irrespective of demand or quality (paragraph 40).

18. The Government agrees strongly that more radical changes are needed to the nature of direct aids under the CAP regime, notably by decoupling them from production. We will be pursuing this, and the issue of aid to the meat industry, through the EU Agenda 2000 programme, particularly in the context of discussions on the reform proposals for structural measures.

10 November 1998


 
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Prepared 17 November 1998