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
