Examination of witnesses (Questions 50
- 69)
TUESDAY 1 FEBRUARY 2000
MR R J BANSBACK,
MR M ATTENBOROUGH,
MR A JORET
and MR M SHARP
Chairman
50. Thank you very much indeed for coming and
thank you particularly for agreeing to share a platform. I realise
there are related issues, but primarily this part of this morning's
session is about IPPC obviously, though climate change levy does
have its impact as well, as we have already heard from our last
witnesses. In the interests of time I shall skip the introductions;
we know who you are from our list and the record will show who
you are. Sometimes we shall be directing questions to MLC or British
Egg Industry Council; do feel free to chip in as best you can,
though we do want to finish this evidence session just after ten
to eleven so we will keep it going quite snappily if we may. How
many are affected is the thing which is puzzling me. We have a
bit of legislation and we do not know whom it affects. We have
heard some estimates from our last witnesses and some reasons
for the difficulty. Perhaps I could look to MLC for pigs first
of all and then to BEIC for poultry.
(Mr Bansback) It is actually quite difficult to make
an estimate on the basis of published figures but we have had
a try and we will indicate where we are. In terms of the intensive
pig holding sector, we reckon that it could actually be affecting
up to 1,000 holdings in total which of course may not sound very
many in the totality of the industry as a whole, but we estimate
that may represent up to 15 per cent of breeding pigs and over
half the finishing pigs in the industry because of the extent
to which the industry is actually distributed in these larger
sectors. So from the point of view of the pig industry, the incidence
in relation to IPPC could be very serious indeed, despite the
relatively low number of holdings.
51. Do you want to give a brief indication of
profitability levels at present in the pig industry?
(Mr Bansback) The industry is in dire straits at the
moment, as I am sure the Committee is aware. Prices went down
yet again by 1.5p during the course of last week and they will
probably be down a little more this week. The industry is losing
£4 million per week at the moment. The price at the moment
of about 73p is below a breakeven point of between 90p and 92p
per kilo and it has been in this situation since July of 1998
and is therefore finding anything which potentially adds to cost
a very serious issue indeed. Although some of these costs are
in the future, when we hope the profitability of the industry
has recovered somewhat, at precisely the time when this profitability
might be recovering the thought for those surviving sectors of
the industry of facing up to something in addition to that is
going to be a big disincentive for them to move forward and invest
in the way that we want. May I just add that at the moment we
are estimating that by June of this year our industry might have
reduced by about one quarter compared with December 1997. We are
estimating the number of breeding sows to be down by 23 to 24
per cent compared with December 1997, at a time when there has
been a relatively small reduction in other Member States. That
is the extent of the concern we have in the pig industry.
(Mr Joret) Speaking for the egg industry, we have
800 farms in our Lion scheme which account for about 70 per cent
of UK egg production; you can scale it up to the number of egg
farms in total. However, not all of those will come within IPPC
because that does include quite a number of free range units,
most of which will be below the 40,000 threshold. What we can
do is come back with an analysis of just how many egg farms it
does represent. I cannot really speak for the poultry meat sector,
because we do not know that sector.
Mr Jack
52. In the egg industry's evidence you say that
cattle were not included in the IPPC arrangements. Why do you
think that was and is it fair?
(Mr Joret) No, we do not think it is fair. We think
that IPPC has essentially missed the target; the target being
a reduction in ammonia. As far as the poultry industry is concerned,
we reckon we are only responsible for 19 per cent of the total
ammonia emission. We believe at the end of the day it was horse
trading in Brussels which had cattle removed from IPPC. They were
included in some of the earlier drafts.
Chairman
53. Looking to the MLC, you said in your evidence
to us that you accept and support the principles of IPPC. We all
want to reduce pollution. However, you are "... concerned
that the cost of compliance may exceed the potential benefits".
Have you done any measurement of the cost of compliance?
(Mr Attenborough) We have tried to make an assessment
at the discussions of the interim charges with the Environmental
Agency. At the time they looked at that they were looking at either
one of two schemes which I have commented on in the letter. One
was the "time and materials" scheme, the other was the
"existing charging scheme". What we felt about both
of these schemes was that it would probably result on a pig farm
in up to about five person days per unit and if you multiply that
by the so-called components they were looking at at the time,
you might want to break down a pig farm into three or more components:
a component of feed, a component of housing and a component of
effluent. The additive cost of all of those might well be in the
order of £18,000 to £20,000 for typically a 1,000 sow
unit. We felt that this was unusual in the context of agricultural
practice and we felt there was a case for getting a review of
a limited number of farms to get a better handle on what would
be required for that and therefore perhaps a more realistic charge
to be set. We also looked at the whole issue of general binding
rules within the context of IPPC and applying those for the farming
industry. We do have some evidence that there are some potential
benefits which can be derived from better environmental practices
on the farm. We did some research at our own pig farm which finished
about three years ago. It was called phase feeding where we were
trying to adjust the ratio of a particular amino acid—amino
acids contain nitrogen—called lysine as a proportion of
the energy which a pig utilises and as a pig grows it does not
need the same amount of lysine as a proportion of digestible energy.
We have estimated that the benefits of this technology, phased
feeding, which is now being applied in the industry, are worth
about 50p per pig. It does not sound a lot but when you multiply
it by what was 14 million slaughter pigs then it is quite substantial.
The environmental benefit on that is that we estimate there is
something like half a kilogram per pig benefit in terms of nitrogen
and about a quarter kilogram benefit in terms of phosphorus excretion;
in other words the phosphorus goes into the animal rather than
going in at one end and coming out the other end.
Mr Drew
54. May I ask you about competition? I am very
interested in how you actually get the overall impression which
you obviously have. For our benefit, and I am sure for the benefit
of the people affected, it would be useful if you could break
that down per bird or per pig to know what sort of implications
the IPPC Directive in particular is going to have. I wonder whether
you have some figures you could bring forward?
(Mr Bansback) I shall start off in terms of where
we are. To divide it into the costs which Mr Attenborough mentioned,
which were to do with the interim charges scheme, if we take those
as a base at the moment, which was what we have to go on, of £20,000
per unit registration costs, then there will be an ongoing cost
and that does not include any compliance costs which the unit
actually has to incur itself. If you apply that to the figure
I gave you early on of about 1,000 holdings affected in the intensive
pig sector, you are talking about an initial cost of the order
of £20 million. In terms of the competitive elements, you
have to compare that and look at that in relation to three issues.
First is the fact that in other Member States the number of pig
farms actually qualifying under this is substantially lower. If
I may quote some figures here, the number of holdings in the UK
with over 2,000 pigs is of the order of 58 per cent of the total
in the UK, compared with an EU average of 38 per cent and an average
in a country like Germany of only 19 per cent. We are at the highest
level and therefore we are going to be hit highest by that charge
and therefore it is going to be substantially higher for us relative
to other Member States. That is not all. You have heard from the
NFU evidence that the actual compliance with these requirements
is very varied in different Member States. The amount of cost
which is covered by government varies, the ability of different
Member States to administer environmental schemes varies and this
results from the different traditions and importance attached
to environment in different Member States. They do not have the
framework to administer and therefore as it is a recommendation
it is likely to be applied rather differently. Then, talking to
our Brussels office, the speed of enacting the legislation varies
tremendously with so far less than half EU countries, according
to the official in Brussels to whom we spoke, having transposed
international legislation, the EU regulation which was introduced
in 1996. So in all those areas you can see that we are ahead of
the game and we are in danger, if we do not address some of these
issues, of adding a further substantial cost burden to the industry
which is going to damage our competitiveness even more.
55. Are you saying that it is a question not
that they are unwilling on the continent to introduce IPPC in
particular but they do not have the mechanisms to do this properly?
Or are you being more trenchant in your criticism that they are
deliberately going slow which is something which it is important
we know about?
(Mr Bansback) What we are saying is probably a bit
of both. We do know that the attitude to environment in some of
the southern European countries is very different to here and
therefore the mechanisms and the supervision systems and everything
else are going to be different. We have evidence in terms of the
point I was making about implementation of legislation where they
are moving more slowly in some Member States as well. I would
add that the information, to answer you more precisely, is actually
quite difficult to get.
(Mr Joret) For the egg sector, just working back from
the figures in our memorandum, we are estimating the cost of a
permit application for an 80,000-bird unit to be 16p per bird.
Then the ongoing subsistence charge thereafter to be 9p per bird.
If you look at the UK industry, which is about 31 million layers
at the moment and let us just assume this morning that two thirds
of those fall within IPPC, you have a charge for the egg industry
of about £3.4 million in the first instances for getting
permits and then ongoing subsistence charge of £1.15 million.
That is really a very significant sum. As we point out in our
memorandum, the permit application fee represents at the moment
21 per cent of the gross margin that an intensive farmer might
expect to receive.
56. Are you saying exactly the same thing as
the MLC?
(Mr Joret) We are very concerned at the level of charge.
57. A lot of reluctance exists because of your
inability to introduce this.
(Mr Joret) We personally feel that the proposed charges
from the Environment Agency are simply outrageous. They are not
just high, they are outrageous. It has already been stated this
morning by the NFU that SEPA, the Scottish Environmental Protection
Agency, is apparently able to do the same amount of work for approximately
half the money. What we would also look at is the number of inspector
days which the Environment Agency thinks is necessary for carrying
out permit application work. We are, however, working with them
very closely in terms of working towards general binding rules
which might be a more cost effective way of delivering the permits.
Equally well, within our own Lion code, that is the farm assurance
scheme, we do not at the moment have a large environmental section:
we just require all members to have an environmental policy. However,
it would be a logical extension of that to build in to our farm
assurance scheme an environmental assessment if that could in
fact deliver cost savings to our members.
(Mr Sharp) It is also worth pointing out that these
charges are purely administrative charges and that is money which
will not then be available for good environmental management within
the business.
58. Can you tease that out a bit more? If there
were more of an emphasis on good environmental management, as
you put it, is there more acceptability in the industry? You see
this as an administrative burden, red tape, rather than genuinely
improving the quality of the environment.
(Mr Sharp) That is correct. Businesses will see that
as money lost for administrative purposes. If that money were
available for implementing environmental management schemes or
for improving assurance schemes such as the Lion code by inserting
environmental aspects into that, that would result in a much greater
degree of environmental protection overall.
Chairman
59. May I ask the same question I asked our
last witnesses? I presume your farm assurance scheme, the areas
it covers at present, is a very rigorous and robust scheme like
those in other sectors and it is not a soft option.
(Mr Joret) Indeed.
(Mr Bansback) Yes.
60. It does sound from the outside that it might
be a bit of a cop out. You would not say that, would you, as someone
who actually experiences farm assurance?
(Mr Joret) No, not at all; it is not a cop out and
certainly, as with most farm assurance schemes, there are two
levels of audit with the ultimate one being an independent audit
of the scheme. Our independent auditors are working towards the
EU standard for independent audit bodies and I think that is as
good as you are going to get.
(Mr Attenborough) As far as the pig sector is concerned,
90 per cent of the pig sector is within farm assurance schemes.
Indeed our whole approach to this issue is to look at the cost
of registration against a backdrop of developing the so-called
general binding rules which are governing matters, for example,
to do with how you handle feed, measures to do with housing and
measures to do with transfer of byproduct, then converting those
binding rules into management protocols which are incorporated
into independently assured schemes which would be covered under
EN45011 series international standards. We think that will help
reduce the cost of registration substantially.
Mr Mitchell
61. What you are saying about competitiveness
and what the Egg Industry Council says, that it therefore "...
believes that if no charges are passed on to industry in other
Member States, there should be no charging scheme implemented
in the UK", is really based on a kind of deep instinct that
the Europeans always cheat, is it not, if only because it is absolutely
true? The problem is that it is very difficult to get to know
what is actually happening because the Commission issues regulations
and then does not see that they are enforced uniformly across
a level playing field. The British Government would rather not
know because it wants to impose charges and if you can argue that
they are not imposed anywhere else that weakens its case. The
industry bodies do not know because they do not have the research
ability or the staffing and it is very difficult to find the information.
We do not really know, do we?
(Mr Bansback) It is important to say that we said
initially that we support the principle of what is trying to be
achieved through this. Because of the attitude of the British
public on these matters, we have to take these matters very seriously
and indeed the pig industry has done for very many years and there
is plenty of evidence to demonstrate that and improvements which
have happened on farms. It is not surprising we are here to defend
an industry which is down on its knees and struggling to survive
and we are defending its competitive position relative to other
Member States. We are not saying brush all this aside. What we
are saying is let us find the cheapest possible option of achieving
these end results. What we are saying initially in relation to
IPPC is that what has been offered so far is way above the cheapest
possible option to achieve the optimum results. We are not hitting
other European countries. We have to defend our industry.
(Mr Attenborough) We are working with the farming
unions regarding these general binding rules, we are providing
an engineering resource input to help in their establishment and
indeed we are in contact with the IPPC bureau in Seville as well
regarding the issue of general binding rules.
62. I can see that; it is necessary to be politically
correct and make due deference to the environment and to European
Union. Of course we all do that; some of us more assiduously than
others. At the same time, it would be useful if there were accurate
information about the way in which it applies over Europe and
to show whether we are actually operating on a level playing field
or a level pecking field or a level pigging field or whatever,
would it not? That is the essence of my question.
(Mr Bansback) We agree with you and as time goes on
we will be collecting more information. We do have enough to demonstrate
that what is happening here in the UK is going to render our industry
uncompetitive and therefore let us work on that information. Certainly
we shall be gathering more and our Brussels office is in the course
of collecting more and more information as these discussions go
on.
63. The real problem for both industries is
that they are in particular crisis at the moment and cannot bear
any further charges. That is definitely the situation, is it not?
(Mr Bansback) Yes.
(Mr Joret) I can also concur that the egg industry
is in serious financial loss at the moment and that is across
all sectors, whether they be cage producers or free range producers.
The losses which farmers will be suffering are in the order of
10p to 15p per dozen right now.
64. I sympathise with that point of view because
wisely, unlike manufacturing which was hit by the high pound in
the early 1980s, both the pig and the poultry sectors have taken
the precaution of inviting large numbers of Labour MPs around
so we now know more about both than we ever need to and are sympathetic
on that basis. Let us move on to the climate change levy rebates.
The rebate system prompts me to ask whether livestock producers
are likely to be able to agree the energy saving measures with
the authorities to qualify for the 80 per cent rebate of climate
change levy. Is it in either industry a realistic prospect?
(Mr Joret) One of the issues which is peculiar to
the egg industry is that we also have the Welfare of Laying Hens
Directive to contend with. What that does at different start points
between now and 2010 is reduce the stocking density which we operate
to across all systems of production, free range, barn and caged,
ultimately scrapping the conventional cage. When we are faced
with that background of reducing stocking density, as producers
we are almost inevitably going to be faced with increased unit
energy usage because we cannot make pro rata savings. If
you have a poultry house and you remove 10 per cent of the birds,
you still have the same number of lights, the same number of motors
and so on. You might have slightly less ventilation in operation
because there is less bird heat, but in principle it is going
to lead to inefficiency. One of our major worries is what sort
of energy reduction target, if any, we could ever agree with DETR
for our sector.
(Mr Attenborough) In our letter we have made the point
that we support the introduction of the concept of the climate
change levy inasmuch as it might help energy reduction, but providing
it was financially neutral. Obviously the National Farmers' Union
is working with the DETR towards the development of so-called
heads of agreement. One of the matters we have recognised is that
it is important that we get an evaluation of the energy usage
over a range of units and to that end we have suggested to the
relevant agencies that an assessment is made of the energy usage
across small, medium and large-scale units. That would be a practical
way forward to establish a base line. One other comment we make
is that we feel that in striving to achieve energy reduction targets
in internal pig units it is very important that animal welfare
is not compromised. One of the prime areas of energy usage is
in heating and ventilation; another one is involved in actually
cleaning when indoor pig units are emptied of pigs. If somebody
decided for example to reduce temperatures of cleaning agents,
that could actually compromise our animal welfare, or animal health
and therefore animal welfare. We do have some concerns in that
regard.
Mr Hurst
65. On the question of welfare which you just
began to talk about, is there not almost a conundrum here in a
way that increased welfare standards are coming along, there are
going to be fewer animals per area than there were before, in
my simple mind they generate less heat and it may well be that
there will need to be more heat to keep the temperature level,
although I accept that there is the counterbalance in the ventilation
question. Is there evidence from the past historically that in
fact when you increase energy costs that does have an implication
on welfare standards?
(Mr Attenborough) There is some evidence to suggest
that in farmers striving to reduce costs there can be an impact
in that direction. I believe that from an animal welfare viewpoint,
certainly if you are in the pig sector, if you are able to control
temperatures and control ventilation well, there are huge commercial
opportunities which have benefits in terms of number of days to
slaughter that a pig actually goes through. To give you an example,
a typical pig farm will actually produce pigs and they will get
to slaughter weight, 100 to 110 kilograms in about 180 days. That
is our own published data. Some efficient pig farms, which have
better hygiene and welfare, good temperature control, can achieve
130 days. That is a huge economic benefit but it also means those
animals are provided for in a very high welfare and health regime.
66. On the particular point of temperature controls,
will it generate more heat or less to achieve that?
(Mr Attenborough) The animal is actually growing at
a phenomenal rate. If you look at how many calories a pig eats
per day it is 8,000 calories a day.
67. Almost Elvis Presley standard.
(Mr Attenborough) It does that obviously because it
is growing as well as producing heat. Yes, indeed, if you reduce
stocking densities it will have an impact on heat and therefore
the whole balance.
68. Are you therefore concerned that in the
present straitened times in which both industries find themselves,
that there will in fact be shortcuts in welfare as these levies
and inspections impinge on the system?
(Mr Attenborough) We have indicated in our letter
that we are concerned that the introduction of climate change
levies, in striving to reduce energy usage may lead to a drive
which could compromise welfare and we have expressed that in our
letter.
(Mr Joret) In the egg industry we would be concerned
with the lower stocking densities which we shall be working to
and in particular in the smaller type free range houses and barn
houses with those lower stocking densities in winter. Unless you
have some additional heating what will in fact suffer is litter
quality and you are into welfare issues of foot damage and so
on. There is a risk that it could be counterproductive. The other
thing within the egg sector is that on the climate change levy—it
was already pointed out by the NFU but I would just concur—the
best available technique as far as cage egg production is concerned
is ventilated belt clean battery cages. I think the Environment
Agency would accept that but unfortunately that is one of the
highest energy users because the whole issue of reducing ammonia
is to get the manure dry as quickly as possible. Again you have
two contrary measures effectively.
69. You obviously read my notes because that
was going to be my next question. What you are really saying is
that you are in one of these Catch-22 situations.
(Mr Joret) Precisely.
|
