Select Committee on Agriculture Second Special Report

APPENDIX (continued)



We also express the firmest possible belief that, whether MAFF continues in its present form or a successor body is established, the competitiveness of the agriculture, fisheries and food industries must be a central consideration of government. We are unconvinced that this has been a sufficiently high priority of MAFF. This is a matter that we will continue to raise with the Ministry at every opportunity.

19. The competitiveness of the agriculture, fisheries and food industries continues to be a central consideration for MAFF, reflected in the department's Objective 4, "to assist the development of efficient markets in which internationally competitive food, fish and agriculture industries can thrive". MAFF has also published its strategy for delivering this and its other objectives in the form of its Service Delivery Agreement.

20. The Department continues to promote industry competitiveness, through Ministerial and official contacts with businesses, and a range of initiatives tailored to the circumstances of different sectors.

21. The Department's Agriculture Strategy actively promotes competitiveness with a number of initiatives. New initiatives were announced as part of the Action Plan for Farming in March 2000 (including the provision of a small business advice service to farmers, for example), and the England Rural Development Programme (ERDP), launched in October 2000. The ERDP includes the introduction of the Rural Enterprise Scheme, the Energy Crops Scheme and the Vocational Training Scheme, along with the re-introduction of Processing and Marketing Grants. The Department also allocated £5 million this year under the Agriculture Development Scheme to pump-prime a wide-range of competitiveness initiatives, including a number which may be taken forward under the ERDP.

22. The commitment was also underlined by the publication in November 1999 of the Food Chain Group's Report,"Working Together for the Food Chain". The report pulled together a wide range of activities by Government and by different parts of the food chain which contribute to improved working together and competitiveness. The Minister's foreword to the Report restates the need to improve the industry's competitiveness, and both MAFF and the industry have been actively addressing the challenges set out in the Report.

23. The Department will continue to work in partnership with the industry to identify ways of promoting industry competitiveness.

The Government has nothing to add to its response in respect of the following:

Recommendations 3, 7 and 8.

Ministry of Agriculture, Fisheries and Food

December 2000

First Report

(1999-2000 Session) Current Crisis in the Livestock Industry

General Update

1. An additional £175 million of aid for livestock producers was announced in March 2000. This comprised £109 million of aid to hill farmers; a restructuring programme for the pig industry; deferal of charges for dairy hygiene inspections and the removal of the Over Thirty Months Scheme weight limit. £66 million of Agrimonetary compensation was also made available to livestock producers.

Specific Action

Directing aid to enhance the competitiveness of the sector (paragraphs 9 and 17)

2. The details of the plans for implementing the Rural Development Regulation and the monies to be made available (including monies raised by "modulation") were set out in separate Rural Development Plans for England, Wales, Scotland and Northern Ireland. Those for England and Wales were agreed as Programmes in September 2000 and have now received formal approval from the Commission. The Plans for Scotland and Northern Ireland were agreed as Programmes in October and formal approval for these is currently awaited.

Review of Regulations and Charges (paragraph 11)

3. This supplementary response reports on progress in relation to what has become known as the Red Tape Review. The three industry led working groups set up by Nick Brown in September 1999 looked at three major areas of concern identified by industry themselves; IACS and Inspections; the Intervention system and Meat Hygiene and Slaughterhouse Rules. The working groups reported in December 1999. Nick Brown published the Government's response and action plans for implementing the recommendations made on 1st February 2000. 98 of the 107 recommendations were accepted. Action on 23 of these has been pursued in Brussels. Further the Action Plan for Farming launched by the Prime Minister in March made a commitment to implement the recommendations as quickly and simply as possible. Work continues. Action plans recording progress in implementation were published in July to contribute to the Agricultural Forum.

4. In addition to the three priority areas a number of other issues were taken forward in bilateral meetings between MAFF and industry. Action has been taken on a number of these minor areas including pesticides legislation, producer groups rules in the horticulture sector and dairy hygiene regulations.

5. We continue to apply rigorous impact and assessment appraisal methods for all new policy proposals and pay due regard to the effects of of regulation on the competitiveness of our industries.

Abattoirs (Paragraph 13)

6. The Government's response to the report of the Meat Industry Red Tape Working Group (the Pooley Group) was published on 2 February 2000. 28 out of the 35 recommendations were accepted, while 4 others required further consideration. Most recommendations were for the Food Standards Agency (established 1 April 2000) to take forward. The report's main recommendation, for a radical change from the current prescriptive meat inspection system to a risk-based system of checks (HACCP) was accepted. This and 4 other recommendations will require EU negotiations. Work on implementing the accepted recommendations has either been completed or is underway. For example:

  • negotiations on changes to the meat inspection system have started in Brussels following the publication by the European Commission in July of its proposals to consolidate and simplify all EU food safety legislation;

  • the Food Standards Agency established the Meat Inspection Charges Task Force in April to consider alternative approaches to charging for meat hygiene inspections. The Task Force's report and recommendations were published in June, and the Government is currently considering its response;

  • the Food Standards Agency has launched a review of the UK's BSE controls which is due to be completed in November 2000; and

  • the Food Standards Agency has commissioned an independent efficiency study of the operations of the Meat Hygiene Service. Part one of the two-part study is due to be completed by the end of 2000, and part two by March 2001.

7. In addition, the accepted Pooley Group recommendations were included in the Action Plan for Farming announced by the Prime Minister on 30 March 2000. Regular reports on progress are made.

Pigs (paragraph 14)

8. Regarding the Action Plan for Farming announced on March 30th, the Government is seeking to introduce the Pig Industry Restructuring Scheme (PIRS). We expect to receive European Commission clearance of the scheme (necessary before a state aid can be introduced) shortly, and hope to introduce the outgoers element in November. This part of the scheme is aimed at pig breeders throughout the UK who have already left the business, or intend to do so. In return for agreeing to stay out of pig breeding for ten years, the Government will pay up to 50% of:

  • the replacement value of pig breeding facilities destroyed (minus wear and tear); and

  • the loss in value of the holding due to not being able to keep pigs for ten years; and

  • a bonus of 20% of the sum of those two figures.

9. The Ongoers element of the scheme, which we hope to introduce early in the new year, will offer an interest rate rebate to pig producers who wish to make their businesses more viable by working to an agreed business plan.

The beef ban

10. Following Nick Brown's letter on the use of beef by Local Education Authorities in October 1999, most have now removed their bans. At the beginning of October 2000, only 4 Local Education Authorities still maintain a total ban on the use of beef and 6 Authorities maintain a ban on the use of beef in primary schools only.

The Government has nothing to add to its response in respect of the following:

The September Aid Package (paragraph 4).

Sheep (paragraph 15).

Ministry of Agriculture, Fisheries and Food

November 2000

Second Report

(1999-2000 Session) The Marketing of Milk

General Update

1. Since publication of the Government's response to the Second Report on 11 April, the milk production sector entered the new milk marketing year with producer prices falling yet again, in some cases up to 12% on the previous year.

2. Supermarkets and Processors appear to have appreciated that producer prices have now fallen to levels that are generally unsustainable in the longer term and negotiated price increases for Autumn deliveries of up to 2 pence per litre. Buoyant international commodity prices and demand for dairy products provided strong signals to the market that a price rise was possible.

3. The Government has taken steps to assist dairy farmers in recognition of the difficult market conditions they face. Various measures have been taken under the Action Plan for Farming announced by the Prime Minister on 30 March.

Specific Action

Milk Quotas

Recommendation 1: We reiterate our support for a rapid end to milk quotas which are a constraint on the development of an efficient, market-focused industry and we urge the Government to press other EU partners to agree an end to the quota scheme before 2003.

4. The Commission has announced that it would like to bring forward the review to 2002. The Government supports this move. Germany has recently indicated in public statements that it now supports an orderly phasing out of milk quotas, a view already held by the UK, Italy, Sweden and Denmark.

Recommendation 5: Whilst we give every encouragement to the development of small, specialist producers of dairy products, we recognise the difficulties involved in the establishment of such businesses. Undeniably, a renaissance of small dairy enterprises could help individual farmers and contribute to the development of regional tourism and we recommend that resources from the rural development fund be applied to support their initial set up. However, for most farmers there is much greater potential for adding value through innovation and investment by the existing dairy companies and, increasingly, the producer co-operatives.

5. The ERDP has now been approved by the European Commission and the England Regional Development Programme was launched on 3 October.

Competition Restraints on the New Co-operatives

Recommendation 6: There seems to us no reason why any regulatory limits should now be placed on the activities of the successor co-operatives beyond those of complete independence from one another. The co-operatives are not yet free of the competition authorities since the restraints on their expansion into processing will not be lifted until Mr Byers has received the advice of the DGFT which should be "round about Easter time" this year. However, a speedy decision in favour of processing, on advice from the DGFT, would be in everyone's interest. We recommend an early decision by the Government that will allow the successor co-operatives to consider processing milk. We note that past references to the competition authorities have resulted from complaints originating within the industry. To that extent, freedom from competition restraints lies in the hands of the industry itself and can be realised only if the habit of appealing to the outside bodies for redress of internal grievances is broken.

6. The Secretary of State announced on 2 May that the successors to Milk Marque are now free to establish or extend their milk processing activities if they so choose. The announcement followed advice from the Director General of Fair Trading that the successors were operating independent arrangements for the marketing and selling of their members' milk.

The Future for Dairy Farmers

Recommendation 8: There is without a doubt a crisis in dairy farming and, sadly, there are likely to be more casualties before any real recovery is felt.

7. Announcements of increases in producer prices to apply from the Autumn, underpinned by stronger world commodity markets provide some encouragement for dairy farmers. The Government announced on 23 November that it would be setting up a Milk Task Force, drawing members from the various parts of the food chain, to identify those areas where greater efficiencies in production and marketing might be obtained and to report on the means to achieve them. The Task Force is due to report to Ministers by 31 March 2001.

Recommendation 11: Other appropriate vehicles for supporting small farms could include assistance with collection charges, which are proportionately higher for small producers, and Government funding of dairy hygiene inspection charges in England and Wales as is already the case in Scotland and elsewhere in the EU.

8. Legislation to remove dairy hygiene inspection charges came into force in England on 10 May and in Wales on 20 May.

Recommendation 12: It is worth noting that the review of the Over Thirty Month Scheme (OTMS) will have a material effect on farm incomes. The removal of the Calf Processing Aid Scheme (CPAS) has particularly affected dairy farmers, and marketing assistance to find customers for dairy bull calves would be welcome.

9. As part of the Action Plan for Farming announced by the Prime Minister on 30 March, the Government successfully pressed the European Commission to remove the payable weight limit for OTMS cattle with effect from 5 June. Dairy producers will benefit from this change, which is expected to increase returns on sales of cattle into the OTMS by over £20m in a full year.

School Milk

Recommendation 14: We recommend that the Government review the school milk subsidy and examine whether a revised scheme, allied with industry initiatives such as generic marketing, might boost demand for milk.

10. The Agriculture Council agreed, in July, to moderate the Commission's planned reduction in the subsidy for the school milk scheme to 75% of the target price for milk rather than the proposed 50%. The Government had pressed for no change at all; this position was supported by a number of other Member States and helped persuade the Commission firstly of the need to retain the scheme and, secondly, to moderate the size of reduction. The Commission was also asked to review the implementation rules with a view to making scheme administration simpler.

11. The Government announced in the House of Commons on 16 November that it would be making a contribution towards the scheme in England. The Ministry of Agriculture, Fisheries and Food, the Department of Health and the Department for Education and Employment, will jointly top-up the subsidy to its previous level based, on current uptake rates. The Government has also co-operated fully in the Commission review of the scheme's administration which should lead to some significant improvements.

Organic Milk

Recommendation 15: We recommend that the Government review the amount of organic aid given to dairy farmers and ensure that the sector as a whole supports the development of organic milk.

12. The review of the Organic Farming Scheme has now been concluded. It did not suggest that there was a need for particular emphasis to be given to dairy farmers in the targeting of conversion aid.


Recommendation 19: MAFF should ensure that the labelling requirements do not conflict with any form of innovative branding concepts.

13. The Food Standards Agency recently adopted a wide-ranging action plan on food labelling proposing a mixture of regulatory changes and diverse voluntary initiatives. The aim is to provide a high level of consumer protection in law, while allowing flexibility for the food industry to give clear, consistent and accurate information about their foods in a practical way which consumers will also find useful and accessible.

Farm Assurance Schemes

Recommendation 20: The proliferation of farm assurance schemes to differing standards could act as a barrier to competition as direct suppliers become bound to one dairy company. This is an issue which the OFT will need to keep under review.

14. Assured Food Standards (AFS) has been established by the industry to bring together existing assurance schemes and licence the use of the red tractor British Farm Standard logo. AFS has been offered grant aid by the Government under the second round of the Agriculture Development Scheme.

Specialist Cheesemaking

Recommendation 22: We deplore the unimaginative and damaging prejudice that the very existence of small food producers such as cheesemakers is inherently a threat to public health and look to Ministers in MAFF and the Department of Health, and to the new Food Standards Agency, to combat such attitudes with vigour and urge the Agency to follow the example of MAFF and appoint an official to act as liaison with the industry.

15. The Food Standards Agency is currently in discussions with the Specialist Cheesemakers Association and representatives of enforcement authorities on the development of the campaign to increase food safety awareness among small cheesemakers. A meeting with the SCA and LACOTS was held on 15 November.

Producer Co-operation

Recommendation 24: We look forward to receiving the views of the Competition Commission on producer co-operation in its forthcoming report on supermarkets.

16. The Competition Commission monopoly report on supermarkets was published on 10 October. The Commission found that the market was broadly competitive, but made adverse findings against the leading supermarkets in respect of their dealings with their suppliers. The Secretary of State has accepted the Commission's recommendations on these issues, including its recommendation for a Code of Practice. He has asked the DGFT to seek legally binding undertakings from supermarkets with 8% or more of the market that they will comply with the remedies. The representatives of suppliers will have an opportunity to comment on the draft.

Recommendation 25: We hope that the regional development agencies will keep a close interest in the development within the dairy industry of supply chain partnerships at regional levels.

17. The National Farmers Union (NFU) is now running a comprehensive programme of workshops and seminars on the supply chain, in conjunction with the Institute of Grocery Distribution. The Regional Supply Offices will, on behalf of the Regional Development Agencies, continue to liaise with the NFU and offer their support.

Government Support for Adding Value

Recommendation 26: We agree entirely with the approach of ensuring Government support for small businesses is more widely available to the agricultural sector. If farmers are to be treated as small businesses, they should be eligible for all the general support schemes open to other industries, including those for research and development.

18. The Ministry of Agriculture, Fisheries and Food, with the Small Business Service (SBS), launched the Farm Business Advice Service for farms in England on 10 October. The £20m scheme will run for the next four years, until March 2004. Over 15,000 farmers and growers are expected to benefit over the life of the scheme. Farmers and growers will be able to apply for a diagnostic business health check of their farm business and have help in drawing up an action plan to refocus their business aims to develop a more viable business and access other sources of advice and support.

19. The service is aimed primarily at farmers and growers with small to medium sized farm businesses which have not previously received mainstream business support and advice. The service will be delivered by the SBS through the network of Business Links. More generally, the SBS is developing a national information and advice service which businesses and individuals will be able to access via the telephone or web. MAFF and the SBS will continue to liaise on the provision of business support and reducing regulatory burdens on the industry, including by such electronic means.

Recommendation 27: We recommend that the Government examine the feasibility of establishing DTI and other relevant departmental information points at MAFF regional centres, so that MAFF staff who deal with farmers on a day to day basis are aware of and can promote the range of non-MAFF schemes open to farmers.

20. The Government is committed to improving the co-ordination and streamlining of the variety of different funding streams and initiatives available to farmers and others in the regions. This is in line with the recommendations of the reports from the Performance and Innovation Unit, and includes the development of a stronger role for the Government Offices (GOs) in the regions. To this end, MAFF is working up detailed proposals for strengthening its regional strategic activities, including its regional information activity, through greater integration with the GOs. From 1 April 2001 MAFF will have a Director, supported by a small team in each GO office. The precise role and responsibilities of the MAFF Director are currently being worked out in consultation with the Regional Co-ordination Unit and the GO Regional Directors. The objective is to contribute effectively to the attainment in the regions of MAFF's PSA objectives, to strengthen the rural capability of the GOs, and to foster closer working relationships with rural stakeholders and environmental interest groups.

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