Examination of Witnesses (Questions 20
MONDAY 11 DECEMBER 2000
20. You did not think the £66 million was
sufficient, did you?
(Mr Sheldon) No, we asked for something over £300
21. Leaving aside the bargaining, what do you
think should have been the actual sum which would have done the
trick, realising that there are such things as treasuries in this
(Mr Sheldon) We believe we identified that in the
two years from mid-1998 to the first third of this year there
was something like a £300 million hole which was blown in
the industry at least in part and largely because of the regulatory
burdens that were imposed on us. That was the size of the hurt
that had been inflicted on the industry, so that was the sum that
we asked for, and we believed and we believe to this day, that
it was entirely justified.
22. The situation now is that the first year
was going to have £26 million earmarked for funding, was
it not, so that will start more than halfway through the year?
On top of that, the producer levy funding which is due to come
through because of the swine fever issue looks as though it may
not come on stream until Easter. Are we going to have a series
of farm crises or financial crises on farms in the first quarter
of this coming year?
(Mr Black) Chairman, it is not a case of "are
we going to have?", they are already taking place.
23. So what action could be taken to try to
get some money to people perhaps more rapidly than originally
envisaged, in order to try to stave off a serious cashflow problem
(Mr Black) In relation to the swine fever, we have
been in discussion with the Minister about the possibility of
trying to bridge some funds for this welfare disposal scheme.
That at the moment is not something that he appears to be in a
position to address. The best that we have been able to achieve
with him in relation to swine fever is the possibility that consultation
periods on the producer levy may be run concurrently both with
the MLC and also with Members of this House.
24. Leaving aside the producer levy and the
swine fever issue, with regard to the scheme we have been talking
about, would it be preferable or possible, or possible and preferable
perhaps, to try to front-load this scheme? It is due to run over
three years. Would you prefer to see a much greater proportion
made available as soon as possible, even at the risk of there
being much lesser sums later on? Have you had discussions in this
(Mr Godfrey) The restructuring schemethe outgoers
schemewill be payable within three months. That is now
open. Once the bids have been accepted and the least cost for
120,000 sows has been accepted, then that will be paid immediately.
It is six months after we had hoped, but it will be paid immediately.
As to the ongoers scheme, we are hoping that that will be launched,
subject to Brussels approval, we understand, early in January.
That is a two-year interest rate subsidy, and hopefully the Ministry
has said that it may be possible to pay that in advance. Again,
though, it is the delay. The problem we have is, of course, that
the funds for the first £26 million were in the financial
year to 31 March 2001. What we do not know is whether that money
will still be available after 31 March 2001. Obviously we would
very much like to see it be there.
25. Perhaps I can move us on to the swine fever
outbreak. Clearly this has had a devastating impact on the industry.
I think it would help me to begin with if you would just say where
you see the disease is now and what the immediate repercussions
(Mr Black) Chairman, through you, to date we have
had 16 actual outbreaks of classical swine fever. They have all
been in East Anglia. The result of that was that there were seven
large surveillance zones put in place throughout the duration
of the disease, and it is the implications and impact of those
surveillance zones which have stopped any movement of livestock,
which has so devastated the whole of the East Anglian region.
It is not the fact that we have just had 16 outbreaks, but it
has been the fact that close to 1,000 units or 1,000 units plus
have been held up at one stage or another with restrictions as
they have tried to control the disease.
26. Before we come on to the compensation that
has been paid and whether that is enough, was the reaction of
MAFF sufficient, was it too much, or have they got it about right
in terms of the need to put these isolation zones in place?
(Mr Black) In terms of the imposition of the zones,
clearly they have, touch wood, worked in controlling the disease,
but the issue has been more in terms of being able to ensure that
for those people who have had stock held up that they have not
been financially disadvantaged by that particular situation. Clearly
those people who have stopped moving stock as a result of the
disease have borne the cost of the disease protection mechanism
for the whole of the country.
27. I am sure we will be coming back to what
really happened a bit later. Can we look at the process of compensation
and your unhappiness with that. The Government has on a fairly
regular basis increased the amount. What is your view on the way
they have handled compensation?
(Mr Black) From day one we have argued that there
should have been full market price support for those people.
28. Which would be what? What sum per pig?
(Mr Black) The market price is obviously varying,
but the situation that we are now in with a pence per kilo basis
is something close to where we thought the compensation should
have been from day one.
29. The Government have got there but it has
taken too long?
(Mr Sheldon) It has got there in terms of the total
amount payable but, of course, the Government has limited its
contribution to 80 per cent of that or £50 as a maximum.
If those thresholds were not there then the mechanism would work
entirely to our satisfaction.
30. So the argument now is over those thresholds
and you are continuing to talk to MAFF about moving the scheme
to full cost of recovery?
(Mr Houston) No. We have arrived at the compensation
package now which is being implemented and MAFF are paying up
to a maximum of £50. The balance is being paid by a producer
levy over which we are currently in a consultation process with
(Mr Sheldon) The advance that we seek from MAFF is
finding ways of liberating the cash that will eventually be forthcoming
from the producer payment. Those producer levies at best will
start to be collected from April and it will take approximately
two years to gather enough to pay the £4 million or so owing
from the producer contribution. Our discussions with MAFF are
centred on how can we find £4 million at the earliest possible
(Mr Black) Chairman, the point is we are talking about
a disease that is here because some control of imports has clearly
failed and that is why we are in the situation that we currently
find ourselves. That failure to control the imports has not been
a failure on the part of the industry; there has been a failure
on the part of import controls and, therefore, we feel that the
whole of the cost of this should not be being picked up by the
31. MAFF has accepted this in terms of the
(Mr Black) No.
32. We must move on. Clearly one of MAFF's arguments,
if not the whole basis of their argument, was that pig producers
insure against such occurrences.
(Mr Black) It has never been possible to insure against
the consequences of consequential loss as a result of being caught
up in surveillance areas.
33. So this was not seen to be an acceptable
(Mr Black) No.
34. Would people who have had outbreaks in the
past find it difficult to get insurance or is this something that
most pig producers would have as a backstop?
(Mr Godfrey) It is possible to get insurance if you
have an outbreak of classical swine fever, and that is the 16
outbreaks, so it would be possible to get insurance and consequential
loss insurance. What is not possible is the fact that there were
restriction zones where people were not allowed to move pigs.
There is not an insurance policy to insure against that risk and
those are the producers that have suffered greatly.
35. To what extent, the figures?
(Mr Godfrey) The figures are absolutely horrific.
You are probably talking in terms of £40 to £50 a pig.
It is very difficult to quantify the actual sums but there will
be producers that will not survive the outbreaks of classical
36. Even if it is front-ended by government?
(Mr Godfrey) That would help considerably but there
will still be some producers who will not survive, yes.
(Mr Black) We had a meeting with the Minister where
we were discussing the front-ending of some cash and there was
a representative of Barclay's Bank at that meeting who reported
that their borrowings to pig farmers in East Anglia had gone up
by £8 million since the start of swine fever in East Anglia.
37. Just to pull this together. You seem to
be expressing satisfaction now with where you have got to in terms
of the support from the Government, although you want it paid
more quickly, and with the levy which you also want the Government
to pay in advance, although the expectation is that you will collect
that from your members. Is the disposal scheme now as it should
be? Have we got to a stage, even if you are not singing from the
roof tops understandably, where you see the scheme operating as
it could and should do?
(Mr Black) In terms of paying the financial level
that it is paying to the farmers but not in terms of the contribution
to that. We believe that it should be fully funded by government,
not by the industry.
38. Can I just be clear; why did you agree then?
Was there a gun against your head or was it just that you had
to settle because people were losing their businesses?
(Mr Houston) Because we had got to the stage where
the Government was going to move no further than £35 per
pig. We approached them, with, "If we can contribute, will
you share that contribution with us?" which raised them from
£35 to £50. The industry contribution is going to be
in excess of £4 million. If things had moved more swiftly
and producers had understood where the scheme was going to go,
that contribution could have been minimised because the producers
would have been able to put the lighter pigs into the scheme.
39. I would just like to follow on from that.
What arguments did Ministers put to you to justify their belief
that your industry could afford to pay their contribution if they
were, if you like, to leverage in their money? The picture you
have painted is of an industry defying financial gravity, it has
got a £300 million hole in it and borrowings in certain parts
of the country are rocketing, and yet the Government sits there
and says, "You can afford to pay, guys." What was the
line of argument the Government put to you to justify that point
(Mr Godfrey) The Government did not work in that way.
What the Government said to us to start with when we first met
them was that hey were not going to pay a penny. Then they said
they would fund a disposal scheme but not pay compensation at
all to farmers. Then they come up with £15 and eventually
they got to £35. Once we got there they stuck at that and
said the Treasury was not prepared to pay any more money. It was
only that we levered some more money out of them by saying we
would try and persuade the industry to go to a voluntary levy
to pay some compensation to producers in East Anglia that the
Government went from £35 to £50.
(Mr Houston) This was because we recognised the extent
of the problem in East Anglia and that urgent help was needed
to that region.