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Session 2000-01
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Delegated Legislation Committee Debates

Pig Industry Restructuring (Capital Grant) Scheme 2001

Second Standing Committee

on Delegated Legislation

Tuesday 13 February 2001

[Mr. Bill Olner in the Chair]

Pig Industry Restructuring (Capital Grant) Scheme 2001

4.30 pm

The Minister of State, Ministry of Agriculture, Fisheries and Food (Ms Joyce Quin): I beg to move,

    That the Committee has considered the Pig Industry Restructuring (Capital Grant) Scheme 2001.

The order deals with one aspect of the ongoers element of the pig industry restructuring scheme. It allows agreed business loans, on which an interest rebate will be paid, to be used for capital projects. A second order, to be made under the negative resolution procedure, will allow those loans to be used for non-capital projects. Article 3(1) explains that the Minister, and therefore the Ministry, may

    ``make to any eligible person a grant towards expenditure incurred in servicing the relevant part of a qualifying loan.''

We are debating an interest rebate, not borrowing.

The pig industry restructuring scheme also includes an element to help those leaving pig production—the outgoers element. That, however, is a non-statutory scheme, and it is therefore not subject to debate. Although it is narrowly focused, the order gives a legal basis to a useful element in the pig industry restructuring scheme. I therefore hope that it will be welcomed and supported by the Committee.

The scheme arose out of the action plan for farming announced on 30 March 2000, following the Downing street farm summit. The action plan recognises that the pig sector had faced considerable difficulties in the previous two years and those difficulties needed to be addressed. As a result, the scheme was born. It was developed in close consultation with the National Pig Association, the Meat and Livestock Commission, the British Bankers' Association and the Central Association of Agriculture Valuers.

Like a number of other components of the action plan, the scheme is a state aid. As such, it needed formal clearance by the European Commission before it could be introduced. To obtain that clearance, the European Commission was formally notified of the scheme at the end of March 2000. As the scheme is, in part, based on a scheme previously approved by the Commission, we hoped that formal clearance would follow fairly quickly. However, as is often the case when negotiating approval for a state aid scheme, progress was not as quick as we would have liked.

Further information had to be provided on six occasions between May and November 2000 in response to various concerns raised by the European Commission. Informal meetings were also held with Commission officials, and my right hon. Friend the Minister of Agriculture, Fisheries and Food discussed the scheme with Agriculture Commissioner Fischler on three occasions. Commission clearance was finally forthcoming on 13 December 2000. Although the clearance process took much longer than we had hoped, it was achieved in a little over nine months. Despite seeming a long time, it was shorter than the average time for clearance of restructuring schemes, which is nearer 18 months.

As I said briefly at the start of my speech, the pig industry restructuring scheme consists of two elements. The outgoers element offers aid to those pig producers who wish to end their involvement with pig production permanently—permanently being defined as for a period of at least 10 years. The ongoers element offers aid to those pig producers who wish to restructure their pig businesses to make them more viable in the longer term. The outgoers element will achieve its aim by providing aid to successful applicants who can show that they were engaged in breeding pigs in June 1998, and are prepared to end their involvement in pig production, other than as a waged employee, on the basis that I have mentioned.

Mr. David Heath (Somerton and Frome): The Minister mentioned pig breeding as a criterion. The wording in the order is ``pig production.'' Does she accept that that has caused some confusion to people who finish pigs, who find themselves excluded?

Ms Quin: I think that the hon. Gentleman is confusing two different things. The order is referring to the ongoer element of the scheme, whereas my comments related to outgoers.

4.36 pm

Sitting suspended for a Division in the House.

4.51 pm

On resuming—

Ms Quin: I was responding to an intervention made by the hon. Member for Somerton and Frome (Mr. Heath) about pig breeders ending their involvement in pig production. That refers to the outgoers element of the pig industry restructuring scheme. The order relates to part of the scheme for ongoers, so we are talking about general investment in pig production for which people will be eligible under the arrangements that I have described.

Mr. David Heath: For absolute clarity, I ask whether the Minister means that everyone who has pigs for commercial purposes, whether keeping them for breeding or buying them in for finishing, will qualify for the scheme if they meet the other requirements.

Ms Quin: They will qualify for the scheme that we are considering under the order.

Those eligible to apply for the outgoers scheme are pig breeders who are still in production, or those who have ceased production since June 1998 but can prove that they were operating at that time and have facilities to demolish or dismantle. In some circumstances, also eligible are pig breeders who have left the business and have already demolished their facilities but can show that they were in production in June 1998. I stress that date, because it was when the sharp downturn in the pig cycle started. By using that date, we can help many who have since been especially affected by the crisis in the industry.

The aid provided for outgoers will be based on a sealed bid by the applicant, giving a figure as to how much is required per sow place for him or her to leave the industry. All bids will be opened at the same time and will be measured against agreed value-for-money criteria.

The ongoers section of the pig industry restructuring scheme, which is the main focus of the order, will achieve its aim of helping pig producers reduce costs, overcome competitive disadvantages and restore long-term viability to their businesses by providing an interest rate rebate on loans linked to an agreed business plan. Pig producers who remain in production and have a commercial loan linked to an agreed business plan are eligible to apply.

The scheme is open to applicants throughout the United Kingdom. The devolved Administrations have worked closely with the Ministry of Agriculture, Fisheries and Food to implement it, and applications from all parts of the United Kingdom will be judged equally and on their own merits. However, the order covers England only. As a result of devolution, Wales, Scotland and Northern Ireland are proceeding with appropriate legislation in parallel with the England order, so that the timetable that we envisage for the scheme overall can be maintained.

The Government are totally committed to the pig industry restructuring scheme. We are determined to make it work. We welcomed the chance to work with the industry to formulate both elements of the scheme. We believe that the scheme will provide much-needed financial support to an industry that we all know has suffered terribly during the past few years. The scheme demonstrates the Government's commitment to the British pig industry. I therefore commend the order to the Committee.

4.55 pm

Mr. James Paice (South-East Cambridgeshire): I am grateful to the Minister for her introduction. As she said, the order is overdue. It is now 11 months since the announcement that followed the Downing street summit. The Minister seems to believe that, bearing in mind how slowly Europe usually moves, the Commission has expedited matters. However, we have had almost four years of witnessing how slow the Government can be. The bottom line is that pig producers, who were in desperate straits for about two years before improvements began last year, are still without support.

In principle, we have always supported the pig industry restructuring scheme. We support the Minister for finding a system that the Commission could approve that would help a sector that does not normally receive much aid from the public purse—probably rightly so—but which has suffered two years of unprecedented losses. Those losses occurred for various reasons, many of them outside the farmers' control.

The Minister referred to the outgoers scheme, which we are not debating today. With your indulgence, Mr. Olner, I should be grateful if the Minister would tell us how applications for that scheme are progressing, how many people have applied and what sums of money are involved. Moving on to the non-capital element of the scheme, I wonder what sort uptake the Minister is budgeting for. My recollection is that the Minister has allocated about £66 million for the scheme over three years, £26 million of which covers this year. The Minister told the National Farmers Union annual general meeting last week that that money was to be rolled over into the next calendar year. That was the clear impression gained by the NFU.

I hope that that statement proves to be slightly more valuable than that made by the Prime Minister when he said that the pesticides tax was off the agenda. Despite the Minister's best efforts and the efforts of the Ministry, it subsequently proved that pesticides tax is very much still on the agenda. As the Minister knows, we wholly support her in opposing the Chancellor's imposition of that tax. We obviously hope that those figures are still available—I am sure that the Minister will confirm it—but £66 million is a considerable sum of money if it is to be used as an interest rate subsidy.

Ms Quin indicated dissent.

Mr. Paice: The right hon. Lady shakes her head. I stand to be corrected. Will she explain to the Committee how she envisages that that money will be used? Article 3(5) refers to grants being no more than a maximum of 5 per cent. of a loan, which roughly equates to a subsidised interest rate. That is relevant when coupled with payments under the non-capital grant scheme. I hope that the Minister will explain more about where the money is to go. At 5 per cent., £66 million adds up to an awful lot of capital spent. We deserve an explanation.

Regarding the longevity of the scheme, I know about the three-year money allocation that the Minister has announced: £26 million was announced nearly a year ago and more figures were announced subsequently. How long will the scheme operate? Will producers receive only a one-off interest rate subsidy, which, while no one would call it unwelcome, will be unlikely to make a dramatic difference, or will it roll on beyond the three years? How many people does the Minister expect to claim? Perhaps she could include in her answer the scheme that we shall not be debating: the non-capital grant scheme.

The Minister commented on the outgoers scheme and referred to the date in 1998 that we all understand to be the point at which the industry took a serious nosedive. She referred to money or investments for demolishing or dismantling buildings or equipment. Perhaps she could expand a little with reference to, for example, the written-off value of equipment. What would happen to farmers who had previously invested substantial sums but then decided that they had to get out? While the investment would not have been made after the July date in 1998, the subsequent business decision to cease production, and therefore the capital cost with no income stream, would nevertheless be borne after that date.

Alternative uses are also a relevant issue. Many pig producers, having decided to withdraw from or reduce production—because reducing production was a possibility—might want to dismantle buildings. However, many would almost certainly want to adapt buildings for another purpose. How would the Government draw the dividing line between demolition or dismantling and the conversion of a building to another purpose? Many pig buildings could, once gutted, be used for something else.

The main aim of my remarks is to obtain reassurance. I should like confirmation that the money allocated to the outgoers and ongoers schemes will be as much as announced. I also want to know how the Minister anticipates that it will be spent in the period that the Government have allowed, and what element will run on beyond that period. Overall, it would be wrong to oppose the motion, because it is long overdue as a means to help the pig industry over problems that are, fortunately, behind it, but which have had lingering consequences. We shall not want to divide the Committee, but I hope that the Minister will respond to my points.

5.3 pm


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