Pig Industry Restructuring (Capital Grant) Scheme 2001

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Mr. David Heath (Somerton and Frome): I thank the Minister for her explanation of the scheme. I pay tribute to the National Pig Association and the National Farmers Union for their part in securing the package for hard-pressed pig producers. I wish that I was as confident as the hon. Member for South-East Cambridgeshire (Mr. Paice) about the prospects for the pig industry. I accept that a welcome improvement has occurred recently but I think that a sharp decline is still possible in future, which is why a scheme such as the one that we are considering is so important. Nevertheless, things have improved. I welcome the increase in prices and, even more, the rise in import prices—the increase in Danish prices by, I think, tuppence a kilo last week. That makes such products less attractive to buyers in this country, which we should be extremely pleased about as partisan supporters of the British pig industry. I will not dwell on the state of the pig industry, but we must recognise that the measure is part of a package that is crucial to the industry's survival.

I want to ask the Minister a few questions about the detail of the scheme. She said that bids would be required, and that the system would operate on a ``first come, first served'' basis. If people make errors in a bid, they will go to the back of the queue and will eventually be reconsidered. However, it is not clear whether the Ministry thinks that there will be a fixed quantity for the total grant payable or whether the quantity will expand to meet demand. In other words, will the bids be at all competitive or simply cumulative? If the Ministry is later to assess the bids that meet the set criteria, will those bids be satisfied in full? I hope that there will be no question of putting in a bid early or doing anything to promote one's bid as opposed to that of another producer.

The proposals are predicated on setting out a business plan and agreeing to adhere to it. However, it is unclear what will happen if there is a marked shift in the industry's fortunes in the near future. The cataclysmic effects of classical swine fever in East Anglia had a sudden impact on the dynamics of the pig industry there. What happens in the case of another shock to the system that requires a substantial revision of business plans? Is there scope for producers to return to the Ministry and say that their business plans need to be revised as they simply no longer make sense? Is there a mechanism by which a producer can do that and maintain the terms of the agreement, and thereby the terms of support to the loan?

The loan is essentially a mitigation of bank interest rates. We assume that the bank interest rate can be negotiated separately from the Government's support for it. Banks should not be able to take advantage of the mitigation to provide less satisfactory terms for pig farmers than they might otherwise do. That would defeat the object of the proposal.

The outgoers scheme was briefly referred to. Although the subject is not directly related to the order, I hope that I may be permitted to say that I am pleased that the scheme will apply to all those engaged in pig production, whether they are pig breeders or not. That was not the case for the outgoers scheme. I know from my correspondence that some people engaged in the pig industry who do not breed feel that they have been misled by the terms of the outgoers scheme. They could not take advantage of it, simply because they did not have breeding facilities.

Is clear guidance on the outgoers scheme being issued, outlining what is required to give evidence of breeding facilities' no longer being available? Some aspects of that evidence are obvious, such as removing farrowing areas, which are clearly adjunct to pig breeding. Other aspects are not so similarly identified. For example, do slurry channels have to be obliterated to meet the requirements of the outgoers scheme?

I do not want people to act in good faith and find either that they have used their cash to comply with conditions that did not apply, or that some official from the Ministry or elsewhere decides that a building could still be used for pig production and so has not been taken out of the system. We need clarity of guidance, both for the producers and for the officials working in the industry.

My last point is that the scheme will not have the intended beneficial effect on the pig industry if, at the same time, the Government impose other financial burdens on the industry. Measures such as the integrated pollution prevention and control proposals counteract the assistance to the industry and make it impossible for people to maintain a profitable business in pigs. The Minister should consider carefully how any proposals, whether they come from this country or from the European Union, would impact on this fragile industry, and how we are to ensure that it is profitable.

I am interested in the point about carry forward. That is crucial to our considerations and I hope that the Minister will respond to it. I will resume my seat, because my hon. Friend the Member for North Cornwall (Mr. Tyler), the Liberal Democrat Chief Whip, may be seeking to catch your eye, Mr. Olner, and it is not wise to speak for too long under such circumstances.

5.10 pm

Mr. William Cash (Stone): The cumulative trading losses of UK pig producers from mid-1998 to early 2000 amounted to £360 million, running at the rate of £20 million a month. Against that background, the sum that is being made available to both ongoers and outgoers—a mere £66 million—is hardly excessive. However welcome any money may be in this context, I am extremely disappointed that the sum offered does not match the industry's requirements.

I should add that I have pig producers in my constituency. Their problems include, for example, the ban on stalls and tethers, which cost the industry £17.5 million. There is also the cost of compliance with UK public health regulations, which, curiously, comes to £66 million, the same amount that the industry is receiving for both ongoers and outgoers. There is also the cost of dealing with the weakness of the euro, which amounts to approximately £80 million a year.

The Minister, who used to be a shadow Minister for Europe, may wonder why I mention the weakness of the euro as a factor. I am simply seeking a level playing field. There are inherent problems with comparing the British pig industry with, for example, that of the Dutch or that of the Danes. I am interested to know the Minister's view on that. European Commission authorisation for state aid in this context should be balanced, fair and equivalent to that given to the Dutch or the Danes. It is not much good, in a competitive industry, to be told that one will receive £66 million for both categories of aid—an amount far below the cumulative trading losses—if it emerges that one's competitors are receiving substantially more, and that they are getting European Commission authorisation for state aid that is disproportionate.

The Minister may be able to give me those figures now, but if she cannot, I should be grateful if she would supply them to me at a later date. I want to know the exactly how much state aid each country in the European Union gets by comparison with the British pig industry. I am sure that the Minister or her advisers will be able to answer my questions.

The Prime Minister's position is curious. In February 2000, he suggested that cash was not out of the question. I am surprised that he said that. However, he also said that any assistance would have to be balanced by a commitment from producers to restructure their businesses to deal with modern competitive pressures. The Minister of Agriculture, Fisheries and Food had stated only one month before that there would be no cash assistance.

Being political and perhaps slightly cynical about such matters, I wonder whether the new availability of money to the pig industry has anything to do with the onset of a general election.

The National Pig Association submitted a memorandum to the Select Committee on Agriculture and rightly welcomed the money, with reservations. No one would refuse it, but what is its value in terms of the perception of the problem? As the association told the Select Committee, the money was needed to

    ``overcome the competitive burdens made worse by government policy.''

The NPA asked several questions about what would happen if the scheme did not work, including, importantly, whether the Government could

    ``have designed a scheme, which did not, as this one does, exclude those producers who are the most efficient and most progressive in the country''.

The scheme has some serious exclusions, one of which is the fact that, according to the NPA's memorandum,

    ``pig production businesses which do not qualify as SAE''—

small agricultural enterprises—

    ``(ie those with more than 10 employees) will have to reduce their businesses by 16 per cent in order to qualify for the restructuring aid. MAFF's own estimation is that this limitation risks excluding as much as 25 per cent of the national herd from receiving aid. If the objective of the scheme is to enhance efficiency, where is the sense in that? Precisely those producers''—

I would include some from my constituency—

    ``who have succeeded in growing their businesses to date, through greater efficiency, are effectively excluded from receiving aid. It is not as if they do not need aid. Even the most efficient producer in the country''

has been affected. As I said earlier, the cumulative trading losses between mid-1998 and 2000 were £360 million. All that has to be put in context. We do not want to regard the matter as a pig in a poke, but as a de minimis step in the right direction.

The sum is insufficient, I suspect due to the European Commission's attitude. Curiously, a MAFF official, according to the NPA's memorandum, stated that the funding was

    ``the only game in town''.

Presumably, that means that people must take it or leave it. Naturally, people will take something, but they could have received more. I see that the Minister is making notes. The comparative levels of state aid in other countries would enable us to make a good judgment of whether our pig producers have been treated as fairly as they could have been.

The NPA sought reassurance that the

    ``£66 million is ring-fenced for the restructuring of the UK pig industry, and that all sums will be paid out by March 2003.''

Serious and important questions should be asked. The pig industry has suffered enormously over an extended period, and there is no doubt that it needs help. I have never argued against public expenditure per se. I do not even object to the idea of regional structural state aids or anything else, by which I mean British taxpayers' money returning to help the British taxpayer. If we do not receive it, it will go to someone else. We make a net contribution to the European Union, and I want to see it return to the United Kingdom in the context of the scheme, which is a little more important than a brief meeting at 5 pm on a Tuesday afternoon suggests. It deals with the lives and livelihoods of English pig producers.

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Prepared 13 February 2001