House of Commons - Regulatory Reform

Select Committee on Regulatory Reform Thirteenth Report

THIRTEENTH REPORT

The Regulatory Reform Committee has agreed to the following Report:

THE PROPOSAL FOR THE REGULATORY REFORM (SUGAR BEET RESEARCH AND EDUCATION) ORDER 2003

1. The Regulatory Reform Committee has examined the proposal for the Regulatory Reform (Sugar Beet Research and Education) Order 2003 in accordance with Standing Order No. 141. On the evidence before us, we are content that a draft order in the same terms as the proposal should be laid before the House. However, some 42 days of the period for Parliamentary consideration still remain, during which we may yet receive further representations. We will therefore make our formal recommendation to the House later in the 60 day period. Meanwhile, our report on the evidence before us is set out below.

Introduction

2. On 16 July 2002 the Government laid before Parliament the proposal for the Regulatory Reform (Sugar Beet Research and Education) Order 2003 in the form of a draft of the order and an explanatory memorandum from the Department of Environment, Food and Rural Affairs (the Department).[1] The proposed regulatory reform order would relieve the Secretary of State for Environment, Food and Rural Affairs (the Secretary of State) of the duty to prepare an annual research programme into sugar beet, and would remove the Secretary of State's power by order to provide for carrying any such order into effect.

3. The House has instructed us to examine the proposal against the criteria specified in Standing Order No. 141(6) and then, in the light of that examination, to report whether the Government should proceed, whether amendments should be made, or whether the order should not be made.[2]

4. Our discussion of matters arising from our examination is set out below. Where a criterion specified in Standing Order No. 141(6) is not discussed in this report, this indicates that we have no concerns to raise about that criterion. In the course of our examination, we requested further information from the Department about the maintenance of necessary protection for sugar beet growers who are not members of the national body representing growers. The Department's response is discussed below.

Purpose of the proposal

5. The proposal would repeal section 68 of the Food Act 1984 (the Act). This would have the effect of removing the following duty from the Secretary of State (as "the appropriate Minister"):

to "prepare for each year a programme for carrying out research and education in matters affecting the growing of home-grown beet" after undertaking consultation with the processors of home-grown beet and any body which is substantially representative of growers of home-grown beet (section 68(1)(a)).

It would also remove the following power from the Secretary of State:

to provide, by order, "for carrying any such programme into effect"; such an order may, amongst other things, require sugar beet growers and processors to meet the cost of carrying out the annual research and education programme (sections 68(1)(b) and 68(2)).

In addition, the proposal would make a consequential amendment to section 69 of the Act by re-enacting the definition of "home-grown beet" that would otherwise be lost by the repeal of section 68, and consequentially repeal paragraph 13 of schedule 2 to the Food Safety Act 1990.

6. The proposal is intended to complete the transition from statutory requirements to voluntary, industry-led arrangements, announced in December 1998 by the then Minister of Agriculture, Fisheries and Food in agreement with the Secretary of State for Wales.[3] At that time, the Government indicated that it intended to replace the existing statutory arrangements with voluntary arrangements whereby the industry itself became responsible for research and education in matters affecting the growing of sugar beet. The arrangements set out in section 68 date back to 1938, when the relationship between the Government and industry was very different. The Government considered that the arrangements should be modernised because, over time, the arrangements had become cumbersome to operate and the requirements of an annual research and development programme created uncertainty for research contractors. Accordingly, the then Sugar Beet Research and Education Committee (SBREC) was wound up in March 1999. The SBREC was a non-statutory, advisory body, administered by the Ministry of Agriculture, Fisheries and Food and responsible for drawing up and overseeing the section 68 programme. As a result of the SBREC's demise, oversight of the 1999/2000 programme fell to the Minister.

7. Currently, the Secretary of State has arranged for the substance of the statutory duty to prepare the section 68 programme to be undertaken by industry, rather than by Government. The British Beet Research Organisation (BBRO), established by the sugar beet industry subsequent to the winding up of the SBREC, provides the Secretary of State with a draft research and education programme every year.[4] The Secretary of State then adopts this as the Minister's programme under section 68(1)(a). The proposal would mean that the Secretary of State would no longer be responsible for preparing a research and education programme, thus allowing industry complete control over the existence, timing and other aspects of any such programme.

Extent of the proposal's application

8. Although the Act applies to Great Britain, the proposal would extend only to England and Wales. This is because the proposal's provisions fall within the devolved competence of the Scottish Executive, and it is therefore for the relevant Scottish Ministers to decide whether to make amendments equivalent to this proposal. Given that no sugar beet is grown or processed in Scotland, the continuing application of section 68 to Scotland should have no practical effect. Scottish Ministers are aware of the proposal and have raised no objections.

Our assessment of the proposal against Standing Order No. 141(6) criteria

INAPPROPRIATE USE OF DELEGATED LEGISLATION

9. The proposal appears to be appropriate for delegated legislation.

REMOVAL OR REDUCTION OF BURDENS

10. We consider that, by repealing section 68, the proposal would remove a legal burden from members of the sugar beet industry. We are satisfied that the proposal would not create or impose any new burdens. However, while we consider that the Department is correct to conclude that the proposal would remove a burden, we do not support the analysis used by the Department in reaching this conclusion. We discuss below our difficulties with the Department's analysis and set out our preferred analysis, in terms of the Regulatory Reform Act 2001.

11. The Department's analysis considers paragraphs (a) and (b) of subsection 68(1) separately, for the purposes of section 1(1) of the Regulatory Reform Act. The Department seeks to demonstrate that each paragraph imposes a separate and distinct burden, and that the proposal would therefore have the effect of removing two burdens, one imposed under paragraph (a) and the other imposed under paragraph (b) (although they appear not to regard it as necessary to establish that paragraph (a) imposes a burden).[5] It is clear that the power granted under section 68(1)(b) imposes a burden, for the following reasons:

section 68(2) to (4) imposes a burden on the sugar beet industry by providing that the research and education programme is to be paid for by the industry

section 68(1)(b) authorises the appropriate Minister to exercise the power by which this burden may be imposed, in terms of section 2(2)(a) of the Regulatory Reform Act.[6]

12. However, the Department's attempt to demonstrate that section 68(1)(a) also imposes a burden, which the proposal would remove, is unconvincing. The difficulty with paragraph (a) is that it creates a duty which appears to impose a burden on the appropriate Minister, and no one else, to prepare an annual research and education programme. Under section 2(1) of the Regulatory Reform Act, a burden which affects only a Minister may not be removed by means of a regulatory reform order. The Department argues that section 68(1)(a) imposes a burden for the following two reasons:

the requirement to consult the industry before preparing a programme could be considered to impose a burden on the industry

the practical effect of the section is to impose a burden, since "the industry is obliged, through the BBRO, to make a contribution to the programme (in effect to conceive it) on the basis that Ministers would not otherwise be in a position to introduce the programme".[7]

13. We do not support either of these arguments. We do not consider that a requirement for the appropriate Minister to consult the industry can properly be described as imposing a burden on the industry: as the Department's own explanatory statement admits, "it is expected that the effect of a burden should be negative, and the assumption is that the legal right conferred by legislation to contribute under a consultation process is a positive imposition."[8] Furthermore, although the practical effect of current arrangements may well be to impose on the industry the burden of preparing a draft research and education programme, we consider that the appropriate Minister is not legally required to impose this burden - there is nothing to stop the Minister from employing departmental sugar beet experts to prepare the draft programme, for example.

14. Nevertheless, we consider that the repeal of the whole of section 68 is permissible under the terms of the Regulatory Reform Act. We consider that section 68 should be read as a single legislative provision for the purpose of section 1 of the Regulatory Reform Act, rather than subsections 68(1)(a) and (b) being read as two separate legislative provisions, as the Department suggests.

15. The purpose of section 68 is evidently to require the Minister to prepare annual research and education programmes to be carried out at the industry's expense. Section 68(1) makes it clear that the Minister's programme can be implemented only by way of an order which will impose a burden on the industry. The Minister's section 68(1)(a) duty to prepare programmes is thus inextricably linked to the remainder of section 68, which deals with the mechanism for carrying the programmes into effect. Section 68, in its entirety, may therefore be treated as a single provision for the purposes of section 1 of the Regulatory Reform Act: the section imposes burdens on the sugar beet industry, and is therefore eligible for repeal by means of a regulatory reform order. Adopting this analysis, we are satisfied that the proposal removes a burden by repealing section 68.

NECESSARY PROTECTION

16. We have considered whether section 68 of the Act need be retained in order to continue any necessary protection. We see section 68 as affording two types of protection to the sugar beet industry:

Protection as regards the management and auditing of the accounts of the levy fund which pays for the research and education programme to be carried into effect.

Protection as regards consultation, in that the Minister may be expected to take account of all representations made about a proposed research and education programme.

17. In relation to the first type of protection, we consider that this protection will no longer be necessary because responsibility for all arrangements for the preparation and implementation of a research and education programme will be transferred to the industry itself. It would not be appropriate for the Government to legislate to protect the management and auditing of fees levied to finance the programme because industry has indicated that it prefers a voluntary, industry-led approach to a Government-regulated approach.

18. In relation to the second type of protection, if the proposed order is made, it is likely that the BBRO will receive submissions from various groups and individuals within the industry in the course of formulating its research and education programme. We were concerned to establish the likely standing of growers - particularly smaller growers - who are not members of the National Farmers' Union (the NFU) in commenting in the course of this consultation process, given that such growers do not sit on the BBRO's board.[9] Currently, the Minister can be expected to take such representations into account in formulating the programme.

19. Our concern was that the BBRO, which is dominated by the NFU and British Sugar, could be less inclined than the Minister to have regard to the concerns of non-NFU member growers. We asked the Department to comment on this point.

20. The Department told us that the NFU is legally required to act as agent for each sugar beet grower,[10] including those growers who are not members of the NFU. Growers who are not members of the NFU are in fact represented by the NFU in several ways; for example, by the NFU presence in each sugar beet factory, monitoring the sampling process when lorries first arrive, and by NFU representation on the BBRO. The Department considers that, if a grower who is not a NFU member wanted to comment on the BBRO research and education programme, that grower could contact either their local NFU representative or the appropriate British Sugar area manager; that representative would then pass the grower's comments to the appropriate BBRO board member. The Department states that "comments from all growers on the BBRO's research programme will be welcomed by the board ... information on the direction and progress of the BBRO's research programme is passed to all growers irrespective of NFU membership or the size of their contract with British Sugar".[11]

21. On the basis of the Department's response, we are satisfied that the proposal will not adversely affect the standing of growers who are not NFU members in commenting on the preparation of the industry's research and education programme. Consequently, we have concluded that it is not necessary to continue either of the types of protection currently afforded by section 68 of the Act, and that it is appropriate that the proposal does not continue either protection.

ADEQUATE CONSULTATION

22. We consider that the proposal has been the subject of, and takes appropriate account of, adequate consultation. The consultation process adopted by the Department does not reflect the standard consultation process for regulatory reform orders, as set out in Cabinet Office guidelines. This is because the proposed changes to section 68 were not originally framed as proposals for a regulatory reform order, for reasons which are explained below. Nevertheless, we are satisfied that the consultation process to which the proposal has been subject has been appropriate.

23. The consultation process commenced in January 1998, following the Government announcement that it considered the SBREC should be wound up. A consultation letter was sent to over 40 organisations across the sugar sector seeking their views on the replacement of the SBREC with a development council for sugar beet and a reduction in the level of government involvement in the section 68 arrangements.[12] Eighteen responses were received as a result of the consultation, including a joint one from the then current and prospective levy payers and from their representatives, namely the NFU on behalf of growers and British Sugar as sole processor.[13]

24. The proposals set out in the consultation letter were generally received favourably by the respondents. While all the respondents agreed that industryfunded research should continue, none of them sought to maintain the existing section 68 arrangements, and almost all commented favourably on the need for change. Many respondents would have found the institution of a development council to carry out industry-funded research acceptable. However, this option was not favoured by the NFU and British Sugar, who, as levy payers, were the main stakeholders. These two sent a joint response pressing for sugar beet research to be carried forward by industry arrangements only, without government involvement. The Institute for Arable Crops Research, the major sugar beet research establishment, also supported this option, as did the then chairman of the SBREC.

25. The outcome of the consultation process was an announcement made by Ministers[14] on 18 December 1998, following further discussions with the NFU and British Sugar about the detail of the proposed industry arrangements. Ministers announced that:

(a) the Government was withdrawing from the section 68 arrangements

(b) the SBREC would be wound up at the end of March 1999

(c) the section 68 system of funding research and education by way of statutory levy would terminate as from 1 April 2000, and

(d) the requirement for the appropriate Minister to consult annually and draw up a programme under section 68 would be continued until such time as that section could be repealed.

Ministers undertook to liaise closely with the industry on the details of the new, industryrun, system with the aim of minimising any disruption during the transitional period. A letter setting out the result of the consultation exercise was issued on the same day.[15]

26. The only responses received from industry to this announcement were from the National Institute of Agricultural Botany and the British Sugar Beet Seed Producers Association.[16] These responses addressed the transfer to the new industryrun arrangements and emphasised the need for the process to be handled smoothly to avoid disruption to research establishments carrying out sugar beet research projects. The Department believes that such disruption was avoided because a close working relationship was maintained between the then Ministry of Agriculture, Fisheries and Food and industry representatives.

27. In March 2002, we received a request for advice from the Department, asking us to comment on the appropriateness of proceeding with a regulatory reform order on the basis of a consultation exercise that pre-dated the requirements of the Regulatory Reform Act. Our response to the Department's request is appended; in summary, we were satisfied that, in the circumstances, the consultation that had been undertaken had been adequate and appropriate.[17] However, given that consultation had never been undertaken in the context of inviting comment on a regulatory reform order, we were concerned to ensure that consultees were informed of the relevant parliamentary process and of their ability to comment to the parliamentary committees. Consequently, we advised the Department that, when this proposal was laid before Parliament, the Department should write to all consultees informing them that it had been so laid, and enclosing a suitably amended version of the annex which is routinely included in all consultation documents.[18] The Department has done as we suggested. We have received no submissions from consultees.

28. On the basis of this information, we are satisfied that the consultation process canvassed an appropriate group of consultees and that adequate time was allowed for responses. We are also satisfied that the proposal demonstrates that the Department has given appropriate consideration to the points raised by industry in response to the consultation letter.

29. We note that the Department reports that the National Assembly for Wales has given "outline consent" to the proposal to repeal section 68. Formal agreement (as required by section 1(5) of the Regulatory Reform Act) will be sought from the National Assembly prior to any draft of the Order being laid before Parliament for a second time.

PREVENTING EXERCISE OF RIGHT OR FREEDOM

30. We do not consider that the proposal would prevent any person from continuing to exercise any right or freedom that he or she might reasonably expect to continue to exercise. We are satisfied that the removal of the right (under section 68(1)) for growers and processors to be consulted on the preparation of the research and education programme is consistent with the transfer of the responsibility for preparing such a programme to those consultees themselves.

COSTS AND BENEFITS

31. We have examined whether the Department has properly assessed the increases or reductions in costs or other benefits likely to result from the proposal's implementation. On the evidence before us, it appears that the proposal would be likely to result in substantial savings to the sugar beet industry.

32. Clearly, under the current transitional arrangements whereby the industry undertakes to prepare the sugar beet research and education programme, the industry has made savings in the form of statutory levies foregone by the Minister. The Department reports that, prior to the transfer of arrangements to the industry, these statutory levies typically raised about £2.2 million annually. However, as the Department notes, it is difficult to quantify net savings since the industry continues to fund its own research and education programme - although the cost of that programme is wholly a matter of industry choice rather than ministerial determination.

33. The Department considers that, if the proposal is implemented, there will be savings to industry in not having to prepare and cost a draft research and education programme for submission to Ministers on an annual basis. Again, it is difficult to quantify the benefits because the BBRO will continue to incur the costs of drawing up a research programme, although the BBRO will be free to determine the programme's frequency once section 68 has been repealed. The industry estimates that the resulting administrative and accounting benefits of abandoning the section 68 procedure would result in savings of up to £90,000 per year. This figure comprises approximately £85,000 in VAT which the BBRO has been advised it could reclaim if it were not acting as agent of the Ministers in drawing up a programme under section 68, and £3,000 in administration costs.

34. We are satisfied that, in so far as possible, the proposal has been the subject of estimates of, and taken appropriate account of, increases or reductions in costs or other benefits that may result from its implementation.

Conclusion

35. On the evidence currently before us,[19] we conclude that a draft order in the same terms as the proposal should be laid before the House. We welcome the Department's assurance that, should the proposal become law, "comments from all growers on the BBRO's research programme will be welcomed by the board ... information on the direction and progress of the BBRO's research programme is passed to all growers irrespective of NFU membership or the size of their contract with British Sugar", as set out in paragraph 20 above.

1 Copies of the proposal are available to Members of Parliament from the Vote Office and to members of the public from the Department. The proposal is also available on the Cabinet Office website http://www.cabinet-office.gov.uk/

regulation/act/proposals.htm Back

2 Standing Order No. 141(2). Back

3 At that time, the Minister of Agriculture, Fisheries and Food and the Secretary of State for Wales were the "appropriate Minister" under section 68; the appropriate Ministers are now the Secretary of State for Environment, Food and Rural Affairs and the Secretary of State for Wales. Back

4 The BBRO is funded jointly by sugar beet growers and British Sugar, and is managed by a Board consisting of two representatives of growers from the National Farmers' Union and two representatives of the sole processor, British Sugar, with an independent chairperson. Back

5 See the explanatory statement, paragraph 12. Back

6 Section 2(2)(a) provides that any reference in the Regulatory Reform Act to creating or imposing a burden includes "a reference to authorising or requiring a burden to be created or imposed". Back

7 See the explanatory statement, para 11(b). Back

8 Above note 5, para 11(b). Back

9 The NFU acts on behalf of all sugar beet growers. The Department states that over 80 percent of growers are members of the NFU. See above note 4. Back

10 This legal requirement arises because all processors and growers of sugar beet in the EU are required to enter into an agreement setting out the contract between them. In the United Kingdom, this agreement is known as the IPA and is between British Sugar and the NFU. Back

11 See Appendix B, correspondence from the Department dated 7 August 2002. Back