Select Committee on Environment, Food and Rural Affairs First Special Report


 The Environment, Food and Rural Affairs Committee has agreed to the following Special Report:—

 The Committee has received the following memorandum from the Department for Environment, Food and Rural Affairs, constituting the Government's Reply to the Eighth Report from the Committee of the 2000-2001 Session, New Covent Garden Market, made to the House on 28 March 2001.

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1.  This reply to the Committee's report is submitted on behalf of the Government by the Department for Environment, Food and Rural Affairs ("DEFRA") which, following a Government announcement on 8 June 2001, took over responsibility for agriculture and the food industry from the Ministry of Agriculture, Fisheries and Food ("MAFF"). References in this response to "the Department" are to DEFRA or MAFF, as the case may be. References to "the Minister" are to the Minister of Agriculture, Fisheries and Food, whose functions are now exercised by the Secretary of State for Environment, Food and Rural Affairs in her capacity as the Minister.

We recommend that MAFF set a deadline for consultation on proposals for Covent Garden Market (paragraph 9).

2.  On 6 April 2001 the Department wrote again to the Corporation and received a response dated 19 April 2001. In the light of this reply the Department wrote to the Corporation seeking further information which has been received.

 We recommend that MAFF clarify the legal position relating to trading at the Market and publish a statement on the conclusions drawn from advice received (paragraph 10).

3.  Different legal views are possible on the question of the extent to which the Corporation of the City of London might, consistently with competition law, assert a market franchise in respect of Billingsgate or Smithfield so as to restrain the selling of fish or meat on the premises of the Authority's Nine Elms site. The Department sought from the Corporation an explanation of its legal case on this issue, and has met representatives of the Corporation to discuss their response. The Minister's decision will be made in the light of the various legal views received. It is no part of the Minister's responsibility, however, to determine this issue either in any quasi­judicial manner or even for the purposes of her own decision as to whether to grant consent. The Corporation's assertion that the activities proposed by the Authority would be tortious appears to the Department to be a relevant consideration for the purposes of that decision, and the Minister's purpose in seeking representations is to enable her to reach a view as to the degree of weight it is appropriate to give to the Corporation's views; but the determination of the issues involved is in general a matter for the courts alone, although the question of whether the assertion of the Corporation's market franchise is consistent with UK competition law is also a matter which would be capable of being considered by the Director General of Fair Trading, either on an application by the Corporation for guidance or in the conduct of an investigation. The Department accepts that, if the Corporation's case appears to be prima facie arguable, so as to give rise to a significant risk that the Corporation may be entitled to restrain the activities proposed by the Authority, and if no other resolution is achievable, it would be greatly preferable for any dispute between the Corporation and the Authority to be determined by the courts in advance of any leases being granted by the Authority for the purposes of the activities in question.

 We recommend that MAFF take legal advice regarding any possible or perceived conflict of interest in the light of human rights legislation (paragraph 11).

4.  The Department has considered the legal position on the points raised by the Committee. The Department does not consider that Article 6 of the European Convention on Human Rights could possibly be legitimately invoked by the Corporation of the City of London in relation to the Minister's decision to grant or withhold consent under section 18(1)(f) of the Covent Garden Market 1961, since, in the Department's view, that decision could not conceivably be construed as a determination of the Corporation's civil rights for the purposes of Article 6. The Minister's responsibility under section 18(1)(f) of the 1961 Act is not to adjudicate between the Authority and the Corporation or any other third party, but rather to determine the appropriate balance between the interests of ensuring that the Authority properly performs its duty of providing a wholesale horticultural market and the interests of ensuring that, so far as is compatible with the proper performance of that duty, the Authority is free to carry on such activities as are conducive to the best use of its assets. For similar reasons, the Department can see no ground whatever for any suggestion that the discretion conferred by the 1961 Act, or the statutory context in which that discretion falls to be exercised, gives rise to a conflict of interest on the part of the Minister.

 We urge the CGMA to submit to MAFF at an early opportunity a detailed and fully costed proposal for a capital investment programme at New Covent Garden Market. We recommend that MAFF open discussions with the Treasury on a more appropriate funding formula for Covent Garden Market Authority to allow it to invest in the infrastructure of the Market. Efforts should also be made to determine if £2.5 million is really the right sum needed to address any contingent liability resulting from CGMA's remaining few tenants in Market Towers. The Treasury should be consulted on the possible use of this money for further investment in the Market. If no solution to the Authority's investment problems is found, the Market will cease to be attractive to traders, regardless of Ministerial decisions on privatisation or diversification. The present situation, where everyone recognises that Covent Garden Market is imprisoned in Government control but no one seems willing to take the initiative to challenge it, is absurd (paragraph 15).

5.  This recommendation covers a number of issues. On capital investment, the Authority has put together proposals for a capital investment plan and these have received the approval of the CGMA Board. The proposals have been discussed with the Department, who are waiting for a detailed cost breakdown of the individual projects before discussing with HM Treasury and the Authority methods of financing the investment programme.

6.  On the question of investment in the infrastructure of the Market, the Department is in discussion with HM Treasury on retention of all, or part, of any trading surplus to fund capital works. However, under resource accounting arrangements the capital charge will, on paper, reduce the Authority's surplus and allow them to retain all or part of the actual surplus.

7.  The calculation of the surplus which determines the sums payable to the Department for transfer to the Consolidated Fund is as follows:

    Profit, pre tax
    Plus Depreciation of plant
    Less Market Towers interest (on contingent liability sum)
    Less Corporation tax on market account
    Less Capital expenditure in year.

The capital requirements of the Market are not directly taken into account.

8.  Turning to the contingent liability fund (CLF). This was established in 1991 following the sale of Market Towers. The purpose of the CLF is to provide a degree of financial cover against possible claims on the Authority by tenants of Market Towers at the time of sale, in respect of any default by the new owners in their obligations as landlords under the transferred leases. The liability covers such items as air conditioning, water supply apparatus, lifts, mains services and associated equipment and the building fabric.

9.  The Authority, with the approval of the Department and HM Treasury, set up the fund by retaining £1.5 million from the proceeds of the sale of Market Towers. This money would otherwise have been paid to the Department for transfer to the Consolidated Fund. Most of the tenants on the lower five floors at the time of the sale have departed, but the greater part of the building (floors 6­21) remain let to the same tenant, namely the Department of Health. This lease expires December 2011. The potential liability has not, therefore, greatly diminished on account of these tenancy changes. Moreover, the sum initially placed in the CLF (which has accrued interest) was not intended to offer full cover for all possible liability claims; it was, rather, regarded as a prudent measure to reduce the cost to the Authority and Government of any future claims. For these reasons the Government does not consider that the CLF is excessive or that it would be sensible to reduce it.

 We believe that it is the right policy to sell New Covent Garden Market but in order to obtain a reasonable price for the taxpayer and to ensure the future of the Market, it is essential that MAFF first address the other difficulties outlined in this Report. Whilst we agree that it is absurd for MAFF to run a horticultural market, the attempted sale of Covent Garden Market without clarification of the legal constraints and a strategy for all London markets (see below) is unwise and may prove fruitless (paragraph 19).

10. The Department is giving further consideration to the options for the future ownership and management of the market. However, it is very unlikely that the estimated value of the site mentioned in paragraph 17 of the report (between ú40 million and ú50 million) would be achievable if the market were sold as a going concern.

 It would be helpful if Wandsworth Borough Council could spell out in greater detail its position on the future use of the site, for example by preparing a more detailed planning brief (paragraph 22).

11.Wandsworth Borough Council has provided further information to MAFF. A copy of the letter is attached.

 We recommend that the Government, together with the GLA and the Corporation of London, instigate an independent review, properly resourced, to take a rapid, rational and strategic view of the provision of wholesale markets in London. We recommend that the review examine the number and location of markets; whether their ownership by public corporations within a framework of statutory restrictions is the most flexible and adaptable model for their delivery; and a programme of action, legislative or otherwise, to implement a strategy for the development of London's wholesale markets (paragraph 24).

12.This is a helpful recommendation which is in line with the initiative taken by the Minister in March 2000 when he chaired a meeting of London market superintendents and Corporation of London representative to discuss the rationalisation of London markets. We are content with the suggested strategy and agree that the future of New Covent Garden Market needs to be considered in the light of the future of wholesale markets in London. However, responsibility for the suggested action only partly falls to the Department and the decisions required cannot be taken by the Department alone. We will establish contact with the Government Office for London and other relevant Departments to discuss how to take the recommendation forward.


13. Paragraph 7 of the report states: "The statutes governing the Market stipulate that at least 50 per cent of its produce must be fruit, vegetables and flowers .......". There is no such restriction in the Acts covering the Market and there is nothing requiring the Authority to make space available to all horticultural wholesalers who apply for space in the Market. However, the Authority can only diversify if it considers that the other activities are "requisite, advantageous or convenient" in connection with the provision of a wholesale horticultural market, or with a view to making the best use of its assets.

Department for Environment, Food and Rural Affairs
14 September 2001

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