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.
* * *
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.
OTHER POINTS
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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