Memorandum submitted by the Dairy Industry
Association Ltd (DIAL) (G4)
1. DIAL is the trade association representing
the interests of the milk processing and distribution sector of
England and Wales. Our members include plcs, foreign multi-nationals,
consumer co-ops, producer co-ops, small independent processors
and bottled milk buyers distributing milk on the doorstep. DIAL
members account for nearly 90 per cent of the milk processed in
England and Wales.
2. The dairy processing industry is a major
industry where there is a significant investment in sunk capital
costs. The industry employs around 40,000 people and the value
of industry sales is in the order of £6 billion.
3. The sector is subject to the normal rules
of business, ie pursuit of profit through effectiveness in competition.
The industry operates in an international market place.
4. In our submission to the inquiry we wish
to focus on providing a response to the first two points of reference
issued for the inquiry:
(i) whether the vision for the Department
is appropriate and what progress has been made towards meeting
that vision; and
(ii) whether farming and food, environment
and conservation concerns and rural affairs are each given proper
weight by the Department and whether the Department is engineered
to deliver its objectives.
5. DEFRA is the sponsoring department for
the dairy industry. Under normal circumstances it could be expected
that the industry would be sponsored by the DTI. It is therefore
important that DEFRA recognises the impact it has on the industry
and that its requirements are acknowledged in DEFRA's aims and
6. DEFRA's vision is elaborated by the aims
and objectives set out in its document "Working for Essential
of Life". We are of the view that these aims and objectives
do not give sufficient recognition of the economic imperatives
agriculture and its associated processing industries are subject
to. This is somewhat in contrast to the focus given to environmental
issues. Both areas require full consideration.
7. We believe that a better appreciation
of DEFRA's function could be achieved if it was explicitly stated
that DEFRA's role was to reconcile competing interests for the
countryside. This should be followed by a statement of those competing
interests which should include a clear and unambiguous affirmation
of the need for the food and farming sector to achieve profitability.
This would ensure that the commercial needs of the sector were
8. DEFRA has only been in existence for
one year. It is difficult at this stage to comment on anything
other than policy direction. However, one example of how it does
not give adequate consideration to the economic imperatives of
the food and farming industry is in respect of DEFRA's objectives
for the reform of the CAP.
9. DEFRA is seeking to reduce the level
of price support given to agriculture. If DEFRA is successful
in realising its objective then it will compel a major restructuring
of UK farming that will mean fewer and larger farms. Whilst a
number of smaller farms will be able to maintain themselves by
diversification and pursuing the range of alternative strategies
identified by DEFRA, the effect of price reductions for the majority
of farmers will be the need for them to pursue economies of scale.
10. The pursuit of economies of scale by
producers must be recognised and supported by DEFRA. DEFRA should
develop policies to assist in this process. This should include
the provision of public funds where possible. DEFRA should also
ensure that other policies, such as its environmental objectives,
give due regard to the process.
11. In the longer term, assuming the economic
needs of agriculture and food processing is recognised, then DEFRA
will only be able to give proper weight to the range of interests
it has to reconcile once it has established a single corporate
culture. This will be achieved by day-to-day contact between staff
and through the process of staff rotation. This will ensure that
staff have an instinctive appreciation of the range of concerns
that need to be reconciled by the Department. The structure and
organisation of DEFRA, whilst it is relevant, probably does not
play such a significant role in the establishment of a single
12. Since the creation of DEFRA we have
continued to maintain a good working relationship with DEFRA personnel.
DIAL remains satisfied with the professionalism and dedication
of the civil servants in DEFRA. DEFRA personnel respond promptly
to queries raised by DIAL.
13. We are however concerned that the consultation
process used by DEFRA to elicit views from industry can be formalistic
and unproductive. Large unwieldy stakeholder forums, whilst they
can be used to demonstrate that all interests have been consulted,
are not effective at establishing the detailed needs of each sector.
14. We have raised this issue with DEFRA
in respect of CAP reform issues and they have indicated that they
will seek to consult more closely on a sectoral basis. DIAL looks
forward to this dialogue.
31 May 2002