Select Committee on Environment, Food and Rural Affairs Minutes of Evidence

Examination of Witnesses (Questions 62 - 79)



  Q62  Chairman: Can we welcome our next set of witnesses: Mr Leif Mills, the Chairman of the Covent Garden Market Authority, and Dr Mike Liggins, its General Manager. Gentlemen, we know you have both been to give evidence on a number of occasions before the Committee and we are grateful for your willingness to come again and talk to us about the difficult situation that we have just been discussing with your colleagues from the Corporation of London. We thought that, just as in the same way as with the Corporation, it might be helpful to set the scene if for a few moments you would make a statement to put in perspective your own position on this matter.

  Mr Mills: Thank you, Chairman, and thank you for the opportunity to appear before the Committee. We welcomed the setting up of the inquiry by Nick Saphir and we welcomed not only his analysis but also his recommendations and we accepted them. That acceptance was echoed by other prominent players in the horticultural world, like the Farmers' Union and the Fresh Produce Consortium and so forth. We were expecting to be able to reach some sort of understanding with the Corporation of London but that proved to be not practical for a number of reasons, which I am quite happy to go into if you wish. In that context we welcomed what the Minister said last Thursday in his written statement and we also welcomed the fact that the Minister also wrote to me at the same time giving his consent to our market trading in fish and meat. We welcomed both Saphir and the ministerial statement and letter in the context of the strategy which the board has of developing the market into a one-stop food shop in the centre of London. We think that our future is promising given the implementation of the recommendations of Saphir and the ministerial consent which we now have which we intend to pursue shortly. There remain, of course, the two outstanding issues of ownership of the market and financing capital investment terms of the market. They are the significant issues that we are addressing at the moment through discussions with various parties and we can see a possible solution to both those points emerging. On the whole, Chairman, we are fairly bullish about the future and that optimism, I think, is justifiably shared by our tenants and by the union that operates in the market.

  Q63  Mr Mitchell: Is that bullish on a kind of Sinn Fein "ourselves alone" basis?

  Mr Mills: No, it is bullish in the context of Saphir and particularly the ministerial statement and his letter allowing us to go into fish and meat. It is a recommendation and a decision by the minister for which we have been waiting, we have now got that decision and that has buttressed our forecasts for the future.

  Q64  Chairman: Let me just follow on from what you were saying in your very helpful summary. If I might just say to you, you have got a track record like a lot of survivors in a lifeboat who keep chucking bits of the market out in an attempt to keep the boat afloat and you have moved away from what was there originally as a wholesale fruit and vegetable market to one where all kinds of intriguing activities take place in the value added food business, we have got herbs down one end and the flower market down the other and it is all desperately in need of lots of investment. You are hanging on now like the guys on the north face of the Eiger, one little rope and it is gradually fraying and any minute now it is going to disappear. Why do you not just throw the towel in? The Government has not listened to you, they have given you no investment, these nice people from the Corporation, the City of London, have offered to take this place off your hands and you can be relieved of all of this worry. Why do you feel so bullish against a background of such despair?

  Mr Mills: How much time have I got, Chairman? First of all, yes, of course the market has changed and it has developed. The development of catering is a significant change from its original function when the six halls of the fruit and vegetable market were all traditional wholesalers; now only two of them are traditional wholesalers and the rest are catering. That catering trade is flourishing and expanding and, of course, it partly supports the wholesale activity that goes on in the market. Yes, we have gone wider than horticulture, our statutes allow us to do it, and the Minister has now said that we can sell fish and meat products.

  Q65  Chairman: He has not quite said that. I thought what he said was that he did not see any objection to it but thought it would have to be ultimately decided in the courts.

  Mr Mills: What he said was as far as he is concerned, in his letter to me, he has "given consent to the authority granting or extending the scope of leases for the purpose of selling fish or meat or fish or meat products, as on such parts as we consider to be appropriate". He also said that in doing so we shall not do anything illegal, which of course we would not, and if the Corporation of London choose to object to us doing that then the Corporation of London will have to take us to court.

  Q66  Chairman: It does not actually show great leadership by Government, does it?

  Mr Mills: It shows exactly what the decision can be given goodwill and intent on the part of the Minister, which I think he has shown. The Minister has to give consent and we then implement.

  Q67  Chairman: I did a Paxman-like interruption on you. You were explaining to me why you were prepared to still try and keep the New Covent Garden Market Authority lifeboat afloat.

  Mr Mills: I think you mixed your metaphors with that and climbing the Eiger, Chairman. Either way, we think there is a fundamental role that the market fulfils of providing not only horticultural products but increasingly wider food products to the traditional part of the market, the retail part, and more particularly to catering. Secondly, we are a large employer in the borough, we employ altogether about 2,500 people, and we wish to see that employment not only continue but to expand. We think that the Corporation's attitude to us and to Saphir and the ministerial statement is now basically anti-competitive and restrictive of us. It has now become clear to us that far from being as you described them, nice gentlemen, although they are personally, in terms of their Corporation responsibilities they are deliberately trying to stifle the development and expansion of New Covent Garden Market to protect their own markets for whatever reason. We do not think they will be successful in this.

  Q68  Chairman: Let us just explore this. You have not objected to the concept of them taking over the running of your site, but you have expressed concern about this question of their investment position. I hope that is factually correct, and do jump in and tell me if I am wrong. It is clear that particular line of inquiry is not making a great deal of progress at this particular time.

  Mr Mills: Correct.

  Q69  Chairman: What would the City of London have to do, the Corporation, to reinvigorate your enthusiasm for that solution?

  Mr Mills: First of all, they would have to completely abandon their current proposals. When we had original discussions with them informally there was some encouragement for the view that they would take on responsibility for the market with all that that means in terms of liabilities and in terms of the future, but when we saw the report that the Town Clerk made to the City Markets Committee, and the letter that he wrote to the Secretary of State, it was clear—explicitly clear—that they wished to curtail the activities that currently go on in the market, not put any significant investment into us, and the only reason for those two things could have been that they wished to see us slowly decline and cease to be a competitor to what they hoped would be an expanding Spitalfields. If I can quote the letter that the Town Clerk wrote to the Secretary of State on 18 February this year, it talked about if they took over ownership "there would have to be some modification of activities at New Covent Garden". They also quoted in the report and the letter that even if finance were available they did not believe that creating two composite markets would be viable or desirable. So the issue of money as the objection falls into that context. They do not wish to see two composite markets, even if finance were available. I can assume the only reason for that, again, is an anti-competitive attitude to not letting us compete because they know once the fish and meat bandwagon starts to roll, I have no doubt that there will be some traders—I am not saying 60%, I am saying some traders—both within and without Billingsgate and Smithfield will want to come to us. If I may make one further point, Chairman. When the Committee met two years ago, and more recently this afternoon, there was a lot of emphasis about the cost of health and safety and hygiene rules for fish and meat traders. In one sense that is a perfectly fair point but, of course, that applies to our fish and meat traders in exactly the same way. We have two fish traders and we have one meat trader. Each of those companies spent between a quarter and half a million fitting out their premises to comply with the latest hygiene regulations. In terms of inspection, our market is patrolled every day by Defra inspectors who look at the quality of the produce, look at the context in which it is sold, and clearly they have the power to downgrade any adverse products or to produce reports if there is anything that is not hygienic or not conforming with statute. We are regulated, and quite rightly so, but the idea that the Corporation has spent all this money on hygiene and somehow we would not if we developed into fish and meat is totally false.

  Q70  Chairman: Since February of this year have you had any kind of formal meetings with the Corporation to discuss the situation?

  Mr Mills: We had an informal meeting with the two gentlemen who have just been giving evidence but that failed to resolve any issue.

  Q71  Chairman: So, to use modern parlance, no roadmap?

  Mr Mills: No.

  Q72  Mr Mitchell: That was not quite what the Corporation said. You quoted their Town Clerk's statement as if it applied to Covent Garden, but what he actually said was: "I do not believe the creation of composite sites at Nine Elms and Spitalfields is desirable or financially viable", he did not say anything about Covent Garden.

  Mr Mills: I think you will find there were two documents. One was a letter to the Secretary of State on 18 February from the Town Clerk and the other is the report that the Town Clerk made to the City Markets Committee.

  Q73  Mr Mitchell: In February?

  Mr Mills: Yes, 11 February was the report. "I do not believe that the creation of composite sites at Nine Elms and Spitalfields is desirable or financially viable", not "and" but "or". Then he says later on: "I would be reluctant to recommend that New Covent Garden and Spitalfields should both be expanded to on-site composite markets even if the necessary money were available in New Covent Garden under the control of the Corporation". If I may emphasise, quite rightly the Corporation have referred to the discussions they have had with our tenants. They came and they met the executive committee of our tenants' association and not only did they make it clear that they were not prepared to put any new money into Covent Garden if they assumed ownership, they would just use the corporation tax that we pay at the moment, but also they made it clear there would continue to be a restriction on the existing meat and fish trade which we have through the three companies we have.

  Q74  Mr Mitchell: That is what they mean by a "modification of some of the activities"?

  Mr Mills: I assume it does. You referred to Paxman, Chairman, and the President of our association asked the Corporation of London people if they took over ownership of the market would our existing meat and fish traders be allowed to sell face-to-face; he asked the question five times and never got an answer. The only reason he could not have got an answer was because I assume the answer would have been no.

  Q75  Mr Mitchell: You cannot raise the money, apart from what Defra gives you from the running surplus, the Corporation cannot either, so you are going to have to turn to new finance.

  Mr Mills: Yes.

  Q76  Mr Mitchell: Your response to the Government consultation on 3 February said: "We do not see how Newco could be funded or would function . . . " Have you had discussions with sources of private capital to make that statement?

  Mr Mills: No, at that time we did not because from our informal discussions we still thought that the Corporation of London route was the route that was practical. There are two points. As you will have known from our Annual Report and Accounts, last year we made about £2.2 million profit on a turnover of £10 million. We pay corporation tax of just over £700,000 and the balance, the £1.5 million, we are now allowed to keep instead of remitting it to the Ministry. In fact, that position has been confirmed not only year by year but the letter we have from Defra says: "With the agreement of Treasury we confirm that we are content to allow the Authority to retain all post-tax profits at the level shown in the accounts until major capital works have been completed". That is a help.

  Q77  Mr Mitchell: Is it a big help?

  Mr Mills: Not significant enough, no. The idea that if the Corporation just let the Market Authority keep the corporation tax would somehow solve the problems of capital investment is ludicrous. It is by no means sufficient, as the table will show, I hope, that we attached to our submission. The other point to your question is that once it became clear that the Corporation route was at best not helpful and at worst deliberately unhelpful, we did start discussions with property development companies as sources of external finance. There are some seven companies which we have been seeing in the last couple of months. We have not finished yet. We have been discussing how they could be involved possibly in developing parts of the site that are not needed for market purposes and possibly developing those for their own purposes at the same time as accepting the capital liabilities which we have now got. At the moment the indications are quite encouraging.

  Q78  Mr Mitchell: They are quite good?

  Mr Mills: Yes.

  Q79  Mr Mitchell: You had not done anything about that because previously you had been thinking of a transfer to the Corporation?

  Mr Mills: Correct.

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