Oral evidence

Taken before the New Covent Garden Sub-Committee on Monday 14 July 2003

Members present:

Mr Michael Jack, in the Chair
Mr David Curry
Mr Austin Mitchell
Paddy Tipping

__________

Witness: MR NICHOLAS SAPHIR, Independent Consultant and author of the Review of London Wholesale Markets (October 2002), examined.

Q121  Chairman: Good afternoon, ladies and gentlemen, welcome to the second evidence session on the sub committee's inquiry into the future of New Covent Garden Market and other associated matters. We have before us Mr Nicholas Saphir, the independent consultant and author of the Review of London Wholesale Markets. Welcome to our Committee, it is a pleasure for me to see you. I have known Mr Saphir for many years, one time when I worked for Marks and Spencer through me he used to sell the company certain fruit, salads and vegetables, so we have negotiated hard in the past. You were given the job of writing the Report which has set in train the inquiry that we are involved in and a lot of work by both Covent Garden Market Authority and the City on looking at the future of London's markets. You came to a specific conclusion, effectively that we should have three markets to deal with wholesale business in London. Could you just take us through the methodology and the basis upon which you came to this conclusion?

Mr Saphir: The future of wholesale markets depend totally on it being composite markets. The concept of individual markets, meat, fish, fruit and vegetables does not stand up in terms of issues of congestion. If you go and stand outside Smithfield market at 10 o'clock in the morning you will find that there are Chinese catering firms that have been to Spitalfields, they have gone to Billingsgate, they have then gone to Smithfield or Covent and Garden and they are consolidating their loads on the pavement outside the market. It does not work in terms of congestion, we have wasted journeys. It does not work in terms of the inability of small businesses to be able to cover the issue of going to several markets, particularly on the catering side. It is catering that is driving the wholesale markets these day, the resurgence of the market is depending on catering. From a general point of view it is uneconomic and wasteful and adds to congestion to have markets in several places, each one selling a different product. That is point one. Point two is that if we look at the development of catering, particularly specialist catering in central London, the catering firms are not just looking for the wholesale provision of a product, they are looking for added value, they are looking for a product that has been prepared in some way, hence much of the work that is done in Smithfield and Billingsgate in carcass portioning, in filleting or even now in New Covent Garden in terms of semi processing is the way in which much of the business will go, and that is not wholesaling, that is something quite different. Chairman, as you will know in the jargon of the food industry that is medium and high risk facilities. There is every reason why wholesalers should have the right and opportunity to take up that function and make profit out of it but it is not part of wholesaling. If you are going to have that sort of facility alongside wholesale markets then it is better to have it in a composite where the clients can come to one place and buy several things. If I can go on from there and say: Why three, why not one? I think that is an important point. The Report does argue there should be three markets. I note the Corporation suggested there is an illogicality in the Report in that it talks about one composite market in the east and one composite market in the west. It says about the west, "sufficiently far for the west not to have a significant effect on the other four markets", which is an interesting point, which I do not agree with. What they say is therefore from their point of view one composite market at the Spitalfields site would do. They add that the New Convent Garden Market should be developed as a complementary site with some modification of its activities. In addressing the proposition of illogicality the Report does begin with the notion of two composite markets, one east and one west, it then goes on to identify the opportunities the development of New Covent Garden will bring in terms of the best use of existing sites and optimum servicing of that large client base of central London catering. That is why the Report firmly comes down at the end of that sequence of arguments to say one east and one west is notionally probably adequate but in terms of the best use of facilities and the best servicing of central London catering three markets would work better. If I then come back to addressing the single market concept. There is quite rightly a point made by the Committee, Rungis is a single market for Paris, why not that model? My argument there was if you could find a suitable site, (and Rungis is 220 hectare site within the locality of Paris), we would still have to introduce French-style trading regulations to make such a site work. We would have to impose an obligation on retailers and caterers to purchase their products from those locations. As a member of the Committee pointed out, there is a 35 kilometre exclusion zone within the Paris area which has to be recognised by French retailers. In our discussions I think that with the purchasers the concept of a monopolistic right for a single market would in the end mean that the geography would defeat many of them (London is a lot bigger than Paris) and the inconvenience would defeat many of them and we would see a significant rise in non-market wholesale distribution, which in the end would defeat the whole concept of the market. We felt that in looking at the future for London that one market would be self-defeating, that two markets would work but that three markets, particularly using Nine Elms in its central position and current business, would be ideal because the third market, ie Nine Elms, would allow us to be able to build round the central London catering business. That is generally the logic of the Report. I could go on and say how they should be financed and who should own them.

Q122  Chairman: You anticipate my next line of questioning, you have given us an overview as to how you came to your conclusion but it has been argued to us, certainly from the standpoint of the Corporation of London, that the idea of a composite market both at Spitalfields and New Covent Garden in their view would be viable. One of the things I think that your Report did not contain was a business plan. Did you do any kind of economic modelling or work to check whether your picture of markets sustained by an increasing catering business and speciality business and the value-added activities that you described a moment ago, whether those trends were sufficiently strong in economic terms to sustain the markets and, as we shall come to, to sustain the investment, particularly in the context of New Covent Garden which requires them to undertake the trade that you described?

Mr Saphir: The brief was to produce a strategy paper on the future, that did not include a detailed business plan for the markets. However, you will find in the Report there is an outline business plan for the Nine Elms site which shows that it would take an £80 million investment and would produce something like a 9.5 per cent return on investment on phase one, which would not attract a great deal of commercial investment, but phase two, which would be seen to be the attraction of bringing in much more processing and hoteliers, etc, would produce a commercial return on investment. That ignores the opportunity for an investor to look at parts of the site as having alternative uses. Before we get too wound up about that particular model I would like to address what I think is a misconception - maybe it is the Report's fault, maybe it is not - the Corporation argued the last time you met that there is not enough business to support two major sites. They talked about an £80 million investment and I think that is where the misunderstanding is. I think we need to define the difference between wholesaling and added-value processing. If I take Smithfield as an example, there was a time people drove cattle to the centre of London and had them slaughtered but we no longer see slaughtering being a wholesaling function.

Q123  Chairman: We do not see too many cattle either, but go on!

Mr Saphir: The Report would argue that the portioning of carcass and the preparation of the portion- controlled cuts of meat and the filleting of fish is not truly wholesaling, it is an added-value process. If we look at the type of business that is conducted and we believe would be conducted by various markets, if you take the market in the east and the market in the west and you had an effective Nine Elms central market the argument is if we look at the type of businesses those two markets are, ie Western International and Spitalfields, they are currently doing most of what I call boxed product, it caters for the suburban and the Home Counties type caterers and retailers who want simple boxed, prepared cuts or boxes of fruit or vegetables. I do not believe those markets need to develop significant added-value facilities. Most of the product that will be sold will be already boxed, it will either come in in a prepared state or if wholesalers saw an opportunity to prepare it there and then it would be quite limited. The Report argues that those particular facilities, that is the one at Spitalfields and the one at Western International, as developed for fish and meat would not need massive investment. Of course it would need more cold storage and more sales space but it would not need added-value high and medium risk facilities. Because of the central London catering thrust it is Nine Elms that would need the high investment. If you take an 80 million investment we are not talking about replicating that in two or three places, we are talking about one 80 million investment in central London that will give added-value facilities, which should be paid for in the economic rent, plus a wholesale market that would be either directly or indirectly subsidised, as they are now and two markets, one in the west and one in the east which would sell boxed products. If the wholesalers want to do anything other than that I think it would be quite peripheral. That is the main thrust. Has it been tested? It has only been tested insofar as we have talked to a lot of caterers and a lot of wholesalers and we talked to the people in Spitalfields and Western International and they also see that as an opportunity. The key is the balance in the Report between two suburban markets that are boxed products and one central market that is truly an added-value food site as well as a wholesale market.

Q124  Chairman: In the work you undertook how much in the way of consultation did you have with the Mayor of London's Office? The Committee has received some papers from that in which after having considered carefully the outcome of the Report put down a structured agenda for further economic appraisal. They have come at it very much from the strategic standpoint that whatever happens, particularly to the New Covent Market site, but also in relation to Spitalfields and Billingsgate, there is an implication in their judgment for strategic economic activity, employment activity and transport activities that effect these key central London locations. If I understood their submission correctly they feel there needs to be a great deal more economic modelling work done to understand the implications against the strategic objectives for the proposals for the future of these markets. When you did your work did you have any input of that nature from the Mayor to help inform your own conclusions?

Mr Saphir: The Mayor's Office was consulted from the first day and we had several meetings with them. We took them along with the thinking as it developed and asked for input. I think it would be fair to say that at that stage there was generally very positive support for the concept of a Nine Elms, which currently employs a great number of people, and it would safeguard and increase that employment if the plans were undertaken. We showed them the feedback we were getting in terms of where the employees at Smithfield and Billingsgate came from, in terms of where they lived and what that was likely to mean. We did not have a great deal of information, we put out surveys and we got some information back. I would say that the Mayor's parlour was consulted right the way through the process. At the very end when we came back and did a presentation of the draft report they asked the question about whether we felt it would be a good idea for some more economic modelling to be done for which they felt they could find some funding and I said I thought it would be an excellent idea once we had got to the point, where the interested parties had got to the point where they understood and accepted the concept and that work was worth doing.

Q125  Chairman: Let me stop you at that juncture, in a letter which was sent from the Mayor's Office to Ashley Baker at Defra it says, and I quote from the third paragraph: "Further engagement with the different stakeholders would seem to be necessary to test whether there are more options". I take from those words they are saying, "Mr Saphir's Report has given us his options, are there other options?" Clearly from the standpoint of the Corporation they have a different agenda. They have questioned, as we indicated a moment ago, and doubted the viability of your model, they have put forward their own proposal, which is different from yours, it sees Covent Garden as a complementary facility to the east/west wholesale split. How do we work our way through answering, first of all, are there any other options other than the ones you concluded we ought to look at and, secondly, how should we propose to evaluate the alternatives which the Corporation have put forward as an alternative to your proposals?

Mr Saphir: That is three questions, I hope I have that right: the first one is, are there any alternatives other than the ones we have all talked about? Two, what work can be done to establish the economics of those? The third point is whether there is a strategic wish to look at a specific project other than the one that was proposed. I think it would be a waste of time, and I will come back to time in a minute, if we were to spend a great deal of time modelling a lot of strategic views that are not acceptable. Are there alternative strategies? I think we are talking about one, two or three markets, or let the whole thing carry on as it is and let it gradually go into decline, and it will, all of them will go into decline, I am quite convinced about that. I think we have enough evidence of it in terms of the non-market distribution that is building up. It may be justifiable to let that happen, let the markets go into decline but I think it would be a great concern, particularly in terms of SMEs, there are a large number of small ethnic catering establishments and retailers dependent on markets, if they had to buy from independent wholesalers they would be greatly disadvantaged, they would find it difficult to do that, they like a market atmosphere and it works for them. There would be a number of producers at a disadvantage as well, I do not believe letting the markets go into decline is a valid alternative strategy. I think that the concept then requires whether you have one, two or three markets and what the shape of those markets is I do not think anybody truly argues against the concept of composite markets, that has become quite interestingly the accepted strategy. If we then look at how to proceed from here I believe it is very important, if anything that is what the Report should have been a catalyst for, that the interested parties now actually get round a table and argue out what they strategically want between them. One of the great shames of the moment, and it was expected in the Report, is that the vested interests are now becoming tactically a moment of negotiation rather than strategy. We are not talking about who and what believes in what strategy, we are talking about how can I negotiate a position where I can get what my objective might be in the medium term, let alone the long-term strategy. I think that is a great shame.

Q126  Chairman: You made an important and interesting point that the parties should engage positively, do you get any sense that with the centuries of proud tradition that the Corporation of the City of London have in operating markets that their position is informed by any argument to keep us independent, to keep us doing things the way that we have always done them, or do you sense there is a genuine difference of opinion but both parties are convinced there is a need to maintain dialogue?

Mr Saphir: If we examine the public position for a moment, we know that the Government wishes to divest itself of New Covent Garden, that is a public statement. We know that the Government has a stated wish, in fact it has taken on an undertaking that the market will remain as a wholesale market in some form. What we do not know is what the stated position is. I do not know, even when I wrote the Report, the stated position of the Corporation or of many of the tenants, except we know many of the Billingsgate tenants would prefer to remain where they are and do nothing. The problem with that position is that that market requires a considerable amount of investment to bring it up to health and safety standards and has all other issues surrounding it, not least of which it has a high intrinsic value as a site and having a fish market in the middle of Canary Wharf may not be a long-term answer. We know that there are some Smithfield tenants who would like to move into composite markets but the bulk of the Smithfield tenants have publicly said, "we sit on long-term leases, 20 year leases, and we will not be moved". I take that, if I may say, a personal hypothesis, as being a strong negotiating position and in a strong negotiating position I would argue that there is a risk they could kill their goose in the long-term because by the time we get there markets will have disappeared. As far as the Corporation is concerned - I cannot speak for the Corporation I can only hypothesise - the Corporation has a desire to maintain its interest in markets, or some of the Corporation members wish to maintain their interest in markets. They do not wish to invest more in markets than they believe is the right amount to invest. I would just make a comment on that, this is an informed but not official comment, in carrying out the Report we commissioned an unofficial valuation of the three main sites, that is Nine Elms, Billingsgate and Smithfield and although the property market is a lot softer than it was at that time and although there are significant issues round Billingsgate and Smithfield we do believe and the information we have is the money that would be released from such a sale would be very, very significant and would actually be sufficient to be able to justify re-investment in markets. Whether the Corporation wish to do that is another matter.

Q127  Chairman: Could you refresh the Committee's mind on what your unofficial valuation revealed as the then worth of the assets?

Mr Saphir: No, because, if you will forgive me, it was an unofficial valuation. All I will tell you is it would have released net probably more than twice the value we are calling for in terms of the Nine Elms investment.

Q128  Chairman: Does Defra know this? Unofficially?

Mr Saphir: Unofficially Defra do know, yes.

Q129  Chairman: Do carry on?

Mr Saphir: The point flowing from that is, what does the Corporation want? It does want to maintain involvement in markets. The Corporation have clearly shown that they feel more comfortable in maintaining monopolistic attitudes to markets, and that is not necessarily just a Corporation point. We must not forget this is not a two-sided negotiation, this is a multi-sided negotiation and the Report was cognisant of that when it was written in a sense that we have tenants that are both powerful and have legal rights who are putting pressure on, particularly from Smithfield to the Corporation - Billingsgate have less power in their elbow. Therefore the Corporation in part, again I would hypothesise, is responding in part to that pressure in defending their position in regard to their tenants in Smithfield particularly and partly in Billingsgate. All in all we have a multi-dimensional model here and either we have to have agreement round the table that has a strategic thrust to it which everyone can buy in to and a time sale or, and I think the minister, I have to say, is absolutely right in giving New Covent Garden the freedom, and that was also written as option number three an as alternative in the Report if there was failure to agree in giving New Covent Garden the right to challenge the current status quo. If we do not have some sort of unplugging of the logjam I would predict, and the Report says this, over the next five to ten years we will have less markets, we will have declining markets, we will have a considerable amount of investment going into Billingsgate, because that is a duty on the Corporation, and we will have a considerable investment going into Nine Elms, because that will be necessary, and that will either become either superfluous or redundant or will have been in the wrong place, and that will be the tragedy. Does that say the Report strategy is absolutely correct? I believe so. It needs testing. The Mayor's parlour is right, I was grateful when they offered the funding which was not available at the time to carry out that work, it needs to be done, and it needs to be done quickly, but it should only be done against an agreed strategy by the main parties, that is the thrust of it.

Q130  Mr Mitchell: That is the helpful part, a main strategy agreement between the parties which we seem unable to cure. You said that you could not speak for the Corporation, and it strikes me having heard the evidence neither can the Corporation speak for the Corporation because it does not know what it wants. It is not going to be happy with the Covent Garden solution unless it controls Covent Garden pretty well for free, and it wants to maintain an involvement in markets but not pay for it. That is the essence of what I deduce from what you have just said. You might not agree with that interpretation but it is mine. Let me ask you about that, you said, first of all, that one of the problems with Billingsgate is it is going to require a big investment because of food safety and hygiene regulations a couple of years ahead, but so is anywhere that sells fish, that investment has to take place whether it is at Spitalfield or wherever the fish sales go.

Mr Saphir: No.

Q131  Mr Mitchell: It is not an argument against Billingsgate.

Mr Saphir: It is actually. The problem is Smithfield had very significant investment and is probably one of the best equipped meat markets in Europe that I have seen and as such it does not need significant investment over the next few years. It has its problems in terms of parking and congestion and it has its problems in the sense that it is not a composite market, although it has the right to be a composite market. Billingsgate is quite different, Billingsgate, which was invested in some time ago, and looks an interestingly good market has very serious problems and as we move into 2004 and the new health and safety regulations are coming in terms of canopies, internals, etc and the other problems associated with it.

Q132  Mr Mitchell: What are those problems? Why specific to Billingsgate?

Mr Saphir: One of the main problems with Billingsgate is the way it is configured, it has considerable common parts, it has common cold storage, et cetera and one of the problems as we move forward is who has the duty to maintain the unit, the seller's unit, to a quality standard that meets health and safety as we move forward. It is very difficult for a tenant in Billingsgate to see that as a duty or as sensible because of the common parts and because he does not have long rights, he has short rights over his unit. Billingsgate has a situation where there needs to be money spent on the common parts, there needs to be money spent on the individual units, that is not the case in Smithfield. In terms of Nine Elms what they have done is they have a meat man, a fish man, a lobster man and people doing prepared vegetables and salads, each one of which, because of the configuration of the market, are investing their own money in their own units to take on that responsibility. Billingsgate has a uniquely difficult problem as we move forward. Having said that, Nine Elms needs major investment and refurbishment. So you have got two markets there that need major investment and that is sunk money potentially that gets left behind or impinges on the strategic decision making. Coming back to the point about your deduction of what I was saying, I think it is very interesting and not a deduction that I would disagree with. I do think we have got to a situation where I hope from this Committee and from the report that we are at the beginning of a serious negotiation, not a standoff. If anything, I think the Minister's action of a few weeks ago should be the catalyst that either breaks the logjam in terms of getting people round the table sensibly, or I would argue then let battle commence and let us see what the economics produce. You had the Chairman of New Covent Garden in front of you saying they had seven commercial investors interested in discussions so far, and in my discussions with commercial investors, because that was one of the things I tested when we wrote the report, I found significant interest in doing something around Nine Elms by releasing some of the property for mixed development and investing more in the markets and developing the market the way we are talking about and I think, subject to what the courts decided, if it comes to the courts, that is going to be a meaningful way forward that will begin to challenge Smithfield and Billingsgate tenants as to their future.

Q133  Mr Mitchell: It might be a little hopeful to get this Government to make a decision on an issue that is contentious, where there is going to be enormous agitation whichever way it decides. The tendency is to pull back from matters like that. I have to say I am quite attached to Billingsgate. You said that the tenants expressed a preference for staying there. Communications-wise, surely it is a very good site and I am wondering if the argument against Billingsgate, and you have come down against Billingsgate, is not actually loaded, certainly in the eyes of the Corporation, by the possibility of greater financial returns from getting rid of it, making more money out of it?

Mr Saphir: As I said at the beginning, this is a multi-dimensional problem. It is not just about interested parties, it is about the releasing of capital to be able to invest. We are talking about markets in themselves are expensive animals, markets in the added value sense are very expensive animals and congestion is a very real problem going forward. I would say the arguments against Billingsgate -and I have an attachment to Billingsgate because I pass it every day coming in from Kent - are it needs major investment going forward and major investment in what will always be a single product site. They sell potatoes but it is not big enough to be able to develop it into a composite site. Composite sites, as far as the catering industry going forward, are essential if markets are to survive. I think it is quite interesting that the volumes within Billingsgate are in decline, not just because of the whole fish problem but also there is considerable activity now outside of the market in terms of direct delivery of fish.

Q134  Mr Mitchell: Which does need to be more effectively controlled than, say, Enfield has done.

Mr Saphir: If you are suggesting ----

Q135  Mr Mitchell: You should not flog fish in car parks is what I am suggesting.

Mr Saphir: I agree with that, but you should not be able to consolidate loads bought in the markets in car parks either and that is another issue that we talked about in the report. In terms of the future of markets, composite markets are important and Billingsgate cannot do that. In terms of investment it requires a significant investment, and is that the right thing to do when I would argue that it has a limited life. Yes, not only for the Corporation, and I am guessing, but definitely from writing the report the opportunity to actually release value from the Billingsgate site to recycle in the development of significant composite markets, and therefore give the wholesalers within that market an opportunity to survive and prosper, was obviously important.

Q136  Chairman: You mentioned a little while ago Defra's position. Your report's principal findings do not seem to contain the words "Defra should no longer be in the business of markets". Do you think they should now bite the bullet and get out?

Mr Saphir: What the report does do is it spends time examining the public good. I think it is very important that we do recognise there is still a public good in markets. Not the original public good, not the public good of maintaining food standards and health and safety because that can be done, and is done, in many food establishments around the country. The two public goods that I believe flow now from markets are for SMEs, small businesses, to be able to buy in a competitive arena, and that is very important, and secondly it gives the opportunity to try and do something about congestion in terms of reducing the number of white vans that are passing backwards and forwards between markets and consolidating on pavements and in car parks, et cetera. There is an element of public good. The second point I would make is the argument in the report is that pure wholesaling, that is the selling of bulk, in my opinion is never going to make a commercial return in terms of rent on the capital investment in markets. There is the need for some form of beneficial investor, or there has to be some way of releasing the capital out of existing sites to excite an external investor to come in for a different reason. That is partly about releasing part of the site maybe, like Nine Elms, and partly because there is the added value processing that we talked about that ought to take place which should be able to secure an economic return. In all of that, should Defra be an owner of market sites? I think that the current position is probably correct: why should Defra be the owner of a single site in the country and not be an owner of many sites? Sites are mostly municipally owned but some privately owned. On the continent the same pattern exists. I believe that Defra probably have no long-term strategic need to remain in markets and should exit at the appropriate time. I do not believe that site should be exited, however, willy-nilly at a price that is driven by a short-term need in terms of obligation rather than financial requirement. I believe that there is a value and it should be realised.

Q137  Chairman: So if we are going to make progress from where we are at the moment, who should give leadership to taking forward the differing views of Defra (Covent Garden) and the City in bringing parties together with the Greater London Authority in actually moving things to some form of conclusion where, if you like, the rational conclusion that you want to come out of all this work is going to be reached? You have produced your report, Defra have produced their statement, which contains quite a lot of fence-sitting and quite a lot of passing responsibilities back to various people to resolve issues that come from your conclusions, the Corporation of London are saying "Thanks, but no thanks" and we are not getting any kind of meeting of minds. The GLA are doing more research, but nobody has stood up and said "Come to this table and we will try and resolve these matters". Who should do that?

Mr Saphir: Let us take the three main protagonists you have mentioned: Defra, the Corporation and the GLA, the Mayor's parlour. They have it within them to make a strategic decision. I am not saying it is easy, I think the Corporation more than anybody is under all sorts of pressures from all sorts of different directions and they will have great difficulty in coming to a strategic decision. That aside, a strategic decision is necessary. I cannot speak for the Mayor's parlour because I do not know how it sees its position in terms of leadership on this matter. What I do know is that I think it would be a great tragedy if this report ended up like the Runciman Report, which was the predecessor to the Covent Garden move, which took five years before anybody moved anywhere. The problem with that is I think the wholesale markets will go into terminal decline during that period, apart from the investment that is going to be necessary. Somebody needs to rattle the cage. I believe that the Minister has succeeded in starting that rattling process by freeing New Covent Garden Market Authority to go and see what they can do. I think that if New Covent Garden Market are able to find external investors, if they are able to create a composite market, that is probably going to change the way in which this develops. My view is that before that happens it would be very sensible for the two main principals to sit round the table and see if there is a solution.

Q138  Chairman: Do you really feel that the Government have properly started the cage rattling exercise that you have referred to? In paragraph five of Mr Bradshaw's ministerial statement, he comes out with the dynamic view and says"...and are sympathetic to the view that such legislation should be amended or repealed as the opportunity arises". This is picking up on an earlier point you made about engendering competition. Later on in his document he says "If we cannot do that then we will not say no to different types of activity being carried on at New Covent Garden Market which are not there at the moment, but we do recognise the fact that the Corporation of London might object to this and they will see everybody in court and that is where we think it should be sorted out". Do you not think that is about the most perfect example of no fault leadership and glorious fence-sitting?

Mr Saphir: No, I do not actually. The report, as you will know, argues for legislation. It also argues that it would be best if that legislation were a cleaning up legislation rather than a legislation that actually imposed. I still believe that is correct because I think imposition through legislation is going to produce as many problems as this current situation. Therefore, I believe what is happening now is we will find out one way or another whether or not this supposed prohibition on the selling of other products in any one market actually will stick at law or not. I think that the Corporation's position is clear, it will defend its tenants' rights, it will have to defend its tenants' rights. If we get to that position it will be a great shame and I believe, therefore, it would be much better to have a meeting before that position is reached to try and find an answer. Failing that, I believe it will end up with the courts deciding whether these prohibitions exist.

Q139  Chairman: Do you actually believe that the courts - bearing in mind your earlier remarks about the need for co-operation, and in your answer the continuing theme of that co-operation - are the best way to resolve some pretty fundamental issues going back over centuries, medieval times we are talking about with the origins of the six and two-thirds mile limit? Do you think that the courts are the best way to thrash it out when in actual fact your report recommended changing the law and in the first part of the Minister's statement he almost agrees with you?

Mr Saphir: Chairman, let me start by saying that being once a barrister many years ago, recourse to the law is never a perfect solution for anybody. It will be wasteful, it will be painful, and we do not know what the outcome will be, we never do. Of course, I agree it would be best to avoid the courts if it were possible. Again I return to the point that I made, that to produce legislation that would clean up a situation is one thing, but to produce legislation that would impose change with all that that brings and the time that it would take to get legislation on the statute books to do that could cause us more problems in the end than we have time for. I think that many people do not recognise that we are on a slippery slope now and, yes, it is quite likely that markets like Spitalfields will continue and Western International will continue to be successful fruit and vegetable markets in the long-term. I do not believe that Smithfield will continue to be a successful meat market, I do not believe that Billingsgate will continue to be a successful fish market, and I think Nine Elms will turn itself into something else because of its property position. I think that would be a great shame for the reasons I have said why composite markets are desirable. My argument would be that, yes, if all of this fails we will need legislation to bring about change. I believe that one last push, whether it be through negotiation or negotiation pursued parallel to the courts, would be extremely useful. If not, then I think the sequence of events probably goes: court, court's decision, court's decision either says composite markets work or do not work, if court says composite markets do not work then I think Parliament will have to address that issue.

Q140  Paddy Tipping: You mentioned timescales, but what are the timescales? If these markets are going to go bust, how long have they got?

Mr Saphir: I think the interesting situation that has suddenly developed ---- If you look at the history, markets went into terminal decline in the 1980s as supermarkets went direct. They were rescued at the beginning of the 1990s, the middle of the 1990s, by the tremendous increase in catering, eating out, affluence, et cetera. Catering during the 1990s has been very much about success, innovation and change. If we look at it today, there is a plateau in the catering world. We have reached a point at this moment in time where, for many reasons, caterers are having a harder time. They are beginning to consolidate. They are beginning to look at costs. They are beginning to address the whole issue of how they get their supplies. At this moment in time no single catering firm has more than four per cent of the business, which is amazing, but I think in five years' time we will find a significant consolidation on catering. Unless we have composite markets that begin to address those issues in the widest sense, the big catering firms will increasingly go direct, as did the supermarkets, the game will be over and we will be into decline again, and we will be managing decline.

Q141  Paddy Tipping: So your view is that we have got to resolve this matter within five years?

Mr Saphir: I truly do believe so. Remember, in resolving this matter over the next five years we are talking about a project that is going to take three to four years to actually bring about because you cannot just switch on a major change in investment and everything else, it needs planned change, and it needs taking the industry along with it.

Q142  Paddy Tipping: But you cannot operate a twin-track approach within five years, can you?

Mr Saphir: I do not think so.

Q143  Paddy Tipping: Because you have got to make your mind up whether you are going to try and get the final negotiated solution or fairly soon say "Tough, this is not going to work, we are going to have to bring in legislation".

Mr Saphir: Or let the balls fall where they fall and we see that economics will take over and maybe the markets will survive and maybe they will not.

Chairman: You presented your report to Defra, subsequently have you had any meetings with ministers to discuss its findings or has it all been done on the basis that you sent the report and they paid the money?

Q144  Paddy Tipping: Have they paid?

Mr Saphir: I was tempted to say at half normal consultancy fees. I have presented the report to both the Corporation and to Defra. I have had meetings with both of them to discuss it. We then went into the consultation period and there was significant input in terms of consultation from people. I have talked to Defra subsequently about what might be the issues. I have spoken to some members of the Corporation as well in terms of what might be the issues. Have we had a formal meeting subsequently to the consultation period where all sides have come together? The answer is no, we have not. Not with me present anyway.

Q145  Chairman: Would I be right in saying that effectively this Select Committee's inquiry is the first formal opportunity that all parties have had to put their two pennyworth forward since your report was produced?

Mr Saphir: I can only answer that question in terms of my position. This is the first formal opportunity I have had to put it forward, although I had a meeting with the three parties prior to consultation.

Q146  Chairman: In the remaining few moments, is there anything you would like to put to the Committee, apart from the "We need to get it sorted out in the next five years" view, as some words of advice to all of the parties in their efforts to try and find this magic piece of common ground, because I think your evidence has given us a clear indication that there are for all concerned some very big issues and, indeed, for Defra itself a fundamental question as to whether it should still be in the market position? Is there anything that you would like to put on the record by way of some sage advice to achieve that end objective?

Mr Saphir: If this was a purely commercial situation, and in many respects I believe that it is, we have two landlords, one of whom wishes to exit and the other one who seemingly wishes to carry on at the least cost possible - not an unusual situation - I would argue that it is probably going to be necessary, if those parties are going to come together, to come to some very innovative ways of costing and paying and developing the necessary sites. I believe that the Corporation is right in believing that Billingsgate is right for moving first. I believe that the Corporation is wrong in saying that it should all be moved to Spitalfields. I think that is part of the pressures on the Corporation and of a negotiating position, if I may say. I believe that the Government is clearly in a difficult position in dealing with Nine Elms, which needs investment and which needs to be offloaded. I believe the sensible parties will get round the table and find some form of deferred consideration for the site that would reflect its success, in other words staying in there with some sort of skill in the game to be able to benefit from the development over a phased basis. Failing that - failing that - and I am again taking a commercial position that it is probably only possible to break the logjam by carrying on the way we are progressing at the moment with Nine Elms challenging, Nine Elms seeking alternative finance and the Corporation having to decide what it wants to do outside of that situation. I think my sage words, if I may say, Chairman, would be to say to the two parties: "You have one more chance really before alternative finance is achieved to find an innovative way of dealing with the problem and it should be possible".

Chairman: Thank you very much indeed. The one thing you cannot do is take away that which you have said, but if upon leaving here there is anything else you want to put before the Committee there is always that further opportunity. May we thank you most sincerely for coming and giving your evidence. Thank you very much.

Witnesses: LORD WHITTY, a Member of the House of Lords, Parliamentary Under Secretary of State, and MR DAVID JONES, Head of Horticulture and Potatoes Division, Department for the Environment, Food and Rural Affairs, examined.

Q147  Chairman: Lord Whitty, welcome to the Committee. You are, as the Committee knows, a regular and helpful performer in our midst. In our further activity we are looking again at the matters that are affecting the future of London's markets, and in particular New Covent Garden Market. With you I see you have brought Mr David Jones, your Head of Horticulture and Potatoes Division, which is a delightful distinction between the whole of the horticulture industry and the bit that is potatoes. We can debate that on another occasion. Our task today is to look at the question of these markets and their futures. Lord Whitty, you will be aware from the Committee's previous reports into this area that we have asked the question why Defra remains involved in effectively owning one of the principal wholesale markets in the country, although we would accept at the outset that it is run on your behalf by the non-departmental public body which is the New Covent Garden Market Authority, but you are the owner of the market. Why on earth are you still stuck in the markets' business?

Lord Whitty: You will be reasonably familiar with the history, that we acquired the market when it swapped sites and we have not found a proper context yet to divest ourselves of the responsibility either for the market site or for the authority. Of course, our commissioning of Nick Saphir's Report was in part to see what is the best way of the Government extracting itself from the current responsibilities in a way that is beneficial to the market system and the trade as a whole. We commissioned that jointly with the Corporation as the owners of the other main markets in London and we hope that has shed some light on the possibilities. It is certainly our intention, as has been said on several occasions, that we will not remain the owners or those responsible for the operation of the market longer than Government needs to.

Q148  Chairman: But admitting that the government, of which I was a part, did not come to a final conclusion on this matter, you have now been in office for the best part of six years, you have had the benefit of two Select Committee reports to help and stimulate thinking in this area, you have now got Mr Saphir's Report, is the best that you can tell us that you are still thinking about this? Why is it that you could not have said to the Market Authority, for example, "We will pass legislation to pass the assets over to you. If you make a lot of money from selling bits of it in the future we will have some of it back because it is the public's money. We will set you free to run the market as you please, go into competition, get on with it. We have not got the money to invest in the market, even though we will give you a bit of revenue income to help you along, but we recognise your demands in the future require some big money to be spent on this crumbling edifice and we would rather you go on with it and we will wash our hands of it". Why have you not done something really dynamic like that?

Lord Whitty: I am not sure that is dynamic, that is just shrugging off the responsibilities. The position is that we would want to see an effective market operating here. We have looked to a partner or a successor to the Government to take over that operation in a way which would be conducive to the long-term future of the market. As Nick Brown pointed out two years ago, over two years ago now, the Government is committed to both divesting itself of Covent Garden but also ensuring that a market continues to operate and, as yet, we have not found the partner to take on those responsibilities.

Q149  Chairman: Minister, I must just probe you a little further on this. We all know that the Wandsworth site is a piece of real estate with value. We know that there have been many proposals put up to develop and exploit that site, to do various things in the area in which the market is carried out, things which had the Covent Garden Market Authority been the master of its own destiny could well have used that asset value to have raised money, to have made necessary investments, to have provided a model that would have sustained a market on that site for a period of time into the future, given it flexibility in terms of its negotiating with others about the future of markets in London, and yet you have never taken that particular model. What we have as the answer to our request about this is that you have had a report and the sum total of the parts of the report say "It is interesting. We had some useful discussions, according to Mr Bradshaw, and as far as thing like the market restrictions, the six and two-thirds of a mile, we think the legislation should be changed but we think it will probably have to be decided by the courts". This does not strike me as a recipe for decisive decision making.

Lord Whitty: I think there are a number of constraints on the Government being able to get out just like that, one of which indeed is clarification of the law because if anybody were taking on the market in any respect then they would need to know what is the scope for a market operating on that site. It is not the case that anybody has ever previously come and said "We will take on the site. We will pay back into the site, developing part of it or whatever, money enough to keep the market going". It is true that discussions currently are looking at that possibility but that has not been the case and it was not the case with any outside developer and it was not the case in our discussions with the Corporation of London that they were going to take the market off our hands and provide the money themselves for the capital investment which will be needed and the long-term security that will be needed. The option that you describe has never been there.

Q150  Mr Curry: In Defra's priorities and bids for legislation, this would be about number 293, would it not?

Lord Whitty: We are not the Home Office, we do not have a huge list of legislation. For the past period we have said that if necessary, if there is a contingency piece of legislation, then a Covent Garden Bill would be part of our bid. Certainly you are right, it has not been the first two or three items which normally are the only ones which are likely to get on to the main programme.

Q151  Mr Curry: We all know that departments bid for legislation and we all know that there is a furious battle to get slots in the legislative programme. Defra has not had a bad run really, it has had a couple of pieces of important legislation, the Water Bill is in front of the House at the moment, but realistically you go along to the business managers, and Covent Garden is pottering along, it has not actually collapsed - it might help if it threatened to collapse, countries are never in a more powerful position than when they threaten to collapse and that might concentrate the mind - there is no point asking you to deliver primary legislation on this, is there, because we would still be waiting by the time of the Second Coming?

Lord Whitty: I do not know how long you think that is off.

Q152  Mr Curry: That in itself is quite a helpful and illuminating reply because you after all said that we had to look for a proper context to divest, (a perhaps slightly curious choice of words), and I was just trying to imagine what the word "context" meant in this. If a Member of Parliament were foolhardy enough to draw a fairly high slot on a Private Member's ballot would the Government support a Private Members' Bill along these lines, provided it had been done with consultation with the Department?

Lord Whitty: A Private Member's Bill to do what?

Q153  Mr Curry: To provide the context in which you could divest yourself of Covent Garden.

Lord Whitty: I would not rule out support of a Private Member's Bill, but the question is, what is the legislation for? There are at least three levels of legislation that have been hinted at during the course of this discussion. One is simply that we allow ourselves the freedom to sell the site effectively. That probably does not of itself require primary legislation, but of course a consequence of that would be that we would have to wind up the Authority at some point which would require primary legislation. There is a third element which is that, in our discussions with the Corporation of London, the Corporation of London would also be looking for a London Markets Act which would be more complex and would deal not only with Covent Garden but also with some of the restrictions and structure of tenancy on all London markets.

Q154  Mr Curry: When Nick Brown became Minister he added those crucial words, did he not, sell the site "as a going concern"?

Lord Whitty: Yes.

Q155  Mr Curry: Is that still the Government's commitment, to sell the site "as a going concern"?

Lord Whitty: Yes.

Q156  Mr Curry: So we are not into the business of straight real estate disposal?

Lord Whitty: No.

Q157  Mr Curry: Then you sort of said in your response to the Saphir Report, if I could summarise that, "Don't call us; we'll call you", did it not? There was no urgency about any course of action. Everybody had to keep talking to each other, so what you did was that in a sense you said, "Okay; we are going to drop a very small hand grenade into here and see whether it goes off and, if it goes off, if anything happens, and that should give Covent Garden a chance to diversify slightly and see if anybody is going to challenge them in court".

Lord Whitty: Can I unravel some of that?

Q158  Mr Curry: But if you look at the Defra way forward, primary legislation, the more realistic will note, is unlikely. Private Member's legislation only needs one Member of the House to decide they do not like it and that is dead. A private Bill is an extraordinarily complex, long procedure, subject to delay after delay after delay if Members do not like it, so the only thing we are left with is somehow putting all the rats in the bag and seeing who comes out on top. The way you have chosen to do that is to give Covent Garden the ability to diversify and then challenge the Corporation to come back at it. Is that not right?

Lord Whitty: That is dealing with a rather different matter than the future of the site, but it does have a bearing on it. The Saphir Report's assessment, and indeed our own assessment prior to that, was that Covent Garden as a going concern, in the changing nature of the food trade and the catering trade, would do better were it able to have a wider range of dealings at the market itself. That is allegedly (but never proven) subject to the 6b effectively common law rule affecting the other London markets which has hitherto restricted Covent Garden going in for areas which are covered by Billingsgate and Smithfield. The discussions we have had with the City and with the Authority indicate that there would be a legal challenge were they to start granting licences for face to face trading in those areas. Your last report indicated that it was incumbent on the Government to seek clarification of the law because if we cannot reach any accommodation with the City on what their interpretation and our interpretation of the law is, then effectively at the end of the day the only way in which we can seek clarification is through taking a decision and effectively the City or their tenants challenging us in the courts.

Q159  Mr Curry: So in practice what you have done is to invite a test case?

Lord Whitty: You could term it that way. I suspect the lawyers would not like me using that terminology, but in everyday parlance, yes.

Q160  Mr Curry: And Defra is picking up the lawyers' bills on this one, is it, if it is challenged?

Lord Whitty: It will not be Defra that is challenged in the first instance. It depends on who challenges whom. We are giving the go-ahead to the authority. We are removing a new restriction on them granting such licences. If they do then in an individual case grant such a licence then those who feel themselves disadvantaged by it will have to take a case, which in the first instance would be against the Authority rather than against Defra. It is conceivable that they may join Defra in that and it would be the Authority's legal defence in the first instance.

Q161  Mr Curry: Would you regard a court case, depending on the outcome, as in a sense then providing a clear enough answer so that everybody knew where they stood, as it were, so then things would flow from it which would form the outcome, or do you think as a result of a court case it might be so messy that legislation of some sort might become absolutely indispensable?

Lord Whitty: I would separate out the two. I think clarification is necessary for anybody to take any long term assessment of the viability and success/profitability of the market in the long run. It is not necessary in terms of a potential decision to divest ourselves of the land or wind up the Authority, but that goes back to where Government policy is. Government policy is to get the central Government out from under the responsibility for the market but to do so in a way which maintains a market on that site. It is not the 6b issue which constrains us from that. It is the availability or otherwise of potential partners or purchasers in so doing and then probably the issue of primary legislation. I suppose I should have said at an earlier stage that of course it would have been helpful in this process if the City and ourselves had agreed not only on the analysis that Nick Saphir presented but also on the action thereafter, and that was our intention and indeed their intention, when we set up the report itself, that we would have a blueprint on which we could jointly work, in which case hopefully legal arguments between us would be avoided.

Q162  Mr Curry: Mr Saphir noted two things. "The market will go into terminal decline if nothing happens", quote one. Quote two: "Many people do not realise that we are on a slippery slope now". Do you agree with those two statements?

Lord Whitty: I think they are a bit absolutist. It is clear that old style wholesale trading will be a reduced part of the way in which meat, fish and vegetables are distributed. They already have been for a number of years. On the other hand, the amount of food consumed, produced, marketed, is going up. The value added of it is increasing, particularly in London itself, in the catering and food service sectors, and therefore a different sort of market, or a partially different sort of market, is there for the markets to identify and develop, but certainly as a wholesale market of the old school, then yes, we are on a slippery slope and if the markets do not identify and deal with the changed pattern of demand then they will go out of business. To that extent I do agree.

Q163  Chairman: Minister, just to be absolutely clear about your attitude towards legislation, in paragraph 5 of Mr Bradshaw's statement, he says,"... and are sympathetic to the view that such legislation should be amended or repealed as the opportunity arises", and then you have a more definite position on the second page of his report where you saw his reply, where he says, "We have no proposals at present to amend the legislation governing markets generally or to promote amendments to the legislation governing specific London markets". You cannot have yourself looking in two different directions. You either are in favour of doing it or you are not. Which is it?

Lord Whitty: I think, Chairman, if I may say so, that you are confusing two issues, the issues of the 6b rule, so-called, which is basically a common law assertion which has to be interpreted in each case. It would be possible for Parliament, I suppose, by statute to delete the existence of such a rule.

Q164  Chairman: If you are concerned that I have not understood it correctly I will always apologise, but the full sentence from which I initially quoted says, "We recognise that some of the legislation which governs the markets may inhibit such developments", and it talks about the needs for the catering trade, and then it goes on, "and are sympathetic to the view that such legislation should be amended or repealed as the opportunity arises". I could not find in here any other reference to legislative change until I came in paragraph 7, "Future Action", to this clear statement saying you were not going to do any of it.

Lord Whitty: There are two sorts of legislative change: one, do we need - and this will probably only be decided in the light of a court case - legislation to enable markets effectively to operate in a free trade situation, and that is where the 6b inhibits other markets in London dealing in the commodities which the ancient markets have kept to themselves? That is essentially an issue of restraint of trade, and the issue is whether we need legislation to change that. That probably will not be decided unless and until we have got clarity in the courts as to what the current situation is. The other is whether we would need legislation to effectively extract ourselves from running the Covent Garden market, and even that has two tiers. One is whether we can dispose of the site in one way or another without legislation, and the other is whether we can wind up the Authority with or without legislation. The answer to the latter is pretty clearly, no, we cannot. If we were to wind up the Authority then we would need primary legislation so to do. The answer to the question of the disposal of the site is that I think it is likely that we would not need primary legislation, although of course a judgment would have to be made whether that was in effect de facto a winding up of the Authority.

Q165  Chairman: We are grateful for your clarification but I have to say it does not come shining through from Mr Bradshaw's statement. Let me ask you about paragraph 10 of your reply to the Committee's report of 2000/2001, and this is what you published on 14 September 2001: "The Department is giving further consideration to the options for the future ownership and management of the market". Would you like to tell us what you have been doing for the best part of the last two years in this further consideration, or was Mr Saphir's report a sort of ship that turned up in the night that enabled you to say," We have done something because we have commissioned the report"? What else have you been doing for these last two years?

Lord Whitty: It did not turn up; we commissioned it jointly with the Corporation of London. What we did on the basis of paragraph -----

Q166  Chairman: It was after we suggested you did it.

Lord Whitty: I am very grateful for the suggestion, but we did do it, is the point I am making.

Q167  Chairman: What else have you been doing?

Lord Whitty: The whole point of the Saphir report was that the best solution seemed to us, in the wake of your report, certainly to me when I came into this job, is that we should, along with the City of London, approach all London markets as a whole, look at the viability of the totality of London markets, not to create some big superstructure, as I think was being hinted at at earlier stages; we were not in favour of that, but allowing a better context for the London markets to develop, and for that we needed an understanding with the Corporation. We had an understanding with the Corporation in the sense that we both agreed that we should set up a joint inquiry to look at the possibilities and that was the origin of the Saphir Report.

Q168  Chairman: Did you make a separate submission as a Department to the report?

Lord Whitty: In a sense we have. We have done our response to the -----

Q169  Chairman: Yes, I know, but you are in an unusual position. You have got the Covent Garden Market Authority, you have got the Corporation, right? You are the owner, if you like, of the site but you are at an arm's length. Somebody else runs it. This report is set up by an independent consultant to look at the totality, the universe of markets in London. Did Defra make any kind of independent submission of evidence and views and analysis to help inform the report of your view on the situation?

Lord Whitty: There is not a formal submission of views as to the likely outcome from Defra to the Saphir Commission, if that is what you mean.

Q170  Chairman: So how did he know what you thought about it?

Lord Whitty: The terms of reference were agreed by ourselves and the City as to what kind of outcome we were looking at.

Q171  Chairman: So you gave Mr Saphir no indication of your views? You told him what you would like him to produce but you did not then say, "In the last two years we have been carefully considering this and here is the sum total of our considerations for you to look at"?

Lord Whitty: Nick Saphir had available the sum total of our information and our views, our previous views, the City's views, the market's views, everybody's views, so it was not as if we were hiding any blueprint from him. Mr Jones may be able to indicate precisely what bit of paper we gave him at the beginning.

Q172  Chairman: Let us hear from Mr Jones. This might be interesting to know, where the Government was coming from on this. Mr Jones, do you want to add something to this?

Mr Jones: As the Minister has said, we set some very clear terms of reference which we discussed in some detail with the Corporation of London before the exercise started. Mr Saphir operated from our offices with the help of an appointed member of staff who came in from outside to do that and, of course, there was a good deal of informal consultation both with the Department and with the Corporation of London, who also provided a member of staff to brief Mr Saphir on the starting point. The Department sought to get from Mr Saphir a view taking account of all the interests that had a stake in this and we were available to tell him what he wanted to know but we did not seek to lead him in any particular direction.

Q173  Chairman: Did he come and ask for direction? Did he come and ask you what your attitudes were to the various lines of his inquiry?

Mr Jones: We had a number of discussions about the issues that were arising and the directions that might be taken, yes.

Q174  Chairman: Would you like to tell us a little more clearly the kind of steer that you might have put into this?

Mr Jones: The whole point is that we did not give a steer. We were asking for a view on the way in which the markets might develop in the future. There were certain things that we did not ask him to look at.

Q175  Chairman: Let me stop you for a second and say, for example, did you tell him in terms what the prospects were for further public investment, for example, into the new Covent Garden market site? Did you give him the facts on that?

Mr Jones: Yes. I think it is fair to say that we made it clear that one of the reasons for the Government's interest in divesting itself of the market is precisely that financing major developments is burdensome and against the background of an assessment of the future prospects for markets commercial decisions about how to underpin their development or the development of alternative facilities which might take a slightly different form are clearly very interesting and so we wanted a background against which to make assessments of that sort of thing in the future.

Q176  Paddy Tipping: Minister, earlier today Mr Saphir almost used your language about how markets were changing because of the influence of the catering sector and Mr Curry quoted some of his remarks back about the slippery slope. Mr Saphir told us that we had got five years to sort this out. What is your assessment of the timescale available to sort this out?

Lord Whitty: I am not sure what the five years referred to but I would hope that we could reach a conclusion on the future of the Covent Garden site in less than five years.

Q177  Paddy Tipping: What is your assessment then? If it is not five years, what is it? What timescale are you setting yourselves?

Lord Whitty: That brings us in a sense to the options which are still in play following the Saphir Report because, as you will know, the Saphir Report recommended that there would be more than one composite market, probably three composite markets, one of which would be Covent Garden, and it would be appropriate that the City took over responsibility for Covent Garden. The City did not in effect accept that view. They were, on terms which were never quite clear, prepared to take over responsibility but not to develop it in that direction. The Authority are therefore looking with our go-ahead at alternative partners for developing that site. This is not to say that an accommodation with the City could not be reached. It is still an option, but not on the terms that the City are currently proposing. There are a number of possible scenarios which will probably take a couple of years to sort through and which may involve us at least in committing ourselves to legislation. The key issue will not be how soon we can get the legislation. The key issue will be how soon can we deliver somebody who is prepared, in partnership probably with the Authority, at least in the initial stages, to provide a deal which provides adequate capital to run the market on that site and fulfil Nick Brown's commitment that that is our intention.

Q178  Paddy Tipping: So there are a number of scenarios and Defra's preferred scenario is to resolve this within a couple of years. Legislation may take longer. What are you pushing for? When you are sitting across the road what line are you going to take?

Lord Whitty: Our concern, in terms of our public responsibility, is first of all to ensure that we get a deal which divests ourselves of financial responsibility for Covent Garden, but also provides sufficient resources to continue to run a market on all or part of that site. That is our sole dual criterion. That would apply if we re-opened negotiations with the City or if there were to be an arrangement with a private developer. There are, of course, other bodies which have a concern here as well. The London Borough of Wandsworth clearly has a view on what planning options are appropriate to that site and what are not and they also made it clear that they wished to see a market continue to operate there and, in a slightly arm's length sense, so did the GLA have a view on the planning implications of any alternative development of that site for that particular area of London. In other words, there are joint operations between the various local authorities and the GLA looking at that whole area which would need to be compatible with that dimension as well, but that is not Defra's prime responsibility. It is as I described at the beginning of this answer.

Q179  Paddy Tipping: What I am not clear about is that there is a problem here and who the key player is to sort it out. I am a bit simple about these things. I just think the Government has got a lot of power. You are the landowner and my perception is that in a sense the Department is the key player, but I am not entirely sure what buttons you are pushing to make things happen.

Lord Whitty: Number one, we have given the go-ahead to the Authority to discuss a takeover with potential partners. Number two, we have triggered the process which may lead to the clarification of the 6b rule and, number three, we are in discussion with all the other partners or potential interests as to what the future of the markets should bring. Yes, the Government is the landowner in an indirect sense, and the Government also has the financial and statutory responsibility for running the market at the moment. Therefore, in that sense we are the key player but we do need others to act to get a positive solution to this.

Q180  Paddy Tipping: So you are more than a consultee, as you say in your response?

Lord Whitty: Yes. We are not a consultee; we are prime mover and we, along with the City, were the prime movers for the Saphir Report and we have prime responsibility for ensuring that a positive outcome does develop.

Q181  Paddy Tipping: Let us just check out the steps that the prime mover is taking: talking to the market Authority, giving them the flexibility, the permission, to go and talk to other investors. Someone must be talking; I am not sure whether it is the market Authority, presumably not the Department, to Wandsworth and the GLA around the planning issues.

Lord Whitty: Both we and the Authority are talking.

Q182  Paddy Tipping: And you are saying, "We will have to wait and see what happens but if necessary we will see people in court on the 6b "?

Lord Whitty: Yes, put crudely, that is the position on that front.

Q183  Paddy Tipping: And all that can be done within the next how long?

Lord Whitty: I do not see why it should not be sorted within the next couple of years. As I say, and you also indicated, the legislative part of that might take a little longer but the Government's view of the way things are going should take that sort of time.

Q184  Mr Mitchell: You understand as a Labour loyalist I am a fairly straightforward person. I am not going to join my Conservative colleagues in this heavy sarcasm which is really just designed to give you the bum's rush into a bog basically because it is a quagmire. I am much more sympathetic to Paddy's approach, exploring what you mean by "consultee". You have agreed, having said the Government was a consultee, that it is in fact more than a consultee. In fact, it is difficult to have changes in one area, whatever happens in New Covent Garden, without change in legislation in the other areas because you cannot really go forward in a situation where there is going to be the uncertainty of law suits. Who is going to invest in New Covent Garden if there is the threat of a protracted law suit on mediaeval legislation and precedents which might stymie the whole thing? No investment is going to go ahead on that basis surely.

Lord Whitty: The potential investor would need to make a judgement on that dimension, certainly.

Q185  Mr Mitchell: You cannot expect them to do that. It is barmy.

Lord Whitty: No, that would not be their key -----

Q186  Mr Curry: You are a loyalist.

Lord Whitty: That would not necessarily be their key criterion. Their commitment, their deal with ourselves and the Authority, would be that they acquired the freehold, that there may be parts of the site that they could do something else with but there would be some of that money ploughed back into the development of the market and how much in that latter category might depend on an assessment of the likelihood or otherwise of the court case going in the Authority's favour. The rest of it does not depend on that at all. The rest of it depends on whether the value of the site and the prospective profit from other developments would make it adequately attractive for an investor in the first place, so I do not think it is quite as crucial as is being implied by your question.

Q187  Mr Mitchell: Mr Jones was looking at you rather quizzically when you said that.

Mr Jones: I wonder, Chairman, if I might try to clarify this use of the word "consultee" in Mr Bradshaw's statement which seems to me to be causing a degree of -----

Q188  Mr Mitchell: We are grateful that he took off time from attacking the BBC and dealing with the affairs of the fishing industry to make this statement. I say that as a loyalist, of course.

Mr Jones: It is clear that the degree of the Department's direct interest in different aspects of the London markets issues is different according to which market you are dealing with. As the sponsor department for Covent Garden Market Authority, which is not an MDP but a public corporation, it clearly has an important stake in making sure that decisions that are made are right and consistent with the legislation and, of course, it has to take its responsibilities in that area in a way that is not true of the markets which belong to the Corporation or the London boroughs. When the word "consultee" was used it was more in the sense of dealing with the wider planning, economic development, transport issues which arise in relation to particular markets. If you substantially change the nature of the business undertaken on a market site or if you change its scale, that has all sorts of implications for employment, for traffic and so on. In that context the Department is, I believe, rightly described as a consultee, but I think it is unfortunate if the statement is being interpreted to suggest that the Department is stepping back from its responsibility to act as a key driver in the overall picture, particularly in relation to Covent Garden.

Q189  Mr Mitchell: I hear that, but there is one further point I want to raise. You said that the Government's sole concern was to decide and develop and get development at New Covent Garden. This is a Labour Government and it does have other responsibilities, particularly in respect of labour force pay and conditions. We have in the Corporation's markets at New Covent Garden a very efficient labour force. I would not want that to be in a situation where development and competition led to the usual kind of processes that go on in these situations, which is driving down pay and conditions and reducing the labour force as a means of enhancing the profit. I hope that Defra's view takes that into account as well and there will be some attempt to ensure that that process does not happen.

Lord Whitty: It is also not my concern to reduce the terms and conditions of labour forces anywhere currently within the public sector's responsibility.

Q190  Mr Mitchell: True, or to go along with anything that permits that?

Lord Whitty: Clearly in the first instance any transfer of responsibilities to anything which approached a private authority would be subject to the normal TUPE arrangements and, secondly, I do not think it would be fair to say, whilst I may not be entirely at one with the City on other things, that the workforces in the City markets were any less favourably employed than those at Covent Garden in most respects. I think the demand for labour and the traditions of the markets and the strength of the union in the markets would ensure that that would not happen.

Q191  Chairman: Minister, you mentioned earlier that you had been having some useful post-Saphir discussions. In the light of the letter which was sent by the Mayor's Office to Ashley Barker of your Department on 26 February 2003 in which the covering letter said "further engagement with the different stakeholders would seem to be necessary to test whether there are more options", and then in the paper on some strategic issues in London which gave a whole raft things that needed to be further evaluated; did you agree with that proposal and, if you did, what is happening?

Lord Whitty: We agreed with the principle of the proposal that a) a wider range of issues needed to be considered in terms of any future development of the market but b) that a wider range of options needed to be considered, and a wider range of options is what we have been talking about. A wider range of considerations is not primarily Defra's responsibility, these are more planning considerations, which are (rightly) the responsibility of the London boroughs concerned and of the GLA. I think the GLA were protecting their position in relation to the cross river arrangements with the various local authorities in that area because there are clearly development issues involved which go wider than the Covent Garden site itself to the whole of that South Bank and the implications for planning, development and transport would need to be taken into account. Certainly we would agree with the GLA on that. We have not had a high level meeting with the GLA on that since the report appeared. Although one is proposed that has not yet taken place.

Q192  Chairman: Can we explore in a little more detail this question of the wider range of issues or proposals because Mr Saphir's report was the model of clarity. It produced a clear statement on what he felt, after careful analysis, was the best way forward for London's wholesale markets. As I understand it, the Government did not support the Corporation of the City of London's proposal for New Covent Garden Market, partly because it did not bring with it a dowry of investment. So if you have rejected that and you acknowledge there are other issues to be taken forward, is Defra looking at alternative models for the wholesale markets of London other than the Saphir report or is it trying to be more than a consultee, an honest broker perhaps, to bring together the parties to try and broach some kind of way forward in terms of the report's findings? I am not quite clear, going back to Mr Tipping's line of questioning, as to precisely what is going to happen next.

Lord Whitty: The Saphir report and the reaction to it were an attempt to get a consensual view from ourselves and the City of London, who are the main owners of the other markets. There was analytically no great distinction. The action points were not agreed. That remains the case. We therefore do not have an agreed strategy for the totality of the London markets. We therefore revert to a position where we are looking at the position of Covent Garden itself and therefore looking at alternative potential investors, which do not exclude City of London nor anybody else, who could deliver the kind of financial supports that the market needs.

Q193  Chairman: But in that scenario are we not going round in circles? You - that is the government of the day - owns the asset, New Covent Garden in the past have put forward various proposals for investment and development. They have not found favour with you and they have not found favour with the Treasury and the most that the Treasury so far have done is to allow some of the income which New Covent Garden Market currently has to be kept to do a limited amount of work. It does not add up to a bold new investment plan into the market to enable the market to fully utilise the asset value that it has and the potential which it itself could identify as an alternative to the scenario that Mr Saphir put forward. I am not clear as to what the way forward is against that background which I hope is factually correct. Can you enlighten us on that? What, for example, is the asset value, as you see it, of New Covent Garden Market and what is your view about the return the nation should be getting for the ownership of that asset?

Lord Whitty: I think the first part of your question is fair comment and we are in a situation where continuing to run Covent Garden as a nationalised industry would require the state to fork out more than the current priorities for public capital investment as a whole would allow. Although the Treasury have been slightly flexible, as you indicate, that is only allowing Covent Garden to keep some of its own money. These are, however, the rules that apply to all nationalised corporations and NDPBs. There is therefore not a future at the level of capital investment that we can guarantee for any length of time that would be required by the Authority to develop Covent Garden as a nationalised enterprise. That is why we are looking for either a private investor or a private partner in developing that site.

Q194  Chairman: Let me stop you at that point. You are looking for a private investor or private partner and the emphasis has been on the word "private". What progress has been made towards achieving that objective? You may for commercial reasons not want to identify by name the private partners to whom you may have been talking, but have you talked to any and are they interested?

Lord Whitty: The discussions with the potential private investors have been conducted by the Authority not by the Department at this stage.

Q195  Chairman: But you are aware?

Lord Whitty: I am aware there have been some such discussions.

Q196  Chairman: In your mind do they stack up to one of the alternative options to which your earlier remarks referred?

Lord Whitty: I am not yet clear whether they do or they do not but certainly there is a potential for them so doing. That is the basis on which the discussions are being conducted.

Q197  Chairman: Just to recap, we have Mr Saphir's report and his findings, we have the response from the Corporation of London which Covent Garden and yourselves have not found acceptable, we have some conversations which are being conducted with New Covent Garden Market and third partners on an unspecified timetable, we have a proposal from GLA that more work should be done, we have a situation of a timetable where Mr Saphir says five years and, in his judgment, that is it, and you own a very important chunk of real estate in central London, and yet we seem to have so many options about its future. If anything, in spite of the report, we seem to be less clear about what the way forward is going to be. How are these different conflicting solutions going to be resolved.

Lord Whitty: I do not see them as conflicting. We are clear and the Authority is clear and potential private partners or investors are clear that the way forward now would be for private capital to come forward which one way or another would deliver enough capital investment to ensure that that market could survive and compete. That is also the view of the London Borough of Wandsworth and also the view of the GLA, who do raise some issues about the wider planning area, but that is not incompatible at all with that solution. I do not think there is a lack of clarity, there may be a lack of ---

Q198  Chairman: In the Mayor's document it lays down in very clear terms the need to take a strategic view on all these issues and you have just described to us what I might call a very "focused" view on the future of the site at Nine Elms. If your proposals came forward and you found a viable private sector alternative which recommended that that was the way forward and that gave an exit strategy for the Government to come out of the running of that, are you not in those matters going to take into account the findings of Mr Saphir's report, because he has quite clearly before this Committee this afternoon raised some very important issues, particularly about the future of Billingsgate Market and it almost sounds as if you are saying if we found a way out of New Covent Garden we are quite happy to do that and therefore we are not interested in the consequences for the rest of London's markets; or are you?

Lord Whitty: In an ideal world we or the GLA would have a view on the totality of London's markets. That is not currently the situation. We do not have a common view with the City, who are the owners of those other markets, as to the way forward. There is not the immediacy of Defra interest in the development therefore of the other markets, and that must be a matter for their owners and their operators. There are some consequences for the way in which the food chain operates but they are relatively small compared with the Government's responsibility, both statutory and legal and financial, for the Covent Garden site, which must be our prime concern.

Mr Jones: May I add something?

Q199  Chairman: Please, Mr Jones, shine us a light into the way forward.

Mr Jones: It is just over three weeks since the Government's statement on the Saphir report was published. Clearly until that response was published the range of interests that might play a part in the future of Covent Garden in particular would not know what the Government was going to say. It is clearly important if we are discussing these broader strategic issues with local authorities and with the GLA that we have some idea of what kind of initiative might be contemplated by people who would play a part in bringing forward future investment, and the discussions which the Authority is pursuing at present with possible developers and investors need to be given a little time to see how they might be taken forward. We expect by September that the Authority will have had this initial round of discussions with people who have expressed an interest and we hope to have had some discussions with Wandsworth, too, to explore exactly what might be accommodated within the planning framework there. I think it will be quite difficult to take forward specific and useful discussions with the GLA until that process has been gone through.

Q200  Chairman: Do I appreciate then from what you are saying that you have stepped into the ring because if you are going to have discussions with a key player like Wandsworth, and you are key player in your own right, and you are then going to have discussions with the GLA; would that be with a view to integrating and discussing with them the possible commercial solution which appeals to you, if one should present, for the New Covent Garden Market site?

Mr Jones: We need to be clear in the first instance that the owner of the site legally is the Authority so we are working with the Authority to discuss arrangements about the future of that site rather than being the prime mover. However, we are working closely with them on that.

Q201  Chairman: And does the Corporation fit into this interesting scenario you have described in any way? Are you going to try and engage them in further dialogue about their problems or simply continue to a conclusion of the discussions you have just described without them being involved?

Mr Jones: Clearly we shall come to a point where we are able to map forward the way in which the conclusions can be reached on possible future development of Covent Garden. If the Corporation wished to pursue discussions on that with us further we are open to that, of course we are, we are not closing off approaches from any direction, but we see it important at this stage to arrive at an understanding with Wandsworth (a planning brief, in the jargon) which will allow future discussions to be more directed than they would otherwise be.

Chairman: Mr Mitchell's line of questioning alerted us to the important employment implications of what we are talking about. What discussions have you had with any of the tenants' representatives of New Covent Garden Market about all this because what you have got is a series of not quite medium sized but small scale and nonetheless very important businesses of long standing whose future continues to be to an element uncertain beyond the timescale of their existing leases, and it is all tied up in this. What comfort are you giving these people? I think Mr Mitchell might want to come in on this.

Mr Mitchell: I would add to tenants the trade unions involved. They should be an essential part of consultation, too.

Q202  Chairman: So tenants and trade unionists.

Lord Whitty: It was clear from the reaction to the Saphir report that both the tenants of Covent Garden and the trade unions of Covent Garden, both of whom we have seen in various capacities, supported the Saphir report and did not support the City's alternative interpretation of the way forward and therefore are supportive of looking at alternatives to that, so there is no dispute on the way forward between the Tenants' Association or the T&G and the Authority themselves on this. Clearly we do keep lines open to all of them but there is not that kind of distinction.

Mr Jones: May I add that whenever we discuss these issues with the Authority the interests of the tenants are recognised clearly and we are very much aware of the importance of decisions on the future of the market to them. Of course so long as the Authority remains the managing body for the market they are the people primarily responsible for keeping the tenants informed and I believe they are doing that.

Q203  Chairman: Gentlemen, you have been very helpful to us. I am going put one final request to the Minister. Minister, you have given us an indication as to some of the activity that is occurring now in terms of your further consultations. In order that we might write a report that is accurate and that reflects what is happening I wonder if you would be kind enough to consider writing to the Committee laying down, in the light of our questioning, what you see as the future way forward, trying to present to the Committee as much as you are able a future timetable of events just so that we have got it absolutely clear what Defra is now doing in the light of this report. Would that be possible?

Lord Whitty: I think we can do some of that, Mr Chairman, I am not sure about all of it. Clearly all of these outcomes would be subject to some fairly complex commercial negotiations and I would not like to lay down artificial timetables for that. It is also the case that we do not wish, bearing in mind the wider interests of London and the London markets and the trade, to close the door to any further discussions with the City, lest anything I or Mr Jones has said suggests that we have closed that possible re-establishment of relations.

Q204  Chairman: We do not mind if your document contains those words because I am sure when people read its contents they would only be too happy to understand that is what you said, and you have put it on the record in front of the Committee this afternoon, but I think it is important that we have as accurate a statement of what is coming next from your stand-point so that we may reflect those accurate facts in our report.

Lord Whitty: We will certainly write you a letter along those lines. Clearly some of that is dependent on discussions which are taking place primarily on an exploratory basis between the Authority and various commercial concerns which for obvious reasons need to be kept confidential and the timing of that letter might therefore depend to some extent on progress on that front but, in principle, I accept we take that responsibility away from this discussion.

Chairman: Minister, Mr Jones, thank you very much for coming before us this afternoon. It has been a very interesting conversation and we look forward to your correspondence. Thank you very much.