Draft Potato Industry Development Council (Amendment) Order 2002

Fifth Standing Committee
on Delegated Legislation

Monday 25 November 2002

[Mr. John Butterfill in the Chair]

Draft Potato Industry Development Council
(Amendment) Order 2002

4.30 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Elliot Morley): I beg to move,

    That the Committee has considered the draft Potato Industry Development Council (Amendment) Order 2002.

I am pleased to see you in the Chair, Mr. Butterfill, and I look forward to your guidance in what I hope will be a short and uncontroversial debate.

The potato industry development council, known as the British Potato Council, is an executive non-departmental public body funded by a statutory levy on growers and purchasers of potatoes. The council was established by the Potato Industry Development Council Order 1997, which was made under the provisions of the Industrial Organisation and Development Act 1947.

The council's main functions are commissioning scientific research and development, with the associated technology and knowledge transfer; disseminating market information; and home and overseas market promotion. The chairman and members of the BPC are appointed by Ministers. No public funding is involved; the council is self-financing through the levy, which raised approximately £5.85 million in 2000–01.

Before getting involved in the technical details of the order, I would like to place on record Ministers' appreciation of the work carried out by the BPC during what has been a particularly difficult time for the industry.

Under the 1947 Act, development councils are subject to a statutory review after the first three years, followed by quinquennial reviews. Those reviews are intended to determine whether a development council should continue for a further term, and whether changes are required to its duties, structure or remit. The BPC's first review was in 2000, when Ministers agreed that it should continue for a further five years.

The report of the 2000 review recommended, among other things, that the BPC should take steps to examine the fairness of its levy arrangements, and consider alternatives. That recommendation was made in response to industry concerns raised during consultation. The BPC therefore set up a levy collection working group, which comprised representatives from the BPC, from growers, purchasers and processors, and from Government Departments. The group's recommendations were considered by the BPC and the industry, and amended in the light of experience before being passed to the Department for Environment, Food and Rural Affairs.

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The order that we are considering today is based on the recommendations of the working group, and follows industry consultation by DEFRA, the Scottish Executive Environment and Rural Affairs Department, and the Agriculture and Rural Affairs Department of the Welsh Assembly.

The order proposes an increase to the minimum levy thresholds for growers and purchasers. The current minimum thresholds—1hectare of potatoes for growers and 100 tonnes per annum for purchasers—make levy collection uneconomical for the BPC, and they impose a disproportionate burden on smaller operators. Those problems will be resolved by raising the levy thresholds to 3 hectares and 1,000 tonnes respectively. That will take about 910 growers and 420 purchasers out of the levy. It is estimated that the consequent reduction of £90,000 in levy income will be offset by a reduction in the BPC's administrative costs, and in other economies, of about £130,000. The balance of £40,000 will be used for the BPC's front-line tasks.

A further proposal introduces provisions for a dual levy rate. Put simply, that is a basic rate for payments made by the due date, as specified in the order, and a higher rate for late payments. That will help to defray the additional administrative costs caused by late payments, which often involve preparation for legal action. The higher rate will ensure fair treatment for those who pay on time, but part of whose levy is being spent on progressing late payments.

Norman Lamb (North Norfolk): I understand from the National Farmers Union that a discount of £1 is allowed to those who pay on time. Is that organised by the board or through the legislation, and will it continue?

Mr. Morley: I must confess that I thought that it was a 1 per cent. penalty for late payment. The changes that we are discussing have to be made by the order, but if the board wanted to make variations, that would be a matter for the board. However, I shall give more details about that when I reply to the debate.

To allow producers more time to pay the levy, the deadline for payment will be changed from 1 November to 1 December. Existing regulations provide for a maximum levy of £40 per hectare for producers and 0.25p for growers. Current levy rates are £40 and 0.17p. To provide for the dual levy for growers, it is proposed that the grower levy ceiling be raised to £50 per hectare. The current ceiling of 0.25p per tonne for purchasers already provides enough leeway for the dual levy rate for them. I must make it clear that £50 and 0.25p are the maximum levy rates permissible, not the actual levy rates to be applied. The council will continue annually to propose levy rates, which will be subject to industry consultation and ministerial approval.

There is also a proposal to put back the due date for grower returns from 15 May to 1 June. That will assist growers in making returns with greater certainty when planting conditions are difficult.

If producer or purchaser returns have not been submitted, existing regulations allow the BPC to make an estimate for levy purposes, based on the previous

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year's returns. The order that we are discussing today proposes that estimated returns may be increased by up to 10 per cent. That will allow the BPC to adjust the previous year's returns with a 10 per cent. ceiling, to ensure that estimates reflect known upward trends or other information held by it.

It would be appropriate to make some minor changes at the same time. The order will allow the BPC to include the names and business addresses of the directors of registered companies on the register of growers and purchasers—that will provide the BPC with all the details needed when submitting information in certain court proceedings—and to tidy up the order by updating references to the Potato Marketing Board, to which the BPC was the successor body.

The most significant changes proposed are the raising of the minimum levy thresholds and the establishment of a basic and higher rate levy system. The increased threshold will reduce the burden on smaller growers and purchasers, and result in a saving of administrative and other costs related to servicing levy payers. The dual levy system will have no adverse effect on those who pay the levy by the due date. It should act as an incentive for punctual submission and payment, and has the advantage that those who pay promptly will not see their levy being wasted on progressing late and non-payers. Both of the main changes should therefore ease the administrative burden on the BPC and direct more of the levy to its front-line tasks.

The order will come into effect on 1 January 2003. I commend it to the Committee.

4.38 pm

Mr. John Hayes (South Holland and The Deepings): It is a great pleasure to serve on the Committee under your benevolent chairmanship, Mr. Butterfill.

I do not anticipate that this will be a long debate, but I should point out that I have been engaged in extensive discussions on the matter with the industry—including the National Farmers Union, which was referred to earlier—and with Mr. A. Harrison, of Moulton, a constituent of mine whose father was a potato grower after the first world war. Mr. Harrison supplied me with details about production and other costs to which his father was subjected, which show that at that time there was very little money in growing and selling potatoes. It is sad to note that the same might be said today. It is important to discuss the context of the order, because the potato industry is in some difficulty, as the Minister will know. Contract prices are a little better, but if one is not selling to contract, the price of potatoes is pitiful. The miserable price of £10 or £15 per tonne is unbelievably low. Little would Mr. Harrison have guessed that his sons would be in the same position as his father was all those years ago, and we need to see the order in that context.

I want to make one or two points about the specific issues that the Minister has described. The Potato Marketing Board, which was replaced by the British Potato Council, had a long history of predicting plantings with reasonable accuracy, but that became

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less relevant as imports grew and market conditions changed. It is therefore right and appropriate that we should perpetuate the role of the potato industry development council, and the Minister is right to say that the consultation exercise on amendments to the council is both welcome and appropriate.

Most recommendations in the order resulting from the consultation are relatively uncontroversial, but I want to raise one or two issues. The principal points to which the Minister has drawn our attention are the increase in minimum payment thresholds from one to three hectares, the voluntary levy for non-levy payers who want to take advantage of the services, the two levy rates for growers and purchasers and the change in the due date for both the receipt of the levy and making planting returns.

I should like to flag up one of those issues, which has already been mentioned. The current arrangement, which will disappear under the order, allows for what is in practice a £1 discount for people who pay on time, and some growers might see that as a double increase in the levy. I do not want to make a great issue of that, but growers have raised it with me and it is important for the Minister to address that point when he sums up.

The change in the deadline for normal years is acceptable because variations in planting and climatic conditions, which affect potatoes more than most crops, make a later date more appropriate. There is a counter-argument that the existing date matches other parts of the regime, such as the integrated administration and control scheme payment dates, but on balance the Ministry is right.

Finally, the increase in the maximum rate would allow it, in theory at least, to rise again and again. We have been assured that such a rise would be in consultation with relevant bodies—the Minister mentioned that in passing—but it might be helpful to reaffirm the consultative arrangements that would be necessary for any further increase to take place, and to offer reassurances. With those minor points, which are queries rather than criticisms, I am more than happy to allow the Minister to sum up and to reassure the potato growers, as reassurance is desperately needed given the plight of the industry.

4.43 pm


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