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Session 2005 - 06
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Standing Committee Debates

Plant Breeders’ Rights (Discontinuation of Prior Use Exemption) Order 2005




 
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First Standing Committee on Delegated Legislation

The Committee consisted of the following Members:

Chairman:

†Mr. Eric Martlew

†Atkinson, Mr. Peter (Hexham) (Con)
Baker, Norman (Lewes) (LD)
†Bradshaw, Mr. Ben (Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs)
†Breed, Mr. Colin (South-East Cornwall) (LD)
†Clark, Ms Katy (North Ayrshire and Arran) (Lab)
†Cox, Mr. Geoffrey (Torridge and West Devon) (Con)
†Cunningham, Tony (Workington) (Lab)
†Dunne, Mr. Philip (Ludlow) (Con)
†Fisher, Mark (Stoke-on-Trent, Central) (Lab)
†Harper, Mr. Mark (Forest of Dean) (Con)
†Hoyle, Mr. Lindsay (Chorley) (Lab)
†Kidney, Mr. David (Stafford) (Lab)
†Lazarowicz, Mark (Edinburgh, North and Leith) (Lab/Co-op)
†Mackinlay, Andrew (Thurrock) (Lab)
Meale, Mr. Alan (Mansfield) (Lab)
Paterson, Mr. Owen (North Shropshire) (Con)
†Southworth, Helen (Warrington, South) (Lab)
Dr. Griffiths, Committee Clerk

† attended the Committee


 
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Tuesday 6 December 2005

[Mr. Eric Martlew in the Chair]

Plant Breeders’ Rights (Discontinuation of Prior Use Exemption) Order 2005

4.30 pm

Mr. Colin Breed (South-East Cornwall) (LD): I beg to move,

    That the Committee has considered the Plant Breeders’ Rights (Discontinuation of Prior Use Exemption) Order 2005 (S.I. 2005, No. 2726).

It is a pleasure to serve under your chairmanship, Mr. Martlew, on what I hope will be, if not a simple debate, a not-too-lengthy one. I want to take the opportunity to rehearse the origins of how we got to where we are with plant breeders’ rights. The origins go back to the early 1950s, when a few agricultural seed companies needed to earn a bit more from their wheat varieties. Interestingly, I understand that the Seed Trade Association then voted against the concept of plant breeders’ rights by 156 to 4, which was an even more resounding success than another vote that was announced today. Nevertheless, the Plant Varieties and Seeds Act 1964 was enacted but did not have much direct impact on the public, or even the general nursery trade. Its scope was limited to about 200 specified genera, because they were the subject of breeding programmes.

The present Government introduced the Plant Varieties Act 1997. A number of hon. Members, including me, made their maiden speeches on the Bill, which was remarkable because it completed all its stages in just one day. I re-read Hansard, which shows that only my hon. Friend the Member for Lewes (Norman Baker) made a meaningful contribution in terms of questioning the Minister and raising the concerns and objections. The Minister said that the Bill provided a robust system of plant protection which was necessary to provide incentives to invest in plant breeding over many years.

My hon. Friend tabled an amendment that would have ensured that

    “no variety which occurs naturally . . . shall be the subject of a grant of plant breeders’ rights.”—[Official Report, 24 June 1997; Vol. 296, c. 729.]

Not surprisingly, it received no support from the Government, and the then Minister dismissed it as unnecessary because if a breeder discovered a plant growing in the wild he must carry out significant selection and re-crossing to establish distinctness, uniformity and stability. It is not just a question of discovering something that is wild; the breeder must develop it and do something about it.


 
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That is a little strange—any individual wild plant that is propagated vegetatively is already both uniform and stable—and is contradicted by the official guidance to the legislation, which says:

    “At its simplest, development might involve replicating the variety to produce sufficient stocks to make it commercially viable.”

Instead of “’significant selection and re-crossing”, all the applicant has to do is to propagate his plant for sale, which he would have to do anyway. To many of us, the idea of owning nature in any way is ridiculous, because it belongs to humanity. However, that has become a real issue in recent years for those who propagate plants for sale or buy them in nurseries and garden centres.

The other important change in the 1997 Act was to introduce a one-year period—it is four years in the rest of Europe—during which someone with a plant that they are thinking of patenting can sell it to test the market without prejudicing their chances of obtaining plant breeders’ rights later. Sales made before the one-year period do not disqualify the plant if they took place without the consent of the applicant. That is fine for the applicant or the plant breeder, but not so fine for other growers, who may buy the plant and propagate it only to find that they are not allowed to sell the results of their work.

During the debate in 1997, the Minister assured the House that the Bill did not allow or provide for retrospective payments. That may be true, but the rights are certainly retrospective.

Clear labelling of plants that are or may be covered by PBRs would certainly help, but recent answers to parliamentary questions stated that the Government were not proposing to introduce any such labelling. PBR plants are often marked “propagation illegal”, which is, of course, untrue. It is propagation for sale that is prohibited. Even wholesalers’ catalogues frequently list PBR varieties with no indication of their restricted status. Incredibly, the UK plant variety rights office and seeds division does not have accessible lists of currently protected varieties under their marketing names.

Other problems are now prevalent, including worthy old varieties being dropped by influential PBR-orientated wholesalers in favour of similar or even inferior new ones that would attract a royalty. Some nurseries simply rename old varieties to get a plant breeder’s right. The lack of regulation has attracted marketing consultants into horticulture. Indeed, their advertisements encourage the public to bring them any exciting plants that they may have found, and there is no pretence that any plant breeding is taking place; they obtain plant breeders’ rights and market the plant for money.

Plant breeders’ rights simply extract money from the public by telling them that they are paying for plant breeding. That adds to the process of individuals and corporations owning the genetic blueprint of nature for profit. What is surely needed now is a strict definition of what plant breeding is; merely selecting a seedling is not plant breeding. My preferred option would be to remove natural material from intellectual
 
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property rights altogether, so that it is freely available to anyone, as always used to be the case. That is a little bit unlikely.

The original legislation was closely modelled on the European legislation, as is this statutory instrument. Europe opened up its system in 1995 and provided protection across what now comprises 25 countries. The UK system only applies here but applicants to the UK system have been relatively modest in number, whereas the European Union receives thousands of applications. The problems that I have mentioned apply to both systems, but they are on a much larger scale in the EU.

Even at this late stage in the UK presidency, I hope that the Government might bring some influence to bear on this most important area of genetic engineering.

Mark Lazarowicz (Edinburgh, North and Leith) (Lab/Co-op): Can I be clear that it is Liberal Democrat policy to go into open defiance of European law on this matter? Is that now the Liberal Democrat position on European matters?

Mr. Breed: I do not know about open defiance. We want to use our influence to make the situation more workable. The original legislation—in European and UK terms—really is not workable in the market; it is certainly not working here and I doubt whether it is working in Europe.

The system can be made to work better for everybody, including those who want to invest in genetic modification and get proper plant breeders’ rights, and excluding those who are making money for nothing and not doing anything in terms of work, investment or research and development, but are merely picking up existing plants and obtaining rights to them.

This statutory instrument is a tidying up exercise, but in truth it is addressing a relatively insignificant matter while failing to tackle some of the real underlying problems that have manifested themselves since the 1997 Act came into force eight years ago. Farmers and growers are against the order, not unnaturally, because they know that it will affect them financially, but it is hardly surprising that plant breeders and seed companies are in favour of it.

The original legislation was flawed and I cannot support this modest measure to change a piece of legislation to which my colleagues and I are fundamentally opposed and which requires careful and considerable amendment to address some of its fundamental flaws. That can be done, but it is time that, instead of looking around the edges, we tackled some of the more fundamental problems of the original legislation.

4.39 pm

Andrew Mackinlay (Thurrock) (Lab): I was enormously excited when the Whips appointed me to this Committee, and I bounced with joy when I received the explanatory memorandum in the post.

There are a number of issues that I should like to ask the Minister about, having studied this matter, including the purpose and extent of the statutory instrument that we are discussing. When the Minister responds, perhaps he could tell us how many farmers would be affected.

I am anxious to clear up the confusion created by the following statement in the explanatory memorandum:


 
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    “The UK prior use exemption was designed to keep in step with the similar, but entirely separate, Community regime with the intention of discontinuing it when the parallel exemption lapsed in Community law.”

European Union law applies to us. We may need to produce an Act or subordinate legislation to provide for EU law, but the word “parallel” does not seem to have any logic.

The explanatory memorandum also states:

    “At Community level, the prior use exemption has lapsed.”

If the exemption has lapsed across the Community, it must have lapsed in the United Kingdom, regardless of what the House does. There was some hope that, somehow, the European Union would retrospectively grant exemptions dating back to June 2001. However, it has not done so, and if European law is overriding, some farmers could be liable for a bill dating back to 2001—because, presumably, that is when the EU legislation lapsed. There is considerable confusion. There is nothing in the instrument or the explanatory memorandum to explain why our regime is different from that of the rest of the European Union. I would be grateful if the Minister would clarify that matter.

I take an interest in Northern Ireland legislation, and it is sometimes a source of irritation that it is passed separately. I noticed that, rather unusually, this instrument applies to England and Northern Ireland. I have no complaints about that, but it raises the question of what is being done in comparable circumstances by the devolved institutions of Scotland and Wales. We must be told about that because, while I understand that these are matters for devolved institutions, it would be absurd if there were there separate regimes within these islands. That would be unfair to English and Northern Irish producers.

I read the 1997 parent Act, and noticed that it gives powers for us to make Orders in Council covering the Channel islands and the Isle of Man. It would be appropriate for hon. Members to know what is happening with regard to those islands. Although they are relatively small, I would imagine that that sort of agricultural work is quite important to them. Depending on how many farmers are affected, there could be significant competition if there were separate regimes operating in those islands, or if their Parliaments did not make the same provision, at the same time, as us.

On reading the explanatory memorandum two or three times, I noticed that paragraph 7.2 states:

    “Only growers of older potato varieties would be affected.”

I listened to the hon. Member for South-East Cornwall (Mr. Breed), who gave us a not unhelpful and not uninteresting tour of the history of this matter. I thought that he might have painted too big a canvas, because we are told that the provisions relate only to older potato varieties. I am nervous that he might be right and I might be wrong—although Ministries have been known to be wrong. The Minister must reassure us that if the order goes through, there will be nil royalties paid on everything save the older potato varieties, because that is what it says. If that is so, the explanatory memorandum could have been a lot shorter, because it could have said that in one paragraph. I fear that that may not be the case, and that we have been misled by the memorandum. I look forward to the Minister’s comments.


 
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The explanatory memorandum also tells us that there is conflict between the plant breeders and the farmers’ unions—unions in the plural, I notice. It does not elaborate on that much, but what does emerge is that if the order goes through, the seed producers will have total discretion to apply whatever royalties or charges they want. They will be constrained by what the market can bear, but the order will create what is in a sense almost a monopoly.

I do not speak for the National Farmers Union, but it has submitted some valid points to the Department that bear rehearsing today. First, it believes that there should be greater safeguards for farmers, for the reason that I just gave: plant breeders will be able to charge whatever they like at a delicate time for farming, when substantial changes are occurring because of reform of the common agricultural policy and the introduction of the single farm payment scheme. This is not the most opportune or sensitive time to make changes in charges, funding and royalties. There is a case for new primary legislation to protect and promote the legitimate interests of both the seed producers and the farmers themselves.

Another thing bewilders me. If an exemption was made for these products in 1997, why has it been lifted? I am sensitive to the intellectual property rights of people who produce seeds, which is a valid concern, but that case existed in 1997. Both the UK Government and the European Union presumably considered that the seeds that we are discussing had been around for so long that it was neither reasonable nor consistent with the wider public interest, especially of the consumer—which the European Commission is apparently charged to take into account—to charge royalties. What has changed? As I understand the legislation, new seeds created since then would be subject to royalty payments, but we are talking about products that have existed for a long time.

I hope that the Minister can answer those questions. They are legitimate if we are to scrutinise this important measure, which could hit the pockets of some farmers, who will feel that they have been unfairly and arbitrarily treated. I particularly want him explain why this House is enacting legislation parallel—that is not my term; it can be found in the documents—to the EU legislation. Rightly or wrongly, it seems to me that European legislation is paramount and ours merely gives effect to it. He shakes his head, so he obviously knows the answer, to which I look forward.

4.49 pm

Mr. Peter Atkinson (Hexham) (Con): I apologise on behalf of my hon. Friend the Member for North Shropshire (Mr. Paterson), who cannot be here this afternoon. There are some other diverting activities taking place just now.

The hon. Member for Thurrock (Andrew Mackinlay) is wrong about one thing and right about the other. He is wrong to say that the order is only about potatoes, because it is much wider. The
 
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explanatory memorandum mentions other cereal crops; I refer him to paragraph 2(4) on page 4. I shall say a few words about that later, because it potentially goes wider than potatoes.

I should like to ask the Minister why the Government are introducing the order now. As I understand it, under existing legislation there is no obligation to introduce this change at this time of dramatic revolution in British agriculture. As Members will know, with the introduction of the single farm payment, the finances of the farming industry are rather uncertain. It would have been better if the exemption had continued. I understand from the explanatory memorandum that the discontinuation of the exemption could have been put off. The loss of the exemption will add costs to a section of the farming industry, and will certainly add costs for the potato producers.

The Minister will say immediately that the single farm payment will benefit potato producers because they did not benefit from any subsidy before. However, the payment does do one thing, which the hon. Member for Thurrock identified: it removes a small spur to competition in the industry. Like the hon. Gentleman—and I believe that my hon. Friend the Member for Ludlow (Mr. Dunne), who is a farmer, would agree—I think that the measure takes away a form of power that the farmer has over the supplier.

At the moment, the royalty costs for seed potatoes are about £200 a tonne; what is to stop the industry from saying, once the order has been introduced, that it will be £1,000 a tonne? That could easily be done.

I know that the deal for the older varieties of cereal crops is that there is a 0 per cent. royalty charge—that is, no royalty charge is applied at the moment. However, again, what is to stop the industry simply tearing up that 0 per cent. deal and saying, “We are going to introduce a much higher charge”? That is why all the farmers’ unions are vehemently opposed to this measure.

The Committee should remember that it is not as if farm seed potatoes are used on a year-after-year basis; that would be poor husbandry. Potato farmers might well use farm-saved seed for one, possibly even two, crops, but after that they would have to revert to buying new seed potatoes and paying the royalty charges.

The older varieties of potato are still crucial and the ones probably best known to us: King Edward, Desiree, Maris Piper and the commercial varieties were in existence a long time before 1997 and are important crops for British potato farmers.

The point was made about what is going to happen in Scotland, which is one of the large seed potato growing countries. It is important that English seed producers and potato growers should not be put at a disadvantage because there are different regimes north and south of the border. That would have a considerable impact on my constituency, which is on the border. We grow potatoes as well.

The issues that I have mentioned are worrying the National Farmers Union and we think it totally inappropriate to introduce this change at this time. So we Conservatives will join the Liberal Democrats in opposing this statutory instrument, although for reasons slightly different from theirs.


 
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4.54 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Ben Bradshaw): It might help the Committee if I gave a little background. There is a certain amount of misunderstanding both in and outside this Committee Room about the order.

Plant breeders’ rights are accepted by breeders and farmers as a fair and effective way to encourage the development of new and better plant varieties. Without the royalty income facilitated through those rights, plant breeding would not be viable. The Plant Varieties Act 1997 makes growers liable to pay holders of UK plant variety rights a “sensibly lower” royalty rate for using farm-saved seed of a protected variety than that paid for bought seed. The rate on farm-saved seed is currently 50­ ˝per cent. of the full rate. That liability was provisionally disapplied for varieties that were farm-saved prior to the coming into force of the 1997 Act and on which no royalties were paid. That is generally known as the prior use exemption, which is what we are discussing today.

The same kind of provisions exist in the European plant variety rights regime, but the exemption applied under Council Regulation 2100/94 on Community plant variety rights was time limited and has now lapsed. In effect it lapsed four years ago and most other European Union countries have already got rid of the exemption.

Andrew Mackinlay: I just do not understand. When the European legislation lapsed, surely we lapsed with it. Did we get a derogation? Why was the United Kingdom different from elsewhere?

Mr. Bradshaw: Because this is not a matter of EU competence. There are two parallel regimes and it is up to the plant breeder to decide whether to register with the UK regime or the EU regime. The Government felt that it was important that we did not have a regime that was wildly out of step, given that we have a single market, with that which operates on the rest of the continent. I will come on to some of the points made in the NFU briefing in a moment.

It has always been the Government’s intention, as we made clear at the time, to remain in step with the Community regime. We publicly stated that in the Ministry for Agriculture, Fisheries and Food guide to the 1997 Act. The order fulfils that long-standing commitment. The Government understand that in most other EU states the exemption ended up to four years ago. The discontinuation of the prior use exemption will not affect small farmers producing less than 184 tonnes per harvest, who will remain exempt. Only a minority of producers of certain older potato varieties still protected by the plant breeders’ rights will be affected. We estimate that that will be about 8 per cent. of the total potato crop. I cannot give my hon. Friend the Member for Thurrock the exact number of farmers, although I asked my officials if they could off the top of their heads. However, that should give him some idea. Those producers could still avoid paying royalties by choosing to grow other old-established potato varieties, such as Maris Piper and King Edward, which are no longer protected by plant breeders’ rights. They are free. Those varieties are widely available and are still very popular with consumers.


 
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To return to the point made by my hon. Friend the Member for Thurrock about whether there was any power to stop breeders charging whatever they like, there is. First, there is competition between breeders. Secondly, as I have said, there is always the option for farmers to buy varieties with no royalties. With potatoes, which are the crop of interest that we are discussing, that category includes the vast majority of the crop.

I want to outline to the Committee what would happen if the order were annulled. It would undermine plant breeding in the UK, leading to a greater reliance on foreign-bred varieties, which in some cases attract higher farm-saved seed royalties that those currently applied in the UK. It would put the UK out of step with the rest of the European Union, would be seen as the Government reneging on an earlier commitment and would leave the Government open to possible legal challenge from plant breeders.

The reason why I am slightly puzzled, both by the fact that the Liberal Democrats are praying against the order and by the briefing from the NFU is that, when we gave notice to lay the order some time ago, we did not get a single letter or phone call from either of the Opposition parties or the NFU saying that they wanted the order annulled. I am perplexed.

Mark Lazarowicz: To clarify, my hon. Friend has said that there might be a possible legal challenge if the separate regimes were to continue. If the matter is entirely within the UK’s competence, how can he foresee a legal challenge to a separate regime?

Mr. Bradshaw: There could be a legal challenge based on the 1997 Act, which is part of domestic legislation. As I say, however, we are puzzled about why the order is being prayed against at this late stage and why the NFU is producing a briefing when it has not bothered to make representations to me or to my hon. Friend in the other place, who has the main responsibility for plant breeders’ rights. On that basis, I urge hon. Members to vote against the annulment.

5 pm

Mr. Philip Dunne (Ludlow) (Con): I need to declare an interest at the outset, as my hon. Friend the Member for Hexham (Mr. Atkinson) has mentioned. I farm both cereals and potatoes, so I have a direct interest in the matter, not least because we also save seeds.

That also means that I speak with perhaps a little more understanding than some other hon. Members about the implications of what is being proposed. My two main points are quite simple. At a time when farm incomes are under such intense pressure throughout the industry, not least because the costs of production of most agricultural products are now at the level of prices, so there is little profitability in most aspects of agriculture, DEFRA could, by perpetuating a relatively small measure, allow the relevant cost pressures to be kept under control.

I have been given figures by the National Farmers Union showing savings on farm-saved potato seed of the order of £40 to £50 per tonne because of not paying the extra royalty. In the cereal sector the saving is of
 
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the order of £5 a tonne, and as farmers are getting about £60 a tonne for cereals this year, that is, for most small producers, substantially the profit that could be made. The Committee should not take the order lightly. I do not think that the figures I have are exact but roughly a quarter of potato acreage is currently farmed with saved seed. As an illustration, on my farm we use approximately three quarters farm-saved seed in our new planting. We are a smaller potato producer, not a major one, but we produce more than the tonnage that the Minister mentioned.

My second point is on flexibility. Most farmers do not use farm-saved seed every year, for the reason that my hon. Friend the Member for Hexham gave. There is a need to change varieties. The exemption allows farmers, who do not, in most areas of activity, have any negotiating status, to apply some negotiating muscle with the breeders, as they have the option to save seed from year to year if they want to. If we remove that flexibility we lay the farming community open to the possibility of more extortionate royalty rates in the future. That will obviously raise costs in years to come.

I think that we have all received the NFU briefing note. The experience of our interpretation of EU directives does not give me confidence that DEFRA will handle the order with a light touch. Paragraph 2(3) of the regulatory impact assessment attached to the explanatory note states:

    “To do nothing would therefore risk damaging DEFRA’s reputation.”

Risk it where? It might risk it in the hallowed halls of Brussels, but it is already very damaged in the fields of Britain, which are the constituency that the Government need to represent in holding back excessive Brussels regulation and allowing farmers to compete and make profits. If they do not make profits, they go out of business, and we do not have a farming industry.


 
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I have one more minor observation to make, in response to a comment by the Minister, about variety use. My understanding of potatoes, in particular, is relatively young, because we have not been at it for long, but I understand that potatoes, of all crops, are particularly prone to disease. The disease prevalence is affected by climatic and soil conditions, primarily. Many farmers know which historic older varieties work in the environment where they farm. To say that farmers can introduce some of the other, older-established varieties, to which royalty rates no longer apply, may be true in some cases, but will not be true in all. I do not think that that is a valid justification for eliminating the exemption.

Finally, I do not believe that the justification that we are undermining the plant breeding industry has validity. We are talking about the older varieties and there is no suggestion that the existing exemption will limit in any way development of plant breeds in the future. For all those reasons, I urge Committee Members to think hard before they fall into line with the Government on this issue.

Question put:—

The Committee divided: Ayes 9, Noes 4.

[Division No. 1]

AYES

Bradshaw, Mr. Ben
Clark, Ms Katy
Cunningham, Tony
Fisher, Mark
Hoyle, Mr. Lindsay
Kidney, Mr. David
Lazarowicz, Mark
Mackinlay, Andrew
Southworth, Helen

NOES

Atkinson, Mr. Peter
Breed, Mr. Colin
Cox, Mr. Geoffrey
Dunne, Mr. Philip

Question accordingly agreed to.

Resolved,

    That the Committee has considered the Plant Breeders’ Rights (Discontinuation of Prior Use Exemption) Order 2005 (S.I. 2005, No. 2726).

Committee rose at six minutes past Five o’clock.

                                                                                           
 
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