The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Jonathan Shaw): I beg to move,

The order is made under the Natural Environment and Rural Communities Act 2006. It abolishes the existing five levy boards from 1 April 2008, and replaces them with a new board: the Agriculture and Horticulture Development Board. The order also provides for the establishment of subsidiary companies for each sector. It is intended that companies will be created for six sectors: beef and lamb, cereals and oilseeds, horticulture, milk, pigs, and potatoes. The scope of the new board will be same as that of the existing boards, with the exception of the red meat sector where separate arrangements are being introduced in Scotland and Wales.

The order brings into effect the recommendations of the independent review into the statutory levy arrangements in 2005. I should say at the outset of this debate that these changes have been the subject of a significant amount of consultation over the last couple of years with levy payers, the industry and the levy boards, and have the support of stakeholders, such as the National Farmers Union, the Tenant Farmers Association and the Country, Land and Business Association.

Restructuring will improve accountability to levy payers, with the sectoral companies having boards made up mainly of levy payers. It will also improve the efficiency of the levy arrangements by providing more scope for co-operation and collaboration across the sectors. The shadow board has already proposed to locate all the boards and companies on one site, at Stoneleigh, with an estimated efficiency saving of £12.7 million over five years.

To improve accountability there is also a provision in this order for a ballot of levy payers in each sector to be held, should 5 per cent. of such levy payers request one. However, in order to allow the new arrangements time to prove themselves, and bearing in mind the proposed business case for the new organisation, which sees a relocation to Stoneleigh in 2009, I think it is right that there should be a moratorium on the right of levy payers to call a ballot for the first few years.

Mr. James Paice (South-East Cambridgeshire) (Con): I am slightly puzzled and I should be grateful if the Minister could clarify this point. The original consultation paper said five years. The summary of consultation responses heeded the view that it was too long and quite clearly said that it was proposed to reduce the moratorium period from five to three years. In the order it is four years. Can he explain?

Jonathan Shaw: Yes, I certainly can. The moratorium is for three years from the date of relocation. So that is the date of Stoneleigh and is from 2009. It will allow for everything to be bedded in. The hon. Gentleman is right. We did originally say five years and now we have reduced that to three years after the relocation and some four years after the restructuring.

The ballot provision was widely welcomed during public consultation. In response to another point that came up frequently in the public consultation, we have now included a requirement at article 6(6) that levy raised in one sector can be used only in relation to that sector. There will be no transfer of funds between sectors. That was the major concern.

The opportunity has also been taken in this order to make improvements to levy collection and to reduce the regulatory burden. For example, the offence of failure to register has been removed. While the requirement to register has been removed, levy payers do still need to provide information, and failure to do so is an offence. All offences under this order will be summary offences only, with the level of penalty applicable to all offences increased to a level 5 fine of £5,000 on the standard scale.

Some of the changes introduced by this order are specific to a sector so, for example, the promotional and general levies in the meat sector have been combined. There are also a number of improvements to the levy arrangements in the horticulture sector, including standardising the arrangements for raising levy on all horticultural products, except mushrooms, based on turnover, and increasing the threshold for paying levy on horticultural produce from £50,000 to £60,000.

In addition, the statutory obligation for those producers who fall under the threshold, but who have a turnover of more than £25,000 to provide returns has been removed. The maximum rate of levy for horticultural produce has been increased to 0.6 per cent. from 0.5 per cent., although it is not expected that next year’s rate will increase. And the levy for mushrooms, at the industry’s request, now differentiates between exotic and non-exotic mushrooms. [Interruption.] I thought hon. Members might be interested in that point. I look forward to questions on that.

In the potato sector, co-operatives will no longer have to pay buyers levy when purchasing potatoes from their own members. In the cereals sector there will no longer be a requirement for an annual levy rate order, rather this order specifies the maximum levy rate that may apply and so puts cereals on a similar footing to the other sectors. In summary, the order introduces simplified levy arrangements and a new structure that should improve the governance, accountability, and efficiency of the levy arrangements for the general benefit of the agriculture and horticulture industry.

Mr. Paice: I am grateful for the opportunity to serve under your chairmanship, Mr. Pope—for the first time, I think.

I thank the Minister for his introductory statement. As he rightly says, the paving legislation for the order is the Natural Environment and Rural Communities Act. I sat through proceedings on that legislation, when we pre-empted some of today’s debate. Although we had not received Rosemary Radcliffe’s report at that time, the proposals were widely expected. The Opposition have no fundamental objection to what is being proposed and we certainly support the idea of a central board; however, there are some points that I want to flag up with the Minister arising from the fact that not all the changes made since the consultation are in accord with the consultation results. I have already raised one of those points.

The principal provision relating to subsidiaries, article 5, has been changed. The original draft stated that the board “must” establish a subsidiary company; the draft order now states only that it “may” do so. In other words, despite the Minister’s comments today, it will be entirely at the discretion of the new board to establish a subsidiary company for each of the industries within the scope of the order. The industry and I find that somewhat puzzling, because it gives rise to the possibility that the board will not do what the Government intend. There is no clarity or certainty that we will end up with the various subsidiary boards, which have been the theme throughout. The Minister himself just referred to each sector board comprising predominantly producers and other people involved in the sector, but we cannot be certain that that will be the case. Will he clarify that point?

Article 5(2) states that

but it continues:

That provision, which was not in the original draft, creates the potential for immense confusion and duplication. I should be grateful if the Minister told us why it might be sensible for the board to create a subsidiary and to delegate functions to it, but then to continue to perform that function itself. Why was the change considered necessary? As far as I can establish, it was not requested by the industry or by any of the stakeholders who were consulted.

The Minister will be well aware that the sector that has expressed the most concern about the proposals in the draft order is the horticulture sector. It is smaller than other sectors of the industry and it is concerned that many of the matters that it considers important will be subsumed within the wider issues of the overall board. It is particularly concerned about research and development—in fact, the Radcliffe review referred to its importance. Rosemary Radcliffe said:

Bearing in mind that the Government—DEFRA—are already slashing expenditure on R and D across many sectors, the horticulture industry’s particular concern about what is happening in that sector and the closure of various centres, does the Minister think that the proposed changes will do anything to assist research? The levy for horticulture is only £200,000 or £300,000 and will therefore not make a vast difference in funding terms.

Only a few minutes ago, the Minister gave me an astonishing answer to my question about the moratorium. In the interests of brevity in my intervention, I did not quote the full consultation response, but that response, which the Minister published, clearly states:

That is not what the Minister is doing: instead, he has put 2012 in the statutory instrument. He says that it is now three years after the move to Stoneleigh, but Stoneleigh is not part of the order. Stoneleigh it is not mentioned in the order, for obvious reasons, and the timetable for the move to Stoneleigh is not in the order. We therefore have four years, not three, from commencement. The summary of consultation made no reference to the provision being related to the move to Stoneleigh. It seems to me that DEFRA has invented a new criterion to extend the moratorium. That is a clear piece of duplicity—an example of DEFRA finding a justification for a position that it wanted to adopt, rather than facing up to what was clearly stated, in black and white, in the response to the consultation.

Will the Minister talk about the movement of staff to Stoneleigh? There is widespread concern that, for various reasons, many staff will not wish to move to Stoneleigh. What estimates have been made of the number who will choose not to relocate and what impact might that have? What costs might be involved in severance arrangements? I understand that the Stoneleigh plan was drawn up on the basis of considerable financial support from Advantage West Midlands. Is that support likely to be forthcoming? Has a contract been agreed and signed? Might the incentive package to move to Stoneleigh be withdrawn? Those were important questions before the Committee, but they become even more important in the light of the Minister’s comments about the moratorium. Unless the move to Stoneleigh is cut and dried and watertight, with the funding available from Advantage West Midlands, it is meaningless to say that the moratorium is for three years from the move to Stoneleigh. We need some explanations.

Beyond those questions, we have no major problems with the draft order. As I said, we supported the overall approach from the outset as it offers the potential for savings and efficiencies. Whether they manifest themselves remains to be seen—they have not done so in other examples—but, in principle, we support the draft order. However, on the points that I have made, I hope that the Minister will provide careful clarification, so that we can be sure that the draft order will achieve the desired aims.

Mr. Alistair Carmichael (Orkney and Shetland) (LD): I, too, agree broadly with the purport of these decisions, although I share some of the concerns of the hon. Member for South-East Cambridgeshire with regard to the significance of Stoneleigh as a vesting date, which in the order is 1 April 2008 and which I should have thought would have been rather more sensible to use as the date from which any moratorium, or any other measure relating to the operation of the boards, should be measured.

The Minister may be being slightly optimistic when he is replacing a structure of five bodies with one which will ultimately have eight, if one includes those in Scotland and Wales, if he hopes to make £12.7 million in efficiency savings over five years. I may table a few written questions in five years’ time to see what the reality is.

Such relocations have been notoriously difficult for other Government bodies. I think in particular of the Scottish Executive’s decision to relocate Scottish National Heritage from Edinburgh to Inverness, which was a challenging move that has not created much by way of efficiency savings. I should be interested to know what progress the Minister is making with the unions in this regard, and what assessment has been made of the likely staff losses and their financial consequences. Will staff who are not minded to relocate be eligible for compensatory payments, or will they be required to be accommodated elsewhere within the various organisations?

Those few quibbles apart, we appear to be getting a structure that should ensure that we have boards because the sectors want them and because they provide a useful function, rather than simply existing for the sake of it. On that basis, I am happy to support the order.

Jonathan Shaw: The summary of the consultation responses was published before the board proposed its business case, so the stakeholder consultation following the business case agreed with 2012 for the moratorium. We have reduced the number of years in which we have the moratorium, but the Secretary of State and the board can call for a ballot, particularly if matters are not progressing in the way that we would hope, and the producers will have a majority on the board, to which the hon. Member for South-East Cambridgeshire alluded.

The hon. Gentleman rightly raised the concerns of the horticulture industry, particularly its concern at the beginning of the consultation process about the importance of good research. We understand that, and we are grateful for the fact that, despite its opposition to the amalgamation of the boards, it has worked with us. We have reassured it on the important point that all the money will not go into one pot, and levies raised for a particular sector will be used for that sector. However, article 5(2) allows for research and development to be carried out centrally on a sector basis, so we can see where there will be synergies, bringing together researchers from across the agricultural and horticultural industries, but it will be separate and the producers will have a majority on the board. There will be opportunities for ballots before that period of time, but it is right that the organisation has time to become properly embedded in relation to the business case.

Hon. Members rightly mentioned staff concerns and, yes, there will be job losses. The boards employ 294 people and 22 positions will be lost. Finance, human resources and IT provision will be brought together for all the sector companies. That will be organised by the board, but the sector companies will have that service and that will account for part of the savings to which we have referred.

Mr. Paice: My point was not about the compulsory redundancies because of the restructuring and savings, but about the staff who it is widely expected will choose, voluntarily, not to transfer to Stoneleigh, which will mean a loss of expertise and some sort of severance arrangements, although I do not know what. What assessment has been made of that impact on the ability to deliver the overall objectives?

Jonathan Shaw: We need to retain the infrastructure of the research and marketing expertise, and there will inevitably be some people whom it will not suit to transfer to Stoneleigh, but, overall, we are confident that we will retain and recruit sufficient expertise in order for the board to function. Time will tell, but where we have centres of excellence of scientific research, rather than it being dotted around in smaller organisations, that is often a great pull. Consultation with staff is ongoing and any redundancies will be carried out properly in accordance with people’s terms and conditions.

I was asked about Advantage West Midlands. No contract can be signed until this order is made. With the good will of the Committee, if it is persuaded by the arguments, when the order has completed its passage here and in the other place later today, that contract can go ahead. Advantage West Midlands has provided financial assistance, and it very much wants to create this centre of excellence at Stoneleigh.

I was asked about the use of the words “must” and “may”. We had to change the wording in accordance with the Natural Environment and Rural Communities Act, but there was no intention that the subsidiaries would not be established. As I say, there is a built-in majority of the chairs on the board. There would be a clamour for a ballot if we did not go ahead with that. We are confident that that will go ahead.

I am grateful that hon. Members support the measure. We want to get on with the building work and ensure that we have the right staff in place, and it will be good for the sectors, supported by the NFU, the CLA and others. It will also deal with a large quantity of older legislation, and Conservative Ms will be interested to know that it will repeal much of the Corn Returns Act 1882. Given the history of that legislation, I am sure that they will not seek to divide the Committee on this matter.