Memorandum submitted by the Food and Drink
Federation (SFS 29)
EXECUTIVE SUMMARY
— Food security is a complex issue,
involving a chain of production and distribution. Consumers also
need enough purchasing power to buy what they need. — Food
security in the UK is intrinsically linked to the health of the
whole supply chain—farmers, processors and retailers. UK
food and drink manufacturers buy some 2/3 of the UK's agricultural
output. Without this processing capacity UK farmers would not
have a market, now or in the future. We also rely on international
trade for the choice and variety of diet and year round availability
that UK consumers currently demand. — The longer term
balance of supply and demand is a global challenge. Climate change
introduces whole new areas of uncertainty to a set of existing
risks, which already include pressure on energy and water supplies
vital to feeding the nation on a day to day basis.
— Managing and mitigating these risks
will require integrated policies which prioritise food security
as an objective in its own right, particularly in the regulatory
area. We also need to maintain and enhance knowledge and skills
to provide flexibility, innovation and resilience to make the
most of what we have, now and in the future.
— The UK food and drink industry currently
provides a wider range of affordable and wholesome food to more
people than at any time in our history. We need to build on these
strengths through a clear and shared strategic framework to help
Government and industry avoid short term difficulties and the
risks of market failure eroding critical mass and undermining
the further capabilities we need to develop.
INTRODUCTION
1. The Food and Drink Federation (FDF) represents
the UK's food and drink industry, the country's largest manufacturing
sector. The industry directly employs around 440,000 people,
widely dispersed across the country in 7,000 companies of
all sizes, and more than twice that number in a range of ancillary
services. It has a turnover of £72.6 billion, produces
a gross added value of about £21.6 billion a year and
is a key partner of British agriculture and aquaculture—buying
approximately two-thirds of what our farmers produce. Consumer
spending on food and non-alcoholic drink amounts to some £129 billion
a year. The industry is also a major player in international trade—and
we export some £7.5 billion worth of food and non-alcoholic
beverages a year, mainly to Europe.
2. Issues related to food security are highly
relevant to the industry's own interests and to the role it plays
in providing safe, nutritious, varied and affordable products
for consumers, in the UK and elsewhere. Moreover, following the
progressive disposal of Government-held stocks, the industry's
own storage facilities (together with those of the retail supply
chain) now constitute the nation's strategic reserves in the event
of civil or other emergency.
3. The industry is very aware of the potential
impact of climate and demographic change, environmental degradation
and possible shortages of fossil fuels and water—at both
national and global level. That is why it is increasingly engaging
with efforts to reduce its carbon footprint and to promote increased
efficiency of resource use, for example through the FDF's Fivefold
Environmental Ambition, which sets targets for cutting CO2 emissions,
reducing water use and transport miles, minimising packaging and
sending zero waste to landfill.
4. The FDF is keen to assist the Committee
with its inquiry and offers the following responses to the questions
posed.
How robust is the current UK food system?
5. Assessing the robustness of the UK's
current food system depends on how food security is defined. There
are many different approaches, but most involve physical and economic
access to sufficient safe and nutritious food combined with supporting
active and healthy life. The level of national self-sufficiency
for particular foods has a role to play, but is not itself a determining
factor.
6. On these broad criteria, the UK currently
enjoys high levels of food security and arguably a wider range
of affordable and wholesome food available to more people than
at any time in our history. With rare exceptions, shops are fully
stocked at all times. Even 20 or 30 years ago, seasonality
would have affected the range of foods on offer. But improved
access to world markets and advances in agronomy mean that most
products are now available all year round. The efficiency of the
manufacturing sector and supply chain is another key factor, as
few foods are grown and consumed locally without some form of
processing.
7. Likely risks to short term supply centre
on issues relating to transport, energy and other forms of civil
contingency, rather than on the availability of food as such.
Maintaining fuel supplies is critical for both manufacturing and
primary production. Recent experience suggests that the UK food
system is relatively robust in the face of brief or localised
disruption, though prices did increase significantly in response
to world conditions in 2007-08. Prolonged or more widespread disruption,
particularly to supplies of energy or clean water, would undoubtedly
pose a major challenge and require direct Government intervention
in support of the industry's own efforts. But, depending on the
availability of unaffected imported supplies, it ought to be possible
to avoid widespread food shortages.
8. By way of comparison, it is worth noting
that adequate food supplies were largely maintained throughout
the Second World War, though there were major adjustments to what
was available, where it came from and how it was produced.
9. Public perception of what constitutes
an acceptable level of supply is also likely to change in response
to the severity of any emergency and who is seen as responsible.
Shortages outside obvious national control (such as those resulting
from major weather events or disasters) are more likely to be
tolerated than those arising from failures in infrastructure or
poor commercial or public policy decisions.
10. Common to all such disruptions to supply,
however, is the extent to which the identification, assessment
and management of risk can mitigate their worst effects. The food
and drink industries have a long and good record of cooperating
with Government and its agencies in these areas. But modern supply
chains keep physical stocks to a minimum to save cost. This increases
vulnerability and dependence on logistical systems to ensure needs
are met. Small failures can have disproportionate consequences
in such circumstances.
11. In the longer term there is now established
consensus that we face a different set of risks relating to the
basic balance of supply and demand. World population is expected
to grow by 50% by 2050 and demand for food to double. Increased
prosperity will also accentuate competition for resources as more
people enjoy higher protein diets. Renewable energy needs may
also impact on water use and food crop production. Policies aimed
at developing biofuels need to take proper account of food security
concerns.
12. At the same time, climate change is
likely to reduce available agricultural land and increase harvest
volatility. Shortages of energy and water may further reduce output.
Mass migrations may compound other changes in patterns of production
and trade. Even if some of these impacts may be less extreme in
the UK, we will inevitably be affected as part of the global economy.
13. The ability of political, economic and
market forces to cope with these challenges remains unknown. Nor
is it clear how linear these processes might be, or when tipping
points might occur. Risk management will again be vital, as will
the extent to which people are prepared to modify their expectations
in the light of changing circumstances.
What are its main strengths?
14. The current UK food system is as strong,
diverse and competitive as any in the world. It has a good record
of innovation and meets high standards of quality and safety,
beyond regulatory requirements. But continued profitability and
investment will be essential to maintaining and improving this.
Food and drink businesses are as dependent as any others on levels
of consumer spending, interest and exchange rates, the availability
of credit and their ability to attract and employ sufficient numbers
of sufficiently skilled staff.
15. Another key factor is the industry's ability
to buy efficiently from EU and wider world markets to improve
the range of products on offer and complement its use of home-grown
raw materials. A variety of suppliers is also inherently more
robust than reliance on single sources.
And weaknesses?
16. As already noted, the industry is heavily
reliant on energy and water supplies and also on a range of other
ancillary inputs such as packaging. In general the more sophisticated
the product, the more vulnerable it is to interruptions in essential
inputs. In the short to medium term, energy security and water
security are probably more relevant to UK food security than the
industry's ability to source raw material supplies in what is
still a relatively abundant world market for primary agricultural
and fisheries production. In the longer term, and depending critically
on climatic, socio-economic and political conditions elsewhere
in the world, the ability to source and transform sufficient staple
foods within the UK is likely to become increasingly important.
17. Maintaining sufficient productive capacity
in both domestic agriculture (and fisheries) and in our own processing
industries needs to be given appropriate strategic priority, as
market forces alone will not necessarily guarantee the continuity
required. This needs to extend to regulatory and other decisions
affecting the context in which the food chain operates, in order
to ensure that there is an appropriate balance between long term
resilience and more immediate policy requirements. National standards
in areas like animal welfare or food safety which go beyond those
applied elsewhere may also adversely affect the relative competitiveness
of UK producers. Maintaining a level playing field may involve
difficult compromises e.g. in relation to pesticide use or planning
consents.
How well placed is the UK to make the most of
its opportunities in responding to the challenge of increasing
global food production by 50% by 2030 and doubling it by
2050, while ensuring that such production is sustainable?
18. The UK food and drink manufacturing
industry already provides a market for over two thirds of the
UK's agricultural production. Maintaining a strong domestically
based processing sector will be vital to exploiting any increase
in output should climate change improve the UK's comparative advantage
in temperate products. The ability to process close to sources
of production is also likely to be inherently more sustainable
than transporting bulk materials over large distances. Maintaining
a critical mass of manufacturing capacity in the UK will be essential
to maximising these opportunities. Access to the relevant technology
and R&D specific to UK circumstances are other necessary conditions
along with the ability to make appropriate capital investments.
This requires a sufficiently stable long term framework for business
and one which looks at the totality of issues, including regulation,
training and an appropriate UK science base.
19. The industry also adds value to a range of
imported supplies using the skills it has developed, in areas
like preserving nutritional value, improving shelf-life and minimising
waste. UK companies are well placed to make less food go further
and get maximum benefit from it, including the development of
new uses for by-products and ways of conserving and recycling
resources used in production. Driving the efficiency of resource
use is one of FDF's key aims and vital to both sustainability
and competitiveness. FDF is keen to work with Government on these
issues. Continued profitability is essential to providing the
platform for future expansion. Attempting to regenerate capacity
or re-acquire expertise may not only be disproportionately expensive,
but may also simply not be possible in the then prevailing circumstances.
What are the challenges the UK faces in relation
to the following aspects of the supply side of the food system?
Soil quality
20. The UK has a long history of cultivation
and industrialisation. It is also relatively densely populated.
Most land suitable for agriculture has already been identified
and improved and some has already been lost to competing land
uses. In these circumstances, conserving soil quality has to be
a high priority, not least because of its close links to water
issues. Good nutrient management and proper control of other chemical
inputs is essential to both. In terms of food security, the challenge
is to balance the maintenance of future productive potential with
meeting current needs. This requires a proportionate regulatory
framework within a longer term land use policy, which recognises
food production as a strategic priority and also takes account
of environmental and biodiversity concerns, including the role
of soil in the carbon and nitrogen cycles.
Water availability
21. Achieving significant reductions in use to
help reduce stress on the UK's water supplies is already one of
FDF's Environmental Ambitions. The same challenge applies to agriculture,
other industries and to domestic consumers. Water shortages which
inhibit production in the UK will lead to increased reliance on
imported food supplies, which in an era of scarcity would almost
inevitably lead to higher economic cost. So timely action to promote
efficiency of water use and increase availability is a form of
spend to save, as well as helping to promote wider food security.
Market signals are still very weak in this area, particularly
in relation to the longer term benefits. But simply increasing
the cost of water to users in the short term risks distorting
markets and moving both food production and food processing to
countries not following similar policies.
The marine environment
22. Properly managed fisheries have the potential
to provide enormous benefit to the nation's food supply, particularly
in nutritional terms. Marine fisheries require no inputs other
than the energy involved in capture. And responsibly fished stocks
are effectively a renewable resource. The UK is particularly well
placed to exploit these opportunities, provided that sufficient
base capacity can be maintained while improved conservation and
stewardship policies take effect. Aquaculture also has the potential
to make a significant contribution to food security alongside
sea fisheries.
23. But, as in the case of agricultural land,
there are increasing issues of spatial planning in relation to
the maritime environment, in relation to a range of competing
uses, other than food production. The oceans also have a key,
but relatively poorly understood, role in relation to climate
change and the carbon cycle. Research into these issues is even
more subject to market failure than in the case of land-based
equivalents, because questions of ownership are much less well
defined. The integration of policies relating to the marine environment—and
the funding of adequate research to support them—is therefore
primarily a task for government, at national and international
level. The history of cooperation and success in these areas is
not good and achieving the required step change in performance
is itself a major challenge.
The science base
24. The need for relevant expertise appropriate
to UK conditions is a consistent theme in many of the above responses.
Another is the need for innovation and flexibility to able to
respond to a range of possible circumstances. Both the degrees
of uncertainty involved in many of these issues and their probable
timescales make many of them inappropriate for industry funding
in a normal commercial or near market context. Ongoing research
and development is essential in order to meet these challenges.
In addition the industry needs a consistent flow of good food
scientists and technologists. In recent years, public funding
for agricultural and food science has been reduced. Reversing
this is probably the single area where government can make the
most immediate and direct impact.
The provision of training
25. Training is another aspect of the knowledge
and skills base which it is essential for the UK to maintain and
enhance. Industry clearly has a lead role in this, alongside educational
providers. But again there are issues of profitability and market
failure which may prevent companies adopting the best long term
strategies, particularly in current trading conditions.
Trade barriers
26. Notwithstanding the potential for an increased
role for domestic supply in response to longer term threats to
food security, imports of food (as raw materials, semi-processed
and finished products) have made a major contribution to UK food
supplies since the industrial revolution. Diversity of sources
is also another key feature of resilience in the supply chain.
It is therefore a high priority for the UK to maintain and improve
access to global markets and also to maximise its own export potential.
The key to this is a genuinely open international trading system.
The FDF fully supports efforts to achieve multilateral trade liberalisation
and the role of the WTO in enforcing a rules-based international
system where the use of subsidies is restricted to non-distorting
measures. We see this as an important element of helping to balance
global supply and demand in years to come.
The way in which land is farmed and managed
27. Beyond the points above relating to soil,
water and the need for a longer term strategy for land use, the
FDF has no particular comments on the way land in the UK is farmed
and managed, other than that consumers need to be able to have
confidence in the quality and traceability of products and that
necessary regulatory requirements have been met.
What trends are likely to emerge on the demand
side of the food system in the UK, in terms of consumer taste
and habits, and what will be their main effect? What use could
be made of local food networks?
28. There seems to be a disjunction between attempting
to analyse emerging trends in consumer tastes and habits and assessing
the prospects for securing food supplies in an increasingly uncertain
future. Although there is growing public awareness of climate
change and its possible consequences, there is little evidence
to date of this having any material effect on patterns of current
consumption. As noted earlier, the range and diversity of food
and drink products available in the UK is probably greater than
ever before and there are no signs that consumers wish this to
be restricted in future. There is evidence of a more direct link
between disposable income and choice, suggesting that consumption
responds more readily to price signals than to any wider concerns
about the impact of production on the environment or the sustainability
of food supplies in general.
29. There is also a growing debate about diet
and health. This will also affect consumer choices and the way
manufacturers formulate products. But it is difficult to predict
the effect on aggregate demand. More use of fresh produce and
localised sourcing may affect some processing sectors. But it
is similarly difficult to assess the implications of this, including
for food safety in respect of storage and production standards.
30. Consumers are also increasingly interested
in how their food is produced and the quality, technical and ethical
standards involved (e.g. in relation to both animal welfare and
human labour). There is also caution over the need for and safety
of new developments e.g. in relation to additives, nanotechnology
and GM. Responding to these concerns requires a careful balance
on the part of industry and its regulators. Meeting higher demand
from fewer resources in future will inevitably require smarter
solutions and technology has an enormous contribution to make
to this.
The role and effectiveness of Defra
31. As recognised in the Government's "Food
Matters" report, a successful food strategy must include
affordable access to necessary supplies, fair terms of trade and
competition, a proportionate regulatory framework and coherence
with wider policies on health and the environment. The challenges
of food security extend further into issues of energy and water
supply and the impact of climate change on global supply and demand.
This agenda—and associated evidence and research needs to
be integrated into a coherent cross-government policy framework.
FDF notes that Defra has recently been given an enhanced role
in relation to food and is awaiting details of what this will
mean in practice. However we have some concerns that it appears
to be primarily directed to co-ordination of the plethora of existing
activities and players rather than the strategic leadership and
clear prioritization of sometimes competing policy priorities
which is essential.
32. Apart from Defra, FDF deals regularly with
BERR, Department of Health, DECC, DfT, DfID, Treasury and Cabinet
Office, with FSA and a range of other agencies and public bodies
and with devolved administrations and local government structures—often
on different aspects of the same issues. FDF engages similarly
with a range of EU institutions, to complement the efforts of
Defra and others in pursuit of UK interests. FDF would like to
see a consistent and coherent view of food policy issues within
Government, with a clear focal point for engagement with industry
and a shared commitment to proportionate, evidence-based regulation.
With so many decisions taken at EU level, particularly in the
regulatory area, it is essential that the UK promotes such an
approach within the EU, taking account also of the wider world
picture.
What criteria can be used to monitor how well
the UK is responding to the challenge of increasing food production
while ensuring sustainability?
33. A key element of this has to be the
efficiency of resource use, in terms of energy, water, carbon
and other greenhouse gas emissions. The way food production impacts
on the environment and the way it is affected by climate change
are other important factors. Absolute levels of output or changes
in self-sufficiency ratios are not good indicators of success,
as they ignore the externalities which are such an important component
of sustainability. The cost of production is also relevant as
the UK has to operate in global markets. FDF would be happy to
contribute to further thinking on these issues.
January 2009
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