Examination of Witnesses (Questions 226-239)
RT HON
JANE KENNEDY
MP AND MR
DUNCAN PRIOR
27 OCTOBER 2008
Chairman: We move into our final evidence
session, and I have great pleasure in welcoming Jane Kennedy to
her first session before the EFRA Sub-Committee of the Select
Committee in terms of her recent appointment to Defra. We hope
very much that you will be happy in your new department. I think
you are on an almost vertical learning curve if those are non-sequiturs,
having had to master the entire CAP for last Monday's outing.
You are now moving diametrically into an area which is not so
directly involved with the Common Agricultural Policy, so thank
you very much in your early stage for agreeing to come and give
evidence to us and we hope you will be happy in Defra. Mr Prior
knows all about this subject because he went to the David Black
Award last year and munched his way through sausages and bacon
and everything and therefore must be an expert.
Mr Drew: Perhaps he should declare an
interest.
Q226 Chairman: Indeed. Perhaps he
will be going to this year's award, I do not know. You are a Policy
Adviser to the Department in the livestock area, so you are very
welcome. Do, please, both of you, feel free to join in the discussion,
because we are anxious about the facts as much as anything. Minister,
when a new minister has to face a new subject and you know you
are going to be asked a lot of detailed questions, you say to
the hapless official who has been summoned from the depths or
the heights of Defra to come and brief you, "What is the
problem?", so when you ask that question what did they tell
you?
Jane Kennedy: So far as the pig
industry goes in the UK, you will have seen from the Defra submission
that the advice I got is that there are broadly two problems.
The first, certainly in recent times, has been the high cost of
feed, and we can talk about the detail of what we have done to
try and mitigate that high cost, but the second would be, and
I am trying to find a succinct way of putting it, the lack of
prices keeping pace with the costs of production, and there might
be a lot of factors affecting the costs of production, some of
which I know you have a deal of interest in here in the Committee.
My practice has always been to say, "That is very interesting,
and what is the pig industry saying? What are the representatives
of the industry saying are the issues affecting them?", and
I must say, not to spare Mr Prior's blushes, that he has been
very effective in communicating the concerns of the pig industry.
Indeed, we both went to visit a pig farmer in the East North Riding
of Yorkshire two weeks ago, knowing that I was coming to this
Committee. As a minister I always like to go and meet the stakeholder
groups if they have a particular issue with either government
policy or another policy affecting their activities; I like to
go out and meet them and see the whites of their eyes.
Q227 Chairman: Let me ask you about
another perspective on this. The pig industry as such is affected
by a variety of European regulations but it has not been in the
past an area of agricultural production subject to subsidy and
payment from within the Common Agricultural Policy, and it is
not unnatural that people in times of difficulty will come to
the principal agricultural department, Defra, and ask for some
help, so perhaps you could assist the Committee by laying out
for us what responsibilities Defra thinks it has towards the pig
industry.
Jane Kennedy: Our overarching
aim is to ensure a thriving agricultural industry across the UK.
That is the department's responsibility and that applies as much
to pig farming as to any other aspect of agriculture, and I am
very quickly beginning to appreciate the vast range and diversity
of agriculture in England in particular and the UK as a whole
and all the different factors that affect it. I beg your pardon:
I have gone off the point of your question.
Q228 Chairman: My question was a
very straightforward one, which was, given the relationship of
the pig industry to the Common Agricultural Policy, what do you
think are the principal responsibilities that Defra has towards
the pig industry? You have given me a clear picture about your
view of the responsibility towards agriculture. For example, in
your submission, in paragraph 3, it says, "Defra estimates
of incomes for pig farms in England published at the end of January
2008 indicate average commercial pig farm losses of £4,100
in year to end of February",[7]
and you can give some comparative income figures as well. That
is quite a showstopper figure—average commercial pig farm
losses of £4,100 a year. You might turn round and say, "Do
we have any responsibilities in the light of an industry which
clearly is in some difficulty?". What do you think Defra's
responsibilities are towards the industry?
Jane Kennedy: They will be demonstrated
in the action that was taken earlier this year when it was perceived
that there were difficulties, as I said earlier, partly caused
by the high cost of animal feed. The UK was instrumental in working
with the EU to lift the duty on imported feedstuffs and to take
at least two other steps to assist. One of them was—
Q229 Chairman: I am going to be very
rude and stop you there because you are giving me a shopping list
of policy responses. I will just come back to the central issue.
If you had said to me, "One of our responsibilities is to
ensure as a department that we do everything we can to ensure
that the industry has, for example, a competitively priced availability
of food", that would have been a perfectly acceptable answer.
Given that, for example, a number of the European directives which
impinge on the industry have cost implications, you might have
said to me, "One of our jobs is to minimise external cost
increases on the industry", but instead you have, not unnaturally,
giving me a shopping list of short-term help measures. I am interested
in trying to put a framework round the industry about what your
department thinks it has as responsibilities towards it. We will
come on to look at some of the detail in a minute.
Jane Kennedy: That is fair enough,
and I am not seeking to evade the question that you are putting.
I was seeking to quote examples of ways in which the department
will work with the industry when we see a particular problem developing
that might mitigate against the overall objective of a thriving
industry. The definition of a thriving industry I am sure is open
to constant debate between government, the industry and other
stakeholders involved, but the department has taken action in
the past to ensure that the pig industry in the UK is not adversely
affected in an unfair way. We believe in keeping markets as open
as possible because that is essential to sustain our food security,
but very integral to that also is a thriving UK industry that
can play its part not only in providing food to our home markets
but also in exporting.
Q230 Chairman: Let us drop down one
level of detail. In looking at the industry we have been told
that there are certain aspects of our industry which put us at
a disadvantage compared with competition from abroad, and cost
of production is one of those that is used. What is Defra's analysis
of the production efficiency of the UK pig industry? Does it,
for example, believe that the industry overall is less efficient
than its continental competitors?
Jane Kennedy: No. Our assessment
is that we have a highly efficient industry, that it is competitive,
but, more importantly, that it is producing pig food products
to a very high standard with very high quality products and we
acknowledge that some of the animal welfare requirements that
we have placed upon the industry are to a higher standard than
our competitors and therefore the department has been encouraging
the pig industry to use that as a selling point for their products.
Q231 Mr Gray: I am terribly sorry,
Minister, but what you said just now was inconsistent. You said
that you were convinced that we have a healthy, competitive industry
competing well with the rest of the world, but that we are proud
of the fact that we have higher animal welfare standards than
the places we are competing with. Surely by definition that means
that it is not competitive, and indeed the evidence we are getting
from other people is that the price which you can buy pigmeat
at from European countries is 15, 20, 30% less than you can get
it for here, and that is because of those very high animal welfare
standards, which I am very proud of. I am glad that we have them,
it was a Conservative Government that brought them in, but nonetheless
surely that has made our industry uncompetitive.
Jane Kennedy: The high cost of
feed has affected pig farmers right across Europe, and indeed
right across the world.
Q232 Mr Gray: I asked you about welfare.
Jane Kennedy: There are a lot
of factors that impact upon the cost of production, not just in
the UK but across Europe. In terms of our animal welfare requirements,
I understand that there are—and I do not know this; I have
not visited yet—other European countries which have imposed
higher standards than the European basic minimums, the European
standard, and that in most of animal welfare the UK applies the
EU standard. In pig farming I think it is fair to say that we
introduced the ban on sow stalls and tethering early and those
have had a major cost, but it is also true to say that other European
countries will face those costs in the next two to three years
as the ban is applied right across the European Union. My reply
to you would be that I believe that in comparison to our competitors
we are doing well. We need to understand what the factors are
which are impacting upon the industry, and that is why I am keen
to listen to what representatives of the industry are saying and
to work with them with Defra to mitigate the impact, if it be
the impact of European regulation, and to make sure that is implemented
in a way and over a time period which our industry can cope with.
Q233 Mr Gray: If that is the case
why is it that Wiltshire, for example, my own county, was historically
the biggest single producing county of pigmeat, I think, in the
whole of Europe, and the pig industry has now been obliterated
in Wiltshire? We have not got any. It is gone, finished. Why is
that?
Jane Kennedy: I simply do not
know the answer to that.
Q234 Mr Gray: Farmers are coming
here and saying they are going bust and the British pig industry
is disappearing and that pig production in the UK is going to
be finished and it is the end of the world. We are saying to you
as Minister, why is that? Why is the British pig industry being
destroyed in this way?
Jane Kennedy: I do not recognise
the word "destroyed". I would be interested to know
what it was that has been impacting on the industry in Wiltshire.
I know that there is still very profitable and productive farming
of pigs going on but maybe that is in East Anglia and the East
Riding of Yorkshire and Lincolnshire where I visited. I do not
know whether you know more about what has happened in Wiltshire.
Q235 Mr Gray: I was just using it
as an example of England as a whole. I am merely using Wiltshire
as a good example. I was not saying there was something different
about Wiltshire. Farmers have come before this Committee to say
that unless something happens the British pig industry is finished.
They cannot compete. The supermarkets are buying pigmeat from
Europe 15, 20, 30% cheaper than they can buy it from British farmers.
Jane Kennedy: That is not what
they were saying to me when I met representatives of the industry
two or three weeks ago. They were clear that there were problems
but it was not apocalyptic in the terms that you were using just
now.
Chairman: It is not very good when they
are losing as much money as has been indicated in our earlier
exchanges, but Mr Drew wants to pursue this line of questioning.
Q236 Mr Drew: In terms of what James
has just said, and I will not be as apocalyptic, certainly the
producer who gave evidence to us the first time we took evidence
was saying he had not made any money for three years and he is
a larger producer. That was interesting because at the end of
the previous session they were saying that there was more money
in the industry of late. I wonder what you think about the sustainability
of the industry if there are people who have not made any money
and yet ours are some of the most efficient producers. What can
you as a Government do to try and allow them to ride out what
currently is a storm? He made every indication he intended to
stay in the industry but he is saying that in the industry he
is losing money. That is a bit of a dilemma for him, surely.
Jane Kennedy: We have over the
last eight years provided funding to the industry to help with
particular problems. I think in the early 2000s we provide something
like £37 million to help with refinancing and restructuring
of the industry and last year we gave further support to deal
with animal disease, such as foot and mouth disease, but that
is not what the industry has been saying to me it needs from the
Government. There were a number of complaints but the two that
I felt were most passionately felt by the representatives of the
pig industry that I met were first of all the cost of regulation
and the way in which the UK tended to implement EU regulation,
and they made points about how the Environment Agency worked with
them and whether that could be improved, but the second point
they made was this sense of powerlessness when dealing with the
big grocery retailers in selling their produce. The farmer that
we visited, David Morgan, in the East Riding, was very clear that
he felt that despite the fact that he had invested in what are
regarded as some of the best animal welfare provisions the supermarkets
were simply not prepared even to meet him halfway in terms of
the impact of the costs of production. I would therefore be keen
to study and understand what is happening there and learn what
we can do to use the power of consumers to influence that.
Q237 Chairman: But, Minister, with
great respect, that has been looked at so many times. We have
just come out of an OFT study, the second one, on the relationship
between the primary production sector and the supermarkets. What
you have just enunciated is perfectly true but with regard to
the idea of bringing the power of consumers to bear, all of this
has been looked at umpteen times by, if you like, "official
arms" of government but seemingly without bringing a solution
to getting a better balance between the supply side and the supermarkets.
You may not have heard the exchanges earlier. In fact, BPEX summarised
it, if I can find the figure they quoted to us, that average retail
prices of pork and pork products have increased substantially
over the last year by 179p per kilo or 37%. Over the same period
the average pig price paid to farmers has increased by only 27p.
If you knock half of the 179p off for margin we are down to 90p
roughly, so there does appear to be a bit of an imbalance and,
in fairness, Mr Opie attempted to explain that to us earlier on.
I am not surprised your pig farmer said that but then people have
been saying that not just in the pig sector but in the horticultural
sector and just about every other sector, seemingly without any
solution, but they all want to carry on doing business with them.
Jane Kennedy: I do not think it
has been without solution. I think there are a number of solutions
and what we have to do is redouble our efforts to make sure the
solutions are effective.
Q238 Chairman: Hold on— "redouble
our efforts to make sure the solutions are effective"? What
do you mean by that?
Jane Kennedy: I think clearer
and more effective labelling will allow purchasers in supermarkets
to make it clear through what they buy that they want to support
farmers who use better animal welfare production methods.
Q239 Chairman: But we have heard
that that does not really apply, that people are not all that
welfare conscious, and when it came to the British Hospitality
Association's evidence they made it very clear to us that the
number one predominant factor at the present time is price.
Jane Kennedy: I suspect that is
the case at this moment but if you look at the impact of consumers
on the way in which eggs have been produced I would argue that
consumer choice has had a major impact on the welfare of laying
hens.
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