The Welfare of Laying Hens Directive - Implications for the egg industry - Environment, Food and Rural Affairs Committee Contents

Examination of Witnesses (Questions 1-63)

Q1 Chair: Good afternoon, Mr Williams. Thank you very much for joining us in our inquiry into the Welfare of Laying Hens Directive and the implications for the UK egg industry. For the record, would you like to introduce yourself, and Mr Clifton?

Mark Williams: My name is Mark Williams, Chief Executive of the British Egg Industry Council (BEIC). Good afternoon, ladies and gentlemen.

Giles Clifton: I am Giles Clifton, Head of Public Affairs for the British Egg Industry Council.

Q2 Chair: You are both very welcome. Thank you. Perhaps I may ask you first a general question. How would you describe the state of the egg industry at the moment?

Mark Williams: At the present moment in sheer commercial terms the industry is going through a sticky patch, but because we are an unsupported industry we have always responded to supply and demand and met exactly what the consumer requires. Like all industries that operate under market conditions, our slight over-supply situation at the moment will correct itself in the coming months.

Q3 Chair: Would you care to comment on the cost of production as opposed to one year, three years or five years ago? How do you find the cost of production looking particularly at feed prices and also fuel costs?

Mark Williams: Both have risen significantly. How energy prices have increased, and continue to increase almost on a daily basis, is I believe well documented. For egg producers the cost of feed is a significant proportion of the overall cost of producing a dozen eggs. We have seen the price of wheat effectively double; the price of soya, which is the main protein ingredient in a laying hen's diet, has also shot up considerably; and of course there are supply issues that are well documented from problems with harvests in different parts of the year. So the industry has been under severe pressure from increasing costs of feed and energy.

Q4 Chair: The industry has made a significant investment in enhanced cage production. Would you like to quantify what the impact of change on production costs will be?

Mark Williams: Yes. We are very proud to be part of an industry that has always taken the initiative here in the United Kingdom. Our egg producers and the other parts of the industry have made a phenomenal investment in meeting the requirements of the new laying hens welfare directive. If you look at it over the implementation period of 12 years, our industry will have invested £400 million in meeting the requirements of that directive. I believe that is the crux of the argument and why we are here today. That investment made by the UK industry must be protected from what we believe will be non­compliant production coming out of Europe in just under 12 months' time.

Q5 Chair: At the moment how competitive do you think UK egg production is compared with production in the rest of the EU and with the rest of the world?

Mark Williams: If you look at our current rate of self-sufficiency, the UK is 80% self­sufficient in eggs. Therefore, we import 20% of our consumption needs and roughly two thirds of that will come in a shell form and tends to get sold in wholesale markets and small retail shops in big cities and food service outlets, at least some of them. The other one third of the import requirement will come in as egg products already. That is where we believe the battle ground will be as we come to the end of this year and start 2012.

Q6 Chair: What would you say are the main challenges to UK egg production at the present time?

Mark Williams: Besides what you raised, Madam Chairman, at the beginning about the increasing cost of feed and energy, the very real concern is that other parts of the European Union will not be ready, as we will be, to implement the laying hens directive in its entirety.

Q7 Neil Parish: In your evidence you suggest that some Member States may be given a last-minute extension to implementing the directive. On what do you base that assessment?

Mark Williams: We have done a considerable amount of work over the last 10 years. In 1999, in the early days when the directive was adopted, we did various economic analyses of the effects on EU production vis-à-vis third-country imports. If we leave third-country imports aside for the moment and look at what is happening just within the EU, it became abundantly clear to us in the mid-part of the last decade that all producers across the EU just would not be ready on time due to a number of factors, some within the control of producers and some certainly outwith their control.

As we look today—we believe that our figures are still relevant and are based on data from the European Commission, so they are their own statistics collected from Member States—29% of commercial laying hens in the European Union of 27 will not be compliant with the directive on 1 January next year. That is nearly one third—or, put into simple terms, 83 million eggs a day would have to be destroyed. The Commission has very clearly said—we totally support it on this point—that the directive will be implemented on time. However, on 19 January it held a stakeholder meeting of various participants: the industry, welfare groups, consumers and retailers as well as Member State representatives. I was part of that meeting. It became very clear that other options would have to be looked at. Some of those options we would support; other options we certainly would not support. But let me make it clear, Madam Chairman: as far as we are concerned we are working closely with our own Government here in the United Kingdom to make sure this directive is implemented on time.

Q8 Chair: Which other Member States are ready and which are not? Do we have that information?

Mark Williams: As things stand at the moment, in theory we are still in the implementation period. They should all be ready at the end of this year. For example, Germany went ahead of the directive and decided to ban battery or conventional cages at the beginning of last year, by the time it was phased in. Austria does not have any conventional cages any more but allows enriched cages, which are allowed under the directive, but they will phase out those eventually in 2020. Sweden went ahead and banned battery cages but started that process before they acceded to the EU in 1995, so there was a transitional arrangement.

Q9 Chair: Sweden?

Mark Williams: Sweden, yes.

Q10 Thomas Docherty: They started it in 1995 and then came into the EU?

Mark Williams: Yes. They banned battery cages in 1989 with a 10-year phase-out, and joined in 1995.

Giles Clifton: It is also true, Madam Chairman, that Poland has repeatedly gone to the Council of Ministers to ask for a three-year extension to the 1 January 2012 ban on the grounds that they simply will not be ready. At the moment the vast majority of their production is still in the conventional systems.

Q11 Neil Parish: I just wanted to add that Jim Paice has been very much part of the Council of Ministers' opposition to any extension of the present system, so the new regulation has to come into force. But do you suspect that one of the things that will be done is that, for example, you will not be able to export eggs from Poland to the rest of the European Union out of the existing cages, but they will be able to sell their egg production in Poland? Does that worry you? Will it stay in Poland under the lower conditions or will we find it going into the rest of Europe in processed form in particular?

Mark Williams: There are two issues here. The first one is getting the policies in place. As you correctly say, the policy is basically to put in place what would effectively mean an export ban of non-compliant production if producers were either given more time or took more time from the beginning of next year to phase out battery cage production. Of course, the second phase is the detail, which is all-important to my members operating out there on the farms in the United Kingdom. How do you prevent either eggs or egg products that are supposed to stay in that Member State from finding their way across the channel or through the tunnel? That is the key point. Defra has been hugely supportive on this point—in particular the Minister and Secretary of State in pressing Europe to ensure that the directive is implemented. But what worries me somewhat at the moment is that the Hungarian presidency at the last Council meeting on 21 February was already talking about transitional measures.

Giles Clifton: If I may come in, Mr Parish, you can see the problem. You might imagine a large farm with seven poultry houses, three of which are converted to the new enriched system and four are still using the old conventional cage system. All the eggs go to a central packing station. Overseeing that things are done properly in accordance with the directive, even if there is a phased derogation period, would be a recipe for chaos, frankly.

Q12 Neil Parish: There is the question of how much processed food we might buy from Poland. If you were buying processed food you would have no idea of the eggs used in it, would you?

Mark Williams: Exactly. With your permission, Madam Chairman, we have brought along some props to try to illustrate the point.

Q13 Chair: You will have to describe it for the record.

Mark Williams: We will. I am holding up a six-egg pack. Fresh eggs would be sold in it. This would be sold, as it happens, in one of our named retailers in the United Kingdom. Just under half of all the eggs produced in the United Kingdom will be sold at retail level in shell. The other problem we have is that at the moment 23% of all eggs produced in the United Kingdom will be processed; in other words, they will be taken out of their shell and made into a variety of egg products. You name it, they can do it now.

The balance, which is really shell eggs again, go to the food service (catering) sector. That sector, not exclusively but generally, is governed by price. That is a key point. So in retail, as you know yourselves, there are eggs from different production systems used and consumers make their choice. It is as simple as that. As to the food service sector, increasingly there are now moves by companies to use non-cage eggs because that is what their customers want, but today it is still very much a price-sensitive market.

We then get into the processing market. Unless the manufacturer can gain a marketing advantage from selling a product made with free-range eggs they will not do it. What they are interested in is both the price and the microbiological safety, i.e. no salmonella or other bugs in it. Animal welfare considerations come low down the chain.

If I am a consumer and go into a retailer on 2 January of next year—because of the bank holiday, of course—basically I wish to ensure that when I buy a bag of imported pasta, the egg from which it is produced is a legal product in that other European country. I know that you are to speak to the British Retail Consortium afterwards, but certainly my members are talking to their customers, who are retailers as well as food service companies and manufacturers, to make sure that they are buying legal product from the beginning of next year. While the vast majority of those people will be responsible, there will be those who perhaps are not in membership of that organisation or others who may just decide to buy on price, and then we have leakage straight away.

I cannot stress enough the collateral damage that will be done to our industry from illegal product coming on to our shores from the beginning of next year unless measures are put in place. The two measures we clearly set out in our submission to you, Madam Chairman, are: that basically the directive should be enforced to the letter, and that if more time is given or taken by producers in certain other Member States then that production must stay within their own borders.

One particular point that I see in black and white, but I am afraid the European Commission does not, is that there should be a different number marked on the shell of eggs that do not comply with the directive, if producers in other member states are given, or take, more time to phase out the use of conventional battery cages after 1 January 2012. This would allow our enforcement authorities in this country, Animal Health and the Egg Marketing Inspectorate, to be able to check that any eggs coming in were legal. To me, it is simple. It then makes it clear that an egg which carries a No. 3 code on the eggshell comes from a legal, enriched cage egg. Any egg that comes across our borders but is not supposed to must carry another mark, a skull and crossbones or whatever. It does not matter, as long as it does not carry a No. 3. That is really what we are pushing for. Defra is supporting that but the Commission is not listening at the moment.

Q14 Chair: Did you say you would not know until the end of the year which Member States are not in a position to comply?

Mark Williams: We know there are certain Member States that physically cannot comply now from the very fact that equipment must be ordered; erection gangs must be contracted; and then physical erection has to take place. I could name the Member States but prefer not to, but, if I generalise, the northern European Member States in general will be ready and the southern and eastern countries will struggle. It is not all producers, because a lot of them in those countries will be ready, but the whole of their industry will not be ready—hence Poland, Romania and Bulgaria went to the Agriculture Council just over a week ago to ask for more time.

Q15 George Eustice: I just want to probe this. You said in your opening remarks that there were factors within their control and others outside it that meant they were not ready to comply. Can you explain a bit more what these are? You talked about lack of time to order, but are we just talking about the fact that they have different attitudes to animal welfare and so do not care, or is lack of financial capital a barrier to compliance? Why is it that Germany complied very easily ahead of time and these other countries are struggling?

Mark Williams: In certain European countries the actual percentage of cage production is above 90%, so consumers in those particular Member States do not really place animal welfare considerations high up on their agenda. For example, by the beginning of next year free range will be 50% of all eggs produced in this country. In the Member State I am referring to, at the moment 95% of all eggs are produced in a cage system. To change that industry to enriched or non-cage will take longer than the deadline that has been given to them. You mentioned the financial crisis. In the same Member State normally they would receive Government assistance to oil the change. Because the financial crisis has hit this particular Member State very hard indeed, Government has delayed providing that grant aid.

Giles Clifton: It is also true, Mr Eustice, that the Commission itself has not helped matters in some ways because when it initially brought in the directive it said it would give a more definitive final say on this by 1 January 2005. It did not produce that final definitive viewpoint until 8 January 2008, which meant that producers in the UK, for example, did not then have the green light that this would most certainly happen on the date it was meant to, so that did not help matters.

Q16 George Eustice: So are there other factors? The number one factor is the basic lack of financial capital.

Mark Williams: I would say market demand is number one. There has not been the willingness to do so. Why on earth would I invest in an enriched cage system in this particular Member State when the cost of production is 8% higher? I have my competitors down the road who will probably carry on using a traditional battery cage. Straight away I am making myself uncompetitive. Therefore, you leave it and leave it and then the financial crisis comes along to compound an already difficult situation.

Q17 George Eustice: Basically, you are saying it is a judgment call that the authorities would not enforce it. This is not like going to free range where you try to get a premium for your product; this is a new legal requirement, and you are saying they are actively just ignoring it.

Mark Williams: One of our legitimate fears is that at the moment the Commission points towards current enforcement measures. The current enforcement measures it uses is missions from the Food and Veterinary Office to check that Member States are complying with and enforcing EU legislation. I refer you to an FVO mission to Poland at the beginning of last year that picked up non-conformity on the current stocking density in cages. The individual producer was fined in the order of €7,500. This particular business has 1.25 million hens. I would say that is not satisfactory. That fine would be classed as a business expense, so what is the incentive to do anything about it? There isn't one.

Q18 Neil Parish: Taking that particular Member State, do you have any idea how many have converted to the enriched cage? Eventually there will be pressure within that Member State because those who have made the investment in the higher standard cages and have extra costs will want to stop the rest of their fellow farmers producing eggs according to lower standards. Do you have any ideas on that?

Mark Williams: I can refer you, Mr Parish, to the stakeholder meeting on 19 January. The representative from the Government of Poland noted that there were 452 production units in Poland using conventional cages. She said that 131 had enriched cages, but I believe she meant to say "enrichable cages". What it means is that it is still a conventional cage in which you would put the furniture of a nest box, perches and scratching area from the beginning of next year. But she clearly said that a phenomenal percentage of their hens would not be legal from the beginning of next year, hence their return to the Agriculture Council last week to ask for more time.

Q19 Neil Parish: Therefore, there will not be much pressure within Poland at the moment.

Mark Williams: There was also reference to lack of enforcement ability at the moment in Poland.

Q20 Amber Rudd: Do you think that it is small and local producers who might suffer most under this directive in terms of the costs of adapting and being commercial going forward?

Mark Williams: To be honest, I do not think any distinction could be drawn between large, medium or small. At the end of the day, the large producers in this country have spent many millions of pounds. To move from a conventional cage to an enriched cage costs £25 per hen. If that is something which your counterpart on the continent does not have to do, it is a significant cost. Therefore, I do not draw any differentiation between sizes.

Q21 Amber Rudd: What about employment issues? Do you think it will affect employment in the industry?

Mark Williams: My personal view is that if we do not get this right, it will. Ladies and gentlemen, you will know better than I do what happened to the UK pig industry a few years ago. One thing we want to avoid collectively is for our successful UK egg industry to go along similar lines.

Q22 Amber Rudd: Have you made any assessment of what effect implementation of the current directive might have in terms of employment?

Mark Williams: In round figures, currently, 10,000 people are employed directly in the industry, and another 13,000 are employed in ancillary industries like feed, veterinary and equipment, which we share with the poultry meat industry, if you like. Quite simply, if you are putting up your production cost by 8%, bearing in mind that price is the governing factor in the particular segments of the market I described earlier, there is no doubt that the impact will be severe.

Q23 Chair: You said that feed and energy costs were challenging. Is that the same across the piece? Do you have energy costs in terms of both heating the units and transporting?

Mark Williams: In terms of energy, the cost of oil will have gone up and affected the price of feed deliveries and the price of manufacturing feed as well. Energy costs have gone up—electricity for running feed mills and so on. We have heating costs because a day-old chick must have heat, which you gradually decrease over the first few weeks of its life until it can produce its own heat to keep it at ambient temperature. These are all costs that the industry has to bear.

In addition, other input costs are going up. For example, vaccine costs are going up significantly. There are issues about availability of supply, all of which must be addressed as we go forward. I would hesitate to use the expression "perfect storm", but at the moment it seems to us there are quite a few clouds gathering. We would wish to get out of the storm rather than allow it to hit us full on.

Q24 Chair: You just referred to the parallel of the pig industry, but there we were in the German position of going ahead unilaterally, well ahead of our competitor countries.

Mark Williams: Yes.

Q25 Chair: Are you getting support from Germany and their position on their producers as well?

Mark Williams: Absolutely. The German Government representatives supported Caroline Spelman when she made her statement in the council rejecting the Poles', Bulgarians' and Romanians' wish for more time, so we were very happy about that.

Q26 Chair: So, you have named the countries.

Mark Williams: We are very happy about the Secretary of State supporting our industry.

Q27 Dan Rogerson: For the record, you have explored a little the trend in what consumers demand here and what retailers provide. Can you set out what evidence there is that consumers are prepared to differentiate between production methods in terms of the choices they make?

Mark Williams: I take you back to 2004 or 2005—I cannot remember which—and the European egg marketing regulations. So they are egg-marketing regulations that are directly applicable. They were amended. They required that every single class A egg produced had to have a code put on it. The code on the egg started with a zero if it was an organic egg; it was one if it was free range; two if it was a barn or three if it was a cage. Then you had the country of origin, in our case "UK", or "NL" for the Netherlands, and so on; and then a unique code after it saying that it came from my farm, for example. That very clearly allowed consumers to see which egg was produced from which system of production. Led by both industry as well as particular retailers, they were already asking for clear labelling on the pack.

Our industry has always been totally transparent. We believe in transparency, and when you are market led you must be. As we saw back in 1999, about 75% of all eggs produced in this country at that time came from a cage system. Today, about 50% of eggs come from a non­cage system, and all of that is done by market demand and by being honest and open with consumers.

Madam Chairman, with your permission I should also bring in that my organisation runs the Lion quality scheme for eggs. That is basically a food safety scheme to ensure that eggs are as safe as possible for consumers. Some 90% of all eggs produced in the UK come under those standards. We took the decision many, many years ago to prohibit the use of misleading terms on packs. Therefore, on a cage pack we do not use the term "farm fresh eggs"; we call them "fresh eggs". There can be no pretty pictures of farmyard or countryside scenes on a cage pack, so when consumers go into a shop they can see very clearly what eggs they are buying. It is their choice, and I believe that is the way it should be.

Q28 Dan Rogerson: Some have argued that in addition to the system that is used, how birds are looked after obviously can have a crucial effect on welfare. Is the industry doing much in terms of training about how to get the best out of the systems that are there to increase standards?

Mark Williams: Yes, absolutely. Within the Lion code there are higher standards of animal welfare than those prescribed by either UK or EU legislation. You are probably aware that Freedom Food runs a scheme for non-cage eggs, and our colleagues from RSPCA will touch on that. We mirror the Freedom Food welfare standards for our non-cage production, so you can see we already have higher standards of welfare. Producers are audited independently to make sure they are trained in bird welfare. We have the Defra code and the same codes in the devolved Administrations. The codes of practice for welfare must be available and understood by farm staff. I certainly would not put someone in charge of £1 million, £2 million or £3 million-worth of stock without making sure they knew what they were doing, if you know what I mean. It is so critical. The margins in our industry are so wafer thin that you cannot afford to get it wrong.

Q29 Chair: For clarification, in the memorandum you have submitted you say that free range eggs currently account for 41.7%.

Mark Williams: Yes.

Q30 Chair: You forecast that free range production will go up to 50% by 2012.

Mark Williams: Yes.

Q31 Chair: Are you confident that will be reached?

Mark Williams: Looking at figures supplied by people like TNS and others, certainly retail sales of free range eggs are still going up. Perhaps they are not going up at quite the extortionate rate they were now we are in recession, but it is certainly true that free range eggs sales are continuing to grow. It is a forecast and we believe it is still relatively accurate.

Q32 George Eustice: You said at the start that you were proud to be implementing this new directive, but, to play devil's advocate, is it that much better for a bird that it has 50% more space and a perch? If you are a chicken do you feel much, much better in that type of cage, or is it still a million miles from barn eggs and even further from free range? I have heard some producers defend cages as better for animal welfare than barns, for instance. I find that counter-intuitive, but I wondered whether you had a view on it.

Mark Williams: The welfare directive prescribes what an enriched cage should provide. A current battery cage provides 550 square centimetres a hen; an enriched cage provides 750, plus the provision of a nest box, scratching area and perching space. In the UK certain companies have led the design and development of this. We now use what we call enriched colony cages. For example, instead of having traditional battery cages—I am sorry; I struggle to describe it for the shorthand writer—we put in big colony cages, which effectively are a series of cages where the hens have open access throughout.

What we are seeing now is that mortality levels are even lower than for a battery cage, which were already very low; the feather cover is better; the bird behaviour is better. It is not just industry saying that; it has been scientifically proven by research done under a LayWel project funded by the European Union on an EU-wide basis that concurs with that.

Q33 George Eustice: With colony cages there is free movement, which enables them to behave more normally, but to comply with the directive do people have to have colony cages, or can they just have a slightly bigger old-style cage?

Mark Williams: You are quite right, Mr Eustice. They can have just a slightly bigger furnished cage, but here in the United Kingdom as far as we are aware all the cages that have been installed are colonies. In the early days of the directive we moved towards, say, 40­bird colonies, then to 60 and the majority of the units going in currently are 80-bird colonies. We are seeing fantastic results. It is important to note that there are not just welfare benefits; there are also economic benefits for the producers. While the cost of production has gone up by 8%, we have now overcome the problems of second-quality eggs that we saw in the early days, where 90% of eggs being laid in a nest box knocked into one another causing hairline cracks, which are not acceptable at retail. Therefore, we have overcome those problems.

Q34 George Eustice: How far away from a barn system is a colony as you describe it in terms of, say, life expectancy of the bird?

Mark Williams: Barn and free range systems inside a house are exactly the same. The difference between the two is that free range hens have access to a range area outside. A barn system has a stocking density of nine birds per square metre, as per the welfare directive. Obviously, Freedom Food/Lion free range hens have higher standards in terms of access by hens to the outside. We have bigger pop holes so they can get out more easily. We enrich the range outside to encourage hens outside, all for their welfare benefit.

Q35 George Eustice: Is there a big difference between the two systems in terms of life expectancy of the hens?

Mark Williams: No. Basically, a laying hen is reared to point of lay and is then transferred to its laying quarters from its rearing quarters, and it will stay in lay for about 13 months. The traditional cycle is 72 to 76 weeks of age, when it is slaughtered.

Q36 George Eustice: The "colony" point is really interesting. How many of the other European countries will take the colony system route, which seems to me almost more significant than the arbitrary and slight increase in space?

Mark Williams: We do not have any cage manufacturers in the UK any more; they are European-based, and the work that is being done—I dare to say it is led here in the UK—will effectively be implemented by other European countries. The problem is that, as we said earlier, a lot of them are well behind at the moment.

Q37 George Eustice: So, if they renew their system they are likely to end up with a colony system?

Mark Williams: Yes.

Q38 Mrs Glindon: I would just like to ask about the potential quality of the eggs in the worst-case scenario if these other European countries were allowed a time delay and were able to undercut the British market. I want to ask about the quality of the eggs. Obviously, the egg has a 'best-before' date. So there must be some implication if eggs are being imported that that would be reduced by the time it gets to the consumer in whatever form. If that is the case, are there also any implications for health and well-being in relation to the consumer? Am I clear in what I have said?

Mark Williams: Totally clear. Because we have European egg marketing regulations that are directly applicable, that sets a 'best before' date on an egg. So when you go into a shop to buy an egg it has to be taken off the shelf at 21 days from lay because that is the so-called sell by date. The EU 'best-before' date is set at 28 days. Within the Lion scheme we set a shorter 'best-before' date because it is a quality scheme. So if you are talking about quality, in theory all other eggs produced throughout the European Union should have the same best-before date of 28 days from lay; it is as simple as that.

If you are talking about safety, that could be a slightly different issue. In the United Kingdom we have done a fantastic job, and full marks to the industry. We had our problems with salmonella in December 1988 and during the early part of the 1990s. Those days have long gone. We are a chalk and cheese industry compared with then. You have only to look at the success of the Lion scheme in effectively eradicating salmonella from UK eggs. That is backed up by our Government's figures and European survey figures, which improve year on year. The industry should really be congratulated on that.

That has not always been the case with all 27 Member States. A survey done a few years ago by the European Commission showed that there were a number of Member States that had a problem. They are sorting out their problem, but they have not achieved what we have achieved here in the United Kingdom. I think your final question was: would it take longer for eggs to be imported from the continent? There is a time factor, but because the best before dates are so long, in many ways, commercially it would not provide protection to say that British eggs are fresher than eggs that have to come across the Channel.

Q39 Mrs Glindon: But it is not ideal. Probably being able to get them more locally, being based in this country with all of the protection around them, means the ideal would be if they were British eggs?

Giles Clifton: It is certainly what the consumer wants as well.

Mark Williams: That is right. We have something like 88% consumer recognition of the Lion mark. You only have to look around the retail sector, and increasingly the food service sector, to see the number of packs now sold with the Lion mark on the box. It has been a phenomenal success story. The problem is that with every success story there is always a risk that you can have problems going forward, and through no fault of our own we can see real problems arising potentially from imports of illegal eggs and egg products from the beginning of next year.

Q40 Thomas Docherty: Good afternoon. It is good to see you again, Mr Clifton.

Giles Clifton: The same to you.

Q41 Thomas Docherty: We have had evidence about some egg producers choosing to leave the industry as a result of the transition costs. I think it would be helpful to the Committee to get a sense from you as to how widespread a factor that is.

Mark Williams: The Lion scheme represents 90% of UK egg production. I suggest that the vast majority of the 10% that is non-Lion will be egg production that is still in a battery cage or is changing to colony cages. The reason I bring in the 90:10 figure is that the people who are part of the Lion scheme have agreed collectively that regardless of what any legislation says, on a commercial basis there will be no Lion conventional cage eggs sold from the beginning of next year; in other words, it will be policed rigorously.

The people who are not part of the Lion scheme do not come under the control of our auditing system. Many of those people in the submissions that you have received have expressed severe concern because of lack of finance and so on, and will leave the industry. I am hearing that others are now starting to invest. Some will be ready on time. I hope all will be ready on time here in the United Kingdom. That is certainly the plan, and Defra and Animal Health in their enforcement arrangements will be making sure that they do comply. I hope that answers your question.

Q42 Thomas Docherty: What percentage is leaving the industry, if you had to take a stab at it? I appreciate that it is difficult.

Mark Williams: It is difficult to say. Because you are providing hens with more space, if you use existing housing you will get fewer hens in the new enriched cages, quite simply. Therefore, producers who want to stay in the business and keep their hen numbers at the same level will have to expand production. A lot of producers have severe problems in getting planning permission to build new houses. Nimbyism is rife, so to speak, in many respects. That has caused problems. There is no doubt that it has delayed things, but it is difficult to put a figure on it, and I would be wrong to guess.

Q43 Thomas Docherty: My understanding is that at least one nation of the UK is providing financial assistance to its egg producers. Scottish ministers provide it through rural development grants and financial assistance to Scottish egg producers to make the transition. I am not clear if it is buying the cages or expanding their areas. Do you think this difference in approach between Scotland and the rest of the United Kingdom has distorted the market within the UK?

Mark Williams: Madam Chairman started by asking whether there were any problems with our industry at the moment. We are suffering from over-production. I believe that one factor that has added to that has been the provision of grants in certain parts of the country. The devolved Administration to which you refer, Mr Docherty, has also made those grant aids available to go into non-cage or free range production.

Q44 Thomas Docherty: Has not? Oh, it has—right.

Mark Williams: It has been made available to producers to get into free range production; it was not just kept to that. What do I think of grants? Not a lot, to be perfectly honest, because I think they distort markets. You just leave the market to get on with it, as long as everybody plays by the same rule book.

Q45 Thomas Docherty: Are you aware of any discussions between Defra and Scottish Ministers as to the impact that the different approach has had on the market?

Mark Williams: I think you would need to ask Defra that question, because I would have thought that is a discussion between the devolved Administration and the Government.

Q46 Thomas Docherty: Have you asked Defra through your public affairs arm, or through your own discussions, to raise the issue with Scottish ministers?

Mark Williams: We have not directly, but the provision of grant aid will have been mentioned in conversations. For example, when we have made submissions to Defra over the past 10 years we have asked for funding under rural development for, I suppose, UK producers, but then some of the devolved Administrations went ahead and provided grant aid; however, in England it has always been refused.

Q47 Chair: How would you describe the current enforcement regime?

Mark Williams: Here in the United Kingdom or on a Europe-wide basis?

Q48 Chair: Both.

Mark Williams: If I may talk first about Europe, Madam Chairman, it has considerable room for improvement. I quoted the example of the FVO mission in Poland in 2010. One of the points made at the stakeholder meeting, not by me but by the representative from the Food and Veterinary Office in Dublin, was to the effect that they need to have more teeth to ensure enforcement takes place that is proportionate to the misdemeanour, so to speak. I have no doubt at all that these other producers in European countries who are looking for more time will eventually comply, but they will not be able to comply on 1 January next year. Some are looking for two more laying flock cycles; some are looking to 2018, or, if the truth be known, probably even longer than that, and the concern is the damage they can cause to our industry in the intervening period.

Q49 Chair: You rather trustingly said that they should put "No. 3" on the egg, or that they must not have that number on it. Which was it?

Mark Williams: It must have "No. 3" on the egg for it to be legally sold from the beginning of January next year.

Q50 Chair: Who would have responsibility for ensuring that they complied, and had the right to have "No. 3" on the egg?

Mark Williams: As it comes under the egg marketing regulations it would be Animal Health Egg Marketing Inspectorate in this country.

Q51 Chair: So, they would be taking on trust what the exporting country was saying.

Mark Williams: Quite, yes. I was talking about the policy and detail. If we get on to the detail, as Giles mentioned earlier our great fear, taking a producer who has part-converted—to be clear, there are many in Europe who are part-converted—is how to ensure that we do not receive non-compliant eggs or egg products. That is where the difficulty arises. We are discussing with Defra ways and means of preventing that happening. To be perfectly honest, I do not see demonstrations at ports helping.

Q52 Chair: It is the same with poultry from Brazil, is it not?

Giles Clifton: Anything that is actually imported from another country in the EU is assumed to be produced according to our standards, so it is never checked. Everything else is checked on a speculative basis.

Q53 Chair: But they could put on "No. 3" without knowing.

Mark Williams: It would be illegal to do so.

Q54 Chair: If they are taking it on trust, how do they know?

Mark Williams: One of the animal welfare groups, for example, in their submission to you said that they saw no need for a different production number. They argue that it would suffice if the egg marketing regulations say that from the beginning of January next year no battery cage-produced egg can carry a "No. 3", so it sorts the problem out straight away. I would suggest, however, that to many producers in other countries, to have a product legal at five minutes to midnight on 31 December and illegal five minutes after midnight is hard to get their heads around. I talked about 83 million eggs a day, or 29% of EU egg production, not being compliant. It would be totally naïve to assume that those eggs or egg products would not enter the marketplace from the beginning of January. Of course they will.

Giles Clifton: When you consider that in Spain there is 20% unemployment—it is 40% in some Spanish regions—the idea that the Government will come along and put anyone out of business, and that the directive will be fully in force on 1 January 2012, is just wishful thinking.

Q55 Chair: Assuming that the directive comes into force, do you expect the inspection regime to be more onerous or expensive than the current one?

Mark Williams: I would certainly hope that Defra-Animal Health will provide sufficient resource to ensure that the directive is implemented properly; and that will, according to all our beliefs and the increasing noises coming out of Europe, ensure that no illegal eggs or egg products are allowed to cross Member State borders. I should also add for the record that we are not against the import of legal product. So if an egg or egg product has been produced from a barn, free range, enriched cage or organic system, that is absolutely fine—that is commercial competition—but we cannot have illegal product coming into this country.

Q56 Chair: But are we assuming that they will be just as rigorous in other EU countries in ensuring that they are legal at the point they leave the country to cross into another Member State?

Mark Williams: I think that is the big problem. As we are in a financial crisis with official resource being scaled back for inspection, for example, it compounds an already difficult situation.

Q57 Neil Parish: I want to take further this line of questioning. Basically, will the countries that cannot comply by next January have all their poultry farms registered? Will they know where they are? Are they going to know whether they are partly converted or partly not? Do you have any ideas about that?

Mark Williams: The honest answer is that I do not believe that is the case in a lot of other countries, for a variety of reasons, and different attitudes by governments towards their agricultural industries is just one of them. Every Member State authority should know where every single commercial egg production unit is, because they are required to register for the producer code that goes on eggs, so it is on record already. The problem we see at the moment—it frustrates me greatly—is that when I presented at the stakeholder meeting in January I used data from May 2010 provided by DG AGRI. I know that DG SANCO, where the welfare dossier sits under their control, had asked all chief veterinary officers in Member States for details of their national plan to implement the directive, plus an update of which hens were in which system—in other words, the state of implementation.

Those figures were not put on the table at the meeting, and the cynic in me would question why. I have no evidence to support it, but I suggest it is because they were too close to the industry forecast—i.e. 29% of illegal hens from the beginning of next year—and I would have thought it would have been an embarrassment. Mr Parish, we have pressed the Commission. They invited us to write to them and request those figures. Because of confidentiality, they then have to go to Member States to ask their permission to release them. We did that, but we are being stalled at the moment in receiving those figures.

Giles Clifton: If I may just add to that, Mr Parish, the European Parliament overwhelmingly passed a resolution in December—by 459 votes to 32, with only 17 abstentions—requesting that the Commission submit by no later than 31 December of this year a list of egg and egg product processors and retailers who would not be compliant with the provisions of the directive.

Q58 Neil Parish: In broad terms, it is bad that 29% will not be compliant, but one would have thought that the fact that 71% should be means there would be a bigger amount of political pressure on the countries to get the rest of them to comply, so the 71% are not disadvantaged. I know it is country by country, whereas the 71% is the overall EU figure, so it is very much targeting those countries, but surely there will be pressure in lots of Member States for compliance, not just in Britain.

Giles Clifton: Yes, absolutely. If you look at Germany, which went ahead and did this two years before everyone else, they are absolutely on side, as it were, so are a host of other countries. It is certainly the case that the UK has very strong allies in sticking to a firm line in enforcing this directive and making sure that our producers who have put in all this money and investment are treated fairly.

  Mark Williams: This ought to be mentioned now: please do not compare the German situation with the UK situation directly. Germany is the world's largest importer of eggs. It is a seriously big importer. Most of their imports come from Holland, so the two industries are really very closely associated. Germany was 70%-plus self-sufficient. Then they introduced the battery cage ban ahead of time. Their self-sufficiency went down, as you would expect, because cheap imports were coming in, but the German industry did a very clever thing. They worked with their retailers to ensure that the only eggs sold in German retailers were non­cage, so they protected themselves, if you like. But the situation we have in the United Kingdom is that we produce eggs in all systems of production. You have seen our forecast: 50% of eggs will be free range; 43% will be enriched cage-produced; 4% will be barn-produced; and 3% will be organic at the beginning of next year. Enriched-cage eggs will still be a significant sector, and that takes into account those consumers who are very price sensitive, and it is really offering the consumer choice. This is where we started from. I just thought it was important to ensure that the German situation is not comparable.

Q59 Neil Parish: The next question you have more or less answered, namely the two actions in particular that you require. One is a ban on non-compliant eggs, and the other is, I take it, to have a "No. 4" stamped on those eggs as well. Is there anything else you want to add?

Chair: Could we wrap up two questions as well from Mr Eustice and Mr Docherty? Perhaps you could then answer them all together.

Q60 George Eustice: You have partly answered my point in what you said about Germany. You said that their self-sufficiency went down. By how much did it go down? What impact did it have on their overall production levels? That is a good case study in a way because they have gone unilaterally ahead of the rest of Europe on this.

Q61 Thomas Docherty: My understanding is that you cannot move a hen out of a conventional battery into a new cage. My understanding is that if it is a 73-week cycle of life, surely they have to be in now and that is the clearest marker. If you have hens continuing to go into battery cages at the moment, that says that farmers either here or overseas will miss the target.

Chair: Perhaps you would like to answer all those questions together.

Mark Williams: If we may we will take them in reverse order. Defra has clearly said here in England—it was reiterated by the devolved Administrations—that the directive would be implemented to the letter here in the United Kingdom, so if I as an egg producer wanted to get a full flock cycle through, the last date I could house a hen in a conventional cage would have been December last year; so, the 13 months in lay. That is very clear. Therefore, if people are putting hens in conventional cages today across Europe, I would suggest that they are taking a brave step and assuming they will get the return on that pullet before 31 December, or they intend to run them beyond. I suggest that the latter is probably more in tune with that.

Q62 Thomas Docherty: Is that happening?

Mark Williams: Anecdotal evidence would suggest it is, yes. There is also the issue about the way certain Governments interpret 1 January 2012. Some people may say that it is pullets housed from the beginning of the year, so straight away they get a 13-month advantage. To answer the question about self-sufficiency, I believe it is roughly 10%. I can provide you with the exact figure afterwards.[1] Because the German market is different from many others, in that it is such a large importing country, it rather distorts the facts, but that is what all the figures point to. There would be a massive decrease in self-sufficiency. I am sorry; I cannot remember your question, Mr Parish.

Q63 Neil Parish: It is really about reinforcing the measures that you want to see.

Mark Williams: It is very simple. We want to see full implementation of the directive here in the United Kingdom and across the European Union. However, we realise that there will be problems with some producers in other Member States. I have already talked about the figure of 83 million eggs a day. Our view is that those eggs will continue to enter the marketplace illegally, or, even if the Commission and Member States allowed more time at the last moment, those eggs or egg products should stay within those Member States. It must be; otherwise, the investment of UK producers has all been for nothing. It is not just UK producers but UK consumers who will suffer that disbenefit. We then need to give the enforcement authorities some means of differentiating.

Chair: You have been very generous. We have overshot your time, but thank you very much indeed for your evidence this afternoon.

1   Note by Witness: The following was provided by the German government representation at the Multi-Stakeholder Meeting on the Implementation of Council Directive 1999/74/EC, on the Protection of Laying Hens, held in Brussels on 19 January 2011-Self-sufficiency had decreased from 69% in 2008, to 59% in 2009 and was estimated to be 58% in 2010. Back

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