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Lord Stoddart of Swindon: My Lords, I am grateful to the noble Earl for giving way. I have listened very carefully to what he said. But will he tell me what will happen if Members of this House or another place wish to raise questions about the new agency? Will Ministers reply directly to Oral and Written Questions, or shall we be fobbed off by a reply from the chief executive of the service?

Earl Howe: My Lords, the annual report of the MHS will be published and laid before both Houses of Parliament. That will enable a full debate to take place in either House as necessary.

Lord Stoddart of Swindon: My Lords, what about Questions? Will Ministers answer them or shall we be referred to the chief executive of the MHS?

Earl Howe: My Lords, the head of the executive agency would normally answer parliamentary Questions on day-to-day operational matters. Ministers will deal with matters of policy, as is reflected in current procedures.

The MHS has only 29 people at headquarters to manage an organisation of around 1,000 people. I believe the House will recognise that this can hardly be described as excessive or, indeed, a bureaucracy. Nevertheless, the management structure will be kept under close review. The MHS will be working to strict financial and performance targets aimed at producing efficiencies not only in its first year of operation but on an ongoing basis. My right honourable friend the Minister of Agriculture, Fisheries and Food published the targets for 1995-96 last month. Parliament and the industry will be able to monitor how the MHS performs against those targets.

Against that background, it is extremely difficult to understand the allegations which have been made about lack of accountability. The MHS's arrangements will be much more transparent and accountable than was possible previously. Parliament, consumers and the meat industry will be much better able to scrutinise how the meat inspection function is being performed.

There is, naturally and rightly, great interest in and concern about the cost of the MHS. Perhaps I may put straight one fundamental point. The amount which the MHS expects to recover from the meat industry in 1995-96 is around £40 million—not £54 million as some

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noble Lords have indicated. That represents a saving of around 10 per cent. of the estimated total cost of the local authority system. That is a significant saving.

We have heard a good deal about abattoirs which expect to be charged more by the MHS than by their local authority. I can assure your Lordships that there are also abattoirs which will be charged less but, not surprisingly, they are not lobbying their MPs or their trade organisations about that. I shall have more to say about that in a few moments.

The MHS is still in the process of consulting plant operators about its proposed charges. Therefore, I cannot provide definitive information today on the number of winners and losers. However, I assure your Lordships that the Government are listening very closely to the anxieties of the industry. My right honourable friend the Minister announced on 29th March that he was minded to make some transitional assistance available in the first year while the MHS achieves the efficiency savings which are possible now that enforcement is organised on a national basis. We are still consulting the industry as to exactly how that assistance should be payable; but I can confirm that it will be of real help to smaller slaughterhouses in particular. I hope that that will be of some comfort to my noble friend Lord Willoughby de Broke, who raised anxieties in relation to that. The National Farmers Union described my right honourable friend's decision as,

    "A very welcome response to our concerns".

I turn specifically to the anxieties raised by my noble friend Lord Willoughby de Broke. I am sure that the House will sympathise with my noble friend's objective to minimise the costs of the MHS to the meat industry and to public funds. However, I remind your Lordships that both the meat inspection procedures themselves and the arrangements for charging for them are laid down in very detailed European legislation. It is not possible for us unilaterally to amend the meat inspection arrangements, although we are working with our European partners in the Scientific Veterinary Committee to update them. I assure the House that, as part of the EC review, we shall look to keep to the minimum the costs needed to provide proper protection of public health.

However, I must express some small surprise at my noble friend's view that it would be possible to contain the total cost of the regulations at £25 million per year. The cost of the current local authority arrangements is estimated at £45 million as against the MHS estimated operational cost of around £40 million. In 1992, before the EC rules were extended to domestic abattoirs, meat inspection was estimated to cost the industry just under £32 million.

It is simply not realistic to seek cost reductions of the order suggested by my noble friend. The MHS, in its first year, is already projecting savings, as I said, of about 10 per cent. of the total cost to industry and the public purse. That is a good start. My right honourable friends and I will be looking to see further savings as the MHS takes full advantage of operating on a national basis. The efficiency targets published last month are challenging and will require the MHS to squeeze costs down as far as possible. However, I am sure that the

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House would not expect the Government to put the objective of cutting costs above the objective of protecting the consumer or of complying with our legal obligations. I see that my noble friend wishes to intervene. I give way.

Lord Willoughby de Broke: My Lords, I am much obliged. My noble friend the Minister mentioned the figure of £40 million as the total cost of the MHS. However, can my noble friend say whether that is net of the subsidy, which we have been informed will cost about £50 million over the first year, together with start up costs, or whether that is a gross figure?

Earl Howe: My Lords, I was about to deal with the whole question of costs, where I believe there has been a degree of confusion in today's debate. I shall attempt to elucidate the details as far as I can.

My noble friend Lord Willoughby de Broke indicated that, to his knowledge, some slaughterhouses have closed because of the implementation of EC rules. That is not, on the whole, the case. Such recent closures as there have been reflect the trend for rationalisation which has existed within the British slaughtering industry for over 20 years as a result of over capacity. MLC figures indicate that the number of slaughterhouses was reduced from 1,231 in 1980 to 647 in 1992. That shows that the bulk of closures occurred before the implementation of the directive.

The noble Lord, Lord Carter, cited some instances of probable increases in charges to plants. It is clear that some plants will benefit considerably from the establishment of a national meat inspection service. Others will see some increase because of the significant differences in current local authority charges. It is also clear that some local authorities have been subsidising, either directly or indirectly, the plants in their areas. During the first six months of its operations the MHS will be targeting in particular those plants where there is the greatest concern about manning levels. We and the MHS are committed to finding the right levels within the overall constraints of the legislative requirements. I have many examples of prospective overall savings on veterinary and meat inspector costs at red meat slaughter houses. I should be glad to supply those to the noble Lord if he so wishes.

It is not possible at this stage to be definitive about how many plants would benefit from the transitional rebate that I mentioned. Much depends on the through-put of the plants. But, based on a sample analysis of over 50 plants and their estimated through-put, we believe that 75 per cent. of that sample is likely to benefit. As I said, it should be particularly helpful to small or more remote premises.

The noble Lord, Lord Carter, mentioned a particular plant in Manchester which might be subject to an increased charge. I am not sure exactly which abattoir the noble Lord has in mind, but I am aware of an abattoir in the area which will be making substantial savings with the MHS compared with the local authority system.

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My noble friend Lord Onslow asked why charging was not based on a headage rate. The idea was discussed, but it was found not to be acceptable to the industry. The charging policy of the MHS has been thoroughly discussed in the Industry Forum.

The noble Lord, Lord Stoddart, said that the average increase to slaughterhouses would be in the region of £20,000. That is simply not the case. The noble Lord has no basis for making that remark. However, if indeed he has, I shall be glad to know about it. The noble Lord also said that some slaughterhouses were having to pay £80,000 more than they paid local authorities. Again, I do not believe that the noble Lord has any basis for saying that; indeed, the MHS is still consulting about its proposed charges. We would want the chief executive to look very closely at any plant facing an increase of as much as £80,000. As I said, some plants will pay substantially less.

The noble Lord, Lord Stoddart, also said that the MHS staffing arrangements were less flexible than those in local authorities. In practice, most local authorities did not co-operate in using staff across local authority boundaries. However, there is no reason why the MHS should not seek assistance from local authorities as well as agencies to cover manpower gaps. There may be advantages to both parties in so doing.

The noble Lord also said that local authorities can call upon environmental health officers to cover gaps in service and that the MHS could not do so. That is not strictly true. The MHS can employ veterinary surgeons under contract, who are required to provide cover for sickness. In addition, the MHS has available to it a number of casual meat inspectors to cover for holidays, sick leave and so on.

The noble Lord, Lord Stoddart, referred to an extra cost of £9 million when compared with the cost under the local authority system. That is a fallacy. The MHS will be cheaper than local authorities. In the financial year 1995-96, there will be one-off, non-recurring costs. But many of those costs will help the industry; for example, by identifying overmanning, removing inconsistencies and buying out the terms and conditions inherited from local authorities.

The MHS is trying to work with plant operators to give them the best value within existing constraints. However, that cannot be only one-way traffic. Plant operators must look critically at their methods of operation and business to see whether they can make changes which would enable the MHS to provide a more cost-effective service. For example, some operators have already changed their working patterns of their own volition, which then enables the MHS to make the best use of its staffing resources in that area.

The noble Lord, Lord Geraint, expressed the view that the MHS is overstaffed. I do not believe that to be true. The MHS was set up as a very lean organisation. There are only 29 staff in the HQ at York and, at operational level, any overmanning will quickly be removed—for example, by visits from hygiene advice teams.

The noble Lord, Lord Carter, asked how many OVSs would be operating in the service. My understanding is that there would be 168 full-time equivalents. The noble Lord also said that OVS costs were increasing by 50 per

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cent. In fact, the ADC survey carried out in mid-1994 showed average costs of £35 an hour and that the most frequently used charge was in the range of £40 to £44.

There has been much confusion in the debate about costs generally. The noble Lord, Lord Geraint, quoted the figures of the Farmers' Union of Wales as regards the costs of the MHS. Those figures are not correct. Mr. Parry, its president, has confused the total cost of £54 million in the current year with the chargeable cost of £40 million. The noble Lord, Lord Carter, said that the MHS would represent a cost to the taxpayer of £20 million. As I said, the cost for 1995-96 will be around £15 million and the cost to the taxpayer after that time will be very much smaller.

My noble friend Lord Willoughby de Broke asked what would happen when the subsidy was removed. Ministers have made clear that the MHS will not be expected to increase its charges next year to compensate for the withdrawal of subsidy. The noble Lord, Lord Carter, asked about the setting up of the MHS. He wanted to know how much of the Government's thinking was due to EC pressure and how much to MAFF ambition. The 1991 review was carried out against a background of the new single market rules. The Government decided that a dedicated agency was the best way of complying with EC obligations. I have already referred to the very important trade considerations which underlie our thinking.

I believe the noble Lord, Lord Stoddart, referred to the Preston Report of March 1985, which recommended that the meat inspection service should continue to be provided by local authorities. All I would say to him is that things have moved on in the past 10 years. The need for consistency of enforcement and charging is now more important. The industry has pressed for this. There is a single market within the Community and our third country trading partners need to be assured that the production of our meat is under proper and effective control.

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