Select Committee on Agriculture Sixth Report


SIXTH REPORT

The Agriculture Committee has agreed to the following Report:-

THE UK PIG INDUSTRY

Introduction

1. The pig industry is renowned for the cyclical nature of its fortunes, but the most recent phase of this cycle has seen a deeper and more stubborn downturn than has been experienced in living memory. The hardship which resulted from that situation led us to hold an urgent inquiry into the UK pig industry in the winter of 1998/99 and to publish a report calling for action on the part of the industry, the Meat and Livestock Commission (MLC) and the Government to address the problems of the sector.[2] A year after our report, in March 2000, the lack of improvement in the economic position of the industry led the Government to announce financial assistance for pig producers in the form of a restructuring scheme. A month or so later, pig prices finally started to recover.[3] However, the industry had scarcely had time to take in the new upward trend in prices when it was hit by a new disaster in the shape of an outbreak of classical swine fever in East Anglia, one of the UK's main pig-producing areas. In the autumn of 2000, therefore, the UK pig industry found itself still waiting for the first payments from the Government's restructuring plan and facing the aftermath, financial and otherwise, of the classical swine fever epidemic. The watching brief which we had set ourselves as a result of our earlier work suggested that it was time to take another look at the industry.

2. We announced our new inquiry on 9 November 2000, calling for evidence on the restructuring scheme announced by the Government as part of its Action Plan for Farming and on the recent outbreak of swine fever. On 11 December we held a single session of evidence with the National Pig Association and with the Minister responsible, the Rt hon Joyce Quin MP, Minister of State, Ministry of Agriculture, Fisheries and Food (MAFF). We are grateful to all who contributed evidence to our inquiry. In this short Report, we concentrate on key issues arising from the Government's response to recent events in the pig industry and consider their wider implications for MAFF's dealings with agriculture in general.

The Pig Industry Restructuring Scheme

3. The Pig Industry Restructuring Scheme (PIRS) was announced as part of the Government's Action Plan for Farming on 30 March 2000, with the objective "to encourage the restructuring of the pig industry in order to improve its long term viability".[4] After the summit, it emerged that the scheme was to have two elements: an outgoers scheme aimed at reducing pig breeding capacity and an ongoers scheme which offers preferential loans to those restructuring their businesses in order to stay in pig production.[5] The scheme was intended to last for three years, with expenditure in the first year of £26 million.[6] Funding of £20 million for each of the two further years was confirmed following the Spending Review 2000, making a total of £66 million in all to be spent by March 2003.

4. The industry welcomed the announcement of the scheme and has worked with the Government to develop the proposals.[7] However, the positive response has become somewhat muted as a result of the long delay in implementing the scheme. Although the timetable was not precisely laid out, both the Government and the industry expected at least the outgoers element to be in operation by early summer 2000. The National Pig Association (NPA) originally expected it to open to pig producers in June 2000,[8] which accords with the assertion of the Rt hon Nick Brown MP to us in late May that the scheme needed only "fine tuning" and was "almost there".[9] The Government's bulletin on the Action Plan for Farming issued in July was still optimistically stating that the NPA and the Meat and Livestock Commission "aim to have the outgoers element of the scheme open for applications in July";[10] but further slippage occurred until, in the event, the outgoers scheme opened for applications on 4 December 2000 and the ongoers finally began on 22 January 2001, nearly ten months after the original announcement. In the meantime, producers were "desperately treading water" and "many have concluded that the government has no intention of channelling cash to them as a matter of urgency, if at all".[11]

5. This protracted delay raises three concerns, one specific to the PIRS and two with more general application. On the specific, the late commencement of the scheme makes it unlikely that all of the £26 million earmarked for the pig industry in 2000-01 can be paid out by the end of the financial year. This raises the possibility that the money will be lost to the industry due to Treasury accounting rules unless the Minister can persuade the Treasury to roll-over the money into the next year. The Minister has repeatedly assured the House that "It is my intention that every penny of the £66 million that was allocated to the pig industry scheme over three years will be spent on the pig industry".[12] To achieve that objective, he has held discussions with his colleagues in the Treasury but no announcement has yet been made. We support the Minister in his endeavours and welcome his statement to the recent NFU conference that "any underspend this year will be carried forward to next year".[13] It would be deeply unfair on pig producers to lose out on funding because of delays for which they bear no responsibility. We recommend that the Treasury and MAFF reach a decision in principle that the £26 million allocated for this year may be spent in 2001-02 if necessary and that the Minister make an early official statement to this effect, to end the speculation in the pig industry and ensure that producers are able to plan on the availability of money which they have been promised.

6. Our two general concerns relate to the explanation for the delay in launching the restructuring scheme - the need to gain European Commission approval for the funding of state aids. We stress that both concerns are aimed at MAFF, rather than the EC itself. In the first place, it is apparent that the process was more lengthy than was necessary. The European Commission was notified of the scheme on the day of its announcement (30 March), and further information was provided by MAFF in response to various concerns raised by the Commission on five occasions between 10 May and 17 November.[14] Ms Quin attributed the delay to the "procedural hoops" in gaining approval which involved a new process beginning every time the Commission raised objections or questions.[15] Clearly, when dealing with such an approval system, it is crucial that preliminary discussions are held before the bid is submitted in order to reduce the number of queries from the Commission to the bare minimum. In this case, we do not think it sufficient for MAFF to have "explored [the proposed scheme] in general terms with Commissioner Fischler"[16] before working up the details for the Commission. The number of further requests for information supports the view that closer co-operation between the Commission officials and MAFF would have been beneficial from the earliest stages. We have in mind the criticisms made in the recent Better Regulation Task Force report on Environmental Regulations and Farmers of the lack of engagement between the UK civil service and Brussels, which makes negotiations more difficult than they need to be. We welcome the Government's positive response to the Better Regulation Task Force report and recommend that MAFF put in place mechanisms to ensure that it explores every opportunity for reducing the time span between announcements and EU approval of schemes.

7. Secondly, it is incumbent on MAFF to ensure that the process which must be gone through to implement any such proposals is clearly spelt out at the time of announcement. There was no indication at the time of the Action Plan for Farming summit that approval by the European Commission could take so long, nor that it was typically such a "frustrating experience", as Ms Quin rightly described it.[17] The industry naturally expected the funding to be made available within a few months and it would assist MAFF's own relations with producers if it had been clearly explained that this was not likely to be the case. MAFF's optimism on this point is puzzling in view of Ms Quin's understanding that "the average State Aid application seems to take about 18 months in the European Commission".[18] We recommend that all announcements of new schemes or funding packages for the agriculture industry should include details of the decision-making mechanisms through which the proposal must pass before it can be realised, together with a realistic timetable for the completion of the process. Managing people's expectations in this way need not blunt the impact of good news; but it should allow those most closely involved, who may be relying on the new scheme for the survival of their business, to plan more accurately for the future.

The classical swine fever outbreak

8. MAFF is engaged in separate reviews of the lessons to be learned from "the administrative handling of the CSF outbreak" and of insurance issues in connection with animal diseases.[19] We look forward to receiving the results of these reviews and we do not intend to pre-empt their conclusions in this report. Nevertheless, we have one concern which we wish to draw to the attention of the Government in terms of planning for such epidemics. Although the UK has been free of CSF since a minor outbreak in 1986, there was a major outbreak in the Netherlands in 1997-8 which spread into Germany, Belgium, Italy and Spain and which should have acted as a warning to MAFF of the possibility of recurrences in this country. In addition, as Ms Quin pointed out, the regulations on control of CSF have changed in the meantime.[20] We asked what contingency planning had taken place within MAFF after the Dutch outbreak and were concerned to learn that MAFF relied solely on disease simulation exercises carried out by the State Veterinary Service as general planning for any "epidemic disease for which we have a slaughter and compensation policy".[21] We believe that specific "wargames" aimed at controlling classical swine fever should have been carried out following the Dutch outbreak. The absence of such contingency planning shows a failure to learn from experience in other Member States and to apply those lessons for the benefit of our own industry and consumers.

Conclusion

9. There is a lot of frustration within the pig industry at the lack of tangible results from the Government's announcements of last year. Much has been promised, and welcomed, but comparatively little has been delivered. We are pleased that the two elements of the restructuring scheme are now open and we note that the strong response from producers indicates that they are much needed. We expect the Minister to continue his negotiations with his colleagues to ensure that all the money originally allocated to the pig industry is paid out in good time. However, we believe that the development of the scheme from its announcement to commencement highlights important lessons for MAFF to absorb and act upon in future.

10. Since we completed taking evidence for this inquiry, the United Kingdom has been hit by an agricultural disaster on a scale far greater than the classical swine fever outbreak. The discovery of foot and mouth disease in pigs in an Essex abattoir has led to a temporary ban on all exports and on the movement of animals within the UK, as further cases are identified across the country and in other sectors of the livestock industry. At the time of writing, it is impossible to predict with any confidence the extent or the repercussions of the current outbreak. We shall of course monitor developments very closely. Whilst it would be premature to summon the Chief Veterinary Officer and the Minister to give evidence to the Committee at this critical time, we will keep under consideration appropriate action for us to take and we expect to make an announcement on this in the near future.


2  Third Report from the Agriculture Committee, Session 1998/99, The UK Pig Industry, HC 87-I. Back

3  Q 2. Back

4  The Government's Action Plan for Farming, 30 March 2000.  Back

5  HL Debates, 11 April 2000, WA 35-6. Back

6  Action Plan for Farming. Back

7  Q 5. Back

8  Q 18. Back

9  Min of Evidence taken before the Agriculture Committee, 23 May 2000, HC 525-i, Q 78. Back

10  Action Plan for Farming Bulletin, July 2000, p. 2. Back

11  Ev. p. 2, para 1.4. Back

12  HC Debates, 1 February 2001, c. 424.  Back

13  Speech to the NFU Annual Conference 2001, 7 February 2001.  Back

14  Ev. p. 15, para 4. Back

15  Q 94. Back

16  Q 94. Back

17  Q 94. Back

18  Q 94. Back

19  Q 108. Back

20  Q 103. Back

21  Ev. p. 39. Back


 
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