Select Committee on Environment, Food and Rural Affairs Appendices to the Minutes of Evidence


Memorandum submitted by the Meat and Livestock Commission (A22)


  Despite recent setbacks, farming continues to make a substantial contribution to the rural economy, in terms of employment and guardianship of the countryside. In many areas, its significance to the community goes beyond its economic value. Farming has an important social role to play in terms of bringing communities together and providing a social network, and its fate is closely linked to the morale and mood of rural communities and their economies. Livestock production provides particular biodiversity benefits, especially imperative to birdlife.

  It is estimated that, 600,000 people are employed directly in the livestock and meat sector in Great Britain. The farm gate value of livestock amounts to about £4 billion, and total consumer purchases of British red meat are valued at over £11 billion. The red meat industry is part of a food chain, which accounts in overall terms for almost 10 per cent of GDP.

  The UK agricultural sector has faced continually changing conditions over the past century, and it has adapted in response to the changing demands put upon it. However, the past few years have seen a succession of poor or negative returns for livestock enterprises. Today, farming stands at a crossroads. The gradual shift away from production support payments to structural and environmental payments is going to be a continual trend within the Common Agricultural Policy, underpinned by the forthcoming WTO and EU enlargement discussions. The decisions taken now will be vital in influencing whether or not British agriculture, and the rural economy in general, has a viable future. With the right guidance, leadership and encouragement, we firmly believe it can.


  Although levels of support to EU agriculture declined during the 1990s as a result of the negotiated reductions under the GATT Uruguay round, average amounts for many sectors remain relatively high as reductions in market price support have been partially offset by higher direct income payments. The following table shows changes in the value of cattle and sheep production in the United Kingdom and the proportion accounted for by farm measures.

The farm support element in UK production

Value of cattle production
Of which: farm support
% accounted for by farm support

Value of sheet production
Of which: farm support
% accounted for by farm support

  EU pig meat production is much less subsidised than cattle or sheep. Most of the support element has come in the form of export refunds, the majority of which are not now being applied (although they still exist).

  Changes in global and EU policy are reflecting the fact that priorities for major industrialised countries are less concerned with conventional, production of food. This trend is reflected by shifts in priorities for the subsidisation of primary production. There is also a widespread perception that the CAP is too costly, rewards the wrong producers and requires reform.

  There is a willingness to subsidise primary production so long as this results in goods and services that match the changing needs of society. It could be argued that many of the CAP schemes distort market signals and reduce transparency in the marketplace. However, it is essential that any changes made are applied across EU countries and not applied unilaterally in the UK.

  Over the next 10 years there will almost certainly be further significant declines in the production subsidies. There will be three over-riding causes driving these changes:

    —  Further reductions in subsidies negotiated under the Doha WTO round will kick in, probably from around 2005-06.

    —  The enlargement of the European Union to Eastern European nations will allow entry to countries where agriculture still represents a substantial part of the economy, and which will still employ a large proportion of the population. I the medium term these countries will provide exceptionally low cost competition. Clearly prices in the present EU must fall closer to the candidate countries' price levels, or the internal EU market will be inoperable. In addition, the cost of applying existing subsidy regimes to acceding nations would be prohibitively expensive.

    —  A shrinking share of EU GDP accounted for by agriculture is likely to mean increasing pressures from urban consumers to ensure spending is more in line with needs of the majority of society.


  The difficulties caused by the scaling down of agricultural subsidies are impossible to evaluate precisely as they will depend on many factors including the speed of change, whether there is partial or complete elimination of production subsidies and to what extent structural and environmental subsidies offset the drop in production subsidies. Nevertheless there are a number of areas where we can minimise any potential difficulties caused by transition:

    —  Borrowing by the agricultural sector has, to a large extent, been influenced by expectations of future subsidy earnings. This should be borne in mind when considering any move away from production subsidies to other types of support, or indeed the gradual phasing out of support all together;

    —  A basic change in support measures will inevitably result in short-term dislocations. It is important to minimise these by structuring changes over time. When Less Favoured Area (LFA) payments moved from headage to area-based payments, for example, there were a number of winners and losers. There needs to be careful consideration to assessment of the effects of redistribution. Again, care is needed in transition;

    —  In terms of animal welfare standards it is particularly important that the UK does not unilaterally introduce new standards which make us uncompetitive against other countries, either within the EU or internationally;

    —  If, as is likely, the overall impact of lower production subsidies and higher agri-environment subsidies is a lower level of total subsidy, farm incomes are likely to come under increased pressure unless businesses diversify;

    —  This may contribute to further reductions in employment on farms but an integrated response from all agencies is required (see Table 1). It is important that encouragement is given to facilitate alternative employment opportunities in other areas, through re-training or re-skilling. Vocational training money available through the English Rural Development Programme is a good example of how this can be achieved.

    —  On a macro-economic basis, liberalisation of trade is likely to involve lower domestic production and an increase in net imports from lower-cost producing countries. There will therefore be a cost in terms of the balance of payments.


  Although the move away from production subsidies could create some potential challenges it can also be perceived as a springboard for opportunity.

  British livestock farms are generally larger and potentially more efficient than those in many other EU countries (particularly for sheep).

  But a major problem facing the farming and food industry across the European Union is the fact that primary producers, particularly in the ruminant livestock sector, respond as strongly to the availability of their farm support payments, as to market signals. Clearly, therefore, a move away from the subsidy system should help remove the culture of subsidy-dependence and could encourage the agricultural sector reacting more directly to economic fundamentals and to consumer demand trends.

  Overall two major long-term opportunities arising from the move away from production subsidies are:

    —  More responsive production systems able to respond more precisely to changes in consumer demand. This is becoming more vital as demand becomes ever more fragmented;

    —  A tighter, more technically-efficient supply chain which will take costs out of the system and which should improve the competitiveness of British meat.

What do consumers and taxpayers require from British farming?

  There is undoubtedly a different frame of reference for urban and rural dwellers faced with debates over the future of farming. Both could reasonably expect a rural environment that is pleasant to live and work in, and to travel to and from. Both could also expect a rural economy that can support employment for those who wish to live and/or work in the countryside, although this is obviously more pronounced for those in the rural community. Increasingly, we are seeing a desire for an environment that supports biodiversity, and there is also growing awareness of global warming and other environmental issues.

  MLC consumer research shows that consumers expect the livestock farming sector to:

    —  produce safe, nutritious, wholesome red meat;

    —  provide a diverse variety of acceptable livestock production systems (without a frame of reference on which to base these judgements);

    —  offer the choice between organic and traditional farming methods, and between free range and more cost-efficient methods, both of which should comply with guaranteed animal welfare standards.

  Consumers expect a wide choice of food products offered in a variety of settings in cost, ease of preparation and taste. They want value, safety, traceability and service.

  Citizens could also expect those involved to receive a return from farming and food production that reflects the investment of effort made, and the opportunity to compete on a level playing field within the European Union.

  Regional products are becoming more and more popular as consumer demands for choice and traceability increase. Regional products can provide choice and added value for ever more demanding consumers.

  As far as taxpayers are concerned, they expect good value for money from the farming and food sectors. With the proposed enlargement of the EU and the next WTO round, this issue is likely to become more important and require further fundamental reform at EU level.

Assistance to achieve the long-term goals

  to help achieve these goals, both government and the Meat and Livestock Commission need to act to promote change.

Responsibilities for Government

    —  To provide clear signals to the industry on future policy changes;

    —  to support increased traceability right down the supply chain;

    —  to ensure that competition is as fair as far as possible throughout the EU, particularly in such areas as environmental and animal welfare legislation;

    —  to incorporate £ sterling into the Euro at a competitive rate for the industry (if the public vote for membership);

    —  to make use of EU support measures to encourage change in industry practice (eg to encourage uptake of quality assurance schemes);

    —  to review the educational needs of the younger generation in the areas of food technology, preparation, storage and safety;

    —  to ensure an effective import policy operates to enforce food safety and animal health standards, and that this is rigorously enforced.

MLC's Vision

  "Within five years the industry will be part of a world-class, trusted and efficient supply chain delivering a product preferred by consumers."

  This can be realised:

    —  by integrating the product and process specification across the supply chain:

      —  enhancing product quality and consistency;

      —  developing a culture of risk assessment, risk management and risk communication;

      —  strengthening sustainability, consistency, traceability, welfare and disease control;

      —  building assurance across all sectors.

    —  by improving competitiveness through use of best practice:

      —  supporting national, regional and local supply chains;

      —  encouraging transparency and integrity in supply chain relationships;

      —  encouraging co-operation and exchange of best practice;

      —  delivering IT solutions to streamline paperwork and bureaucracy;

      —  championing cutting edge technology and processes.

    —  by differentiating meat from Great Britain so that consumers can make appropriate choices:

      —  developing and vigorously promoting key attributes;

      —  building brand values at home and abroad.

    —  by building business at home and abroad:

      —  keeping up the pressure to lift export bans;

      —  providing support to exporters to rebuild businesses;

      —  developing new markets for British exports;

      —  business development in the food service and manufacturing sectors.

  A more detailed explanation of MLC's proposals is attached in the Appendix [not printed].

14 December 2001

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