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Delegated Legislation Committee Debates

Home-Grown Cereals Authority Levy (Variation) Scheme (Approval) Order 2001

Ninth Standing Committee on Delegated Legislation

Monday 16 July 2001

[Mr. Jimmy Hood in the Chair]

Home-Grown Cereals Authority Levy (Variation) Scheme (Approval) Order 2001

4.30 pm

The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (Mr. Elliot Morley): I beg to move,

    That the Committee has considered the Home-Grown Cereals Authority Levy (Variation) Scheme (Approval) Order 2001.

The purpose of the order is to make a small but significant change to the 1987 Home-Grown Cereals Authority levy scheme, which set the conditions under which the authority may raise levies from cereal growers, dealers and processors to fund its activities. I should stress at the outset that the change is made at the request of the HGCA and reflects its discussions with the stakeholders concerned. The Government have also carried out consultation on the change, as required by the Cereals Marketing Act 1965.

The HGCA is a levy-funded non-departmental public body set up under the 1965 Act. Its primary function is to improve the production and marketing of United Kingdom cereals and, since 1989, oilseeds. Its main activities include providing an independent market information service for cereals and oilseeds, developing and funding research and development programmes for them, promoting the development of UK cereals exports and supporting the funding of selected projects designed to increase sales of value-added products.

Funding for the authority comes almost entirely from statutory levies paid by growers, dealers and processors. In the cereals marketing year 1999-2000, expenditure was £10.74 million, the majority of which was spent on research and development. Membership of the authority, aside from an independent chair and deputy chair, is drawn from those capable of representing the interests of the range of levy payers. The authority therefore remains directly answerable to the industry that it has served for more than 35 years.

The order amends the scheme under which the authority collects the levy on cereals. The separate levy scheme for oilseeds is not affected by the change. The rates of levies are set annually by a statutory instrument subject to negative resolution. Except when grain is sold directly into intervention, the first purchaser of the cereals collects the levy from cereal growers on behalf of the authority. The first purchaser, who is generally the dealer, pays the grower levy to the authority, as well as the levy payable by the dealer on the transaction. That method of levy collection is cheaper and more efficient than the alternative of requiring direct payment to the authority from 60,000 or so UK cereal growers. It means that more of the levy collected can be used to fund the authority's activities rather than being spent on administration.

Dealers are permitted to make a deduction from the gross sum of levy collected before passing the balance to the authority. That deduction, a type of commission, provides dealers with some recompense for the costs incurred in collecting the grower levy on behalf of the authority. The only change made by the order is to increase to 5 per cent. from 3.7 per cent. the deduction that dealers may take from the gross levy collected.

The increase is the result of an agreement between different sectors of the industry that will benefit all levy payers. It will obviously benefit the dealers, because they will receive an enhanced contribution towards their levy collection costs. Other sectors of the industry will benefit, as the agreement paves the way for them to access other funds.

Under the previous, non-statutory method of attribution accounts, sums received from different sectors were kept in separate funds to help each sector identify the benefits that it received from authority expenditure. In that way, the authority built a fund of dealer contributions that it was, in effect, able to spend for the benefit of the entire industry without the express agreement of the dealers. Under the new agreement, the attribution account system is ended and all funds will be under the direction of the authority's board, so that they can be used to benefit the entire industry. All hon. Members will agree that that is an improvement. The increased costs to the HGCA of the higher deduction rate are some £100,000. Set against that is almost £350,000 in contributions from dealers, which is now released. The change follows a comprehensive strategic review of the authority's structure and functions, initiated by the authority itself. That found that the authority should be structured and managed to be able to be more responsive to industry needs.

The order will come into force on 1 August 2001, in time for the first tranche of levy collection in the cereals marketing year that started on 1 July 2001. The results of the consultation that I mentioned have been placed in the Library, along with a regulatory impact assessment.

I hope that the Committee will approve this short but very useful order.

4.35 pm

Mr. James Paice (South-East Cambridgeshire): It is tempting, in the face of massed Labour party ranks, to spin the debate out and delay people's tea. However, the Minister will not be surprised to learn that my researches demonstrate that everything that he has just told us is accurate. The only point that the Minister glossed over was how contentious the matter has been in the industry. I have spoken to many stakeholders, if I dare use that phrase, and they are glad that an arrangement has been reached and are satisfied with it. Does the Minister believe that the order will stand in the long term, or is it a conclusion that has been reached because it was necessary to resolve a contentious issue that might arise again in the near future?

4.36 pm

Mr. Morley: I welcome the comments of the hon. Member for South-East Cambridgeshire (Mr. Paice). I agree that all issues involving levies and funds from industry bodies are contentious. The size of a levy, whether it is appropriate and how it is distributed will always be subject to debate. For that reason, I am glad that the industry has come to agreement on the order.

The hon. Gentleman asked how long the order would be in place. The HGCA will go through regular reviews, the next of which is in 2003. That will be an opportunity for the authority to consult its members on its structure, its levies and any other issue. I am glad that there is consensus among industry members in this case. That illustrates that the authority has improved the way in which it works. All interest groups are to be congratulated on having reached an agreement.

Mr. David Drew (Stroud): May I ask a simple question? Does any Government money go towards the levy?

Mr. Morley: I am not aware of any, but I shall write to my hon. Friend if I am wrong. The HGCA is an industry organisation and raises the money within the industry, as do other bodies of that type.

Question put and agreed to.


    That the Committee has considered the Home-Grown Cereals Authority Levy (Variation) Scheme (Approval) Order 2001.

Committee rose at twenty-two minutes to Five o'clock.

The following Members attended the Committee:
Hood, Mr. Jimmy (Chairman)
Ainger, Mr.
Cruddas, Jon
Cryer, Mrs. Ann
Drew, Mr.
McNamara, Mr
Morley, Mr.
O'Brien, Mr. Stephen
Owen, Albert
Paice, Mr.
Randall, Mr.
Rooney, Mr.
Shipley, Ms


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Prepared 16 July 2001