Memorandum submitted by the National Pig
The National Pig Association (NPA) is the trade
association representing UK pig producers and those companies
and individuals supplying goods and services to pig producers.
The association was formed in October 1999, following a merger
of the pig representational interests of the NFU and the British
Pig Association (BPA).
The issues covered in this memorandum comprise:
Pig Industry Restructuring Scheme;
Classical Swine Fever; and
Issues of Competitiveness.
1. Pig Industry Restructuring Scheme
1.1 The need for restructuring
This evidence does not rehearse in detail the
experience of pig producers in this country since mid-1998, when
market prices dropped below break-even. The NPA's predecessors,
the NFU and the BPA, appeared before this committee in 1998, and
made that case very well. Nevertheless, we wish to re-emphasise
several key points:
Cumulative trading losses by UK pig
producers from mid-1998 to early 2000 amounted to £360 million
(£20 million per month)
Cumulative trading profits for 2000
will amount to no more than £35 million (£3 million/month).
The next downturn in market prices
could come as early as Quarter 3 of 2001.
the capital value of pig production
assets remains today at approximately £200 million against
a 1997 level of £600 million, and a cost of reinstatement
of £1.5 billion.
The Meat and Livestock Commission (MLC) and
the NPA produced a report on the Economic and Social Costs of
the British Pig Industry Crisis in January 2000. The Executive
Summary of the report is attached as Appendix 1. [Not printed.]
The report identified that many of the factors
causing the crisis were matters that led to an imbalance in supply
and demand, which, in turn, led to a crash in market prices the
world over. However, the report also identified that UK pig producers
were subject to additional pressures that went beyond normal market
forces, and which, therefore, prompted the industry to seek redress.
These pressures included, among others:
The unilateral UK ban on stalls and
tethers, costing £17.5 million per year in extra running
costs, quite apart from the one-off capital cost of conversion.
The cost to pig producers of complying
with UK regulation measures to control the public health risk
of BSE in cattle, amounting to some £66 million per year.
The cost of dealing with the strength
of sterling, amounting to approximately £80 million per year.
In January 2000, the Minister of Agriculture
stressed at the Oxford Farming Conference that there would be
no cash assistance for pig producers. By February 2000, the Prime
Minister suggested that cash was not out of the question, but
that it would have to be balanced by a commitment from producers
to restructure their businesses to deal with modern competitive
The NPA, together with colleagues from NFU and
the MLC pursued this opportunity and promptly sat down with MAFF
officials to see what could be done. And so the Pig Industry Restructuring
Scheme (PIRS) was born, when the government was finally persuaded
that the pig industry was in need of hard cash to help it overcome
the competitive burdens made worse by government policy.
1.2 The NPA's collaboration
From the inception of the NPA in October 1999,
the NPA sought a collaborative approach with officials at MAFF,
with a view to seeking out the best available solution to the
problems of the industry. We are pleased to report that our efforts
to work together were met with a ready acceptance, and it was
this co-operation that has led to PIRS becoming a reality.
Many of the NPA's suggestions were incorporated
into the scheme, and MAFF officials were keen to listen to argument
about what would and would not work. There were, of course, difficult
hurdles to overcome, particularly in terms of making the scheme
workable according to the relevant EU Commission guidelines on
state aid of this sort, while still making it practicable on the
ground. The acid test of whether these hurdles have successfully
been overcome will be the level of uptake of the scheme over the
next three months.
If the scheme does not work, the NPA's questions
Was this really the best option open
to the government in its pursuit of a way to channel desperately
needed funds to pig producers?
Is it really true that the restructuring
route was the only one open to the government, or was it the route
chosen in order to satisfy policy choices specific to this UK
Could the government have tried harder
to make the scheme more palatable to pig producers?
Could the government have designed
a scheme, which did not, as this one does, exclude those producers
who are the most efficient and most progressive in the country?
1.3 Serious exclusions from the scheme
The objective of the scheme is to enable pig
producers either to leave the industry, or to restructure their
businesses to be more viable. In other words, the scheme is designed
to pursue the goal of greater efficiency. This objective is espoused
by the NPA, by the government, according to its statements at
various times, and by the EU Commission, in the preamble to its
guidelines on aid to sectors in difficulty.
The objective is broadly met. Those who do not
see a viable future as primary pig producers can get financial
help to manage their exit in an orderly fashion. Those producers
who qualify as Small Agricultural Enterprises (SAE) can secure
cash to help finance their restructuring plans.
However, pig production businesses which do
not qualify as SAE (ie those with more than 10 employees) will
have to reduce their businesses by 16 per cent in order to qualify
for the restructuring aid. MAFF's own estimation is that this
limitation risks excluding as much as 25 per cent of the national
herd from receiving aid. If the objective of the scheme is to
enhance efficiency, where is the sense in that? Precisely those
producers who have succeeded in growing their businesses to date,
through greater efficiency, are effectively excluded from receiving
aid. It is not as if they do not need aid. Even the most efficient
producer in the country has had an enormous hole blown in his
balance sheet since mid 1998.
The scheme, therefore, is designed to subsidise
the small and less efficient, at the expense of the large and
more efficient. This is unfair, illogical and discriminatory.
The NPA's questions are:
Has the government explored every
avenue to avoid this state of affairs?
What alternative methods of making
aid available to these excluded producers is the government exploring?
1.4 The impact of time
Our report on the crisis was published nearly
a year ago. The concept of the PIRS was born 10 months ago. The
scheme is only now being launched, and producers will receive
the first cash in April 2001 at the earliest. Recipients of aid
under the Ongoers part of the scheme will have to wait until 2003
before they receive all the cash available to them under the scheme.
Meanwhile, producers have been desperately treading
water. They have known about the scheme since early 2000, and
they have been calling for the cash as a matter of urgency. Their
businesses have continued to be starved of cash, at least in part
because of government policy. Not unreasonably, in those circumstances,
many have concluded that the government has no intention of channelling
cash to them as a matter of urgency, if at all.
The NPA's own contacts with Commission officials
over the last year have contained the same refrain: they have
been content to react promptly to any proposal put forward by
the UK government, and they have had sympathy to the need for
urgency. The most recent letters in this vein between Franz Fischler
and John Godfrey, the chairman of the NPA, are attached as Appendix
2. [Not printed.]
The NPA's questions are:
Has the Government done everything
in its power to expedite the approval of the PIRS by the EU Commission?
Could the authors of the scheme have
done more, at an earlier date, to make the scheme acceptable to
1.5 Reassurance sought
The funding of the scheme has been published
In the light of the losses sustained by the
UK pig industry, especially when the contribution to those losses
by the unilateral action of the UK government is considered, the
NPA considers that sum insufficient. At the time of the announcement,
the NPA's view was to support the scheme, and to accept the funding
proposed, on the grounds that it was, to paraphrase one of the
MAFF officials, "the only game in town".
This remains the NPA's position. If there were
to be any movement from this level or timescale of funding, either
to reduce the total available, or to extend the timescale, the
NPA would argue that this would be unacceptable and unfair treatment
of the pig industry.
In particular, as we approach the end of the
first of these three years, the first year's money has not been
made available to producers. The £26 million must be carried
over into the following years, or replaced like for like by new
money in those two years.
The NPA seeks reassurance, therefore, that the
£66 million is ring-fenced for the restructuring of the UK
pig industry, and that all sums will be paid out by March 2003.
2. Classical Swine Fever
2.1 The cause of the
outbreak of Classical Swine Fever
The State Veterinary Service concluded that
the most likely cause of August's outbreak of Classical Swine
Fever (CSF) was discarded, imported, contaminated pigmeat coming
into chance contact with a pig. The NPA accepts this as a reasonable
There are a number of precautions that a pig
producer can take to reduce the likelihood of this happening:
locate the farm away from roads and
locate the farm away from landfill
erect fences or walls; and
place notices warning of the risk
of transmitting disease to pigs.
All of these are known about, all are already
practised to one extent or another. Clearly, the first two are
difficult to achieve with existing units. The work of the group
chaired by MAFF's Neil Thornton will examine the opportunities
of encouraging and enabling producers to modify their operations
to reduce risk.
However, all these measures are local measures,
designed to provide protection from something which is in the
immediate environment. While they are important, they are not,
alone, a satisfactory solution to the risk of infection. The only
satisfactory solution is complete and sustained eradication, backed
by all necessary measures to prevent reinfection.
The government and the industry invested significant
resources in the 1960s to eradicate the disease. This policy can,
even today, be said to have worked, given that this is only the
second outbreak since eradication. The 1986 outbreak was controlled
very promptly, largely because it occurred in a region of relatively
low pig density. The 2000 outbreak is being controlled, not without
difficulty, at least in part because of its location in a part
of the country that is home to a significant proportion of the
UK pig industry. In addition, the growth of extensive pig production,
which has been marked in East Anglia, and which is desirable in
many ways, especially as a way of satisfying demands for particular
standards of animal welfare, has unfortunately exacerbated the
difficulty of limiting the spread of the disease.
Both outbreaks since eradication have been attributed
to a similar cause: accidental contact with contaminated, imported
meat. The NPA's contention is that it would be more cost-effective,
and fairer to UK pig producers, if the importation of contaminated
meat were prevented. The NPA requests consideration of these measures:
banning the import of pigmeat products
from countries that have a regular and frequent incidence of CSF;
obliging the importers of pigmeat
products to warrant the absence of contamination with CSF;
publicising the consequences of the
casual importing of pigmeat by individual travellers; and
increasing the penalties for the
illegal importing of pigmeat products.
If the government chooses not to take any of
these actions, the NPA contends that it therefore retains a responsibility
for the continued exposure of producers to the risk of infection
with CSF. That responsibility should manifest itself in providing
all the necessary funds to deal with any future outbreak, including
all the cost incurred by the imposition of statutory movement
2.2 Producers' response to "business
As the impact of movement restrictions began
to unfold during late August, producers reacted with consternation
to the assertion by the Minister of Agriculture that the threat
to their livelihoods posed by the action of government was a normal
The NPA's contention is that the cost of complying
with movement restrictions is not a normal business risk on two
an action taken by the government,
which prevents a citizen from enjoying the free and unimpeded
use of his assets, is an unreasonable imposition on that citizen,
in which case the government should compensate the loss caused
by its action;
the risk of business interruption
caused by movement restrictions is not covered under any available
business interruption insurance; and
restrictions imposed on a business
overnight should be the responsibility of the imposer.
In support of its argument, the NPA would also
cite the UK government's comments to the EU Commission regarding
the aid paid to pig producers following fire at the Ballymoney
". . . the United Kingdom authorities .
. . do not accept that the sudden total inability of a producer
to sell a product in his usual market at any price, owing to circumstances
unrelated to the market situation, and without any changes in
levels of consumer demand, coupled with the almost total inability
to transport this product for sale at any price in other markets,
due to restrictions on animal movements, can be considered
to fall within the normal parameters of entrepreneurial risk."
2.3 The need for government action
Given that the absence of cover for this risk
was universal, and given the rapidly building animal welfare problem
of overstocked pig farms, the government rapidly changed its position,
and introduced the Pig Welfare (Disposal) Scheme. Under this scheme,
producers whose farms become overstocked with pigs, as a result
of being unable to move them off farm while the movement restrictions
are in place, are able to have pigs removed from their farms,
rendered and disposed of outside the food chain. Pigs entered
into the scheme receive a payment through the Intervention Board.
Through the months of September and October,
the government listened to the representations of the NPA, and
progressively modified the scheme, making it more workable, and
more likely to achieve the desired aim.
We are grateful to the government for listening
to producers and meeting at least part of their requests.
2.4 Industry solidarity
There was virtual unanimity amongst pig producers
throughout the UK that the government should pay for the consequences
of its actions, and this belief remains unshaken.
However, there is also a profound sense amongst
producers of being comrades-in-arms. We regard ourselves as a
community, we believe we are stronger working together, and we
do not wish to see ill-fortune befall our fellows. Therefore,
there was a clear emotional response to the plight of producers
caught up in the movement restrictions: producers wanted to help
This response was not just emotional. Producers
know that their industry depends on the existence of a viable
infrastructure: feed manufacturers, abattoirs, builders, equipment
suppliers, vets and all manner of allied industries. If a large
chunk of production capacity were to be put out of business by
swine fever, those allied industries would suffer, and remaining
producers would suffer in turn.
The NPA offers this as the reason behind producers'
willingness to support the idea of an industry-funded top-up to
the government's payments under the Welfare Disposal Scheme. Producers
believe fundamentally that the government should pay the whole
cost. In the absence of the government's willingness to accept
this responsibility, producers believe it is in their interests
to keep as many of their fellows in business as possible.
2.5 The Pig Industry Development Scheme for
Disease Risk Management
The NPA supports the scheme, launched by the
MLC, 24 November, for its 56 day consultation period.
The support is not without qualification. The
NPA recognises that the scheme is the best available method to
deliver funds to the producers caught up in swine fever restrictions,
recognises the need for the scheme to be written more widely than
its initial task would otherwise require, but is wary about the
role of the scheme after swine fever.
Throughout the compilation of the scheme document,
the NPA was concerned about: the scope of the scheme, its duration,
its potential for an inexhaustible demand for funds, and its effectiveness.
It was also concerned about the potential disproportion between
the funds at the scheme's disposal, and the cost of the functions
illustrated in the scheme document. Finally it was concerned that
the scheme would be used as an excuse for the government to offload
its current responsibilities; and to avoid argument as to its
responsibilities in the future.
These doubts remain, even as the NPA works to
make a success of the consultation and of the implementation of
The NPA poses these questions:
Will the Government confirm that
it has no intention of offloading its current obligations onto
Will it also confirm that it recognises
that its obligations in the management of disease, together with
all and any financial consequences, run further than its strict
Will it confirm that it agrees that
the scheme will become, at best, one of the weapons in the national
armoury with which to fight disease, and will never become the
sole site of recourse for pig producers?
2.6 Lessons to be learned
The NPA seeks confirmation that there will be
a thorough government review of the handling of the swine fever
crisis, that the NPA will be invited to take part in that review,
and that the conclusions of the review will be published.
At this stage, the NPA would not wish to prejudge
such review, other than to make these general points:
Speed is of the essence in responding
to disease outbreaks such as these, and we are not satisfied that
the response was as rapid as it might have been.
An aggressive response is also required
from the very first weeks of the outbreak, the NPA was calling
for the 3km kill-out zones (subsequently implemented) to be put
in place around the sites of confirmed cases. In this we cited
Dutch experience and advice. The request was denied on the grounds
that such aggression was not necessary, a level of confidence
that has proven to be misplaced. The result was increased losses
for pig producers, and increased cost to the government.
The MAFF communication programme
was, at first, slow. If a small trade association, with meagre
resources, can be efficient and effective in the use of its website
from day one, then it does not seem unreasonable to expect MAFF's
resources to deliver an even better service. This did not happen.
2.7 Fears for the future
The NPA fears:
That UK pig producers are unreasonably
exposed to a repeat outbreak of a disease such as Classical Swine
Fever, due to government inaction on effective control of the
import of contaminated meat.
That the government will wash its
hands of the consequent problems, in the event of such an outbreak.
3. Issues of competitiveness
3.1 Animal welfare regulation
The NPA understands the role of regulation in
the maintenance of high standards of farm animal welfare. We support
the continuing influence and development of whole chain assurance
programmes, such as Assured British Pigs, and its umbrella organisation,
Assured Food Standards.
We support the principle of regulatory change
being based on good science rather than anthropomorphism.
We consider that it is folly to implement unilateral
change in welfare regulation, in the hope of leading the market.
Given the limitations imposed by food labelling law, the unilateral
imposition of change and its consequent costs simply and inevitably
result in the export of production to locations with lower standards.
This results in a loss of control by the consumer, and a loss
of influence by UK consumer groups and the government, resulting,
in turn, in a reduction in farm animal welfare standards
We strenuously oppose unilateral change in animal
The NPA seeks reassurance from the government:
that it agrees with our argument,
and that it has no intention of introducing any such unilateral
that it will not implement a unilateral
ban of the farrowing crate;
that it will press for a Europe-wide
ban of the sow stall, in line with current UK legislation;
that, in the event of new European
legislation, it will comply with its previously-given undertaking
not to "gold plate" any resulting changes; and
that it will seek to limit the imports
of meat from third countries, where there is no warrant that all
EU specifications have been met.
3.2 Environmental regulation
The NPA's views on environmental regulation
echo its views on animal welfare regulation.
The timetable for implementing the IPPC permit
and inspection programme for pig farms has been relaxed, in order
to give producers more time to prepare themselves for compliance.
The NPA welcomes this.
However, the NPA remains implacably opposed
to the way the Environment Agency has interpreted the requirements,
and how the Agency proposes to charge for operating the programme.
This is an example of "gold-plating"
at its worst. One glance at how the directive is being implemented
in other member states betrays this. The NPA has grown hoarse
seeking to persuade the Agency of the folly of its approach, but
to little avail. Some progress has been made, but we remain bitter
at the Agency's intransigence.
The Agency's interpretation of the requirements
of the directive has an inappropriate balance between practicality
and benefit. For example, the regulations require that, when farmyard
manure has been spread on arable land, it be incorporated within
24 hours. The benefit of compliance is reduced odour from manure
lying on the surface. However, the cost, of guaranteeing that
labour and implements, whether owned or contracted, be available
without fail to comply with the 24-hour limit, is disproportionate
to the benefit. Further, the 24-hour limit poses an unreasonable
burden of weather forecasting on those wishing to spread farmyard
The charging structure, even after hard-won
modifications, is disproportionate. The level of charging is more
appropriate to chemical plants or large factories, and is completely
unaffordable to a pig farmer. The Environment Agency staff blandly
insist that they have a duty to recover their costs. Indeed they
do, but they also have a duty to offer value for money.
In particular, the NPA contends that this challenge
remains unanswered by the Environment Agency: while acknowledging
the principle that the polluter pays, why should non-polluters
pay for the establishment of the infrastructure required to monitor
The Environment Agency must observe the rules
of better regulation. In particular, there has to be a healthy
relationship between the level of charging and the ability to
pay, and between the cost and the value of the environmental benefit.
The NPA contends that neither of these tests
has been passed by the Environment Agency.
3.2.2 Climate Change Levy
The NPA recognises the role the pig industry
needs to play in the global effort to reduce the risk of climate
Discussions with government regarding the implementation
of a scheme to rebate any Climate Change Levy to producers who
comply with targets to reduce energy use are current.
Given our unsatisfactory experience in dealing
with government agencies regarding IPPC, we seek reassurance from
the government that any scheme will need to pass all the tests
of better regulation.
3.2.3 Better Regulation Task ForceEnvironmental
Regulations and Farmers Sub-Group
The NPA welcomes many of the conclusions and
recommendations of the report recently produced by this group,
under the chairmanship of Lord Haskins.
"Recommendation 7: animal welfare:
MAFF should re-examine ways of compensating
farmers, especially small farmers, for additional costs imposed
by certain UK animal welfare regulations; and
the UK government should resist unilateral
demands for further animal welfare regulations and lobby to raise
standards in other EU Member States to those currently practised
in the UK."
"Recommendation 11: Integrated Pollution
Prevention and Control:
Ensure that enforcement is appropriate
and proportionate; and
that on-farm inspection charges do
not exceed those elsewhere in the European Union."
The NPA would also like to draw the Committee's
attention to one of the principles of good regulation identified
in the report:
"Where regulation disproportionately affects
small businesses, the state should consider support options for
those who are disadvantaged, including direct compensation."
3.3 Food safety regulation
The NPA's views on food safety regulation echo
its views on animal welfare and environmental regulation.
The NPA contends that new food safety regulation
must always be based on good science, and must pass the test of
a satisfactory balance between cost and benefit.
We also urge that, if the cost of delivering
pigmeat to consumers is inflated by costs associated with solving
a food safety issue unconnected with pigmeat, as was the case
with BSE regulations, for example, the pig industry must not be
expected to bear those costs unaided.
We also urge that, if food safety regulation
is brought to bear on UK pig products, all importers of pigmeat
be required to warrant that they have complied with an equivalent
level of control.
3.4 Food labelling
The NPA believes that, under existing food labelling
legislation, both UK and EU, and under existing WTO rules, it
is not possible satisfactorily to market superior standards of
animal welfare, environmental protection or food safety. In particular,
the WTO rules, that preclude differential labelling on the grounds
of different Production or Processing Methods (PPM), mean that
any producer, who is obliged to accept a regulatory burden from
which his importing competitor is exempt, is at an insuperable
The RSPCA, in their report, "Conflict or
Concord, Animal Welfare and the World Trade organisation",
"Mandatory labelling is far more likely
to be effective than voluntary schemes, as long as the standards
promoted are meaningful and the scheme is transparent. This may
not produce an absolute shift in consumer demand however. Other
factorsincluding price, availability, familiarity, reliability
and performancemay lead consumers to continue buying a
product even if they disagree with aspects of its production,
ingredients or consumption. Paradoxically, a significant proportion
of consumers may be willing to support regulatory measures to
outlaw production processes or ameliorate consumption consequences
without actually modifying their own purchasing choices for the
same products. For this reason legislative [labelling] solutions
are seen as the most desirable aim."
The NPA requests assurance that the government
will either secure a compulsory labelling mechanism that is able
to demonstrate differentiated PPM, positively or negatively, or
will commit to avoid all unilateral regulation in any of the areas
of animal welfare, environmental or food safety regulation.
3.5 Aid to EU pig producers following the
spread of BSE
It seems likely that many European pig producers
will soon be facing similar consequences of BSE control measures
to those faced by UK producers since 1996. In particular, it seems
almost certain that the temporary ban on Mammalian Meat and Bone
Meal (MBM) will become permanent in all member states.
In that case, the NPA requests one of two courses
of action from the government:
either, it must ensure that no state
aid is paid to pig producers in other member states as a result
of such regulatory change, either directly or indirectly; or
it must ensure that UK pig producers
are entitled to similar aid.
In general, the NPA urges the government to
keep a close watch on how the BSE crisis is managed in other member
states, to ensure that no competitive disadvantage of any kind
accrues to UK pig producers.
30 November 2000