HC Deb 25 June 1991 vol 193 cc967-74

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Chapman.]

10.38 pm
Mrs. Ray Michie (Argyll and Bute)

I am grateful for the opportunity to raise the matter of the Scottish salmon farming industry, the outlook of which is increasingly serious. A brief look at the history of salmon farming reveals that it started more than 20 years ago and in the past decade it has witnessed spectacular growth. Its annual output is valued at £140 million while exports amount to £55 million. There is great potential for growth. Of the capital investment of £120 million, 25 per cent. has come from Highlands and Islands development board assistance, with the rest coming from the private sector. I am sure that the Minister approves of that. The industry has a research and development programme, which I should like to see increased substantially. I shall return to that.

Of fundamental importance are the 6,300 jobs that the industry has created. Of special concern to me and my colleagues who represent constituencies with fish-farming interests are the jobs that have been created in the highlands and islands.

My support for the fish-farming industry is based on the contribution that it has made to the lives of those who live in the areas where it is located. It provides employment for viable communities in isolated areas. It sustains schools, shops and, above all, employment for people such as crofters and small family farmers, who form the backbone of the rural economy. These people sustain, especially in the highlands and islands, important cultures, traditions and values.

Salmon farming has probably replaced forestry as a source of employment. When the Forestry Commission was first established, one of its purposes was to provide jobs for those who could not sustain a living off the land. For salmon farming, however, the reality now is a far cry from the promise of the past. There is a serious crisis, with a consequent loss of confidence in the industry. There have been job losses and forced sales, especially of small fish farms. In 1989, the European Community market price for salmon collapsed from a farmgate figure of £1.65 per pound to only £1.

I have a letter from Highlands and Islands Enterprise, in which it is estimated that 56 companies have been sold or closed between 1988 and 1989. That organisation believes that all large and small companies in the industry have been seriously weakened. Without an early remedy within the European salmon market, the Scottish salmon farming industry will not survive as we know it.

In Lewis and Harris in the Western Isles, 18 companies have ceased to trade. That has affected the employment of 90 to 100 people. Co Comunn Na Hearach, Co Comunn Na Pairc and Western Isles Salmon—to list only three—were all community-based companies. They were local employers run by local people.

I received a letter today from a croft-based operation in Daviot near Inverness, which currently is surviving. The letter states: My croft-based operation supplies smolts to ongrowing farmers on the West Coast and Shetland". Clearly that involves the constituency of my hon. Friend the Member for Orkney and Shetland (Mr. Wallace). The letter continues: I employ 8 full-time workers and 4 part time, all local, 7 of them being ex-students of Inverness College and under 25 years of age … We are a successful and profitable company producing 800,000 smolts per year. However, the market difficulties being experienced by our customers due to Norwegian dumping cause concern and put our future at risk. He went on: This was described to me yesterday by our main customer 'we cannot go on like this we might as well stand on the shore tearing up pound notes'. Why has this happened? There has been a sudden and unprecedented rise in Norway's production—in fact, a doubling from 80,000 tonnes in 1988 to 160,000 in 1990. It has been dumping its excess on the world markets, selling at below its production costs and undercutting its own minimum domestic price system.

Following the 1989 EC market collapse, to which I referred earlier, an anti-dumping case was brought before the Commission. The case was proved, and an 11.4 per cent. import duty was proposed but never implemented. Meanwhile, the Americans imposed an import duty against the Norwegians, which simply compounded the problem by diverting further tonnage from the United States to the EC market.

I know that the Government are anxious to stress their record on environmental issues, and at the same time to promote high safety standards. In recent years, consumers have become acutely aware of the dangers posed by the use of chemicals in food. Certain pharmaceutical products must be bought by salmon farmers for use in aquaculture; they must be certified, and the cost of authorisation is reflected in the sale price.

Here again, there is a huge discrepancy between this and other EC countries. Our Government are failing to provide any assistance, according to a written reply that I recently received from the Scottish Office Agriculture and Fisheries Department. In Spain, authorising a new product costs the equivalent of £8; in Luxembourg, it costs the equivalent of £49; in France, the equivalent of £155. In the United Kingdom, it costs £12,000.

At the same time, the Government are spending less on research and development. Since 1980, when £2.3 million was spent on fish-farming research and development, there has been a real-terms cut of 29 per cent. The Government spent only £3 million in 1990–91. That is simply not acceptable at a time when people are increasingly worried about the possibility of fish-farm pollution around our coasts and in our inland waters. The Crown Estate Commissioners, who take their whack in rent, should contribute much more to research and development; too much profit goes straight to the Treasury.

There is also the threat posed to the industry by the Food Hygiene (Scotland) Regulations. I could not let this evening pass without repeating my plea to the Minister —a plea that I have often extended to the Parliamentary Under-Secretary of State for Scotland, Lord Strathclyde —to make allowance for the smoked salmon and fish-curing industry in Scotland. Without special exemptions applying to delivery of such products, many smokeries will go out of business, and that will have a huge effect on areas like Argyll and Bute.

To cap it all, there is the added shock of the suggestion in last week's talks that the European Free Trade Association be given access to the EC tariff-free trade area. That must not leave the Scottish industry defenceless: we need more talks to agree a reference price. The whole issue is really a trade disagreement, not a fisheries disagreement.

What are the Government going to do about this? In the past weeks and months, the Government have received increasing representations and requests to act decisively and swiftly. That message has been carried to them by Members of Parliament and by the Scottish Salmon Growers Association. The Leader of the House told me during business questions a month ago that he had held discussions on the subject at the recent Tory party conference in Perth. Perhaps the Minister of State, who is to reply, also held such discussions.

The belief is that the Government will not give Scottish salmon farming a high priority. Appeals to the Ministry of Agriculture, Fisheries and Food and to the Prime Minister have had little effect. As the Scottish Office Minister responsible for fisheries, the hon. Gentleman must surely realise that this is an important Scottish industry. I appreciate that he has many other tasks that take up his time, but he and his noble Friend in the other place should go to Brussels tomorrow and seek EC action on measures against Norwegian dumping and set the scene for a long-term and stable solution to the problem.

Will the Minister tell me—if not tonight, perhaps later —what rule or legislation allows Highlands and Islands Enterprise to refuse grant aid to those who are not members of the Scottish Salmon Growers Association? In Cowal in my constituency, 85 per cent. of salmon produced is not eligible for grant assistance.

I am particularly worried about the small growers, many of whom have had to pull out of the organisation simply because they cannot afford the levy. Only the large companies and the multinationals can continue to pay a fee that has risen from 1 to 3 per cent. of turnover. In addition, high interest rates guarantee that the smallest companies are hardest hit. Surely there must be a discretionary element that ensures that the right projects receive the necessary backing from Highlands and Islands Enterprise, regardless of their membership of the SSGA.

The Prime Minister and the Secretary of State for Scotland keep saying that to persuade the Commission to act the Government will need good evidence of the extent and impact of Norwegian imports. I must tell the Minister that we have given such evidence time and again—on 15 separate occasions since January—to the Commission, to the fisheries department at the Scottish Office and to the MAFF.

I am grateful to the Minister for having listened so patiently, and I hope that I have conveyed to him the serious nature of the situation. If the salmon fish farming industry in Scotland is to survive, it needs Government action now.

10.53 pm
The Minister of State, Scottish Office (Mr. Michael Forsyth)

I congratulate the hon. Member for Argyll and Bute (Mrs. Michie) on her success in raising this issue for debate. I know that she has taken much interest in the salmon farming industry, and I much appreciate her concern about the difficult trading conditions that are facing many fish farmers.

Salmon farming has been one of the success stories of the past decade in Scotland. The geography and environment of our western coastline and islands, with their clean, unpolluted waters and protected coastal inlets, are ideally suited to salmon farming.

From a production level of 1,000 tonnes in 1980, the industry has grown steadily year after year to an output of more than 32,000 tonnes in 1990, with a first-sale value of more than £100 million. As the hon. Lady said, the industry is a major employer, employing almost 2,000 people directly, with two to three times that number employed in related industries such as processing, packaging and transport.

I understand that some £120 million was invested in the industry during that period. As the hon. Lady pointed out, most of that money came, appropriately, from the private sector, but there has been significant Government support. Some £30 million has been provided through the Highlands and Islands development board—now Highlands and Islands Enterprise—and the European Community has also made a valuable contribution.

The problems which we face now, which the hon. Lady set out, are those of success. They stem from a rapid expansion of this young industry, an expansion which has run ahead of the increase in demand for salmon, although that has been growing by about a quarter each year in Europe. We have a problem of surplus production capacity for Atlantic salmon, and that will mean a period of—dare I say it—consolidation, even retrenchment, until supply and demand come back into balance. Our concern, of course, must be to ensure that the pain of such retrenchment should fall fairly where the cause of the problem lies.

The letter from Highlands and Islands Enterprise to which the hon. Lady referred came from Mr. Gaskell, and the hon. Lady quoted some of the points which had been made. The letter said that HIE was convinced that without early remedy within the European salmon market, our salmon farming market will not survive as we know it and that the financial standing of all companies in the sector has been seriously weakened". Those statements are not particularly helpful. What is needed is confidence in the industry and in the future.

Although Scotland produces by far the largest amount of farmed salmon in the European Community, our output is less than one quarter of Norway's. The Norwegians' figures show that between 1988 and 1990 production of farmed salmon rose from 80,000 tonnes to over 160,000 tonnes. More than 60 per cent. of that salmon is exported into the EC. Even in a market which has developed as rapidly as salmon, this was bound to have a destabilising effect.

The first signs of difficulty came in 1989 when the market price for salmon began to fall significantly and the industry saw signs that salmon from Norway was being sold in European markets at unreasonably low prices. The Scottish salmon growers, in conjunction with their Irish counterparts, alleged that the Norwegians were "dumping" salmon in EC markets and asked the Commission to intervene. As a result, as the hon. Lady said, the EC announced in February 1990 that it would mount an anti-dumping investigation. The Government supported that investigation. We did not seek—nor shall we—any "protectionist" measures for our industry. Our concern has always been to promote an orderly expansion of this market and to ensure fair competition within the European market.

As the hon. Lady said, in August 1990, the EC announced its finding that dumping by Norwegian companies had taken place and that this had caused injury to EC producers. The Commission proposed that an anti-dumping duty of 11.4 per cent. should be levied on imports of Norwegian salmon to the Community. In the event, it became clear to the Commission that this was not supported by member states and earlier this year the Commission formally closed the anti-dumping case.

The Government, however, had been keeping in close touch with the industry and with the Commission about the outcome of this investigation. We were able to obtain assurances from the Commission and, through it, from the Norwegian Government about future market stability. The Commission undertook to monitor closely the market for farmed salmon; to initiate discussions with the Norwegians, if so requested; and to consider urgently a further anti-dumping case against Norwegian companies should the EC industry so request.

The Norwegian authorities, for their part, agreed that they would continue their programme to freeze surplus salmon production which the Norwegian industry had been funding since the beginning of 1990 and to take other measures to control what the Norwegians term "black sales"—sales outside their export sales organisation.

The Norwegian measures had a welcome effect on the EC market for salmon—prices recovered during 1990 but they have since fallen back, and in recent weeks they have fallen back to the levels that caused the industry in 1989 to raise its anti-dumping case. So it seems clear enough that we face renewed instances of Norwegian dumping of farmed salmon into Europe.

Officials of the fisheries department were in contact with the Commission throughout the early months of this year, and were present when the industry met the Commission in April to renew its protests about Norwegian dumping. We have pressed the Commission to take action, either with Norway or in respect of the EC market, to bring stability back to the market. The hon. Lady is right to highlight the importance of that.

That pressure has borne some fruit. Recent reports from Norway show that new steps have been taken to control supplies and future output. I understand that the Norwegian industry has reached agreement with a consortium of banks for a short-term loan facility of 1.6 billion kroner—about£145 million—to freeze up to 40,000 tonnes of fish this year. We also understand that action is in hand to destroy up to 20 million smolts this year, which would otherwise produce up to 40,000 tonnes of fish in 1993. These are very welcome steps which should ensure that we recover the balance between supply and demand for Atlantic salmon before too long.

However, we recognise that, as long as a large quantity of frozen salmon remains available for sale, it will be very difficult to obtain a reasonable level of prices. We are also concerned at reports from our industry that the Norwegian minimum price system, and the Norwegian's efforts to stabilise the market, are being undermined by consignments of salmon entering France at prices that are quite inconsistent with the Norwegians' minimum price.

Last week, therefore my, noble Friend the Minister for Agriculture and Fisheries at the Scottish Office, arranged to meet the Norwegian ambassador, and expressed to him very clearly our concern that the Norwegians' efforts to achieve market stability were proving ineffective, and that we were facing again evidence of dumping of Norwegian salmon in the European market. The ambassador was asked to convey to his Government our serious concern at these developments and our intention to follow them up through the European Commission.

The hon. Lady mentioned research and development, but the figures that she gave did not tell the whole story. The Government are also carrying out work on the environmental aspects of fish farming, which will be of direct benefit to the industry. The industry has contributed over £1 million so far to fund research and development, as it should. Highlands and Islands Enterprise has provided up to £400,000 this year with the prospect of additional funding over the next two years. The Crown Estate has also contributed more than £300,000, those sums are additional to the figures that I recently provided for the hon. Lady in response to a series of written questions that she tabled.

The current Government research and development programme reflects the change in emphasis from "production" projects, which formed the majority of expenditure in the early years and which have now transferred to industry, to a greater emphasis on disease and environmental work which is vital. The Government are funding work with the industry on alternatives to Aquagard to treat sea-lice infestation, and we have high hopes of the furunculosis vaccine which was developed by our scientists in Aberdeen.

The hon. Lady mentioned the regulations covering the sending of smoked salmon through the post. I know that it is a matter of concern to her, and I can help her. The regulations have not been laid in Scotland, but following the representations that we have received, the English regulations will provide exemptions for smoked salmon being sent through the post. Research is currently being undertaken into the validity of the argument that it is necessary for smoked salmon to be sent in special containers which maintain a particular temperature. That particular difficulty has been averted and the Government were extremely grateful to the hon. Lady and to others for drawing it to our attention. My hon. Friend the Member for Dumfries (Sir H. Monro), who I see is in his place, was especially helpful in drawing our attention to the difficulties that the industry would face.

I assure the hon. Lady that, on the dumping issues, we shall continue to work in close co-operation with the industry. I understand that the Scottish Salmon Growers Association is currently collecting details of Norwegian trading activities and alleged breaches of the undertakings given. As soon as those have been received, we shall renew our contacts with the Commission and press to develop specific measures to restore stability in the EC market for salmon—and to do so without further delay. In the meantime, we are examining the options open to the Commission to safeguard the EC market.

The future of the salmon farming industry is of great importance to the fragile economies of the north and west of Scotland, and the Government are well seized of the need for urgent and effective action to restore price stability in the European market. Achieving that stability will require action by the Commission and by the Norwegian authorities. We intend to work closely with the industry, and we shall make it abundantly clear to the Commission that we require action quickly.

The hon. Lady raised one further point about the policy on the provision of grants adopted by Highlands and Islands Enterprise towards particular small producers. That is not a matter that falls within my area of responsibility, but I am happy to give the hon. Lady an undertaking that I will ask my hon. Friend the Member for Eastwood (Mr. Stewart), the Parliamentary Under-Secretary of State, to write to her tomorrow setting out the position on the matter. I am sure that he will want to examine with Highlands and Islands Enterprise whether the hon. Lady's suggestions can be incorporated as part of its future policy.

I hope that my remarks will reassure the hon. Lady that we are very much concerned about the problems that are arising from the dumping of salmon and that we will have no hesitation in working to ensure that they are resolved.

Question put and agreed to.

Adjourned accordingly at six minutes past Eleven o'clock.