HL Deb 19 July 1993 vol 548 cc583-7

6.46 p.m.

The Earl of Strathmore and Kinghorne rose to move, That the draft order laid before the House on 7th June be approved [33rd Report from the Joint Committee].

The noble Earl said: My Lords, it might be helpful if I begin with a few words about what the Meat and Livestock Commission does. The MLC was set up under the Agriculture Act 1967 to promote greater efficiency in the livestock industry and improve the demand for meat and meat products. Its work ranges from improving the efficiency of production on farms and elsewhere in the meat marketing chain and developing the market for meat. Many of your Lordships will have seen the MLC's advertisements, but there is much other work of a more subtle nature involving in-store promotions, magazine articles and so on. The commission also supplies chargeable services to the industry including carcase classification in abattoirs, grading of livestock in markets and on-farm herd and flock recording schemes.

The order has two features, as set out in the schedule. Paragraph 2 of the schedule would amend the levy ceilings and paragraphs 3 to 6 will enable exporters of live animals, who pay their levy direct to the MLC, to recover parts of it from their suppliers, either farmers or auctioneers.

I should like, first, to explain the changes in the levy ceilings. The levy has two components. The general levy finances the running of the MLC and the generic promotion of meat. The species levy finances specific promotions of beef, pork, bacon and lamb. The MLC sets its levies each year within the ceilings set out in orders such as this one. Responsibility for advising the commission on specific activity with beef, pork and lamb rests with species promotion councils. There is a council for each species consisting of producers and others and they decide on the kind of promotion campaign they wish to see for their product and make recommendations about the level of finance necessary to pay for it. The Pork and Bacon Promotion Council wishes to increase its promotion work on pigmeat and proposed a doubling of the levy ceiling in order to provide the necessary finance. The opportunity provided by this amending order has enabled other small increases to be made to the general levy ceilings but there is no proposal to increase the species levy for beef and lamb.

No proposal for a levy increase would ever be welcome but, at the moment beef, sheep and pig prices could modestly be described as reasonable owing, at least in part, to demand from the rest of the European Community for British meat and livestock. Beef exports are now 30 per cent. higher than they were at the same time last year. They amounted to £265 million in 1992. Pork exports have also risen sharply with particular growth in sales of pork cuts to France, the Netherlands, Portugal and Italy. Sheep exports in 1992 were 22 per cent. up on the previous year and rising in 1993. The MLC estimate is that exports are 38 per cent. up on the same period in 1992. The MLC has played a prominent role in encouraging exports. Its work in promoting demand for meat will also have improved prices.

The second part of the schedule provides for exporters of livestock to be able to recover levy from the persons from whom they have purchased their animals. This is the same right as slaughterers already enjoy. Ever since the levy was extended to live exports in 1979, exporters have passed the levy back by agreement with few problems. But it is now right to give a more formal power, given that exports make up a significant proportion of the market.

I should also remind your Lordships that the Meat and Livestock Commission is currently undergoing a quinquennial scrutiny review. Staff of the agriculture departments are engaged in the review and I expect to have their report later this year. The review provides an opportunity for the meat industry organisations, and individuals, to offer their formal and less formal thoughts on the future direction of the MLC.

There has been a vigorous debate in the meat industry about the job that the MLC should be doing. It is tempting to conclude the review before making this order but it would be wrong. The pig industry wants to increase its spending now on meat promotion and this order would allow it to do so. And the proposal to extend to exporters the right to recover levy from their suppliers would achieve a necessary and consistent treatment between exporters and slaughterers. The measures are necessary. They have been broadly welcomed by the industry in two rounds of consultation. I ask your Lordships to support the Motion. I beg to move.

Moved, That the draft order laid before the House on 7th June be approved. [33rd Report from the Joint Committee].—(The Earl of Strathmore and Kinghorne.)

Lord Carter

My Lords, I thank the Minister for explaining the order. As he said, the MLC was set up under a Labour Government in 1967. It has done a good job generally, particularly under its current chairman Mr. Geoffrey John. It is to be congratulated on its promotional work and other development activities.

We have no quarrel at all with paragraph 2 which amends the levy ceilings in the usual way. I assume that the usual consultations have been conducted. As a director of a farming company with a large pig enterprise, I suppose that I should declare an interest in the pig promotion levy. Indeed, I believe that the noble Earl, Lord Strathmore and Kinghorne, has just had his first litter. I take this opportunity to welcome him to the pig cycle.

However, there are some serious questions which arise—and I know that the Minister is aware of the anxieties in this respect—as regards paragraphs 3 to 6. They enable exporters of live animals who pay levy direct to the MLC to recover parts of it from their suppliers, whether they be farmers or auctioneers.

The Minister will be aware of the very real problems which it is feared that that will create. The matter was discussed in another place at some length. The British Association of Sheep Exporters has been particularly active in drawing our attention to the problems.

It seems that with the deregulation of the beef and sheep regimes, it is now difficult to define any criteria for store markets as opposed to slaughter markets. The same traders attend both and the quality definition depends entirely on the anticipated outlet. As a consequence, many sheep for export are purchased by traders in store auctions where up to now it has not been the practice for farmers to pay any levy. Traders in live sheep have many outlets and I believe that none of them trade specifically in sheep for export only. Therefore, it is impossible for a producer or auctioneer to establish the purpose for which the sheep have been purchased.

Therefore, it seems that we have a situation in which, if the draft order is approved, sheep traders will be authorised in effect to recover the levy from the producer or the auctioneer on sales of store lambs in addition to lambs that are due for slaughter or export.

There is a further complication. I understand that at present there are about 16 live sheep exporters who are challenging the MLC's right to charge a levy on exported sheep. I understand that those cases are not likely to be brought for trial for about 18 months. During that time, it is unlikely that those exporters will he paying levy to the MLC. While it would be unwise to prejudge the outcome, it is fair to say that at present there is at least considerable doubt over the legalities of the practice. I should be interested to know the effect of the order on that situation.

It seems that there will be a situation in which live sheep exporters will, in their own interests, have to collect the levy on all purchases, whether direct from producers or auctioneers and whether they operate store or slaughter sales. I suppose that they will find it necessary to hold the money pending the outcome of the court case which I understand may take two years. Only then will they he in a position to decide whether to return the levy to the producers or pay it to the MLC. It is a complicated situation and I am not sure that the order has made the matter any simpler.

The Minister said that the consultations are proceeding. It is difficult to know why the decision has been made not to await the outcome of the proceedings. I understand that the report of the review procedure will be published later this year. The effect is that the MLC has rather jumped the gun as regards that aspect of the order which deals with live exports. I find it difficult to see why the Government did not take the usual power to increase the levy, which is entirely straightforward and we have that every so often, and then consider the problem of live exporters as a separate matter and attempt to deal with that in a separate order.

The Earl of Strathmore and Kinghorne

My Lords, the noble Lord, Lord Carter, has drawn attention to the problem of recovery of part of the MLC levy by live sheep exporters trading through auction markets. I am aware that some livestock exporters and organisations representing them have made representations on that point.

Noble Lords will be aware that the MLC levy has been payable on exports of live animals since 1979. Currently the arrangements at auction markets whereby slaughterers exercise their statutory powers to recover part of the levy from producers have been widely applied, by agreement, to sales to exporters. Live animal exports, in particular live sheep exports, have now reached significant levels and the time is now right for all live animal exporters to have the same legal powers to recover part of the levy as are enjoyed by slaughterers.

As the noble Lord, Lord Carter, said, there are some practical problems for some parts of the trade. Representations have been made on that point as part of the Government's review of the MLC. Those problems are understood. They relate to the practicalities of recovery of the levy from producers if some of the lambs which are to be exported are traded at store markets, where normally animals are sold for further fattening, rather than in fatstock markets where they are sold for slaughter. Levy is currently recovered only at fatstock markets but exporters being liable for payment of the levy to the MIX will wish to exercise their right of recovery wherever they buy their lambs.

The noble Lord also raised the possibility of exporters collecting contributions to the MLC levy and not subsequently paying them to the MLC. That is a potential difficulty as the less scrupulous dealers can be hard to track down. However, that should not prevent us from providing powers of recovery to those exporters who comply with the legal and moral requirements to contribute towards the costs of the benefits that they receive from the, MLC by paying the levy. They are entitled to expect the same legal powers to recover part of the levy from producers as are enjoyed by slaughterers.

There are some practical problems for some parts of the industry in the recovery of the MLC levy by exporters, but for the majority, those who trade through the fatstock or slaughter markets, the matter is straightforward. The Government will look into those problems where they exist as part of the current review of the MLC. They are not central to the principles of the issue that exporters of live animals, because they benefit from the activities of the MLC, are liable to pay the levy and so should have the same powers of recovery as slaughterers already enjoy. This order achieves that by removing art element of discrimination which currently exists.

The noble Lord, Lord Carter, also asked about the effect of the order on outstanding objections. The simple answer is that there is none. The levy is payable following the 1979 order. This order gives exporters the right to recover the levies for which they are liable. In the past the levy has been largely recovered by voluntary agreement. Exports of live animals have now reached such a scale that it is appropriate to provide legal powers.

The noble Lord also asked why we do not wait for the outcome of the review of the MLC that is currently being undertaken. The pig meat industry needs extra funds for promotion as soon as possible. There is widespread industry support for the increase in the levy ceilings. The review of the M LC is one of the routine Government reviews of non-departmental public bodies. It would not be fair to those exporters who pay the levy to make them wait for the outcome of, and any action on, the review before giving them the same right of recovery as slaughterers already have.

The measures are necessary. They have been broadly welcomed by the industry. I trust that I have answered the noble Lord's points and I commend the order to the House.

On Question, Motion agreed to.