HL Deb 07 March 2001 vol 623 cc288-95

8.12 p.m.

Baroness Hayman rose to move, That the scheme laid before the House on 1st February be approved [6th Report from the Joint Committee].

The noble Baroness said: My Lords, the two Motions standing in my name on the Order Paper deal with specific policy developments in the pig sector which arose in the course of the past year. The Pig Industry Development Scheme 2000 (Confirmation) Order 2001 relates to last year's outbreak of classical swine fever in East Anglia where pig producers whose herds did not have the disease but which were none the less caught up by the movement controls found themselves faced with extremely difficult animal welfare problems. To help deal with these problems the Government introduced the unprecedented Pig Welfare (Disposal) Scheme. In the period between 31st August and 31st December 2000 that scheme cost the taxpayer over £14 million, of which £9 million was direct payment to producers.

As part of the agreement to change the payment structure of the scheme, the industry agreed to provide a top-up payment to those making use of it by way of a levy fund. The Government welcomed the recognition that, while movement controls affected the few, their introduction to control the spread of disease was of benefit to the whole industry.

The only mechanism available to introduce a compulsory levy on pig producers is a Meat and Livestock Commission development scheme under the Agriculture Act 1967. The aim of the scheme is to build up an industry fund to be used to provide advice, services, facilities and financial assistance to pig producers to assist them in the prevention and/or limitation of the spread of an outbreak of pig disease. It will be collected in the form of an industry levy, set initially at 20p per pig slaughtered, although the order allows a maximum of £1 per pig to be charged. The first use of the fund will be the industry top-up to the payments already made under the Pig Welfare (Disposal) Scheme to producers faced with CSF movement restrictions.

The scheme is a state aid and, therefore, requires clearance by the European Commission before introduction. While we believe that that clearance will be forthcoming very shortly, as the two-month deadline for Commission comments has now passed, in accordance with the rules we have written to the Commission to say that we intend to introduce the scheme in mid-March when it has passed all its parliamentary procedures.

It will take some time to build up the fund to a level whereby payments to producers can be made. To help remedy that, my right honourable friend the Minister of Agriculture, Fisheries and Food is prepared to look at authorising a loan from the Aujeszky's Fund to the development scheme fund to allow small but nevertheless useful upfront payment to be made. The industry supports such a move, and a formal request from the hoard of the Aujeszky's Fund has been received and is being considered.

The scheme is for Great Britain only. The SI requires the consent of the Scottish Executive, which is recorded in the SI, and the approval of the Welsh Assembly. The Assembly has approved the scheme, subject to EU state aid clearance.

The House will understand that the complexities surrounding a development scheme have resulted in it taking quite some time to reach this advanced stage in the procedures. Nevertheless, we are now able through the scheme to offer assistance to pig producers, and it is being introduced at the behest of the industry as a whole.

The other statutory instrument with which we are dealing relates to the Pig Industry Restructuring Scheme. This scheme was developed in close consultation with the National Pig Association, the Meat and Livestock Commission, the British Bankers Association and the Central Association of Agricultural Valuers in recognition that the pig sector had faced considerable difficulties in the previous two years and those difficulties needed to be addressed.

Like a number of other components of the action plan for farming, the Pig Industry Restructuring Scheme is a state aid and as such needs formal clearance by the European Commission before it can be introduced. To obtain that clearance, the Commission was formally notified of the PI R S on 30th March 2000 and clearance was finally forthcoming on 13th December 2000. 'The clearance process took much longer than we had hoped, but it remains the case that it was achieved in a little over nine months. I believe that the average time for clearance of restructuring schemes by the Commission is nearer 18 months.

Turning to the details, the Pig Industry Restructuring Scheme consists of two elements: outgoers, which offers aids to those pig producers who wish to end all involvement in pig production permanently, and ongoers, which offers aids to those pig producers who wish to restructure their business to make it more viable in the long term. Assistance under ongoers will be provided in the form of an interest rate rebate on loans linked to an agreed business plan. Pig producers who remain in production and have a commercial loan linked to an agreed business plan are eligible to apply.

The order that we are debating tonight is narrow in focus, in that it allows for the agreed business loan on which an interest rebate will be paid to be used for capital projects. There is a second order passing through this House under the negative procedures which allows the loan to be used for non-capital projects. The outgoers element of the PIRS is a non-statutory scheme.

The Pig Industry Restructuring Scheme is open to applicants from all over the United Kingdom. The devolved administrations have been working closely with MAFF to implement the scheme, and all applications from throughout the UK will be judged equally and on their own merits. The order covers England only. Following devolution, Wales, Scotland and Northern Ireland are proceeding with their own legislation in parallel.

The Government are totally committed to the Pig Industry Development Scheme and the Pig Industry Restructuring Scheme and are determined to make them work. They provide much needed financial support to an industry which has suffered terribly over the past few years and demonstrate our commitment to the UK pig industry. They are particularly relevant perhaps in the difficult days that the whole of the livestock industry faces at the moment. I commend the orders to the House. I beg to move.

Moved, That the scheme laid before the House on 1st February be approved [6th Report from the Joint Committee].—(Baroness Hayman.)

Lord Glentoran

My Lords, I thank the noble Baroness for coming before the House today to present the scheme. The Minister has our total support for the work that MAFF is carrying out elsewhere to fight foot and mouth disease. The industry also welcomes this scheme. Having read Hansard of another place—I have clone a good deal of that recently—I should like to probe a few of the numbers and crave the assistance of the noble Baroness.

As I understand it, initially the Pig Industry Restructuring Scheme was to have received £66 million: £26 million for the current year, £20 million for 2001–02 and £20 million for 2002–03. The noble Baroness said that it took some time to get the scheme off the ground but, considering that it had to go through Europe, it was not really that long. I am quite prepared to give the Government the benefit of the doubt and accept that most of the time was taken up in Europe rather than Whitehall. As a result of that, it would seem that the first year's allocation of £26 million, or most of it, has disappeared. I am not quite sure what has happened. We hoped that it would be rolled forward. But I understand that some of the £22 million has been spent on the outbreak of swine fever. I thought that when the assistance for the outbreak of swine fever was set up the money had already been allocated. I am trying to find out what happened to £22 million.

We are now left with £40 million. As the noble Baroness pointed out, it is both an outgoers and an ongoers scheme. I understand that that was part of Europe's insistence that some of the money should be spent on taking capacity out of the marketplace. It was decided that £16 million should go into that side of the scheme. Today, it seems that £40 million is left in the scheme, of which £16 million goes to outgoers. That leaves only £24 million for reinvestment in the industry. I understand that the industry, quite rightly, is more interested in its survival and future than in those leaving. In particular, the noble Baroness will know that many ancillary jobs and businesses are dependent on the successful survival of the industry. Can the noble Baroness assure the House and the industry that the missing millions will be reinstated in year three of the scheme and that the figures I have quoted are something near correct? Having read Hansard of another place, I was not particularly clear on that point.

Perhaps I may turn briefly to the Pig Industry Development Scheme, which, having listened to the noble Baroness's clear explanation, I probably understood even less well. The scheme was set up in agreement with the Government to help the pig industry after the awful diseases and as an insurance against future problems. It started because the Government could come to an agreement of £50 per animal whereas the industry said that it needed £70. The net result is the scheme before the House, with the industry having the power to raise a levy, which in the long-term must be a good thing.

Where does the noble Baroness expect the first year's levy to start at? Although in the legislation there is £1, I do not believe that the industry could even begin to take on a levy of that nature. I should be interested to hear where the Government think the levy will start from. What is the total target for the levy? Are the Government prepared to offer the industry an interest-free loan to get the scheme started? The noble Baroness made some encouraging remarks to that end. I was not absolutely certain whether that was what she was referring to. Having made those points, I support the Government on both the schemes.

Lord Thomas of Gresford

My Lords, we on the Liberal Democrat Benches very much support the two statutory instruments. I echo some of the points made from the Conservative Benches by the noble Lord, Lord Glentoran. The size of the fund in the Pig Industry Development Scheme is not stated anywhere and yet a quite ambitious programme is set out in the functions of the board that is to be set up by the commission. It is not simply confined to giving emergency aid to those who are affected by restrictions on the movement of pigs or those who are pig producers affected by the incidence of any pig disease. There is an ongoing duty to give financial assistance to pig producers to make structural and other changes to their business premises in order to prevent and/or limit the spread of any incidence of pig disease. A quite expensive programme is to be undertaken. I should be interested to know how much money we are talking about. How long will the levy take to arrive at anything like a sufficient capital sum to fund the rather ambitious functions that the board, under the commission, may have?

Should there be another crisis in the future—let us get over the one with which the noble Baroness is dealing at the moment—how quickly can the board move to process applications for grant? There is a cumbersome collection procedure in making the levy on the slaughterer, who has then to go down the chain to collect it from the original owner of the animal. One wonders whether the machinery is sufficiently flexible to achieve the object of rapid help to farmers when a crisis emerges. I underline the point made by the noble Lord, Lord Glentoran, about the necessity to have a significant fund to get the scheme underway.

I turn to the Pig Industry Restructuring (Capital Grant) Scheme. Can the noble Baroness confirm that the grant payable under the scheme is a one-off grant and not an annual grant, that it is limited to 5 per cent of existing loans as well as future loans and that whether those loans are existing loans or future loans, they must be supported by a business plan? A great deal of paperwork must be gone through in order to apply for the grant. At the end of the day, how much money is involved? Is it £24 million, to adopt the arithmetic of the noble Lord, Lord Glentoran, or is it an open-ended fund? Can anyone apply provided that he or she qualifies? Whatever the ultimate cost, is there a cap on it? Are there future plans for this kind of grant to be included in the agricultural grant, the Comprehensive Spending Review, and so on? Are we looking at something in the short-term or is a permanent scheme being put forward?

Having made those comments, I say again that we very much support the schemes. We very much hope that, after tonight, the noble Baroness will be able to return to her much more pressing duties and conquer the plague that is afflicting the countryside.

Baroness Carnegy of Lour

My Lords, when the Minister comes to reply, can she clarify how devolution is working in respect of the two instruments? She said in relation to the Pig Industry Restructuring (Capital Grant) Scheme that the Scottish Executive is devising its own scheme. I understand that to be the situation. However, in relation to the Pig Industry Development Scheme, she said that the Welsh Assembly had already agreed to it. But she did not say whether the Scottish Executive had agreed. Is that agreement still to come? Does the order have to wait until the Scottish Executive has agreed before it can be brought into force? I may have misunderstood the position, but it is better to be clear about these matters.

Baroness Hayman

My Lords, perhaps I may reply to the noble Baroness, Lady Carnegy, first. I may not have been absolutely clear. The Pig Industry Development Scheme is for Great Britain only. The SI requires the consent of the Scottish Executive, which is already recorded in the SI. The Welsh Assembly has approved the scheme subject to EU state clearance, but it is recorded in the SI.

Continuing with the Pig Industry Development Scheme, I shall try to clarify the position. The noble Lord, Lord Glentoran, asked me about the levy. The initial levy will be set at 20p per pig. An upper limit has been set, but the initial levy will be set at that figure. On that basis, and on the basis of the market operating as it did before the recent events, it will take around 20 months to collect the required funding for the initial use of the fund; that is, the top-up payment to those payments from government funding that have already been made under the Pig Welfare (Disposal) Scheme. Some £4 million needs to be raised to achieve that.

The noble Lord, Lord Thomas of Gresford, asked how we will collect the levy. That will be done through the system established by the Meat and Livestock Commission. The commission has been deeply involved in the formulation of the scheme and in the consultation. It has set up a collection system and it is happy that it can be administered without any unnecessary bureaucracy.

The noble Lord, Lord Glentoran, asked me about the possibility of making available a loan with regard to pump priming the Pig Industry Development Scheme.

Lord Glentoran

My Lords, I asked about the possibility of an interest-free loan.

Baroness Hayman

My Lords, we must consider two issues here. First, the noble Lord may be aware that we have in place an existing, limited fund called the Aujeszky's Fund, which I mentioned in my opening remarks. The trustees have already put in an application to use it for up-front payments. Once the scheme is fully operational and the board—which will make decisions about future use—is in place, either the board or the MLC may wish to consider seeking a commercial loan in order to build up the development scheme and so allow early payment of moneys to eligible producers. An interest-free loan from government to finance the fund would constitute yet another state aid and thus would require Commission clearance. The delays that that would cause have been made clear tonight. It would not be an effective way in which to get an early payment to producers.

So far as the future of the fund is concerned, I should point out that setting it up has proved to be a complicated business. Fairly wide parameters have been built in to cover what it aims to do. Thai was very much related to the primary legislation under which it has been set up. We have made it clear that the agreed first use is the £4 million top-up payment of the government-funded Pig Welfare (Disposal) Scheme. Once that commitment has been met, it will be a matter for the board of the Pig Industry Development Scheme to decide how the fund might be used.

Perhaps I may turn now to the Pig Industry Restructuring Fund and try to make the position clearer than perhaps was achieved in another place. However, the matter is not without complexity. I shall respond to some of the questions rightly asked by the noble Lord, Lord Glentoran, as regards the funding of the scheme.

The noble Lord knows that three tranches have been made available, totalling £66 million over the three-year funding period for the scheme. However, because of the difficulties in obtaining commission clearance, which was not secured until the end of December last year, the £26 million allocated for the year 2000–01 will not now be spent on the Pig Industry Restructuring Scheme. My right honourable friend undertook to ensure that that money would go to the pig industry. That has now taken place and, in the main, the funds have been spent on dealing with the classical swine fever outbreak in East Anglia.

Any remaining sum from that £26 million, which will be at least £3.9 million, will be carried forward into the financial year 2001–02 and spent on the Pig Industry Restructuring Scheme. In addition, the Minister has announced that the £20 million allocated to the scheme for 2002–03 will be brought forward to be used in 2001–02. That means that we shall have a total budget of £44 million in the next financial year. That is in recognition of the fact that we shall be opening a second tranche of the outgoers' scheme in case more people wish to take it up. In fairness to the applicants already in place, we have closed the first tranche.

The noble Lord rightly will ask me what will happen in subsequent years. Additional funding for future years takes us into the next spending review. For that reason, I cannot make any commitment, except to say that, in general terms, the Government are determined to ensure that the scheme meets its objectives. The noble Lord will understand that we cannot make commitments about the next tranche. However, as I have said, we are bringing forward the funds from the year after this one in order to make more moneys available.

As regards the method of application, the aid provided is based on a sealed bid, put in by the applicant, giving a figure for how much is required per sow place for him or her to leave the industry. All sealed bids will be opened at the same time and the bids will be measured against a set of value for money criteria that have been agreed previously. Outgoers 1 closed for applications on Friday, 2nd March and sealed bids will be opened later this week. It is hoped that the successful applicants will be informed by the end of March. However, we recognise that a number of pig producers who had intended to carry on in business may now be thinking again as a result of the foot and mouth outbreak. That is why we have decided to open an Outgoers 2 scheme from 12th March. The cap is in the form of the funding that will be available each year for the scheme.

I hope that that answers the questions put to me by the noble Lords, Lord Glentoran and Lord Thomas of Gresford, and the noble Baroness, Lady Carnegy of Lour. On that basis, I hope that the House will agree to the Motion.

On Question, Motion agreed to.