§ [Relevant documents: Fourth report from the Agriculture Committee, Session 1999–2000, HC 212.]
§ Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Kevin Hughes.]2.30 pm
§ Mr. David Curry (Skipton and Ripon)
The debate that we have requested today is important both in its own right and because of its wider implications. It relates to a regulation that could result in significant costs for the intensive livestock sector of the agriculture industry. The wider implications relate to the Government's response to, and the costs that flow from, regulation. I shall speak briefly about the specifics of the regulation before dealing with its broader implications.
The proposal is a European Union regulation that is, quite properly, designed to control the pollution that flows from intensive livestock—pig and poultry—production over a certain size. For the purposes of this debate, it is not necessary to detail the particularities of the units that will be affected.
Each member state will apply the regulation in its own way. The regulation is facultative, in the sense that it does not prescribe rates of levy for the agriculture community but clearly prescribes the objects intended. That is another important factor.
The proposal envisages a system of regulation and control to be introduced over the next six or seven years. Our anxiety is that the matter involves a series of unknowns. I recognise from the Government's reply that some aspects are genuinely difficult to nail down—such as how many units are involved in poultry production, for example—simply because records are not available.
We were equally worried that the proposed costs seemed disproportionate and unevenly spread. We spoke to the Environment Agency about the proposed costs, which ranged from about £12,000 to £18,000. Subsequently, we spoke to the Scottish Environment Protection Agency about the costs to be levied in Scotland, and found that it proposed about half as much. That led to the suggestion that the Scottish Environment Protection Agency might, in the spirit of tendering, win the contract for England and Wales, too.
The regulations allow each member state to decide the level of cost recovery to apply. Therefore, if on the continent it is decided that no costs should be recovered, no one will be breaking the law. That would be perfectly within the spirit of the regulations. However, it would have an impact on the sector's competitiveness.
114WH At no stage did the Committee argue that it was wrong to apply pollution controls. We never started from the thesis that we want nothing to do with the proposal. We recognise that at Kyoto the Government made commitments, to which we all subscribe, for environmental and pollution control, and that it is sensible for those mechanisms to be common throughout the European Union in order to maintain that most beloved phenomenon of farmers, the level playing field.
We were anxious for the playing field to be level and reasonable and for the administrative burden to be as minimal as possible, consistent with delivering the objectives. We believed that the Government supported us in that view, because the Ministry of Agriculture, Fisheries and Food set up the red tape review group, a rather picturesque expression, which sounds as though it had a veterinary origin—the chief veterinary officer applying himself to an especially difficult form of tapeworm.
That review has now reported, and has argued about the need to tackle the regulatory burden, especially in the context of the crisis in agriculture. However, one must be careful not to plead simply because of the particular circumstances in agriculture. The question of the regulatory burden is important, whether agriculture is flourishing or in recession. I do not want anyone to conclude that a little bit of deferment here and now until things look better is acceptable.
We examined the two measures: the integrated pollution prevention and control directive and the climate change levy addressed by Kyoto. That has been the subject of recent debates in our discussion of the final stages of the Budget and I do not intend to go over those arguments. In our recommendations, we were critical of the Government's lack of knowledge of how our competitors were implementing the measures. We were anxious that the importance of assessing the impact of new and pending legislation on industry should be recognised and that the measures should be applied as effectively as possible.
We suggested, therefore, that the Government should delay implementation until it was clear that others were implementing. We intended to implement rather earlier than other member states—we have a history of complaints about gold-plating of legislation and quite a substantial history of gold-plating, too. We felt that on this occasion being laggardly would be rather virtuous. I take the rather idiosyncratic view that, in a sense, disqualification of expenditure by the European Union is normally a symbol that the Government are trying to help their industry. I do not subscribe to the view that we must reduce it to an absolute zero. That usually suggests serious oppression of the industry that is suffering from the phenomenon. I am glad to say that the Government accepted that suggestion. They accepted that implementation should be at the back end of the bracket during which it can take place.
The remaining serious question is about the competitiveness of industry and full economic cost recovery. Let me admit immediately that the provisions for full economic cost recovery were enacted by the previous Government in 1995. It seems reasonable that if a service is applied to a business, the business should support the funding of that service, but how are those costs calculated? I recall the milk inspection charges 115WH in England, which, interestingly, were never applied in Scotland. I was always querulous about the way in which they were levied. Every journey to each farm seemed to be calculated from the bases of the headquarters.
Our first series of questions related to the calculations, and the second series was more fundamental. There may be a conflict between full economic cost recovery, which is a perfectly proper economic objective in the absence of an external factor, and full economic cost recovery seen in the context of competition with other member states, whose farmers are in competition with our producers. This is not specific to agriculture. If burdens are applied to UK producers, of whatever commodity, and quite correctly or legally are not applied elsewhere, there is a genuine dilemma for the Government. The Government say that a concept of financial or fiscal rectitude determines that we should seek to recover the costs, yet no Minister would say that it is not our job to sustain the competitiveness of our industry. They cannot have it both ways. A choice must be made between the two.
We saw the Government seeking to find a way through that choice in the action plan for farming that was announced at the end of March or the beginning of April. According to the smoke and mirrors that accompanied it, the Prime Minister wrestled with the Chancellor of the Exchequer across the roofs of Downing street to get a better deal for farmers. Certain costs such as those applied to the abattoir industry were mitigated. The milk inspection charges in England would disappear so that English farmers were on the same footing as Scottish farmers. Some other charges were deferred and the cattle passport charges were cancelled. A real gesture was made to deal with the situation. Were they what the French would call "les mesures ponctuelles"? Were those measures taken solely to deal with those circumstances, or has there been a change of heart? I have not yet received a satisfactory response about the Government's view on the conflict between improving the competitiveness of the industry while recognising that other people do not follow the same procedures as us and may be misguided, and pursuing the full recovery of costs, which is a proper principle.
§ Mr. Lembit Öpik (Montgomeryshire)
Does the right hon. Gentleman agree that that is an important question to resolve? We are discussing pretty big sums that will impact on farmers' long-term economic plans. At the moment, they must make guesses, and that could lead to economic hardship if the Government change direction or make the wrong call.
§ Mr. Curry
I agree. I acknowledge that the Government have tried to help farmers. They say that they envisage that charges will be much lower than originally contemplated. They are considering establishing a general rule of inspection, so businesses affected might expect charges to be significantly lower than those under a regime of individual inspections. That makes a great deal of sense.
The Committee has not discussed its reaction to the Government's response, so I shall try to extrapolate what I think are the Committee's views. The response is 116WH two months late and is not specific on some issues. It does not say whether marginal costing will be used when recovering such costs and expenses as are incurred by the Environment Agency, for example. The Government's response contains the phraseto ensure that unnecessary negative effects of policies…are avoided.Communiqués from the Chinese Communist party contained similar phrases during some of the more bitter debates with Chairman Mao. They were circumlocutory and said that people were pursuing the not altogether correct line. I do not know whether the Minister is a right deviationist or a capitalist roader. New Labour politicians and capitalist roaders are fairly similar, but perhaps I should not make that remark. However, some of the Government's words have a curious lack of resonance, despite being in the language of Shakespeare.
How is MAFF actively seekingto ensure that unnecessary negative effects of policies on agriculture and food are avoided?During the inquiry into the current crisis in the livestock sector, the Minister of Agriculture, Fisheries and Food told the Committee:I believe that I am the sponsoring Minister for the industry, for the whole of the food industry, and that includes producers.The Minister for the Environment appeared before the Committee and said unequivocally that one of his tasks was delivering competitiveness for the industry. We hope to find out where the balance is drawn. The Government have tried to help by applying the regulations later than anticipated, as we wanted them to be, and by making efforts to reduce the estimated costs to a more tolerable level. That is welcome. However, there remains a question mark over the philosophy that underpins—I choose my words carefully and I get them right first time, but I fear that some hon. Members are in a post-prandial mood of lack of perception of that joke.
§ Mr. Curry
The hon. Member for South Derbyshire (Mr. Todd) is new. If he had been here longer, he would know that when a Committee Chairman signals that he has made a mildly humorous remark, it is indeed obligatory to laugh. I will endeavour to flag up my jokes later, but not by holding up a notice.
Will the Minister tell us the Government's plans? I acknowledge that they have deferred or cancelled charges in a significant number of policies, the majority of which are not the responsibility of the Minister for the Environment. I shall therefore not press him on the action plan for farming; the Government have tried to alleviate the difficulties involved.
We are anxious to know whether agriculture will recover. There are flickering lights at the end of a tunnel; will the policy be reinstated when the Treasury feels that agriculture is better able to bear it, or will competitiveness be re-established as a dominant policy if it becomes apparent that continental Governments will not impose the charge? That would be most significant to our industry.
Those are the essential matters that we want to debate. Other members of the Agriculture Committee are present and I look forward to their contributions. 117WH I am grateful to the Minister for coming to the debate, although he probably did not have much choice in the matter. However, it is nice to see him—we have seen each other a lot this week—and I look forward to his response.
§ Mr. Mark Todd (South Derbyshire)
We commend the Government's response to the Agriculture Committee's report. It was a much more concrete response than we expected, especially on the deferral of the impact of the integrated pollution, prevention and control regime on agriculture and the introduction of a 50 per cent. rebate on the climate change levy. Several other welcome steps were trailed in the action plan for farming.
My concern, which is reflected in the report by the Agriculture Committee, of which I have been a member for the past three years, is that the methodology for tackling regulations is consistently inadequate. I should be surprised if every Select Committee with responsibility for examining the regulatory burden did not make similar remarks.
We need constantly to remind ourselves that the methodology used is driven by the convenience of the regulator of a particular sector, not by what that sector will bear, or by a comparative analysis of what was done elsewhere when the same regulatory regime was imposed.
Anyone examining the evidence given to the Agriculture Committee in this case would either laugh or cry. Representatives of the Environment Agency were asked why its suggested charges differed so dramatically from those of its Scottish counterpart. It had not occurred to them to compare notes with those north of the border. They were also completely ignorant about the approach adopted by our European partners and competitors—we recognise that they are both. We garnered some information from within the farming community but that was news to Ministers and to the Environment Agency. That was alarming because it was not the only such instance; the same occurred on virtually every occasion when we raised an issue relating to the regulatory burden facing the industry.
I take as an example the charges relating to the livestock sector in abattoirs. We asked repeatedly for an analysis of the burden on that sector compared with the charges in Europe. The initial answer—I tabled the first parliamentary questions on the subject—was that it was none of our business: it was entirely a matter for individual member states to implement as they saw fit. Gradually, the Government were persuaded to adopt the approach of gathering information first. Unsurprisingly, some alarming information was discovered—for example, that many member states had far more generous charging regimes and far looser regulatory frameworks than this country. By appointing working parties to examine the regulatory burden on the farming sector, the Government steadily showed a willingness at least to listen to others on the subject and to look elsewhere for comparisons.
Once again, however, we find the same old approach in this report, which is worrying. There is no comparative analysis, not even within our own country, and I still regard Scotland as part of our country. 118WH There is no comparative analysis within a European context; no analysis of the sector's ability to pay the charges; no attempt to work with the grain of the sector to establish a proper basis for the charging structure; no analysis of how competition might affect the sector or of how the charging regime might affect the framework of competition within it; and no concept of proportionality in relation to appropriate charges for the expected social gain.
Coming into Parliament three years ago from the private sector, it was not too much of a surprise for me, but there seems to be a disease running through the public sector in this country and an unwillingness to look outside to view matters comparatively or to understand the framework within which business works. Instead, it seems to be driven entirely by a civil service mentality based on the narrow experience of people who are imposing a regulatory burden. The Committee Chairman did not refer to some of our future reports, but we are going to examine comparative regulatory burdens across Europe in the integrated control and admission system, for example. I would be surprised if we did not find examples of cuter regimes in other member states. It alarms me that that message comes through constantly, yet we never seem to absorb it or try to remedy the problem.
The thrust of my remarks is that we should examine the issue once more across government and understand that the imposition of regulatory burdens—we all accept that they are driven by laudable objectives; as the Committee Chairman said in his opening remarks, no one questions the introduction of stronger controls on potentially polluting agriculture sectors—can be harmful. There is a large-scale poultry operator and pig producer in my constituency. They must accept a proper regulatory framework and I would be happy to explain it to them. However, they want an appropriate framework in which they, as business people, can operate—not something drafted in from the planet Mars.
It saddens me to have to quote some remarks. It seems from responses to questions that the proper instinct has not yet moved our Ministers, still less the civil service that serves them. Questioned by me on whether the Environment Agency could be expected to recover its regulatory costs and on what happened in other member states, the Minister said that it may not apply in other states—in other words, he did not know. He was asked whether costs were borne by individual producers in other member states, but we have already said that we did not ask the Environment Agency to take account of charging systems in other member states when they pick up these costs. To be fair, that was a blunt admission by my right hon. Friend, who has given evidence to us many times and has always been honest and forthright. His straightforward answer was that the Environment Agency was not asked to give any thought to the competitive framework within which the charges might be imposed. That is the blunt message from the report. We might now amend our ways; one hopes so.
The introduction of an automatic rebate of 50 per cent. for horticulture was a positive move, but the evidence is that it was very much an afterthought. It revealed a surprising degree of ignorance among the relevant Ministers about the possible impact of the climate change levy. The thrust of the evidence, and the 119WH firm view of the Committee, was that the horticulture sector in other member states, where burdens to deal with the impact of energy consumption on our climate were being imposed, was either being exempted entirely or treated completely differently, partly in recognition, of course, of the industry that it is. When plants grow they consume CO2, so we make a positive gain to our environment by growing them. Therefore, penalising horticulture in the same way as a sector that simply consumes energy is scientifically crude. I appreciate that the 50 per cent. rebate goes some way towards recognising the special status of the horticulture sector, but I admit to being disappointed. I feel that more should have been done. I would have welcomed either a better rebate or—my constituency contains horticulture producers as well as those who grow agricultural produce—longer-term special recognition of our sector. I should like to hear the Minister's thoughts on the longer-term future of some of these approaches, such as whether the climate change levy would be set at the same level for the horticulture sector in the longer term, and whether the IPPC—we have not, of course, been told yet of the rates to be placed on these sectors—will address the longer-term concerns expressed in evidence to the Committee, and by it, in its report.
§ Mr. Lembit Öpik (Montgomeryshire)
I will address one issue—strategic clarity. My right hon. and hon. Friends from the Select Committee have highlighted many of the more detailed points. I want to underline the importance that farmers attach to ensuring a level playing field. Many of the responses in the document are worthy, and clearly go in the direction that many members of that Committee would like.
Our concern is that some of the responses are tactical rather than strategic. The worry for farmers is that they are not entirely clear about the support that they can expect. The common agricultural policy is an example of what happens when a policy evolves from a clear strategy into something that, over time, takes on board issues that develop subsequently. That is why the CAP has had unintended consequences in terms of its influence on the dynamic of the market and the industry.
There is a danger that the support mechanisms now being introduced for animal welfare could lead in the same direction. Reference has already been made to the variety of solutions that have been implemented across Europe. In my judgment, the UK is not unique in failing to address these issues in an overtly strategic fashion, but British farmers probably have more reason to say that the direction in which we are going is somewhat less predictable. In terms of cost, many European countries regard the matter as the responsibility of Government rather than producers. Pig farmers have made that point many times, and it has also been highlighted by the National Farmers Union and the Farmers Union of Wales.
I hope that the Minister can assure us—I realise that he may be unable to do so today—that the Government will look at the individual measures that have been implemented and perhaps provide a strategic direction, through which Britain's producers can plan investment and economic targets. I have no doubt that the 120WH professionals and organisations with which farmers are associated would be eager to participate in that dialogue. Even if they did not get exactly what they wanted, such clarity would prove a tremendous asset as we move towards a new regulatory framework.
§ 3.1 pm
§ Mr. Alan Hurst (Braintree)
I am grateful for the opportunity to participate in this debate, and I think that there will be broad agreement on the consequences of the integrated pollution prevention and control regulation. I disagree slightly with the distinguished Chairman of the Agriculture Committee, the right hon. Member for Skipton and Ripon (Mr. Curry), when he said that it does not matter whether agriculture is doing well or badly, because the principle remains the same. That may be so in philosophical terms, but in practical terms it is not. Industries such as agriculture—particularly unsupported sectors such as poultry and pigs—have entered a down-cycle that is connected not with regulation, but with worldwide events over which many of us have no control. An extra regulatory burden may well prove the final blow, like the punch that finishes off the boxer who has taken too many blows.
At one stage, that might have seemed the case in respect of this regulation. The point has been well made that we seem to be racing ahead of other European countries in our keenness to apply the regulation two, three or four years ahead of our competitors. In addition, we appear to be bent on imposing heavy charges on the industry. In other countries, charging levels vary from half ours to nothing at all. Given that the market for poultry and pigmeat products in particular allows the importing of foreign products, such factors can prove very important. Indeed, the situation appeared very bleak when our inquiry began.
I shall not veer into sycophancy and suggest that this was the most wonderful ministerial response that I have ever heard. However, when a response is positive, we should sometimes say so without adding the word "but". The word "almost" is probably the most damning qualification of all, but "but" is almost the most damning.
Now that the praise is out of the way, I turn to the real meat of the argument. The matter should be expressed the other way round, in that the Minister responded positively to the question of when the regulation will be put into practice. In fact, he gave rather more than we expected: we asked for 2006 and he said 2007. We asked whether the general binding rule is the way forward, and we were told that, where appropriate, it is. I accept that the phrase "where appropriate" provides a get-out, but the principle has been accepted that the rule should apply, and it is anticipated that the costs in this country would be at least one half of the rather horrific figures that were originally bandied around. Great progress has been made in those areas.
On the question whether the Environment Agency or another body should carry out the inspections and administer the scheme, I accept the Minister's statement that the preference would be for the Environment Agency to do so. However, my reading of the response does not lead me to believe that the alternatives have been ruled out.
121WH Just for once, I think that the Committee can be self-congratulatory about the points that it has raised. We also welcome the response that we have received. One point is often overlooked. Like my hon. Friend the Member for South Derbyshire (Mr. Todd), I had to earn a living before I came here. That was in a world in which one could not simply ask for something and it would automatically be there. I was amazed recently when, on one of those rare hot days, I thought that it might be a good idea to have a fan. My assistant made a telephone call, and a fan was on my sideboard within moments. I thought, "By golly." In the world of private enterprise, things do not happen quite like that. One might be told that there were not enough hot days in the year.
§ Madam Deputy Speaker (Mrs. Gwyneth Dunwoody)
Order. The hon. Gentleman need not worry. I am sure that the fan will soon be removed.
§ Mr. Hurst
My soul feels better for that, Madam Deputy Speaker.
Another burden that will fall on agriculture, with regard to this regulation and others, is the cost of implementing the alterations to the business in order to qualify for the permit that allows it to trade. We have no evidence relating to those costs, because no one yet knows exactly what will be required. However, the cost charged by the Environment Agency, or another body, will almost certainly be only the tip of the iceberg compared with the changes that will have to take place in those businesses in order for them to comply. I hope that the Minister will monitor that matter carefully and—if I may use a word from the report—prudently as time goes by.
The other matter, which again relates to whether the Environment Agency or another body carries out the administration, is the number of inspections that a business can be expected to suffer. Those of us familiar with the teaching profession know of the spectre of the Ofsted report. It is about the most horrific event in a schoolteacher's career, and their lives become overwhelmed by that spectre as it approaches. I am not saying that the kindly Environment Agency going round to a pig farm or a poultry farm will be quite in that category, but there is no doubt that carrying out inspection after inspection will have certain results.
Every time an inspector comes, it will cost a business money. Those who have been in business—or mixed with those who have—will be familiar with fire inspections. One year, one might be told by the fire inspector to blank out a certain internal window, only to be told by another, three years later, that one must open it up again. I always took the view that if I came out of such an inspection having to spend less than £200, I was doing jolly well.
Anyone in business knows that inspections, by their nature, will not only find things that need to be remedied, but do so inconsistently. Agriculture bears a greater brunt than many other industries because of the nature of its work, and we should be sympathetic and mindful of that while seeking to achieve our objective with regard to the regulation.
Having said all that, I congratulate the Minister on the response to the IPPC, and I trust that he will heed the words spoken by right hon. and hon. Members this afternoon as the matter progresses further.
§ 3.9 pm
§ Mr. David Heath (Somerton and Frome)
It is a pleasure to speak in this debate. I share that pleasure with the right hon. Member for Skipton and Ripon (Mr. Curry), who was looking forward to the opportunity of setting out the case on behalf of his Committee, which he did with great aplomb. The Committee did an extremely good job responding to the errors that are associated with environmental regulation and farming. The Minister has also done a good job responding to the relevant concerns and the issues raised. I share the view of the right hon. Member for Skipton and Ripon and other hon. Members that this touches on a wider, almost philosophical, issue, which involves the process of regulation rather than specific details.
Three themes are raised time and again by this regulation and previous ones. The first involves the notion of gold-plating—the fact that this country appears to over-emphasise the regulatory functions that are associated with agreements that we enter into freely in the European Union and elsewhere. I dispute whether that is true in every case, but the evidence suggests that we often apply a high level of regulation. The hon. Member for South Derbyshire (Mr. Todd) was absolutely right in his analysis of the way in which that comes about. It involves the virtues but also the vice of our civil service. A virtue is involved in that there appears to be a view that if there is a task to be done, one should start with a blank piece of paper, approach the task with commendable diligence and thoroughness, and produce a model of regulation to realise one's objectives. The contrary view is that that is done in a state of ignorance of, complacency about or with disdain for the effects on those who are regulated—the approach is adopted to achieve the objectives of the regulation and the regulators, and does not involve an holistic look at the health of the relevant industry or activity or at the wider societal objectives.
The second issue involves joined-up government and establishing whether there is a genuine relationship between Departments that involves them interrelating, communicating and appreciating the cumulative effects of what each organisation or Government agency is doing. In that regard, we also need to establish whether there is sufficient co-ordination of effort.
The third issue involves the charging regime. Although the notion of the full recovery of costs is relevant, it is important to identify what are and what are not genuine marginal costs of inspection—the Agriculture Committee rightly drew attention to that. The evidence that the Committee heard contains the industry's response. A wide range of respondees were involved, including a near-constituent of mine, Mr. Finn Christensen of Steanbow farms. His farms are a couple of hundred yards away from my constituency boundary—he is, as near as dammit, a constituent of mine. The evidence points to a unanimity of response—to a certain extent, one expects that from any industry that is facing new regulations and a new impost because the industry responds to protect itself. The respondees reiterate the same points with a degree of consistency that obliges us to examine the matter more deeply.
The integrated pollution prevention and control regulations were not designed ab initio for agriculture. They were designed to have an industrial application, 123WH although they will apply to agriculture, and rightly so. There is no reason why pollution control should not apply to agriculture, although the regulations were not originally designed to do so.
What is the proper response to such a requirement? My answer picks up on points that have already been made in this debate. What are the regulations intended to achieve? Is the effect intended to be benign or otherwise? If it is meant to be benign, are regulations needed to achieve that objective, or will they duplicate existing inspection regimes and mechanisms? Even if a new regulatory instrument is necessary, is a new process of inspection and regulation required? Is it proportionate to the needs of the industry? Is it timeous in terms of the state of the industry? That is a crucial point, given the crisis in agriculture and the difficult position in which many people in the pig and poultry sectors find themselves.
What will be the effect on the industry's competitive position with regard to interests elsewhere in continental Europe—which are, theoretically, working broadly within the same regulatory regime—and beyond? We have heard the argument about the importation of poultrymeat from Thailand, which is completely outside our regulatory regime. Is that fair competition? Should there be better monitoring of the conditions under which those poultry are reared and better regulation on their importation?
The inevitable conclusion is that the original IPPC proposals were neither timeous nor proportionate. Furthermore, they are over-prescriptive and over-expensive, and it is debatable whether they achieve an objective that could not be achieved by other means. To give the Government credit, that is the view that they have reached. I doubt whether such a measure will promote lower impact farming: other means, such as reform of the common agricultural policy, could be far more effective. Fiscal means of control—this is, in a way, a fiscal method—are unlikely to be effective. I also strongly believe—irrespective of whether it is the right or the wrong thing to do—that transitional periods are essential in any industry. One should not simply move from day one—on—to day two—off, but follow a transition that allows producers to effect the necessary changes.
Two aspects of the IPPC regulations remain to be addressed. First, the Government have said that before 2007 they will apply only to enterprises that are new or substantially changed. That may affect poultry farmers in terms of the laying hens directive, which comes into effect in 2003. Will the necessary changes introduced by the directive represent a substantial change to the nature of the business in question, so that such farmers are unwittingly brought into the regime? Will the Minister clear up that ambiguity? Secondly, on full cost recovery, is work being done to identify those costs that are overheads of the agency—irrespective of the inspection regime—and do the costs that have been quoted genuinely reflect the marginal costs of applying the provision?
As the right hon. Member for Skipton and Ripon said, we recently debated the climate change levy in the Chamber, so it is pointless to rehearse those arguments—other than to say that it was clear from the 124WH start that in no sector of agriculture or horticulture will the measure be revenue neutral. Obviously, horticulture, in particular, is a special case. In the light of the points that have been raised on CO2 emission and reduction, it is clear that the Government should proactively have sought the advice of the industry from the first day on which the measure was promulgated as part of our answer to the Kyoto protocols. We have not yet got the answer right.
Horticulture will not, in the long run, be competitively placed. We have not dealt properly with the issues relating to combined heat and power in horticulture. I do not accept the Government's view that a larger rebate would comprise European Union state aid. In civil service speak, a handy defence against doing anything that the Government do not want to do is that it might constitute an illegal state aid. That is not true in the present case. After all, the impost is a British one. It is not being applied throughout the EU so it is hard to see how that argument can apply.
The action plan for farming, which was announced on 30 March, was a beneficial process, but it was effectively a list of industry complaints, to which the Government are responding. To pick up on a point made by the right hon. Member for Skipton and Ripon, it is not necessarily a change of Government process that will ensure that the complaints will not need to be made again in future. It is not a means of preventing over-regulation and duplication and the prospect of agriculture drowning in a sea of red tape, which would be catastrophic for agriculture in the long term. It would perpetuate a lack of the competitiveness that will be vital if British agriculture is to prosper.
§ Mr. David Drew (Stroud)
I am delighted to take part in the debate, but apologise for missing the remarks of the Select Committee Chairman, the right hon. Member for Skipton and Ripon (Mr. Curry). When I left him in deepest Gloucestershire in the middle of yesterday afternoon I was not sure who was more likely to be here, given the lack of a guaranteed way of getting back to London. As it was, he made it and I did not. I shall ask him later how he managed to do it.
The issue that we are debating is important. I am grateful that yet again the Agriculture Select Committee has the opportunity to be involved in a Thursday afternoon Westminster Hall debate. The debate on bovine tuberculosis about six months ago was useful. I do not want to repeat points that other hon. Members have already covered, but want to adopt some different perspectives on the important changes that we are considering.
First, I want to take the perspective of the rightness of, or rationale for, the introduction of IPPC and the climate change levy. Secondly, I want to examine the way in which the Government have responded; like other hon. Members I think that it was a good response, even if some of us think that it would be possible to take matters further. Thirdly, I want to consider the impact on competitiveness, which was an underlying theme of all our debates and discussions and our report. Finally, I should like to deal with some odds and ends.
The important changes that we are considering are both right and necessary. I was on the Standing Committee that considered the introduction of IPPC 125WH and learned much during that time. The solidarity across the political divide—in contrast, perhaps, to what happened over the climate change levy—was good to see. The benefits of introducing the measure, as well as the reasons for moving towards best available technology from best available technology not incurring excessive cost, were understood. When I was a councillor dealing with environmental health I learned what that terminology meant, and I made repeated use of it.
We need to understand not just the philosophical advantages of what is being done, but the implications at the coal face. I do not agree that the pollution and climate change that give rise to the need for action are primarily the result of urban problems and that the countryside is relatively unproblematic. All hon. Members know that there is much pollution in the countryside, whether caused by agriculture or the impact of other changes such as the level of ozone, which seems to come about as a result of pollution from motor vehicles plonking itself down in country areas. We have a problem and it is important that we understand why the polluter pays principle is necessary and must be followed through. We did not just talk about it during the general election—we must see it coming into practical detail.
We have an environmental obligation, which it is right to pursue, but not at any cost or in any manner, as members of the Committee learned. That is why it is so important that we consider the implications of the way in which the Government have responded and the way in which—I hope—they have learnt from both what has happened and, more particularly, what we see occurring now. We must be aware of the term gold-plating and be aware of what we are doing in this country and what is happening across the rest of Europe and in the rest of the world.
As has already been alluded to, we tend to do the thing properly. We adhere to rules when we pass them, whereas other countries are slower to introduce them or do not adhere to their full letter when they do. I find that response disappointing because we all share environmental degradation, which is on a genuinely international perspective and not local.
With regard to the impact of the IPPC and the climate change levy, we learned early on that there was confusion concerning the charging regime. That has already been mentioned. The situation was certainly not helped by our session with the Environment Agency, about which I will say more later. We all felt that the agency was operating by the seat of its pants to some extent and had not thought through in detail the way in which it would operate the charging regime. We might need to consider the matter in the future but I hope that the agency can learn from the experience of appearing before the Committee.
The Government have come out strongest with regard to the timetable. They have listened to views on the IPPC and have delayed the introduction. I hope that they have also considered the difficulties of introducing the climate change levy. The horticulture experience might have been one key factor in persuading them to tread carefully.
The overall issue is the need for clarification of the way in which the different changes will be introduced. Again, I will say more about the subject when I 126WH conclude, but the way in which Departments approached the subject from different perspectives was instrumental. We dealt with three Departments. This is not a criticism of a specific Department, but we felt that we were perhaps more used to dealing with MAFF Ministers than with Ministers from the Department of the Environment, Transport and the Regions, let alone from the Treasury. That is, in a sense, the value of a Select Committee inquiry—it forces Departments to work together because they must perform in front of us. We learned from the experience.
We were faced with an underlying criticism regarding competitiveness from those who would have to deal with the impact of the changes. Their strongest argument was that there would be a disproportionate effect on them if they introduced the measures because competitors in other countries were either well behind us or would not introduce them. We clearly cannot repatriate in this area. Some of us argue in strong terms that a case could be made for ensuring that some, if not a great deal, of agriculture support is run nationally. We can take the common agricultural policy as an example and consider the problems there. However, a national consideration is difficult in terms of the environment. There is no point any one country that has a regime, structure or system to support or penalise pretending that that can be done in isolation. Although we cannot be indifferent to what is happening in other countries, we must face up to our environmental obligations.
I was particularly affected by the NFU's response. It is openly happy about several aspects of the Government's policy, but it is worried about the problem of competitiveness. We need to monitor that. The dearth of data means that it is unclear what other countries are doing. We must trawl around to discover what is happening in a general and industry-specific way when the changes are implemented. We already monitor and check what is going on and those of us with positions of responsibility criticise when necessary—for example, when the system is being over-laboured. Agriculture is a special case, partly because of the nature of the crisis in the industry, but its peculiarities need to be recognised and to be made clear to Ministers in other Departments and colleagues who know a little less about agriculture.
There is an inquiry into organic farming. We should also consider what impact the changes will have on other types of farming. It could be argued that organic farming will not be affected, but other types of agriculture might have environmentally sound principles and philosophies. We must be careful that we do not make it more difficult for them. The changes might carry through to other sectors, such as the poultry and pig sectors, from which we took evidence. The poultry sector could say that it has made great strides to use its energy more efficiently but that it will not get much back if the changes are implemented. We should bear that in mind.
People who are tasked with implementing the changes need to get their act together so that they are better than the Environment Agency appeared to be. The right hon. Member for Skipton and Ripon might have underlined that point in his speech. The Environment Agency misunderstood the special features of agriculture. In particular, the charging regime was unclear. The agency's response to my questions revealed that it was 127WH unsure about how it would implement the changes on individual farms, who would go on the farm, what their powers would be and so on. Farmers need to know that. It is not enough to rely on being in the right place at the right time. Thankfully, there is a great deal more time to ensure that the system is right. Our proceedings were not very good because we tried to ascertain information that the agency did not have. There were also problems with its vocabulary. I still do not understand the difference between a holding and an installation. Perhaps those definitional differences will become clear in years to come. However, we must bear in mind the fact that the agency will have to interface with farmers.
I touched on how we tend to consider the way in which one Ministry and one sector of the economy relate to general changes. I want to make a plea on behalf of all of us who are interested in agriculture, strange as that may seem. I realise that, to some extent, the problems of the agricultural industry are over-elaborated. At the same time, where fundamental changes are afoot, and certainly where changes will impact disproportionately on the industry, there is a need to recognise its special features.
Questions were asked about how MAFF will stand in relation to IPPC when the DETR is the lead Department and how it will stand in relation to the climate change levy, on which the Treasury is the lead Department. We believe that MAFF should not be squeezed out completely because it is the voice of agriculture, through which farmers like to express their influence. That needed to be clarified, but the Government have listened and responded to that.
In conclusion, the report was good and the Government have listened. They can go further and carefully monitor the true impact of the changes when they are introduced. Success will be measured in terms of not only environmental benefits, but the fact that those benefits are not achieved at the cost of British farming. The worst thing would be if we made environmental changes and were faced with ever more imports from nations that have failed to live up to their environmental obligations.
§ Mr. James Paice (South-East Cambridgeshire)
It is a shame that this sort of debate must take place in Westminster Hall, partly because it lacks atmosphere, as so many hon. Members would agree, but also because it seems to defuse criticism. As anyone who has read the report knows, it is a damning criticism of the Government. Although I accept that things have moved on since its publication, the report is extremely critical, but that fact is virtually lost to the public by being debated in this Chamber. The old story is if you want to keep a secret, tell it to the House of Commons; but tell it in Westminster Hall and it becomes a negative secret.
I want to congratulate my right hon. Friend the Member for Skipton and Ripon (Mr. Curry) and the Select Committee on the report, not only because it is critical of the Government—although from my perspective that is helpful—but because it goes into the issues in great detail. From the evidence sessions, especially those with the Minister and with the Financial 128WH Secretary to the Treasury, it is obvious that some extremely probing and articulate questioning took place. However, as I said, things have moved on. I welcome the changes announced by the Government on 30 March in the action plan for farming, as well as one or two other changes that have been put forward in response to the report. Unlike some right hon. and hon. Members, I want to consider one or two aspects in detail, although I assure the Chamber that I shall not take up too much time.
The decision to put off implementation of the IPPC charges until 2007 is welcome, but we must ask—the question was implicit in some of the speeches made by other hon. Members—why it was ever considered necessary to implement them earlier. We know from experience that if other European countries do anything at all, they will leave it until the last minute to comply with whatever rules and regulations are made.
The hon. Member for South Derbyshire (Mr. Todd) rightly questioned the Whitehall culture regarding regulations. In the Government's response to the Committee, they quoted figures for the units affected, which seem generally to be agreed by the industry, the Government and the Environment Agency, but that is only part of the issue. The point at stake is that the proportion of the pig and poultry industries that will be hit by the regulations is larger in Britain than in competitor countries, purely because our industries are generally larger in their unit size. That is worrying because it means that our industry would pay heavier penalties even if everything else were the same. As has already been made clear, however, many other aspects are not the same. For example, it is clear that the proportion of the pig herd included within the large grouping that is caught by the regulation is significantly greater in Britain than in other European countries.
Obviously, I welcome the proposed reductions in the charges, but as the Agriculture Committee Chairman said, the payment is still high and we must ask why that is the case. A number of hon. Members have mentioned comparable charges elsewhere, which should also be considered. I was fascinated to read a paragraph that appears on page 5 of the Government's response and which deals with the Committee's recommendation that research should be conducted into how other member states are implementing the directive. It states:The Agency is undertaking a study of how IPPC is being implemented in other Member States. The results of a short preliminary investigation suggested that there is currently some uncertainty in a number of other Member States as to exactly how IPPC will be implemented.That is a masterly piece of Whitehall understatement and it is absolute gobbledegook, as is shown by the NFU, which can provide some facts. The facts are that in Denmark the full cost recovery of the implementation of the regulations is £1,000, and in Holland there is no charge at all. Those countries are probably the two biggest European pig producers that are competitors with the British pig industry. In France, there is a charge for the implementation of the regulations, but the money is used to fund pollution prevention measures on farms. In other words, the money is taken, but given back in net terms so that farming does not suffer.
129WH That is the problem that this country is up against, and I am not pretending that it has arisen in only the past three years. I would not be so stupid as to suggest that. It is clearly a cultural problem and it has been getting worse while our pig and poultry industries have been in immense difficulty, like so many other sectors of agriculture. Of course, many of them are still experiencing huge difficulties and the impact even of just £1,000 or £2,000 a year can make the difference between survival and the end.
I want to mention the costs that have been recovered. The problem is that there is no external challenge to the Environment Agency on how it formulates the charges that are necessary for full cost recovery. Even if one accepts that full cost recovery should include all the overheads and so on—there is a debate to be had on that issue—one can see that there is nothing to bear down on how the organisation manages its costs so as to minimise the impact of the charges that it then applies. If we want to see an example of how that can go wildly wrong, we should consider the Meat Hygiene Service because there have been many concerns about its charging methods. I think that the hon. Member for South Derbyshire referred to those charges and mentioned that it was researched at his behest. The overall amount that had to be recovered by charging was completely uncontrolled.
Will the Minister explain what the Government can do to ensure that the Environment Agency tries to bear down on the costs that it seeks to recover? My right hon. Friend the Member for Skipton and Ripon referred to the lesson from Scotland, which is obviously important in that respect. If Scotland can do it for that price, why cannot the Environment Agency do so in England? What do the Government intend to do when they receive the result of the study on implementation in other states, to which they refer on page 5 of their response? How do they plan to ensure that whatever information they obtain is built in and used so that our charging mechanism is not out of balance with the rest of Europe?
I turn now to the matter of climate change. Recommendation (o) is about negotiated agreements and whether the National Farmers Union and others should be responsible on behalf of the industry for negotiating an agreement with Customs and Excise. I can put it no better than the NFU, which said that the Government's response did not address the fundamental issue of why it, or any other trade body, should do the Government's work for no payment.
Competitiveness has been a common theme this afternoon. Of course I welcome the concessions for horticulture, as does every other hon. Member who has spoken, but they seem to have been squeezed out of the Government. Reading the evidence given to the Select Committee by the Financial Secretary to the Treasury, it seems that he did not fully understand the issues involved. I remember that during an earlier inquiry he said that the industry had no problems with his proposals; but he was proved to be categorically mistaken.
Agriculture and horticulture are currently excluded from the rebate scheme, for the reasons set out in the Government's response to the report, yet the energy costs for horticulture are huge. As the NFU said, they can be as much as 50 per cent. or even 65 per cent. of gross turnover. By any assessment, the industry depends heavily on energy, and I wonder why it was excluded. 130WH To say, as the Government do, that no other criteria could be used that would not cause more problems is an excuse.
On climate change, the unique aspect of agriculture and horticulture is the carbon fixation element. A large proportion of the carbon dioxide emissions that result from the energy used in growing horticultural crops is absorbed by the plants as they grow. Yes, it is recycled, but much of that consumption and digestion recycles the same carbon dioxide; it is not a net emission. The Committee raised that point only tangentially, but the Government did not consider it properly. That is why agriculture and horticulture are unique; no other industry takes carbon dioxide out of the atmosphere and fixes it, temporarily or permanently. They should have dealt with that more coherently.
The Government want to stick with the horticulture concessions at the suggested level, but for only five years at 50 per cent. We do not yet understand why. I wonder whether the Government think that the fuss will have died down by then and they can get rid of the concessions, or that things will have changed—or even that they may not be in office. Why did they choose five years rather than making the concession permanent? The net effect will be to drive production abroad
The hon. Member for Stroud (Mr. Drew) referred to imports being produced to less exacting standards than ours. That is our worry. Imposing regulations to restrict carbon dioxide emissions is of no use if we drive our business overseas and the tomatoes or whatever are produced in another country without those controls. Carbon dioxide does not remain over one country; it is part of the global environment. We need to understand that.
The Committee raises, rightly, the issue of increased imports of horticultural produce under recommendation (q), which says:We recommend that a full assessment be made of the implications for carbon emissions of decreased horticultural production within the UK and increased transportation of fruit, vegetables, plants and flowers.All the Government say in response is:As section (p) above indicates, Budget 2000 contained a special package of support for the horticulture industry, in recognition of its unique position, which has been designed to address the suggested problems.That is another example of Whitehall-speak: it says absolutely nothing and does nothing whatever to deal with the fundamental issue of carbon fixation.
Some hon. Members have referred to MAFF's role. I am slightly surprised by its relatively small involvement in developing the IPPC charging system and the climate control levy, because MAFF is supposed to be the Department that understands the horticultural and agricultural industries. I can draw one of two conclusions, either MAFF was not consulted or it was consulted, but failed to convince the Department of the Environment, Transport and the Regions of the importance of those two sectors. That is worrying.
The action plan for farming refers to waste management on page 7. It talks about ensuring that the new regulations are not burdensome and about the waste framework directive. I hope that the Government will consider carefully what is defined as waste. Over the 131WH past few years, I have come across many absurd definitions of waste by local waste control authorities. The action plan states that the Government willstart from the position that the Directive does not apply to manure and other natural, non-dangerous substances used on farms for agricultural benefit.I am sure that we all agree that that is sensible and wise.
However, that is not actually happening. A large amount of manure comes from the racing stables in my constituency around Newmarket. The council classifies it as waste, instead of accepting it as manure. Large quantities of vegetable waste are classified as waste, because they come from a vegetable pack house. Another example is sawdust classified as waste. That does not happen in my constituency, because of the obvious shortage of trees in Cambridgeshire, but I have had discussions with people from sawmills in other parts of the country. Sawdust and shavings are classified as waste, even though paper mills use them as raw material for paper. That is not sensible, and I hope that the Government will, in the spirit of their action plan, address the problem.
I welcome the deferral in implementing the IPPC regulations until 2007, but Britain's pig and poultry sectors will then face charges that their competitors overseas do not. A larger proportion of our industry in the large units is covered by IPPC than that of our competition. I have already described the charges being introduced in Denmark, Holland and France. In introducing the climate change levy, the Government have not understood how the industry works. The 50 per cent. reduction is clearly designed to defuse the row, and to some extent it has, but underneath it is a refusal, an unwillingness or an inability to understand the unique nature of agriculture and horticulture to which I refer.
Mention was made earlier of the fact that we had a debate on the climate change levy during proceedings on the Finance Bill two days ago. Some of the issues involved have therefore been discussed in the House this week. In that debate, the Financial Secretary reaffirmed his belief that the rest of Europe will introduce a similar tax. However, there is little evidence of its doing so, and even if there were evidence that it might, to return to a point that other hon. Members have made, there is a great difference between Government intent and the reality on the ground.
Long ago, when the Conservatives were in office, and before I joined the Government as a Minister, I pressed the then Minister of Agriculture, Fisheries and Food to find out what our competitors abroad were doing on the ground. It is all very well for our civil servants to ring up civil servants in Paris to ask what they are doing about the directive and to be given wonderful explanations of how France is implementing it to the letter, but what really matters is what is happening on the ground.
All Departments, not only the Ministry of Agriculture, Fisheries and Food, need to make a much greater effort to find out what is happening on the ground in other member states. That does not necessarily mean merely going there and wandering around. I am sure that it is not beyond the wit of Ministers and civil servants to devise a way of finding out the reality. I regret to say that, despite all the fine 132WH words in the report and the Government's response to it, I do not yet see real evidence that the Government are set to remove the competitive disadvantage that the measures will place on the industry. I hope that the Minister will now prove me wrong, but so far we have seen a lot of words and not much action.
§ The Minister for the Environment (Mr. Michael Meacher)
I, too, congratulate the right hon. Member for Skipton and Ripon (Mr. Curry), Chairman of the Agriculture Committee, on an excellent report that probed extremely hard, made a series of fair points and has, as almost all hon. Members who participated in the debate recognised, achieved a considerable shift in the Government's position and a recognition that the Committee was right and that, in some respects, we were wrong.
I am sorry that the hon. Member for South-East Cambridgeshire (Mr. Paice) is disappointed that there seems to be a general feeling in the Committee that the Government's response was fair and thoughtful, and feels that the setting of the debate in Westminster Hall is disadvantageous because it undermines the combativeness that he associates with the Chamber of the House of Commons. Before he said that, while listening to the debate as we all were, I was about to say that I had exactly the opposite response. This is my second debate in this Chamber, and I believe that a great deal is to be said for debates in this Chamber, precisely because, as in Select and Standing Committees, there is a much greater readiness for thoughtful discussion and less easy point scoring. That was extremely apparent here today. I thought that it was a rather good debate.
The right hon. Member for Skipton and Ripon recognises that there is a need for environmental regulation in agriculture, as, indeed, no one disputes. Considerable discussion has taken place on the manner in which it is done, as I shall discuss in a moment, and, once again, much of it is probably fair.
It is not controversial to say that the pig and poultry sectors are potentially large point sources of air pollution from ammonia, which also increases nitrogen deposition, and that poorly managed or excessive waste spreading increases the risk of diffuse pollution of both surface and ground waters. The previous Government tried to prevent the inclusion of agriculture in IPPC. There was little support for that in Europe and they decided the burden should be minimised by, for example, raising thresholds, replacing some emission limit values with technical control measures and taking account of costs and benefits. Those are measures that I acknowledge and support. What we have been left with is not the result of any Government not trying to minimise those burdens.
It can be said, although it was not said by any hon. Member today, that agriculture is already adequately covered by environmental legislation; however, the sum of the different environmental regulations for agriculture is not the same as IPPC. The Environment Protection Act 1990 goes much wider than IPPC, but it does not cover the impacts addressed by IPPC.
133WH The only other point that I want to make relates to pesticides, which are an issue at present. We are committed to minimise the environmental impact of pesticides. The British Agrochemicals Association, which has changed its name to the Crop Protection Association, has brought forward proposals that we are now evaluating. We made it clear that we would not introduce a pesticides tax in the Budget. Again, the Government have tried to listen to industry's concerns.
The right hon. Member for Skipton and Ripon also referred to the extent or the scope of the regulations. I do not think that that is in dispute. They apply to installations with more than 40,000 places for poultry, 2,000 places for production of pigs of over 30 kg and 750 places for sows. Some of those are increases on the earlier thresholds as a result of UK negotiations.
The question of charging is critical. I am sorry that my opposite number, the hon. Member for South-East Cambridgeshire, is not satisfied by the much lower charges that the Committee said that it expected in its report. We have achieved those and more. Where general binding rules are in place the application fees will now be less than a quarter of those originally proposed, and subsistence fees less than half; fees for site-specific permits have also been reduced to less than half.
I shall come to the list of the questions that the right hon. Member for Skipton and Ripon raised with me. We have lots of experience of sparring in Committee on the Countryside and Rights of Way Bill and I can see that it will continue here. It is a perfectly fair to ask why the original charges were fixed at such a high level. They were fixed at £12,000 to £18,000 for the initial application and £7,000 a year in subsistence charges. I made it clear in Committee that we were asking the Environment Agency to look again at its proposals and that we would not approve any charging scheme unless we were content that it fairly reflected the regulatory effort involved. The Environment Agency has taken account of that and the fees are now at the lowest level possible to maintain a level of regulation proportionate with the risk that intensive farming installations present.
§ Mr. Paice
I thought that I said that I welcomed what the Government have done on this matter, as announced in the action plan. The point that I want to make is this. In some ways he has just summed it up by saying that the fees are at their lowest possible level, but a quarter of those original figures is still £3,000, even if one takes the bottom of the £12,000 to £18,000 bracket. That is £3,000 compared with £1,000 in Denmark and nothing in Holland. How can our industry compete when it is being penalised like that and its competitors are not?
§ Mr. Meacher
The hon. Gentleman is too eager. I am coming on to the question of other member states, which his right hon. Friend the Member for Skipton and Ripon raised. In any case, the £12,000 to £18,000 figures have now been reduced to £6,000.
Some member states, such as the Netherlands, fully subsidise permitting for these sectors. Others, such as Sweden, Finland, Austria and Ireland, subsidise only partially. However. France, Sweden, Ireland and the Netherlands already permit intensive farming 134WH installations, the latter under IPPC. Ireland, Finland, Italy and Denmark plan to implement IPPC for the sector before 2007. While it is true that farmers in those member states may not face the same implementation costs, they will face compliance costs sooner, and in some cases before the BREF note—best available techniques reference note—has been finalised.
That may still not be a satisfactory answer because we are talking about an initial transition of the first few years as compared to the medium and longer term. I regard as important, and intend to press, the fact that we are now launching a financial and management policy review of the agency which may well indicate efficiency savings that can be passed on to operators through the longer-term scheme, because such things as interim charges and the longer-term scheme charges come into effect in 2002. It is important to have secured on the review team or advisory body representatives of industry, including those from the NFU and agriculture and from the whole range of industry who are concerned about the operation of the Environment Agency. They will be able to bear down on the costs charged by the agency and have the opportunity in this important review to make their case extremely clearly and in detail, and we shall require answers from the Environment Agency. We are listening, but I know that we must take it further still.
§ Mr. Meacher
I am grateful to the right hon. Gentleman for drawing my attention to that point, which the Committee examined closely. I am no expert on the Scottish Environment Protection Agency, but I understand that there are significant differences in the way in which costs are approached in Scotland. For example, the Environment Agency makes annual subsistence charges for deemed authorisations, while SEPA does not; the Environment Agency south of the border can charge subsistence fees at the outset, whereas SEPA cannot, but SEPA has a higher application fee. It is a perfectly fair question that must be looked at in the round. However, it is not as simple as it looks.
When I come to respond to my hon. Friend the Member for South Derbyshire (Mr. Todd) I shall acknowledge the force of what he said about these types of comparisons having to be made more fully and thoroughly before the charges—even interim charges—are set initially. I have to say that the EA consulted on its interim charges; they were not, as some hon. Members suggested, somehow plucked out of the air, nor did the civil service just pick on a figure. It was done more thoroughly than that. Consultation was the basis on which interim charges were initially fixed.
§ Mr. Curry
When the review of the Environment Agency takes place—I recognise that bodies are reviewed regularly—will it be based on some internally generated criteria or will it be regarded as a legitimate exercise to do a peer group review by stacking up the criteria retained by the Environment Agency next to those of their Scottish equivalent? Under devolution, 135WH people are more sensitive to differences north and south of the border, so there may be an argument in favour of developing some common criteria.
§ Mr. Meacher
That is perfectly fair. We are finding our way in the post-devolution environment. The devolved Administration are keen to do their own thing, and the environment is a wholly devolved matter, with the exception of international obligations for which the UK Government retain an override. I hope that we do not have to use it and that there will be agreement on what Scotland and Wales have to do for the UK as a whole to meet its obligations. We should learn from each other, and I am the first to say that we may learn from them as much as they may learn from us. I agree with the right hon. Gentleman that that sort of exercise should have been done more thoroughly.
§ Mr. Todd
The Committee specifically suggested that, should SEPA continue to produce charges lower than those of our own body, it should be invited to tender for this particular service. The Government did not rule out that option definitively, but viewed it as not entirely appropriate. Will the Minister give further thought to the point?
§ Mr. Meacher
I will give further thought to it, but that is as far as I will go. It is a radical suggestion, but if the Government were in a competitive mood, they would take it seriously. No public agency should regard itself as automatically the guardian of a particular function or role; it has to justify the retention of its roles and we certainly gave that matter consideration in connection with the Environment Agency. I repeat that FMPR—financial management and policy review—is now being launched and it is the first since the Environment Agency was established four years ago. It will provide an opportunity for industry and agriculture to hold the Environment Agency thoroughly to account.
I move on to implementation. As my hon. Friend the Member for Braintree (Mr. Hurst) rightly said, we have gone even further than the Committee's recommendation and deferred implementation of IPPC until 2007—just about the last possible date consistent with issuing all permits before the directive deadline, which is 30 October 2007. The industry is now understandably expressing concern—as have the Committee and the agency—about the short time available in 2007 to issue permits for the 1,500 or so installations in the sector. That is how the matter now stands.
Under the pressure of questions from other hon. Members, I have already dealt with the general issue raised by the right hon. Member for Skipton and Ripon about competitiveness and full recovery. I see the right hon. Gentleman nodding, so I may not need to pursue the matter further, but, under the Environment Protection Act 1990, the Environment Agency is required to obtain full recovery of costs. We must do so in a manner that, so far as possible, maintains the overall competitiveness of the industrial or agricultural sector. Our case is that the charges and their timing go 136WH as far as possible to meet the requirements of the directive while keeping any threats to our competitiveness to a minimum.
§ Mr. Paice
The Minister is entirely right. The obligation to recover costs is enshrined in that legislation. However, it also applies to the Scottish agency, which was set up on the same basis and, to the best of my knowledge, the Scottish Parliament has not changed that. So we must return to the question why, under the same legislation, Scotland can operate a system that is apparently far cheaper.
§ Mr. Meacher
Again, that is an interesting point. One reason why SEPA charges are lower is that they get more grant in aid. I leave hon. Members to ponder the interesting notion that Scottish taxpayers should subsidise the regulation of English pollution.
§ Mr. Curry
The Minister has been extremely helpful. He said that he had got the charges as low as possible, consistent with full economic cost recovery. During the review, he will, no doubt, consider how those costs are calculated, as there is a permanent argument about what constitutes a full recovery of costs. We could do with a general rule on that point so that we know what we are talking about.
§ Mr. Meacher
I am sure that that suggestion will be pressed in the course of the agency review. I understand that the agency can recover costs in the form of gross salaries, common services such as finance, personal and information technology, staff development and training, technical guidance and service provided, administrative and management costs of inspection, policy work in regard to authorisations and the cost of environmental assessment. That is in accordance with the Treasury guidelines; each of those items can be costed and the basis on which they are calculated can be sought.
§ Mr. Meacher
I have such respect for the hon. Gentleman after the Countryside and Rights of Way Bill that I will always give way to him, although I should probably begin to move on now.
§ Mr. Heath
The Minister is kind. I am puzzled by what he said about the Scottish cost recovery, because the items that he included could not possibly be affected by grant in aid, however generously it was applied by the Barnett formula. None of those items changes the management costs involved, therefore they should not be different on either side of the border.
§ Mr. Meacher
I did not say that the items that I read out as constituting a basis of cost recovery were specifically grant aided, but that the level of grant aid in general to SEPA is different from that for the Environment Agency. It will be an interesting issue to pursue in the financial management and policy review.
My hon. Friend the Member for South Derbyshire made a thoughtful speech, and I am grateful for his initial comment about the Government's response; I have much sympathy with what he said. He asked a 137WH philosophical question about the nature of the regulation in this country; other hon. Members wanted to know how it was constructed, whether a competitive analysis of its effects had been undertaken, what impact on the sector had been calculated and what other countries are doing. Those are perfectly fair questions and, although I cannot go into detail now, I believe that the Environment Agency has a rationale of a kind. It carried out a consultation on interim charging, which gave all partners, stakeholders or those likely to be affected—victims, if you like—an opportunity to express their views. It was entirely transparent; the interim charges were set and proposals were made for long-term charging in the light of a proper public debate.
We must also consider the question of subsidiarity; we in this country are entitled—we are very demanding about it—to set our own charges and have our own taxes and fees. However, my hon. Friend the Member for South Derbyshire is entirely right to say that we should consider very carefully what happens in other countries, and ask whether their practices are better and more equitable. My hon. Friend also talked about the Environment Agency, which will shortly publish a comparison of the costs of implementing IPPC in eight member states. That report will include information on charging practices. I agree that that should have been done earlier. As a result of the Committee's work, I suspect that such practices will be followed in the future. My hon. Friend also talked about horticulture, which several hon. Members mentioned. We recognise the unique position of the horticulture industry, which does not meet the criteria for a negotiated agreement under the IPPC, for understandable reasons. We recognise that the industry will be penalised because it uses a significant amount of energy.
However, the 2000 Budget contained a special package of measures to improve the industry's position. Although I will not spend too much time on history, it is only fair to mention that the Budget included targeted support for agriculture allocated from the energy efficiency fund, and an extension to the list of investments qualifying for enhanced capital allowances to include thermal screens. There are targeted fiscal incentives for horticulture firms to invest in energy-saving technologies, and there is a temporary 50 per cent. discount on the levy for up to five years. The hon. Member for South-East Cambridgeshire criticised the time limit as too short, but that is the time within which we initially expect the energy measures to take effect. We have tried to do what we can, in a sense by breaking our own rules about access to the negotiated agreements, because we recognise that the horticulture industry has a good case.
The hon. Member for Montgomeryshire (Mr. Öpik) made a wide-ranging point about a strategic environment in which farmers could plan. That goes beyond the issues under discussion, and hon. Members will be delighted to know that I shall not respond at length to that. The causes of the crisis go deep. They include the collapse of world prices, overcapacity, overproduction, the level of the exchange rate—although that has begun to decrease—and several other deep-rooted and perhaps endemic factors. Those problems cannot be resolved immediately. The action plan for farming responds only to particular grievances, 138WH and I honestly believe that no Government could do much more, given that the causes of the crisis are global and do not relate only to the state of United Kingdom agriculture.
§ Mr. Meacher
There is no doubt about that. My right hon. Friend the Prime Minister took the lead in presenting the action plan for farming and he is determined that it should be implemented properly. All the edicts from on high about the speed with which we are implementing every detail of the action plan show that the issue is a high priority at No. 10. The measures are being implemented accordingly speedily.
I thank my hon. Friend the Member for Braintree for his comments about the charges and the Government's responsiveness. He also asked about inspections. We are keen to develop a system of general and binding rules as requirements that the Secretary of State can set out instead of permit conditions. That should reduce the Environment Agency's frequency and depth of inspection, and therefore lower costs. Following advice from the Committee and the Government, the agency will keep the number of inspections to the minimum commensurate with essential regulation. It has received that message clearly. This is a new field of regulation, and to some extent the agency will want to learn from experience in determining inspection cycles for the sector, but I repeat, the agency has certainly got the message.
The hon. Member for Somerton and Frome (Mr. Heath) referred to gold-plating, which I have heard about before. I did wonder whether he was arguing that we should aim for a deliberately sloppy response to directives, but decided that he was arguing instead for something that is merely a little less thorough, rigorous and British. I shall not mention any southern European states, but we all know what the hon. Gentleman is saying. If we agree to a measure and we pass it, it should be implemented—I note that you are looking a little uneasy, Madam Deputy Speaker—but I take the point that it should not be over-implemented.
On the question of joined-up government and insufficient co-ordination, relations between the DETR and MAFF have improved. I was not involved in such matters during the previous Government, but I am led to believe that co-ordination has improved significantly. I have some sympathy with the point about charging, because IPPC is concerned primarily with industry. Perhaps the hon. Member for Somerton and Frome is saying that there should be a specific regulatory framework for agriculture, but there is no obvious reason why—there are considerable differences between industrial sectors, but no one would suggest that the paper industry should be treated differently from iron and steel. However, I agree that the provision should be proportionate and timely, and take note of the impact on the UK's competitiveness.
139WH I appear to have misplaced my notes, but as I recall, the laying hens directive requires cages to be built on a larger scale. Should that require that an installation be extended, emissions are not likely to increase per se, so we do not believe that the directive will have a substantial effect.
§ Mr. Paice
I do not want to allow the Minister time to think of too many answers, but I should point out that, as a result of the directive, farmers will have to consider more than the number of birds that they keep in a cage. The Government's response makes it clear that farmers will not necessarily keep fewer hens, but I should remind the Minister that the same directive phases out battery cages altogether. No one is going to provide extra cages to re-house hens, when those cages will themselves be illegal in about 10 years' time. Increasingly, farmers will have to spend money on entirely different ways of keeping laying hens, or, as the Agriculture Committee suggested, cut down on numbers.
§ Mr. Meacher
If, as a result of the laying hens directive, they decide to reduce the size of the flock, they might fall outside the scope of the IPPC. I am not recommending that they do so, but that may be the effect of such a decision.
The hon. Member for Somerton and Frome and others wondered whether a unique feature of horticulture is its contribution to net carbon dioxide emissions. Of course, there is no doubt that plants sequestrate carbon dioxide. Lord Marshall, the former president of the Confederation of British Industry, chaired the report that lay behind the climate change levy. The report made it clear that there must be an incentive for all businesses to save energy at the margin, which I am sure is right. He also noted that there was scope for energy efficiency savings right across business, including the agricultural sector. The levy will result in improved energy efficiency and even lower carbon emissions for the horticulture sector. It is, therefore, wrong to exclude the sector, but the contribution that it makes should be taken into account. Bearing in mind that the requirement under the climate change levy relates to all cost-effective reductions in greenhouse gas emissions, the fact that it saves carbon dioxide is already encapsulated in that definition.
My hon. Friend the Member for Stroud (Mr. Drew) made a series of points, most of which I have already covered, about gold-plating and costs in relation to the rest of Europe. He also made the point, with which I agree, that we must not make things more difficult for sectors of farming such as the organic sector, which are very environmentally sensitive. Indeed, during the debate on genetic modification—I always say that I will make a speech without mentioning that, but here I go again—we concluded that we need a model of sustainability in agriculture. It is not a question of whether one is pro or anti-GM, but rather of what one means by sustainability in agriculture. We need to give a lead on that issue.
The hon. Member for South-East Cambridgeshire asked why the charges for 2003–04 changed at the last minute. The proposals for the phasing-in of IPPC were 140WH made by the Environment Agency and a very wide tranche of industry had to be brought within it, so not everything could be left to the last moment. I agree that the proposal, which I neither defend nor resist, to begin in 2003–04 might not have taken account of the state of the farming industry and, under pressure, it was pushed back to 2007. However, the idea that everyone can begin in 2007 is patently wrong. The only way in which the pig and poultry sectors can begin in 2007 is to bring forward other industrial sectors. On balance, I think that we agree that that is the correct approach.
The hon. Gentleman said that the charges remain high, and we have discussed that matter. He also asked how we should bear down on costs, and I have already said that the proper way to do that is via the review to which I have referred.
§ Mr. Meacher
The hon. Member for South-East Cambridgeshire also asked what action we should take regarding the costs of other member states, in relation to the review of those costs that is being undertaken. We shall, of course, look at them extremely closely. If it is true that our proposed costs constitute the lowest level that could be maintained consistent with proper regulation of intensive farming—as the Environment Agency suggests—it would be difficult to reduce them further. However, if the analysis showed that they could be taken lower, we should want an explanation of why that could not be carried through.
With regard to the NFU having to carry through the costs of arranging the negotiated agreements or reliefs, the Government want to keep the system for such agreements as straightforward as possible, to provide administrative simplicity for business. That can most efficiently be achieved by collective negotiation with trade associations. If anyone found a better, cheaper, more efficient way of doing it, we should be quite prepared to look at it.
With regard to horticulture and the 50 per cent. discount, our view is that if the right balance can be struck between protecting the competitiveness of UK horticulture and maintaining an added incentive to save energy, the firms that are subject to the negotiated agreements will have to implement all cost-effective energy saving measures to qualify for the discount, but for the horticulture sector the discount is unconditional. That is an important and unique concession on the part of the Government.
The points that the hon. Member for South-East Cambridgeshire raised about the definition of waste are best dealt with by correspondence. Under the 1991 waste framework directive that was introduced under his party's Government, the UK has outstanding obligations to transpose the directive's requirements on agricultural waste. I am told that it excludes animal carcasses, faecal matter and other natural non-dangerous substances. We can discuss in correspondence whether the examples that he gave, such as sawdust and the contents of certain barns, should be classified as waste or as a resource.
The hon. Gentleman asked about other countries introducing climate change-related taxes. The evidence is that they are doing so. Eight European countries have 141WH a form of energy or carbon tax, and France and Belgium are working on proposals. It is difficult to compare such taxes between countries, because they work in different ways, but the headline rates for the UK's climate change levy place us towards the middle of the range of rates that operate in the eight EU countries that have carbon or energy taxes.
The picture is changing all the time. My latest information is that the German Parliament has agreed stages 2 and 3 of its eco-tax reform, which will significantly increase the rates that operate there before the climate change levy comes into effect in 2001. Industry is not unduly penalised in this country—we are probably around the middle of the pack in that respect. 142WH However, I entirely support the view that we should not impose any higher costs than are strictly necessary for environmental purposes and for environmental regulation under IPPC.
I hope that I have not tested your patience too much, Madam Deputy Speaker, in seeking to respond to all the points that hon. Members raised. One or two items require further correspondence, and I shall be happy to deal with that. We await the report on practices in other countries, and I am sure that we shall return to the matter in the autumn.
§ Question put and agreed to.
§ Adjourned accordingly at twenty-three minutes to Five o'clock.