Rural Affairs and Islands Committee [Draft]

Meeting date: Wednesday, November 22, 2023

Official Report 698KB pdf

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Subordinate Legislation

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Quality Meat Scotland (Amendment) Order 2023 [Draft]

Our second item of business is consideration of the draft Quality Meat Scotland (Amendment) Order 2023. I welcome Mairi Gougeon, the Cabinet Secretary for Rural Affairs, Land Reform and Islands, and her officials: Michelle Colquhoun, head of livestock products policy, and Mairead McCrossan, a lawyer at the Scottish Government. I invite the cabinet secretary to make an opening statement.

Good morning, and thank you for inviting me to speak about the Quality Meat Scotland (Amendment) Order 2023. The Quality Meat Scotland Order 2008 makes provision about the constitution and function of Quality Meat Scotland and specifies the rules on the rates for the red meat levy. The rates that are included in the order are the maximum rates that can be charged, and QMS sets the payable levies annually, with my approval, within those ceilings. The order stipulates that QMS cannot increase the paid levy in excess of the maximum levy rate in the order. Contravention of that requirement would be an offence.

The maximum rates have not been amended since the order was laid in Parliament in 2008. Since then, there has been only one increase in the payable rates. That was in 2010, when the rates increased from £4.57 to £5.50 for cattle, from 67p to 80p for sheep and from £1.05 to £1.26 for pigs. Those figures are for the combined producer and slaughterer levy. That change took the sheep rate to the maximum and left only 9p of headroom on pigs.

Levy income is fundamental to the running of QMS, which provides several functions to the benefit of the red meat sector. I do not have time to cover all of QMS’s activities, but I highlight its marketing of Scotch Beef, Scotch Lamb and Specially Selected pork, which is important for Scotland’s red meat industry and for raising the profile for the export market. It is important to ensure that QMS has the ability, with the agreement of industry, to raise the payable levy if it feels that there is a need to do so, and the draft order amends the Quality Meat Scotland Order 2008 for that purpose. Final approval of any rise in the payable levy is required from ministers.

I reiterate that the maximum levy rates are being raised due to the current payable sheep rates having reached the ceiling that is permitted by the 2008 order and the pig levy being just 9p away from the limit. The changes for which the new Scottish statutory instrument provides will ensure that the 2008 order will meet the sector’s needs for a number of years. Raising the maximum rates in the order does not mean that the payable rates will automatically increase. In giving my approval for any subsequent proposed increase in payable rates, I will have to be satisfied that QMS has fully engaged with levy payers, that stakeholder views have been heard and that the impact of the rise has been considered.

Levy income is fundamental to the running of QMS and I am content that the amendment to the 2008 order is necessary. I hope that my comments have been helpful in setting out the rationale for laying the draft order. I am happy to take any questions that the committee has.

Thank you very much, cabinet secretary. My understanding is that the ceilings for the levy have not been considered since 2010. That is some time ago. Why are we seeing an amendment only now, when the sheep levy is at its maximum? Why are the rates not reviewed regularly so that any increase might be smaller than it needs to be now? That would also give farmers more certainty. Thirteen years is a long time to wait, and it looks like you are making the amendment at the last minute because you have reached the top of the charge that you can make for sheep, in particular.

To be clear, I note that the ceiling was set in 2008, but you are correct that the last time that the levies were increased was in 2010. However, the levies are set annually and I have to approve them. It is up to QMS to propose and consult on any changes to the levies.

I agree that it has been a long time, which is why it is only right that we consider the ceiling rates and why we have made the proposals for the committee’s approval. A lot has happened in that time. We are all seeing and experiencing the impact of inflation and the industry has faced some sizeable challenges over the past few years. That is why it is right that we look to increase the ceilings but also ensure that we future proof those rates so that, should QMS want to raise the levy and should levy payers ultimately agree to that after consultation, we have the ability and flexibility for it to do so.

We understand that the 2008 order sets only the maximum levy. Is there a reason why it has not been reviewed more frequently? Will you review it more frequently in the future so that we do not get such legislation only every 10 years? If we compare the current maximum levy with the proposed maximum levy, we can see that there is a big increase, and some stakeholders have raised concerns about that. If it was raised every two years or every five years, the ceiling might not have to rise so much. Why have you not reviewed it more often? It is 13 years since the matter was last discussed.

I make the point again that the order deals with the ceiling—the maximum rate. QMS would have to consult levy payers on whether to increase the levy. There is no guarantee in that regard. Ultimately, QMS needs to have a discussion with levy payers about the rates. That is looked at and considered annually.

Yes, but the only time that the Parliament can look at the issue is once every 10 to 13 years. We have no role whatsoever when it comes to QMS engaging with its stakeholders and you, as the minister, in order to decide whether an increase is valid. That is why I ask the question. This is the last time that we will get to see the legislation before QMS could put the levy up from £5.25 to £9. I do not expect it to do that—I hear what you are saying—but this is the last time that we will get to look at the matter.

There is also a question as to why a business and regulatory impact assessment was not carried out on the order. I know that you have said that, currently, the order will not have an effect, but it will have a financial impact down the road, and the Parliament will have no role in relation to that. Why was an analysis not done of the potential impact of the levy increase that the order would allow so that the committee could consider that?

I want to make sure that we are absolutely clear on what we are talking about today. The last thing that I want to do is put a fear into the industry that levy rates will increase to the absolute maximum that is allowed by the ceiling. This is a technical order. We are raising the ceiling; the levy rates are not being increased.

I come back to the fact that any rise in the levy rates is a matter for QMS and its discussions with its levy payers about that. A proposed rise must come to the Scottish ministers for approval. As I have set out, that is an annual process.

It would have been very difficult for us to prepare a BRIA. As you set out, I wrote to the committee to outline why we did not undertake a BRIA. Had we done so, it would have been purely speculative. There is no proposal on the table for an increase in levy rates. We do not know whether such a proposal will be made or what it would be, so it is not possible for us to make a definitive assessment or to say that there would be a direct impact on businesses when we do not know whether the levy will rise.

I appreciate that, but this is the last time that we can look at the matter. We are about to approve an increase in the ceiling—I absolutely understand that that is what we are doing—but the Parliament and this committee have no role whatsoever in scrutinising when any levy increase may or will kick in. The levies for cattle, sheep and pigs will increase, but we will not have any role in that and we will not be able to assess what the financial impact will be. That is what I am trying to get at. Do you see the committee having any role in the future in relation to the ability of QMS and ministers to raise the levy?

The roles and responsibilities in relation to that are set out in the legislation. That is why I am appearing before the committee today to give evidence on the order, which is about raising the ceilings. However, I will be more than happy to keep the committee updated. QMS is undertaking engagement across the country through a range of events to discuss the issue of levies, as well as its wider strategy, with industry. That is a discussion that QMS needs to have. We will be informed and approached if it considers raising the levy, and I will be happy to keep the committee updated.

Thank you. Rachael Hamilton, Kate Forbes and Jim Fairlie have questions.

Good morning, cabinet secretary. There were two responses to the Government’s consultation. Do you agree that that is not exactly a solid basis on which to proceed with the proposed technical amendment?

09:15  

What is key there is who was consulted and the fact that there were follow-up discussions with the two people who responded to the consultation. It is critical that we engage with the people who would be most impacted by the amendment order, who are the processors. There was also a response from NFU Scotland. There were follow-up discussions and meetings with the two organisations to discuss their concerns about the order. Again, this is about their discussions with QMS should the levy rates be raised. We are talking about a technical order and raising the ceilings, and that was the discussion that we had.

Michelle Colquhoun might want to say something further on that.

Although we had only two responses, those two organisations have many members, so many more organisations were reached.

That is interesting. I was at an event with farmers when our committee survey had been sent out. Unfortunately, it was just a little bit too late. We did our due diligence, however, because we wanted to understand a little bit more. I understand that you hand picked the people from whom you sought an opinion. Is that true? Farmers were not aware of it.

It was a targeted consultation.

What is a targeted consultation? How do you hand pick those people?

In consultation with QMS and using our own knowledge, we made sure that we reached levy payers. NFUS covers farmers and the Scottish Association of Meat Wholesalers covers processors. Those were the two respondents.

It was up to those organisations to speak to their members.

That is not an unusual approach. We take that approach with other consultations when we need to consult and hear from specific interests. Just to be clear, the consultation was about the ceiling and not about an increase in the levy, which is a discussion that QMS needs to have with the levy payers.

Do you believe that the consultation process should have followed the detailed engagement from QMS to understand what the levy payers actually believe about the particular raising of the ceiling?

I am sorry, but I do not understand what you mean.

Would it not have been better to ask QMS to do detailed engagement prior to the consultation process, so that QMS levy payers could have understood that the issue was coming up and we could have had a broader understanding of what they felt about it?

It was important that we consulted on the raising of the ceiling and that the consultation was, quite rightly, a separate process from consideration of raising the levy, because they are distinct processes. It is important that we set out that process and that we undertook the consultation in the way that we did.

Does the possible increase in the levy or the raising of the ceiling correlate directly with an increase in operational costs for QMS, or does it relate directly to the marketing of Scotch Beef?

Again, this is about future proofing the ceiling for years to come. QMS used a certain methodology in considering what the appropriate ceiling rates might be. Michelle Colquhoun might be able to say a bit more about that. We considered the consumer prices index, the retail prices index and the agricultural price index. We looked at the averages for the past 10 years and how they have changed, and we looked at how the ceiling could be future proofed for the next 10 years, at least, to give flexibility. Again, this is all about the ceiling and not what any rate might be.

QMS is not the only agency that is going through this process. The same discussions are taking place across the rest of the UK, including in England and Wales, where the agencies are looking at the ceiling rates for their levies.

I am thinking about the answers that you gave the convener about looking at the technical raising of a ceiling in the past 13 years. Is it a coincidence that this is occurring now or is it related to the inflationary cost burden on QMS?

As I highlighted, there have been a number of challenges over the past few years. We have seen inflation soar, which is why it is important that we are considering the matter now, especially as the levy for sheep is at the ceiling and the levy for pigs is only 9p away from the maximum. That leaves no leeway should QMS, in discussion with the levy payers, decide that there needs to be a change to the levy to enable it to carry out its activities. The levy is fundamental to the running of the organisation.

Does the Scottish Government have any oversight? QMS is a Government-funded organisation. Do you know whether the levy will be increased or whether an increase will be consulted on? Will any extra revenue be used for operational activities, taking the inflationary burden into account, or will it be directly correlated with marketing activities to promote Scotch Beef? A lot of farmers are concerned about that.

First, QMS is not a Government-funded organisation. The information that you ask for can be interrogated by the committee or by any member of the public in QMS’s audited accounts, which are published annually.

I thought that QMS is Government funded.

It is not. That is why the levy is so critical. The levy is considered annually. It has to come to the Scottish ministers for approval even when there is no change, and that process will continue. When the levy comes forward for consideration, I would expect QMS to consult the levy payers before it proposes an increase—should it, in fact, propose one. I would expect to see evidence of that consultation that shows how QMS has engaged with stakeholders. I understand that QMS has already begun that consultation and is running a roadshow across the country to discuss both strategy and the levy. I will continue to take an interest in those discussions before any proposals are put to me.

Rachael Hamilton asked about targeted consultation. Can you give us a list of those who were asked to respond to the consultation?

I would be happy to provide that. If you want me to list them now, I have that information here, but I would also be happy to follow up in writing.

If you have the information to hand and could tell us who they are now, that would be helpful.

Michelle Colquhoun has the list.

The list is: the National Sheep Association Scotland, the Scottish Beef Association, the NFUS, the SAMW, the Institute of Auctioneers and Appraisers in Scotland, the Scottish Association of Young Farmers Clubs, the Scottish Crofting Federation, the Agricultural Industries Confederation, and Scottish Craft Butchers.

Can you tell me who actually responded?

The NFUS and the SAMW.

And the Scottish Association of Meat Wholesalers.

Were you surprised by the lack of responses, and was anything done to follow up with the organisations that did not respond? As you know, we put out a call for views about the subject last week. The Scottish Beef Association said that it found the email in its spam folder. Was there any attempt to ensure that everyone actually got the message and was able to respond? Was there any follow-up? Two responses out of nine seems a low response rate.

Legitimate though that question is, I cannot see how the minister can be responsible for an email going into someone else’s spam folder.

Thank you, Alasdair. I will decide whether my question is valid.

My question is about the fact that you got only two responses from nine consultees. Was there any effort to get further responses to what was a targeted, rather than an open, consultation? That is where my question is coming from.

As I have said, we followed up with the NFUS and the SAMW. Michelle Colquhoun can explain any further correspondence that we had with other organisations.

We were content that the two organisations that did respond were representative of both producers and processors. The timeline for the consultation was a tight one.

Why was the timeline tight?

It was to enable us to bring the instrument forward. As I said when I set out the process, it was important to bring it forward to enable time for scrutiny of the ceilings and to enable QMS to undertake the engagement work that it has to do.

Okay. Thanks.

It sounds to me as though all the questions about what happens to the levy after this technical instrument is passed should really be directed to QMS.

Cabinet secretary, I took heart from what you have said this morning and from what you said in a previous letter, which was that you would expect QMS to fully consult as widely as possible and to engage with producers and processors before taking any action on the proposed increase. Many of the questions stem from a concern that right now it is hugely challenging for producers, in particular, to make any sort of margin in the industry. Will you say a bit more, broadly, on what role you expect QMS to take and how the Government is supporting producers and farmers more widely at a difficult time?

Absolutely. You raise a really important point. It is important that we do not conflate or in any way confuse the different roles and responsibilities in relation to this. As I have said, we have the responsibility of laying the SSI in relation to setting the levy ceilings. However, it is up to QMS, if it wants to raise the levy, to have that consultation and discussion with its levy payers and to put forward those proposals to me, ultimately, for approval.

I am sure that the committee will agree that QMS plays a hugely valuable role in marketing and promoting red meat and in everything else that it does for the red meat industry. I have seen at first hand, through the different trade fairs that QMS attends, what it does in relation to exports and the value of its promotion to the red meat sector, which equates to tens of millions of pounds annually.

The strategy that QMS is consulting and engaging with its members on at the moment shows it to be driving forward sustainability for the red meat sector as well as considering a number of exciting projects. However, it is up to QMS to have that discussion with its levy payers to show exactly what it is doing on their behalf and why that role is so critical.

One of the respondents to the consultation said:

“a change in the levy ceiling within the Order must not be taken by QMS as industry agreement to an increase in the levy rates paid”.

I assume that you agree with that, but I do not want to put words in your mouth, because it is for QMS to determine that.

Secondly, we understand that, although there is no requirement for QMS to consult, ministerial approval is still required at the start of each financial year, regardless of whether there is a change to the payable rates.

Yes, that is absolutely right. In response to both points, I would say that, if any proposal for an increase in rates were to come to me, I would expect to see evidence that QMS had consulted and engaged widely with its members and levy payers about the proposed increase and what that levy rate would be. That is the very least that I would expect.

Thank you.

Kate Forbes has just very eloquently asked all the questions that I had. Thank you, Kate. I would just note from the responses to the committee’s call for views that there is broad support across the industry for the right to put the price up as and when, as long as that consultation happens. It is worth getting that on the record.

Absolutely. I have a small supplementary question from Rhoda Grant and then we will go to Emma Harper.

In response to Kate Forbes’s questions, cabinet secretary, you seemed to make two points. The first is that there would have to be agreement from the industry to a price increase, and the other is that there would have to be consultation with the industry. Those two things are not the same thing—agreement is very different to consultation. Which is the correct response? Does the industry have to agree?

I would expect to see engagement and consultation with industry. That is a given—the industry needs to be consulted about any potential increase in the levy rate, which would be up to QMS to do. Of course, I would hope that any proposals that it put forward would have that industry agreement. At the moment, I cannot speculate on what any potential decision might be or what it would look like, but I know that QMS has a strong relationship with its levy payers and that at that moment it is engaging with them and undertaking that engagement across the country. I would hope that QMS would reach overall agreement and consensus, if it were proposing to increase the levy, about what that should be.

Okay, but it is not necessary.

Again, QMS would put a proposal to me and then it would be up to Scottish ministers to agree on it one way or the other. I am just trying to set out how that fits into the overall process.

09:30  

Do you have the ability to go back to QMS and say that you are not satisfied with the consultation and that you want to see approval from the stakeholders?

Again, we are going down all sorts of different roads here and speculating about what might or might not happen. We have not been in that position in the past. The proposals are put to Scottish ministers for approval.

QMS is a responsible body, and I know that it would undertake that engagement. As I have said, I know that, in this case, that engagement has already started. I do not think that QMS needs any prodding from me or to be told to engage with the industry—it is doing that now. It is in its best interests to do that and to have a good relationship with levy payers.

I am not questioning QMS’s ability to do that. I am just asking, on the back of Rhoda Grant’s question, whether you have the power to go back to QMS and say, “We know that you’ve consulted, but we want an affirmative, positive response from the industry that the levy increase is acceptable.”

I am sure that we would have those discussions with QMS. Again, I think that we are jumping automatically to a negative situation, and I do not think that we will be in that position. We have a very strong working relationship with QMS, and I know that QMS has that kind of same relationship with its levy payers, so that engagement from its side is important. I do not imagine that we would end up in that situation, to be honest.

Okay. That is fine.

I know that I am a substitute on the committee, but I want to go back to the beginning. This is a technical instrument making a technical amendment. In my engagement with Quality Meat Scotland, I have found it to be competent, professional, responsible and diligent in working with businesses and farmers. I would trust Quality Meat Scotland to carry out the correct engagement.

My question goes back to the fact that this is a technical amendment. It allows Quality Meat Scotland to go out and engage if levies are to be increased, which would be done incrementally over an annual engagement basis. Is that correct?

Yes, you are absolutely right. I agree with everything that you have just said about Quality Meat Scotland. This is a discussion that it needs to have. You are absolutely right that the instrument is technical; it just raises the ceiling, not the levy itself, because that requires a discussion between QMS and its levy payers.

I do not think that the committee is in any doubt about what, exactly, the instrument is. Are there any more questions from members?

I have one, convener, on the issue of whether QMS is likely to review this in another five years. What if it reaches the ceiling for the levies? Will we find ourselves in this position and have to go at it again if there are extreme market conditions? It is relevant that QMS has cited inflationary pressures as a reason for implementing the increase. We might find ourselves in such a position again, but I suppose that we will just cross that bridge when we come to it.

You are absolutely right in that sense, but I have tried with the proposed ceilings to future proof things, so that we do not need to come back every year to look at them and decide whether they are at the appropriate level.

As I have said, a variety of factors have been taken into account in developing the proposals for the ceiling rates set out in the order. We have looked at averages over the past 10 years to project as well as we possibly can in order to future proof things. Of course, we can never say never—we do not know what will happen a few years down the line—but we hope that the ceiling rates in the order today are future proofed to a certain degree.

I just want to clarify one other thing. QMS found itself with a shortfall of £1 million for its activity as a result of how things worked out in relation to the levy. Did it raise that with you when it asked you to make this technical change?

That is not a discussion that I have had with QMS.

Thank you.

If there are no further questions from members, I just want to raise one point about the policy note. You are aware that the committee wrote to ask for clarification of some things. As convener, I felt that the policy note was lacking in some information that could have been provided. For a start, there was no indication of the proposed changes or the history behind the policy. In general, we quite often find that there could be more detail in the policy note to help the committee in considering SSIs, and this particular policy note could easily have contained a little more information to help us, before we had to engage our clerks to investigate it.

With that, I thank the cabinet secretary and her officials. The session has been hugely helpful.

We will now deal with the real business. Having had the discussion, we move to formal consideration of the motion to approve the instrument.

Motion moved,

That the Rural Affairs and Islands Committee recommends that the Quality Meat Scotland (Amendment) Order 2023 be approved.—[Mairi Gougeon]

Motion agreed to.

If there are no further questions from members, I just want to raise one point about the policy note. You are aware that the committee wrote to ask for clarification of some things. As convener, I felt that the policy note was lacking in some information that could have been provided. For a start, there was no indication of the proposed changes or the history behind the policy. In general, we quite often find that there could be more detail in the policy note to help the committee in considering SSIs, and this particular policy note could easily have contained a little more information to help us, before we had to engage our clerks to investigate it.

With that, I thank the cabinet secretary and her officials. The session has been hugely helpful.

We will now deal with the real business. Having had the discussion, we move to formal consideration of the motion to approve the instrument.

Motion moved,

That the Rural Affairs and Islands Committee recommends that the Quality Meat Scotland (Amendment) Order 2023 be approved.—[Mairi Gougeon]

Motion agreed to.

Is the committee content to delegate authority to me to sign off our report on our deliberations on this affirmative SSI?

Members indicated agreement.

That completes consideration of the SSI. I thank the cabinet secretary and her officials once again for the information that they have provided.

I briefly suspend the meeting to allow a change of witnesses.

09:36 Meeting suspended.  

09:41 On resuming—