Rural Affairs and Environment Committee, 23 Jan 2008

Meeting date: Wednesday, January 23, 2008

Official Report 282KB pdf

---

Subordinate Legislation

---

Agriculture and Horticulture Development Board Order 2007 (Draft)<br />Quality Meat Scotland Order 2008 (Draft)

I welcome everybody to the meeting and remind members and witnesses to switch off their mobile phones and pagers or to put them in flight mode, not receiving wireless communications.

The first item on the agenda is subordinate legislation, and our business today starts with consideration of two affirmative instruments. I welcome Richard Lochhead, the Cabinet Secretary for Rural Affairs and the Environment, and his officials: Aileen Bearhop, from the agriculture division, and, in a change of personnel, instead of Sandy McNeil, Malcolm McMillan, from the solicitors rural affairs division. Members may ask questions on the instruments before we move to the formal debate on them, which is agenda item 2. The officials can contribute to the discussion under agenda item 1, but they will not be able to contribute to the discussion under agenda item 2.

I invite the cabinet secretary to make an opening statement on the two affirmative instruments. For obvious reasons, we would like you to keep it brief.

It is a pleasure for me to be at the committee for the first time in 2008. I was informed on the way here that the Scotland rural development programme has been voted through by the European Union's Committee on Agriculture and Rural Development. That is good news, as it will allow us to stick to our original timetable. Importantly, in the short term it will enable us to deliver the less favoured area support scheme payments, which are worth £61 million to Scotland's farmers. I hope that that will begin before the end of the month, as originally timetabled.

That is very welcome.

I thank the committee for giving me the opportunity to present the two orders to it. Both orders are made under the Natural Environment and Rural Communities Act 2006. The work behind the orders began in March 2005, when Rosemary Radcliffe was charged with undertaking a review of the five existing levy boards—the Meat and Livestock Commission, the British Potato Council, the Home Grown Cereals Authority, the Horticultural Development Council and the Milk Development Council. The review also examined the structure of Quality Meat Scotland.

The review concluded that there remained a need for a compulsory statutory levy, but that changes were required to ensure a common overall framework for levy bodies to encourage common working and approaches, where possible, and to promote efficiencies. A new structure was proposed to ensure that those who were responsible for using the levy were as close as possible to the levy payers and that appropriate monitoring and accountability arrangements were put in place. Rosemary Radcliffe recognised that ministers in Scotland and Wales might want a different arrangement for their red meat bodies. All United Kingdom ministers agreed to the implementation of a modified version of the proposed Radcliffe model.

The purpose of the Agriculture and Horticulture Development Board Order 2007 is to abolish the existing levy boards and establish a single new public body in the form of the agriculture and horticulture development board. The order provides for the establishment of subsidiary companies for each sector. It is intended that companies will be created for the six sectors of cereals and oil-seeds, horticulture, milk, potatoes, beef and lamb in England, and pigs in England.

Quality Meat Scotland is currently a private company. The dissolution of the Meat and Livestock Commission means an end to the current arrangements whereby functions of the Meat and Livestock Commission in Scotland are delegated to Quality Meat Scotland. Given the distinctiveness of the red meat sector in Scotland, it was not appropriate for Quality Meat Scotland to come under the wing of the agriculture and horticulture development board.

Procurement rules require a full tendering exercise to be carried out if public funds—levies—are to be passed over to bodies that are not wholly publicly owned. Quality Meat Scotland could not, therefore, be guaranteed responsibility for levy expenditure if it remained a private company. The Quality Meat Scotland Order 2008 provides for the organisation to be established as a public body that is fully accountable to Scottish ministers. In reality, there should be no wholesale change to current accountability arrangements for Quality Meat Scotland, and there should be no extra costs for Government. Sponsorship arrangements are in place to ensure appropriate use of Scottish levy for the delegated Meat and Livestock Commission functions.

The restructuring will improve accountability to levy payers, who will be well represented on the boards of the sector companies and Quality Meat Scotland. The provisions that allow for a ballot of levy payers, should 5 per cent of levy payers request a ballot, will also improve accountability. The agriculture and horticulture development board will provide more scope for collaboration and co-operation between levy boards. We expect Quality Meat Scotland to continue to co-operate effectively with its counterparts in England and Wales. In drafting the orders, we have taken the opportunity to make improvements to levy collection and to reduce the regulatory burden—for example, by removing the obligations to register in the horticulture, potato and cereal sectors.

Throughout the policy development process, there has been considerable stakeholder involvement. During the review process, Rosemary Radcliffe consulted—often face to face—a wide range of industry players. That included detailed discussions with the Scottish industry and with Scottish ministers in the previous Scottish Executive. Public consultations were conducted on the review recommendations and, later, on the proposals for the two orders. There has been overwhelming support for continuation of the levy—in Scotland, too—and strong support for the proposals for change. That has included support for the establishment of Quality Meat Scotland as a public body that is accountable to Scottish ministers.

The levy bodies have been fully engaged in the implementation process through project and strategic boards that were established by the Department for Environment, Food and Rural Affairs. There have been some concerns, particularly from the horticulture sector, in the course of that work, but the view of Rosemary Radcliffe and ministers was that horticulture would benefit from inclusion in the new structure and from greater collaboration with other sectors.

Quality Meat Scotland has been working closely with Scottish Government officials and the Meat and Livestock Commission to ensure a smooth transition to public body status.

The start date for implementation of the new levy board structure is 1 April 2008 and we are on target to meet that deadline. We will then have a levy board structure that is more joined up and efficient and closer to levy payers. The new structure and improved accountability will benefit the agriculture and horticulture industry. For the red meat sector, we will have a separate structure that is in the best interests of the Scottish industry and which is wholly accountable to Scottish ministers. I invite the committee to approve the orders.

While we are on agenda item 1, I ask members to keep their questions to relatively factual issues. We will take any argumentative debate under agenda item 2. That will allow us to get through the process more clearly.

I am pleased to hear that piece of good news from the minister.

There was an issue with regard to the value added tax status of the levy boards. I presume that that has been sorted out and that the VAT payments to the Exchequer will not be any greater than they have been hitherto for QMS.

My understanding is that that is the case, but I ask Aileen Bearhop to comment—we were discussing the issue earlier.

John Scott is correct.

So that has been sorted out.

I have another question, just out of interest. You have decided to include butchers as levy payers at the point of slaughter, whereas before they were not. What are the reasons for that?

The principle is that organisations or individuals that buy animals for slaughter pay the levy. The rationale has been extended to butchers, who do that in some circumstances. That is why they have been included. The measures will apply only to butchers who buy animals for slaughter.

Schedule 2 to the draft Quality Meat Scotland Order 2008 sets out the constitution of the new public body and the way in which it will be established. It states:

"The board members shall be appointed by the Scottish Ministers."

When will the board be appointed? Can you give us more detail of the procedures that are involved?

You are correct that ministers appoint the board. Quality Meat Scotland's current status is that of a private company. I have already reappointed the existing chairman, Donald Biggar, as the chairman of the new body. That announcement was broadly welcomed in the industry, as Mr Biggar has an excellent track record as chair of Quality Meat Scotland in the past few years. Donald is well respected.

I am in the process of appointing a shadow board. I have the ability to appoint up to 12 members to the board and no fewer than 50 per cent of the board members should be levy payers. I must follow those rules, which I am doing. I have not yet made my final decision—the process is taking place this week. We hope to make an announcement shortly when we have approached the successful candidates. I am taking advice on the appropriate individuals. The factors that I am taking into account include the need for broad representation of the red meat sector and perhaps a geographical distribution of the individuals. I am also considering the candidates' experience and appropriateness for the post.

That is where we are in the process, and I hope that we will make an announcement shortly. The shadow board will meet before 1 April—hence the term "shadow board"—and will then take over and become the board of the public body.

Under the previous Administration, there was a protocol between ministers that, if a minister made an application to set up a new quango, other ministers would vet the process. Was such a procedure in place? Was there consultation between you and other cabinet secretaries? Was it discussed at Cabinet whether, in principle, a new quango should be established in the circumstances?

Yes. It has been discussed at Cabinet. We discussed the way forward for Quality Meat Scotland. We also discussed the wider agenda of the future of public bodies in Scotland. QMS is one of those bodies to which we are committed. I am in a slightly unusual position here, because the agreement was made prior to the Government coming to office. We fully support the outcome of the consultation process and the previous Administration's decision to go down this road, because it is the best way forward for the red meat sector in Scotland.

It might be useful if you could write to the committee, indicating the steps that were taken to seek permission to establish a new quango, and the relationship between that and the Government's overarching policy on delayering. I am not opposed to the decision in principle; I am just interested in how the procedures operate. It would be useful for the committee to understand the mechanism that was used by the department to secure consent. It is not an issue of whether it is a good idea in relation to QMS, but more of how any application to establish a new quango might be dealt with.

What will be the status of the staff of QMS? Will they be, in effect, executive agency staff? Will they be taken into the civil service or will they continue on their existing terms and conditions?

Under the Transfer of Undertakings (Protection of Employment) Regulations, there will be a direct transfer of the staff from the existing private company to the new public body. Their pay and conditions will not change.

Will they be counted in that context as members of an executive agency or as civil servants? Will they be counted in the overall total of staff who are employed directly or indirectly by the Government?

They will not be civil servants.

I am interested to know how the overall numbers will work out. Perhaps you can come back to us on that issue, too.

We will come back to you on how we calculate the numbers when we publish who works for, and does not work for, the Government.

In the Agriculture and Horticulture Development Board Order 2007, the business case identifies

"Net Present Value savings of £12.7 million"

in a five-year period. In the Quality Meat Scotland Order 2008, there are no financial benefits. Are the savings just to the United Kingdom Treasury? Are none of them transferable in terms of the rationalisation of all those bodies to the Scottish Government?

Scotland is involved in all the UK levy boards, other than those that relate to red meats. That is why we have QMS. Our cereal growers and potato producers, and all the sectors that are part of the UK structures, will benefit from the efficiency savings. The only Scottish structure here is the red meat sector. The £12.7 million savings will benefit Scotland, but they relate only to the UK bodies. That is because of the sharing of corporate services, for instance. The purpose of the order is to have an overall UK body. There will be a rationalisation of those services among the six constituent UK companies below that.

QMS is speaking to the Meat and Livestock Commission and its constituent bodies to ensure that assets transfer across and that it gets the benefits from that, too.

And funding for QMS in the future will be from—

Scottish levy payers—the levies from producers and processors.

Will that be the sole source of funding?

Yes, except for quality assurance schemes, which are self-funding schemes that are met from membership fees. It can also apply for grants from the Scottish Government in the same way as other bodies.

We have supported Quality Meat Scotland financially in the recent past—we did so late last year, and that route remains open. The organisation also raised approximately £4 million in levies off its own bat.

There are no further questions, so we move to agenda item 2, which is the formal debate on both draft orders. At this point, officials may not participate. I invite the cabinet secretary to move motions S3M-1166 and S3M-1167 together. He is entitled to make an opening speech, but he may consider that it is not necessary in the circumstances.

In the interests of time, I am happy to forgo an opening speech.

I move,

That the Rural Affairs and Environment Committee recommends that the draft Agriculture and Horticulture Development Board Order 2007 be approved.

That the Rural Affairs and Environment Committee recommends that the draft Quality Meat Scotland Order 2008 be approved.

I invite contributions from committee members. Having had the factual question-and-answer session, members may now raise any argumentative, or at least debating, points.

It makes good sense for the bodies to have been rationalised in this way. I am particularly pleased about QMS retaining its independence in a Scottish context. I am very happy to support the motions.

I assume, cabinet secretary, that you are waiving your right to wind up.

I am happy to do so. I get the message.

I am aware that you have another pressing engagement.

The question is, that motions S3M-1166 and S3M-1167, in the name of Richard Lochhead, be agreed to.

Motions agreed to.

The committee will consider a draft report on the two draft orders in private at a future meeting. Is that agreed to?

Members indicated agreement.

Thank you, cabinet secretary. I hope that your cold gets better.

I am sorry about that.

I also thank the two officials for attending.

---

Sheep and Goats (Identification and Traceability) (Scotland) Amendment Regulations 2007 (SSI 2007/559)<br />Zoonoses and Animal By-Products (Fees) (Scotland) Regulations 2007 (SSI 2007/577)

Agenda item 3 is also subordinate legislation. This time, we have two negative instruments, on the identification and traceability of sheep and goats—our old friend—and on fees relating to the control of zoonoses. I invite Bill Wilson to correct my pronunciation of that.

Far be it from me to do that. I would not have the nerve.

As committee members will remember, SSI 2007/559 was deferred from our last meeting. Correspondence from the Scottish Government and NFU Scotland is provided in paper RAE/S3/08/2/3. I invite comments from members on the correspondence that we have received. The committee has various options in respect of the regulations.

The correspondence has helped to clarify matters. I do not think that we are in a position to oppose the regulations, because the Government would find itself subject to infraction proceedings. That said, the documents are public, and the committee should note the clear disagreement between the NFUS and the Government about the basis of the actual cost to the industry. I find the NFUS's arguments persuasive and factual.

More important, for the sake of future preparation by the committee, we should consider the NFUS's point about electronic tagging becoming the big issue for the industry in the future. Perhaps we ought to write to the Government on the matter in advance. We have had notification from the NFUS on the issue, having asked it for its views, and we should begin to prepare ourselves for future changes.

I agree with everything that Peter Peacock has said. There is no real benefit in double tagging. The industry is utterly opposed to it. Even the letter from the minister implies that the methodology that is used in some of the calculations is, at best, suspect. The NFUS is not happy about the matter, from what I can gather.

As I said, double tagging does not seem to provide any real benefits. The reason for its introduction is to improve traceability, but I am not even certain that traceability will improve—in fact, it may decrease as a result of the imposition of the new system. With those caveats, I must accept that, because of the possibility of infraction procedures, we cannot do anything other than allow things to go ahead.

I will try to be helpful. The 40-day period for the instrument expires on 6 February, which is the date of our next meeting. Therefore, today's discussion need not necessarily be the final cut. A draft report could be produced for consideration on 6 February.

I suggest that we simply get on with things, because we cannot responsibly put the Government in a position in which it would be liable to infraction proceedings being taken against it. It would be irresponsible for the committee to leave matters to the final day of the 40-day period, given the inevitability that is involved.

I utterly agree with Peter Peacock that the electronic tagging system shows every sign of being a disaster—

But that is not what the—

I appreciate that, but I want to respond to the NFUS's letter. A full cost benefit analysis needs to be carried out. I do not think that the proposed scheme, as it is currently structured, will deliver any benefits. We need a scheme that suits Scottish producers.

There are various options that we can pursue, one of which is to write to the Cabinet Secretary for Rural Affairs and the Environment to invite him to respond to the points that the NFUS has made. The second option is to take oral evidence from the cabinet secretary and/or the NFUS. Obviously, we would have to schedule an additional meeting on 30 January to do that, but there is no guarantee that witnesses would be available within such a short space of time. The third option is to report to Parliament on the regulations. We would have to consider the draft report, which could include points that have been made, on 6 February. Finally, we could agree to make no recommendations on the regulations.

We should write to the cabinet secretary. Double tagging is essentially an interim measure before electronic identification is introduced in 2010, which is why it is not worth going to the wire on the matter, notwithstanding the inconvenience that it will cause. However, we need to get a response from the cabinet secretary to the concerns that have been expressed, and we need to find an electronic tagging system that will work for Scottish producers.

If we wrote to the minister, we would put the emphasis on electronic tagging, which is causing the concern. We cannot do much about the regulations because we do not want infraction proceedings, but we should push the electronic tagging issue.

Yes. Obviously, our report will be on the regulations, but I am sure that we can find a way of drafting a sentence or two in it that flags up our awareness of the pending changes. We shall write to the cabinet secretary and discuss a draft report at our next meeting, in February. It is clear that members do not wish to take further evidence.

Do members agree not to make any recommendation on SSI 2007/559?

Members indicated agreement.

Do members agree to discuss the draft report in private on 6 February, as is our normal procedure?

Members indicated agreement.

Convener, I apologise for my late arrival.

That is okay. You are let off.

No issues have been raised in connection with SSI 2007/577. Do members agree not to make any recommendation on it?

Members indicated agreement.