Food Supply Chain
The next item of business is a debate on motion S2M-4884, in the name of Sarah Boyack, on the Environment and Rural Development Committee's eighth report of 2006, which is on the committee's inquiry into the food chain.
I thank Parliament for giving us the time to debate an issue that the Environment and Rural Development Committee feels is an important topic. I want to thank the many witnesses and members of the public who contributed to our call for evidence and helped us to produce a report that came to some important conclusions and made some important recommendations that we firmly believe need to be acted on by the Scottish Executive and others.
Over the past few months, as we concluded our inquiry, there has been a big debate on this matter in the newspapers. I think that that reflects the level of public interest in the issue. We wanted to examine what was happening between various elements in the food chain. We picked up concerns about the impact of the changing retail markets, particularly with regard to centralisation in some of the major retailers. It was reported to us that that is putting pressure on farm-gate prices. From our previous work on the reform of the common agricultural policy, we were aware of the need to manage the impact of CAP reform, particularly with regard to the issue of preparing the farming industry to adapt to a world in which there are no subsidies for production but, instead, subsidies for stewardship of the land. That will mean that there will have to be a much greater emphasis on marketing products that are grown in Scotland.
We also wanted to recognise the importance of agricultural production to our rural areas and to look for a focus from the Executive, through its agricultural strategy, on how more can be done to bolster rural economies and to promote rural diversification and new economic communities in those areas in which two or three jobs make a big difference. We had a number of key objectives when we set out on our inquiry.
We took evidence from a wide range of interests and heard some passionate and well-argued views. We spoke to farmers, food processors and supermarkets and we had representations from consumer representatives and business development agencies. We also wanted to hear not only from the Minister for Environment and Rural Development but from the Enterprise, Transport and Lifelong Learning Department because we wanted to find out how joined up the Scottish Executive is and how committed it is to the twin aims of making sure that our agricultural industries are fit for the future and are promoting the economic opportunities that come from the growing of food in Scotland.
It is fair to say that the committee heard a lot of strong views, but there were some clear messages. There were big worries about price pressures, particularly in the farming community. It was argued that there is uncertainty about and a downward pressure on prices. We heard a range of views from different parts of the agricultural sector about supply and demand issues—there were many articulately-made points about that. There were big concerns about the long-term viability of the Scottish agricultural community, depending on how CAP reform goes through.
The committee also heard that the supermarkets' purchasing policies are adding to the general uncertainty and pressure. It is important to say that we found it difficult to get specific examples, names, dates and times from farmers who have experienced difficulties with the major supermarkets. They were reluctant to put their names to those difficulties in public because they were worried about potential retribution and about losing contracts. It is fair to say, however, that we received good evidence about the major trends. The committee was keen to pass those messages not only to Executive ministers but to the Competition Commission's recent inquiry.
Farmers told us of their concern that supermarket dominance is putting them at risk. There are short-notice contracts and word-of-mouth contracts whereby there is no guaranteed price and no guarantee that the retailer will purchase the food. Such concerns exist not just about retailers but also about the food processing industry. Pinning things down and seeking transparency was a key challenge for the committee during the inquiry. We found it impossible to track where the money goes in the food chain, and we were not the first to have found that impossible. The House of Commons Select Committee on Environment, Food and Rural Affairs reported on the milk industry in England and Wales and it, too, found it difficult to get people to put numbers on the record.
Another issue is two-for-one offers. The Environment and Rural Development Committee was surprised to learn that it is usually the farmers who pay for the two-for-one deals that we see in supermarkets.
On the issue of milk, the report states that the committee
"was not able to get a clear answer to critical questions such as exactly where the retail price of milk is shared out between elements in the supply chain".
I can understand that farmers do not want talk on the record about their contracts with supermarkets, but I would have thought that the committee should have been able to find out how the retail price of milk is allocated. Why was that not possible?
We managed to get the starting price of milk as it comes out of the farm gate and we managed to work out—not surprisingly—how much it costs on the supermarket shelf, but the process in between was not transparent to us. The committee explored that with a number of witnesses but we could not pin it down.
If Alex Fergusson lets me move on, I will take his intervention later.
There is also an issue of scale. Because there are major contracts that cover the whole country, it is difficult for the small producers to get into the system and to get access to the process. The smaller farmers told us that they found it difficult to gain the expertise in negotiation that is needed to deal with major organisations. We also talked to food processors because we acknowledge that it is important to add value to agricultural produce, but, again, we found it difficult to get transparency on costs.
The committee thought it important to talk not just to farming interests but to retailers and other people who are involved in the food supply chain. One of the key conclusions of our report is that, in future, it is important to consider not just the supermarket industry but the public sector, which is a critical potential market for Scottish farming goods. Schools, hospitals and Government organisations are important purchasers. A key message that came back in evidence to the committee was to think of the opportunities and not just the problems.
The committee came up with some strong conclusions. We wanted to put on record the importance of the food industry to Scotland, considering the money that it generates in Scotland. We wanted to focus on how the agricultural community can be supported in a time of change. We considered business support, promoting collaboration among different farmers and developing farm businesses in the long run.
We also looked at how local enterprise networks could help the process, particularly through the development of agriculture and food strategies, so that they can give business assistance and advice to farming communities. We felt that the Scottish rural development plan was crucial in terms of funding opportunities. If we are moving away from an agricultural-based subsidy system, we have to look to rural development and diversification, which we look to the Executive to promote.
We also considered how to increase the value of local production, by keeping local jobs and ensuring that farmers markets are fully supported. We saw huge opportunities in that, and we asked the Executive to tell us how important that was for its strategy. We came up with the idea of a food surplus agency. A number of farmers reported that if they did not produce agricultural goods of exactly the shape, size and weight requested by a supermarket, that produce potentially went to waste because the farmers were tied into a contract with one supermarket chain. The minister was not particularly enthusiastic about that in the Executive's response, but it was one of the issues that came up in evidence that we would like to be pursued.
I said earlier that procurement is important, and one of our key recommendations to the Executive concerned it. We are well aware that European Union competition rules are not joined up. For example, they are fully in favour of sustainable development, but we are not allowed to use food miles as a criterion in choosing the produce used by the public sector. We find that crazy in a context in which we are trying to cut CO2 emissions and be more environmentally sustainable. Permissible criteria include freshness and whether something is organic. We know that the Executive has done successful pilot work in Ayrshire, and we would like the lessons from those projects to be learned across Scotland and the Executive to promote them in the future revisions to procurement guidelines. A lot could be done by the Executive.
There are also issues with competition rules. Competition is not a competence of the Scottish Parliament, but we know that the minister has previously commented on it to UK competition authorities, and we felt that the Scottish experience that we picked up should be fed into the process. We would like more collaborative supply chains, food co-ops and farmers co-ops. We would like to learn lessons from other countries, particularly on milk production. We felt that previous decisions by the Competition Commission had not helped Scottish business and that it was important to lobby the commission. When the commission came to Edinburgh, cross-party committee representatives gave feedback to it from our committee report.
The approach to competition must not be short-term or narrow. We have to be able to take a long-term perspective. If we take only a short-term approach, we could risk the viability of part of our farming communities. We would certainly have a longer-term impact on the choice that is available to us as consumers and our access to good-quality fresh goods at a price that we can afford. We also thought that the environment must be part of the process of considering competition. It needs to be internalised into the process, rather than seen as an external issue.
There were a lot of detailed ideas on competition, including that of a supermarket regulator. We believed that the current code of conduct does not go far enough in encouraging supermarkets to take a full role in considering the opportunities from local food supplies.
It is fair to say that, since our report was published, there has been a lot of debate in the media and rural communities about some of these issues and how we take them forward. Over the past few months, most members have probably been lobbied by a major supermarket chain wanting to show off its local food supply and tell us the good stories coming from its supermarkets. Several months on from our inquiry, I think that the committee very much welcomes that but does not want it to be a one-off. We do not want to be told good stories just this year; we would like those good stories to continue.
Our retail industry faces a challenge in working together with the farming community to improve the quality of networking in the farming community—particularly through food co-ops and farmers co-ops. We look for the retail industry to be keen to promote local produce and to be keen for local produce to be retained in Scotland and for more food processing to take place in Scotland.
We wanted to put a range of issues on the table. I very much look forward to hearing how the Executive has developed the agenda since our report was published several months ago. We received positive feedback from the Executive on some matters, such as procurement and support for rural businesses, but we would like the Executive to go further on other matters.
We should take opportunities from the procurement pilots and build them in with the bricks, so that every time a hospital contract for food is produced or somebody looks for a supply chain for a school, a process is followed that gives local food producers a chance to be part of the market and does not exclude them on the ground of scale.
The report contains many messages. I hope that the minister will also take forward our comments about the European Union's rules and regulations as part of future discussions in Europe.
I move,
That the Parliament notes the conclusions and recommendations contained in the Environment and Rural Development Committee's 8th Report, 2006 (Session 2): Report on an Inquiry into the Food Supply Chain (SP Paper 595).
I thank the committee for its report, which is on the food chain, although by delving into that subject, the committee inevitably embraced a range of other issues that were raised by the many witnesses who were called.
As Sarah Boyack said in her excellent speech on her committee's report, there is no doubt that the workings of the food chain are complex. I am cautious about one point. I am responsible in the Executive for agriculture and food and it is clear that the Executive can do much work, but I make it clear that we are talking about a market process, so we are considering inefficiencies in the market and deficiencies in the market process. We should be careful about the extent to which the Government, on its own, can automatically interfere with that process.
The minister will be aware of the Welsh Assembly Government's modest intervention, in that it seeks to buy locally for Government purposes. Has he talked to the Welsh Assembly Government? Is he minded to follow processes and practices that it has successfully followed within European rules?
I have talked to the Welsh Assembly Government—I will return to that subject.
I will focus on the size and scale of the market. If we are to have successful food and agricultural industries, we must be clear about where the major element of the market is. We must also be clear about the fact that although we use the phrase "the food chain", it can be divided into two broad headings. Fresh produce that is sold as such and goes through only an intermediate stage follows a different process from goods and services that are sold on to be processed for added-value purposes.
We have experience of examining the issue—Rhona Brankin and I and our department have been exercised about it for some time. If we are talking about the food chain, we should not focus exclusively on agriculture; we should consider the difficulties that face fisheries markets, including the pressures on their food chain from landing a fresh perishable product that cannot be withdrawn from the market.
The vegetable market has been mentioned and evidence was heard on it. Even in that market, we know from the work that we have done, including work with the Scottish Agricultural Organisation Society, that the potato sector in Scotland has one of the better collaborative food chains. However, in the brassica sector—to which Sarah Boyack referred—the low price and the immediate change in terms and conditions were a severe problem this summer.
Meat is not a simple, one-size-fits-all sector. The sector is divided into red and white meat and its organisation is quite complicated. The sector deals with the supermarket sector to a huge extent.
Can the minister tell me how much red meat we import?
I might have to get the member an accurate figure for that later, but if I am right, the United Kingdom is not self-sufficient in red meat—that is quite interesting in relation to the prospects of obtaining a price for the product and making a return on it. Sarah Boyack made the point about the viability of particular farms.
The Executive is working with the food chain in our fisheries projects and we facilitate the work of industry-led working groups, which are very exercised at the moment. A key component of our agricultural strategy is a working group that is made up of representatives from right up and down the chain such as farmers and people from the processing sector and the large retailers.
SAOS has been leading collaborative work on the food chain and we are building on that. The committee's report referred to the development of co-operatives in Scotland. In fact, we are quite advanced in the number of co-operatives that we have, and they are also promoted by SAOS.
Talking of co-operatives, collaborative work and vertical integration brings us to the milk industry. As Sarah Boyack pointed out, the milk industry is enormously complex. Mike Rumbles asked where the money goes, but it is not so much about that. Comparisons between this country and America or Europe show that relative supermarket prices and the prices obtained by farmers are not materially different. The materially different factor is that in those other countries—particularly in mainland Europe—a large proportion of milk goes into value-added products, whereas in this country, the proportion of milk that is sold as fresh milk is substantial. This country is bedevilled by lack of vertical integration. As long as our competition authorities continue to define small parts of Scotland as a market, I neither know nor understand how the milk industry will ever achieve that necessary, sustainable vertical integration.
I hear exactly what the minister is saying; indeed, he said some of it in response to a parliamentary question that I asked a couple of weeks ago. Nonetheless, recent negotiations in this country have led to an increase in the shelf price of milk of 1p or even 2p per litre but to a reduction to the primary producer of a half or even three-quarters of a pence per litre. Clearly there is something wrong there, and it must be fairly obvious where the money has gone in such cases.
That is not a question of where the money has gone but it shows that negotiation up and down the chain is exclusively between the processor and the retailer. We share the committee's concern that there is a total absence of collaboration with the primary producer.
From the consumer end of the food chain, we are looking down a different lens. We directly fund farmers markets and are very keen to increase the amount of goods that are of local provenance. However, we must be careful. Five million people are not enough for us to have a financially successful agricultural sector. Although I agree wholly about the undesirable amount of international air miles that food can travel, we need to be able to penetrate the English market and those of some our near European neighbours. I have not heard of anyone who thought that it was not a good thing to resume beef exports and, believe you me, when I was in Bologna, I was not asking the people to buy local. We have to be careful and strike a balance between the two key objectives. We also have to understand that many opportunities come from consumers showing a clear preference for more differentiated products.
Will the minister take an intervention?
No, I must conclude.
On public procurement, as I said in our formal response to the committee and as Sarah Boyack has rightly pointed out, we changed the guidelines in 2004 and, after research into what the barriers were, in 2006 we rolled out the evaluation of the East Ayrshire project. We are determined that all those findings should be rolled out across Scotland, so we should be able to do more.
Finally, our submission to the Competition Commission makes clear our concern, which the committee shared in its conclusions, about the lack of transparency up and down the food chain. Mike Rumbles and everyone else should be able to see—without being given private and confidential information—what is happening in the food chain. We made that point to the Competition Commission's inquiry and I encourage others to do so also. As the committee convener said, people have been reluctant to come forward but we will not get a better answer unless we provide the evidence. We need to find the means whereby those who feel aggrieved by competition pressures in the food chain are able to express that.
We welcome the committee's report. At both ministerial and official level, we are very heavily engaged across the diverse nature of the food chain. We are absolutely determined that Scottish agriculture should, over the medium term, become much less subsidy dependent. Ultimately, it will need to survive in a market, but that market must not be dominated; it must be a market in which openness and accessibility allow the farmer to be much more proactive and much more collaborative because of the way in which the food chain works. The same should apply to those at the other end of the food chain—this is not a one-way street. I believe that the report helps to direct us to where we should be going. I am absolutely clear that we in the Government are fully engaged in the process. I welcome the committee's report.
The SNP very much welcomes today's debate and the committee's report.
Scotland has a reputation for being a superb food-producing nation. When food producers such as farmers and others warn us that that reputation and the very industry is being jeopardised, the Parliament has a duty to sit up and take notice. The Environment and Rural Development Committee certainly took on that task and, as Sarah Boyack mentioned in her opening speech on behalf of the committee, many of the issues are highlighted in its report.
Today's news mentions that Tesco now commands nearly one third of the United Kingdom's grocery market and that its half-yearly pre-tax profits are up by 12.5 per cent. A key theme in today's debate will be that the primary producers, on whom our supermarkets largely depend, will not record similar increases in their profit margins or in their half-yearly figures.
We need to be careful. The member refers to profit margins. My understanding from this morning's reports is that Tesco's turnover has increased by 12.7 per cent and its profits have gone up by 12.5 per cent. I accept that it is dangerous for one supermarket to occupy a third of the market, but it is not right to conclude that Tesco's margins have gone up. The member is wrong to accuse Tesco of exploitation on that basis.
I appreciate the minister's defence of the supermarkets, but I ask him to allow me to develop my point. Our primary producers in Scotland will not record similar increases in their profits because they are at the bottom of the supply chain. In many cases, the supermarkets are increasing profits by squeezing those who are further down the chain. That is the crux of the issue that the committee investigated and of the general debate that is taking place in Scotland about dominance in the marketplace.
We need to protect Scotland's food and drink industry. We are all aware of its importance and economic value. It puts Scotland on the map for excellent produce around the world. This country produces healthy, good-quality food and, at a time when we are debating Scotland's diet and eating habits, we should also be talking about protecting and promoting the sector.
Food security needs to be part of the debate. It is important for any nation to ensure that, in so far as is possible, it can maintain food security and not simply rely on food imports. That is particularly important at a time of environmental considerations and climate change. We know that we can cut food miles by increasing our purchasing of local food. That issue has been raised with the minister time and again in relation to public procurement.
We must protect our indigenous food businesses but, as the minister rightly says, we must also understand that there is a marketplace. Our businesses can survive on quality, because in many cases they offer quality produce, but they must be able to compete on a level playing field. The debate is about abuse by supermarkets, which have so much power in the marketplace. At the same time, we must recognise that consumers vote with their feet. They want convenience and, in many cases, a good price—perhaps the lowest price. We know that supermarkets are here to stay. The challenge that faces the Parliament and regulatory bodies lies in ensuring that our primary producers, consumers and supermarkets can all survive on a level playing field and in partnership.
We must ensure that consumers are made aware of why they pay lower prices in many cases. That is why transparency is so important in this debate. One way in which we can empower suppliers is to ensure that consumers have full information, so that they can buy in full knowledge of exactly what they are paying for and of who is getting the profit.
We are aware of the fact that the supermarkets have been abusing their power. It is a ridiculous situation when the Environment and Rural Development Committee has to take evidence from farmers on an anonymous basis. That speaks volumes about the relationship between food producers and supermarkets in today's society. In this age of openness and transparency, people should not have to give evidence anonymously to a parliamentary committee because, as they pointed out to the committee, the relationship between the supermarkets and their suppliers is often characterised by blackballing and bullying. That is wholly unacceptable. Some supermarkets, although perhaps not all of them—we must find out which supermarkets are doing it—are abusing their massive power in the marketplace.
As other members have mentioned, milk producers are being paid less than the cost of production and are being put out of business. That is wholly unacceptable and must stop. We must ensure that there is transparency, so that consumers know that producers, rather than the supermarkets, are picking up the tab for two-for-one promotions. It is unacceptable that in many cases there are no binding contracts between suppliers and supermarkets. That is a ludicrous situation. Supermarkets can simply phone up suppliers to tell them to change or cancel orders without notice, although a supplier may be dependent on such orders for survival. Proper contracts must be put in place. The committee was convinced that such things are happening and that the problems need to be addressed.
In the little time that I have left, I can make only one or two more points. I urge the minister not to rely on the Competition Commission. He should not think that he can get himself off the hook by passing the buck to the commission. We need proactive action on the issue from Scotland's responsible minister. Time and again, the SNP has made the point that the minister should get together with supermarket chiefs in Scotland to discuss the issue in an open and transparent manner, to ensure that the public know that he is taking the issue seriously and doing something about it. Regulation is required and we must ensure that it is introduced. We must also ensure that the minister uses public procurement to support local produce. He has a massive budget, which should be used to buy such produce.
My closing message to the minister is that he should pick up the cudgels and get tough with the supermarkets. He should talk to them on the issue so that we can deliver a much better deal not only to suppliers in Scotland, but to consumers.
As both Sarah Boyack and Richard Lochhead said, one of the most disturbing aspects of the committee's inquiry into the food supply chain was that many producers who wished to give evidence would do so only if their names and businesses were not identified to the supermarkets. We heard allegations of price imposition and a take-it-or-leave-it attitude by the supermarkets to producers, who all too often were left to carry the risks. The minister talked about markets, and as Conservatives we broadly support market forces. However, sometimes markets can become skewed. The balance of power between supermarkets and producers now seems to be tilted too heavily in favour of the supermarkets.
In evidence, the committee heard about supermarkets changing prices and volumes on a weekly basis. Often farmers were working on the basis of what they thought was a fixed price, only to find that the buyers forced down the price after farmers had sustained their costs.
Is that the Conservatives' way of apologising to milk farmers in Scotland for the abolition of the milk marketing boards?
I will speak about milk farmers in a moment. Whatever responsibility the Conservatives had, Alex Fergusson and I will be delighted to take it.
Sarah Boyack and Mike Rumbles mentioned the difficulties of getting answers to key questions about profits in the milk sector, but we can be sure of one thing—the producers were not making excessive profits. In the past five years, six out of 10 Scottish dairy farmers failed to cover costs. As a result, no fewer than 700 family farms—a quarter of Scotland's total—have gone out of production.
In north-east Fife where I come from, farmer Robert Balfour, allegedly one of the most efficient producers in Europe, quit the milk sector in November last year. In Dumfries and Galloway, where there is little scope for diversification, farmers are trapped in a spiral of economic decline from which there appears to be no escape.
It is neither acceptable nor does it make business sense for the supermarkets to squeeze producers out of business with punitive margins.
What will the new Conservative party offer to the market this time next year?
I will be happy to address that as I develop my speech.
Next year when we are in the Executive, that is.
Indeed.
As we heard, the committee was frustrated in coming up with clear answers to many of the questions that we asked. As we know, the Competition Commission recently took evidence in Scotland as part of what I believe was the Office of Fair Trading's third grocery market investigation. I have little confidence that it will be any more successful than our committee's investigation.
I come to Christine May's point. An important part of creating a more even playing field is for farmers and food producers to create more market power by adding value to their primary product by means of co-operatives and collaborative supply chains. An incoming Conservative Executive would want to follow that particular route.
The Executive must use every means to promote the procurement of local produce and to provide guidelines to ensure that locally produced food is used locally. It must think more creatively about applying existing procurement rules throughout the public sector. The Executive must ensure that we enjoy the same advantages as our European competitors under European Union procurement rules on local sourcing. As we heard, although Scotland has some of the finest meat, vegetables and dairy produce in the world, all too often we cannot buy it in our local supermarkets. That is wrong and must be addressed.
The Executive must encourage the development of farmers markets, which have really taken off, and other direct marketing to ensure quality and contribution to town centre viability.
Without doubt, the major supermarket groups have been hugely successful and consumers vote with their feet when they shop there. However, as a Conservative I am concerned by two aspects of the supermarkets' policy, the first of which is their apparent ability to use planning laws to purchase land holdings to prevent competitors from opening up. For example, is it fair that Tesco is set to operate four supermarkets in Inverness? Are there not other competitors in Inverness that would provide a more open market? Secondly, there is the supermarkets' growing incursion into the convenience store sector.
Conservatives believe that we must protect small independent shops, which must not be forced out by the pricing and planning tactics of the giant multiples. We want to work with small independent retailers to help them address the challenges that they face in a changing consumer market. In St Andrews where I live, we are fortunate still to have an excellent local butcher and fishmonger, but for how much longer is anyone's guess. We also have three supermarkets. It is not always cheaper to shop at the supermarket than to buy from the local producer—less expensive meat and fish come from local independents. To that end, as some members might have read in the press, our manifesto for next year's Scottish parliamentary elections is likely to include major business rate concessions for small businesses.
It is in no one's interests—not the small food retailers or the Scots farmers, and certainly not the consumers or the supermarkets—to allow supermarkets unfettered control of the supply chain. The Executive continues to wring its hands over the growing power of the supermarkets. The time is long overdue for answers and actions.
The committee's inquiry and report on the food supply chain has confirmed what many of us believed: the policies of many, but not all, of the supermarkets could destroy food producers in Scotland.
Something is badly wrong with the system when contracts are sometimes binding on the farmers' side, but not on the supermarkets' side; when the cost of the two-for-one offers is often borne by the producer rather than the supermarket—incidentally, such offers are the source of the unacceptably high wastage of food in this country; when dairy farmers have to sell their milk at below the cost of production; and when farmers and suppliers are afraid to name names publicly for fear of being blacklisted. There is no transparency and no fairness. The dice are loaded in favour of the supermarkets and a new code of practice is urgently needed.
Cheap food for the consumer is a laudable aim, but it should not be pursued to the exclusion of consideration of quality, the distance travelled and welfare conditions for animals. The health, safety and remuneration of those who produce our food must also not be neglected, nor can we ignore the subsidies for the overproduction of food in the EU, which is then dumped on the third world.
Let us consider some anomalies. Organic beef is brought from Argentina to Scottish supermarkets. How many food miles are involved in that? Tiger prawns are brought more than 7,000 miles from Indonesia, while our own fresh langoustines are absent from supermarket shelves because they are being driven to Spain. Flowers—I know that they are not strictly food—are grown in Africa, with workers exposed to dangerous insecticides and pesticides. Vegetables and chickens that are produced in the EU are dumped on west Africa, which destroys the livelihoods of local growers.
Is organic acceptable if it is flown halfway round the world? The boom in demand for organic produce should be, but cannot be, met by our farmers when it comes to beef, milk or vegetables. Sometimes that is because farmers do not have the get up and go to go organic, but it is also because farmers cannot afford to invest in organics when profits for supplying supermarkets are cut to the bone and Executive support is based on competitive bidding for a fairly measly sum.
I am sure that Maureen Macmillan accepts that there is vegetarian input to much of the demand for organic produce. Where in Scotland would she grow organic cashew nuts?
That is not the point. What can be grown here should be grown organic; I do not object to importing organic cashew nuts.
Importing produce in such a way if we can grow our own is not acceptable, but as far as I am concerned it is acceptable if we cannot grow our own. I do not object to our importing food that we cannot buy here, but I ask members to buy fair trade goods; I am sure they all do that anyway. Buying fair trade cashew nuts—it is possible to do so, by the way—tropical fruit, coffee, tea or sugar is a good way of helping businesses and co-operatives in the third world to thrive. It guarantees rights at work and health and safety for workers. I have heard it argued that the fair trade agenda is counter to our desire to cut down on food miles, but they can co-exist.
It is said that local will be the new organic, but that is not entirely true. I would not eat a locally produced battery egg, but I would eat a non-organic local cabbage rather than an organic cabbage that had been imported from Holland. We must sort ourselves out as food consumers. We should know where our food comes from and make informed decisions. We must support and invest in our farmers, food producers and suppliers, not only by supporting farmers markets and shopping in local butchers and greengrocers, but by using Government procurement as a tool for investment. The Competition Commission must realise that its focus needs to shift. It must realise the danger to our food industry if profit is cut to the bone.
Yesterday, Tesco announced pre-tax profits of £1.09 billion after taking more than £17 billion from UK shoppers in six months. I know that Ross Finnie and Richard Lochhead have argued about what that means or implies, but I think that it implies an imbalance between the supermarkets' power and the farmers' power. One commentator said that Tesco focuses on what people will want tomorrow. I hope that Tesco is listening to what we are saying today about what we want tomorrow. We are saying that we need a fairer world for our food producers. We need more local food and more locally grown organic food on supermarket shelves. We also need imported food to be fair trade food, as far as possible. That is the kind of food supply chain that we wish to see tomorrow.
We move to the open debate. If members stick to six minutes, including interventions, I will just about get everyone in.
I may very well be short of six minutes, Presiding Officer.
I want to pick up on four points: the role of supermarkets; procurement; local food economies; and the concept of the food surplus agency, to which Sarah Boyack referred.
The minister is right to say that the food supply chain is a market and that one must intervene in it with caution. However, there is no doubt that supermarkets cause an imbalance in the chain. On page 7 of the committee's report, the word "control" is used to describe the supermarkets' dominance. The report says that supermarkets
"control over 70% of food retailing".
I was unaware of the fact that anonymous evidence was given on the issue. As Richard Lochhead said, that speaks volumes.
I do not think that the report refers to how the supermarkets' control determines what food is grown. I remember many years ago going down to see the Clydesdale tomato co-operatives—unfortunately, only one of them now grows tomatoes—where it was explained to me that a supermarket sent them various test varieties for growing seed plants. When they were grown, the supermarket chose a variety not for the taste but for its appearance. The vine tomatoes that are in the supermarkets look so pretty. They all have the same deep red colour and are all the same size, but that is not how nature grows fruit. However, that is the kind of fruit that supermarkets offer.
Supermarkets control varieties of all kinds of fruit and vegetables and we are losing many tasty varieties as a result. The supermarkets also sell standardised meat products, so a bigger issue is involved. It is true that people are voting with their trolleys. However, as Maureen Macmillan said, an educational issue is involved. People need to know about animal welfare—for example, the condition of battery hens. Supermarkets determine what appears on their shelves through what appears on their till rolls. They can see what is being bought in volume. If something is not being bought in sufficient volume, it disappears from the shelves and choice begins to narrow. There is certainly an issue about educating the public.
We have all taken advantage of buy-one-get-one-free offers and two for the price of one, although we do not need two. How much of that food is discarded? For example, I might buy two cauliflowers, but I can eat only so much cauliflower in a week. That is particularly the case for people who live alone, compared with other households. There is an issue about false economies. If the price cuts are being borne by producers, that is wrong. We do not need such offers, which are often false promotions.
I want to pick up on what Stewart Stevenson said about the National Assembly for Wales with regard to procurement. First, though, I refer the minister to my so far ineffectual efforts to get the Parliament, through the Scottish Parliamentary Corporate Body, to buy local Scottish produce. We keep bumping our head against the European procurement rules. It is my understanding that health boards—or whatever they are—in Wales have somehow managed to do what I have described previously to the minister as creative contracting. The minister was rather taken aback by that idea and thought that it might be illegal. However, I think that creative contracting should be built into contracts, particularly public sector contracts, so that local produce can be bought.
I understand that Orkney Islands Council managed to do some creative contracting by ensuring that what it does promotes remote and rural areas. That means that it does not have to buy imports. In recommendation 46 of its report, the Environment and Rural Development Committee recommends that
"the Executive considers how it can use its contacts with supermarkets to influence their contract practices."
The committee also requests in the report that
"the Executive reports to it on how it can work to secure further emphasis on local sourcing in EU procurement rules".
It cannot be beyond the wit of the minister and his team to try to make this Parliament a model that can promote what the committee requests.
I want to talk about local food economies. There was a recent members' business debate on farmers markets. They are small beer at the moment, but they are very useful. In an initiative in Peebles—I had to bring the Borders into it—a local restaurant is sourcing everything locally. It gets the meat, vegetables and fruit locally, and it makes the bread. On this side of the chamber, we aim to improve the business rates for small businesses, and I would like to know whether there is another way in which the Scottish Government can assist local businesses to buy locally—especially restaurants that are promoting local produce.
I would call a food surplus agency the ugly fruit and vegetable shop. I would be all for it. It is a nonsense that four baking potatoes all have to be the same size and shape, or that all carrots have to look the same, or apples. Often the tastiest ones are the ones that do not look like that. There has been a huge impact on what tomato producers have to bring out, and we are losing taste. I am all for an ugly fruit and vegetable shop, with reduced prices, and I will be there shopping without my supermarket trolley.
Since the Greens first raised the issue of supermarket power in the chamber in 2004, the situation for the farming industry has not improved. However, I sense that the political consensus on rebalancing the supply chain in favour of producers has become stronger. That is reflected in the Environment and Rural Development Committee's report.
I was proud to take part in the committee inquiry. It was an excellent example of what the Parliament can achieve consensually through a short inquiry. The report will not sit on the shelf. The committee came up with conclusions that, as Sarah Boyack has said, have already fed into the Competition Commission's grocery inquiry, which a number of us gave evidence to last month.
Over the past few years, I have seen desperation in the faces of farmers. I have seen it outside the milk distribution depots at 6 in the morning, where farmers have had to sink to the low of taking direct action to obtain trade justice; I have seen it in the faces of the farmers who came to the committee to give evidence. As we have heard, part of that evidence was heard in private—behind closed doors and not covered in the Official Report—because of the fear of reprisals from supermarkets and processors.
How can anybody tell a dairy farmer who is being paid less than the cost of production that they are getting a good deal? The supermarkets have a powerful relationship with processors that enables those two parts of the chain to dominate producers. Milk prices are a good example. The milk price rise that retailers announced with a flourish was billed as a boost to farmers, but the money never made it back through the supply chain to the producers. The British Retail Consortium gave evidence to the committee and told us that, somewhere along the line, the money had "run into the sand". We were unable to find out where that money had gone; the Environment, Food and Rural Affairs Committee at Westminster was unable to find out either.
There are lots of ways in which profits get stuck to the sides of the supply chain, as the British Retail Consortium has said in the past. For example, there are paybacks from processors to retailers for packaging design, and there is rent for shelf space. Whatever way we look at it, the farmer is being paid less than the cost of production. That is nothing short of theft.
The price cuts for dairy farmers that followed the retail price increases are still happening. Recently, Asda cut the price yet again—and farmers will no doubt be out at dawn protesting again, livelihoods will be crushed again, and the fabric of our rural communities will suffer yet another blow.
I want to highlight two ways in which we can combat the problem. First, we need a fairer code of conduct that applies not only to the retailers but throughout the supply chain. It needs to clarify terms such as "reasonable notice" in respect of order cancellations—such terms are a gift for corporate lawyers—and it needs to ensure fair trade and a level playing field in our supply chains. The code also needs to be enforced by a regulator who can act as an independent ombudsman and who can proactively spot-check the relationships in the food supply chain as the norm, rather than being called in by producers who, of course, are rightly scared of reprisals and delisting.
Secondly, we should support the development of producer co-operatives—not just through the work of the Scottish Agricultural Organisation Society, which needs to be built on, but through the definition of markets that allow the co-ops to take their fair market share unchallenged by competition authorities.
It is outrageous that Tesco is allowed to maintain a 51 per cent market share in grocery retail in Inverness, but that when a farmers co-op tries to get 25 per cent of the milk market along the M8 corridor, that is deemed to be anti-competitive. Those supporters of the supermarkets who argue that the low price of milk is a result of the link with the global commodity price for processed milk cannot also argue that the market boundary for the milk market is the M8 corridor, because that simply does not make sense.
In our report, the committee highlights many other developments in Scotland that need to be supported. Ultimately, the building of a vibrant local food economy that connects consumer with producer through a short supply chain that maximises local wealth retention and minimises environmental impact is the vision around which we must unite. Public procurement will and should have a key role to play in the development of the local food economy. The use of the public pound in that way is vital. As well as dismantling those barriers that prevent that from happening, we must stimulate good practice.
Along the way, it is essential that we ensure that when power is wielded unfairly—which is ostensibly the case with the supermarkets—there is regulation to level the playing field. Ministers must continue to use their influence to achieve trade justice for Scottish farmers in the months and years ahead.
I, too, welcome the opportunity to debate an issue that not only affects a major part of the Scottish economy—in Fife, food production accounts for 1.5 per cent of the economy, which is almost the national average—but which has a vital role to play in making Scotland a healthier place to live and in improving the health of our population.
In common with many other members, when I did my research for the debate, I came across the same issues that are identified in the committee's report and the same fear among primary producers of having their comments attributed to them, on the ground that that could lead to blacklisting and so on. That must be a serious concern for us all.
Today I want to talk about carrots. I was told that to attempt to shed light on the subject by talking about carrots was a little contrived; that may turn out to be the case, but there is a purpose to it. I remind members of my entry in the register of members' interests, which states that, as well as being a member of the Labour Party, I am a member of the Co-operative Party.
Many of the producers to whom I spoke strongly supported the idea of an independent regulator. They liked the idea of someone who could bring some weight to bear on the problem of the back-door pressure that they come under.
Another concern that producers had—which I know that the minister is aware of—related to the availability of potential aids through the Scottish Executive. For example, they felt that the rural stewardship scheme had turned into a stick for many people who had spent money trying to become new beneficiaries of it. Perhaps they could not benefit from such schemes because so much of the funding for agriculture and environment had been committed that there was no room for new entries. I would like the minister to say how that situation could be improved.
Does the member agree that some of the people who could not get into those schemes had paid the modulation tax that was meant to fund them?
Modulation payments are a separate issue and I am not sure that I would agree that they are a tax.
There is a great temptation just to bash the supermarkets and to blame them for everything. We should be concentrating on some of the suggestions in the Executive's response to the committee's report. We should be examining what methods exist to combat the power of the supermarkets. I make no apology for suggesting that the Co-op is one such vehicle. In 2004, it published a report entitled "Shopping with Attitude". As a direct result of the survey that formed part of that report, the Co-op decided to set for itself a number of goals, one of which was to
"Work with more regional and local suppliers to deliver local economic value and reduce environmental impact, setting targets for the amount of local produce in stores."
For the Co-op, the term "local" can be applied only to products that come from within a 30-mile radius of where they are sold. That means that strawberries that are grown in Blairgowrie by Farmcare—which itself is a co-operative—are now sold in Co-op outlets in Scotland. The policy applies not only in the Co-operative Group, but in co-operative societies such as the Scottish Midland Co-operative Society and the Lothian, Borders and Angus Co-operative Society, for which Scottish products are integral to the product range.
By working in partnership with producers, the Co-op can contribute to sustainable local enterprise that benefits producers, local consumers and the local economy. Further evidence of the benefits of working together comes from the few instances in which producers have got together with the processors and said to the supermarkets, "No; not enough." One supermarket is reputed to have been left with empty shelves as a result, which of course supermarkets do not want. That has resulted in a price increase. The processors have more power than they believed they had 12 months ago. If they can sink their differences with the suppliers, they can make progress. In Fife and Tayside, 57 producers have joined with Kettle Produce to form what I believe is the largest food-producing co-operative in the United Kingdom, which has secured a three-year contract to supply all Sainsbury's carrots. That provides security not only for Kettle Produce, but for the farmers who grow the carrots, many of whom are my constituents and who have spoken to me about the issues.
Finally, I would like to mention one matter that is not covered in the committee's report but which was raised with me today, unexpectedly. Most of the malting barley that is grown in Scotland is grown in my constituency and goes to Diageo to make some very nice products; that production also happens in my constituency and employs 800 people. However, the barley goes south to Berwick to be malted. Similarly, most of the vegetables from Kettle Produce go south to penetrate the English supply chain. All that produce goes over the Forth road bridge. For industries that cannot move, the prospect of the bridge being closed to lorries in four years' time causes huge concern. Will the minister meet me and the chairman of that local co-operative to discuss those concerns?
I declare an interest as the owner of a hill farm in Argyll that still produces store sheep and beef cattle. I welcome the debate, which is on a subject vital to my region of the Highlands and Islands and other parts of rural Scotland. All the constituencies in my region produce high-quality food and drink. Although the whisky industry is apparently doing all right, our producers of beef and sheep—famous Scottish industries—are going bust. That is because prices in markets are still at 1980s levels, while costs have soared. I admit that the businesses receive subsidies, but producers are still going bust.
Last week, I visited Dalmally auction market in my home county of Argyll, where I saw correct cast ewes selling for as little as £10 per animal and some feeder ewes selling for as little as £5. It is hardly worth taking animals to market at those prices. Sheep farmers are wringing their hands in despair wondering how they can tighten their belts even further to survive another year. The lamb price may have been slightly up on the previous year, but, to be honest, it would have to double to give hill farmers a fair income and allow them to reinvest in improving their land and livestock.
The number of animals in the Highlands and Islands is already dropping dramatically. For example, the number of animals entered at the lamb sales in Lairg in Sutherland, which is the most famous market for north country Cheviot sheep in Scotland, has declined hugely. The number of sheep in the Western Isles and Shetland has almost halved in the past 10 to 15 years and the number of cattle is going the same way. It is impossible to meet sustainably the costs of over-wintering animals, when all the costs have gone up but prices for the product have remained static for 20 years. That seems doubly unfair to farmers and crofters, who see the prices supermarkets charge for beef and lamb, much of which appears to be imported from countries with poorer animal welfare regimes. I have asked the minister what percentage of red meat we import.
The same story comes to me from Dingwall market in Ross-shire, which is the main centre of livestock agriculture in the north. Obviously, the livestock auction companies themselves suffer as a result of a drop in prices and numbers. If we consider the transport companies, all the feed suppliers and those who sell animal dips and medicines, it is easy to see why that disastrous slump in agriculture is affecting a huge part of the economy in the Highlands and Islands. We must remember that one in 10 of all Scottish jobs is dependent on agriculture.
I have heard Mr Finnie committing himself to a prosperous future for Scottish farmers and crofters. I have heard him talk about bringing added value to the food chain. I do not doubt his sincerity, but the situation has worsened progressively since devolution. I speak from practical experience, as do others all the way from Shetland to Campbeltown. One area of livestock farming that used to stand alone as remaining profitable when others were failing was the dairy sector. However, I have spoken to the dairy farmers of Kintyre, Islay and elsewhere and it is obvious that that sector is also in the doldrums. That is why I note with interest that the Environment and Rural Development Committee, in its summary of recommendations, requests that the minister explain in detail how the revised agriculture strategy will contribute to farmers and food processors being able to create more market power and increase margins by adding value to the primary product, which they need to do. I ask the minister to explain that now, or as soon as possible, because hill farmers are desperate to know how his plans will affect their futures. For example, the Executive talks about its concern to minimise the regulatory burden but as far as I can tell there is, disappointingly, no commitment actually to cut or ease any existing regulations.
The primary producers of beef and lamb off the hill areas of the Highlands and Islands have always concentrated on providing the best possible product that the fodder from disadvantaged land can create. They have to import expensive winter keep. They have to buy expensive medicines to improve animal welfare and they endeavour to stay inside numerous new Government regulations. Surely it is only fair that those unrecognised stewards of our much-acclaimed open Highland landscape, which is so valuable to our tourist trade, survive. Without those farmers and their animals that graze our landscape, the picture-postcard perfection of the Highlands and Islands would degenerate into a tick-infested tundra that is difficult to walk through.
Those hill animals have traditionally been sold through store markets to low-ground farmers with better land, who can fatten the animals and thus make themselves a profit at a later stage. That agricultural system has held Scotland in good stead for a long time, but if the primary producers of quality beef and lamb in the Highlands and Islands do not get enough of a share of the cake to be sustainable, the system will collapse and the land on our hills will no longer be properly looked after. That is the danger facing us. The skills learned over generations in livestock handling, dog handling, fencing, stone walling, draining and land improvement will melt away like snow off a dyke and it will be blamed on a Government that has failed our farming industry by ignoring the crisis and failing to plan a proper food chain strategy for Scotland that gives Scottish hill farmers a fair deal.
I remind Jamie McGrigor that it was the arrival of sheep in the Highlands that helped to clear the human population.
If anyone doubted the relative strength of the links in the food chain, today's announcement by supermarket giant Tesco of an expected annual profit well in excess of the annual output of all Scottish agriculture proves the imbalance. It is an imbalance that has come upon the Scottish food industry in the past decade, with more and more people shopping at major retailers, at the cost of local shops closing. It is an imbalance that has squeezed a great deal of profitability out of the primary producing sector, but it is also an imbalance that has given and continues to give customers access to a wide range of cheap food.
As the Environment and Rural Development Committee correctly identified, one of the major problems of the current imbalance is the fragmented nature of the Scottish farming industry. Scottish farmers have never been good co-operators, giving rise to the saying that the only time two farmers will work together is to conspire against a third. Thankfully, there is now greater collaboration within the farming industry, with more than three quarters of all produce leaving farms through co-operatives of one sort or another.
The industry has not been helped by schemes under the European Union's common agricultural policy, which helped to blunt the cutting marketing edge of producers over the last three decades of the 20th century. Eyes were taken off the market and its increasing demands in the pursuit of livestock and crop subsidies. At the same time, the growth of supermarkets continued apace to the point at which they not only choked out competitors in the retail trade but started to use bully-boy tactics to stop their suppliers speaking about the conditions of trade. I remind Mark Ruskell that that did not start in 2004, but has been going on for at least a decade. As a journalist over that time, I heard stories from producers that could not be confirmed for fear of reprisals because, as has been pointed out, the producer who comments publicly will no longer be a supplier.
Will Andrew Arbuckle clarify whether he is insulting simply Fife farmers or all farmers in Scotland?
I am not insulting any farmers. I am a former farmer and a former reporter on agriculture and I have supported the farming industry all my life.
Producers have been told that they have to supply two for one next week and the supermarkets pay for only one. They have been told that the agreed price had to be slashed as part of a promotion. One local packer was told that his profit was too high and had a £3 million fine imposed on him because of that. Producers have been told that they will pay for shelf space for the product that the supermarkets buy from them.
The minister has acknowledged that those practices exist and that there is a need to address them. I hope that the Competition Commission is able to expose them, but the introduction of a regulator, as NFU Scotland proposes, will not improve the bargaining position or help to remove or even reduce the current misuse of market strengths because there are too few players in the field to prevent the source of any complaint from being identified quickly. There are basically only half a dozen major co-operative packers of meat, potatoes or vegetables and any complaint could quickly be traced back to them.
Does Andrew Arbuckle acknowledge that, if an ombudsman was proactive in spot checking the supply chain, it would be difficult for any individual complaint from a producer to be sourced back because spot checks would be the norm?
The idea sounds good, but I do not believe that it is practical. I have tried to think it through and determine whether it is possible, but I do not believe that it is possible without complainers being identified. Remember that almost all produce can be traced back to source.
The supermarkets will change their ways only if consumers cease to go through their doors or, as Christine May has pointed out, go through other doors instead. That is why consumer support for a new initiative that supports high street shopping will hurt the majors more than any constraint that the Government imposes. Farmers markets are a good thing as far as they go and in the range of goods that they sell but, to be realistic, they represent only a small percentage of the food that is produced and consumed in Scotland. The answer to the present imbalance in the food supply chain does not lie in the organic sector; that is and will remain a niche market.
It is important to point out that, although I and others have lumped supermarkets into one grouping, one or two of the majors have a buying policy that takes into account the primary producer's need to remain profitable. It is also important to remember that, although today's debate is on the food supply chain, the same demolition of primary producers who supply the major retailers is going on in other markets, such as clothing or electrical goods. That is where the answer lies because, as that devastation spreads into other sectors, we can expect a wider backlash against the so-called super-supermarkets.
I draw members' attention to my entry in the register of members' interests.
In the helpful briefing that it issued in advance of this debate, the Federation of Small Businesses reminds us that three quarters of our land mass is under agriculture and that the landscape that we love to see is in the stewardship of our farmers, crofters and growers. The industry produces £2 billion a year, which is about 2 per cent of our gross domestic product and, with whisky, represents £2.4 billion in exports. Some 70,000 people are employed in agriculture in Scotland, which is approaching 10 per cent of our rural workforce. We know that it is important.
Ugly fruit and vegetables have been talked about. I am fortunate in that I am able to go to a shop in Longside in my constituency and buy, from a co-operative, ugly but deliciously tasty fruit. However, there is only one such co-operative in my large constituency and there is none in adjacent constituencies. Next week, when I come down for our party conference, I will be bringing beef from my constituency to my friend who has the great misfortune to live in the central belt. I will be doing so because, of course, the quality of the beef transcends the quality that is associated with the extremely local purchasing that is, perhaps, not sufficient to sustain our industries.
I will pose a few questions about how Governments behave. First, does the Italian Government buy Parma ham or Danish bacon? Secondly, does the French Government buy champagne or cava? I think that we know the answer to those questions. Thirdly, when the First Minister is stocking the drinks cupboard in Charlotte Square, does he buy Vat 69 or does he import that well known Indian whisky, Cat 69? Of course he does not buy the Indian whisky. In other words, there are ways in which one can specify something that is particularly local when one wants to buy it. Some things are within the rules because they come only from a local area. With regard to the Parliament, I propose that, the next time that Frank McAveety wants a scotch pie, he is able to order an Arbroath smokie scotch pie, because Arbroath smokies can come only from Arbroath. That will mean that he will be assured of a quality Scottish product that will meet his every need.
Does the member agree that, given that, as well as Arbroath smokies, certain sorts of lamb and beef also have protected geographical indicator status, a scotch pie might be more clearly identified by using the right product?
I direct the minister to Downies of Whitehills, that excellent fish processor in my constituency, where he may buy and enjoy precisely the product that I have described.
The minister makes precisely the point that I am making. Where there is a designation, there is a way in which we can use that designation to control the sources from which a contract may be fulfilled. The bottom line is that we need to use imagination and energy to promote local sourcing within the rules of the European Union. I have given only some examples, of course. I look forward to Scottish venison receiving a designation and, with that in mind, say that if kids want to eat burgers in schools, perhaps they should be given venison burgers because they are healthier than some of the stuff that they currently eat.
Some health products are food related. For example, yesterday I was told that growing bog myrtle will yield £750 per hectare, yet the Executive offers farmers no support to diversify into that crop. There is a range of imaginative things that we can do. Indeed, they are the kind of things that political colleagues of our Government in Scotland have been seeking to do in Wales in order to promote the value of Welsh food and sustain and support local procurement. The committee makes the point quite forcibly in its report. Paragraph 28 reads:
"The Committee believes that the Executive must think creatively about procurement".
I do not expect all my remarks to be taken seriously or literally, but I make those points in order to engage the minds and sentiments of members with the issue and in the hope that that will encourage them to be similarly creative in thinking of ways in which we can proceed.
It is certainly a huge disgrace that so much waste comes from our supermarkets. They chuck food into the bin to the extent that, in parts of these islands, the freegan movement is operating, whereby people live solely by scavenging from supermarket bins. That tells us something about the waste that is intrinsic in the supermarket system.
I close on the subject of red tape and unnecessary costs for producers by highlighting once again some of the unhelpful activities of the Scottish Environment Protection Agency that put unnecessary costs on farmers. There have been fights over the use of tallow. That fight has been won, but the fights over road planings continue. Better co-ordination between producers, processors in the food chain and Government would certainly help.
I read the Environment and Rural Development Committee's report with interest, particularly the part entitled "Influencing the operation of the market". I find it ironic that the Tories are coming out fighting on the issue. The regulation and structure of the market are mentioned throughout the report. I make the point that that is not just about the supermarkets, although they are an important factor in the report because they supply a high percentage of food.
The report gives a number of examples of failure, and the evidence is interesting. The example of First Milk jumped out at me; it
"cited the loss of the sale of milk to schools as a factor in the reduction of consumption in the milk sector."
Apart from asking ministers to put pressure on the supermarkets, there are other measures that would effect a cultural change in the food chain so that more local produce is consumed in Scotland. The idea of public sector contracts for the supply of food should definitely be explored. That is an important issue that is relevant to local produce, but it is not just the market that we are discussing this afternoon. The big issue is political will, which is more important than the market.
That brings me to my proposal for a bill on free, healthy school meals—the school meals and snacks (Scotland) bill. The cost of the bill just for primary schools—it would be a lot more for secondary schools—is £73 million. Where should that money go? What produce should it buy? Is it possible that we could ensure that schoolchildren in Scotland eat healthy food that has been produced locally?
One of the big issues in public contracts is the enormous competition. There has been huge deregulation in the competitive market for school meals. I was at a conference in Hull last year and I met some of the people from local authorities who are responsible for the procurement contracts to provide school meals. They are well lobbied and taken out on trips. They are—I cannot think of the word—lulled, I suppose, by the big companies. I had one discussion about the supply of cheese to schools in England. There were massive orders. Given the cheese production in Scotland and the surplus milk production that we have, there is big scope there.
The committee's report states:
"The Committee believes that the Executive must think creatively about procurement, and produce clear objectives and procurement guidelines to ensure that locally-produced food is used locally."
I agree with that recommendation. The issue is about attitude. Is it the Executive's approach to say, "It's the market. It's Europe's rules"? We have heard that approach in relation to other things, such as Caledonian MacBrayne ferries. Is the Executive prepared to find a way to give local contracts to local producers?
Recently, I went to a seminar about school meals in Italy, which has some of the best school meals in Europe. They use quality food. In Rome, the procurement contract for school meals ensures that 30 per cent of the food is organic and that almost all of it comes from within a 30-mile radius. If I am not mistaken, Italy is a member of the European Union.
The Rome city council has to work under the same rules that we do, so how on earth did it manage to do that? The seminar was on how it managed, and there are ways and means. The council introduced the word "fresh" into its contract and then stipulated what it meant by fresh produce. As a result, young people in primary and secondary schools in Rome are now eating healthy, organic food produced locally. Why can we not do that? We have the Isle of Arran. It is not on quite the same scale as Rome, but commendably it is aiming to ensure that more than half of the raw ingredients for school dinners come from local producers.
Infrastructure is a big issue. The report supports co-ops and says that we should develop them further. If there was the political will, we could reach the position of co-ops bidding for big contracts with schools. However, it is not just about schools, but about other food contracts that the Scottish Executive, hospitals and other public bodies put out to tender. With political will, we could have huge cultural change using that mechanism. Is there the political will to pass my proposed bill on free, healthy school meals? Is there the political will to do a Rome and tailor the procurement policies that we have for public food so that they benefit public producers? I am expecting an invitation from the NFUS to discuss my bill.
My free school meals bill, especially if it was extended to secondary schools, would help enormously and ensure that children in Scotland get healthy produce on their plates that comes from within 30 miles. That would benefit everybody.
The Environment and Rural Development Committee's inquiry into the food supply chain was short but interesting and informative. Once it was under way, it widened out somewhat, as we have heard.
As has been mentioned by other members, support for local food economies was promoted by witnesses from all parts of the food supply chain. There was particular emphasis on the need for high-quality Scottish produce to be marketed with a focus on its Scottishness rather than on trying to compete on price in global commodity markets. It is accepted that, although price is important, many consumers are prepared to pay a wee bit more for high-quality, locally produced foods.
The development of farmers markets has been discussed and during the inquiry it was raised as a positive initiative that can help both to reduce the dependence on big supermarket contracts and to offer a range of high-quality produce to people who might otherwise not have such access and choice. It is therefore disappointing that the farmers market in Coatbridge has withdrawn its monthly event after two years in the town centre. Several reasons have been cited for that, foremost among them being affordability for local people, but there were also cultural barriers surrounding the use of fresh produce.
The market has gone from Coatbridge, so I am pleased that the committee has recommended that the Scottish Executive report on the contribution of farmers markets and on what it is doing to support and co-ordinate their development. It is in everyone's interests to ensure that farmers markets are not just the preserve of affluent suburbs or city centres. They should be enabled to have a viable presence in more economically deprived communities; the example of Coatbridge tells us that much more work has to be done. I note the Scottish Executive's response and urge it to look again at the matter.
Another issue was raised by several witnesses, but a written submission by a woman called Valerie Carson struck me in particular. It related to what she called "ugly ducklings". She talked about the emphasis on the cosmetic and uniform beauty of products—we have heard about that today—and is concerned about the waste that is created by items that do not conform. The suggestion was that the Scottish Executive could explore the idea of a food surplus agency for the public benefit. I know that committee convener Sarah Boyack mentioned that. I ask the Executive to consider the idea again. It would not deal with supermarket surplus, which FareShare helps with, but it would help when farmers have to destroy products that do not meet a certain standard perhaps because of a contract.
We all agree that public procurement policies could be better utilised, so it would be interesting to hear that the Scottish Executive is thinking again and more creatively about those policies to assist local food and drink producers. As the Scottish public's awareness of healthy lifestyles is raised, more interest is shown in the sources of food, what is in it and its effect. That is due partly to Government effort, so it is important that the Government takes an interest.
I apologise for missing the first part of the debate.
The short inquiry that the Environment and Rural Development Committee conducted in December 2005 was in response to widespread concerns about food supply chain issues. Perhaps it is worth reminding ourselves of how important the food and drink sector is to rural development. Scottish agriculture provides 36 per cent of inputs to the Scottish food manufacturing industry and 24 per cent of inputs to the food and drink manufacturing industry as a whole. About 40 per cent of jobs in the food and drink manufacturing business are in rural Scotland.
In the Liberal Democrat manifesto of 2003, we made commitments to support the Scottish food and drink industries by encouraging localised food distribution systems that involve more local processing of produce; to promote direct sales, farmers markets and alternative marketing schemes to ensure that producers have a stake in each stage of the food chain; and to support local food chains in order to reduce the number of food miles. Those issues were picked up in the inquiry and in the committee's recommendations. The committee recommended that the Executive use every possible avenue to promote procurement of local produce and it believes that the Executive should produce clear objectives and procurement guidelines to ensure that locally produced food is used.
Some work has been done on that. In 2005, the Executive published research into the opportunities and constraints in the public sector food procurement market. Subsequently, the food forum network has been used to bring potential suppliers and public sector procurement officers together to improve the information flow.
Further research has been commissioned to examine successful local food procurement models and to improve understanding of the practical issues for producers. There is good practice out there—East Ayrshire Council has adopted a procurement model that has improved the quality and freshness of ingredients and has reduced packaging waste and food miles, but which still conforms to EU procurement rules. It can be done.
The committee also recommended that the Executive re-examine how business support can assist in farm diversification and in developing and incentivising local food chains more effectively. Another recommendation of the committee was that the regulatory framework be considered so that Scottish farmers are not disadvantaged by regulatory costs.
Those recommendations are fine and there is much consensus about them, but the two big unresolved issues that prompted the inquiry concerned supermarkets and competition rules. Sustainable trading relationships throughout the food supply chain are essential and it is important for companies to have fair and transparent contracts.
When we looked into people's concerns about the food supply chain, we heard allegations that supermarket buyers impose arbitrary price reductions at short notice or even retrospectively, that producers are forced to enter unsustainable buy-one-get-one-free promotions and that restrictions are placed on selling produce that is surplus to contract requirements. I have experience of that in my area. Christine May mentioned carrots. In my area, a successful local business that employed 40 people in supplying carrots to supermarkets was put out of business overnight when the price was reduced, without warning, from 16p a pound to 12p a pound. When that company went out of business, 40 people were thrown out of work, which had a devastating impact on the local economy. It cannot be in the interests of retailers or consumers for short-term price pressures to put local suppliers out of business.
The committee therefore recommended that the Executive consider how it can use its contacts with supermarkets to influence their contract practices. We hope that we can influence supermarkets to consider spreading more evenly and transparently the risks of promotions and to consider contracts that would allow edible produce that supermarkets might reject to find other suitable markets, which would avoid discards.
The second big issue that came out of the inquiry is competition and how competition rules are interpreted in this country. The industry needs further co-operation and collaborative activity—that must be clearly stated. We asked the Executive to consider the lessons that can be learned from examples of collaboration among farmers in other countries. There is significant scope for further development of agricultural co-operatives, so it is important that the Competition Commission's current inquiry pay heed to our representations on the effect on Scottish interests of restrictive interpretations of the market effects of collaboration in the Scottish food industry.
This is the third inquiry that has been undertaken into the subject, but this time the right questions have been asked: we hope that the right answers will be given. The inquiry is important and its recommendations were sensible and widely welcomed. Many of the recommendations are being progressed. I hope that they bear fruit.
This has been a good debate on a good report. I know that several of my constituents in Galloway and Upper Nithsdale, some of whom gave evidence to the committee, will welcome the debate. I confess that it makes me rather sad that I am no longer a member of the Environment and Rural Development Committee, although I also accept that that view might not be shared by its current membership.
It has been a good debate because the report is important. It has engendered a gratifying level of public debate since its publication, although it has almost inevitably ended up highlighting the helplessness of the primary producer in a chain that is effectively controlled by four retailers. As we heard from several members—if not all—that helplessness is best portrayed by the current plight of milk producers; the dairy farmer is currently being screwed to the wall by whatever combination of factors it is that determines the farm-gate price that they receive for their product.
Would Alex Fergusson support the reintroduction of free milk in schools?
If that was the will of Parliament, I would have no choice but to do so.
Two weeks ago, I accepted the minister's answer to my question on this subject, when he said:
"There are clear instances of prices in Scotland being set in a way that suggests a rather curious similarity between each round of negotiations involving each of our supermarkets and processors. Although 1p or 2p may keep disappearing from the chain, the negotiations are between the processor and the supermarket and the farmer is never engaged in that process."—[Official Report, 21 September 2006; c 27797.]
In reality, that means that where the supermarkets have raised the price on their shelves, and no doubt the processors have had an increase as well, the farmer has received less than he or she was getting before. I accept that the minister has made recommendations on those curious similarities to the Competition Commission, but I have to ask whether there is not some more direct action that could be taken to loosen the stranglehold in which those primary producers find themselves.
Stewart Stevenson intervened on my colleague to ask whether the Conservatives apologise for dismantling the milk marketing boards. I am sorry that he is not here so that I can remind him that the price of milk rose for three years following the dismantling of the MMBs and continued to do so until producers stopped following what had been Government advice and took a higher price that was offered by a new retailer. If I may say so, the phrase "United we stand; divided we fall" has never been more vividly validated.
Perhaps the most chilling phrase in the whole report is in the sentence in paragraph 47, which states
"the Committee was struck by the deep reluctance of farmers and producers to comment on the record, due at least in part to a fear of losing business."
Surely that is worse than a stranglehold; it is tantamount to holding a loaded gun to the head of the producer through the terms of a commercial contract. I do not believe that anyone in Parliament finds that acceptable. Just because other producers are lining up to sign up if a producer drops out, that is not a sufficient reason to hold the sword of Damocles over those producers. If people are frightened to speak on the record in their own Parliament, as Richard Lochhead said, then we have arrived at a sorry state indeed. I find it hard to believe that the only action that can be taken to influence that state of affairs is to make representations to the Competition Commission. However, in the minister's defence, I do not expect him to go as far as Andrew Arbuckle, who has clearly joined the UK Independence Party in his efforts to do something about it.
Among the many good recommendations in the report is one on which, I fear, the committee is probably mistaken. The fifth bullet point of paragraph 61 asks the Executive to ensure that
"regulation is not disproportionate to the need to secure consumer confidence."
I fear that there is little point in its asking that. Reluctantly, I agree with Stewart Stevenson. After all, the Executive set up a special committee to reduce red tape and bureaucracy, but it has presided over growth such that red tape and bureaucracy are at a level that has never before been witnessed. We need only consider the situation that faces a number of farmers who are being threatened with highly disproportionate financial penalties for making a minute error in complying with a one-off 5 per cent heifer rule, on which the Scottish Executive Environment and Rural Affairs Department guidance notes left a lot of room for doubt. The farmers, who actually had the required stock numbers, are supposed to have committed the crime of failing to provide SEERAD with information which—this is the irony and injustice of the situation—SEERAD already possesses. Far from reducing red tape and bureaucracy, this Executive has turned it into a new art form.
We can all agree on the committee's report. I would have liked it to go further in some respects, but I acknowledge that issues are split between devolved and reserved responsibilities, which does not make the committee's task easier. I have no doubt that the report will be fully endorsed by Parliament, but I doubt that we have an Executive that is prepared to act on the report's recommendations. If we do not, perhaps it is time to look forward to a new Executive.
Presiding Officer, I would like to apologise on his behalf for the absence of Stewart Stevenson, who was unable to hear that speech because he has to be on "Holyrood Live" and it changed its time.
Some 1.5 per cent to 2 per cent of our gross domestic product is involved in the creation of the food and drink that we consume. That 1.5 per cent is vital to life; the other 98 per cent or 98.5 per cent could not happen without it. The way in which our Government enables that industry to provide its vital products for consumers to eat is of paramount importance. That is why today's debate about the Environment and Rural Development Committee inquiry into the food supply chain is absolutely vital to every Scot.
The lack of transparency in the system, which has been mentioned by many members, affects not only the consumer, who is given very poor labelling that has not improved, but the producer and those who cannot find out where in the market or supply chain the profits are being made. That is something that people ought to be able to find out. The position in which we find ourselves is that we, the consumers and the producers, are being farmed by the shareholders of the big four supermarkets. That is an appalling situation to be in. The supermarkets, which have shareholders around the world, are farming us. That is no way for us to conduct a food policy. I say to the minister that we need not a free market but a fair market. The tenor of today's debate has been that we need the regulation and input from Government that will allow the existence of a fair market.
Business support, or the way in which we apply the limited common agricultural policy funds, is a major issue. The supports that allow people to produce high-quality food are being cut and the minister can do something about that, but farm diversification is only part of the solution—the minister and the Government have other powers that could be applied
On the big supermarkets, people can park for nothing in the car parks of out-of-town supermarkets whereas, if they use a small shop in the town centre, they will probably need to pay parking charges. I do not suggest for a minute that the large numbers of people who use supermarkets should be required to pay parking charges, but the supermarkets should be paying far higher rates. The supermarkets could also be encouraged to stock local produce and to carry their goods by rail in order to reduce problems on our roads. However, the planning bills that we consider never deal with those issues. The Executive must get involved in such regulation and start to help consumers and producers alike.
There is a warning in our report on the position of the consumer. Paragraph 62 of the committee's report warns that to allow
"a short-term focus solely on the current prices faced by consumers risks undermining the viability of farm businesses, which will have long-term effects on the choice, freshness, quality and price of food available to consumers."
The minister has a role in relation to public health and is trying to make it possible for people to live better. Is he intervening to ensure that consumers are given better education and are better equipped to tackle what they are presented with on supermarket shelves? Convenience food is often poor food.
Parliament should not condone the supermarkets' making bloated profits. The minister intervened during Richard Lochhead's speech to say that a rational debate is needed, but it cannot be rational that the Tescos of this world make such bloated profits at our expense, not only from our pockets but, to some extent, from our health. I seek responses from the minister on that point, because we need to bring about a sea change. Governments can to some extent help to create a fairer market.
In her book "Bad Food Britain", Joanna Blythman talks about
"Britain's long-standing food philistinism that sees money spent on fleeting pleasures such as artisan cheese, a well-hung, patiently reared piece of meat or a unique and special bottle of wine, as money down the drain."
She continues:
"New trainers, a flat screen TV, another car? Now those are solid things that endure, for a while at least, and they buy you status in the eyes of friends, neighbours, colleagues and classmates."
Too often, in our society of consumerism, it is the second set of values that comes to the fore. If we are to change society—the food chain inquiry was about trying to change attitudes—we must get people to appreciate good food, rather than cheap food. I am interested in hearing how the minister will suggest that we should intervene to put out that message, because in Scotland we can do more.
As other members have said, Governments in other countries in Europe ensure that their consumers are presented with local food. I hope that in Scotland we, too, can achieve that.
I echo the comments of my colleague Ross Finnie. The Environment and Rural Development Committee put a great deal of work into the report, and we welcome it.
A variety of contributions have been made to the debate—I will deal with as many as possible. At the start of the debate, the Minister for Environment and Rural Development set out what we are doing to ensure that the whole food chain works together to secure a profitable future for all. Many members mentioned the power of supermarkets, which was covered extensively when Ross Finnie appeared before the committee. As he said then, the Executive stresses in all its dealings with the supermarkets the importance that it attaches to maintaining sustainable trading relationships throughout the food chain.
The minister refers to the Executive's dealings with the supermarkets. Can she elaborate? Surely it is time for a summit with the supermarkets, with ministers present. We should get everyone together to discuss the issues in a full and frank manner.
Ross Finnie meets the supermarkets regularly. I would be more than happy to ask him to give Richard Lochhead some of that information. We have a regular and on-going relationship with the supermarkets, in which we make the point very clearly to them that sustainable trading relationships must be maintained throughout the food chain. We encourage the supermarkets to have fair and transparent contracts, although we cannot intervene in individual dealings between parties.
Ross Finnie has also written to the Competition Commission to emphasise that it is not in the interests of retailers or consumers that short-term price pressures put local suppliers out of business. He met the commission recently during its hearings in Edinburgh and reiterated our view that although there is no hard evidence of breaches of the supermarket code of practice, complaints continue to be heard anecdotally, and today we heard from committee members about evidence that was brought to the inquiry, so clearly there is an issue to be addressed.
Will the minister take an intervention?
I would like to continue, if possible, and respond to several points that were made.
The Competition Commission still has a great deal of work to do and it might be some time before we see its report, but I hope that it will provide some assistance in solving what are serious problems for the industry.
Unsurprisingly, the position of the Scottish dairy industry has arisen in the debate. I fully understand and share the concerns of members who are worried about the future of that hugely important agricultural activity. Although many farmers have taken the agonising decision to leave dairy farming, the volume of milk that is produced in Scotland has reduced only slightly. Credit for that must be directed at the enterprising dairy farmers who have been able to use skilfully improved genetics, animal husbandry, feeding regimes and grassland management to obtain more litres from their cows. Scotland has some of the largest dairy herds with the highest yields per cow in the European Union, and many of our most efficient producers can be benchmarked easily against the best in the world. In addition, let us not forget the developing market in organic milk in Scotland.
The price that producers receive for their raw milk is critical to business profitability. My earlier general comments about the need for sustainable trading relationships apply particularly to the dairy sector. It must be apparent to all who are involved in the trading, processing and retailing of milk and dairy products that continuity of supply can be guaranteed only if producers receive a reasonable return. The Executive continues to foster collaborative approaches to dairy supply chain issues and we will continue to do what we can to bring about more positive relationships.
Many members mentioned procurement; several mentioned the pilot scheme in East Ayrshire. Frances Curran did not need to go to Italy to see creative procurement in action because she could have seen it in East Ayrshire, where the council strives to ensure that local producers are aware of the local opportunity to bid for contracts.
Hurlford primary school was the first in the area to procure organic food and has now achieved 50 per cent usage, 70 per cent of which is locally produced and 100 per cent of which is unprocessed. The council has extended that model to 11 schools in the area. The Environment and Rural Affairs Department commissioned research to evaluate the pilot and assess what lessons can be learned for the rest of Scotland. In addition to an increase in the uptake of school meals, the survey found that 77 per cent of parents believe that the scheme represents good use of the council's money. Those are good indications and provide guidance for what we can do in the future.
I apologise for having to leave the debate earlier on other business, which I explained to the Deputy Presiding Officer.
Is there a role for the minister's department in trying to move Parliament towards procuring locally? If we could do that, we would be taking a stand and showing the rest of Scotland what it can do.
I am sure that the Deputy Presiding Officer will be glad to hear me say that we would not presume to interfere with the powers of the Presiding Officer. The Deputy Presiding Officer and the Presiding Officer will be most interested to hear Christine Grahame's suggestion.
The Executive has supported farmers markets since they began. There are now more than 60 markets, with a turnover of £6 million a year. They provide producers with an outlet for their produce and the opportunity to meet consumers face to face to learn what they look for in a product. They also provide consumers with a ready source of quality local produce that is fully traceable.
As our evidence to the ERDC inquiry and our response to the committee's report demonstrate, we are taking action with partner organisations on many fronts: we are investing in the processing and marketing of Scottish produce, in local food and in public procurement to name but a few.
Today's debate has centred on agricultural issues because that was the focus of the committee's inquiry. However, the Executive's support for Scottish food and drink includes fisheries and aquaculture products, which make a significant contribution to the sector.
The committee's report tackled a complex and multi-faceted set of market relationships and made a number of valuable recommendations. Ross Finnie and I are pleased that we are all striving towards the same goals and towards helping everyone who is involved in the food chain to work together for mutual benefit. Finally, I inform Christine May that the minister will be delighted to meet her.
I am in a strange position, because I am summing up the debate for the committee although I was not on it when it undertook the inquiry. My colleague Mark Ruskell, who has already spoken in the debate, was on the committee then. However, I have read the report thoroughly and Mark kept me up to speed on the inquiry, as I was interested in its progress.
The report shows the value of a committee undertaking such an inquiry. It would be a great pity if committees were not able to find the space for such inquiries in their work programme. The debate that we have had today shows how valuable the inquiry has been.
The inquiry turned out to be timely, as shortly after it finished the Office of Fair Trading referred the grocery market to the Competition Commission. As others have said, committee members were able to give evidence to the Competition Commission. It is clear that although competition is reserved to Westminster, other aspects of the supply chain, such as agriculture and rural development, are devolved.
The minister talked about the Government not interfering too much in the market. Rob Gibson and others mentioned the idea that there should be a fair market, but another aspect is that the Government has a duty of care to our rural environment and to our farming communities and their long-term viability. The First Minister has previously been challenged in the Parliament over the actions of supermarkets and their effects on our farmers. The response has been that supermarkets must understand that such a negative impact is not in their interests, and that it is in their interest to ensure that farmers who supply them are viable and are not put out of business by their practices. That is fine, and I agree that the supermarkets should realise that, but ultimately the Executive has the duty of care. Where the Executive can interfere, it should do so.
The background to the inquiry is well known. The price pressures that producers face and the climate of fear in which businesses operate are clear. It is frightening that in 21st century Scotland some witnesses were unable or felt unable to give evidence to the committee openly and on the record.
Several members touched on the direction of agriculture post-common agricultural policy reform, and I have referred to the power balance in the supply chain. Another issue is the different way in which public money will go into land management and the different way in which we will fund agriculture and food production.
The committee referred to adding value to our raw materials. That is timely, as the Executive is consulting on its rural development plan. The Executive's response to the committee listed the goals in "A Forward Strategy for Scottish Agriculture", which are fine, and included using the measures that are available under the rural development plan to develop processing and marketing. I welcome that and hope that it reflects Executive thinking, because some of us have criticised the fact that Scotland has not used all the measures that are available to it under the rural development regulation to add value to the raw materials that our rural communities produce.
Christine Grahame mentioned the supermarkets restricting choice and the varieties that are grown, confining them to those that are bred and grown for appearance rather than taste and flavour. If I were not summing up for the committee—I will temporarily put on my party health spokesperson's hat—I would go into the matter in more detail. We have recently had evidence of the failure—I think we can put it as strongly as that—of the Scottish diet action plan. There is evidence that all the health messages about food have not had the desired effect.
We should look at food in a different way. We should look at good food and tasty food—food that people want to eat. We should look at meat that has been hung properly and vegetables that have been bred for flavour rather than for shelf life or appearance. Perhaps if we focused on those matters instead of the health message, health benefits would be a side effect. Concentrating on the health message has not brought health benefits and has not given us tasty food either. The choice of food where most people shop is now restricted and the food is arguably not of the quality that it could be, unless they hunt out alternatives.
The issue of local food economies is highly topical. The Scottish Parliament cross-party group on food has considered procurement issues. We hope that the Executive inquiry into a vision for crofting will consider the contribution that crofting can make to local food production. We have considered local food initiatives and farmers markets and agreed that they must be nurtured. Producing food in the area in which it is consumed is sustainable in a way that incurring food miles is not.
The minister said that we are not self-sufficient in red meat and that we import it, and members discussed earlier the importing and exporting of food. A Green MEP, Caroline Lucas, produced a report called "Stopping the Great Food Swap", which showed the illogicality of countries exporting beef, poultry meat and pig meat while importing similar quantities of the same produce. Such a practice does not make sense in any logical, human or environmental way—it just adds to food miles. There are issues around where our food is going and where our food is coming from.
Paragraph 29 in the committee report is on procurement and is crucial. I am glad that the Executive's response was not hostile. The Executive has agreed to consider how procurement can, within EU rules, be used to favour local produce. I would like the accent on procurement to change—I think that it is changing—to emphasise the possibilities and not just the problems and stress the importance of sustainability, under best value. The Executive's response said that sustainability is part of best value. That point should be stressed. We must not be defensive; we should be gung-ho and consider what we can do rather than be afraid of falling foul of rules and inadvertently doing something that we are not allowed to do.
The minister mentioned the food for life project in East Ayrshire. A similar project has been piloted in the Highlands. The food for life model of having produce that is 30 per cent organic, 75 per cent unprocessed and 50 per cent local is a good one. Other countries would not find that a mountain to climb or something to which it was difficult to aspire, and neither should we. If it can be done in Rome and East Ayrshire, it can be done everywhere.
I was a bit disappointed in the Executive's response to paragraph 29, because it said that it was not at present trying to alter EU procurement rules. I know that the Executive must act in that respect through the UK, but it does have an input into the process. If there are EU rules that are a genuine barrier to local procurement, they should be looked at. It is in the interests of nobody in the EU to increase food miles under the name of openness and fair competition. However, I was glad to see that support was expressed for farmers markets.
I welcome support for diversification and I hope that the rural development plan will help not only farmers but larger units—groups of farmers or co-operatives—to diversify. Obviously, I cannot avoid mentioning the domination of the supermarkets, because we are all aware of it, the insecurity of farmers, and the difficulty with the code of practice and the feeling that it is not working. We all agree that the committee's inquiry shows clearly that the code of practice is not working. I am a bit disappointed that the minister did not respond—although it was not an action point for him—to the committee's conclusion that the code of practice should be extended to the whole supply chain and that we should have an independent regulator, because the voluntary code is simply not effective.
I note that agricultural co-operatives are regarded as a sensible way forward and that we must create conditions for them to develop. I agree that that is essential. As the minister and others have said, it is important that our farmers are able to handle—if not fight back against—the pressure that is put on them by supermarkets and perhaps processors. However, that is a bit like blaming the victim. It is not really up to the farmers to fight back; it is up to the other links in the chain to behave in a civilised and sensible way to the people with whom they deal.
I welcome the Executive's support for co-operatives and I welcome the funding that the Executive already gives to the SAOS, although its grant of £325,000 a year seems quite small out of a common agricultural policy budget for Scotland of £450 million. However, perhaps the grant is sufficient to allow the SAOS to do its job.
The committee recommended that competition authorities must consider how markets are defined. That recommendation is crucial—unfortunately, I do not have time to go into it in any detail.
I conclude by saying that the committee's inquiry was important, timely and very worth while. The issues that it highlights, and the actions that are needed at Scottish, UK and EU levels, will be crucial for the future of our rural economies. The recommendations deserve to be acted on. I am encouraged that the Executive seems to agree with us, and I look forward to action in all those areas and, eventually, to the results of those actions.