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Mr. James Gray (North Wiltshire) rose--
Mrs. Organ: I am afraid that I cannot give way, as I want to make progress and I have only limited time.
The NAO has said that the BSE crisis has been the single most expensive peacetime catastrophe. The cost is set to rise to more than £4 billion before 2000, the biggest part of the bill will be compensation to farmers, and average compensation for younger animals being slaughtered is £1,400.
The previous Government's handling of the whole beef saga is a tale of mismanagement and ineptitude--such as the lack of response to the Select Committee's recommendation in March 1994 that they should ban offal and brain substances in the food chain. That recommendation was turned down. The NAO report points out that, in their panic after March 1996, the previous Government did not act in the best interests of taxpayers but threw money indiscriminately at the problem.
The report questions some of the financial deals struck with farmers, slaughterers and renderers. There was no proper competitive tendering--slaughter fees were simply set at £87.50 per animal in May 1996, even though there was over-capacity in that sector. In reality, the cost was closer to between £39 and £51 per animal, as Coopers and Lybrand found in an open book examination in July 1996. The fee was not reduced to £41 until late August 1996, and competitive fees did not come in until this Government put them in place in July 1997.
Mr. Hunter:
Will the hon. Lady give way?
Mrs. Organ:
I hope to make progress. There is very little time, and I would like other hon. Members to be able to get into the debate.
The NAO report states that the £670 million compensation paid to farmers in 1996-97 was too generous for beef animals. That financial mismanagement of the affair is an example of how the whole situation was handled. In addition, the lack of unity in the Conservative party on European affairs did not help. They continually call on us to claim agrimoney compensation that they know is not available. It is interesting that the Conservative party, over the period of the crisis, did not ask for it or get it. However, we have secured £85 million compensation, which we announced as part of an aid package in December 1997, using up almost all the aid that we can apply for.
The decline in farm incomes and the depression in the beef industry did not appear after 1 May 1997. We have had to pick up the pieces of the Tory legacy.
We have introduced a raft of measures to help the beef sector--additional hygiene measures to restore confidence; the introduction, on time, of the cattle traceability system and paying for the set-up and first year running costs; the launching of the beef labelling scheme, supporting the assured beef meat initiative to the tune of £1.8 million; and publishing hygiene assessment scores from UK slaughterhouses.
I note that my two local slaughterhouses, Ensors at Cinderford and Lyes at Minsterworth, have excellent scores in this month's enforcement report. This Government, with other European Union states, the Parliament and the Commission, have worked tirelessly to lift the beef ban, with the first exports of Northern Ireland beef being reported in last week's Farmers Weekly.
Mr. Paul Keetch (Hereford):
Will the hon. Lady give way?
Mrs. Organ:
I will not, as I have told other hon. Members. I want to make progress so that other hon. Members can speak.
We are pressing for a wider lifting of the ban under the date-based export scheme. The proposal to permit the export of beef from cattle born after 1 August 1996 has now been referred to the Standing Veterinary Committee. We will shortly press in the Council of Ministers for the decision to be made on a scientific basis alone.
As the hon. Member for Mid-Worcestershire said, the Government have agreed to almost all the recommendations in the Select Committee report. We have already put many of them into place. As the hon. Gentleman said, two of them were put in place while the report was being printed.
Another factor that beef farmers in the Forest of Dean claim is responsible for poor farmgate beef prices is the dominance of the retail multiples, which control 70 per cent. of retail fresh meat sales. Farmers know that their industry is cyclical. All livestock producers know that markets go up and markets come down. Sometimes it is good for producers, sometimes it is good for retailers, but since the mid-1980s farmers have faced increased pressure from retail concentration in the beef supply chain and hence surprisingly low returns.
Before the mid-1980s, farmers would grumble about the butchers making money, but they did feel that it was a matter of "a season for us, the next season for the butchers". That has gone; the game has now changed. Even during the present difficult situation, retailers have been able to hold their margins. The Meat and Livestock Commission states:
In response to the London Economics report "The Supply Chain for Beef and Lamb"--commissioned by Tesco--Don Curry responded by saying:
The final report proved that supermarkets have not been making huge profits from the sale of beef or lamb. They have not been making excess profits after BSE, because their margins have been eroded due to the post-BSE added costs and the specified risk material controls, with the gap between producer returns and retails rising by 23p per kilo since March 1996 and the costs due to BSE increasing by as much as 27p per kilo. The incurred costs of the processing and market chain have not led to increased profits for retailers.
I should have thought that that argument was undermined by the obvious fact that slaughterhouses are paying less for cattle. Tesco is selling beef as a loss leader for other, more profitable, foodstuffs. It states that beef was the biggest loss maker in its entire meat category in 1997-98.
Whatever the report says, the multiple retailers are using their ever more powerful grip on the market and are abusing their buying power--and farmers are suffering as a consequence. That pressure--particularly when other supermarkets are buying meat on price alone from overseas processors who do not face the same regulations and have little regard to quality or concern about how the animal is reared--makes it difficult for our domestic producers to compete, even with their high quality, safety and hygiene regulations and some of the best animal welfare standards in the world. Labelling should inform the consumer of all that.
It is not all doom and gloom, as the hon. Member for Mid-Worcestershire stated. Consumption is up and confidence is being restored. Beef is back on the menu in many schools. British beef is back in McDonald's hamburgers. There has been a 7 per cent. increase in home beef in the first quarter of 1998 over 1997. My local National Farmers Union representative, Robert Purdey, tells me that there has been a small increase in the beef price of late and that feed costs have gone down. Locally in the Forest of Dean, the small organic beef sector is faring extremely well, aided by the marketing strategy of the Forest of Dean food directory. I commend that document to the House.
Beef producers receive more than £500 million each year in normal beef subsidy. It is a difficult time, and producers are facing problems, but there are opportunities in the long and short term. It is predicted that there will be a 2.4 per cent. growth in world meat consumption in the next seven years.
The Meat and Livestock Commission has close contacts with Europe and, although it will take time, many caterers and retailers there want our beef. I look to the Minister to assist in promoting beef when the European market is open. If farmers come together, they should be able to put pressure on the retail markets. With assistance from the Government, we should be able to give the consumers what they want--quality and food safety, and good British beef that can be delivered competitively.
5.43 pm
Mr. Charles Kennedy (Ross, Skye and Inverness, West):
In following the well-informed speech made by the hon. Member for Forest of Dean (Mrs. Organ)--and the excellent opening speech by the hon. Member for Mid-Worcestershire (Mr. Luff), the Chairman of the Select Committee--I start by saying that I hope that the hon. Lady will forgive me for reflecting that, at times, such was her clarity and authority that her speech sounded like a ministerial intervention in terms of the Government's response to the Select Committee report rather than a supportive contribution from the Government Back Benches. Those of us who have been in the House for a while remember another female politician who used the royal "we" in a similar fashion. Perhaps we were listening to a throwback to that a few moments ago.
I congratulate the hon. Member for Mid-Worcestershire and his Committee colleagues on the report. I link his name to that of the Chairman of the Welsh Affairs Committee, the hon. Member for Clwyd, South (Mr. Jones). That Committee has done some excellent work on the supermarket aspect.
The hon. Member for Mid-Worcestershire was right to say that the debate takes place in the immediate context--perhaps one should say shadow--of the Chancellor's statement, which immediately preceded it. Being a quintessentially fair-minded person, and never one to jump to instant conclusions, the hon. Gentleman spoke of what he thought of as the modest implications for MAFF of the statement. Having had no more time than the hon. Gentleman to look at the figures, I suggest that that modesty could be slightly more ominous in due course. Food safety, correctly, is being hived off to an independent agency, but the mission statement of MAFF is changing profoundly alongside that. Coupled with some of the initial figures--which we will need to look at in greater detail--some alarm bells may yet sound in agricultural communities and the various section heads in MAFF.
I, too, wish to touch briefly on the export ban, on compensation payments and controls and on the continuing problem underlying so many of the present difficulties--the strength of sterling. All quarters in the House and all parts of the country have welcomed the progress on the lifting of the export ban for Northern Ireland. That is good news, but we need more progress on the date-based scheme, which, frankly, appears to be bogged down by political shenanigans in Brussels.
I was in Brussels speaking to officials a couple of weeks ago. There is no doubt that the Standing Veterinary Committee has postponed further inspection consideration, and is unlikely to consider the matter again in Brussels until September. By then, the GB database on animal movements should be up and running, and one expects that DG XXIV will want that linked into the scheme. Allied to that, the German elections will be imminent. It is easy to see that the Standing Veterinary Committee--and the political and Council decisions that may flow from it--may be subject to further political delay as a result of the German elections timetable.
Some advantage has been taken of those events in a way that has not been designed--I put it no more strongly than that--to bend over backwards to help British Ministers and the British Government in their genuine efforts.
The hon. Member for Mid-Worcestershire was right: we must look forward in this debate. In looking forward, however, the recent experience examined by the Committee gives some important pointers. At the time of the March 1996 export ban, the veal calf market collapsed overnight, affecting about 500,000 animals. The calf processing scheme was brought in to compensate those affected--mainly in the dairy sector--by the loss of their market. That had the additional benefit of reducing the number of cattle produced in the EU. However, that has proved to be yet another example of action taken domestically here which has helped to bail out people elsewhere in the EU without providing any great return, merit or benefit to us.
Any halting of the scheme would lead to disaster if the veal market was not properly restored to farmers who have been hit. Once the date-based scheme is established, over-30-months cattle should be able to re-enter the food chain after February next year. That will lead to a serious early glut in the beef market, and it will be important that the ancillary measures taken in Scotland, England and Northern Ireland in terms of advanced promotion are redoubled by the Department to ensure that we can take as early advantage as possible.
Mention of February next year leads me in passing to something we debated in the House ad nauseam, if not ad infinitum--probably both: the ban on beef in the bone--[Hon. Members: "On the bone."]--on the bone. The Minister may feel that it is in his bones these days, he has had to defend it so often at the Dispatch Box. The Minister knows the views of Opposition parties and I shall not rehearse them here, but there is not much practical need for that. I am not accepting the need for it here and now, but there will not be much further particular need for that beyond the date itself. That seemed to be the implication of the interview given recently by the Minister of Agriculture to the Financial Times.
I notice that the English court case against the restaurateur who sold beef on the bone has been rather quietly dropped. That being so, this is a further golden opportunity for the Government to save the public purse by not pursuing the Scottish case, which is now the only one outstanding and which has been referred by the Court of Session to Selkirk sheriff court. We know that we are beginning to see the light at the end of the tunnel, even given the stupidity and unnecessary nature of the policy, so why not just drop the Scottish case completely?
In 1997, a 47 per cent. drop in farm incomes was recorded by the NFU, showing suffering not only in the beef sector but across all sectors of the farming community. It can be seen most tellingly in the Welsh agriculture community, where beef and sheep rearing often occur on the same holding, subjecting farmers to a double whammy. That needs to be taken on board still further.
The London Economics report for Tesco has been mentioned. Even with the cloak of parliamentary privilege, no one wants to end up in the legal action that may yet be pursued as a result of all this but, as the hon. Member for Forest of Dean fairly said, that report revealed that whatever view one takes of the activities of supermarket chains--I incline towards the sceptical or
critical view of their activities--the fall in farm gate prices is indisputable, not least because of the concentrated nature of the farming activity involved.
If the plug is pulled on someone's main or one of their two main activities, they are at the mercy of wider events and not in a position to exert much influence, but a Tesco or a Sainsbury that experiences a loss in one of its product ranges is always able to expect--indeed it encourages--the consumer to switch to other forms of produce and thus cross-subsidise product lines. The only group in the process, which includes the abattoir sector and the supermarket sector, that has been entirely exposed throughout since the imposition of the beef ban are the farmers, because they have no cushion and no alternative means of defence against the economic conditions that have been visited upon them.
The collapse in the beef market--BSE was central to it; for example, the Welsh market has fallen 28 per cent. since 1995--has been exacerbated by the strength of the pound and the unwillingness to access compensation funds available through the EU. Moreover, the additional regulatory controls imposed on our producers are not duplicated for competitors in other parts of the EU.
"Supermarkets have continued to make steady margins on beef sales over the past two to three years while returns for producers have slumped."
That was the commission's conclusion in response to the Welsh Affairs Committee in March, and it remains the case.
"it is clear the multiple sector has not shared the reduction in industry returns in the past two years."
14 Jul 1998 : Column 225
That is bad news for producers and consumers, but not for the retail giants.
The London Economics report has an element of controversy about it, the second draft being a revision of the first; the comment that beef farmers had been inefficient and complacent operators immediately before the BSE crisis was withdrawn. The National Beef Association said that the report was not fair, factual or independent, as it was commissioned by Tesco.
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