THE PROCESSING INDUSTRY AND THE
URBAN WASTE WATER DIRECTIVE
182. A healthy processing sector is crucial to the
overall success of the UK sea fishing industry. As we have seen,
competition between fish merchants is good for fishermen in increasing
the market for their fish and good for the customer in increasing
the choice of product. Concentration of fish processing activities
encourages vessels to land their fish in a particular port, thus
creating a stronger economy and a more viable future. Processing
adds value to the product, further enhancing the viability of
the industry in that locality. Finally, processors are the key
link in the chain between supermarkets and fishermen. Without
a strong processing sector, even more fish sold in our shops would
be sourced from abroad.
183. It is therefore worrying that the processing
sector in the UK is under considerable pressure at the moment
and there are concerns that many companies will not survive the
next few years. The Scottish Fish Merchants' Federation described
the situation as "almost impossible",[700]
due to economic factors such as the strength of the pound and
high quayside prices for fish.[701]
The SFIA confirmed that the processors' "margins are under
severe pressure",[702]
and its Chief Executive observed that "particularly the primary
processors but the whole of the processing sector at the moment
feels under threat, and there is going to be a shake-out, I am
afraid, of some of the processors".[703]
This situation is not wholly new: the number of fish processing
units in the UK fell by over a quarter between 1986 and 1995,[704]
with a reduction from 200 processors to 85 in the last 15 years
in Aberdeen alone,[705]
although changes in the size of unit led the SFIA to conclude
that "employment within the industry had remained stable".[706]
However, the latest threats to the industry in the form of charges
derived from implementation of EU legislation are the worst yet.
184. There were two problems raised with us by processors
in Grimsby and Aberdeen. One, charges for hygiene inspections
has been resolved by the Government's decision to give the maximum
discount to both the catching sector and to the processing sector
who have to pay for inspections at the quayside and at the factory,
respectively.[707]
The Scottish Fish Merchants' Federation observed that this was
"the fairest way forward and we will accept it, albeit reluctantly"[708]
and that "we have got to say the Government has acted very
fairly in this particular one".[709]
We note, however, that the Grimsby Association still believed
that "the cost of administrating the charge will be more
than actually paying it" and that "in most cases it
will be unlikely that the EHOs [Environmental Health Officers]
will actually do the work for which we are being charged".[710]
185. The second charge arises in connection with
the European Directive on Urban Waste Water Treatment. The Directive
aims to ensure that sewage is collected from significant sized
communities and that it is treated to standards laid down in the
Directive before its discharge into fresh waters, coastal waters
and estuaries. On environmental grounds, the Government has adopted
"a precautionary approach" to some aspects of the Directive
in order to require secondary treatment for all coastal sewage
discharges serving populations of 2,000 or more in England and
Wales, and has required speedier implementation to improve unsatisfactory
storm water overflows. The cost of the first phase of the Directive
which concerns installing tertiary treatment by 1998 in 33 sensitive
areas and secondary treatment by the end of 2000 at all sewage
treatment works serving populations of over 15,000 is £8
billion. £6 billion of this is being invested by the water
industry which is also planning to spend a further £8.5 billion
up to 2005 on improvements to water quality, partly in response
to the Directive's requirements to install secondary treatments
at smaller sewage works by that date, and £18 billion on
a pre-existing programme of maintenance and improvements between
1989 and 2005. These costs are passed on to customers of the water
companies. For certain industrial discharges, including fish processing,
conditions for discharging trade effluent can be set on a case
by case basis, "appropriate to the nature of the effluent
and to the type and nature of the receiving water" but all
discharge consents, including existing ones, have to be consistent
with the requirements of the Directive.[711]
186. What this means for the fish processing industry
is massive increases in sewerage charges to pay for the extra
treatment required by the Directive. In Aberdeen, the charges
are to be phased in over the next four years which is scant comfort
to a company whose payments are due to increase from £40,000
per annum to over a million pounds.[712]
For a medium sized company, the rise is from £17,000 to £240,000.[713]
These charges have been arrived at by the North of Scotland Water
Authority, which sampled discharges for each factory, "and
worked out accordingly the capacity of the plant that would need
to be built to treat the sewage".[714]
According to the fish merchants, the Authority "have admitted
now that the samples have been flawed".[715]
Apart from the scale of the charges, the main complaint of the
industry is that the Authority has not given them sufficient time
to come up with alternative cheaper methods to meet the requirements
of the Directive, as is perfectly permissible.[716]
The processors are being assisted by Aberdeenshire Council "to
find ways of reducing waste water charges in the fish processing
sector" by means of "alternative sustainable ways to
meet the criteria of the Urban Waste Water Directive".[717]
Three examples given by the Council were a study into waste minimisation,
training for companies on waste minimisation and a group treatment
plant, the cost of which "is hugely different to the PFI
equivalent",[718]
proposed by the water authority, the contract for which is to
be awarded in August 1999.[719]
The separate plant for treatment of waste from fish processing
was also supported by the Herring Buyers' Association which was
desperately worried about the impact of the proposed charges on
the competitiveness of the industry and employment in the North
East of Scotland.[720]
187. More urgent concerns about the impact of increased
charges were raised in Grimsby. These fall first on that port
because the treatment plant there, under construction before the
Directive, is now in operation. Increases in charges are therefore
being imposed from July 1999. The Grimsby Fish Merchants' Association
argued that the implementation of the Directive would result in
serious damage to Grimsby's competitive position, job losses,
business closures, and a sharp rise in the price of fish to the
consumer.[721]
The increases in Grimsby are "to pay for connection to a
new treatment works of an outfall into which the industry's effluent
flows via Anglian Water's sewer".[722]
The Department of the Environment, Transport and the Regions argued
that in the past fish processing companies had benefited because
they had discharged their effluent without treatment and hence
not had to pay for treatment: "Because the by-products of
fish processing are comparatively polluting and expensive to treat,
the fish processors' trade effluent charges will be generally
very much higher than at present".[723]
There was disagreement on this point. In Grimsby the charges were
levied by Associated British Ports and shared out among the merchants
but are now being levied directly by Anglian Water on new customers
whose level of charges must therefore be assessed by fairer, consistent
and agreed sampling procedures before there is a legal basis for
charging. Moreover, fish processors pointed out that they were
discharging a biological product back into the sea. However, the
principal debate as in Scotland is whether Anglian Water has acted
fairly in its treatment of customers and what can be done to ease
a scale of charges which may lead to bankruptcies and will constitute
a heavy competitive burden on Grimsby and the UK fishing industry.
The DETR stated firmly that "This is not a case of the abuse
of monopoly power", as there are various ways in which the
industry could arrange to bypass the Water Authority.[724]
However, even following an agreement reached in April with the
Minister responsible, Michael Meacher MP, that "Anglian Water
and local fishing industry representatives would work constructively
together to find the best solution to this issue",[725]
we were told in May that the two parties were "still not
agreed on basic sampling procedures, which are the basis of their
charging regime".[726]
188. The anger of the industry is fuelled by apparent
disparities in the treatment under this Directive of their competitors
in other countries. The SFIA had conducted research which indicated
that "the northern European countries are perhaps a bit more
advanced than we are in their compliance with that, Germany, the
Scandinavian countries and Holland; and generally the southern
European countries are not as advanced".[727]
The Scottish Fish Merchants' Federation told us that the treatment
plants in other countries were "not being paid for by the
processors themselves. In Denmark, for example, many of the factories
were relocated at council/government expense so that the taxpayer
was paying. In France huge grants have been made available to
processors to do it".[728]
One French company "had been given £150,000 of French/European
funding to get the equipment for his factory".[729]
As the DETR commented, "It is for each Member State to determine
how to implement the Directive",[730]
but it seems to us that this is a clear-cut case of the UK
industry being disadvantaged in a competitive market. Unlike fishermen
with quotas, merchants and processors are not guaranteed a percentage
share of the market and they are forced to compete with their
counterparts in other Member States for the custom of supermarkets
and caterers. The impact of the charges on their competitiveness
does not even appear to have been assessed by the Government.
189. The Scottish Fish Merchants' Association called
for two concessions to solve this impending crisis - time to work
out alternatives to the expensive plans of the water authorities
and Government funding to help meet the costs of building alternatives.[731]
It argued that as its solutions would undoubtedly be cheaper,
then the Government would save money on the PFI deal through its
efforts.[732]
The situation in Grimsby and in England and Wales in general is
different, as the water companies south of the border are no longer
state-owned, but throughout the UK there is a need for both time
to reach sensible agreements and consider the options, and assistance
to meet the costs of either water authority or alternative treatments.
Mr Morley was clearly sympathetic to the plight of the industry
but was restricted in his efforts to help to making representations
over the "very, very steep" increases in charges to
the DETR, or suggesting that the SFIA could offer "advice
about how waste can be minimised in ways which are not terribly
expensive".[733]
The DETR has held meetings with all parties but to little avail.
Until the recent closure of the processing grants scheme, it would
have been possible for companies to apply for European funding
to improve their premises to meet the new requirements but Mr
Morley could not give us a definite answer whether the issue "might
fit in, in relation to future structural aid and structural funding".[734]
The situation is confused and unsatisfactory. We accept that the
Government "cannot tell Anglian Water what to charge".[735]
Like the Government, we support the main aims of the Directive.[736]
However, in an adjournment debate, Alan Meale MP, Parliamentary
Under-Secretary of State for the Environment, Transport and the
Regions, also expressed the support of the Government for "the
determination of our fishing industries to be fully competitive
internationally".[737]
To achieve this, they need more from the Government at present
than their good offices in arbitration. The example of other Member
States shows that the Government cannot realistically claim that
additional assistance would be viewed as an illegal state aid.
It is essential that the imposition of the charges be delayed,
and then only phased in, to give the industry time to develop
alternatives and to minimise waste.
190. In Cornwall, we came across one processing company
which had shown admirable resourcefulness in adapting to a seemingly
inappropriate regulatory regime. Threatened with closure or expensive
alterations to a traditional pilchard factory in order to comply
with modern hygiene regulations, Mr Nick Howell of the Pilchard
Works in Newlyn converted his business into a museum, thus side-stepping
the regulations and enabling the company to operate in the traditional
way. In addition, the income from long-established export markets
in Italy has been supplemented by earnings from tourism. While
this particular solution may not have widespread application,
the
example of the Pilchard Works stands as testimony
of what can be achieved within the fishing industry with ingenuity
and determination.
652 
