Scottish Government

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The In House Policy Consultancy
4/12 Great Minster House
Department for Transport
76 Marsham Street
SW1P 4DR
0207 944 4507

20 July 2005

Dear SFIA stakeholder,

Review of the Sea Fish Industry Authority

We have been asked by the four Fisheries Ministers in the UK to undertake a review of the Sea Fish Industry Authority ( SFIA), looking at its roles, responsibilities and funding. The review is one of a regular programme of reviews of non-departmental public bodies undertaken under Cabinet Office guidelines.

The consultation paper attached briefly describes the current activities of the Authority, sets out some of the issues which we are addressing, and poses some specific questions.

We should like to know what you think.

Please let us have views by 23 September. They should be sent to me at the above address, or emailed to Daniel.Barrett@dft.gsi.gov.uk.

This letter comes on behalf of my co-reviewer, John Martin, a former Scottish Executive senior civil servant, and myself.

Thank you for your help

PRISCILLA RUSSELL

REVIEW OF THE SEA FISH INDUSTRY AUTHORITY - STAKEHOLDER CONSULTATION PAPER

Prepared by the Review Team

Introduction

1. The Sea Fish Industry Authority ( SFIA or 'Seafish') is a levy funded non departmental public body established under the Fisheries Act 1981 to serve the interests of the UK sea fish industry. Based in Edinburgh and Hull, it has an annual turnover of £11.5m and 117 staff.

2. The four Fisheries Ministers in the UK invited us to undertake a review of the SFIA, looking at its roles, responsibilities and funding. The review is one of a programme of periodic reviews of non-departmental public bodies undertaken under Cabinet Office guidelines. Our full terms of reference are at Annex A.

3. We are a team of two: Priscilla Russell of DEFRA's In House Policy Consultancy and John Martin, a former Scottish Executive senior civil servant.

4. We started work in late May 2005 and expect to report to Ministers in early November. We want our conclusions to be informed by a full understanding of how the SFIA and its activities are valued by its stakeholders. The purpose of this paper is to encourage stakeholders to contact us with their views.

The issues

5. We are focussing our attention on three sets of issues, described in more detail in the following sections of this paper.

(i) SFIA role and activities (paragraphs 8-32)

Does the SFIA still have a role, what is it, and what should it be doing to fulfil that role?

(ii) The levy and other funding sources (paragraphs 33-41)

Is the levy still the right way to finance the SFIA.? Are there ways in which its apportionment and administration might be improved? How far should the SFIA look to other sources of finance, such as charges and government grants?

(iii) Governance and accountabilibily (paragraphs 41-48)

Who should appoint Board members, and to whom should they be accountable? Does the SFIA do enough to report back to its stakeholders, and to keep in close touch with the industry?

6. These issues are not intended to be exclusive. Our remit does not extend to questions about the internal management of the SFIA, but we would be very pleased to hear about other issues that are of interest or concern to SFIA stakeholders.

How to contact us

7. Please write to or email us by 23 September, addressing your response to:

Priscilla Russell

Email Daniel.Barrett@dft.gsi.gov.uk

Section (i): SFIA role and activities

Statutory background

8. The current remit and powers of the SFIA are laid down in the Fisheries Act 1981. It is required to use its powers for the purpose of 'promoting the efficiency of the sea fish industry and so as to serve the interests of that industry as a whole'. It is also required to 'have regard to the interests of consumers' ¹. The 'industry' is defined to include catching, processing and transporting sea fish and sea fish products from vessels registered in the UK, and operations within the UK to breed, rear or cultivate sea fish for human consumption, or to import, process or sell sea fish or sea fish products. 'Sea fish' is defined to include shell fish but exclude salmon and migratory trout. ²

9. The Authority's powers are also set down in the legislation. It may carry out research and development, give advice, provide or support training, promote and market the consumption and export of sea fish, make loans towards the costs of constructing or improving fishing vessels or processing plant and give financial assistance to relevant co-operatives ³.

Current activities

10. A table showing SFIA's expenditure under five broad function groupings is provided at Annex B. The work of each grouping is described briefly below.

Industry development

11. This grouping includes the inshore fisheries group, set up to help the inshore/shellfish sectors develop to take advantage of current market opportunities, and a group of nine regionally based staff ⁴ located around the UK. Their role is to act as the prime contact point for SFIA with fish processors, fishermen, regional seafood groups and regional development organisations. They have responsibility for maintaining contact with the largest levy payers as well as delivering advice and support programmes to industry. In doing so, they draw on the work and expertise of the other teams described below.

Market analysis and economics

12. This group gathers statistical information on all aspects of the supply chain, undertakes market research, and provides regular economic and business advice to the industry and to government on request.

Marketing and PR

13. This grouping is engaged in a range of activities to promote fish consumption and the reputation of the industry. Activities include Seafood Week, promotional activities in schools, the Fish and Chip Shop of the Year competition and the publication of a quarterly newsletter.

Training

14. SFIA provides financial and other support for a network of 18 industry-led Group Training Associations across the UK, and for Improve, the Sector Skills Council for the food and drink sector. In addition, SFIA staff are directly engaged in developing learning materials, running training courses, providing advice and guidance, and working with other providers to analyse and meet the needs of the industry. Fishermen's safety training and training in health and food hygiene are two of the main programmes delivered. SFIA facilities include a flume tank in Hull, which is used for both training and R&D purposes.

15. In the light of changes in training support nationally, including the establishment of Improve, SFIA is currently reviewing the priorities and deliverable outcomes for its future support of the training organisations.

Technology: R&D, surveying services and legislation

16. Technical research and development work undertaken by this grouping covers subjects across the board from vessel safety and fishing gear to conservation techniques, food storage and processing, and waste disposal.

17. Other services provided by this grouping are:

• surveying and certifying fishing vehicles as agent for the Maritime and Coastguard Agency;
• Kingfisher Information Service which provides positional information on offshore surface and seabed hazards (such as cables and oil and gas structures) to fishermen and other seabed users.

18. A small team within this grouping acts as a link between Government and the industry in developing and interpreting new legislation.

The changing industry

19. There are a number of reasons why stakeholders might take the view that the remit and powers decided in 1981 need to be updated to take account of the circumstances that apply today.

20. The structure of the fishing and seafood industry in the UK has changed dramatically over 25 years. Official statistics show a 40% decline in the tonnage of fish landed by the UK fleet in the UK between 1981 and 2003. The demersal and pelagic sector landings are both markedly down over the period, to 35% and 64% respectively of what they were in 1981. Conversely, the tonnage of shell fish landed doubled over the period, now accounting for about 30% of the total landings. The numbers of jobs in the catching sector halved from nearly 24,000 in 1981 to less than 12,000 in 2003.

21. The amount of fish consumed in the UK, however, has seen continuing modest growth, with consumption up by about 10% over the period since 1981. The emergence of low cost farmed salmon over the last 20 years has played a significant part in driving this growth; but more recently the wide range of imported species has also contributed. Both imports and exports have grown substantially over the period, and imports now exceed exports by some 30%. Supermarkets now account for nearly 90% of retail sales of fish and fish products as compared to just 10% in 1980. So, overall, while the catching sector and small retail outlets have declined over the period, other parts of the sea food industry have grown substantially.

22. There have also been important changes to the institutional context within which SFIA operates. Most fisheries management responsibilities have been transferred to the devolved administrations under the devolution legislation of 1998, as have a range of responsibilities for the delivery of functions with which SFIA has an interface. In addition, new bodies with new responsibilities have been set up. The Regional Development Agencies, Welsh Development Agency, Scottish Enterprise and Highlands and Islands Enterprise are in place now to promote local industries. Sector Skills Councils now exist to bring together employers, unions, professionals and government to promote training, but their focus leaves a gap in the catching sector which SFIA accepts as its continuing responsibility. The Food Standards Agency was set up in the late 1990's to monitor food hygiene standards and promote healthy eating.

23. Finally, the debate over sustainable fishing has developed over the period, from the formal establishment of the Common Fisheries Policy in 1983, the subsequent establishment and management of total allowable catches ( TACs) and quotas, and the recent work by the Prime Minister's Strategy Unit to explore options for a sustainable and profitable future for the fishing industry in the UK. The Government's joint response to this work was published on 28 June 2005, as was a framework document for Scottish sea fisheries. ⁵

Options for the future

24. The question we are concerned with is where this changing context leaves the SFIA, and what should be its role in the years ahead.

25. An extreme view is that the industry and its environment have changed so fundamentally that there is no longer any role for a UK-wide authority representing the industry as a whole. It might be argued that the different sectors within the industry now have very little in common, and that work currently undertaken by SFIA could better be done by smaller bodies focussing on discrete parts of the industry. Another view is that the SFIA might be broken up on a geographical basis, with smaller bodies representing the industry in the areas of each of the devolved administrations, much as Seafood Scotland does at present ⁶. Another view again is that the SFIA functions should be transferred to specialist functional bodies such as the producer and fishermen's organisations, the sector skills councils, the MCA, the Regional Development Agencies in England, the Welsh Development Agency in Wales and the Local Enterprise Network in Scotland.

26. On the other hand, there are good arguments that there is an important continuing role for SFIA despite the changes to the context within which it is operating. It can represent and pull together the interests of the seafood industry at large, from the catching sector down the supply chain to the retailers and the consumer. It is able to take a UK-wide overview and achieve economies of scale on pan- UK issues, while achieving effective regional deliverability through the associated regional bodies. It can provide an understanding and focus on the seafood industry which may not be easily replicated in wider functional bodies such as the development agencies and sector skills councils.

27. In the initial informal soundings we have taken in the industry, we have sensed little pressure for major change to the Authority, and have picked up some very positive references to aspects of its activities, and to the reform of the organisation in recent years. On the other hand, views have been expressed to us that the Authority lacks some focus and sense of direction in the changing world, and that it is currently spreading its efforts too thinly. There is no easy consensus about where its priorities should lie, with some parts of the industry for example urging a focus on the consumer, while others underline the importance of maintaining the confidence of fishermen.

28. Against this background, we are very keen to know what individual stakeholders think about where the Authority's priorities should lie, to what activities it should give priority, and areas of work from which it should perhaps withdraw. Associated with this, it would be useful to have views on the balance of SFIA's efforts as between the different sectors that make up the industry. There may be new areas of activity in which stakeholders would like to see the SFIA engage, including some which are outside its current statutory remit. The extension of the Authority's remit to include salmon is an issue which has been raised with us here, given the transformation of the farmed fish sector since 1981. Such an extension would require new legislation; but how welcome, and how straightforward, would such a change be?

29. A particular issue that has arisen in almost all our discussions is how far the Authority as a non-departmental body should see itself as an agent of government, and how far it should see its role rather as responding to, and promoting the interests of, the industry. Those within the industry to whom we have spoken are quite clear that the Authority should be pursuing an industry driven agenda, paid for as it is largely by themselves through the levy. At the same time, it is clear that government departments and agencies value the contribution the Authority has been able to make in linking with the industry to help promote Government policies in areas such as food hygiene, marine conservation and waste management, and that the Departments now see SFIA as an important partner in delivering the recently published fishing strategies.

30. It can be argued that the differences between the Government and industry agendas are more apparent than real, and that work to promote the delivery of government fishing strategies will be supported by many in the industry as being in its wider interest. SFIA is particularly well-placed to help bring together and deliver programmes of work which are supported by both the Government and the industry. The work which SFIA is currently engaged in through its Waste Strategy Group is a good example.

31. Our terms of reference expressly require us to consider how best the Authority "can work with Fisheries Departments to deliver the strategic framework and priority tasks of the Departments' joint and individual fishing strategies". We should welcome stakeholders' views on how SFIA should go about this task, and on whether they see any potential conflict between it and the Authority's ability to retain the confidence of the industry, and to represent its interests.

The questions

32. We should welcome views in general terms about the role of the SFIA. Particular questions which respondents may want to address are:

Q(i)a. Is there still role for the SFIA. How would you define it?

Q(i)b. Which of SFIA's services do you value most highly and use most often?

Q(i)c. Are there new areas of work in which SFIA should engage? Should salmon be added to the Authority's remit?

Q(i)d. Are there activities which SFIA should rethink, reduce or withdraw from? Particular areas on which respondents might want to comment are:

• SFIA's role in training, including the continued operation of the flume tank in Hull, and the Authority's relationship with the Sector Skills Councils;
• SFIA's work on vessel standards and surveys, and relationship with the Maritime and Coastguard Agency;
• SFIA's involvement in the production of sector statistics;
• the Kingfisher service, and the potential benefits of transfer to a larger mapping operation.

Q(i)e. How well has SFIA responded to the new institutional context which devolution in particular has brought about? Does SFIA strike the correct balance between serving and promoting regional industry interests as opposed to promoting the industry as a UK-wide entity? How do you see the relationship and demarcation of responsibilities between SFIA and eg Seafood Scotland, Seafood Cornwall?

Q(i)f. Is the balance of SFIA's activities about right as between catchers, importers, processors, retailers and fryers?

Q(i)g. How can the Authority best help to deliver the Government's strategies for the sea food sector? How far should it be seeking to do this?

Section (ii): The levy and other funding sources

Background

33. The 1981 Act provides that the Authority may impose a levy on all sea fish, shell fish and sea fish products landed, imported or cultivated in the UK. Levy income was £8.69m in 2004/05, 77% of the Authority's total income in the year. Levy rates are set out in regulations made by the Authority after consultation with the industry and approval by Ministers. There are currently 26 different rates, calculated by tonnage for different types of fish and fish product, but primarily three major categories, for whitefish, pelagic and shellfish. The current rates have remained unchanged since 1999.

34. 74% of levy is paid on imported fish and fish products. Only 26% is attributable to UK landings. Whitefish account for over two thirds of levy paid, and shellfish for approaching a quarter.

35. The Authority also benefits from FIFG⁷ and other grants paid in relation to specific projects, and it charges for some of its services. Income from these sources amounted to some £2m and £630k respectively in 2004/05.

Options for the future

36. The first question which we need to address about the levy is whether it remains appropriate to impose a compulsory charge of this kind on the sea fish industry in 2005 and beyond. The levy regime dates from at least as far back as 1951, when the White Fish Authority was established, and the thinking which drove it is no longer easy to establish. A separate but concurrent review of the rationale for the five agricultural levy boards is being carried out and we await with interest the conclusions on the case for levy funding which that review produces.

37. Our initial soundings did not point to a strong body of opinion in the industry pressing for the abolition of the levy, though clearly individual levy payers would rather pay less or none at all. There was certainly no enthusiasm for its replacement with core funding from government, which it was felt would turn the authority into an arm of government rather than a service for the industry. There were, however, some concerns expressed about the lack of congruity between the source of levy income, the bulk of which comes from imports, and beneficiaries of levy spend, which some argue is directed disproportionately to the catching sector.

38. There are concerns about what is felt to be the unnecessary complexity of the levy arrangements, and some interest in exploring the scope for integrating levy collection with the work of Customs and Excise. A number of people argued that a single undifferentiated 'ad valorem' rate would be much simpler to administer than the current varying rates based on tonnages. We should welcome views on these suggestions, the practicalities of which we shall be exploring in more detail as our work progresses.

39. We shall be considering whether it would be possible and appropriate for the Authority to increase the income it generates through charges for its services, and would welcome views on this question also. There are some sensitivites about charging for services which the industry might argue they have already paid for through levy.

40. The Authority actively seeks to maximise income from grants and other income streams, using levy to leverage additonal funding. Clearly this is beneficial where it increases the resources available to deliver the Authority's objectives. We have however heard the argument that the pursuit of funding can on occasion take the Authority into areas of activity which are not of high priority for the industry. Again, we would welcome any views.

The questions

41. We should welcome views about the levy and the financing of the SFIA. Particular questions are:

Q(ii)a. Is a compulsory levy still the right way to pay for the SFIA? Should it be replaced by a voluntary levy, by core funding from government, or by some combination of these and other sources of funds?

Q(ii)b. Should the current varying rates for tonnages of different types and forms of fish be replaced by a single undifferentiated ad valorem rate? Are there other ways in which the calculation and collection of the levy might be simplified? Could bureaucracy and duplication of effort be lessened by greater information sharing with other bodies involved with the industry?

Q(ii)c. Should the SFIA seek to raise more money through charges?

Q(ii)d. How far should SFIA seek to rely on specific grants?

Section (iii): Governance and accountability

Background

42. The 1981 Act provides that the Board of the SFIA should have up to 12 members appointed by Ministers. Four members, including the chair and deputy chair, are required to be people who are independent of the industry. The remainder must be people selected to represent the interests of the industry, who are appointed after consultation with representative organisations. All Board appointments follow Nolan procedures, and are made for a period of three years. The annual rate of pay for ordinary board members is £8,921, for which they are expected to commit up to three days per month.

43. The Authority has an executive team of six, headed by the Chief Executive. It is supported by 5 industry advisory committees, reporting to the Board, and covering each of the main seafood species groups and priority areas such as training and sustainable fisheries, and an Inshore Review working group. Each of these meets twice a year. Their membership includes board members and staff as well as industry representatives. SFIA also supports a legislation expert group meeting frequently to comment on proposed legislation and provide compliance guidance to all sectors.

44. The Authority is statutorily obliged to produce an annual report and accounts, which are laid before Parliament by Ministers. It produces a range of other publications about its activities, and has a full and well sign-posted web-site.

Options for the future

45. Changes to the composition of the Board or to the method of appointment of members would require legislation, and there can be no guarantee that any early place could be found in the Parliamentary timetable for legislation which consultations suggested was desirable. However, we are interested to establish whether stakeholders consider appropriate the current arrangements for appointments to the Board, including their views on whether appointments should continue to be made by Ministers, and whether the chair and deputy chair appointments should continue to go to people who are independent of the industry. Some have suggested to us that a body that is financed by the industry should be governed by people who are more directly appointed by the industry, though it is not entirely clear to us how that might be made to work in practical terms. On the other hand, it can be argued to be important that Ministers retain some control over a body which has statutory powers and duties.

46. In our informal soundings with stakeholders, we found that people had very little knowledge of how appointments are decided. There were some who argued for clearer links with the industry, or at least for greater transparency in the process. Others noted that it was helpful that the Chairman at least was independent, and thus able to hold the ring between competing interests in the industry. We were told that appointments need to be better phased so that changes in membership do not all come at the same time. Some have suggested that remuneration levels need to be improved to encourage suitable people to get involved as Board members. On a related issue, there was a suggestion that making available financial loss payments might encourage industry participation in key discussions.

47. On accountability to the industry, no clear picture about levels of satisfaction emerged from our informal soundings. The web-site in particular appears to be valued as a source of information about SFIA's activities. However, there appears to be some concern that the very broad range of functions which SFIA attempts to perform can result in dilution of the resource it can deploy on highest priority issues. Few comments were volunteered about the role and importance of the industry advisory committees.

The questions

48. We should welcome views about current arrangements for Board appointments and for accounting to the industry. Particular questions are:

Q(iii)a. What views do stakeholders have on how Board appointments should be made? Do they agree that some members should be independent of the industry, including the chair and deputy chair?

Q(iii)b. How do stakeholders view the role and importance of the industry advisory committees?

Q(iii)c. Does the SFIA provide sufficient information about its activites to its stakeholders, and is the information available in a helpful form?

Q(iii)d. Is there a case for increasing the remuneration of Board members, and/or for making financial loss payments available to others who actively contribute to the Authority's work?

ANNEX A: REVIEW OF SEAFISH INDUSTRY AUTHORITY

TERMS OF REFERENCE

"To undertake a review of the rationale for, and role, organisation, funding and functions of, the Sea Fish Industry Authority, paying special attention to

(i) how the Authority responds to the needs of the industry it serves; and, as part of that function

(ii) how best it can work with Fisheries Departments to deliver the strategic framework and priority tasks of the Departments' joint and individual fishing strategies;

and to make recommendations to the Authority's four sponsor Departments on whether:

• there is a continuing need for the Authority and, if so
• there should be changes to its remit, membership, funding arrangements or mode of operation.

The review should take account of the emerging conclusions of the current Review of Levy Bodies operating in the agricultural sector."

ANNEX B: Sea Fish Industry Authority

Analysis of expenditure and income by function for the year to 31 March 2005

Source: SFIA

Footnotes

1 Fisheries Act 1981. Section 2(1).

2 Ditto. Section 14 (1) and (2)

3 Ditto. Section 3(1).

4 Known internally as 'trade and quality'.

5 Net Benefits: a sustainable and profitable future for UK fishing was published by the Prime Minister's Strategy Unit in March 2004. Securing the benefits, the joint UK response, was published on 28 June 2005 as was A Sustainable Framework for Scottish Sea Fisheries published by the Scottish Executive Environment and Rural Affairs Department.

6 Seafood Scotland is a trade organisation set up by the industry in 1999 to promote, market and develop the Scottish seafood industry. It is funded largely on a project by project basis by Scottish Enterprise, SFIA and FIFG funding.

7 Financial Instrument for Fisheries Guidance governing EU intervention to support the fishing industry.

8 This total excludes £408k expenditure attributable to FRS 17 pension adjustments.

9 Total levy receipts were £8.69m, part of which were applied to cover the pension adjustments referred to in note 9.