CONSULTATION ON REVIEW OF LEVY BOARDS - ANALYSIS OF CONSULTATION RESPONSES
OVERVIEW
The Review of the Agricultural and Horticultural Levy Bodies was announced on 15 March 2005 and the reviewer, Rosemary Radcliffe, published her report on 11 November 2005. The consultation on the review commenced the same day and ended on 3 February 2006. Separate consultations were held in England, Wales and Northern Ireland.
The report was published on the Scottish Executive website and copies were distributed to interested parties. The consultees included a number who had been involved in the review, either directly through meetings with the reviewer or indirectly through written comments.
In total, there were 27 responses to the consultation, including five from the levy boards. Six respondents had an interest in the work of the BPC, three in the HGCA, six in HDC, one in MDC and six in MLC/QMS. Four respondents had an interest in all of the levy bodies and one was interested in all but the MLC/QMS. A full list of respondents is at Annex A.
All respondents who commented were in favour of retention of the statutory levy. On arrangements concerning the levy, most respondents supported maintaining the dealer and processor levies in the sectors where they currently operate, namely cereals, meat and potatoes. All those who commented supported the combination of general and promotional meat levies.
There were mixed views on the Fresh Start proposal with the greatest support coming from key players in the red meat sector such as QMS and the NFU Scotland. Other respondents were not convinced of any need for change and it was noted that the HGCA had only recently been through a review process. The MDC and others questioned the concept on the grounds of cost
The classification of activities put forward by the reviewer stimulated debate on the question of what levy funds should be used for. In general there was a broad consensus that the classification of activities put forward in the report was generally accurate although some respondents defended the use of generic promotion.
The concept of a 'nuclear button' to prompt a ballot on continuation of the levy was generally popular, in principle, with respondents to the consultation. Some of these respondents, particularly in the potato and meat sectors, felt that the threshold for triggering the ballot might need to be higher and emphasised the need for safeguards.
The proposed structural changes to the levy boards were the main focus of the responses to the consultation. Generally, there was anxiety over the New Model and its complexity. Many respondents perceived NewCo as an added layer of bureaucracy which would not improve the service provided by levy boards to levy payers. The concept of a shared ServiceCo was criticised by many respondents, who were unconvinced of the merits of a totally separate service company. The expected cost benefits associated with what would be a major structural change were considered insufficient justification for that change.
There were some positive comments, for example about the possibility of greater consistency of approach across sectors. The BPC indicated that if the ServiceCo concept were reconsidered then the model could still offer advantages over the current system.
Amongst stakeholders, those with an interest in meat were the most positive about the New Model. Those in the horticultural sector were most strongly opposed and concerned that the new model would lead to an inferior service to levy payers than that currently offered.
Respondents from the meat sector were wholly supportive of the continued accountability of a Scottish red meat body to Scottish Ministers. The idea of the body as an NDPB outwith - but linked to - the New Model - was accepted by all the main players including the NFU Scotland, QMS, the Scottish Association of Meat Wholesalers and the National Beef Association (Scotland).
RESPONSES TO SPECIFIC QUESTIONS
1. Do you agree with the retention of the statutory levy?
Twenty-six of the 27 respondents answered the direct question about retention of the statutory levy. All were in favour of retention with many commenting that this remained the most effective way of supporting the industry.
The Horticultural Trades Association commented that they agreed with retention of the statutory levy "for the time being" since market failure and other difficulties highlighted in the report were likely to remain as issues for the horticultural sector for the immediate future. The MDC also qualified their response, commenting that the levy should remain for the period which encompasses CAP reform and WTO decisions, thereby allowing the market to prepare for the provision of unsupported commercial services.
2. Your views on whether processor or dealer levies should continue for potatoes, meat and cereals are sought. If the meat processor levy were to continue, the reviewer proposes that the general and promotional levies should be combined: do you agree?
Processor and dealer levies
Eighteen respondents commented on this question. Sixteen supported the continuation of processor or dealer levies for potatoes, meat and cereals although the NFU Scotland commented that they agreed with the view in the report that in practice, processor levies are shifted back to producers in the form of lower prices. The MDC opposed processor or dealer levies because processors already contribute to match-funded activities. The National Sheep Association (NSA) opposed payment of levies by processors for the same reason as that mentioned by the NFU Scotland, i.e. in reality the whole levy is paid by producers because processors reflect their contribution in their prices for stock. The NSA believed the situation should be transparent.
The Scottish Crop Research Institute agreed that the whole of the supply chain needs to be engaged if UK agriculture is to remain competitive. They added that that they were not in a position to decide whether processor and dealer levies should continue for potatoes.
The Horticultural Trades Association noted that processor and dealer levies were not an issue for the horticultural sector. They mentioned, however, an area of concern surrounding levy paid by retail nurseries and suggested that this should be addressed in any forthcoming legislation.
Seven respondents made no comment on this issue. Five of these respondents were linked to the horticultural sector, where levies are currently only paid by producers. The other two respondents were linked to the meat and milk sectors.
Combination of general and promotional levies
Eight respondents commented on the question of whether general and promotional levies should be combined. These included the six meat sector bodies, the Scottish Agricultural College and DTZ Pieda Consulting. All were supportive of combination of the levies.
Respondents commented on the suggestion in the report that meat levies might be distributed according to place of rearing of an animal rather than place of slaughter. QMS, the Scottish Association of Meat Wholesalers and the National Sheep Association called for the status quo. The NFU Scotland agreed in principle that the place of slaughter should be the basis for distribution of levy but only if this did not lead to excessive bureaucracy and cost and if it did not shift the burden of payment, e.g. from finishers to breeders.
Nineteen respondents made no comment on whether general and promotional levies should be combined. These were all the respondents from the horticultural, cereal, potato and milk sectors.
3. Your views on the reviewer's comments on the basis for calculation of levies would be welcome. Do you agree with the "Fresh Start" approach to calculating levies?
Calculation of levy on the basis of turnover
Seventeen respondents commented on this question, of whom three were wholly supportive of value-based levies for all sectors. DTZ Pieda Consulting considered value-based levies appropriate for all sectors except meat, where a headage based levy was more sensible. The Scottish Agricultural College was one of the organisations in support of this approach but they noted that a value-based approach could cause some structural problems where turnover is volatile from year to year, e.g. in the potato sector.
Thirteen respondents did not think that levies should be calculated on the basis of turnover. They represented a cross-section of the agriculture sectors, i.e. cereals (2), potatoes (6), meat (3), various (2).
Respondents from the cereals sector commented that the HGCA had already been subject to a major review and so there was no need for change. The HGCA themselves commented that it would be helpful to have a levy collection system that clearly identified individual levy payers.
The respondents commenting on the potato sector were concerned that value-based levies were not appropriate for the sector because price volatility meant that there would be considerable variations in income from year to year. The BPC commented that loss of statistics, difficulties in verification and minimal savings were other reasons for opposing levies based on turnover. The BPC had submitted a report on alternative levy collection arrangements to the reviewer and were disappointed that it did not appear to have been taken into account in the review report.
The Virus Tested Stem Cutting Growers' Association suggested that it would be appropriate to base potato levies on tonnage traded, with collection at the first point of sale. Pseedco commented that levies based on turnover would be cheaper to collect but open to inaccuracies and abuse.
All those responding from the meat sector considered levy collection on a headage basis to be the simplest method of collection for the sector and saw no reason for change.
Ten respondents did not comment specifically on the points raised in the report about levy collection on the basis of turnover. Three represented the meat sector, two the milk sector and five the horticultural sector.
"Fresh Start"
Of the 18 respondents who commented on "Fresh Start", eight were in favour of this approach. They included all of the levy boards except the MDC.
Those opposed to "Fresh Start" represented the horticultural (3), potato (4), milk (1) and meat (2) sectors. Reasons for opposition varied but cost was a major factor and, for the cereals sector, the fact that the HGCA had only recently undergone a review.
Nine respondents did not offer a comment on "Fresh Start". They represented all sectors.
4. Do you agree with the classification of activities and priorities and in particular with those activities that are deemed inappropriate?
Eleven respondents from across the sectors, except milk, indicated agreement with the classifications in the report including those activities deemed inappropriate. DTZ Pieda Consulting added that it was not helpful to be too prescriptive about what levy boards should or should not do. A framework for guidance would be helpful but not one that specified activities too rigidly.
While generally content with the other activities listed, nine respondents disagreed with one or other, or both, of the activities deemed inappropriate. Six disagreed that generic promotional activities were inappropriate - two of these commenting were from the meat sector, one each from the potato and milk sectors and two had cross-sectoral interests. The Horticultural Trades Association questioned whether benchmarking was "always appropriate".
On the question of political lobbying, four respondents commented. Three considered it appropriate - one each from the horticultural and potato sectors and one with cross-sectoral interests. The NFU Scotland considered lobbying inappropriate where it impaired the independence of levy bodies.
Seven respondents - representing the horticultural (4) and meat (3) sectors - did not comment.
5. Do you agree that levy payers should have the right to trigger a vote on whether a particular levy and/or SectorCo is abolished, or new ones established.
Fifteen respondents, representing all sectors, agreed with the basic proposal that levy payers should have the right to trigger a vote on whether a levy and/or SectorCo should be abolished or new ones established. Of the 15, only the MDC did not express reservations. The remainder had a variety of concerns about the threshold for triggering a vote, with many believing 5% was too low. There was also a widespread wish to ensure that controls were put in place to ensure the mechanism was robust and not open to abuse.
The HDC considered that levy payers should have the right to trigger a review of whether a levy board should continue but any option to wind up or create a new levy board should have grower and Scottish Executive backing. The HDC considered that any major change proposed as a result of the recent review of levy boards should be subjected to a vote of horticultural growers.
Both the Scottish Agricultural College and the Maltsters Association of Great Britain expressed concerns about how this proposal would work. They saw the value of levy payers having a strong voice but pointed out the risks of "short termism" deciding the future of a levy body.
Eight respondents representing the horticultural (4), meat (3) and milk (1) sectors had no comments. Two others commented on the need for accountability but did not give a view on the question asked.
6. Have you any views on the proposed arrangements for sector companies?
Twenty-one respondents expressed views on the proposed arrangements for SectorCos.
Those from the horticultural sector expressed particular concerns about the proposals. For example, respondents commented that the HDC was already highly accountable and the centralisation of decision-making and creation of a ServiceCo would affect its close relationship with the sector. There was concern that creation of a horticulture SectorCo would dilute the horticulture agenda. One respondent, the Scottish Crop Research Institute, did not support the SectorCo proposal but suggested that closer collaboration between the three crop-based levy boards might be the way forward. The HCGA proposed amalgamation of the crop levy bodies into a crop NewCo.
Most respondents from the potato sector supported the idea of a single GB potato sector company although one preferred to see a new BPC rather than the New Model proposed in the report.
The MDC commented that the proposed SectorCo arrangements allowed a sector focus to continue.
There were a number of comments to the effect that the needs of the livestock sector were different from arable. The respondents from the meat sector were more supportive of the SectorCo model but envisaged QMS as a separate Scottish body accountable to Scottish levy payers. The NFU Scotland agreed with the continued separation of the sector bodies and the proposal for separate meat bodies for Scotland and Wales but commented that the NewCo/SectorCo arrangement would not improve accountability to levy payers.
Six respondents did not comment. They covered the horticultural (2), potato (2), milk (1) and meat (1) sectors.
7. Your views are sought on the proposed New Model (of NewCo, SectorCos and ServiceCo), associated cost-benefit analysis and the recommended implementation timetable.
Twenty-six respondents commented on the New Model. One respondent from the meat industry did not comment.
Of the twenty-six respondents who commented, six supported the new model (four from the meat sector and two with cross-sectoral interests). Those from the meat sector commented only in relation to QMS, with their comments also relevant to the final question 8 (detailed below). The two other expressions of support came from the Scottish Agricultural College (SAC) and DTZ Pieda Consulting. The SAC considered the New Model to be acceptable provided that it led to administrative cost savings and a consistency of approach across the sectors. DTZ considered the New Model to be a sensible one although like others they believed that the timescale for implementation was tight. The position of QMS within the New Model needed to be clear.
The BPC took the view that the review had not gone far enough and that all functions should be on one site except market information and statistics. They expressed reservations about the outsourcing of levy collection.
The remaining nineteen respondents had concerns about the New Model and were either wholly, or on balance, opposed to the proposals. They covered all sectors: HDC (6); HGCA (3); QMS (1); MDC (2); BPC (5); more than one sector (2).
The overwhelming concern, mentioned by the majority of respondents who did not support the New Model, was that the savings identified in the review did not justify the changes proposed. There were also general concerns about the lack of benefits of change for the sectors and, particularly from the potato sector, a perceived lack of understanding of the sector. There was some concern too that the ServiceCo appeared to represent a monopoly and more savings could be achieved by other means, for example joint tendering in the private sector.
8. Do you have any views on the establishment of QMS as a SectorCo or, alternatively, the establishment of QMS as a separate NDPB with voluntary links to NewCo and ServiceCo?
Nine respondents commented on the proposals for QMS. Five of these represented the meat sector, one the crop sector and three had a cross-sectoral interest.
No respondents expressed support for the idea of QMS as a SectorCo. Respondents from the meat sector were wholly supportive of the continued accountability of a Scottish red meat body to Scottish Ministers. The idea of the body as an NDPB outwith - but linked to - the New Model - was accepted by all the main players including the NFU Scotland, QMS, the Scottish Association of Meat Wholesalers and the National Beef Association (Scotland). NFU Scotland commented that they would be concerned about NDPB status if this prevented levy payers from being represented as board members.
The Scottish Agricultural College expressed concern about the proposed structure for the red meat sector. They considered that making links to the proposed new bodies voluntary rather than compulsory would maintain or worsen the current level of support by devolved bodies for central research and development and other technical services.
The Scottish Crop Research Institute did not comment specifically on the position of QMS but believed that all sectors should be treated equally. They did not agree with the concept of devolved SectorCos.
Eighteen respondents, from across all sectors, had no comments.
Other issues
Respondents were invited to comment on other points mentioned in the report. Ten took the opportunity to do so. These covered a range of points, including some linked to the key questions in the consultation. Comments included:
· Support proposal that changes in levy structures and remit possible without need to refer to Parliament (though not in the case of NewCo).
· Stakeholders should have chance for full discussion/consultation, if necessary, on what is a complex review.
· Interest of all stakeholders served by vertical integration of dairy industry. Statutory levy should in time be replaced by voluntary levy.
FULL LIST OF RESPONDENTS TO CONSULTATION
British Potato Council
Horticultural Development Council
Home Grown Cereals Authority
Milk Development Council
Quality Meat Scotland
Seed Sectorial Group of the British Potato Council
Horticultural Trades Association
Institute of Auctioneers & Appraisers in Scotland
NFU Scotland
National Beef Association (Scotland)
National Sheep Association
Scottish Agricultural College
Scottish Association of Meat Wholesalers
Scottish Federation of Meat Traders' Associations
Scottish Potato Trade Association
VTSC Growers' Association
Scottish Crop Research Institute
Stewarts of Tayside Ltd
R & N Cessford, farmers, bulb Growers, Haulage Contractors
Kettle Produce Ltd
The Maltsters Association of Great Britain
Middleton Farms
Crop Evaluation Ltd
DTZ Pieda Consulting
Scotherbs Ltd
Pseedco Ltd
Alexander Harley Seeds Ltd