OVERVIEW
On 28 June 2006, Ministers announced the outcome of an independent review by Rosemary Radcliffe of the five statutory agriculture and horticulture levy bodies: the British Potato Council ( BPC), the Horticultural Development Council ( HDC), the Home Grown Cereals Authority ( HGCA), the Milk Development Council ( MDC) and the Meat and Livestock Commission ( MLC). The announcement followed consultation on the review recommendations.
The new structure for the levy boards will see a Great Britain approach for the milk, potato and horticultural sectors, with a UK-wide approach for cereals. New sector-based companies in these areas, and in the English beef, lamb and pork sectors, will be close to levy payers and answerable to an overarching Non-Departmental Public Body, Levy Board UK.
A consultation paper was distributed to interested parties on 14 March 2007 inviting comments on the Statutory Instrument, and accompanying partial Regulatory Impact Assessment, that will provide the legal basis for Levy Board UK. The consultees covered a range of levy payer interests as well as a wider range of industry interests. A total of six responses were received which included three from the levy boards. A list of respondents is attached at Annex A. The paper and responses were published on the Scottish Executive website.
RESPONSES TO SPECIFIC QUESTIONS
1. What are your views on the power to estimate and a higher rate for late payment?
The HDC did not favour estimating which they saw as bureaucratic and likely to lead to an increase in operating costs. They commented that the proposal would produce an incentive to delay levy payment and introduce a "cat and mouse" mentality into the levy collection process. The HDC strongly recommended the use of powers similar to their existing arrangements which provided reversion to the Courts for continuing offences.
The HDC commented that the provision in the draft Statutory Instrument requiring Levy Board UK to initiate a prosecution for non-payment of levy within six months left no room for flexibility or judgement.
The Scottish Association of Meat Wholesalers ( SAMW) supported the taking of action against persistent offenders as opposed to a one-off case. The HGCA was in favour of there being a power to estimate levy and that a higher rate should be levied for late payment.
The BPC welcomed the power to estimate plantings and purchases in the absence of proper returns as this was a continuation of the powers which BPC currently have. Similarly, BPC favour the option of a higher levy rate being applied as a means of recovering additional costs associated with pursuing late payers.
2. Do you have any comments on the ballot and voting mechanism?
The HDC indicated support for a weighted system as it believed that this would better reflect the wishes of the investment power of the collective industry. The power of Ministers to make final decisions on the future of a statutory levy should be highlighted as this was seen by the HDC as very important to avoid a false expectation that a vote for abolition meant automatic abolition.
SAMW favoured there being a provision for a ballot but instead of the proposed 5% threshold they believed that the issue was of sufficient importance to warrant a higher threshold of 20-25%. The effect of this proposal would be to avoid ballots being triggered by "small numbers of disenchanted levy payers." The ultimate power of Ministers to decide the issue was recognised.
NFU Scotland strongly believed that levy payers should have the right to trigger a vote on whether a statutory levy should continue. They felt, however, that a simple 5% threshold was too low to be representative and suggested that the threshold should apply to both number of levy payers and levy paid.
The BPC did not support the "one levy-payer, one vote" arrangement proposed and, instead, favoured a weighting system based on planted area for producers and tonnage for purchasers which was seen as a fairer method of calculation. Another option would be to take into account the amount of levy paid to determine the weighting to be applied. The BPC recommended that Ministers be obliged to act on the results of any ballot instead of this being optional.
HGCA expressed disappointment that the draft legislation did not contain a provision requiring Levy Board UK to establish and maintain a register of levy payers. This was seen as a key omission and would make it more difficult to manage a future ballot on the future of the levy.
Quality Meat Scotland ( QMS) felt that it would be inappropriate for them to comment on the question of ballot provision as this did not directly concern Scottish (red meat industry) levy payers.
3. What are your views on the proposed enforcement sanctions?
The HGCA supported the principles contained in the draft Statutory Instrument but questioned the necessity of there being a limit on the time between the commissioning of an offence and the commencement of legal proceedings. This would restrict Levy Board UK's room to manoeuvre by constraining its powers in ways that may not always be appropriate. If a deadline was to be set HGCA favoured a longer limitation period to allow the enforcement regime to function effectively.
The BPC supported the proposal to increase the level of fines to £5,000 for each offence and the requirement to bring prosecutions within 6 months of the date of the offence being committed. The ability to charge interest on a debt was also seen as beneficial.
The BPC commented that there was considerable resentment within the sector over producers who paid the levy in accordance with the rules effectively bearing the cost of pursuing defaulters. A system of enhanced penalties was favoured which could be set at level sufficient to encourage compliance and the BPC expressed disappointment at their omission.
The Council also suggested that data from the Single Farm Payment scheme should be made available from the RPA to assist with levy calculation. This did not appear in the draft Statutory Instrument and the BPC wished the matter to be further considered.
SAMW agreed with the proposed enforcement sanctions. HDC commented that the proposals were too restrictive and required the horticultural sector company to automatically begin legal proceedings. This runs counter to the existing HDC arrangement which allows a degree of flexibility for specific circumstances. The effect of the proposals would be to risk alienating growers by having to start legal proceedings earlier than necessary. The proposals are also thought to be unnecessarily bureaucratic.
Cattle, sheep and pigs
4. Your views on the lamb, beef and pig maximum rates are sought.
NFU Scotland supported the merger of the general and promotional levies in the meat sector. SAMW also favours combined general and promotional levy and the maximum rates set out in the draft Statutory Instrument. Both QMS and SAMW highlighted the need to clarify the use of "in trust" to ensure that producers' funds were safeguarded in the event of a levy collector enterprise (such as an abattoir) going into receivership.
Cereals and oilseeds
5. Do you have any comments on the move to maximum levy rates?
The HGCA was supportive of the proposal to stipulate maximum levy rates as it would ease administration.
6. Do you have any comments on the repeal of the Corn Returns Act? Your views on the current value of the information gathered under the Corn returns Act, and whether or not the information should continue to be collected on a weekly or monthly basis would be appreciated.
NFU Scotland noted the proposal to repeal the Corn Returns Act of 1882 and commented that much use was still made of the information gathered and that this information should still be gathered weekly. HGCA supported the change but only with the proviso that a statutory obligation upon those buying cereals to make returns would continue. The organisation was happy with the current arrangements whereby they maintained a weekly return which was disseminated as market information to levy payers and stakeholders.
Horticulture
Your comments on the above points on:
- an increase to the threshold for payment of horticultural levy (except mushrooms) to £60,000;
- an increase to the maximum rate of levy to 0.75% of the adjusted sales figure;
- removal of the requirement to submit a return for businesses under the threshold of £60,000;
- changes to the apple and pear levy; and
- differential maximum rates for agaricus (of 20p per litre) and non-agaricus (8p per litre) would be appreciated.
The HGCA supported the proposed changes to the levy arrangements but recorded the "considerable concern" of the industry to the proposed change from 0.5% to 0.75% of turnover. Whilst recognising the additional flexibility that the change would bring the HGCA did not, for the foreseeable future, support a levy rate above 0.5% and "never without the support of the main grower groups".
Milk
The creation of a new offence if a buyer fails to notify Levy Board UK or its subsidiary of returns.
Your views on this change are sought.
No specific comments received.
Potatoes
Your comments on buyers submitting quarterly returns (rather than annual) and exempting potato co-operatives from paying buyer levy are sought.
NFU Scotland "warmly welcomed" the proposal to exempt potato co-operatives from paying buyer levy.
The BPC currently submit monthly returns (at the industry's request) and did not favour a move to quarterly returns as this would affect the potato sector company's ability to produce stocks data for the industry. A shift to annual returns would render the statistics so out of date that they would have little practical value. The Council was "very pleased" to note that the draft legislation provided an exemption from tonnage levy for potatoes handled by co-operatives.
Other issues
Respondents were invited to comment on other points mentioned in the draft Statutory Instrument and partial Regulatory Impact Assessment. These covered a range of points, including some linked to the key questions in the consultation. Comments included:
- A need for VAT and Corporation Tax issues to be considered to ensure that Levy Board UK will be treated in such a way so as not to reduce the amount of levy available to be spent for the benefit of the various sectors.
- Greater involvement of levy payers in determining how their levy should be spent could be achieved by requiring the endorsement of business plans and budgets by both the boards of Levy Board UK and Sector Cos.
- The transfer of property, rights and liabilities from the existing levy bodies to Levy Board UK should be more clearly set out and defined.
- A provision to allow levies to be raised on new crops grown for cosmetic, pharmaceutical or other manufacturing processes. This was identified as a potential major growth area.
- A need to define the purpose to which the proposed Levy Board UK reserve fund could be put.
- The necessity of there being a defined relationship between Quality Meat Scotland and Levy Board UK to maximise scale economies and increased collaborative working to assist targeting of levy funds.