Fourth Standing Committee on Statutory Instruments, &c.


Wednesday 18 July 1990


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The Committee consisted of the following Members:

Chairman: Mr. James Hill

Amos, Mr. Alan (Hexham)

Bowden, Mr. Andrew (Brighton, Kemptown)

Burt, Mr. Alistair (Bury, North)

Cash, Mr.William (Stafford)

Curry, Mr. David (Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food)

Davies, Mr. Ron (Caerphilly)

Jack, Mr. Michael (Fylde)

Jones, Mr. Martyn (Clwyd, South-West)

Livsey, Mr. Richard (Brecon and Radnor)

Martlew, Mr. Eric (Carlisle)

Morley, Mr. Elliot (Glanford and Scunthorpe)

Pike, Mr. Peter L. (Burnley)

Viggers, Mr. Peter (Gosport)

Walden, Mr. George (Buckingham)

Waller, Mr. Gary (Keighley)

Wells, Mr. Bowen (Hertford and Stortford)

Williams, Mr. Alan W. (Carmarthen)

Wood, Mr. Timothy (Stevenage)

Mr. J. R. Rose, Committee Clerk


[MR. JAMES HILL in the Chair]


10.30 am

The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. David Curry): I beg to move, That the Committee has considered the draft Meat and Livestock Commission Levy (Variation) Scheme (Confirmation) Order 1990. This order is to permit the Meat and Livestock Commission to levy the high maximum rate it has on two schemes. The first scheme is a general levy, which is a generic meat promotion. The second is the so-called species promotion to promote a particular meat—beef, lamb or pork. Under this proposal, the current maximum is 160p to 190p per head for cattle under the general levy, and 140p to 240p on the special promotion. The other species would increase correspondingly. There is an exemption for animals imported to the United Kingdom for a short period of fattening of three months for cattle and two months for pigs and sheep, which complies with European rules and accounts for less than 1 per cent. of slaughtering, which is insignificant. The general levy is paid on a 50-50 basis between producers and slaughterers while; the species promotion is 100 per cent. paid for by producers. We must do that because VAT will apply to the levy from 1 September under a Customs and Excise ruling. Unless there is an increase, the MLC will lose about £2 million which it will have to pay in VAT. Nobody is hurt by that because the MLC can get its VAT payment back and so can the levy payers. In a sense, no additional burden will be placed on them. A new levy will apply from 1 September. The MLC has a meeting scheduled shortly at which we expect it to announce the rate that will apply from that date.

10.32 am

Mr. Peter L. Pike (Burnley): This draft order should not delay us too long. I appreciate the Minister telling us that the increases in levies are maximum figures. That removes any uncertainty in interpreting the new levies. The Minister also explained the position with regard to the exemption to meet European rules. I was going to ask what percentage that involved, but the Minister answered my question by saying 1 per cent. The point about VAT is complex. The Minister said the increase was partly to compensate for VAT payments and then said that virtually everybody could claim back VAT, 4 which makes it sound as thought everybody could be paying less. However, I am sure that that is not the position. Could the Minister clarify that point? We understand that the ability to levy and reclaim money is to ensure that costs are met, but what has caused these increases? Is it inflation, additional duties, responsibilities, research carried out by the Ministery or other changes? Will the Minister tell us whether BSE has had, or is likely to have, an effect? If the answer is no, my legitimate question will have been answered simply. The changes are not based on a straightforward percentage. The general levy for cattle other than calves not exceeding 68 kg deadweight will increase from 160p to 190p, whereas the species promotion levy for the same category will increase from 140p to 280p. For calves not exceeding 68 kg, the general levy will remain 12p, and there will be no species promotion levy. The general levy for sheep will increase from 27p to 34p, but the species promotion levy will double. The species promotion levy will remain at 40p for pigs, whereas the general levy will increase from 40p to 48p. It would have been simpler to have a straightforward formula that increased everything by the same percentage. However, if the figures were agreed as a result of the consultation exercise, the fact that they are not based on a percentage is not a problem.

10.37 am

Mr. Curry: I can confirm that wide consultation took place, and that the industry is content with the proposals. VAT must be paid in the first instance, and can then be reclaimed. The upfront costs will be higher than the present maximums, therefore, which is why the levies are being increased. As they have not been increased since 1987, we want to provide room for manoeuvre, so that we do not have to ask for annual increases.

Mr. Elliot Morley (Glanford and Scunthorpe): I take it that almost everybody who pays the levy will be able to reclaim the VAT. The process of shuffling VAT around—paying it and reclaiming it—and the added cost and bureaucracy will mean that someone will gain from that, but it will not be the producer or the meat and livestock industry. Why could not the levy be exempt from VAT, at the discretion of Europe? That would save the expenses incurred by the Government.

Mr. Curry: The decision to impose VAT does not stem from European discussions. Customs and Excise has determined that it must be paid. The hon. Gentleman may recall an analogous situation when we discussed the Homegrown Cereals Authority levy. It is the result of a domestic determination of liablility, and does not stem from a European fiscal measure. I make that clear because the latter is a sensitive subject. None of us would have been deeply upset if the ruling had not been made. However, we must accommodate ourselves to it and observe the law.

Mr. Pike: There are no great party differences on the issue, but it would be sensible if Departments reached agreement with the Treasury on such matters. As my hon. Friend the Member for Glanford and Scunthorpe (Mr. Morley) rightly said, the measure will involve much bureaucracy and form filling. Additional costs will therefore be incurred, which, though their effect may be minimal, seem unnecessary. I know that the Minister 5 cannot solve the problem today, but such measures create unnecessary burdens which should be removed. Another Department has produced a publication about removing the burden. This burden could easily be removed by mutual agreement between the Departments and the Treasury.

Mr. Curry: It would be quite improper for me to make a value judgment about reaching agreement with the Treasury. The hon. Gentleman will appreciate that a not inconsiderable length of time has been spent discussing a range of issues with that particularly august body, and we know its staff quite well. VAT will be charged to remove an anomaly in the present situation, in which a statutory body such as the MLC can reclaim VAT on its inputs but cannot charge VAT on its output. So that it can reclaim VAT on its inputs, VAT has to be charged on the levy, which would reduce annual costs. That complicated and technical matter has been discussed extensively, and we concluded that it was better to bring it into a regular order, as we have done in the cereal sector. Several species councils have agreed to the more than average increase in species promotion, which they want to see focused on the specified meats. The promotion has been authorised by those who pay the levy. 6 The hon. Member for Burnely (Mr. Pike) asked about BSE. There is no hidden BSE agenda in the order. He will know that the MLC has a £200,000 promotional campaign that is aimed at countering some of the public's reactions to BSE. However, that sum is a small amount of the total expenditure of the MLC. I assure the hon. Gentleman that we are not privy—the MLC, of course, runs its own affairs—to any hidden campaign that the MLC will launch once it receives its money. We last came back to the House for a financial increase three years ago, and we do not anticipate having to do so again.

Question put and agreed to.

Resolved, That the Committee has considered the draft Meat and Livestock Commission Levy (Variation) Scheme (Confirmation) Order 1990.

Committee rose at eighteen minutes to Eleven o'clock.


Hill, Mr. James (Chairman)

Amos, Mr.

Bowden, Mr.

Burt, Mr.

Curry, Mr.

Jack, Mr.

Morley, Mr.

Pike, Mr.

Viggers, Mr.

Waller, Mr.

Wood, Mr.