Review of the Agricultural and Horticultural Levy Bodies: Final Report
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Review of the Agricultural and Horticultural Levy Bodies final report final report October 2005 British Potato Council the Horticultural Development Council the Home Grown Cereals Authority the Meat and Livestock Commission Milk Development Council Review of the Agricultural and Horticultural Levy Bodies Levy and Horticultural of the Agricultural Review © Crown copyright 2005 Copyright in the typographical arrangement and design rests with the Crown. This publication (excluding the logo) may be reproduced free of charge in any format or medium provided that it is reproduced accurately and not used in a misleading context. The material must be acknowledged as Crown copyright with the title and source of the publication specified. Printed in the UK, November 2005, on material that contains a minimum of 100% recycled fibre for uncoated paper and 75% recycled fibre for coated paper. PB 11427 Review of the Agricultural and Horticultural Levy Bodies 1 Table of Contents Foreword 2 Executive Summary 3 Section I. Background to the review 9 Section II. An introduction to the levy bodies 13 Section III. The needs of the sectors 40 Section IV. The role and performance of the levy bodies 71 Section V. Options for the future 81 Section VI. Implementation of change 106 Section VII. Summary of conclusions and recommendations 111 Glossary 120 Annex A Terms of Reference 122 Annex B Acknowledgments 123 Annex C Governance and audit 131 Annex D Activities of the levy bodies 148 Annex E Levy arrangements 168 Annex F Properties 180 2 Review of the Agricultural and Horticultural Levy Bodies Foreword It is well known that the agricultural and horticultural sectors of the UK economy have been undergoing massive change in recent years, change that is certainly set to continue. All the sectors have been affected by the forces of globalisation; most have been affected by major recent reforms to the Common Agricultural Policy, with an end to production subsidies, and by other European regulatory initiatives. And the UK policy environment has had its part to play, with key issues such as animal health and welfare, health and nutrition, and the domestic regulatory environment all impacting on these industry sectors. They face a formidable array of change drivers but their role in the economy, and their health and prosperity, continue to be of great importance, not just in terms of their direct economic contribution but also in terms of their contribution to the wider sustainability agenda. That is why I was very pleased to be invited by Ministers, earlier this year, to undertake an independent Review of the five GB and UK statutory agriculture and horticulture levy bodies. These bodies, which are financed by statutory levies raised on production and, in some cases, first-stage processing, have each been involved in providing services to their levy payers for some years. But, although each of them has been the subject of individual reviews, this is the first occasion when they have been looked at as a group. The Review therefore provided an opportunity to examine in some detail what is going on in these industry sectors: what changes they have faced and are facing; what their needs are in the light of these drivers of change; what support can and should be made available to them in responding to the challenges they face; and what part levy bodies have played and might play in all this. Understanding needs, and hearing the views of stakeholders about all these issues, has therefore been a primary focus for my Review. I wanted to collect views and opinions about what is going on and, in particular, to hear the views of levy payers themselves. Accordingly, I have devoted a great deal of time to this, time that has proved to be very well-spent. I have met a very wide range of individuals and organisations and have obtained and studied the views of many more. Annex B to this Report, which acknowledges and thanks all those involved, is testimony to this. But throughout my Review I have been impressed by the importance everyone attaches to the issues I have been examining: people have been willing to make time, at senior level and often at very short notice, to help me in this way. Whilst views on some of the detailed issues may differ, all are agreed that getting things right, or at least making them better, is of major importance to the sectors concerned, and thus to UK plc. I hope, therefore, that the conclusions and recommendations set out in this Report will, indeed, help to make things better. In summary, I have concluded that, for the time being, there is still a case for retaining statutory levies but that some important changes now need to be made. Change is never easy, and doubtless my recommendations will not appeal to everyone. But I believe they can and will appeal to most, and in particular to the levy payers, and their representative organisations, who are, effectively, paying the bill for the services provided by the levy bodies. Value for money for them has to be the most important test. Rosemary Radcliffe CBE October 2005 Review of the Agricultural and Horticultural Levy Bodies 3 Executive Summary Background to the Review 1. On 15 March 2005 I was asked by UK and Devolved Administration Ministers to undertake an independent Review of the five GB and UK statutory agriculture and horticulture levy bodies: the British Potato Council (BPC); the Horticultural Development Council (HDC); the Home Grown Cereals Authority (HGCA); the Meat and Livestock Commission (MLC); and the Milk Development Council (MDC). I was asked to make recommendations to Ministers and to include, where changes to present arrangements were advocated, proposals on how such changes could be carried forward. I was asked to submit my findings and recommendations to Ministers by the end of October 2005. This Report meets this requirement. 2. In discharging my remit I have taken as a primary focus the need to understand the present and future requirements of the industries concerned, and in doing this to engage with all the stakeholders: the levy payers themselves; their representative organisations; and all the other stakeholders who have a direct or indirect interest in the issues. I have accordingly conducted a substantial exercise to obtain their views, and am most grateful to the very many individuals and organisations who have helped me in this way. An introduction to the levy bodies 3. I have undertaken a comparative analysis of the five levy bodies and have drawn the following conclusions: • Whilst there may be some broad similarities between the five bodies, there are also very considerable differences. Their broad statutory remits are similar – they all focus on the need to promote efficiency and productivity in the industries concerned – but the detailed remits vary. In terms of their governance arrangements, all five are NDPBs (Non Departmental Public Bodies) but there are variations with regard to board size and composition and to remuneration arrangements. Whilst the bodies undertake a similar range of activities the extent and degree of focus on particular activities varies considerably. Arrangements with regard to the levy are not uniform. And the size and scale of the bodies’ operations varies greatly. • Until recently, little was done to coordinate the work of the five bodies and to identify areas where making common cause would bring benefits. It is encouraging that steps have recently been taken to improve the degree of coordination between the efforts of the five bodies but these initiatives are still in their infancy. • Consideration of the work of other bodies indicates, first, that in some industries arrangements can be made that do not require the backing of a statutory levy; 4 Executive Summary however, it may be argued that the circumstances in some of these industries are different in a number of material respects from those faced by the five bodies. Nonetheless, there are several other organisations quite properly operating independently but who might also be able to benefit from some degree of cooperation with one another in order to save costs. The needs of the industries 4. I have examined the needs of the industry sectors the levy bodies were set up to serve. My principal conclusions are as follows: • At first sight the economic significance of the agricultural sector to the UK economy is modest: it accounts for only 0.8% of gross value added in the UK economy as a whole and has been declining in relative importance for many years. But its output is a key input to the agri-food sector. The food processing sector is now the largest manufacturing sector in the UK. A further relevant issue relates to self-sufficiency: whilst the degree of self-sufficiency is no longer a specific objective of UK government policy it is relevant to an assessment of risk in the event of an interruption of trade. Self-sufficiency as a proportion of all foods is around two thirds and as a proportion of ‘indigenous type foods’ is nearly three quarters. The economic health of the primary production sector is thus indirectly of much greater economic significance than its direct size would suggest, a significance that is enhanced when the role of the sectors in the wider sustainability agenda is also recognised. • The size and structure of the industry sectors has been changing significantly. In primary production there are still very many small producers, although fewer than there were. Further up the supply chain it is evident that, in keeping with all other sectors, the degree of concentration in the processing of agricultural products, in food manufacture and in retailing is increasing.