§ 6.42 p.m.
§ Earl Howe rose to move, That the draft order laid before the House on 30th November be approved [2nd Report from the Joint Committee].
§ The noble Earl said: My Lords, it is right that I should declare a personal interest as a milk producer.
§ The draft order is presented in accordance with the requirements of the Industrial Organisation and Development Act 1947. Its purpose is to establish a milk development council for Great Britain, the primary function of which will be to commission research and development in dairying. The order will empower the council to raise a levy for this purpose on sales of milk by farmers.
§ Before going into the details of the order, I should like to explain to your Lordships a little of the background. I emphasise at the outset that there have been full consultations with all interested parties as required under the 1947 Act. The draft order takes account of the views expressed.
§ In July 1993 the former Minister of Agriculture received proposals for a milk development council from the NFU. A compulsory levy was preferred because it was thought it would ensure that there would be no discrimination between milk producers and would provide greater certainty and continuity of funds. My right honourable friend conducted a poll of milk producers in England and Wales in April 1994 with a view to finding out whether they would support the establishment of a development council under the Industrial Organisation and Development Act 1947. A parallel poll was conducted in Scotland. There was no request from farmers' representatives in Northern Ireland for the development council to be extended to the Province. Interested organisations were consulted about the establishment of the development council at the same time that milk producers were being polled. The majority of organisations consulted were in favour and producers gave their overwhelming support. The response rate to the postal ballot of producers was 66 per cent. and 73 per cent. of those who voted favoured the establishment of a development council. In the light of the support from all sides of the industry, my right honourable friend and the Secretaries of State for Scotland and for Wales decided that a milk development council should be established.
§ Noble Lords will recall that provisions relating to agricultural development councils were included in the Agriculture Act 1993, the legislation which, among other things, ended the milk marketing schemes in Great Britain. When the legislation was passing through the House, I explained to your Lordships that the National Farmers Union was advocating the establishment of a milk development council.
§ Your Lordships will wish to note that Article 2 of the draft order restricts the activities of the development council to Great Britain. Article 2 also restricts the definition of "milk" to cows' milk. Goats' milk and sheep's milk will not be subject to the levy and it is not 1266 envisaged that the development council will undertake any work in this area. Article 2(2) ensures that producer processors are required to pay the levy.
§ The functions of the council are dealt with in Article 3 and Schedule 1. The broad range of functions listed in Schedule 1 will enable the council to set its own agenda and continue some of the functions previously undertaken by the milk marketing boards in Great Britain. It will, for example, be able to cover such areas as the funding of R&D, livestock improvement, human nutritional guidance, the preparation of industry statistics, the provision of market information and the management of health, hygiene and other crisis issues which are not company or brand specific.
§ Article 4 specifies the number of members to be appointed and requires all appointments to be made by Ministers. Under the 1947 Act, a development council must comprise people capable of representing the interests of producers, people capable of representing the interests of employees, and independent members with no financial or industrial interests that might affect them in the discharge of their duties. The Act provides that members with special knowledge of milk distribution and marketing may also be appointed. It is the intention of Ministers to appoint the full complement of six producer representatives, two employee representatives, two independent members (one of whom will be the chairman, as required by the 1947 Act) and one member with specialist knowledge of milk distribution and marketing. We feel it is important that producer representatives are in the majority on the council since it is milk producers who will provide the council's levy income.
§ We have not accepted the NFU's suggestion that the producer representatives should be active milk producers. That would rule out talented people whose active involvement in milk production may have diminished—for example, as a result of handing over to a son or daughter the responsibility for day-to-day management of the farm—but who are well qualified to represent the interests of dairy farmers. It is envisaged that the member with specialist knowledge of milk distribution and marketing should also be able to represent the views of first-hand purchasers of milk in their role as intermediary levy collectors for the council.
§ Article 5 introduces Schedule 2, which sets out the council's rules of procedure. Members will be appointed for a term not exceeding four years. The general practice will be for appointments lasting three years, but some flexibility is desirable.
§ Articles 6 and 7 set out the arrangements for the registration of producers. As required by the 1947 Act, anyone may inspect the register or obtain a copy of the entries upon payment of a fee. Producers will be required to register with the council within 120 days of the order coming into force, unless they have been informed by the council that they are already registered.
§ Article 8 provides the council with powers to require returns and information from farmers relating to their activities in milk production, having first obtained ministerial consent.1267
§ Article 9 provides for the council to raise a charge on the sale of milk by farmers to meet its expenses. As envisaged in the explanatory note, which accompanied the polling forms sent to all milk producers in Great Britain, the council will be empowered to impose a levy not exceeding 0.05 pence per litre. It also provides for purchasers to act as intermediaries in the collection of the producer levy. In that context, it is envisaged that an agency agreement would be drawn up which would make clear the obligations placed on the individual parties. In signing an agency agreement purchasers would agree to collect the producer levy (by making a deduction from the producer's monthly payment cheque) but would not be obliged to pursue producers who subsequently decided that they did not want to pay. In such cases the purchaser would be obliged to notify the council, which would then have to pursue the producers concerned.
§ Article 9(6) reflects the wishes of both milk producers and purchasers that the levy should commence on the first day of the month after which the order comes into force. This was considered desirable from an administrative point of view. Article 10 contains standard provisions permitting the council to borrow money and create reserves. Article 11 provides for returns of sales to assist with levy collection. Article 12 deals with offences against the order.
§ The council will have an important task to perform, and in its first few months will be faced with a number of issues. As well as having to decide which areas of work to support, it will have to decide on its administrative arrangements. While decisions on these matters are, within the legislative framework, entirely for the council, my department is ready to provide it with any assistance that it can. We wish the new Milk Development Council well, and I am happy to commend the draft order to your Lordships.
§ Moved, That the draft order laid before the House on 30th November be approved [2nd Report from the Joint Committee]. —(Earl Howe.)
§ Lord Carter
My Lords, the House will be grateful to the Minister for explaining the Milk Development Council Order so clearly. Like him, I should declare an interest as a registered milk producer and a potential levy payer. I certainly support, and my party supports, the idea of the Milk Development Council. I have long felt that the development council route was one that we should have followed in agriculture much more than we have. It is a good way of collecting the money that is needed for producers to carry out research and development and other activities. I am glad that the Minister has confirmed that producers will be in the majority and that they will have six out of 11 members of the new council, as the council will be funded entirely from the levy that is collected from producers. The trade will not be contributing.
The council is welcome. Formerly, the expenditure was in effect raised with a compulsory levy by the Milk Marketing Board. The Minister will remember that when we were discussing the Agriculture Act 1993 I said that I hoped there would be a Milk Development 1268 Council. I also hoped that there would be as small a gap as possible between the vesting day of the new milk system and the setting up of the Milk Development Council. As it happens, because—if I may use a phrase that we were using yesterday regarding the effluxion of time—the vesting day was delayed from April to 1st November, there will be a smaller gap, but we hope that the Milk Development Council can start as early as possible in the new year. It has substantial support from producers.
I wish the Minister to confirm one or two points. He is aware of them because I informed him that I would be raising them. Will he confirm for Hansard—he was kind enough to do so in writing—that the Milk Development Council will take responsibility for the valuable work of the animal data centre, which is not mentioned in the order? This gives me a chance to pay a tribute to its first chairman, Mr. John Moffitt, who has done an outstanding job in setting it up. It is intended that 0.01 of the 0.05 pence will be devoted to the animal data centre. I believe that it is not expressly mentioned in the order because the Government quite understandably quoted the criteria for the functions rather than specific areas of activity. I hope the noble Earl can confirm that the Government support the work of the ADC and that they fully expect the Milk Development Council to use a proportion of its levy funds to fund the ADC.
Perhaps I may ask why the Government have set out the seven functions of the council but have omitted the eighth function which was suggested by the National Farmers' Union. It concerns human nutritional guidance, issues and crisis management, education, and livestock improvement. The human nutritional guidance work was done by the old National Dairy Council. Do the Government feel that these areas can be sufficiently covered in the seven functions which they have given the council? Is that why they have left out the eighth function suggested by the NFU and the industry bodies?
My next point is important. What will happen if an agent collects money from producers, has the money in his bank for a month, and then goes bankrupt? Is the MDC a preferential creditor in that situation?
I should be glad to have the Minister's confirmation that the development council will have responsibility for pursuing producers who do not pay their levy. In the discussion on previous development council orders setting up the development council, it was suggested that the agents would not be able to pursue the producer because they were acting as agents. At that time it seemed that the development council could not pursue the non-levy payer either. But it seems that in this case the problem has been overcome, which is very welcome.
With those few comments I am glad to confirm the support of this side of the House for the new council.
My Lords, I am grateful to the noble Lord for his welcome for the order. There is recognition across the industry that the order addresses issues of fundamental importance for the milk sector. Research and development are essential for the future wellbeing of the industry. I am confident that the Milk Development Council will play an important role in that 1269 area. The Government will also continue to contribute considerably to the funding of R&D in the milk sector—more than £3.6 million for 1995–96 and a similar amount in the following year.
The noble Lord referred to the future of the animal data centre and to the importance of it being fully supported. The broad range of functions listed in Schedule 1 to the draft order would permit the Milk Development Council to engage in activities such as livestock improvement and genetic evaluation work. As I said during the Committee stage of the Agriculture Bill just over two years ago, it would certainly be possible for the Milk Development Council to operate in co-operation with the animal data centre. In the end that would be a matter for the council itself to decide under the terms of the 1947 Act. It is not specifically mentioned but the powers are there.
The noble Lord asked why one of the proposed functions of the MDC had been dropped from the list in Schedule 1 to the draft order. A very early draft of the order listed eight functions in Schedule 1. One of the functions was dropped prior to the draft order being sent out to consultation because it would have permitted the MDC to engage in advertising and promotional activity, functions to which the industry had not previously given its support. I understand that the National Dairy Council would be able to do this if that is what sectors of the industry wished to happen.
The noble Lord asked what would happen if the agent collecting the levy from producers went bankrupt. Matters such as that would be covered by civil law. In such situations it would be unlikely that the MDC would be a preferential creditor.
It is important to repeat my earlier assurance that Ministers will appoint the full complement of six producer representatives so that the producer view is in the majority on the council. I am pleased that the noble Lord has welcomed the order. I commend it to the House.
§ On Question, Motion agreed to.