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Agriculture and Horticulture Development Board (Amendment) Order 2023

Volume 832: debated on Monday 24 July 2023

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Agriculture and Horticulture Development Board (Amendment) Order 2023.

My Lords, I declare my farming and land management interests, as set out in the register. This order was laid before the House on 6 June 2023. It delivers a package of financial and operational improvements to the Agriculture and Horticulture Development Board—AHDB.

I start by highlighting the AHDB’s important role in supporting and developing our agricultural sectors, investing around £42 million each year in a range of levy-funded services for farmers and others in the agri-food chain. These important services include: applied research and knowledge exchange, such as developing genetic improvements for livestock and tackling pests and disease in crops; market intelligence and analysis, such as providing data and information on input costs, prices, shifting consumer trends and future outlooks for supply and demand of commodities; marketing and consumer education, such as delivering the campaign, We Eat Balanced, to encourage consumers to eat British red meat and dairy as part of a balanced diet; and working with industry and government to establish new export markets.

This instrument modernises the Agriculture and Horticulture Development Board Order so that it can continue to deliver these important services efficiently and effectively. It will also enable more agricultural sectors to access AHDB services if they wish to. Currently, the narrow scope of the order limits the AHDB to working with only the sectors that are listed. By expanding the scope of the order to include other agricultural sectors and related industries, we are providing flexibility for the AHDB to work with a range of other sectors that may wish to access the AHDB’s expertise and services. Any activities that the AHDB undertakes through this expanded scope will be funded directly by those industries and will not involve a statutory levy.

The AHDB will apply clear governance principles to its expanded scope, including that there will be no cross-subsidising of new activities with existing levy-funded services. Another key principle will be that activities in other sectors will add value to the core work the AHDB delivers for levy payers and will not detract from or undermine levy-funded services.

The instrument also delivers changes to help the AHDB reduce administration costs and operate more efficiently. It will put in place more efficient processes for ministerial approval of levy rates so that, in future, approval must be sought when changes are being proposed, instead of the bureaucratic annual approval by default. It will also enable the AHDB to deliver a temporary zero-rated levy to provide financial relief to a sector in exceptional circumstances such as a disease outbreak or market crash.

This instrument will also deliver important modernising changes to the outdated levy deduction provisions. These provisions will enable third-party levy collectors to deduct a percentage of the levy that they collect to cover any administrative costs they may incur. Modern automated financial systems have significantly reduced the administration costs of collecting the levy. Therefore, going forward, rather than having a deduction rate set in statute that cannot easily be updated, the provision will enable any deduction rate to be reviewed and agreed between third-party levy collectors and the AHDB. This will deliver better value for money to levy payers, as reviewing and amending levy deduction rates on a cost-recovery basis will reduce any unnecessary administration costs and enable more levy income to be returned to the AHDB to invest in delivering services.

A further important update we are making to the order concerns the maximum levy rate allowed for the sheep sector. The levy rate for the sheep sector has been at the maximum allowable rate for more than 10 years. We are raising the maximum rate ceiling by 25% to provide headroom for the AHDB to consult further with the industry on an appropriate rate to maintain the services that it receives in future. The new ceiling will be 75 pence per head for sheep producers and 25 pence per head for slaughterers and exporters. The government consultation on this reform shows that key industry organisations, such as the National Sheep Association and the National Farmers’ Union, are supportive of raising the sheep levy ceiling. The AHDB will undertake detailed consultation and engagement with the industry on future options for changing levy rates.

Finally, this instrument delivers some smaller changes to modernise the AHDB order so it is up to date with current practices on invoicing, reflects consolidation in the pig sector and is in line with Cabinet Office guidance on public appointments of board members.

I take this opportunity to thank the chief executive and the chair of the AHDB, Tim Rycroft and Nicholas Saphir, for their service and contribution. Together, they have delivered a significant programme of change putting levy payers at the heart of what they do and supporting our agricultural sectors to adapt and thrive in a changing world.

In conclusion, these modernising updates to the AHDB regulations will ensure that the board can continue to deliver important services to farmers efficiently and effectively. I beg to move.

My Lords, I thank the noble Lord, Lord Harlech, for his thorough introduction to this statutory instrument which, although straightforward, is confusing in some elements. Throughout the Explanatory Memorandum, there are references to what is being changed and what it will do now, but they do not always appear coherent. The AHDB was set up in 2008 under the provisions of the NERC Act 2006 and provides advice to a number of industries involved in animals and horticulture. The original 2008 statutory instrument, No 576, allows the AHDB to introduce and set levies to cover the cost of its operations to all the sectors set out in paragraph 7.2 of the Explanatory Memorandum to this order. The original 2008 statutory instrument is quite clear in Article 11.7 that the appropriate authority for each sector is not bound by the decision of the levy set as a result of a ballot of its sector. I understand why this would be an unwelcome obstacle to overcome and that, as the Explanatory Memorandum to this order states in paragraph 7.6, the levy rates

“have already been approved by the appropriate authority is unnecessary and inefficient. It also limits the ability of the AHDB to put forward proposals for changes to levy rates”.

However, paragraph 7.7 of this Explanatory Memorandum states:

“Final decisions on approving a proposed change to the levy rate will remain with the appropriate authority”.

This gives a strong impression that the appropriate authority can refuse to approve a new levy rate. Can the Minister provide some clarification on this issue?

Paragraph 7.8 states that Article 6 of the 2008 order will allow for

“a zero rated levy to be imposed on an industry … for a temporary period”.

Can the Minister say how long “temporary” is likely to be? It is clear from paragraph 7.2 that the pig industry is included in the provisions of this instrument, but there appears to be some dispute about what constitutes a pig keeper in terms of influencing the outcome of a vote on the levy. Why do some pig producers not pay the levy? Do the producers have undue influence on the outcome of the vote on the levy? If so, has this been the case since 2008? If so, surely this should have been sorted out before now?

I turn now to the issue of the sheep levy. As is generally accepted, sheep is not the sector that produces untold wealth for their farmers. Having looked at the actual rates proposed in the schedule attached to the original SI No. 576, I found that the levies set then per beast were a total of £8.75 for cattle, £1.50 for calves, £1.625 for pigs, and a pound for sheep. It would seem that this levy has remained the same for 10 years, although I think the Minister may have given some different information, which I am pleased about. The current SI proposes that the sheep levy will rise by 25% and the industry will be consulted. This would allow the AHDB to increase, reduce or keep the levy at the same rate. Can the Minister confirm that the 25% increase will be on the figures quoted on the original SI of 2008, or whether it will be on some other figures, which I think he has said will be 75p for the buyer for sheep and, if I heard correctly, 25p for the slaughterers? Could he confirm this in relation to sheep?

There is also a question mark over when invoices will be raised by the AHDB. Payment will be due 30 days from the date of the invoice for the levy issued. I realise that it is extremely important for budgeting purposes for invoices to be issued and payment received as soon as possible. Is the Minister able to say whether all invoices will be issued at the same time, maybe at the beginning of the financial year, or whether there will be a gradual issuing of invoices throughout the year?

Lastly, I turn to the issues raised in paragraph 7.18 of this EM, which states that buyers, slaughterers and exporters have lost levy income of between £600,000 and £700,000 per year due to admin costs. Those costs are all part of running a business, and would be expected to be accounted for in business plans. The original instrument No. 576, in the paragraph on levies, in sub-paragraph 6(3)b states that the AHDB can impose a levy to meet its administrative costs, so this would appear to have already been considered. It is important that, when these changes to the levies are implemented, all concerned accurately calculate their admin expenses in relation to the current economic climate, so that levies are not increased at a later date to retrospectively put this right.

When the consultation between December 2022 and February 2023 was conducted, there was some disagreement on establishing a statutory register of levy payers. Consequently, this proposal was dropped in favour of a voluntary approach. Given the very varying nature of the areas covered by the AHDB, I can envisage that there will not be voluntary unanimity on this subject across the various sectors. It may be that there will have to be a statutory duty to keep a register to ensure parity across those differing sectors. I am nevertheless happy to support this SI and can see that it is long overdue.

My Lords, it is a pleasure to respond on behalf of His Majesty’s Opposition to this final Defra SI before the Recess. I thank the Minister for his overview.

As we made clear in the other place, the Labour Party will support the provisions outlined in the statutory legislation. This is an important step forward for the wider agricultural and horticultural sectors. As my colleague Daniel Zeichner said in the other place:

“working across a host of agricultural sectors, the AHDB undertakes important research, development and farm-level knowledge transfer, along with working to improve supply chain transparency and stimulating demand to help develop export markets”.—[Official Report, Commons, Delegated Legislation Committee, 18/5/23; col. 4.]

While some of the larger agricultural organisations have the resources and capacity to engage in those activities themselves, the vast majority of farmers do not. Therefore, pooling financial resources from farm businesses large and small to invest in improving the sector for everyone is important. In fact, I would argue that the AHDB is more significant than ever given the range of challenges facing the food sector. But, as ever, this SI raises some concerns with regards to implementation and potential impact. In light of that, I hope the Minister can assist with a few questions.

Many of the changes proposed in the SI are entirely sensible but, given the pressures that different types of farmers have been facing for a number of years, it is not clear why the Government are acting only now to reform the Agriculture and Horticulture Development Board. Can the Minister explain why they did not act more quickly?

While it makes sense for the AHDB’s remit to be widened to include other parts of the agricultural sector, is the Minister confident that these additional tasks will not lead to any reduction in focus on the organisation’s core functions? Does he accept that, if the AHDB is not able to devote the same time and energy to these core functions, it could undermine its relationship with levy payers?

Following that point, the Agriculture and Horticulture Development Board currently works with more than 100,000 farming and supply chain businesses. Given the proposed expansion in remit, how many more entities do we believe the AHDB will work with going forward and what provisions are being made to ensure that it has capacity?

When debating this instrument in the Commons, there was some discussion of the ability of larger farming organisations to buy services directly from the AHDB. How does the department propose to ensure that smaller producers, which often face significant financial pressures, are not priced out of the organisation’s activities or otherwise disadvantaged in comparison to larger businesses?

I look forward to the Minister’s response but, in the meantime, I wish all members of the Committee a relaxing and happy Recess.

My Lords, I am grateful to noble Lords for their views and questions on this instrument. We all recognise the importance of the services that the AHDB delivers to our agricultural sectors and that this instrument will help it to continue to do that that as efficiently and effectively as possible. I will now address some of the points that have been raised in the debate, and I undertake to follow up in writing any questions that I cannot answer today. I will place copies of those letters in the Library.

It may be helpful to expand on the financial impact of the AHDB in detail and how funds are allocated. In total, the AHDB collects and invests around £42.1 million a year in statutory levies. The investment that the AHDB makes in each sector, and the gross amounts that are collected and invested annually, are broken down as follows: cereals and oilseeds, which is UK-wide, £11.2 million; dairy, which is GB-wide, circa £7.3 million; beef and lamb, which is England only, circa £14.7 million; and pork, which again is England only, circa £8.9 million.

Both noble Baronesses talked about the impact of the AHDB and what it delivers for farmers. The noble Baroness, Lady Anderson, talked about scale and how smaller producers are perhaps affected. This is exactly why the board is so important: most individual farmers do not have the financial resources to invest in large research and development programmes that will help their businesses thrive in the future. By pooling resources through the statutory levy, the AHDB delivers those services for the whole sector so, even if someone is not invested—so to speak—the research and development going into the sector, the knowledge that is created from it, the expertise in new farming techniques and so on will have an overall benefit for everybody. These services include applied research and knowledge exchange, market intelligence and analysis, domestic marketing and consumer education and, crucially, export market development opening up new markets abroad.

With a view to talking about the scope of the board and how we will ensure that an expanded scope does not distract from the AHDB’s core purpose, the AHDB is clear that levy payers are at the heart of its activities. With this in mind, the AHDB intends to deliver services and activities to sectors where they will add value to its core work with levy-paying sectors. The AHDB will ensure that any new activities do not undermine or detract from its core activities.

The noble Baroness, Lady Bakewell, talked about a statutory register of levy payers. Such a register was consulted on but was not supported by industry, so we feel that a voluntary approach is the best way forward. However, we will keep this under review.

We are keen to ensure that the AHDB does not intend to operate where there is already a trade body or consultancy delivering a viable solution. The AHDB intends to use this expanded scope only where there is a unique need from industry that is not being met somewhere else and where that activity adds value to the levy-funded activity.

The noble Baroness, Lady Bakewell, talked about the zero-rated levy and asked how long it will continue to be allowed. I am not sure how much I can say because the exact length of a zero-rated temporary levy holiday would need to be determined on a case-by-case basis according to industry needs. However, we would expect this to be a short-term measure of no more than a few months to help the sector through a difficult time. For example, the pig levy holiday introduced last winter to help pig producers through a difficult time lasted one month. I hope that this provides some clarification on the sort of timescales that we envisage it being used for.

The noble Baroness also talked about the evidence needed to support a change in levy rates and asked what kind of evidence Ministers would want to see before a change in the rate would be approved. Ministers would expect to see evidence from the AHDB setting out why a change in the levy was necessary, what the benefits and impacts would be for levy payers and, crucially, the views of levy payers and representative trade bodies on those proposed changes before anything was approved.

I shall focus in a bit more detail on pigs because they were raised in the debate. Most pig contractors who raise pigs on behalf of larger pig owners do not pay the pig producer levy and so will no longer have voting rights on how the levy is spent. It is right that only those who pay the pig levy should be able to vote on levy spend priorities. This will result in a smaller number of pig producers voting on levy matters in future, which is consistent with recent consolidation in the sector. Currently, the wide definition of “keepers of pigs” means that anyone who keeps a few pigs but does not pay the producer levy could have undue influence on the outcome of a vote on how the levy is spent. It is therefore right that the vote is limited to only those who pay the levy in future.

I hope that I have addressed the issues raised by noble Lords. Once again, I commit to reading back through Hansard to check whether there are any specific questions that I have missed; I will write to all members of the Grand Committee if I have. I hope that noble Lords will approve this instrument, thus ensuring that the AHDB can continue to deliver value for money and support farmers for years to come.

Motion agreed.