Levy Board UK: Pig Sector Chairman Replies

UK - Questions regarding the Levy Board UK by Digby Scott, NPA to pig sector chairman Stewart Houston.
calendar icon 18 April 2007
clock icon 12 minute read
DS. Levy board reform will cost levy-payers about £1m (Radcliffe Report). There is no democratic process allowing levy-payers to have a say in the amount of levy collected and how it should be spent.

SH. There are two separate points here. Point one - we don’t know what the cost will be but if it were £1m we would hope that would be regarded as an investment in cost savings achieved by combining some services and/or better delivery of services. Point two - there IS a democratic process to allow levy-payers to have a say and that is through the consultations that Defra is carrying out every step of the way. Levy-payers can be assured that we would never increase the levy without consultation and in fact we would have to consult even if we decreased the levy. This has been consistent BPEX policy over the period that I have been involved. What you are really getting at here is the loss of the democratic process of constituting the BPEX board. I agree we got off to a bad start and this only increases the responsibility of myself and the NPA members on the selection panel to get it right.

DS. As part of its Fresh Start exercise, Defra commissioned consultants to find out what levy-payers want from their levy boards. The consultants carried out a telephone and internet survey using names and addresses from Yellow Pages. For obvious reasons, most professional pig farmers are not in Yellow Pages. Only 52 of the farmers who answered questions in the telephone survey were pig farmers. Although the survey is as unrepresentative as the consultants were warned it would be by NPA, Levy Board UK chairman John Bridge has indicated he will be guided by it.

SH. We have got a good track record in recognising what levy-payers need and producers can rest assured that we will use other routes to confirm, or not, the findings of this exercise.

DS. Pig farming is about managing crisis – unsustainable prices in 1998-99, classical swine fever in 2000, foot and mouth in 2001, PMWS in 2002. But the Fresh Start survey proposes downgrading crisis management as a levy board function.

SH. It is easy to forget about crises when you’re not in them so we must make sure we are always prepared. A crisis isn’t necessarily foot-and-mouth or classical swine fever. It can be anything from a food scare to animal welfare matters. The Fresh Start survey did make a recommendation to downgrade crisis management, but we have already moved it back up the list.

DS. If Levy Board UK were running BPEX currently, some pig farmers might be looking at a court appearances, perhaps a spell in prison, because there would be no Nigel Penlington to help them navigate the bureaucratic maze of IPPC. John Bridge says it will not be part of the new BPEX’s role to help untangle bureaucracy.

SH. I think it is a question of defining bureaucracy and I think this will untangle as we go forward. By the time we get to April 2008 when the new BPEX takes over everybody will understand what the issues are and there will be the right responses to the challenges of issues such as IPPC .

DS. BPEX is the pigs-only subsidiary of MLC. MLC has never interfered in BPEX business. The relationship between Levy Board UK and the new BPEX will be different. “We have a clear vision of the future and we can translate that down to the sector companies,” said Bridge in a press interview. In contrast, the pig industry’s view is that the role of levy board reform was to ensure that levy-payers’ voices are heard in forming policy and therefore the industry’s vision for the future should come from the bottom up, to be shaped by the sector boards.

SH. The new pig sector board will develop its strategy in consultation with levy-payers and I am confident that Levy Board UK will not seek to change that strategy.

DS. Levy Board UK will intervene in the pig industry’s research programme. John Bridge has said he will be seeking to have a debate on ‘priorities’.

SH. This is written to make what Levy Board UK is seeking to do sound confrontational. What will happen is that we will research everybody’s priorities and see if there are areas where we can combine resources. What I will not be comfortable with is co-funding research that the pig industry doesn’t want. It has to be something that pig producers genuinely want and need.

DS. Pig levy money may not be ring-fenced. There is talk of a ‘central override’ requiring sector boards to allocate a proportion of their research budgets to Levy Board UK.

SH. I repeat, as far as I am concerned pig levy money will be ring-fenced.

DS. Levy-payers may expect that Levy Board UK will create efficiencies, but John Bridge has indicated a different emphasis, namely a better flow of relevant services. He has never seen levy board reform as just an exercise in saving money.

SH. I am clear that Levy Board UK WILL create efficiencies that will save money but I am not just looking at saving money, if we can achieve better delivery from the same money or more. I think that overall we will get financial savings AND more efficient services.

DS. The independents on Levy Board UK have little knowledge of the agricultural industry. They have been given the key roles in Shadow Levy Board UK, as chairmen of the audit committee, the nominations committee, and the remunerations committee.

SH. This is true and that is why the independents are there, to oversee good corporate practice – but that isn’t to say they are running Levy Board UK.

DS. Although Defra’s consultation on Levy Board UK runs until March, Levy Board UK is already operating as a shadow board and is already making key decisions that affect the future of the pig industry, for instance banning elections to the BPEX board.

SH. I have already agreed that we did get off to a bad start. Lessons have been learned and it certainly means I will have to be stronger on the board to make sure that the interests of pig levy-payers are met.

DS. Defra’s draft statutory instrument, which will later this year create Levy Board UK, says that encouraging the entry of people into the pig industry will no longer be a levy board function. BPEX current training strategy is partly geared to attracting new, high quality candidates to the industry, which is suffering a skills crisis.

SH. This is something that slipped through but it has been picked up now and both BPEX and NPA will be commenting on it in our response to the draft Statutory Instrument. BPEX is currently committed to and is financially supporting a pig industry training strategy which includes attracting talented new people to the industry. We are also funding the British Pig Project which is trying to attract brown-envelope-receivers into the pig industry.

DS. The new (unelected) BPEX board, which will take over next April, will set its own levy rate up to a maximum of £1.075 (producers) and £0.275 (processors). The current pig levy is 85p (producers) and 20p (processors).

SH. There is no way we would make changes to pig levy rates without consulting levy-payers. In fact the ceilings have always been there to allow flexibility because of the time it would take to get a Statutory Instrument through the House of Commons. We have always worked well within the ceiling and I don’t see that changing.

DS. The Radcliffe Report recommended levy-payers could demand a ballot every three years. The draft statutory instrument increases this period to five years and forbids a ballot before 2013.

SH. If anybody has got a problem with this then they should make their feelings known as Defra is currently consulting on the draft Statutory Instrument that will create Levy Board UK. Personally I agree that it will be best not allow ballots before 2013 because the new structure will need time to settle in and prove itself.

DS. At least five percent of levy-payers must demand a ballot before Levy Board UK is required to hold one. The required number of votes needed to trigger a ballot must be collected within three months.

SH. Seems fair to me but I would welcome comments.

DS. Any ballot will be one man:one vote. (A weighted vote – favoured by some levy-papers- would be outside the powers of the Natural Environment and Rural Communities Act 2006). Levy Board UK must inform Defra of the result of all ballots, regardless of the result.

SH. I have some sympathy with the weighted vote but we are where we are. If we engage properly with levy-payers we should know whether we are doing a good job or not. I know that some of the bigger producers would like to retain the cash in their own supply chains but the weaker the rest of the industry, the more they will have to compete with cheap imported product.

DS. The final decision on whether a statutory levy should continue will rest with ministers and Parliament.

SH. It would have to be a very extreme case for a Minister to intervene in a way that wasn’t in accordance with levy-payers’ wishes.

DS. Although levy-payers cannot trigger a ballot before 2013, ministers and Levy Board UK can hold a ballot at any time.

SH. See my answer above.

DS. There is no provision for protecting pig levy-payers from paying disproportionate overhead costs to Levy Board UK if other sector boards vote to disband themselves.

SH. We had noted this and recognise that when we respond to the draft Statutory Instrument we will have to seek a form of words that will protect any remaining sector boards from shouldering a disproportionate share of overhead costs.

DS. John Bridge will be paid £500 a day by levy-payers; it is expected he will work a three to three and a half day week. The experience he brings to the job includes the chairmanship of the Land Restoration Trust and a seat on a number of private and public sector boards. He was founder chairman of the rural development agency for the north-east of England and has recently sat on government advisory groups, dealing with urban regeneration and transport policy.

SH. His experience is in change management and this should prove invaluable as the process unwinds.

DS. NPA Producer Group invited John Bridge to its January meeting when all members present understood him to undertake not to scrap elections to the BPEX board. However Levy UK has subsequently outlawed elections.

SH. We have enough strong characters in the industry at present to ensure we get through this process with what levy-payers want. What we need to do next is make sure that future generations are not ham-strung by a process that is not what they want or need. As I have said earlier the first Levy Board UK meeting where this matter was discussed was a difficult one and I have learned lessons from it. Having said that, I have always believed in corporate responsibility and if we had chosen the election route the other five sector chairmen would have felt vulnerable to challenge from their sectors. In the pig industry we have got to engage with about 1,800 serious players whereas milk has 18,000 and grain, for example, has nearer 50,000. We are also very fortunate that we have just one producer organisation to work with, whereas all the others have several, in some cases up to six or seven, as well as Scotland and Wales. It remains my ambition to return to a proven method of BPEX board member selection.

In my preamble to the 20 points I said the national herd has stabilised after seven years of turmoil and I claimed this restoration of confidence has been placed in jeopardy by Levy Board UK.

I said that under Defra-appointed chairman John Bridge, Levy Board UK has set itself on a collision course with levy-payers, in particular by its decision to strip out democracy by prohibiting elections to the board of the new BPEX, which will take over in April next year.

I accused the Levy Board UK of dilettantism and said it has the potential to change the face of the pig industry in a way that professional pig-keepers find abhorrent.

Stewart Houston’s response: “You know, and the industry will know, that I, and the members of BPEX, and the BPEX staff, have always got the industry’s best interests at heart. I simply will not allow this pessimistic picture you paint to happen. Neither can I see NPA Producer Group sitting back and allowing it to happen. Notwithstanding we have lost the ability to elect I am still convinced we will get the BPEX the industry needs and deserves.”

I said the management term for what Levy Board UK is doing to the English pig industry is ‘strategic drift’ and noted how in 1998-1999, when prices plunged far below cost of production, producers discovered that, because of strategic drift, some of the organisations that existed to help them had become partially or wholly dysfunctional, and were incapable of responding to the crisis.

As a result, British Pig Industry Support Group was formed. BPISG’s role was to be the industry’s ‘sharpbender’; to bring about strategic change. I claimed in the article that as a result of Levy Board UK's interventionist approach, the pig industry is now entering a period of flux after which a period of decline may set in, unless NPA and/or BPISG take action.

SH response: “Many people, myself included, retain vivid memories of 1998-2001. I do not want anything to dent the fragile confidence that is building. We have got enough to worry about with environmental legislation and increased feed prices to allow ourselves to be distracted by what Levy Board UK is or is not doing.
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