Official Controls Charging

In addition to those in London the following were connected by video link.
FSA/NI – Joy Cresswell (host); Jean Wales, DARD/NI; Raymond Gamble, DARD/NI Colin Smith, Ulster Farmers Union
FSA/Scotland, Aberdeen – Karen McCallum-Smith (host); Douglas Scott, SFMTA
Scottish Government, Edinburgh- Elspeth Macdonald (host), Penny Johnston, NFU Scotland; Stuart Ashworth, QMS; Martin Morgan, Scottish Government
FSA/Wales – Jayne Griffiths (host), Dylan Morgan, NFU Cymru, Laura Griffiths, Welsh Government, Sion Aron Jones, Hybu Cig Cymru-Meat Promotion Wales
FSA/York – Terina Hurley (host), FSA officials: Colin Hall, Martin Brewer, Richard Collier, Chris Hitchen

The impact assessment had not yet been finalised and so figures presented were remain subject to final review.

Tim Smith introduced the topic with some background and updated situation in wake of the FSA Board meeting in Belfast.

Role of the FSA: Board confirmed that it is not a function of the FSA to subsidise industry; the role of the regulator is to protect consumers, which should not be based on economic circumstances.

Full Cost Recovery: Should be introduced over a 3 year period beginning in April 2012.

Pension (LGPS) Costs: Following the review by HM Treasury it was agreed that industry will not bear the cost relating to the deficit in the LGPS, which totals £4.7m.

Low Throughput Definition: Consultation proposal amended to allow more small businesses to fall under the 'low throughput' category.

Low Throughput Support: – Plants to pay reduced charges in a tiered system depending on the volume of livestock units or meat they process.

To avoid a 'cliff edge effect' the FSA Board requested consideration of a staged move to a respective maximum 70%, 50% and 25% tiered reduction of the full cost charge for LTP establishments in 3 steps over a 3 year period to be implemented from April 2012. Tim Smith said that FSA were not formally seeking approval of ministers but FSA were not “silly people” and would listen very carefully to what they have to say especially about medium throughput abattoirs.

There would be no reason why industry could not respond directly to ministers and the Impact Assessment allows a broader discussion in the political field.

It was estimated that the re-defining of LTP abattoirs could cause another 79 plants to fall into that category.

There are concerns that full cost charging could have a disproportionate impact on medium sized establishments.

There are two ways of analysing and assessing such an impact:

1) Absolute Impact – measuring the increase in full/ reduced maximum charges. (The real amount in £)

2) Relative Impact – measuring the increase in full/ reduced maximum charges as a proportion of the estimated value of throughput (output).

An example was shown where the full cost charges as at 2014/15 at Plant A would rise by 210% that was the absolute impact.

Then an example was tabled showing the relative impact. This was the amount of increased charge in 2014/15 as a proportion of Plant A's estimated value of throughput. The critical part here is the estimate. No industry figures were available since no one would divulge turnover (although that must be available at Company's House) and I feel here the Impact Assessment has grossly overstated turnovers. Using their estimate a nominal increase of £74,000 in charges would make only 1% relative impact but that means turnover would have been £7.4m and I think that is far too high but without someone in the industry telling us then this could be presented showing a low percentage that looks easier to absorb.

The analysis was shown based on 3 individual plants across each category of plant
size; ranked by relative impact. Each plant represents a case example of worst, average and best. In the LTP category relative impact was between 0.8% and 0.1% but in the medium throughput category this ranged from 3.9% down to 0.01%. Any business faced with a 3.9% increase would be seriously disadvantage in comparison to others.

I asked if the Impact Assessment addressed contract kill abattoirs where absolute increases in cost have to be passed on to the butcher users and subsequently the consumer. Tim Smith thought this might have been missed and requested dialogue on that point

Everyone had the opportunity to question the method and accuracy of the Impact Assessment and it is clear that industry needs to feed in more information to make this more meaningful. Tim Smith requested information so that in the final Impact Assessment the figures are as accurate as possible and leave little argument / doubt.

The final Impact assessment report would give more detail and country by country figures.

Douglas Scott
11/07/11