The Scottish Parliament - Rural Affairs and Environment Committee Report

To consider and report on agriculture, fisheries and rural development and other matters falling within the responsibility of the Cabinet Secretary for Rural Affairs and the Environment.

Roseanna Cunningham (Convener)
Karen Gillon
Jamie Hepburn
Des McNulty
Peter Peacock
Mike Rumbles
John Scott (Deputy Convener)
Bill Wilson

2. As the two draft affirmatives are related in subject-matter, the Committee considered them together, at its meeting on 23 January. The same meeting included further consideration of the negative instrument, which had first been considered on 9 January, and it was therefore convenient to report on all three together.

The draft Agriculture and Horticulture Development Board Order 2007 and draft Quality Meat Scotland Order 2008

Agriculture and Horticulture Development Board Order - purpose
3. Of these two affirmative instruments, the draft Agriculture and Horticulture Development Board Order is the more ambitious in scope. Its main purpose is to create the new Board of the title, replacing five existing bodies (the British Potato Council, the Home-Grown Cereals Authority, the Horticultural Development Council, the Meat and Livestock Commission and the Milk Development Council). This rationalisation was a principal recommendation of a review commissioned by the UK Government and the devolved administrations, and undertaken in 2005 by Rosemary Radcliffe.

4. The new Board will have a remit to develop the beef, sheep and pig industries in England; the cereal and oilseed industries in the United Kingdom; and the horticulture, milk and potato industries in Great Britain. In particular, its role will be to increase efficiency or productivity in these industries; improve marketing; improve or develop services that they provide to the community; and improve the ways in which they contribute to sustainable development. The Board may establish subsidiary companies to carry out some of its functions in relation to individual industries.

5. To pay for itself, the new Board (like its predecessors) will set producer levies for each industry it governs. The rate of levy will be determined annually (subject to maximum rates specified in a Schedule). In certain circumstances, there may be a ballot on whether a levy should continue to be charged, and relevant persons in each industry (keepers or slaughterers of livestock; milk producers; anyone liable to pay horticulture or crop levies) will have a right to vote in ballots relating to that industry.

6. Under the enabling power in the Natural Environment and Rural Communities Act 2006, this instrument can only be made by the Secretary of State with the approval of the devolved administrations, including the Scottish Ministers – who must in turn first lay a draft of the instrument before the Parliament for approval by resolution. The instrument is therefore subject to affirmative procedure in the normal way, even though it is a UK instrument whose application to Scotland is only a relatively small part of its overall scope.

Quality Meat Scotland Order 2008 - purpose
7. Quality Meat Scotland (QMS) is currently a private company limited by guarantee, jointly owned by the Meat and Livestock Commission, the National Farmers Union Scotland (NFUS) and the Scottish Association of Meat Wholesalers. The Scottish levy is collected by the MLC and transferred – via the Scottish Government – to QMS, which is accountable to Scottish Ministers for its use.

8. The Radcliffe review acknowledged that current arrangements for QMS could not continue under a single UK-wide levy board and that the decision about the future of QMS was a matter for Scottish Ministers. A consultation in Scotland found overwhelming support for the option of establishing QMS as a separate public body, thus retaining accountability to Scottish Ministers

9. Accordingly, under the draft Order, QMS will become a non-departmental public body with a constitution, functions and powers (including in relation to levies) similar to those of the new Agriculture and Horticulture Development Board. Like the Board, it will have the ability to establish a company to carry out functions delegated to it.

The Committee's consideration
10. The two draft affirmative instruments were laid on 9 January and referred to the Rural Affairs and Environment Committee as lead committee. The Committee considered them at its meeting on 23 January, when it took evidence from the Cabinet Secretary for Rural Affairs and the Environment, Richard Lochhead, and his officials. The Cabinet Secretary then moved motions to recommend approval of the instruments and these were agreed to without division.

Subordinate Legislation Committee report
11. The Subordinate Legislation Committee (SLC) has reported on the two draft Orders in its 3rd Report, 2008 (Session 3)¹. Following correspondence with the Scottish Government, the SLC has drawn attention to:

12. The Rural Affairs and Environment Committee notes these points. In relation to the two offence provisions, the Committee is concerned that both appear to criminalise without qualification relatively minor failures to comply with administrative requirements. In one of these cases, the particular concern is that the requirement, if read literally, appears unreasonable, since it requires milk producers to report “at” the end of each month data for the same month – with the result that any delay between finalisation of a month’s data and its reporting renders a producer liable, at least in principle, to prosecution.

The Sheep and Goats (Identification and Traceability) (Scotland) Amendment Regulations 2007

Purpose of instrument
13. This instrument applies a system of “double tagging” for sheep and goats in order to implement a 2004 EC Regulation. The United Kingdom – which until now has operated a national system involving a single tag identifying the holding of birth and movement tags thereafter – initially secured a derogation from the EC Regulation but this lapsed in June 2007, and the Commission has since made clear that it expects double tagging to be implemented in the UK by January 2008.

14. The double-tagging requirement is itself a precursor to a planned system of electronic identification (EID), initially planned for 1 January 2008, but now deferred by two years. The Scottish Government believes that in the absence of a workable system of EID, double tagging will actually reduce the traceability of animals moving between holdings – a common occurrence in the Scottish context. However, it points out that it has no alternative to implementing double-tagging in place of the existing national system, since any failure to do so would render the United Kingdom (and, by extension, the Scottish Government) liable to EC infraction proceedings.

Cost implications
15. The instrument was accompanied by a regulatory impact assessment (RIA) which estimates the overall annual cost to the industry of the new double-tagging system as around £1.55 million, less than the estimated £1.8 million cost of the current system. However, when the Committee first considered the instrument, members questioned some of the figures in the RIA were arrived at, and whether the assumptions on which they were based were realistic, given in particular the weather conditions in which tagging often has to be carried out on Scottish hill farms. Accordingly, the Committee wrote to the Cabinet Secretary inviting his comments, and also wrote to the NFUS for an industry view.²

16. The NFUS challenged, in particular, two assumptions used in the RIA. Firstly, it claimed that the pay rate of £8.50/hour used in the RIA was an underestimate, with the actual rate closer to £10/hour. Second, it said the RIA was wrong to assume that all sheep slaughtered at less than a year old will now require only single-tagging, since the “slaughter derogation” only applies to the proportion of animals – around half – that are going into the domestic market. Adjusting for these two factors yielded, in the NFUS’s view, a total compliance cost to industry of around £1.86 million – around the same as the current system. More generally, the NFUS felt that there were “fundamental flaws” in the process for preparing RIAs, which did not sufficiently involve the industry and did not properly assess the purpose of regulation, its benefits and costs, and the alternatives, including approaches taken by other EU countries.

17. When the Committee gave the Cabinet Secretary an opportunity to comment on the NFUS letter, he said the £8.50 figure was “a fair indication” and that in any case using the £10 figure would only increase overall industry costs to around £1.66 million. He also said that the NFUS argument about the number of sheep less than a year old exported to other member states was “simply not correct”, and that the number of animals in this category in fact amounted to less than 0.5% of the entire lamb crop. As such, this factor would not have a significant impact on the RIA estimates.

Other issues
18. The NFUS also flagged up wider concerns about the EC Regulation and the proposed implementation of EID, describing the policy of requiring individual animal identities to be recorded at each movement as “completely unworkable in Scotland”. It attributed this mainly to the “stratified” nature of the Scottish sheep sector, where animals are routinely moved from hill farms to lowland areas for finishing, by contrast with other EU countries where most sheep spend their entire lives on one farm. The NFUS outlined three conditions it had for the forthcoming trial of EID:

19. On these points, the Cabinet Secretary’s response was that the concerns about EID were shared by the Scottish Government, which – along with the UK Government and the industry – had already lobbied the Commission for the longest possible deferment of EID and for revisions to its impact assessment. At the same time, the Scottish Government had set up a working group with industry (including NFUS) to assess the practicalities of EID with a view to pressing the Commission for improvements, including possible exemptions.

Subordinate Legislation Committee report
20. The instrument is referred to in the Subordinate Legislation Committee’s 17th Report, 2007 (Session 3)³, but the SLC did not identify any issues requiring to be drawn to the attention of the Parliament.

21. The Committee recommends to the Parliament that the two draft Orders be approved. In doing so, it draws attention to the concerns about new offence provisions in these draft Orders identified by the Subordinate Legislation Committee. It also draws the Parliament’s attention to the issues about sheep-tagging noted above in relation to SSI 2007/559, and in particular to the evidence given by NFUS.

Subordinate legislation: The Committee considered the following negative instruments—

The Committee agreed, in relation to SSI 2007/559, to write to the Cabinet Secretary for Rural Affairs and the Environment raising concerns about the potential cost implications for farmers and asking whether a specifically Scottish tagging system had been considered, to write to the National Farmers Union (Scotland) for its view on the cost implications, and to consider the instrument again at its next meeting. The Committee agreed to make no recommendations in relation to SSI 2007/562.

Subordinate legislation: The Committee took evidence on the draft Agriculture and Horticulture Development Board Order 2007 and the draft Quality Meat Scotland Order 2008 from—

Subordinate legislation: Richard Lochhead, Cabinet Secretary for Rural Affairs and the Environment, moved—

The Committee agreed to consider a draft report on the draft instruments in private at a future meeting.

Subordinate legislation: The Committee considered the following negative instruments—

It agreed to write to the Scottish Government about SSI 2007/559, inviting its response to the concerns expressed by the National Farmers Union Scotland about the regulatory impact assessment and forthcoming electronic tagging legislation. It also agreed to consider a draft report on the instrument in private at its next meeting. The Committee agreed to make no recommendation in relation to SSI 2007/577.

Subordinate legislation (in private): The Committee considered a draft report on the draft Agriculture and Horticulture Development Board Order 2007, the draft Quality Meat Scotland Order 2008 and the Sheep and Goats (Identification and Traceability) (Scotland) Amendment Regulations 2007 (SSI 2007/559). The report was agreed, subject to minor amendments.

I am writing in response to questions from the Rural Affairs and Environment Committee, at the debate on 23 January 2008, regarding the Quality Meat Scotland Order 2008.

The Committee asked about the steps taken to decide on the creation of a new Non-Departmental Public Body (NDPB). The process towards NDPB status began with the Radcliffe Review of the Agricultural and Horticultural Levy Bodies which reported in October 2005. The report acknowledged that it was for Scottish Ministers to decide whether Quality Meat Scotland (QMS) should be a part of what is now the Agriculture and Horticulture Development Board structure or whether other arrangements should be made.

In a consultation on the Radcliffe Review that issued in November 2005, the industry was invited to comment on whether QMS should be a part of the Agriculture and Horticulture Development Board structure or whether it should be established as an NDPB. The idea of QMS as an NDPB was welcomed by all the main players in the red meat sector who responded to the consultation.

In late 2006, the decision was taken to establish QMS as an NDPB. I was not party to the discussions of the previous administration but NDPB status was the only practical option to ensure a stable future for QMS, retain accountability to Scottish Ministers and protect the distinctiveness of the Scottish red meat sector. I therefore continued on this basis.

The Committee also asked the exact status of QMS staff following the transfer to an NDPB. QMS staff will remain as employees of QMS. They will be NDPB staff (not civil servants in the Scottish Government) and will contribute to the overall size of the public sector in Scotland.

Richard Lochhead MSP
Cabinet Secretary for Rural Affairs and the Environment
29 January 2008

ANNEXE C: THE SHEEP AND GOATS (IDENTIFICATION AND TRACEABILITY) (SCOTLAND) AMENDMENT REGULATIONS 2007 (SSI 2007/559)

The above instrument was considered by the Rural Affairs and Environment Committee at its meeting on Wednesday. Members expressed concern about the potential impact on sheep farmers of the double tagging requirements imposed by this instrument, and agreed that I should pass these concerns on to you in writing.

The Committee recognises, of course, that the Scottish Government is obliged to ensure that the relevant EU legislation (Council Regulation (EC) 21/2004) is implemented in Scotland, despite your view that the current “national system” involving single-tagging plus a system of movement tags achieves better traceability in a Scottish context.

We note from the Regulatory Impact Assessment your estimate that the overall cost implications of the instrument will be lower than those of the current system, and that the option chosen for implementing the EU Regulation involves almost no “gold-plating”. However, members questioned the basis on which some of the calculations had been made – particularly about whether the RIA assumptions about the time required to carry out individual tagging operations were realistic in the context of typical Scottish hill-farm weather conditions at the times tagging is likely to be carried out. In this context, I note that the RIA cites only single figures for each element of the cost breakdown, although in reality, these are likely to conceal wide variations, depending on varying circumstances for different types and sizes of sheep farm. It would also be useful to know what margins of uncertainty are associated with the cost estimates in the RIA.

You may wish to note that I am also writing separately to the NFU (Scotland) for their comments on the likely implications for farmers of the move to double-tagging.

Members also noted that the various provisions in the instrument for individual identification codes require those codes to begin with the letters “UK”, and questioned whether the Scottish Government had given consideration to a separate Scottish identification system. I recognise that the EU Regulation (paragraph A2 of the Annex) requires the first characters of the codes to identify the Member State (i.e. the letters “UK” for all parts of the United Kingdom) and hence that the Scottish Government in fact had no flexibility in terms of the legislation. Nevertheless, it would be interesting to know whether you have considered the potential benefits of a distinctively Scottish identification system, particularly in the context of a “regionalised” response to future disease outbreaks.

The Committee will resume consideration of the instrument at its next meeting on 23 January, and it would therefore be appreciated if you could reply by Thursday 17 January so that your reply can be circulated with the papers for that meeting.

Thank you for your letter of 15 January regarding the above instrument which was considered at your Committee on 9 January. I am pleased to note the Committee recognises we have had to introduce the changes this instrument makes in order to ensure compliance with Community law following the loss of our UK derogated system. I accept that this will mean changes for many of our sheep farmers; however, the system being introduced has been designed as simply and cost effectively as possible, within the constraints of Community law.

It may also be helpful if I outline the cost implications that arise from this amended legislation for our farmers before going into specific details of your letter. The instrument will result in a slight decrease in cost burden for most sheep and goat keepers, with a decrease across the Industry from approx £1.8 million to £1.55 million per annum. Although the amendment instrument provides that animals will now require to be identified with two means of identification, the cost savings can be attributed to (i) no longer having to apply a further means of identification every time the animal moves, (ii) the adoption of a slaughter derogation that means animals under the age of 12 months intended for slaughter can be identified by a single tag (approx 60% of all lambs born), and (iii) a reduction of the administrative burden on most keepers as a result of making the system less complex.

The calculations presented in the RIA are based on figures from a variety of sources which were used to provide the best estimates of cost and resource implications for introducing the system. Specifically, the calculations used relating to the time required to carry out tagging operations were taken from figures provided in a report by ADAS (the UK’s largest independent provider of environmental solutions, rural development services and policy advice) which formed part of the UK EID Evidence Report to the Commission and covered tagging time and practices.

Although I accept that tagging practices are not universal and there are different types of typical farms (as mentioned in Annex 3 of the RIA) all farmers have the opportunity to tag their sheep within a 9 month period if they are extensively reared which allows each farmer to tag at the most opportune time for them within the 9 month period before an animal moves off their holding. This, coupled with approximately 60% of lambs moving direct to slaughter from their holding of birth with only a single tag, will mean that the majority of animals will continue to be tagged as required by the previous system.

As with any new system or changes to be introduced the best interests of Scotland and its Industry are always considered and this was no different in adopting our specific identification system. As you have pointed out EU regulations require that our animals are identified with the “UK” prefix. However we have already ‘regionalised’ the remaining make up of the identification code in a way where each farmer in Scotland is allocated a unique flock mark for their land which is used on the identification tag. This flock mark is easily distinguished from those animals arriving from other countries including England and Wales and this regionalisation assisted in allowing movement restrictions to be lifted in Scotland more quickly than other parts of the UK during the recent Foot and Mouth disease outbreak. The complete separate identification system for Scotland would prove very costly to set up and run and could increase the costs and slow down trade for those farmers who wish to export or move their animals south.

I note that you will be writing to NFU Scotland to receive their views on the likely implications for farmers. We have worked closely with the NFUS as well as other sheep and goat stakeholders to obtain a pragmatic solution to the double tagging system. Industry stakeholders have played an important role in determining the costs and best options for a double tagging traceability system in Scotland. We will continue to work closely with our industry stakeholders to ensure an effective identification and traceability system is maintained for Scotland.

Richard Lochhead MSP
Cabinet Secretary for Rural Affairs and the Environment
16 January 2008

The above instrument was considered by the Rural Affairs and Environment Committee at its meeting last week. Members expressed concern about the potential impact on hard-pressed sheep farmers of the double tagging requirements imposed by this instrument and it was agreed that I should pass on these concerns to the Cabinet Secretary. In doing so, I have in particular questioned whether the estimates in the Regulatory Impact Assessment (RIA) accompanying the instrument for the time implications of double-tagging are soundly based.

The Committee also agreed to give your organisation the opportunity to comment. It would be useful to know what discussions you had with the Scottish Government during the preparation of the instrument and, in particular, whether you consider that the RIA has used a robust methodology to calculate the likely costs for farmers.

The Committee will resume consideration of the instrument at its next meeting on 23 January, and it would therefore be appreciated if you could reply by noon on Friday (18 January) so that your reply can be circulated with the papers for that meeting. I am sorry for the delay in getting this letter to you, and hence for the short timescale for reply.

Thank you for letter of 15 January regarding the Regulatory Impact Assessment which accompanied SSI 2007/559 and the opportunity to comment.

I share the same concerns as Members over the cost requirements of double-tagging, particularly in the absence of any attempt to quantify the benefits.

In answering your specific question, NFUS would cast doubt over the estimates in the RIA of the cost implications of double-tagging regulations. Two assumptions have been made in the RIA which we believe are flawed. Firstly, the assumed pay rate for labour, of £8.50/hour for skilled labour, is an under-estimate. The normal pay rate is more likely to be £10/hour – indeed this is the figure used by Quality Meat Scotland and the Scottish Agricultural College in their own economic assessments for the industry – although much of this kind of work will be done in overtime so even £10/hour is a conservative estimate. Secondly, the RIA mistakenly assumes that all sheep that are slaughtered before one year of age will only have to be single-tagged. The derogation for single tagging sheep that are slaughtered before their first birthday only applies to those going into the domestic market. However, around half of this lamb crop is destined for export to the European market and will therefore have to be double tagged.

Using the £10/hour labour figure and factoring in the double tagging still required for younger sheep going for export – and assuming that all other Scottish Government estimates are correct – the total compliance cost will be nearer £1.86 million than the stated £1.55 million. In other words, around 20 per cent higher.

These problems highlight fundamental flaws in the RIA process, which I would like to draw to the attention of the Committee. NFU Scotland was not involved in the production of this RIA, nor are we aware of any of our members that were. If we had been, we would have been able to address the points above. However, beyond this particular problem, the RIA process is seriously flawed for a number of reasons.

An assessment of costs associated with new regulation is largely meaningless without any attempt to quantify the benefits. Also, with no industry involvement, there is little faith that RIAs represent the true costs involved, as shown in this particular case. NFUS is a member of the Regulatory Review Group, whose remit has been extended by the Scottish Government. One of the immediate priorities will be to look at options to overhaul the RIA process to make it far more transparent and meaningful to both to regulators and those regulated.

In essence, if those regulated are to understand the reason for new legislation and regulators are to properly assess the costs and benefits, an RIA must be able to answer some very straight-forward questions. These must include: what evidence is there of a problem requiring new legislation; what are the benefits it will bring; what are the approaches being taken by other EU countries; what are the alternatives to legislation; how does this fit with Government policy? This must be in addition to speaking to industry about its impact and properly assessing costs. In their present form, none of the answers to these questions are easily identified within most RIAs.

I would also like at this point to raise a related issue which is of real concern to the sheep industry regarding the future of sheep tagging and traceability. The latest rule-changes that the Committee has been considering are effectively designed to bridge the gap between now and the introduction of electronic identification (EID) of sheep.

At the end of last year, the European Commission agreed to delay the introduction of EID for sheep until the end of 2009. As currently written, the EU Regulation requires the recording of individual animal identities at each movement, a policy which is completely unworkable in Scotland. At present, we have a system of recording batch movements of sheep because recording individual identities at every movement is virtually impossible given the nature and scale of the sheep industry in Scotland. Individual recording can be done elsewhere in Europe because the industry is very different there. The majority of EU sheep farmers are breeder/finishers. In other words, their sheep spend their entire life on one same farm before going into the food chain and so there is only ever one move between farm and food chain. In Scotland, our climate and geography has resulted in our “stratified” system, where sheep born on hill farms, then have move to lower ground for finishing via a market or sale, before going into the food chain. In other words, there are a higher number of necessary movements, making individual recording potentially crippling.

NFUS is urging both the Scottish and UK Government to make urgent representations to Brussels to amend the part of the Regulation which demands individual recording to allow movements of batches of sheep to be the cornerstone of the ID system here. An EU working group to discuss this issue meets for the first time on Friday 25 February, where the UK will be represented through DEFRA. Any representations Committee members could make to the Cabinet Secretary or UK Government on this issue would be very helpful. The fact remains that the recording of individual sheep identities on movement delivers no more disease control or food safety benefits than batch recording.

The Scottish Government is expected to shortly approve and fund a research pilot of EID in Scotland under commercial conditions. NFUS welcomes the opportunity for volunteers to test EID technology in field conditions as a way to assess the workability of EID and as a means of providing hard evidence to discuss the future of sheep identification in Brussels. NFUS has set out three conditions for the forthcoming trial which will determine if EID can have any future in Scotland. These are:

1. The ability to effectively record batch, not individual, movements of sheep. Therefore, the flock/batch number, showing holding of birth, must be the cornerstone of the system;

2. The ability to allow lower risk animals – like home-bred ewes which don’t move from their holding of birth – to use a simpler ID (such as a single, non-EID tag);

3. A commitment to address lessons learned from the trial (including a cost-benefit analysis) with the European Commission prior to the implementation of any future system.

This latter point is extremely important. The sheep industry is currently facing a price crisis, exacerbated by the fall-out from the foot and mouth outbreak last year. A sheep farmer with a 1000 ewes will have faced losses of between £25,000 and £30,000 as a direct result of FMD. This comes on the back of Scottish Government estimates which show that the average sheep farm showed a profit of only £4000 in 2006. Against that backdrop, the immediate costs of double tagging are hugely concerning, let alone the proposals for the end of 2009 which, in their current form, would cripple the Scottish sheep industry.

I hope the above information helps inform the Committee on the specific questions on the current SSI and the related issues. As always, NFUS is happy to provide any written or oral evidence the Committee would find helpful.

Thank you for your letter of 16 January about the above instrument, which was circulated for consideration by the Committee at its meeting yesterday. Also circulated was correspondence with Jim McLaren, President of the National Farmers Union Scotland, a copy of which is attached.

At yesterday’s meeting, members noted clear discrepancies between your evidence and that of the NFUS. Firstly, your letter repeats the claim made in the RIA that the overall cost burden on the industry will be reduced from approximately £1.8 million to £1.55 million per annum, whereas Mr McLaren believes this figure is based on erroneous assumptions and that the correct figure will be nearer to £1.86 million. Secondly, your letter says that you have “worked closely” with NFUS and other industry stakeholders in developing the double tagging system; however, Mr McLaren says that neither the NFUS nor (to his knowledge) any of its members were consulted on the likely cost implications during preparation of the RIA.

Mr McLaren also raises the related issue of the electronic identification (EID) system that the European Commission is proposing for the near future. The NFUS believes that such a system will be “completely unworkable” in a Scottish sheep-farming context, without offering any additional disease control or food safety benefits. It sets out three conditions for the forthcoming field trial of EID that is planned in Scotland. It would be useful to know what the Scottish Government’s general attitude is towards the proposed EID legislation and whether it agrees with the NFUS’s conditions for trialling EID in Scotland.

The Committee has agreed to report to the Parliament on this instrument. As you know, such a report must be agreed within the 40-day period for Parliamentary scrutiny, which ends on 6 February (the date of the Committee’s next meeting). In order to enable your reply to be reflected in the draft report being prepared for that meeting, I would be grateful if it could be received no later than noon on Wednesday 30 January.

Thank you for your letter of 24 January allowing me to comment on concerns expressed by the National Farmers Union of Scotland (NFUS), some of which are in relation to the Regulatory Impact Assessment (“RIA”) which accompanies the above instrument.

The NFUS cast doubt over two specific estimates in the RIA, leading them to believe that the RIA under-estimates the overall cost of implementing a double tagging system by approximately 20%.

Their first concern relates to associated labour costs and, whilst I can accept that there will be some variance in labour costs depending on the source of information, the key point to make is that the costs in the RIA were used mainly as a basis for comparison between the previous derogated system and the new one.

On this basis, applying a £10 an hour labour cost as indicated by the NFUS in place of the £8.50 per hour labour cost in the RIA (taken from figures provided by ADAS as part of the UK EID evidence report to the Commission) the total cost of applying the new system for Industry would rise to a figure of £1.66 million – an increase of just over 7% from the original RIA. By comparison, the total cost of applying the old derogated system would also increase to a new figure of £1.9 million – an increase of just over 5.5% which, when subtracted from each other, still provides for a very similar difference in costs between the two systems of approximately £250K. Therefore, variance in labour costs aside, the new system will result in a slight decrease to the Industry as a whole which is an important factor.

With regards to the specific figures used, the RIA uses a figure of £8.50 which is seen as a fair indication of labour costs. The Scottish Government’s Economic Report on Scottish Agriculture 2007 edition (based on farm survey results) quotes a £7.20 figure and the Agricultural Wages board sets minimum rates of £5.96 for agricultural wages (from 1 October 2007). My officials have also spoken to QMS who have confirmed that their figure of £10 is based on a per ewe ratio within entire sheep enterprises, that covers total farm labour costs, and they do not have an average hourly paid rate figure. Therefore, with this in mind, £8.50 is believed to be a fair estimate.

Secondly the NFUS letter also mentions that approximately half of the Scottish lamb crop is destined for export in Europe and therefore these animals will have to be double tagged. This is simply not correct. Whilst it is true that all live animals for export require to be double tagged regardless of their age, as has been the case for several years, figures show that in 2006 approximately 13,500 lambs were certified for export from Scotland to other Member States for finishing and none in 2007 due to FMD restrictions. Based on a lamb crop of approximately 3.7 million animals this equates to less than 0.5% of the entire lamb crop, and therefore does not significantly impact on the RIA figures.

Based on the information above, the figures in the RIA are still believed to provide balanced figures to estimate the Industry cost for applying the new system. As mentioned previously, the key thing to note however is that the figures used provide a basis for comparison. My officials will contact the NFUS and offer them the opportunity to go through the RIA in detail to explain these calculations and to clarify any further queries that they may have. This will build upon previous discussions held with the NFUS where they helped determine figures used in the RIA, particularly relating to the typical examples of farms.

As noted by you the NFUS have also used their letter to express concerns they have over the introduction of Electronic Identification (EID), an issue related, but not connected to this SSI.

We acknowledge that the implementation of EID will be challenging for the Scottish Industry, which is why the Scottish Government and other UK departments, along with Industry, lobbied the Commission for the longest possible deferment on the introduction of EID. Although this lobbying helped secure an extension to the original implementation date of 1 January 2008 to 31 December 2009 we are still aware that there is much work to be done on this issue to help find a workable and affordable system for Scotland. We have also asked the Commission to revise its impact assessment, taking account of the cost to Industry and enforcement bodies, and the impact that the EU Regulation will have on the competitiveness of the EU sheep and goat Industry. This is to confirm, before entry into force of EID, whether the objectives of the Regulation are being met in the most cost effective way.

The joint Scottish Government/Industry EID working group (of which the NFUS are members) is currently looking at the issues that still have to be resolved in relation to cost and technology. In particular there are issues with recording high volume movements such as at markets and we will continue to take views of the NFUS and all Industry stakeholders to look at the options available to us to ensure that we do what we can do limit the impact on sheep keepers. We will use the evidence gathered to take to EU working groups where we will try to negotiate the best possible system, including exemptions procedures, for the introduction of EID across the UK. The Committee may wish to note that the issues that have been highlighted by our working group are similar to those faced by Industry across the UK.

Finally we fully welcome the resources that the NFUS are contributing to this area of work and look forward to continuing to work with them along with all Industry stakeholders in the coming months.

I trust this letter provides reassurance to the Committee on the concerns raised by the NFUS.

Richard Lochhead MSP
Cabinet Secretary for Rural Affairs and the Environment
30 January 2008

¹ Subordinate Legislation Committee, 3rd Report, 2008 (Session 3)

² The correspondence is attached in Annexe C.

³ Subordinate Legislation Committee, 17th Report, 2007 (Session 3)