Grimsby Seafood Manufacturers

(Limited Text - Ministerial Extracts only)

Wednesday 15th October 2014 Westminster Hall

[The Parliamentary Under-Secretary of State for Environment, Food and Rural Affairs (George Eustice)]

I congratulate the hon. Member for Great Grimsby (Austin Mitchell) on securing the debate and bringing this subject to the attention of the House. As other Members have said, he has long been a champion of fisheries issues and the many fisheries businesses located in his constituency. Indeed, I remember when he changed his name a little over a decade ago to Austin Haddock, to highlight the plight of our fisheries industry. Earlier this year, I had the pleasure of visiting the Grimsby fish market and, along with my hon. Friend the Member for Cleethorpes (Martin Vickers), Grimsby Seafood Village. I also visited the new Morrison’s fish processing facility, and at a dinner I had the opportunity to meet representatives of Young’s to discuss some of their plans and aspirations. I understand how important the sector is to the local economy around Grimsby, so I am pleased to have the opportunity to respond to this debate.

As the hon. Gentleman said, we have corresponded on this matter, and I have also received representations directly from Young’s Seafood. He expressed some regret that we took some time to reply to that letter, but I assure him that there was a good reason for that. When I was shown the initial draft, it said that we could not do anything, and I wanted to explore the issue further. I put a hold on the letter and said I wanted a meeting to explore the issue with officials, to discuss it more fully with our lawyers and to challenge the legal opinion that we had. During that discussion, however, I was persuaded that their interpretation was correct. I will come on to explain the reasons for that, but first, I underline my support for the fish processing industry. When I visited Grimsby earlier this year, I saw at first hand what a forward-looking and dynamic sector it is. As well as employing thousands of people, it plays a vital role in providing the whole country with affordable, healthy food.

The hon. Gentleman and I have something in common: we are both on the Eurosceptic side of the political spectrum, despite being on opposite ends of the political spectrum on many other things. He has been consistent; I remember him saying before that his view of the European Union can be summed up in four words, and three of them are “the European Union”, and I can see that that has not changed at all. When I was the director of the “No” campaign against the euro, he played a leading part from the Labour Benches. I am afraid that the regulations I will describe will probably not do anything to diminish his scepticism on the European Union.

There are two issues under consideration: first, what constitutes a seafood business, and, secondly, whether such a business should be eligible for financial support from public funds. On the first question, which relates to the state aid rules, there are two relevant regulations. The first is the fisheries block exemption regulation, EC regulation 736/2008, which concerns aid to small and medium-sized enterprises active in the production, processing and marketing of fisheries products. The second is the fisheries de minimis regulation, EC regulation 717/2014. Both are clear, in alignment with the financial measures under the common fisheries policy, that they apply to the entire fisheries sector. The rules cover not only fishing or fish farming, or even the primary stages of processing, as the hon. Gentleman suggested, but all stages of production, including the processing and marketing of the finished product. The regulations effectively mean that support can only be offered in accordance with the conditions set out in the European fisheries fund, which is soon to become the European maritime and fisheries fund. There is a de minimis exemption for small projects, up to a total of just €30,000 over three years. I appreciate that such a small amount is of little comfort to Young’s, which has such an ambitious project.

I have some sympathy with the argument that a company, as the hon. Gentleman said, may primarily be a food manufacturer that produces meals of all kinds, rather than just a fisheries business, but I cannot agree that we are gold-plating the EU state aid requirements. They have a little room for interpretation, but it is just that: a very small amount of room. In this instance, it cannot reasonably be argued that a business whose entire product range appears to be fish-based is anything other than a fisheries business, as defined under the regulations.

We have applied the rules consistently, and have rejected similar large proposals from large applicants on exactly the same grounds. To be consistent, we have to apply the same approach now. If we were to take a high-risk approach on Young’s and allow it to receive this aid, the risk would lie with Young’s. The European Commission could decide that the aid was unlawful and require it to be repaid. If Young’s had already invested the funds in infrastructure and jobs, it would then be in the unenviable position of having to repay the aid in full, plus interest. That could pose a greater risk to the business than simply being clear in the first place that it is not eligible. In addition, should the Commission find the UK to be systematically making unlawful payments, that would put the entire programme at risk.

The hon. Gentleman asked an important question: what do other countries do? As a Eurosceptic, I always ask whether we are gold-plating regulations and what other countries do. The risk I described is not theoretical. There was a similar case in 2012 concerning a manufacturer of frozen fish products in Spain. The European Commission opened a formal investigation to determine whether the type of aid proposed was compatible with the internal market. It concluded that it was not, which resulted in the entire project being cancelled and the funds disallowed. If we look at what happened with that case and the approach we have taken with other large processors, we have to be consistent and recognise the risks of doing what the hon. Gentleman urges us to do.

It is not all bad news for Grimsby, however. There are a lot of good projects that have been supported through the European fisheries fund. Some 31 projects carried out by seafood businesses in the Grimsby area have already received some £3.2 million of European fisheries funding under the current programme. Individual grants have ranged from £4,000 to £1.2 million. Those projects have already delivered a wide range of local benefits, including port improvements, new processing units and ice plant facilities in the fish market, which have allowed local businesses to grow and prosper. When I visited the Grimsby Seafood Village, I saw a lot of those businesses benefiting from new premises and new investment to allow them to take their businesses forward.

While very large companies would be excluded from such support under most scheme rules due to their size, there are also significant general EU restrictions on large companies receiving state aid. That is simply because the European Commission has concerns that large subsidies in the fish processing sector would seriously distort the market. That is why the de minimis ceiling for state aid has been set at €30,000 over a three-year period. Additionally, the European Commission is explicit in stating that aid can be used only to support activity that a company would not otherwise undertake. That is what they call the incentive effect, and it is contained in article 7 of the fisheries block exemption regulation, which stipulates:

“Aid shall be considered to have an incentive effect if it enables the beneficiary to carry out activities or projects which it would not have carried out as such in the absence of the aid.”

I am not sure that we can make that case with Young’s.

[Austin Mitchell]

I thank the Minister for giving way. First, he is telling us why it cannot be done, but fish is only a part of the fish meals prepared by Young’s. There are other ingredients, whether carrots or chips or whatever. This is food manufacturing, so why can it not get support for the other sides of the process, which would help it to expand? The problem is that the alternative available sources of fishing finance mentioned by the Minister are only small-scale stuff compared with the big investment need of Young’s. Secondly, what are the British Government doing in Europe to change the situation?

[George Eustice]

I will come on to that second point, but on the hon. Gentleman’s first point about Young’s selling products that are not predominantly fish, when I had that meeting with officials I said, “Go and look at Young’s website and look at their entire product range. Let’s see what they are actually selling.” We could not find a product that was not fish or predominantly fish or one that would not fall within the definition of fish product under the regulations.

I want to finish the point that I was making about investment. Taking a broader perspective across the Humber, most businesses have benefited from some large-scale investment. Some £260 million in public and private funding is being invested under the local enterprise partnership growth programme. There is also the electrification of the east coast main line right out to the coast, so we are doing many things to help Grimsby.

In answer to the hon. Gentleman’s second point about what the Government are doing, the Government recognise not only that large companies are often part of the driving force behind growth in the regions, but also that they can in many cases have the greatest impact on the environment. As such, we are in discussion with the European Commission about ensuring that when it comes to investment in environmental protection or upgrading a plant’s facilities to help the environment, we may indeed be able to change the block exemption rules. We will work with the Commission on that for the benefit of those sectors of UK industry that stand to benefit, including the companies discussed today. We have already raised the matter with the Commission and if we get the proposal through, it could be of benefit to companies operating in the aquaculture and fish processing sectors and would at least help to support their investments in some of their environmental improvement, which we would encourage.

In conclusion, I again thank the hon. Member for Great Grimsby for his efforts in securing the debate. I reassure him that I did not just sign a letter and send it back. When I saw the draft, I was clear with officials that I wanted a meeting to get to grips with the issue. Having discussed the matter with our lawyers in some depth, I am afraid that my conclusion was that their interpretation and the Marine Management Organisation’s approach had been right, but I thank the hon. Gentleman for the opportunity to set out what we have done and the attempts that I made on his behalf to explore this important issue.

Question put and agreed to.