Grimsby Seafood Manufacturers

Austin Mitchell Excerpts

Wednesday 15th October 2014 Westminster Hall

[Austin Mitchell (Great Grimsby) (Lab)]

I am glad to have the opportunity to discuss an anomaly that arises from the common fisheries policy. The anomaly is a measure designed to check state aid for fishing, but it is now depriving Young’s Seafood—a firm that we are very proud of in Grimsby and Cleethorpes, and my colleague, the hon. Member for Cleethorpes (Martin Vickers), is here—of the ability to get state aid for investment and expansion.

Young’s is a seafood manufacturer on a considerable scale; I think it is the biggest seafood manufacturer in the country. However, this anomaly also applies to other seafood manufacturers, and seafood manufacturing is a major section of the food manufacturing industry. None of these companies can get regional selective assistance, or other public support, for the investment they need to expand and grow.

I emphasise that although my reputation is for being a Eurosceptic—a man whose opinion of the European Union can be summed up in four words, three of which are “the European Union”, and who is a continuous critic of it—I do not raise this issue just as a critic of the EU. I raise it because this situation is daft, impinges on a major manufacturing firm in Grimsby, and needs to be ended.

What is at issue here is the EU guidance on state aid regarding the entire fisheries sector. That sector is defined as being concerned with

“the exploitation of aquatic resources and aquaculture together, with the means of production, processing and marketing of the resultant products”.

That definition is being interpreted as applying to Young’s, which employs 3,000 people in Grimsby and Scotland. It is the largest single private employer in Grimsby, employing 1,700 people in processing jobs there, and—I have to say—creating a superb product range. It seems to me, and to Young’s, that to extend these European guidelines to the company is a distortion of their purpose, because Young’s itself catches no fish. It farms no fish; it does not have a fishing fleet; and it does no primary processing of fish, which is the filleting and gutting of fish—the only processing, I think, that the guidelines are meant to cover.

Young’s imports its fish from all over the world. In fact, it uses 30 species of fish from five continents. Very little of that fish is caught under the CFP, of which these guidelines are part. Young’s makes from those fish more than 300 dishes. It makes dishes; it turns fish into meals by processing it, adding ingredients and selling it as a meal. So, in every sense Young’s is not a fishing company but a food processing company—a fish and seafood processing company—and therefore it deserves to be excluded from these guidelines.

Young’s is a food manufacturer and it is an important part of Britain’s manufacturing industry. Young’s and other food manufacturers hit by this anomaly are anxious to expand, grow, invest and create jobs, but they cannot because they cannot get public support in the way that other industries that they are competing with for investment can. I hope that I can persuade the Minister to see that, and to do something about it, because if he does not, he will put Young’s and other seafood manufacturers at a competitive disadvantage not only to other food manufacturers but to the rest of the industry. He will also put us—the people of Grimsby, which is Europe’s food town—at a competitive disadvantage when it comes to attracting jobs and investment, which will harm the development of Grimsby, because we all know the importance of cluster growth, as emphasised by Michael Porter, whereby clustering industries can trade experience, skills, staff and research. We have such a cluster in Grimsby, but it will be damaged if it cannot get Government support in this way.

I have been working hard to drive that lesson home. On 6 June, I wrote to both the Department for Environment, Food and Rural Affairs, and the Department for Business, Innovation and Skills. In those letters, I asked for an early reply, but I did not get one. BIS passed the letter to DEFRA, and DEFRA did not answer. An Under-Secretary of State at DEFRA wrote to Young’s on 17 September—although I had written in June—explaining what the Commission thought, but we already knew what the Commission thought. What the Commission thinks is wrong. We want independent thought relating to the point that these are food manufacturers, not fisheries firms. The reply seemed over-complacent about the situation.

I took the issue up with our local enterprise partnership, which is very good and active. Lord Haskins, the chair, wrote supportively and pointed out in passing that some restrictions also apply to flower-growing in our area, although I do not see why, and to making potato chips. Let us face it: the fish and chip industry, which is vital to this country and provides a good deal of the sustenance for our people—and certainly for me—is being hit both ways; it is being hit because we cannot invest in the seafood producers, and because of restrictions on what can be allocated to producing chips. However, I am not taking up the chips side of the argument today; I am taking up only the seafood manufacturing side. Lord Haskins added helpfully that he and the LEP supported Young’s, which he said were

“wealth creators and providers of large local employment”,

which is true.

Our Euro MP, Linda McAvan, was also helpful. She understood the problem and the consequences and mentioned that guidelines for the fisheries sector are being revised at this very moment. If those guidelines are being revised, it is up to us to get our voice in, to get that revision changed so that this restriction no longer applies to seafood manufacturers. I want the Department to get in there and get this regulation changed.

That is my plea. I plead to the Government and Ministers to stop wringing their hands and stop telling us what they cannot do. Government is good at telling people what they cannot do. I want the Minister to find out what is happening to seafood manufacturers in other European countries, because I am sure, from a little bit of evidence that I have—it is incumbent on the Department to check this—that they are being aided by the state in a way that our state will not aid our seafood manufacturers. I will bet that those states are doing that, because the degree of cheating on European regulations is quite astonishing; others are less timid and hidebound than we are.

I plead with the Minister not to brass-plate European lunacies. Let us get round them, put Britain first, and put Young’s at the forefront of putting Britain first. Let us get food manufacturing excluded from this fisheries regulation, so that structural aid and regional support aid for investment and jobs can come to this sector, which is anxious. The purchase and consumption of seafood dishes is increasing steadily; they are good for us, and we want to encourage that and to encourage the manufacturers. The firms want to expand, and it is only this barrier that is preventing them from expanding.

I am fed up with excuses, and so is the industry. We need action on this anomaly. It ill behoves a Government who are constantly telling us that they will get a better deal from Europe to do so little to get a better deal in this instance. I have every hope that the Minister will accept that.

[Martin Vickers (Cleethorpes) (Con)]

I share my hon. Friend’s views, and congratulate him on getting this debate. The other word that he uses in connection with the European Union is surely “out”; I would agree with that, as would most of our constituents in north-east Lincolnshire. Does he agree that this is yet another example of a case where the seafood and fishing industries have been at a disadvantage as a result of European intervention, and that they have missed out on many of the grants and benefits that other industries have had? To take up the point he was just making, does he agree that this issue should be a vital part of any renegotiation?

[Austin Mitchell]

I agree with my hon. Friend and colleague. I will also agree on the use of “out”, but there is a long trail a-winding there. The immediate issue is to get help now for a firm that needs and wants investment. My last words to the Minister—other hon. Members will have something to add—are these: stand up and support Young’s and Grimbsy, and get rid of this anomaly.

--- Later in debate ---

[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.