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PAPER B

Directorate of Legal and Democratic Services Director Davina Fiore

Policy Commission Blue Paper 1 RESPONSIBLE BODY

Policy Commission for Business and Infrastructure

2 PROJECT NAME

Island Abattoir Feasibility Study

3 PURPOSE OF ENQUIRY AND PROPOSED OUTCOME 3.1 Currently animals travel long distances to mainland abattoirs. A slaughterhouse and

associated cutting plant on the island could help to reduce food miles and shorten journey times for livestock. An Island abattoir could also provide financial advantages for local farmers and help to meet the demand for local produce.

3.2 Identify actions the Council could take in supporting the provision of a local

slaughterhouse and associated cutting plant on the Island. (Note: the terms abattoir and slaughterhouse have the same meaning, they are interchangeable).

3.3 The following options have been identified by this enquiry:

Option 1 That this Council develops a fully costed business case to construct an

island abattoir for lease to a commercial operator at market rent.

Option 2 That this Council agrees and makes public a policy statement to the effect that it aspires to a private sector organisation/individual constructing and operating an island abattoir and that the Council will do all that it reasonably can to assist with site location, grant applications to third parties and the provision of guidance on enforcement where the Council is the enforcing authority.

Option 3 That this Council makes public a policy statement to the effect that the

island is an inappropriate location for an abattoir to be sited.

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4 RECOMMENDATIONS 4.1 That Option 2 be agreed.

Cllr Jonathan Fitzgerald-Bond, Commissioner

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5 BACKGROUND TO ENQUIRY 5.1 The National Context 5.1.1 Abattoirs are a crucial component in the UK’s food and farming economies, providing

the link in the chain that takes livestock from local farms and supplies meat for human consumption to wholesalers, retailers and ultimately the general public.

5.1.2 Abattoirs indirectly protect valuable landscape created by grazing animals. Grazing

helps to maintain ecologically diverse habitats and landscape character. 5.1.3 A national network of abattoirs improves animal welfare. Local abattoirs have been

proven to minimise livestock stress by reducing journey times, reduce the spread of disease and reduce transport cost. Local abattoirs reduce food miles.

5.1.4 Abattoirs contribute to rural economies by providing direct employment, supporting a

range of local businesses including farmers and retailers, stimulating farmers markets and farm shops and helping to sustain tourism by establishing distinctive local food brands. Locally farmed meat with clear provenance provided through local abattoirs boosts consumer confidence.

5.1.5 The abattoir industry is heavily regulated. Much of the legislation is european in origin

driven by an objective to promote and protect animal health and welfare and, more importantly, public health. The public are susceptible to a range of animal borne diseases or “zoonoses”. In the last 20 years the UK meat sector in all its guises, has suffered enormous damage after animals have fallen victim to diseases like foot and mouth disease, and bovine spongiform encephalopathy. Some animal diseases transfer to humans. Standards of food hygiene, animal welfare, the provenance/traceability of animals, the treatment and disposal of animal waste products and pollution are closely monitored by a range of regulators including the meat hygiene service, the state veterinary service, the environment agency and local authorities.

5.1.6 Livestock arriving at an abattoir is unloaded into pens where it is inspected by qualified

vets. After anti-mortem examination animals are humanely slaughtered. Meat hygiene service inspectors supervised by veterinarians undertake post mortem carcass examinations. If the carcass is deemed to be fit for human consumption the meat is chilled and then sent direct to a cutting plant or to a wholesale or retail butcher to be matured. Sometimes, cutting plants are co-located with abattoirs. In either case, after maturation, the meat is cut into joints, minced etc and supplied into the food chain. Those parts of the animal not destined for human consumption such as skin, bone and offal must be disposed of as animal by product in accordance with a separate legislative framework.

5.1.7 Considerable quantities of water are used at abattoirs to wash vehicles delivering

animals and to help clean the slaughter facility. Run off is usually held, cleansed by filtration and then reused on site, or provided for irrigation of adjacent farmland.

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5.1.8 Abattoir numbers across the UK fell rapidly in the latter part of the 20th century as the

legal regime surrounding their operation tightened, demand for cheap cuts of meat increased, and the boundaries of the European Community were extended leading to enhanced competition. Smaller abattoirs in urban communities often closed and sites were redeveloped. The industry became increasingly focussed on large high throughput abattoirs in less sensitive locations. There are currently about 300 abattoirs across the UK. Thirty years ago there were approximately 2,500 abattoirs (meatinfo.co.uk).

5.1.9 The early part of the 21st century has seen something of a meat sector revolution.

Many more consumers want choice, they increasingly want to understand provenance and buy local, farmers markets have boomed and the animal welfare lobby has strengthened. Modest growth in the numbers of relatively small scale, low throughput abattoirs has followed.

5.1.10 Costs associated with constructing an abattoir are considerable.

It would appear that a minimum of £600k would be needed to build a modest (low throughput) facility see Para 5.2.2. Land costs would be an additional factor. The Commission heard evidence from SEEDA representatives about grant opportunities (see paragraph 7.1.2) available to abattoir and cutting plant developers. SEEDA expressed interest in grant aiding the livestock sector.

5.1.11 The Commission’s enquiry focussed on abattoirs associated with the slaughter of cattle, pigs and sheep. There is also a network of dedicated slaughterhouses across the UK for large volumes of poultry. Small numbers of poultry can be slaughtered on farm by producers for retail and local wholesale distribution. This arrangement is consistent with a relatively low disease risk associated with poultry when compared with cattle, pigs and sheep. There are very specific controls in place that provide for home/on farm kill of cattle, sheep or pigs by licensed slaughtermen. The meat produced can only legally be consumed by the owner of the slaughtered animal. Home kill meat is deemed to have greater health risks associated with it. It cannot legally be sold.

5.2 The Local Context 5.2.11 The Island has not had an abattoir since the closure of the FMC Hillsdown plant in

Newport in 1987. Currently all finished stock for slaughter travels off island. Interest in a new abattoir has been publicly expressed by farmers, the local branch of the NFU and councillors since the closure of that plant. Importantly, in 2002 this Council supported funding a feasibility study for a low throughput abattoir and farm retail outlet on the island. The report was prepared by “MLC Industry Strategy Consulting” on behalf of a small Isle of Wight Farmers Co-operative supported by the NFU. The Commission heard evidence from two of the farmers who were part of the co-operative.

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5.2.12 The thrust of this feasibility study, following careful evaluation of options and recognition of the state of the local agricultural sector, was to focus on a “low throughput” facility. The term “low throughput” is significant because the legal framework that must be satisfied by operators is less burdensome than that which must be met by operators of “full throughput” facilities. The EU definition of a livestock unit is 1 unit = 1 cow = 5 pigs = 10 lambs. Full throughput abattoirs are EU approved to export red meat. Low throughput abattoirs cannot export and may only kill for domestic human consumption. Low throughput facilities can slaughter up to 1000 and in some special circumstances 1500 units per year.

The amount of meat produced by a low throughput abattoir is nonetheless significant.

5.2.13 Key findings from this 2002 feasibility study were:-

• Previous feasibility studies have considered constructing large ‘wholesale’ facilities on the Island, and mobile facilities. These have proved unfeasible. The Isle of Wight (IOW) Farmers’ Co-operative have therefore briefed MLC Industry Strategy Consulting to undertake a feasibility study into the construction and operation of a low throughput red meat abattoir and farm retail outlet on the Isle of Wight.

• The management explored ownership of the site by IOWFC with operation of the

abattoir overseen by them, renting out the shop to a third party. In this scenario it is envisaged that the meat from stock killed in the plant is sold through the shop. Clearly agreements need to be reached for this to happen. The abattoir would operate as a contract kill facility, generating revenue from fees, hides/skins, and rent from the shop.

• IOWFC members are confident that a small low throughput abattoir would operate

at its maximum of 20 livestock units per week. It is recommended that the members demonstrate this supply in more concrete terms in the business plan. Likewise, the amount of meat from 1000 LU is significant and a more concrete indication of the market for this meat must be given in due course.

• The figures indicate that the retail outlet will make a £10,000 net margin in year

two, rising to £30,000 in year three. Taking the abattoir and shop together, therefore, the operation would make a net yearly surplus. How this would be achieved in practice is something IOWFC must consider carefully.

• No investment appraisal has been undertaken, nor are there any ROI (return on

capital). However, the model supports the view that maximising throughput in abattoirs is essential in returning a profit.

5.2.14 The capital cost of a facility, excluding land, as at 2002 was estimated by the feasibility

study authors as £438k. The Commission noted that business risks associated with this publicised proposal in 2002 were so great that no organisation/individual decided to take it forward. The

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study provided for a cutting plant and retail unit alongside the abattoir. This arrangement was favoured by several Commission witnesses because it should help to establish local brand identity and therefore sustainability.

5.2.15 Elements of the livestock industry have been relatively healthy since 2002 particularly

the sheep sector. Pork prices are currently poor predominantly because of competition from imports. Meat prices generally are volatile. Volatility brings risk.

5.2.16 The Commission were advised of a problem facing the livestock sector unique to the

island. Legislation dictates that most animal by-product (and this includes fallen stock), is disposed of by incineration or rendering. No such commercial disposal facility exists on the island. If it were not for a “local enforcement arrangement” negotiated by the Council with the Environment Agency and the Department for Environment, Food and Rural Affairs permitting on farm burial with appropriate precautions all such material would have to be transported off island for safe disposal at cost to the farmer. The “local enforcement arrangement” is widely understood by local farmers. It is however a temporary arrangement put in place to assist local farmers that could be withdrawn at any time. It continues as long as its requirements are met and effort is being made by the agriculture sector on the island to provide a realistic disposal solution. A steering group lead by the local NFU, with DEFRA, Council and Country Landowner Association membership has been actively seeking a solution for 3 years. Disappointingly a solution is still some time away. As is so often the case the main obstacle is finance.

5.2.17 The Commission extended invitations to several national retailers with an interest on

the island to present evidence on stocking and promoting meat from locally reared animals. Disappointingly, most invitations were met with silence. An informal meeting was held with a senior manager from Southern Co-operatives Ltd. The Co-op’s commitment to stocking and supplying an increasingly broad range of Isle of Wight produce was outlined. It was explained that plans were in hand for a pilot project to place pre-packs of lamb and beef from Isle of Wight reared stock in selected Co-op branches on both the island and in Hampshire. Livestock could be transported from specific island farms to a Hampshire abattoir for slaughtering, maturation, cutting and packing. This project has been proposed by the company to determine the extent of consumer demand for clearly branded “Isle of Wight lamb and beef”. If demand is strong and the market for such lamb and beef grows, the Co-op may expand the project.

5.2.18 The Commission recognises that a local abattoir could provide opportunities for small

holders who historically may have moved a few sheep or pigs because they wanted to pursue a self sufficiency life style.

5.2.19 Work recently undertaken by MLC Consulting on behalf of the Isle of Wight Fallen

Stock Group (of which this Council is a member) provides best estimate figures for animals reared on the island for food consumption during 2006: beef cattle - 2,400, lambs - 23,500, pigs - 6,000.

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6 CONSULTATION EVIDENCE 6.1 The Commission has consulted widely through formal and informal meetings, and site

visits. Consultees included:

Mathew Legge – branch secretary Isle of Wight NFU Stuart Attrill – land agent Stuart Pierce – farmer Paul Griffin – farmer Susanna Sealey – farmer Andrew Hodgson – farmer David Biles - farmer Isle of Wight Council – planning services Isle of Wight Council – engineering services Isle of Wight Council – consumer protection Isle of Wight Council – director of environment and neighbourhoods Isle of Wight Economic Partnership SEEDA representative – Jonathan King EBLEX representative Nick Allen Duncan Rawson – English Farming and Food Partnership Ltd Andy Gustar – butcher (Hamiltons) Bill Tuffrey – butcher (WA Foods) Mark Newman – landowner and abattoir operator Richard Phelps – slaughterhouse proprietor (Langport) Southern Co-operatives Ltd (Co-op) – retailer, wholesaler Colin England, Peter Harris and John Cluely – landowners Mike Bulpitt – Rural Community Council Commission meeting notes and supporting papers to this enquiry are identified in section 9 of this blue paper. Copies are available on request to the Isle of Wight Council.

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7 ISSUES IDENTIFIED 7.1 FINANCIAL 7.1.11 The fundamental obstacle to an Isle of Wight abattoir appears to be a business risk

linked to high cost. The SEEDA representative and other witnesses separately suggested to the Commission that build costs for a low throughput abattoir would be in the order of £600k. At least £100k would be required to fund an incinerator to dispose of site generated waste. Land would be an extra cost.

7.1.12 The SEEDA representative suggested that up to 40% of development cost may be

available as grant. A low throughput abattoir in the SEEDA area has already been grant aided, (Henfield in West Sussex). Elsewhere, grants have been provided to help fund cutting plants.

7.1.13 Once built profit, interest on capital and day to day operating costs could be covered

by a headage cost against livestock numbers processed. That cost must be realistic and must not deter farmers etc from using the facility. Livestock producers on the island could not be compelled to use an island abattoir.

7.1.14 Evidence was taken from several witnesses on an informal basis. One potential

developer appeared to be actively considering a low throughput abattoir and was looking for any indication of support the Council could give. On the other had another individual, a prominent local butcher with many years experience, made it clear that in the present economic climate he would not invest his own money in a local abattoir.

7.1.15 The 2002 feasibility study was viewed by the Commission as a serious piece of work

driven by local farmers. Time shows that these farmers were hesitant and unable to take the work forward at that time, or at any time since the work was completed.

7.2 STRATEGIC 7.2.11 Evidence presented to the Commission by SEEDA highlighted lessons learnt from the

recent abattoir project (and similar projects) in the region that have been grant aided. As the project evolved key issues identified included:

• Legislation – planning permission, MHS • Contentious – public perception • Economies – capital cost, return on investment • Waste – method of disposal, cost of removal

7.2.12 Strategic benefits to the island economy flowing from a low throughput abattoir would be considerable. Food miles would be reduced, animal welfare enhanced, island branding of locally reared meat boosted, farmers markets strengthened, etc. Every individual and every agency giving evidence to the Commission spoke enthusiastically about the merits of a local abattoir.

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7.2.13 There is limited history of council ownership of abattoirs. Orkney Council took over an

abattoir that had been scheduled for closure by FMC Hillsdown in 1987. The Council still leases the premise. Shetland Island Council own two abattoirs. Both require considerable investment to modernise. Both are operated by tenants. These facilities were built using capital funds resulting from levies charged against North Sea oil landed at local terminals.

7.2.14 The problem facing livestock owners seeking to dispose of fallen stock should not be

underestimated. If this problem is not resolved and farmers have to transport all fallen stock to the mainland for disposal the cost may be prohibitive for some of them. Faced with that cost it could reasonably be anticipated that the livestock sector on the island will radically reduce and any potential for a low throughput abattoir would decline.

7.2.15 The Commission identified commercial sensitivities of those parties who have

considered or are considering an abattoir development. If the business case was sound it was felt that an entrepreneur would have invested and a facility would now be available. The fragility of the business case has lead the Commission to conclude that the most appropriate way forward is for the Council to make a clear statement of policy support for development of an abattoir by a private sector operator. Consideration would be given to how such a statement was made public. It was felt to be inappropriate and high risk for this Council to construct an abattoir using public funds.

7.2.16 The retail market for fresh meat is controlled by supermarkets. Supermarkets were

generally not prepared to speak with the Commission. Several farmers who gave evidence to the Commission were reluctant to do business with major supermarkets. Evidence points the Commission towards development of a low throughput abattoir with cutting plant offering direct sales to consumers, and supplying local butchers, restaurants and hoteliers with high value island branded quality meat.

7.2.17 The Co-op proposal was welcomed. The Commission hopes that demand for meat

from island reared animals will be strong. 7.2.18 The Council and its public sector partners on the island could help boost local meat

production by developing purchasing policies that were geared towards meat from locally reared animals. It was noted that a small group of island schools had been piloting such a policy

7.3 OPERATIONAL 7.3.11 Enforcement officers report strong interest from consumers for “buying local”.

Retailers and restaurateurs recognise added value that flows from “selling local”. It is important for Council enforcement officers to prioritise investigation of all “local” claims to ensure that they are neither false nor misleading.

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7.3.12 Enforcement officers in Consumer Protection should be vigilant in investigating claims

that meat and meat products are local to ensure that such claims are neither false nor misleading.

7.4 LEGAL 7.4.11 It is not open to the Council to develop a skewed purchasing policy favouring local

production however through the procurement process and specifically when undertaking the evaluation of tenders it is possible to address social issues. The Office of Government Commerce have produced a guidance document titled ”Buy and Make a Difference – How to address Social Issues in Public Procurement” and by ensuring compliance with the guidance as provided the Council will not distort competition or discriminate against other suppliers there by ensuring compliance with the EU Public Procurement Directives and the regulations implementing the same in the UK.

7.4.12 Option 1 – Develop a fully costed business case to construct an island abattoir

and lease to a commercial operator.

There would appear to be no legal impediment to the Council adopting this option. Evidence gathered during the course of the enquiry indicated that abattoirs were owned by councils in Orkney and the Shetlands. In these cases the abattoirs were leased to private sector companies and in the case of Orkney established by a farming co-operative. Market rents approved by the district valuer were charged. Both these councils appear to be capital rich. Much of the wealth has been derived from levies charged to oil companies.

7.4.13 Option 2 – Make a public policy statement to signify support for an abattoir to be

run by a private sector company.

The Commission recognises the need for commercial confidences to be respected where significant investment is being considered. If the business case for an abattoir either full or low throughput was strong the Commission believes that it would have already been built or under development. A strong public statement of support for the concept of an island abattoir might reassure potential investors.

7.4.14 Option 3 – Make a public policy statement that the Council views the island as an inappropriate location for an abattoir.

Most of the evidence for this enquiry came from individuals and organisations with an interest in agriculture. Enthusiasm from those who gave evidence was universal. The work of the Commission receiveved media coverage but prompted limited interest from the public – again when received that interest was supportive. Possible sites for an abattoir were suggested to the Commission. It seems reasonable to assume that there are island sites where an abattoir could be located if appropriate planning considerations were addressed.

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8 RISK ASSESSMENT 8.1 Risk Assessment – for risk matrix please refer to Appendix. Nature of Risk Score Possible Controls Likelihood x impact Option 1 – IWC build then lease

Securing appropriate funding.

3 x 4 = 15 It would appear that minimum £600k is needed for building costs in addition to land costs. Additionally £100k for an incinerator. 40% grant may be available from SEEDA. Source of balance of funding needs to be established before any significant work is undertaken to mitigate risk. It may be that a public opinion survey needs to be undertaken if funds were to come from Council sources.

Costs exceeding business case figures.

2 x 3 = 9 Business case needs to be prepared by suitably experienced person to ensure that figures contained are robust. Contingency funding needs to be identified up front.

Inability to locate an operator.

3 x 4 = 15 Conduct survey across potential operators before committing further to construction.

Return on capital for IWC is not at an acceptable level.

3 x 3 = 12 Ensure that contract with operator has appropriate reimbursement levels at commercially acceptable rates.

Possibility that project becomes unviable after a period of time.

3 x 4 = 15 Check business case and financial forecasts of selected operator before awarding contract. Carry out appropriate interim assessments to support operator and encourage continuance.

Option 2 – offer support

Expectation gap of 3 x 2 = 8 IWC needs to be clear from the

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financial input of ‘support’.

outset whether there are any financial contributions the Council can offer aside from guidance on where to go for funding.

Expectation gap of co-operation of authority functions in favour of an abattoir.

3 x 2 = 8 Planning and highways etc. could not go against policy just because IWC had offered ‘support’. Policies need to be clearly defined and reiterated during all conversations.

Volume of officer time required to liaise.

3 x 2 = 8 IWC needs to decide whether they are going to allocate someone to specifically deal with this issue, and allocate appropriate budget, or whether they are going to task an existing member of staff to undertake any work alongside their day job, thereby acknowledging that this may put pressure on the staff member and their workload.

Option 3 – declare IOW inappropriate location for an abattoir

Risk of challenge by parties supporting an abattoir.

3 x 1 = 4 The reasons behind the decision to accept this option need to be clearly communicated.

Risk to viability of livestock farming community by not being able to slaughter locally.

3 x 3 = 12 With no local facility livestock needs to be transported to the mainland for slaughter incurring ferry and other costs. The permissions to bury fallen stock locally may be renounced thereby incurring farmers in further costs to dispose of dead animals on the mainland which may cause strain on the viability of their businesses.

Risk of increasing meat prices to the public.

3 x 2 = 8 Raising, slaughtering and selling meat locally reduces food miles which in turn could help keep costs down.

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9. SCHEDULE OF EVIDENCE • Attrill, James. 2007. Feasibility Study Presentation. • Committee and Scrutiny Team. January 2008. Notes of Informal Meeting with Mr David

Biles and Mr Bill Tuffrey. Park Farm, Forest Road, Isle of Wight. • Committee and Scrutiny Team. October 2007. Notes of Informal Meeting with Mr Colin

England, Mr Peter Harris, Mr John Cluely and Mr Mike Bulpitt. RCC, Isle of Wight. • Committee and Scrutiny Team. October 2007. Notes of Informal Meeting with Mr Andrew

Hodgson, Isle of Wight. • Committee and Scrutiny Team. October 2007. Notes of Informal Meeting with Mr

Matthew Legge, National Farmers Union, Isle of Wight. • Committee and Scrutiny Team. November 2007. Notes of Informal Meeting with Mrs

Susannah Seely and Mr Steve Fruin, Dunsbury Farm, Isle of Wight. • Committee and Scrutiny Team. October 2007. Notes of Informal Meeting with Mr Richard

Phelps, Southern Counties Fresh Foods Ltd, Langport, Somerset. • Department for Environment, Food and Rural Affairs (DEFRA) June 2006 Agricultural

and Horticultural Survey – England www.defra.gov.uk • English Beef and Lamb Executive (EBLEX). 2007. Presentation from Mr Nick Allen. • Isle of Wight Council. August 2007. Policy Commission for Business and Infrastructure

notes of evidence. Isle of Wight.

• Isle of Wight Council. October 2007. Policy Commission for Business and Infrastructure notes of evidence. Isle of Wight.

• Isle of Wight Council. November 2007. Policy Commission for Business and

Infrastructure notes of evidence. Isle of Wight. • Isle of Wight Council. January 2008. Policy Commission for Business and Infrastructure

notes of evidence. Isle of Wight. • Isle of Wight Council. February 2008. Policy Commission for Business and Infrastructure

notes of evidence. Isle of Wight. • MLC Industry Strategy Consulting. March 2002. Report on the Feasibility of Constructing

and Operating a Low Throughput Red Meat Abattoir and Retail Outlet on the Isle of Wight.

• Phelps, Richard. 2007. Blade Farming – 2007. Langport, Somerset.

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• South East England Development Agency (SEEDA). 2007. Presentation from Mr Jonathan King. www.seeda.co.uk

Prepared by

- Rob Owen - Head of Consumer Protection - Andrea Lisseter, Overview and Scrutiny Officer - Cllr J Fitzgerald-Bond, Commissioner

Date: September 2008