Supplementary Memorandum from Adrian Crompton, Secretary,

Agriculture & Rural Development Committee, National Assembly for Wales
My memory of these was hazy at the meeting today but I attach a paper presented to the Committee at the time which, thankfully, confirms what we said (see paras 5&6 in particular) in response to Ted Rowlands' question.
The charges were only charged in England and Wales, we could have lifted them unilaterally in Wales but this would have been likely to have been in breach of EU state aids rules. Eventually England decided to lift them there too and so a successful application to lift the charges in England and Wales was approved.
Adrian Crompton
Secretary, Agriculture & Rural Development Committee
27 February 2003
Agriculture & Rural Development Committee ARD 01-00(p.3)
Date: 26 January 2000
Time: 9:00am - 12:20pm
Venue: Committee Room, National Assembly Building
REVIEW OF DAIRY HYGIENE INSPECTION CHARGES
Purpose
1. To update the Committee on the position relating to the proposed removal of dairy hygiene inspection charges in Wales.
Background
2. In November 1999 the Agriculture and Rural Development Committee recommended that the Assembly should consider waiving dairy hygiene inspection charges in Wales for a period of three years. Officials were remitted to investigate the possibilities of making such a change, and to report back.
3. The Committee recognised that their proposal would require legislative change. The Office of the Counsel General has subsequently advised that the Dairy Products (Hygiene) (Charges) Regulations SI 1995/1122, made under the Food Safety Act 1990, provide the legal basis for imposing charges, and that these powers have been transferred to the Assembly under the National Assembly for Wales (Transfer of Functions) Order SI 1999/672, and have been delegated to the Assembly Secretary for Agriculture and Rural Development. The regulations would have to be revoked in so far as they apply to Wales. Before this action could be taken the statutory requirement to consult the industry on such changes would have to be met, and the approval of the European Commission would have to be sought and obtained. The new regulations would constitute Assembly General Subordinate Legislation, and Part 1 of Standing order 22 would apply to their making.
4. On 1 December 1999 the Finance Secretary, Ms Edwina Hart, announced that the Cabinet had agreed in principle to lift the charges on a permanent basis. In her statement, the Finance Secretary referred to legal considerations which would have to be resolved before the Cabinet’s decision could be implemented.
5. In particular, the question of state aids must be resolved with the Commission. Such aid can take a variety of forms, including "operating aids", which are defined as assistance towards the day-to-day running costs of an operation, as opposed to capital investment. We have established that there is a clear risk that the abolition of dairy hygiene inspection charges would be regarded as constituting an operating aid, in which case the European Commission’s approval would be required prior to their removal. (It would be necessary to make a state aids application via MAFF as the lead Agricultural Department for the UK.)
6. The fact that there are no charges in Scotland and Northern Ireland is very unlikely to solve this problem. State aids issues are notoriously complex legally, but the argument that is likely to prevail in law is that Scotland and Northern Ireland are in a different position, because charges have never been levied there. The argument would be that the industry currently pays these charges in Wales and England, on the basis of a common system of inspection and charging, and that removing them unilaterally in Wales would provide a new form of assistance for the industry. It is the creation of a new operating aid which would require Commission approval. We do not believe that an approach to the Commission to lift the charges on a Wales-only basis would be successful because this would be regarded as distorting the market and discriminating against English farmers, by exercising discretion in relation to one part of a Member State only.
7. These difficulties would not arise if any application went forward on an England and Wales basis, since this would bring practice in those two countries into line with existing charging policies in the rest of the UK. As part of the red tape review, and given the disproportionate resentment to which the imposition of charges gives rise, MAFF are considering the dairy hygiene inspection regime, including the question of charging for inspections. This might make a joint approach possible. We are still in discussion with MAFF colleagues and will provide an oral update to the Committee.
8. One of the arguments Assembly officials are putting in this context is that the current inconsistency in administering and charging for dairy hygiene inspections throughout the UK - with charges imposed in England and Wales, but not in Scotland and Northern Ireland - will inevitably be brought into sharper focus when the Food Standards agency assumes responsibility for dairy hygiene inspections from 1 April 2000.