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Nearly all those damaged by the BSE tragedy either have a breadth of business that enables them to mitigate their loss, or will be eligible for compensation. I want to speak briefly about a small sector of the meat processing industry that has neither of those advantages. It has nowhere else to turn, and it is not currently eligible for compensation. I refer to the cow head deboning companies, of which there are about 12 in this country. Their business has been eliminated by the Specified Bovine Material Order, which came into effect on 29 March this year. My constituency contains one such company, Pinnacle Meats. It employs some 25 people. If I refer to that company, it is because it is typical of the dozen or so companies that make up the industry.
Pinnacle processed about 300,000 cow heads a year, and provided an essential, steady and reliable service for abattoirs. The process of deboning involved the removal of the cheek meat, most of which went into beefburgers, sausages, meat spreads and so on, but which was quite a delicacy. Pinnacle exported 10 tonnes of cheek meat a month to France, a business worth about £15,000 a month.
The industry has always been controlled in terms of health and hygiene, as part of the food sector, but in recent years BSE problems have caused MAFF and the European regulators to impose a strict and specific series of controls. When the trade was permitted, before March, cow heads were collected from abattoirs under strictly controlled temperature conditions; at every stage, temperature and cleanliness were vetted and recorded. The quality of meat was graded on arrival at the deboners' premises, and there were controls to ensure that the paths of the raw material and the product did not cross. Everything was recorded by a process control report, which was checked, regularly and irregularly, by MAFF officials. Record keeping by the companies had to be meticulous, and available for inspection at all times. There was a daily audit of stocks.
The premises and companies had needed an EC cutting plant licence since 1992, and a cattle head deboning licence from MAFF since August 1995. I am told that this is the only part of the meat trade that required a special licence of that nature.
Such were the controls on the business that companies in the trade needed to buy special equipment. Pinnacle Meats moved to new premises in 1992 in order to build a purpose-related plant, at a total cost of about £300,000. The floor had to be epoxy resined; also needed were special wall cladding, metal detectors, code-printing weighing scales, vacuum-packer conveyor systems and a scissor lift to enable the product to be loaded directly into a specially designed bay.
The whole of that business has now been destroyed by the order to which I referred earlier. It is now deemed that the whole of the heads of cattle constitutes specified bovine material. It is not the head meat itself that is thought to be dangerous; imports are still allowed. What is feared is the risk of contagion at abattoirs. No one suggests that anyone in the cow head deboning industry has been at fault in any way.
The worth of the industry has been assessed at about £11 million. I refer to a compilation by Price Waterhouse of the total value of the industry that has been wiped out. There has also been an informal valuation of the cost of meeting the European regulations at about £2.17 million. It may be asked why the head deboners do not turn to other business. The answer is that they cannot. They were small, specially designed meat processors, working with special equipment and able to stay in business only because the margins on that modest business were higher than in the rest of the meat industry. Head deboners worked on a margin of about 10 per cent., whereas the margins of the rest of the meat processing industry are tiny—typically 0.5 per cent. to 1 per cent. The plants can tolerate that because their turnover is huge.
It would be impossible for the head deboners to turn their hand to less specialised fields, because their equipment is unsuitable. For instance, Pinnacle has a blast freezer with a capacity of 30 tonnes a week, which is minuscule by the conventional meat processors' standards. The deboners are out of business, and it is impractical for them to switch to another part of the meat industry. Their only hope is compensation.
Typically, the companies are family owned, and in most cases the proprietors have borrowed against their houses to buy the equipment that is needed to meet the European regulations. Therefore, now that they have been driven out of business, they face ruin and bankruptcy. It is grossly unfair that such hard-working people, who have done nothing wrong, should face such problems.
There are possibilities of compensation. A legal claim is possible under article 1, protocol 1, of the European convention on human rights. I am informed that Lord Lestor, who is a QC, has advised that the companies have a good case for compensation but that it would take years to be heard. Objective 5a of the European Union structural funds, which is used to speed up the adjustment of agricultural structures, may be invoked. The UK, with impeccable timing, decided in 1994 that it would contract out of that objective with effect from 31 March this year. There is no reason why the UK cannot make a further request to opt back into it.
The question is asked whether compensation would set a precedent. The Library, with its usual skill, has produced the answer that the only precedent of companies being driven out of business by a Government order were those producing oral snuff and repeater rifles, although they were only a small part of the overall business. I do not know of a case in which an industry has invested to meet tight Government criteria, only to be wiped out overnight by a Government order. It must be possible to devise a compensation scheme that does not set a precedent for others.
It is not fair for head-boning companies to be driven out of business and their proprietors into bankruptcy. It is the Government's duty to find a way of compensating them. An increasing number of parliamentary colleagues share my view. The question will not go away until a method of paying compensation is found. The problem will not go away, and nor will I.