Getting access to public money has long been a headache for producers, and when that money comes through the European coffers the pain is often more acute.
The European Fruit and Vegetable Aid Scheme is a case in point. Set up in 1998, the scheme provides funds to assist growers in developing their businesses to become more efficient through investment in technology and collaboration within so-called producer organisations (POs).
And it works. Speak to those involved with POs that have taken advantage of the cash and they will talk of rising turnovers - one cited figures of
£20 million to £120m - and of huge reductions in their reliance on marketing agents.
Indeed, as Liz Bowles, regional manager for the European Food and Farming Partnerships (EFFP) points out, the PO scheme funding gives producers a chance to improve their influence in the marketplace. “That’s the scheme’s raison d’etre,” she says. “If you’re looking to drive consolidation, then the support is there to achieve it. The money can drive the marketing efficiency of a group of producers and improve production efficiencies.”
The government’s Fruit and Vegetable Task Force has already recognised collaboration as “one of the central methods” giving growers the ability to negotiate with retailers from a position of strength, particularly in a sector that is notorious for its wafer thin margins and tough marketplace.
Size matters when it comes to negotiating with the likes of the UK’s big supermarkets; the aid scheme offers the chance for the smaller fish to come together and better protect themselves from the larger ones. And, for a time, they did. By 2006 there were more than 70 POs in the UK taking advantage of millions in funding. But today there are just 45, drawing around £27m of EU support. So, what’s happened?
The auditors have arrived, for one thing. The European Union’s scrutiny of POs began to intensify about five years ago, but in the past two years there have been some major recognition issues that have spooked not only the producers but the government too.
Claims started to surface from the audits that POs were failing to comply with the shared facilities rules of the aid scheme. In other words, POs had been formed to obtain funds to buy specific items that are then not shared with other members of the organisation.
Some challenged the claims, unsuccessfully: most notably the French, who in 2009 lost their appeal against a multi-million euro fine. DEFRA reacted by suspending payments to the UK’s 50 or so POs while it worked out a new policy on shared facilities.
Given the hefty fines handed out to the French, it’s understandable that the UK wanted to get its house in order, but it’s not an easy process. The main problem with the scheme is that the regulations are flexible in drafting and open to different interpretation, says Keith Leddington-Hill, MD at agricultural consultant Laurence Gould.
“The regulations are drafted by the European Commissioners but the EU auditors make their own interpretation. The situation is further complicated by member states having their own ideas on how the scheme should work. If everyone were working to the same criteria, many of the issues that have arisen with the scheme would not have occurred.”
The suspensions to payments and confusion has, unsurprisingly, brought the ire of those banking on the money for their organisations. “We’ve had a series of crises that have been disturbing, distracting and uncalled for,” says John Smith, Northern Mushrooms chairman. Meanwhile, Richard Hirst, chairman of Anglian Pea Growers, believes industry confidence in the scheme is “at absolutely rock bottom”.
Some also question whether the Rural Payments Agency (RPA) has a lack of confidence in its own abilities. This could, in part, be explained by the agency changing its staff more often than a football team changes its manager. The RPA during the lifetime of the scheme has fully changed the staff twice in moving initially from Reading to Northallerton and then to Newcastle. Even in the last year, due to government cutbacks, there have been more major staff changes with temporary staff contracts not renewed.
Still, Smith says withholding the payments last year was “totally unacceptable”. While the resultant publicity was welcome in lobbying for the money to be released, it has made life difficult for those groups looking to recruit more members and consolidate.
UK POs tend to be smaller than many of their European counterparts - countries which have had a history of forming co-operatives. In the Netherlands, for instance, the smallest PO has a turnover of £14m, while in the UK it’s £1m. EFFP’s Bowles says the UK often doesn’t see the bigger picture.
“It’s always tempting to look at the available money first and the wider benefits second, but it should be the other way round. Potential POs must to look at how they can improve their margins and better influence their marketplace through working together, and then assess how any funding could help them achieve that.”
Some sectors have embraced that ethos, using the funding to maximise knowledge transfer, improve productivity and invest in new technologies. The top-fruit industry has benefitted considerably from the investment in new orchards, and soft-fruit growers from tunnelled and table-top production systems.
Berry Gardens first signed up to the scheme in 1997 - a time when polytunnels were a fairly new idea in the UK. “Right from the start [the scheme] allowed us to invest in technologies that would help provide a continuity of supply we hadn’t achieved before,” says finance director Nick Allen.
Applying for the grant wasn’t as hard as people say, he adds. However, the increased bureaucracy is intensifying the strain on admin. Indeed, some POs are spending more and more of the EU money on admin costs. The benefits still outweigh this extra admin strain, but times have definitely got tougher, says Allen.
The auditing spotlight has created uncertainty among producers, but it’s also leaking to suppliers. The banks have had their heads turned too: the December delays forced some POs to look for further private funding, but were met with demands for earlier repayments on their current loans given that the suspended RPA payments had left some POs in a very precarious position financially.
So, what next for the UK’s POs? Leddington-Hill feels the opportunity for the scheme has been missed. “It’s a great shame, but the opportunity with the scheme was five or six years ago when growers were interested in joining POs. The bad press [since then] means growers now have grave concerns over becoming involved.”
Others are more upbeat. Recognising that the turbulence is far from over, NFU chief horticultural advisor Philip Hudson remains confident that the current pain is “necessary if we are to get a scheme which is much more settled in the future”. A new Producer Organisation Working Party, consisting of DEFRA, the RPA and representatives of POs will also help clarify guidance for the sector to ensure EU requirements are met.
“There’s no question that we are at a crossroads at the moment in terms of this scheme moving forward,” Hudson adds. “There have been issues, but these are not unique to the UK - these are much broader issues. Clarity will help everyone, and allow the scheme to provide the support for POs so they can get on with business and [as is the basis of the scheme] improve their position in the marketplace.”
Indeed, at EU level there is also optimism. Speaking at the International Conference of Producer Organisations in Vienna in November, Rudy van der Stappen, the European Commission deputy head of unit for agriculture, said the commission’s objective is to have
60 per cent of fruit and vegetable production within POs by 2013. Currently, the EU figure for involvement is around 35 per cent.
The UK figure is close to that, and thus in stark contrast to competitors such as the Netherlands, where over 85 per cent of production is supported through the scheme. That means there remains an opportunity for UK growers to work together to improve supply chain efficiency through the development of POs and use EU support as an “enabler of change”, concludes Bowles.
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