Meat Board Plan for ChangeJohn Luxton Food, Fibre, Biosecurity and Border Control
Dear Meat Producer,
Review of Meat Board's Plan for Change
In November 1998, the New Zealand Meat Board presented its Plan for Change to the Government. Since then, the Government has been reviewing the plan in consultation with the Meat Board. We have also received a range of enquiries from farmers for information on the Government's process.
In response to farmers' enquiries and with a view to assisting the Meat Board's consultations, we are sending you this update letter. It sets out the issues that the Government is considering in reviewing the Meat Board's Plan for Change.
The Government welcomes the Meat Board's consultation process with farmers over February and March. These consultations will be a very valuable contribution in developing a regulatory framework for the industry to realise its full potential for farmers and the New Zealand economy.
Hon John Luxton
Minister for Food, Fibre,
Biosecurity & Border Control
The Meat Board is a non-trading Producer Board. Unlike the Dairy, Apple & Pear, and Kiwifruit Boards, it does not sell commodities. It is not 'a single desk seller' with the sole right to export. The Meat Board is, in effect, an industry organisation with the power to levy farmers.
The Board's main current functions are:
- marketing and promotion ($24.6m, 54.2% of total expenditure);
- research, development and information ($11.2m, 24.7% of total expenditure);
- communications and external relations ($3.1m, 6.9% of total expenditure);
- trade advocacy and access ($1.7m, 3.7% of total expenditure); and
- quota administration (self funding).
Total expenditure for the Meat Board in 1998 was $45m, of which $26m came from levies, with the balance funded from investment income of $9 million and reserve capital. The Board's cash reserves, as at 30 September 1998, were $104.3m. The Board's current levy rates are:
|Adult Cattle and Vealers||$3.60|
SUMMARY OF THE MEAT BOARD'S PLAN FOR CHANGE
In November 1998, the Meat Board proposed to the Government that the Board should:
- continue to be established under the Meat Board Act 1997;
- retain statutory powers for levying and quota management;
- establish a constitution under the Act (but not corporatise or define ownership shares);
- establish rules under the constitution, by vote of levy payers, to govern operational aspects of the Board's activities; and
- place the reserves in a Trust for the benefit of farmers.
The Government's main role is to set and monitor the regulatory environment in which the Meat Board operates. It is for farmers to evaluate the quality of the Board's performance and strategies.
In reviewing the Meat Board's plan, the Government is concerned to:
- give farmers more say in the governance of their industry organisation; and
- improve the accountability and responsiveness to producers for the use of their levy money.
The Government does not intend to take any action which would put New Zealand management of the meat country specific tariff quotas at risk.
In reviewing the Meat Board's Plan for Change, the Government is focussing on four key issues.
At present, the Meat Board is established under the Meat Board Act 1997. Having special legislation of this kind makes the Government a party to the Board's constitutional structure.
Given the Meat Board's role as an industry organisation, farmers may wish to consider whether having special legislation like this is still desirable.
An alternative could be for the Meat Board to be established under existing generic legislation eg: the Companies Act, Cooperative Companies Act, or the Incorporated Societies Act.
This would enable the Board's form to fit the functions determined by its own members, rather than have its form determined by special legislation.
The power to raise a compulsory levy is only possible with legislative backing. It is a coercive power and therefore should be governed by efficient and consistent rules, which allow levy payers to set the levy and govern how it is spent.
The Meat Board currently levies producers under its own Act but levy payers do not vote to determine whether a levy should be raised, its size or how it is spent. These decisions are currently made by elected directors. Farmers may wish to consider the option of funding 'industry good' activities under new generic legislation where:
- farmers can vote on whether there is a levy, how much it is and how it is spent;
- administrative costs and the role of Government are kept to a minimum;
- there are appropriate criteria for 'industry good' activities on which levies can be spent.
If such an option were to proceed, the Government would work through these issues with farmers, other stakeholders and the Board.
3. Commercial Activities
Wider industry trends are impacting on some of the traditional roles in the meat sector. For example:
- overseas buyers are becoming more specific about product requirements, and they are developing closer relationships with exporters; and
- New Zealand exporters are becoming more strategic in targeting particular markets.
Any levy system should not crowd out commercial enterprise. Nor should farmers be forced to pay a levy for things that are inherently commercial. Business activities are best funded by voluntary capital rather than taxes or compulsory levies.
Farmers may wish to consider whether some of the Board's current activities may be more appropriately funded on a commercial basis (rather than relying on compulsory levies) with users paying directly for the services provided.
The Meat Board holds cash reserves of $104.3m. The Government has no claim to the reserves.
The owners of the reserves should make decisions about the future of the reserves. (The Meat Board Act 1997 states that the assets of the Board ultimately belong to livestock farmers.)
The Government welcomes the consultation process being undertaken by the Meat Board. Constructive industry discussion over the coming weeks on these issues will be a valuable contribution to the process of developing a robust regulatory framework for the Meat Board.
Producer Board Project Team
PO Box 696