Milk Distribution System

Commerce and Employment Department laid a policy letter in September 2015 setting out its recommendations for a new milk distribution system. In effect it opened up the system to anyone and allowed shop retailers to transact directly with the Dairy. During the debate an amendment was laid that gave 2 options. The first proposed leaving things more or less as they are, the other sought to adopt the Department’s recommendations, but requiring the Department to look at possible compensation. My speech is below.

In the end, the latter option was supported and Commerce and Employment was instructed to come back to the States with their revised proposals.

Sir, now we have got a choice: keep things more or less as they are or pay the milkmen off.

The current model is nonsensical, and perpetuating it just retains an inherently inefficient model. The Dairy do not want it and this is all about the optimum distribution regime for the Dairy.

I said, when we debated the Fallaize amendment last year… it became abundantly clear to me when I was on the original Dairy Review Group that this was an industry suffocated by its past and never more so than in the distribution system. As a result of Members approving the amended report last year, the dairy industry has been able to start looking to the future – and a positive one at that – except that it has to retain the current distribution system. So I will oppose option 1 which makes no sense at all.

So can I support option 2?

 

Well, this does not say ‘pay compensation’ nor does it say from where that compensation should be paid. However, I do have concerns about what the potential impacts of paying compensation would be. The first is I will not support any compensation being paid for by the Dairy – that is something I fundamentally oppose. Should this amendment be passed, and C&E come back with that proposal, I will not support it.

Deputy Fallaize’s draft amendment did include the use of Dairy funds to pay compensation and I made it clear this would not be acceptable to me – and I therefore thank Deputy Fallaize for making the changes that he did, which then became incorporated into Deputy Le Lièvre’s amendment.

I have been in communication with the Guernsey Farms Association since before the debate and they had already voiced concerns that there would be calls for compensation, and that it would be to use Dairy funds. Dairy reserves are there to invest in the machinery and equipment to maintain the Dairy, to ensure we have a 24/7 supply of milk and the Dairy is a 24/7 operation. Equipment does not come cheap, especially for what is a micro-dairy operation in a time of mass-consolidation in the dairy industry in the UK, EU and beyond.

Relatively speaking, the cost of equipment is expensive and, as in any industry which has to comply with environmental health regulations, the requirements for more equipment – and more modern equipment – just increases.

I can say from my first-hand experience, having been on the Dairy Management Board, we have a fantastic Dairy. The management and workforce are doing a brilliant job converting a first-class raw material – thanks to the hard work of our farmers – into a first-class product that is loved by Islanders and, in the case of our butter, by those beyond our shores.

I am not prepared for our Dairy to have to stump up any cash for the retailers that will pump up the price of our milk and affect sales to the disadvantage of our farmers who, let us not forget – and it is so easy to do so – will have seen a massive £1 million reduction in subsidy in less than four years’ time. Why should they suffer again? After all, if it was not for our farmers the milk retailers would have nothing to sell.

The GFA – thanks in no small part to their Chairman – have approached the original report in a very professional manner. We should not abuse their professionalism or do anything more that could impact on their livelihoods.

My second reservation is the precedent that compensation might set. If we pay off these retailers, who else is going to come out of the woodwork and claim that because they have suffered a loss because of the States of Guernsey they should be compensated – businesses that took out leases on the Pollet because of passing trade from cruise liners but who now do not see that because they land at the Albert Pier, and the businesses losing money as a result of roadworks?

Whilst this amendment does not state that we should give the retailers compensation, I will not approve any subsequent report recommending compensation until I have assurances that this will not set a dangerous precedent. There is nothing in the report that gives me an assurance in relation to that and I will not support it.

Finally, I would just like to say that I think this is the time for the retailers to start working with C&E. I think the engagement has not been there in the past and now it is their opportunity. I agree with C&E’s recommendations as to the optimum distribution method and I am minded to support the alternative Proposition that was not fully considered in the policy letter – and I believe it should have been. But I would ask C&E to bear in mind my concerns as, unless they are addressed, I will not and cannot accept any recommendations for compensation that are subsequently tabled.



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Email: heidi@heidisoulsby.com