A damning report into the island’s meat plant has identified several flaws in the structure of the regulation and promotion of Manx meat, questioned whether it presents value for money for the taxpayer and recommended the island’s soon to be appointed Auditor General should investigate its finances as a ‘matter of urgency’.
The Environment and Infrastructure Policy Review Committee is due to present its findings to Tynwald later this month.
Chaired by Douglas East MHK Clare Barber, the report recommends a separation of powers and has called on CoMen to consider this, amongst other changes. The report centers on the meat plant which is the only abattoir on the island and is currently operated by a gov owned company, trading as Isle of Man Meats.
Early on in the report, the committee, worryingly, said it agreed to take evidence from several people involved in the meat plant anonymously because they ‘fear reprisals from the Department of Environment, Food and Agriculture’. These submissions haven’t been published in full, but one MHK told Gef that these reports are said to be deeply critical of some senior figures.
Documents Gone Missing
In 2017, the gov launched a tender process to find an operator of the Meat Plant, which was running at a loss and had seen several directors walk away from their roles as, the report says, ‘they could not see a way forward’.
The committee found that while tenders were received, they were rejected and the decision to cancel the process was made in either August or September 2017. In December it was announced that a new commercial board would be put in place to run the Meat Plant and the Isle of Man Meat Company Ltd was established in January 2018 with DEFA as the golden shareholder.
The report says that the committee was told neither tender bid matched all the requirements and so were rejected. However, it adds: ‘While we have been given a copy of the scoring matrix template, both DEFA and the Attorney General’s Office have been unable to find a copy of the completed matrix despite the fact that copies of completed matrices are supposed to be kept for at least six years following the conclusion of a procurement exercise. We are therefore not in a position to confirm whether this was the case.’
It continued: ‘We have seen copies of the feedback letters sent to the tenderers, which appear to be based on the missing completed matrix. The feedback highlights two main reasons for rejecting the bids: the level of subvention proposed was too high in both cases, and the proposals did not include any significant investment on the part of the tenderers. These reasons for rejection raise further questions, considering that the current model is reliant on a £2 million annual subvention to cover its operating costs, and the current Board has also not personally invested in the company.’
Mrs Barber and her colleagues Chris Robertshaw MHK and Rob Mercer MLC said they are ‘disappointed that DEFA did not in the first instance work with the bidders to attempt to resolve any issues with the tenders or find an alternative public-private partnership model’. They said that one of the bidders told them they were not able to see the same financial information as the other tenderer.
They add: ‘We are aware that one of Mr Baker’s political aims at the start of this administration was to ‘go into DEFA and sort out the Meat Plant. However, we find this level of political involvement in the procurement process and the formation of a Government-owned commercial enterprise to be inappropriate.’
The committee said that other concerns it had were the ‘lack of clarity’ around the role of chairman Tim Baker MHK and how it was nationalised. Mr Baker is also the DoI Minister and Chairman of Manx Utilities. It added that DEFA hadn’t provided it with ‘any evidence that explains why and how the decision was subsequently made to set up a company with DEFA as the majority shareholder’ and that ‘we are concerned that a significant policy decision has been made without the necessary background information or planning’.
They added: ‘Moreover, we would expect any proposal for a taxpayer-funded commercial enterprise to come before Tynwald for debate and approval. This was, for instance, the case with the purchase of the Steam Packet; a more recent example is the establishment of the Manx Development Corporation. Putting any enterprise into Government ownership is a major policy decision which should be scrutinised by Tynwald. The Meat Plant should not have been an exception.’
Moreover, the committee said that this highlights the need for CoMen to develop a formal transparent policy on gov ownership of enterprises and said that decisions ‘appear to be made piecemeal, department by department, resulting in different approaches and outcomes’.
The committee has recommended that it would be ‘more appropriate’ for the Treasury to act as the shareholder of the Meat Plant as this is the usual mechanism put in place for gov owned companies.
Since 2018, Isle of Man Meats has received a subsidy of about £2m a year. The committee said it was ‘unclear’ how this figure was arrived at but that the business accounts ‘make it clear that the company is reliant on the subvention’ and both DEFA Minister Geoffrey Boot and Mr Baker have repeatedly said that without the subvention, the plant would no longer exist.
This isn’t much of a surprise to the committee as small abattoirs across the UK are struggling and many other island communities have seen theirs close. The committee said: ‘In the Isle of Man, the loss of red meat derogation in particular has made it difficult for the operator to compete in the local market, where Manx meat arguably has the highest recognition and value. However, we think that it would be possible for the company to operate with a lower subvention, and with greater value for the Manx taxpayer, if its strategy did not rely so heavily on wholesale export.’
Earlier this year, when the company experienced financial difficulties, it led to cutbacks at the plant, which in turn made it harder for farmers to send their livestock for slaughter at the most profitable time for them. The committee was told that in such circumstances, ‘it is often easier for farmers to send their animals for finishing and slaughter in the UK’. Mr Baker said that the issue came about because of the subvention and the way it is administered and explained that the yearly budget process ‘does not fit well with the needs of a commercial enterprise’.
Clear as Muck
Keith Kerruish, of Ballafayle told the committee that Mr Baker is the ‘no numbers accountant’ because of his reluctance to disclose any financial information relating to Isle of Man Meats, Tynwald members have received similar responses when questioned in Tynwald.
The committee’s report said: ‘There is a lack of clarity about the reporting requirements for Isle of Man Meats. In the House of Keys on May 4 2021, the Chairman explained that Isle of Man Meats’ accounts would be consolidated into the Government accounts going forward.To date the company’s accounts have been laid before Tynwald. It is unclear why this decision has been taken, which has the potential to obscure the company’s financial information.
‘We recognise that Isle of Man Meats is legally established as a private company. However, it is substantially reliant on tax funds; as both the DEFA Minister and the Chairman have repeatedly stated, without the subvention it would not exist. As a Government-owned company, Isle of Man Meats must ensure that it meets the highest standards of accountability and transparency. More consideration should be given to how to balance any requirements for commercial confidentiality with the requirement to explain its operations, via DEFA, to Tynwald and the public.’
The committee says that it put it to Mr Baker ‘it could be said that the low amount of Manx meat sold on island means that Manx taxpayers do not benefit from the subvention given to Isle of Man Meats’. However, he highlighted the other ways that the existence of a Meat Plant benefits the island, ‘such as supporting the agricultural economy and providing employment’.
They said: ‘While we recognise these wider economic benefits and the importance of having an abattoir on Island, we are not convinced that the £2 million subvention for the company’s operating costs represents value for money for the taxpayer. Rather than providing the Island with a healthy supply of Manx meat, as was the aim of various previous strategies, the subvention is currently helping to enable the off-Island market. The effect of this on the local economy needs to be assessed. We are also concerned that both DEFA and Isle of Man Meats seem to be resigned to the inevitability of a substantial subvention for operating the Meat Plant. This is all the more concerning considering the reluctance to give a private operator the opportunity to run the business or consider other forms of public-private partnership.’
For these reasons, the committee has recommended that the Isle of Man Meats should be examined by the soon to be appointed Auditor General ‘as a matter of urgency’.
When the company was established, it allowed DEFA to appoint up to six directors and a chairman with the other director being appointed by the other shareholder Fatstock Marketing Association. The committee said it is ‘concerned by the dominance of DEFA on the board’ and repeated references, during his evidence to the committee, by Mr Baker to ‘the shareholder’ as opposed to ‘the shareholders’.
The committee added: ‘Robin Bromley-Martin, one of the original directors on the new board, has told us that a number of key decisions were presented to the Board as a “fait accompli”, and as a result he “felt that the Board was not the key decision-making forum for IOMM”. In other words, decisions were being made in St John’s, not Tromode. It is no secret, for instance, that DEFA had been exploring the possibility of working with Northgate for some time; Mr Baker mentioned in an interview with Paul Moulton that the company had been ‘working really over the last number of months to find the right strategic partner for us, and a lot of conversations, in fact some of the conversations were even before the new board was in place.
‘While we appreciate that DEFA has a substantial financial and political interest in the success of the Meat Plant, we do not think that it is appropriate for a Government Department to be involved in this way in key operational decisions of a Government- owned company.’
Mrs Barber and her committee members, as previously highlighted, said there is a ‘lack of clarity’ about Mr Baker’s position as chairman and said this appointment has meant the ‘role has become politicised’. They said: ‘Having the Chairman as a current Member of Tynwald also raises issues of potential conflict of interest, as it means that the Chairman has the ability to debate and vote on issues relating to the Meat Plant, such as its funding.
‘As the DEFA Minister is responsible for the appointment, it is possible that Mr Baker could continue as the Chairman in the event that he is not re-elected at the 2021 General Election. We think that it is inappropriate that a politician who was involved in the formation of a Government-owned enterprise could be able to continue as a director of the company.’
However there are further suggestions that the entire structure for appointing a board should be reviewed as it could potentially be chopped (pun intended) and changed at the whim of the DEFA Minister, who themselves can be replaced at the whill of the Chief Minister.
As previously stated, DEFA acts as both promoter and regulatory for the industry. In the case of the Meat Plant, the situation is particularly complex where, as well as the subsidy and board, DEFA also provides a vet to oversee animal welfare and food hygiene in the Plant, Meat Hygiene Inspectors, and other regulatory services such as microbiological sampling and test via the gov lab.
While the committee was satisfied that the Director of Regulation, the Head of Environmental Health, the Official Veterinarian, and the Chief Veterinary Officer are professionals who understand their roles as separate from the operational management of the plant.
However, it says that the ‘current structure is incredibly worrying’ as it could make it difficult for staff at the Meat Plant to have the confidence to whistleblow if a necessary situation arises. The committee adds: ‘Ordinarily, if an employee did not feel able to raise concerns directly with their employer, they would be able to do so with the relevant regulator – which in this case would be the same entity that is a majority shareholder in the Meat Plant.’
Equally the report says the committee was also concerned that there is no clear reporting structure to the board about regulatory matters.
A Clear Strategy
The report concludes by saying that Isle of Man Meats and the Meat Plant need a clear strategy to take them forward. This includes the gov using its levers to boost on island sales of Manx produce, the business becoming more transparent, having a better strategy for by-products such as hides, bones and blood. It said that the system could learn from the example of Isle of Man Creamies and that ‘serious considerations should be given to ways in which the successes of the Manx milk industry can be translated to the meat context’.