EU Sugar Regime (EUC Report)

My Lords, it is a great privilege to be part of what I believe to be a very cohesive team in Sub-Committee D under the very able chairmanship of my noble friend Lord Renton of Mount Harry. We were well served, as he said in his opening remarks, by our Clerk, a secretary and our specialist adviser to the inquiry on the sugar regime, Professor Sir John Marsh, who is regarded as one of the most experienced policy advisers in the United Kingdom on agricultural business—hence the excellent report that was produced. Naming our report on changes to the sugar regime Too Much or Too Little? may sound a little frivolous, as my noble friend said, but I believe it sums up admirably the worldwide views of all who gave evidence from Brazil, Australia, South Africa and some of the larger producers who unfortunately have been linked into the ACP group. As has already been said quite clearly, this matter, so far as the ACP countries are concerned, must be dealt with very positively country by country because of the differences and the difficulties so many of those countries have. If you compare the spread of large producing countries that are still intent on increasing their production with countries such as Malawi and some of the other very poor regions, you can see that very different treatment is needed in all those cases. The economies of many of those smaller countries are mainly, if not solely, dependent on sugar production. I often think of the similar situation with bananas—many people felt that the central American banana would put many of them out of business. I remember people trying to tell dear old Mrs Charles in Strasbourg that we could get much cheaper bananas from central America. A big brown fist came down on the table and she said, ““If you want my bananas, you have my bananas. You don’t have my bananas, you have cannabis””. We should stop and think about that for a moment. If we are not careful, we could drive some of these countries completely out of business, and what will we get in exchange? It does not bear thinking about. I declare an interest as an ex-grower of sugar beet. I stopped growing it many years ago because, as a Warwickshire farmer, I could not compete with Norfolk farmers. I also declare an interest as a farm leader. When my noble friend Lord Eccles was speaking, my mind went back to those days when many of the negotiations were going on about the part that UK growers could play against the world leaders of growing cane sugar. Your Lordships would not expect me to say that the report, or the decisions taken by Ministers since the report was produced, is wholly satisfactory for the producers of sugar beet. It may not be fully appreciated, and it may surprise many people to know, that while sugar beet is seen as a very important breakcrop in arable areas, particularly East Anglia, it is also important to the livestock industry in the United Kingdom. It may be surprising when you read the 260-odd pages of the report, with the evidence given from so many, that a body such as the sheep association felt that it had a responsibility to make a point. It said that within the arable rotations where sugar beet is a suitable breakcrop, it is environmentally beneficial and provides immensely valuable after-crop forage for grazing sheep and beef cattle in the form of sugar beet tops. I refer to the golden hoof of the sheep, therefore, which is promoted as a feature of good husbandry. It also reduces the cost of land production to the benefit of the industry and exports. Sugar beet pulp, another by-product, is a vital ingredient to many livestock rations. All that must fit into the whole pattern. It is a breakcrop, but it is also a crop which fits into the pattern of the balance of farming. I have spoken with a lot of individual sugar beet growers recently. With cuts now agreed on the longer term by Ministers, the price could drop as low as £17 a tonne, against a cost of production of between £16 and £19 per tonne. As sugar beet growers prepare to plant this year’s spring crop, they say that that would make it unprofitable. I am sure that the Minister will say, ““Yes, but there is appropriate and generous compensation, which will be paid to the farmers””. As one farmer said to me recently, ““It sounds reasonable and generous to pay up to 64 per cent compensation against a cut of 36 per cent. But if that is paid through the single farm payment to all employed in agriculture, beet growers will quickly say that that is not so good””. As they see it, it has been announced that in the rest of Europe their competitors’ compensation may stay directly with the individual. We are aware of the substantial surplus of sugar in Europe, particularly in France. When we were taking evidence, I think that it was quoted that the surplus in France is almost equivalent to the total consumption of sugar that we consumed last year. So that has to be dealt with. When national quotas are reduced, I hope that Ministers therefore will agree that those countries with the largest surplus should take their share of the reduction over time. I accept that the national quota will have a value and that the reduction will affect processes as well as growers. But if a farmer decides to give up beet growing through economic reasons, or British Sugar decides to close its factories by moving quota elsewhere, compensation will be crucial in allowing restructuring of its businesses. It is already planned to convert part of the Whittington factory, which has already been referred to and is in a very large beet growing area, and to take surplus C beet and convert it into bioethanol. This will give growers something in the region of £10 to £15 per tonne, depending on world ethanol prices and future demand. Farmers are beginning to wonder if they will be turning their fields into oilfields for the future. It is a very small part of the overall mix and the overall scene at the moment. Let us hope that the future will take away some of the problem as far as sugar is concerned. This may provide some ray of hope. British Sugar is to be congratulated on the initiative it is taking. It will be essential for growers and processors to work in harmony in order to stay in business. As ever with European Union reforms, we end up with compromise. I believe there is a lot to be done to ensure improvement and get a better start than seemed likely when the decision on price levels was first taken. The efficiency of the scheme in removing production in order to reduce surpluses is central to its success; therefore I support it. It provides a voluntary means of reducing surpluses, instead of applying an across-the-board quota cut. The United Kingdom has, as we know, an efficient beet growing industry yield. That yield has doubled since my beet growing days; it has probably trebled. To reduce production, the issue is one of market balance, while encouraging inefficient industries to exit under a reasonable strategy. If the policy is to last for nine years and three months, until September 2015 from 1 July this year, it at least offers a period of stability and, I hope, visibility for the sugar sector. If the price cuts span four years, they allow for adjustment. Growers will hope that if payments are made and managed by the RPAs, the present confusion will then be history. Let the appalling mistakes of last year be a lesson for the future. Looking ahead to 2014, will the reform work? Does it—or will it—comply with WTO rules? Will all countries that are party to the WTO honour those rules? At the end of the day, will it be worth it? Our inquiry covers the world sugar market and emphasises the difficulty one has, because the situation must be looked at globally. Evidence from many of the ACP countries, who rely on cane sugar production and export for their economy, claims that the impact of change is potentially large and serious. This is at a time when the G8 emphasises the importance of free trade and fair trade for ACP countries. If they lose market share and compensation is insufficient there will be problems. The case for aiding underdeveloped countries carries a heavy political weight. Is causing economic damage to the European sugar industries the best means of helping them? Will this reform lead to benefits for ACP counties, or will it increase exports from countries such as Brazil? The reports I hear from Brazil indicate a growth in sugar production, with plans to double their output over the next 10 years. I learned from someone who arrived back last weekend, having studied some of the factories there over the past three weeks, that 75 new plants are being erected in Brazil. That must be set against the possibility of 56 plants being removed in the European Union. Of course this would be sugar coming from a country with a greatly devalued currency and very low wages; moreover, a country where the environmental damage to fragile soils and tropical forests should be causes for real concern. Helping through trade the small, traditional supply countries, particularly through the Caribbean supply arrangements they have had in the past is another matter which cannot be ignored. I re-emphasise that, in my opinion, many of those countries need different treatment. When he comes to respond, I am sure that the Minister will give the sugar industry the recognition it deserves and hope for the future.