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Alun Michael: I take the hon. Gentleman's point about who decides that we should have debates. If all of us can agree to blame a third party, I am happy to connive in such an agreement.
We agree that the quotas should be tradable across national boundaries. Again, going further than that is difficult, but, as a principle in going forward, that is what we would pursue in the discussions.
Norman Lamb: I am delighted that we have received an expression of a view from the Minister. That is a great breakthrough.
I return to the question of regulatory impact. The Minister makes an assertion, which is in the European Scrutiny Committee's report. It states that
''the relatively efficient UK industry . . . would be expected to survive at lower production levels''.
That is an assertion, but it seems to be made without any evidence. There was a previous impact assessment, but it was produced a long time ago. Does he agree that a lot of work should be done on what the impact on the industry will be of current proposals and what is likely to come forward?
Alun Michael: The main reason why we have not got an updated regulatory impact assessment is that we do not have the proposal. It was expected earlier. The appeal means that the proposal has been delayed, and therefore that the proper analysis, which will certainly be needed, is not ready. I do not think it makes a lot of sense to go into great detail on an impact assessment when so many factors are not clear.
Work is going ahead on the elements that would need to be included in a regulatory impact assessment, which is to be submitted once the formal legislative proposals are available. That means, I hope, that we will be able to produce one quickly once firm proposals are before us.
We have already published independent research by Cambridge university and the Royal Agricultural College, which focuses on the economic, social and environmental implications of the sugar reform, on the basis of the range of illustrative options. That document gives information that should assist discussion.
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The hon. Gentleman raised the issue of the likely impact on British farmers. That will be difficult to assess until we see the final detail, because Government policy on sugar reform must be seen in the wider context of our whole policy on common agricultural policy reform. We want to secure a more economically rational CAP that is sustainable for the countryside, the environment and the rural economy. We also want a more competitive farming industry that can respond more flexibly to consumer wishes without being constrained by the market-distorting nature of the current CAP.
All that has implications and places considerable demands on our farmers and on our food industry more widely. It is worth pointing out the extent to which the agriculture and food industries have engaged with such issues since, for instance, the publication of the Curry commission's recommendations on the creation of sustainable food and farming.
Although the element of CAP reform under discussion is detached from the mainstream of CAP reform agreed at the Agriculture Council last July, it should nevertheless be seen in context, and decisions by farmers about what to produce in the longer term should also be seen in that wider context. That is as true for the production of sugar beet as for the production of any other crop. In practice, the impact of lower beet prices will be limited by growers switching to other crops and increasing productivity, and by any compensation arrangements agreed as part of the reform. All that needs to be taken into account in working out the exact impact on our industry.
Mr. Paice: I find it difficult to understand how the Minister can equivocate when, for a start, he should be in possession of the report produced for DEFRA by the university of Cambridge and the Royal Agricultural College. That showed that a 25 per cent. price cut would result in a 50 per cent. reduction in the UK beet area in the long term. If the price cut was 40 per cent., it would lead to a beet area reduction of 80 per cent.
The report considered a number of scenarios, and the Minister ought to have it available so that he can answer questions such as that asked by the hon. Member for North Norfolk. The Minister will also have a report from the Commission that showed that the break-even point for UK producers is £28 a tonne. I confess that I find that figure difficult to understand. At that price, it would be more profitable—or less ''lossful'', if there is such a word—for British producers to change over to producing wheat. The figures are there, and he should have them available.
That leads me—before you can challenge me, Mr. Forth—to a direct question.
Alun Michael: Just made it!
Mr. Paice: Indeed. I did not even dare to look at you, Mr. Forth.
The Minister referred in his opening remarks to the time scale and the fact that there is slippage. He said that the reform that we are discussing—whatever form
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it takes—will not happen until 2006. Does he expect the Commission in that year to stand by a further review date of 2008, or does he expect that to be delayed? What is the Government's view of that issue, given that refiners and producers would be surrounded by huge uncertainty, which would destroy investment until they knew what the longer-term picture was going to be?
Alun Michael: The hon. Gentleman's attention must have lapsed during my response to an earlier question. I have just drawn the very Cambridge report to which he refers to the Committee's attention. I also referred to that report's calculation of a number of possible outcomes based on a variety of scenarios. I think that I used almost the same words in speaking to the Committee as he used in drawing my attention to the report. I welcome him back to our conversations.
The Cambridge study is interesting and helpful, but not conclusive on the outcomes. Its main findings were that all reform scenarios will lead to reduced beet production in the UK. That reflects the relatively high cost of beet growing in the UK, and all of us would accept that that is a fact of life. The study went on to make some interesting points. For instance, it said that the impact on production would be significantly lessened if growers restructured and reduced their costs. Variation in performance suggests that this is possible. The most efficient grow beet at less than £15 a tonne, the least efficient at more than £30 a tonne.
Those variations are not dependent on the reform of the regime and would have an implication for the outcome for the industry as a whole. It is worth mentioning that the land under sugar beet production represents less than 2 per cent. of the crops and grass area of England and slightly less than 4 per cent. of the cropped area. The value of output for sugar was £283 million in 2002. That is approximately 2 per cent. of gross agricultural output.
That is why, as I suggested, the implications for production of sugar beet and for sugar production in this country had to be considered in the context of the wider changes brought about by reform of the CAP and the changes consequent on the Commission's report, ''A Sustainable Future for Food and Farming''. That report is about connecting the farming industry with the markets and ensuring that there is a better return for farmers.
I also say to the hon. Member for South-East Cambridgeshire (Mr. Paice) that we do not welcome uncertainty. As I said earlier, we want certainty as soon as possible. We want early decisions. We want early proposals from the Commission. It is the Commission's decision to appeal against the WTO findings that is causing delay, which we cannot now avoid. The matter comes down to the fact that we are not in control of the timetable.
The date that relates to the WTO negotiations and the ''Everything but Arms'' agreement is 2008, which is the important one in that context, but the important thing for us, and the starting point for substantive
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discussion on the issues, is the publication of a firm proposal or set of proposals by the Commission to which we can address our attention. That applies to many questions that are understandably exercising MPs, producers and the industry at large, but we will not be in a position to give replies to those questions until we have firm proposals.
Matthew Green: The Commission's proposals are for roughly three phases of change—first, a 16 per cent. reduction across the board, secondly, tradable quotas and, thirdly, restructuring. Does the Minister accept that there is broad consensus that all three are needed but that what is at stake is the order in which they occur? Will the Government consider whether it would be more appropriate for restructuring to be first, tradable quotas second and, if necessary, the 16—or whatever—per cent. reduction third?
Alun Michael: I see the logic in what the hon. Gentleman says, but I am not sure whether such a timetable is possible—I am not close enough to how the proposals might have to be implemented or the implications of the WTO decision for that. I am happy to consider the sequential approach that he describes and return to him on that point. His opinion is not what the Commission is saying. We will have to see what it comes forward with, but I am happy to consider the implications of trying to go in that direction and whether there is any possibility of doing so.
Matthew Green: I return the Minister to the question I started with—his view on the world price. I am sure he is aware that the price of sugar has fluctuated between $150 and $250 per tonne in the last decade and that the average production cost is $450 per tonne, although Britain's costs are lower than that. I am sure he accepts those figures because they are out on the open market. Given that, will he say whether the world price is genuine or a dump price?
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