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Alun Michael: No, I do not think I can answer the question in those terms. The figures that the hon. Gentleman gives are right, but the relationship between them is more difficult to trace. A market liberalisation and a different approach in Europe would have considerable implications. For instance, outcomes depend on whether changes are made by the industries that use sugar. There are some initial findings that lower sugar prices would not lead food and drink manufacturers to incorporate more sugar in their products, but simply reduce the price of their products. Would they do that, and what would the implications be for consumption? The effect of lower prices is being analysed, and we are considering findings with colleagues at the Department of Health, because of the health implications of sugar consumption.
The consequence of protectionist policies—not only in the EU, but elsewhere—is market distortion. It is rather more difficult to be precise about what those distortions are and what would happen if they moved and changed over a period. We have a distorted market, and there will be elements of distortion for
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some time to come. If one considers the likely proposals in the Commission's communication, those are the parameters within which we have to work.
The Chairman: Question time having reached a natural conclusion, we come to the debate. I call the Minister to move the motion.
Motion made, and Question proposed,
That the Committee takes note of European Union document No. 11491/04, Commission Communication on accomplishing a sustainable agricultural model for Europe through the reformed Common Agricultural Policy—sugar sector reform; and supports the Government's objective of achieving a more sustainable, market-based approach, in line with the reforms already agreed in June 2003 and April 2004 in other sectors, and consistent with the EU's wider trade and development objectives.—[Alun Michael.]
3.51 pm
Mr. Paice: When making notes earlier, my opening line was going to be to say that I welcomed the debate. In the light of the past 40 to 50 minutes, I am not sure that I do any more, because I was going to go on to say that it is important to know the Government's position. Although, as I said privately to the Minister before we started, I recognise that the Commission's communication is not a firm set of proposals and the final version may be somewhat different, I was hoping that we would have some idea of how the Government saw the general approach to sugar policy reform.
The Opposition believe that the sugar regime must be reformed. The communication clearly will not be introduced in the manner in which it has been envisaged. Some 11 countries have already said that they will not accept it, and we must await the outcome of the WTO's appeal panel.
Britain is, one way or another, self-sufficient in sugar. Approximately 50 per cent. of our consumption comes from domestic production of sugar beet, and the other 50 per cent. comes from cane sugar through our historical ties to the ACP countries. In a good production year, we might produce 100,000 tonnes or so of excess, which has to be exported. In addition, British Sugar, our domestic refiner, is one of the most efficient refiners, certainly in Europe.
We do not deny that change is necessary. However, I am concerned by remarks made by the Minister or one of his colleagues in the newspapers, stating that change is necessary not least because sugar is out of balance with other commodities. It is odd to assert that because farmers cannot make a profit out of any other crop, they should not make it out of sugar beet either. Nevertheless, as the Minister rightly says, change is necessary in order to meet the implications of the WTO and ''Everything But Arms'' initiatives.
We must recognise our traditional ties with African, Caribbean and Pacific producers, and the newer ties and commitments to the least developed countries. I was interested in the exchange between the Minister and his hon. Friend the Member for Putney, who has just left, about the exclusion of some LDCs, and in the Minister's remarks about Brazil. As the Minister realises, there is widespread concern among not only British producers but other organisations, including the Royal Society for the Protection of Birds, about
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massive expansion of Brazilian sugar production, because of its impact on our market and the natural environment of Brazil and the damage it would do to the Cerrado, which is one of the most diverse habitats in the world. Nevertheless, we have to face up to the commitments that we have made to those other countries. Any price cut will mean that some ACP countries will not able to compete and there has to be compensation for them. I hope that the commitments in this communication are carried through to the final proposals.
Equally, however, it is clear that if there is a price cut, some other European countries will not be able to compete. One could debate which ones, but it is likely, from the reports to which I have referred, that Finland, Greece, Italy, Spain will be involved, and perhaps more. My view, and that of the Opposition, as I intimated in an earlier question, is that those countries should be given the necessary funding to convert and their quota should be cancelled and taken out of the system before we think about reducing the quotas of more efficient producers in other countries in Europe.
We strongly oppose the proposition in this communication to merge A and B quotas before making any cuts. I am sorry that the Minister was not able to commit the Government to opposing that idea, because we know that Britain is not a surplus producer, although other countries, such as France, are significant surplus producers. The concept of A and B quotas was originally designed so that the B quota was roughly equivalent to the surplus being produced by other countries. It is logical that if we need to cut a quota to reduce subsidised exports, it should be the B quota, which is for surplus production. Those who take the time to read the report of this Committee's proceedings will be concerned that the Minister was not able to commit the Government to oppose the merging of A and B quotas before making cuts.
We have concerns about sugar security. I was somewhat taken aback by an offhand remark made by the Minister, in which he seemed to dismiss security. We are not suggesting that we should always aim for 100 per cent. security. Indeed, we do not have that, given that we currently have 50 per cent. imports. However, simply to dismiss sugar security was somewhat cavalier.
The other fundamental point that I hoped the Minister would address—perhaps he will do so in winding up—was that the principle of the reform should be to enable the most efficient producers and refiners in Europe to compete. The one positive thing we got out of the Minister in the question session was that the Government support the cross-border transferability of quotas. That has to be right and I hope that the Government will push it, even though the 11 countries that currently oppose the proposals are specifically opposing that aspect of the Commission's communication.
I am also concerned about the instability, as I intimated in a question. The year 2008 is one of significance in the WTO, but the Commission's communication is clearly saying that the reform—
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whether in 2005 as was originally envisaged, or 2006—is only expected to last until 2008, when there will be a further review of the sugar regime. That will be a recipe for complete stagnation in the industry, where investment by refiners or producers is significant. Large quantities of sugar beet are lifted by contractors using equipment that can cost several hundreds of thousands of pounds and has a limited lifespan, and those people will now wonder whether it is worth renewing it. The knock-on consequences of insecurity are quite serious. I accept that, as the Minister said, the Government do not want that period of instability, but he needs to understand that it will be there if the year 2008 is held over the industry like a sword of Damocles as a further review after this one clicks in.
The Minister touched on the Brazilian production of ethanol but, of course, there is the potential for United Kingdom production of ethanol that could provide the means of absorbing some of our surplus production, albeit at a much lower price for sugar beet than growers have been used to receiving. However, because the surplus is a marginal aspect, that lower price might still be adequate to enable growers to continue to produce. While the Government's reduction in duty on bioethanol at 20p a litre is helpful and a step in the right direction, it has not triggered the ethanol industry in this country and it will not do so unless either that figure is increased or the Government make a commitment through some form of renewables obligation, so that there is security for the investors to know that, if they invest in a plant that produces ethanol, there will be a long-term supply. If oil prices were to drift back down towards $30 a barrel, that 20p would be completely inadequate, so no one will take the risk of making investment in ethanol production. It is a key area, however, that must be considered alongside proposals for reform of the sugar regime.
The objective must be, first, to end the subsidised exports from the European Union, which, as the Minister rightly said, upsets the world market price. I agree with the implication of what was said by the hon. Member for Ludlow that the current world price is not a true price and that it is partly affected because the EU subsidises exports to it. We must reduce the surplus of about 2.8 million tonnes. The second objective must be to protect the access for the developing countries that we are trying to help. However, the access must not be entirely open-ended. Concern has been expressed about what we might call import-export from some LDCs that might pull in sugar into their countries from the world market, so that they can export their production into a higher priced market in Europe.
I also believe that the price cut must be sufficient, so that it puts out those less efficient countries in Europe to which I referred, and that we should cancel their quota. Transferability is important. I am not necessarily a sympathetic man, but I recognise that, for any Minister, such matters will not be an easy circle to square. Resolving the future of the sugar regime will
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not be easy because of the many conflicting interests of the developing world, our producers and the WTO, and trying to draw them together.
However, I am disappointed that the Minister has not been able to give us a better insight into the Government's approach to such matters today. I hope that he will do so more clearly when he winds up the debate. We must know about the principles for quotas and how cuts should be applied. We must know about compensation and whether it should go only to beet growers or to each recipient of single-farm payments. We must also know whether the Government want to see, for example, some countries in Europe go out of production all together and their quotas cancelled before we cut British quotas. Do they perhaps intend to put the interests of British growers and refiners ahead of the those of some in other countries?
So far, the Minister's approach has been to say, ''Well, we don't know the answer to all the questions, because we do not know what the proposals will be.'' I should have liked to have been a fly on the wall in the discussions between the right hon. Gentleman and his Parliamentary Private Secretary, who I know has constituency interests in such matters. Only last night, I was talking to several farmers—not his constituents—who supplied to the factory in his constituency. They are concerned about such matters and I know that the hon. Member for The Wrekin (Peter Bradley) is taking a delegation to see Lord Whitty about it, or perhaps he has already done so. I hope that I will be forgiven for referring to him, but I am sure that he is worried in respect of his constituency interests about what the Government's approach will be.
I suspect that the Minister has been clearer to his PPS than he has been to the Committee. Perhaps when he winds up the debate, he will redress that matter and clarify to the Committee how he envisages the Government dealing with such matters. I hope that he can produce some of the answers that we have asked for about the general issues of the Government's approach to what I recognise is a thorny issue. It has to be grasped, but it must not be resolved in a way that is unduly against the interests of British producers.
4.5 pm
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