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Westminster Hall
Tuesday 12 July 2005
[Mr. Bill Olner in the Chair]
EU Sugar Regime
Motion made, and Question proposed, That the sitting be now adjourned.—[Mr. Heppell.]
9.30 am
Mr. Keith Simpson (Mid-Norfolk) (Con): It is a pleasure, Mr. Olner, to be under your gimlet eye. I am pleased also that the Minister of State will be replying to the debate. For many of us—I say this in the most positive way—discussing United Kingdom farming and the European Union sugar regime has something of "Groundhog Day", but I am pleased that he is here; it shows that his Department takes the debate seriously.
I am grateful for the opportunity to debate the subject. Sugar beet is obviously important to farmers and to the food industry in my constituency of Mid-Norfolk. Several thousand jobs in Norfolk depend directly on farming and food processing. British Sugar has a beet factory at Cantley in my constituency, and many other people, including road hauliers, depend on that business. Sugar is important to my constituents in a wider sense, not only as consumers but as people with concerns about the environment and the developing world, which has been the subject of a nationwide debate over the past few weeks.
The timing of the debate is apposite, given that the UK took over the EU presidency on 1 July. The EU Commission proposals for reform of the EU sugar regime were published on 22 June. The timetable for consideration of those proposals was set by the UK. Consultation will take place during the summer and autumn, with the Council of Agricultural Ministers on 21 and 22 November taking a decision on the EU's position for the World Trade Organisation ministerial meeting in Hong Kong that will take place between 13 and 18 December. I regard today's debate as part of the consultation process.
One of the purposes of the debate is to outline some of the concerns about the EU proposals that have been expressed by UK farmers—particularly those in my constituency—and to press the Minister on what he believes will be the main issues that will determine UK policy. I hope a little later to put some specific questions.
Reform of the UK sugar regime will go far beyond the narrow position of UK farmers. It will have a direct impact on the wider UK food industry, which does not necessarily speak with one voice on the subject. Indeed, I note that in recent oral questions to the Department for Environment, Food and Rural Affairs, some hon. Members have taken a different position on sugar processing and free markets. Reform will not only affect consumers but will have a major impact on sugar producers in the Caribbean; some of them rely on sugar as a staple product, and it is their main earning power for overseas currency. It will also have an impact on access to EU markets by many developing countries. Reform goes beyond narrow UK farming interests.
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Over the past few years, farmers have been pillorised as fat cats by the UK media because of the EU subsidies that they receive, particularly those for sugar beet. That is unfair. Many British farmers would not be able to continue without such subsidies. It is unfair to think of them as selfish fat cats. There may be some like that, but the overwhelming majority of farmers in my constituency do not see themselves like that; they believe that they have been unfairly caricatured. They believe that they are putting something back into the community by caring for the land and the environment. They are also conscious that in the past—this could apply in the future, too—they were concerned about security of food supply in a changing and, at times, threatening world.
Consumers in the UK are ambivalent about farming and food. They want UK farming to be compassionate, environmentally friendly and free of subsidies and additives. At the same time, they want the cheapest possible food. They want food that has not been grown or bred abroad under inhumane or environmentally poor conditions; they want food that has not been transported thousands of miles and they want food that is not frozen rather than fresh. We have to square that circle. I do not knock UK consumers; we might find that attitude in our own families.
However, there is a downside to all the plus positive things that we want for our food. One of those is that the very market forces that we wish to open up will close down some of the most efficient, environmentally conscious, humane farming in the world, here in the UK. While I do not wish to exaggerate the problem, it is a sad fact, as the Minister knows only too well from previous debates, that some of the food that we consume in the United Kingdom—perhaps labelled with a Union jack—does not come from the United Kingdom but was produced under inhumane and environmentally horrendous conditions. We should be conscious of that in this debate.
Paddy Tipping (Sherwood) (Lab): The hon. Gentleman knows the difficulties that remain to be debated. Given what he has just said, is it not important to try to get a political agreement on the sugar regime during the British presidency while we have more opportunity to influence change?
Is it not important to push out the more inefficient producers in Europe—those in places such as Greece and Finland? Thirdly, in any decoupling mechanism, is it not right that the compensation arrangements that must surely follow are the same across Europe, so that there can be no unfair competition?
Mr. Simpson : I was very happy to take that intervention from the hon. Gentleman, who knows the subject well—several years ago, we served together on the Environment, Food and Rural Affairs Committee. In fact, I am beginning to think that there is some sort of spy camera in my office, because he seems to have read parts of my speech that I thought were known only to me—it seems that Labour Whips have become more efficient over the years. He is absolutely right that the presidency represents an opportunity for the United Kingdom. It has to show Uberparteilichkeit—that is my one bit of German for the day—to be above party politics. At the same time, farmers and consumers are
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looking to the UK to take a position. He is right that whatever happens must happen across Europe. Why should some of the most efficient, environmentally conscious farmers be put out of business while others continue? I shall come back to that.
Looking back over debates in the past few years about the common agricultural policy, in particular those on the EU sugar regime, I am struck by the fact that there seems to have been a general consensus that subsidies either need to be phased out or are going to be. Even farmers who do not want to consider that possibility accept the likelihood that they will go, and the majority think that it is inevitable. However, the devil is in the detail, and there are real concerns about how it will be achieved without wrecking UK farming and possibly damaging the agricultural economies of many developing countries.
Moving from a protected, subsidised farming economy to a free trade economy is not necessary. When the hon. Member for Sherwood (Paddy Tipping) and I were members of the Environment, Food and Rural Affairs Committee, we visited New Zealand to see how it had moved from subsidies to a free market. Obviously, there is no direct analogy with the United Kingdom, and New Zealand is not a member of the EU. It took the New Zealanders about 15 years to develop a new farming economy. Many farms went out of business, and there was much hardship on the way. I left with the impression that it had been nip and tuck whether they would produce the free trade farming economy that they now have.
United Kingdom farmers face a similar journey, possibly over a similar time scale. I am concerned that the Government have not yet produced a strategic road map to navigate the UK farming industry from where it is now to where it might be in the next 10 or 15 years. About 36 per cent. of the national sugar beet crop is grown in Norfolk, and it is regarded as the county's cornerstone crop. Getting changes wrong will have a serious detrimental impact on farming in Norfolk and particularly in my constituency.
What are UK sugar beet growers' concerns about the EU proposals? First, the timetable for implementing the price cuts is too short and will cause a shock to the industry. Interestingly, that view was endorsed by Oxfam, which argued for shallower price cuts and a longer implementation period than that proposed by the Commission, precisely because of the damaging impact on some of the world's poorest economies. Are the Government considering proposing to other member states that the timetable be shortened, for the reasons that I have advanced?
Secondly, there is the extent of the price cuts. A 42.6 per cent. cut is too drastic and goes far beyond what is required to achieve a balanced market that ensures production in the EU's most efficient regions—the very point made by the hon. Member for Sherwood. The price cuts threaten production, even in the EU's most efficient regions, which obviously include the United Kingdom.
Mr. John Greenway (Ryedale) (Con): My hon. Friend has come to the point in the new proposals that causes
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the gravest concern. Although they are considerably better than the EU's first draft, does my hon. Friend agree that the objective of taking 5 million tonnes out of production does not require a cut in the proposed reference price of the scale proposed by the European Commission? For all the Government's support for change, is it not important that they embrace that thought?
Mr. Simpson : My hon. Friend has made a good point, which I absolutely support. I look to the Minister to address it in his reply.
Is the Minister aware of the work done by the sugar beet expert Martin Lainsbury of the Arable Group, which is based at Morley, near Wymondham, in Norfolk? Mr. Lainsbury has calculated the financial implications of the proposed price cuts for the average sugar beet grower in Norfolk. He estimates that growers' income would slump by more than £750 per hectare—from a gross £712 to a loss of £40 per hectare. In other words, we are going straight into deficit. If correct, that would have a devastating impact on farmers. At the very least, it would persuade many to get out of sugar beet; in some cases, it would persuade them to get out of farming.
Thirdly, it seems that highly efficient sugar beet producers such as the United Kingdom will be treated exactly the same under the proposals as the most inefficient producers in EU countries such as Greece and Finland, as the hon. Member for Sherwood said. Surely, the logic should be to close the least efficient producers down and compensate them. Why drive out efficiency rather than inefficiency?
Fourthly, there is the merging of the A and B quotas. Implementing a 42.6 per cent. price cut on an amalgamated A and B quota disadvantages small proportional B quota member states because, as the Minister knows, the price of B beet is lower than that of A beet. The UK's status as a relatively small B sugar producer means that our growers are likely to face an additional price cut of 2.3 per cent. over and above the 42.6 per cent. proposed by the Commission. Do the Government intend to oppose cutting prices on an amalgamated A plus B quota?
Fifthly, since the Government began their partial regulatory impact assessment on 30 June, they have concluded that if sugar beet prices fell to €25 a tonne, the majority of UK sugar beet growing would be unprofitable. I understand that the Department for Environment, Food and Rural Affairs does not expect the price to fall that low and states in the assessment that €30 a tonne is more likely. A €5 margin is not that great. Can the Minister explain on what basis DEFRA made that calculation, and what will happen if the calculation is wrong and the price falls to €25 a tonne?
I could continue to ask a whole raft of questions, but I am conscious that other Members wish to speak. The EU Commission has failed to recognise the legitimate rights and interests of growers. There appears to be no explicit provision for growers to have a say in the process of deciding whether to purchase additional quota or to relinquish quota under the restructuring scheme. I do not think that growers have any more right than any other group in the EU; but they certainly have a right per se to be heard, given that at the end of day
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their livelihoods are at stake and they are potentially the cornerstone of UK farming. Does the Minister agree that there should be explicit provision for growers to have their say in the consultation process?
Sugar beet growers would have more confidence if there had been a serious policy decision to consider an alternative crop to sugar beet that might help provide financial stability and be environmentally friendly. I refer, of course, to biofuels. Biodiesel is made from vegetable or animal oil, mixed with a small quantity of methanol. Bioethanol is a simple alcohol that is produced by the fermentation of plant co-products—straw, wheat, potato and sugar beet tops.
Over the past few years there has been a long, exhausting debate about biofuels. I would like to acknowledge my former colleague and good friend Baroness Shephard, who has now transferred to another place and whose presence hovers in this Chamber even as I speak. As a former Minister with responsibility for agriculture, she knew the issues only too well and has led the charge on biofuels. Her successor, my hon. Friend the Member for South-West Norfolk (Mr. Fraser), will continue with that and hopes to catch your eye later, Mr. Olner.
The serious point is that hon. Members have won the argument with the Minister and his Department. However, although it would be churlish not to acknowledge that the Treasury has lowered the duty on biofuels, it is not until we get a zero-rated duty that those interested in investing in them will be prepared to do so. We are in a Catch-22 situation: the Treasury say that if duty were lowered to zero, we would be flooded by biofuels from the continent, yet if we do not do so, we are ultimately still likely to be flooded.
Paddy Tipping : It is very good of the hon. Gentleman to give way again. Let me associate myself with his remarks about the noble Baroness Shephard. He mentioned the Treasury, but what about the Department for Transport and the notion of a biofuels obligation, which is already in legislation? What has happened to that work? Why is the Department for Transport not moving forward on it? A stepped-up obligation would avoid the import of Brazilian ethanol.
Mr. Simpson : Once again, the hon. Gentleman has made a strong point and although I do not necessarily expect the Minister to answer on behalf of another Department, the point should be passed back. Developing biofuels not only would provide a staple crop for many farmers but would be environmentally friendly on the whole and answer the increasing problems caused by the import of fuel. I recognise that there are many difficulties en route, but I would like to think that the Government were considering the issue strategically. Such behaviour would be a form of what used to be called joined-up government—I do not know whether that phrase has now gone out of fashion.
Mr. Greenway : I am very grateful to my hon. Friend; he has evened up the score of interventions with the other side.
With regard to a strategic view from Government, is my hon. Friend aware of the significant research project into the production of bioethanol from sugar at the
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Central Science Laboratory in my constituency? I am assured that that work is virtually complete. We could launch that initiative very soon.
Mr. Simpson : A lot of research has come together. Norfolk MPs recently had a presentation from people from the north-east who are involved in looking at developing the industry. I am ashamed to say that they seemed to be far ahead of those of us in Norfolk. Lots of things are coming together and the Government must surely get on with it as quickly as possible.
My debate has been about UK farming and the EU sugar regime. We tend to debate that at the strategic level and we rarely come down to the individual farmer and his family. I am only too conscious that in my constituency the majority of farmers are not large commercial groupings. It is frequently the farmer and his business partner, who is usually his wife. Most of them manage to farm under the most difficult conditions, not least the blizzard of rules, regulations and computer failures.
I want to close with a short quote from a farmer who wrote to me on 4 July, when he heard that I had initiated this debate. He writes:
"I have now had an opportunity to work through the figures and the impact on my business. I am a small farmer in Norfolk looking after 600 acres. Financially the impact is devastating to the economics of the farm, in fact the only sensible option is to cease beet production altogether. Looking to the future I will have to radically change the way I farm to the complete detriment of the environment I have spent 10 years building up. I currently grow 40 hectares of sugar beet (a spring crop) 50 hectares of linseed (a spring crop) and 30 hectares of spring barley (another spring crop). This spread of winter/spring cropping gives a good balance of environments to all wildlife. I feel particularly proud of my 30 pairs of Grey Partridges and 2 pairs of nesting Barn owls. Without sugar beet the only way I will be able to remain financially viable will be to pursue a Wheat/Oilseed Rape/Beans rotation. This will maximise my gross margin and I hope allow me to remain in business. These are all autumn sown crops and so will offer little in the way of diversity to wildlife. Overwintered stubbles will be a thing of the past, granted I have planned for some skylark plots in my ELS application, but will a dozen 12 square metre plots make up for 60 hectares of stubble or 40 hectares of lifted beet debris, both of which support an enormous diversity of wildlife. I know the impact this will have on the wildlife's environment. I just feel very sad that wildlife is again going to be the main loser in man's pursuit of a fractionally cheaper Mars bar. If this is the implication on my farm, I wonder what impact cutting down vast tracts of rain forest in Brazil to produce sugar cane will be?"
I have not come here as an advocate or to make a special plea for UK farmers. We are beyond that. I believe, however, that UK farmers have a right to look to the Government to see what their policy will be in terms of the EU Commission's proposals. Have the Government thought through the road map to get us from where we are now to where they would like us to be in five or 10 years? If they do not, other colleagues will be debating the disappearance of UK farming in this Chamber in a decade's time.
Mr. Bill Olner (in the Chair): We have just over half an hour of general debate before I call the Front-Bench spokesmen. If hon. Members can keep their remarks rationed, they will all get in.
9.55 am
Dr. Richard Taylor (Wyre Forest) (Ind): One of the enormous privileges of being an independent Member in this place—particularly in Westminster Hall—is that I
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can sit in the middle and if there are not many Members on one side or the other, I get called early. So, I am grateful to you, Mr. Olner. I am also grateful to the hon. Member for Mid-Norfolk (Mr. Simpson) for raising the issue, because I have just had a meeting with some National Farmers Union members in my constituency and this debate allows me to put all my questions directly to the Minister, who I am pleased to see present, rather than writing to him at some length.
Sugar beet in Wyre Forest is not of nearly the same significance as it is in Mid-Norfolk, but there are at least 20 farmers who, on average, produce 1,000 tonnes a year. Because the farms are much smaller than the Norfolk farms and are on tight rotations, at least a third of their land is taken up in that way. So they are very vulnerable to changes in the price. Of course, the price that we are being quoted is unviable for many of them. As the hon. Gentleman has said, the timetable is far too short.
One point that has been raised repeatedly with me is the compensation deal. Apparently, the compensation deal involves the Government and not the growers, whereas in some of the continental countries, compensation is going straight to the growers. It is crucial that compensation goes where it is needed. In my area, there is a larger producer, who has bought the incredibly expensive harvesting equipment, which he then lets out to the rest of the growers in the area.
I know of the Minister's interest in wildlife, and he knows of mine. At least we still have lapwings and skylarks in Wyre Forest. We cannot manage corncrakes or pink-footed geese, but I can still hear skylarks. Not to be able to do so would be a huge loss.
Alternative uses have been referred to, and I can only support the comments on getting bioethanol from beet. It is so obvious that there is another use. Why the dickens can we not pursue that? I am sure that many of the farmers in Norfolk, Scunthorpe and certainly in Wyre Forest are joining the specially chartered flight to Brussels on 18 July to lobby the meeting there. As the hon. Gentleman said, this debate is very much part of the consultation and we want to convey the message that our farmers are desperately worried.
I shall talk briefly about diversification, because that is the way sugar beet farmers are having to look. Producing biodiesel from oilseed rape has been mentioned. It seems ridiculous that we export the rape to Germany to be processed and then reimport it to this country. Is that due to subsidies or because there is no processing capacity? Could we not produce the biodiesel in this country?
On niche marketing, high-quality poultry is produced in my area and sold directly to small butchers and farmers' markets. However, the farmers who do that have come up against a tremendous problem. There are apparently eco-friendly poultry houses. They are low-profile, on skids and mobile, and they have solar panels, but they do not fit in with any of the local planning guidelines. The local planning committees do not know how to pass them. Somehow, planning rules are not keeping pace with the aims of diversification.
Another interesting niche market is asparagus. One of the farmers who is growing asparagus and selling it directly has found that the bashed-up fragments are
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much better than the high-quality stuff, because people buy them for soup. Sometimes he has to bash up his good-quality asparagus just so that he can sell it for soup.
Another problem that was raised with me relates to environmental stewardship. Even getting in at the entry level is difficult because of the problem in obtaining the digital maps. One farmer applied on 17 January and still has not got them. I am sure that all hon. Members have seen them and know the amount of detail that has to be completed. We are talking about every field, every hedgerow, arable scrub and woodland. Every tree that measures more than 30 cm in diameter at chest height has to be entered. So the farmers cannot even start until they get the digital payback.
One bit of good, purely local news that we raised in the Chamber last week concerns neighbourhood policing. There will be trials of that in the area that I represent. As the farms in the area are close to the towns, it will give local farmers a direct phone number to call when the local ne'er-do-wells are invading.
How can the Minister protect the growing of sugar beet in this country? I am sure that, following the trip to Brussels, he realises the strength of feeling. I expect that some of his farmers will be on that trip. It is vital that compensation to growers really gets there. I also want to ask about diversification—converting beet to bioethanol and oilseed rape to biodiesel—and about the planning rules. How can those rules be brought up to date so that they keep pace with diversification? Finally, I would like to know about the digital maps for environmental stewardship.
10.1 am
Mark Pritchard (The Wrekin) (Con): I congratulate my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) on initiating the debate, which is important. I represent The Wrekin, which is in Shropshire and in which is situated the Allscott sugar beet factory. At peak periods, the factory employs 150 people. It is supplied locally by 600 farmers, of which 200 are in my constituency. Therefore, sugar beet, and the sugar industry in general, is important to The Wrekin, and to Shropshire as a whole.
Many of the people employed at the factory have children who go to local schools. When those people get their pay packet, they go off to local retailers and take their families to local leisure operators. Therefore, the future of the Allscott factory is of great importance. I hope that the Minister will be able to confirm that he has held discussions at the most senior level with British Sugar and to reassure me and my constituents that there will be no threat to jobs at Allscott.
I have some concerns on the specifics of the proposed changes to the sugar regime. My hon. Friend the Member for Mid-Norfolk mentioned the reference price. It seems to have slipped. In the White Paper, the reference price was €421. The proposed change now makes it €385, which is a considerable and extremely sharp drop from the existing price of €632. We know now that, for sugar beet specifically, there is a proposed price change to €25. That is unnecessarily severe. It is a huge drop in price. Many farmers have telephoned me to express their concern about the issue.
We have heard about food security. There is a real issue about how it will affect the supply chain. Can we be confident that farmers will not say, "Well, supplying
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sugar beet is just not profitable any more and I can't continue to do it"? If that happens, we may find ourselves importing far more sugar beet, despite the fact that we have been producing a huge amount for our own needs, never mind those of other people.
We heard from the hon. Member for Wyre Forest (Dr. Taylor) about compensation. I agree with him that compensation needs to be equitable and that there needs to be a level playing field throughout Europe. He touched on compensation going directly to beet growers. I also agree with him on that point. The rules on the origin of sugar beet need to be transparent and secure.
My key point is about diversification and bioethanol. It is a real opportunity for the Government to produce a strategy that protects farmers and gives them a new outlet for sugar beet. It would enable the Government to say, "We are actually doing something to try to meet our Kyoto and climate change targets." I was in the Chamber when the Minister who led the debate on climate change and made the winding-up speech kindly agreed to consider the issue of bioethanol. I hope that he will comment on any progress that the Government have made during the past two weeks. It is a real opportunity for Britain to lead the way in Europe. It is said that others, such as Germany, are leading. Well, we can catch up.
Why is it that in Brazil 23 per cent. of cars use some form of biofuel? Why is Brazil leading the way? It is a fine country, but we should be leading the way. We have the technology, the innovation and the capability to establish a leading biofuels industry. Of course, it must be led by the Government, and they need to provide tax breaks and some sort of preferential loan, so that the capital investment can be made by those who wish to be involved in the industry. I hope that the Minister will comment on whether he discussed that issue with oil companies and with the Petrol Retailers Association, because the fuel companies appear to be dragging their feet. They appear to be reluctant to get involved, while everybody else wants to.
I have a couple of facts to impart before I close my speech. I note that bioethanol can be produced from UK-grown sugar beet and wheat. Bioethanol produces at least 50 per cent. of the carbon emissions produced by petrol. Surely, that is attractive. Use of bioethanol by 5 per cent. of cars in the UK would provide the equivalent carbon saving of taking 1 million cars off the road. Surely, that is attractive. I hope that the Minister will be able to inform us of the progress that the Government are making.
Allscott is a vital part of the community in The Wrekin. In 2007, Allscott will celebrate its 80th birthday, and I hope that it will be a happy birthday, not an unhappy birthday. There is an issue about the 350 lorries from the plant that travel through my constituency at peak time, and I held discussions with the plant manager on Friday. The company is aware of the issue, and it is addressing some of the local residents' concerns that I raised. However, we welcome Allscott, the jobs that it provides and the spend that it provides in the local community. It is an integral part of Shropshire life.
This is not a matter of either/or; the changes do not mean in extremis the potential demise of the sugar beet industry, its growers and its producers. Let us turn the
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matter around and consider it as an opportunity. The change is dramatic, and British Sugar will inevitably make cuts somewhere in the United Kingdom. However, let us be proactive rather than reactive, and let us use this change as an opportunity to diversify into biofuels. Let us do it early and do it now, so that in the transitional period between now and 2008, when there is sadly no review, and up to 2015, there are no casualties among farmers, and in particular, farmers in Shropshire.
10.10 am
Mr. Christopher Fraser (South-West Norfolk) (Con): First, I congratulate my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) on securing this debate on a subject on which my predecessor, the right hon. Baroness Shephard, also secured several debates.
The recently announced European Union proposals on reform of the sugar regime will, as my hon. Friend said, have a significant impact on Norfolk and particularly on my constituency. I endorse his comment that the proposed cut in sugar prices will seriously undermine the profitability of many sugar beet growers. The Government's partial impact assessment on the proposals states that, at €25 for a tonne of sugar beet, most United Kingdom sugar beet growers will be unprofitable.
I shall repeat the questions that my hon. Friend asked the Minister. How certain are the Government that the sugar beet price will not fall to €25 a tonne? From the Government's conversation with British Sugar, how likely do they think it is that British Sugar will pay higher prices to maintain consistency of supply? How many sugar beet growers do the Government believe will remain in the UK after the implementation of the reforms? The EU proposes to compensate growers for 60 per cent. of the price reduction in a single farm payment. It is hoped that that will cushion the impact, but the Minister needs to answer several questions before we know the full implications of those payments. Will the Government guarantee that the sugar beet compensation payment is paid solely to sugar beet growers and not to other farmers, or do the Government intend to dilute the compensation by putting it into the general funds for the single farm payment? How many UK sugar beet growers will remain if the compensation payment is diluted? Does the Minister agree that a fully decoupled payment paid directly to beet growers should be implemented throughout the EU? Will the UK Government prevent other countries from obtaining a competitive advantage by retaining an element of coupled payments?
In addition to the large number of beet growers in my constituency, there is also the Wissington processing plant, which is one of six such plants operated by British Sugar. That plant, and others at Bury St. Edmunds and elsewhere, process nearly half the UK's beet crop. Out of the six plants, the Wissington plant is the biggest employer. It directly employs 240 people, but is considered to support another 2,300 jobs indirectly. The EU proposals, however, might threaten the future of that plant and the livelihoods of many people in my constituency.
British Sugar is the most efficient processor in Europe. It has the lowest processing costs, and might seek to use the restructuring funds offered to reorganise itself.
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Given lower beet supplies and smaller margins, it might seem uneconomic to have six factories. Indeed, without restructuring funds, British Sugar might witness a £90 million fall in annual income. The Government's own assessment states that British Sugar might want to close one or two of its factories. There might be opportunities in the future for processing raw sugar cane, but the likely location for those processing factories will be alongside ports and waterways and that might benefit the British Sugar plants elsewhere in the country. That puts into question sites such as Wissington.
What support will the Government provide to people who lose their jobs in the processing industry as a result of these reforms? As has already been mentioned, the future of many beet growers will be determined by whether we can stimulate a domestic bioethanol industry in this country. The new EU payments for energy crops are an important aspect of that. Payments of up to €45 a hectare would certainly help many of the sugar beet growers in my constituency. That payment, however, is limited throughout Europe to 1.5 million hectares, after which aid is reduced. Will the Minister clarify how much of that payment UK sugar beet farmers are likely to be entitled to? Will countries such as Germany and France take the lion's share? The Government have reduced the duty on bioethanol, but much more is required to stimulate demand.
The renewable transport fuels obligation will provide an enormous boost to demand for biofuels and bioethanol. There are, however, questions that need to be answered about that. When do the Government expect to make a decision on the renewable transport fuels obligation? Could the Government clarify the pilot project that is due to be introduced in 2006 on duty incentives for encouraging the use of biomass in conventional fuel? What progress have the Government made on deciding whether to use an enhanced capital allowance scheme to encourage biofuel processing plants?
It is clear that new markets for sugar need to be found. The Government should do all that they can to achieve that. Jobs are at stake, but so too are aspects of the local and wider environment, which the Government appear not yet to have considered.
10.15 am
Mr. John Greenway (Ryedale) (Con): I congratulate my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) on securing the debate. I confess that I did not expect an opportunity to speak this morning. If the Minister will forgive me, I must chair another meeting, which starts at about five to 11, and I may therefore have to leave just before he concludes his remarks. However, I regard the issue as so important that I am grateful for the opportunity to say a few words on it, and to support my hon. Friend the Member for Mid-Norfolk (Mr. Simpson). I am disappointed that more Labour Members are not here to debate an extremely important issue for UK agriculture and the Government's whole agriculture policy.
I recognise that the Commission's proposal in the latest draft policy is a significant improvement. I pay tribute to all those who lobbied vociferously against the
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original proposal, which would have applied quota cuts across the whole of EU production, when no quota cuts could possibly be justified in the United Kingdom.
It is worth bearing in mind that we have a balanced market in the UK. Roughly 50 per cent. of our sugar needs are met from our domestic sugar beet growing and producing industry, and the other half are met from cane sugar imports that honour obligations that go back generations. It is vital that, as the Government consider what to do about the EU proposals, we should bear in mind not just our farmers' interests but those of the cane sugar producing countries that will equally lose if the price of sugar collapses and the market is made up by imported sugar largely from Brazil.
We should also keep in mind the fact that there is a difference, as we have been discussing in recent days in the light of the G8 summit, between free trade and fair trade. We should keep in mind what happened in connection with coffee growers. A free trade regime was introduced about a decade ago and many third world producers' economies were decimated. I do not believe that anyone in the Government or the Commission wants that to happen with sugar.
We should equally recognise that there is a problem. The European Union agriculture industry produces 5 million tonnes of sugar a year more than we need. That is exported, with the benefit of export subsidies, and many of the exports take the form of manufactured products such as confectionery and biscuits. That is unsustainable and must change. The Commission, supported largely by representations that have been made by the industry, has devised a scheme, which it considers provides a realistic prospect of taking out the 5 million tonnes of excess production. Under the restructuring scheme, whole sugar-processing factories will be closed and growers will be compensated proportionately and appropriately.
It will be difficult, however, to ensure that the efficient industry in the UK and in other member states is maintained while inefficient production is lost. The proposed reference price of €25, which has been one of the key points of this debate, will not keep efficient UK farmers in production. I endorse entirely what has been said by my colleagues. Sugar beet growers in Ryedale, of whom there are many, say that it is simply uneconomical to grow sugar beet at a price of €25 per tonne—absolutely insane. They recognise that there must be a cut, but the price needs to be higher than that.
I hope that the Minister will take from this morning's debate the views of our growers. This debate is important because, while we recognise that the proposals are better than what we had before, they are by no means a perfect solution. Work on the reference price is absolutely vital.
I endorse what my hon. Friend the Member for Mid-Norfolk said and, from a sedentary position, I supported the views in the letter that he read out. Many similar things have been said to me by sugar beet growers in my constituency. The crop has not only provided financial stability for two or three decades during this long period of instability in UK agriculture, particularly for growers, but benefited wildlife considerably. The way that we farm our landscape ought to reflect the need for biodiversity as well as the drive for more efficiency, lower prices and greater fairness in world trade.
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I have time to endorse another couple of points and to raise an issue that has not yet been mentioned. Last week on the Floor of the House, the Foreign Secretary made a statement about the outcome of the EU Council of Ministers and the obvious rows about the future of the common agricultural policy. I said that there must be mandatory decoupling of the restructuring scheme and the compensation arrangements across the whole EU. We must not have the problem that arose with the last round of CAP reform when, in particular, the French took the compensation and paid it to their farmers because of the lower price but then allowed them to continue producing at a lower price.
If the aim of the proposals is to decrease production by 5 million tonnes, the surplus must be taken out where it is being generated, and that is mainly in France. As I said to the Foreign Secretary, I do not in any way underestimate the political difficulties in doing that, given the current climate. Naturally, the French Government will take a view that is completely contrary to the one that has been expressed this morning. They will speak up for their farmers in the same way that we speak up for ours. They do not want processing plants to close down or growers to be put out of business any more than we do. However, I come back to the fact that, by and large, that is where the surplus is being generated and that is where the problem must be addressed. Therefore, there must be mandatory decoupling of the compensation.
Another issue that has been alluded to is the need to change the reference years proposed by the EU. Because of some of the past restructuring in this country, they would disadvantage our farmers.
My hon. Friend the Member for Mid-Norfolk referred to the proposal to merge the A and B quota—I shall not reiterate the point. That proposal would be very disadvantageous to our farmers, but no one has mentioned an associated issue, which is a thing called the C quota. It is proposed that none of the sugar produced under the C quota should be allowed to be exported, which prompts the question: what on earth are we going to do with it? I hope that the Government accept at least that C quota sugar exports should be allowed up to the European Union's World Trade Organisation volume ceiling, which is, I believe, just over 1.27 million tonnes. Without that, the market will destabilise further. As we saw last year when there was a drought, the amount of sugar produced can drop below that of average years. Who knows what will happen this year? The size and sugar content of the crop varies from year to year, and the system must be flexible enough to deal with that.
I hope that all these points will be taken on board by the Minister and the Government as they embark on the negotiations, which will surely be complex, detailed and difficult. I hope that our comments today will help the Minister and his colleagues in those negotiations.
Mr. Bill Olner (in the Chair): Order. If the two Front-Bench spokesmen are happy to give up a couple of minutes, I shall allow Mr. Moss to speak.
10.26 am
Mr. Malcolm Moss (North-East Cambridgeshire) (Con): Thank you, Mr. Olner. I shall be brief. First I congratulate my hon. Friend the Member for
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Mid-Norfolk (Mr. Simpson) on securing the debate on this issue, which is extremely important not just for his constituency, but for the majority of the farming community in East Anglia. I represent the fens of Cambridgeshire. The whole of the fens region, stretching from the Minister's constituency in north Lincolnshire down to Cambridge, is the primary beet-growing area of the country. Anything that jeopardises the successful growing of sugar beet in that region strikes at the economic hearts of farmers there.
Our farmers want to ensure that the Minister and the Government will negotiate as vigorously as possible on their behalf, and to ensure that our interests and growers' interests are paramount in their thinking. I understand that the issue must be seen in the context of the Government's overall position on CAP reform, but it makes no sense for my constituents seriously to affect the economic viability of beet growing in our region if by decimating that local growing, we encourage the decimation of rain forests in places such as Brazil to grow cane sugar. Of course, that would not even benefit local growers there, because it would be funded by foreign money—probably American bank money—and would lead to other severe problems.
I have received many letters from my growers, many of whom are in despair. Mr. Bill Burton of White Fen farm in Benwick wrote to me saying that having perused the proposals for sugar reform, he believes that British growers will get the worst possible deal all round, and that it could well signal the death-knell of our sugar beet industry. The Government must give some sort of encouragement to our farmers that they will be even-handed in their negotiations.
I have a letter from Lord Whitty that was written before the recent negotiation position—when he was the Minister for Food, Farming and Sustainable Energy—in which he replies pretty positively to questions about discrimination against UK growers. I hope that the Minister will endorse that view in his response. In the letter, Lord Whitty says:
"We will certainly be looking for reforms which result in fair terms of competition for all concerned and give UK growers the opportunity to benefit from their relative efficiency . . . But we will seek to ensure that any necessary reductions"—
The letter goes on to say that DEFRA commissioned independent economic research that suggested that some 20,000 people are employed throughout the industry. I dispute that figure. It is not clear whether those people are directly employed in the production of beet, or whether the figure includes everyone who works on a farm that grows the crop.
The research also found that the impact of lower prices would be offset by the ability of many growers to switch to other crops and to increase productivity in a more genuinely competitive market. I do not know where that research came from—it would be interesting to have it published—but farmers in my constituency would oppose that switch very strongly. Arable farmers are under incredible pressure, and have been for the past few years, from changes to the CAP, the price that they receive for their wheat and the strong pound. I could go on.
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Sugar beet is a fundamental cash crop for many arable farmers. If it is removed from the equation, arable farming as a whole will be under severe pressure. The Minister must tell us and farmers what future they have if that fundamental cash crop is taken from them. There is every sign in the present negotiated position that our farmers will be the ones who will carry the can. They believe that that is unfair.
It has been suggested that the French, who produce 150 per cent. of their sugar needs, should be the ones under closer scrutiny, but our farmers, who produce only 50 per cent. of our sugar needs, are the ones who seem to be carrying the can. It will therefore be interesting to see how the Minister answers the many questions that we put to him today. I hope that he will give some reassurance to the growers in my constituency.
10.32 am
Mr. Roger Williams (Brecon and Radnorshire) (LD): Before I begin, I remind hon. Members of my agricultural entry in the Register of Members' Interests, although there will have been substantial changes in the climate and economy when we start growing sugar beet in the area that I represent.
I place on record my admiration for the remarks made by the hon. Member for Mid-Norfolk (Mr. Simpson) and his resolute defence of the sugar beet industry in his area. Whatever the faults of the sugar regime, it should be said that the farmers who have operated under it and the processors who have processed the beet have done so most efficiently, and that the industry has become one of the most efficient sugar beet industries in Europe.
The hon. Gentleman mentioned food security, a subject that is close to my heart but one that has been unfashionable for several years. Food security is the reason why sugar beet was first established in this country. People are impatient for sugar. Indeed, they become very irritable if they do not have their sugar. It was important for this country to produce at least a certain amount of sugar, although we are still a net importer of it, unlike France and other countries in the European Union.
Food security will be of concern when political instability and climate change do not allow us to predict how much food this planet will produce in the next 10 or 20 years. Any Government will take great care to ensure that at least a certain amount of the food that this nation needs is produced here in this country by the farmers who have shown in the past that they can produce it and who will, I am sure, show that they can do so in the future.
In the past few frenetic weeks, it has seemed that one could propose any reform, renegotiation or even abolition of the agricultural policy and that it was bound to be a good thing. It would help the environment, the consumer, the third world and almost any other organisation that cared to be interested in it. Yet as soon as there is fundamental change to a particular regime, such as the sugar regime, it quickly becomes apparent that certain aspects of our life will suffer, whether it is the farmers who grow the sugar beet or the processors who process it.
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Indeed, they are part of an interdependent economic unit, because without the sugar beet growers, there will be no factories, which would obviously lead to unemployment. Other interests will suffer, too, and that is certainly true of the environment. As several hon. Members have said, sugar beet is an important spring-summer crop, which contributes to the over-wintering of several important bird species.
The changes will also affect those African, Caribbean and Pacific countries that entered into the sugar obligation a long time ago. They knew that they had a ready market for their sugar in the UK and the EU and that the price was profitable. The reduction of that price puts their standard of living and their prospects of developing their industry under threat.
This is a convoluted problem. CAP reform is a complex issue, as we can see from the sugar regime, and the Minister would do well to follow through some of the consequences. The National Trust noted only last week that the profitability of its tenanted farms in the national parks was under great threat, so we could lose landscapes and biodiversity, too. The Minister must follow through the consequences of the proposed action.
I, too, am concerned that we should keep a viable sugar beet industry in this country. We have been told that a 30 per cent. price reduction could be just about bearable for British beet growers, but that depends very much on the monetary and exchange rate circumstances, and small changes in them could make sugar beet completely unviable in this country.
We need more time to ensure not only that sugar beet growers and processors in this country can adjust to the proposals, but that third-world countries—particularly those involved in the sugar protocol—can adjust to them. I therefore have a two-pronged request for the Minister; let us make sure not only that everyone agrees to the changes in the sugar regime, but that the people whose interests are bound up with those changes are taken into consideration.
10.38 am
Mr. Owen Paterson (North Shropshire) (Con): I begin by heartily congratulating my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) on landing the debate. It raises a matter of enormous importance not only for East Anglia, but for the whole of British agriculture. It is also very timely, because the long negotiation process will begin next week at the Council of Agriculture Ministers. This is a critical time.
I entirely agree with my hon. Friend the Member for Ryedale (Mr. Greenway) that the price is too low; that is the most fundamental problem that we face. The issue goes back some time. My hon. Friend the Member for Mid-Norfolk is a military historian and will know that the naval blockade that resulted from our success at the battle of Trafalgar, which we celebrated last week, led Napoleon to heavily subsidise sugar beet in France.
Our message to the Government is that the UK is the good guy in this. We produce only 55 per cent. of what we consume and take the rest from the less developed countries, so we are not the problem. It is the EU that has an obvious problem because, as my hon. Friend the Member for Ryedale said, the present arrangements are unsustainable. Under the Uruguay round, the WTO
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allowed Europe to export 1 million tonnes of sugar, but it has been exporting 5 million tonnes. It is not us who have been producing that surplus; it is the French, and it is they who should take the pain. As my constituent Mr. Frank, from Morton, near Oswestry, said,
"we only grow 55 per cent. of our needs of sugar, whereas countries such as France grow well over their sugar requirements—thus swamping the world market . . . Surely if there are cuts to be made, they should come from countries that are over producing."
If we are not to reduce quotas and are to depend entirely on the price mechanism, we must have a level playing field, something that my hon. Friend the Member for Mid-Norfolk mentioned.
With respect to France, what assurances can the Minister give us that in his negotiations he will consider the lack of a level playing field? Already, French farmers have significant benefits. There are soft loans; French farmers' co-operatives do not pay corporation tax; there are significant grants. Above all, they have not decoupled. It is nonsense to go through the reform if France has not decoupled and if we treat sugar as purely a food product in an open market.
I should be grateful if the Minister dealt with that point. In recent years sugar has been the only profitable crop for arable farmers. They have not made money on grain, but they have on beet. How many farmers does the Minister think will be able to make a profit at £17 a tonne, when many of my constituents tell me that £18 is the absolute minimum break-even price?
I am concerned about details of the proposal, which is better than what was presented to us originally. I agree with my hon. Friends that the price change is too drastic, and too quick. That view is even endorsed by British Sugar, which buys the material. It says that £25 for beet is unnecessarily severe to meet the EU's objectives and would risk damaging even the most efficient industries in Europe, of which we are one, of course.
One of the details that I do not understand is a production levy, which was originally charged to help exports in the event of excess. As I understand the proposal, we shall not be exporting excess. Why is there still a production levy? There is a flexibility clause allowing for a further 10 per cent. reduction in the minimum beet price. Why is that still in the proposal? Why does the Commission not give real recognition to the legitimate interests of growers? Why are they not involved in the restructuring scheme?
Mr. Henry Bellingham (North-West Norfolk) (Con): I am grateful to my hon. Friend for giving way; he is making an extremely strong case. Is he aware that in Norfolk, Cambridgeshire and Lincolnshire many of the growers are running not large farms but small farms? Many are county council smallholders in my constituency and in that of my hon. Friend the Member for North-East Cambridgeshire (Mr. Moss). They would go out of business if the proposals were to go through in the shape that we fear they might take if the Government do not listen.
Mr. Paterson : I endorse that comment, coming as I do from Shropshire, where there are also many small growers.
The point that I am making is that although the process that we are considering is inevitable—it is inevitable that the world sugar price will be approached
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by EU growers, and the export of the excesses is not sustainable—the move that is proposed is one huge hit. This one sudden move will cause enormous damage across British farming.
The matter of the A and B quota was mentioned. Again, I want to know why we will be hit by that. What will the Minister do in negotiations to ensure that we are not discriminated against on the price change and the jiggling with the quotas? I endorse the comment of my hon. Friend the Member for Ryedale; what will happen to the C quota production now? Where will it go?
I want quickly to discuss the fact that there are other things that one can do with sugar. What discussions has the Minister had with the monopoly processor? It is set to benefit from many of the restructuring arrangements. What is to stop it closing down production here and importing molasses or half-processed material from other countries? We know that British Sugar has invested quite heavily in Poland and is already producing 200,000 tonnes of sugar there.
Will the Minister comment on the EU animal feed regulations? Until recently, sugar beet pulp has been a profitable product. It has now become a cost to the processors and has to be cross-subsidised by sugar production. A further consequence of new regulations is that beet washings have become excessively costly to remove. What discussions has the Minister had with the Commission about that? It is another extra cost that makes processing in this country less interesting.
As to the position of the processors, I am as concerned as my hon. Friend the Member for The Wrekin (Mark Pritchard) about the future of Allscott, which is now the only plant on the western side of the country. If Allscott is not to have a role in the production of sugar and given the Government's history with Milk Marque, which was smashed up although it had only 38 per cent. of the market, in comparison to British Sugar's 100 per cent., what will the view of the Government be should farmers' co-operatives be set up with a view to taking over processing plant and possibly getting into biofuel?
It is extraordinary that the Government have not grasped the chance to get into biofuel; they would have all-party support if they did so. We do not have to eat sugar; we can do other useful things with it. The former Energy Minister Brian Wilson pointed out in an interesting recent article that Tesco is bringing in biofuel, but is transporting it in carbon-fuelled vehicles. Would it not be more sensible to produce it here, in plants that are currently producing a food product?
I am pleased to say that my hon. Friend the Member for South-East Cambridgeshire (Mr. Paice), who is at the great Yorkshire show today, is to press the Government again for the introduction of a road transport fuel obligation. Sugar beet is part of a broader picture. I do not understand why the Government are holding back on doing something that would have very wide support, instead of pouring money into wind farms. The average 2.2 MW turbine gets about £438,000 subsidy a year, a dramatic subsidy for a system that is only 30 per cent. or so efficient. It has been done in Sweden. I am told that in Stockholm, biofuel cars are not subject to congestion charge and attract reduced vehicle excise duty and fuel duty. Such a measure would have overwhelming support, and would be a legitimate use of the beet product.
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If I may touch on the technology that dare not speak its name, have the Government considered the merits of planting GM beet as a fuel crop, strictly for non-human consumption? What would be the savings on inputs? Figures given in Farmers Weekly a couple of weeks ago showed that major savings could be made. If it were used strictly for fuel rather than for human consumption, would there be merit in it? Have the Government a view? Have they discussed the issue with the Commission?
Moving on to the environment and picking up the East Anglian connection, I think that "Turnip" Townshend, who established that a break crop is needed, came from that area. There are real benefits for the environment. The Royal Society for the Protection of Birds points out that half the world's population of pink-footed geese winter in north-west Norfolk and on the broads, and they depend on grazing the tops of sugar beet after harvest for winter food. It also mentions lapwings, skylarks and other birds.
Mr. Bill Olner (in the Chair): Order. The hon. Gentleman must give the Minister a chance to respond.
Mr. Paterson : I shall be brief. There is a clear environmental benefit in growing sugar beet. There is also a distant environmental benefit in that we would not damage rain forests such as the Cerrado, as mentioned by the RSPB.
In brief, we have a good story to tell. We do not contribute to the surplus, we have a crop that provides employment—as we heard from Allscott—and a food, which is required but which could be used in other ways. What the Minister is proposing to the Commission is too drastic and too quick. We all know where we want to get to, but he should consider the amenity benefit—people go to Norfolk to look at the birds—and the general environmental benefit. All that would be thrown away if reform were too hurried and too drastic.
10.48 am
The Minister for Climate Change and the Environment (Mr. Elliot Morley) : I will do my best to respond to what has been a wide-ranging and very knowledgeable debate. The hon. Member for Mid-Norfolk (Mr. Simpson) has a great interest in the issue, and put his case very well and comprehensively. As many hon. Members have mentioned, the matter is complex and as it has arisen under the UK presidency, we want to address it and to make progress. The debate is timely because many of the issues have not yet been resolved, even within the framework of the Commission proposals, which I, like the hon. Member for Ryedale (Mr. Greenway), welcome. They are a considerable improvement on previous ones.
To pick up on what the hon. Member for Mid-Norfolk said, it is important for our growers that the Commission has moved away from compulsory quota cuts—that would disadvantage a country such as this, which is not producing a surplus of beet sugar—and towards voluntary exits, with compensation. The more efficient growers will have the greater opportunities. That is exactly what we want from the changes. Our
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sector is efficient, so if the regime is based on efficiency, our sector should benefit from it. That should be one of the central tenets of the reorganisation.
I agree with my hon. Friend the Member for Sherwood (Paddy Tipping), who apologised that he could not stay to the end, that there needs to be an equal approach across Europe and that there should be decoupling, as other hon. Members said. That is a sensible suggestion and the Government are sympathetic to it. The hon. Member for Mid-Norfolk said, quite fairly, that there were differences of view on the sugar regime. Although it has been beneficial to many farmers, including those in my constituency in north Lincolnshire, there has been a downside to the sugar regime, particularly on the processing side. We have heard the views of other hon. Members who represent processing areas, especially where confectionery is involved, about the impact that a world price of sugar three times the average has on processing in this country.
It is important to remember that the existing regime is estimated to cost EU consumers and taxpayers nearly £5 billion a year, less than half of which is transferred as benefits to beet growers and processors, which is one of the problems with the common agricultural policy. The result is a welfare loss to the EU economy of about £3 billion a year. In the UK, the net annual economic cost is estimated to be more than £500 million. Therefore, although I do not dispute that there are potential impacts on the sugar beet sector, as is outlined in the regulatory impact assessment by the Cambridge university study that DEFRA commissioned, there is a balance to be struck. We must try to seek that balance, taking into account the impacts on the sugar beet industry and the growers, as well as on the wider economy and our aspirations.
The hon. Member for Mid-Norfolk mentioned moving to a free market, which, as I said, will benefit our growers. He also mentioned biofuels, as did my hon. Friend the Member for Sherwood and the hon. Members for Wyre Forest (Dr. Taylor), for The Wrekin (Mark Pritchard), for South-West Norfolk (Mr. Fraser), for Ryedale (Mr. Greenway), for North-East Cambridgeshire (Mr. Moss), for Brecon and Radnorshire (Mr. Williams) and for North Shropshire (Mr. Paterson); a wide spread, which demonstrates the interest in the issue.
I am enthusiastic about biofuels. As the hon. Member for Mid-Norfolk knows, we are in a climate change review, which is considering the various methods, policy options and economic tools that we can apply in this country to achieve our target, which is a 20 per cent. reduction of CO 2 by 2010. Biofuels feature in that review. Also, the Department for Transport is conducting a detailed review on the workings of a biofuel obligation. That report will be published in the not-too-distant future, and will guide and inform the overall climate change review, which will be published in November. We take the issue seriously and are considering the options.
Even with the reforms suggested, however, the price of sugar will still be twice the world average. That is probably not helpful to our sugar beet growers serving the biofuel industry, because they will be competing with ethanol, which will be entering the country at lower prices. It is important that we should have an
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infrastructure of processing and sales that will help our growers to enter that market, which I believe can be done. However, the risk of large-scale imports into this country remains, which is why I would say that, in answer to the questions about the study and the biofuels obligation, we must consider the implications. We would not want the obligation to be pitched at a level that would shut out our domestic market and allow imports to dominate. Things will be difficult enough as it is, but we want our producers to have a share of that market. That is part of the studies that are being conducted.
The hon. Member for Wyre Forest asked about the wider issue of CAP changes. He asked about planning, and we are certainly trying to address that in terms of diversification. He also mentioned problems with digital maps. We accept that there are problems and we are trying to resolve them as quickly as possible, as it is important for those applying for the new entry-level schemes.
The hon. Member for The Wrekin asked whether we were talking to British Sugar. I assure the hon. Gentleman that we have contact with the company at the highest level. He will understand that it is not for me to say what will happen; the provision of factories and jobs are matters for British Sugar. Factory closures are not a new phenomenon in the sugar sector. Rationalisation has been going on for many years; for instance, it resulted in the loss of the factory at Brigg in my constituency. Those are commercial decisions for the company.
Mark Pritchard : I wonder whether the Minister feels that the proposals are more or less likely to lead to casualties and factory closures. If he thinks it more likely, will the sword be likely to come down on the east coast or the west coast?
Mr. Morley : As I said, that is a matter for the company, not the Government. They are commercial decisions.
The impact of reform on prices, too, is largely hypothetical. I return to the fact that reform that is open and transparent, and based on the efficiency of growers, should be in the UK's interests. That is what we want to pursue. Representations on the time scale are a matter
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for consideration, but the WTO has made a ruling on the sugar regime and we are under some obligation to deal with it. We want to deal with it in a way that is sustainable rather than impose a fix that might last only two or three years. If we did the latter, we would have to do it all over again; that would not be good for the industry either. It is far better that we address the issue properly.
Many hon. Members asked about compensation. It was rightly said that growers will be compensated by 60 per cent. of income. I might have misheard the hon. Member for North Shropshire, but I can tell him that the production levy will go. In some cases that can be 40 per cent. of the cost; it is a high proportion, and it will make a big difference. The proposal is that compensation will go into the single farm payments. It has not yet been decided how it will be structured, so we have the opportunity to take account of various factors. We will of course be listening to the industry and taking account of its views.
Several hon. Members, including the hon. Members for Ryedale and for North-East Cambridgeshire, spoke about Brazil. It is often said, wrongly, that the regime will not change the arrangements on tariff access for sugar from Brazil. I emphasise that the changes in the regime will not necessarily bring any more imports from Brazil, nor will they have further detrimental effects on what Brazil is doing in relation to its rain forests. The tariffs will not change.
An action plan will be put in place to assist ACP countries with the transition. However, even with the reforms, sugar will still be twice the world average price. For some countries—for instance, Swaziland has featured recently—sugar is still a big earner. There will still be opportunities for such countries. Indeed, the reforms will allow increased access for those who can take up the utilisation of other ACP countries that will be withdrawing from the scheme; that will give further opportunities.
Time does not allow me to answer all the points that were raised this morning, but I hope that I have dealt with the key issues. It is a timely debate. Much discussion and negotiation about the exact shape of the reform will take place under the EU presidency, and the knowledgeable and perfectly reasonable points that have been made will be taken into account in those negotiations.
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