Examination of Witness (Questions 180-199)
MR TIM
BENNETT, MR
MIKE BLACKER
AND MS
HELEN KIRKMAN
24 OCTOBER 2005
Q180 Chairman: Can I just follow
on from Lynne's line of question because in paragraph 5.11 of
your evidence you talk about—and I quote—"Will
the government acquire this tonnage . . ." that is the 82,847
extra tonnes of sugar quota ". . . on behalf of the industry,
without seeking to recover any of the cost of acquisition from
the processor or grower? If not, on what basis will a contribution
be sought from the process and/or grower?"[13]
Would you like to develop that because it is great the thought
of getting some more quota but if the Government is the custodian,
the farmer is the producer and British Sugar in this case is the
processor, how is the trick to be pulled to acquire it? What happens
if the Government says we have not got any pennies in the Government
coffers to buy it, what is the solution?
Mr Blacker: I guess this is, in
my mind, an example of the problem to some degree that we have,
the fact that the Commission have chosen for their own reasons
not to specifically rule on this in my opinion. I think we know
what will happen at the end of the day but clearly there is nothing
in this that says who does these things. Therefore we are in a
bit of a dilemma, we know that we have this available to us, we
know that British Sugar are very keen to have it as part of our
portfolio, if you like, of an extra 83,000 tonnes and we believe
that at some point somebody is going to have to buy it, and that
may well have to be British Sugar.
Q181 Chairman: Can I just be clear,
when we talk about the extra, this is not an increase in terms
of the whole of Europe's production of sugar from beet, it is
a reallocation of what they think will be the market effect in
the less efficient areas freeing up a total for which some growers
who are coming out will get compensated and those fishing in the
pool remaining will get some of the benefit. If I have understood
it correctly, it is the current regime participators who pay for
the people who are leaving, is that right?
Mr Blacker: That is around it,
yes, it is the current people who pay for it so there is a difference
in the middle between the price to the consumer and the price
that the growers and the processor gets.
Q182 Chairman: Who puts into the
compensation pot, where does that money come from?
Mr Blacker: Eventually that
would come from the consumer. The consumer would still pay the
same price for a period of years but the grower, the primary producer,
would get his price dropped dramatically over a period of two
years, then the processor would get a reduced price as well and
then the piece of money in the middle would be going into the
pot for the restructuring.
Q183 Chairman: There is a compensated
restructuring pot. Why is there a need to buy back, in other words
a second payment? Why does a second payment have to be made, we
have already paid for the compensation once.
Mr Blacker: That is not quite
the same. That is part of paying some money into the pot because
in fact the 83,000 or the one million tonnes has to be bought
out of the pot at the same price that the fund is going to be
refunding the growers to go out or the processor to go out. It
is money that goes into the pot to help refund that as well, so
part of that is doing the same as the consumer money.
Q184 Chairman: What happens if the
Government says to British Sugar "You boys are going to be
the direct beneficiaries of 82,000 tonnes a year more of beet
to process, you boys pay for it"? Is that feasible? They
are on next.
Mr Blacker: They are on next so
you can hear what they have to say, I am sure you will be able
to ask them the question directly.
Q185 Chairman: Do you think they
ought to pay because no farmer ever wants to pay anything.
Mr Blacker: I think the things
we put in the document were asking the question because it is
a grey area, we do not know the answer to it.
Q186 Chairman: I think I know the
answer but who do you think ought to pay?
Mr Bennett: Chairman, with respect,
if it was a really good liberalised economy this should be effectively
a market place movement and the people who want to grow the sugar
should take on purchasing. In a sense this is an artificial mechanism
at this stage of the reform. Finally what we want to do is make
sure there is a sugar industry at the end of this in the UK which
wants to produce this tonnage, that is the most important thing
of all but you are right there has to be a discussion about who
effectively dips in their pocket for this extra tonnage. The most
important thing for us is that we wish to use it because we have
got an industry that we would want to go on between the processor
and ourselves to use this tonnage; that is the most important
thing of all.
Chairman: I can see British Sugar reaching
for the company chequebook already. Roger Williams will carry
on with the questioning.
Q187 Mr Williams: You set out in
your written evidence how, because of historic reasons, Britain
has been dependent on cane sugar and we have ended up with less
beet quota than some other European countries, but you also went
on to say that because of that the price reduction will be discriminatory
against the UK. Could you explain that to us?
Mr Blacker: It is quite a complicated
issue. Here I want to talk in beet terms rather than sugar terms
and you know that sugar is going to be reduced by 39% in this
proposal and in beet terms it is 42.6%. Clearly what the Commission
have done are two or three things. The first one is they have
left in place a thing called the Production Levy which was there
historically to help manage the system and, if you like, to put
surplus sugar on to the world market and restitutions, et cetera.
They have left it in place which is
12 per tonne of sugar, which is 70 some pence per
tonne of beet. They seem determined not to move that for whatever
reason they believe in. Equally, they have decided that they want
to merge `A' and `B' quotas together. Whilst this might be a logical
way of moving forward, within the Community we have different
sized `B' quotas, so the UK has a 10% `B' quota and if you move
as far away as Denmark they would have a 29% `B' quota. By merging
these two together and then removing the 42.6%, or them doing
a different sum on that figure, we finish up with a smaller `B'
quota, more disadvantaged than countries with a large `B' quota.
I guess part of that comes from the initial Commission document
where they suggested rightly or wrongly—we would say wrongly—that
countries with large `B' quotas were in fact more efficient than
countries with small `B' quotas. It all revolves around this package.
Those two bits together mean that we are disadvantaged quite dramatically.
There is another issue that talks about moving to a reference
price rather than an intervention price and if the physical price
drops below the reference price then negotiations can be done
to allow the processor to claim up to 10% of that back again in
theory just to keep factories open if money gets very low. Quite
where the grower fits in with that I have no idea at this stage.
If you were to take all of those things together and add them
up we could, in fact, finish up with more than 50% take off. It
is quite draconian.
Q188 Mr Williams: From the UK point
of view, what is the solution? How would you put forward amendments
to the proposals to satisfy the UK situation?
Mr Blacker: We want a balanced
one. We want to be on the same layer as everybody else wherever
it might be. If you like, we want to avoid any form of distortion
because it is wrong if one country has a massive advantage over
another country in my opinion. We have been trying to work on
the Commission to change that but have failed at this point. We
shall think of other ways of trying to get that to happen. Maybe
talking to you guys might help us a little bit. We have to start
to employ other ways of doing it, frankly. The European Parliament
has obviously taken this cudgel up in the last few weeks and they
have put quite a lot of amendments into the proposal which I guess
we will see coming out in the next few weeks.
Q189 Mr Williams: From the UK point
of view, should we just be dealing with the `A' quota rather than
the merge of `A' and `B' quotas?
Mr Blacker: No. We are saying
you can merge them together, we do not have a problem with that,
but we do not want to finish up being worse off by that happening,
which is effectively what is going to happen. We are going to
see a larger price cut than countries with a higher `B' quota.
Mr Bennett: It is a key point
that we made to the Secretary of State in earlier negotiations.
Q190 Chairman: She is not doing the
negotiations, she is chairing the Council.
Mr Bennett: But she is still Secretary
of State.
Q191 Chairman: She is not negotiating.
Mr Bennett: The Minister who will
be sitting in the chair for us will talk to the Secretary of State
as we have talked to that Minister as well.
Q192 Mr Williams: I can understand
what you want for the outcome but I am still not clear as to how
you would like to change the proposal.
Mr Blacker: It is a question of
how we do the maths at the end of the day, I suppose. We have
to work with the Commission and the Government to work out how
that can be done.
Mr Bennett: Could I suggest on
this particular issue that we write to you with a note about how
we feel this could be done in a better way.
Q193 Chairman: That would be very
helpful. Am I not right, just for the record, that the problem
that we have with (a) our total quota and (b) the split between
`A' and `B' goes back to the history of what happened with growing
sugar beet before the regime was established? My memory tells
me that sugar beet was not exactly the world's most popular crop
prior to the CAP starting, is that right?
Mr Bennett: It was a crop that
in the late 1970s and early 1980s was still an extremely physical
crop. We were still doing things called side hoeing which was
going through it mechanically and we were hoeing by hand to take
out every other plant or whatever. It was a very, very physical
crop. A wonderful thing came on the horizon that painted the whole
countryside yellow called oilseed rape that you have all seen,
and some hate it and some love it. This crop was going to be a
revolution for farming. It came on at a crazy price of about £300
a tonne and everybody thought, "This is fabulous. You can
do this off a tractor seat or a combine seat and you do not have
to get muddy in the winter" and a lot of people decided to
opt out. It was a very short lived experience and one that a lot
of people regretted. Frankly, two years after that when a lot
of people had got out they were all clamouring to get back into
sugar beet growing again. It was a total and utter disaster that
did not help our industry, frankly.
Chairman: I am afraid not even the powers
of this great Committee can rewrite the accidents of history but
it is just worth having that information.
Q194 Daniel Kawczynski: I would like
to ask these questions because I have almost 100 sugar beet producers
in my constituency of Shrewsbury & Atcham and it is something
that I feel very strongly about. What would be the impact on UK
producers of a compromise which allowed other countries to maintain
some element of coupling with their sugar payments? Secondly,
how much money would a UK beet grower stand to lose from a decision
by Defra to spread the sugar compensation monies evenly across
all eligible land in England?
Mr Bennett: The first one is dead
simple. We have to have complete decoupling within this reform.
To allow partial coupling where the signal effectively is to produce
if you can produce it at a cost where it is profitable, if that
gets lost and you have some countries partially coupling then
this reform will not work well ultimately. It is one of the key
principles that we have asked of our Government, that this has
to be fully decoupled.
Mr Blacker: We would like to see
that extended to all other Member States.
Mr Bennett: It has got to be fully
decoupled across all the countries involved.
Q195 Daniel Kawczynski: So far in
your discussions with Defra have you been given assurances that
will happen?
Mr Bennett: From the Defra point
of view, because of their past commitment to decoupling, they
would want all of this to be decoupled. It is pretty essential
in terms of getting the right signal to the most efficient that
it is decoupled right across Europe. We were very, very strong
on this with Defra and the Commission, that you cannot reform
and effectively send signals to the most efficient to be part
of the future of growing sugar if you allow some Member States
to have partial coupling. They have allowed that already in my
opinion in the flawed reform of the Council of Luxembourg which
is already showing distortions and that is not acceptable.
Q196 Daniel Kawczynski: What about
the second point? How much will my Shropshire sugar beet farmer
lose if the compensation monies are not guaranteed in this way
purely for them?
Mr Bennett: What is absolutely
critical in terms of the way that compensation is handed out is
when you move from a supported regime to a decoupled regime it
is inevitable in the first few years, even if the money is decoupled,
that subsidy/support is inevitably still part of their process
for one, two, three, four or five years. What is critical about
the compensation to British growers is it should not be any less
than the most efficient competitors that we would face across
the water. Everything we have done in terms of talking to Defra
and the Commission, particularly Defra on this issue because it
will be a Member State area, is that the French sugar beet producers
should not receive any more compensation than the British ones,
certainly in the early years, otherwise that is not a genuine
reform to allow the most efficient to survive. Your question about
how much money is an almost impossible one to answer. We have
already had many discussions about this because we are aware of
the historic model in some parts of Europe of the regional Single
Farm Payment type of model. It is absolutely critical, it is a
principle of ours, that our sugar growers will not be disadvantaged
against their French competitors.
Q197 Lynne Jones: Does your position
differ from Mr Wage's position and the Dutch beet growers?
Mr Bennett: I did not hear what
his position was.
Lynne Jones: Maybe I misunderstood him
but I understood that he did want to have some coupling.
Chairman: He wanted some partial early
years coupling.
Q198 Lynne Jones: But set at recent
levels to ensure that farmers who got out of sugar beet growing
did not benefit.
Ms Kirkman: My interpretation
was that initially, and it still may be a position they return
to, they supported the principle of decoupled compensation. However,
in looking at options of coupling the compensation what they are
doing is accepting and acknowledging the inter-dependence there
is between producing the crop and processing the crop. Equally,
we acknowledge that there is a very close relationship but coupling
the compensation in our position is not the way of achieving that.
That was my understanding.
Chairman: Good. Everybody is nodding.
Are you happy?
Lynne Jones: Not really.
Chairman: If you are not happy, why not?
Q199 Lynne Jones: I may have misunderstood
Mr Wage's position then.
Mr Bennett: Our position is quite
clear. We want full decoupling. Effectively, if we are moving
into a marketplace then that allows the growers to grow the crop
or not.
Chairman: Have a think about it. Roger
just wants to come in with a quick supplementary.
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