HC Deb 12 February 1957 vol 564 cc1220-31

10.23 p.m.

Mr. Frederick Willey (Sunderland, North)

I beg to move, That an humble Address be presented to Her Majesty praying that the Sugar and Molasses (Rates of Surcharge) Order, 1956 (S.I., 1956. No. 2058), dated 21st December, 1956, a copy of which was laid before this House on 28th December, be annulled. The Joint Parliamentary Secretary will probably agree that, in the circumstances, this is an unexpected Order. Last week we were discussing milk prices, and I pointed out that the price of milk at the time of the Labour Government was 5½d. per pint but today is 8d. The price of sugar at the time of the Labour Government was 6d. per lb., but now it is 9½d. to 10½d. per lb. There have been steep increases in price in the last two months. The retail price increased by ½d. in December and by Id. in January. In part, these price increases are related to the present Order. The first price increase immediately preceded the coming into operation of the Sugar Act. 1956, and the second immediately followed the setting up of the Sugar Board, confirming the complaint we repeatedly made in discussions on the Bill, that the Government were following a high price policy.

We regard the Order as quite unnecessary, and I call the attention of the Joint Parliamentary Secretary to the fact that the chairman of Tate and Lyle has admitted that the increase imposed by this surcharge has been directly borne on the retail price. What is the position and why is the Order so surprising? During the past few months there has been a very sharp increase in the world price of sugar. In fact, it doubled between the months of October and January. It is admittedly not as high as it was in 1951, when under a Labour Government we were selling sugar at 6d. a 1b.

The sharp increase is partly due to circumstances which have been operating over a period. Consumption per head in Asia, the Middle East and Africa has considerably increased in the past few years. It is partly due to more current circumstances, that there has been a fall in the production of sugar beet in Europe over the past year. The Suez conflict has had its impact upon world prices, and the Sugar Act itself has had a direct effect on world prices by throwing open the British market to world sugar.

The result of all this is that quite unexpectedly the price of world sugar is considerably higher than the fixed price we are paying for Commonwealth sugar. We now have this absolutely ludicrous position. In this country we import only about 10 per cent. of our sugar at a free world price, and yet our refiners are having to pay for all the sugar—not only 10 per cent., but the other 90 per cent. which comes from Commonwealth and home sources—at world prices.

If only the Ministry had continued buying we should have occupied a sheltered position and we could have avoided any retail price increase. The Ministry must have held the stocks and we can assume that the Government would have been able to safeguard the consumer during this period of high world prices. As the Sugar Board is obliged to sell at world prices, we can assume—it must be a fact, and I should like the Parliamentary Secretary to give us the figures—that the Sugar Board is making a very substantial profit on the sale of Commonwealth sugar and building up very substantial reserves.

The Order adds insult to injury. Not only is the retail price forced up because the refiners have to buy all their sugar at world prices, although we are importing only 10 per cent. of our sugar at that price, but the Minister is imposing a further surcharge on all sugar. When we discussed the surcharge in considering the Sugar Act, it was made quite clear that a surcharge would be imposed only to provide an element of equalisation when the Commonwealth price was above the world price, but today a different position obtains, a position in which distribution payments should have been made.

Our complaint about the Order is that, in a situation in which the consumer, the housewife and the manufacturer are being unfairly prejudiced in any event by the high price policy of the Government, contemporaneously the Sugar Board is imposing a surcharge and further forcing up the retail price, the price not only of sugar but of all manufactures including sugar, particularly jam and preserves. I appeal to the Parliamentary Secretary to assure us that this Order will be withdrawn, that appropriate steps will be taken to see that this ludicrous, stupid action is stopped forthwith and that the consumer will be given some relief.

We must protest that here in the very beginning of the operations of the Sugar Board all our forecasts have been borne out. The Chairman of Tate and Lyle talks about the Board playing for safety. The Board, the sugar trade and the Government are relying upon a high-price policy. In those circumstances, it is absolutely unjustifiable to impose in addition to that a surcharge which, as the Chairman of Tate and Lyle has explained, is being borne at present on the retail price. I hope that we shall have an assurance from the Parliamentary Secretary that the Order will be withdrawn.

10.31 p.m.

Mr. Sidney Dye (Norfolk, South-West)

I beg to second the Motion.

It will be no doubt a matter of discomfort to the new Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food that he has to come here tonight to defend an Order which, because of the surcharge, raises the retail price of sugar to housewives, manufacturers and everybody else, when his was the party which so enthusiastically claimed throughout the country that they were the people who knew how to bring down the price of food.

They had a specially designed Sugar Act to control the marketing of sugar, because they feared that it would be necessary at times to control the price against the possibility either of a slump, and therefore a low price, or a rise in world prices. They thought that this policy which they favoured, which they thought was going back to freedom and therefore greater competition, would lead to lower prices. In fact, we find that world prices have gone up, and we are now being made to increase our prices at home to be in accord with world prices.

This is the result of the policy which the Government have pursued and which they thought would lead to lower prices. This makes us wonder whether the whole idea is sound or not. Quite clearly, more and more of this kind of policy will lead to conditions in which prices at home will have to be adjusted upwards. But for the fact that farmers in this country and in the Commonwealth have produced as much sugar as they have, prices would have gone very much higher.

What we said when we discussed the Bill in its various stages was that we should rely far more on the planned production of sugar here and in the Commonwealth rather than upon the world market and adjustment of our prices accordingly. It looks as if this Order is an indication of the failure of the whole principle of the Sugar Act which we spent such a long time discussing—

Mr. Deputy-Speaker (Sir Charles MacAndrew)

We cannot discuss it now, of course.

Mr. Dye

—in Committee, when we tried to persuade the Government that their policy was wrong and that it would be better to organise and plan the production of sugar in this country and the Commonwealth rather than rely on a mechanism such as this to adjust our prices according to world prices.

10.35 p.m.

Mr. A. E. Oram (East Ham, South)

Those of us who took part in the work of the Standing Committee on the Sugar Bill about a year ago can, perhaps, be excused if tonight we think that we are looking at this question of sugar prices and this surcharge through a looking-glass, and a looking-glass, moreover, which distorts the picture, at least one aspect of it. My hon. Friends the Member for Sunderland, North (Mr. Willey) and the Member for Norfolk, South-West (Mr. Dye) have reminded us that then we were discussing the surcharge in a situation in which the world price of sugar was well below that of the Commonwealth Sugar Agreement. We expected, therefore, that when the Sugar Board began its operations it would make a loss and that, as a consequence, the surcharge would become necessary. Instead, the situation now is the reverse of that. The picture is distorted in that we have a surcharge when the world price is distinctly above that of the Commonwealth Sugar Agreement.

I have been looking up the words of the Minister when he explained what he had in mind about the surcharge. He said: I repeat that the object of the levy is a very simple one, to recoup the Sugar Board for the difference in the price at which it buys Commonwealth negotiated sugar and the price at which it sells it; to recoup it for any deficiency that it may have to make good to the British Sugar Corporation; and to cover its own modest administrative expenses. Those I believe to be the only objects of the levy. If the price works out the other way, if the Board recovers a profit from the British Sugar Corporation and if the price it pays for Commonwealth sugar is less than the world price, then, of course, there will be a surplus, which will be disposed of in the way which we shall come to later in this Bill."—[OFFICIAL REPORT, Standing Committee A, 31st January, 1956: c. 350.] The Minister's "if" in the latter part of that passage is now an established fact. The folly of this Order is that we have now a surcharge in circumstances the very reverse of those which were anticipated as make the surcharge necessary.

If one puts oneself in the position of the members of the Sugar Board one can, perhaps, understand their "playing for safety," as the Chairman of Tate and Lyle has put it. After all, they are newly launched on a new function in life, and they are anxious not to make a hash of things; therefore, they are anxious to build reserves. They are, however, receiving from the price structure of the sugar market today quite unexpected windfalls. Yet here they are making doubly sure by putting on this surcharge.

Of course, it is not only the Board which is playing safe. Everyone all along the lines plays safe. The person who pays the price of everyone's playing safe all along the line is the domestic consumer, the housewife, who pays the final retail price. The refiners have already admitted that they pass on the surcharge to the consumer. They have passed on the increased prices that they paid for the raw sugar. One can perhaps understand that, but it seems to me that they have shown a little indecent haste in passing on the increase, and it will be interesting to see whether they are just as quick and sensitive to the market if prices take the opposite trend and start to come down.

There is only one person in this business who is not able to play safe, and that is the housewife. According to the trade Press, she did what she could a few weeks ago by laying up modest stocks in her larder because of rumours of increased prices and shortages, but she cannot do much in that respect. As a consumer she is pretty powerless in this world, faced with a powerful monopoly organisation in sugar, and a Government whose sugar policy is giving added freedom to that monopoly organisation.

The particular part of the Government's sugar policy that we are discussing is the surcharge, and the amount of the surcharge works out at only a small fraction of a penny per pound. In itself it may not be considered a terrible imposition, but we have to remember that it is part and parcel of the Government's policy, as contained in the Sugar Act of last year. During the debates on that Measure hon. Members on this side of the House did their best to warn the country that the Government's new policy in sugar was throwing away recklessly the safeguards which the country had. It was throwing away the means which the Government had of protecting both the consumer at home and the producer in Colonial Territories.

We did what we could, but we were unsuccessful in changing the Government's mind. We were assured by the Minister and by the Parliamentary Secretary's predecessor in office that all was well; that the consumer would not be adversely affected by the changes which were going to take place; that it was only a question of a new method of accountancy being instituted and that when the Sugar Board came into operation the consumer would still be in the same position.

Is it not a strange coincidence that at the very time when the Sugar Board comes into operation the housewife is faced with this increase in retail prices. She is feeling the full blast of the increased prices in the world market and the present Joint Parliamentary Secretary —if he has caught up with the ramifications of the sugar trade in the short time in which he has been in his present office—will have to exercise a great deal of skill if he is to be successful in convincing her that she is not having a raw deal, and that the prices she is being called upon to pay week by week are not a direct result of the policy which the Government have been pursuing in this connection.

10.44 p.m.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. J. B. Godber)

I am very glad to have the opportunity of dealing with the points raised in the Prayer, because I think that there is a little misconception which should be cleared up. I have had an opportunity of studying something of this rather involved subject, Which probably few hon. Members would claim to have a complete knowledge of, but having read some of the debates which have taken place on it I am a trifle disappointed that we have not with us tonight the hon. and learned Member for Kettering (Mr. Mitchison) who moved the previous Prayer dealing with sugar, and who made a quite remarkable speech, managing to bring in all sorts of things, including Cavendish and Negro-head tobacco—but he said very little in regard to sugar, so far as I can find out.

The hon. Member for Sunderland, North (Mr. Willey) has put forward some points to which I shall endeavour to reply to the best of my ability. I feel that I shall have to take him up on one or two claims which he made. In one of them he said that all the Opposition's forecasts in this matter were borne out.

The hon. Member has a remarkable record in the forecasts which he makes about food. I will not take him back over a lot of them, but in this case I looked specifically at the remarks he made at the opening sitting of the Committee stage of the Bill. There on the very first Amendment, which he called a wrecking Amendment with a candour which I appreciate, he gave three reasons which he called the three fundamental reasons why the Opposition was opposing the Bill. The first of these fundamental reasons was, he said—

Mr. Willey

I do not want to discourage the hon. Gentleman, but I think that this is a little unfortunate, because. I would have dealt with the matter in moving the Prayer—

Mr. Deputy-Speaker

I do not want to discourage anybody. but we can only deal with the Order.

Mr. Godber

I am very sorry indeed, because I would rather have liked to bring this point to the hon. Gentleman's notice. The hon. Gentleman opposite quoted from a rather similar document, also about the Committee stage.

Mr. Deputy-Speaker

I stopped him.

Mr. Godber

I will not pursue that matter any further, but I hope that the hon. Gentleman will in his spare time study again the remarks which he made on that occasion, when he will see that not quite all his forecasts in this matter have been borne out.

To come more closely to the Order against which the Opposition is praying tonight, I should like to point out that it imposes a surcharge at the rate of 1s. 2d. a cwt. on refined sugar. This works out at, approximately, one-eighth of a penny per lb. No one can pretend, therefore, that this Order of itself has had an appreciable effect on the retail price of sugar in the shops. I think that the hon. Member for East Ham, South (Mr. Oram) acknowledged that fact in the course of his remarks.

It is important to get that fact clear. This surcharge, whatever it does, does not have a substantial effect on the retail price. That being so, the next point to deal with is why, in fact, there is a surcharge at all. That was the gravamen of the charge made by the hon. Member for Sunderland, North—that we should not have had a surcharge because the world price has risen so sharply that, as he claimed, it was not necessary.

I think that I must take the hon. Gentleman back to a point which is very strictly relevant because, although it was made during the passage of the Bill, it relates particularly to this Order. During the course of the Bill, the hon. Gentleman and his colleagues were at great pains to urge the need for a definite period to be written into the Bill which would be the period during which an Order such as this would remain in force. Eventually a period of six months was written into the Bill as the length of time during which one must be able to see clearly ahead before deciding what to do. That was done in Clauses 13 and 14 of the Bill, and it was done at the instigation of the hon. Gentleman and his colleagues.

Mr. Willey

I think that the hon. Gentleman would agree—and we are obliged to the Government for meeting our point of view—that our point was that we should not legislate for an indefinite period. We wanted to ensure that this matter would come up continually for review by the Board. and not for the reason given by the hon. Gentleman.

Mr. Godber

For a definite period. In other words, the hon. Gentleman would have preferred a shorter period, but I think the right hon. Member for Rochester and Chatham (Mr. Bottomley) suggested a limit of three years.

Mr. Wiley

The Parliamentary Secretary must face up to the point that this was a suggestion as against an indefinite period, which is a period without finity. We were limiting the period. The Government wished to make it indefinite. We said that we ought to ensure that this matter was reviewed and that we could not agree to an indefinite period and to the Board imposing a surcharge indefinitely.

Mr. Godber

I accept that that is the position. Having got a figure, whatever it is, into the Act, it is surely wrong at the very first opportunity for hon. Gentlemen to seek to alter it, when neither have we had six months' experience of it nor can we envisage—I certainly could not—what the position will be six months from now. The world price of sugar has fluctuated very sharply. Indeed, following its movement during recent weeks it has not come to rest even at this moment.

I have the latest figures for the world price. Using the normal basis of the price free alongside ship Cuba in United States cents per lb. the price has varied over the last four years. At first it was almost completely static. In 1953 it was an average of 3.41 cents, in 1954 3.26 and in 1955 3.24. Towards the end of last year it started to go up very sharply. In early November it was 3.55, at the end of November 4.65. In December it was up to 4.90 and at the beginning of January 5.15. It rose to a peak in the middle of January, when it was 6.37. Since then it has dropped to 5, but has now risen again. The latest figure is about 5.60.

With such wide fluctuations of price, how can anyone look six months ahead at this moment and say what should be the right level? At the moment it may appear that there should be a substantial distribution payment. Who can say what it should be in six months' time? Surely it is essential, by the very terms of the Amendment that the hon. Gentleman pressed us to put into the Bill, not to press us to make this change. I say that with absolute conviction. I am sure that is the position to-day. We know that the Board is accumulating substantial sums of money and that in due course, if the price remains above the guaranteed price for any period of time, we shall eventually have a distribution payment in which this money will be returned to consumers in some form or other. It is not being absorbed by the refiners or anybody else. It will be refunded, and the housewife may well get the advantage later on.

I am all for seeing that this is returned at the earliest moment possible. All I am saying is that the state of the market today is so widely fluctuating that it is unreasonable to try to strike a balance at this stage. That is the general answer to the Prayer.

Much of the fluctuation in the world price is due to world climatic conditions, which may change again. We have had the difficulty of the sugar beet crop in Europe, and in Cuba production has been affected by a certain amount of drought.

Also, of course, there is the difficulty, which was mentioned, I think, by the hon. Member for East Ham, South, of stocking up by housewives and others. Housewives have stocked up to a certain extent, and who can blame them for it? That is a factor which has had, I think, an influence not only in this country but, perhaps to a far greater extent, in other countries. Sugar is probably the easiest commodity in the world for people to stock up, and that has, I am sure, had its effect. I remember very clearly that when sugar was derationed sales went down because the amounts which had been stocked up were dissipated. I think that the opposite has taken place now, and that does to some extent explain what has happened.

I will not attempt to deal with the points quoted from previous debates, because I am told that I should be out of order if I were to do so. I would sum up the present position in this way.

Mr. Wiley

Before the hon. Gentleman goes on, would he just deal with this one point, which would, I think, be in order? Why are we imposing the surcharge at all?

Mr. Godber

I am sorry if I have not made it clear. Clearly, a decision had to be taken before the Act came into force. It was taken in December, I think; and the Order was published about the middle of December. I spoke a few moments ago about prices, and around the time when the Order was published the world price stood at about 4.65 cents, which was very similar to the Commonwealth Agreement price. Since then, it has risen very considerably, but that was the moment of time when the decision was taken, and the price was just about at parity. It was rising, but who was to know how much it was going to rise?

Mr. Willey

I am sorry to intervene again, but this Order did not come into force until 1st January. It is a very bureaucratic explanation to give to the House, that some bureaucrats or accounting agencies had taken the decision when circumstances were different from those obtaining on 1st January. What I am asking is, why allow the Order to come into force, imposing a surcharge at a time when we are trying to hold the cost of living, and say, by way of consolation, that later the housewife will get the money back—perhaps a few months before a General Election; I do not know?

Mr. Godber

I shall not go into the point about a General Election. This particular Order shows the date of 21st December as the date when it was made, and that is only a few days after the date for which I have just quoted the price. Once an Order has been printed and laid before the House, surely the hon. Gentleman would not expect us to take it back forthwith? Quite honestly, I do not think he is being reasonable in making this point.

The price had risen a certain amount, but there was no indication that it was going to rise to the extent that it did. Those who took the decision to put on merely one-eighth of a penny per pound were showing very remarkable business acumen, in that they did not put a much larger surcharge on, which is what everyone would have expected only a week or two before. If the hon. Gentleman now claims to know that the price was going to rise, I doubt very much whether he would have made that claim at the beginning of December. There is ample reason for the surcharge being put at this level, and I make no apology for it. I believe that when hon. Members think fairly over this matter, they will accept that.

I was about to sum up by saying that the world price at New York last night closed at 5.60 cents, which is a figure that it has stood at now for about a week; but nobody knows how it is going to move. Last night's price is in fact about 80 points less than it was four weeks ago, and it is still some 100 points above parity with the Commonwealth negotiated price.

There is no certainty that this novel situation will be maintained, but if the world price remains at its present level, or something like it, for some period, the House can rest assured that the machinery —provided in the Act to ensure, by means of distribution payments, that the British housewife will receive the full benefit of a situation in which the fixed prices which we pay the Commonwealth and the cost of beet sugar produced at home are below world prices—will be brought into operation.

That is the situation as we must leave it now. I have endeavoured to give the reasons, and I hope that the House is satisfied with them. I think that we have been right to follow this course, and I have no hesitation whatever in asking the House to reject the Prayer.

11.0 p.m.

Mr. Willey

I think that the House is far from satisfied. I think that hon. Members on both sides are thoroughly dissatisfied—[HON. MEMBERS: "No."]—but we hope that the fact that our arguments have been heard and are recorded will bear weight with the Sugar Board. We also hope that the Joint Parliamentary Secretary will now realise that we were right in saying that the members of the Board should have commercial experience and not be mere accountants.

In view, however, of the courtesy of the hon. Gentleman's reply, in spite of its lack of convincing reason, I think that it would be proper to ask leave to withdraw the Prayer and give the Sugar Board time to think again.

Motion, by leave, withdrawn.