HC Deb 25 July 1969 vol 787 cc2316-31

2.57 p.m.

Sir John Gilmour (Fife, East)

The closing of the Cupar sugar beet factory is a bitter blow not only to the Royal Borough of Cupar and surrounding district, but to my constituents who work in the factory. It extends to many ancillary industries round about which are connected the growing of sugar beet and its harvesting. It is of vital importance to farming on the east coast of Scotland, which is the main sugar beet growing area, and even to areas as far south as Northumberland and Durham.

The first complaint I have to make about the closure is that sugar beet is a price review commodity. As such, if an announcement was to have been made, in which the Government apparently agree, that the sugar beet factory was to De closed, then full consultation ought to have taken place with the National Farmers' Union in Scotland. I am certain that there would be a very great outcry if it was proposed to close down a plant in any other industry without any consultation with the people vitally affected.

It is true that for the last three years the sugar beet acreage of the Cupar factory has been low and the factory has not been working to full capacity, but it is interesting to recall that even before many of the modern methods were introduced to improve the yield of sugar beet, acreage of the sugar beet crop was fully subscribed by growers in Scotland. I have on my file a letter from the late chairman of the British Sugar Corporation telling of the appeal by Scottish growers to extend the present factory or to produce another factory. I believe that there was also a demand at that time for a factory in Northern Ireland. The changes in agricultural methods plus the need for import savings, and the changes have all increased the popularity of sugar beet as a crop.

There is not time in this short debate to go into detail as to what has happened to bring this about, but the fact is that the acreage is nearly at full capacity in the factory and it should be full next year. This shows that it is now accepted by the farming community in Scotland as a profitable crop to grow.

In the last two or three years the Government have acknowledged the need for an increase acreage of cereals. There is a need for what is known as a break crop to break the cereal rotation. This is being subsidised by the Government. In this year's Price Review the amount offered was something like £1.6 million, but none of this money is going to Scotland. The break crop which has been chosen is that of field beans, which has been shown by agricultural experts not to be a crop which can be grown, roughly speaking, north of the area of Yorkshire. The £l.6 million has gone to help cereal growers in England, and nothing has gone to Scottish cereal growers. I think that there is a direct Government responsibility and involvement in this part of the agricultural programme.

There is no doubt that the bulk of growers of beet at its present price are finding it a profitable crop to grow, and if the factory were to stay open we could look forward to the maximum acreage being taken up. The British Sugar Corporation argues that it cannot make the Cupar sugar factory pay, but I think it must make plain to the farming community in Scotland why this is so. The factory was designed more than 40 years ago—I think it was opened in 1925 or 1926—and it may be in need of modernisation. I put down a Question today to the Secretary of State for Scotland asking how much had been spent on improving beet handling, because one knows that the factory was designed for an intake of beet by rail, and now 98 per cent. of the crop comes by the road. I do not believe that anyone has made clear whether the money that has been spent has been sufficient to enable the factory to handle the crop by road economically. Is it the fault of the factory not modernising its equipment that is making it run at a loss?

I understand that the corporation, I suppose one might say out of the kindness of its heart, to keep the factory going for two more years. It has helped growers by a transport subvention. I have already mentioned the obligation which the Government have in regard to the break crop. They might be able to relieve the corporation of this item of its expenditure, because the corporation has said that it is losing between 25s. and 40s. a ton on the operations of this factory. This may or may not be so, but this should not be the stumbling block to the continuing operation of the factory, and we ought to have from the Government, or through the corporation if that is how it is to be done, some realistic estimate of how this money has to be spent. Should it, for example, be spent on modernising the boiler plant, an eventuality which any factory has to face from time to time?

This factory has been going more than 40 years, and I think that we must consider what will happen in the next 20 years. I do not believe that agricultural production will go on in exactly the same way as it does now. One of the main reasons for this is that Britain's entry into the Common Market is now becoming a very real possibility and we have to consider what effect our entry will have on the sugar beet industry. I do not believe that in the terms of this debate it is possible for the Minister to answer what is perhaps a hypothetical case, but, in laying plans for the future, the corporation has said that it is trying to rationalise this industry, and, looking ahead, it is bound to take into its calculations what effect joining the Common Market may have.

As a high user of sugar, we produce about one-third of our sugar consumption. We buy sugar from the Commonwealth, which may be a limiting factor on what we produce ourselves. Having looked up the figures for 1968, I find that we buy raw sugar from France, West Germany, Holland and Poland, and refined sugar from all those countries and East Germany as well. The Commonwealth Sugar Agreement should not prescribe exactly the amount of sugar beet production which this country may have in the future. If we go into the Common Market, shall we find that producers in Germany, producing less sugar to the acre than Scottish farmers are now producing, will be able to sell it to housewives in Scotland? If that happened should we be convinced that it was right? Consumption of sugar in the E.E.C. countries at just over 6½ million tons a year is met entirely from their own resources, and they are usually net exporters of sugar. The fact that they send sugar to this country demonstrates that that is so.

Some of my English friends say, "It is no good going on about sugar beet growing in Scotland. It will never pay. You do not have the right climate", and so on. I do not believe that. I have the figures for the better growers of sugar beet in Scotland. Taking a five-year average, I find that there are yields of more than 20 tons to the acre at best.

With the changing pattern of agriculture we find people specialising more in sugar beet. Previously there were 1,200 to 1,500 growers, but the numbers will decrease while the quality of production rises. If only the right steps could be taken on the factory side, sugar beet growing would be a profitable industry in Scotland. So many new things are coming along which will increase plant population. This will ensure the increase in yield needed in Scotland.

There have been some years, not many, when Scottish average production has been better than the English figure. There is real hope for the industry. In the original statement the corporation said that it would close the factory in two years' time and that the Government had been informed. I hope that we can have an assurance that the Government and the Scottish N.F.U. will get together to see whether, in the circumstances which are likely to arise, discounting the past, this can be a profitable industry and the Cupar factory can remain open.

3.7 p.m.

Mr. Ian MacArthur (Perth and East Perthshire)

The House will be grateful to my hon. Friend the Member for Fife, East (Sir J. Gilmour) for raising the problem of the sugar beet industry, which is in a state of extreme uncertainty and grave worry. My hon. Friend raised this question in an Adjournment debate on 19th April, 1967. I see that the Parliamentary Secretary said then that … we should let the situation ride and see what kind of confidence can be restored among the beet growers."—[OFFICIAL REPORT, 19th April, 1967, Vol. 745, c. 771.] That statement was made against the background of the assurance that the sugar beet factory at Cupar should continue for three years. It was widely understood from that statement that a sufficiently increased beet acreage would make the factory more viable. There was no suggestion from the Government, to my knowledge, that the factory would be unable to continue, whatever the acreage planted, because it would inevitably become uneconomic owing to the capital investment required.

In the light of that statement, coupled with the increase in the transport subvention and the other factors mentioned, farmers believed that if the acreage could be brought up to a viable level the future of the industry would be assured. The confidence which the Minister looked for returned and the acreage increased from 6,785 acres in 1967–68 to 13,620 acres this year. It was widely believed that 16,000 acres would represent the acreage required for the factory to become commercially viable.

The industry is approaching this target and I am convinced that it could reach it. It was, therefore, a very great shock to the industry to be told the other day that the factory would close in two years. It was a great shock to the industry and to me to read the reply of the Secretary of State to a written Question tabled by my hon. Friend the Member for Edinburgh, West (Mr. Stodart) on 21st July. He asked what the estimated tonnage of sugar beet would be to make the Cupar factory operate at a profit. The reply was: In its present form the Cupar factory could not be operated at a profit."—[OFFICIAL REPORT, 21st July, 1969, Vol. 787, c. 277.] There was no suggestion of that in our previous debates, and the Minister must not be surprised if the industry is shocked by the position which has been presented to it today.

The confidence was such that some farmers made a very large personal capital investment. Some of them spent thousands of pounds on equipping themselves to deal efficiently with the crop, which they believed would continue into the future in the light of the Government's previous assurances.

My hon. Friend has spoken already about the critical importance of the sugar beet crop to Scottish agriculture. It is a break crop, and it is also a cash crop which cannot be replaced. It is a commodity covered by the Price Review and, therefore, the Government have a special responsibility for it. In passing, perhaps I might remind hon. Members that it also produces a useful byproduct in that it provides valuable feed.

I find it extraordinary that there should now be a proposal to remove completely the opportunity for Scottish growers to produce sugar beet when the direction given to agriculture should be to help the nation save imports, and when the direction given to Scottish agriculture should be one that will inspire its confidence. By their recent statement, the Government have dealt a mortal blow to the confidence of Scottish farmers in the Government's intentions.

I want to put several questions to the Minister which I hope that he will answer since they are critical to the whole problem. First, what capital investment is required to modernise the Cupar factory? Is it the £1.7 million which has been published in the Press, or can the modernisation be carried out with a more modest expenditure?

Secondly, to what extent have the Government considered the cost to the Exchequer of providing alternative employment for those of my hon. Friend's con- stituents who are employed in the factory? Taking a round figure of 200 jobs, on a scale of £2,000 a job, it would involve an investment of about £400,000.

Thirdly, to what extent have the Government and the B.S.C. in their calculations taken account of the improved techniques in recent years to which my hon. Friend referred and the probability that sugar beet growing, which is becoming more economic, will become even more economic in the years ahead?

Fourthly, if sugar beet is removed from Scottish agriculture, what will happen to the 13,000 acres and more at present devoted to the crop? That acreage cannot be switched to potatoes, which would be a first-sight solution in Perthshire, at any rate. However, that does not bear examination, because it would dislocate the potato trade. It cannot be switched to another break crop, because there is none available. When the Minister considers this aspect of the problem, I hope that he will bear in mind the large break crop subsidy payable in England for beans that cannot be produced in Scotland.

The root problem which the Government must consider is the effect which this decision, if adhered to, will have on the confidence of those engaged in Scottish agriculture. They must bear in mind, too, the critical need for a break crop in the Scottish arable pattern. I hope that the Minister will be able to give us some assurance that the recent statement is not the final word, and that urgent discussions would be engaged in with the industry immediately so that farmers can be told soon that the future of this crop is assured. Without that, the Government must not be surprised if the feeling of farmers is that they were gravely misled a few years ago and that the expenditure which they have been involved in as a result was inspired by false pretences.

3.15 p.m.

Mr. Anthony Stodart (Edinburgh, West)

I wish at the outset to express my gratitude to my hon. Friend the Member for Fife, East (Sir J. Gilmour) and to Mr. Speaker for his kindness in allowing this debate to take place.

I feel some sympthay for the Under-Secretary, for while we appreciate his competence in dealing with matters of health and education, we are surprised that the Secretary of State is not here, because we are discussing not a minor issue but a matter of vital importance to an important Scottish industry. There are many questions to be answered. My hon. Friends have put some and I have more. There is a great deal of explaining to be done, particularly after what the Scotsman wrote in a leader the other day, in which it said: It is not unfair to interpret from Mr. Ross's parliamentary answer as implying that the British Sugar Corporation should be congratulated for giving farmers such long notice—until 1971. Then, in Farming Leader, the newspaper of the Scottish N.F.U., it was said: The Union and Scottish beet growers have been sadly misled. In 1966, when we were given a three-year guarantee of the factory's continued existence, the Corporation told us that its life after this year would depend on Scottish farmers growing a sufficient acreage—up to the permitted maximum—to ensure that the factory could be run economically. When the Scottish Farmer contains a leader on this matter headed with the single word "Deceit" in large capital letters, I am led to ask: deceit by whom? As for the other Under-Secretary, the hon. Member for Renfrew, West (Mr. Buchan), in view of a remark which he made in an Adjournment debate in April, 1967, he may be let out of any charge of deceit, for he said: It is true … that if one were to spend the £150,000"— that is, the amount of the break crop grant which we had suggested, by putting … it all into one section of the industry, that would of itself solve the problem and keep employment going".—[OFFICIAL REPORT, 19th April, 1967; Vol. 745, c. 771.] Recent figures which we have received show that the giving of that £150,000 would not keep it going. The gap is wider than that.

My hon. Friend the Member for Perth and East Perthshire (Mr. McArthur) referred to the large amount of private capital investment made by farmers over the last few years. There is something even more disturbing in relation to the amount of public money that is involved. I refer to the grant which has been given to a co-operative group with, I understand—I have made inquiries about this —the full approval of the Scottish Office.

I understand that the Department of Agriculture was consulted throughout the negotiations, which started over 18 months ago. We must be told how public money has come to be wasted by the announcement which has been made within the last few days. There is no doubt that everyone was under the impression that, at 16,000 acres, Cupar would be viable. Its slicing capacity was given the other day as 1,966 tons a day. There are in England two factories which have a lower slicing capacity than that.

If 16,000 acres is not enough, what is? My hon. Friend has referred to the rather enigmatic reply I received from the Secretary of State the other day that Cupar could not make a profit in its present form. What does that mean? Does it mean that, if Cupar were bigger, could increase its capacity, it would make a profit? I presume it means that because there must surely be a point of throughput at which viability in a sugar beet factory is reached.

Mention has been made today of the amount of capital investment that would be required to keep the factory going. I received a written reply from the Secretary of State only today. I had asked him how much would be required over the next 10 years to keep the factory going at full capacity and what the breakdown of that capital figure would be. His answer gives the figure which has been rumoured—£1.7 million—but adds that the breakdown is a matter for the British Sugar Corporation. I hope that the corporation will give the breakdown because it is most important that we should get all the facts and figures.

The corporation, I understand—and I take my information from an article in the Glasgow Herald on 11th July—has three directors who are nominees of the Government, one of whom must be chairman. I also understand that the corporation is being offered financial incentives for "promoting economy and efficiency". If there is this Government representation, by no means a minor one, on the board, what is happening is virtually a veiled Government directive that Cupar has got to be closed.

The figures we have been given are much worse than I thought. It is essential that all possible information be provided so that calculations by the N.F.U. may be done and proposals or propositions made. Only if we get all the information, including the breakdown of the £1.7 million, can we see the road ahead. I do not want the Under-Secretary of State to be under any illusion about the serious blow this is to farming. If I may be immodest. I am aware that he is perhaps not as well acquainted with the farming industry as I am. I can assure him that it is a serious blow, particularly to the arable sector, although one must not forget the ancillary uses to which sugar beet products are put. They feed flocks of sheep and cattle all over the country.

I do not think that we in Scotland have yet really felt the full impact of continuous cereal cropping as it has been felt in the South of England. My hon. Friend is dead right. The head of the N.A.A.S. in England is on record as saying that field beans are of no use north of York. To take all this away from Scottish farmers will do immeasurable damage to them.

3.25 p.m.

The Under-Secretary of State for Scotland (Mr. Bruce Milan)

The hon. Member for Fife, East (Sir J. Gilmour) and other hon. Members have expressed their regret and disappointment at the decision of the British Sugar Corporation to close its factory at Cupar. I hope that they will accept in turn, particularly in view of the more recent history of the factory, that the Government sincerely share their regret at the corporation's decision, but nevertheless, for reasons which I shall explain, we reluctantly accept the necessity for the closure of the factory.

I was rather surprised that the hon. Member for Edinburgh, West (Mr. Stodart) was vague about the basis upon which the corporation carries out its activities. May I remind him that it is now operating under a 1964 incentive agreement which was negotiated when hon. Members opposite were in power and when the hon. Member himself had a measure of responsibility in these matters. That incentive agreement was to make the corporation more commercial in outlook, and nothing that has been said today leads me to suppose that hon. Members opposite disagree with that proposition. But it means that, as well as bearing more of the commercial risks, the corporation has to look for economies in its operation.

The hard fact of the matter is that it has been increasingly difficult to reconcile the demands of that agreement with the position of the factory at Cupar. It is no secret to Scottish farmers that the future of the factory was in jeopardy immediately after the 1965–66 season. The contracted acreage at that time had started to decline. Incidentally, it is not difficult to see why that acreage started to decline at that time. It was due largely to the decision of hon. Members opposite to reduce the transport subvention.

For almost 30 years, Scottish farmers had enjoyed a free-on-rail contract, under which the farmer bore only the cost of transporting the beet to the nearest railway station and loading it on to the railway wagons. Even under this arrangement, the acreage grown had fluctuated between 8,000 and 15,000 between 1934 and 1954. In 1963, however—and I hope that hon. Members will appreciate some of this history—the then Government agreed to the reduction of the freight subsidy payable by the corporation and the subsidy was consequently reduced to less than half the total transport cost.

As it happened, the 1963 beet harvest was poor and this, combined with the reduction in the transport subsidy, led to a decline in the contracted acreage from 15,500 in 1963 to only 9,050 in 1965. The rather better figures in recent years arise directly from the fact that the present Government intervened at that point to improve the transport subsidy arrangements.

Mr. Stodart

It was not entirely a matter of good instead of bad seasons?

Mr. Millan

That is, naturally, always a factor in these matters, but the relationship between the level of transport subsidy and the acreage actually contracted is so close that it is clear that the transport subsidy has played an extremely important part. In any case, for 1966 the structure of the transport subsidy was altered and, among other things, this increased the average value of the subsidy.

As an added incentive, the Government added a further subsidy of 2s. 6d. a ton to be paid by the sugar consumer via the Sugar Board. The hon. Member for Fife, East asked why the board could not step in and help to keep the factory going. That is already the position. The two-part subsidy continued in 1967 and when contracting was almost completed in 1968 the consumers' contribution was raised by 6s., from 2s. 6d. to 8s. 6d. a ton. That 8s. 6d. a ton, as well as the B.S.C. transport subvention, has continued for the current season.

The result of these incentives is that the subsidy is now running at about 19s. a ton. The acreage has risen from 6,785 in 1967 to 13,620 for the current year.

As I have said, the factory appeared to be in jeopardy in 1966, and it was as a result of representations by the Scottish N.F.U. and with the agreement of Ministers that the Sugar Corporation gave the guarantee that the factory would remain open until 1969 and that its future would depend upon the willingness of Scottish farmers to grow the necessary 16,000 acres.

I have recounted that little bit of history because I wished to put it on record as emphatically as possible that the Government had given every assistance in the last few years, particularly from the transport subvention point of view, to enable the factory to be put on a viable basis. But, despite the increased acreage, the losses have continued to be very substantial indeed. They were given the other day—

Sir J. Gilmour

It is true that the Government have given assistance, but two-thirds comes from the British Sugar Corporation.

Mr. Millan

I have given the figures. It is less than two-thirds. The 19s. breaks down to 10s. 6d. from the B.S.C. and 8s. 6d. through the Sugar Board. The Government were involved, in their relationship with the corporation and the board, in these improved arrangements—just as when the transport subsidy was reduced earlier that was a decision of hon. Members opposite.

Despite the improvement in acreage, the factory ran at a loss last year of no less than £180,000. That includes the B.S.C. part of the transport subsidy, but not the Sugar Board's part, which amounts to £70,000 per year, giving a total loss of about £250,000.

The Corporation has reviewed its longterm programme in the light of the necessity for it to have due regard to commercial considerations imposed upon it by the 1964 agreement. It has decided that it must rationalise its factory structure and that in that rationalisation a factory as small as Cupar—that is, one receiving the produce of only 16,000 acres—can never be made viable.

The hon. Member for Fife, East asked what might happen if we went into the Common Market. The basic answer is that that would perhaps increase the emphasis on enlarging the size of the factory. It would not make a factory the size of Cupar viable in present circumstances.

Mr. MacArthur

rose—

Mr. Millan

Perhaps the hon. Gentleman would allow me to develop the argument. Hon. Members opposite have asked for the figures, and I propose to give them.

The corporation's view is that the Scottish farmers would have to grow about 30,000 acres of sugar beet to provide a sufficient output to make the factory viable. The £1.7 million mentioned by hon. Members is not the sum which would be required to convert the Cupar factory into one which would take the production of an acreage of 30,000, but the amount which would be required to modernise a factory to cope with an acreage of 16,000. On the basis of the figures which I have given, it would be uneconomic to spend as great an additional sum of money as that on a factory which, in present circumstances, could not be made economic.

No hon. Member opposite—and as far as I know this is the general view of the farming industry—has suggested that Scottish farmers could grow 30,000 acres of sugar beet and get a sufficient return to make beet growing competitive with alternative crops. The hon. Member for East Fife, mentioned increased yields because of improved techniques in recent years, but he will know that there have been similar increased yields in the English beet-growing areas and that the gap between the Scottish and English yields is still as great as it was before those improved techniques were introduced. There is a difference in yield of between 20 and 25 per cent. in tonnage terms.

Similarly, Scottish beet has a sugar content which is on average, less than in England, and since the price is adjusted to take account of that, from that point of view it is a less economic crop than it is in England. With the transport subvention the crop becomes an economic one for many Scottish farmers. The subvention made a difference to the willingness of Scottish farmers to grow the crop. It seems unlikely that Scottish farmers would grow even the 16,000 acres without the subvention.

If we were to increase this to something like 30,000 acres, the transport subvention, by and large, would have to be greater, because we would be bringing in beet from a greater distance to the factory. The higher the subvention the less possible it is to get economic operations in the factory. We are in a vicious circle.

With the price offered, a transport subvention is required to make the crop economic for the farmer, but, on the other hand, the subvention is among the factors making the operation of the factory uneconomic from the Sugar Corporation's point of view. It is a dilemma that no hon. Gentleman has seriously faced. It is in those circumstances that, as part of the rationalisation programme, the corporation has regretfully decided, and we regret it very much, that the Cupar factory will have to be closed. The corporation has also made it clear that the rationalisation process would involve factory closures in England, although no details have been given yet.

The reason Cupar is the first to be singled out for closure is simply that it is the least economic factory. The question of total acreage will be decided by the annual Price Review. The closure of Cupar will make no difference by itself, because the acreage will simply be allocated to the other factories concerned. It is fairly clear that, had we looked at this purely from the economc point of view, there would have been a strong case for closing the factory at the end of the 1969 campaign instead of at the end of the 1971 campaign, as has been decided.

We and the corporation are anxious to allow adequate time for the farmers to adjust to the new situation and also to deal with the serious position, which I do not want to underestimate in any way, of the 200 people employed at the factory. It is a pity that this has not been mentioned more today.

I will not go over all the Government incentives available to industry in Scotland, but I would say that we shall be having discussions with Fife County Council to ensure that land is available for incoming industry, and we will also discuss any action that might be taken to ensure that the area is attractive to industrialists. The Board of Trade will also be anxious to bring additional employment to the area. Apart from the normal activities, I would remind hon. Gentlemen that it was announced by my right hon. Friend in the spring, that the Department and the Scottish N.F.U. were setting up a joint working party to provide information to food processors willing to expand in Scottish locations.

Since then there have been a number of initatives, with the food processing industry. Although I cannot say anything definite about this now, in such a matter East Fife is one of the most productive arable areas in the country, and is in a favourable position to attract the interest of food processors. Naturally, the Government and the N.F.U. hope that this initiative will produce results and, if it does, we would like to think that East Fife will share them. As a joint initiative this is well worth mentioning, although I cannot say anything further.

My final point is about the adjustment from the farmers' point of view. All hon. Gentlemen have spoken about the importance of sugar beet as a break crop in Scottish conditions. None of them, however, has mentioned the natural break crops of grass, ladder crops and potatoes which, in terms of acreage, account for considerably more than the 16,000 acres in question. The acreage for the fodder crops is 190,000, for potatoes—it is declining, I know—104,000 acres and for rotational grass, over 1,700,000 acres.

Sir J. Gilmour

Has the Department made any estimate of the capital cost to the farming industry if it has to go into grass and stock it with cattle?

Mr. Millan

I cannot give figures for that. In the overall Scottish context, even if one compares the acreage with the total cereal acreage of 800,000 acres, we are dealing in this problem with a relatively small acreage, although I am not in any way diminishing its seriousness for the farmers concerned.

Mr. MacArthur

My hon. Friend has dealt with the grass aspect. Will the Minister turn his mind to potatoes, to which I referred? Does he believe that we could produce an extra 13,500 acres of potatoes in Scotland without distorting the potato trade?

Mr. Millan

I did not say that. I appreciate that there are difficulties in the potato trade, but reductions in the potato acreage have been considerably greater than the 16,000 acres with which we are concerned today. These processes of adjustment face farmers in Scotland and elsewhere as part of adjustments to changing agricultural conditions. The point I am making is that this is certainly not an insoluble problem in the context of the kind of notice which we have been given for the closure in Cupar.

Obviously, we regret the closure very much, but, for the reasons which I have given, the factory is no longer economic. No serious argument has been put forward, either today or at any other time, to demonstrate that it could be made economic. In those circumstances, closure is inevitable but there is time both for the farmers to adjust to the new situation and for us to use every effort, as we shall, to try to bring new industry to the area. I hope very much that we shall succeed.