SUGAR BEET, SCOTLAND (Hansard, 24 November 1971)

§ Mr. John P. Mackintosh (Berwick and East Lothian)
I raise tonight the issue of sugar beet-growing in Scotland, partly because it affects the farmers in my constituency who grow sugar beet and who are extremely alarmed about the present situation and partly because it raises many much wider issues. In looking at this matter, we have to consider the background.
We have a sugar beet factory at Cupar run by the British Sugar Corporation. This has permitted Scottish farmers to grow this very valuable crop. We must consider the impact on Scotland if this factory closes and sugar beet production ceases in Scotland. The factory has 200 permanent staff and 160 part-time staff, making 360 jobs connected with the factory. The majority of the crop is brought by lorry into the factory, so that it has an effect on the transport industry in the area.
Sugar beet is a labour-intensive crop in which a large number of farm workers are employed and the loss of the 14,000 acres of sugar beet-growing would mean a diminution in the agricultural labour force. Altogether, 100,000 acres of Scottish farm-land are affected by the growing of this crop as a rotation crop in the East of Scotland. Therefore, in every way the cessation of sugar beet production in Scotland would have an immediate effect on the job situation and a very deep effect on the prosperity of the whole farming industry in the East of Scotland.
In the six years that I have represented a farming constituency I have come across nothing which has caused more intense feeling in the East of Scotland than this issue. That is why I make no apology for raising this matter tonight, at a time when, in the next week or 10 days, we have to have a final decision and when, if it is not taken in an affirmative sense, sugar beet-growing ceases in Scotland.
I would point out that at this juncture the Scottish farming industry has not got 1496 any ready alternative to turn to if sugar beet production ceases. Scottish farmers have been told that the acreage under potatoes has to come down; it has to be 87½ per cent. next year of the present level. So they cannot turn easily to further potato production. Again, a number of vegetable processing firms have stopped production in Scotland and the farmers cannot turn to vegetables. This is, therefore, a very serious matter for the Scottish farming industry and affects its whole confidence and resilience when we want to encourage the industry at the time just prior to our entry to the Common Market.
I must bring attention to the fact that this immediately affects jobs in Scotland at a time when we are heading for 1 million unemployed in this country, at a time when we should be doing all we can, and when the Government say they want to do all they can, to stimulate and maintain employment in Scotland.
Let us look at the history of this particular concern. In 1966 the British Sugar Corporation operating the sugar factory at Cupar said that if from 14,000 to 16,000 acres were grown in Scotland, the factory would be economically viable. Given these circumstances, the corporation pressed, and the Government of the day encouraged, Scottish farmers to increase their acreage of beet production to that economically viable level. They pressed and pushed and encouraged Scottish farmers, who increased the acreage under production steadily until it reached the 13,500 acres at which it stands today. Then, suddenly, in 1969 the British Sugar Corporation turned round and said that even with this acreage, it was now not profitable and that, looking ahead, sugar beet was not a viable economic industry to maintain in Scotland. As a result, the British Sugar Corporation announced the closure of the factory in 1971.
I, along with many other Members of Parliament, took up this matter with the then Labour Government and asked them why it was not a viable industry and demanded an independent survey apart from the B.S.C. survey of the viability of the corporation's factory. I was prepared at the time to accept the argument that if it was not economically viable it should not be continued. But we were given no 1497 chance of an independent survey and no chance to attempt to see whether the corporation was efficient and whether it was doing the job properly. We were told that £2 million was needed to modernise the Cupar factory if it was to be made satisfactory.
We were told, accurately at the time, that the Government had to find a transport subvention to allow transport of the sugar beet to the factory and to make production reasonably economical. It was said that no one could suggest that this area of Scotland could compete with the more fertile plains of Lincolnshire and that, in the circumstances, it was reasonable to close down the factory. I was very unhappy about this, and I am particularly unhappy when a monopoly refuses to allow any independent survey of its figures and makes a claim of that kind. Nevertheless, under the last Government, I said that if that was the situation we must accept it. Very reluctantly I accepted the position and urged it upon the farmers in my constituency.
Tonight, when we are discussing the future of the Scottish farming industry and jobs in Scotland, I do not think we want to indulge in too many petty party polemics and make quotations from the speeches of hon. Gentlemen opposite who are now members of the Government, who are now junior Ministers and Whips and Government back benchers. I will not quote the things they said at that time attacking the Labour Government and saying that this closure was unsatisfactory, that it was disastrous and that it was a total depredation of Scottish interests. I shall not bother the House with all that. I simply want to stick to the issue as it stands today and the total change in the situation which has occurred since 1969.
What has happened since 1969 puts a totally new complexion on the situation. First, into the picture there came a consortium of Scottish farmers who said that if the British Sugar Corporation was not capable of running the factory at a profit they—the farmers—would like to look into the situation. The Scottish farmers and the National Farmers' Union of Scotland went into this in great detail.
First, they investigated the profit and loss of a factory in France with an exactly equivalent tonnage. They went into 1498 this in great detail and found that a French factory with exactly the same tonnage of beet sugar available was running at a profit. They then looked around and produced a consortium of Scottish interests—retailing, banking and farming interests—which said it would look into the matter. A survey of the situation in Scotland was commissioned and was carried out by sugar refining experts who came to the conclusion that unlike the British Sugar Corporation, the consortium could make the Cupar factory pay at the rate of between £130,000 and £150,000 a year.
The consortium said that it was prepared to take over the sugar factory and to buy it at a reasonable price agreed by an independent valuer. Moreover, the consortium was prepared to pay the transport subsidy to the farmers. It was asking nothing from the Government. On this basis the consortium was prepared to take over and run the B.S.C. factory in Cupar and allow the acreage of beet-farming in Scotland to continue. This was a totally new situation which should have led the Government to reconsider the whole position and recalculate their attitude.
I have heard it said by certain people that the consortium was not wholly genuine and that some people behind it had ulterior motives for getting into the sugar beet refining industry. This is not true. These suspicions were not founded. I cannot on the Floor of the House reveal the precise names and amounts of money that have been put up by this consortium but it is entirely a group of reliable people, connected with Scottish farming, Scottish banking and Scottish retailing. There can be no possible suggestion that they are unreliable people who do not know what they are about. They are people who have thought about this matter with the greatest care, because if they fail the financial liability is on their own heads. If they cannot produce the goods at the end of the day, only they will lose. I hope that no one on the benches opposite will try to cast any aspersions on the genuine intention of the consortium when it set about this activity.
Let us look at the position when the consortium offered to take over the factory, to run it at a profit and to maintain sugar beet-growing in Scotland. What 1499 has been the attitude and response of the Conservative Government to this offer by private enterprise to run something which was otherwise a Government monopoly and to maintain sugar beet-growing in Scotland? This is the cardinal factor.
The Government have not welcomed it. They have not said, "Splendid, this is what we want. Let us help. Let us draw these people into discussions and bring them together. "The Government have stonewalled. They have pleaded difficulty after difficulty. I have been told again and again that the Government did not go to see the various interests involved or speak to them. Why did they not do so? Why did they not say, "This is a chance to keep this industry in Scotland"? Why did they not help these people and push them along? The Government have done nothing but create difficulty after difficulty all along the line.
Let me deal with the three major difficulties. The first is the question of acreage. On this I am glad to say that the Government came clean very quickly. On two occasions, on 19th October and 16th November when answering Questions, the Parliamentary Secretary and the Minister of Agriculture both stated that the acreage of Scottish beet-growing was not an issue. They said, "This is quite clear. You can have the 14,000 to 16,000 acres you want for growing beet in Scotland." So we can put the problem of acreage aside.
The second difficulty is this. Having grown the beet on those 14,000 to 16,000 acres and produced, it was expected, 22,000 tons of white sugar from the beet, will the Scottish farmers and the consortium be entitled to the overall price accepted by the British Sugar Corporation for their production?
This matter depended on an elaborate question of the negotiated total tonnage for Britain as a candidate applicant for the European Economic Community. It was agreed that we should produce in this country 900,000 tons of refined white sugar, and that has been the position settled by the Government's negotiators in Brussels.
Up to a certain time there was no problem about the Scottish industry because the existing acreage in England, which is 1500 roughly 443,000 acres, produced on average over the years 1965 to 1970 between 850,000 and 870,000 tons of sugar, or between 30,000 and 50,000 tons short of the total that Britain is allowed to produce under the agreement we have made with the Community. There was, therefore, no intrinsic problem in the Scottish 14,000 to 16,000 acres producing an extra 22,000 tons within this quota.
Difficulty has arisen in the past year because 1970 and 1971 have produced bumper crops. In 1971 in particular the crop was so good that the total passed the 900,000 ton limit. The question therefore arose: if Scotland's 16,000 acres contributed to total United Kingdom production beyond the 900,000 ton limit, would this mean that this sugar would not be covered by the overall price guarantee? In other words, would it have to be sold on the open market, some of it at raw sugar prices? If so, the operation in Scotland might no longer be economically viable because the Scottish consortium assumed that the total tonnage that it produced would be sold at the price for refined white sugar.
The real question, however, is that with 900,000 tons to be produced in the United Kingdom as a whole, surely the Government could have given 22,000 tons to Scotland. If the Government really believe in regional policy and in a reasonable share-out, they did not have to negotiate an extra quota for Scotland. They could simply have said, "Scotland will be entitled to 22,000 tons out of the 900,000 tons for the United Kingdom as a whole."
Consider the figures. We are simply asking that out of 443,000 acres we in Scotland should have 16,000, and that out of production of 900,000 tons we should be allowed to produce 22,000 tons. Is this too much to ask?
I have no doubt that the Minister will say, "The contract for beet-growing have been given out in England. We cannot go back on them." But what about the Scottish farmers who were encouraged to put more land into sugar beet production, to buy machinery and to increase output? Are they to be sold down the river at the expense of the English producers? This is the key point.
The third difficulty is the question of the price of the Cupar sugar beet factory. 1501 If the Government were helpful and said that the acreage for Scotland would be allowed and that they would accept the production of 22,000 tons of refined sugar, this question would remain: are the Government prepared to allow the British Sugar Corporation factory to be taken over by the consortium at a reasonable price? This is the 64,000-dollar question, because the corporation has put a price of £700,000 on this factory.
This matter of the price cannot be argued both ways. In the first place the B.S.C. said that the factory was derelict and needed £2 million spent on it to put it on a reasonable footing. In the second place the corporation turns round and says that it is worth £700,000. That is absolute nonsense. How can a factory be worth that much when, if it is not sold, it will have to be knocked cown? In that event the only money that would be returned would be from the machinery, which would have to be dismantled and sold south of the Border, and hon. Members can imagine how much it would fetch.
It has been estimated that between £150,000 and £200,000 would be a reasonable price for the factory, and that is what the consortium is prepared to pay. Indeed, the consortium is prepared to pay whatever sum is suggested as a result of an independent valuation.
On this critical point what do the Government, who are supposed to be interested in Scottish farming and regional development, say? The Under-Secretary said recently that they believed in firms taking their own decisions. He said: What the consortium have asked us to do is to intervene between two commercial firms and persuade one to sell at the price the other is prepared to pay. The Government cannot interfere in this way. Those are the words of the Under-Secretary.
Let us be clear about this. In a monopoly where the Government own 36 per cent. and where they appoint the chairman and two of the directors, they are not prepared to intervene. Right hon. and hon. Gentlemen opposite are not slow to tell the nationalised industries what levels of wage settlements they must aim at. They are not slow to tell the nationalised industries to invest more. 1502 Yet they will not give guidance to a firm in which they own 36 per cent. As shareholders, will not they safeguard public money by trying to get something back for the machinery which otherwise will become derelict? They could get £200,000 from the consortium but, apparently, they prefer to allow it to become derelict rather than dent the B.S.C.'s monopoly.
The present Government are supposed to stand for private enterprise but they say "No" to private enterprise in this industry. They are supposed to be in favour of regional development but in this case they are cutting down on regional economic activity. They are supposed to be the farmer's best friend. In this case, however, they are booting him in the backside.
The Government are turning their backs on all their promises to the farmers. What could they do now? I do not want to be harsh on the Under-Secreary. My guess is that he wanted to save the sugar beet industry. I suspect that the proposal to do so went up to the Cabinet and that the Secretary of State, the greatest loser in the business that Scottish politicians have ever known, lost in the Cabinet. As a result, the Under-Secretary now has to carry the can for him, and I am sorry for the hon. Gentleman. He has to explain why this indefensible position must be maintained.
What could the hon. Gentleman do to dig himself out of this hole? I am not gunning for the consortium to be allowed to carry on. I am gunning for the continuation of this crop in Scotland. All that the hon. Gentleman has to do is to say to the British Sugar Corporation, "You can go on for another two years." At the end of 1974, the sugar position will be wide open. The 335,000 tons provided by Australia will be open to British producers to provide. There will be a great opening for Scottish production after 1974. We want to keep production in Scotland going until then. All that the hon. Gentleman has to do is tell the corporation that it must go on for two years. That is a minor issue compared with the directives which have been issued to public corporations on other matters. He could even ask B.S.C. to lease the factory to the consortium for two years, telling the consortium that it is its own business if it goes bust. He 1503 could say to the consortium, "Make money out of it if you can."
Tonight, Scottish farmers are looking to the Government—

§ Mr. Ian MacArthur (Perth and East Perthshire)
Hurry up and sit down.

§ Mr. Mackintosh
If the Government are not prepared to act now, Scottish farmers are in great danger. At the moment they have vacant fields. Within a week or two they have to decide what crops to plant. If the Government are not prepared to help in this matter, they will not be readily forgiven by Scottish farmers.

§ The Under-Secretary of State for Home Affairs and Agriculture, Scottish Office (Mr. Alick Buchanan-Smith)
I begin by congratulating the hon. Member for Berwick and East Lothian (Mr. Mackintosh) on raising this matter, though I must say that if he had wanted some of his points answered he could have left me a little more time than about nine minutes in which to do so.
There has been no question of the Government stonewalling on this matter. We are equally concerned, and we believe that our policies on agriculture in Scotland show that we are far more concerned than the hon. Member's Government were when they were in power. If I may, I shall go through the record and try to correct some of the false impressions that the hon. Gentleman has left with the House. I hope that by doing so I shall help hon. Members to understand what has taken place.
Before coming to that, I should pay tribute to my hon. Friend the Member for Fife, East (Sir J. Gilmour), who has been extremely active at all stages of the matter over a number of years in trying to preserve this industry for his constituency. I also commend to hon. Members the active interest of other hon. Members. My hon. Friends the Members for Perth and East Perthshire (Mr. MacArthur) and South Angus (Mr. Bruce-Gardyne) have been especially active over this matter in recent weeks.
I must come back to the fact, which the hon. Member for Berwick and East Lothian recognised, that the original decision to close the factory was taken by 1504 the British Sugar Corporation in July, 1969, with the agreement of the then Labour Government. At that time we undertook to take a fresh look at the decision and to review it. After very full discussions we reluctantly had to conclude that there were not sufficient grounds for reconsidering it.
The hon. Gentleman mentioned a number of factors which influenced the British Sugar Corporation's original decision. It is right to remind the House of them to keep the record clear. First, the corporation was suffering losses at the factory at the rate of £180,000 a year. Secondly, to bring the factory up-to-date with modern equipment and make it viable for a longer period, the corporation reckoned that it would need an investment of £1.7 million, or £2 million at today's values. Thirdly, it pointed out that the average yield per acre in Scotland was about 20 to 25 per cent. lower than in England. Finally—we must remember that sugar is a sunshine crop—the sugar content of the beet in Scotland is lower than that further south. That was the position at the end of last year.
In December last year the proposal came forward for the operation of a sugar beet processing factory at Cupar independent of the British Sugar Corporation, and the Farmers Supply Association of Scotland, Ltd., expressed a wish to undertake a feasibility study.
The conclusion of that study was basically twofold: first, under certain conditions operations at Cupar could be viable; and second—a point which the House must not overlook—the British Sugar Corporation was right to contend that under its commercial requirements, the Cupar factory was not a viable proposition. It is important to remember this point, which came out of the consultants' report.
The study was presented to the Government at the end of June. Although at that time we recognised that there were certain technical hurdles, we believed that there was sufficient optimism to justify asking the British Sugar Corporation to discuss the project with the sponsoring group which has become known as the consortium.
I met representatives of the consortium on 4th August. At that meeting I undertook to facilitate discussions with 1505 the corporation. On 11th October, nearly two months later, I was told by the consortium that the project required three conditions: first, an adequate allocation of acreage; second, that the Cupar factory should be allowed to produce and market 22,000 tons of white sugar; and third, that the price of the factory should be in line with the figure in the feasibility study.
I should make clear at this stage where we stand on the issue. There is no question of stonewalling or of trying to hide behind anything. The position is absolutely clear.

§ Mr. Harry Ewing (Stirling and Falkirk Burghs)
Will the hon. Gentleman give way?

§ Mr. Buchanan-Smith
No, I will not give way.
On 4th August we indicated to the consortium that acreage was not a serious problem. My hon. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food confirmed this in the House on 19th October. At the meeting on 4th August I also made it plain to the consortium that concerning the production of white and raw sugar, it could not expect to operate on a more favourable basis than the British Sugar Corporation.
On 1st November we again met the consortium and the Scottish National Farmers' Union. At that time my right hon. Friend the Secretary of State for Scotland made it clear that viability depended on the price of the factory and the plant. As was said earlier, we believed that this was essentially a transaction between two commercial organisations and that it would not be right for the Government to intervene.
I should like to make the Government's legal position quite clear. The corporation is a publicly-quoted company, with 65 per cent. of its shares in private hands. Apart from our belief that it is wrong to intervene in a commercial matter such as the sale of a factory, it is not possible for us to do so. We have no power to appoint an arbiter; no power to direct the corporation to undertake a particular commercial operation; no power to direct it on how it should dispose of its assets; no power to pay out of public money the differences in commercial valuations. Where we have 1506 power, or even a reasonable discretion, to act, we have at all stages declared our willingness to do so.
I come to the main points of difficulty, beginning with acreage. We made it quite clear as long ago as last August that the Government were prepared to use their powers under the Sugar Act to ensure that acreage was made available in Scotland without reducing that available in the South to the Corporation.
On the questions of the balance between white and raw sugar and the restrictions of total domestic output of white sugar from beet, I have two points on what the hon. Gentleman has said. First, the agreement on how it is split up is an agreement between the refiners, to which the Government are not a party, and the relevant international agreement is the Commonwealth Sugar Agreement. Second, about one-third of the raw sugar produced from beet is refined by the cane refiners.
To be viable, the consortium has told me that it would have to produce a higher proportion of white compared with raw sugar than the corporation does now. In effect, it has asked for a guaranteed output. In other words, it expects to operate in more favourable circumstances than the corporation or the other refiners. We have said that we can allocate acreage to Cupar, but what we cannot do is to create unrealistic conditions to favour the consortium. I made that clear in August.
There has been controversy on the question of the access to the factory. We indicated last August a willingness to facilitate the negotiations with the B.S.C. This was again emphasised on 1st November, and within the past week I have asked the chairman of the consortium whether he wanted action on my part to help, but I was told that it was not needed at this stage.
I hope that in the short time tonight I have managed at least to set the record straight and—