HC Deb 13 July 1987 vol 119 cc817-34 11.45 pm
Mr. Colin Shepherd (Hereford)

It was with some relief that I learnt that the subject that I had chosen had come third in the batting order and we still had not reached midnight before we started this debate.

My purpose in raising the question of the United Kingdom sugar beet quota is to give strength to the elbow of my right hon. Friend the Minister of Agriculture, Fisheries and Food when the next round of negotiations gets under way later this year for new quota levels. As my right hon. Friend was involved in the last set of negotiations, he will recall that quotas were fixed up until 1988 only so that developments in sugar consumption and distribution of producer levies could be assessed. As the Commission is expected to put forward its proposals in September and the House is about to adjourn for the summer, now is the appropriate time for the House to make its views known.

My hon. Friend the Under-Secretary of State will be aware that the present distribution of quota reflects the negotiations between the original six members of the European Community. That quota has never been fully revised to take account of United Kingdom membership. It is also worth noting that major sugar exporters, such as Belgium and France, have quotas equivalent to twice their domestic consumption. The United Kingdom must make do with a quota equal to only half its consumption.

United Kingdom sugar beet growers also recall that, at the review in 1981, they lost the ability to grow beet to the extent of more than 182,000 tonnes of sugar—a reduction of 13.7 per cent. Although it is correct that until that time the United Kingdom sugar beet industry did not fulfil its quota, for a variety of reasons, the substantial investment made by the industry in the past 10 years has meant that the United Kingdom quota has been met in full every year since 1981. There is now capacity to produce 1.5 million tonnes. Moreover, British Sugar is arguably the most cost-efficient producer in Europe.

In the light of that and the geographical factor that British Sugar is located in one of the few countries in which there is likely to be a substantial increase in sugar usage by the chemical industry, surely it is right to argue for the introduction of a margin of flexibility in the quota system to allow for differing efficiencies and demand prospects, and to reflect British circumstances.

With regard to demand prospects, the United Kingdom has one of the largest chemical industries in Europe. It is a world leader in the development of biotechnology. I am sure my hon. Friend will agree that biotechnology is one of the leading edge technologies in which an advanced industrial nation such as Britain cannot afford to fall behind.

It is clear that the European Commission recognises the importance of encouraging biotechnology, from the introduction of its scheme to make sugar available at close to world prices for new chemical industry developments. As anticipated, the chemical industry has waited for the greatest price reductions before buying sugar in any quantity. That quantity is now starting to increase.

The European chemical industry forecasts a sixfold increase from the present sugar usage of 80,000 tonnes annually to a new level of 500,000 tonnes in the early 1990s. The Chemical Industries Association Limited has estimated that its current usage of 25,000 tonnes will increase to 150,000 during the same period.

I believe that ICI is investigating the feasibility of a plant in Britain to manufacture biodegradable plastic, and that Sturge is currently investing some £30 million in a new citric acid manufacturing facility at Selby in Yorkshire. Other plans for diversification by British Sugar, using sugar as a base, are as widespread as to include animal and food proteins, biodegradable plastics, polymer bulking agents, natural flavours, natural pharmaceuticals and substitutes for oil-based materials used in the production of polyurethane and bakelite.

As a major part of Europe's biotechnical research takes place within the United Kingdom, it will be especially galling if, as a consequence of there being no spare domestically produced sugar, the actual physical facility for making the product of that research is to end up being located other than in the United Kingdom. Given the size of the potential investment, the fear must be that the chemical industry will locate bulk manufacturing facilities on the continent, where there is a great deal of spare sugar. Apart from the high unit values low volume products, the industry will not be able to afford to transport sugar from the continent because of the significance of the sugar costs in the final pricing of the high volumes low unit value bulk products. Again, from a security of supply standpoint, the United Kingdom chemical industry would not want to be dependent on imported sugar when, by locating in France or Belgium, it can be assured of as much sugar as it will need.

On the distribution of producer levies, it is clear that the present position is grotesquely inequitable to the United Kingdom. As the United Kingdom does not export any of its domestically produced quota sugar, which attacts an export refund, the United Kingdom industry receives no rebate or return on its levy payments. Such exports as the United Kingdom industry makes are re-exports of sugar that has already been imported from the continent. Although statistically it has been needed for the United Kingdom sugar users, who themselves need to be assured of the continuity of supply. Therefore, in effect the United Kingdom's levy payments go to finance the export of surplus sugar by the Community's net sugar exporters, France, Belgium, Germany the Netherlands and Denmark.

Our United Kingdom levies represent a transfer from Britain, whose beet quota is equivalent to only half its consumption, to countries such as France and Belgium, whose quotas are twice their consumption. Britain does not contribute to the Community's surplus of quota sugar, but ends up paying some 9 per cent. of the levies raised from the EEC sugar industry, whereas Belgium, for example, produces 14.5 per cent. of the surplus, while paying only 7.5 per cent. of the producer levies. That is the basis of assessing the United Kingdom's position as being grotesque in respect of producer levies.

It is interesting to note the tight position of the United Kingdom's supply position for sugar. In recent years, as British Sugar has demonstrated its ability consistently to fulfil its production quotas, industrial sugar users have felt able to reduce their requirements for sugar imported from the rest of the continent and the Community. In the past five years that has halved to just over 80,000 tonnes, and over the same period there has been a dramatic reduction in the "free" sugar stocks in Britain, from almost 200,000 tonnes to an anticipated 49,000 tonnes at the end of this season. As a result, British Sugar tells me that it is operating with barely adequate stocks to cover normal demand before the new season's crop becomes available. To put that into context, that anticipated 49,000 tonnes is equivalent to about one week's sugar consumption. That is hardly an adequate safety margin.

What is boils down to is that the tightness of the United Kingdom's supply situation for sugar means that their is no scope for supplying new chemical industry demands from domestic production without taking sugar from existing users. This has to be an unacceptable position for the United Kingdom to be placed in.

Reasonable fears have been expressed that an increase in the United Kingdom sugar beet production would prejudice the position of African, Caribbean and Pacific sugar in the British market. While it is interesting to note that five of the 16 ACP states with current sugar quotas must import sugar from the world market in order to release their domesic product to fulfil their preferential quotas in the EEC, it is also the case that the ACP quota has been enshrined in the Lomé Convention and can be changed only by political decision by all signatories to the convention. It is also the case that the British beet quota is being fully filled by domestic production, with there being yet additional capacity.

However, it is important to point out that an increase in the United Kingdom quota to cater for the needs of the emerging bio-technical industries depends on the continuation of the ACP quota at its current level. If the quota decreases, any increase in the beet quota will have to be diverted to traditional sugar users to make up the shortfall, thus destroying the security of supply that the chemical industry will require if it is to set up plants in the United Kingdom in the first place.

British Sugar has assured the Government that it will export any new quota sugar for which the expected increase in chemical industry demand has not yet come through. It would not be placed on the British market so as to weaken the position of ACP sugar. British Sugar's track record on exports is encouraging, in that during the early 1980s a surplus in the United Kingdom market brought about by imports from the continent was successfully exported by British Sugar without disturbing the position of ACP sugar in the market.

The value of a comparatively small increase in the United Kingom sugar beet quota is considerable to the United Kingdom. In industrial terms, the bio-technology prize must not be allowed to slip away. In agricultural terms, sugar beet production is the second most profitable, large-scale arable crop and is the most consistent in its profitability. It forms an alternative to other crops, which is of inestimable value for the rural economy. Many hon. Members present have constituents such as mine which depend on the continued development of the sugar beet crop and they would welcome the ability to produce a little more.

In employment terms, it is interesting to note that the University of East Anglia estimates that for each job in British Sugar another seven jobs are supported in the rest of the economy, and that for every 100 tonnes included in the quota, three jobs will be created. That shows that if we could get a further 150,000 tonnes, another 4,500 jobs in the sugar industry would be created even before we consider the ramifications for the biotechnological industries.

In terms of fairness in respect of the levy position, the case for an increase is, again, strong. The decision in 1985 to fix quotas up to 1988 only has, in the light of developments both in the market and technology, been shown to have been right. Now is the time to ensure that the United Kingdom has a fair opportunity to share in these developments as they progress, and a relatively modest increase in quota will be helpful in achieving just that. I know that my hon. Friend the Parliamentary Secretary and our right hon. Friend the Minister will be determined to address this problem in the negotiations to come.

11.58 pm
Mr. Michael Lord (Suffolk, Central)

I should like to stress the need for the extra quota of 150,000 tonnes to come to the United Kingdom. No hon. Member can be unaware of the problems facing agriculture in all sorts of ways or of the problems of surplus and the need for us to find alternative crops. Farmers desperately need to grow a crop which they can grow well, which is not in surplus and which has great potential. So far as I can see, sugar beet appears to fit the bill.

I am greatly concerned at the moment about agriculture in general, because I think that the industry has reached a point at which it will have to decide what direction it must take. I believe that all industries go forward or backward and they rarely stay in the same place for very long. Agriculture is now in grave danger. As my hon. Friend the Member for Hereford (Mr. Shepherd) has explained, so much in the rural areas depends on agriculture, not just directly on farming, but on all the associated industries. It is crucial that farming should continue and it is no more crucial than in the area that I represent and in East Anglia where farmers are very worried about the direction which farming might take.

Agriculture has been an object lesson in efficiency and it stands comparison with any other industry. I want to refer to my experience in the sugar beet industry. I do net know how many other hon. Members share my experience, but I remember many years ago walking behind a sugar beet drill as the seeds were put in and the drill was drawn by a marvellous grey Percheron. Grey I may be, but I am not too old to remember that: indeed, it did not happen so long ago. That gives us some idea of the strides made by the industry, which is the most efficient in Europe and probably the most efficient in the world.

Like an efficient engine, I believe that the industry is now up against the buffers of the common agricultural policy and it badly needs new outlets and ideas. We cannot get away from the fact that the medium in which agriculture works is soil. Farmers must grow crops. Yes, there may be alternative enterprises such as forestry and woodland and nothing could be nearer to my heart with my experience and fondness for trees than for us to grow more trees in this country. That is a good idea, but it is a long-term prospect. Other enterprises must also be considered because farmers now must consider themselves as business men as well as farmers. They must apply themelves to other alternatives and I am sure that they are doing that. Unless large quantities of land are taken permanently out of agriculture for housing, which on any kind of scale would be extremely ill-advised, land must grow crops.

The combination of the new biotechnology involving sugar capable of giving us biodegradable products is heaven-sent for those of us who care about the environment, commerce and jobs. The developments are extremely exciting for both those areas and we must grasp the opportunities with both hands.

I want to consider briefly the question of fairness. My hon. Friend the Member for Hereford drew the Minister's attention to the history of quotas and the present imbalances and inequalitities in the EEC. Nothing incenses our farmers more than a sense of injustice and that sense of injustice is all too often engendered by the machinations of the CAP. I understand the great difficulties facing the Minister, given the overall surplus of sugar in the EEC. I urge the Minister and his team to fight for our farmers, for fairness and for an increased quota when they go to Europe.

12.5 am

Mr. Geraint Howells (Ceredigion and Pembroke, North)

As far as I am aware, there are no sugar beet growers in Wales—although there may be a few. Many of us who farm in the Principality, however, are dependent on sugar beet to feed our sheep in the winter. It has proved a very successful method of feeding them during the hard months that we get on the hills.

My purpose in taking part in tonight's debate is to support the hon. Member for Hereford (Mr. Shepherd), who, I think, has made a very good plea on behalf of this country's sugar beet growers. I should like to ask the Minister a few probing questions. Many farmers in west Wales are very worried about the present milk quotas. They believe that British farmers are not competing on equal terms. I want to ask the Minister this question: do British sugar beet growers compete on equal terms with their counterparts in the EEC?

I believe that the Minister's negotiations and deliberations will succeed in persuading the other EEC Ministers to give British farmers an extra quota. But let me ask a question similar to those I have asked on milk before. If a young farmer in this country was very keen to start growing sugar beet, is there a quota that he could get from the British Sugar Corporation? I believe that there are many young entrants into farming, and that we should be able to help them. There should be an extra quota somewhere within the system to help youngsters who want to start on their own.

However, the main question is parity within the Community. I hope that, by saying a few words tonight, those of us who are far away from the sugar beet growing area of this country can help those who, one day, may in turn help the dairy farmers of west Wales when they too are in need.

12.7 am

Mr. Michael Brown (Brigg and Cleethorpes)

The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) has correctly identified the problem that my hon. Friend the Member for Hereford (Mr. Shepherd) so ably outlined in his excellent introductory speech. I congratulate my hon. Friend on securing this important debate.

We have had the opportunity from time to time to consider sugar beet production in this country, and I have had the privilege of addressing the house on the subject before. I now have interests to declare: the British Sugar Corporation factory in Brigg, which is the largest employer of labour in the town, and the large number of sugar beet farmers in my constituency. As my hon. Friend the Member for Hereford said, for every one person employed in a British Sugar Corporation factory, up to seven jobs have been derived in the country's sugar factories. Sugar beet farming is an important part of the rural economy for many of us who are here this evening.

The hon. Member for Ceredigion and Pembroke, North made a very important point. I have a table, of which my hon. Friend the Parliamentary Under-Secretary—who, I am delighted to see, will respond to the debate—will be aware. It is a simple chart showing EEC beet sugar production quotas as a proportion of consumption by member states. The figure that jumps out at me—this is something that I have never been able to understand—is the quota in the United Kingdom: 1,144,000 tonnes of white sugar. Yet United Kingdom consumption is 2,256,000 tonnes. Quota represents only 50.7 per cent. of consumption. I am referring to beet sugar. However, as a percentage of consumption, the quota is 222 per cent. In France it is 199.5 per cent. Therefore, the case for a fair deal for the British sugar producer, sugar beet farmer and sugar factories is overwhelming. Britain is producing only 50 per cent. of its sugar quota. Therefore, equity demands that British Ministers should speak up for the British sugar beet industry in the European Community. When the United Kingdom quota is renegotiated, it is imperative that British Ministers should bang the table hard for the United Kingdom sugar producer and the beet farmer.

My hon. Friends have already said that the sugar beet industry's request is for a modest increase of 150,000 tonnes in the United Kingdom quota. Ministers should put such a reasonable and modest demand before the Council of Ministers on the ground that, in equity, the imbalance in the United Kingdom's quota, compared with the rest of Europe, should be rectified. Indeed, it is vital that Ministers should do so because the United Kingdom is the only major European Community country whose sugar beet production quota is less than its sugar consumption.

Even allowing for imports of ACP sugar, the United Kingdom is barely self-sufficient at the existing levels of sugar consumption. However, the United Kingdom is facing an important increase in sugar consumption, because of the needs of the chemical industry, based on its European leadership in biotechnology. I enjoy the privilege of having an ICI subsidiary factory in my constituency. Together with other chemical industries in this country, ICI wants to play a leading role in biotechnology. However, it must know that beet sugar will be available so that it may make the long-term investment that is required. The United Kingdom has been denied the marginal increase in its sugar quota that it needs to meet this genuine new demand, while other EEC countries, whose needs are not so great, had major surpluses of quota sugar which had to be exported. The United Kingdom was obliged to fund those exports through its producer levy contributions.

The United Kingdom sugar beet industry is looking for fair treatment in Europe so that it is not denied the opportunity to create a new chemical industry, based on biotechnology at home. I join my hon. friends and the hon. Member for Ceredigion and Pembroke, North in asking the Minister, who is a first-rate Minister, and his colleagues in the Ministry of Agriculture, Fisheries and Food, who have done a superb job on behalf of British agriculture in the past, to ask for a modest quota increase of 150,000 tonnes to cater for this new use.

12.13 am
Mr. Nigel Spearing (Newham, South)

The hon. Member for Brigg and Cleethorpes (Mr. Brown) declared his interest, largely in a sugar beet refinery. As a constituency Member. I must declare mine. The cane sugar refinery at Silvertown in Newham, east London, refines no fewer than 1 million tonnes of cane sugar a year, which is nearly equivalent to the whole of the beet sugar production—approximately 1.2 million tonnes.

My hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman), who represents the only other cane sugar refinery in the United Kingdom, would have been here tonight, but unfortunately he is unwell. His case would have been similar to mine.

The hon. Member for Hereford (Mr. Shepherd) asked why we produce only half the sugar that we consume. The answer is that historically—and I believe rightly—there has been a national policy since the early 1930s to produce sugar in this country from sugar beet instead of relying wholly. as we did, on Commonwealth imports. That balanced arrangement continued successfully until 1974, when, having entered the EEC the year before, the Commonwealth sugar arrangement fell and new arrangements had to be made. The quota arrangements, of which Conservative Members have made some justifiable criticisms, came into vogue at that time.

I shall now make a point with which I am sure Conservative Members will agree. Britain is the only country in the EEC that imports large quantities of cane sugar. France imports only a small amount from its Departement Outre Mer, which for fixing purposes is part of domestic France, although that is the West Indies. We do that for a number of reasons. First, we do it as a moral responsibility to our overseas partners in the Commonwealth and the Third world. That is recognised throughout the EEC, and I am glad to see Conservative Members nodding in agreement. It is an undertaking on behalf of the EEC, although we have a part to play in it.

Employment in the cane sugar refining industry in the ports has been reinforced by two resolutions of the House: first, on 11 November 1974; and secondly in December 1985. The first resolution emphasized: The continued existence of and employment in the port sugar refining industry of the United Kingdom, or for securing long-term supplies of domestically refined cane sugar at a fair price to consumer and producer. That was reinforced by a resolution of the House on 2 December 1985 in an amendment that was moved by my hon. Friend the Member for Greenock and Port Glasgow to take account of the interests of both producers and users of the products concerned and fulfil the objectives set out in the Resolution of the House relating to sugar supplies of 11 November 1974. The hon. Member for Hereford dwelt on this matter and rightly reminded the House that part of the Lomé arrangement—it is an adjunct to the renewable treaty—is the arrangement to which I have referred.

The problem with what Conservative Members have said is that there appears to be a statistical imbalance between what is open to British agriculture and what is open to the French in particular. The problem is compounded by the figures. As I understand it. EEC production of beet sugar is about 13.6 million tonnes in white sugar equivalents, but the consumption, including that of the United Kingdom, is only 10.6 tonnes. In other words, there is a surplus production of about 3 million tonnes, which is just under three times the amount of imported cane sugar. While there is criticism from some European beet farmers of cane imports, it is a relatively small proportion, not only of the consumption of the EEC but of the total available surplus.

The problem is how to maintain our moral responsibility and the long-term agreement to which we are all committed; provide pricing arrangements for the refiner's margin and the extra cost of shipping the cane from places such as Fiji, Mauritius, Jamaica and other Commonwealth friends, and at the same time make that sugar marketable at a price that is comparable to the beet price in European and United Kingdom markets. That is one of the other aspects of the matter that the Minister will have to see to. Not only is he battling for greater beet quotas; he is having to follow that resolution of the House and the moral responsibility to which the EEC agrees to ensure the refiner's margin. The Minister is aware of that, and the debate is not specifically about cane sugar, so I shall not pursue that matter. I am sure that the Minister will renew the Government's commitment to maintain that margin so that the structure continues.

Conservative Members who represent beet-growing areas put the case fairly in some respects. We must recognise that there is a certain resistance, perhaps from those who ultimately pay or consume, to increasing the amount of beet sugar that goes into chemical stock above the present surplus. Some people might think that it is not good policy, especially in the northern parts of Europe, where there is less sunshine, to grow beet sugar that is refined, at some expense, and then becomes chemical feedstock. This is a little unusual from the point of view of conservation and, ultimately, of the good use of land. I know that there are surpluses, but Conservative Members face the problem of persuading our continental "partners" that it is their surplus that should be used for that burgeoning chemical use about which we have all heard, and that they should voluntarily transfer some of their surplus beet production to the United Kingdom.

Why would those continental countries give up any of their existing national quotas to increase United Kingdom acreage when they already have a surplus? In equity, of course, they should, but I suppose that equity is the United Kingdom's strongest argument. The EEC is on a ratchet. The answer to the questions aked by some Conservative Members lies in the fact that, even before Britain became a member of the EEC, the Agriculture Ministers built in a surplus when the beet quotas were agreed. Instead of each national arrangement balancing out, as the United. Kingdom's wisely did under the Williams arrangements from the 1930s, other countries, especially France, had a surplus that was built in by a political arrangement. I believe that the facts will show that that is so. It is at least an argument why, in equity, British beet producers should share in the ill-distribution made at the beginning. especially as we are discharging our responsibility, and wish to continue to do so, to the Third world and our Commonwealth colleagues.

The moral commitment to the Third world is shared by us all. The pricing arrangements to assure the margin for cane sugar refiners at the ports and the price paid to our Commonwealth producers so that they can continue to produce must be viable. It is no use having a quota of 1.3 million tonnes if the price prevents our Commonwealth colleagues from producing. At the same time, we should promote an agricultural regime that is equitable in the sense that I have outlined. I hope that in Brussels the Minister will respond to his hon. Friend's requests and ensure that the refiners' margin and the price paid, not only in this quinquennium but in those that follow, enable the resolutions of the House to be fulfilled.

12.24 am
Mr. Stuart Randall (Kingston upon Hull, West)

This is a splendid opportunity to get over the point about biotechnology and the need to increase quotas. We are all here to support our industry, to back Britain and to ensure that, where there is inequity, it is overcome. We know that there are historical reasons for it, but Belgium and France seem to have huge production quotas in proportion to demand which seems unfair.

I was interested to hear what the hon. Member for Hereford (Mr. Shepherd) said about the increase in demand from biotechnology, which uses sugar for chemical non-food processes. I hope that developments proceed successfully in Britain. I wonder whether there is too much optimism about biotechnology as the EC proposals amount to only 300,000 tonnes by 1992, which is a tiny increase. There are problems to overcome in biotechnology, but I am glad to hear that we have a British company doing research.

Although the rate of development might not be as rapid as many people expect, the opportunity for job creation is important and welcome. I wondered whether there was some devious motive behind the debate, but the hon. Member for Hereford made a straightforward case. I am anxious that there should not be pressure on ACP imports of cane sugar in the negotiations.

The ACP countries depend on exports of about 1.1 million tonnes of cane to the EC for a considerable amount of foreign exchange. They are principally the West Indies, Fiji and Mauritius. I should like the Minister to give a commitment that nothing in the negotiations could lead to that figure being reduced. I appreciate that the levels were established under Lomé, but I should like an assurance that the Minister of Agriculture, Fisheries and Food and the EC are not thinking along those lines.

Mr. Michael Brown

I can probably reassure the hon. Gentleman. He will probably realise that the Lomé convention can be changed only with the agreement of all the signatories to the convention. That may give him the reassurance that he seeks.

Mr. Randall

I appreciate that that is the mechanism, but all things can be changed. I ask the Minister for an assurance that that sort of activity, or the lifting of the foundation stones, will not take place because of the inequities that exist and, therefore, the pressures from our own industry. My main concern is for the ACPs, the poorer countries of the Third world, and whether we are being optimistic about the effect of biotechnology and of those small quota arrangements.

British Sugar has had a superb opportunity to put its case. A company does not usually have the opportunity of having a one-and-a-half hour debate on a matter of this sort. Obviously everyone except myself has been briefed up to the eyeballs. The important thing is to make sure that we back our own industry and that opportunities are created for developing it. The Opposition will be supporting it.

12.30 am
Mr. Henry Bellingham (Norfolk, North-West)

We all share the concern voiced by the hon. Members for Kingston upon Hull, West (Mr. Randall) and for Newham, South (Mr. Spearing) about the ACP or Third-world countries. We realise that there is a moral and legal obligation towards them, but one thing that stands out sharply, which was mentioned by my hon. Friend the Member for Hereford (Mr. Shepherd), is that, of the 16 ACP countries, five have to import sugar from the world market to match their share of EC quota. That is outrageous and something ought to be done about it. When the Minister winds up, I hope that he will be able to deal with that. Why are we being so weak and pathetic over that matter? It is costing many jobs in this country. We obviously have that moral obligation. No one here wants to sabotage the Lomé convention. We realise the importance of it, particularly so far as jobs in Newham, South are concerned. I have a sugar factory in my constituency, and I was interested to hear the figures given by the hon. Member for Newham, South.

I join my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) in congratulating my hon. Friend the Member for Hereford on securing the debate.

I do not think that we have been briefed up to the eyeballs. I certainly have not been briefed at all. I do not know where the hon. Member for Kingston upon Hull, West got the idea that it was all a put-up job. Certainly the point that my hon. Friend the Member for Hereford made about the number of jobs being created being a factor of seven for every job in British Sugar would mean that in my constituency British Sugar either directly or indirectly in the past 20 years or so, has created more than 1,400 jobs, which is a very considerable input into the local economy. That shows how important the whole area is to Norfolk, and to west Norfolk in particular where many small farmers at the moment rely to a large extent on sugar beet. I am talking about the smaller farmers because the larger farmers certainly have more of a cushion to survive difficult times. People seem to think of Norfolk as being a county of large farmers, but there are many small farmers who rely to a considerable degree on sugar beet. If they could be allowed to grow just a little bit more, it would make a tremendous difference.

We had an interesting tour de force by my hon. Friend the Member for Suffolk, Central (Mr. Lord), who took us down memory lane. My memory does not extend that far, although the grey hairs are coming. It was a thoughtful and penetrating speech that reflected the concern of many of us on the Government side of the House for farmers in our constituencies, who are the fabric of rural constituencies, and for jobs in rural areas. Even in Norfolk where there are many light manufacturing industries and where there is a big growth in the service and tourist sectors, a large number of jobs are still totally dependent on agriculture. We have heard of many different schemes and ideas. My hon. Friend the Member for Suffolk, Central mentioned some of the ideas put forward by the Ministry of Agriculture, Fisheries and Food. One thing that it could do that would make a profound difference to the confidence of farmers throughout the country especially in areas where a lot of sugar beet is grown would be to increase, even modestly the United Kingdom quota. I hope that the Minister will take that on board. At one stroke he could achieve an enormous amount. In that one small stroke he could achieve more than would be achieved by any number of set asides, schemes to encourage forestry or schemes to encourage amenity and small businesses in rural areas, laudable though those schemes may be. I urge that on him to a great extent.

The case is strong. One has to bear in mind the points that have been made already about where the United Kingdom stands in relation to other European countries. My hon. Friend the Member for Brigg and Cleethorpes quoted an interesting set of figures. I do not know where he got the table from. He must be the only one who came here with a brief. The figures show the disadvantage at which the United Kingdom finds itself. We must bear in mind the fact that in 1981 the United Kingdom suffered a cut on the most spurious of grounds. I have never quite been able to work out why the United Kingdom suffered that cut. However, it was manifestly unfair, and surely now the time has come to reverse that.

The hon. Member for Newham, South mentioned the dilemma in which the EEC finds itself in terms of equity and how it would be equitable for European farmers to give up quota to the United Kingdom. That is probably pie in the sky. However, if there is an increase in quotas overall it will not cost the EEC anything at all. Of all the agricultural regimes in the common agricultural policy, the one that is totally self-financing is the sugar beet regime. Therefore, a small increase for the United Kingdom, and perhaps a small increase for other EEC countries, would not cost the national taxpayer or the EEC taxpayer one penny. The regime has been cleverly tailored so that it is entirely self-financing.

Mr. Spearing

The hon. Gentleman may be correct, but I understood that there was a storage levy. If there is greater production of beet in the whole Community, the levy for overall storage from one campaign to the next might wit go up. I may be wrong about that. I am willing to concede that in terms of export restitution it is different, but there is quite a bit of public money involved if one looks at the matter in overall terms.

Mr. Bellingham

I do not know the exact answer to that. The Minister may be able to put us right but my understanding is that, given the situation raised by the hon. Member for Newham, South, it would be British Sugar that would be paying more. It would greatly reduce its overall profit.

Mr. Tim Boswell (Daventry)

It is a producer levy.

Mr. Bellingham

My hon. Friend is right. The taxpayer would not have to dip into his pocket any more if there was an increase in quota.

The points about the chemical and biochemical industry have been made clearly. There is a great opportunity for the United Kingdom in biotechnology. If plants were located away from the United Kingdom in Europe on account of that fact that there was not a ready supply of sugar available on the doorsteps of the plants that would be a tragedy. I understand that the United Kingdom Chemical Industries Association has predicted a six-fold increase in the need for sugar from roughly 15,000 tonnes to getting on for over 125,000 tonnes per year by 1991. That is a big increase.

On all those points we have a strong case. I join hon. Members in urging the Minister to push the United Kingdom case as hard as possible. He should kick over traces, sit on the table—not break it—and do his best to put the case for the United Kingdom farmer. He should bear in mind that he could do more good by a modest increase in the United Kingdom beet quota than a whole panoply of other measures. I hope that he takes that on board.

12.39 am
Mr. Tim Boswell (Daventry)

I begin my remarks by congratulating my hon. Friend the Member for Hereford (Mr. Shepherd) on introducing the debate, on his timing and on the substance of his speech. It is appropriate that we should encourage the Government to address such matters in good time before the negotiations take place and before the Commission makes its proposals. I, too, say to the hon. Member for Newham, South (Mr. Spearing) that the House has no interest in creating a conflict of interest between beet growers and the cane industry. It is essential to proceed on the basis of mutual interest.

As to who was or was not briefed, there may have been certain domestic difficulties to be sorted out amongst Opposition Members. I do not know whether that had anything to do with the matter. My basic interest derives from some years back through my having worked with the Ministry of Agriculture, Fisheries and Food as its special advisor. Some hon. Members will know that I am also a farmer, but I am not a beet farmer. My family gave up beet farming roughly at the time when my hon. Friend the Member for Suffolk, Central (Mr. Lord) was plodding behind his Percheron. We cut the beet tops off by hand, but we gave it up a long time ago.

I hope that it reinforces the points that need to be made if I tell the House that we in Daventry have a virtually insignificant constituency interest in beet growing, lying as we do between the eastern factories of Peterborough and the west midlands. Little beet is grown at any one time in my patch. Nevertheless, for many reasons, we have a proper interest in the subject of the debate. The first reason, as some hon. Members have said, relates to employment, which affects us all. The second reason is the importance of creating and sustaining as many hectares of arable land for alternative uses to cereal production as we possibly can. That goes to the heart of the need to expand our beet quota when we can do so.

There are two specific points. The first was eloquently touched upon by the hon. Member for Ceredigion and Pembroke, North (Mr. Howells). He mentioned the benefits to the farming and livestock industry, which is or interest to me also, in having a supply of beet pulp. British Sugar is the third largest manufacturer of animal feedstuffs in the country—that fact surprised me—and about 85 per cent. of its total production now goes outside beet growers to other livestock farmers. It is as important to my farmers as it is for people in the eastern counties that as much feed as possible should be available. It is an excellent feed.

It is important for the whole industry to draw on the example of plants such as the ABR chemicals plant at Corby, which is just outside my constituency. That plant. is able to use modern technology to separate wheat feedstock, make the best product and add value to it. That is highly relevant to increasing farmers' returns and the saleability of their product. As in Corby, modern developments in biotechnology in beet production, sugar and related products are highly relevant to the tenor of agriculture.

There is an unfortunate background to the negotiations. At the time of the 1980 negotiations and the 1981 quota quinquennium, this was the worst possible background against which to conduct a European negotiation. There were two reasons: first, we tended to decline as a producing country during the immediately preceding years, and we threw away one of our negotiating counters. Secondly, at that time and since, a high proportion of the European beet crop had to be exported. Therefore, it was a natural ploy that was carried out, to deprive us of a proportion of our quota. The industry has not yet recovered from that blow.

In the meanwhile, we have two major encouraging changes in the situation. First, the British beet industry and sugar industry have had good performances over the past quinquennium in fulfilling their quota, increasing their productivity and reducing their costs. The second change, which we should take back to Europe, is that we now find the potential for an enlargement of the whole market.

When I was in MAFF I was worried about the impact of concern about diet and health on the consumption of raw sugar. It now seems to have stabilised in a healthy way and there is the possibility of an additional demand for new uses. Europe recognised the new situation to some extent by the introduction last year of provisions for chemical sugar, which recognises the principle that new industries based on new technology should, wherever possible, take place and be founded within the Community, rather than abroad, exporting products into the Community.

We are asking the Government to work on behalf of the industry to see that Britain gets its proper share of the action of these new developments. Nobody can be certain of the exact level or timing of them—it may well be that quotas will have to be adjusted or modified as they develop. We cannot anticipate how far they will go. If they go slowly, there must be some scope for modulation, but the principle must be established that we need to go forward as the European sugar industry goes forward.

We have two powerful moral claims on that. First, we are not talking about increasing over our historic quota level; we are talking about working towards a reestablishment of our historic quota. We lost 182,000 tonnes, and the British Sugar Corporation is not indenting for more than 150,000 tonnes, so we are in no sense going above our historic quota. The second point, which has been commented upon inadequately, is that the British consumption of sugar is the largest in the Community. We are significant users of sugar and we have a strong base on which to make our claim.

My hon. Friend the Minister and his colleagues must go in to bat on our behalf on the sugar quota. We have a similar kind of European negotiation on a smaller scale and in microcosm to the issues which have been tackled on a wider scale in relation to the European budget by my right hon. Friend the Prime Minister. She fought both for the equity of the situation and within the context of realism. We are asking the Minister to undertake to go in and understand the reality of the situation and to understand that we did lose ground, but there is now the possibility of the market widening so that we can make a claim to gain more ground, or to regain ground. We must put these points firmly, together with the compelling point of fairness and to stand up for the British industry, which has a rightful claim.

12.48 am
The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Donald Thompson)

I congratulate my hon. Friend the Member for Hereford (Mr. Shepherd) on initiating the debate and I congratulate everybody who has taken part in it. It is flattering to me to see that they are all still in the House, and it must be of great satisfaction to the sugar industry, which is delighted that my hon. Friend has raised the subject tonight.

British sugar beet growers and British Sugar, which processes their beet, have a legitimate interest in maximising production and marketing of this profitable crop for our domestic market. The Government fully share the desire of the House to have a strong and prosperous British sugar beet industry, and we will continue to work for that. My hon. Friend the Member for Norfolk, North-West (Mr. Bellingham), in his usual forthright manner, urged me to work for that, and I can assure him that that is what we will do.

However, that is not the only interest that the Government have to consider. We also take pride in ensuring fulfilment of our long-standing Community commitment to import cane sugar from producers in African, Caribbean and Pacific countries—ACP countries. The hon. Member for Newham, South (Mr. Spearing), who apologised for the absence of his hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman)—we wish him a speedy recovery—made a strong speech on behalf of the ACP countries, to which I will refer as I go through the speech I wrote before I heard the speeches tonight. Fortunately—touch wood—it fits fairly well. The House is going to get it—it fits, and that is better than usual from either this or the other side of the House.

We need a viable cane refining industry, and that industry is itself an important source of employment and revenue, as the hon. Member for Newham, South said. We must also have regard to the interests of British food manufacturers and consumers in supplies of sugar at competitive prices. Finally, we need to take account of the concern of sugar producers throughout the world—mostly in developing countries, including those who do not enjoy privileged access to the Community—at the volume of supplies on the world market. Clearly, the Government's policy on the EEC sugar regime must strike a fair balance between those interests, and that is what we have striven to do in the past.

I wish to say a word about someone who has not been mentioned often tonight—the consumer. Two weeks ago, we finally reached agreement on CAP support prices for 1987–88. For sugar beet, common prices were frozen for the fourth successive year. Over the same four-year period, there has been an increase of just over 1 per cent. in the effective common support price for white sugar. In real terms, the support price for white sugar in the United Kingdom has fallen by more than 10 per cent. since July 1983. That is, of course, less satisfactory to growers. However, even my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown), who is always keen to ensure that his constituents are well rewarded, is not complaining about the income of sugar beet growers. The consumer must be very pleased that the price has remained steady. Sugar remains a relatively profitable crop with available quota keenly sought after, and growers will now have the benefit of the green pound devaluation.

There is to be a review of the Community regime in the autumn, as a direct result of this Government's pressure. Specifically, the Community will need to determine in the review both the A and B quotas for the period 1988–89 and 1990–91 inclusive and the incidence of the various production levies, which are designed to recoup from growers and processors the cost of supporting the Community sugar market. We do not know at this stage, and may not know for some months, what proposals the Commission will put forward on those and other relevant issues. Clearly, therefore, I am in no position to set out the Government's policy on the review. However, I will try to give some indications of our attitude on a number of the points raised tonight.

First, we should consider the balance of supply and demand in the Community of 12 as a whole. Production within both A and B quotas, together with the committed supplies from ACP countries, far outstrips the market available within the Community. The EEC is having to export about 3 million tonnes of quota sugar a year, and these exports can be made only with the aid of large subsidies. The export subsidy has averaged nearly £300 per tonne in the past year, which is about two and a half times the world price. It is true that the Community beet growers and processors themselves meet most of the cost of these exports through the levy system, and it occurred to me as the hon. Member for Newham, South was speaking that they may have done that originally because they knew that they would be in surplus and that it might be a good way of getting rid of surpluses. I am not sure that that is true and. as I have said, it was merely a thought that occurred to me as I was listening to the hon. Gentleman.

Community sugar exports amount to about a fifth of the free world sugar market, which is the market not covered by special arrangements such as the ACP countries enjoy in the Community or by bilateral contracts. We cannot ignore the effect of these exports on world markets.

Against this background there can clearly be no case for any increase in the overall Community sugar quotas. Indeed, there is a case that these quotas should be reduced, and at the previous review in 1985 we proposed that the overall quotas should be reduced. British Sugar pressed for an increase in its quota but that was not negotiated because, among other things, of the serious position of the sugar market. Quotas for all member states were therefore left unchanged for two years. In addition, an elimination levy was introduced to clear the deficit on the export refund levy account that had built up from 1981 to 1986, and this was shared among member states to our basic advantage. That brings us to the 1987 review and this debate.

At the 1985 review we proposed that overall quotas should be reduced and that this should be achieved by means of a more equitable allocation of B quotas on a standard percentage of the A quotas for all member states in place of the present allocation, which ranges from 10 per cent. for some member states, including the United Kingdom, up to 30 per cent. for others. The Commission and most other member states, however, were strongly opposed to any reallocation of quotas. I have no reason to believe that they will change their minds despite what has been said during this debate, including the wise words of my hon. Friend the Member for Daventry (Mr. Boswell). My hon. Friend has made two successive speeches in the Chamber without interruption, and that must he a record. His first contribution was, of course, a maiden speech. The Government will do their best to ensure that the allocation is changed.

The hon. Member for Ceredigion and Pembroke, North (Mr. Howells) asked about the United Kingdom's position. When quotas were last reallocated in 1981, the changes were made on the basis of past production. Our production in the base period had been adversely affected by climate and other factors, so our quota, especially our B quota, is less than it might otherwise have been. As a result, although we are fully producing our A and B quotas, there is little if any surplus in the United Kingdom over our domestic requirements.

I have been asked whether the machinery of the sugar quota operates differently from the milk quota, and to the best of my knowledge it does.

When a sugar beet farm goes out of production British Sugar takes it back and then reallocates it. That reallocation may lead to new entrants into farming or new entrants into sugar beet production.

Although we are fully producing our A and B quotas, there is little, if any, surplus in the United Kingdom over our domestic requirements. At present, beet sugar production within quotas of 1.144 million tonnes, together with supplies of imported ACP cane sugar of 1.15 million, roughly matches domestic consumption of 2.25 million to 2.3 million tonnes. Taking one year with another, we import about 120,000 tonnes of white sugar from other member states and export slightly more—150.000 tonnes to 200,000 tonnes—of domestically produced white sugar to third countries.

As my hon. Friend the Member for Daventry has already said, there is little likelihood of any increase in domestic demand, but, as mentioned by all hon. Members, there is a growing interest in biotechnology and the biotechnological use of sugar in other products. The hon. Member Kingston upon Hull, West (Mr. Randall) comes from a part of the world which is accustomed to biotechnology and such chemical plants. We are aware that such industry is found on the north-east side of England. We would like to see the development of this aspect of the chemical industry in the country and especially in the north-east. It is important that, if biotechnology is extended through the use of sugar, we should push as hard as possible for an extra quota to meet that increasing demand.

At present there is no evidence to suggest that the figure covered by the review will exceed 50,000 to 100,000 tonnes a year. However, my hon. Friend the Member for Hereford discussed a level of usage far higher than that.

The level of national quotas is inseparable from that of the level of the production levy. Under current arrangements, the basic A quota is subject to a maximum levy of 2 per cent. of the intervention price, the B quota to a maximum additional levy of 37½ per cent. This seems appropriate since it is the additional production represented by the B quota which has to be exported and therefore provides the main additional expenditure. The Government continue to attach importance to maintaining this distinction between the levies applying to the quotas.

My hon. Friend the Member for Suffolk, Central (Mr. Lord), who backed his Suffolk horses into the buffers at one time—that will make an interesting mixed metaphor in Hansard—called for an increase in quota. Our quota represents 9 per cent. of EC quota production and we contribute under 6 per cent. of levy. In some ways, that is reassuring.

We must also continue to maintain a reasonable balance between cane and beet producers in the United Kingdom to ensure a secure market for ACP cane sugar. I share the belief of the hon. Member for Newham, south that we must protect the ACP and the jobs that are created by that body.

Mr. Spearing

I am grateful for the Minister's reassertion of the principle already reasserted by other hon. Members tonight.

I believe that the quotas for producers were introduced in 1981. Cm.167, the Intervention Board report for 1986, showed that the United Kingdom got no less than £86 million from the funds. The hon. Member for Norfolk, North-West (Mr. Bellingham) mentioned storage and that report shows that there was a £24 million contribution to the storage levy. Later, I hope that the Minister will check whether all that £86 million comes from the producers' levy, the percentage of which he has just given.

Mr. Thompson

If it was four minutes past one o'clock in a Committee room and the hon. Gentleman started talking about Cm. 167 and going into such details, I would be terrified, but as it is I shall write to him.

We have it very much in mind that ensuring a secure market entails more than ensuring that there remains a place for ACP sugar on the United Kindgom market. In the long term there will be a market in the United Kingdom for ACP sugar only if the Community regime also provides a sufficient margin to enable this raw sugar to be refined. Last year, at United Kingdom insistence, the Commission undertook to carry out a review of that margin and it has yet to submit a report on it to the Council of Ministers. I am glad to say, however, that as part of the price-fixing settlement secured a week ago, the Council formally recognised the need to take measures rapidly to resolve the problem of the refining margin for cane sugar and the Commission undertook to submit proposals to this end. The Government will continue to press for a speedy and satisfactory solution in the interests of the United Kingdom industry and the ACP suppliers.

The hon. Member for Kingston upon Hull, West asked me about that commitment and I have made that commitment. Hon. Members have said that things change and, of course, the Portuguese entry has changed the entire nature of sugar and sugar refining in the EEC. Nothing stays still and in the machinations of EEC committees, it may be that Portugal's entry will give us a window whereby we may get various adjustments to our satisfaction. I do not know.

I end by assuring the House that I have noted the various points made in this debate; and that the Government will have them very much in their mind when we come to the review of the regime in the autumn. It will continue to be our objective to maintain a fair balance between cane and beet supplies in the United Kingdom—and to secure a fair deal for each in the Community, within the limitations imposed by the Community sugar regime and by the stark fact of a substantial Community—and world—surplus of sugar.