§ 3.47 p.m.
§ Order of the Day for the Second Reading read.
EARL. ST. ALDWYN
My Lords, this Bill may look complicated at first sight, but I think on closer examination it becomes clear that in essentials the main provisions are fairly simple and straightforward. The primary purpose of the Bill is, first, to bring to an end the present system of State trading in sugar and to return the trade to private hands, and, secondly, to achieve this whilst at the same time enabling the Government to continue to implement to the full their commitments to Commonwealth sugar exporters under the Commonwealth Sugar Agreement and to the sugar beet grower at home under the Agriculture Act, 1947.
It is important, when considering the Bill, to bear in mind that in general the history of legislation on sugar for the past fifty years has been a history of agreed legislation. That is why I wish to emphasise to your Lordships at the outset that this Bill in no way affects the Government's continuing obligations towards the cane producer in the Commonwealth and the beet farmer at home.
Before I describe the main provisions of the Bill, it may help your Lordships if I try to explain briefly the present arrangements for dealing with sugar. Under the Commonwealth Sugar Agreement (an Agreement negotiated in its early stages by the Party opposite, when they were in power, and concluded by my right honourable friend, the present Secretary of State for the Home Department, when he was Minister of Food in 1951), the Government are committed until at least the end of 1963 to buy from the Commonwealth fixed annual quantities of sugar, totalling 1,568,000 tons, at prices negotiated each November in accordance with an agreed formula. Moreover, there is available under the Commonwealth Sugar Agreement an 27 additional quantity of so-called "free" sugar totalling 807,000 tons.
Commonwealth sugar enjoys tariff protection in the United Kingdom and Canada, and after Commonwealth producers have met the important requirements of the Canadian refiners they should have no difficulty in selling the balance of their "free" sugar in the United Kingdom. We in this country are at present eating about 2.million tons of raw sugar a year. This consists of the 1. million tons of Commonwealth "negotiated price" sugar and, depending on the yields of the crop, about 650,000 tons coming through the British Sugar Corporation from our own sugar beet production. The balance of what we need comes from Commonwealth "free" sugar or from foreign sources in the open market.
Sugar beet is a guaranteed crop under the Agriculture Act, 1947. At present a guaranteed price fixed in the light of the Annual Agricultural Review is paid for all sugar beet grown from the acreage approved by the Government. This guarantee is implemented by the British Sugar Corporation, which buys beet from the grower at the guaranteed price and sells its sugar at the prevailing internal price. To-day, this price is largely determined by the prices at which my Department buys sugar from the Commonwealth and from foreign sources. At present, the Commonwealth negotiated price, and the cost of producing sugar at home from our own sugar beet, are both substantially higher than the so-called world price. Therefore all sugar imported by my Department, irrespective of origin or price, is resold to the refiners and the trade generally at a common price sufficient to cover the average cost to the Department. These arrangements at present result in an internal price in the United Kingdom which is above the world price, and this price determines the price the British Sugar Corporation can get for its sugar.
That brief review of the present arrangements will, I hope, have shown your Lordships the nature of the problem for which a solution has to be found if State trading is to be brought to an end. The problem is, in short, how to continue to average the price of sugar for which a fixed contract price is agreed with 28 the prices of "free" sugar, whilst still giving importers and other users the maximum possible freedom to revert to normal commercial practices. What is the solution proposed in this Bill? It is that the task of averaging the prices should be carried out through the agency of a small Sugar Board—a chairman and not more than four members. The Board will have a statutory obligation, first to buy Commonwealth sugar that the Government has contracted to take at the negotiated price, and, secondly, to ensure that the British Sugar Corporation is enabled to pay the guaranteed price for sugar beet.
Clause 1 of the Bill provides that the Board must sell the sugar it buys in the country of origin before shipment at the best price obtainable. Thus the sugar trade will resume responsibility for the physical handling of the sugar, the taking of freight, insurances and the like. The Board will not have any responsibility for the balance of sugar which we import from the Commonwealth. However, we are quite sure that, with the aid of the tariff preference which Commonwealth sugar enjoys in this country, and with the assurance given by the refiners that they will make it their practice to prefer Commonwealth sugar for their home trade requirements, provided that it is offered competitively, Commonwealth exporters will have no difficulty in selling here the balance of their exports after they have met the needs of their important customers in Canada.
There remains the problem of how to average the prices. So long as the "world" or free market price of sugar is lower than the Commonwealth negotiated price and the cost of producing sugar from beet (and that is the pattern we must expect will normally prevail), the Sugar Board will make a loss. It will cover this loss out of the proceeds of a surcharge to be levied on all sugar and on the sugar content of manufactured goods coming into this country. If, on the other hand, the "negotiated price" were below the "world price," the Board would then earn a surplus and would pay it out as a rebate instead of making a surcharge. This averaging arrangement—for that is what the surcharge is—does not mean a higher charge on sugar. It will simply mean that the home consumer will continue to pay the true average cost of the sugar he eats.
29 Moreover, although at first glance your Lordships may find the surcharge and other similar provisions of the Bill in Clauses 7 to 16 rather fearsome, from the trader's point of view the system is simple. The surcharge will be collected by the Commissioners of Customs and Excise as the Board's agent at the same time as customs or excise duty is collected. Similarly, on exports the surcharge will be repaid just as duty is drawn back. So the traders will be using procedures of Customs and Excise to which they have been long accustomed.
May I now turn to the special provisions in Clauses 17 to 24 of the Bill dealing with the British Sugar Corporation. Some twenty years ago the Corporation was an untried and heterogeneous collection of private companies. Today it is a solid, efficient organisation which has the confidence of the farming community and the good will of the refiners. The Government can therefore see no grounds for interfering in any way with the structure of the Corporation. The Bill must, however, bring up to date the legislative framework within which the Corporation operates. Accordingly, in the first place, under Clause 32 of the Bill, the Sugar Industry (Reorganisation) Act, 1936, and the war-time Sugar Industry Act, 1942, will be repealed and the Sugar Commission established under the 1936 Act and suspended under the 1942 Act will be dissolved.
In the second place, the Bill, in Clause 17, lays down the responsibility of the British Sugar Corporation to contract for the acreage of sugar beet authorised by the Government at the price and on the terms determined under the Review procedure. Provisions have also been included in Clause 19 to enable Ministers to continue incentive payments to the Corporation for the purpose of promoting economy and efficiency. Moreover, your Lordships will, I am sure, be glad to note that, as a result of an Amendment to the Bill carried in another place, any agreement made to encourage efficiency will provide that the purposes for which incentive payments shall be used will include benefits for persons employed by the Corporation.
This House has always shown a keen interest in the promotion of research. Your Lordships will therefore welcome the continuation, in Clause 18 of this Bill, 30 of the provisions in. the Agriculture (Miscellaneous Provisions) Act, 1954, for the promotion of research and education in matters affecting the growing of homegrown beet. I understand that both the growers and the Corporation, who contribute to the fund to finance the programme, are satisfied that they are getting considerable benefit from the work being clone in this field. The Bill also provides, in Clauses 25 and 26, for continuing the present kind of market-sharing arrangements between the British Sugar Corporation and the other refiners. All of us, I think, recognise, reluctantly perhaps, that market-sharing arrangements are necessary to ensure adequate outlets on the most economical terms for the beet sugar which the Corporation produces after implementing the guarantee to the sugar beet growers.
Nevertheless, your Lordships may well feel some anxiety about the effects which arrangements of this kind might have on the interests of users and consumers of sugar. I feel sure, however, that those interests will be adequately protected, because the Bill provides two safeguards. First, it puts a statutory obligation on the Minister, when deciding whether to approve a sugar refining agreement (as these market-sharing arrangements are called), to take into account the effect it will have upon the interests of users and consumers of sugar. Secondly, the Bill gives specific: powers to the Minister to secure modifications in a sugar refining agreement if its operation is bearing harshly on users and consumers. Consumers, too, can feel assured about the price of sugar. The principal refiners have offered to give my right honourable friend the Chancellor of the Exchequer, an undertaking which will serve to regulate their margins on the lines indicated in Clause 27 of the Bill. The formula they have offered, I understand, is expected to produce results which will be virtually the same as those produced by the Agreement which at present exists. By this Agreement the refiners bound themselves some years ago to regulate their margins in accordance with a formula based upon an up-to-date investigation of their costs.
My right honourable friend is confident that the provisions of this Bill will produce conditions which will enable the London Terminal Market in sugar to reopen and to play an important part, 31 as it did before the war, in earning foreign exchange. The Bill will bring to an end State trading in sugar. On the other hand, the Government will continue to stand firmly behind the Commonwealth Sugar Agreement and its obligations under the Agriculture Act, 1947, towards the producer of home-grown beet. I therefore commend the Bill to this House, and beg to move that it be now read a second time.
§ Moved, That the Bill be now read 2a.—(Earl St. Aldwyn.)
§ 4.4 p.m.
§ THE EARL OF LISTOWEL
My Lords, it is perhaps a rather curious coincidence that your Lordships have been asked this afternoon to approve two Bills both of which bear witness to the Government's firm—I had almost said dogmatic—belief in the efficacy of private enterprise. So far as this Bill is concerned, we can agree with the Government—and we are very glad to be able to do so—about some of the policy it contains, while I am afraid I must admit at the outset that we disagree with a large part of it. We can go a certain distance together about Commonwealth and Colonial economic policy, and, of course, about the implementation of the guarantees to British agriculture under the 1947 Act. This Bill, as the noble Earl has rightly pointed out, effectively safeguards our obligations towards the Commonwealth sugar producers under the Commonwealth Sugar Agreement and also our obligations to growers of sugar beet at home under the price guarantees of the 1947 Act.
We remain—and I am relieved to find that this situation is unaltered—the principal market for all sugar bought under contractual arrangements with the British Government from the Colonies. No one who knows the island territories in the West Indies, which contribute the bulk of the one and a half million tons of Commonwealth sugar imported every year, and their dependence still, in spite of all that has happened since the war, on this single export crop, will underestimate the value to them of the Commonwealth Sugar Agreement. I am sure that the noble Lords, Lord Colyton and Lord Hall, both of whom are familiar with the West Indies, will agree with that statement. There was, of course, no contract of any kind between the Government and 32 sugar producers before the war. Your Lordships will recall that the widespread disturbances in the West Indies which preceded the appointment of the Royal Commission in 1938 were directly due to unemployment and poverty resulting from the disastrous fall in the world price of sugar. Since the war, there has been relative stability in all the West Indian territories. Employment and wages are no longer as they were before the war, at the mercy of the ups and downs of the world's sugar market. Now, at last, the West Indies have an assured long-term market in this country, and can rely on getting a fair price related to the cost of production for all the sugar covered by the Commonwealth Sugar Agreement.
As I understand the Bill, the Sugar Board will have a statutory duty—it will not be a permissive matter—to buy Commonwealth sugar at the negotiated price. In this capacity, it is simply an agent for doing what the Government has hitherto done through different Government Departments. I believe, from what I have heard, that the sugar producers, whether or not they are parties to the Agreement, both in the Colonies and in the independent Commonwealth countries, have been consulted about this new machinery, and they are satisfied that they will be no worse off than at the present time.
Some doubt has been expressed, both inside and outside Parliament, as to whether a political Party which is pledged to private trading in food as a matter of policy, may not eventually allow the Commonwealth Sugar Agreement to lapse. I think it is reassuring to note that the present Government have already extended the Agreement for a further period of one year until the end of 1963. I will not go on to draw any Party conclusions as to what the position may be after 1963. I think that this shows that Ministers who have stated their opinion publicly about the value of this undertaking to buy Commonwealth sugar at a guaranteed price, are not only conscious of the importance of this undertaking but are prepared to carry it out in practice. I hope this means that the post-war policy of a guaranteed market in this country for Commonwealth sugar has now been accepted by both our main political Parties. I think it will take a little longer 33 time for our noble friends who normally occupy the Benches a little further along on this side of the House to do so.
Turning now from cane sugar to sugar beet, I think noble Lords will agree that it is no less desirable, on strategic as well as agricultural grounds, that the growers should continue to have the advantage, which they have enjoyed in the past, of a guaranteed price. The Bill places squarely on the British Sugar Corporation the duty of buying the sugar beet crop at the guaranteed price. This should give farmers the confidence they need to go on producing the sugar beet we require.
That, I am afraid, is about as far as we can go now in company with noble Lords opposite representing Her Majesty's Government. I should like now to explain why we regard this alternative machinery for carrying out our obligations to the sugar producers as either undesirable (because a satisfactory alternative ought to have been worked out before we reached this stage) or as unnecessary. I need hardly remind your Lordships that there is a basic difference of opinion between noble Lords on this side of the House and the Government about the best method of buying essential foodstuffs. We believe that Government purchase, or purchase by marketing board, is more economical and efficient than purchase by a multitude of private traders. This view is not a dogma, though noble Lords opposite may regard it as such, because it is based on the acknowledged success of State trading during the war and for several years after the war. But, as the noble Earl explicitly said, the Government want to hand as much as possible of the food trade back to the middlemen.
That is the main purpose of this Bill: it is intended to bring back traders and importers into the distribution of sugar. It sets up a Sugar Board, but a board limited in its powers and functions so as to interfere as little as possible with the activities of those businessmen who are resuming their part in the distribution of sugar between the producers and the consumers. The Board will be little more than an accountancy agency—I believe that that was how the Minister of Agriculture described it in another place. The physical handling of sugar from the moment it leaves the growers until the 34 moment it reaches the refineries or warehouses, will be done by different forms of private enterprise.
This Bill, with its complicated and expensive marketing machinery, would have been quite unnecessary if the Government had continued to buy sugar, as it did so successfully for many years. When the Government proposed to scrap the Ministry of Food, we suggested that its trading functions should be transferred to the Board of Trade. The noble Earl may remember that my noble and learned friend Lord Jowitt and I expressed this view when the Order came before the House. What a lot of money and what a lot of work that simple arrangement would have saved! However, the Government have decided, as a matter of policy, to stop State purchase, so as to give the maximum scope and the maximum freedom for private enterprise. That being so, we have to accept the inevitable; and it is clear that a statutory body of some kind, such as the Sugar Board, is indispensable to safeguard our existing commitments. Therefore we welcome the setting up of this Board, while we regret that its powers have been narrowed down to such a limiting extent in the interests of the middlemen. It is authorised only to buy sugar imported by contract under the Commonwealth Sugar Agreement. In our view it should have been allowed to buy any Commonwealth sugar that the market here can safely be assumed to be able to absorb; and if the demand for sugar in the home market should exceed the capacity of Commonwealth producers, why should not the Board be free to go into the open market for foreign sugar? I realise, of course, that this is directly contrary to Government policy. The Government do not desire this to be a full marketing board. Their deliberate policy is to keep its powers to a minimum, however much the profit margins of a whole host of traders may add in the end to the cost of sugar and products containing sugar to the consumers.
My next objection to the Bill relates to the method it proposes for closing the gap, when there is one—and, as the noble Earl pointed out, there is a gap at the moment—between the guaranteed price for sugar and the commercial price. The proposal in the Bill is that when the free market price is lower than the 35 guaranteed price, the Board will recover this loss on their sales by a surcharge on sugar. This means that the consumers of sugar and other foodstuffs containing sugar will pay the whole cost of supporting the Commonwealth and the home growers of sugar. Surely the responsibility for sheltering the sugar industry, whether at home or abroad, is a national responsibility, which should fall equally on every adult citizen and not merely on those who eat sugar in one form or another, and presumably proportionately to the amount of sugar they eat. That is the essence of the Bill.
May I point out that diabetics cannot eat any sugar; they are forbidden to eat it—in fact, it is poison to them—and they are deprived of their responsibility as citizens. Children are probably the largest consumers, so that large families will pay much more than single persons. As noble Lords are aware, indirect taxation is always regressive and the poor man or woman will pay as much as the well-to-do. These inequitable effects of concealing a subsidy in the shop price of sugar could have been avoided if the difference between the guaranteed and the market prices, when the market price is lower than the guaranteed price, had come out of direct taxation. That is how we pay the subsidies arising from price guarantees by our own "Review" commodities and I cannot see why sugar could not have been treated in the same way—by subsidies which could have been paid out of direct taxation to both the Commonwealth and the home growers of sugar whenever their sugar was more expensive than sugar in the open market.
My final objection to the Bill is that it fails to make the British Sugar Corporation a proper, normal public utility. This body is an extraordinary hybrid. It is publicly controlled and faithfully carries out Government policy. Yet it is owned by a number of sleeping partners, shareholders with no say whatever in the management of the concern. No one disputes the fact that the British Sugar Corporation has an excellent record or doubts that it will continue in future to show its past efficiency, but there are reasons to suppose that it could be even more efficient than it is now if it were organised in the same way as other public utilities, such as the gas or the electricity 36 industries, with public ownership of its assets as well as public control of managerial policy. I believe that these private shareholders are a handicap to the Corporation. That is not merely a belief of my own; I hope I can show your Lordships that there are good reasons for holding this view. The first reason is that there is an agreement, made in 1952, which entitles the shareholders to a share in any economies that the Corporation may be able to make. I do not say that as a result of this agreement the added income of the shareholders is excessive or that the rate of interest that they receive is unreasonably high, but we on this side of the House should like all the benefits of increased efficiency on the part of the Corporation either to be ploughed back into the industry or to be used to improve the lot of its workers.
The second reason is that the Corporation has to negotiate with the sugar refiners about marketing rights. As your Lordships are aware, by the agreement made in 1937 the country is divided into watertight compartments for marketing areas, and however unexceptionable the conduct of the refiners might have been in the past and however unexceptionable it might continue to be, I think it is undesirable, on public grounds, that they should own a substantial shareholding in the Corporation at the very moment they are negotiating for marketing rights. So I cannot help feeling that this body, though it may have worked well in the past, would work even better if organised in exactly the same way as any other monopoly performing important functions in the public interest and susceptible to improvement in its efficiency under the ordinary forces of supply and demand. I have stated our objections to the Bill, with which I am no doubt the noble Earl is familiar, and although we shall not press the matter to a Division, we should like your Lordships to be fully aware that we do not share the views of the Government on these important matters of policy.
§ 4.20 p.m.
§ LORD JESSEL
My Lords, I should like to support this Bill, chiefly because, as the noble Earl, Lord St. Aldwyn, said in his opening remarks, its main purpose is to end State trading in sugar and, at the same time, to honour the Common- 37 wealth Sugar Agreement and protect the sugar industry at home. The noble Earl in charge of the Bill has explained to us most lucidly its rather complicated mechanics, and I am not going to try and follow him in that direction. He said that the Bill might appear complicated, but was, in fact, quite simple. However, having heard his opening speech, and the remarks of the noble Earl, Lord Listowel, I think the actual details need a good deal of study. There is one small point I should like to make in regard to Clause 1 (1), which says:There shall be established a Board, to be called the Sugar Board, who shall, as from the appointed day, perform the functions assigned to them by or under this Act.Are the Government able to tell us when the appointed day is going to be? Clause 35 says thatdifferent days may be appointed for the purposes of different provisions of this Act.…I feel that that makes it all the more important for the various interests concerned to be informed as soon as possible what is to be the appointed day. It should not be long before this Bill to which your Lordships are asked to give a Second Reading this afternoon becomes an Act of Parliament, and I hope it may be possible within a matter of months for the Sugar Board to be authorised to start functioning.
§ 4.23 p.m.
EARL ST. ALDWYN
My Lords, I am glad that the noble Earl, Lord Listowel, can join with us, at least in regard to some portions of this Bill. I appreciate that there are certain fundamental differences of opinion on which, no matter what I or anybody else on this side of the House may say, he will not be greatly influenced. The noble Earl touched on several points on which I should like to say a word or two. As I understand it, he would like to see any loss made on the sale of sugar paid for by the Exchequer, rather than by the consumers, as is suggested in the Bill. But what is proposed in the Bill represents no change in principle. It is, in fact, what has been happening under the present arrangement. As I see it, the only advantage of the suggestion made by the noble Earl would be to enable some future Government to subsidise the consumer of sugar. That, I imagine, is the intention: that to keep the price as low as possible, the Ex- 38 chequer should be pouring this money in, instead of the consumer paying a reasonable price.
§ THE EARL OF LISTOWEL
I am sorry that the noble Earl has used the words "pouring this money in," because they may lead to misunderstanding. I am not suggesting that any more money should be paid than at the moment, but only that it should be paid out of general taxation, instead of out of the shop price of sugar.
EARL ST. ALDWYN
I appreciate that the diabetic does at the moment get off scot-free, but he suffers from a number of other troubles, and personally I do not think the position is unfair. As regards the large family, there are certain members of your Lordships' House who have quite large families. The demand for sugar in various forms by their progeny is not seriously restricted at the moment, and I trust that noble Lords in that position will continue to see that their children get a fair and proper proportion of sweets.
The noble Earl, Lord Listowel, also referred to the question of the private shareholder in the British Sugar Corporation. I think we must remember, first, the fact that the rate of interest paid by the Corporation reached 5 per cent. two years ago for the first time in its history. One can hardly say that there is an excessive rate of interest, compared with that of other undertakings. It has also been suggested (I think I may conveniently mention the point here) that as the assets grow the value of the shares will be rather out of proportion to what it should be. But the Corporation's assets are largely in machinery of various types, and it would be difficult to realise on them if the Corporation were wound up. I feel that the value of these shares must be judged by their Stock Exchange price to-day, which is considerably below par. My noble friend Lord Jessel raised the question of the appointed day. As your Lordships will appreciate, it will take a little time to set up the Sugar Board. It will be necessary to find offices, and there are bound to be one or two other delaying matters. However, to put it broadly, I hope that it will be possible to get tile Board into operation within three or four months after this Bill receives the Rod al Assent.
§ On Question, Fill read 2a, and committed.