EUC Report: EU Sugar Regime

Lord Knight of Weymouth Excerpts

Monday 3rd June 2013 Grand Committee

[Lord Knight of Weymouth]

My Lords, I, too, congratulate my noble friend Lord Carter on introducing this debate. I think that I am the first to speak in this debate who is not a member of the committee, so I congratulate the committee as a whole on an excellent and concise report, which has been mirrored by this debate. I, too, aspire to be both excellent and concise in making my comments now, though I feel somewhat more confident in one than the other. I will leave it up to the Committee to judge which.

The EU sugar regime is impossible to defend, and I am pleased that no one has sought to do so today. Coming to this fresh, it is difficult for me to think of a worse example of the problems of the common agricultural policy and the need rapidly to reform away from the legacy policy enshrined in this regime.

In trying to understand EU matters, it is always easy to get bogged down in jargon. When I read the response from the vice-president to the committee, I was reminded of some of those problems. The noble Baroness, Lady Byford, read out a particularly interesting section on how consumers might be able to engage with the High Level Forum for a Better Functioning Food Supply Chain. It goes on,

“In this context, consumer organisations have supported the work done under the B2B platform of the High Level Forum”—

blah blah; it is a lot of euro-babble. I would therefore like to think how I would explain it to a lay person. What would I say? This is an attempt, based on my efforts to understand the regime.

It was established 45 years ago as a Common Market organisation to protect producers of sugar. It does so, as I understand it, by using taxpayers’ money to pay a direct subsidy to producers and by setting a minimum price paid to producers by sugar factories. At the same time, we are also subsidising some of these farmers through rural development grants—and this is to produce a product that we know is unhealthy, leading to obesity and with some links to cancer.

Having then interfered with the market once, we are then locked into a spiral of constant, costly market interference. To prevent overproduction in response to the generous price, and to in some way control the cost, there are then quotas to set a limit on production. Production in excess of the quota is known as out-of-quota sugar and strict rules then govern its use. It can be exported up to another limit, sold for biofuel or other industrial non-food uses, or be counted against the following year’s quota of sugar. The quotas can be varied to try to keep up with changes in the amount of sugar that people want to buy.

So far so good, in terms of the story, but of course it does not end there, because some of the poorest countries in the world grow sugar cane. Although we know that those countries would be better off if they refined it themselves, we like to import it and refine it here. Indeed, when our beet production was limited, some of our refiners adapted to refine cane sugar themselves as well. So, we give free access to preferred poorer countries to fill the gap between what we allow ourselves to produce and what we need. Fair enough— as the noble Baroness, Lady Byford, reminds us, these countries need the help—but they get it on our terms.

However, it seems that the Commission is very bad at giving extra money to help those countries produce the cane sugar we need, so we have to make up the shortfall, which we do by importing from other countries, rather than, say, allowing ourselves to produce some more. We sometimes pay our beet producers to store some sugar so we can release it on to the market to make up for shortfall, but we are normally too slow to do this because the Commission is not proving that good at responding quickly.

I may have misunderstood some of the detail but that appears to be the story from my reading today. It is a story that could have been written by the most swivel-eyed of Eurosceptics. It is madness and needs to change. At no point are consumers accounted for and, despite all this public money, consumers are paying a lot more for sugar, as the noble Baroness, Lady Byford, set out so well.

Of course, it is easier to say what is wrong with the system than how we get from where we are now to a market-based system. I welcome the committee’s report, which is sensible and discusses the risks for ACP and LDC countries as well as others in the industry of changing too fast. I also welcome the Government’s response, although I note the comments of my noble friend Lord Carter and others who have spoken on the unacceptable lateness of that response. I also agree that the response on research appears a little complacent. However, we are all broadly in agreement.

My position on the main specific issues is that quotas are outdated measures that create artificial shortages on the EU market, do not deliver supply to meet demand, drive prices up, affect consumers heavily, limit the functioning of the market and hinder farmers from adapting to market signals. They also hamper efficient producers and stop new entrants from joining the industry and helping to develop it. Therefore, as we have heard from the noble Earl, Lord Caithness, they should be abolished as soon as possible. I hope that the Government will find some friends on the Council and reject the Parliament’s proposal to delay from 2017 to 2020. I suspect that they will end up compromising on 2018. If so, I guess that I can live with that, provided that it is adhered to with no concessions to being subject to progress and such like, as argued by some MEPs.

On cane refiners, regardless of whether the quotas stay or are abolished, beet growers and cane refiners must be treated fairly. A mechanism could be introduced so that when it is clear that a refiner’s raw material needs cannot be supplied from the preferential countries or topped up from beet production, raw cane sugar from other sources would be made available at low or no import duty.

On developing countries, through the European Parliamentary Labour Party we are pushing the Commission to ensure measures to help mitigate the effects of abolition of the quotas, such as increasing competitiveness and diversifying production. We must move away from a costly system that fails to stabilise the market, is doing little to serve producers and is certainly not serving consumers.

We would do well to recycle some of the savings from abolition into education about the health effects of consuming too much sugar. However, I agree with the committee that health is no reason to continue with the barmy EU sugar regime. I am, incidentally, unpersuaded as yet by the argument for using tax in this area, as the noble Baroness, Lady Parminter, argued, given the comments that we have already made about consumer pricing.

We would do well to ensure that assistance to preferred suppliers works and assist others to follow the Mauritius example and those supported by the Fair Trade Foundation to process more sugar domestically.

Most of all, we must get on with regime change. My one question to the Minister—I promised him only one question—is to ask how likely it is that we will get agreement, as planned, by the end of this month, and whether the Government will stick to their determination to phase out quotas before 2020.