EUC Report: EU Sugar Regime

Baroness Byford Excerpts

Monday 3rd June 2013 Grand Committee

[Baroness Byford]

My Lords, I thank the noble Lord, Lord Carter of Coles, for introducing the debate. I thank him for having chaired our committee for several Sessions. As he said, he is now handing over to the noble Baroness, Lady Scott of Needham Market, and we welcome her. The noble Lord has done a wonderful job for us on several reports.

My family’s farming interests meant that I had to withdraw from—or, I would rather say, did not take part in—this report. On our farm in Suffolk we grow about 100 acres of sugar beet. I therefore felt that it was not correct to take part in the report. I have not had the advantage of listening to the evidence given, so I am looking at this from a slightly different point of view. However, I was shadow Minister at the time when we debated the earlier reports, and I re-emphasise the frustration that the noble Lord, Lord Carter, has described that things move very slowly with regard to sugar reform. It reminded me of the occasions when we had reports from EU Sub-Committee D on fisheries. We were talking constantly about discards but for month after month and year after year nothing seemed to be done. However, to encourage us, at least that has now made a start and I hope that today’s debate will move things forward. To some extent, I have read the report from an outsider’s point of view, but before I go further I apologise to Members of the Committee if my words take them over a trail they have already travelled.

The report, Leaving a bitter taste?, was published in response to the many questions raised by the 2006 report. If it had been a direct response to the plight of the least developed countries to which the noble Lord has spoken, particularly those in the Caribbean, I would have applauded it even more than I am able to applaud it today. I share the frustration. For many years we have looked at what we could do to help our colleagues in those countries but, as we have heard, not much progress has been made.

The figures from the FOA quoted two weeks ago in the “Food Programme” on the radio showed that white sugar consumption per head per annum averages 12 kilograms in China, 27 kilograms in the UK, 33 kilograms across Europe and 25 kilograms globally. Assuming that we are moving towards a world population of 7 billion, that means that a world white sugar market of 175 million tonnes is likely in the future. Clearly we want to free up this market so that it can fulfil its role.

I am a little disappointed that we still have problems some seven years after the 2006 changes. These were highlighted in paragraph 12 of the report and were driven by the WTO ruling that the EU was subsidising its sugar exports by guaranteeing producers prices above world levels. As the noble Lord, Lord Carter, said, it is the most protective regime in existence.

Paragraph 13 summarises the effects that the regime change has across Europe. Here in the UK, prices for sugar beet fell, production was reduced and a number of processing factories have closed. The anticipated rise in raw sugar imports for refining did not happen. The beet processors built refining capacity, and I understand that Mauritius has started a refining industry. The outcome is a UK refining industry reportedly running at 60% capacity. The EU reference price has been brought down but the current market price for white sugar is some 16% higher than it was in July 2006. As a consumer, my observation of local shops is that the price is a further 13% or so above the market price in those days.

Surely the combination of sugar beet production quotas and the tariffs charged on raw cane and refined sugar can only be acting to keep the consumer price up, which I am sure we do not want to see. If you take another view, that might not be a bad thing in the light of the research findings on the damage done to our health by sugar consumption. I wish, however, that the arguments for the retention of tariffs and quotas were not put in a way that makes me think of the protection of EU income coming from the former and the benefits to France and Germany from the latter.

Having said that, however, I remember that Janet Young on many occasions introduced dinner debates in the House on the way in which we could help the ACP and less developed countries. She continually drew our attention to those former Commonwealth countries whose livelihoods depend almost entirely on raw cane, coconut and bananas. Following on from the questions of the noble Lord, Lord Carter, in that context, I would like to ask the Minister which countries have received transitional assistance, whether it has all been dispersed, and whether he is able to tell us how it has been spent. The noble Lord mentioned that there were not enough personnel to make this happen, but I wonder whether there is a broader picture to follow here.

In the event that further assistance is required, I am convinced that, whatever happens in the future, there must be a time limit on sugar quotas and a date set now to help prevent the manipulation of the market in future.

Surely China’s per-head consumption will continue to rise over the next decade, and the question has to be how the ACP countries and the less developed country producers could be helped to take advantage of the situation while making clear that this will be a short-term help and that they will have to stand on their own in future years. I am not quite clear from the report, not having heard the evidence, what it really is that is stopping the ACP countries from being able to process and develop, or whether they are continuing just to export their raw materials. If that is so, what steps could be put in place to help them to add value to their initial crop?

Here in the UK, farmers have grown beet for many years, with 50% of the sugar that we use coming from sugar beet that we have produced. With the CAP negotiations well under way, I would like to add to what the noble Lord, Lord Carter, has mentioned, that the CAP is looking at ways in which farmers will be encouraged to spread their crop production—in other words, not just wheat, rape and barley. In fact, for many farmers sugar beet is a good crop break because it puts goodness back into the ground, so from a cereal farmer’s point of view it is an important break. At the end of the day, however, it will be important that whoever produces the sugar, whether beet or cane, can make sufficient money out of it or they will not continue to grow it. In this country and in Europe, they will grow something else. Again, though, that is not a possibility for the ACP countries.

I understand that the market price for white sugar is something like €710, which is roughly £600 per tonne or 60p per kilo. Prices paid to farmers vary, but somewhere between £28 or £30 per tonne should be possible to obtain. That is 3p per kilo, and my observed off-the-shelf price to the consumer is about 79p per kilo. Does this perhaps ring a similarity with what happens with our dairy farmers across Europe? The question has to be: what is the reason for the price rising so much for the consumer while the actual producers of the cane and sugar beet have not grown? Changes to bagging and distribution and to the retail technology should surely have managed to counterbalance some of the rises that will have occurred, especially perhaps within fuel. Maybe the Minister can throw some light on the situation.

Both the report and the Government’s response make reference to inefficient production. That makes my mind wonder what is inefficient. Is it the growers, the producers or the people at the other end? Perhaps the Minister can tell us a little more about that—whether it is on the growing, the refining or the processing side, and which countries it occurs in the most, because we are looking across the whole of Europe.

I endorse the committee’s recommendation as laid out in paragraph 33, although I do not put out too much hope for an agreement in recognising the changes that were made before 2006 being taken forward.

The report is very worthy and goes into quite a bit of detail. However, to me, there are three real issues: first, the whole question of quotas and import restrictions; secondly, the ACP countries; and, thirdly, the CAP and where we are going in future years. I have had briefings, as perhaps have other noble Lords, from the UK Industrial Sugar Users Group, which has highlighted the need for wide-ranging reform of the EU sugar regime without delay. It goes on to suggest in that briefing:

“The competitiveness of manufacturers of products containing sugar is severely impacted by existing EU sugar policy”.

We should bear in mind that this is a huge sector that employs about 70,000 people, with a turnover of more than £12.3 billion, accounting for about 70% of the sugar usage in the UK. A little further on, it says:

“The mistake is graver because the maintenance of sugar quotas will not benefit European farmers and the EU sugar sector overall either: shortage of domestic supply, growing global demand and rising world prices are opportunities that European farmers and sugar processors can exploit if the production and export restrictions that the quota system imposes are removed”.

I have tried not to view it from a producer’s point of view but there are clearly things that the report identified very specifically, which I would like to highlight and reflect in this short contribution. I thank the noble Lord, Lord Carter, again for initiating the debate.