Deputy Egan told us that a ton of coal was needed for the extraction of one ton of sugar. Assuming coal at fifty shillings or three pounds a ton inland—I think fifty shillings a ton, would not be an extravagant figure for large quantities—£5 a ton would be the cost of the production on the basis of coal being half the cost. If that is a fact it reveals a state of things much more damaging to this project than I had anticipated.
I find from the discussion in the British House of Commons when they were debating the Bill, a month or two ago, that one of the representatives of Lyle, Tate and Company, Sugar Refiners, said "The finished article costs about 24s. per cwt., or £24 per ton." There is a big margin between £5 and £24 and one would naturally say that margin is to cover the cost of raw material, risks, depreciation of machinery, and overhead charges. If raw material is delivered free, then the difference between £5 and £24 is to cover overhead charges, depreciation and profits. That is too great a margin. It suggests what I had already thought, that the proposition before us is that the first three years of the guarantee amounting to £441,000 on the estimated production will be enough to cover the cost of erection of a factory, and profits. That is to say, the first three years is intended to relieve the shareholders of any further liability and risks. Supposing, after the three years' contract with the farmers is completed, that the farmers refused to supply at the expected lower price for beets. There will be no risk to the shareholder because they will have already written off their investments in the first three years of working. The big margin between the working cost of production and the price, of sugar on the market, wholesale would require some explanation. I wish the Minister had been as careful to present to the Dáil on this proposal as much detail as has been given in regard to the Shannon Electricity Scheme. I wish we had examination by independent experts and the presentation of estimates, costs of production, prices, etc. Even though there may be greater variations it would have been calculated to give us more confidence in the proposal.
The case, as I understand it, is that it is worth two million pounds in ten years to stimulate new agricultural production and to improve agriculture in this country, that the sugar industry is quite subsidiary, and that the real value of this proposal is that it will stimulate better cultivation and improve farming. I think we ought to ask whether this is the best way to spend two million pounds in ten years to achieve the same end. Of course it is not by any means sure that we will be called upon to pay two million pounds. It is fairly certain that in the first three years we shall be called upon to pay £441,000, inasmuch as in those three years, an attractive price was guaranteed to the farmer for the production of beets. Contracts are expected to be three years contracts, at the price of 54/- per ton, for beets, "delivered at the factory"—that is a difference between the proposal here and that in England. After that period it rests with the company and the price of sugar as to whether they can afford to offer the farmers a price sufficiently attractive to encourage the farmers to continue producing beets.
The very clever, eloquent, and able advocate of beet sugar industry, Sir Alfred Wood, told us—this was sent by post to us, and I am sure every Deputy has received a copy—that in due course it was inevitable—he was speaking to English farmers, but the lesson is equally strong for Irish farmers—that farmers would be obliged to accept a beet price very much lower than the guaranteed price. He went on to suggest the possibility of not more than 30/- per ton for beet. I say it depends on the price of sugar, after the first three years. One might say everything depends on the price of sugar after the first three years, and whether the farmer can be induced to continue to grow beets. Perhaps it is worth while to look at the sugar position in the world. Before the war 46 per cent. of the world's sugar production was produced from beet. In 1923-24, only 26 per cent. of the world's production was produced from beet. There had been a considerable increase in cane sugar production. Plantations had increased rapidly both in Australia, West Indies, and East Indies. There is an increasing production of sugar in Europe. In 1912-13 the world's production was estimated at 18,187,000 tons. The war prevented production to a considerable extent; it certainly prevented the collection of statistics.
In 1919-20 the world production was down to 15,193,000 tons. It is worth noting, and it is important in view of the possible course of prices, that there has been a steady increase in the world production of sugar from 1919 to 1924-25. Last year the estimate was 22,633,000 tons, or four and a half million tons more than was produced in the year preceding the war. I do not know whether the demand has increased as rapidly as that, or is increasing more rapidly. It is difficult to say.
The fact that prices have varied so much as they have done in the last year or two, is a consideration which we must take into account. Perhaps it would be well if we endeavoured to arrive at some explanation of the rapid variations. In the two years 1923-24 the world price variations, apart from duties, were as much as from 22/- to 40/- per cwt., the pre-war price being about 15/- to 16/- per cwt. It is down again to about 22/- or 23/-; that was so about a month ago. These variations in the price of sugar suggest manipulation by market controllers and speculators. America and Holland are playing a strong game in this matter. While I do not pretend to understand anything about the manipulation of the markets, I can only say that where the course of production has been so steady in ten years, and where the consumption must be fairly steady, the rapid variations indicate to me more than anything else, a market manipulation.
We can contemplate, for the purposes of argument, that we may have, for the next three years, a production of sugar quite small in comparison with the world supply, and small even in comparison with the Irish demand. We can, however, only keep thinking of the next three years, the three years during which the farmers are guaranteed, inasmuch as after three years the price to the farmer is going to depend inevitably upon the world market price. We can only think of that period with certainty, and can only be comparatively sure in regard to that length of time. For that three years there is an estimated production of 18,000 tons of sugar, and the subsidy amounts to £441,000. During that time, provided the quantity and the quality of the beets are as such as may be counted upon to bring forth that quantity of sugar, the total sum payable under the guarantee to the farmers will be £405,000. That is to say, the State will hand to the factory £441,000, of which £405,000 will be paid to the farmers for beets. There will be £35,000 or £10,000 a year, of a margin over and above free raw material. I think we ought to have presented to us an estimate—not a binding estimate in this case, but a fair and reasonable estimate—of the normal costs of production in a factory which has been working. Then we can add a percentage, a reasonably ample percentage, to meet the novitiate stage, the risks of failure to supply beets in sufficient quantity and quality, or a failure of the man-power. We could add that if we had the basic price and the costs of production in a normally working factory.
For instance, if we can get from the Minister particulars of the cost of production in the existing British factories, not in the earliest years but say last year, it would help us to form our judgment on something like a sound foundation. The Minister quoted one of the factories, the Kelham factory, and to my amazement compared the subsidy paid over to the establishment of the Kelham factory, and likely to be paid over under the ten years proposal, with the amount likely to be paid over by this scheme, to the Irish factory. It is notorious that the whole Kelham scheme was a failure largely because of bad management. Certainly, it has not been looked upon as a fair test of a sugar factory, and to suggest that we must be prepared to go through a similar stage, like every child is supposed to go through measles, is asking us too much. I would have thought that that superstition had passed. On the question of experiments, the Kelham factory and the Cantley factory have been running for several years. These are the first experiments subsidised by the British Government and the amount of the subsidy was not unlike the amount of the subsidy proposed in this scheme.
They have had their experiments. They have proved now profitable. They have overcome their early difficulties. They have learned that they can grow beets in England suitable for sugar production and that it can be produced in paying quantities and that the farmers will respond, given a price. But there are six or seven factories being started in other parts of Scotland and England. Is it suggested by anybody that because in Norfolk, it was found possible to grow beets, and to make a commercial success of a factory, that that is sufficient to prove the possibilities in the North of Scotland or in any other part of England? Is that the contention? If it is, then I say it is equally proved that beet can be grown in Ireland. I recognise that the farming conditions are different. I recognise that, but it should not require that we must go through the same process of experiment at the same cost as they have done in England and that we must never take advantage of the experience of other people.
It seems to me that if it is possible now to persuade sugar companies to start factories on a basis of 19/6 for the first four years, 13/- for the next three years, and 6/6 for the last three years, in Scotland and parts of England which have not yet been touched by sugar factories, then we should get very much nearer to that in Ireland. The difference as between our proposals and the proposals now being put into operation in England, would mean for the same quantities, in the ten years not less than £869,000. I am prepared to admit that the circumstances of Ireland might require that we should pay something extra for added risks, but I am not prepared to say that we should bind ourselves to a sum of £869,000.
I think that we ought to be able to take some advantage of the experience of other countries. While for the first three years, we provide £441,000 to the factory as a subsidy and they pay to the farmer £405,000 for beets, if the estimates of the Minister is fulfilled in the ten years we shall have paid to the factories £1,961,000. Provided that the factory maintains the same price for the remaining seven years, as they have proposed to do for the first three years, 54/- per ton for beets, then the total amount paid to the farmers for the whole ten years for all the beets produced and supplied to the factory would be £1,935,000, or £25,000 or £26,000 less than is paid in subsidy to the factory. That is on the assumption that they maintain the price during the succeeding seven years that they have fixed for the first three years which the advocate of sugar beet growing promises is most unlikely. That brings us to the position of the Company in relation to the Government. The Company has had produced 86,000 tons of sugar and has received in subsidy £1,961,000, in the ten years.
What is the position of the Company? The cost of the factory is, according to different estimates, to be between two hundred and three hundred thousand pounds. Perhaps the difference between the two hundred and the three hundred thousand pounds is intended to cover floating capital. But they have this very big margin between current prices of sugar on the market and the actual cost of production. That is to be used for paying off the capital and for providing a substantial profit. I propose to quote from a weekly journal of last week an extract from a letter which is alleged to have been written by a director of this company, M. Lippens. It is a circular which has been distributed with a view to raising capital in Ireland towards this company, and it says: "From M. Lippens' letter, it will be seen that the earnings of the factory, together with the Government subsidy, are expected to be sufficient to amortise the entire capital expenditure in ten years, in addition to the payment of substantial dividends."
Now, I have no particular fault to find with that except that it proposes to run no risks. I think the probabilities are that they are hoping to amortise the capital within three years, but the Government has, during this time, paid over nearly two million pounds. Has it any sort of control of the company, has it a share-holding in the company in that period? I am reminded of the play produced by the Ulster Players where the fisherman caught herring. The dealer played a trick upon his neighbours by pretending that there were found, in the gullet of the herring, as if by a miracle, one pound notes. The fisherman wanted to know: "Who owns the herring, and who owns the pound notes?"
We have paid over to the company £1,961,000, and the company has got its beet as a consequence for nothing. At the end of ten years the capital expenditure has been wiped out, but who owns the factory? Is it the company or the people who paid over the £2,000,000. Of course the proposal is that the company shall continue to own it as usual. I think that there ought seriously to be in any scheme of this kind, which involves the paying over of large sums of money to a company to assist the establishment of a new industry, a definite share in the control of that company, and that there ought to be a definite share in the possibilities of profit during this period of ten years. While I am not influenced, and have not been influenced, by any arguments that have appeared in newspapers in regard to this matter, I feel that the suggestion, so far as the terms on which it may have been proposed— I say nothing of the suggestion that the Government should become part proprietors—to pay 49 per cent. of the share capital is one which is certainly worth supporting, so that if there is an exhorbitant profit during the period of ten years of subsidy, a share of it will come to the Treasury.
I would like, if the Minister for Agriculture is to speak on this matter, that he will give us his views as to whether this is the most beneficial way of spending £2,000,000. I have said more than once here that I believe what is required for agriculture is to give a direct stimulus to tillage. I have no doubt that this will be a stimulus to tillage, but unfortunately it will be a stimulus to tillage in a very limited area. Thirty thousand acres or thereabouts will be the limit of the stimulus until there are new factories set up in other parts of the country. I think the stimulus ought to be more general, and should not be confined to the factory area. I think that is a fault in this scheme so far as giving a stimulus to the extension of tillage is concerned. I feel that another fault in this matter is that it is going to extend tillage perhaps in a tillage area. The probabilities are that the factory area which will be called upon will be the area where at present there is a great proportion of tillage. It may extend tillage. To that extent it would be of value, but if we were going into a country where there is at present no tillage, or at least only a very small proportion of tillage, then we would have more satisfaction. There may not be very much in that point, and it may be said that whatever area is chosen, if the proportion of tillage there be small, it must inevitably be extended.
But, I fear, examining these proposals with every care and with a desire to support them if possible, I fear that they are going to be too costly, that the two million is not being spent to the best advantage, that we have not been provided with sufficient details to warrant us in practically voting that this agreement, which is only in broad outlines presented to us, should be confirmed. We ought to have much more details. Experiments as to the possibilities of the country producing beet in large areas and in considerable quantities, shall I say, could be tested at a cost of a few thousand pounds per year, even supposing the beets as a whole were shipped to the factory in England or dropped into the sea. I think, as an experiment in the possibilities of beet production of the right quality, it is altogether too costly. If we had any assurance after tentative experiments that factories could be brought here, for a much smaller subsidy, I do not believe there would be much loss of time if the Board of Agriculture were to test beet production in various parts of the country on a fairly large scale, but not on a factory production scale, to prove that not merely demonstration plots but fields could produce beet root for sugar of a paying quality, and on a paying basis. I think that experiments could be tried at comparatively small cost. I think, if that were true, it should be sufficient to satisfy the sugar speculator or the sugar factory investing company that they would be fully justified in opening a factory in Ireland for the promise of very much smaller subsidy for ten years than is proposed in this scheme. It will depend upon the course of the discussion whether I can give my support to the Second Reading of this Bill. I have tried to examine the question fairly and with a bias in its favour, and I have come to the conclusion that so far a case has not yet been made for this scheme with a very high subsidy over a period of ten years.