An Open Letter to M Cube
18th November 1949 from the Tribune Magazine Archive
Topics
Business / FinanceOrganisations
Conservative Government, Labour PartyPeople
Lor Lyle, Lyle Family, CubeLocations
Dear Mr. Cube, In recent months your familiar figure has spoken to us from the 'hoardings and the sugar packets of Tate & Lyle. We gather that you do not support the proposal to nationalise the sugar industry that was contained in Labour Believes in Britain. Since you are second only to Lord Lyle in your denunciations of this proposal, we are taking the liberty of writing to you direct to point out one or two facts that you appear to have overlooked.
First of all, why has sugar nationalisation been proposed by the Labour Party? Whatever Government is elected next year, something will have to be done about the sugar industry. In December 1950, the legislation governing the working of the sugar industry comes to an end; new legislation will have to take its place. The present structure of the industry dates back to 1936, when a Conservative Government passed the Sugar Industry, Reorganisation Act.
Beet-Sugar Monopoly Under that Act, a state - supported but privately - owned monopoly — the British Sugar Corporation—was set-up in the beetsugar industry. This Corporation took over the running of the eighteen beet-sugar factories, and the share-holders of those factories received £3,400,000 worth of shares in the Corporation, plus a cash distribution of more than £1,200,000. Though the Corporation was privately-owned, the Treasury agreed to pay a basic dividend of 4 per cent on ,its share capital. Even today, the Treasury still guarantees a dividend of 31 per cent each year. . Thus, public money has been spent since 1936 to subsidise the private owners of the Corporation.
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Your company, Tate & Lyle, as the biggest refining concern in the country had long been worried about the competition of beet-sugar with their own cane - sugar business. In 1928, the refiners led by your firm secured a protective tariff from a Conservative Government against imports of refined sugar into this country. But that was not sufficient in their view. They still wanted to see that the beet-sugar industry did not progress to such a stage that it would menace their own refining activities. They got what they wanted. Under this 1936 Act, the amount of refined sugar that the B.S.C.
could produce was limited in the interests of Tate & Lyle and the other smaller refining companies. The share of the Corporation was restricted to just over one-quarter of the total refined sugar trade. Your company was allocated 86 per cent of the remainder.
Another limitation on the beet-sugar industry was that the Corporation was forbidden to compete with the refiners in the manufacture of syrup and of speciality sugars.
This has led to waste of resources. Out of the eighteen factories, only twelve under take refining. If the other six factories were adapted for refining, the capacity controlled by the Corporation would increase by more than one-fifth, and represent altogether some 28 per cent of the total refining capacity in the country.
Competition in the sugar industry was eliminated by the working of the 1936 et.
The development , of the beet-sugar ind stry was restricted. Tate & Lyle was gu•anteed a large share of the market for su ar.
And as the single largest private shareho der in the British Sugar Corporation with ne of its own directors on the board, it as placed in a dominating position over the whole sugar industry.
High profits came to Tate & Lyle as a result. The amount earned for 'dividends r. se from £683,000 in 1933 to more than , million in 1938. Not all of this money Was distributed to the shareholders. But, e en so, they fared very well. The amountdistributed in ordinary dividends alone creased from £544,000 in 1932 to £883, in 1938, when the ordinary shareholders eceived (for the second time within years) a 40 per cent share bonus. You, lv r.
Cube, have said that refiners' profits are small; that a pound of sugar would only be 1/28th of 'a penny cheaper if the sha holders received no profits. That may so. But you have omitted that, besides £520,000 distributed in ordinary divider s last year, another £760,000 was placed to reserves. We do not quarrel with that actin But you should not conceal the fact that your profits were much higher than you iik to admit.
No Grumbles You have said that there are no grumble about the price of sugar. There is a goo4 reason why the price of sugar on sale in th shops is as low as it is. At present, thos .W.S. 'Incidentally, the twelve prices ar subsidised to the extent of £8 million a ear. If there was no food subsidy for sugar', its price would go up by 20 per cent, fro 5d. to 6d. a lb. You will agree, we know that it is a little unfair of your boss Lor Lyle to claim all the credit for low sugaru prices, when they are partly due to the foa l '' subsidies which his Tory avociates have o often attacked.
You h • e denied that there is anything to preven new firms from entering the industry. ere is no legal restriction it is true. B there might have been. For though it as never put into effect, the 1936 Act did w for a licensing scheme to be imposed. here was no need for it. It costs a lot of money to set-up a sugar refinery, and a newcomer would have had a tough Mu forcing his way into a trade which was already so rigidly amortioned between ex ting firms.
Lyle Family 1Control
It was t s fact that made the Co-operative Whole ale Society become a shareholder in T to '& Lyle rather than enter the trade direc y on its own account. The C.W.S. is, s you say, the largest single shareholder, but it is closely followed by the Pearl a the Prudential. But the real control of e firm does not rest with its 17,000 shar olders; that privilege lies with the Lyle fa ly. There are Ave Lyles (plus one Tate) the present board of directors, and together 'their share-interest far exceeds that f the directors of our firm have shared between them nearly 250,000 in remuneration and fees alone in the last two years. We won:ler how muc you get? We have ticed that you have reported with some u ardonable glee the statement of Mr. Bus mente, the Jamaican union boss, that he ill call a general strike in the West Indies sugar is nationalised. Yet only two yea s ago this same Bustamente was- actually eading a strike in what he called his "tot 1 war against the sugar manufacturers." , Your own Lord Lyle condemned his i responsible actions on that occasion, yetl, when Bustamente visited Brithin in the summer, he was wined and dined by Lor Lyle. Adversity certainly makes for stra ge bed-fellows! Can we no sum up Labour's cast for public ownersh of the sugar industry? We object to priva monopolies controlling the production of s ch a vital foodstuff as sugar.
We object to he privately-owned British Sugar Corpora on being subsidised by the taxpayer, whip its full deitelopment has been restricted In the interests of firms like s your own. We want to free both the beetsugar factories nd the sugar-refining industry front priva monopolies, and develop both sections in Ian orderly way under public ownership. he public will gain, while the interests of is the workers will be safeguarded, by the ationalisation of the sugar industry.
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