FERTILISERS (Hansard, 29 June 1959)

§ The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. J. B. Godber)
I beg to move, That the Fertilisers (United Kingdom) Scheme, 1959, a draft of which was laid before this House on 13th May, be approved. This Scheme extends for another year, from 1st July, the payment of contributions towards the cost of nitrogenous and phosphatic fertilisers. As it is in almost identical terms with that of last year, except that there is an amendment to the rate of sulphate of ammonia because of the slightly higher nitrogen content, I will move the Motion formally.
I shall, however, be happy to answer any inquiries and I hope that my course of action will not be regarded as a discourtesy to the House. I think it would be more convenient to do it in that way.

§ Mr. Frederick Willey (Sunderland, North)
I have no objection to the Parliamentary Secretary taking that course and I have no intention of taking up an undue amount of time at this late hour. But it would be wrong if the House allowed this Scheme to go through formally. After all, this authorises the expenditure of £28 million. That is £1¼ million more than we were spending last year. We cannot regard that increase as a flea-bite. Someone has to act as watchdog over the taxpayers' money.
In 1951–52, the fertiliser subsidy was running down to a rate of about £8 million. Now, with the lime subsidy, which we shall be discussing later in the week, we have a subsidy of £38 million, which represents an expenditure in one year of more than the cotton industry will be receiving in five years. This is of particular importance to farmers because it comes off the prices which farmers receive as a result of the Price Review determination. I am always surprised that more attention is not paid to the subsidy.
It is a puzzle to know who benefits most by this considerable sum, the farmers or the manufacturers. I do not expect any reply to this, because the odd thing is that we have this expenditure of £28 million without any costings at 197 all. On the face of it, the manufacturers do not do badly. Fisons have been paying 15 per cent. for a considerable time and I.C.I. seem to have been in a similar position.
We know that this industry has been the subject of inquiry by the Monopolies Commission. The industry has been inquired into for about three years now and I understood that a report is about due. I expected the Joint Parliamentary Secretary at least to comfort us by saying that we should be receiving the report very soon. It is a highly unsatisfactory position to be in, paying £28 million by way of subsidy to an industry which has been the subject of inquiry by the Monopolies Commission for three years.
The situation is even more unsatisfactory than that. I have raised the question of the Fertilisers and Feeding Stuffs Act, 1926. It was conceded before the war that this matter should be revised, but nothing has been done. One complaint is that there is over-charging for the mixing and bagging of fertilisers. Again, that is in an industry which is receiving £28 million in subsidy a year. I have pressed the Board of Trade to inquire into the duty on sulphate of ammonia, which is at the rate of £4 a ton, and I understand that is being inquired into by the Board of Trade.
Surely this is an unsatisfactory position. Here is an industry receiving the benefit of a protective tariff of £4 a ton and, at the same time, being subsidised by the taxpayer. If the objective is to reduce fertiliser prices, it would be a greater advantage to allow the import prices to affect price here. I do not blame the Joint Parliamentary Secretary for not trying to explain this, for it would certainly be very difficult to decide where the major benefit of this subvention goes, but if one looks at the records of the big companies largely responsible for the production of fertilisers, one sees that they are doing extremely well, not unaided by the taxpayer. There could be greater competition, but the Government so far have done their best to avoid extending competition.
If we turn to the purpose of the Scheme, we recognise that it is laudable enough. It is to encourage the increased use of fertilisers, but, nevertheless, are 198 we satisfied that an expenditure of £28 million is justified? It is not sufficient to say that this is laudable; a subsidy of £28 million for coal might be advantageous. There is a very great argument for a price incentive to get coal moving, so it is not sufficient to say that the objective is laudable. We have to satisfy ourselves that this considerable expenditure of money is in fact serving this purpose. The position is that the British farmer today is well behind most European countries in the use of fertiliser. On the latest O.E.E.C. tables he comes eighth.
In spite of the expenditure of £28 million, Britain is below the Netherlands, Belgium, Iceland, Germany, Norway, Denmark and Luxembourg; and a very bad eighth at that. We are below countries making an insufficient use of fertilisers. If we compare ourselves in this table with countries similar than ourselves we find three are using twice as much and two are using three times as much. Indeed we are using a quarter of the rate used by Japan, a third of that used by the Netherlands, and half as much as is used by West Germany.
One might say that these figures justify the use of the subsidy, but unfortunately, the case is not made at all because not only are we behind those other countries in the use of fertilisers, but we have lagged behind most European countries in the rate of increase of their use in past years. If we consider any other test—for example, whether this subsidy aids the fertiliser industry and whether it has aided production—we find a negative result. To test ourselves against Western European countries, we find again that we lag behind Western European countries not only in the rate of increase of the use of fertiliser, but in the expansion of the fertiliser industry. This is not surprising, because this is an industry which at least bears the appearance of being monopoly-ridden.
If we take the price, which is our main concern as this is a Scheme to provide a subvention to the farmer against our present prices of fertiliser, I concede at once that over recent years the price has been fairly steady. The gross price of fertilisers has not moved remarkably. This means, however, only that we bear comparison with most other Western European countries, and no more than 199 that. I suspect that one of the factors which has kept the price steady may well have been that the industry has been a subject of inquiry before the Monopolies Commission. That is usually a salutary discipline.
If we compare our price position with Western European countries, we come out of it badly. I take merely a couple of examples. If we ignore the subsidy, superphosphate in this country is higher priced than in any country in Europe, except, possibly, Greece and Turkey. Some nitrogenous fertilisers have been cheaper in Denmark without a subsidy than they are here with a subsidy. Certainly, this has happened over the past two or three years.
If we make a valid comparison and compare the use of subsidised fertilisers with the use of non-subsidised fertilisers—we know, as the question is occasionally raised in the House, that potash is not subsidised because it is imported—we find that no case can be made for the subsidised fertilisers, because the use and the rate of increased use of potash bear comparison with the subsidised fertilisers. There is no markedly different pattern.
I am not against the use of a subsidy to encourage the use of fertiliser. This is done by two or three other countries and there are several different ways in which aid is given through other means than a direct subsidy. I urge upon the House, however, that if such an enormous sum as this is given, the House must be satisfied that it is serving its purpose. We really cannot be carelessly open-handed in this way in aiding private enterprise.
Here is an industry whose affairs are subject to an inquiry by the Monopolies Commission. At the same time, this is a subsidy that goes steadily up. One and a quarter million pounds is such a flea-bite that the Joint Parliamentary Secretary does not deign to mention it. We are entitled to demand that we should be satisfied that this money is properly spent, particularly as it is money which comes out of the Price Review and if it were not going in a fertiliser subsidy, would go in a direct price incentive. I always thought that this Government of all Governments were in favour of the price incentive. This method, however, is blunting it.
200 We are entitled to be satisfied that a large sum like this is properly administered. Whoever heard of over £28 million being spent by the Government without any costings inquiry and without any inquiry to satisfy the taxpayer that the money is properly spent? There has been no inquiry to satisfy ourselves that this expenditure is serving its purpose. Steps, for example, have been taken in Holland to ensure that the use of fertilisers is encouraged and properly applied, and I would ask what we are doing compared with the Dutch advisory service. If we are spending £28½ million, it is worth spending a good deal by publicity, advisory services, and so on, to ensure that we are taking other less expensive steps to increase the use of fertiliser.
Above all, we should ask ourselves how other countries have managed to achieve all this and have, in fact, a better record than us, without spending £28 million. It is surprising that we have such a lax Government and such lax producers that they have never inquired into these things, and it is remarkable that the N.F.U., I believe, still has no fertiliser committee. But this is coming off the price which the farmer receives for his produce. This is a matter about which we can be dispassionate; it comes out of the Price Review, but affects directly both the farmer and the taxpayer, and we cannot go on allowing these subsidies to run to heights which were unimaginable a few years ago.
Who ever thought then that we should be discussing a subsidy of £28½ million for fertilisers, or £38 million is one considers the lime subsidy as well? What evidence have we that this money is not going largely to aid the fertiliser manufacturers? What evidence we have surely points the other way. We have a monopoly-ridden industry which is increasingly supported at the taxpayers' expense, which is showing less initiative and enterprise than corresponding industries in other countries, and the farmer finds that he is getting less and less direct incentive.
The Government and the producers should seriously discuss this matter, and before we discuss a similar Scheme again we should be assured that the Government will hold a full inquiry and review.

§ Mr. Godber
The hon. Member for Sunderland, North (Mr. Willey) was a trifle unfair to me when he said that the additional £1¼ million was such a flea bite that I did not mention it. I said I was only too happy to respond to any points, but, as I knew that we were all waiting to hear him I did not go into it then.
We anticipate that the cost this year will be about £28½ million, which, I agree, is a considerable sum of money. But this subsidy, like others we have been discussing recently, is directed as a production grant, which we believe is very valuable in the farming cycle, in that money is brought in at the beginning. This is particularly helpful to small producers. We have stepped up our production grants deliberately as a policy over the years. It is true that, coming out of the Price Review as they do, they must be taken as part of the Price Review settlement and, therefore, must affect the end price product. We think that that is the right kind of policy.
The hon. Member made a fair point about these fertiliser subsidies, regarding the report of the Monopolies Commission. I had hoped that we should have received it by now, but my hon. Friend the Parliamentary Secretary to the Board of Trade made a statement on 23rd June in which he said that it was hoped to receive it before the end of July this year. So it will be coming out very soon, but we have not yet seen it and must await what it has to say. The hon. Member had one or two harsh things to say about Fisons and I.C.I. He seems better advised on their profits than I am, but I noticed that I.C.I.'s profits went down by £10 million last year, which is not an indication that they were making a good deal more money out of fertilisers.
The hon. Member made one or two rather damaging comparisons between our practice and European practice. I have one or two figures, from the Annual Report of the O.E.E.C. last February, for some countries, and these make me a little puzzled by the hon. Member's reference to nitrogenous fertilisers. He compared our figures with those for Denmark. The figure from that O.E.E.C. document is that the cost per long ton of plant nutrient, which is a complicated 202 formula, is £95 5s. l0d. in Denmark and £100 14s. 3d. in the United Kingdom, before deduction of subsidy. After deduction of subsidy the figure is down to £57 16s. 1d.

§ Mr. Willey
It depends on the point of time at which the comparison is made. The hon. Member knows that the Press have reported that there have been occasions on which the Danish unsubsidised price has been below the British price.

§ Mr. Godber
I was taking the latest figures. I was not aware that that has been the case in recent years, certainly not in the last two years. The price is now very much lower in this country, with the subsidy.
I agree that comparisons with phosphatic fertilisers show that the unsubsidised U.K. price is higher than that in most European countries, but I was dealing with nitrogenous fertilisers, where that is certainly not the case. In the O.E.E.C. figures there are four countries where the price at present is higher than in the U.K. This indicates that there is not such a wide disparity. We must wait to see what the Monopolies Commission Report reveals.
I do not think that there is evidence to suggest that the fertiliser industry is taking unfair advantage of this subsidy. As far as the subsidies stimulate demand, the fertiliser industry benefits, but we have no evidence available as yet—I say "as yet" advisedly, because we are awaiting the report—that unfair advantage is being taken of the subsidies, which are provided for the farmers and which are a definite part of the Price Review.
The hon. Member spoke of the increase in the use of fertilisers in other parts of Europe. There has been a considerable rise in the consumption of nitrogen and potash in this country over the last seven years. The consumption of nitrogen has risen from 230,000 to 340,000 tons of plant nutrient, which is an increase of nearly 50 per cent.
The hon. Member referred to steps to encourage greater consumption and to the Dutch advisory service. Our N.A.A.S. does a lot of work in this connection, through testing soil and advising on the need for fertilisers. This has proved helpful and it is being extended all the time. It deals with the greater 203 use of fertilisers where the need is proved. Some of the other figures which are sometimes quoted in this matter are a little doubtful because much depends on the types of land which are brought into the estimations. If we were to include all our rough hill grazing it would give a very false impression.
I assure the hon. Member and the House that we are very anxious to see that the fertiliser subsidies are properly used. We want to continue to stimulate the increased use of fertilisers in this country. We want to see the farming community getting the best advantage from them. In these, as in other production grants, we are trying to assist farmers to obtain more economic production, which is the whole object of the production grants which we are discussing. I hope that with that explanation the House will be willing to pass the Scheme.