§ 2.54 p.m.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF AGRICULTURE, FISHERIES AND FOOD (EARL WALDEGRAVE)
My Lords, I beg to move that the Draft Fertilisers (United Kingdom) Scheme, 1961, a copy of which was laid before Parliament on May 4, be approved. This particular Scheme extends the arrangements for subsidising farmers' purchases of nitrogenous and phosphatic fertilisers for a further year, from July 1 next to June 30, 1962. May I say a brief word about the progress we have made in the use of fertilisers since these arrangements were introduced some ten years ago? It was in the year 1951 that the wartime subsidy ended; for several months there was no subsidy. Fertiliser use then fell substantially. The first year of the subsidy under the present Scheme was 1952–53. Taking that as a base year, the use of nitrogen has gone tip since by about 80 per cenit., from 230,000 tons to 415,000 tons; of phosphoric acid by 25 per cent., from 371,000 tons to 462,000 tons; and of potash by nearly 100 per cent., from 227,000 tons to 437,000 tons. Potash is, of course, not subsidised directly, but as about 90 per 394 cent. of it is incorporated in compound fertilisers which are subsidised for their nitrogen and phosphoric acid content, its use is indirectly stimulated by the subsidy.
During the decade that I have been speaking about, wheat yields have gone up by about 20 per cent., barley yields by about 17 per cent., and sugar beet by about 25 per cent. There can therefore be no doubt that the increased use of fertiliser has played a considerable part in raising these crop yields. However, farmers, especially in grassland areas, are using less fertiliser than the experts say they should. While there has been this increase of use during the period of about 4 per cent. per annum, there have been wide variations. For instance, in the twelve months ended June, 1960, the increase was 20 per cent. above the year before. Your Lordships will remember the exceptionally fine summer of 1959, which was followed by good cultivation conditions in the autumn and winter. It is interesting to see that, though last autumn was far from favourable for cultivations, and the subsidy was lowered in the 1960 Annual Review, usage in the present year looks like being well maintained, so progress is continuing.
Your Lordships will recall that the subsidy was reduced in the 1960 Review by £1½ million. Subsequently, fertiliser manufacturers reduced their prices by about £3 million. But the total cost of the subsidies still continued to rise because of the increased use of fertilisers, and reached £32 million in the last financial year. In this year's Review (that is, the 1961 Review), the subsidy has again been cut by a further £2½ million, representing about 7½ per cent. at the current level of payment. Your Lordships will, however, have noticed that three of the leading fertiliser manufacturers have already, in the last few days, announced that they will again reduce their prices at the beginning of July, and if this lead is followed throughout the industry, then farmers will be paying about £2 million less in the coming year for the corresponding quantity of fertilisers they bought in the twelve months which is just ending. We shall then have the position that the taxpayers' subsidy commitment has been reduced by £4 million in two years, but the farmers in general will nevertheless be paying less pr ton 395 for their fertilisers after taking the subsidy into account.
To turn now to the Draft Scheme, your Lordships will find it on precisely the same lines as before. But it incorporates, of course, the reduction in subsidy rates. There is one other small amendment and it is an amendment in paragraph 2 to the definition of the word "delivered". The rates of contribution have been replaced by 8d. per unit for nitrogen; by 7d. for water soluble phosphoric acid; and 3d., on average, for water insoluble phosphoric acid. These reductions, which have been agreed in discussions with the National Farmers' Union, are designed to apportion the total reduction of 7½ per cent. equitably as between nitrogen and phosphates. The total reduction for nitrogen is a little under £1.4 million, and for phosphates it is a little under £1.1 million.
Examples of how these reductions will affect particular fertilisers are as follows. For sulphate of ammonia the new rate of subsidy will be £8 15s. a ton, a reduction of 14s.; for superphosphate, £5 18s. 6d. a ton, a reduction of 10s. 6d.; and for the most commonly used compound fertilisers, the reduction is about 12s. to 15s. a ton. The fertiliser subsidy is of great value in increasing the efficiency of farming in this country. I would remind your Lordships that the proposed decrease in the amount of subsidy forms part of the Annual Review this year, which was agreed between the Government and the industry; and I hope, therefore, that your Lordships will approve this Order, which implements that agreement. My Lords, I beg to move.
§ Moved, That the Draft Fertilisers (United Kingdom) Scheme, 1961, be approved.—(Earl Waldegrave.)
My Lords, I think we shall all agree that it is very satisfactory that it has been possible to reduce the subsidies by this amount, thus saving the taxpayer. But would the noble Earl bear in mind, and ask his colleagues to bear in mind, that in the case of imported fertiliser there is still a tariff, so that the money is taken from the farmer there. He has to pay a higher price for imported fertilisers, then gets it back in subsidy, which seems to me a most inconsistent 396 way of doing things. If the tariff could be reduced or abolished, there would be no need to maintain the staff for dealing with it, and the fertiliser could be sold to the farmer at the equivalent net price which he is now paying after receipt of the subsidy.
§ 3.1 p.m.
§ LORD WISE
My Lords, this is one of the agricultural hardy annuals; it is an Order which we pass year by year. As the Minister has described to your Lordships, the wording of this particular Order is more or less the same as that which we passed last year, after a discussion in your Lordships' House which started one day and then went on to the next, by reason of the fact that your Lordships had extra, important Business to do on that first day. The same applies to-day; there is an important Bill coming up for discussion later on, and for that reason I shall be brief.
The other place passed this particular Order without any amendment or discussion whatsoever, but there are one or two points in it which I think we should mention. They are points which have been referred to, to some extent, by the noble Earl. The first, as I have said, is that the wording is practically the same as in the last Order, but there is a difference in the rate of the contribution. That rate of contribution has now gone down, first in 1959, then in 1960 and again in 1961, by steps of some importance. What I am anxious to safeguard is the fact that the farmer does not suffer in the long run from the fact that the rate of contribution is lower than it has been. So far as I can see, for the main products the rate of contribution has one down by about one-eighth, I think—but by 8 per cent., at least—during last year; and that, of course, is of importance.
There are other figures which are of interest in this Order when one reads it in conjunction with the Price Review, which has also been mentioned by the noble Earl. There is one point which I should like to refer to in that connection. According to the last Price Review (I can use only the figures in the last Price Review: I cannot go into any details of what may have happened in the year) the figures show that the cost charges in regard to fertilisers are reduced for all products by no less than 397 £2.85 million, and for the Review products by £2.18 million. These figures, I assume, include lime, as well as the ordinary fertilisers, because lime is not mentioned in that particular item in the Price Review. I conclude that those figures are based on an estimate of what would happen this particular year.
The noble Earl has referred to the considerable increase in the use of fertilisers in past years, and I commend that because it is, I think, important. In these days, when our farming practices are different from what they used to be in the days of stockyards and manure heaps, it is important that these fertilisers should be used. There is one point that I should like to make, in passing. I do not want to press it; but it is the fact that the Government control the subsidies which are paid to the farmers in regard to these figures, whereas, so far as I can understand, there is no control over the costs passed on by the manufacturers to the farmer. Another point which I might put to the noble Earl is that the lime subsidy and the fertiliser subsidy are on two different bases. The lime subsidy is a percentage of the whole cost of the operation, including the cost of the product, transport, and the cost of spreading. I know that, so far as lime is concerned, it is mostly done by contractors, whereas the ordinary fertilisers are spread by the farm worker. But would it not be possible for the fertiliser subsidy to be calculated on the same basis as the lime subsidy? I think that would be to the financial advantage of the farmer, and it might be helpful. We are grateful for the receipt of this particular subsidy, and from the point of view of those of us on this side of the House we wish to welcome this Order and to approve it.
§ 3.7 p.m.
§ LORD WALSTON
My Lords, my noble friend Lord Wise said that he would be brief. I hope that I shall not be trespassing too much on his brevity, or imposing on it, if I am not quite so brief on this Order. Because I do believe, my Lords, that this is a pretty important matter. It is not simply a question of disposing of something over £30 million of the taxpayers' money: it raises rather wider issues. In passing, on that aspect of it I should like to point out a rather curious form of argument 398 which, as it seemed to me, the noble Earl put forward.
He justified the subsidy on the grounds that it had increased fertiliser consumption; and undoubtedly it is in the interests of good farming, and therefore of the consumer and the taxpayer, that we should have good and efficient farming. But the figures he gave us, unless I wrote them down wrongly, were that the use of nitrogen had increased since the subsidy started by 80 per cent. and the use of phosphates by 25 per cent. Both these two were in receipt of subsidy, but the use of potash, then unsubsidised, had increased by 100 per cent. If those figures mean anything at all, as he put them forward, they must mean that farmers use more if they are not subsidised than if they are. I would not strain the argument too far, but I suggest to the noble Earl that he has therefore put forward no evidence at all to show that this subsidy does, in fact, increase the use of fertilisers, and that it could therefore well be thought of as not fulfilling any useful purpose from the taxpayers' point of view. From the farmers' point of view, of course, I entirely support what my noble friend has said, that we want the money. But, as I said in the case of the ploughing-up subsidy some days ago, in my view it would be very much better if this money were given to the industry in the general Price Review, and not specifically for the use of fertilisers in view of these figures which the noble Earl himself has brought forward, that it is the consumption of unsubsidised fertiliser that has in fact increased a good deal more than either of the two subsidised ones.
The noble Earl also mentioned some more figures which rather bear out this point—or, rather, a slightly different point, though a significant one. When the Government reduced the subsidy on fertilisers by £2½ million, it was followed by a still further reduction by the manufacturers to the farmers of another £2½. million. So, in fact, if we pursue that argument to its illogical conclusion, the less the subsidy the cheaper the fertiliser is going to be, because the manufacturers will reduce their prices. My Lords, I will not push it to its illogical conclusion, but it does suggest that there is a considerable margin somewhere between the producer of the fer- 399 tiliser and the farmer which, if the subsidy is knocked off, can in fact be absorbed, and more than absorbed, by the manufacturers themselves.
Where this problem becomes, in my view, a good deal more important than the other matters, such as the ploughing-up subsidy which we have already discussed, is that the fertiliser industry is, to a very large extent, a monopolistic industry. Therefore, we have to watch it much more carefully than we should if there were completely free competition from a large number of producers. Your Lordships know perfectly well that the fertiliser industry was investigated by the Monopolies Commission several years ago. In 1959 they published their Report, and it is only fair to say that the Commission, when they made their Report, exonerated entirely one of the main producers of fertilisers—namely, Imperial Chemical Industries Limited—from doing anything against the public interest. May I read one sentence from that Report, because I want to be quite fair about it? They said:As regards I.C.I., we have found nothing in the history of the development of the company's present position to suggest that it has abused or is likely to abuse its monopoly power.When one turns to the other large producer and supplier of fertilisers, Fisons, the picture is not quite so favourable. There, as your Lordships will remember, the Commission said:We think the Company mistaken in believing that it is entitled to use its strength, due largely to the degree of monopoly it enjoys in a protected and subsidised market, in order to earn profits at the high rate of recent years for the express purpose of financing its further overall expansion. We regard the fixing of prices at a level which produces such profits as a thing done' by Fisons as a result of its monopoly position which operates and may be expected to operate against the public interest.However, in fairness, perhaps I may continue to quote, because they go on to say:We have to consider Fisons' activities in their entirety and, despite the criticisms we have made in the preceding paragraph and our comments on the bogey system used for pricing compounds, we do not conclude that its monopoly position in classes (c) and (f), as such, operates or may be expected to operate against the public interest.The fact that the Monopolies Commission have investigated these two concerns, and others, I think makes it neces- 400 sary for us to be a lot more careful when it comes to handing out £30 million of public money to the fertiliser industry, or to consumers, in some way or another.
I have been somewhat interested in this matter for some time, and I have made some inquiries how the fertiliser industries in other countries compare with ours, and how prices in other countries compare with ours. I was extremely glad that the noble Lord, Lord Rea, mentioned this question of the £4 per ton protective duty, because you have here a situation where you have a monopolistic set-up, in an industry which is given some protection against competitors outside its own country; large sums of taxpayers' money are being pushed out to assist the industry in some form or other; and, on top of that, there is this protection by way of £4 per ton tariff against competition from overseas.
What, in fact, is the situation with regard to foreign fertilisers? I first became interested in this subject when I was looking for fertilisers for the West Indies, and I tried to get quotations from English producers of fertilisers. This was several years ago, and they were not interested. They did not want to quote; they did not want to export to one of our own Colonies. So I had to go to Holland and Germany. More recently, I have made further inquiries and have had quotations from Holland and Germany and from England. I am sorry to say that the only quotation I was able to get from this country was significantly higher—a question of £2 or £3 per ton, depending on shipping rates—than the Dutch and German quotations. That is not a very satisfactory state of affairs for an industry which is monopolistic in character, and which is protected by a pretty substantial tariff.
I hope I am not boring your Lordships with going into too many figures, but, as I have already said, I think this matter is important and it is necessary to substantiate what I have said by quoting the actual figures. If you look at the price for fertilisers which is paid by farmers in different foreign countries, you will find, taking six countries—Holland, Denmark, France, Germany, Belgium, and the United Kingdom—that in all three groups of fertilisers, nitrogen, potash, and phosphates, the British 401 farmer, disregarding any subsidy element which comes in here or in other countries, has to pay significantly more than farmers in any of the other five countries. For instance, taking the cheapest nitrogen, that supplied by Holland, the price in U.S. dollars for 100 kilos of plant nutrient (which is the way the O.E.C.D. provides its information) is 26 dollars and 61 cents, compared with the United Kingdom price of 31 dollars and 7 cents—quite a big difference.
As regards the price for phosphates, we find that Belgium is the cheapest, 13 dollars and 62 cents; the United Kingdom is the most expensive, 23 dollars and 47 cents. With regard to potash, where admittedly we are at a disadvantage, not having any potash deposits in this country whereas Germany, the cheapest country, has, the German price is 6 dollars, 55 cents, compared with our price of 11 dollars and 62 cents. So that all the way through this great industry of ours, which is run by large, progressive, and apparently very successful firms, and is protected by this very considerable tariff, on the figures I have just quoted is either much less efficient or is making a much higher profit (I do not know which it is) than any of the concerns in these other five European countries. In fact, the margin is so great that it is possible nowadays for English firms to go to the Continent, buy their fertilisers, pay the transport and the £4 per ton duty, and still undersell the home-produced fertilisers. The last set of figures that I will give your Lordships will bear that out.
I freely admit that since these figures have been published, some price reductions have taken place on the home market. But the February figures for imported superphosphate, comparable in every respect, delivered to nearest station, packed in bags, and so on, show it could be bought, 18 to 19 per cent., for £12 18s. 0d. a ton, whereas home-produced 19 per cent. superphosphate cost £15 5s. 0d. a ton. That was after having paid duty. Imported nitro-chalk, 20 to 21 per cent.—imported from Italy, in fact—cost £22 a ton; home-produced cost £23 11is. 6d. a ton; with compound fertilisers, 12–12–18, there was not such a big difference — imported cost £30 7s. 6d.; the home-produced cost £31.
402 Therefore, I suggest, my Lords, that all these figures should make us think very carefully indeed as to where this £30 million that we are paying out this year is going, and what benefit we are getting from it. Would it not be very much better to follow up the suggestion that the noble Lord, Lord Rea, made, to abolish the £4 per ton protective duty, and to make an equivalent cut (or whatever it might be) in the subsidy? This would save the taxpayers' money, and the farmer would not be paying any more. Looking ahead, would it not be better progressively and rather more rapidly to reduce this fertiliser subsidy, which appears to go far more to the producers than to the consumers of fertiliser, and the money thus saved be taken into consideration in the Price Review and go into the global figures received by farmers? I ask the noble Earl seriously to consider this point with his colleagues, and not to relax, happily thinking that the payment of this fertiliser subsidy is increasing the use of fertilisers and is increasing the efficiency of fertiliser production.
My Lords, we have had rather a longer debate than usual on the fertiliser scheme. I am glad to see that it has generated interest. I will answer the point of the noble Lord, Lord Wise, about lime, because I think that there is a misconception in his mind. This scheme has nothing to do with lime. Subsidies for lime are dealt with in a different way and include assistance for spreading costs, but spreading costs are not included in the fertiliser scheme. As the noble Lord said, the rate of contribution has gone down by annual steps recently. The noble Lord wanted farmers to be safeguarded. From what I said in my opening remarks, the noble Lord will see that farmers have not suffered. Fertilisers are being increasingly used.
Before I come to the question of tariffs, which was raised by the noble Lord, Lord Rea, and developed by the noble Lord, Lord Walston, I should like to answer the point the noble Lord, Lord Walston, made about potash. I do not think that he drew the right conclusions from the figures. He knows well why we do not subsidise potash specifically—namely, because there is an international arrangement and any subsidy would go straight 403 to the producers of potash in those countries where it is produced. But, of course, potash is an inherent ingredient of plant foods. Nearly 90 per cent. of it is used in the making of compound fertilisers, and the reason why the use of potash has gone up so much is because the use of compound fertilisers has gone up. The subsidy helps to keep the price of the nitrogen and phosphatic content down. It is not a proper deduction to draw from the figures that the less the subsidy, the higher the usage of fertiliser.
With regard to the general position on tariffs, I have noted what has been said by the noble Lords, Lord Rea and Lord Walston. If there were evidence that the manufacturers were abusing the tariff protection that is afforded to them, and if this could be established, in accordance with the general system for considering these matters, to the satisfaction of the Government by a representative body of users, then there would of course be a strong case for tariff cuts. In advance of any such evidence, I do not wish to argue generally in respect of matters which hypothetically may be brought out in such a way.
On the other hand, I think it is only fair that the point should be made, when thinking of this matter, that the very low prices of some Continental fertilizers, which are sometimes quoted in contrast to United Kingdom prices—and it may be this kind of quotation to which the noble Lord, Lord Walston, was referring when he asked for quotations for supplies to the West Indies—should be treated with considerable reserve. The figures quoted for export sales are often considerably lower than the domestic prices that Continental farmers have to pay and on many occasions do not represent the cost of production. And very low figures are often given for limited surpluses which are being sold off, and are not a general basis for comparison. I was interested in the figures which the noble Lord produced and will certainly examine them with care, but my advice is that domestic prices to farmers in the United Kingdom compare very favourably with domestic prices to Continental farmers. I do not think it is a fair comparison to take what are really "dumping" prices for exportable surpluses.
§ LORD WALSTON
My Lords, that is why I quoted the general prices given in this statistical handbook. I was going to ask the noble Earl if the advice he received on the comparability of our prices with European farmers took account of the subsidy element. If that is taken into account, it is true that they are very comparable, but if we deduct the subsidy, we come out much higher.
My Lords, I have taken the fullest note of what the noble Lord has said and will go into the figures, and if I may continue this with him I will write to him later.
The noble Lord also raised the question of what action the Monopolies Commission had taken with regard to the two biggest manufacturers of fertilisers—I.C.I. and Fisons. I should not like there to be any misunderstanding here. Your Lordships will remember that the report of the Monopolies Commission was favourable to the I.C.I. situation, but they raised their eyebrows slightly at the Fisons situation, which was rapidly corrected in the light of their Report. Therefore, the trouble is not with us now. I had hoped to be able to say something about the discussions which both these firms are having with my right honourable friend the President of the Board of Trade but they have not been concluded. When they have, Parliament will be told about them, but I do not want to add anything now which might be prejudicial to their satisfactory outcome. Of course, my Department is fully associated with the Board of Trade in this matter. I think these were the only points which were raised to which I need reply now, and I hope that your Lordships will approve this Order.
§ On Question, Motion agreed to.