§ 2.58 p.m.
§ LORD CHAMPION
My Lords, I beg to move that the draft Fertilisers (United Kingdom) Scheme, 1965, a copy of which was laid before this House on April 14, be approved. This Scheme does not involve any radical changes from the schemes which have been approved by the House in recent years. The rates of subsidy have been reduced in accordance with the cut of £2 million announced at the Annual Review. Apart from this, there are relatively minor changes in the drafting of the Order itself.
The cut in the subsidy is equivalent to a reduction of a little over 6 per cent. in the present subsidy, and in this Order we have to apply this reduction to the rates of subsidy paid for nitrogen, soluble phosphoric acid, insoluble phosphoric acid and insoluble phosphoric acid in basic slag. The method by which this is done is to reduce the individual rates of subsidy for these nutrients by this average amount, allowing for the fact that, since we cannot work to fractions of a penny, we cannot make a completely even percentage reduction in all the rates. In detail, these cuts show a reduction of 5d. per unit for nitrogen, 4d. per unit for soluble phosphoric acid and 2d. per unit for insoluble phosphoric acid. The reduction on grades of basic slag of over 14 per cent. is 3d. per unit. For lower grades of basic slag the reductions are somewhat higher, so that we can balance the sum without making bigger cuts on the higher grades and on the other nutrients, which represent by far the greatest part of all nutrients used.
370 The new rates mean that the amount of subsidy will be equivalent to some 30 per cent, of the cost of the principal straight fertilisers. For compound fertilisers the amount of subsidy is in the range between 22 per cent. and 28 per cent. of the cost, according to the proportions of the different nutrients from which they are composed. For all fertilisers taken together the average subsidy represents some 25 per cent. of the cost at the prices for the 1964–65 fertiliser year.
To turn to the Order itself, there are no major changes. The changes which we have made are designed to clarify the wording of the Order in a number of respects and to deal with a number of minor points that have arisen in the administration of the Scheme during the past year. I will run through these changes briefly, dealing with them in the order in which they occur. The definition of "delivered" in paragraph 2 has been amplified, but this does not represent a change in policy. In paragraph 3 of the Order the position regarding the eligibility of fertilisers containing nitrogen or phosphoric acid not wholly derived from organic materials was found to be slightly ambiguous. We have now clarified the position and made it clear that where either the nitrogen or the phosphoric acid contains an inorganic element the fertiliser will qualify for subsidy. Paragraph 5(2) has also been re-worded, but this is purely a drafting alteration.
The next amendment occurs in paragraph 6(3). Here we have made it clear that, in accordance with our practice in administering the Scheme, when calculating whether the subsidy represents 50 per cent. of the cost of a fertiliser, discounts allowed or offered shall be deducted from that cost. The last amendment to the text of the Order is that we have added a new paragraph—paragraph 8—to provide for a new declaration on the application form which is signed by the applicant. This is to safeguard the Minister in reclaiming subsidy where fertilisers are not used in accordance with the terms of the application. What we have in mind in particular here, is that an applicant may order too much fertiliser and may return some of it to his supplier.
I am sure that the House will agree that these amendments to the Order are, as I have said, relatively minor changes 371 in the Scheme which is in all essential respects exactly the same as Schemes approved in earlier years. The important feature is that the fertiliser subsidy is continuing and that the valuable contribution which it has made to increasing agricultural production will also continue. In 1952–53, which was the first year in which the fertiliser subsidy applied to nitrogen and to phosphates, as it does at present, the subsidy amounted to £12.7 million. For the fertiliser year 1964–65 we estimate that the subsidy will amount to £31.4 million. I think that this demonstrates clearly the expansion in the use of fertilisers which has been facilitated by the existence of this subsidy, and I ask the House to approve this Order to enable the subsidy to be continued for a further year.
§ Moved, That the Draft Fertilisers (United Kingdom) Scheme 1965, laid before the House on April 14, be approved.—(Lord Champion.)
My Lords, this again is an Order which we on this side of the House wholeheartedly welcome. Fertilisers have been of inestimable benefit to the agricultural community, and this subsidy has increased their use enormously. It is comforting to see that the Minister of Agriculture is ever mindful of the ways in which some people may possibly avoid or evade the restrictions imposed by these Orders, and I am glad to see that they have been altered in some form so as to make them more watertight. I was sorry to hear that the subsidy is to be reduced by £2 million, but I do not propose to pursue that point, because I believe it is not exactly without precedent. But I think the noble Lord did himself less than justice, because one of the anomalies of the agricultural subsidy system is that, whereas a subsidy on a commodity may be reduced, the Exchequer's liability may not be reduced. In this case I believe that although the subsidy is being reduced by £2 million, Her Majesty's Government will in fact in the forthcoming year be expecting to pay out just about the same amount as, if not more than, that paid for fertilisers last year. But we are grateful to the noble Lord for his Order.
§ LORD CHAMPION
Yes, my Lords, it is the case that although there appears to be a reduction of £2 million we rather 372 expect that the amount to be found by the taxpayer for the forthcoming year will be up by £600,000. I know that that sounds rather odd after my talking of the cut of £2 million; but fortunately the farmers recognise the benefits of using fertiliser and the use graph is continuing the upward tendency that has been showing for a long time. So, actually, we rather expect to be spending a little more this year than in the last year.
My Lords, I wonder whether the Minister will be able to tell us what the net effect of this reduction of £2 million may be to the farmer. We have heard that it may mean that more will be paid out by the Exchequer; but in the past the fertiliser manufacturers, by means of increased efficiency, have been able to absorb sometimes all the reduction in subsidy and have reduced their prices to the farmer so that the farmer has not had to pay more. Now, if the reduction of £2 million in Exchequer grant is made and if it is not possible for the fertiliser manufacturers to reduce their prices, the farmers will have to pay more for their fertilisers. I wonder whether the Minister has any estimate of what those increased costs to the farmer are likely to be, on the assumption that the prices of fertilisers will not be reduced.
§ LORD CHAMPION
My Lords, I have the figures here, but they will take rather a lot of "digging out". I should be happy to convey these figures to the noble Earl. We are not sure about this, because we do not know quite what the fertiliser manufacturers are going to do. There have been various suggestions. I saw one of them in the Financial Times on the 13th of this month to the effect that it is likely that the manufacturers will manage to maintain their fertiliser prices at the prices existing last year, despite the increased costs to them. Of course, we are glad to see that they might do this. But, inevitably, if they maintain their prices at the present level, it will mean that the farmers will have to pay slightly more for their fertilisers than they did last year. But if the noble Earl wishes it, I can give him the figures and set them out in tabulated form. In fact, I will do that.
My Lords, can the noble Lord help me a little on 373 the solubility of phosphates or phosphoric acid? Can he tell me, for example, how he assesses the solubility of basic slag? It is a little confusing as there are two rates of subsidy and there are very great differences in the solubility of some of these phosphates.
§ LORD CHAMPION
My Lords, I am afraid that my chemistry never arrived at that stage; but, as in my previous answer, I shall be happy to get this information, which I am sure is available, from the Ministry so that the noble Viscount will get his answer to this very highly technical question. I had rather hoped that no noble Lord would fling such a question at me on this particularly difficult matter.
My Lords, I thank the noble Lord. I did not raise this question in a frivolous manner. It has a point behind it.
§ On Question, Motion agreed to.