§ 3.12 p.m.
§ LORD HILTON OF UPTON
My Lords, I beg to move that the Draft Fertilisers (United Kingdom) (Extension of Delivery Period) Scheme 1968, laid before the House on the 25th of April last, be approved. Schemes have been approved by the House regularly since 1952 and the new Scheme extends to May 31, 1969, the period of operation of the 1967 Scheme. Subsidy will continue to be paid upon the phosphoric acid and/or nitrogen content of chemical fertilisers bought in lots of 4 cwt. or more for use on agricultural land or crops or for growing mushrooms. No subsidy is paid on potash or on fertilisers wholly derived from organic matter.
Expenditure on this subsidy during the coming fertiliser year is expected to be £32½ million. This scale of contribution meets about 23 per cent. of the gross cost of subsidised fertilisers and combined with the improved returns to agriculture resulting from changes made in this year's Review, provides a substantial inducement to farmers to maintain and improve the productivity of their soil. And farmers with special difficulties—in hill areas and the Scottish islands—can have this scale of contribution supplemented under other Schemes.
There were changes, I know, in fertiliser prices in 1967–68 resulting from the recommendation of the National Board for Prices and Incomes in March, 1967, and, later on, the unavoidable effects of the closure of the Suez Canal and devaluation on costs of imported raw materials. The proposed total of subsidy is little more than that of recent years, but the increase in cost of fertilisers was taken into account during the last Price Review. Despite the increases, the technological progress of the industry has meant that compound fertilisers are still cheaper per ton of plant food than they were ten years ago.
Since 1952–53 there has been a 97 per cent. increase in fertiliser use, and the benefits which come from the use of the right kinds of fertilisers are well known to most farmers. The main task now is for the farmer to judge how much more 600 fertiliser to use profitably in his own particular circumstances. I have every hope that the propaganda and advisory effort being made in many directions, coupled with the price guarantee incentives in the Review, will overcome any indifference in this respect. I am sure the House would wish this subsidy to continue for a further year, and I therefore ask the House to approve the Scheme.
§ Moved, That the Draft Fertilisers (United Kingdom) (Extension of Delivery Period) Scheme 1968, laid before the House on April 25 last, be approved.—(Lord Hilton of Upton.)
§ LORD NUGENT OF GUILDFORD
My Lords, I should like to thank the noble Lord, Lord Hilton of Upton, for the terms in which he has moved this Order continuing the fertiliser subsidy. I wish to make a point of rather more substance than I made on the last Order. It is with regard to the price increase of fertiliser that has taken place in the last year. By keeping the total cost of the subsidy at about £32 million—that is, at about the same level as before—when there has been this sharp increase in fertiliser price, the effect is to reduce the effective rate of subsidy per ton of fertiliser and, if my arithmetic is correct, to make fertiliser to the farmer about 10 per cent. more expensive. This, I think, is bound to have some restraining effect on fertiliser use by the farmer at a time when we want the farmer to increase fertiliser usage.
The noble Lord has referred to the three factors which have increased the price—the prices and incomes award of 1967; the effect of closing the Suez Canal on freight rates; and, of course, devaluation, which may still have further effects. These have all caused a much sharper increase in the price of fertilisers in the past year than has occurred before. I would make the point to noble Lords that although, as the noble Lord has said, fertiliser usage has increased greatly in the last 15 years, it has still far to go before it reaches the optimum level. A recent study by I.C.I. showed that in their sample the nitrogen usage by the best ten dairy farmers was more than four times the national average; and not only does this affect production, it affects profit as well. And most interestingly, a recent paper by Fisons showed that if the 601 increase in rate of usage of fertilisers could be raised from 5 per cent. to 7.3 per cent. over the next five years we could get an increase in total national production on our farms of £200 million per annum, mostly in livestock products. Nothing would be more welcome than that to our balance of payments at the present time. So I advisedly make to noble Lords the point that anything which tends to deter or restrain the use of fertilisers at this time seems to be very shortsighted policy. That is what this Order does, and it falls far short of the increased incentives which farmers were told by the Prime Minister they were to receive in order to increase production when he was making his statement at the time of devaluation.
It is too late for us to do anything about it now; we can but approve the Order and hope for the best. But I would strongly urge on the noble Lord, Lord Hilton, and on his right honourable colleague the Minister of Agriculture, that this should be looked at again next year to see whether it would not be wise policy to increase the total sum available for fertiliser usage in order to keep up the rate of subsidy and so keep the price at the level it was before. Nothing would pay us better than an increased usage of fertilisers on the farms; nothing would give more production more easily. With those rather strong cautionary words, I support the Order.
§ LORD BESWICK
My Lords, as usual, the noble Lord, Lord Nugent of Guildford, has made some very relevant points, and I am sure that most of them will be taken into account. I think, however, that when he speaks about the reduction in the effective rate of this subsidy he exaggerates the position somewhat. He is quite right when he says that the increase in the price of fertilisers has been very substantial, but he will also recognise that this increase in the price was known at the time of the Annual Review 602 and was taken into account at that time. I think the noble Lord will agree, also, in fairness, that one has to look at the Review as a whole when one thinks of the incentive given to production. The noble Lord mentioned an effective reduction of 10 per cent. in the proportionate rate of subsidy. I do not think that this is quite so. I am advised that his arithmetic is somewhere at fault.
§ LORD NUGENT OF GUILDFORD
My Lords, may I interrupt the noble Lord for one moment? I said, "an effective increase in the price to the farmer of 10 per cent". Of course, in fact the £15 million increase in price will make a very much bigger decrease in the rate of subsidy.
§ LORD BESWICK
But probably we should look at it in this way. In recent years the effective rate of subsidy has been reduced each year by some 2 or 3 per cent. The encouragement has been given, and as the encouragement is given the amount of money necessary to encourage the additional use of fertiliser has been reduced; and there has been, so I am advised, over recent years, a reduction of 2 to 3 per cent. in the proportionate rate of subsidy. This year the effective rate of reduction is only some 3 to 4 per cent. Normally the amount is reduced. This year the £32½ million includes a net increase of £1 million, so although I agree with the noble Lord that there is a great reduction, I do not think it is quite so great as he suggests. Nevertheless, we are at one with him in hoping that a more widespread application of fertiliser will continue, and that with education and experience it will be used much more widely and wisely, and we shall get the increased production which he requires. Nevertheless, I am glad that he has no intention of opposing this Order, and I hope we can now go on to adopt it.
§ On Question, Motion agreed to.