29 May 1998

FERTILISER USE UNDER CLOUD

THE shadow of a government-imposed tax on fertiliser still hangs over the industry, according to Barry Higgs, director general of the Fertiliser Manufacturers Association.

"We believe the threat is still there, even though the consultation document Economic Instruments for Water Pollution, to which we responded last January, failed to make the case for such a levy."

As in his first Budget speech last November, the chancellor made passing reference in his latest budget to such measures being under consideration, says Mr Higgs.

"There is little doubt that environmental taxes are popular with some economists and Treasury back-room boys who were playing with the idea well before the general election having, no doubt, read the mind of the Labour Party."

A group of economists from six European research institutions has also obtained EU funding of 316,000ecu (£210,000), plus other money from various governments, for a two-year research project into a "nitro-tax", he notes.

However, the difficulties economists and politicians face in contemplating a fertiliser tax are considerable, maintains Mr Higgs. "They are not confined to the current financial problems facing British agriculture. For example, could it be designed to take account of organic and mineral nutrient sources and reward good nutrient management or focus on areas at particular risk? How would the taxes gathered be distributed so as to deal with problems associated with nutrient enrichment of water?

"It is claimed by many, such as the EU and the National Consumers Council, that fertilisers are used to excess. But evidence suggests the reverse. Over the years the relationship between fertiliser use and crop output has continued to improve. Farmers use fertiliser efficiently not profligately.

"It is impossible to attribute nitrate loss to fertiliser usage alone. The land holds vast amounts of nitrate. Soils may contain up to 20t/ha so some loss is natural and inevitable.

"It would be impossible to set environmental targets related to changes in fertiliser use that a tax might be designed to influence," adds Mr Higgs. "But the greatest difficulty is that, as farmers well know, fertilisers are very cost effective. This means that a very heavy tax would have to be imposed before use was significantly reduced."

In recent years fertiliser prices have varied by as much as 30%, and grain prices by more, he notes. "But fertiliser use has remained very steady and reasonable. This suggests that a tax at an affordable level would have no influence on fertiliser use or bring any environmental benefit."

Does all this mean that the government will give up on the idea?

"I believe the odds must be against such a tax. But they are not very long odds, " he warns.

Government economists and treasury officials have had their eye on crop inputs as a source of tax revenue since well before last years general election, says the FMAs Barry Higgs.