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5 May, 1927.]

Sir CHARLES T. DAVIS, K.C.M.G., and Mr. ALWIN DICKINSON, C.M.G.

3808. How many years do you think it would take at that rate to get back the capital sum that we have invested in it?— The Redemption Fund charge is calculated on a 50 years' basis.

3809. This Commission was set up, I believe, primarily during the War, was it not? No. As an outcome of the War Nauru was mandated, and the three Governments decided then to acquire the phosphate rights in Nauru and Ocean Island from a private Company.

3810. I suppose next year we shall have these accounts presented under the new scheme, Sir Malcolm? (Sir Malcolm Ramsay.) Well, so far as the figures go, the costs are related to the turnover already. The sales are given at £705,000, and the cost charges are 90 per cent. of that.

3811. That is the cost of the phosphate f.o.b. including interest? Yes.

3812. Of course, everything has been put in one account. You do not give much opportunity for any criticism. I should like to observe that if any account could be put in an omnibus manner, those responsible for the framing of this account ought to be congratulated, because it leaves little scope for asking any detailed question. If that is the object of the witness I think he has been successful. Is that the object?-(Mr. Dickinson.) Well, although this is a Government-owned concern, we are still a competitive concern. I think you know why it is that we do not want to publish information of all and sundry, but I should be very glad to hand the detailed accounts 4ound if anyone would like to see any of the details.

3813. Of course, that would be very useful if those detailed accounts were given to us at the commencement of the Committee's sittings so that one could have a glance at them; but it is a little unfortunate to have them handed on the spur of the moment, and it is difficult to do them justice if given them while asking questions of the witness?—I explain any or all of the items.

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3814. I suppose to make ends meet, having practically a monopoly, you can charge anything you like within reason? -No, that is not the spirit of the undertaking at all. After the Governments have been paid their interest on capital and the sinking fund charge, and, of course, certain other charges provided for in the Act, we are not supposed to

[Continued.

make any profit on the phosphate sold to the partner countries.

3815. But, of course, you will admit, I suppose, that unless you come down on one side you would show a loss at the end of the year? That is where our experience in the business is supposed to come in.

3816. You say that you have competitors. How much cheaper are you than the competitors?-In Australia and in New Zealand I should say about 10s. a ton cheaper.

3817. What about England?-At present we cannot compete. We are about 2s. or 3s. above the parity in the United Kingdom.

3818. That is attributable to what?It is largely attributable to freights, but mainly, I think, to the rate of Exchange which admits places like Morocco supplying phosphate at prices with which we cannot compete.

3819. Are they the only competitor that you have?-Florida is the next one, but Morocco set the pace by reason of the Exchange.

3820. Let us take your other competitors. Take the Florida competitor. Have you the same price as the Florida competitor? The Florida competitor is a profit-earning concern, and they will always follow the lowest price. We should come into this market in the United Kingdom if we could get our prices down 2s. or 3s. lower than they are to-day, and I hope to do this in a short time.

3821. Is it a question of turnover with you? Well, of course output is the greatest element in the question of cost.

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5 May, 1927.]

Sir CHARLES T. DAVIS, K.C.M.G., and Mr. ALWIN DICKINSON, C.M.G.

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3824. Why do you hope to get in byand-by as against what you can do at the present time?-Because our output is increasing at the present time. The consumption is increasing.

3825. Increasing in the Colonies?-In the Colonies.

3826. I understood you to say just now that the Treasury are particular that they have their interest for money advanced. That money was advanced, presumably, to help this Country, was it not?-No. Three Governments came in.

3827. But the object of the Home Government and the Colonial Governments was, of course, to help the people of this Country?-Exactly. During the War this Country had to pay such a high price for phosphate that it was decided to buy this business, but since then the franc, as you know, has gone down, and that has altered prices entirely. Now prices are abnormally cheap, and our phosphate is too dear. We are trying to get down to the abnormally cheap prices.

3828. As a matter of fact, you ought to have been in a better position this past year than the year before, if you take the value of the franc?-We are in a better position, but not in a good enough position yet.

3829. As a fact, this phosphate can be sold at a profit by other Countries to this Country, presumably?-It can be, yes.

3830. And they are able to pay a dividend?-Unfortunately many of the phosphate companies have not been paying dividends. Quite a majority, I should say 90 per cent., of the suppliers from Florida have been going without dividends, but we have had to pay our 6 per cent., so that you see we have a little obstacle to get over before we come on to even terms with them.

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[Continued.

3831. What is the price you are charging for phosphate in this Country?To-day our price would be about 56s. Od. a ton. About 53s. Od. a ton would bring us in. It is all a question of quality and various other conditions connected with the quality of the material.

3832. Do you suggest that the quality that you are producing is a better quality than that of your competitors? It is the best in the world.

3833. Has it not got a greater value if that be so?-Of course it has. But take the freight. The freight from these islands to the United Kingdom to-day would probably be 33s. Od. net. From Florida it would be shipped at, say 12s. 6d., and from Morocco at about 7s. 6d. to 8s. Od. So that you see the advantage of our quality is whittled down by the freight. Then, in addition to that, we have been up against the Exchange.

3834. Was your output last year greater than it was the year before?Yes, greater than any other year.

3835. You had your best year last year? -Yes.

3836. Do you carry a very large stock this year? No, not a very large stock.

3837. Have you any market in South Africa?—No, we do not regard that as a good market on account of distance. We should probably have to pay a freight of 35s. Od. to South Africa. From the middle of the Pacific round to the Cape is a very long pull.

3838. In taking in your stock for your Balance Sheet, what value do you take it in at?-At the cost of raising.

3839. Not at the market price?-No, just at the cost of raising.

3840. The bare cost?-The bare cost. I think that is the fair way of doing it. 3841. I still have not got, of course, the details I should like to have of the expenses. For instance, what is the percentage of your labour and the percentage of your overhead charges and administrative charges?-The cost is £23s. 7d. a ton. That is made up of the islands' working cost such as wages, rations, and all that sort of thing, amounting to 8s. 1d. We pay local royalties, of 1s. 11d. a ton. The cost of the Commissioners and administration comes to 1s. Od. a ton. Interest on the Government investment and the sinking fund comes to 9s. 51d. a ton. Then we provide a staff bonus represent

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5 May, 1927.]

Sir CHARLES T. DAVIS, K.C.M.G., and Mr. ALWIN DICKINSON,

C.M.G.

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ing 3d. a ton, and we also have a Staff Provident Fund to which we debit 2d. a ton. Then we have the cost of our moorings. The loading of phosphate is done out in the open. I do not know whether I have explained it before, but we have no harbours out there. We have, therefore, very large mcorings, and we have to keep a pretty considerable moorings reserve fund which takes 4d. a ton. Then we take the depreciation of plant at 2s. Od. a ton, and there is a special charge for a special steamer out there which costs 44d. a ton. That totals up to 23s. 7d. a ton. Those are the items of our expenses.

3842. But your 23s. 7d. a ton is the amount it costs you for raising. That is how you arrive at the figure of 23s. 7d.? -Yes.

3843. You carry forward a sum of money the same as you have carried forward a sum of money from this year to next year?-Exactly.

Sir Fredric Wise.

3844. Have you bought any new plant recently? I have just placed a contract for a very large cantilever.

3845. Where does the money come from?-Out of our reserves.

3846. What is the cost of the cantilever? This cantilever will cost about £170,000.

3847. Is the contract given to a British firm? To a British firm in Manchester.

Mr. Briggs.

3848. Are the phosphates that are brought into this Country the basis of many of those products that are now being advertised in this Country? To mention one, I will mention "Plutophos "?" Plutophos" is a manufactured article.

3849. A manufactured article manufactured from your material?--It is not made from our material. I am not sure, but I think it is partly manufactured from Morocco phosphate and partly from Florida phosphate. That, I believe, is an article that has already been treated. Our material is purely raw material.

3850. But yours is just as effective?Well, ours is very seldom used in the raw state. It is generally converted into what they call superphosphate by the addition of sulphuric acid.

3851. You dispose of it therefore to the large distributors ?-There are about

85 manufacturers of superphosphate in this Country.

3852. What I wanted to arrive at was this. You said the value per ton at which you sold here was £2 16s. The average price of these distributors is £5 a ton to the farmers. What I want to know is where that huge difference is going? That difference is going mainly in the cost of sulphuric acid and the costs of labour and distribution in this Country.

3853. Would it not be worth your while to attempt to put your own article directly on to the market? That is a question which they are now considering particularly in Australia. They are rather afraid of it. I should be rather afraid of it here unless we were more certain of our supplies of raw material.

Major Salmon.

3854. Is there any doubt about your supplies of raw material?—I mean as to cost.

3855. Not as to obtaining it? Oh no. In these islands I think we have got well over 100,000,000 tons of the best phosphate in the world.

Colonel Henderson.

3856. What is your annual output-For the current year we are just topping the 500,000-ton mark.

3857. It will last you, therefore, 200 years? Yes, at that rate; but we hope presently with new arrangements to have an output of 1,000,000 tons a year. That, I think, answers the Honourable Member's question as to getting it into this Country. We are aiming now at an output of 1,000,000 tons.

Mr. Briggs.

3858. Whilst one does not want to advocate a policy that must only be raised on the Floor of the House, you will realise that you have already got established a Government producer of raw material. It is a raw material which is absolutely urgently needed by the farmers of this Country. The farmers of this Country cannot employ it to anything like the extent that they would like to do, because of the cost, the cost being as I have already told youand I known it from bitter experience£5 per ton. Here have a you material which you say you could dispose

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5 May, 1927.]

Sir CHARLES T. DAVIS, K.C.M.G., and Mr. ALWIN DICKINSON, C.M.G.

of in the raw state at £2 16s. Could you not carry your investigations further, not necessarily with the idea of making a profit, but with the idea of benefiting the agriculture of this Country?-If I were dictator in the matter I should do quite different things, but I do not think the Chancellor of the Exchequer would quite agree to abandon his interest.

3859. Then how can this Committee arrive at your opinion? We can deal with the Chancellor of the Exchequer. May I ask for a paper on this matter showing the cost at which this basic material can be landed here, and the cost that would be incurred in manufacturing it ready for the agriculturists? suppose you have those facts?-I think that would be rather a matter for the Minister of Agriculture. I should have no opportunity to get at that.

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3860. But those are practical factors that must be in the knowledge of your Department?-It is within our knowledge, but it is not within our right to say what we know.

3861. If it is within your knowledge, and if I am in order in asking for it, you must not tell me to go to the Minister of Agriculture. I must ask you for the information?—I should be glad to give any information that I can properly give.

3862. If you have that information, we then know you can produce this article manufactured, we will say, at £3 10s. a ton, and we then know the State has it in its power to offer the article that the farmers must have at a very considerably less price than he has to pay for it at present. I would like to have that detailed information so that I can bring it up before the House.

Chairman.

3863. I gather that Mr. Briggs presses for a reply to this question. As I understand, his object is to see this article placed on the market in this Country more cheaply.

Unless I am wrong, the situation is for all practical purposes regulated by the agreement, and I put that agreement to the Treasury. If that were to be done in existing conditions, is it not true that you would require to recast this agreement which was entered into in 1919?-(Mr. Phillips.) Yes.

3864. That is beyond all doubt?—That is so.

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Chairman.] So that any memorandum which the witness was asked to put in could only be put in in conjunction with the Treasury. That is perfectly plain. I imagine there is no difficulty in offering to Mr. Briggs and the Committee a statement on that point.

Mr. Briggs.] Conditional to the agreement.

Chairman.] If you say conditional to the agreement I am afraid you are ciosing the door to a memorandum.

Mr. Briggs.] I do not want to do that. Mr. Ellis.] Does not Mr. Briggs want an estimate of what in the opinion of the witness it would cost to convert this raw material into the finished article?

Mr. Briggs.] What I want to know is, what the witness thinks it would cost if instructed by the Government to produce the manufactured article and sell it to the farmers in this country.*

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5 May, 1927.]

Sir CHARLES T. DAVIS, K.C.M.G., and
Mr. ALWIN DICKINSON, C.M.G.

phosphate is not coming here, because it is 56s. Od. a ton. The output for the year in question was about 480,000 tons, and it all went to Australia and New Zealand, and a little to Japan.

3869. You are selling it at 56s. Od. a ton to someone?-No, that would be the price if it were coming here. We have been selling it to Australia in the year in question at about 46s. Od. a ton.

3870. If it came here it would be sold at 56s. Od. a ton?-That would be our price.

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3871. Does that mean that would be the price for individual tons, or for larger quantities?-By the agreement we cannot make any difference. We cannot make any concession for large quantities.

3872. I was only wondering whether large quantities would effect a difference in price, but it is not a question of quantities?—No, it would not affect the price for individual purchases. It would over the whole, of course, because increased output would bring down the cost.

(Sir Charles Davis and Mr. Dickinson withdrew.)

CIVIL SERVICES APPROPRIATION ACCOUNTS, 1925-26.

CLASS V.

ON VOTE 3.

OVERSEA SETTLEMENT.

Mr. T. C. MACNAGHTEN, C.M.G., C.B.E., called in; and examined.

Chairman.

3873. Mr. Macnaghten, you reply for the Oversea Settlement Account?-(Mr. Macnaghten.) Yes.

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3874. There is no report on Account, Sir Malcolm?-(Sir Malcolm Ramsay.) No. (Mr. Macnaghten.) A question was asked before I came into the witness chair as to the staff of this Department. May I answer that question now?

3875. Yes, if you will do so.-The total staff of the Oversea Settlement Department is 67. The administrative staff is 8; the accounts department 14; the outdoor branch-that is the men who work at the Dominion Offices for us checking our accounts with themnumber 10; the clerical staff is 15; the typists number 10; and then there are 3 interviewing officers, men with experience of the Dominions; and there are the messengers.

Sir Fredric Wise.

3876. Has the staff increased ?—No, it has fallen off in the last few years.

Mr. Briggs.

3877. With regard to subheads C. to H. under the head of the "Empire Settlement Act, 1922," may I ask what is the number of persons that have been

dealt with under that Act as against these costs shown in these subheads?The number has been 40,000 annually during 1923, 1924, 1925, and last year the number rose to about 66,000.

3878. Therefore the figures shown under these subheads cover the 66.000?-No. This is for the year 1925. The 66,000 was in reference to the year 1926. In the year 1926 the number was about 40,000. Those were all State-aided settlers.

3879. At the bottom of page 400 there is an item of ordinary receipts amounting to £100,000. What does that come from? -Those are repayments of passage loans. Passage loans are partly by way of grant and partly by way of loans. The loans are recovered for us by the Dominions.

3880. The only loans that I can see referred to are those on the next page which are irrecoverable?-Those are irrecoverable passage loans.

3881. That is the only place where 1 can see loans referred to. These others are sums recovered as against loans for passages? Yes.

Major Salmon.

3882. Are the assisted passages growing this current year?-For the first four months of this year, no. There has been a small falling off as compared with last year, when there was this increase of quite 50 per cent.

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