CLAUSE 44.—(Interpretation.) (Hansard, 11 November 1926)

§ The ATTORNEY-GENERAL
I beg to move, in page 32, line 8, at the end, to insert the words The expression 'transmission line,' when used with reference to a line which is a main transmission line within the meaning of the Electricity (Supply) Act, 1919, shall include all such works as are mentioned in that definition, and, when used with reference to a line which is not such a main transmission line, shall include any works necessary to and used for the control of the transmission line and the transmission of electricity thereby and the buildings or such part thereof as may be required to accommodate those works. This is really a drafting Amendment. It brings to their proper place some words which appear in the Third Schedule, which I am going to move later to leave out.

§ The ATTORNEY-GENERAL
I beg to move, in page 32, to leave out lines 14 to 28, inclusive.
This Amendment requires a little more explanation, although I think it is merely of a drafting character. There is in this Clause an elaborate definition of what is meant by "capital charges." At the time the Bill was drafted, and those words were in, there were, I think, in two of the Schedules provisions including capital charges, and it became necessary to have 1358 a definition of "capital charges" to make sure what was included. As things went on, the words disappeared as a term of inclusion, and the only two places in which the words "capital charges" now occur are Clauses 10 and 14. In Clause 10, Sub-section (3, a) there is a reference that no account shall be taken of capital charges in respect of capital expended on the station, and in Clause 14, Sub-section (3), again are the words No account shall be taken of capital charges in respect of capital expended on the generating station. As we are now merely using the expression "capital charges" when we are referring to things which are to be taken into account, then whatever is a capital charge is not to be taken into account, and there is no need to have a definition to say what is a capital charge, because whatever are capital charges are to be left out altogether. On these grounds, it is unnecessary to have a definition of a term when anything of a capital charge is automatically excluded by virtue of the definition in the two Clauses, and, therefore, the definition becomes redundant.

§ Mr. SPEAKER
I take it that if lines 14 to 28 be left out, the hon. Member for Limehouse (Mr. Attlee) will not want to move this Amendment?—[In page 32, line 24, to leave out the words "less than five nor," and to leave out the words "six and a half," and to insert instead thereof the word "five."]

§ Mr. ATTLEE
I should like to raise a point on this Amendment. This definition of capital charges was not originally in the Bill, but was inserted in Committee, after we made changes in the Bill, and I understood it was to cover the specific cases in Clause 10 and Clause 14. I realise that this question is one of exclusion—that we are saying no account shall be taken of capital charges. The question is, if it was necessary to define in Committee what should be capital charges, I cannot quite see why it is not necessary to define it now. I cannot remember the words "capital charges" having been struck out in the earlier Clauses.

§ The ATTORNEY-GENERAL
I think it was inserted because the expression was intended to cover the Second and 1359 Third Schedules, which contained cases of inclusion. It turned out to be impossible to do that, because there was considerable difficulty as to what should come in, and we did not use therefore the phrase "capital charges." The result is that these words become redundant.

§ Sir PHILIP DAWSON
I beg to move, in page 33, line 27, at the end, to insert the words () Where for the purposes of this Act it is necessary to calculate what the cost of taking a supply of electricity from the Board over a number of years will be, then in making the calculation it shall be assumed that the price of fuel and the rates of wages remain constant. The object of this Amendment is that, when a long-term contract for the supply of electricity is made, it shall be assumed that the price of fuel and rates of wages will be constant, so that if there be a decrease or increase, there shall be either a corresponding decrease or increase in the cost of electricity. This is the usual clause of long-term contracts in electricity. We had them many years ago in railway contracts in this country and abroad, and they have resulted in getting far cheaper agreements for the supply of electricity than would otherwise be possible.

§ Mr. HANNON
I beg to second the Amendment.

§ Mr. BALFOUR
I am afraid the intention of my hon. Friend would not be carried out by this Amendment, and that if adopted in its present form it would be disastrous. I assume he means to make the contract take a standard price of coal and a standard rate of wages, and so fix the price; but, necessarily, a provision would then be required for a rise or fall. If the price of fuel fell, of course the price would have to be varied, and there is no provision for that as the Amendment stands, and I am afraid there would be confusion. Although I am in agreement with the intention of my hon. Friend, I do not think this Amendment would carry it out.

§ The ATTORNEY-GENERAL
I think we must all be agreed as to the purpose of the Amendment, and at present I do not think the fears of my hon. Friend the Member for Hampstead (Mr. Balfour) are really justified. The necessity of these words arises, from the fact that in the various Clauses in the Bill—Clause 10 is the obvious one which at once comes into our minds—there are provisions that the Board may impose conditions as to taking the whole of the supply from the Board, and one of the provisos is that the Board is not to impose such a condition unless satisfied that the cost per unit to the undertakers of taking the whole of their supply directly or indirectly from the Board (including any expenditure necessarily incurred by the undertakers in the provision of any plant or apparatus to enable them to use the supply) will for a period of not less than seven years be less than the cost per unit at which electricity is then being produced at the generating station of the undertakers, If there were not some such words as are now proposed to be inserted, the Board could never be satisfied on that. One of the things with which the comparison has to be made is the cost per unit at which electricity is then being produced at the generating station. The other is the cost per unit over a period of not less than seven years of taking the supply from the Board. The Board cannot tell seven years ahead what the cost per unit of taking the supply will be, for it mainly depends on the cost of fuel and wages, which are the two big items. Therefore, for the purpose of making the comparison, you have to assume that during the seven years the wages and price of fuel remain constant.

§ Mr. BALFOUR
I quite agree as to the necessity of having standard prices on which to fix calculation, but there may be difficulties in actual practice if no other words are inserted to give effect to the argument the right hon. Gentleman is advancing.

§ The ATTORNEY-GENERAL
In as much as fuel and wages vary, obviously, in a period of seven years, you have got either to assume that the cost of the Board's supply is based on a fixed fuel and wages expense, or else you have to put in something that you are not to take as the cost of electricity which is then being produced, but the cost of the 1361 electricity which is then being produced if the cost of wages and fuel turn out, as they do ultimately turn out, to vary. It is stating the same thing more clearly. I think the words suggested by my hon. Friend the Member for Lewisham (Sir P. Dawson) do meet the difficulty and do insure what I am certain was the intention of everybody should be done.

§ Mr. ATTLEE
I quite appreciate the necessity for something of this sort in making the calculation, but I should prefer it to be assumed that the price of fuel and the rates of wages would remain the same for the two parties in the comparison. The real point is that if those two factors vary in the case of both the bulk supply super station and the local generating station the conditions would equally affect both parties.

§ Sir J. NALL
I think it is obvious that the competing calculations should be on the same basis.

§ The ATTORNEY-GENERAL
I will answer, if I may have the leave of the House to speak again. If my two hon. and gallant Friends will be good enough to look at page 13 of the Bill, which I was using in my illustration, they will see that the comparison is not between the cost to the Board over the next seven years and the cost to the undertakers over the same period, but that the comparison is between the cost to the Board over the next seven years and the actual cost to the undertakers at the moment. One is a fixed and definite sum—there is no necessity to take into account the varying costs of fuel or wages as far as the undertakers are concerned, because their price is the price fixed at the moment. It is the other figure that has to be guessed over a period of seven years in advance and in regard to which you have to estimate, for the purpose of making a comparison, that there is not going to be a change in the cost of fuel or wages; if there were to be such a change, it would be impossible to state that the cost to the Board in seven years would be the same as at the beginning.

Mr. HERBERT
This is a difficult question and I quite understand the Attorney-General's last explanation, but I am not at all sure that the words as they stand would provide that the particular 1362 figure we are talking about would be the same for the two cases which are to be compared. I can only say that I hope the matter will receive further consideration.

§ The ATTORNEY-GENERAL
I will certainly give it consideration, but I think it is right.

§ Colonel GRETTON
I think there is another point with reference to this question. Is this not really a limiting Clause, making a fair comparison of the two calculations? There may conic the case—it may easily occur—of an undertaking with a progressively improving production and a falling scale of costs. Is it to be assumed that the undertaking which is to he taken over or is to supply the Board is not going to show any further improvement? If so, it is going to be a false calculation. Account should be taken of what has been going on and whether the process is likely to continue, and I suggest that it would be dangerous to insert these words. There is an attempt here to bind the calculation to a particular form. It has not been represented that any one wishes to go outside the regular forms and methods of making these calculations, and assuming there is good will and honest intention on all sides this Clause is not necessary, and it would be dangerous to insert it.