§ Order for Second Reading read.
§ The PARLIAMENTARY SECRETARY to the BOARD of TRADE (Mr. Herbert Williams)
I beg to move, "That the Bill be now read a Second time."
This Bill is not very controversial. The gas industry is an old-established industry, and has been in existence for about 100 years, and, at the time of its establishment, it partook of the character of a monopoly, because there was no alternative method of lighting. To-day, 583 of course, the position has profoundly changed because of the competition of electric light, and also in some areas because of the competition of heating by oil. Accordingly, when Parliament legislated originally, it legislated having regard to the fact that the industry was a monopoly. The bulk of the legislation under which the industry works is three-quarters of a century old, with the solitary exception of the Act of 1920, and there is no doubt that much of the legislation now calls for amendment in order that the industry may be able to deal with the present circumstances. When the industry was established, it was solely a lighting industry. To-day two-thirds of the gas produced is used for heat, one-quarter for industrial purposes, and only one-tenth for lighting purposes. That indicates quite clearly the enormous change which has come over the character of the industry. Incidentally, it is today a very important branch of the chemical industry. It produces coke, sulphate of ammonia, toluol, tar, benzol and a number of other by-products. It is sometimes thought the industry is not a growing industry. That is a misapprehension. I have not yet got the figures for 1928, but between 1920 and 1927 the sales increased from 235,000,000,000 cubic feet to 280,000,000,000 cubic feet, an increase of practically 19 per cent. in seven years. There is £200,000,000 of capital invested in the industry, of which about three-fifths is held by statutory companies and two-fifths by municipalities. Though I do not know exactly how many people are engaged in the industry, the number must be substantially in excess of 100,000.
For a long time this industry has been suffering under a disability, or a number of disabilities, on account of, it is claimed, antiquated legislation, and the National Gas Council, who are a body thoroughly representative of the whole industry and all interests in the industry, have asked for legislation. Their proposals were submitted to the National Fuel and Power Council, of which Lord Melchett is Chairman, and of which the hon. Member for Bilston (Mr. J. Baker), whom I am glad to see here, is, I think, a member. That Committee examined the proposals of the National Gas Council and, broadly speaking, found themselves in favour of the proposals; but there is 584 no doubt that some of the proposals are controversial. They are not controversial in the party sense; I do not think the dividing lines would be lines of party. I think all parties would find themselves divided internally a little in regard to some of those proposals, and it is realised that it would be impossible to carry a controversial Bill through the present Parliament having regard to those events which, apparently, are shortly ahead of us. Therefore, an endeavour was made to select those proposals which it was believed were not controversial, and, so far as I am aware, the Clauses of this Bill, which has already passed through the other House, and has undergone certain amendment there, represents substantially the non-controversial features of the proposals of the National Gas Council.
I think I ought briefly to explain the Clauses. They are not quite easy to read, because there is, unfortunately, a certain amount of legislation by reference, and I will endeavour to explain them. Clauses 1 and 2 should be read together, and perhaps it would be an advantage to read Clause 2 before Clause 1. Clause 2 lays it down generally that the borrowing powers of an undertaking may be up to an amount not exceeding one-half of the aggregate amount of the paid-up share capital. That is a general power Which is given; it is an extension of borrowing powers. Under Clause 1 it is provided that there may be some further extension of borrowing powers by an Order of the Board of Trade and provided that the consent of the local authority is obtained; but there is a Sub-section which says that if the Board are of the opinion that the consent of the local authority has been unreasonably withheld, they may, nevertheless, grant the Order subject to this, that every 15 years the undertaking concerned, if they desire the local authority to be over-ridden, must come to Parliament.
Broadly speaking, the effect of those two Clauses will be to make it possible for undertakings to obtain power to borrow without incurring the expense which is now imposed upon them and which sometimes has prevented them from seeking powers which they really ought to have. At the same time, the control of Parliament is retained, though somewhat relaxed. I say quite frankly 585 that it is somewhat relaxed, but at least every 15 years the undertaking must come to Parliament if it wants powers and the local people object. Therefore, I think the rights of Parliament are adequately safeguarded, and at the same time those restrictions, which are really rather absurd, are removed and the industry will be able to make more rapid progress at less expense than has been the case in the past. Let us realise that in the long run all the cost of these proceedings is handed on to the consumer. In the long run it is added to the price of gas, and if we can relieve the industry of this expense we are, in the long run, benefiting the consumer and facilitating progress.
§ Mr. A. V. ALEXANDER
I am not clear about the reference to 15 years. As I read the Bill the 15 years would only apply where consent has been unreasonably withheld.
§ Mr. WILLIAMS
Precisely. In the ordinary way an Order can be made if the local authority agree. If the undertaking wants to do it and the local authority does not object and nobody else objects, there is no reason why the matter should be brought to Parliament. It is only desired that the matter should be brought before Parliament if there is a grievance, and the way to discover that is to discover the attitude of the local authority. This Bill will give power to the Board of Trade to overrule the local authority if it is thought that the local authority is acting unreasonably, subject to this condition, that that power can only be exercised by the Board of Trade within a period of 15 years after the undertaking last came to Parliament In other words, the Board of Trade are given power in the case of each undertaking only for a period of 15 years since that undertaking last came to Parliament. The Board of Trade are not given an unlimited power, but only a limited power, and this ensures that periodically, at least, quite apart from other opportunities, any undertaking which may have difficulties with the local authority will be forced to come to Parliament. I think that is bound to be the effect of the Clause.
Clause 3 deals with a different matter. Gas undertakings are permitted to build 586 up a reserve fund for the purpose of meeting extraordinary emergencies. Clause 3 lays it down that the reserve fund, instead of being calculated at one-tenth of the share capital, should be calculated at one-tenth of the real capital, that, in other words, the loan capital should be taken into account as well as the share capital. Obviously that is the right thing. When Parliament decided that one-tenth should be the proportion, it was thought that one-tenth of the amount of capital employed represented a reasonable sum to have in the reserve fund, and the one-tenth ought to relate to the real capital Sub-section (1) of Clause 3 deals with those companies that are working on the maximum dividend system, whereas Subsection (2) applies to those companies that are working on the standard price and the sliding-scale system.
Clause 4 will, I think, have the effect of increasing the efficiency of operation of a number of gas undertakings. As I have indicated, the gas industry is to-day a branch of the chemical industry, and the various by-products have to go through various processes for the purpose of producing what I would call important sub-by-products. But it may be that the production by an individual gas works of some of these by-products is not sufficiently great to enable it to operate at the maximum efficiency the amount of plant required for dealing with those by-products, and it may be necessary for them to be in a position to supplement their supplies by buying by-products in order to secure the efficient operation of the plant for dealing with them. Therefore it makes it possible for them to buy these by-products from other producers. Also, this Clause will facilitate the purchase of gas from coke ovens. That, I think, would also be a desirable thing.
Clause 5 is, I think, a very reasonable one. It sometimes happens that a prospective customer is in the area of one undertaking but that in actual practice it would be more satisfactory for another undertaking to supply him. I will call it "the fringe Clause." I hope it will be for the convenience of undertakings as a whole, and for the convenience of prospective customers.
Some years ago the system of charging in the case of a great number of undertakings was altered from the cubic foot basis to the therm basis. There 587 is no doubt that the therm basis is logically the proper basis, because under it you are buying heat. Under the cubic foot system you are buying—well, you are not quite certain what you are buying; you may find out; but you are not getting the same guarantee that you are buying what you are looking for, namely, heating power.
There was by chance a great deal of controversy with regard to the therm system when it was introduced, largely, I think, because, on account of weather conditions, it happened that during the quarter when the therm system came into operation in London and other places bills chanced to be rather high and people blamed the therm. That was quite illogical, but nevertheless they did blame the therm. To-day that feeling has died away, and everyone who has studied the matter realises that the therm system is the proper system, and Clause 6 will make the therm system compulsory except in the case of small undertakings. The reason for excepting small undertakings is that sometimes the amount of gas produced by an undertaking is so small that you cannot get a satisfactory average number of British thermal units in the thousand cubic feet of gas to apply the thermal system. For technical reasons you may not be able to apply the therm system satisfactorily in the case of small undertakings and therefore compulsion is not to be applied to them. A small undertaking is defined as one supplying less than 20,000,000 cubic feet of gas per annum.
Clause 7 deals with people who have failed to make use of their powers, and it gives the Board of Trade power to transfer rights from one undertaker to another. The Board of Trade cannot exercise that power until five years have elapsed. If one undertaker fails to take advantage of his powers, it is only right that someone else should have those powers. This can only be done by a special Order, and these powers can only be exercised provided there has been a positive vote in this House. It is not a case of laying Orders on the Table, but a formal vote must be taken. These matters are generally dealt with after eleven o'clock at night, but this provision gives an opportunity of opposing these measures if anyone desires to do so. 588 Paragraph (b) of Clause 7 deals with mixed undertakings and loans. If a company seeks to develop the gas side of their undertaking they have power under this provision to mortgage the whole of the undertaking. That provision is so essentially reasonable that no one will object to it.
Some minor Amendments of the principal Act are authorised under Clause 8. It will be remembered that, as a result of the change in the value of money owing to the war, a great hardship was inflicted on gas undertakings, and, accordingly, the Gas Regulation Act of 1920 was passed in order to put the gas industry on a fair basis. At the present time, it appears to be necessary that there should be some slight Amendment of that Act in respect of the sliding scale, so that if it is necessary in the future to have a re-adjustment of the standard price in relation to the sliding scale this change may be carried out. This Amendment will give the necessary elasticity to the Bill, and enable the undertakers to deal with any problem that may arise in the future on account of changes in the rates of interest and the provision of work or plant. This provision gives the necessary powers to make the system in accordance with what ought to be done instead of continuing on a false basis until such time as Parliament passes another Act of Parliament. I think I have now explained the rather complicated matters in this Bill which might appear rather difficult to understand by those who are not acquainted with the technicalities of legislation dealing with the gas industry. This is a non-controversial Measure, and I hope it will be treated as such by subsequent speakers.
§ Mr. A. V. ALEXANDER
We are much obliged to the Parliamentary Secretary for his very clear explanation of the main Clauses of this Bill. I am sure the gas industry will be grateful to him for the changes which he has described in the speech. The overtures which have been recently made by the gas industry seem to indicate that there is a feeling that electricity undertakings, as compared with gas undertakings, have been given some advantage. I think there is a general view that justice should be done to the gas industry, and that a Measure to achieve this object should be put upon the Statute Book.
589 There is reason to regret that such an enormously important industry as that which deals with the by-products of coal should not have been dealt with in a more general way. It is true that there are powers in this Measure for making some advancement in that direction. The Parliamentary Secretary has explained the Clause which will enable a larger production of gas from coke-oven undertakings. I am sorry that Parliamentary exigencies have arisen which prevent the whole question of a much-needed reform in our gas legislation being dealt with, because a much more comprehensive Measure ought to have been brought forward. I hope the Parliamentary Secretary will recognise that, while we shall not regard this Bill as being controversial, it can only be regarded as a stop-gap Measure, and there must be a further consideration of the legislation to be enacted by this House and a much more comprehensive Bill placed upon the Statute Book.
There are one or two points upon which I should like to comment. When we are dealing with an industry which is more or less a monopoly, the House has a duty to perform in seeing that the consumer is not placed in an invidious position. When we are dealing with an industry which is either partially or wholly a monopoly, the House should make sure that the consumer is not placed in a disadvantageous position. I look with some anxiety to the exercising of the powers of the Board of Trade to deal with the variations in price of gas to the consumer. It is very difficult for one to speak on that question without a full knowledge of the changes which have taken place, and I have had to content myself with a study of the report of the Committee on Fuel and Power, and I gather that that committee have satisfied themselves that there is not likely to be any undue exploitation of the consumer as a result of the granting of the additional powers under this Measure.
I do feel, however, that the Board of Trade will have to be watched pretty carefully—[Interruption.] It may be, as the Parliamentary Secretary says, that very soon he will be watching some Member of my party at the Board of Trade, but, when you get wide powers like this in dealing with a commodity which is a monopoly, it is very im- 590 portent that the way in which a Government Department acts in the exercise of those powers should be under such close surveillance that there is no danger of the consumer being adversely affected. The ether point to which I should like to draw attention is in connection with Clause 5, with regard to helping undertakings outside the limits of the supply undertaking. The Parliamentary Secretary was rather inclined to pass lightly over that. So far as I can see from the Bill, it will be possible for that to be done by an Order—
§ Mr. ALEXANDER
I cannot see that that requires a special Order; I am not at all sure that it is a very valuable protection; and I should have preferred that the Government, in making such an important change in regard to delimiting supply areas, should have made it subject to the passing of a special Order, so that it would have to come before the House at the instance of the Board of Trade. I do not think that that would have entailed any appreciably increased cost to the promoters, and it would have been a real safeguard. I do not propose to take up any more of the time of the House on the matter, beyond repeating that this Measure can only be regarded as a stop-gap Measure, and that, no matter which party comes back to office, it really must give attention to the wider issue which has been raised by, among other people, the National Gas Council, and a more comprehensive Bill must be passed. I hope that, when such a Bill is passed, it will also include something that will assist, not only the gas industry, but the basic industry of coal itself.
§ Mr. J. BAKER
I think that my hon. Friend the Member for Hillsborough (Mr. Alexander) has overlooked a qualification in the minor Amendments with regard to safeguards for the consumer. The Committee on Fuel and Power felt that, while the safeguards might not be absolute, or even complete, they were satisfied that (he modern development of electricity and the use of oil prevented the consumer from being at the disadvantage at which he was prior to the last 10 years, and that, therefore, he cannot be mulct to the same extent, even by the most grasping of gas-producing companies, that he 591 might have been in those days. As has been pointed out by my hon. Friend, the gas companies are feeling the competition of the electricity companies, and, therefore, they think that they ought to be relieved of legislation which is certainly cramping, if not crippling, and the House will be asked to deal with this matter to a greater extent than is provided by this Bill.
To my mind, there are in the Bill three snags which the House ought to have in mind when it is inclined to pass the Measure. One is the question of charges, which my hon. Friend mentioned. It is proposed to abolish what is known as the sliding scale, but I would draw attention to the qualification in the paragraph immediately following paragraph (d) of the Schedule:The Board may make an amending order under this section revising the powers of charging authorised by the original order with respect to the undertakers, in such manner as to secure that they are not prejudiced by any such increase or benefited by any such decrease.That affords an additional safeguard with regard to the application of the sliding scale. The gas world, of course, does want the abolition of the sliding scale and unlimited dividends, and, as the Parliamentary Secretary rightly pointed out, that led to some little difference among the members of the Fuel and Power Committee. But the House is not asked at this stage to settle that principle. During the period when, as the Parliamentary-Secretary pointed out, money was changing in value so rapidly, the gas-companies, in my opinion and in the opinion of the other members of the Fuel and Power Committee, were certainly at a disadvantage, and the Board of Trade had no power to deal with that matter. The only way in which it could be dealt with was by amending legislation, which there was no opportunity of getting through this House. On that point I feel certain that the House can agree to the minor Amendments without any feeling that the gas consumer is going to be mulct in unreasonably higher charges for the benefit of the gas companies.
The other two snags in the Bill open up much wider and more controversial matters, which we are not asked finally to settle to-day. The suggestions here are more like the proverbial thin end of 592 the wedge. They make it possible to get over the boundary of a presently constituted authority, whether it be a public company or a municipal authority supplying gas. At present, areas are mapped out, but it seems perfectly reasonable to say, "Here is an area which is awkwardly situated, and within that area there are people desiring to consume gas. They cannot get it from the authority, because it would be so expensive to run mains, but just over the border there is a gas company which could reasonably supply." What is going to happen once you have broken that down?
One ought to have that point in mind because, at the present time, gas is being produced in coke ovens, and large quantities of it are wasted. The sane thing to do would be to put that gas to some practical use if we could, and there is a growing tendency, both on the part of companies inside municipal areas and of municipal authorities, to purchase that coke oven gas, purify it, and sell it to the people for whom they produce gas within their own area. But that gas can be sold at a much lower price, because its production is cheaper than the old style of gas production, and it may be that some company producing coke oven gas, once it has got over the border of some competing company, may say that, having got permission to go over the border, it will claim the right to spread all over the area, merely on the ground that it can produce and is willing to sell gas at a lower rate than the company or authority within the area is prepared to do. That might lead to a conflict which would actually increase expenditure, a thing which this Bill is promoted to prevent. This Bill is promoted to cheapen the cost of production and distribution. The other snag in the Bill is the question of the therm and the quality of the gas; but on the Fuel and Power Committee there were several men of world-wide note as gas engineers who were perfectly satisfied that the consumer is not going to suffer so far as quality is concerned I myself am satisfied that the Bill is one which the House ought to pass in order to help the gas companies, because I believe that in doing so we are going to help the consumer to get cheaper gas.
§ Mr. HARDIE
This Bill is the result of what took place as a result of the Elec- 593 tricity Act of 1926. Spending 4½ months in Committee on the Bill, I realised at the end that the gas interests of the country would be out to find something approximating to that which was a gift, so far as electricity is concerned, to this country. They expected to have the same for the gas interest. But, viewing the gas industry of these islands as a whole, this is a tinkering Measure. If a serious step had been desired, making it a definite link in the industrial chain, a different kind of Bill would have been brought forward. This Bill resembles the Electricity Act in this way. The Electricity Act, as was promised by the Prime Minister before it was brought into the House, was to make a connecting link in the chain of industry. To-day, you have this complicated business from coke oven gas to blast furnace gas, because there are still those processes going on where, instead of these by-products being caught and used, they are being wasted in the air, and, just as you waste the by-products that you could get money for, so you increase the price of the article produced. I was hoping, from what was said after the Electricity Act was through, in relation to gas, that we were going to have something wider. For instance, there are some mains carrying gas which were put into the ground 60 years ago in certain parts of Britain. There are conditions of gas supply which could have been dealt with, but have not been dealt with because every time you make a suggestion you are told the gas companies have not the money to re-pipe a certain area. Alt these things might have been dealt with if we wanted to do something for the gas industry.
This Bill is not really dealing with the gas industry as regards the producing of gas. We are not dealing directly with the industry as an industry. We are not really dealing with the increased sale or production of gas. We are only dealing with the relations as between those bodies called companies or corporations in the production of gas, and that statement is borne out by some Clauses in the Bill. This is a commercial Bill. If it had been a Bill dealing with the technical side of the industry as well, 594 Clause 6 would not be drafted as it is. I should have thought the defects which were made so patent in regard to the working out of the Electricity Act to any Government with any sense would have been some guide. If they had been taking the national point of view, this Bill would have been altogether different. If we had been advancing with the march of science in relation to gas, we should have had a Bill saying science shows us the best and cheapest way of giving it to the consumer, and it would have contained the means whereby that was to be applied as soon as it could possibly be carried out. I had hoped that we should have a comprehensive Bill dealing with the whole industry from the point of view of those who know most about it, but it is the commercial element that is the major portion of the Bill. It is no longer possible for those charging by the therm to charge for something they are not supplying. In the past, a gas company charging by the cubic foot could give you the B.T.U. you are getting now and put air in, and you were paying for that during the War. That is one way the consumer of gas was bled white. He was charged for air being put into the gas. These things, of course, have gone, and we have the therm basis. Why there should be an exception at any point in the manufacture of gas to the application of the scientific way of getting the correct value by therm, I do not know. I would like the Minister to explain or to send an explanation to me as to what these things are, for they cannot be found in the provisions of the Measure.
§ Question put, and agreed to.
§ Bill read a Second time. Bill committed to a Committee of the Whole House for Monday next.—[Commodore King.]
§ The remaining Government Orders were read, and postponed.