HC Deb 20 December 1934 vol 296 cc1364-9

4.19 p.m.

Sir J. NALL

I beg to move, in page 2, line 19, after "Board," to insert: taking into account the annual expenses of the Board on income account under such arrangement and a proper proportion of the Board's general expenses (including interest and sinking fund charges) with such margin as the Electricity Commissioners may allow. Under the Act of 1926 the board have to frame their charges so that their income will balance their outgoings, including interest and sinking fund charges. The board have already framed charges for most of the country. It follows that, if their estimates are correct, their interest and sinking fund charges will be covered by the grid tariff. But the operation of the Clause as it stands may well result in prejudicing the grid tariff, and so our object in this Amendment is to make clearer the somewhat indefinite and certainly illusory phrase in the Bill regarding financial loss by the board. We have heard several times of agreements which have been already made by the board along the lines of this Clause, and it has been alleged that in those agreements the charges are uneconomic and unsound, and throw a burden on third parties who have no say in the matter.

We understand that in the South-West England area the board offered without success to pay a great proportion of the cost to stations dealt with under the Clause in order to induce the owners to come into the grid at all, and it is really in the interest of the board and those people who have to pay the board's charges that the owners of a non-selected station should not be able to make too hard a bargain with the board, as for instance in the case of Wimbledon and Dorking. Wimbledon got away with a special arrangement by which it pays 40 per cent. less than its neighbours, because it has a highly efficient undertaking which could show that its costs were cheaper than the grid tariff. So, in order to get them in, not for the advantage of other undertakers by bringing in a cheap supply but in order to shut up this small, cheap undertaking and bring its supply into the grid, they are able to drive a hard bargain and get away with this 40 per cent. off. I do not see why the consumers of Wimbledon should get some very special concession in this way to the disadvantage, shall we say, of West Ham or Poplar. It would appear that the board's officers went to Wimbledon at the time of the championship and got mixed up with the tennis crowd.

Unless these charges under special arrangements carry their fair proportion of the board's expenses, it is obvious that what they do not carry will have to be borne by the other undertakers and their consumers. This Amendment is really a mild one in dealing with the question of overhead charges. There is some £16,000,000 of the board's expenditure which has, so to speak, gone down the drain on the question of standardisation in the North-East area, and the whole interest and sinking fund charges on that £16,000,000 are spread over all the authorised undertakers, who have to pay a levy to the commissioners. The consumers who get these special supplies will make no contribution whatever to this levy. They are already getting away with that much in comparison with other consumers, and it is at least reasonable that these special supplies should bear their proper proportion of the board's own charges, even if they do not bear the commissioners' charges. Bad as it is to have these special arrangements at all, it is really aggravating the hardship on consumers in the same branch of, industry if they do not even pay the relevant overhead charges of the board. I hope my hon. Friend will review the matter in the light of what has passed, and will be able to accept this Amendment.

Mr. LAW

I beg to second the Amendment.

4.25 p.m.

Mr. HORE-BELISHA

This Clause enables the Board to enter into arrangements with authorised undertakers for the supply of electricity to the undertakers by the board and to the board by the undertakers. In order to secure that the grid system shall not be imperilled, the Commissioners are empowered, in scrutinising the arrangements, to require that they shall be satisfied that the arrangments will not result in financial loss to the Board. To these words my hon. Friend seeks to add other words which go much further than securing that there shall not be a financial loss. He wishes to secure, in fact, that there shall be a full profit, because the board have, under his Amendment, to cover a proper proportion of their general expenses, the interest which they pay to their stockholders and sinking fund charges. My hon. Friend is an experienced business man. Can he tell me of any business in the country which is so restricted Power companies, taking the industry with which we are concerned, enter into arrangements such as this, and it is for them to decide whether or not upon the whole they derive advantage through a contribution to their overhead costs. If the Board can secure such a contribution, there would seem to be no more reason why they should be debarred from entering into arrangements than that any business should be debarred.

This is an ordinary current business procedure and we have put upon the board a protecting restraint that they shall not be involved in a loss. I do not think it is arguable, if the board are to be trusted as a business enterprise, that you should go further than that and say they must not only not make a loss but must, in fact, make a profit. Those are the principles upon which every business in this and every other country is conducted. The purpose of these agreements is to secure that at the end of them the Board will be supplying the whole of the electricity, and that these undertakings will have ceased to generate. That is a plain advantage to the board. One might have thought the board could have been trusted to make up their own mind as to what agreement was sound and what was unsound. In order, however, to meet criticism and to assuage doubts, we have agreed that the board shall not be permitted to make a loss, and I hope the House will support me in the view that it would not be proper to go further than that. I appreciate my hon. Friend's fears, and the sincerity with which he states them, but I think, now that all these agreements have been open to review, both present and future agreements, he might be satisfied that that is about as far as the Government can be expected to go in the matter.

4.30 p.m.

Mr. CHARLES WILLIAMS

My hon. Friend the Minister, who has been Financial Secretary to the Treasury in his turn, and a very good one, rather astonished me by the new doctrine he has just preached. I am not concerned so much with what may occur technically in certain businesses, but I was a little astonished when the Minister laid down the doctrine, by inserting the words "will not result in a financial loss," that you do not have to cover either the expenses or the interest or the sinking fund charges which might be involved in these agreements. My hon. Friend, having put down the word "loss," should accept the Amendment. It is conceivable that it might be tying down the board too much, but I would far rather that they were tied down by over-sound financial conditions than by unsound conditions. The Amendment is a reasonable one, and the board should go into such matters as expenses, sinking fund charges and interest and consider them very carefully indeed. A considerable case has been made out for the Amendment, and I regret that apparently the Government are not going to accept it. I notice, however, that the Minister did not seem very certain in his opinion. He seemed to say, "We have gone a long way and we do not want to go any further, but if we are pressed we might go further." I would press him to take that little extra latitude and go a little further in this matter and accept the Amendment. It would enable every one of us to realise that the matter was being dealt with under the best possible financial conditions. I intend to support the Amendment, unless some stronger arguments are brought against it. It is one which should be included in the Bill.

4.33 p.m.

Sir PHILIP DAWSON

I intend to raise a point upon which the Minister has not touched. It seems possible that, as the Central Electricity Board has already fixed grid prices, and these include maintenance, depreciation and sinking fund, it cannot incur a loss even if it does not include these items in the contracts it may enter into with undertakers owning non-selected stations. It may, therefore, at the expense of other consumers, be in a position to charge lower prices in one area than in another one. I should like the Minister to take that point into consideration.

4.34 p.m.

Mr. H. WILLIAMS

I am disappointed by the Minister on this occasion. He drew an analogy between a company and the board. If a company for reasons of long-term policy, or indeed of any policy, enters into an arrangement which is not very profitable, that is their look-out and the company is the sufferer. But here is a case where the board may conceivably enter upon an arrangement which does not prejudice them but prejudices all the other authorities with whom they have contracted. It is the duty of the board to obtain such revenue as will meet their expenditure. If they fail to get it from Mr. A, they have to charge it to Mr. B and others. We ask in the Amendment that Mr. A. shall pay his fair share of the capital charges, and the Minister says that it is a matter of ordinary business not to do this sort of thing. There is not the faintest analogy between the ordinary company and the board. The board have to look after the interests of the whole community, and it is their duty as far as possible to treat everyone equally.

The provision with regard to undue preference applies throughout the whole of the industry, but the analogy of the Minister has no existence at all. No greater emphasis has been laid, both in another place and here, upon any other matter than was laid upon the setting up of a grid tariff and then proposing that certain people should pay something different from the grid tariff, and, presumably, something less. It is clearly the intention that the sum to be paid shall be less than the grid tariff, and that in the long run that something shall be placed upon somebody else. That is not fair dealing, and it is because of that fact that the Amendment has been put upon the Paper.

Amendment negatived.

Mr. SPEAKER

The next Amendment which I call is that standing in the name of the hon. Member for South-West Hull (Mr. Law) on Clause 2.