§ Motion made, and Question proposed, "That this House do now adjourn."
§ 11.2 p.m.
§ Mr. HOROBIN
I want to take the opportunity to raise a matter of considerable financial importance, namely, the financial position of the grid of the Central Electricity Board which has been given a monopoly of wholesale electricity in this country, and for which we are responsible. The situation to which I would call the attention of the House is ore of great magnitude. The borrowing powers of this corporation extend to no less a sum than £60,000,000, of which the major portion has already been borrowed. The responsibility is fairly upon us and upon the Minister, because by a procedure which is becoming more and more common, although it is not altogther without its dangers, this huge sum of money is not in the hands of any authority which can be dealt with by the ordinary company procedure in general meeting where questions can be asked. The responsibility is upon the Minister of Transport under the Act for giving us the only information that we can obtain for the form of accounts has to be approved by him. He has to prescribe it, and the first point I wish to put to the Minister is that the form of these accounts is in fact exceedingly unsatisfactory. It does not give information which the House and the country ought to have.
Although that vast sum has been spent on capital expenditure on the grid we are entirely in the dark as to what, if any,1182 provision has been made for obsolescence and renewals, and I think the figures should be provided. We have been given no particulars of the capital expenditure apart from a gross sum, and, perhaps most curious and objectionable of all, there is no provision in the revenue account for showing exactly what the sales of current are. We are given a gross figure, and there are no means of telling how many units have been sold in the country as a whole or in particular years. This body, which has a monopoly of electricity, is in close competition with other great and important industries, particularly coal, oil and gas; and I would draw the attention of the Minister to the fact that these other industries, particularly the gas industry, which is under the Board of Trade, are compelled to give all these particulars for which I am asking, and give them in great detail, and it seems exceedingly undesirable that private enterprise should be compelled to give a great many particulars which apparently are not required from an industry for which Parliament has taken the responsibility. Absolutely complete details of capital expenditure, sales, provision for depreciation and so on have to be given.
Passing from that, and still upon the point of the insufficiency of the information given, the almost secretive nature of the accounts, I come to the most important point on that head. The Minister will remember that by a provision, with which I have no quarrel in the least, the whole of the interest and sinking fund upon this enormous capital expenditure is being borrowed and added to capital account. I am sure he will agree that it is a dangerous procedure and one which requires to be watched carefully, because it is a comfortable thing to be able to go on for a great number of years borrowing your interest and sinking fund and running deeper into debt. Therefore, the House and the Minister ought not to be satisfied with approving forms of accounts for this enormous corporation which do not give any actuarial basis to show how the charges and the margins which the Board allows itself have been arrived at if at the time when this interest and sinking fund become payable, the Board is to be self-supporting. There is a very great danger that when very large sums do become payable from 1183 interest and sinking fund on this enormous expenditure the Board should not be in a position to meet those new charges.
So much for the insufficiency of the information which is given to us in these accounts. But we are given some information, and I submit that the information we have got is exceedingly disquieting. I will ask the Minister to follow me for a moment in one or two calculations upon the basis of the information which is available to us. I will only say that if these calculations, though I have made them as carefully as I could, and had them checked, should turn out not to be accurate, the blame, if any, lies on the Minister's shoulders and not upon ours. I have done the best I can to interpret the exceedingly "scrappy" information available, and I think that I shall not have wasted the time of the Minister or the House in raising the matter even if it turns out that those calculations are not, in fact, accurate.
I would draw the attention of the House and the Minister to the fact that we already have some indications that the fear which I have expressed that the Board will not be self-supporting is not an imaginary one. I have here particulars, with which I will not weary the House unless the Minister desires, of no less than three schemes which already have, shall I say, got themselves into difficulties in this matter of electrification. There is a scheme for rural electrification in Bedfordshire; and another in Dumfriesshire, where a loss equivalent to a sixpenny rate throughout the county has been incurred. There is another in North Wales, where the Government are already pressed by the local authority to give general financial assistance to rural electrification, because, as they say, there is no likelihood that the scheme will be a paying proposition unless financial assistance is given. That shows that already there is a growing danger that we may be faced once more with this situation of putting up Government subsidised businesses to compete with private industry which has not the benefit of a subsidy.
I have no doubt that the Minister is cognisant of the 1934 report of the Central Electricity Board. We find from the 1184 revenue account that they make, roughly speaking, a turn of 5 per cent. between their buying and selling price of current. I have been able to make a calculation, which I do not think is far out, that by 1942 an increase in the resources of the Board of no less a figure than £2,000,000 will be required to meet interest and sinking fund charges upon capital. I am leaving out of account all the capital which is used for the unification of frequency. For reasons which I confess I do not regard as satisfactory this money was in fact given to the electrical industry by the Government. Taking their capital used purely for the grid, there is a charge which will come upon them of something like £2,000,000 for interest and sinking fund money in about six years' time. The gross turn, as shown in these accounts, is only about £1,000,000. That means that within a few years the gross revenue of the Board will have to be multiplied about three times and will have to go up from the present sum of £1,000,000 to about £3,000,000.
Let me examine what likelihood there is of that taking place. We are given in the report of the Board the information that in the last five years the sales of current have gone up by something like 50 per cent. That is a very great increase. It must be borne in mind that it is something like five times as great as the increase over the world as a whole. In that period, of course, they have been taking the cream of the market; and obviously they have been working at a time when business recovery has been going on, thanks to the National Government, at a very rapid rate. It is exceedingly unlikely that the increase of 50 per cent. in five years is going to be turned into an increase of something like three times that figure. It is fair, however, to point out to the House that there is a small increase—which is almost in the nature of a bookkeeping increase—due to the fact that general trading had not begun in the whole country at the time of these accounts. Therefore, as general trading does come into operation in the whole of the country there will be a considerable increase in the amount of current going through the Board's books without any increase in current generally. That figure, as near as I can calculate, is at a maximum not more than 25 per cent., for in something like 80 per cent. of the country general trading had come 1185 into operation at the time of these accounts. Nothing of substantial importance should be attached to that figure. That makes it improbable that this huge increase in income which will be necessary to meet interest and sinking fund charges will be obtained.
We can check that figure in another way. Roughly, what density of electrical consumption will that imply? At present we are using something like 15,000 million units a year. The United States, with considerably more than three times our consumption per head of the population—there are other considerations with which. I will not trouble the House, as time is short—reached a figure in 1929 which, I think, they have never reached since, and even then they only arrived at a figure of 90,000 million units. Allowing for an increase of something like 25 per cent., due to general trading to come into operation all over the country, if we were to have an increase of three times, it means that there would have to be a consumption in this country of something like 30,000 million units by 1942. That is a considerably bigger consumption per head than the maximum ever consumed in the United States. I am not going to say that it is an impossible consumption, but it is a very optimistic one, and if it is on that assumption that the board's plans are being made it is well that the public should be told at an early date. We do not want to have an optimistic estimate; we ought to be told frankly upon what assumption, over the period of the next few years, the board are proceeding, in framing their charges for current and in the provision they are making for meeting those very heavy charges for interest and sinking fund.
I will give one other figure before we leave this calculation. Lord Weir's Committee made a calculation of the probable consumption in 1942. Their figure was something like 21,000,000,000 units. It is interesting to observe that if you take our present figure of 15,000,000,000 units and estimate a 10 per cent. increase over the whole period, that roughly, corresponds with the Weir Committee's calculation. It is extremely probable that the most optimistic figure will be the original figure of Lord Weir's Committee. If that figure is true, the House will observe that a deficiency of something like £7,000,000 per annum of gross in- 1186 come will be in store for us in the early 40's of this country. If those figures are anything like correct, I submit that the House should examine them at an early date. We do not want to be faced, when time is short with the position that here is an enormous industry, with Government support, organised by Government compulsion, with enormous sums of money held by the public, not under a Government guarantee but under one of those vague Government participations which are so dangerous because there is nothing by which you are limited. We do not want in this House to be faced with the position in which we can neither afford to let the scheme go completely and publicly broke nor on the other hand face yet one more subsidy; one more illustration of something which is bad enough in regard to agricultural finance and which we do not want to be faced with in electricity.
So important is this possibility of a deficit that I have checked these figures in another way. I should like to thank the Parliamentary Secretary for giving us a most important figure that we have never been able to have before, in answer to a question of mine the other day. That kind of figure should not be left to be dragged out by casual questions in the House, but should be properly put into a candid statement of accounts issued by the Department. He gave us a figure that the average gross revenue per unit sold by the Board was approximately 0.4d. I have taken the figure which I have already quoted to the House, the Weir Committee's estimate, which seems to me a most optimistic estimate of output in 1942. If that present gross revenue figure remains, and the Weir Committee's estimate is reached, the position will be that the gross revenue of the Central Electricity Board will have to be over £35,000,000, and their surplus would be, at a maximum, £1,800,000. Even if we assume that there is no increase in transmission and management expenses, you have to deduct from that £80,000, leaving a balance of £920,000. The capital charges in that year will be something like £1,500,000 on the wrong side, and that means that in four years' time there is a grave possibility of a deficit, on the accounts of the Board, of £750,000, while by 1942 that deficit may easily be largely increased.
1187 I am afraid I have had to go rapidly through some rather complicated calculations, but I have raised this matter because of its magnitude and because it is proper that it should be raised in good time, now. My first point is that we are not given enough information—information which could be given without disadvantage to anyone, and which we should now be given in much fuller measure. My second point is that such information as we have, and the best calculations that we can make, show that there is a real danger of a very substantial deficit at a very early date. If that be so, I submit that the House should take early steps to ensure that we are not faced with the possibility, either of a heavy subsidy, which we cannot afford, or of letting an industry of great importance to the country come to grief, or, if we give a subsidy, of being faced with the position of subsidising this industry and leaving private enterprise competing with it as best it can under very unfair trading conditions.
§ 11.22 p.m.
§ The PARLIAMENTARY SECRETARY to the MINISTRY of TRANSPORT (Captain Austin Hudson)
I am certain that no one in the House will complain that this matter has been raised in this, the only manner in which the hon. Member could raise it. I think it is only right that the House should take an interest in and study these accounts. The hon. Member will not expect me to go into all the details that he has given. All I can do is to give a very general answer to the points which he has raised. First of all, the Minister's powers under the Act of 1926 are fairly strictly regulated. Section 25 lays upon the Minister the duty of prescribing the form of report by the Board of their proceedings during the year, and Section 30 lays upon him the duty of prescribing the form of and the particulars to be contained in the annual report of the accounts which that Section requires the Board to prepare and publish. But Parliament definitely laid certain obligations on the Central Electricity Board which was set up under the Act of 1926—first, that the tariff should be so fixed that, over a term of years to be settled by the Board themselves, receipts and expenses should balance; and, secondly, that the express 1188 powers which Parliament granted for the payment of interest out of capital, and for the suspension of sinking fund, should be exercised with the approval of the Treasury and subject to the consent of the Commissioners. The House having granted those powers, the Minister himself actually has no power in the matter. It has frequently been the practice of this House, in the case of great schemes and works of the type of the grid system, to grant power, when those schemes are started, authorising the capitalisation of interest and the suspension of sinking fund.
I think that the House, realising that the Central Electricity Board is composed of business men, would be wise to allow them to carry out the powers granted by Parliament. It has always been realised that a long-range scheme of this kind would be unremunerative at first, but that later surpluses would wipe out deficiencies, and I am assured by the board and by my advisers that with continued increase in the consumption of electricity there need be no fear that this scheme will not be self-supporting. Another point raised by the hon. Member was the question of giving a figure for the whole country rather than a figure for an area. It would be, in my opinion, wrong to give such a figure. First of all, the division into areas is entirely for administrative purposes. It has no particular significance. It is simply done for the purpose of making it easier to carry out the administration of a great scheme.
The board has taken 10 years as the budget period over which it thinks it can make the scheme pay. All these areas have different starting times for that 10-year period, and therefore while at the present moment it is obvious that certain of them have only just started and cannot be remunerative, some will become remunerative before others. For instance, Central Scotland and Mid-East England started on the 1st January, 1933, and South-West England and South Wales on the 1st January, 1935, and we feel that we cannot ask the Board to give these figures separately, for one reason only, namely, that in cases which started earlier, when these schemes become remunerative, you might have an occasion where there was a big surplus, and you would immediately have had a demand 1189 from them for lessening the charges. The whole idea of the grid was that the schemes should be taken as a whole, and therefore that the schemes which were already paying during the lean years should pay for the later-started ones. There is the further slight complication that the intercommunication of grid areas makes it difficult to give these figures, because of the question of getting supplies of current from one area to another, and it would be extremely difficult in these circumstances to get figures which would be really of use to the House and strictly accurate.
All that I can say to my hon. Friend is that I have taken note of what he 1190 has said, and I will see that the Board has a report of these proceedings. I have the assurance that I gave at the beginning of my remarks that the Board are confident that they will be able to make the scheme pay for the budget period, and I feel confident that if they think so now, in view of the tremendous increase which is bound to come in the use of electricity, that very optimistic feeling at the present moment will be fully carried out by the facts.
§ It being Half-past Eleven of the Clock, Mr. SPEAKER adjourned the House, without Question put, pursuant to the Standing Order.