§ Order for Second Reading read.
§ 3.35 P.m.
§ The Minister of Fuel and Power (Mr. Shinwell)
I beg to move, "That the Bill be now read a Second time."
During the war, the Coalition Government decided that the responsibility for the fuel industries of the country should be concentrated in one Department and, accordingly, the Ministry of Fuel and Power was created in June, 3942, replacing the previous Mines Department of the Board of Trade. Subsequently, Parliament passed an Act making the Ministry permanent and the Act stipulated that one of the functions of the new Ministry was to secure the effective and coordinated development of coal and to promote economy and efficiency in the supply, distribution, use and consumption of fuel and power. Three months after the passing of that Act, following the General Election which the Labour Party won, the Government decided to introduce a Bill to nationalise the coal industry. That Measure has now been passed and the National Coal Board have taken over the mines and are now in process of reorganising them—a task which is long overdue. Obviously, the next stage is to take appropriate measures to reorganise the electricity industry. It is my submission that the supply of electricity and, in particular, its distribution, are at present organised on a basis which must be regarded as completely out of date. In due course, the gas industry will come under review and an appropriate Measure for reorganisation will be introduced into Parliament.
It may serve the convenience of hon. Members if I relate in brief outline the history of legislation affecting the electricity industry. It all began in 1882 when-the first Electric Lighting Act set up a legislative framework for the industry. 1405 The major principle underlying this Act of Parliament was that electricity supply should be a function of the local authorities and that should any company be permitted to enter the field it would be with a limiting franchise, at the expiration of which the local authority could purchase on favourable terms. That franchise could be determined by the local authority at the end of 21 years. At a later date that period was regarded as too short, and an amending Act of 1888 increased it to 42 years. With certain exceptions, the principle embodied in those early Acts still prevails. The technical developments of electricity since those early days have been immense, but, except in the field of generation, Parliament has not taken any definite steps to relate the legislative structure to the technical requirements of the industry. It soon became obvious in those early days that electricity could be used for purposes other than lighting, that it possessed great possibilities and could provide the power for industry. Obviously, those small early undertakings could not cater for industry and in 1898 a Joint Select Committee suggested the creation of electricity undertakings which. became known as power companies. These undertakings were to establish large stations and supply electricity in bulk to small undertakings and industrial consumers. Some of those companies secured private Acts but never really fulfilled the purpose for which they were created because local authorities did everything possible to prevent them supplying power to industries in their own areas, and naturally the most important industries were in the areas of the municipalities.
In May, 1919, after various committees had reported, a Bill was introduced which provided for the appointment of Electricity Commissioners endowed with powers to carry out a thorough reorganisation of the industry. They were to determine electricity districts and set up district electricity boards, if necessary by compulsion. These boards were to own generating stations and have compulsory powers to reduce their numbers and interconnect them. Both private and municipal undertakings combined to resist these compulsory powers, but nevertheless, with certain modifications, the Bill went through the House of Commons and was introduced into another place. Here it was strongly opposed and, in Committee, the then Lord Chancellor abandoned the 1406 proposal for compulsion. This Amendment was finally accepted by the Government, who emphasised that this was merely postponing and not abandoning compulsion. Despite this statement, nothing further was done and thus the Electricity Supply Act of 1919 left it to the Electricity Commissioners to attempt a general reorganisation of the industry by voluntary agreement among the undertakings. They failed completely. It was clear that something had to be done to reorganise generation and accordingly, in 1925, the Weir Committee was appointed to consider this problem. As a result of that Committee's report, the Conservative Government of 1926 introduced a Bill to set up the Central Electricity Board empowered to construct a grid to inter-connect the power stations; of the country with each other and with the systems of other undertakings, on a national basis. Once again, the vested interests in the electricity supply industry did their utmost to destroy the Bill and succeeded in weakening it considerably. Several times in Committee, wrecking Amendments were defeated only because the Labour Party supported the Conservative Government against its own dissentients.
In 1935, a Committee was appointed under Lord McGowan to review the organisation of the distribution of electricity. They reported in favour of a drastic reduction in the number of electricity undertakings which, at that time, numbered 635. It was proposed that the Electricity Commissioners should delimit areas, and then appoint a person with suitable qualifications to prepare schemes for reorganising the undertakings in each area. The McGowan Committee quoted, as a glaring example of the need for reorganisation, the state of electricity supply in the London area. At that time there were 82 undertakings of various kinds in the London area and even now there are 75 of them. These undertakings were controlled by 243 separate Acts of Parliament, Provisional and Special Orders, many of which are extensions or variations of the original Statutes. The McGowan Committee pointed out that the existence of such a large number of undertakings in the London district, supplying at different tariffs and voltages and offering unequal facilities for the hire of apparatus and 1407 schemes of assisted wiring, was clearly detrimental to the furtherance of a cheap supply of electricity throughout the district. This had given rise to justifiable complaints by consumers. If hon. Members look at a map of the electricity undertakings in the London area they will see that it resembles something like a jigsaw puzzle. Some undertakings are pockets inside other undertakings; the areas of the undertakings bear no relation to the technical requirements; private companies and local authorities are hopelessly intermingled. Under the London Electric Supply Act of 1925 the date for putting this state of affairs right is 1971, and even then it is not suggested that it will deal with all the companies. I wish to say, on behalf of the Government, that we are not prepared to wait until 1971 for the reorganisation of the electricity industry in an area so large as London.
The fundamental difficulty in the reorganisation proposed by the McGowan Committee was the cleavage in the industry between the municipal and company undertakings. To create large undertakings means, in many cases, the absorption of municipal undertakings by private companies. This proposal met with strenuous resistance. The Government of the day put forward proposals based on the McGowan Report and even went so far as to draft a Bill, but the intense opposition to the McGowan proposals and the impending threat of war prevented any action being taken. As I have said, the Electric Lighting Act of 1888 provides that the franchise of a private company should be limited to 42 years, after which the local authority in the area has the right of purchase. The McGowan Committee was strongly exercised by the fact that many of these franchises were reaching their determination. If, in the 10 years from 1936 to 1946 the local authorities had exercised their rights of purchase, the 100 undertakings who own these purchase rights would have been replaced by no less than 344 undertakings. Moreover, if the local authorities were to exercise their purchase rights during the coming 10 years from 1947 to 1956, local authority undertakings would increase to 878 and the companies decline to 148, most of them much smaller than the existing companies. The result would be that many of these additional 1408 local authority undertakings would consist of unco-ordinated fragments taken from the companies. There would, therefore, be no guarantee of efficiency nor of capacity to serve the consumers in their area. In short, the exercise of these longstanding statutory rights of local authorities would make for disintegration of the electricity industry and would operate against the integration which every committee which has reported on the subject agrees is essential. Mainly owing to the war, the results foreseen by the McGowan Committee have not ensued, because the Electricity Commissioners could only in exceptional cases permit any change in the structure through the exercise of local authority purchase rights.
When I considered this problem I found myself confronted with a situation where urgent action was necessary if the local authorities were not to proceed with their rights to buy out such portions of the company undertakings within their boundaries. For example, the franchise of the Bournemouth Company had expired and as the company had paid dividends of 15 per cent. for many years, and even during the war had paid 12½per cent., the Corporation of Bournemouth which, as every hon. Member is aware, is not wedded to Socialist principles—no one is more aware of that than the right hon. Member for Bournemouth (Mr. Brendan Bracken)—insisted on their rights and demanded that my Department should allow them to proceed at once to buy out the company undertaking. But if the Bournemouth Corporation had been allowed to exercise its rights, it would have bought out from the company undertaking the urban area which represented 85 per cent. of the company's sales. We should then have been left with a situation where the company had a large and thinly populated rural area surrounding the new municipal undertaking and clearly the new company undertaking would have been much less efficient than the present one, if indeed it could have survived.
In face of these facts, I submit that whatever Government had assumed office in July, 1945, would have been compelled to introduce long-overdue legislation to reorganise the distribution side of the electricity supply industry. That is expected by everyone in the industry. Even private companies are well aware that the present state of affairs cannot be left unchanged, although, of course, their intensive and 1409 expensive propaganda suggests that all would be well if they were allowed their own way. I have been impressed with the fact that the various sections of the electricity supply industry find it impossible to reconcile their differences. This is not surprising. The municipal undertakings regard the supply of electricity as a public service. The companies regard it solely as a business enterprise, the success of which is determined by their profits. The local authorities base their claim on the fact that Parliament has throughout designated them as the future owners of the electricity supply industry. On the other hand, companies, always conscious of the uncertainty of their tenure, have repeatedly tried to show that the technical development of electricity, which requires undertakings covering wide areas, was best served by the strengthening of company organisation.
For many years there have been constant complaints of the extraordinary variety of charges in electricity supply and the basis on which those charges are fixed is often obscure. I am satisfied that this public service must do everything possible to rationalise its method of charging. That is not possible so long as there are 563 undertakings, each possessing rights in its own area. On two sides of the same street there are sometimes different forms of charge, and even inside the area of a single undertaking there can be a great variety of charges. Not only must the method of charging be standardised, but also the supply itself. The only part of the supply that has been standardised is the frequency at the generating stations, which was provided for in the 1926 Act. Many undertakings still provide both alternating and direct current, and there is a great diversity of voltages. It is true that progress is being made, but it is much too slow, and there is no obvious inducement to undertakings to incur substantial expenditure in standardising their system of current for their supply. It will be agreed that the sooner this standardisation is carried out the better, and that can only be effected by undertakings operating ever wide areas with adequate resources and with far-reaching plans for development. The great number of undertakings also leads to excessive variety in other respects. Different undertakings have different ideas as to the type and design of their appliances or the plant they re- 1410 quire. Engineers display a great divergence of views in the design of plant and that means that sometimes the variety of tastes is expensive. In the end it is the consumer who has to pay.
It is clearly time, therefore, for Parliament to review completely the whole structure of the electricity supply industry. Apart from the 1926 Act which, in any case, dealt with generation only, no major change has been effected since 1882. I am sure that hon. Members will agree that a complete overhaul of the whole industry is a matter of great urgency. I am satisfied that the national interest makes it imperative that the work started in the 1926 Act should be carried to its obvious conclusion and that the responsibility for generating electricity should be placed firmly and squarely on one national body which should be empowered to plan and operate the power stations of the country under a single control. These power stations are very expensive to construct and will for many years to come require a substantial proportion of the national industrial resources. If only for that reason I am convinced that there must be one body responsible for the construction and operation of all power stations.
The Bill, therefore, provides that the British Electricity Authority shall have full responsibility for the generation of electricity and its sale in bulk for public supply. The Government suggest, however, that the British Electricity Authority should not undertake the detailed work of local distribution. Electricity is an all-pervading service, and if it is to be satisfactory we must maintain the closest contact with local requirements, together with a sense of local responsibility. I propose, therefore, that there shall be created fourteen area boards the boundaries of which I have indicated in the White Paper issued with the Bill. The British Electricity Authority will be responsible for the general policy affecting distribution and will be the sole body in the industry with powers to raise capital. It is proposed, however, that each area board, within limits assigned to it, should have freedom to carry on its detailed work without reference to the Central Authority. It is far from my desire that problems which can be settled locally shall be taken to London. I am satisfied that the provisions of the Bill provide area boards 1411 with sufficient scope. I am very anxious that there should not develop any possibility of divergence of outlook between the Central Authority and the area boards. The Central Authority will be in a strong position and the area boards might feel that they were not getting adequate opportunity for stating their own point of view. I regard them as autonomous bodies and for that reason I propose to appoint them myself.
It is essential that the area boards and the Central Authority should learn to understand each other and work in the closest cooperation. The Bill therefore provides that four chairmen of area boards will be appointed as members of the Central Authority, this membership moving in rotation among the chairmen. The 14 chairmen will have four representatives on the Central Authority capable of expressing their view and also informing those chairmen on the general policy of the Central Authority. This will, in itself, lead to unity of interest between the Central Authority and the area boards, which will make for close and harmonious working. Naturally, the Bill provides that the Minister shall be empowered to give directions on matters of national interest—[HON. MEMBERS: "Hear,hear."]—and, when necessary, these directions will be given to the Central Authority. It will be their task to translate them into suitable terms for transmission to the area boards.
One of the criticisms of the Bill is that the Central Authority will have power to manufacture electrical plant and fittings and that they and the area boards will have power to sell, hire or install electrical fittings. In some quarters it is regarded as monstrous that these public bodies should manufacture electrical plant and fittings. It is, therefore, necessary to explain why we are giving the electricity boards such power. At present, many private companies in the industry, such as the County of London Electric Supply Company and the North Eastern Electric Supply Company, have power in their articles of association to manufacture plant or fittings and I regard it as the right policy to give to their successors similar powers. [HON. MEMBERS: "They have never used them."] I understand that the companies have not exercised these? powers, but while they have not done so 1412 directly, there has been a close connection between the supply and the manufacturing sides of the electricity industry. The device of interlocking directorates is quite well known. For example, the managing director of Edmundsons is on the board of the English Electric Company. The chairman of Babcock and Wilcox is on the board of the Power Securities Corporation, which controls many electricity supply companies both here and abroad. Furthermore, firms engaged in the manufacture of electric plant and fittings have purchased controlling rights in supply companies and became themselves holding companies. For example, this has been done by some cable-making companies and the General Electric Company. It is not surprising, therefore, that the electricity supply companies have not engaged in the manufacture of electric plant and appliances. Why should they do so when they work in the closest relationship with the firms who are engaged in that manufacture? It may be that there are special arrangements between the supply companies and the manufacturing companies which are not always disclosed to the public.
Moreover, it is essential that the new boards should be vested with power to manufacture plant. Otherwise, they may encounter difficulties in obtaining reasonably satisfactory terms from the existing manufacturers. I am not prepared to start these new boards on their career without the necessary powers to secure supplies of suitable equipment and appliances at prices which are reasonable; and they must, therefore, in the last resort, have the power to manufacture. Equally, the selling and installation of electrical appliances is an essential part of the work of the boards. Many of the existing undertakings, both municipal and private, have developed on a wide scale the supply and installation of appliances and without these activities the supply undertakings would have found it difficult to expand electricity in the way they have done. The major domestic electrical appliances are often beyond the reach of working class families unless they receive assistance from hire purchase schemes. The electricity boards will be in a position to afford those facilities and will also service the appliances when installed. Furthermore, many houses require wiring which is expensive, and supply undertakings have provided schemes of assisted wiring because landlords will not under- 1413 take the necessary expenditure. I expect that the boards will develop schemes of assisted wiring which are usually outside the range of the electrical contractors' functions. The great expansion of electricity which will emerge from the activities of the boards will assist electrical contractors in various ways and if there are firms who wish to co-operate with the boards by acting as their agents or by undertaking the work of installation, there is no reason why they should not enter into agreements for that purpose But I am not prepared to accept a situation where there are limitations on the power of the boards to help consumers by selling or installing appliances which are required.
There is a further point of some importance, which is that the boards will only sell or install appliances of the best quality. At present the shops have far too many shoddy electrical appliances which are both inefficient and expensive and, in many cases, unsafe. The boards, as public corporations, will have every inducement to sell the best appliances and they will be able, as large purchasers, to raise the standard of those appliances so that the consumer can be assured of the best value. Consumers will find that when they go to the showrooms of the area boards they will obtain sound advice about their requirements and will not be sold appliances which are often unreliable and expensive. Millions of domestic consumers are spending enormous sums on domestic appliances and it will be a responsibility of the area boards to provide consumers with full value for their money. The area boards will divide their areas into districts and appoint appropriate officers. Each area board will be a very large undertaking and I am anxious that consumers of electricity should not feel that they are dealing with a body which is remote and aloof from their problems. There will be local showrooms where they will be able to make their complaints to the district officers of the area boards but we must also provide for the contingency that the consumers may not be satisfied that their complaints are adequately handled.
I therefore propose that in each area there shall be set up a consultative council. Most of the members of these consultative councils will be nominated by the local authorities and other members will be nominated by representative associations including trade unions. The councils will 1414 have wider functions than consumers' councils. They will be associated with the work of the area boards, be advised on its plans and will examine these plans in the light of their knowledge of local interests and requirements. The councils are authorised by the Bill to create such local machinery as may be necessary to keep them informed of requirements in all districts in their areas and full publicity will be given throughout the areas to the existence and location of the consultative councils. By this means, I hope that the consumers everywhere will feel that they are dealing with organisations which are responsive to their requirements. The proposed structure of the Central Authority, the area boards and the consultative councils has everything to commend it. It is simple, democratic and should achieve its object. It will certainly require a much smaller number of persons on those boards and councils than are required at present to control the existing 563 undertakings, all of which have their committees or boards of directors. I believe that such an organisation is more in accord with the nation's needs.
I turn now to the subject of compensation for the acquisition of assets of electricity undertakings. The major part of the industry is in the hands of local and other public authorities, the remainder being operated by companies, and there are, in addition, statutory boards, such as the Central Electricity Board Local authorities have played a great part in the development of electricity which, as I have already stated, was recognised by Parliament from the very inception as a service to be owned and controlled by public authorities. There are 362 local authority undertakings and about 20 per cent. of that number regard their electricity undertakings as a means of contributing towards the relief of rates. The majority of the local authorities have refused, as a matter of policy, to take from their electricity undertakings any contributions for rate relief. The transfer of undertakings from the local authorities to the new organisation set up by the Bill is a transfer from one form of public ownership to another. Local authorities have always displayed a sense of public duty and will not wish to make any profit from the transaction. I propose, therefore, that the basis of compensation to the local authorities should be the transfer of their assets and liabilities to the new boards. 1415 That will mean that the new boards will have to service the net outstanding debt of the local authorities attributable to their electricity supply undertakings. I am fully aware of the fact that the net outstanding debt in the case of local authorities is less than the capital expenditure of the undertakings transferred. In other words, the consumers in the areas of those local authorities who own electricity undertakings have already made their contribution towards the reduction of outstanding debt on the undertaking. If the local authority were compensated for the difference between the net outstanding debt and the capital value by the Central Authority, the total amount of compensation would be increased and the electricity consumer would, in fact, be asked to pay again what he has already paid. I cannot see the fairness of such a suggestion.
As regards the private companies, the problem is one of some complexity. As I have already indicated, the companies engaged in the distribution of electricity operate on a limited franchise. It is true that the power companies have a perpetual franchise, but they are usually holding companies controlling distribution undertakings, or have distribution powers under separate Orders. If the local authorities were to take over these distribution undertakings or powers, as they are entitled to do, the profitability of the power companies' operations would be adversely affected. If it were a case of buying out a few companies, or parts of companies, it might be possible to make a detailed valuation of the assets of those companies. The House must appreciate that the problem of determining the value of those assets is almost unexampled in its difficulties. A company might be operating on 20 franchises which could be bought out by 20 different local authorities at 20 different dates. It would be necessary to determine the value of that particular portion of the company's assets which could be attributed to each franchise. To separate a portion of the assets of an integrated undertaking and then value that portion is very difficult, if not impossible. Each local authority would have the powers to acquire the portion of the undertaking in its own area under the terms of the Electric Lighting Act, 1888, which make no allowances for goodwill and have always been regarded as favour-able to the local authority.
1416 Many of these franchises have already fallen in and it is only because of the emergency created by the war that the hands of the local authorities have been stayed. Many have a few years to run but some have a substantial number of years. During the remaining periods of the franchise, the company would be entitled to compensation in respect of the revenue which it would be likely to receive from that portion of the undertaking still left to them. In other words, there would have to be made a series of calculations of net maintainable revenue for each portion of the company's undertaking for the period during which the franchise for that portion would operate. I am satisfied that the work of calculating all this in relation to hundreds of portions of companies would be so involved that in fact it is quite out of the question as a practicable proposition.
There is a further complication about the concept of net maintainable revenue as applying to electricity company undertakings arising from the fact that they have been almost entirely free from financial control. Most of the companies have been organised in groups under holding companies and the profits earned by companies in the electricity supply industry have been substantial. Dividends of 7 per cent., 8 per cent. and 10 per cent. are usual and even 12 per cent. and 15 per cent. are to be found. The average dividend on ordinary shares of electricty companies has not fallen below 7 per cent. since 1923. The McGowan Committee, which cannot be accused of anti-company bias, suggested in their report that one of the features of the reorganisation which they proposed should be a stronger financial control, includingan aftective sliding scale of prices and profits.Parliament has been very lax in this matter in the past. When the Tory House of Commons in 1925 agreed that the tenure of the London companies should be extended from 1931 to 1971, the companies were allowed, by Act of Parliament, to capitalise some of their reserves. For instance, one company, the City of London Company, doubled its ordinary capital by capitalising its reserves in two bonus issues in 1927 and 1932, at the same time reducing its rate of dividend from 15 per cent. to 7½per cent. Clearly those ordinary shareholders have done very well. [HON. MEMBERS: "Why?"] Even 1417 if nationalisation had not taken place, some effective control of dividends would have been imperative, and the net main-tainable revenue for the future would have had to be calculated on the basis of some level of dividends much lower than at present and more in line with the profits which should be earned by public utility undertakings operating a statutory monopoly. I have, therefore, come to the conclusion that the only possible method of compensation to be adopted is the one embodied in the Bill. The holders of shares in the companies will be compensated on the basis of the average market value of the shares on certain dates; alternative dates are provided in the Bill and compensation is given on whichever is the more favourable to the shareholders. This method is not only practicable but fair and even generous. First, because the future of the companies in this industry was fraught with great uncertainty in view of the existence of local authorities' rights, and second, because of the probability that the Government would be compelled to introduce legislation which would affect the future level of companies,' profits. The companies themselves have been fully aware of this possibility. They pointed out to my predecessor, in a memorandum of November, 1943, thatthe electricity supply industry is unique in respect of the series of investigations to which is activities have been subjected over a long period of years by Departmental and other Committees, and the reports of these Com-mitte is have, in several instances, been followed by legislation.Incidentally, I hope that this statement of the electricity supply companies will dispose of any suggestion that any further inquiries into this industry are necessary.
I have already referred to the practice of capitalising reserves by the issue of bonus shares, which has been practised by the companies sometimes even under the authority of Acts of Parliament. Many companies have adopted the practice of issuing their existing shareholders with new shares at prices below the prevailing market value. [An HON. MEMBER:"And above."] In 1935, for example, the North Metropolitan Electric Power Company issued to its existing shareholders £678,000 of £1 shares at 40s. per share.though the approximate market price at the date of issue was 63s. 9d. In 1937, the North Wales Power Company issued two million 10s. Ordinary Shares at 11s. 6d. to their existing shareholders, 1418 though the approximate market price was 15s. The Clyde Valley Power Company in 1938 went even one better. Despite the protests of the Electricity Commissioners, they issued 1,050,000 £Iordinary shares to their existing shareholders at 20s. per share, though the approximate market price was 41s. 6d.
§ Mr. Shinwell
I will tell the right hon. Gentleman in a moment. The day those shares were issued, they stood at a premium of 15s., which meant a nice profit of £750,000 to the fortunate shareholders to whom this issue was made. In some cases, the House should understand that the existing shareholders were largely, if not entirely, the holding company which controlled the company in question, so that the holding company was simply manipulating the issue of new shares to line its own pockets. There are many other ways in which holding companies could make undue profits in their transactions with their subsidiaries the statutory undertakings. They could make excessive charges for purchasing materials, for technical advice or for raising capital. It is difficult to obtain information on those charges, which are not necessarily shown separately in the accounts of the subsidiaries, but enough is known to justify uneasiness. The McGowan Report discussed various forms of this abuse and declared thatThe above examples will suffice to show that the holding companies structure contains certain possibilities of charges for electricity being maintained at an unnecessarily high level.Here again, Parliament would have had to intervene and the companies had no right to expect that they would be allowed to continue the practices which, before the war, were giving rise to much criticism. In fact, in 1939 a Select Committee of the House of Lords, under the chairmanship of Lord Sankey, began to investigate the affairs of holding companies in public utilities, but the war put an end to the inquiry just as it had begun.
Any electricity undertaking during the last twenty years could make handsome profits—whether well or badly managed. As a result, all types of people developed an interest in electricity. Investment houses became involved; the manufac- 1419 turers of plant and appliances bought up undertakings. And they bought them haphazard—on no plan or basis: they could all be made profitable. The Southern Areas' Electric Corporation bought companies in Essex, Sussex, Devon and Hereford. The Lincolnshire and Central Electric Supply Company not ony operate in Lincolnshire, but also in Cheshire, Cumberland, Argyll and Caithness. British Electric Traction are interested in companies operating in the Lothians, Sussex, South Wales, Kent and Somerset. Callenders, the cable manufacturers, control three undertakings in Kent, Ayrshire and Oxfordshire, while another cable company—Messrs. Johnson and Phillips—are responsible for three undertakings in Argyll, Westmorland and Sussex. How can the electricity supply industry be reasonably organised, when its control and ownership are manipulated in this fashion? What do we know of the terms on which these plant manufacturers sold their goods to the undertakings which they controlled? Why did they buy these undertakings? Even if they improved them, what did the improvements cost these undertakings? What control had the Government over the relations between these outside interests and the subsidiaries? It is time that these unsatisfactory manipulations were ended, and that the electricity supply companies came under adequate control. Too long has the electricity consumer been made the victim of financial speculation.
In all the circumstances, compensation on the basis of market value must be regarded as generous. It is also fair to the purchaser because, as I have said, some limitation on the profits taken from the electricity consumer was long overdue, and the companies were uneasily aware of that probability. It is not unreasonable, therefore, that compensation should entail a reduced income to the existing shareholder. Had the basis of compensation provided shareholders with an income as great as they enjoy at present, the Government would have found it necessary to propose a scaling down of market value. The reaction of the shareholders to such a proposal would have been extremely interesting.
As the House will observe, the Bill provides that the British Electricity Authority can raise, for purposes of develop- 1420 ment, capital to the amount of £700 million and in the case of the North of Scotland Board to the value of £100 million. There is no fixed period in which it is estimated this development will be undertaken. It depends upon whether physical resources permit the work to be carried out. It is estimated that of the £700 million at least £200 million will be required for power stations alone. The Government are very anxious that the programme for developing power station capacity of the country to meet its requirements shall be pushed on with all possible speed because an ample supply of power is fundamental to the country's economic welfare.
About £400 million will be required for improving the distribution network and a substantial proportion of that will be used in the development of supplies to the countryside. The new boards will be able to undertake rural development on a national and systematic plan and unless it is proceeded with quickly, 1 am satisfied there is no hope of checking the decline in the rural population. In agriculture, electric power can play as great a part as it can in industry and with the shortage of manpower in agriculture, intensified electrification is imperative. The Central Authority and the area boards will spread throughout the whole country the high standard of service which at present is confined to a number of undertakings. They will then proceed to improve those services and bring them up to the highest standard of efficiency. There is a vast field of work to be undertaken, and I have every confidence that the arrangements set out in the Bill will enable the boards to carry out the work. The private companies have made great play with the suggestion contained in the McGowan Reportthat a scheme of complete reorganisation which would -involve the vesting of all -electricity undertakings in a number of regional boards must result in a serious and unnecessary dislolcation of the supply industry.This is just idle speculation, as neither the McGowan Committee nor the private companies can produce any evidence. Indeed, the transfer of the coalmining industry from the former owners to the State was effected without the least disclocation, and none is likely to emerge. Should development schemes be arrested, it would not be due to national ownership, but to the difficulty in providing sufficient plant and labour. But the Government will 1421 make every effort to expedite development plans and also promote the speedy production of generating plant. It is just humbug on the part of the private companies to promise grandiose schemes of rural electrification, without any conception of where the stations and plant are to come from.
I invite the attention of hon. Members to Clause 47, to which I attach special importance. This provides, as in the Coal Industry Nationalisation Act. for full and effective consultation between those employed in the industry and the boards. At present, machinery exists to enable negotiations to be conducted in the matter of wages and conditions of work, but so far as I am aware, there is no effective provision in the industry as a whole to enable the employees who possess technical and other qualifications to express their views on such matters as the organisation, research and advancement of the industry. Already the National Coal Board have come to an agreement with the National Union of Mineworkers on these lines. It is desirable that in the sphere of electricity supply and distribution the principles of industrial democracy should operate.
This Bill is based on the original and frequently repeated intentions of Parliament that electricity supply should be treated as a public service. It seeks to reconcile these intentions with the great technical developments of the industry over the last half century, and enable the industry to enjoy the benefits of large-scale organisation. It eliminates the uncoordinated methods of electricity distribution which have emerged from the early Acts of Parliament, and have persisted because of the timidity of past peace time Governments, frequently influenced by profit-grabbers. It makes an indispensable service a national concern. available, as soon as physical difficulties are overcome, for industrial and domestic use at a price strictly related to costs. Far from this Measure impeding production, it provides the basis upon which alone maximum productivity is possible. Furthermore, this Bill fortifies the endeavours of the technicians in the electricity supply industry, and affords them the opportunity of putting into effect development plans which, up to the present, have far too often been impeded by sordid financial considerations. It provides all the workpeople in the industry with the widest 1422 facilities for consultation in all matters affecting their employment, and thus promotes the security and improved conditions which it is their right to enjoy. In every respect this is a Bill designed for public wellbeing, and I can confidently commend it to the House.
§ 4.36 p.m.
§ Mr. R. S. Hudson (Southport)
I beg to move, to leave out the word "now," and, at the end of the Question, to add "upon this day six months."
I have been a Member of this House for some 20 years, and in the course of that time I have heard many Bills introduced, and many Ministers make Second Reading speeches. But, frankly, I think I have never, in the whole of that time, heard a Minister give such an inadequate explanation of a Measure as that which the right hon. Gentleman has given today. I propose to go through the Bill, and try to show the House what it contains and what it fails to do; and I venture to think that many hon. Members on both sides of the House will besurprised when they hear what this Bill does contain.
The right hon. Gentleman, in his opening remarks, gave us a long history of the electricity supply and distribution services in this country, and suggested that no Government, of whatever party, which had taken office in 1945, could have failed to introduce some long-term legislation to reorganise the distribution of electricity in this country. I do not think that anyone would dissent from that statement, but there is a great deal of difference between saying that any Government would have had to introduce long-term legislation to reorganise distribution, and the Bill which is now before the House, and which the right hon. Gentleman, I repeat, made no attempt to explain. He trotted out the usual complaints—variety of charges, differences in voltage, progress being much too slow, no inducement to undertakings to standardise current, frequency, and so on. I will deal with these, and see what the Bill does to deal with them.
I suggest to the House that anyone defending this Bill ought to endeavour to show what benefits to the consumer will flow from the measures proposed in the Bill. I suggest that two things are then necessary. It is essential to show positively that the benefits will be greater than those which reasonably could be expected 1423 to accrue from the present development plans, both of private companies and of municipalities. Secondly, it is essential to show that those benefits will outweigh the disadvantages which are bound to result from the dislocation of the industry. The right hon. Gentleman said there would be no dislocation and that the companies could produce no evidence that there would be; but the onus of proof is not on the companies nor upon me. The onus of proof is on the shoulders of the right hon. Gentleman. Of course, he produced no evidence at all.
I want the House and the public to remember that the benefits, if any, that accrue from the Bill will be benefits only in the future, whereas the dislocation, and disadvantages that follow from dislocation, must be endured in the present—the very unpleasant present to which the Government have brought this country. Whether the right hon. Gentleman could have chosen a worse moment than the present in which to precipitate dislocation, I leave to the judgment of the country. The right hon. Gentleman talked about benefit to the consumer. What is the interest of the consumer. whether the domestic or the industrial consumer? I do not suppose that the right hon. Gentleman will disagree with me when I suggest that his interest is that he should be able to get cheap and abundant supplies and good service, and that there should be no undue preference between one consumer and another. What does the Bill do to achieve those objects? In Clause 1 (6) hon. Members will see a certain number of platitudinous pious wishes set out as being the policy which this new authority will pursue. First, in Clause 1 (6, a) it is provided that. the policy of the board? shall be directed to securingthe use of all economical methods of generating. transmitting and distributing electricity;If that is not a pious platitude, I do not know what pious platitudes are. Where does the Bill improve present conditions? It does not mention generation and, as far as transmission is concerned, there is no improvement because that is already owned by the Central Electricity Board. Clause 1, (6, b) says:the cheapening so far as practicable of sup plies of electricity;1424 Authorised undertakers are now under an obligation by statute to supply cheap and abundant electricity. I notice that the phrase:Obligation to supply cheap and abundant electrcityhas been, wisely, dropped in favour of the much vaguer phrase:the cheapening so far as practicable.The consumer will not get much benefit out of that. Clause 1 (6, c) reads:the avoidance of undue preference in the provision of such supplies.But that is the law now. The only difference that this Bill makes is That Sections 19 and 20 of the Electric Lighting Act are being repealed. No statutory safeguards for the consumer against undue preference are to be inserted in the Bill and the protection which they have is destroyed.
Clause 43 enables the new authority to supply electricity to railways, but it does not say that it is to be supplied to railways without undue preference. At present, the Central Electricity Board is authorised to supply electricity to railways only so long as it is not done at a loss. That very important safeguard has been eliminated. Therefore, it will be open to the electricity authority in future to subsidise nationalised railways. In this connection, it is rather interesting to consider the history of the question of undue preference. As far as I am aware, there have been six cases in which the High Court was asked to prevent a continuance of what was alleged to be undue preference. In only one case was a company concerned, and that company was acquitted. In five cases, local authorities were concerned, and it is interesting to note that four were convicted. The mere fact of public ownership confers no safe-guard con the consumer, no assurance that he will not be a victim of an undue preference.
Clause 1 (6, d) sets out as an aim:the simplification of methods of charge for such supplies;'The right hon. Gentleman made great play with the diversity of charges today. What he did not tell the House—and it is very significant of his methods of argument—is that a committee to go into this matter was set up, and set up by whom? It was set up by the Central Electricity Board. At the instance of the Minister, the Board of Trade, or the consumer? 1425 No, it was set up at the instance of the companies concerned and, if the rumours I hear are correct, that committee is about to report and, without this Bill, a substantial measure of simplification of charges would come into operation this year.
Then the Minister talked about standardisation. Clause 1 (6, e) states that the boards shall have regard tothe standardisation of systems of supply and types of electrical fittings;The right hon. Gentleman failed to tell the House that already frequency has been virtually standardised. It was virtually standardised as a result of the 1926 Act, not at the cost of the taxpayer or the State, but entirely at the cost of the industry. As a result of long technical examination, the voltage only recently has been decided on at 240. Both the standardisation of the voltage and the remaining standardisation of frequency would have been achieved, of course, by now, but for the interruption of the war. The right hon. Gentleman talked about the question of fittings. There is something to be said for standardising the size of plugs, and things like that, though I am not altogether sure that the housewife and the ordinary purchaser will be awfully pleased when given nothing but a series of austerity models. They may have something to say upon that.
The right hon. Gentleman attached some importance to the consumers' interest. I suggest that there is a complete absence of any protection for the consumer in this Bill. We should not forget that we are concerned with the provisions of the Bill and not with what the right hon. Gentleman thinks may happen. Under Clause 33, for example, to whom are tariffs left? The right hon. Gentleman did not mention that tariffs are left to the decision of the area boards. There is no provision, such as existed in the past, in the case of haulage charges in the Railway Rates Tribunal, now known as the Railway Tribunal and perpetuated in the Transport Bill. In other words, the consumer is at the mercy of the area boards. Some play was made by the right hon. Gentleman with the fact that there were to be consultative councils. We should have a good deal more faith in the efficacy of these councils—again I am only dealing with what is in the Bill —first, if they had any effective executive 1426 power; and, second, if they were appointed by outside bodies, and were not to be merely stooges" of the Minister.
The right hon. Gentleman in his remarks adumbrated some reorganisation concerning gas. I presume that that is an euphemism for nationalisation. In the past, the competition of gas and electricity has had the effect of cheapening gas and of cheapening electricity. The right hon. Gentleman prayed in aid, when it suited him, some passages of the McGowan Report, which, he said, could not be accused of being Red. I am going to pray in aid not any Conservative statements—I do not want to weary the House at length by reading them out—but the Simon Report, under the chairmanship of a gentleman who has just signalised his promotion to another place by joining the Labour Party. As the right hon. Gentleman will find, 1 there are some very pertinent comments, in the case of local authorities, on the advantages of competition between gas and electricity under separate ownership, and on the results of monopoly, when these came under the same ownership of the same municipality. The right hon. Gentleman will also find, if he will look, some further statements, not by a Conservative but by an hon. Gentleman who has recently joined this House, with some copious quotations to the same effect, in One of Mr. Gollancz's "Yellow Books." I think we may take it that the result of taking over gas, so far as the consumer of electricity is concerned, is going to be that one more safeguard against a rise in prices will be taken away.
The right hon. Gentleman talked about local authorities. The fact that he is taking over distribution from the local authorities is just one more example of the present Government's policy of whittling down the power of the local authorities. I have been very interested recently to notice that Socialist chairmen of electricity authorities, who lauded the efficiency of the undertakings for which they were responsible, have now; in the majority of cases, swallowed their previous statements and toed the party line by saying, "Of course, it is a very good thing for the nation and for the municipalities that these undertakings should be taken over by the Government." But a few Socialist members of local authorities still have the courage of their convictions. I would 1427 quote, for example, a speech of Alderman Herdman,. the Socialist chairman of the Barrow-in-Furness Electricity Committee. He said that, while he supported the idea of nationalisation of the electricity industry, so far as generation is concerned, the proposed nationalisation of distribution was an altogether different matter. It was going to be bureaucratic, and the personal contacts which existed between consumers and local authorities would be lost. The House will remember that the right hon. Gentleman emphasised that one of the results of the Bill would be to maintain local contacts and local responsibility. Evidently, the chairman of one of his own local parties thinks that the result will be the opposite.
§ Mr. Hudson
I am obliged for that interruption, because it merely shows what happens to Members of the party opposite when they venture to differ' from party policy.
§ Mr. Hudson
Perhaps the hon. Member would like to hear a little more of what Alderman Herdman said? Alderman Herdman said there was the probability that they would get down to the situation, that the engineer would act as merely a rubber stamp, that he would have to obey the instructions or orders of someone at regional headquarters, while, so far as the consumer was concerned, he would be humbugged by filling in innumerable forms if he had any complaints or requests to make. I have a similar statement by Alderman Gough, the Socialist chairman of the Electricity Committee of Cardiff Corporation. It seems to me that the results which the right hon. Gentleman forecast will not necessarily follow.
Then, the right hon. Gentleman talked about the advantages that were going to follow this Bill, regarding rural electrification. One of the stock arguments used against the present system is the slowness of rural electrification. The general complaint is that rural electrification has been neglected. Certainly, it has been neglected by municipalities, and the only people who have taken the risk are the companies. I see the Parliamentary Secretary laughs.
§ Mr. Hudson
Three experiments, I think, have actually been made by local authorities to deal with rural areas. One is the Bedford rural demonstration scheme, and another is the Norwich scheme. The local authorities were invited to make an attempt to do the same sort of thing for rural supplies, and for the people in rural areas, as they did for their own customers. Very briefly, I will give details. Both schemes were sponsored by the Electricity Commission in 1930–1932, and they had the great advantage of Treasury finance free of interest. The Bedford scheme, by 1940, showed a loss of £28,549, and the Bedford Corporation, in 1941, came to a settlement with the Electricity Commission and abandoned the scheme. The Norwich scheme, up to 1939, had a deficit of £21,821, and an agreement was reached between the Commissioners and the Norwich Corporation, whereby the scheme was abandoned. I am much obliged to the hon. Gentleman for asking me to bring that out. So much for the rural areas.
I would ask the right hon. Gentleman, in view of his statements about what is going to follow from this Bill—and it is the Bill we are talking about—whether he suggests that, when this Bill is passed, and the new electricity authority takes over, rural charges would be brought into line with urban charges? That was one of the plums held out to people living in the rural areas. The right hon. Gentleman is more careful than some of his supporters have been in the country, but there will be nothing for them, is far as charges are concerned, in this Bill. What is the right hon. Gentleman going to spend on rural electrification? Will he abolish installation charges—a great source of complaint at present—which was one of the baits held out by supporters of his party in inducing people to vote Labour? They were asked to vote in order that there could be a change in the installation charges. Will the Government give priority to the provision of electricity in rural areas? The truth is that the right hon. Gentleman does not know the answer to any of these questions. At any rate, he did not give them in his Second Reading speech.
1429 When the right hon. Gentleman and his hon. Friends on the Front Bench were arguing in favour of the nationalisation of the coal industry, they used the following arguments. They said that the coal industry was technically inefficient, that it was a dilapidated industry, that it was cursed by unemployment, that it had labour disputes and a legacy of bitterness; that it would not amalgamate or reorganise itself, and that its output had been seriously reduced. If the right hon. Gentleman was sincere in these arguments against the coal industry, as I imagine he was, I think he will agree with me that none of them applies to electricity, and that, if they were valid for coal, they destroy the case for electricity. [HON. MEMBERS: "No."] Let us look at them again for a moment. Supposing that, in the case of coal, the industry, instead of being technically inefficient, had been technically efficient; supposing that, instead of being a dilapidated industry, it had been an industry with up-to-date plant; supposing that, instead of being cursed by unemployment, there had been no unemployment; supposing that, instead of having continual labour disputes and a legacy of bitterness, it had not had a strike since the General Strike of 1926; supposing that, instead of not being willing to amalgamate or to reorganise itself, it had been anxious to amalgamate. but had been prevented from so doing by existing legislation, and, supposing that, instead of its output being seriously reduced, it had multiplied tenfold in the course of the last 20 years—does anyone think that, in those circumstances, there would have been any case for the nationalisation of the industry? Of course there would not. Equally, on those grounds, therefore, there is no case for the nationalisation of electricity. So much for what the right hon. Gentleman said, or, rather, did not say.
I turn now to one or two other details of the Bill, not one of which was mentioned by the right hon. Gentleman. They might, perhaps, be classed as constitutional or legal, although I should prefer to describe them as those affecting the individual and his rights of access to the courts. First of all, patronage. The already considerable patronage enjoyed by the right hon. Gentleman under the Coal Act is going to be substantially increased. The people selected to fill the major appointments under this Bill are to be 1430 members of the Central Authority and area boards, some 138 altogether, and somewhere between 280 and 420 members of consultative councils. As regards the consultative councils, what we take exception to is the principle of the Minister appointing the other chap's watchdog. That principle is quite incompatible with what the right hon. Gentleman said he was anxious to obtain, namely, a body of men who would be responsive to the consumers' requirements. However, he appoints them, and there is no guarantee that they will be responsive to other than his own promptings.
As regards the members of the Central Authority, one point of extreme interest emerges. The right hon. Gentleman will not deny that he has recently been at great pains to disown all concern with appointments to the district coal boards. In case there is any doubt on that score, I have his quotations here. He has said that they were people who were appointed by the Coal Board, and that he was not going to interfere. The interesting thing is that, under this Bill, he reserves to himself the right to appoint members of the comparable area boards. There can be only two possible reasons for that It is possible that one of the reasons may be that he believes the persons nominated by the Coal Board to the district coal boards are not the most efficient persons who could have been selected. That possible reason is not of very good augury for coal nationalisation. The other possible reason is that he has been subjected to pressure by his own party, on the ground that the Coal Board has not reserved enough of the jobs on the district boards "for the boys." That, also, is not of very good augury for the future of the Electricity Bill. The right hon. Gentleman can take his pick, but, in neither case, does he emerge very creditably.
§ Mr. Hudson
There is a noticeable difference that, in one case, the Coal Board appoints the members, and that, after an experience of only a very few months, the right hon. Gentleman comes along and does exactly the opposite under this Bill. If the right hon. Gentleman or the Parliamentary-Secretary can get out of that later on, or if any hon. Member opposite can help them out of the hole by supplying them with an ingenious argument, we on this side of the House shall be very glad to hear it.
1431 I now come to the Clauses of the Bill which are of a constitutional and legal character. The Bill gives the Minister—I apologise for reading this, but, as it deals with legal matters, I want to get it accurate—wide and arbitrary powers. He is authorised to adjudicate on matters which are normally decided by Parliament or the courts and there is no appeal from his decision. He makes himself the sole judge of when he is or is not entitled to exercise some of those powers, and the Bill is so framed as to prevent relief by the courts, on the ground that the Minister is exceeding the very wide powers which he has actually taken. The constitutional principle followed up to now has been that public utility undertakings authorised by Parliament were, in general, controlled by Parliament, whether operated by companies, by municipalities or by statutory boards.
This Bill gives nearly all the control to the Minister, and takes it away from Parliament. All local Acts and Orders applicable to electricity undertakers are to be modified as the Minister may prescribe. He may also, by departmental order, extend or repeal private Acts or any public Acts affecting the electricity commission. Many third parties, especially county councils, are involved in this. The Minister can, without reference to Parliament, even repeal the Acts controlling the statutory companies and water undertakings that belong to some of the electricity undertakings which he has taken over, even though they are not electricity undertakings and that water is a property which is the concern of the Minister of Health. As far as the individual is concerned, contractual rights of third parties can be taken away without those parties having been at fault, and without their receiving any compensation.
I suggest this would seem contrary both to natural justice and constitutional practice. I should like to give an example. Let us assume that a builder enters into a contract with an undertaking to build some showrooms. It is open to the area board, when they take over, to say that the showrooms are not necessary for that undertaking, and they can repudiate the contract. The builder concerned had no reason to know whether the showroom was necessary or not; yet that contract 1432 can be repudiated, even though the builder was completely innocent, and he has no redress at all.
§ Mr. Hudson
There is a series of Clauses making every director personally liable in respect of certain dividend payments and other matters, even if he voted against the action taken, even if he was serving as an officer on active service abroad, or even if the action was taken in accordance with a resolution passed before the Bill was even published or thought of. The Bill does not say that a director "may be" made liable as a result of appearing before a tribunal. The Bill specifically says that he "shall be" liable, and he has no recourse to any tribunal at all. Under English law, the onus of proof is supposed to be on the prosecution, the accused being deemed to be innocent until he is proved guilty. But under Clause 54 (2), a director, general manager, secretary or similar officer of a company, who commits any offence under any regulation made under any of the 27 enabling provisions of the Bill, is deemed guilty, unless he can prove that he did not consent or connive, and that he exercised due diligence to prevent the offence. Except in only a very small number of cases, it will be impossible to prove that negative. In a few years, no official of any of the companies will know whether or not he has committed an offence.
I turn to the position of employees. The right hon. Gentleman talked about the advantages to the staffs resulting from this Bill, in that it will enable them to be consulted about the running of the industry. But he said nothing about what is to happen to the existing members of the staffs of companies and municipalities. Compensation to displaced employees is a matter for which no other Parliament during the last 80 years has failed to provide in express terms. Before 1946, every Act gave statutory rights to a specified class of persons, in specified events, on a specified scale. This Bill shirks all these points, and leaves them to the Minister for the time being, with the power to vary or revoke his own provisions. This is certainly contrary to the established practice, that when Parliament takes a right away from a subject, it should itself state 1433 the basis of compensation. Finally, employees who are engaged, promoted or re-engaged after war service are in an even worse position. They cannot, without the Minister's consent, even ask a tribunal to hear their objections.
I am sorry the Prime Minister is not in his place today. Frankly, I was horrified and shocked when I read through the Bill and realised what these provisions implied. But I believe that a great many hon. Members, not only on this side, but on the opposite side of the House, will be shocked when they hear what this Bill actually does. I have not very great hopes for the right hon. Gentleman opposite. It is said that "absolute power corrupts absolutely," and he has not got far to go. I doubt whether the Prime Minister himself, with all his preoccupations, realised what his lieutenant was doing, or that he would really have agreed to it if he had.
I now want to deal with the compensation Clauses. The right hon. Gentleman made an ingenious attempt to get out of his difficulties, but the fact remains that a company or an undertaking, and its shareholders, are separate entities. A company can sue the shareholders, and the shareholders can use the company, and that is very obvious in the case of debenture holders. At any given moment of time, it does not follow automatically that the total value of shares quoted on the Stock Exchange accurately represents the real value of the assets of a company. Stock Exchange quotations tend, on the whole, to be governed by the rate of dividend paid or anticipated. As an example, let me take two companies, just to show the hopeless unfairness of the present proposals. Company A, a young, progressive company in a developing area, has to spend a very large amount of capital on development, which capital expenditure will not come to fruition for four, six or ten years. Clearly, that company is not able to pay a large dividend and, therefore, its shares stand at a low quotation, although it has, in fact, spent large sums of money in capital development. Take the second company which happens to be operating in an area which is already highly developed. That company has not to spend the same amount of capital. Probably its capital is already bearing fruit, and it can legitimately pay a higher dividend to compensate its shareholders for the earlier years of 1434 abstinence. As a result of that higher dividend, their shares stand higher and, therefore, the compensation they will get will be much greater than in the case of the first company. That is obviously grossly unfair. [An HON. MEMBER: "We shall remember that argument."] I will come to that in a minute. I call that the first swindle that is being perpetrated.
There is a second swindle, which is this. The choice of Stock Exchange values lies between dates in pre-Election months, and dates in November last. In the case of electricity shares, obviously the former will be accepted, because the shares stood higher. But not only did the shares stand higher in pre-Election days; a matter that is also of some importance is that the value of the pound stood higher in pre-Election days. What the Chancellor of the Exchequer proposes to do is to pay shareholders pre-Election Stock Exchange quotations, but in depreciated currency. Well may the "Economistd" say this is not nationalisation on the cheap, but legalised confiscation. In other words, the shareholder. in addition to suffering a loss of income, is also going to suffer a capital loss, through the Chancellor of the Exchequer valuing what he takes in pre-Election currency and paying in post-Election currency. I should describe that operation as the Chancellor of the Exchequer valuing his assets in "Sound Andersons," but paying for them in "Inflated Daltons."
In the case of the municipalities, only the first swindle is perpetrated, although there still remains the contrast in treatment accorded the provident local authority, which has steadily expanded its services and yet amortised its debt, and the improvident local authority which has kept charges low. The right hon. Gentleman may try to argue that if a local authority has a debt, under this Bill that debt will be paid off by the State to the man who lent the money. But there is this difference. Under this-Bill, the municipality will have lost its-undertaking, whereas if this Bill had not been brought in, that debt would still have been discharged and, at the end of the time, the municipality would have owned the undertaking. No amount of dialectics on the part of the right hon. Gentleman will convince the ordinary ratepayer that he is not getting a raw deal.
1435 This Bill dismisses directors without compensation. I pass over this petty example of class warfare. But there is a very important national interest involved. It is fashionable for Socialist writers and speakers, and some hon. Members opposite, to decry directors, to hold them up to obloquy as "guinea pigs" or "stooges" of the Stock Exchange. But electricity happens to be an industry where directors—and I include in that class chairmen and members of local authority electricity committees—can legitimately point with pride to what they have achieved. I do not decry the technicians, engineers, scientists, managers, salesmen and so forth, but I am perfectly certain they would be the first to admit that the electricity industry as a whole could not have achieved the very great things it has achieved, without the judgment, the guidance, and, indeed. I go so far as to say the inspiration of the men at the top under whom they have served. And the right hon. Gentleman is jettisoning the whole of that experience. He may say the result will be that he will have. a nice tidy national development. Well, he may get it tidy, but, believe me, he is going to get tidiness at the cost of the loss of one of the chief factors that produced full enterprise and progress in the years that have gone by.
I have left to the last what is probably, in the present circumstances, the gravest objection to this Bill from the point of view of the public interest. I find it extremely difficult to reconcile the compensation to be paid in this Bill to electricity supply companies with the oft-repeated views of the Chancellor of the Exchequer on the proper use of profits. Let me refer to what the right hon. Gentleman said in his last Budget speech:Last autumn, I expressed the view that postwar development should come before increased dividends, and I invited industry to plough back increased profits rather than distribute them to shareholders.The right hon. Gentleman objected to that being done in the case of the City of London, who issued bonus shares, that is they ploughed their profits back into industry. The Chancellor went on to say:The response to this invitation has been patchy. Many of the most efficient and up to date concerns have responded very well; but others have shown a tendency to chuck money about among the shareholders, rather than to strengthen their reserves and improve their equipment."—[OFFICIAL REPORT, 9th April, 1946; Vol, 421, c. 1834.]1436 Yet the method of compensation proposed in this Bill is designed perfectly to ensure that those people who, to use the Chancellor's elegant words, "chuck money about among the shareholders," will, in fact, get the highest compensation. I say quite frankly to the Chancellor and the Government, the method of compensation on Stock Exchange quotations adopted in this Bill—and in the Transport Bill, too, for that matter—will drive directors in any industry threatened with nationalisation to chuck the money about among the shareholders, because they know that if they do, the compensation they get will be higher than if they pursue the course the Chancellor has asked them to, namely, to invest their profits in development.
I would remind the House, moreover, that on 19th November, 1945, the Lord President of the Council gave an explicit assurance in this House that progressive undertakings would not be prejudiced if they continued to develop in the interim period. What, in fact, has happened? Those undertakings which, in the interim period, have expended considerable sums out of their profits will, inevitably, under this method of compensation, get a smaller amount than they otherwise would have done. In short, the right hon. Gentleman, with that loyalty to his colleagues which is such a well-known and marked characteristic of this Government, has made fools of his colleagues, the Chancellor of the Exchequer and the Lord President of the Council, and has shown to the world at large the value to be attached to any assurance given by either of them. On Saturday, at Gateshead, the Chancellor of the Exchequer had some words to say about what happened when a stockbroker died. I have never read a more fallacious argument. Stockbrokers die, like all of us, and they usually own shares. But I have yet to hear of the stockbroker who died owning the whole of an electricity undertaking; and unless such a one is found, the whole argument of the Chancellor of the Exchequer falls to the ground.
To sum up, this Bill is one more example of the Government's passion for over-centralisation. It is not only an attack on a decentralised industry, but two-thirds of it is an attack upon nonprofit making local authority enterprise. It is a Bill to give more power to the Minister, and more "jobs to the boys." 1437 Many of its provisions are grossly unfair and unjust to large numbers of people, hitherto directly and indirectly connected with the industry, whether they are directors, managers, employees, shareholders, or ordinary ratepayers. Many of its legal provisions abolish rights which have been regarded hitherto as part of the inalienable heritage of the British people, not only here but overseas, in countries which have taken British ideas of justice as the basis for their law. Finally, of all the nationalisation Measures hitherto introduced by this Government, this will do the most harm to that revival of industry, and that increase of production to which so many right hon. Gentlemen pay lip service, but, alas, only lip service. It is for all these reasons that I move that this Bill be read this day six months.
§ 5.26 p.m.
§ Mr. Henry Nicholls (Stratford)
In accordance with the custom of the House I have to do two things: first, to ask for the indulgence of the House; second, to declare my interest. With regard to the first, I should say that I have waited some time before making this effort. The people whom I have the honour to represent are themselves patient, and I think they would wish that patience to be used in order that I might reserve the facilities afforded to a maiden speaker for a subject in which they have some special interest. May I now declare my own interest? I understand that is the custom in the House, though it is very seldom necessary for an hon. Member on this side of the House to declare an interest. I have a financial interest in an electrical undertaking. Not a large interest, it is true, but an interest similar to that held by every other inhabitant of West Ham: together we own, via the municipal authority, an electrical undertaking which is the envy of less fortunate areas. Perhaps I might be excused if I mount the parochial platform for a little while, because the story of West Ham is, in fact, the story of all other municipal undertakings, to the same or perhaps to a lesser degree. As that undertaking is affected by this Bill, we should know something of what the undertaking in fact is, and how it will be affected by this Bill.
We have a generating station, now approaching 50 years of age. Yet, if I might use the expression, it is growing 1438 younger every day. At the present time there are extensions, alterations and additions which have as their objective the production of 180,000 kilowatts: that, in terms perhaps more acceptable to a layman like myself, means 250,000 horsepower. That is the intention of the local authority so far as future generating is concerned—no mean objective. Allied to this undertaking is the supply side. True, there have been difficulties in recent years due to damage by the blitz and the usual war difficulties. I give as an instance the loss of one-third of the houses and, in consequence, their domestic load. There has been the total destruction of many factories and damage to others and, in addition, the interruption that normally comes because of war damage. The loyalty of the local residents to the Minister of Fuel in his demands has resulted in a reduction of their local consumption requirements. These, and many other factors, have reduced the load below what it normally would be, and yet today the output of that undertaking is in the order of 200 million units a year. That is no mere bagatelle. I may add that the revenue may be taken as some indication of the public service of the undertaking, for it is as low as that of any anywhere in the country, the revenue is £1,000,000 a year.
I have given that thumbnail sketch of the undertaking because one can anticipate the nervousness with which most shareholders in undertakings of this kind may look at this Bill. How do the people of West Ham look at it? We have invested a good deal of money in this undertaking. It represents large capital assets. I think the Minister himself referred to the large amount of capital needed to build a generating station. He might have referred also to the supply equipment—cables, feeders, and so on. The size of such an undertaking means that there must be large capital assets. According to the Bill, we are asked to throw these capital assets into the lap of the nation. These large capital assets we are asked to share with some backward area, that may be backward without being poor; perhaps, a rich backward area like Westminster. We are asked to share these capital assets with those other localities, even while we delve into our pockets to find the wherewithal to pay railway shareholders and colliery owners. 1439 We are asked to share our civic pride with places where social service is hardly known. We are asked all this in order that electricity may be extended into every home, every workshop, and every factory in the country.
We have always preached the extension of public services to the widest possible extent, owing to the influence of such people as Keir Hardie. We have consistently voted Labour, and Members of the House will recognise that West Ham has always been safe for Labour. Now that the point of view expressed on the platform—our beliefs—are being put to the test, what are West Ham going to do? They are asked to part with these capital assets, and for nothing in return, except the good will of the rest of the community. I am proud to say that the people of West Ham, through their representatives on the local authority, have approved in principle the terms of the Bill, and are prepared to back the Minister in his efforts.
I would not have it said, though, that that means we have no criticism to offer. This Bill is the latest child of the Front Bench, and it is a lusty infant. but, perhaps, by some small effort of ours, through our Parliamentary plastic surgery, we may make it even more attractive. If I may make a criticism, I would first say that there is no court of appeal here. I think that that is a valid point. If there should be a difference of opinion within the industry, or between the industry and some allied industry, the only court of appeal that there may be is to consist of the officials, or much the same officials, who made the original decisions. I suggest that some independent tribunal might be of use. The Minister referred to the Clause dealing with employees. He may feel entirely satisfied with it; but we must remember that we owe so much to our employees, and that, after all, we are transferring, not only our capital assets, but the employees, too, who have served us many years, and without whom we should have no undertaking. Whatever affiliations I have, whatever promises may be made, I should not vote for this Bill unless I thought that the interests of those men, their prospects of promotion, their prospects of a rise in their standard of living, were better under the new Authority than they are under the existing one. 1440 If there is any doubt on this point I should like the Minister to say so.
One further criticism of the Bill I may make is this. There are about 70 references in the Bill to the power of the Minister to intervene. I do not think that it can surely be intended that the Minister should intervene in all these cases. But I should like to know whether this does mean the Minister or the Ministry. It is right and proper, of course, that the Minister should have power to intervene. powers to effect policy, and that he should be able to answer effectively to this House. But it is hardly right that some subordinate at the Ministry should have authority to interfere with and to frustrate the efforts of the individuals, the technically competent individuals, trying to provide the service lower down the scale. I think the Minister might dispense with some of these powers to his advantage and to the advantage of the new undertaking. I believe in the devolution of power to the utmost possible extent commensurate with effective co-ordination. I believe it is essential. I believe that in our small way we have locally practised that devolution. We like the individual to be trusted to do a job without too much interference. That way we get service.
Let me refer to another aspect of the Bill, the consultative committees: I think the Minister referred to the London area as a jigsaw puzzle. There is to be one consultative committee to cover one huge area. It does occur to me that in such an event the committee are either going to be overwhelmed with work or may have some difficulty in carrying out their task. In practice, probably, the task would fall to district officers in a great measure, and I feel that these district officers might have the assistance of district committees. I notice the Minister nods his head. I am glad, indeed, he concedes that point, because I believe there is a weakness in that part of the Bill, in that contact with the consumers, with the public generally, is only at consultative council level.
I do not want to take too long or to take advantage of the indulgence of the House. I make these criticisms not with any idea of wrecking the Bill or opposing the Bill. We have the same objective as the Minister. I would say that he appears to me to be an extraordinarily self-sufficient person, but if by chance he 1441 needs support, if by chance he needs loyal co-operation, if by chance he needs any of the wisdom that comes from practical experience in operating public services such as this, he can turn with confidence to West Ham.
§ 5.40 p.m.
§ Colonel Lancaster (Fylde)
It is my privilege and pleasure to congratulate the hon. Member for Stratford (Mr. H. D. Nicholls) on a well-informed and lucid speech. He spoke with the authority and experience he has gained from many years of public service in West Ham, and he brought knowledge and wisdom of a practical nature to the deliberations on this Bill, I feel sure that I am voicing the opinion of Members in all parts of the House when I say that it was an excellent contribution, and that we shall look forward with pleasure to further speeches from the hon. Member in the near future.
This is the second occasion within 12 months that matters affecting the Minister of Fuel and Power have come up for decision by this House, but the circumstances today are very different from those which existed when the Minister introduced the Coal Nationalisation Act. At that time, the tide was running strongly in favour of the Government, and the prospects of recovery under the magic of a planned economy were buoying the hopes of an expectant people, whereas today it is fair to say, I think, that the circumstances are very different. We are at this moment in a difficult situation. Coal, which is the raw essential of this Bill, as it was of the Act of 12 months ago, is in short supply, and factories are closing down. Recovery is being jeopardised, and the outlook, to say the least, is uncertain. On the earlier occasion, the Minister came to the House with a claim which, on the face of it, was reasonable. He was introducing a Measure which his party had striven for more than a generation to get on the Statute Book, and he was implementing an election pledge which had the fervent acclaim of the great mass of the Government's supporters. He was taking action to harness the good will of the miners, without which he claimed, with some apparent justification, the recovery of our economy was in jeopardy. On a more suitable occasion I shall attempt, in the light of experience, to deal with some of those claims, but for the purposes of to- 1442 day's argument, let us assume that they were valid.
Is it claimed, in this case, that the electricity industry is a black spot in our economy, that the party opposite have had plans for its nationalisation in the forefront of their policy for more than a generation, or that the employees within the industry are sullen from years of bitter frustration? Nothing of the sort. Most people claim to know something about coalmining, or anyhow to know something about the miners. It was said at one time that one man in seven in gainful employment in this country was connected in some way with the coal industry. But can it seriously be claimed that the average voter knows a great deal more about electricity than how to switch on the light, or plug in the electric fire? Is it really suggested that people can hold a balance between the conflicting claims of the industry and those of the Minister and the Government in regard to centralisation? I doubt it. Let us consider these claims for a few minutes, and more particularly those in regard to the future efficiency of the industry.
The Minister wisely refrained from deprecating the past record of the industry, or the development which has taken place during the last few decades. He claims that the various improvements which have been recommended by the McGowan and Cooper Reports, as well as in the White Paper on the industry, can best be achieved by nationalisation. This is becoming something of a technique. Precisely the same claims were made 12 months ago in regard to the implementation of the Reid Report, when it was said that the general reorganisation of the coal industry could only be obtained by nationalisation. Neither the Reid Committee, nor the McGowan Report, nor the White Paper on Electricity recommended nationalisation. There seems to be growing up an idea that when integration, centralisation or rationalisation needs to be brought about, there is only one medium through which this can be done, and that is by nationalisation. This is becoming a dangerous doctrine, and one which we should do well to dispel. No one denies the necessity of integration, or for an increase in both generating power and in distribution of electricity. A great deal of generating plant is, of course, required, but one very forcible criticism 1443 springs to the mind. The right hon. Gentleman has referred to 14 areas, but J have it on competent authority that at least double or treble that number should be set up in the first instance. There is nothing good about size merely for the sake of size. If it is possible to point to inefficiency in certain respects, has no one ever heard of inefficiency under a national regime? Has no one ever heard of a poor ship's company, a bad battalion, of an inefficient telephone exchange, or even an obstinate and incompetent bureaucrat?
This is a very poor argument, and I prefer to judge this matter purely on the score of the service the industry should be capable of rendering to the public. As an industrialist for a great many years, I have been taking something like 15 to 20 million units annually from the electricity industry, and I have had the, advantage of a number of safeguards which have been wholly swept away by this Bill. I was in the fortunate position of being able to draw my -supplies from more than source—I admit that every industrialist is not in that happy position—and therefore I had the advantage of competition between the sources of supply for my custom. Even if neither of these sources of supply had provided me with power, at what I considered to be a reasonable price or with reasonable efficiency, it was always open to me to produce my own electric power, and, as hon. Members know, I could have done so by raising steam for its generation either by coal, gas, or oil, or hydro-electrically in certain circumstances. I had the further opportunity of producing such power as I needed by steam. Now, the recommendations and restrictions which can be imposed both by the Ministry of Fuel and Power and by the Ministry of Supply have withdrawn from me every one of these safeguards.
The Minister made some play with the claim that he in this Bill was out to safeguard the interests of the consumer. Well, I have been a large consumer for a great many years, and I do not think that I have been treated badly. My costs for power have been going down steadily, at a time when the cost of coal for electrical concerns has risen from 14s. a ton to about 42s. a ton. That is not a bad 1444 record. I have no interest of any sort or description in any electricity concern. I am not here to fight their battles. I look on this matter simply from the point of view of an industrial consumer who, over a number of years, must judge this matter merely on the service obtained, and the price paid for it. On neither score, do I feel that I have much of which to complain. As a consumer, I want to see a great many of the recommendations of the Bill carried out. But I do not think for one moment that it is necessary to introduce a Bill of this nature to carry them out. The Electricity Commissioners, fortified by an advisory committee, could be afforded the necessary powers for the integration of this industry and to cany out everything suggested in this Bill. It was precisely the same with coalmining. The Coal Commission had, or could have obtained from Parliament, the necessary powers to carry out the integration which we on this side, as much as Members opposite, thought desirable in the interests of the coal industry. I cannot believe that whenever integration is required, that should be an immediate reason for introducing a Bill such as this, which, as I say, in one fell swoop, takes away from the consumer that vital safeguard of competition or ability to secure power for' himself by his own arrangements.
I believe that this Bill is unnecessary. I believe that, by it, in the guise of seeking to produce a tidy scheme, we are going one stage further down the road towards national Socialism. I am opposed to a Bill of this conception, to centralising authority. I am not interested in compensation, and matters of that sort. I am looking at this question purely from the point of view of the consumer, and whether he is to have the safeguards which any consumer must desire. I cannot see them in this Bill. Therefore, I shall vote against the Second Reading of this thoroughly pernicious Measure.
§ 5.55 P.m.
§ Mr. Palmer (Wimbledon)
I rise to support the Second Reading of this Bill as an electrical engineer with some fairly long experience of the British electricity supply industry, in the service of company undertakings. There are occasions when hon. and right hon. Gentlemen opposite tell us that they are not against public ownership in principle, that their approach is 1445 practical, experimental, empirical, and, of course, always disinterested. For instance, the right hon. Member for Bromley (Mr. H. Macmillan), who, I regret, is not here today, has written a great deal on fuel and power questions. It was he who, when he was still walking in what I think is called "the middle way," defined electricity as qualifying for his nationally owned sector of industry because it satisfied the test of being an industry thatshould be conducted with a view to the achievement of beneficial economic and social results for the community generally, and where its own profitability may be a secondary consideration and an inadequate test of its efficiency.I am sorry that the right hon. Gentleman's political friends do not agree with him. I suggest that the opposition by the Conservative Party to this necessary and overdue Bill proves that they are about as flexible towards the general question of the ownership of industry as a good poker. Electricity supply served this nation faithfully during the war, and the men engaged in the provision of that supply played a great indirect part in ensuring the production of necessary war weapons. It is not surprising to find that the plant is now overloaded and strained, by the vastly increased postwar demand for electricity. It is true also that bad and unsuitable coal has lowered the efficiency of many excellent power stations, and that labour and material are in short supply, but these are all passing troubles. To suggest that the proposals in this Bill would in themselves heal wartime scars overnight would be unduly optimistic, and I have no wish to make such a suggestion.
But I think it is foolish for Members opposite to argue that the Bill, if approved, will hinder reconstruction. I cannot see that for one moment. For example, the building of new power stations will be a major activity in this country for some years to come and this Bill makes it possible to complete the unification of generation by wiping out the multiple ownership of power stations. Is it seriously suggested that the Bill will be a hindrance and a nuisance if prolonged negotiations for the improvement of existing and the construction of new stations are no longer needed? This Bill means that the design and structure of power stations can follow standard lines, and that manufacturers will not be bur- 1446 dened with a great variety of separate specifications. I cannot think that that is going to hinder the process of electrical reconstruction. On the distribution side: the distribution networks are now being greatly extended, although there is much work to be done and much ground to be made up. The city boundary does not always correspond to the electrical economic limits. Is it going to strain and cramp development to reduce these artificial barriers? Of course not. The Bill will assist in making up the ground lost during the war years.
The great merit of the Bill, is, however, in other directions. Here we have the bold, comprehensive scheme for which the British electricity supply industry has been waiting so long. It completes and rounds off the 1926 Act, and brings hope of standardisation of voltages, tariffs and maybe of retail charges for considerable areas. It implements the major technical recommendations of the McGowan Report. It will place town and country on an equal footing with regard to the availability of electricity supplies. It puts all these things on the only possible political basis—that is, public-ownership.
The Opposition, apparently, have two opinions on this point. They hold the opinion that the industry can agree on essential reforms without Governmental interference and the alternative opinion that legislation should not go beyond the McGowan suggestions and should stop short of the McGowan recommendation of ultimate public ownership. I draw the conclusion from the powerful but rather inaccurate little Tory pamphlet entitled "Power," which has recently appeared and has a foreword by the hon. Member for The High Peak (Mr. Molson). Are hon. Members aware that an attempt was made in 1943 to obtain agreement between the local authorities and the companies on the future of electricity supply? A joint memorandum was issued. This memorandum, which was claimed to represent 97 per cent. of the electrical undertakings, impressed no one, because on the trifling matter as to who was to own the industry, the parties agreed to differ. The local authorities wanted a speedy extension of public ownership, which would have meant the breaking up of many large company districts. This was really a repetition of what happened in 1937. 1447 At that time, the Conservative Government flew a fairly substantial kite in the shape of a secret—but not for long—memorandum for putting into effect the McGowan recommendations. As a result there was a storm which raged fast and furious. I think that my right hon. Friend's proposals will be rocked by a summer sea compared with the storm which met the suggestions made in that confidential memorandum of 1937. On that occasion, it was proposed in some cases to transfer the municipal undertakings to company ownership, and the municipalities made it clear that they wanted, not an extension but a reduction of private monopoly in electricity supply.
The policy of the Opposition for electricity supply is simply a return to the McGowan recommendations undiluted. I think that the present situation has been well put in words which appeared in the "Electrical Times "of 7th November last. The "Electrical Times" in its editorial policy is not at all favourable to the nationalisation of electricity supply, but these words were used in an article written by Mr. F. W. Purse, the former Chief Engineer of the London and Home Counties joint Electricity Authority:Endless attempts have been made in the past to achieve cooperation and coordination by voluntary means.…Agreement to oppose has been the only agreement arrived at, although no one could deny the necessity for reform.The trouble is that for over 60 years there has been much electrical legislation of a patchwork character. Often a technical development has made it out-of-date before it could come into operation. The 1919 Act is a good example of that. The 1926 Act, introduced by the Conservative Party, was the first Measure which resulted in electricity supply really looking ahead. This Bill, although not perfect, will, I believe, do for the electrical supply industry as a whole, what the 1926 Act did for one part of it. The present Bill centralises policy but decentralises administration. I think that is an ideal pattern for a nationalised industry. The transfer of generating stations to a Central Authority and regional grouping for distribution had been common ground for a long time, in the opinion of those with a knowledge of practical conditions in the electricity supply industry. The difference of opinion has been over the degree 1448 of national co-ordination to be imposed. I believe that the solution of my right hon. Friend is extremely sound.
It is true that the distribution problems of electricity supply in London are very different from the distribution problems, for instance, of electricity supply in Cornwall. Everyone appreciates that. I think, therefore, that the arrangement by which the Minister appoints area boards is a major contribution towards regional autonomy. I do not think that it is desirable in the case of electricity supply the regional area boards should be appointed by or be entirely under the thumb of the central regional authority. The right hon. Member for Southport (Mr. R. S. Hudson) criticised Ministerial interference at the area level. In doing so, he made the mistake made by most critics of the Electricity Bill. They see the Bill in an exceedingly political light. To them, it is out of the nationalisation stable, and they assume, therefore, that it is soaked in politics. In fact, the solution put forward to deal with the organisational problems of the industry is, I am convinced, dictated by technical and administrative considerations. The major political question concerning the industry is who should own it? To that, I am convinced, the House will give the only possible answer—the people.
I know that the local authorities view the Bill with considerable misgivings. They are, rightly, proud of municipal electrical achievements, and many of them are already arguing that the Bill entails a loss of direct consumers' control, but I think the mechanism of the statutory Consultative Councils, with representatives of local authorities, electrical associations and consumers directly, goes a long way towards meeting that objection. in any case, it is not for the defenders of private monopoly in electricity supplies to make that point. If the Bill becomes law, consumers in company areas will get a say in electrical policy for the first time. I hope—and in this I shall court unpopularity in certain quarters—the Minister will stand by his compensation proposals for undertakings which are transferred from one public authority to another. I hope very earnestly he will stick to his guns. Those who have the development of electricity supply at heart, and the consumers, will not complain. 1449 To compensate for actual or potential contributions to local rates would place a tremendous burden on the nationalised industry. The companies are the diehards of electricity supply. I agree that some of the company undertakings have done very valuable work in the development of electricity, and it would be unfair not to say so, but in doing this work they have, of course, taken a very handsome profit in return.
§ Sir Patrick Hannon (Birmingham, Moseley)
Has the hon. Gentleman considered the immense risk taken by many of these companies to develop electricity supply, the amount of capital put into the industry, and the immense responsibility and technical skill given by the promoters of the industry to make electricity what it is today?
§ Mr. Palmer
That was done in the very early days, when, undoubtedly, great risks were taken then; but the companies have bean well paid in recent years. I suggest that there have been no real risks in electricity supply for the last 30 years. It is a monopoly, and the returns are quite certain.
§ Mr. Palmer
Electricity is naturally a monopoly; it always has been a monopoly; Parliament made it a monopoly. The only exception is the Central London area where, I believe, as a result of the 1882 Act, two supply undertakings were given the right to supply the district along the Strand, Holborn, Kingsway, and so on, and they long ago reached a working arrangement among themselves. There one gets one company supplying one end of a building and another company supplying another end, but that is the only example of that kind of competition I have seen in electricity supply.
§ Colonel Lancaster
Does the hon. Gentleman seriously contend that it has not been open to the industrial consumer to obtain supplies in a competitive market from two competing power stations?
§ Mr. Palmer
Under the Electricity Supply Acts, there is one authorised undertaking for a given area. [Interruption.]I can only refer the hon. and gallant Member to the Electricity Supply Acts, and I would add that, on occasion, 1450 when one company or local authority was not in a position to give a supply of electricity, it has objected to someone else doing so. Therefore, there was the whole process of fringe orders, and those who have worked in the industry know all about fringe orders. I want to be fair to the companies. I have worked for company undertakings, and they have always treated me very decently. I am simply pointing out that they have not worked for nothing.
§ Mr. Palmer
There are reasonable profits and there are unreasonable profits. With regard to holding companies, I was very glad to hear my right hon. Friend give such a detailed description of their work. They are, of course, the notorious villains of the piece in electricity supply. Their financial practices are well known to those who have studied the industry. I do not want to say anything more about them, except to refer hon. Members to the very cautious and very impartial P.E.P. Report of 1935, which dealt in great detail with the practices of holding companies; and even the McGowan Committee was not silent on the question of the objection to the holding company arrangement.
§ Mr. Pickthorn (Cambridge University)
As the hon. Member is giving a short bibliography on this subject, will he also recommend to his friends the evidence given before the Select Committee in the House of Lords?
§ Mr. Palmer
Certainly. I am very glad indeed that my right hon. Friend has so arranged the Bill that the holding companies are not to escape the honour of belonging to the nation in future. I thought there was a danger with regard to that at one stage. With regard to the companies' interests, the companies were invited to cooperate with the Minister on the subject of the changeover to national ownership, and they refused to do so. I think they were the only section of the industry which refused to talk. I suppose it is not done to assist at one's own execution, so I do not blame the companies too much for that; but they have gone even further, and have staged a sort of scaffold repentance. I do not know why. I would not accuse them of any undue neglect of their own interests. They say 1451 now, "Give us five years' freedom, and all will be well; we will finish the job." They have carried on a tremendous campaign, which has not been very successful, and has not excited anybody very much.
One of their claims is the remarkable one that since 1932 electricity prices have fallen by 40 per cent. at a time when the costs of material, labour, and so on, have gone up and up. I have worked out the figures and, although 1 am subject to correction in my arithmetic, I do not make it 40 per cent., but 20 per cent. Most of this reduction is due to savings from grid working, the establishment of which the leaders of the companies fought. I have a quotation from the address given in 1940 to the Institution of Electrical Engineers by its President, in which he pointed out that the grid saved about one-eighth in the wholesale price of electricity as compared with what it would have been if there had been no Central Electricity Board. It was, of course, the companies who, in the main, fought against the establishment of the Central Electricity Board. In any case, the publicly-owned undertakings show an equal reduction, so that such an argument is not an argument for the continuance of a private monopoly in electricity supply.
I have some interesting quotations from Mr. George Balfour, a former Member of the House, who represented quite eloquently on occasion the point of view of the companies. He fought most stubbornly against the creation of the Central Electricity Board. Yet, today, we are told that the savings brought about by the Central Electricity Board are a tribute to private enterprise. We are told that all the industry is against the Bill.' The truth is that parts of the industry are against parts of the Bill, and that the companies are against all the Bill. The right hon. Member for Southport was very concerned about the future of employees in the British electricity supply industry The right hon. Gentleman thought even that an appeal should be made to the Prime Minister. As far as I know the view of employees in the industry, they are not over troubled, if the voices of their associations are any guide. Employees in the industry, the technical staffs and engineering staffs and the manual workers support nationalisation, but naturally they are anxious to protect 1452 their rights in matters which specially concern them, such as superannuation, compensation for possible loss of employment, future negotiating machinery—
§ Mr. Pickthorn
Put that in the Bill, Will the hon. Gentleman vote for Amendments putting those things in the Bill?
§ Mr. Palmer
The unions have already talked with the Minister of Fuel and Power on these matters. They found him most friendly, most accommodating and most anxious to meet any reasonable objection. I am not sure that the procedure in the Bill is open to objection or that it would not be to the advantage of the employees. Anyhow, I think the House will agree that the employees are the best judges of their own interests and they would prefer not to leave them to the Conservative Party. If Conservatism has a great future amongst the employees of electricity supply, let the Conservatives be up and active. I think I know the feelings of the engineers and the technical staffs very well, and whatever their private political opinions they will not fail in this matter in their public duty. I can assure the Minister that they will work with enthusiasm to make this scheme a tremendous success. I hope, in return, that the Minister and the new Boards will regard those who work in the industry and are devoted to its progress as partners in an enterprise which is one of the greatest material assets possessed by the British people.
§ 6.21 p.m.
§ Mr. Niall Macpherson (Dumfries)
In considering a Bill of this nature it seems to me that we must first of all be guided by the interests of the consumer, and it must be asked by everyone in this House how those interests can be best achieved. I have the impression that when the Minister was making his speech this afternoon he was considering the question of electricity supply as a question of Ministerial convenience, and he was treating that and putting that in a higher category than the interests of the consumer. What exactly is he proposing? He is proposing the establishment of a Central Board and 14 area boards. Those boards are far wider and far bigger than anything that has been proposed before. We remember that the Electricity Commissioners proposed in 1937 no fewer than 30 districts and those districts were to 1453 be divided into 76 groups. The essential aim must obviously be to achieve a unit of distribution which is big enough to economise as far as possible in administrative expenses, and, at the same time, can keep in close contact with the consumer.
No doubt the right hon. Gentleman will reply to this, as he replied to the same question in regard to the Coal Board. He was asked then why he had not set up a complete framework, and he said that he wished to leave the maximum freedom to the area boards to run their own show. Possibly he will make a similar reply in this case, but that is the difficulty he is up against when he imposes a system of nationalisation. He is faced with the choice on the one hand of laying down so complete and rigid a framework, stretching from the Minister right down to the consumer, that there is no flexibility whatever, with the officers and servants of that organisation losing all sense of in dependence and initiative; or, on the other hand, leaving it open in the Bill to boards to make their own arrangements, though there is no guarantee that the arrangements that they will make will be any better than the. arrangements existing at the present time for the service of the consumer.
The right hon. Gentleman credited the local authorities with the desire to serve the consumer, but in regard to the companies he implied that their entire interest was simply in the making of profits. Nothing could be further from the truth. No company could possibly survive on those terms. The companies are very often in competition with local authorities, who side by side produce gas or electricity. The hon. Member for Wimbledon (Mr. Palmer) said it was not open to an industrialist to get a supply from anywhere he chooses. If the hon. Gentleman studies the Acts he will see that an application can be made to obtain a supply from some other source than that from which he would normally get a supply, and that the Minister has power to overrule a refusal by an electricity undertaker directly concerned—that is the undertaker for the area from which that application is made—to make a supply. The hon. Gentleman the Member for Wimbledon should study the Acts.
§ Mr. Palmer
I suggested that previous electricity supply legislation should be 1454 closely studied. I was not referring to this particular Bill.
§ Mr. Macpherson
I am referring to a previous Act, the Act of 1909. We have to decide how the consumer interest is best to be served, and what is involved. It is a question obviously first of all of the right team work. There will not be team work if the employees are liable to perpetual direction from far distances. The Minister was talking about his directions being "translated" by regional boards and passed down. He is not even under the obligation to disclose the fact that he is giving these directions. He can order the Central Board to withhold that information. Such power enables him to deceive the public entirely. It could be thought that an order given by the Central Board is the Central Board's own order whereas, in fact, it may come from the Minister. Only in the case of public security could such a power be justified, and even in that case it would be necessary for a Committee of this House to justify that action.
§ Mr. John Lewis (Bolton)
Would the hon. Gentleman concede that in some cases it would also be in the national interests?
§ Mr. Macpherson
No, I would not concede that at all. The only justification would be national security; otherwise, the Minister would be sole judge of what is in the national interest. The Minister's treatment throughout the Bill of compensation even to local authorities is such as to lead us to Consider him to be so unfairminded that we would not entrust him with the sole judgment of the national interest. I said that the first thing that we had to do was to insure good team work. So far, as has been said by the right hon. Member for Southport (Mr. R. S. Hudson), there have been no labour difficulties in the industry. No one can say what labour difficulties may arise once the industry is nationalised. Team work again involves some determinable unit. That unit might be a county council. In my own constituency of Dumfriesshire, which the Minister was good enough to visit, and I am quite sure as a result of which he learnt much to his advantage—
§ Mr. E. Porter
The hon. Gentleman should tell his hon. Friends about it. We on this side have been to Dumfriesshire.
§ Mr. Macpherson
As I have said, it must be based on some unit. I do not mind whether it is the company or a local authority, but it should be a unit. There has been a remarkable example of the spirit of team work. In the last 15 years the number of electricity units sold by the Dumfries County Council has multiplied by something like 30 times, and about 60 per cent. of farms of 50 acres and over have an electricity supply. In all, over 70 per cent. of the total possible consumers are supplied and electricity is available in every village except one in the constituency. That is what can be done by team work.
The second thing that is necessary is some kind of competition. It must be felt by those who are working that they have a spur in the sense that if they do not do their job someone else can take it on. At present, gas can replace electricity to a large extent in many cases. There might be something to be said for this Bill if the Minister were not also intending to nationalise gas later on. He is going to nationalise them both, and that removes the possibility of competition in the way I have described. I have been assured by companies that where there has been a reduction in a neighbouring rate by a local authority the whole company has been stirred from top to bottom to see how economies could be made to reduce the rate in the company area as well. That is the effect of competition.
§ Mr. Macpherson
The hon. Gentleman has interrupted several times already and I do not wish to prolong my speech. The third point is that there must be real knowledge of the needs of the locality. At the present time these area boards are set up and representations may be made to them by consultative councils, but they will probably decide on their own organisations, on their own initiative. Consultative councils will hardly have been called into being at the time when they have to do so. In any case, what are these consultative councils? They are merely creatures of the Minister, pallid phantoms without any power or responsibility whatever. Surely it would have been better for the Minister to work from the bottom upwards? Instead of starting at the top by nationalisiing and saying that the whole framework is to be stan- 1456 dardised throughout, would it not have been better to accept the diversity of the needs of different localities through the country and to build from the bottom up? It would have been quite easy to amalgamate local authorities and even companies into some workable organisation. Was it not possible to do that by legislation? Hon. Gentlemen seem to be saying that it is "this Bill or nothing." That is not a fair alternative. The right hon. Gentleman has already pointed out how, at the present time, local authorities have the power to take over companies, and he has explained the difficulty that arises because the companies' areas would have to be parcelled out between local authorities. But even under the Act of 1926 it is possible to combine these authorities, so surely it would not be beyond the Government now to take power to combine them compulsorily where necessary?
This Bill is completely unnecessary, and I maintain that the interests of the consumer are not properly safeguarded. One way in which they are not safeguarded is that the local authority is now being taken over on the basis of the payment of its interest and sinking fund only. The right hon. Gentleman has said that only 20 per cent. of local authorities were treating their electricity undertakings as contributing factors to rates. In that he is not quite correct because it will be found that almost all local authorities derive from their electricity undertakings contributions to their general overhead expenses, and there is no provision in the Measure allowing for compensation to local authorities for loss of overhead contributions from their electricity undertakings. That is a serious omission. Nor is there any provision for severance of contracts or severance of interests in land where that prejudices the local authority, although even in the 1888 Act it was provided that where local authorities took over from companies at the end of their franchise, severance and prejudice resulting from severance would be taken into consideration. The right hon. Gentleman referred to the terms on which local authorities take over under the 1888 Act as favourable; if that is so, he is taking local authorities over on entirely one-sided terms. There is another factor to which I wish to draw the attention of the right hon. Gentleman. The pension schemes of the local authorities depend for their continuance, quite 1457 naturally, on a minimum number of contributors. He is now taking away from them a great many contributors, and the schemes may no longer be solvent on that basis. Will there not be a contribution towards that also? There is nothing about it in the Bill.
I urge hon. Members on the other side most strongly to consider this Bill purely from the point of view of how it will affect the consumer. I have already demonstrated what local authorities can do in rural areas, and we have heard from my right hon. Friend what are the plans of the industry for rural electrification in the next five years. How is this Bill capable of bringing any additional benefit to the consumer? If hon. and right hon. Gentlemen opposite could prove that there was some certain benefit which would result from nationalisation and which could not be obtained without it, then we would be prepared to support the Measure. So far there has not been one argument put forward that could possibly justify so sweeping a change.
§ 6.40 p.m.
§ The Secretary of State for Scotland (Mr. Westwood)
It may be for the convenience of the House if I intervene now, to explain briefly the proposals of the Bill in relation to the North of Scotland. In 1943, the Hydro-Electric Development (Scotland) Act was passed, with the general approval of all parties in both Houses. It set up a public board consisting of four Members appointed by the Secretary of State and the Minister of Fuel and Power, and a representative of the Central Electricity Board. This body had the task of developing further the water power resources of the Highlands, meeting from the electricity so generated the requirements of the Highlands and Islands, selling the surplus power at a guaranteed price to the Central Electricity Board, and carrying out in their area the functions exercised elsewhere by the Central Electricity Board.
The Act of 1943 did not disturb the powers of existing undertakers in the Highlands of Scotland. The distribution powers of the new board were expressly confined to the undeveloped areas, in which electricity could be provided only at a loss. This loss was to be met from the profits earned on sales to the Central Board; so that the generating and distributing powers of the North of Scotland Board 1458 were deliberately and necessarily complementary. The North of Scotland Board was also placed under an obligation by the Act of 1943 to cooperate in the carrying out of measures for the economic development and social improvement of its district. It was, therefore, more than an authorised undertaker in the ordinary sense. It was the desire of Parliament that it should contribute to raising the standard of life, and to developing the resources of a part of the country in which, for many years, depopulation, unemployment and a considerable measure of poverty had been crying out for remedy.
In the three years of its existence, the North of Scotland Board has, I claim, made remarkable progress. Large-scale constructional schemes at Loch Sloy in Dunbartonshire, in the Pitlochry area of Perthshire, in the Affric and Fannich areas of Inverness and Ross and Cromarty, and in the Cowal area of Argyll, have been approved, and substantial progress with the work of construction has been made. Smaller local hydro-electric schemes at Loch Morar, Kyle of Lochalsh and Gairloch have also been approved and are in hand. A very substantial number of local distribution schemes, several of which are being carried out, have also been prepared. Co-operation between the Board and local authorities, industrialists, agriculturists, Government Departments and various development bodies, has been close and continuous. It is not too much to say that, in its short life, the Board has done more than almost any other agency to inspire the Highlands and Islands with a new hope and, what is no less important, with evidence that it has the ability to carry out its extensive plans for Highland regeneration.
When the new plans for the nationalisation of the electricity industry were being framed, it seemed clear to the Government that it would be wrong to take away from this newly created and highly promising public Board the special responsibilities for the discharge of which it had so recently been expressly created. The development of the water power resources of the Highlands, in the wider interests of the development of the Highland areas socially and economically, is a task different in character and calling for a different outlook from the task of organising the 1459 electricity industry in other parts of Great Britain. Further, as I have already tried to show, the difficulty of supplying electricity in the great remote areas of the Highlands and Islands with small and scattered populations, is such that it can only be tackled by a body which has at its disposal a means of earning substantial profits in other ways to meet the inevitable loss that comes by the cost of distribution in those wide, scattered areas.
It was decided in 1943 that the best way to provide the revenue needed for this Highland development was to sell the surplus output of Highland hydro-electric schemes. The reasons which. have led to this decision have lost none of their urgency. Their acceptance pointed to a continuation of the arrangement under which, in this special case, the generation, and distribution of electricity are left in the hands of a single body. The Bill accordingly proposes that the North of Scotland Board should continue in existence and should be made solely responsible for the generation, transmission and distribution of electricity in the North of Scotland District.
To this district, as constituted under the Act of 1943, there has been added, partly for technical reasons and partly to produce a better balance of urban and rural supply, the City of Dundee and those parts of the counties of Angus, Perth and Kinross, which are, at present, outside the board's area. The district will thus consist of: the cities of Dundee and Aberdeen; the counties of Aberdeen, Angus, Argyll, Banff, Bute, Caithness, Inverness, Kincardine, Kinross, Moray, Nairn, Perth, Orkney, Ross and Cromarty, Sutherland and Zetland, and parts of Stirling and Dunbarton. The district will have an area of about 21,638 square miles and a population of about 1,165,000–674,000 urban and approximately 491,000 rural population. There will be transferred to the North of Scotland Board all the existing undertakings, including the large Aberdeen and Dundee municipal undertakings and the important hydro-electric undertaking of the Grampian Company. For the sake of simplicity and convenience, compensation will be paid to those undertakings by the central authority, but the compensation so paid will be refunded to that authority by the Board, in whom the transfer assets will vest.
1460 In view of the wider responsibilities of the Board, it has been thought right to make provision for some increase in its membership. The Board at present consists of five members. It is proposed that, in future, it should consist of not fewer than five nor more than nine members, all of whom will be appointed jointly by the Minister of Fuel and Power, and the Secretary of State for Scotland. They may be either full-time or part-time members. In order that the Ministers and the Board may be free to adopt the arrangements best suited to the possibly varying requirements of the different stages of the Board's work, the present statutory requirement that the deputy-chairman must be the Board's chief executive officer, is to be repealed. It is, of course, essential that there should be the closest cooperation between the North of Scotland Board and the Central Authority, and that the work and policy of the two Boards should be properly integrated.
The North of Scotland Board will be subject to the direction of the Secretary of State in the same way as the Central Authority will be subject to the direction of the Minister of Fuel and Power. It will be the duty of the two Ministers to keep in touch, in regard to the policy to be followed in matters of common concern. Further, the chairman of the North of Scotland Board will be an ex officiomember of the Central Authority, and the authority and the Board will be placed under a statutory obligation to appoint a joint technical committee.
There is one other important respect in which the work of the two bodies will be formally integrated. It is proposed that new constructional works in the North of Scotland district should continue to be authorised by constructional schemes under the Act of 1943. These schemes are at present approved by the Electricity Commissioners and confirmed by the Secretary of State. It is proposed that approval by the Commissioners should be replaced by approval by the Central Authority, subject to the proviso that even if approval is withheld, it should be open to the Minister and the Secretary of State, after hearing both parties, to direct that the scheme may, nevertheless, be submitted for confirmation and considered on its merits by the Secretary of State in the light of objections and of the report of any public inquiry.
1461 The North of Scotland Board will continue to have the benefit of the advice of the Amenity and Fisheries Committees appointed by the Secretary of State under the Act of 1943, and it is proposed that it should be assisted also by a consultative council appointed by the Secretary of State and representing the interests of consumers in the same way as the area boards. For the most part, the North of Scotland Board will continue to function under the powers of the Act of 1943, the Central Authority taking the place of the Central Electricity Board as the purchaser of its surplus output, and the Secretary of State coming, in most cases, in place of the Electricity Commisioners. But it is proposed to give it also, in relation to its district. most of the new powers which are being conferred by the Bill, upon the Central Authority and the area boards, with the Secretary of State for Scotland taking the place of the Minister. As a result of this it has been felt right to discontinue the present arrangement under which the Board must prepare a distribution scheme, and have it approved and confirmed, before it can undertake the supply of electricity in any area. This rather complex procedure is not appropriate in the case of a board with the wider responsibilities of distribution now proposed; and the Bill before the House places the Board under a general obligation to supply electricity in its district, subject to the directions of the Secretary of State.
Some reference has already been made to finance. The North of Scotland Board will have to stand on its own feet, and it will remain, as now, under an obligation to balance its budget over a period of years. It will continue to have a guaranteed market for its surplus power at the guaranteed price—the price of the most efficient steam station, on the assumption that Scottish coal is used—fixed under the Act of 1943. Its price policy will in other respects be subject to Regulations made by the Secretary of State. The Board will continue to be responsible for raising its own capital. Under the Act of 1943 it may borrow, without statutory restriction of amount, with the approval of the Electricity Commissioners, but the Treasury may guarantee its borrowing only within a maximum of £30 million. Under the Bill, the Board may borrow with the consent of the Secretary of State up to a total of £100 1462 million, apart from compensation payable to the transferred undertakings, and the Treasury may guarantee loans up to this amount. This substantial increase in the limit upon the Treasury guarantee fixed in the Act of 1943 is justified by the wider responsibilities now being assigned to the Board, and by the fact that the hydroelectric resources to be developed are substantially greater than was expected when the Act of 1943 passed through all its stages in this House.
In brief, then, the Bill proposes that the North of Scotland Board should, under the general supervision of the Secretary of State, exercise in the North of Scotland district functions which are elsewhere to be given to the Central Authority and the area boards, and that they should, in addition, continue to have those wider responsibilities for Highland regeneration which were placed upon them by the Act of 1943 under which they were set up. The increased resources which will be available to the Board under the new Bill, and the wider opportunity which it will be given of planning and developing the electrical resources of the district as a whole, should ensure that the high hopes already formed of the Board's ability to make an immediate and substantial contribution to the baffling problem of Highland development are fully realised. That they will be realised, I. for one, have not the slightest doubt.
The Government have been criticised in come quarters in Scotland on the ground that the organisation of the industries which are being nationalised takes insufficient account of Scottish needs and the Scottish point of view, and that Scottish business is being subjected to remote control from London. I do not regard that criticism as in. any case well-founded, and I think it will be generally admitted that, in this particular case, it cannot possibly be offered. Within the North of Scotland district the proposals of the Bill now before the House, as I have described them, speak for themselves and effectively refute any suggestion that in the vast area north of the central belt, the electricity industry will be subjected to the influences of a long range or Whitehall control. There is not the slightest truth in the statement in the Beaverbrook Press thatA long arm was stretching out from Whitehall to grab this great Highland project.1463 Nor yet that…the Board's chairman had to brush it aside.The provisions in this Bill are the work of the Minister of Fuel and Power and the Government—
§ Mr. Westwood
—and no outside pressure from anywhere was necessary to get what is now provided for in this Bill. Here at least the Scots—[Interruption.] I can assure the House that there was no pressure from outside—none, whatever.
§ Lieut.-Colonel Elliot
Does the Secretary of State really wish us to believe that? Does he think, I will not say a man but a beast of the field would believe that statement?
§ Mr. Westwood
I cannot speak for the beasts of the field, but I am honest, and I challenge the right hon. and gallant Gentleman to dispute my honesty. I can say without any hesitation at all that no influence from outside was necessary in connection with the provisions in this particular Bill—not the slightest influence— and the decisions were the decisions of my right hon. Friend and of the Government themselves. I know that the right hon. Gentleman opposite believes what I have said. This is only politics across the Floor of the House.
The responsibility for the distribution of electricity in Scotland outside the North of Scotland district rests upon two Scottish area boards, each with a wide measure of autonomy, each meeting and having its headquarters in Scotland and each with a Scottish consultative council to keep it effectively in touch with local views. The generation of electricity in Great Britain outside the North of Scotland district will be in the hands of the Central Authority for the same compelling technical reasons as those which led the Government of the day, in 1926, to invite Parliament to authorise the present arrangements, under which the control of generation and the operation of the grid system is entrusted to a Great Britain Central Electricity Board. Of the central authority the chairman of the North of Scotland Board will be ex officio a permanent member, and the chairman of the two Scottish area boards will also be eligible for membership. The work of the central authority 1464 must also, for reasons of technical efficiency, be closely and continuously integrated, at all levels, with that of the North of Scotland Board and the Scottish area boards. These Scottish bodies may, I think, be counted on to see that the general arrangements to this end are such as to satisfy legitimate Scottish needs.
Finally, the responsibility placed upon the Secretary of State for Scotland in relation to the North of Scotland Board will require close cooperation in the shaping and direction of policy between himself and the Minister of Fuel and Power, so that on the ministerial level, the Scottish point of view can be assured of direct and informed expression. I submit, therefore, that the Bill embodies a fair deal for Scotland and I commend it confidently to the House.
§ Sir T. Moore
Would the right hon. Gentleman say why he has restored the division of Scotland between the Picts and the Scots? That is what he is doing under this Bill.
§ 7.2 p.m.
§ Commander Galbraith (Glasgow, Pollck)
Mr. Speaker, in accordance with the custom and tradition of this House I think it is right that I should inform you and the hon. Members of this House that I am interested in concerns which may be prejudiced by the passing of this Bill.
§ Commander Galbraith
But be that as it may, I find it very hard to believe that at any time in the long history of Parliament, a Bill of the momentous nature of that which we are discussing this afternoon has ever been introduced at a more inappropriate time. The normal development of the electrical resources of our country has been halted as the result of six years of war, and there is a great deal of leeway to be made up. Coal is short—almost at famine level—and that has led to an ever increasing demand for electrical power, as also have the needs of those industries which are concentrating on the export trade. Yet it is at this moment, when the whole energies of the electrical industry should be devoted to increasing output, should be putting into operation the plans which they have ready, should be doing everything in their power with the very limited resources which are available to them, due to the Government's failure to supply them with 1465 sufficient quantities of raw materials to increase their distribution, network—it is at this moment that the Government see fit to dissipate their energies, to slow down the whole progress of extension by the introduction of this Bill.
It would almost seem—and I am sorry that the right hon. Gentleman is not here—that the Minister was. determined to retard, to the greatest possible extent in his power, the development and extension of this industry. If that were his purpose, he could not have achieved it more thoroughly than by introducing these vindictive Clauses in the Bill, placing such unnecessary liabilities upon directors, for it places upon them liabilities of a retrospective and other character such as hitherto have not been known either to the law of England or Scotland. And the effect of that must be to slow down, if not to bring to a standstill, all major developments. That is the contribution which the right hon. Gentleman the Minister is making to the industrial progress of his country at this critical period.
Like my right hon. Friend who opened the discussion from this side, I was interested to observe that, among the objects which it is the policy of the electricity boards to achieve, is the cheapening of the supply of electricity. There is not one word in the Bill which shows how that is to be done. There was not one word in the speech of the right hon. Gentleman today that gave any indication that he knew how it was going to be done. In fact, I cannot help but think that those words were merely introduced into this Measure to delude the public, and particularly, those who live in the rural areas. Many hon. Members will know that the cost to the consumer does not depend only on the cost of the generation of electricity, but also on its distribution, and I would like to quote to the House two examples to illustrate that point.
In the last year a county council applied to have 142 of its houses, scattered throughout the countryside in lots varying in number between 4 and 16, given a supply of electricity. In respect of 22 of these, there was no trouble because they were on the outskirts of villages to which electricity was already supplied, but in respect of the remaining 120 it was found that to bring electricity to them entailed 1466 the erection of 150 miles of overhead line and the erection of more than 100 transformer points at a cost in labour and material of £200,000. That is equivalent to over £1,600 for every house, and even on the assumption—and it was only an assumption—that a similar number of houses could be picked up on the way, it meant an expenditure of over £800 per house. The other example concerns a factory erected during the war in the vicinity of a great industrial area. With the grid actually passing over its premises, the estimated cost of connecting that factory to the grid was £131,500, and connecting it to the nearest power house direct by cable, £89,000. I hope, therefore, that the public will not be deluded into imagining that, automatically on the passing of this Bill, they will receive lower charges for electricity. For, as far as I can see, the elaboration of the administration and the centralisation of the control is much more likely to result in higher than lower charges, although, of course, if the right hon. Gentleman happened to introduce a standard tariff throughout the country—and it would not appear from what happened earlier in the day whether he has made up his mind on that point—then the rural areas would benefit, but only at the expense of the urban consumer.
My principal reason for intervening in this Debate is to call attention' to the effects which this Bill will have on Scotland. I am very sorry indeed that I shall find myself at almost complete variance with the right hon. Gentleman the Secretary of State for Scotland. Indeed, I am surprised that he has not defended the interests of the Scottish consumer more than he has. I doubt very much if the people of Scotland ever imagined that either Socialism or nationalisation would entail the removal of the control of their public undertakings out of Scotland. If I may quote the people of Glasgow as an example, never for one moment did they dream that their great undertakings of gas, electricity and transport, of which they are so proud, which are publicly owned and democratically controlled, would be removed from them. Even less did they dream that the past prudent and economic management of those undertakings could possibly have a boomerang effect as, indeed, will happen under the terms of compensation laid down under this Bill, for the assets of the electricity undertakings, accumulated 1467 through the economies of the citizens, are now to be taken over by an authority over which they have no control whatever, and that at a mere percentage of their actual value. For the benefit of whom? For the benefit, presumably, of less thrifty and less enterprising communities. Is the right hon. Gentleman aware that the effect of this Bill is to tax the citizens of Glasgow to the tune of £10 million? That is the difference between the written down value of the undertaking and the sum to be paid in compensation. Can he justify a tax of that nature being placed on the city of Glasgow at this time?
Like other Scotsmen, I have always fell that the union between the two countries has always been of the greatest possible benefit to the United Kingdom as a whole. But, I am beginning to wonder, now that the control of our great public services is passing to authorities far removed in distance and understanding, whether, in the future, that benefit is going to be anything at all so far as Scotland is concerned, and whether it is in accordance with the dignity of our country, or the welfare of our people, that predominantly English organisations should control, manage and direct institutions built by Scotsmen and financed by Scotsmen, which have served our people well, and on which our prosperity depends. _ That is a very different picture from the one painted by the right hon. Gentleman. I speak these words with a sense of very considerable responsibility. I do it because I am assured that my countrymen have grave feelings of disquiet at the course events are presently taking, and that the Government should be warned. I do not believe it would be in the interests of our two countries if those friendly and close associations, which have so long existed should be broken. But, at the same time, I have to recognise that my countrymen cannot accept a situation in which they find themselves debarred from control over affairs and undertakings which are their most intimate concern.
The scheme proposed in the Bill divides Scotland into three parts; the Northern area remains under the control of the North of Scotland Hydro-Electric Board, while the Southern part is split into two areas, and passes under the control of the Central Authority, and the Minister in 1468 London. That is an unnatural division. It severs the whole South of Scotland from the North, and makes the country into what are really two English provinces. No Scotsman. least of all a Scottish Member of this House, can contemplate such a thing with any equanimity. The Minister is attempting to do something which Edward I failed to do 600 years ago, and as a result of the lesson which was taught his successor the experiment was never repeated. I hope that in the interests of both our countries the right hon. Gentleman the Minister will drop this project as Edward II was forced to drop it. Scotland is a single entity; it has a community of interests, it has its own code of laws, its own customs, habits, and outlook. In these respects it differs very considerably from England. The natural boundary in these respects, and geographically, is the Border. If anyone doubts these facts, let him travel in the Border country and he will realise how naturally and completely the Border divides England from Scotland.
Another thing to which I would draw the attention of Scottish Members is that we must recognise as a fact that in England generally, and in official quarters in London particularly, Scotland is regarded as an outlying community. Little regard is paid to its views, or anything which concerns it. This Bill as it stands, if it becomes an Act, will mean that industrial Scotland will become a mere appendage of Northern England, with none of the advantages such as a natural affiliation produces. The authority will be ignorant of Scotland's requirements and unsympathetic to its desires, already having 12 great areas over which to exercise control
The Minister and, I was indeed surprised to note, the Secretary of State also, pointed out the great protection which Scottish interests would receive from the area boards. If I did not know the Secretary of State so well, I would be inclined to charge him with hypocrisy. The Central Authority have complete control, and completely dominate the area boards. I wonder if the right hon. Gentleman has ever taken the trouble to inquire how that control is exercised. Is he aware of the 'fact that the Central Authority fixes the tariffs for bulk supplies, gives directions for the purposes of co-ordination, exercises control over policy, and gives direction for 1469 the framing of tariffs for the application of surplus revenue? It also approves all capital expenditure, and, when it requires, other expenditure as well. These area boards are mere servants of the central authority. They are controlled to such an extent as will make it impossible for them to do their job. They are going to be handicapped by directions from the Central Board to an extent which will make it impossible for them to exercise any initiative, or those quick decisions which are essential for the successful running of any commercial undertaking.
The Secretary of State said that the Government were criticised for having taken insufficient care of Scottish interests. Let me examine a little more closely the effect which this Bill will have on the Scottish consumer. Is the right hon. Gentleman aware that electricity is cheaper in Scotland than it is in England; that, taking the country as a whole, England's prices are 25 per cent. higher than in Scotland, and that the price in England is 12½ per cent. higher than in the South of Scotland? Does he appreciate what the result will be if a common tariff is to be introduced over all these areas controlled by the central authority? It would mean an automatic and immediate increase in electricity charges in the South of Scotland.
In regard to national resources, Scotland is a poor country. Her prosperity in the past has been dependent on a cheap supply of power given to us by coal, and proximity to a great port, with easy access to the trade routes of the world. That cheap source of power is becoming exhausted, and if Scotland, particularly the South-West, is to prosper in the future some alternative supply of cheap power must be found. Happily, hydro-electricity provides that source. That power should be harnessed to Scotland's needs, and not exported outwith her borders, until that need is fully satisfied. Hydro-electricity is produced at a very low cost indeed, and the output of existing Scottish hydro-electric stations, and those presently under construction for the North of Scotland Hydro-Electric Board, would provide sufficient to meet a very large proportion of the total demand of Southern Scotland. If, instead of that output being exported, as it will be under the Bill to the Central Authority, it is given its natural outlet to the Low- 1470 land industrial areas, then, without disturbing in any way the projects of the North of Scotland Hydro-Electric Board for the regeneration of the Highlands and Islands, the cost of electricity in Southern Scotland could be reduced by 7½ per cent. In other words, if there were set up an independent authority for Scotland, there would be a difference in the cost of electricity as between Southern Scotland and England of 20 per cent.
I may well be asked whether such a difference is really justified. To my mind it is. It is justified to the full by the much greater difficulty which confronts Scottish industry, by the distance from markets, and the cost of transport, difficulties which must be compensated for if we are ever to obtain in Scotland those light industries which are so necessary to us. We are very unlikely to forget the plight of the people of Scotland during the years of depression, particularly between the years 1929 and 1935. We are unlikely to forget what our people suffered then, the absolute impossibility of attracting these light industries which we need from the huge market provided by London and the Home Counties. We must have some compensating advantage to offer. In my opinion that advantage is to be found in the supply of cheap electrical power. If we allow this opportunity to slip past, as it will if this Bill passes into law, it is unlikely to return, and Scotland will be saddled for all foreseeable time, with those disadvantages from which she suffered in the interwar years, and that without giving any corresponding advantage to our English friends. If we are to have nationalisation, then it is the duty of Scottish Members to demand that there should be an independent Central Authority for Scotland, and unless we receive assurances that such a board will be set up under the supervision of the Secretary of State, I say that no Scottish Member of this House, with the interests of Scotland at heart, can possibly, all other considerations opart, give a vote in support of the Second Reading of this Bill.
§ 7.22 p.m.
§ Mr. Wadsworth (Buckrose)
As an Englishman I feel rather that I have been intruding in the Debate in the last hour, for we have had a heated discussion on Scottish matters. Perhaps as a Yorkshireman, who is somewhat akin to a 1471 Scotsman, I may be forgiven for digressing. I am sorry the Minister is not here—I suppose even Ministers have to dine. I would have liked to tell him that I did not agree with the right.hon. Member for Southport (Mr R. S. Hudson) when he said that the speech made by the Minister was inadequate. I thought that the Minister spoke like an important chairman of a large electrical industry expounding to his shareholders the advantages of a new policy or reorganisation. In other words, he did not, as I hoped he would, speak as a progressive Minister lifting the curtain to the less enlightened, and showing a glimpse of the new Utopia which we hope to see in due time.
I should like to make it clear from the start, speaking as I do as the representative of my party today, that we do not shudder every time the word "nationalisation" is used, as perhaps do some hon. Members on this side of the House. We consider carefully whether nationalisation, as applied to any industry or service, will bring greater efficiency to'it. In the case of the nationalisation of transport, we made it very clear in this House that we thought the Bill was a bad Bill, that we thought it would not bring the efficiency which was suggested by the other side of the House. But in the case of the nationalisation of electrical supplies, I can assure the Minister, or the Parliamentary Secretary, who is now present, that we do, in the main, support this Bill, provided we can obtain certain interpretations which I shall mention later. I hope that the Minister and the Parliamentary Secretary will sleep the sounder tonight for knowing that my Party will support them. Although we might be very few in this House I would remind the Parliamentary Secretary, and I hope he will inform the Minister, that many millions of people in this country pay special attention to the opinions of the Parliamentary Liberal Party as expressed in this House.
I believe that we can support a nationalisation Measure if we can apply successfully one of two tests. The first is whether, in the opinion of the party concerned, after investigation, it will render a service or industry more efficient. The other test which I think we can equally apply is whether the service or industry is so important to the country as a whole 1472 that we can support nationalisation regardless of efficiency or cost. An example of that is the Post Office service, which enables the service of communications to be extended to every part of this island. Whether it be in the North of Scotland or in the South of England, the service is provided regardless of the cost.
I wish first to mention an argument which has to be considered so far as the efficiency of the organisation of electrical supplies is concerned. This House is fully conscious, it has been reminded by the Minister in his opening remarks, that the production of electricity was very inefficient prior to the 1926 Act, which he mentioned was introduced by a Conservative Government. There were so many small stations supplying electricity that there was needed some unifying influence, which the Act brought to bear. The success of that Act in its unifying influence was obvious in a short time, by the cost coming down by leaps and bounds, and by greater efficiency in production throughout the whole undertaking.
It appears to me a great pity that the recommendations which were made, in due time, for the unification of the distributive part of the industry were not carried out, and that we have had to wait until this moment. I am certain that if the distributive side of the industry had been brought into a scheme similar to that of the Central Electricity Board which was defined by the 1926 Act, greater efficiency would have been brought to bear over the whole industry, and not only a part of it.
§ Sir P. Hannon
Surely the hon. Member must realise that since 1926 there has been immense development of electricity supply. Both municipally and privately it has developed enormously all over the country.
§ Mr. Wadsworth
Yes, but as I hope to show, the great developments that have been brought about in the efficiency of the industry were chiefly in production. I shall refer later to the question of the efficiency of the supply. Perhaps the hon. Member will forgive me if I leave my reply to him until later in my speech.
I have had the opportunity of serving for many years on the electricity committee of a municipality, where we had a large grid station. I came to the conclusion 1473 that, to a large extent, efficiency was a matter of mathematics and that it depended less upon good management than upon the supply of the very latest equipment. When we installed new equipment we were given a guarantee by the manufacturers that it would produce electricity at a certain cost. Of course, it was up to the station managers to make certain that the equipment accomplished the tests laid down—
§ Mr. Hobson (Wembley, North)
Would the hon. Gentleman not agree that a contributory factor, when considering the efficiency of a generating station, is the calorific value of the coal?
§ Mr. Wadsworth
The calorific value of the coal is important. I think the hon. Member will realise that electricity stations use a much lower grade of coal than gas undertakings. In fact, a great point made about some of the latest equipment, especially boilers, was that municipalities were able to use a poor grade of coal and still obtain splendid results. In my experience the position was that if one had the very latest equipment one could show low figures of cost for the production of electricity. From the point of view. of the Minister one of the difficulties about introducing this Bill at this stage is that, due to the war, the development of electrical plant has not gone forward as it should have done. More stations should have been erected but throughout the war years there was a curtailment of production of the necessary generating plant. The result is that we now find ourselves with a great shortage of plant and generating stations.
The demand for electricity has increased by 50 per cent. since 1938. The effect of that is that we are compelled to ration supplies or, as the Minister would prefer, we have to shed the load. I hope that present conditions will not cause any delay in making arrangements for the new grid stations. Not a moment should be lost so that, at the earliest possible moment, supply can catch up with demand. Assuming that it takes 18 months or two years to lay the foundations for a new power station before introducing the generating plant, it will be 1950 before supply is adequate to meet the demand.
§ Commander Galbraith
Could the hon. Member tell us whose fault it is that we are short of generating equipment now?
§ Mr. Wadsworth
During the war years it was impossible for us to maintain production and to anticipate the demand which there would be for plant at the end of the war. We had to concentrate our efforts upon the manufacture of armaments which could be used in the war. I hope my hon. and gallant Friend is satisfied with that reply. I see he shakes his head.
§ Commander Galbraith
Is my hon. Friend not aware of the fact that the Electricity Commissioners turned down the applications put in by the power companies and other undertakings for the installation of further generating plant? It was later on that development was stopped by the war. In the first place, it had nothing to do with the war at all.
§ Mr. Wadsworth
I cannot agree. Obviously the Coalition Government were responsible and they had well in mind the fact that they had to allocate and direct production in those days. An interesting point in the Bill is the reference to district heating. I consider it a great pity that so much heat is lost at the cooling towers in order that the water can be returned to the dynamos at a low temperature. This Bill will help us to develop district heating, which will be quite new to this country. It is a great amenity which the people should enjoy.
§ Mr. Wadsworth
I could not give the number of the Clause, but there is a distinct reference to district heating. I have a special interest in this subject and I was pleased to see that reference.
§ The Parliamentary Secretary to the Ministry of Fuel and Power (Mr. Gaitskell)
The reference is in Clause 44.
§ Mr. Wadsworth
I was also pleased to see references to research. If we are to improve the efficiency of production, much more money must be spent on research than has been spent in the past. Taking everything into consideration, it appears to me that there will not be a great deal of improvement in production in the near future by the nationalisation of the industry. I cannot see a very great difference between a central electricity board and what is termed the central authority. It is from the point of view of distribution that I think that the greatest efficiency will be shown as the result of nationalisation.
1475 I wish to draw attention to the position, of rural districts, which have been sadly neglected. Ninety per cent. of our electricity is used in the urban districts, cities and towns. Only 10 per cent. is consumed in the rural districts. Those of us who represent rural districts have been disappointed that greater progress has not been made. I have great hopes that we shall go forward immediately with the electrification of the countryside thus enabling us to supply our villages and farms. I hope my desires are not misplaced when I express the view that there should be some standardisation of price so that consumers in the country can enjoy the same low prices as are paid by people in the towns. It appears to me that there is no reason why the agricultural producer should have to pay more for his electricity than does the industrial producer producing goods in a factory in a town. I see no reason, indeed, why the agricultural worker in his cottage should not be able to have electricity at the same price as the industrial employee in the town. In view of the fact that 90 per cent. of the electricity is used in urban districts, there is no reason why they should not, to some extent, subsidise the other 10 per cent. without raising the price to any degree, and, in fact, we hope that there will be no increase in that burden as a result of this Bill.
I think it is quite clear that, if we are to help agriculture, we must go forward immediately with the electrification of the farms. Great benefits can be obtained by the farmer from the use of electricity, and, in this regard, I hope the Minister of Agriculture is paying attention to this Debate, so that when, in due time, this electrification is made possible, all the necessary equipment, such as milking machines and so on, will be available so that the farmers can derive the fullest benefit from the electricity service.
I would now like to draw attention to some of the special points in the Bill on which I should like further information. I should like to be assured by the Minister, or by the Parliamentary Secretary if he is to reply, that under the powers given in the Bill to "sell, hire or otherwise supply electrical plant," he will not enter into competition with the thousands of small traders in this country who are supplying electrical equipment 1476 and who depend for their livelihood on their small businesses. I should like an assurance that the Minister will not enter into such competition, so that the livelihood of these people shall not be jeopardised. I should also like him to give us more information on what he means by "the national interest." The right hon. Gentleman states that he will report to the House on the activities of the Central Authority and the area boards from time to time, except when, in his opinion, it is against the national interest to do so. It is important that the right hon. Gentleman should report to this House as frequently as possible, and should give us the fullest information, financial and otherwise. That is a trust which we are placing upon the Minister, and I should like him to tell us on what occasions he might consider not giving a report to the House because, as is stated in the Bill, it is against the national interest to do so. I would also hope that, in the selection of the personnel of the boards and of the Central Authority, he will carefully observe the terms of Clause 3 (2, a)of the Bill, which states that they shall be selected frompersons appearing to him to be qualified as Having had experience of, and having shown capacity in, industrial, commercial or financial matters, applied science, administration, or the organisation of workers;and that he will not give undue preference to men who do not really fit these descriptions, but who are merely supporters of the Labour Party. I am sure that it is in the interests of both the Labour Party and the Minister himself that he should do that.
Again, I would ask the right hon. Gentleman to give special attention to the requirements of Wales. I would suggest to him that, as Wales is denied the opportunity of having its own Secretary of State, which I think it well deserves, at least one member of the Central Authority should be selected from Wales. I hope that the special needs of Wales, owing to geographical and other considerations, will be borne in mind. Finally, I repeat that my party approves this Bill, though we hope that the Government will meet us on the points I have raised. The development of electrification throughout the country can be a great boon to the people. Electricity is one of the best servants of mankind, and I hope that this Bill will mean—and I believe it will— 1477 that the standard of life will be raised and that electricity will bring increased happiness and content to the people who deserve it.
§ 7.47 p.m.
§ Mr. Blyton (Houghton-le-Spring)
I should like to preface my remarks by-stating that I desire to view this Bill from the administrative point of view of the local authorities. I spent many years of my council life on the electricity committee of a. large town, and I was also its chairman. I found that, over a long period, a difference existed between the municipal undertakings and the power companies, which indicated to me that, unless electricity was nationalised, the reorganisation of the distributive side would never come about. I support this Bill because it will bring about that reorganisation. From 1919 to 1925, the municipalities and the power companies could not. voluntarily come together and, as I think they never will come together, this Bill will provide the basis of reorganisation of distribution. I suggest that, had the Opposition been in power, the strengthening of the power companies, which has taken place since 1888, would have been continued further, and that we should have witnessed again a battle royal between the power companies and the municipalities, with the former gradually absorbing the latter, as we saw, according to the McGowan Report, 10 years ago.
The point which I desire to raise on the Bill is in relation to Clause 7, in which it is stated that the consultative councils shall consist of not less than 20 or more than 30 persons. The area in which I am interested stretches from Berwick to York and goes inland as far as Harrogate. For a vast area like that 20 or 30 persons will not adequately represent the large number of local authorities concerned. Therefore, I entirely agree that the Minister should appoint the consultative committee because, if he did not, there would be dissensions among the local authorities as to who should be elected to that committee. But I suggest to the Minister that the composition of the local councils should be such as to enable them to keep contact with the consultative committee. The local authorities could be allowed to pick their own representatives to serve on their own committees, which would give them the 1478 counterpart of what is known as their electricity committee on the various local undertakings. That would retain the continuity which they now enjoy, and would mean that, where differences existed, they could be settled and, if they so desired, they could make representation on any local matter which came before the consultative committee, the area board or the Central Authority.
The second question I wish to ask the Minister is: What is to happen in respect of the joint industrial councils who control the wages of the technical staffs, the manual labourers, the wiremen and the technical engineering staff? Generally speaking, the position today is that the chairmen of the electrical committee and the engineer, together with the power company engineers, form the employers' side. When the vesting date arrives, who will represent the State as the employers on these joint industrial councils, in the districts, in the regions and on the National J.I.C.? At present, the clerical and commercial staffs of municipal undertakings are catered for by N.A.L.G.O. and are governed by the clerical and! administrative workers' joint industrial councils. These men are anxious to know whether they will continue to be governed by the N.A.L.G.O. Joint Industrial Council, or whether a new joint industrial council will be set up under this Bill to provide machinery, quite separate from the Corporation, for regulating their disputes.
Under this Bill, the Minister must make many regulations. But the municipal engineers with whom I have spoken, and who support this Bill, are apprehensive lest regulations are made which will interfere with the every-day work of the electricity industry. I would ask the Minister, when replying, to clear away these apprehensions by informing us whether there is any intention to interfere with the every day work of the industry. Unlike my hon. Friend the Member for Wimbledon (Mr. Palmer), I want to ask the Minister to reconsider the Clause dealing with compensation for local authorities. The rating position of towns in. the North-East area, which is a great distressed area, is very high. The effect of the compensation Clause on the large town of Sunderland, for example, whose position is identical with that of' many other big towns, will be such that, I hope the Minister will reconsider that Clause.
1479 As stated by my hon. Friend the Member for Wimbledon, two points of view are held by the engineers. One is that the rates contributions ought never to have been taken from the electricity industry. In the towns of the North where the Poor Law rate was extremely high, due to the Tory Governments of the past refusing to face their national obligations in respect of unemployment, the profits from the electricity industry had to be used to reduce the tremendously high rates. Sunderland has a very prosperous electricity undertaking, but the law provides that no contribution can be made to the rates if the reserve fund is below one-twentieth of the capital expenditure, and then only 1½ per cent. of the profits can be taken, if the reserve is in excess of one-twentieth of the capital expenditure. Therefore, during the last 20 years, the Sunderland authorities have only taken £84,114 for rate contributions, whereas, legally, they could have taken £182,980, a difference of £98,866. That additional sum which could have been taken for the relief of rates was put back into their particular industry. Sunderland's rate stands at 17s. 6d. in the £. Last year, its electricity undertaking contributed £12,500 to the general rate. It will be remembered that the South Shields Corporation won a law case against the Chancellor of the Exchequer in which it was decided that what is known as an "income tax offset" to electricity undertakings could be earmarked. Last year, the Sunderland electricity undertaking was able, in addition to the £12,500, to contribute £16,500 towards the rates, because of the income tax offset. Therefore, when one takes into account the £3,000 establishment charge to the town hall for certain work carried out last year, the Sunderland undertaking contributed £31,855, or 8£d. in the £, in helping to keep down the town's rates.
All the municipalities have agreed that the nationalisation of electricity undertakings is the right thing. But they are complaining very bitterly of the financial burden that will soon fall upon the ratepayers when, on the vesting date, these special contributions to the rates come to an end. All things being equal, it will mean that, in Sunderland, the next estimate for rates after the vesting date will go up a further 8½d., thus making a rate of 18s. 2½d. in the £. Their out- 1480 standing debt is £894,203; £672,000 of that belongs to the Central Electricity Board in relation to generation, and for which, at the present time, they are paying sinking fund charges. If we deduct that figure from the total debt, there remains £222,141 for distribution debt. The Reserve Fund stands at £198,691, so that, if that fund were used to eliminate the debt, only £30,000 would remain outstanding. They have expanded from the revenue in the last few years for capital expenditure £350,000 for which no compensation will be paid. While none of them complain at the industry being taken over, they ask the Minister to recognise that in the areas where the rates are high and where contributions have been paid from electricity revenue, after vesting date there will be a very serious increase in the rates. Therefore, I ask the Minister to consider giving some help to these local authorities, and to give a little more compensation to assist the finances of towns like Sunderland and others so placed.
§ 8.1 p.m.
§ Colonel Clarke (East Grinstead)
I have listened to the speech of the hon. Member for Houghton-le-Spring (Mr. Blyton) with great interest. I agree with what he said, and also with the hon. Member for Stratford (Mr. Nicholls) as to the inadequacy of Clause 7. Like the hon. Member for Houghton-le-Spring, who is a member of South Shields Town Council, I, as a county councillor in East Sussex, feel as he does, that public authorities are somewhat slighted, but my objections go wider, and I shall have more to say on this subject on the Committee and Report stages. I would like to do what I always do in connection with Bills relating to fuel and power, and that is to declare a possible interest in view of my directorship of a company which might be affected at some point.
Recently in White Papers and in speeches by the President of the Board of Trade, and in particular one speech the clarity and courage of which I think deserves a tribute, we have been told by hon. Members opposite what for many months past we on this side have been saying, namely, that.for the next two or three years, and possibly longer, this country will be engaged in a life and death struggle to recover and, if possible, extend our industrial production. The cost of failure at best will be a severe reduction in 1481 our standard of living. At worst, it will be the relegation of this country to the status of a second or third class industrial country. For that reason, in view of this struggle, we feel it is essential that in every, commercial and financial experiment—and this is an experiment on the highest scale—the Government should consider it with the greatest possible care before it is undertaken. The acid test must be whether nationalisation will really contribute to the winning of this struggle, not over a long period of years but during the critical phase of the battle in the next few years, or whether it will act as a brake. I am aware that the Government are committed to election promises. I know that many hon. Members opposite sincerely believe that only through nationalisation of all the main means of production, can their Fabian idea of paradise and the equality of social opportunity be obtained. But I am also certain that in the present crisis the Government cannot be prepared to advocate nationalisation as an end in itself. Their decision must be taken from a practical and technical angle after thorough and impartial analysis.
What are the facts? To begin with, 1 hold that from the very first day nationalisation was mentioned, considerable damage was done. Directly the shadow fell on a number of industries in November, 1945. efficiency at once became impaired. The energies of directors and managers were diverted from their normal activities, and a disturbing element of uncertainty at once arose. They were thinking of extraneous matters, such as what would happen to their staff, what compensation their shareholders would get and what would happen to themselves. Some of the more robust of them were considering what resistance could be made to the plan. There was all this dissipated energy. The workers have been affected, too. Discipline has declined. There has been a drift to other industries where men are not, willy nilly, threatened with becoming State employees. The whole atmosphere, in fact, becomes one totally different from that which should be cultivated where an all-out endeavour is required. Nationalisation blights an industry from the moment it is suggested. It brings in short-term views instead of long views, which must be based on security of tenure if they are to fructify. Again there is bound to be a serious delay in ex- 1482 pansion of distribution owing to the dislocation and reintegration of management.
The Minister knows that at present the industry is run by boards, committees and similar bodies experienced in working together—teams, in fact. Those teams are going to be arbitrarily broken up. Some individuals, for reasons of conscience, will not be prepared to continue in the industry. Therefore, teams have to be found, and they have to learn to work together. While they are learning, delay, dislocation and a check on administration of management will take place. They will get no flying start, either. If it is anything like what happened with the coal industry, they will have handed over to them this industry, short of its directing staff and without a blue print on which they can work. Again, for better or worse, the Minister of Fuel and Power is today the most important man in our industrial life. On him depend our supplies of fuel which is the life blood of industry, and the need for making the best use of available supplies also depends upon him. I cannot think that at this moment of crisis he wants to be burdened with this Bill, which will occupy his energies and those of his Ministry, which are already over-burdened with much work, for the best part of four or five months.
Next I want to turn to the advantages or disadvantages of this Bill so far as it affects my own constituency. My constituency is agricultural, and I want to be perfectly fair. It is really only in agricultural areas that I have heard much criticism of the present set-up. I know it is said that there has been slowness in extending supplies and that excessive charges have been made. The main reason for delay in Sussex in the extension of electricity, however, is, first of all, the supply of labour, which is dependent on the Government; next, the lack of porcelain fittings, galvanised steel and small fittings, and the fact that there is something like 12 months' delay in the delivery of transformers and cables. The position as regards poles is not much easier, although I thank the Minister for his co-operation with me in arranging for farmers to use their own poles, as a number of people have done in my area. There are much greater distribution difficulties in the country than in the towns, although if it had not been for the war, 95 per cent. of all rural premises would 1483 today have a supply of electricity available to them.
Now I want to ask the Minister a question. I want to give him an opportunity of saying that, in intention at any rate, the new British Electricity Authority will not fall behind the standard that the industry would have achieved if left alone in connecting up the farmlands of this country. I need not dilate on the need for electrical equipment on farmsteads, motors for power, milking machines, hammer mills, lighting in cowsheds and, perhaps from the amenity point of view, the need to provide, in the houses of the workers, cookers, washers, irons, light—all those things which our towns enjoy, and which may persuade the wives of new workers to allow their husbands to remain on the land, and may perhaps attract more men to the industry. I believe this improved amenity can only be found in the immediate future by means of the provision of electricity. I feel the need for these rural supplies is so great that I must remark, in passing, my disappointment at not seeing the extension of rural electricity mentioned as a policy in Clause 1 (6) of the Bill—among those five great platitudes of the Electricity Board's policy. I also regret not seeing the mention of organised agriculture in connection with consumers' councils.
To return to my question, is the Minister prepared to promise that the new British Electricity Authority will carry out the agreement made between the National Farmers' Unions of England, Wales and Scotland and the present supply authorities made in September of last year, to provide supplies to all farm premises at present without electricity, which number some 150,000, except in the most remote and inaccessible areas, within five years? It was estimated that it would cost some £72 million. The present supply authorities had promised that £45 million of that sum, which should provide the services, would be found by themselves without cost to the farmers. The remaining £27 million, which includes provision for wiring and apparatus, would be found by the farmers. The capital contribution—which today I admit is a check in the case of isolated farms—was to be reduced to a minimum, and, if possible, waived 1484 altogether. Incidentally I believe the Minister mentioned this matter. in his opening speech.
If the answer of the Parliamentary Secretary is that the pledges of men on the scaffold do not count for much, I should make three comments. First, I agree that those pledges might not have been carried out while the Government controlled all labour and all materials, and probably did not wish to see them carried out. Second, I suggest that all the Government's Election promises which were made about rural electricity might be included in the same category. We know well enough that the Government never expected to get into power in the way they have done, and were, therefore, reckless in the things they promised. But birds will come home to roost. Even today the Minister of Agriculture is repeating this old story. In the Labour Press Service of 6th November, I see he said that these things would come, and nationalisation was the first essential step. But he did not give any reason. Third, I would say the agricultural industry has been led to expect that those promises will be carried out, but they will be grievously disappointed if this agreement is thrown over, as so many other agreements have been thrown over. I do not want to speak too long, for other hon. Members wish to take part in the Debate—
§ Colonel Clarke
That agreement was made between the National Farmers Unions of England and Wales—Scotland joined in afterwards—and representatives of the supply companies.
This is a young, vigorous and efficient industry. It contains, and has contained for many years, little unemployment. Its arrangements with its work people are happy; they have long holidays, excellent insurance and sick schemes. In fact, those schemes are much above the average. Its prices are falling; its output is increasing, and has been for many years. Two-thirds of it is owned by municipalities, so the old argument of working for a profit motive hardly comes in. It is an industry which has shown itself not only ready, but willing to reorganise if the arrangements can be made. I feel 1485 that in the case of this industry, as was said earlier in the Debate, all the arguments brought forward by the Minister to justify the nationalisation of the coal industry automatically fall to the ground. I do give him a meed of tribute that he did not try to bring any of those arguments forward, because I was waiting to hear some such reasons which I could, I know. have refuted at once.
What is proposed will gravely delay development. Next year, the natural pace-maker of the electrical industry, the gas industry, which in the race of progress has done excellent work in keeping the younger competitor up to form, will go. The management is to be over-centralised. Any possible advantage was in the course of attainment, and could have been attained by existing legislation without a transfer of assets. Why was the proposal made? I have listened to the Minister's explanation. I know it is possible for a Nasmyth hammer to crack a nut, but it seems to me that the work that is really necessary at the present moment could have been done with a Bill tiny in comparison with this. I feel that hon. Members opposite have been perhaps driven into introducing this Bill. If one says long enough and loud enough at street corners that a thing is necessary, in time one comes to believe it, and ultimately frozen in the fixed belief that it is true so that one cannot listen to reason. For years past that has been said by hon. Members opposite. I believe that now, against the better judgment of hon. Members, as a result of it having been said so often, it is to be implemented to the detriment of the country. I have never felt more iustified in supporting the rejection of a Bill.
§ 8.20 p.m.
§ Mr. Hobson (Wembley, North)
I am very pleased indeed to have caught your eye, Sir, in this momentous Debate. I am rather amazed that, when there has been so much fuss about the nationalisation of this industry, the benches opposite should be so sparsely occupied. If hon. Members opposite are enthusiastic about it, one would expect crowded benches, and a crowded Front Bench, particularly.
I want to declare my interest in this matter. It is not one of finance. It is one of employment—as a former power station worker, and as one whose union caters for the power station workers. I 1486 was very interested in the speech of the hon. and gallant Member for East Grin-stead (Colonel Clarke). He denounced the Measure on the grounds that it is impracticable and technically impossible, and then proceeded to give not one reason why it is impracticable and could not be achieved technically. He made great play with the statement that the electricity companies are good employers. That just does not happen to be true. Let there be no dubiety about it at all. What is the position? In 1938 there was one power company which was a member of the No. 10 area London conciliation machine.
§ Mr. Hobson
Did they not? As soon as they saw that labour was determined, they came rushing in for protection, and now they remain, probably because we have a Socialist Government. In point of fact, Edmonson's combine had not officially recognised the shop stewards until recently. It is perfectly true.
§ Colonel Clarke
May I say a word? I merely ask. Is it not better to have a record of 20 years without a strike of any size, and to give men three weeks' holiday a year, with pay, and to have the excellent schemes for sickness and pensions that they have got, than to happen to belong to some conciliation scheme?
§ Mr. Hobson
The hon. and gallant Gentleman says every worker in this employment has three weeks' holiday. I state, categorically, that that is not true. If he cares to look at the records of his company, with his staff officers, he will find what is the position. The shift workers have three weeks' holiday, but the day workers have a fortnight's holiday; and the shift workers have three weeks' holiday because they work statutory holidays. Indeed, the conditions in power stations are very indifferent, particular!}' where there is a tendency to instal up-to-date plant in out-of-date buildings, because the workers are on top of the boilers, and work in great heat. I have worked in a temperature of 125. There is a tremendous escape of fumes from the boilers when they are banked, and, altogether, a power station is a very unpleasant place in which to work. Inspectors do not go round the boiler-house on top of the boilers. They go round the engine-room floor, where everything is 1487 spick and span. If the hon. and gallant Gentleman cares to make a rendezvous with me, I will take him round the tops of the boilers.
The hon. and gallant Member for Pollok (Commander Galbraith) raised the question of the Central Electricity Board, and drew attention to the shortage of generating plant in 1942. That is perfectly true; but what he did not say was that, as a result of representations, no less than six power stations were built in Britain during the war, despite the fact that that was not a top priority.
I welcome the Bill, and I think it is commendably simple. 'I do not think the Minister will take it amiss, if I say it is no new idea. It is true that it is the implementation of our Socialist policy, but it is also true that Ministers of the party opposite previously considered legislation on rather similar lines. Let there be no doubt about it. For instance, they set up the McGowan Committee, and they hoped to introduce legislation. They gave it great consideration. What happened was that a White Paper was produced for the implementation of the McGowan Report. It was never implemented, largely due to the intervention of the Lord President of the Council at that time, who was in Opposition. Our objection to the McGowan Report was that it set up two different forms of organisation, one through the local authorities and the other through monopoly; and, consequently, it was impracticable. Further, there was criticism of the method of compensation. The compensation of local authorities was to be that as outlined in the present Measure. That, I think, is the right line, namely, to take over outstanding debts. But the companies were to be compensated on the basis of future profit. We have had some of that form of compensation in the London Passenger Transport Act, and we know precisely how it saddled that undertaking with terrific capital and interest charges.
The 1882 and 1888 Electric Lighting Acts did themselves foreshadow ultimate public ownership under the local authorities of the electricity undertakings; so this Measure is merely the logical consequence of those Acts. But, at the present moment, we have got national technical direction in the grid actually operating today, and, as a result, we have been able 1488 to economise considerably in plant; and that is very important from the point of view of capital costs. It is no longer necessary for large generating stations to carry large spare turbines and boilers which cost large sums of money, and, consequently, very great saving is effected. Further, the grid has standardised the frequency, and that shows there is some value in it. We are able, as a result of that, to change over from station to station, and that worked exceedingly well during the war, when stations were bombed. If it had not been for the grid, the effect on our industrial output would have been enormous. I am quite sure that even today my right hon. Friend the Minister of Fuel and Power would acknowledge that there would be far more drastic cuts in electricity if it were not that the grid system is in operation.
There are weaknesses in the present control of the grid, and if this Bill is passed, in my submission, they will be eradicated. What is the chief weakness? The chief weakness is that workers in the control rooms at the power stations are serving two masters. They have got to serve the Central Electricity Board, who are demanding output from the turbogenerators, and also they have got to serve the local authorities or companies, whomsoever they are working. It is a very unfortunate situation, and I am not so sure that, as a result of this dual control, some cuts are taking place in the power stations, when the load has been shed, when there are boilers and turbines available; but the Central Electricity Board are entirely dependent upon the statements from the companies or local authorities with regard to plant.
One other important aspect of the Bill with regard to generation—and I come now to the question of cost—is the fact that the Bill eradicates Sections 12 and 13 of the Electricity Act. I think that is very important. Those are the Sections of the Act under which if selected plant can prove generating costs less than the grid operation, it can buy from the grid at hypothetical cost.
What is the actual effect of this? I do not want to detain the House, but I should like to give these figures, because I think they the illuminating. In 1942–43 the revenue of the Central Electricity Board from the public authorities was 504d. units; from the companies.545d.; 1489 whilst authorities with no generating stations bought at .7d.a unit from the Central Electricity Board. What it means is, that the whole of the cost of the transmission lines was falling on those undertakings that had got to buy from the Central Electricity Board acting as wholesalers. That is the position. With those Sections of the Act going by the board in the new Bill, the actual bulk price of the Central Electricity Board will be considerably cheaper than it is at the present time. I think it fair to quote an example, and 1 will show how it affects the City of Liverpool. In 1943, Liverpool generated 1,303,000 units, and the city took 640,000 units at.46 pence per unit. The average charge to the domestic consumer in the City of Liverpool was 1.38 pence, and the difference contributed £15,000 to the rates. In other words, the saving effected on the rates had been paid for by the electricity consumers.
I can fully appreciate that there are cases, especially in what were known as the "distressed areas," where local authorities look to the electricity account to help them maintain their social services, but I think that the point which i-being overlooked is that if there had been no grant to the rates, the result would have been a lower charge for electricity. I am rather interested in the compensation provisions, and I hope that hon Members opposite will raise the point. [HON. MEMBERS: "Oh"] I would say to hon. Members opposite that whenever a Bill has come forward to nationalise an industry, they have attacked it only on the question of compensation. I am rather surprised that the Minister has not chosen compensation on the basis of capital assets less depreciation. Companies which have been progressive, and have ploughed back their profits for new plant, are to be compensated on precisely the same basis as those which have paid high profits and levelled high charges on the consumers. I hope that the Minister will look into this.
On the question of the siting of new power stations, the Central Electricity Board have not been as independent as they should, and have given certain large local authorities and certain large companies the right to enlarge their power stations or build new ones. I hope that, in future, it will be possible to site power stations in relation to the availability of coal. I should like to quote one or two 1490 figures in this connection. In the North-East area, coal is 38s. per ton, as compared with 52s. per ton in the London area. That is equal to a difference of 1176d. per unit, and it is a considerable amount in relation to the millions of units generated. I know it can be argued that in siting a station near to a coal supply there is a loss of transmission lines, but in my submission the loss arising through the dropping potential, is infinitely less than if a plant is sited without regard to coal costs.
I notice that no mention is made of railway power stations. I understood that these stations were to be taken over by the Ministry of Transport. I hope this is not so. I should like to see the Central Authority controlling ail generating stations, because I believe that these stations could be of value in helping to meet the general load, apart from traction purposes. Then there is distribution, and in this connection there will be large savings. Take the example of my own municipality, that of Willesden. On one side of the Harrow Road the cost of electrical energy is 1¾d. a unit, whereas on the other side it is ¾d. per unit, although the electricity is, in all probability, coming from the same generating station. The reason for this difference is that, in the one case, the company are under an obligation to their shareholders to make the largest amount of profit. There is not the slightest reason why we should not be able to effect a considerable saving in cost for those people who obtain their electricity from power companies.
There has been a lot of talk about representations to the Minister for having a unit within each of the areas. I hope that he will resist this. I know that the Incorporated Municipal Electrical Association are concerned that the areas should be sub-divided. but I hope the Minister will stand firm. By virtue of its name, this association would convey the impression that it represented municipalities, but in actual fact it represents the engineers. It must never be forgotten that under the terms of the charter, engineers have two-thirds of the control, although for the first time in history it had a lay chairman last year. As I have said, the association is more the voice of the engineers than the voice of the municipalities, and only at the annual general meeting is the municipal opinion given. I 1491 think that the Bill is a. good Bill, that it is simple, and will work. As I have indicated, part of it is already in operation, and I am sure that when it becomes an Act, it will work with the smoothness and efficiency which have characterised the grid since 1926.
§ 8.37 p.m.
§ Mr. Gerald Williams (Tonbridge)
We have just heard a somewhat technical speech from the hon. Member for North Wembley (Mr. Hobson), but I wish to return to the broad and important principles involved in the Bill. This Bill is being introduced at a time of emergency. We are fighting for our very existence to keep up our exports, and we are even struggling for our lives to produce more coal from the mines.
§ Mr. Williams
I hope that Members in all parts of the House are struggling to get more coal produced by the miners. We are unfortunately living on short rations, and also with too few houses. I think that all Members will agree, therefore, that this might be termed a state of emergency. And now, in the midst of all our troubles, we are having the whole methods of producing and distributing electricity completely changed. We have to set up a new organisation under this Bill; new entrants are coming into the industry, many of whom will have to be trained and others are being chucked out. Perhaps this may not cause chaotic conditions in the industry, but without doubt, there will be a great deal of shifting about and a good deal of changeover.
There is much disagreement between both parties in this House as to the best way of running the electrical industry, whether it should be run by private enterprise or by the State. Let us suppose for one moment that the Tory Party thought that it might be a good thing to nationalise the electricity industry?
§ Mr. G. Williams
If that was the case, the Tory Party would never be so insane as to make the experiment at this dangerous time. All our efforts should now be directed towards producing more coal, houses, and food. First things should come first at this moment, almost more than at any other time. Doctrinaire 1492 experiments such as this Bill should not be allowed to be even among the "also rans". In the past dividends have been paid, and cheap electricity has been produced. The Minister has told us that instead of dividends he wants officials, but he has given us no promise of cheaper electricity, and he made no mention at all of what he intended to do to benefit consumers. Shortly, he will be taking the gas industry under his control, which is the one form of competition which has kept the electricity industry up to the mark in the past.
§ Mr. G. Williams
The Minister intends to set up area boards, and there will be much changing over and reorganisation, so that the development which has been promised, and which would have been forthcoming in the next year or two, is bound to be considerably retarded. From time to time, Government spokesmen have freely admitted that when the coal industry was nationalised there would be a state of flux for a number of years. If that is the case with the coal industry, it will be just the same with this industry.
To help the Government to carry out their nationalisation scheme successfully, they intend to fleece the local authorities. I want to tell the House what will happen in my own constituency, although I will not go into details because a Member' on the other side of the House has already gone into considerable detail as to what will happen in a borough in the North of England. In the borough of Tun-bridge Wells, we reckon that under this Bill we shall get £30,000 in compensation. The capital outlay stands in the balance sheet at the moment, after writing down considerable sums each year out of profits, at £860,000. This is a significant case of underpayment for compensation, because that borough have run their industry successfully and efficiently in the past. They have paid off £259,000 out of revenue over a series of years, and because they have done that, and because they have adopted a cautious attitude, they have a smaller outstanding loan than they would have had otherwise. It is obvious to the Minister and, I expect, to Members opposite, that the corporation is to be punished for its own sound and cautious management in the past.
As time is short I will not say any more about the borough of Tunbridge 1493 Wells—but I make no apologies tor what I have already said—because that is an example of what will happen all over the country. Many other borough councils and local authorities are to be treated in the same way. Tunbridge Wells Corporation will get £30,000 for what is valued at over £800,000, that sum being the equivalent compensation of two years' profits. That might almost be termed a scandal. The excuse the Minister put forward for these terms is that it is difficult to treat each authority separately, and to work out what is fair compensation. What will the Tunbridge Wells ratepayers think of this Socialist Government if, as a result of all this. their rates go up by another 3d. or more while, at the same time, they have no guarantee that the cost of their electricity will go down?
Finally. I want to say that in the. last 10 days we have seen enormous powers handed over to three different Ministers. Before that, unprecedented powers have been given to other Ministers. We on this side of the House are fearful of these acquisitions which they have taken unto themselves, because we visualise the day may come when a strong man, a super strong man, may arise on the Government Front Bench. He may well take all these powers into his own hands, and he may use them with the disastrous results which we have seen only too recently in Nazi Germany.
§ 8.49 p.m.
§ Mr. Edward Porter (Warrington)
I am sorry that the hon. and gallant Member for East Grinstead (Colonel Clarke) has left the Chamber because I want to refer to a question I asked him about what he described as the agreement made by the National Farmers Union and the electricity companies. The reason I asked that question was to find out whether such an agreement had been made by the Government, because I think Members of the House should understand the position. I happen to be a member of the Incorporated Municipal Electrical Association and I know that the Farmers Union were approached by private companies and that both, in turn, approached the Incorporated Municipal Electrical Association to try to make arrangements for the supply of electricity The news was splashed on the front page of most newspapers that the electricity companies 1494 were to spend £175 million in five years. They wanted the Incorporated Municipal Electrical Association to agree to this statement for no other motive than to oppose the Government's introduction of this Bill, but the Incorporated Municipal Electrical Association stated that as they represented public authorities, they could not take sides against any Government, irrespective of which party was in power.
A colleague of mine has given us to understand that I.M.E.A. is run by the engineers of the local municipalities. That is not correct. What he means in effect is that representatives of the local authorities do not know their business. The hon. and gallant Member for Pollok (Commander Galbraith) is, I understand, a director of the Clyde Valley Electrical Power Company. I have no objection to that. He is probably as fit to be a director as anyone else. He has made a statement against the Secretary of State for Scotland in reference to the prices charged by companies in Scotland. The question I would put to you is this—
§ Mr. Porter
I apologise. I understand that the Clyde Valley Company operate on the fringe of the City of Glasgow. The prices charged by the municipality are considerably less than the prices charged by the Clyde Valley Company to its consumers. The hon. and gallant Member for Pollok, in his speech, talked of the work of this particular company and other companies, and said that on 3rd April, 1946, this company issued a chairman's statement to the shareholders. I wrote for one, which they very kindly sent to me. All over the country, housing schemes are being developed through the Government, and this is what the chairman is reported to have said to the shareholders:As I have said, we are at present unable to forecast the demands of our existing consumers, both power and domestic. There are at present under consideration in our area seven new industrial estates and approximately 100 housing sites of varying magnitude, ranging from ten to 100,000 houses.The point I wish to make is that public money is being spent to construct these houses. Private enterprise, from the electricity point of view, has done nothing and cannot do anything to provide sites 1495 for these housing schemes, yet it must have its rake off, simply because it is in the position to supply the electricity.
§ Commander Galbraith
As the hon. Gentleman has in a way attacked me, may I be permitted to give him the actual figures for which he has asked? For the year ended May, 1946, the average charge per unit to all consumers by Glasgow Corporation was 82yd., and the Clyde Valley and associated companies charge was.839d. The hon. Gentleman will, no doubt, recollect that Glasgow serves an area of some 30 square miles, and the Clyde Valley serves an area of 1,300 square miles, and has connected 89 per cent. of all the premises within its territory.
§ Mr. Porter
The figures for the Central Electricity Board have been issued to date, and their statement is that 80 stations in this country are, in the main, controlled by municipalities and are responsible for 91 per cent. of the production of electrical units.
There are strong reasons why I am in favour of this Bill. I sincerely believe that as a result of it there will be electricity at cheap prices for the domestic and industrial consumer. I believe that it will lead to greater efficiency. Within 14 miles of Manchester Town Hall there are no fewer than 30 separate undertakings, and, assuming ten members to each committee, that will give some idea of the waste of manpower in providing electricity in that area. In Lancashire, there are no fewer than 50 undertakings. The McGowan Report recommended in 1935 that 72 generating stations were sufficient to supply all the requirements in every town and hamlet in this country.
Another reason why I am in favour of this Bill is in relation to street and road lighting. Hon. Members opposite will probably say that the Minister of Fuel and Power will have no control over that. I expect that in time the Ministry of Transport and the Ministry of Fuel and Power will put an end to the particular scandal which I propose to relate. In this country there are 2,500 lighting authorities, and from Slough to Hammersmith there are 15 different changes of lighting within a space of 16 miles. In the North of England, two miles of road come under 22 lighting authorities. As a result of this 1496 Bill, that kind of mismanagement will end. We are trying to put an end to a state of affairs which existed some time ago when I referred to the late Mr. George Balfour.
The late Mr. George Balfour was chairman of 17 electricity companies and vice-chairman of two companies. He was chairman of a great civil engineering firm, Balfour, Beatty and Company, that built the majority of the generating stations for the companies of which he happened to be chairman or vice-chairman. and in his spare time he was a Member of Parliament. There are several gentlemen holding many directorships in this country, and many of them are members of firms and combines which produce the electrical machinery necessary for the generating stations. They have the idea that they should be able to charge whatever price they want to any local authority "applying for generating machinery. That is why the Minister of Fuel and Power has been compelled to include in this Bill a provision to enable the Department to set up works in various parts of the country for the purpose of meeting those requirements.
Hon. Members opposite, who oppose this Bill and other Bills to bring about nationalisation, would like to lead us to believe that this country is the only country attempting to nationalise the electricity industry. In the next few weeks, people will read a great deal about South Africa. In South Africa, the Government control the cable services, the air services, and a portion of the iron and steel industry; the railways are nationalised, the road motor services are controlled by the Government, the harbours and lighthouses, and the power supply industry are solely controlled by the Government. In a statement that anyone can obtain from South Africa House, it is said that South African industrialists can obtain electric power at a price as low as anywhere in the world, and that this is due to the existence of an electricity supply commission which is the national authority for the supply and co-ordination of electric power in South Africa; and that commission operates on the basis of neither earning a profit nor incurring a loss. In South Africa, although no one can class them as Socialists, they have seen that those industries which are necessary for the development of the country 1497 are nationalised in the interests of the whole of the people.
Having been connected with the electrical industry for many years, I am convinced that this Bill is one of the finest steps which this Government, or any other Government, could take to bring into the houses of the common people that electricity supply which the people have demanded but have never been able to afford until quite recently. The countryside has been deliberately neglected and we can say of the private companies, taking them large and small, that they refused to go to the countryside unless the people paid exhorbitant prices for the supply of electricity. Now, to try to gull the public, the companies talk about spending millions of pounds, but that is for no other purpose than to lull the people of this country. I hope that the Minister of Fuel and Power will get this Bill through as an Act of Parliament as early as possible.
§ 9.6 p.m.
§ Lieut.-Colonel Sir Thomas Moore (Ayr Burghs)
I think that many hon. Members on this side of the House will share my particular disappointment with the speech of the Minister of Fuel and Power in introducing the Bill. It reminded us, I imagine, of those rather reckless gentlemen, the orators of Hyde Park, who endeavour to stir up feeling by implication and inference without bringing any real argument to bear on the strength of their case. The Minister made it appear to all of us but those who know better that the directors of the holding companies and the electrical supply companies were purely influenced by self-interest, had no care for either their consumers or their investors, and that they were some sort of slimy community which lived as parasites on the rest of the country.
I suppose you, Mr. Deputy-Speaker, had you been in the Chair at the time, would have noticed the howl that went up on the other side of the House when the word "profit" was mentioned. We are all making profit or we all hope to make it. The doctor makes profit out of the money he spends as a medical student and the labourer makes profit out of the skill of his hands. We all make profit, but the only person who is not allowed to make a profit today is the builder. Indeed, all Members of Parliament on the opposite side of the House are now 1498 making profit out of the speeches they made during the General Election, and a very handsome profit it is. To that I will refer later.
There is only one other comment I wish to make on the speeches from the other side of the House, and that is in reference to the unfortunate interjection by the Secretary of State for Scotland. Very few of us knew—some of us wondered whether he knew what he really intended to say himself—what his reference had to do with the electricity supply in Scotland. I could only remind him, if he were here, that it was completely contrary to the Cooper Report, which I understood the opposite side of the House and the Government accepted as a very wise, shrewd and far-sighted document. However, I will leave these rather ineffective contributions from the Government benches, and I will come now to deal with a few outstanding "disqualifies" of the present Bill.
When the Government decided to nationalise the coal industry, to which the Minister of Fuel and Power today referred at some length, the average citizen was not really surprised nor was he really greatly shocked, except possibly at the unexpected generosity of the compensation terms. Of course, we now recognise that that was the bait to buy some Quislings. It was generally recognised amongst the public that the coal industry had for a long time been a sick body, due to the inverted Coue system adopted by the leaders of the Miners' Federation, who constantly pumped into their members by insistent and penetrating propaganda that they were badly treated, overworked, badly paid and that their conditions of life were intolerable until eventually they began to believe it themselves. [An HON. MEMBER:' "What do you think?"] There was a lot of truth in it, but like the statements of the hon. Gentlemen opposite and those who believe in them in the country they were grossly exaggerated. The public did not know that, and, of course, ignorant as they were and unaware of the cause, they said in so many words, "Any change may be a good change and better than nothing, and so if nationalisation of the coal industry will produce more coal, cheaper coal and a contented industry, let us have it and hope for the best." It will be 1499 observed by hon. Members opposite that they are still hoping.
The public were also greatly comforted by the statement made by the Lord President of the Council, in which he implied that the Government only proposed to take under its inefficient wing those industries and the services "not in good shape." If we accept that assurance and if we compare it with this Bill, we are obviously forced to the conclusion that some, madness has descended upon the Government, for in no circumstances can the electrical supply or the distribution industries be called or proved inefficient. I suppose we can only assume that the reforming zeal and enthusiasm of the Government have carried them beyond reason, beyond commonsense and, indeed, beyond sanity. Yet, one would have thought that it would be unnecessary to remind them that Lenin, Hitler and Mussolini were all reformers in their time. Lenin shrewdly realised that he was making a mistake five years after he came to power in 1922 and he introduced his New Economic Policy which brought Communism in practise to an end though not in theory. We know the fate of Hitler and Mussolini, and, therefore, I trust that the Government will take warning.
I think the House would be interested if the hon. and gallant Member would refer to the Bill now under discussion.
§ Sir T. Moore
I was only pointing out that the wine of power seems to have gone to their heads. I was putting it in other words, but that is the effect of my argument. The Government have got the impression that the 400 well trained, well disciplined and well paid sycophants behind them will put through any mad project, even such as this Bill.
I will now come to the Bill. I would misquote a poem many of us know:Into the Valley of Death,Ride the carefree, ignorant and irresponsible Four Hundred.I can only hope that they will remember that in riding into the Valley of Death they may bring the country with them. I hope they will dwell on that. May I now survey the arguments both for and against this Bill? First, I take those against because they are the more numerous. The 1500 first argument, of course, is that this Bill dislocates and disturbs the electricity industry at a time when, as has already been said, it has designed its plans for re-arrangement of production and supply. I did not say "reorganisation", nor did I say "reconstruction"; I said "rearrangement",because that was all that was necessary. Secondly, this Bill gives monopolistic control to the Minister through his stooge, the Central Authority, without any protection whatever for the consumer. There is not even a right of appeal against the almighty will of the dictator. Thirdly, it removes the limitation of cost to the consumer at present in operation and gives the Government power to impose any charges they like, as they do in the case of the Post Office to pay for their reckless expenditure in other directions. Fourthly, it takes away all the rights of the employees in the industry which are at present guaranteed by Acts of Parliament, and, fifthly, it removes—and I think this is one of the most important factors—from the control of the industry that intimate, local knowledge of county borough or district supply companies which is now the very essence of democratic as opposed to the bureaucratic administration it is proposed by the Government to introduce.
Lastly, it introduces a system of exploitation—some people might call it confiscation—instead of compensation. Millions of small investors who have put their savings into the industry will now find that their dividends will be reduced by nearly, and in some cases by more than, one third.
The Government choose to destroy all that local direction, just when the industry had so arranged its affairs that it would have been second to none in efficiency, either in Europe or elsewhere. The Prime Minister is going away, I see, just as I was going to give him what I think will be the one advantage accruing from the Bill. The only advantage will be that the Bill will give the Prime Minister an opportunity to get rid of some more of his inefficient Ministers by planting them profitably in the area boards and Himley Halls throughout the country. That is the only comfort which he can derive out of this unhappy Bill. Now the Prime Minister may go.
I happen to have what I think I can reasonably call firsthand knowledge of two 1501 electrical undertakings. I am not connected with either of them and I have no interest in either of them. One of them is almost the oldest electrical undertaking in the country, and it has operated with complete success to itself, its shareholders and its consumers for over half a century. It is the Ayrshire Electricity Board. It has prudently managed its affairs. It has refused to pay high dividends and has always ploughed back its profits into the industry for the purpose of expanding and improving its services. This undertaking now shows only £1,700,000 of outstanding loan debt, out of a total expenditure on capital account of nearly £4,000,000. And now this Dick Turpin Government comes forward and proposes to take over all the assets and pay the company only the £1,700,000 of outstanding loan debt.
That is confiscation of the most drastic character. It is simply the theft of nearly £2,000,000. Nothing can cloak that definite truth. The other electrical undertaking of which I have some knowledge is St. Marylebone. It was acquired from the Central Electricity Board some years ago, for over £1,000,000. Something like £3,700,000 has been spent upon modernising, including £500,000 for changing over from direct to alternating current. To put the facts bluntly and briefly, the Government are seizing £3,000,000 of tangible assets. The cost will fall upon the ratepayers and they will lose £2,000,000. That is the result of prudence and foresight, of charging high prices sometimes, to the consumer. They paid their way, saved money and kept their industry upon a sound financial basis; now, what is their reward? It is to have the result of all their efforts negatived. The policy of the Government is to penalise prudence and thrift and to recompense the reckless and the spendthrift. That is the policy by which the Government hope to retain the good will of the electorate. I can foretell for them a very sad awakening. But it is only one more signpost on the road to destruction which this Gadarene Government are pursuing with headlong violence.
§ 9.20 p.m.
§ Mr. Cook (Dundee)
I was rather interested to hear the speech of the hon. and gallant Member for Pollok (Commander Galbraith). I could almost see the Scots coming in the bottom door of 1502 the Chamber with claymores. I could imagine Bannockburn being fought all over again, and I wondered if the Treaty of Union was still in the House of Lords and whether it did not require a couple of extra policemen to guard it. The last time I spoke in this House hon Members opposite had put down a Prayer of annulment of an order relating to the hydroelectric industry. Now he tells us he is thankful for the scheme. This is a remarkable change. The hon. and gallant Member was well briefed. His brief is contained in the "Electrical Times" of 16th and 23rd January, which said that the companies are opposed to nationalisation and that this Bill must be rejected lock, stock and barrel. The following week the "Electrical Times" said, in briefing further, that it was not sufficient to carry out purely anti-nationalisation propaganda but to go to the country and tell what the consumers were going to lose as a result of this Bill being passed.
Unlike the hon. and gallant Member for Pollok, the only financial interest I had in the electrical industry ceased in July last year when I was returned to this House. I am a member of the Electrical Trades Union and also a member of the Society of Instrument Technology. I have made some study of the electrical industry as at present constituted. Commission after Commission were agreed that unification of the industry was required. The trouble was that the local authorities would not agree to being taken over by the power companies and the power companies would not agree to being taken over by the local authorities. There was therefore a conflict of interests all the way through. The previous Minister of Fuel and Power sent out in 1942 or 1943 an invitation to the local authorities and the power companies to state their views upon the future organisation of the industry. I am quite sure that the right hon. Gentleman was not surprised when he got their reply, which was that they could not reconcile their differences on the basis of voluntary co-operation and co-ordination. We have noticed that when we on these benches and the Labour Party talk about nationalisation, it is a very ugly word, but if polite Tory circles speak of rationalisation, it is a polite word, although it is the same thing with a different purpose.
1503 I hope that in view of what has been said tonight the Minister will have another look at this question of compensation and pay on the basis of capital expenditure less depreciation over the whole of the industry. I also hope that the Minister will not work to annual budgets. We have 15 to 20 years in which to plan the industry as it has never been planned before, and this Government have ample time to do it. I hope that in the early stages of the development we shall seek first to standardise tariffs to the consumers, in zones and regions to begin with and, ultimately, over the whole of the country, because one thing that has not been brought out is the fact that the biggest problem in developing the industry as it ought to be developed in a technical sense, has been the problem of off peak loads. The consumer demand in the domestic field has increased this considerably over recent years. No one has suggested that the power companies and the local authorities have not done a good job; they have, within very narrow limits, but we have passed the stage when we can allow this major industry to develop in a haphazard fashion. Therefore, we want to see that the crofters in the North of Scotland can have a supply of electricity at the same price as the individual who lives in Hackney or Stepney.
§ Mr. R. S. Hudson
I do not want to interrupt the hon. Gentleman, but he has made an important statement. He will remember that, in the course of the Debate, I particularly asked the Minister of Fuel and Power whether he could hold out any hope of doing anything to reduce the price and amalgamate rural with urban prices. Very wisely, he said, "No."
§ Mr. Cook
That was the only point in the long tirade made by the right hon. Gentleman the Member for Southport (Mr. R. S. Hudson) which had any bearing at all on the Bill. I am positively certain that the Minister intends that unified charges shall be brought into being as soon as possible, but what the right 1504 hon. Gentleman wanted him to say was that he would immediately unify charges—[HON. MEMBERS: "No."]—knowing full well that it could not be done at this stage.
§ Mr. Cook
On the average, the private power companies are one halfpenny dearer on 1937–38 figures than the local authorities and if, under national planning, we retain this halfpenny, it can support the capital expenditure year by year of close on £100 million in order to provide all the facilities for every crofter throughout the length and breadth of this country. [Laughter.] The right hon. Gentleman laughs, but it is true, and I quote as my authority Mr. Leslie Gordon who, I believe, knows more about commercial electricity than any other individual in this country. I also want to see the complete co-ordination of fuel and power over the whole network of this industry. The gas industry uses 20 million tons of coal annually; in the domestic field we use 35 million tons; the railways use 15 million tons—allied to 24 million tons used by the electrical industry itself. If we take the 70 million tons used by the first three and convert it into electricity, the benefits to industry and to the domestic field would be enormous—and to the transport industry as well.
At the moment we are discussing very actively the question of the manpower shortage. Over the weekend I went to the trouble of getting the relative figures of industry in this country and in the U.S.A. and found that horsepower per man in Great Britain is 2.37 as against 4.91 in the U.S.A. That has been the direct result in many cases of prohibitive charges for electricity. Shall we still go on leaving it to free private enterprise on the basis of these costs and take the blood, toil and sweat from the workers, as we were told to do during the period of the war? I say that industry can be brought up to a much more efficient level by a complete reorganisation of the whole electrical industry of this country.
One hon. Gentleman opposite made great play with the fact that his charges have decreased. I was employed for a period in taking a survey of the fuel consumption in certain establishments. The biggest waster of electrical power and fuel 1505 takes place in many of our industries, indeed, private enterprise in many cases forgets all about the boiler house and the power station, and adds to the capital costs by throwing money away. At the insistence of the local authority and private power companies, power factor correction and maximum demand on load was introduced and with a consequent reduction in charges. Many industries objected to the capital cost of condensers for power factor correction. We had to demonstrate to them that the initial cost of the condensers would probably be high, but within a year, or two years, it would justify itself, and would be showing a profit on the power factor correction as a whole by the reduction of consumption cost.
Under the Clyde Valley Company's assisted wiring scheme a very big change took place, and it justifies the attitude taken up by my right hon. Friend. If a contractor were doing any job for the Clyde Valley Electric Power Company, he was told where to buy the cable and fittings, and would be sent to the Clyde Valley offices at 206, St. Vincent Street, in order to collect the lamps for the job. It has been suggested that this is a fairly progressive authority. In many ways it is. But, when war was imminent, its network was hopelessly inadequate to meet the anticipated load which was coming. E.H.T. cables were only being laid in 1936 and 1937 in order to boost it up, and extra transformers had to be put in in parallel to meet the rising load. It was not possible to get into many substations because of the heat of the transformers, which normally should be running cool.
In Wales, the National Farmers' Union and the local authorities at a recent conference decided unanimously to ask the Government to nationalise the electrical industry, and the water supply of that area. We heard that the private companies were willing—when they knew nationalisation was coming along—to spend £160 million in rural electrification. They were too late; my right hon Friend and those behind him saw to that. If I were lucky enough to get a house on the other side of the street in which I live, there would be a difference of a halfpenny to three-farthings in the price of electricity supplied by the same company, the Clyde Valley Electric Power Co. It 1506 arose in this way, is this healthy competition? Glasgow Corporation offered the borough of Rutherglen a supply of electricity at their rates, and the Clyde Valley Company came along and said, "We will give you the same rates, rise or fall, as the City of Glasgow." Having a good Tory majority, the local council said, All right, we will give it to free private enterprise, "and the Clyde Valley Company became the suppliers in that area. If the Clyde Valley Company were able to give the royal borough of Rutherglen a supply of electricity at Glasgow Corporation rates, why could they not provide the whole of Lanarkshire—which they supply with electricity—at the same rates?
I hope the Minister will not only look at the question of compensation again on the basis of capital expenditure less depreciation but will also pay particular attention to negotiations or consultations between trade unions and area boards, and will take cognisance of the fact that just recently a national agreement was drawn up between the power companies and the five big unions. I hope he will learn the lesson, so bitterly learned by the Civil Aviation Board, in regard to negotiating machinery, and will examine it fully and make some alteration. I think this Bill is long overdue, and my right hon. Friend has made a first-class job of its presentation.
§ 9.35 p.m.
§ Colonel Crosthwaite-Eyre (New Forest and Christchurch)
The hon. Member for Dundee (Mr. Cook) has covered most of the field, and on one part of his remarks I hoped to be in agreement with him—that in which he said that the terms of compensation were not as he would have chosen. But he hastily went on to cover a great deal more ground, saying how he wished to see every crofter in the north of Scotland and in every part of Lanarkshire provided with electricity at a uniform rate; and all I can do is to quote what my right hon. Friend the Member for Southport (Mr. R. S. Hudson) said that there is nothing in the Bill to produce any of the things to which the hon. Member devoted his speech. That is the type of reason, and the sole type of reason, why hon. Members on these Benches have opposed this Bill from the beginning of the Debate. During the last two hours I have listened to speeches from the hon. Member for North Wembley 1507 (Mr. Hobson), the hon. Member for Warrington (Mr. E. Porter), and the hon. Member for Dundee. The hon. Members quoted various examples to prove their case, but they chose two most unfortunate examples, because, in instancing local authorities and saying what benefits this Bill would bring, they spoke of Glasgow and Liverpool. It so happens that Glasgow and Liverpool, which have councils with Socialist majorities, have condemned this Bill. Those two examples are the last that hon. Members opposite should quote, because they show that their own party do not support them in the localities.
§ Mr. Keenan (Liverpool, Kirkdale)
On a point of Order. The hon. and gallant Member is not right in quoting Liverpool as having a Socialist majority.
§ Colonel Crosthwaite-Eyre
The electricity committee of Glasgow has passed a resolution within the last few days to the effect that compensation should be on the basis of capital cost instead of the basis proposed in the Bill. Those are two of the major authorities who dispute that this Bill will benefit the community. With regard to compensation, hon. Members on this side have become accustomed to the Government using one criterion after another to try to justify the Measures they bring before the House. But never either in the House or in the country, have I heard such a weak speech to try to justify confiscation as was made by the Minister today. What he really did was to try to stir mud in comparatively still waters. The right hon. Gentleman quoted several examples of companies which, he alleged, were doing malpractices, and he drew cheers from the hon. Members behind him. I would like to look into a few of those complaints. I am very sorry the Minister is not here at the moment, because when a Minister makes allegations of that sort against companies that have done a great deal for the public good, the least he can do is to be in the House to hear the answer.
First, the right hon. Gentleman made a gibe at the City of London Company. He said that a 100 per cent. bonus issue of shares was made and that the dividend payable on those shares was reduced by 1508 half. I must admit that it was not quite clear to hon. Members on this side what was the objection, if the shareholders did not get any more. The position was simply that that company, during its operations over 25 years, had saved up an adequate amount of reserves for future development. At the end of those 25 years, the company was purchasable by the London County Council, but the London County Council did not exercise the right, and preferred to leave the company in private hands. This bonus issue was made simply in order that the reserves might be brought into the capital construction of the company, to provide the wherewithal for future development. To make any assumption as the Minister did, that this was some trick in hand, is a gross misrepresentation of the facts.
The right hon. Gentleman went on to refer to the Clyde Valley Electrical Company, in regard to a bonus issue in which the shares had been issued at a price somewhat higher than the market value. I think it is common knowledge that any issue of additional shares is bound to affect the value of the shares already on the market. In addition it may well be that the directors knew certain facts in regard to those shares, which would make their issue at a higher price impossible if they were to justify the trust the shareholders had in them. In the case of the Clyde Valley Company, both those considerations applied. The Minister did not tell the House that there were very special considerations which made it impossible for that company to float the shares at a higher value. He preferred to make a debating point, rather than tell the House the full circumstances. I hope that if I have said anything to which he or his Parliamentary Secretary object, they will reply to it either now or in due course.
The Minister then talked about holding companies. He was dully mysterious. He hinted at this and that, but he did not tell the House that both the McGowan Commitee and the Sankey Committee, to whose views, he had access, had absolutely nothing to find against the practice of holding companies. There is nothing which the Minister or his Parliamentary Secretary can state in this House to support the allegations which were made. If there is anything in those allegations then 1509 he should publish to this House the result of the investigations of the Sankey Committee. The last thing he should have done was to bring forward this Bill before he has published the Sankey Committee report, which would have enabled hon. Members on both sides of the House to judge the true situation.
The fact is that the Minister has found himself on an even more impossible wicket than his predecessors who have brought forward Measures of nationalisation. He has none of the excuses presented during the Transport Bill Debate. Therefore, he has been forced to try to stir up mud by producing quotations from companies and making allegations which I challenge him to substantiate. I challenge him to substantiate the charges which he has made.
§ Mr. Mitchison (Kettering)
Before the hon. and gallant Gentleman leaves the question of company finance, could he explain how the issue of bonus shares provides a company with any additional capital for the working of its business?
§ Colonel Crosthwaite-Eyre
Certainly, if it is in Order. The answer is that certain sums are put to reserve. Those reserves are in fact used, but, according to the balance sheet, they are available for distribution. A wise and prudent company increases its capital, so as to show them in their proper position, which is as part of the working capital not available for distribution.
§ Colonel Crosthwaite-Eyre
Under this Bill the companies are to be given Stock Exchange values. I have never heard a weaker reason for this proposition than that given by the Minister today. Stripped of all his venom against various companies, it showed that he did not understand the difference between price and value. He did not understand that on the Stock Exchange, a share has a value at a particular time, in accordance with what the Chancellor of the Exchequer said recently about the hopes and fears of the industry at that time. It has nothing to do with the value of the company. In fact, the Government admitted that in the Cable and Wireless Act under which they are acquiring shares. There, the first thing they did was to say that they could acquire the shares only if they knew 1510 the value of the undertaking. The Minister had forgotten that this afternoon.
He had also forgotten, when he quoted, as he did, the point of view of the Chancellor of the Exchequer, that, after all, Stock Exchange prices are taken for Death Duties. If the Minister is acquiring shares at any given moment, as a willing buyer from a willing seller, then Stock Exchange prices are unquestionably right, but, if he is buying that undertaking without the consent of the vendors, then the value on any particular date, influenced by all the fears which are naturally in the minds of ordinary investors, particularly under the present Government, is simply a travesty of the real value. No Government, claiming to be a model of fairness, should ever set themselves up as sole judges and arbiters of the price that they are going to pay. If the Minister is to be a buyer, let him be a buyer; and, if a valuer, let him be a valuer. To try to do the two things at the same time, is manifestly wrong, and, if the Minister has any common sense, he will reconsider this matter.
Of course, the right hon. Gentleman will put up a case, trying to show that it is the Government's intention to be fair, but the Government must be fair if they are to carry the country with them. The Government, however, cannot hope to carry the country with them, because they will lose the confidence of all those to whom they are appealing day by day—the very people who are trying to carry out the reconversion of industry, the people who believe the Government, when they say that their efforts will be appreciated. They are the very people whom the Government have deluded by their present attitude, and I ask again that the Government should reconsider the matter. I ask that they should be willing to accept an outside authority for arbitration, and that they should accept, at least, the principles which have stood us in such good stead throughout centuries of commercial negotiations. If they do so, they will win the support of the country; if they do not, they are certain to fail, because they will destroy the foundations on which the country's greatness is based.
§ 9.48 p.m.
§ Mr. Goodrich (Hackney, North)
I have listened, I think, to all the speeches but one in this Debate, and all that I have gathered from the other side of the 1511 House is that hon. Members there are interested in the compensation and financial aspects of this Bill. It is true that one hon. Member did suggest that we might consider the consumer aspect, and it would be interesting to the House to hear something in that respect from hon. Members opposite. One cannot develop a long argument, as one would wish, and, therefore, I am going to content myself, first of all, with congratulating the Minister on this excellent Bill, and to asking him if he will, in due course, look at one or two aspects of it.
The Minister this afternoon drew attention to the fact that the Central Authority would be empowered to manufacture equipment and so on, and I want to congratulate him on having put that into his Bill. As one who has been associated for many years with local authority electrical undertakings, and another one of greater importance today, I have, on many occasions, when asking for tenders, discovered the appalling fact that probably eight, nine or ten tenders submitted were within 6d. or 1s. of one another. The same thing applies in respect of tenders for equipment. It is well known to those who give out tenders that the firm or contractor who is to have the contract is informed in advance to that effect by his own colleagues.
We have heard this afternoon that this Bill will do away with competition. In regard to plant and equipment. I congratulate the Minister very sincerely in that respect. I do not wish to go over the whole ground of compensation again, but I would like to remind the House that only 20 per cent. of the municipal undertakers are providing revenue in respect of rates. With regard to Clause 7, which deals with the consultative councils, as I have already said, approximately two-thirds of the country's electricity supply is under local authority control. Local authorities, who are at present authorised undertakers in a large number of cases, purchase rights which will enable them to become undertakers. Local authorities are themselves large consumers of electricity, particularly for street lighting.
I wish to draw the Minister's attention to the London area. I am informed that, in the London area, there are, approximately,. 50 local authorities. Assuming 1512 that the Minister agrees to the maximum of 30 members on the consultative council, only 15 of the local authorities would be represented out of a possible 50. I have been asked to approach the Minister with a view to increasing that 15 to 20. It is felt that the London areas are so interconnected that there should be a better opportunity for the consumers to be represented than is at present envisaged. Of course, the Minister might say that he cannot make special provisions for London alone. But may I call his attention to the fact that, with only 15 members representing the consumers in the very large areas, it may mean that it is well nigh impossible for the representatives to con-, tact one another, and, that, therefore, a true expression of opinion would probably not be obtained from the consumer angle? My right hon. Friend has made provision for the consultative councils to set up, if they wish, small subcommittees. That is a great advantage which is appreciated, but, in addition to that, it is thought that two-thirds of a council of 30 will be far better than the present proposal.
Another matter I would like him to look into concerns pensions. Clause 48 provides that the Minister "may" make regulations for this purpose. I suggest that he "shall" make regulations in order to clear up that matter satisfactorily. This afternoon an hon. Member referred to the need for tribunals to hear disputes and applications from consumers. I would again ask my right hon. Friend to look into that problem and see whether it is possible to set up an independent tribunal, whereby a consumer, large or small, either himself or through his local authority, can make representations to an impartial body.
I would like to make one more point, and that is in regard to the many Statutes which are involved in this Bill. I would ask my right hon. Friend, as soon as possible, to consolidate all the Statutes involved. We feel it would be much easier for those who will be charged with the responsibility of administering the undertaking, and it would be better for all concerned. Finally, when he is dealing with the regulations, particularly with relation to Clause 56, on the question of law and fact, I would ask him to be a little more definite and give us some further explanation on that point.
§ 9.58 p.m.
§ Mr. Nigel Birch (Flint)
I had some difficulty in following the hon Member for North Hackney (Mr. Goodrich), but I gather he was more satisfied with this Bill than he was with the provisions of the National Insurance Bill so far as they concerned friendly societies. Tonight I have a few words to say upon the well-worn subject of compensation to bond and shareholders. I have no financial interest, except as a payer of electric light bills and taxes. I think it is necessary to say something more on this subject, because the Minister defended the Clauses on compensation purely by the method of"spreading dirt."I think it is charitable, and probably true, to say that he did it very largely from ignorance. The case is very often argued purely on the grounds of hardship, but there is a far superior consideration to that of hardship to an individual, and that is the consideration of justice.
If one is to act with justice, one must act on some sort of principle. In the various Measures produced by His Majesty's Government in this Parliament, there have so far been eight methods of compensation. They were: Bank of England, exact maintenance of income; Coal, agreed terms put up to an independent tribunal; Cables and Wireless, agreement or, failing that, independent arbitration; Railways, as now, stock exchange prices; Road Haulage, cost of replacement plus two to five years' purchase of profits; private wagons, scrap; Town and Country Planning, bluster combined with conscience money; and, perhaps the strangest of all, the compensation of Lord Beaverbrook for the annoyance caused him by Professor Laski, and for that hon. Members opposite have subscribed their own money. The results have had all the caprice of a sweepstake, and the lucky numbers have been drawn by the coalowners and Lord Beaverbrook. Clearly, the Government have acted on no sort of principle, or indeed of reason.
The principles are very well understood. The first principle is, that no man and no Government should be judge and jury in their own case, and that failing agreement the subjects in dispute should be submitted to arbitration. The second is that arbitration should take account of both the value of the assets of the concern 1514 and its earning power. This is the method recommended by the McGowan Committee earning power being adjusted to the length of the franchise. That is the method of the Electricity Act, 1888, but in that case, of course, ex hypothesi the' franchise had come to an end, so only the assets were valued, and failing agreement on a fair market price the matter was to be referred to arbitration. The Minister said that his answer was, frankly, that he could not be bothered to work it out, and that it would be a difficult thing to do. Of course, it is administratively inconvenient. The hon. Member for Wimbledon (Mr. Palmer) wrote a most interesting book called "The Future of Electricity Supply," in which he gave very cogent arguments against nationalisation at this stage. He did not repeat them tonight—in full at any rate. In that book he said that equitable compensation to ratepayers and shareholders for loss of income is bound to be a very complex business. He is right, it is bound to be a very complex business. But he obviously thought it would be fairly carried out, and there I would say he failed to assess at its correct value the integrity of his own Front Bench.
Let us examine this question of Stock Exchange values slightly more carefully. I will not go into the more obvious points which have been raised. I will discuss what I believe to be the basic factors which have not been fully brought out. The Stock Exchange is a recording instrument on which a price is arrived at by the balance of a very large number of factors of different weights. If an industry is to be nationalised, then every factor, except what one is likely to get for compensation, ceases to be of account. The earning power, the assets and so on of that industry are of no value, except for what one might get in compensation. Therefore, the dominant factor in determining prices is the guess of holders as to what they will get. The question whether there would be nationalisation of that industry was a factor in prices well before the election. Indeed, a pamphlet was issued by the Incorporated Association of Electrical Power Companies in 1943, giving cogent reasons against the nationalisation of the industry. Clearly they thought it was a likely thing to happen at that time.
I will illustrate the effect this has had on prices. Take the average of the years 1515 1935 1936 and 1937. Taking the actuaries index of 16 ordinary shares in the electrical supply industry for those years it will be found they yielded on the average 4.12 per cent.; over the same period Consolidated 2½per cent. Stick yielded 3.07 per cent. If that is worked out it will be found the yield on electrical supply ordinary shares was 134 per cent. of that on Consol 2½ per cent. Stock. In October last, just before the compensation dates, we 'find that these same electrical shares yielded almost exactly the same—4.08 per cent.—whereas the yield on old Consols 2½ was 2.53 per cent. If the ratio of 134 per cent. had remained the same, then the yield on electrical Ordinary shares would have been 3.37 per cent. instead of 4.08 per cent. So, in fact, owing to the fear of nationalisation; we have a loss of something over one-sixth in the value. That was not accounted for by the running out of franchises. To a certain extent, it was, I have no doubt; but it applied equally to power companies, such as the Clyde Valley and the North Metropolitan Electric, which, I think I am right in saying, are little affected by the limitation of franchises.
§ Mr. Scollan (Renfrew, Western)
1 should like to clear up this point. What does it matter to John Smith, if he holds 500 shares in one of these companies, and sells them at the market price according to the Stock Exchange, not to James Jones, but, instead, to the Government, under the nationalisation scheme? How does he lose anything?
§ Mr. Birch
I am afraid my argument has been, perhaps, a little difficult for the hon. Member to follow. I am trying to make it clear. The price is lowered by the prospect of nationalisation. Therefore, he gets a lower price than if nationalisation had not come in, and he had dealt in the shares in the ordinary way.
§ Mr. J. Lewis
One can see that the hon. Gentleman's argument is reasonable in some respects, but has he taken into account in his calculations the question of watering down capital over a number of years?
§ Mr. Birch
I do not think that applies in any way. If the hon. Gentleman cares to follow out what has actually happened to certain shares he will find out it is not so. These statistics are difficult to follow, and I think that the hon. Member for Western 1516 Renfrew (Mr. Scollan) found them a little difficult. Let me give a simpler explanation. Supposing the Minister, in one of his pig and piano moods, said he was going to take over the gas industry at scrap prices—that, unlike his other predictions, would be believed—prices would go down; he could then take shares over at Stock Exchange value on a profitable but highly dishonest basis.
Now, it may be said that you have got the security of the pre-Election price. Prices were then to a certain extent affected by nationalisation fears, but the point is that the argument is falsified by the rigging of the gilt edged market by the Chancellor of the Exchequer. He has done it at the cost of adding £779 million to bank deposits, during a period of over-employment. It has caused a big rise in fixed interest securities. As anyone can see that this will result in inflation, there has been a bigger corresponding rise in ordinary shares, because people are more prepared to buy ordinary shares at obviously inflated prices than take a certain loss in gilt edged in terms of real values. If, at the time of the Election, one had known one was going to be compensated at market values, then, at that time, one could have bought Consolidated 2½at 83, now at 98½ or Prudential "A" at 29, which are now 37½. That is the measure of the loss. Compensation is being paid in Dalton pounds in fixed interest stock which, in real terms, is certain to depreciate further. It has not been very generally understood. There was a masterly article in the "Daily Herald"—I do not know whether the hon. Member wrote it—the other day. It said:The Stock Exchange has been showing a robust confidence in the outlook. In the past few days prices of almost all the main industrial shares have been rising under the influeace"—That is good—of a steady and keen demand due to soberly optimistic forecasts from financial leaders. This week's experience on the Stock Exchange also refutes those who complained that there were no alternative investments for railway stock holders waiting to sell their present holdings and maintain their incomes by buying other securities.'In fact, it shows precisely the opposite, and is a very good example of what we may expect as a result of the present inquiry when the Press is properly integrated and coordinated in the national interest.
§ Mr. Douglas Jay (Battersea, North)
May I ask the hon. Member two questions? How does it show exactly the reverse of what the newspaper said, since if persons selling railway stock were buying securities it presumably would show that they were able to do so? Secondly, the hon. Member has surely not answered the point, that the price of the shares before the Election were not seriously affected by the expectation of nationalisation.
§ Mr. Birch
The rise in the ordinary shares shows that you cannot obtain an equivalent yield.
I come now to the worst feature of the Bill, which is the treatment of the North Metropolitan 5 per cent. guaranteed stockholders. This is the second default of a Government guaranteed security by this Government. The first was in the case of the L.P.T.B. 3½ stock. The Chancellor of the Exchequer defended that default the other day on the ground that, if one looks at the redemption yield, people are not doing too badly. That is not the point. The point is whether the British Government are going to honour their bond or not, and there is no difference in logic or in past practice between a Government guaranteed stock such as this, and a direct Government obligation. I should like to ask the Parliamentary Secretary who is to reply a question. He is a faithful lapdog of the Chancellor of the Exchequer, and he will no doubt give me the same answer. Under Clause 20, local authority stocks, issued for the purposes of electricity, are continued on the old terms. There is no scaling down of interest on local government stock in respect of electricity undertakings. Why are the Government more tender towards the credit of local authorities than towards their own credit? It seems to be grossly wrong, and extremely foolish. I think it would be wrong to mtertere with either but if there is to be interference with one, why should the Government be more tender towards local government credit. I believe that the ultimate effect will be far more damaging than anything done under this Bill.
I would sum up by saying that the Government have broken faith with their bond holders and with the holders of stockholders, the Central Electricity 1518 Board. They have perpetrated a swindle on the shareholders which they dare not submit to arbitration. I believe the Chancellor of the Exchequer is the real villain in the piece, and that the Minister is the receiver and the "fence." If hon. Members will consult the dictionary, they will find, under the heading, "Daltonism," that it is inability to distinguish red from green. It came from a distinguished professor who was colour blind. From that, of course., the Chancellor suffers. While his colleagues preach danger he has a song in his heart. I am inclined to think that when he dies a new word will come into the dictionary, "neo-Daltonism," one who is unable to distinguish between right and wrong.
§ 10.15 p.m.
§ Mr. George Jeger (Winchester)
At the time when the nationalisation of electricity was announced as part of the policy of this Government for this Session, we were promised by the Leader of the Opposition that we would get unrelenting opposition to this Measure. Consequently, I have been interested today to hear on what grounds we would get that opposition. It seems to me that the only ground which has been put forward so far, is that of inadequate compensation. In other words, the way to rouse the opposition of the Tory Party is inadequately to compensate them. It appears that their principles are not directly opposed to nationalisation, but rather that they are prepared to sell their principles if the price offered is sufficient. Earlier, the hon. and gallant Member for the New Forest and Christchurch (Colonel Crosthwaite-Eyre) played a slightly different tune. While concentrating to a large extent on the Stock Exchange valuation and financial aspects he gave us this very artificial phrase, that he was "opposing this Bill because it did not show that it would equalise charges." Does that mean that the hon. and gallant Member wants things in their present chaotic state, as was so aptly described in the McGowan Report?
Our opinion is that this Bill is urgent, necessary, and much overdue. We consider that it will bring our people, both present consumers and large numbers of potential consumers, efficiency, cleanliness, and comfort. Particularly will that be so in rural areas where, at the present time, the amenities of this mechanical age are singularly lacking. I have been into many rural cottages in my constituency 1519 which are lighted by paraffin lamps or candles, and where all the cooking has to be done over open fires, even in the summer, with coal or wood. Those who live in those cottages have to cycle or walk to neighbouring villages to get their wireless accumulators charged each week in order to get even the benefit of that form of civilisation. They can go to farms and switch on the electricity in the cowsheds, but they cannot get it in their cottages.
We envisage, as a result of this Bill, that electricity will provide rural England with the amenities of civilisation. People will be able to use it for lighting, heating, cooking, and for water pumps and domestic appliances which will make the housewife's domestic burden much lighter. That fact was admitted by the hon. and gallant Member for East Grinstead (Colonel Clarke), who contradicted himself when he said that his rural constituents would welcome the Bill, that they were looking forward to the installation of electricity, and then said that he would oppose it in spite of the benefits which it would bring to the countryside.
§ Colonel Clarke
I said that an arrangement was made between the National Farmers' Union and power companies whereby, if there was no nationalisation, a great scheme of rural electrification would be carried out, and that that would be welcomed. I said that that scheme would be wrecked by nationalisation, and I shall wait until tomorrow to see whether that is so or not.
§ Mr. Jeger
We have yet to hear that the power companies, if left alone, would electrify our countryside. They have had plenty of opportunities to do so. In my constituency power companies have laid down very harsh financial conditions before they would extend the supply of electricity a few hundred yards to potential customers. I could introduce the hon. and gallant Member to a blacksmith whose shop is 200 yards from the main supply, and the supply company asked £50 to make a connection. We have practical experiences of those who have suffered under the power companies in the past. The right hon. Member for Warwick and Leamington (Mr. Eden) in Blackpool a few months ago, according to "The Times" of 5th October, said: 1520The vastly changed conditions to which we must look forward make it inevitable that the State should play an increasing part in our national economic life.I would invite hon. Members opposite to co-operate with the right hon. Gentleman. We intend to in this connection. It would seem by their opposition that they are in favour of nationalisation yesterday and nationalisation tomorrow but never nationalisation today. There seems to be some conflict and confusion, in the minds of the electricity companies themselves. A little while ago hon. Members were sent gratuitously a pamphlet addressed, "To those with open minds: The argument of the Electricity Supply Company." This perhaps is what some hon. Members are thinking of when they pin their faith to the promises of the private companies. They say under the heading "Nationalisation":The electricity supply companies are not allowing any uncertainty about the intentions of the present Government to interfere with their duty to the public. They are proceeding with the five years programme outlined above, and no threats or rumours will deter them from fulfilling their promises of extending, increasing and cheapening the electricity supply of Great Britain.That sounds very nice. It gives the promise, which has apparently taken in some hon. Members opposite, that the electricity companies really have a programme for the future which they intend to carry out if they are not nationalised. But when we take the views of one of the constituent companies covered by this booklet—the Mid-Southern Utility Company, I find that in August of last year they wrote to the clerk of a rural district council in Hampshire:I should perhaps offer you an apology in that a written reply has not been sent to your written letter of 14th May last"—This was written on 23rd August—thank goodness that was not from a Government Department—and they went on to refer to their intentions of bringing electricity into the remote rural areas. They continued:The broad question was considered by the management yesterday and I am directed to inform you that until conditions generally become much more stabilised and my company, with other utility undertakings, emerging from the sense of frustration which now hampers us we shall be unable to tackle the broad question on the lines indicated.This is a letter from the company, which is part of the industry, which, 1521 according to this booklet, "subordinates profits to social ends." It says:At the same time I am to say that ray company is equally unable to undertake small installations simply to satisfy the craving of individuals.This is the public utility company which exists not for profit but as a social organisation, with its mind on the comfort and welfare of a possible consumer. This, I think, emphasises the chaotic state of the electrical distribution industry. The McGowan Report of 1936 reveals its weakness when it states that there were 635 separate undertakings all of whom were operated in different ways. When there are 43 different voltages, ranging from 100 to 480, half alternating current and half direct current, with all the inconveniences that attach to these variations, particularly in the case of removal from one district to another, with different methods of charging and assessment, obviously we can only reaffirm what the McGowan Commission reported, that it was one of the most pressing matters that called for reform.
§ Mr. Niall Macpherson
Does the hon. Member suggest that all the area boards will have the same tariffs, the same methods of assessment, and the same rates?
§ Mr. Jeger
No, not to start with, but we hope that, as we develop along coordinated national lines, we shall be able to work towards a national system instead of having an absolutely unco-ordinated and chaotic one as we have at present. We shall never get that improvement unless we take the necessary steps of coordination now. There is in my constituency a village which matches up to some of those that have been described during the Debate, where, if one lives on one side of the street, one pays 4½d. a unit for electricity, and if one lives across the road, one pays 9d. a unit. The 4½d. is paid to a municipal corporation; the 9d. is paid to a private company which buys the electricity, in the first place, from the municipal corporation, but it has statutory powers over the area which extends up to that side of the street, and consequently, it depends upon which side one lives as to whether one pays 4½d. or 9d. We are hoping that distribution will be organised and controlled in the public interest and will do away with that chaotic state of affairs. 1522 In paragraph 188 of the McGowan Report, issued in 1936, it was stated:We see no reason to recommend any departure from the general principle laid down by Parliament of eventual public ownership, and in fact we recommend an extension of that principle.What was recommended in 1936 we want to see implemented now. It was a good day for this country when it sent a Labour Government to power in order that no more delay should occur before the implementation of that recommendation.
There are one or two matters to which I should like to draw the attention of the Minister in the hope that further discussion of these particular items will perhaps clarify the situation and settle the doubts of one or two local authorities who are at present feeling a little unhappy. There is the question of Income Tax set-off which at present is permitted to local authorities with an electricity undertaking, on the basis of their profits. I know that local authorities should not make any profits on any of their undertakings, but many of them do. Unfortunately, many of their members were brought up under a capitalist system and look upon the making of profits as a very worthy end, instead of looking upon service to the community as the real purpose of their functions. At the present moment, however, there is some relief to the rates caused by that Income Tax set-off, and I hope that consideration will be given by the Minister to the loss that might be occasioned to their rates if that were discontinued. This does not apply to all local authorities, but there are some of them who would like to have the situation in that respect clarified.
There is another rather smaller point. A number of municipal undertakings use chief officials of the municipality, to a certain extent, for their electricity undertakings—people like the borough treasurer and the town clerk—and contribute from their revenue a certain amount of the salaries of those officials. If they are debarred from doing that in future, or unable to do it because they lose their electricity undertakings, there will be a slight addition to their normal expenditure on the salaries of those officials in order to make up the deficiency formerly met out of the electricity accounts.
Another point is the question of superannuation funds where, as in some municipalities, a number of officials previously occupying high positions are now receiving 1523 superannuation benefits and the superannuation fund is benefiting by the contributions of those who are still employed in the electricity undertakings. There will be a disproportionate drawing from the superannuation fund if previous electricity employees are still drawing their superannuation from a fund which is depleted by the withdrawal of the electricity employees. I hope that the Minister will discuss this question amicably with the local authorities who are, in the main, in favour of the transfer of their undertakings—[HON. MEMBERS: "No."]—because they realise that there will be a gain in efficiency, and the benefit to the consumers. Local authorities in the main are actuated by a sense of duty to the public and service to the community, and they know that under this Bill, under this Government, that service to the community will go on.
The Bill generally has been welcomed in the country, and specially by people who have used their votes in order to state their opinion of this Government in by-elections and municipal elections. They understand that nationalisation now, means better living sooner.
§ 10.32 p.m.
§ Viscount Hinchingbrooke (Dorset, Southern)
I think all hon. Members will agree that we have had an interesting first day's Debate on the Second Reading of this Bill. It has also been, in my view, a somewhat quiet Debate. I must say I expected rather more powerful advocacy for this Measure from the opposite side of the House, but I fear that what has happened is that the right hon. Gentleman so exhausted the minds of his supporters behind him, by the polemics in his own speech, that they have not been able to recover themselves sufficiently to state their arguments plainly and forcibly. It is left, therefore, to the hon. Gentleman the Parliamentary Secretary, in his winding up speech to-morrow, to rouse his followers to a new and fervent expression of their political aims if they are to carry their heads high in the voting Lobby tomorrow night.
Several hon. Members have accused us on this side of the House of attacking this Bill solely on grounds of compensation. That is entirely untrue. I suppose that not more than ten minutes of the speech of my right hon. Friend the Member for 1524 Southport (Mr. R. S. Hudson) this afternoon was devoted to that topic, and out of eight or nine speeches on this side of the House, two only have dealt with compensation. Our case against this Bill is on grounds other than that of compensation. It is on grounds of bureaucratic control, of inefficiency, of hardship to the consumer, of diminishing supplies and on many other grounds besides, as I hope to make clear in the course of my speech.
In the opinion of many of us on this side of the House electricity is, of all the industries in this country, the most unsuited for nationalisation. It is not like coal. There is no dynamic longstanding political demand for nationalisation by the workers engaged in it. I have read the resolutions of the electrical trade unions, and they seem to me to deal exclusively with the withdrawal of Ambassadors from Spain and troops from Greece—subjects about which these clever and genial artisans would, I should have thought, have known very little. But I make the point that the industry is politically quiescent. It is not like Cable and Wireless; no friendly Dominion has asked for State acquisition. It is not like civil aviation, where there is one remaining hope, external competition, to keep the industry on its toes. It is not like transport. As my hon. and gallant Friend the Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) said in a striking speech just now, the Government cannot find a single poor physical asset in the bag, unless it be the electrical fires which the right hon. Gentleman cannot provide the coal to heat. It is not like the Bank of England, where nationalisation makes no difference at all. The electricity industry is young; therefore it must be throttled. It is competitive; therefore it must be extracted from the field of competition. It is efficient; therefore it must have a ministerial and bureaucratic hierarchy stamped upon it. It is progressive; therefore it must have the road to free development blocked and cratered.
We have in this Bill the pure essence of Socialism, the poison of administrative power for its own sake. The methods of distillation are exactly the same as before; rushed legislation and a streamlined and mechanical design, imposed by Whitehall planners in defiance of the best advice from the industry itself. If 1525 the right hon. Gentleman would drink from the poison cup himself, I should not be sorry, but what appals me is the inconvenience and perhaps suffering which will be caused to many excellent people in the industry through political jobbery, and to many millions of consumers by reason of those perpetually increasing charges and that high-handed personal treatment which only a State monopoly knows how to impose. My right hon. Friend referred to the upheaval which is being caused by nationalisation at this time. 01 course, the right hon. Gentleman denied that there was any upheaval. Are we not. short of coal? Is there not the possibility that people's minds have been taken away from the technical side of the industry to deal with administrative complexities of nationalisation. Of course that is what has happened The coal is hot being produced.
Nobody is trying to gainsay that a degree of co-ordination in the electrical industry is required, and had it not been for the war, I expect that the majority of the decisions in the McGowan Report would, by now, have been enacted. I think I can safely say that we on this side of the House have gone a certain distance with the Minister. We should have entrusted the Electricity Commissioners with the task of reducing the number of undertakings. We should have defined areas of supply, though we should not have made them so few as has the right hon. Gentleman. The East Anglian area, for example, is of a fantastic and unworkable size. We should have standardised voltages, and fixed maximum prices, and reorganised tariffs. We should have insisted on equitable terms of compensation both for the companies and for local authorities. We should have reformed the industry, but our pace would have been reasonable, and our method sure.
The harm which the right hon. Gentleman is doing by his rushed and arbitrary methods is incalculable. He is taking hundreds of key men in the industry from practical tasks of development and putting them into the political and legal atmosphere required for a battle of rights. The planning of new power stations is being held up, because of the acute sense of disquiet and indecision which prevails. I know of one scheme, the Usk River Scheme, which is shelved or seriously de- 1526 layed because of lack of confidence in future prospects; and if the people of that area are miserably cold in a winter or two when the scheme might otherwise have been in operation, they can only blame the right hon. Gentleman, for his actions to-day. It is one of our main objections to this Bill that it disturbs and distresses the industry at a crucial moment in its recovery from the war.
I want to direct the attention of the House for a moment to Clause 2. The Central Authority is there given power to do two things which we on this side of the House do not like at all. The first is research, and the second is manufacture. With regard to the first, a duty is laid on the authority to conduct research into matters affecting the supply of electricity. Research is not permissive, it is mandatory. Now Section 30 of the Electricity Supply Act, 1919, empowered the industry to contribute from its revenue to its own research associations. The result of this has been the growth of such institutions as the British Electrical Research Association and the British Electrical Development Association. They are also—and this is a more important matter—in close touch with the supply side of the industry, the great research departments of the manufacturing companies and concerns, such as G.E.C., the Cable Group, English Electric, and so on. This Bill repeals Section 30 of the 1919 Act, and instructs the authority to conduct is own research. Is it the Minister's intention to destroy the research associations, and carve out of the manufacturing concerns one of their best earning assets If that be the case, he is dealing a shattering blow at the industry. We must have an answer to that, and I hope the Parliamentary Secretary will deal with it tomorrow.
The whole industry is very alarmed about this, on the radio side as well as the heavy engineering side. Rumour has it that the Coal Board is doing precisely this, and undermining the research institutions which deal with fuel conservation and the like. Perhaps we can have that cleared up tomorrow as well. But the position is potentially more serious when we look at manufacturing itself. The power companies have statutory authority to manufacture plant and equipment, but they do not do it. The Central Electricity Board never had the power. Local authorities never 1527 had the power to manufacture plant, though they have power to sell and hire. Now, we on this side of the House are opposed to extensions of State manufacturing and trading. We did not like the powers the Minister of Works took in the Housing (Miscellaneous Provisions) Bill last year to create a building organisation personally directed by himself. We would not like to see the Post Office extending its influence to absorb the great telephone and cable supply companies. We therefore ask the right hon. Gentleman whether he is, in effect, telling the Central Authority in Clause 2 (3) to get on with the manufacturing and sale of plant and fittings, and if so what safeguards he proposes. He said this afternoon that, in the last resort, he must have these powers. What precisely does that mean? Does he intend to hold it back as a threat or to exercise it?
What we fear is that part of the proceeds of an unnecessarily high tariff may be diverted to the manufacturing side of the Central Authority in order to secure commercial advantages for it against its competitors. The House has heard something today about interlocking manufacturing and supply concerns—I suppose "rings" were what was meant. I know that the British Electrical and Allied Manufacturers' Association is a powerful "ring" in the trade. I entirely agree that there must be some check upon its operations. I, for my part, detest private "rings" as much as I detest State monopolies. The point is that this Clause is much too blunt a weapon to use against the B.E.A.M.A. or lamp "rings," for example. I hope that between us we shall be able to devise something rather more subtle before the end of the Committee stage.
I pass on to the problem of the rural areas. Consumers in rural areas before the war complained grievously about the supply of electricity. My constituents, excellent supporters as they are, attacked me vigorously on the subject at the General Election. Before the war they waited years for electricity; but they are waiting for coal now. Waiting is not to be associated with a Government of a political persuasion. Mankind, unfortunately, is endowed with imagination and that raises expectations to unreasonable limits, as in the phrase: 1528Two hundred thousand houses is chicken feed.But, on the whole, I think there was ground for justifiable complaint. When electricity came to these rural areas, heavy instalment charges were exacted and tariffs were high, sometimes up to 5d. or 6d. a unit. I take the view that the companies could have done more than they did. But we must not allow our impatience at what was not done to belittle what in fact did take place. The capital cost of installation of rural equipment is 50 per cent. higher than in urban areas. In spite of all that, the number of domestic units consumed in the companies' areas, which are predominantly rural, jumped from 445 million in 1928 to 3,650 million in 1945.
That is an example of expansion which nobody can gainsay. Surely it is not the fault of the electricity companies that only 49 per cent. of rural houses are now using current. The current is available at the doors of some 67 per cent. of all rural houses. There is nothing in this Bill or in the White Paper about rural supplies. The right hon. Gentleman spoke about rural supplies, and talked about an intensification which was to take place, but he had no specific remedy for the present state of affairs. I do not see that nationalisation offers any hope, far less a guarantee, to my constituents that they will get cheaper and more abundant supplies of electricity. If the Post Office could show the same sweeping reduction in charges, and the same proliferation of its facilities as the electricity industry, then there might be a real argument for nationalisation. But it cannot do that. We all know that charges are higher all round and that the quality of service in post offices today is an abomination. Had it not been for the war, the electricity companies would have carried their supplies by now into 95 per cent. of the villages and, if left alone today, they would no doubt fulfil that pledge. In all the difficult circumstances of the war, their record was remarkable. For example, over 3,000 farms were equipped with electricity in that time.
I would like to ask two questions of the Minister. What is his policy on price unification? It is agreed that there must be some reduction in rural areas. Is he going to get that reduction by a subsidy from the urban areas, by a subsidy from the State or by reduction of costs under the new scheme, and, if so, how? The 1529 other question is about the material position. The right hon. Gentleman knows of the scheme that exists between the N.F.U. and industry—the five year plan —in regard to the number of wooden or concrete poles. That gave a figure of 180,000 poles a year, but 45,000 were all that was available last year. What is his policy for importing these poles, and what is being done to get 20,000 poles now lying fallow in the G.P.O. stores? What are the prospects of getting 100,000 miles of copper wire and 750,000 horse power of electric motors for farms?
I must rapidly pass over the question of compensation, which has been so ably dealt with by my hon. Friends, and come to the last subject with which I have time to deal, that of the consultative councils. The right hon. Gentleman said they were to be simple, democratic and would achieve their object.
§ Viscount Hinchingbrooke
The whole structure? On the contrary, I think the whole structure is oligarchic, difficult to work and likely to be frustrated. I congratulate the right hon. Gentleman on one thing. He has learned a lesson from the Coal Industry Nationalisation Act, and has decided that the consultative councils are to be set up forthwith and not at his subsequent pleasure. The danger that lies in the Goal Board is that it is virtually autonomous. If the Minister controls it, he will not tell us how he is controlling it. We have had a lot of very poor answers to recent questions. But the right hon. Gentleman has at any rate sought, in this Bill, to give a democratic facade to an authoritarian Measure, and he is, perhaps, the first Socialist to realise that the House of Commons has its work cut out to democratise the Government, let alone the vast industries which he is now taking under his control.
Nevertheless, I believe that Clause 7 is the velvet glove on the mailed fist, and tor these reasons. First, the members of the consultative councils are to be appointed by the Minister. Does he think that is democratic? It largely depends upon whom he appoints and what sort of persons are nominated by the local authorities. To judge by some recent appointments, I should say that the members of the consultative councils are more likely to argue the consumer's case against the consumer than represent the consumers' 1530 grievances to the area boards. The councils are, indeed, a hopeful resort for those gallants who have just missed appointments to the National Coal Board. In the whole array of area and district officers, with salaries and allowances, appointed by the Minister, there are plenty of opportunities for the old timers. The councils ought to be elected; if not, they ought to be entirely appointed by the local authorities, and not by the Minister. I hope we may get an Amendment on that.
Secondly, any decision of the councils stops short at the area board, if the area board frowns on it. There is no channel of approach from the councils to the Minister.
§ Viscount Hinchingbrooke
I cannot find it in the Bill. Thirdly, the consumer is powerless in the matter of tariffs. As my right hon. Friend has said, there is no quasi-official body under this Bill, such as the Railway Rates Tribunal. Under Clause 33, tariffs are determined by the area boards, subject to the direction of the Central Authority. The Central Authority can dictate what bulk charges it will make, and the area boards will have no option but to return a dusty answer to the consultative councils. The right hon. Gentleman can well say that that position obtains now. So it does, in part. But we do not like that situation, and if we had had the remedying of it, we should have made changes. The Bill makes it worse, and when, next year, gas is nationalised as well by a further Measure of Gleichschaltung, it will be worse still.
In conclusion, I want to express my chief complaint about this Bill, and to say what I conceive to be its prime danger, in the words of someone else. They are those of Mr. David Lillienthal, architect of the atomic age in the United States of America, and a man to whom technical planners, like many hon. Members opposite are, would be apt to turn as a source of pure knowledge and wisdom on social engineering questions. He writes, as a director of the Tennessee Valley Authority, that large-scale experiment which has lately been revealed as containing very considerable and very bare financial patches in its central administration.
§ Viscount Hinchingbrooke
Time will show. He says:When managers and technicians in business and in Government are permitted to use the leverage of their authority and expert knowledge to lodge irresponsible power in themselves, the very foundation of democracy is threatened.This Bill carries our ill-omened managerial revolution another stage forward. It gives semi-political power to a. new class of unrepresented and uncontrolled scientific administrators. It gives pride of place to technical achievement, and dethrones consumer needs. It is another plan foisted on a struggling country to satisfy and propitiate a temporary doctrinal madness. I ask the House to reject it absolutely.
§ Debate adjourned.—[Mr. Snow.]
§ Debate to be resumed Tomorrow.