HC Deb 25 June 1947 vol 439 cc613-21

(1) This Part of this Act applies to—

  1. (a) the bodies specified in the Schedule (Authorised undertakers to whom Part II of Act applies) to this Act (hereafter in this Act referred to as "authorised undertakers") being the bodies who fall within the class described in the next following subsection;
  2. (b) every company (hereafter in this Act referred to as a "power station company") who are not authorised undertakers but whose business wholly or mainly consists in the construction, owning or operating of a generating station or stations for the supply of electricity to authorised undertakers; and
  3. (c) every company (hereafter in this Act referred to as an "electricity holding company") who—
  1. (i) are not authorised undertakers, or a power station company,
  2. (ii) had at the date of the last audited balance sheet of the electricity holding company before the first day of January, nineteen hundred and forty-six, one or more subsidiary companies, being authorized undertakers or power station companies, and
  3. (iii) at the said date held securities of, or rights in respect of moneys owed by, 614 the said subsidiary companies, the value of which, as shown in that balance sheet, amounted to not less than three-quarters of the total amount of all the assets of the holding company as so shown.

(2) The class of bodies referred to in paragraph (a) of the last foregoing Subsection are—

  1. (i) bodies who supply electricity under the authority of any enactment in any area of supply in Great Britain; and
  2. (ii) bodies who supply electricity, under the authority of an enactment, to the bodies mentioned in paragraph (i) hereof or to the Central Electricity Board;

Provided that the said class does not include—

  1. (a) any body, other than a local authority, whose business as suppliers of electricity consists wholly or mainly in the supply of electricity for consumption by themselves or by a company of whom they are a subsidiary company;
  2. (b) any local authority who supply electricity for the purposes of a transport undertaking carried on by them and do not supply electricity for other purposes to any substantial extent; or
  3. (c) any body, other than a local authority who carry on a transport undertaking and who do not supply electricity under any provisional or special order made under the Electricity (Supply) Acts, 1882 to 1936.

(3) Where a special order made under section twenty-six of the Electricity (Supply) Act, 1919, comes into force between the passing of this Act and the vesting date and provides for the transfer of the undertaking or any part of the undertaking of any authorized undertakers to another body, the order may—

  1. (a) if the body from whom the undertaking or part thereof is transferred no longer falls within the class described in Subsection (2) of this Section, provide that this Part of this Act shall not apply to that body;
  2. (b) if, by reason of the transfer, the body to whom the undertaking or part thereof is transferred falls within the said class, provide that this Part of this Act shall apply to that body;
and this Act shall have effect in accordance with any such direction.

(4) Any such special order may, for the purpose of giving effect to a transfer of the undertaking or part thereof, revoke or amend any enactment relating to the powers of the body from whom the undertaking or part thereof Is transferred.

(5) For the purposes of paragraph (c) of Sub section (1) of this Section, where the value of any such securities or rights as are therein mentioned is not separately shown in the balance sheet therein mentioned, by reason that they are grouped with other assets of the company and the balance sheet shows the value of the group as a whole, the value placed on the said securities or rights in the books of the company and used in arriving at the value of the group of assets as so shown shall have effect as if it had been shown separately in the balance sheet."—[Mr. Gaitskell.]

Brought up, and read the First time.

Mr. Gaitskell

I beg to move, "That the Clause be read a Second time."

In the Bill as originally drafted the bodies whose assets were to be transferred were authorised undertakers, power station companies and certain holding companies, and authorised undertakers were defined as the Central Electricity Board, any joint electricity authority and any other body authorised by any enactment to supply electricity in Great Britain. This last definition was found to be too wide. It includes certain local authorities and other bodies which supply electricity for transport and tramways only, and the attempts we made to try and narrow the definition were not entirely successful. We finally decided that the best way of dealing with the problem was to put a list of authorised undertakings into a Schedule and describe in the new Clause, in general terms, the classes of bodies to be taken over in the Schedule. These changes were foreshadowed by my right hon Friend at an early stage in the proceedings in Committee and subsequently I myself gave the scheme in outline in the discussions on Clause 59. The new Clause takes the place of Subsections (2) and (3) of Clause 13, and it proceeds to list the three groups: first, all those in the Schedule; secondly, power station companies; and thirdly, holding companies.

Apart from the differences I have mentioned, the only other change is in the definition of holding companies. This has been altered again in accordance with undertakings we gave so as to allow out of vesting certain classes of holding companies which otherwise would have been in. As the hon. Member for Stockport (Sir A. Gridley) will recall, he asked during the Second Reading Debate whether we were to take over holding companies with no controlling interest in any subsidiary companies? I indicated that we should not do so. There is one such company which will be excludes under the new arrangements as I shall describe in a moment. Now we are pressed to go further than that and we have agreed to do so and adopted the suggestion made by the Opposition that we should take over holding companies which have 75 per cent. of their assets in the form of holdings of subsidiary companies in the electricity industry. And that of course, does narrow the field slightly. I will explain the change by example. If a company had assets of £I million and £500,000 in subsidiary companies, say, £300,000 in other electricity undertakings which it did not control and the remaining £200,000 in cash and outside investments, such a company will now be excluded whereas previously it would be included.

I do not need to say very much more about the new Clause. Subsection (2) indicates the classes of bodies included in the Schedule and specifically excluded. Subsections (3) and (4) provide for alterations which may be made by special orders before the vesting date. Finally, we had the assistance of the Opposition who put down two Amendments of a technical kind at an earlier stage which we certainly would have wished to accept in principle. We discussed the matter with the Opposition as to whether a slightly different Amendmem would meet these points and we are grateful to the Opposition for drawing attention to these weaknesses in our original draft.

Mr. R. S. Hudson

I beg to move, as an Amendment to the proposed Clause, in line 20, at the end, to insert: Provided that it any electricity holding company shall before the vesting date serve on the Minister a notice in writing requiring that in respect of the securities or rights' mentioned in paragraph (c) of this subsection the company desires to be treated in like manner as other holders of the like securities or rights, then for the purposes of this Act such company shall be treated accordingly and shall be deemed not to be an electricity holding company. Perhaps it would be for the convenience of the Committee if I also deal with the following Amendment on the Paper to insert: Provided that any of the bodies specified in Part II (Composite companies) of the said Schedule may, at any time before the vesting date, serve on the Minister notice requiring that this Act shall not apply to such body and thereupon this Act shall not apply to such body. These Amendments are intended to provide that different persons may opt to be out of the Clause. The result of our first Amendment would be to enable holding companies to opt right out of the Bill altogether. I do not want to go into it at great length except to say that if any such holding company did opt out, it would not prevent the new Central Electricity Authority from having all the electricity assets that the holding company possess. The electricity assets would automatically, of course, vest in the Board, and it would really enable the holding company for other purposes, either at home or with important assets from an invisible export point of view abroad, to continue in business. We do not think that on the whole this could do any harm to the general routine set up in the Bill.

1.o a.m.

The second Amendment refers to a comparatively small number of special cases of composite bodies, undertakings which are probably only 12 in number. Under the provisions of the new Clauses, arrangements are contemplated whereby these composite companies can sever their electricity undertakings, which have to be handed over to the Board, from the rest of their activities, in particular, and most important, gas. We understand, from speeches made by Members of the Government, that, sooner or later, they propose to bring in a Bill to nationalise the gas industry. On that assumption, as the electricity portions of these companies are not of any great importance or moment, it would seem better that, instead of going through all the difficulties which will be involved in severing the electricity and gas parts of the undertakings for a comparatively short time before gas is nationalised, they should carry on as they are and that one bite should then be made at the cherry and the whole lot taken over later on, when the gas industry is nationalised. That represents, very briefly, the substance of our two Amendments, and I hope that the Government, even if they cannot accept the exact wording of the Amendments as we have them on the Order Paper, will consider accepting the principle of them and possibly making the necessary alterations during later stages of the Bill.

Sir A. Gridley

I was hoping that someone would rise from the Front Bench opposite to give us an indication whether the Government are going to accept these Amendments, or not. If they are not going to accept them, I am afraid I must put my case in support of them. May I disclose a particular interest which I have in this matter, because I happen to be a director of a small combined electric lighting and gas undertaking? It may be one of a dozen undertakings which own gas or water undertakings or both. It would be a most absurd arrangement if we had to part with the electricity undertakings and were left for a comparatively short time to carry on with the gas. In fact I do not know how it would be possible to do so, because the majority of the management and staff are engaged in looking after the electricity supply undertaking, which is by far the larger of the two; there would be no one, if the electricity undertaking were taken over, with its staff, to run the gas undertaking properly. There are other cases where these composite companies have ordinary shares, preference shares and debenture shares, and if part of the securities is taken over, great complication would arise with regard to the rights of the debenture holders and so on.

These are reasons additional to those which were put by my right hon. Friend, and there is the third point which I would raise. We have had a very long discussion about compensating local authorities. There would be a similar question arising about these composite organisations and there is no suggestion there should be compensation for such companies as these. I should have thought that from the commonsense point of view the Government's nationalisation would be in no way affected by these 12 undertakings being left as they are as a matter of convenience. It will not make the initiation of the nationalisation of the industry much different. Leave these for 12 months or so until the gas nationalisation Bill is put on the Statute Book. Of course, if the Government say they have not any intention of nationalising gas, the position is different but we have heard no alteration to the statements made that that industry is to be nationalised. The Government will have gas, electricity, coal, and oil in one great monopoly undertaking, and I do feel the Minister should say if there is any real reason why the undertakings to which I refer should be disturbed. They will fall into the Government's lap in due course and if the Government leave them alone, there will be no unnecessary dislocation.

Mr. Gaitskell

I am sorry, but we cannot agree to this Amendment. I would like to meet the Opposition on this but there are pretty strong grounds why we cannot go farther than we have already gone. I think the Opposition will agree that we have gone a long way to meet them. These holding companies— now reduced to 12—are true holding companies managing a series of electricity undertakings, as an essential and integral part of the electricity supply industry. As hon. Members have said, these companies have played a worthy part in the past in developing electrical supply. We shall be taking over few non-electrical assets, under the new definition we have made of holding companies. There is something in what the hon. Member for Stockport (Sir A. Gridley) has said about it being a matter of common sense, but one of these undertakings has a capital of about £2,500,000 and practically all of it is electrical. Secondly, if a company feels it cannot carry on with gas alone and without electricity it is free to opt to be taken over as a whole. I cannot go farther than saying that I will think over the points the hon. Gentleman has made on the second Amendment, but I am afraid I cannot give a definite undertaking now.

Colonel Crosthwaite-Eyre

I did not think the Parliamentary Secretary's statement was very satisfactory. He has in effect said that we on this side ask them to' take over holding companies. I think that was a slip of the tongue but I would make it clear that we on this side have never asked him to take over these companies. We asked for certain companies to be excluded when we discussed it in Committee. I cannot see that these holding companies should not be treated just as any other shareholder is treated. Why should they not be paid out? The Parliamentary Secretary said he wants managerial experience. That seems to be a very poor reason. Shareholders of holding companies may have other ideas of what should be done. He says he is going to perpetuate injustice in order to secure this particular advantage he wants for himself, or the Government want for themselves under this Bill. That does not seem to be a logical or reasonable argument. We should expect, and have every right to expect, holding companies which, in fact, are exactly equivalent to shareholders, to be treated in the same way and for this differentiation to be made does not seem to us to be reasonable.

I would go further. Holding companies under previous Measures, such as Cable and Wireless, have been exempt and are starting in spheres of activity which are highly useful and it seems that holding companies in the electrical field could do the same. If they are to be taken over and abolished, according to the Parliamentary Secretary's own words, so that managerial experience may be available to the electricity board, it was not reasonable. If they want managerial experience, let them compete for it and obtain it from the open market. They could do that on terms as favourable as anyone else but to abolish the existing enterprises so as to force on the market this sort of type of experience seems to be quite unjustified. It seems to me that there is no real reason for taking them over. They are merely being taken over to provide, on the cheap, something that the Minister desires in a technical way. That seems to be inequitable and unjust. I hope that before we leave this someone from the Front Bench will produce a more positive reason than that of trying to get something on the cheap as they are now doing.

Mr. Palmer (Wimbledon)

I want to deal with the point about holding companies. There is another good reason why they should be taken over because very often they have a very vast practical technical organisation which has been, for a great number of years, integrated into the whole structure. I have Edmund-son's particularly in mind. Edmundson's have a large technical staff and a central testing department and fine facilities of a higher order than is available to the electrical supply industry. Not to take over holding companies and their organisations intact would seriously weaken the intention of this Bill. Therefore I, for the best practical reason, support the Government.

Sir A. Gridley

The argument of the hon. Member for Wimbledon (Mr. Palmer) is entirely fallacious. Under our Amendment the composite companies would remain unsevered until they could be taken over as a whole and no staff severance would arise.

Amendment to the proposed Clause negatived.

Clause added to the Bill.