HC Deb 01 November 1950 vol 480 cc293-304

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Sparks.]

10.0 p.m.

Lord John Hope (Edinburgh, Pentlands)

The subject which I wish to raise tonight is one of general importance, although the particular argument that I have to make will apply only to one part of the whole. The subject concerns the disposal of the general reserve funds of former local authority electricity undertakings in what is now the South-East Scotland Area. These funds, which include more than £1 million of investments and cash, are vested under the Electricity Act, 1947, in the British Electricity Authority. The South-East Scotland Area Board claims that, on principle, credit for such reserves should be given to the area boards in whose areas they were originally formed. So far, after many months of correspondence, the Minister has refused to intervene in favour of the board's claim, although, of course, the Act explicitly gives him the right of intervention.

Before examining the Minister's case point by point and destroying it—it will not be my advocacy that will do that but the facts themselves—I must ask—[Interruption.] I hope that the hon. Gentleman the Member for Ayrshire, Central (Mr. Manuel) will be with me. Most of his party in Scotland are—I must ask the House to note the effect of the Minister's refusal. It is that savings carefully accumulated in pre-vesting days are to be taken from those consumers whose savings they were and applied for the benefit of other consumers, who have contributed in no way whatever to their accumulation. This is confiscation pure and simple, and goes right against the spirit of the Electricity Act.

As for the Minister's case, there is one point to be made straight away. The fact that these reserves admittedly are vested in the Central Authority under Section 14 of the Act does not help the Minister in the least, for on Monday, 25th April, 1949, in an interview with the Lord Provost of Edinburgh on other subjects and then on this subject, the Minister explained—and I quote from a Ministry of Fuel and Power hand-out—that these (meaning these funds) have been vested in the Central Authority under the provisions of Section 14 of the Electricity Act, but that Act did not determine the ultimate destination of the assets which vested under this Section. The Central Authority might decide to return to the area board part of the financial assets vested under Section 14, and the Minister understood that this question was now being discussed between the area boards and the Central Authority. So much for the mere fact of vesting and its powers or lack of them.

I come now to the details of the Minister's case, and these are contained in the last letter from the Minister to the area board, dated 29th September, 1950. This is an unfortunate letter from a Minister, because, as I shall attempt to prove, part of it is inaccurate, part is offensive and most of it is irrelevant. The Minister puts up six points. The first is that he feels it desirable to emphasise that the principle underlying the Act is nationalisation and not regionalisation. That simply is not so. The truth is that although generation has been nationalised, distribution and consumer service is still regionalised under 14 area boards, and if that is not regionalisation all I can say is that the appointment of the boards in the first place was simply an expensive bluff and quite meaningless. As to the responsibility of the Central Authority for the overall balancing of budgets, that has no relevance here, for no action regarding the disposal of reserves can affect the overall budget in any way.

Secondly, the Minister says that: The Central Authority have the duty of generating and providing for all the boards supplies of electricity. … They are discharging that duty and are in fact selling electricity to all the area boards on the same basis. Then he has to add: Subject only to variation due to the 'Coal Clause'. So that there is, in fact, a variation. This point, too, therefore, is misleading; in any case it is irrelevant.

Thirdly, the Minister pointed out that the Central Authority, by spreading the benefit of the reserves throughout the country, is merely extending the principle that the board itself will follow in using them not for the benefit of Edinburgh, where admittedly they were mostly collected, but for the whole of the South-East Area. What a quibble! The intention of the board is simply to carry out the area principle in the Act itself. That is all they want to do.

Fourthly, the Minister states: in general, the finances of the Authority and area boards are designedly so interlocked that any special concession to South-East Scotland could only he given at the expense of the 13 other areas. This may be so in terms of the actual running of the industry after nationalisation, but again can have no conceivable reference to reserve funds accumulated before the Act was passed. The area is not asking for a "special concession." The true position, of course, is that it is all the other areas who are getting a special concession by this and that this particular area is having to bear a special burden. Why should it be so?

Fifthly, the Minister calls in aid: The almost unanimous concurrence of the area boards with the action taken by the Central Authority. Such concurrence would not be surprising on the part of those areas who have no reserves of their own. What I think is a little surprising is the readiness of the Minister to fall back on a self-contradictory phrase like "almost unanimous." It was not unanimous, obviously.

Sixthly and lastly, the Minister, as I said, finds it necessary to be offensive, and it is a great pity. He writes: It is possible to draw the conclusion from the representations which have been made and from Press comments in South-East Scotland that the board's attitude on this subject and local publicity are founded not solely on objections to specific action which has been taken under the Act, but on local objections to the principles of the Act itself. The short answer to that unworthy insinuation is that the board raised their objection as soon as they knew what the Central Authority intended to do and before any publicity was raised locally at all. I think in this connection it is not without interest that the suggestion of direct Parliamentary intervention in this matter was first publicly made by a Socialist member of the consultative council in the area.

So much for the Minister's case and the answer to it. So far as action is concerned, he can act under one of two sections: either under Section 19 (1), of the Act and direct a transfer of these assets; or under Section 5 (1), which he knows enables him to give such directions to the Central Authority: as appear to be requisite in the national interest. Personally, I think Section 5 is the right section for the Minister to use and what I would like him to do is to direct that the Central Authority, whilst retaining ownership of these general reserve funds, should give credit to the area boards which surrendered them by an appropriate writing down of the value of the assets on which these boards pay interest and depreciation. The spirit of this Act, as the Minister will agree and the House knows, was to give the consumer a square deal. It is in that spirit that I put my case to the Minister, and it is in that spirit that I hope very much that we shall get a favourable answer tonight.

10.10 p.m.

Mr. Hoy (Leith)

I wish to appeal to the Minister to reconsider this decision about the funds of the South-East Scotland Area Electricity Board. This money, which was accumulated under the prudent management of the old authority, was in fact a sum set aside for the benefit of the people under what we have always described as a scheme of municipal Socialism.

These funds were accumulated for the benefit of the consumers in the Edinburgh area. It is true that when the national authority took over, it was felt that, as far as possible, we should make electricity available to all sections of the community. Some people were prevented from getting it because of the charge, and the whole idea behind the scheme was that those who were in a more favourable situation should in some way help those who were in a less favourable situation. But, as the plan worked out, this large sum of money which was accumulated by the people of Edinburgh has been taken from them with no real compensation for the loss. In other areas debts were accumulated and, to a very large extent, those debts have been taken over by the Central Authority.

I ask the Minister to give further thought to this matter. We feel that there should be some system whereby this area which accumulated these funds should receive the benefit of them. I should not like the Minister merely to give us another emphatic "No" to this appeal. I ask him at least to consider the whole case again to see whether anything can be done to meet what I consider to be a very fair request from the people in the South-East Scotland area.

10.12 p.m.

Sir William Darling (Edinburgh, South)

It will be observed that in the House tonight are several Scottish Members, particularly Edinburgh representatives. There are present four former Members of the Edinburgh Town Council and, although they are in different parts of the House, they are well aware of the high quality and high standard of municipal management which the Edinburgh Corporation brought to its electricity undertaking. It was the pride of the City of Edinburgh not only that it was a competent local authority but that it managed prudently, and very properly laid aside suitable reserves.

For many years the rates of the City of Edinburgh were 7s. 11d. in the £. They were, I think, the lowest in the United Kingdom. In spite of that fact, by care and prudence in management, and possibly by over-charging in the electricity undertaking, there was built up a reserve of £1,042,000. That, in a House which deals in tens and hundreds of millions, is perhaps a small sum, but to a population of 500,000 a sum of over £1 million is considerable. It was with astonishment and regret that Edinburgh citizens of all parties learnt that one of the consequences of the Electricity Act was to take away from Edinburgh this carefully husbanded reserve.

As my noble Friend the Member for Edinburgh, Pentlands (Lord John Hope) has said, there are 14 areas. It seems to the citizens of Edinburgh that prudence, thrift, good management, business efficiency, and all the qualities which one would like to see in government, have apparently been despised and cast on one side. Those who did well have been put in the same position as the thriftless and the unworthy, the reckless and the spendthrift. The idea is current in Edinburgh that the city has been made to make sacrifices for other areas.

The noble Lord quoted from a statement by the Minister of Fuel and Power that the other area boards were hostile to this idea. My information is that that is not so and that the other area boards, although few of them have suffered the sacrifices that the South-Eastern area have suffered, are as hostile to what the citizens of Edinburgh think is confiscation as is the South-Eastern area. They feel that, though the concern has been nationalised, the Government should not do away with a certain amount of local control over the funds that they have accumulated, and I must say that I cannot think of a more irresistible argument.

The Lord President has drawn our attention to the importance of efficiency in nationalised industry, and I put it to him and to those who share his views that it is likely to cause a great deal of concern if local interest is removed from the management of electricity entirely. It is not only that local interest is being removed, but the carefully accumulated reserves by which the authority would benefit have also been removed, and that seems to be placing an undue handicap upon the possible success of a nationalised industry.

I am comforted by the fact that the hon. Member for Leith (Mr. Hoy) has spoken as he has done, and with that persuasive sweet reasonableness which is his characteristic. No doubt he feels, as a good Socialist, that this is a very bad thing. Here was municipal Socialist enterprise, successful in providing the glittering advantages which we would all like to see, and here it has been shattered and utterly destroyed by the chimerical organisation of the South-East Scotland Electricity Board. It is neither good government nor good local government.

I put it to the Parliamentary Secretary, who was recently entertained in the City of Edinburgh and who welcomed the entertainment, without any intention of prejudicing his independent views, that he must not allow this injustice to be done. It is not merely an injustice to the capitalist system, but an injustice to municipal Socialism. It is a crying down of ideas of which Mr. R. B. Suthers, in his book "Does Municipal Management Pay?" and Mr. George Bernard Shaw have been pioneers and which are to be destroyed. The Socialism which was built up 20 or 30 years ago by the pioneers is being torpedoed by the Ministry of Fuel and Power, and I beg the Minister not to do this thing. From the Socialist point of view, he should not do it, and he should see that Socialist principles and practice, established successfully, are upheld and not destroyed. I hope he will accept the advice of the hon. Member for Leith, look at the matter again and examine it in a calm and calculated way, and that, after he has done so, he will accept the advice which the noble Lord has offered to him this evening.

10.18 p.m.

Mr. Pryde (Midlothian and Peebles)

I should like the Minister to consider the problem which has been presented to him tonight. Coming from an area which includes some 700 square miles of the South-Eastern Electricity Board's district, we have very much at stake in this question. Hon. Members for the city have stressed the position of Edinburgh, but the area of the South-Eastern Electricity Board extends very considerably beyond the boundaries of Edinburgh, and I think that if the Minister will examine the first annual report of the Board, he will find that it stresses the fact that this was the last area to commence providing a supply of electricity to those areas. Previously, it was supplied by private companies, which bought the electricity for a fraction of a penny and sold it for much more.

We stand in great need. There is a large area in Peeblesshire which is one of the finest agricultural areas in Britain, and I hope the Minister will reconsider the problem to see if some relief can be afforded.

10.19 p.m.

The Parliamentary Secretary to the Ministry of Fuel and Power (Mr. Robens)

While great emphasis has been laid on Edinburgh in this Debate I am perfectly certain that the House would agree that we could not really deal with the reserves of the Edinburgh Corporation in isolation from the reserves of any other local authority in the country. Therefore, if there were to be any change at all in the treatment of these reserves it would have to be on general lines throughout the whole of the country, in order that we should be fair to all local authorities which are in the same position.

Lieut. - Commander Clark Hutchison (Edinburgh, West)

Is there any comparable case with any of the other areas?

Mr. Robens

If the hon. and gallant Gentleman will allow me, I was going to say that the size of these reserves does, of course, lend a good deal of colour to the argument, but there are other local authorities whose reserves, not being exactly as high as those of Edinburgh, are certainly in the region of £1 million. For instance, my own City of Manchester had reserves of something like £976,000, which is near enough to £1 million, but they have not sent representatives to this House to say that those reserves should have remained in the Manchester area.

What we have to look at is how the reserves of the local authorities should be treated. The Act laid down very specifically certain things. It said (a) that property, rights, liabilities and obligations connected with generating stations and main transmission lines, and all investments and cash, were to vest in the central Authority and (b) that property, rights, liabilities and obligations relating to distribution networks and the distribution side of the undertakings were to vest in the Area Boards.

It is quite true that there was no specific reference at all to reserve funds, but the central Authority were responsible under the Act for paying compensation for vested undertakings. They had to do it in two ways, in the form of stock for the private undertakings and by the payment of interest and repayment obligations in respect of outstanding debts of municipal undertakings. Additionally, of course, the central Authority has placed upon it by the Act the responsibility for the finances of the electrical industry as a whole. It has power to require area boards to make contributions towards the financial obligations of the central Authority in respect to compensation and Treasury borrowings.

That, broadly speaking, is the responsibility which is vested in the central Authority and the responsibilities of the area boards. Whilst the central board have the responsibility laid upon them under the Act, they did discuss with the area boards the arrangements which ought to be made, and general agreement was reached——

Sir W. Darling

Not Edinburgh.

Mr. Robens

No, not Edinburgh—that the burden of compensation should be borne in proportion to the net assets available for the use of the Authority and the 14 area boards. After calculating the assets on the basis of book values and setting against them any specific reserves, and after replacing the old securities by the new compensation stocks, there was a large debit balance made up of the intangible assets in the books of former undertakers. Hon. Members who are interested in that point might look at pages 171–2 of the first report of that Authority when they will see what was involved.

Lord John Hope rose——

Mr. Robens

I cannot give way; I have very little time.

In view of that fact, the general reserves of the former undertakings were applied to the reduction of the debit balance. But, even when this had been done, there still remained a net figure of £64 million which appears in the accounts. There was a conference of area board chairmen in July, 1949, and that conference agreed this procedure with the exception of the South-East Scotland and the Midlands Boards, so that, out of 14 chairmen, 12 felt that this was the right procedure to adopt.

Sir W. Darling

They were in debt.

Mr. Robens

That is not so because I have indicated some of the reserves held by the local authorities throughout the country. They may have taken a much broader view of this thing; I do not know. But the fact remains that out of 14 chairmen, 12 agreed with this pro- cedure. Now the suggestion that is made tonight is that the 12 area board chairmen who agreed with this procedure were wrong in their view but the two who dissented were correct. It really is contrary to all our ideas of consultation to decide that a minority of two are right and the other 12 are wrong,

Lord John Hope

Perhaps the Minister will adress himself to my arguments. I do not care two hoots about 12 or two area boards. I gave him my arguments in great detail. He might say something about them.

Mr. Robens

I am sure the noble Lord the Member for Edinburgh, Pentlands (Lord John Hope) would like to come over here and reply to his own speech. It just is not possible. The fact remains that we cannot look at this in isolation. We simply cannot take the South-East Scotland Electricity Board in isolation. What I am trying to do is to put the situation generally in broad principle and to say why it was decided that the reserves of local authorities should be treated in this way, and I had reached the point where I had said that 12 out of 14 area chairmen said this was the right procedure to be taken and the other two dissented.

On that basis, a decision was taken. What is being proposed at this stage? It is that each area board should take over all the assets and be responsible for all the liabilities in their areas. That would not have been nationalisation; that, in fact, would have been regionalisation, and we passed an Act of Parliament to nationalise the industry. Therefore it is just absurd to suggest that an Act of Parliament which, whether hon. Members agree with it or not, still remains an Act Parliament, to nationalise an industry, should be turned by some administrative procedure into an Act for regionalisation. The fact is that regionalisation was never the intention of the Act, and what has been done has been done in the sense in which the Act passed through this House.

Let us take Edinburgh, since it has been specifically mentioned. Hon. Gentlemen opposite would agree that a proportion of these reserves were in respect of the Portobello generating station. The profits made on that station went towards those reserves—I do not know just how much off-hand, and I doubt very much whether anybody else in this House knows. But the station did not vest in the Area Board. Consequently, some proportion of those reserves would still require to go to the central Authority in respect of that generating station. Therefore, the claim that is made for the whole of these reserves simply does not hold good.

All I am saying to those who raised the question and mentioned a specific figure of something over one million pounds is that it cannot all be in relation to the assets taken over by the South-East Scotland Electricity Board. The Portobello station must inevitably carry a very large proportion of that, and the reserves are there to back up that capital investment. The Portobello station is now under the central Electricity Authority, and therefore some portion of those reserves must lie there.

The noble Lord may not like the argument, because he may not like the facts. It is perfectly true that, where a large sum of money is involved, obviously there is great local feeling that it should stay within the area. I understand and recognise that. It seems to me one has to adopt an attitude in relation to this which is in the broad interest of electricity distribution throughout the country and that is what has been done.

The Question having been proposed at Ten o'Clock and the Debate having continued half an hour, Mr. SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at Half-past Ten o'Clock.