Clause 13.—(BORROWING POWERS OF ELECTRICITY COUNCIL, GENERATING BOARD AND AREA BOARDS.) (Hansard, 4 April 1957)

§ Mr. Richard Fort (Clitheroe)
I beg to move, in page 9, line 33, at the end to insert: (2) The Generating Board or any Area Board may, with the consent of the Minister and the approval of the Treasury, borrow money by the issue of Electricity Stock for all or any of the following purposes, that is to say—

(a) the provision of money for meeting any expenditure incurred by a Board in connection with any works the cost of which is properly chargeable to capital account;

(b) the provision of any working capital required by a Board;

(c) the repayment of money temporarily borrowed by a Board.

I move this Amendment in the absence of my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke), who is away on the business of the House. He asked me, Mr. Speaker, to express to you his apologies on that account.
My noble Friend, my hon. Friends and I tabled the Amendment for two reasons. The first is to bring before the House 587 a point made by Sir Edwin Herbert and his Committee which has not so far been fully answered by the Government in rejecting the reasoning put forward by the Committee. The second reason, and this is perhaps more fundamental, is that many of us feel that only by getting nationalised industries such as the electricity industry to go to the market can we make sure that they are really using to the best possible advantage the capital which they had been getting from Government sources or with Government support.
For many years I have held the view that this country's second most valuable asset, after our countrymen, is the savings which we make. Those savings should be used to the best possible advantage. Many of us feel that the method by which the nationalised industries have been allowed to draw capital with the full backing of the Treasury has often resulted in their not using that asset to the best possible advantage.
The Herbert Committee made this point extremely well in paragraphs 347– 350 of its Report. Its first remark, which does not represent the point of view of some of us, was: We believe that in the nature of things the use of capital cannot be as strictly or as closely guided by economic considerations as is the case in private industry. I think we feel that the valuable asset of capital should be closely controlled whether it is in private or public hands.
The Report goes on: With this in mind, we have given serious consideration to the question whether Area Boards and the Generation Board should not be required to raise their own capital by going directly to the market, without the support of the Treasury guarantee, and competing there on the basis of the financial position and prospects of each of those bodies respectively. We feel that short of this it is very difficult to achieve full efficiency. I know that last year my right hon. Friend the Prime Minister, when Chancellor of the Exchequer, took action which gave the Treasury closer control than in the past over the capital expenditure of the nationalised industries, including the nationalised electricity undertaking, but, even so I do not think that there is any party controversy about this—I believe that it has so far been impossible to work out a system of Government control to make the best use of the capital which 588 these industries require or to make them use it in a manner comparable with that of private industry when it has to go to the market.
It is for those reasons that we tabled the Amendment, which seeks to give permissive rights to the Generating Board and the area boards to go to the market and employ that means of making their use of capital more efficient, provided that they first get the permission of the Minister, thereby making sure that their operations fit in with overall Government planning of capital expenditure.

§ Mr. Gerald Nabarro (Kidderminster)
I share the regret of my hon. Friend the Member for Clitheroe (Mr. Fort) that my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) is unable to be present to move this very important series of Amendments. My noble Friend went to Germany this afternoon. His absence is singularly um fortunate. because during our proceedings in Committee on the Finance Act of last year—sadly, at 4 o'clock in the morning —he initiated a discussion of similar Amendments standing in his name and my name dealing with the Clause in that Measure which placed directly upon the Treasury the statutory responsibility for a close scrutiny of the capital investment requirements of certain nationalised industries.
We are here discussing an industry which is by far the most expensive of all the nationalised concerns. I make no criticism of that, having regard to the capital equipment necessary in respect of generation plant, and especially as, in arithmetical progression, the energy demand of the country is rising at about 10 per cent. per annum. thus doubling every ten years, one would expect the sums of money involved to be very heavy. However, there may well be legitimate differences of opinion, in both fundamentals and incidentals, as to how the capital should be subscribed and what control should be exercised over it by Parliament or, alternatively, by money market considerations. That second point enters into the matter at every stage, and especially having regard to the very pointed and often critical comments made by the Herbert Committee.
The fact is, of course, that during our lengthy debates in Committee, all 589 speakers, whether Socialist or Conservative, used sections of the Herbert Report to suit their particular argument. I do not exonerate Her Majesty's Government from idiosyncrasies of that kind. They followed exactly the same practice. In fact, certain major recommendations of the Herbert Report have been enshrined in the Bill. Others have been neglected and others have been amended and it would he fallacious to suggest that the Bill is an implementation of the whole series of recommendations of the Report. That is not so.
However, the Report is very explicit indeed upon this important matter of capital subscription. My hon. Friend the Member for Clitheroe quoted just one passage. There are other passages to which the House ought to give consideration today, because the Report is voluminous. It runs to nearly 200 pages and is packed with technical and economic data of every kind. The issue of the subscription of capital recurs at intermittent stages in the Report, but is right through the theme of the Report and every recommendation is consequential on the fundamental point that this very expensive nationalised industry should change its borrowing habits and that the Government should do all possible to induce it, as far as they are able. to resort to the money market, instead of the close umbrella arrangements which we have at present under the Finance Act of last year and earlier statutes with a Treasury guarantee.
The House might first care to turn to page 6 of the Report, where paragraph 26 contains words which are very carefully chosen and upon which, I am informed, the members of the Herbert Committee deliberated for a very considerable time. The words are: The electricity industry does not compete on equal terms in the money market, because in common with other nationalised industries, it has been given the benefit of raising money under Treasury guarantee on the national credit through the gilt edged market. The amount of capital to be raised, therefore, depends not upon the attractive power of the industry as such but upon the decision of Her Majesty's Government as to how much capital shall be raised on the national credit on its behalf. which in essence is a political decision in the sense that the Ministers responsible for making it are answerable to Parliament in respect of it. It appears to us that this unavoidably injects a political element 590 into the whole structure of the industry including the price structure of its product. That is a very clear statement of the position which has existed during the last ten years, but it does not mean to say that it is a desirable position, having regard to the high percentage of the national investment programme which is claimed by the electricity supply industry.
I shall aver in a moment that this is a practice which leads to wastefulness in resources and to financial extravagance. These views are not unique to me. They are views which are expressed in other words and in other forms by the Herbert Committee which investigated this industry so thoroughly. In paragraph 28, and these words are equally important, the Report says … although the industry is not required to earn a profit over and above the cost of servicing its loans, it should be conducted as a commercial concern, should be self-supporting and (except with regard to compensation stock) should be able to finance itself without any reliance upon a Treasury guarantee being always available for raising its capital… That is an extremely important announcement. It is the first time that an entirely impartial committee of investigation, an investigation undertaken on the generally accepted thesis that these great undertakings should be impartially considered every seven years, has decided and pronounced that this industry, the most expensive of them all, should resort to the money market without a Treasury guarantee.
Right hon. and hon. Gentlemen opposite can hardly criticise the method in which the Herbert Committee was established, its terms of reference, or the interval of years which was allowed to elapse between nationalisation of the industry—and it passed into national ownership on 1st April, 1948—and the date the Herbert Committee was established. It was the right hon. Gentleman the Member for Lewisham, South (Mr. H. Morrison) who said in the House in 1950 that his view was that, on balance—and I concurred from the then Opposition—that such impartial inquiries should be conducted into these nationalised undertakings, by persons suitably qualified and equipped to do so, once every seven years.

§ Mr. William Warbey (Ashfield)
The hon. Member keeps using the word 591 "expensive" about this industry. Will he make it quite clear that he is using that word in a rather odd sense, in which he means that it is responsible for a large proportion of the capital expenditure of this country, but not in the sense that it is inefficient expenditure, as every objective test shows that this is one of the country's most efficient industries and has reduced its real cost to the consumer?

§ Mr. Nabarro
Of course, there is an important distinction between the meanings of "expensive" and "extravagant". I said earlier that this industry took a major part of our capital investment programme. It is, therefore, expensive. I said, quite reasonably, and I do not think that anybody will quarrel with me, that in the very nature of electricity generation the capital plant required was expensive. That should not be a controversial statement. What will be controversial—and, my goodness, the hon. Member for Ashfield (Mr. Warbey) will not like it—is the statement that this industry is extravagant and wasteful.

§ Mr. Warbey
Nonsense.

§ Mr. Nabarro
The hon. Member says "Nonsense". We will quote from the Herbert Report. Evidently the hon. Member has not read the Herbert Report with the avidity with which he should have read it. Let us glance at page 91: As we shall show, there is ample scope for an attack upon costs, in the scale of capital expenditure, in the utilisation of capital, in the use of manpower and in other directions. In our opinion, the industry is languid "— I emphasise the word "languid"— in its approach to these problems and we should expect to see a far more vigorous approach before the expedient of raising prices is contemplated. Does the hon. Gentleman now say that my terms are extravagant, or that the industry is not extravagant? The use of the word "languid" is an indictment of the industry, in its approach to these matters, of very great importance, especially having regard to the fact that it is the most expensive of the nationalised industries. I will willingly give way to the hon. Member for Ashfield if he wishes to withdraw his earlier assertions. He does not. He shouted "Nonsense", but I think that my hon. Friends and I certainly prefer to have much greater 592 regard to the deliberations and findings of the Herbert Committee and its admirable Report than to the personal opinion of the hon. Member for Ashfield.
I shall not quote at greater length from the Herbert Report because, as I have said, it is fundamental to all the recommendations and findings of the Committee that there should be resort to the open money market and as early as possible the expunging of the Treasury guarantee on the substantial sums of capital the industry raises. I claim that the first Amendment is exactly consonant with the economic and financial policy of the Tory Government during the last few years. Three or four years ago, we decided to grasp the nettle of local authority capital-raising activities and caused many of the larger local authorities not to have to resort any longer to the Public Works Loan Board, but to go direct to the money market.
4.0 p.m.
When my right hon. Friend replies he might tell me what is the difference in principle between the large local authorities going to the money market for their requirements and the nationalised electricity industry doing likewise. In fact, they both have a monopoly source of revenue, the local authorities through their rating system and other sources and the nationalised electricity industry through the revenue which it derives from the sale of current. I believe that the principle which the Treasury promulgated four years ago of causing local authorities to borrow their money on the open market should be extended.

§ Mr. Cyril Bence (Dunbartonshire, East)
Shocking.

§ Mr. Nabarro
It is not shocking. It has made a very important contribution to resolving financial problems in the last few years, and I emphasise that it has done a great deal to minimise extravagance in capital expenditure.
That is one of the primary reasons that the Herbert Committee recommended that there should be resort to the money market by the area electricity boards—for exactly that reason and to restore a greater degree of financial probity. It is true that my right hon. Friend has an annual scrutiny of the capital sums involved, but if there were unrestricted resort to Treasury 593 finance the situation might be highly inflationary, as my noble Friend brought out very clearly in his speeches in Committee.
I turn to a different aspect of the problem, but one which the House ought to consider this afternoon. The sums of money which the nationalised electricity industry raises are not solely for the purpose of generating and transmitting electricity. The nationalised industry is involved in every kind of commercial enterprise connected with electrical contracting, directly in competition with private enterprise, and in the sale of appliances. There are tens of millions of pounds worth of electrical appliances sold annually from the retail shops and showrooms of the area boards. For example, one may go into an area board showroom in practically any town in the country and see it absolutely packed with electrical appliances of every description.

§ Mr. Ernest Davies (Enfield, East)
Why not?

§ Mr. Nabarro
I have no objection to the system at all providing that there are terms of parity and absolutely fair competition between the nationalised undertakings and private enterprise.

§ Mr. Bence
There are.

§ Mr. Nabarro
The hon. Member displays his ignorance in these matters by saying that there are. That is exactly what there are not. He keeps nodding. He must go away and learn the facts of life before he contradicts me in this matter.
I will give just two examples to show why the competition between the two is grossly unfair. There are scores and scores of these showrooms and shops, for the sake of example, which are not paying local rates; they are not paying a penny either through the pool of rates or direct to the local authority. They have never been assessed for rates, because they are part of a nationalised concern.
Does the hon. Member consider that it is fair that where a shop is selling refrigerators or carpet sweepers or electric blankets or cookers, because it is nationalised it should pay no rates, whereas the private enterprise shop down the road should pay rates?

§ Mr. Speaker
I can see that there is a connection between this point and the Amendment, but I do not think that we want to get involved in this discussion again. We have already had it.

§ Mr. Nabarro
I will leave the problem of local rates with this final statement on it—that there is great disparity in this matter today between the two.
What is more germane to this Amendment is the simple fact that the capital used for financing the stock in trade of these appliances in the area boards' shops and showrooms is being provided at artificially cheap rates under Treasury guarantee and at approximately half the cost which the private enterprise shopkeeper has to pay for his capital in financing the sale of appliances. It is no good the hon. Member for Dunbartonshire, East (Mr. Bence) shaking his head; this is a point which has readily been conceded, and if he will turn to the Herbert Committee Report he will find it clearly set out in that Report.

§ Mr. Arthur Palmer (Cleveland)
Would the hon. Member care to give a figure showing the amount of capital expenditure on fittings, stocks and the domestic appliances to which he referred as a proportion of the total capital expenditure of the industry?

§ Mr. Geoffrey Hirst (Shipley)
That has nothing to do with it.

§ Mr. Nabarro
It is a matter of degree.

§ Mr. Palmer
It is a fleabite.

§ Mr. Nabarro
On the contrary, it is not a fleabite. It is a matter of £50 million. Is that a fleabite?

§ Mr. Palmer
What is the proportion?

§ Mr. Nabarro
I will give the proportion.

§ Mr. Nabarro
May I answer this point first?
The fact is that in the aggregation the area boards last year sold appliances and carried out contracting services, in direct competition with private enterprise, to the extent of about £50 million a year. That is a very large sum of money. It is a trading expense.
595 Of course, the net capital employed in that trading depends on how many times the stock was turned over in the course of a year, as everybody will recognise. The average sale of appliances in the average shop involves turning the stock over twice a year. If the hon. Member for Cleveland (Mr. Palmer) does a little sum, and divides £50 million by two, he will see that, taken on an annual basis, £25 million is vested in stocks in trade of these appliances in the shops of the nationalised industry. Does he still consider that a fleabite? He nods, so I presume that he does consider it a fleabite. In the Socialist pattern of finance it may be considered a fleabite, but to me £25 million is a very large sum of money, especially when it is money provided under Treasury guarantee and used, in my opinion, for a purpose to which, when the industry was nationalised, the Treasury never intended that the Treasury guarantee should apply.

§ Mr. Albu
Would the hon. Member stop being quite so emphatic and answer one question of fact? What is the capital sum which has to be raised by the Electricity Authority or the area boards for this purpose and what would be the difference between the interest paid on the capital at present for these enterprises and the interest the Authority would have to pay if it went to the free market?

§ Mr. Nabarro
I will deal with those two points; they are separate, but related.
If the hon. Member will turn back over the records of the OFFICIAL REPORT he will find that a few months ago I asked the predecessor of my right hon. Friend the Paymaster-General, the present Minister of Supply, Questions about the capital arrangements of these nationalised industries. In reply to one of those Questions, my right hon. Friend said that he had stopped all capital authority for appliances sold by hire purchase. Most of these appliances are sold by hire purchase, and it is, therefore, clear that he considered that this was a matter of considerable moment.
The hon. Member for Edmonton (Mr. Albu) asks what is the difference in the rate of capital. I will tell him willingly. The electricity industry is raising money at 4¼ per cent. In present circumstances 596 that is an artificially low rate. If a private enterprise distributive or retailing firm sells an equivalent appliance from a retail shop it will have to pay approximately twice as much for its capital, which is the commercial rate today; it will have to pay approximately 8 per cent. to 10 per cent. for the capital which it is employing for that purpose.

§ Mr. Bence
No.

§ Mr. Nabarro
If the hon. Member wishes to contradict me, let him get up and do so.

§ Mr. Bence
Is the hon. Member suggesting that a retailer carrying stock and arranging credit with his bank to carry that stock would have to pay 8 per cent. to 10 per cent. on his overdraft?

§ Mr. Nabarro
I did not say "overdraft." If he borrowed from the bank he would pay the Bank Rate plus 1 per cent. or 1½ per cent., making a total of about 6½ to 7 per cent. But I did not say "overdraft." As usual, the hon. Member is very wide of the mark. The retailer would pay the appropriate market rate for risk capital. The carrying of stocks in a retailing enterprise requires risk capital. In present circumstances he would pay between 8 per cent. and 10 per cent. for it.

§ Mr. Nabarro
No doubt in due course everyone will have an opportunity to reply to the points which I have made. I should not expect that any Socialist would agree with me. The Socialists believe that the nationalised industries should borrow their money either at infinitesimal rates of interest or at no rate of interest at all.
I am a Conservative and I believe exactly the opposite. I believe that the nationalised industries should pay the market rate for their capital. If the area boards are in competition with private enterprise, as they are in all their retailing and contracting activities, they should he required to pay the market rate for their capital in order that there shall be strictly fair competition.
That is in the Herbert Committee's Report. It is the general theme of the Report. It is the purpose of the Amendment standing in the name of my noble Friend the Member for Dorset, South (Viscount Hinchingbrooke) and myself. 597 It is also the tenor of my right hon. Friend's Amendment that we will be discussing later. The tenor of my right hon. Friend's Amendment is that permissive power shall be granted to the area boards to go direct to the money market.
I am delighted, therefore, to find that my right hon. Friend and myself are exactly in agreement with one another on this important principle. [HON. MEMBERS: "No."] Oh, yes, we are. I see the right hon. Member for Lewisham, South nodding. We are exactly in agreement with one another. It is a matter of degree, possibly, but we are all moving in the broad stream of Tory policy.

§ Mr. Bence
The broad stream is muddy and sluggish.

§ Mr. Arthur Holt (Bolton, West)
In case, by inadvertence, the hon. Member misleads the House, may I point out that in both the original Act and in the Bill the intention always has been that the Treasury could give a guarantee? As far as 1 can see, nothing has ever prevented the Treasury from allowing the old Central Electricity Authority to issue stocks on the market without guarantee and to take the normal conditions.

§ Mr. Nabarro
As the hon. Member will appreciate, I do not yet sit on the Treasury Bench and it is no part of my purpose to enunciate Government policy. My right hon. Friend will do that presently.
What I was saying when I was interrupted by so many Socialists was that my right hon. Friend and myself are moving forward in the broad stream of good Tory policy. That is why right hon. and hon. Members opposite are so cross with us for having put down these Amendments this afternoon. I commend the first of these Amendments to my right hon. Friend. I know from the terms and the text of his following Amendment that it will have his most sympathetic consideration and I hope that in preference to his Amendment, he may consider it appropriate to write into the Bill the Amendment in the names of my hon. Friends and myself.

§ Mr. Herbert Morrison (Lewisham, South)
We have just listened to an anti-consumer speech from the hon. Member for Kidderminster (Mr. Nabarro). Let there be no mistake about it. That was a speech, conscious and deliberate, in opposition to the interests of electricity 598 consumers. It was meant to put up the price of electricity and it was meant to do that to discredit a nationalised industry.
I listened to the hon. Member for Clitheroe (Mr. Fort), who made a moderate, steady and constructive speech from his point of view, with which I do not agree. The hon. Member for Kidderminster, who followed him, was typically loquacious, speedy, denunciatory and inaccurate on a whole number of things, for which he is famous not only in this House but in the world of industry outside.
It is implied that the Government having appointed the Herbert Committee and the Committee having reported, we must not disagree with it. That is nonsense.

§ Mr. Nabarro
I did not say that.

§ Mr. Morrison
It was a respectable Committee. I do not agree with a number of its recommendations, but it did its work to the best of its ability. It is true that when 1 was Lord President of the Council I announced that the Labour Government would periodically appoint such reviewing committees at intervals of about seven years. I still think that it is a very good thing to do and to have done.
When the Committee has deliberated and produced its Report, however, it really is silly to handle the Report, as it has been handled, as if there was something divinely inspired about it and that it is wrong to disagree with any of its conclusions. It would be silly on the part of the Government, or of any of us, not to study the Report with care and attention, but we must be free not to be enslaved to it as we go along.
4.15 p.m.
The short point before the House is whether there should, or could, be a Treasury guarantee for the borrowings of the electricity authorities. The word "expensive" has been flung about as a typical device to give the public outside the impression that the Board will be squandering its capital expenditure. That is why the word was used. Under cross-examination, it had to appear that that was not meant but that what was meant was that the amount of capital expenditure on the part of the electricity supply industry was a big proportion of 599 our capital expenditure. Of course it is. It always was. It was in the case of the companies, with the exception that a good many of the old companies did not spend sufficient capital and, therefore, did not keep their undertakings up to date. In that respect, the municipalities were, on average, in advance of the old companies.
The case of the local authorities and the Public Works Loan Board has been quoted. We strongly objected to the local authorities losing the facilities of the Public Works Loan Board. What are the consequences? The hon. Member for Kidderminster has advocated a policy which must put up electricity charges. Let it be understood that he is advocating —not that he said so, but the implication of all his speech was so—a policy which, inevitably, would put up electricity charges. The hon. Member is also the advocate of a burden on the local authorities that has helped to put up the rates and the Government must share responsibility for that.
The purpose of taking the local authorities as far as possible away from the sphere of the Public Works Loan Board was partly that they should have to pay a higher rate of interest and, therefore, they would not borrow. Consequently, the local rate burden has increased. What are we facing now? This is a publicly-owned industry. The generation and supply of electricity belongs to the nation. Incidentally, one point which I ought to mention is that the hon. Member for Kidderminster implied, at least, that the electricity authorities were not paying any rates.

§ Mr. Nabarro
I said that they were not paying them in every case.

§ Mr. Morrison
The hon. Member said that they were not paying any rates.

§ Mr. Nabarro
I said, not in every case.

§ Mr. Morrison
It was the hon. Member who brought in this subject, and he was verging on being out of order. Why could he not have explained the arrangement whereby there is, to the best of my recollection, a national scheme for electricity undertakings which was settled between them and the Government? There was a similar scheme in principle from the earlier days when the railway 600 companies used to pay rates separately to the local authorities through whose areas their railways ran, and that was converted into a national scheme. I was connected with it as representing the London County Council.

§ Mr. Nabarro
I would not like the right hon. Gentleman to misunderstand the exact sector of the industry to which I was referring. It is true that there is a pool scheme for rates affecting power stations, and so on, but in the last few years a large number of additional retail shops have been opened by the area boards primarily for the sale of appliances, and most of those area board shops are not at present paying any rates at all. That was admitted at the time when the Rating and Valuation Bill was debated in the House. No doubt, there will be amending legislation to put it right, but that is the fact and it is no good the right hon. Gentleman contradicting it.

§ Mr. Morrison
An arrangement was made. If it was in the Rating and Valuation Bill, it is the fault of the Government, if fault there be. I did not come prepared to deal with the point, because I did not know that it was to be raised, and, therefore, I speak with restraint and moderation upon it. What, I think, happened was that national accommodation was reached between the valuation authorities and the electricity undertakings which would include all their undertakings. It could, I suppose, be argued that what are called the shops—some of which are mere collecting offices. but some of which, I agree, are substantial showrooms, and they are very well organised and attractive in appearance—should be separately assessed and that the benefit should go to the local authority in whose area they function.

§ Mr. F. H. Hayman (Falmouth and Camborne)
I suggest that the figure set aside for rates by the Electricity Authority for the current financial year is over £19 million.

§ Mr. Morrison
I am much obliged to my hon. Friend.
If that is so, let us consider what the effect of the hon. Member's speech on the ordinary citizen outside is likely to have and what he meant it to have. He wanted the man in the street to think that the 601 Electricity Authority, being a publicly-owned concern, was not paying any rates at all.

§ Mr. Nabarro
Not paying enough rates.

§ Mr. Morrison
No, that is what the hon. Member wanted the man in the street to believe. The hon. Member is a Member of Parliament and we are entitled to have from all Members of Parliament a reasonable sense of fairness with this House, fairness to the nationalised industries, even when a Tory Member is speaking, and fairness to the public outside. The game of treating the House of Commons as if it were a cheap, amateur debating assembly is not good enough. The hon. Member is not doing the House any good and I do not think that he is doing himself any good. I say that it was wrong for the Government to have denied those facilities to the local authorities.
Here is a publicly-owned concern. It is national property; it belongs to John Bull. I know that is objected to by some hon. Members opposite, but I suggest that something had to be done about the electricity supply industry. There were other proposals, it is true, but they would not have commended themselves to public opinion. If John Bull wants to guarantee the capital borrowed for his own property why should he not do it? Why have hon. Members opposite to be so anti-British sometimes when they speak? Why must they impede the economic and financial well-being of property merely because it belongs to John Bull, whereas, if it belonged to private ownership, I would not put it past them to give it a Treasury guarantee?
In this case, it is said—I find it difficult to believe—that when the electricity people borrow in the free market, instead of getting their money at 4¼ per cent. with a Treasury guarantee, they would have to pay 8¼ per cent.

§ Mr. Nabarro
I did not say that. What I said was—and I will repeat it so far as I can recall my exact words—that the private enterprise shopkeeper raising risk capital for the purpose of financing appliances would have to pay 8 to 10 per cent. I did not say that the Central Generating Board, which finances power stations, would have to pay that figure. There is a very great difference in the risk entailed for the capital, but I would not 602 expect the right hon. Gentleman to know the difference.

§ Mr. Morrison
I am not going to compete with the hon. Member for Kidderminster in rudeness, because I should get the worst of it. What does his argument mean? The whole purport of the argument was that the Electricity Authority ought not to be able to borrow at a less rate than private enterprise doing contracting business in the electricity supply industry. What does the hon. Member want to do? He wants the Electricity Authority, instead of borrowing at 4¼ per cent., to borrow at between 8 and 10 per cent.

§ Mr. Nabarro
The market rate.

§ Mr. Morrison
The hon. Member talks so loosely that he does not know even the implication of what he is saying. Still less does he know the implication of what he has said. He reminds me of the open air orator who, after a meeting one day, confessed, "My trouble is that when I get on the platform at a street corner I do not know what I am going to say; when I am speaking I do not know what I am saying; and when I have finished I do not know what I have said." So we get the line whereby the hon. Member contemplates that publicly-owned undertakings should pay 8 to 10 per cent. interest instead of 4¼ per cent., with the consequence to the ordinary citizens that their electricity would cost them more. The hon. Member is antisocial; he is against the public interest—everyone knows that he is against the public interest. We know it directly we look at him. He looks that sort of man.

§ Mr. Morrison
I was not referring to the hon. Member; he is a better looking chap.

§ Mr. Fort
Can the right hon. Gentleman tell the House why the consumer of electricity should have specially subsidised prices through the interest rate?

§ Mr. Morrison
I will give two reasons. One is that it is a great and necessary public utility service upon which the well-being of the country enormously depends and I would remind the hon. Member that it is not only the domestic consumer at home. There are vital private industries based upon electricity 603 being abundantly and cheaply supplied, to quote the traditional words of our electricity supply legislation.
The hon. Member for Kidderminster did not care twopence about private industry in this respect. He may not have thought of that side issue, but it is true. His policy would be to put the price of electricity up to the industries of the country.
The Minister is a new Minister in this line of country. Notwithstanding the threats made to him and the implication that he is in the pocket of the hon. Member for Kidderminster, floating down the stream with him—and I would not advise him to float anywhere with his hon. Friend—I hope that the Minister will demonstrate that he has a mind of his own and that he will stand by the public interest which, it seems to me, it is his duty to do in circumstances of this kind.

§ The Paymaster-General (Mr. Reginald Maudling)
As some of my Amendments, with your permission, Mr. Speaker, are being considered with this one, I think that it might be for the convenience of the House if I endeavoured to explain the difference between the Government's proposals and those made by my hon. Friends. I think I am right in saying that in some degree we are in accord with what they are suggesting, but to a considerable extent I cannot accept the argument that is being put forward.
The House will be aware that the present position, which is continued under the Bill, is that the Central Electricity Authority and the individual boards can borrow for temporary purposes with the consent of the Minister and the approval of the Treasury. That is the first point. All other borrowings, that is, in fact, all borrowings for genuine capital purposes will have to be made by the Electricity Council, as they are made now by the Central Electricity Authority, through the issue of British electricity stock, and it is provided in the Bill that the Treasury may guarantee the issue of such stock as to principle and interest.
The hon. Gentleman the Member for Bolton, West (Mr. Holt) was quite right in saying that this is a permissive and not a mandatory guarantee, and that there is nothing in the Bill to prevent the Government from allowing the Electricity Council to go to the market without a 604 Treasury guarantee should it wish to do so.

§ Mr. Palmer
Would the right hon. Gentleman not agree that that was also the position in relation to the 1947 Act?

§ Mr. Maudling
I agree. The guarantee always has been permissive, but, in practice, it has always been used up to now, for very good practical reasons.
The capital situation at the moment in the industry is that under the Finance Act of last year the Treasury advances money to the Central Authority and the Bill continues this arrangement for the Electricity Council until 31st March next year. That is the general system whereby the capital requirements of the industry are financed—temporarily by temporary borrowing, and the main capital outlay by the issue of electricity stock by the Central Electricity Authority with the permissive guarantee, which has always been exercised in practice.
4.30 p.m.
At present, under the Finance Act, Treasury advances take the place of issues of stock. Above all this, there is the overall borrowing limit of £1,400 million, on all obligations other than the issue of compensation stock, which has been approved by Parliament. This is the situation at present and the Bill envisages, as previous legislation did, the issue of British electricity stock without a Treasury guarantee should it be considered desirable.
The Amendments in my name would give the individual boards power if they wish, and with the consent of the Minister and the approval of the Treasury, to make issues of stock on the market. That is the difference which we are proposing. In addition to the power of the Electricity Council to issue stock, we are proposing that individual boards should have the power to issue stock, with the consent of the Minister and the approval of the Treasury. There will be no question of a Treasury guarantee applying to these issues by the individual boards because, under Clause 15, the guarantee can apply only to the stock issued by the Electricity Council, and I do not think it possible, within the terms of the Money Resolution, to apply the Treasury guarantee to issues other than those of the Electricity Council itself.

§ Mr. Nabarro
In effect, my right hon. Friend is telling us, therefore, that the area boards may go to the money market and raise capital without Treasury guarantee on a permissive basis, exactly as the Herbert Committee recommended and thus in a directly opposite sense to the speech of the right hon. Member for Lewisham, South (Mr. H. Morrison).

§ Mr. Deputy-Speaker (Sir Charles MacAndrew)
Is the hon. Member for Kidderminster (Mr. Nabarro) making a second speech?

§ Mr. Maudling
I am grateful to my hon. Friend the Member for Kidderminster (Mr. Nabarro) for making clear the effect of my own remarks, but I should prefer to endeavour to put my own case to the House, grateful though I am for his assistance. My hon. Friend has a peculiar knack of putting a question in the form of an assertion, which is most endearing to all of us who speak at the Dispatch Box.

§ Mr. Warbey
The right hon. Gentleman said that it is doubtful whether the Money Resolution would make it possible to extend the Treasury guarantee to the form of borrowing which he is now discussing. As he is introducing a new principle in the Bill, it would be possible to introduce an amended Money Resolution if the right hon. Gentleman wanted to do so.

§ Mr. Maudling
I am not proposing to do that, as the hon. Member will be well aware.
I was endeavouring to explain the effect of our Amendments and also the difference between ours and the body of the Amendments proposed by my hon. Friends. The effect of the Government Amendments, which are possibly a little complex, is that individual boards will have power, subject to Ministerial and Treasury consent, to make issues on the market, but they will not be able to have a Treasury guarantee. I suggest that this is logical. The Bill already envisages the possibility of the Electricity Council at some time borrowing without a Treasury guarantee. That has always been the case in previous legislation. If we envisage the possibility that the Council might borrow without guarantee, it isa, fortiorireasonable, when the area hoards' requirements are much 606 less and more easily accommodated on the market, to envisage that the area boards should be able to go to the market without Treasury guarantee.
If we accept the logic of the Bill, and of previous Measures, that in certain circumstances the Council may go to the market without a guarantee, the smaller demands of the area boards can also be placed on the market without a Treasury guarantee. That is what our Amendments provide. The Herbert Committee Report, to which my hon. Friend the Member for Kidderminster so rightly referred, recommended that the various electricity authorities should go to the market on their own credit.
My right hon. Friend the Prime Minister, when he was Chancellor of the Exchequer, explained on 12th June last year the Government's attitude to this matter when he said: … we should like to move in the direction of the Herbert Committee's Report. It would be a good thing if these industries could borrow from the market on their own credit, but I do not think that that is practical. We have to face facts as they are, and the necessity for meeting the needs of capital investment in these industries at present by going to the market."—[OFFICIAL, REPORT, 12th June, 1956; Vol. 554, c. 529.] My right hon. Friend was saying then that we on this side of the House accept what the Herbert Committee said in principle as a desirable objective towards which we should try to move, but not as a practical thing which we should try to do at the moment.
The difference between the Government Amendments and those of my hon. Friends is that while we make it permissive sometime for the Treasury to agree to this, my hon. Friends wish to make it mandatory now, and from this moment onwards to abolish the Treasury guarantee of these issues. I argue that it is not practical and not really possible at present to abolish Treasury guarantees for the issues that are made by the electricity authorities.
There are several reasons for this. In the first place, as the Herbert Committee rightly recognised, we cannot take action for one industry alone. It would be unreasonable to introduce a measure of that kind for the electricity industry without simultaneously doing it, for example, for the gas industry. That is one reason why we cannot immediately 607 proceed to this system. It must be remembered, secondly, that the amounts involved and which need to be borrowed by the electricity industry are very large indeed. They are, of course, drawn from the same sources of finance as those from which Government borrowing is drawn.
Generally speaking, money put up for these issues is money that goes into gilt-edged. In the present circumstances, in which the main financial problem of the country is inadequacy of savings to meet total investment demand, nothing is more important than that the Treasury should maintain control over the money market and particularly over gilt-edged issues and issues of that character. In these circumstances, we must recognise that the Treasury must have proper control over gilt-edged and quasi gilt-edged issues.
Apart from the rate of interest involved, it would not be practicable at the moment to place on the market, without Government underwriting, issues of the size involved for electricity. It would not be practicable to issue electricity stock without a guarantee. It is the aim of underwriting to enable the market, technically, to meet the amount involved. The large amount involved here is one reason why, at the moment, it is not practicable to do what the Herbert Committee recommended and what the Government have recognised for a long time as desirable.
The question whether these issues should have trustee status or not is an important matter which we should have to deal with before making up our minds about a guarantee. What about the ranking of the stock? That point is not dealt with in my hon. Friends' Amendments, but it is dealt with in mine, to the extent of saying that at the time any such issue is made the Minister must provide by regulation as to its ranking, in view of the large amount of existing obligations that must be borne by the electricity industry.
There are, therefore, a number of reasons why we cannot accept that it is practicable at present to do what is suggested and to put these people on the market for capital borrowings without Treasury guarantees. That is why we have made it permissive and not mandatory. I do not think that people should 608 exaggerate the effects of an operation of this kind. We must be practical about the arguments for these people raising their money, as it is said. on the open money-market.
I thought that the right hon. Member for Lewisham, South was not up to his usual form when he talked about John Bull in this connection. There is a solid. substantial argument here. It is that the amount of national capital available for industrial investment is limited and that it must be invested in such a way as to show the best possible return. I agree that electricity is vitally important, but so are coal, engineering and textiles, and it is difficult to argue definitely that investment in one form of industry should receive a lower rate of return than in any other industry. That is the substantial argument behind this Amendment and l do not think that it was given the seriousness which it deserves.

§ Mr. H. Morrison
It would put up the price of electricity.

§ Mr. Maudling
That intervention shows that the right hon. Gentleman is not treating this matter seriously. No one wants to put up the price of electricity. The right hon. Gentleman should not assume, as he assumes too readily, that, because there is a higher rate of interest on an investment, that has no effect on efficiency. My hon. Friends would argue that the higher the rate of interest paid the greater the incentive to show a good return on the investment, and the national interest in this matter is the highest possible return on what the nation invests. That fact should not be overlooked by right hon. and hon. Gentlemen opposite.

§ Mr. Morrison
If the electricity undertakings have to pay a substantially higher rate of interest that must have some effect upon the price the consumer pays. If the right hon. Gentleman is arguing that a higher rate of interest is to be welcomed for its own sake, as a painful stimulant to the efficiency of the industry, logically he ought to be advocating higher interest rates all round; indeed that the higher interest rates are, whether in public or privately-owned industry, the more efficient industry will be. He is landing himself in a difficult situation by that argument.

Mr. Mandling
What I am saying to the right hon. Gentleman is that I thought 609 he was unwise in assuming that the electricity industry, if faced with high interest rates, would pass them on automatically to the consumer, and would not endeavour to cover some of them by increased efficiency.
I want to deal with this point a little more and to say one or two things about what my hon. Friend the Member for Kidderminster said in the course of his typically modest and brief speech. I would hesitate to say that my hon. Friend was dwelling in cloud cuckoo land, since he is never in the clouds, but on this point it is possible to exaggerate the effect of what he said about putting people on to the money market.
What do we mean by that? We must decide whether we are talking about equity issues or fixed-interest stocks in this connection. If my hon. Friend is thinking in terms of the boards making equity issues, that is a different matter, but within the framework of the Bill, and of the powers given to the Minister, I do not think that anything in the nature of equity issues can be. contemplated. The Minister's powers under Clause 20, to instruct the authorities what to do with their surplus revenues, would clearly be intolerable in the case of any equity issue.

§ Mr. Nabarro
May I make a further endearing intervention? All I did during the course of my speech, Mr. DeputySpeaker—and I was absolutely purist in my approach—was to follow precisely the line of the recommendations of the Herbert Committee. While I know that my right hon. Friend is quarrelling with many of those recommendations, I believe that Herbert is right in this matter—[An HON. MEMBER: "Who is Herbert?"] Not the right hon. Gentleman the Member for Lewisham, South (Mr. H. Morrison); he is always wrong. I think that it is a matter of mathematics here. I think that my right hon. Friend has gone a little way towards meeting us, but I still think that Herbert is more right than my right hon. Friend.

§ Mr. Maudling
I am sure that Sir Edwin Herbert would be most gratified. The point I was making was that I do not think that this can be a question of an equity issue.
Then we come to the question of a debenture issue. What would this mean? 610 It was pointed out by my right hon. Friend the Chancellor last year that the boards have no power to charge their revenues. Well, we are providing here for the power of charging their revenues. So, in fact, the boards will be issuing fixed-interest stock charged on their revenues, and they have a statutory obligation to meet their revenue obligations year by year, including their interest obligations. This means, in practice, that anyone taking up a debenture or mortgage stock of an electricity undertaking is getting as near as it is possible to get to a gilt-edged security; in fact, it would probably have to be issued at½ or¾ per cent. above the gilt-edged rate. However, I do not see a great advantage in that one way or another, because anyone investing in electricity stock in such circumstances would own a security which was as good as it could be. Therefore, I do not think that there is much involved in this change in the long run.

§ Mr. Fort
I do not follow the course of my right hon. Friend's argument. Earlier, he was arguing the difficulties of underwriting and now he is arguing that these are equivalent to Treasury guaranteed stocks.

§ Mr. Maudling
My point is a valid one. It was that in current circumstances it is difficult to see how these large issues could be marketed efficiently without Treasury underwriting. We can envisage a time when stocks could be marketed without Treasury underwriting, but I was saying that when we do so it will not make all the difference that people think, because when local authorities have gone to the market it has generally been for the finance that it should be able to bear. It will not make a dramatic difference to the financing of electricity undertakings, as it has not to the financing of the local authorities.
If I may sum up my points, they are as follows. I think that both sets of Amendments would give the individual boards the right, with Ministerial sanction and Treasury approval, to go to the market, and neither set of Amendments would give them a Treasury guarantee. The difference between them is that the set of Amendments proposed by my hon. Friends would make it mandatory from the; start that the boards should go to the 611 market without Treasury guarantee. I am suggesting that we should put into the Bill a right that the Electricity Council already has, which is, in suitable circumstances, to go to the market of its own accord. We should extend that right to the individual boards. It is more than likely that they will be able to go to the market for their smaller requirements before the Electricity Council can go for its large demands.
In extending this possibility to the area boards we should make it always subject to the consent of the Minister and the approval of the Treasury, because, obviously, this will not be a practicable proposition until conditions in the gilt-edged market are adequate, and the flow of savings is adequate, to ensure that the issues are made in the way they should be made.

§ Sir Frank Soskice (Newport)
Before the Minister rose I thought that I should be able to congratulate him on standing his ground this time, but I was naturally suspicious as to[...] when he had spoken, I would still be of the same frame of mind. I am delighted to think that the right hon. Gentleman has stood his ground on the gilt-edged issue raised by the Amendments put down in the name of the noble Lord. It is brave of him, and it is a refreshing experience to us to see it.
The Minister was extremely apologetic to his hon. Friend the Member for Kidderminster (Mr. Nabarro). The right hon. Gentleman turned to him many times and did all he could to make the hon. Gentleman believe that he was, in principle, going almost as far, if not quite as far, as the hon. Gentleman and his hon. Friends wanted. However, the Minister cannot disguise it, and I do not believe he will have satisfied his hon. Friend, despite the professions of satisfaction to which we listened when the hon. Gentleman was speaking.
The real issue raised by these Amendments, both the Minister's and those of his hon. Friends, is briefly as follows: is the power of the Treasury, a permissive power to underwrite large-scale issues by the Electricity Council requisite for the capital provision for this industry, to remain or not? The issue really is the Amendment in the name of the hon. 612 Member for Kidderminster, which would seek to take away that power. We are glad to see that the Minister has retained it. That is what we on this side of the House were anxious to ensure, and that is what we were concerned with. We wished it to be quite clear in the Bill, as it has always been under the 1947 Act, that these large-scale capital requirements can be obtained at a rate which will be appropriate to an issue guaranteed by the Treasury. We wanted to make certain that the Electricity Council, and in general the capital requirements of this industry, would not depend upon the market rate of interest.
Having listened to the Minister, and having studied with great anxiety the Amendment he put down and the Amendment with which he was dealing when he spoke. speaking for myself, I feel satisfied that he has retained that power in the Treasury. That is all we on this side of the House are really concerned about. In an endeavour to pacify his hon. Friends, the Minister put down an Amendment which gives a permissive power to the area boards and to the Generating Board for their minor requirements, if they do not wish to make use of the Treasury guarantee, to chance their arm on the money market independently. If they want to do so, and if they wish to pay a higher rate of interest than they need pay; if they want, in consequence, to charge the consumers more than need be charged, that is their own responsibility, and no doubt they will have to answer the criticism which would justly be levelled against them if they did adventure in that way, making use of these new powers. We do not mind those powers being in the Bill, if the Minister thinks it necessary to put them in the Bill, to pacify his hon. Friends. We do not think the Bill is much worse, and certainly it is none the better, so we are content that they should be there.
The fundamental issue raised in this debate, and there is really no concealing it, is this. The question is whether, as the Herbert Committee said, this industry should still be capable of supplying electricity to consumers at an extremely cheap rate—relatively, extremely cheap, as the Herbert Committee says—or whether that power is to be taken away from it by the Amendments put down by the hon. Member for Kidderminster and his hon. 613 Friends. The hon. Member for Kidderminster read a portion of the Herbert Report, but he read a portion which simply served to support his own arguments. If the hon. Gentleman had been fair in trying to give a fairly balanced view of the recommendations of the Herbert Committee, there are certainly other passages that he might have read. In his speech, he ranged throughout the Report, and if he had wanted to be fair, he might have asked the House to look at paragraphs 33 and 34. In view of the fact that he did not read them, I propose to do so. Paragraph 33 of the Herbert Committee's Report said, in referring to the industry: It has made substantial technical advances and it has succeeded in supplying electricity to consumers at a price which on the average is only 30 per cent, above that ruling in 1939. This has been done at a time when the cost of coal, the principal raw material of the industry, has increased by 270 per cent, and the general cost of living index has risen by 137 per cent. Contrast the figure of 30 per cent with the figure of 137 per cent. The Report goes on, in paragraph 34: We doubt whether the ordinary domestic consumer has any idea of how cheap his supply of electricity is. The average consumption in domestic premises in England is of the order of 1,400 units a year. At the average price paid by the domestic consumer this works out at about 3s. 6d. per week. For this price, the consumer can light his house in a clean and convenient form and also add to his heating comfort at critical times; and he may have a television set and a radio receiver as well. All this he gets for the equivalent of the price of 20 ciragettes. His daily expenditure on electricity is the equivalent of the cost of three boxes of matches. I read that quotation because the hon. Member for Kidderminster quoted passages which served only to support his own arguments, and to distort, if I may say so, the whole debate upon which we have embarked. Why we object to his Amendment, and the Amendments which his hon. Friends had put down with him, which they have endeavoured to force upon the Government, is that we feel that if the boards are to have to pay higher rates of interest, it will be very difficult to prevent at any rate some part of that extra cost being passed on to the consumer. As my right hon. Friend the Member for Lewisham, South (Mr. H. Morrison) said, these Amendments are really anti-consumer Amendments, and we are very glad that the Government have had the courage at long last at least 614 to resist some of the proposals of the hon. Gentleman.

§ Mr. Nabarro
I do not want to let the right hon. and learned Member for Newport (Sir F. Soskice) get away with accusing me of being biased in this matter. The passages in the Herbert Committee Report which I quoted, and I quoted scores of passages in Committee upstairs, were only those which deal with the raising of capital, and it is absolutely undeniable that the words used by the Herbert Committee were that the industry is languid in its approach to the matter of the utilisation of capital and the scale of capital expenditure. The Report uses the very damaging term "languid", and as we are debating on these Amendments the question of raising capital, I suggest—

§ Mr. Deputy-Speaker
I must remind the hon. Gentleman that we are on Report stage.

§ Sir F. Soskice
You have been very lenient up to now, Mr. Deputy-Speaker, and I hope I shall keep strictly within the limits which you have kindly permitted me. I only mentioned that subject because it was initiated by the hon. Member opposite. As the hon. Gentleman now suggests that I am trying to show that he is biased, may I add that I would not be blazing a trail if indeed I said that.
I am somewhat tempted when the hon. Gentleman omits a passage of the Report which is immediately and directly relevant to this debate, and selects one particular sentence containing the ward "languid", repeats it three or four times, and seeks to imply that the Report means that this is a sluggish, languid and inefficient industry, when in fact the burden of that Report is precisely the opposite. If I have incautiously used any language implying that the hon. Member is biased, I would put it forward as a somewhat venial offence, for which I ask his pardon.

§ Mr. Nabarro
Readily granted.

§ Sir F. Soskice
I am much obliged to the hon. Gentleman. Indeed, I feel much better after that.
If I may come back strictly to the debate upon which we are engaged, provided that the Minister does not go any further, we are content to let him have his Amendment. I must call attention to 615 certain ominous remarks—I will not say rumblings—which went on throughout the course of his speech—references to not being able to go further at present; and I think we all understand on this side that the right hon. Gentleman has been in great difficulty and that he had to throw some sop to his hon. Friend. I do not think that the statement that he has made about the present unduly alarms us, because he and his colleagues obviously will not occupy the positions they hold very long, and therefore we feel that there will not be time for them to do very much more harm; but, for the present, the right hon. Gentleman has gone as far as we think it is proper for him to go, and if he stops, as he has stopped, at giving extra powers which the area boards are unlikely to use to borrow money at a rate of interest higher than that which they need pay, we say that his exercise is a rather futile one but is not one particularly harmful in itself.
I am very glad that the right hon. Gentleman has had the courage to resist his hon. Friends for once and, as a reward for it, perhaps my hon. and right hon. Friends will not cavil too much at the rather ineffective and useless change which he himself seeks to introduce into the Bill in order to get himself out of his difficulties.

§ Mr. Warbey
After the speech of my right hon. Friend the Member for Lewisham, South (Mr. H. Morrison) and that of my right hon. and learned Friend the Member for Newport (Sir F. Soskice). it is hardly necessary for anyone else to engage in deflating the demagogy of the hon. Member for Kidderminster (Mr. Nabarro), because it has been done already most effectively. When the hon. Gentleman accused me of not reading the Report with avidity, I accept that soft accusation. He clearly has read it with avidity in order to find in it every sentence, phrase, dot and comma which will justify his own prejudices and pro- vide him with ammunition with which to sling arrows against the nationalised industry. He has certainly read it without judgment or perception.
I want to express a slightly greater degree of anxiety on the views expressed by the Paymaster-General than has been expressed so far from this side of the House. The Paymaster-General may not 616 yet be swimming in the broad stream of Tory philosophy àlaKidderminster, but he is doing his best to keep up with the tide. He has already made a number of surrenders, and his firm stand on this occasion, when examined, is not quite so firm as we on this side of the House would like to see. He indicated that his Amendment is a step in the direction desired by the hon. Members behind him—

§ Mr. Nabarro
Hear, hear.

Mr. Warlbey
—and we now have that confirmed by the hon. Member for Kidderminster. Knowing how regrettably successful the hon. Member for Kidderminster and his hon. Friends have been in chasing and hounding Ministers up to now—and not only this Minister, but others too—if this Government stays much longer in office, that firm stand which the Minister has taken today on this question may very soon turn out to have similar feet of clay to the other firm stands which he has made.
In putting forward the case for his own Amendment, the Minister was careful not to give any examples of the way in which area boards might require to use the power which he is so graciously conferring upon them. I wonder if the Paymaster-General or the Parliamentary Secretary could tell the House exactly in what circumstances an area board would want to go to the open market to raise capital, undoubtedly paying a higher rate of interest and paying commission to people to enable it to raise the capital, when it might obtain that capital by means of a Treasury guarantee.

§ Mr. Maudling
I think in rather similar circumstances to those in which some local authorities decide to do the same thing.

§ Mr. Warbey
I am very glad to get that response from the right hon. Gentleman, because that is exactly what I feared. It is now clear from the reply of the right hon. Gentleman that the purpose of the Amendment which he proposes is to enable the Government at some future date to force the area boards to go to the open market as they have forced the local authorities to go to the open market. That is the real purpose of the Amendment. I wonder if the Minister heard what I said, because this is a very important point.

§ Mr. Warbey
I hope that the right hon. Gentleman is assenting to the interpretation which I am putting on the Amendment.
It is perfectly clear that it is extremely unlikely that any area board would want of its own volition to pay a higher price for the capital that it raises. It would do so only in circumstances in which it was prevented from borrowing capital under Treasury guarantee.
What are the circumstances in which it would be prevented from borrowing under Treasury guarantee? They are circumstances in which the Minister refuses to give his approval to a request from an area board for sanction for the carrying out of a capital development programme and for the raising of funds to carry out that programme by means of stock under Treasury guarantee. Those are the only circumstances I can envisage in which area boards would want to use the powers which the Minister says he is conferring upon them.
In other words, this is a way of introducing within a nationalised industry the same conditions which have been applied by the present Government to the local authorities. It is a way of making it possible for the Government to compel parts of a nationalised industry to go to the open market when the Government want to restrict capital development or want to prevent the industry from borrowing capital under Treasury guarantee.

§ Mr. Maudling
It is putting them in the same position as the Central Authority was placed under the initial Act—exactly the same position.

§ Mr. Warbey
The Minister may place very great stress upon the difference between the words "may" and "shall". I am sure that the Parliamentary Secretary, with his legal experience and his experience of the working of Acts of Parliaments in which the words "may" or "shall" appear, knows very well that when the word "may" appears in the 1947 Act the general intention is that the stock should be issued under Treasury guarantee, although it does not rule out the possibility of a variation from that in certain circumstances—circumstances which may never arise and which were probably never expected to arise by the drafters of that Measure.
618 Probably my right hon. and hon. Friends would agree that we really did not envisage the idea of the nationalised industries going to the open market to raise their capital in competition with private industry. That was never our conception of the way in which things should be done. The fact that we left the door open for that as a possibility dues not mean that we considered it as a policy.
It is now quite clear from the way in which the right hon. Gentleman has brought forward the Amendment that it is submitted as part of a deliberate Government policy in order not only to throw the door wide open but so that the opportunity will exist for the Government at some future date to be able to operate this policy of compelling area boards to go to the open market just as they have compelled the local authorities to go to the open market and to pay a higher price for their capital than they have had to pay through the Public Works Loan Board and, of course, with the same results.
Just as local authorities are having to put up their rates and impose higher payments upon their residents as a result of having to borrow capital in the open market, so the area boards may be compelled to put up their prices to the consumer, because a Conservative Government have compelled them to raise capital on the open market.
I hope that now we have had this confirmed by the Minister himself, my right hon. Friends will consider again whether we ought to accept the Amendment in the name of the right hon. Gentleman. I suggest to my right hon. and hon. Friends that we ought to look at the matter again very carefully indeed in the light of the admission made by the Paymaster-General and consider whether we ought to oppose the Government Amendments, perhaps not as emphatically, but equally, in the Division Lobby as we shall certainly oppose the the Amendment in the name of the hon. Member for Clitheroe (Mr. Fort) and other hon. Members.

§ Mr. Fort
In view of the undertakings given by the Paymaster-General during the discussion we have had on the subject, I beg to ask leave to withdraw the Amendment.