§ Order for Second Reading read.
§ 3.45 p.m.
§ The Paymaster-General (Mr. Reginald Maudling)
I beg to move, That the Bill be now read a Second time.
The Bill itself is a very brief one, running to only two Clauses but, of course its financial and economic implications are very considerable. The purpose of the Bill is to extend the borrowing authority of the electricity authorities in Great Britain. In the case of the Electricity Council, the total limit of its permitted borrowings will go up from £1,400 million to £2,300 million; the North of Scotland Hydro-Electric Board from £200 million to £300 million, and the South of Scotland Electricity Board from £75 million to £135 million.
These are very large sums indeed, but we are dealing with an industry in which the rate of investment year by year has now for some time been very high, and in which the rate of investment must continue at this high rate if the supply industry is to be able to meet the demands of the electricity consumers, domestic, industrial, commercial and the rest.
The Bill has the purpose of increasing the authorised capital of the industry. It does nothing whatever to increase the issued capital of the industry. That is an important point which I should make at the start of the debate, because we are not today asking the House to approve the issue to the industry of any money whatsoever. We are asking the House to increase the limits within which such issues can be made. As I said, we are increasing authorised capital and not the issued capital.
The issue of capital to the electricity authorities and the borrowing of money by them from normal commercial sources are subject to very stringent controls both Ministerial and Parliamentary. The issue of Exchequer advances, for example, is, of course, subject to strict and continuous control by my noble Friend the Minister of Power and by the Chancellor of the Exchequer, and the amount of temporary borrowings at any time is subject to a specific limit which is laid 41 down by my noble Friend in consultation with the Treasury. There is continuous Ministerial control over the actual amount of money which is, within this ceiling and at any given time, available and is borrowed by the electricity authorities.
On the question of Parliamentary control, there is now, I would suggest to the House, fairly substantial and extensive Parliamentary control over the actual amount of the borrowings of the industry. In the first place, the total amount to be advanced by the Exchequer to the nationalised industries as a whole year by year now has to be approved by this House in the Finance Bill. In the second place, there is published every April the White Paper on capital expenditure in the power industries, which gives this House an opportunity annually to check the rate of expenditure, and to satisfy itself that it is in accordance with the national interests. Thirdly, there is the Select Committee, which has been doing and is doing such extremely valuable work in probing into the actual use by these industries of the capital they borrow. Fourthly, there are the annual reports of the nationalised industries, which are debated in this House.
So I would say that Parliamentary control of the actual issue of capital or of the actual borrowing of money from commercial sources by the nationalised industries is a strong one and is clearly laid down. What we are asking the House to do today is in no way to agree to the issue of any additional capital, but to increase the authorised limits within which such issues may take place. It is necessary to do this because the authorised limits laid down a few years ago will be exceeded, in the case of the Electricity Council, by the end of 1959, and, of the Scottish Boards, in 1960. So we must take action now to increase the total ceiling, and, in the view of the Government, it is right to take a seven-year period, because of the nature of the industry, the long time over which its capital development programme must unfold, and the time it takes from the start of a project for electricity generation to its completion.
For all these reasons, it seems most sensible to take a seven-year period. This seven-year period of authority for borrowing is linked with a seven-year programme for the general expansion of the industry, 42 which was made public in the booklet which the Electricity Council recently published, "Power for the Future", in which the Council sets out what its general plans are and how it intends to finance them.
What we are asking the House in this Bill to do is to approve an overall limit of borrowings by the electricity authorities over the next seven years, and, in asking the House to do that, we must also ask it to confirm the Government's view that the general programme laid before the Government, the House and the public for the expansion of the industry over this seven-year period is, in broad terms, a reasonably sensible programme. We are not asking for detailed approval, which must be given year by year, but it is important that there should be general approval for the expansion programme of the industry over this seven-year period.
What we are concerned with in the Bill are the estimated borrowings of the industry, which are, of course, calculated by deducting the amount which it intends to finance from internal sources from its total capital outlay. Therefore, the amount of the borrowing limit is the result of the total investment of the industry, after deduction of the percentage of that investment which will be met from internal sources. In endeavouring to justify the Bill to the House, I will try to deal with both these points.
First, we might look at the programme of capital investment of the industry. The figures are, of course, very large. This is an industry in which great expansion is taking place, and in which, therefore, necessarily, very large capital investment is required. The total figure of capital investment over the next seven years that is envisaged amounts to £2,130 million, of which £1,470 million will go in generation and £660 million on distribution. All this is fixed capital, and there is no provision, as I will explain later, for any increase in working capital.
The proposal is for an investment over this seven-year period of £1,470 million in fixed capital for generating electricity and £660 million for distribution, giving a total of £2,130 million. These are the figures for the Electricity Council alone. I am not including the Scottish boards at this stage. Of this figure of £2,130 million, £980 million will be provided from internal sources, depreciation 43 allowances, and so on, and the borrowings to meet the balance will, therefore, amount to £1,150 million. These are very formidable figures indeed.
The basis of this plan for expanding the industry must be the estimates that have been made of the demand for electricity over the next seven-year period. The Electricity Council has proceeded by making, both centrally and in each individual area, assessments of the likely growth of the demand for electricity by various classes of consumer—domestic, farms, industrial, commercial and so on. These estimates have been checked against past experience of the rate of growth of electricity consumption, and experience in other countries, which seems to be remarkably consistent with the experience which we have had in this country, of a broad trend towards doubling the consumption of electricity within ten years.
I think that that is the rule of thumb which is normally taken. The estimates of the Electricity Council are roughly on these lines. Over a period of seven years, it estimates that industrial consumption should increase by about two-thirds. This is assuming the same rate of growth in manufacturing industry in this country as we have had in the last seven years, Therefore, I would think that it is on the conservative side. Secondly, as far as domestic consumption is concerned, we must recognise that, with 92 per cent. of the households of the country already connected, the scope for new domestic consumers of electricity is relatively small, and that expansion will take place, not in connecting new consumers to the supply, but in getting, persuading and encouraging individual consumers to use more electricity.
The estimate of the Electricity Council in this field is that consumption should increase by about two-thirds over this period. Farm consumption, where there will be both an expansion in the number of farms connected to the supply, and expansion in farm uses of electricity, should probably double over this period. In the remaining fields of commercial use and use for light and traction, the estimate is that there will be about a 50 per cent, increase. Clearly, none of these estimates can be taken as very precise or accurate; they are very broad estimates, but I suggest that as the estimates made by this 44 industry in the past have been fairly accurate we can have confidence that the estimates for the future should also be fairly accurate.
Adding these various increases together, we get a calculation based on an annual rate of increase of electricity consumption of 6.6 per cent, per year compared with an increase of 7.6 per cent., which has been the experience in the last seven years. I think that it is not surprising that there should be a rather slower rate of increase in the future, because there have been many arrears to catch up in the past and because the general spread of electricity to consumers not previously connected has almost reached saturation point in some areas. I think it is not unreasonable and in no way disappointing that we should budget for a slower rate of increase in total consumption over the next seven years than has been the case during the last seven years.
Calculations by the Electricity Council lead to the conclusion that the maximum demand in an average cold spell in the country—if there is such a thing, and apparently there is for statistical purposes—should rise from just under 21 million kilowatts at present to 29½ million kilowatts in 1964–65. As I say, that is a calculation based upon the demand experienced in an average cold spell. Against this estimated increased demand of just under 9 million kilowatts, the plan is to commission new plant to the extent of 12¼ million kilowatts and the reconciliation of those two figures follows these lines: that 12¼ million kilowatts of new plant will be put into commission and about 2 million kilowatts of old, less efficient plant will either be derated or taken out of commission.
One must give a 10 per cent, provision for plant undergoing maintenance or repairs, which is another million kilowatts, and that will mean, in effect, if the Electricity Council is right in its assumption of an increase in maximum demand to about 9 million kilowatts, that the programme we are now putting before the House will cover the increasing demand and slightly improve the margin available in times of normal cold weather demand. At present, I understand that there is a margin of about 1.7 per cent. available, and that margin will increase to 3.7; per cent. but there will still be a deficit in times of extreme cold.
45 I suggest to the House that this action is right. When we think of the cost per kilowatt of installed capacity in this industry, it would be a very extreme use of national resources to plan to have capacity available to cover 100 per cent. of all possible demand in the most extreme weather conditions. On the other hand, it is right for the Council to plan to have a margin of capacity in hand as against experience in average weather conditions, and that is the basis upon which these forward plans for investment and generating plant have been based.
If it be accepted that this assessment of future demand is reasonable, it seems to me that two questions remain. In the first place, could the load factor be improved? In the second place, is the cost per kilowatt, which the Electricity Council is assuming, reasonable? The load factor is, I suppose, one of the greatest problems of the electricity industry, namely, how to ensure the maximum use of plant. Consumers of electricity like to take advantage of its convenience by switching it on for a short period and leaving it switched off for a long period. The records show that in the last ten years there has been a steady improvement in the load factor on the basis of figures adjusted for weather conditions which are available in the Report of the Central Electricity Authority. From a figure of 42.7 per cent. in 1947, the load factor has improved to 46.8; per cent. in 1958.
§ Mr. Gerald Nabarro (Kidderminster)
If I may interrupt my right hon. Friend, those are the figures quoted in the publication, "Power for the Future", but they are not the figures for the load factor at the power stations. As such a heavy part of the investment we are talking about relates to investment in respect of power stations, and it is the use of capital invested in the power stations which ought to be our principal concern today, would not my right hon. Friend agree that the load factor at the power stations has declined from 47.03 per cent. in 1951 to 43.17 per cent. in 1958?
§ Mr. Maudling
I know that my hon. Friend is very interested in these matters, so I took particular care to quote figures based on what seemed to me to be the important factor, which is the system load factor over a period adjusted for seasonal variations, because a cold winter makes 46 an enormous difference to the figures unless they are adjusted for the weather. The proper calculation is the system load factor, which should be the ratio of the actual use of electricity over the year to the total use there would have been if maximum demand were sustained throughout the twelve months.
That is perhaps as fair an estimate as one can get, though these are matters upon which different opinions can be held and statistical considerations can add to the complications. The 46 per cent., or whatever it is, sounds rather a low figure, but the fact is that 77 per cent. is about the maximum we could get in practical terms because of the existence of the week-end, which we cannot abolish even in this House and because of the need for plant maintenance, and so on.
It is estimated, however, that 60 per cent. is probably the maximum load factor any country could hope to get. I understand that in the United States they have about a 60 per cent. load factor and they are not expecting any improvement on that in the course of the next twenty years or so. In the United States, however, conditions are very different because of the much greater shift working and because the winter heating load is carried largely by oil, not by electricity. So international comparisons are difficult.
Obviously, there is room for substantial further improvement in the load factor, and the electricity industry is doing what it can by tariff variations, by encouraging the use of appliances and by new uses of electricity to try to improve the load factor. I feel myself that if we take the figure showing the amount which electricity prices represent in the total expenditure of industry, it is a very small figure, and it would take a very big tariff variation to encourage industry to alter its habits as regards shift work, and so on, when so many other matters are bound to be more important financially than the rate paid for electric power. So there is here a big problem. The electricity authorities are tackling it, and will continue to tackle it, with vigour.
The second point I mentioned was this. Assuming it is right to say, as we believe it is, that the electricity industry should plan for a capacity of the size I have outlined, is it right in assuming that it must pay so much money for that capacity? In other words, is the cost per kilowatt which is being assumed, a reasonable 47 one? I think it is and I think that the figures are rather impressive because, as I understand, the cost per kilowatt of installed capacity now is no higher than it was ten years ago, although the costs of materials and labour have increased by 75 per cent, meanwhile.
This is a tribute to the electricity industry. It is an even greater tribute to the people who make the plant and equipment who are not—in answer to certain remarks I almost hear from across the Floor—a nationalised industry. I say that because the price of the plant is very much the responsibility of the man who makes it, even more so than of the man who orders it. Without wishing to be controversial, I think that the consumer, the electricity supply industry and the electrical goods manufacturers are entitled to take considerable credit for the fact that with all the changes in costs during the last ten years the price per kilowatt of installed capacity in coal-fired power stations is no higher than it was ten years ago. That being so, we cannot criticise the assumption made by the Council of the cost of installing this amount of new capacity.
The position is being changed by the gradual coming in of nuclear power where, as the House is well aware, the capital costs are much higher than in the case of conventional stations. In the case of Bradwell and Berkeley, the first stations, the cost will be about three times that of a coal-fired station, and in the case of Hinkley Point it should be down to two and a half times.
The running costs should not be higher. I should tell the House that on the whole, since the White Paper on this subject was published, there has been a certain recalculation of the comparative costs of conventional generation and nuclear generation. This is partly because the cost of conventional power has fallen slightly and partly because we have had to make a change in the amount we allow for credit from the nuclear stations. Our calculation now is that the Hinkley Point station, of which the capital cost will be £120 a kilowatt, against £145 in the case of the earlier ones, should be marginally slightly more economic than a coal-fired station operating in the same area, because one must compare the nuclear power plant not with a coal-fired plant operating in the coal fields, but with one operating away from the coal fields and 48 in the area where the nuclear plant will be, which will make a big difference.
My impression is that with an assumption of 5 per cent. interest rates—an assumption open to challenge—an assumption of twenty years' life for the plant and 75 per cent. load factor for the plant—those two latter figures are fairly conservative—we consider that by the early 'sixties the nuclear plant will be marginally more economical than conventional plant. I would say that they would be about the same.
§ Mr. A. Woodburn: (Clackmannan and East Stirlingshire)
Has the right hon. Gentleman compared that plant with the most efficient coal plant or the average? There is a big difference between the modern coal-fired electricity stations and the older ones, as there will be between coal-fired stations and atomic energy stations.
§ Mr. Maudling
The right hon. Gentleman is right. One is comparing the costs of nuclear stations installed in a certain position with the cost of installing at the same place the most modern form of conventional plant. Some of the calculations are too fine to be entirely realistic, but the general conclusion that I reach is that by the early 'sixties nuclear investment will compare in economic terms with conventional investment, and we shall then still be at the very beginning of the development of this new form of power generation. The capital cost of creating power from nuclear sources should, over the years, be reduced, and, we would hope, be reduced very substantially.
I should say a word on the question of oil firing in power stations, which is a matter to which the right hon. Gentleman opposite attaches very considerable importance. In 1955 a plan was introduced for the substantial use of oil in power stations both by arranging for some new stations to be constructed from the start as oil-fired stations and by converting from coal to oil some of the existing coal-fired stations. In the case of the converted stations provision will exist for reconvening back to coal if at any time this were decided to be the right policy.
In 1955 there was every reason to believe that there would be a shortage of coal for the electricity industry, and, certainly, the production figures in the industry in 1955 and 1956 justified this 49 view. Therefore, a plan was formed of conversion to oil which was designed to save 3½ million tons of coal in 1957, rising to 7½ million tons in 1960. In 1957, when we and the industry realised that there was a change in the situation of the supply and demand of electricity from coal, revisions were made in the programme as the result of which the use of coal in the power stations in the 'sixties will be about 3 million tons a year greater than would have been under the original contracts.
It is not, as far as I can see, possible at this time to go further than that without pressing the electricity authorities to break contracts into which they entered at a time of some difficulty and which they do not wish to break, and which, I am sure from what the right hon. Member for Blyth (Mr. Robens) has said on previous occasions, the House would not wish them to break. It would be a very bad thing if we pressed for the breaking of commercial contracts.
The oil companies have entered into very substantial commitments on the good faith of these contracts, and they have been very helpful and co-operative in reducing the amount of oil, and already there has been an arrangement for a reduction at an annual rate of 3 million tons of coal equivalent in the amount of oil to be used for the power stations in the early 'sixties. It would be wrong for us to press anyone to break a commercial contract entered into in good faith. In any case, the total fuel consumption of the power stations is already higher than was expected when the 1955 estimates were made.
In 1958 coal consumption in the power stations fell by a small amount, about 250,000 tons, largely due to a switch to oil, but it is our belief that the trend of consumption of electricity coal will start to move upwards again very soon and will continue upwards throughout the period covered by the Bill, in other words until 1965. Despite the existing oil contracts arrangements, it is the Government's belief that the demand of the power stations for coal will be on a rising curve throughout the next seven years.
I turn to the question of distribution. Of the capital expenditure involved in the industry, £660 million will be devoted 50 to distribution, a larger amount both in absolute terms and in relative terms than was devoted over the last seven years. I think that the House would accept this as being a wise policy. There is no doubt that in catching up with the arrears of generating plant to meet the demand for current there has been a postponement of much work on the distribution side that should have been done. In the opinion of the Council and the Government much reinforcement work which has been postponed must now be speeded up.
Turning to the new consumers, the main expansion will be in the rural and farming areas. I am glad to say that the 1954 programme of extending electricity to rural areas and the farms is well ahead of schedule, and we now expect that by 1963 87 per cent. of the farms in England and Wales will be connected, as well as 95 per cent. of the houses in rural areas. That will represent an increase over and above the 1954 programme. The House will welcome the fact that the spread of electricity in the rural areas and the farming industry is going ahead so well.
As I said, no provision is made for any increase in working capital. It is a fact that the calculations of the Electricity Council are that they will not need to increase their working capital net over the next seven years.
A question to which I should like to refer is that of hire purchase, which interests many hon. Members. As I said, the total amount of working capital for the industry will not increase, but the amount of working capital devoted to hire-purchase finance will increase. Now that the restrictions on hire purchase have been removed, it is right that the nationalised industries should be allowed to take part in the general expansion of hire-purchase credit. I do not think that anyone will contest that.
§ Mr. Maudling
I am always optimistic that my hon. Friend will see reason, but sometimes I am disappointed.
The Government's view is that as a general expansion in the volume of hire-purchase credit is taking place it is reasonable that the nationalised industries should share in it. It might be a 51 point of principle that the nationalised industries should not have hire-purchase agreements, but as long as they are selling by hire purchase they should not be subject to restrictions which do not apply to others.
§ Mr. Nabarro
Whether or not they have hire-purchase arrangements, is there any objection to their sub-contracting their financial arrangements, or should they always be found to finance their own hire purchase?
§ Mr. Maudling
It is a matter for the commercial judgment of the boards as long as they are in the business.
I think that the amount of capital devoted to hire-purchase finance should be subject to control by the Minister just as much as the capital devoted to fixed assets. The same principle must apply. If the Minister is supposed to control, as he does, the amount of capital devoted to fixed assets, he should equally control the amount of capital devoted to working purposes.
It has been decided that the amount of additional capital required by the industry for hire-purchase finance should be obtained not from the Exchequer, but from normal commercial sources, which, after all, is the way the industry normally obtains its capital for working capital purposes. At present, the total amount to be authorised is being discussed between the industry and the Government. In settling the amount of the increase in the authorised borrowings of the industry for this purpose, the Government will have two principles in mind. The first is that there should not be competition in credit terms between the gas and the electricity industries. I think that the House will, on the whole, agree with that. There has often been complaint of a lack of co-ordination between those two industries. It would be a pity to have the two competing with each other on the basis of credit terms.
Secondly, we feel that nationalised industries which, by reason of Treasury guarantee, have access to an amount of bank finance to which the ordinary trader cannot have access, should not act as pacemakers in this matter to industry as a whole. There is no doubt that the granting of excessive consumer credit is commercially unsound. The nationalised 52 industries will, therefore, have regard to general commercial standards in this matter.
§ Mr. Arthur Palmer (Cleveland)
Does not the right hon. Gentleman agree that the actual proportion of borrowing for hire-purchase purposes is a very small part of the total capital borrowings by the electricity boards?
§ Mr. Maudling
I quite agree, but I do not see what point that argument makes. Whether it is small or large, it is right that, like all other forms of borrowing, it should be subject to Ministerial approval. The principle I have laid down is that there should be expansion of hire-purchase by the nationalised industries as by private industries and that that should be based on sound commercial principles and on the principle that they should not use their access to bank finance for going beyond what is commercially sound in credit terms.
§ Mr. Woodburn
Will the right hon. Gentleman bear in mind that this is not altogether a matter of finance and that it is also concerned with improving the homes of the people? Whether people can buy gas or electric cookers often depends on the credit terms. If the boards can persuade people to buy electric cookers and similar appliances, that will be of assistance not only to the boards but to housewives. Will the right hon. Gentleman keep the housewives' point of view in mind when he is considering this mere financial jugglery about credit terms?
§ Mr. Maudling
This "financial jugglery about credit terms" is more important than the right hon. Gentleman suggests. However, we have recognised the importance of hire purchase in improving living standards by relaxing the statutory control of credit terms. We think that credit buying can be exceedingly good, provided it does not go beyond what is commercially wise and prudent. The principle should be to extend hire-purchase credit to the extent which sound commercial principles would justify, but not beyond that. In practice, there will not be much difference about that point.
§ Mr. Alfred Robens (Blyth)
Has the right hon. Gentleman decided the sum beyond which the electricity boards may not borrow in relation to hire purchase? If so, what is the amount?
§ Mr. Maudling
I cannot have made myself clear. I said that the industry and the Minister were discussing the amount of additional capital which should be available for that purpose. The figure has not yet been settled. It is a matter for discussion with the Minister, as much as the provision of capital for a new generating station. It is exactly the same in principle as other borrowings and the figure is still under negotiation.
I have tried to set before the House the picture of the demand which the industry is facing and the reasons why it will need these large sums of additional capital. There are two further matters with which I should deal. The first is whether the money will be well used, and the second is whether more could not be provided by way of self-finance.
Looking at the statistics of the electricity industry over the last ten years or so, one can show a steady increase in thermal efficiency in the first place and, in the second place, a very interesting price comparison in that fuel costs have risen by 74 per cent., retail prices by 62 per cent., the cost of generation by 39 per cent., and the price of electricity by 34 per cent. All of that shows prima facie a good record. However, the fallacy of all nationalised industries is that one never knows to what extent the statistical improvements are due to the natural development of technical factors and to what extent they are due to good management. One can never be sure whether an enterprise has done the best it could have done unless one can test its performance against someone else. That is a simple fact. The best alternative in these cases is an examination by an independent body, as in the case of the Herbert Committee.
The House as a whole will recognise that although it commented on certain weaknesses in the industry, the Herbert Committee gave considerable commendation to the industry as a whole. The legislation passed by the House in 1957 was designed to remedy weaknesses in the industry's organisation and I can say with confidence that the statistical record and the investigation made by an impartial body suggest that though the industry is not porfect—and no industry is perfect—it has a good record. The new legislation which was recently passed should enable it to give even better service to 54 the public in future than it has given in the past.
Self-finance is a very important matter. Assuming that the industry is right in planning to expend large sums of money in new generating plant and new distribution plant, what percentage of that money should be raised internally and what percentage should be borrowed from the public or the Government? The industry has a good record over the last ten years. The percentage of capital outlay which it has financed from internal savings has been rising. The average percentage over the last ten years has been 33 per cent. and the estimate over the next seven years is 46 per cent. The Electricity Council's figure of 48 per cent. is based on a certain difference in accountancy principles and there are strong arguments for it. However, the more austere, although not necessarily more correct, figure is 46 per cent.
That is a big increase in the total amount of internal financing and the proportion is now fairly high. It is not at all easy to decide the principles on which a publicly-owned industry should determine the amount of its expansion which should be financed from internal sources. This matter was discussed at great length by the Herbert Committee, which concluded that in principle the industry was working on the right lines and that, in practice, it was following those principles.
Technically speaking, the industry provides its depreciation on an historic cost basis, but it takes out special revenue reserves in order to increase that, so that by and large the industry is financing its replacement costs out of revenue. In other words, by and large it is providing and setting aside enough out of its revenues to keep in existence and at full efficiency the amount of generating capacity which it has at any given moment.
Over and above that, it may be making some small provisions, once again in line with the principles of the Herbert Committee. Compared with other nationalised industries, the electricity industry can claim a good record in providing from its own revenues enough for full replacement of its plant. To go further than that would give rise to many difficulties. Any revenue the industry earns over and above its depreciation provisions is subject to tax, as is the revenue earned by any private business. 55 Therefore, any amount ploughed back into expansion as such would be after the deduction of tax. There is a good deal in the argument of the Herbert Committee that for a publicly-owned industry to finance expansion out of current revenue on a large scale is putting the burden of future consumption upon the present-day consumer.
These arguments are very complex and not very easy to determine, but as a matter of common sense and common practice I suggest that in increasing its proportion of internal finance, as it is proposing to do and as it has done over recent years, the industry is measuring up to what is commercially sound and practicably sensible for a nationalised industry. To go further and to provide even more of its capital expenditure out of net revenue would involve increases in the current price of electricity which would certainly not be popular—which is not so important—and which would not be economically sound. This is a matter on which it is impossible to be dogmatic. All one can do is to put the principles on which the industry is working and suggest that in the view of the Government, by and large, those are sound principles.
I hope that I have said enough to commend the Bill to the House. I have tried to outline the general programme of the development of the industry based on estimates of demand over the next seven years. I have suggested that those estimates of demand are sound and that the amount set out to meet that demand is reasonable. I finish as I started by emphasising that the Bill does not issue any money from public or private sources to the electricity industry. It increases the authorised total borrowing limit within which issues of money will be made over the next seven years, subject to strict Ministerial and strict Parliamentary control. By passing the Bill, the House will make proper provision for the expansion of an industry which is serving the country well and which must continue to serve the country well if our economy as a whole is to prosper.
§ 4.32 p.m.
§ Mr. Alfred Robens (Blyth)
From this side of the House we cannot help noticing how embarrassed Ministers are in speaking about nationalised industries. On every occasion that the Paymaster-General 56 has spoken about a nationalised industry, gas, electricity or coal, he has had to pay fulsome compliments to the industry concerned. More than that, he has had to produce figures which have proved how efficiently those industries have been serving the nation. We have always tried to save him and his two predecessors the utmost embarrassment by refraining from cheering too loudly, because that has always brought a counter-attack from the hon. Member for Kidderminster (Mr. Nabarro) and other back benchers.
On this as on previous occasions, the right hon. Gentleman has had to fall back on his old theory that one cannot discover whether a monopoly nationalised industry is a success because one has nothing by which to test it. But all the inquiries into nationalised industries have shown them to be efficient and to be serving the nation well. When compared with industries of a similar character in almost every country in Europe or in the United States, nationalised industries have stood up to the test.
We give general approval to the Bill, which we shall examine in greater detail in Committee. We approve it because it enables greater borrowing to be available to the industry at a time when we feel that there should be an even greater use of electricity and power in industry We shall never raise the standard of living to the height to which we know it can be raised, both here and abroad, unless we use considerably more power in industry than we are doing today. Most economists who have studied the American industrial scene and compared it with our own place tremendous emphasis upon the amount of horse-power at the elbow of the worker in the States vis-à-vis his British contemporary. Therefore, speaking on behalf of my hon. Friends, I can say that we want to see the highest possible level of investment in this industry, together with a tremendous Government drive to persuade industry in general to use much more electricity and more mechanical handling for which power is required.
The right hon. Gentleman has given us some information about hire purchase, which we were rather interested to hear. We had understood that his hon. Friends sitting behind him had decided to make this the basis of one of their most vicious attacks upon him. We will help him. It is not the first time that hon. Members opposite have made vicious attacks upon 57 Ministers in the position of the right hon. Gentleman; in fact, they "saw off" two previous Ministers, and the Government became so frightened about their "seeing off" a third that they decided to put that third Minister in another place, out of harm's way. The right hon. Gentleman, whose main task is not in this field but in European matters, is safe and sound, because he has not to answer exactly for his noble Friend in another place, who is the political head of the Department concerned.
I do not quarrel with any of the right hon. Gentleman's remarks about the Government having the right to sit down with the electricity boards or the Electricity Council to determine the amount to be used for hire-purchase financing, just as the Government sit down with them to discuss the amount of capital investment for generation. One can see no argument against that, as a principle. I also take the view that a State-owned enterprise should not be put at a greater advantage in this field than those who have to obtain their capital from elsewhere. At present, however—with probably one or two exceptions, which I understand are to be brought into line—I believe that no better terms are being offered by electricity boards than by private enterprise.
If there is not a prudent financing of hire purchase the Minister is quite right to sit down with the area boards and say, "The capital raised on the authority of the State should not be used in an imprudent financial way." I do not think that anybody would quarrel with that. But we would very much resent any diminution of the right of the industry to sell appliances on hire-purchase terms. That would be a most retrograde step.
The right hon. Gentleman has been telling the House of the importance of the load factor in this industry, and it is right to emphasise that it is upon the selling of appliances that the load factor depends, and the ability of the industry to sell its cookers and water heaters in vast quantities because of the facilities it has available should in no way be mitigated. This is one of the ways in which the boards can influence their load factor, which the right hon. Gentleman has proved to us this afternoon is so important in relation to the financial outturn of the industry.
58 While accepting in principle the things which I have indicated, I hope that when the right hon. Gentleman sits down with the electricity boards—as I understand he now is—to determine the amount they may use for hire-purchase finance, he will not regard his task as one of pruning that amount to a certain figure to placate his hon. Friends, who will be coming to this charge later in the day. I hope that, instead, he will ensure that sufficient funds are available for the electricity undertakings to provide the maximum service to housewives and those people in industry who wish to take advantage of hire-purchase arrangements. As the matter is now one between the Government and the boards, the right hon. Gentleman will not object if, at a suitable time, we put down a Question as to how these arrangements are being made.
The right hon. Gentleman has told us exactly how the industry has done in the matter of self-financing; I think that it has financed itself to the extent of about 42 per cent. I do not know what the figure should be, but if the industry were self-financing to the tune of 50 per cent. I suppose that that would be as much as we should expect. I do not think it right to place an undue burden on the present consumers for the benefit of those who are to come later. We must be prudent. We must pay in our generation what is right, but the burden should not be too great, and I would have thought that a 50 per cent. self-financing was prudent, and about right.
I would also hope that the electricity undertakings, together with the Minister, would look for their additional revenues not through increased electricity prices but from economies, some of which the right hon. Gentleman has mentioned this afternoon. In the next few years, as a result of work which is now and has for the past ten years been taking place, there will be greater economies. Therefore, if prices remain the same, and there is no large increase in overhead costs and charges, it will be possible to raise the amount of self-financing from the present 42 per cent. to about 50 per cent. without placing an undue burden upon present consumers.
I welcome the view of the right hon. Gentleman that competition between the gas and electricity industries should be fair in the matter of hire purchase, and 59 that there should be some uniformity in terms. Hon. Members on this side of the House have never taken the view that there should not be fair competition between the two industries. It would seem that it would be reasonable to bring them into line in the matter of hire-purchase arrangements.
Speaking in terms of investment over the next seven years, which may now amount to over £2,000 million, it is fair to try to find out whether or not the money which has already been borrowed has been used wisely. We have been aided in this task of examination by many of the figures given by the right hon. Gentleman this afternoon. He referred to the outstanding fact that the average cost per kilowatt today, which is £50, is no greater than it was ten years ago. When he said that, the cheers from hon. Members on this side were, unfortunately, rather too loud. They caused the Minister to add that the private manufacturer of appliances, generating sets, and so on, had been as much responsible as had the electricity boards. The truth is that everybody has contributed to this situation.
The right hon. Gentleman should understand that the manufacturers of plant have been put in a far more favourable position under public ownership than they ever were under the separate, privately and municipally owned enterprises. They have been able to simplify plant design, which is a considerable factor when one considers the enormous amount of work on the drawing boards. If the fancies of 200 or 300 different engineers have to be considered, work on the drawing board takes very much longer, and costs go up. Today, plant design can be simplified, and because of the finance which the publicly owned enterprises now have at their command they have been able to go in for much larger sets, which is the main cause of the maintenance of the average price per kilowatt remaining at only £50.
It is interesting to see how the size of sets has been developed. Ten years ago the average size of sets was 60,000 kilowatts, but today private manufacturers of equipment are being given orders to manufacture sets of 550,000 kilowatts. Without these orders the manufacturers would not have been able to bring down their costs. Therefore, although I pay tribute to the great engineering companies, 60 and the skill of the engineers and craftsmen which goes to make up these enormous generating plants, there is no doubt that the public ownership of the electricity industry has been the means by which private enterprise has been able to be more efficient than it was in the old days of municipal and private ownership.
It is worth looking at some other figures which demonstrate the continued efficiency of this publicly owned enterprise. We can look at the number of workers engaged in the enterprise, and see what happens when production is increased. Ten years ago 2.7 men were employed per 1,000 kilowatts of plant capacity. Today, the number is 1.73 per 1,000 kilowatts of plant capacity. We have had a tremendous increase in production, and a much smaller amount of manpower to operate the plant.
The Minister referred to the question of thermal efficiency in one way, and I want to refer to it in another. Ten years ago we consumed 1½ lb. of fuel per unit sent out; today we consume 1.2 lb. In ten years this has saved 41 million tons of coal, of a value of about £147 million. That is another very good indication of the efficiency of the larger units which public enterprise has been able to bring about.
The distribution and transmission side of the industry also shows tremendous progress. I will not weary the House with the figures, but they are available. What is important to note is the inauguration of the super grid, which in itself will save about £10 million each year, because it lessens the capital expenditure in plant capacity and reduces operating costs. The super grid, which is now 726 route miles long, has another 1,096 miles in commission. Another interesting factor is the cross-Channel link, which, again, should save money to the extent of about £200,000 per annum. All these factors show that there has been no lack of initiative or drive on the part of this undertaking and those who manage it.
The right hon. Gentleman showed us that despite all the money that has to be spent because of the high capital cost of the industry its efficiency has meant that prices have risen only by about 35 per cent. while general costs have risen by over 50 per cent.
Part of the case made on behalf of public ownership concerned the necessity 61 to provide rural areas with electricity. Hon. Members on this side of the House said that unless we had larger units, which would be prepared to spread out in the rural areas, or had the authority to do so, we should never get rural electrification with the speed which was so necessary for the benefit of the countryside, from the point of view not only of domestic amenities but of the power to be used on modern farms. Rural development has gone on apace, much more quickly than was ever estimated. I understand that by 1963 about 87 per cent. of farms and 95 per cent. of rural houses will have been connected. That is a great achievement, and I doubt whether any other country in the world, including the United States, can say that it has accomplished so much.
At the same time, the amount of energy consumed in rural areas has been shown to be very disappointing. The right hon. Gentleman says that the consumption will double in seven years, but that is not quite enough. There has been high capital cost—no one quarrels about bearing it—in providing amenities and power to our farmsteads. It is highly important that those who receive this new power should be encouraged to use it rather more than it is being used at present. The right hon. Gentleman ought not to be satisfied with doubling consumption in seven years.
One of the area boards has analysed the consumption of 10,000 farms in its area on the basis of electricity used. The analysis showed that 18 per cent. of those farms used fewer than five units quarterly. There has been a joke running around since the days when electricity was put in about the old lady at the end cottage who used to switch the light on so that she could see to light her paraffin oil lamp. It looks, from the five units quarterly, as though that sort of thing is happening.
The analysis also showed that 50 per cent. of the farms used fewer than 100 units quarterly. Those figures are surprising for a town or city dweller. If our electricity usage were only about 100 units per quarter we should wonder what had happened. An inspector would be round to check the meter. A further figure was that 60 per cent. used fewer than 200 units quarterly.
This position is not good enough. This is where the Government must help. On 62 the domestic side it is obvious that the rural housewife will want the same amenities as the housewife in a town or city. She will be encouraged to buy electrical appliances, through the hire-purchase arrangements, to make her housework less heavy, and she will be able to see at the agricultural shows and fairs what appliances are available. It is on the power side that the Government ought to help to stimulate expansion of the use of electricity in the rural areas.
There is difficulty here for the farmer. Through the various arrangements made by the Government the farmer is able to secure finance for capital investment of many different kinds, but he is not able to secure for his movable assets the same generous loans or capital assistance which he can get for other projects. The Government have tackled this matter in industry by having two industrial finance corporations, one for smaller borrowers and one for larger borrowers.
I wonder whether the right hon. Gentleman would consider it worth while to enable one of these finance corporations—or perhaps a separate finance corporation—to be available for use by farmers for the purchase of movable assets which are not covered by the easy borrowing facilities in other directions. To provide loans of this character for the electrical machinery that farmers need for the improvement of their farms might be the best way to get a much greater use of electricity in rural areas. I would be glad if the right hon. Gentleman would give thought to this suggestion.
We are dealing with a very big generating programme, covering 38 new power stations, which will include five nuclear power stations to be commissioned by 1963 and to provide 12¼ million kilowatts of power. I do not want to say anything about conventional stations, but to refer to the nuclear power stations.
At present there is an arrangement for about 5 million or 6 million kilowatts to be provided by 12 or 14 nuclear power stations by 1966. Originally, it was a year earlier, but the date was delayed for twelve months because of cuts in capital investment. I believe that there are four groups—it may be five; I have an idea there is an additional one—in a consortium. Who determines whether a 63 consortium shall be allowed? I know that this means access to information some of which might be regarded as secret. Who determines whether official permission or authority is given to a consortium? Upon what basis is the decision made?
I have noted one British firm which is able to build power stations abroad and which, I am advised, has been refused authority or permission to form a consortium to tender for nuclear power stations. I can well understand that a great deal of misuse might be made of scientific manpower and research if a very large number of groups were enabled to build nuclear power stations. The Government may have come to some conclusion about whether the number is to be four, five or six.
Is there a number? If there is, what is it? What are the terms upon which groups who feel that they can build nuclear power stations and have the capacity to do so are permitted to do it? Is there a closed shop which nobody else may enter? There may be a very good case for saying that four or five groups are adequate and that there is no point in having a tremendous amount of skilled manpower for the building of stations if the work is not available.
It is important not merely because of our home programme that we should encourage big contractors and others who feel that they are in the position to build nuclear power stations. Power stations must be one of the great exports to which this nation must turn. We have come to the conclusion that we cannot expect coal and cotton to remain the traditional exports that they were fifty years ago and that we have to look to new things like electronics. I would think that nuclear power stations came into this category. It is important that British industry should be in a position to compete with the Americans. I understand that at present the Americans give away a certain amount of fuel for a year for every new power station, as an extra gimmick. That is the sort of thing that British manufacturers are up against, but we should encourage them to go into this field of activity.
It may well be that the number of groups within the present tendering arrangement is more than, or is as much 64 as, the Minister wants. Some of us would like to know whether there is now a closed shop, or whether other companies who can make a contribution to this development will be permitted to join the groups that already exist. It is important that those who have the knowledge and experience to sell the British power stations abroad should be able to do so.
§ Mr. Maudling
I agree very much with what the right hon. Gentleman says. The Atomic Energy Authority wants to help these firms, but the problem is always one of diverting the activities of the Authority from new research into training British industrial firms. That is one of the limiting factors.
§ Mr. Robens
I see the point that the right hon. Gentleman is making, but I think he would agree that we have to give every British firm which feels it can build power stations abroad the opportunity of training its people in order to do so. The particular firm I mentioned has secured contracts to build power stations abroad, but it is having to do so on the American pattern, with American patents and licences. I do not think that that is as good as if the same British firm could be using British patents and the British system.
In connection with the nuclear power programme, what does the right hon. Gentleman envisage for the years beyond 1966? I understand that we are to use conventional stations to the limit of the anticipated coal resources and then we shall have to fill in a very large gap of power that will be required and cannot be filled by the use of coal. That must be divided between nuclear stations and oil stations. I should like to know what the policy of the Government is in this matter. Do they intend to develop nuclear power stations mainly and place less reliance on oil, or to provide more oil-fired power stations in the years beyond 1966? While one does not want to debate this matter at great length today, it is a question of great importance. I should like to see the emphasis, after the use of coal in conventional stations, on nuclear power stations rather than on the use of oil and I hope that would be Government policy.
We have the programme up to 1966, but I do not believe that we ought to wait 65 very much longer before we get an estimate—which would not be binding to the minutest detail—of the forward building after that period for another seven years. If the emphasis is to be on nuclear power it would be necessary to bring in a lot more trained people. The building of these power stations is very expensive and it is still obviously experimental. Changes have been made in almost every station. Those engaged in their building ought to know what their future is and whether the programme is to go on for the next twenty years, or whether we are to use oil rather than nuclear power. They ought to know because there is a great deal of research to be done, at tremendous expense, by those in the consortium and only if there is a continued programme for nuclear power station building will that expense be justified.
If there is not the continuation then the higher costs involved in anticipation of a rather larger nuclear programme will fall on the present programme and add to its costs. I do not expect the right hon. Gentleman to give an answer on this forward policy at this stage, but I hope that he will give it consideration and that he feels we should not be too long now—perhaps twelve months as a maximum—before we get some idea of the future programme of power station building.
One thing I am bound to say will. I am sure, be expanded by my hon. Friends. I repeat that we cannot break commercial contracts, and that goes for oil contracts, but I still feel, as I felt when I expressed myself in the House on this matter before the Recess, that, without breaking contracts, on the basis of normal commercial relations, if the Government so willed they could secure the reversion back to coal of some of the power stations now burning oil. It is a scandal that we should have large stocks of small coal and that the Government have done nothing to use their influence with the oil companies. They are a principal shareholder in at least one company and there would be a fair amount of weight given to what they had to say in getting this reversion.
The right hon. Gentleman is looking at me as though I were not strictly on the ball, but I am using his own phrases. In the last debate he was careful to say that it was not the Government who made these contracts but the Electricity 66 Authority, as it then was. I am saying that if the Government, in his words, had nothing to do with these contracts, here is a stage in which the social consequences of using oil instead of coal are damaging not just for the individuals concerned, but for the future of the coal industry. It has disturbed the feeling of many young people that there was a future in coal and they are beginning to wonder whether there is a future in the industry. We may get a very sharp reduction in recruitment of mining engineers unless we can get a more optimistic spirit back into the mining industry.
I say again, as firmly as I can, that in my view the right hon. Gentleman would be wise now to see whether a gesture could be made—although I know the difficulties—for the reversion of one, two or some of these power stations which were converted to oil back, to the use of small coal.
§ Mr. Maudling
The right hon. Member must not neglect the fact that already there has been a very big gesture, involving, as I think I said, an additional consumption of 3 million tons of coal in the 'sixties, because some stations which were to run on oil will run on coal. There has been a big reduction in the consumption of oil rather than of coal by agreement with the oil companies, who have been very helpful in this matter. The right hon. Member should not neglect to mention what has been done.
§ Mr. Robens
I do not wish to neglect what has been done and I understand full well the change which has been made in the arrangements. The change made in the arrangements was for oil to be consumed in the 'sixties, but I am speaking about unburnt small coal in 1959.
I say again that, while the oil companies have been generous in stretching their contracts, they have not been burning less oil this year or last year. They are burning the oil for which they contracted. The oil they are not going to burn in 1960 is oil which is still in the ground in the Middle East and which has not yet been extracted. The Government, if they so desired, could use their influence and at least make a gesture about reconverting some of the oil-burning stations back to coal to meet this very difficult problem in the mining industry.
I will finish my speech with a reference to the load factor. The change in the 67 bulk supply tariff may have a big effect on this. In the last debate the hon. Member for Kidderminster said that the difference of 1 per cent. in the load factor meant £21 million worth of capital investment lying idle and not being used. I should have thought that there needs now to be a tremendous amount of research done on the question of storing energy. If, as the right hon. Gentleman said, the limit we shall ever get to and the best that the Americans have been able to do is 60 per cent., that has been done only by the balancing of the use of electricity through the 24 hours. If we could reach a stage in which we could store electricity that would mean a colossal saving. I do not believe enough money is being spent nor enough scientists being engaged on that sort of project.
§ Mr. Nabarro
The right hon. Member has kindly quoted me, but he will remember that I went on to say that the habit in this country was of chasing the peak load and failing to recognise the enormous possibilities of economy in capital investment by a proper diversification of load, which, equally, is a matter of Government policy as of Central Electricity Generating Board policy, and is a much more rewarding exercise than further research into electricity storage.
§ Mr. Robens
I should doubt that and would cross swords with the hon. Member on that. I believe that storage would represent the greatest possible saving. If one were able to store electricity it would mean that the most efficient stations would be working 24 hours a day, 365 days a year, subject to being out for repair, and so on. That would bring really cheap electricity. I believe that this work ought to be done.
Secondly, how much work has been done in finding a means of transmitting electricity without the very elaborate and expensive equipment we have at present? I think I am right in saying that probably half of the capital expenditure is in the distribution of electricity once it has been produced. A number of my scientific friends say that this is not an impossible task, but that a tremendous amount of research would have to be done upon it. In these two fields, scientific research is absolutely essential. The Government should stimulate this, and indeed take part in it. They should find a method 68 of storing electricity and see whether we can find a way of transmitting electrical energy without the elaborate transmission arrangements we have at present.
We give the Bill our approval and we are glad this afternoon once again to have heard a Conservative Minister praise the efficiency of a publicly-owned enterprise.
§ 5.10 p.m
§ Mr. Nigel Birch (Flint, West)
I hope that the House will not look upon the passing of this Bill purely as a formality. It seems to me to raise in an acute form the still unsolved problem of governmental and Parliamentary control over the capital expenditure of the nationalised industries. In what I have to say, I am in no sense attacking the management of the electricity industry. My own guess—and it can only be a guess—is that it is probably more efficient in management than any other nationalised industry.
I concede at once that the capita] demands of the industry are necessarily and rightly very great. Indeed, so far as capital hunger goes, electricity is in a class by itself. Up to 31st March, 1956, when separate issues on behalf of nationalised industries ceased, the electricity industry had already borrowed £200 million more than all the other nationalised industries put together. Today that sum must be much greater. Now we are asked to sanction a very large capital programme, £2,130 million, of which £1,150 million is to be borrowed. I think that it is most important that the House should realise what a heavy burden upon our economy is the financing of the nationalised industries and how much it adds to the difficulty of controlling our affairs.
In the Budget of 1956, a change was made, and instead of the industries borrowing under their own names, money was to be issued directly from the Exchequer and would appear below the line in the Budget. That was done simply as a matter of management and convenience. It was found much easier to sell direct Government obligations and Government guaranteed stocks, and also the funding operations of the Government were made easier because the issues could be made exactly when wanted. There is an admirably bland comment in "Power for the Future" on this matter.
Referring to this change, it said that up to the time when it took place it had 69 been practicable for the industry to borrow for its long-term capital needs by the issue of British electricity stock. It was perfectly practicable for the industry. What it did was to go to the Treasury and say, "We want £300 million", or whatever it was; an issue would be made and it would get its £300 million. A difficulty arose then because, in fact, when such issues were made, more often than not, subscriptions from the public were negligible and virtually the whole issue had to be taken by what are known as the Authority, and the stock had to be peddled out over a long period of time.
These amounts are very large. I calculate that the net borrowing by the nationalised industries in the current financial year is £478 million. Next year, presumably, it will be quite appreciably larger. It is very difficult indeed to find genuine investors who wish to buy longdated Government or Government guaranteed securities to that amount. What happens? There are three possible consequences of these difficulties.
The first is that the long-term interest rate may have to be put up, so that it is higher than one would like it to be, in order to try to attract buyers of such stock. Secondly—and this has happened in every recent Budget—taxation has to be higher than it otherwise would have been in order to finance the amount of this stock for which one could not find genuine buyers. Thirdly, if there is a miscalculation of how much stock can be sold, which very often happens, the capital expenditure has to be financed by Treasury bills, which is really the printing press, and that is inflation. One may either get higher interest rates or higher taxation or inflation or, more generally, all three.
I believe that it may well be that in future years the financing of the nationalised industries may be a major factor in the whole of our monetary policy. It is for the reasons that I have given that we should be more than careful about sanctioning borrowing and most careful to see, so far as we can, that such money is not wastefully employed.
That brings me to the question of the period for which we are asked to sanction this borrowing. We are asked to sanction borrowing until 31st March, 1965. If this Parliament lasts for its full time and the next Parliament lasts for 70 its full time, it could be that those borrowing powers would be exhausted in the next Parliament, but in this century no two peacetime Parliaments have lasted their full time and therefore it seems to me to be in the highest degree probable that this money will run out before the end of the next Parliament.
Therefore, we are being asked to sanction an amount of money on so vast a scale as to affect the whole of our economy and the level of our taxation over this long period. That seems to me to be something very near the abdication of the traditional rights of Parliament to control expenditure.
The period has been defended on three grounds by my right hon. Friend the Paymaster-General. The first ground is that administrative control is retained by the Treasury and the Minister of Power because the Treasury may say, "You are spending too much or too little; you must alter your plan." That is true so far as it goes in respect of administrative control. He also said that there is Parliamentary control because the global amount for the nationalised industries appears in the Finance Bill. If I may say so to him with great respect, I think that he has got hold of the wrong end the stick. What I think he is referring to is Section 36 of last year's Finance Act. The object of that Section was to carry on the provision made about borrowing by nationalised industries which were first enacted in 1956—to carry that on for a year while the Chancellor of the Exchequer was making up his mind. If my right hon. Friend will look at the previous year's Finance Bill, he will find that no such Clause came in at all and there was no chance on that Finance Bill of voting on the amounts of money to be allocated to nationalised industries.
The third argument, and the one on which the most weight was put, seemed to be highly inconsistent with the other two. The third argument is that seven years is the minimum period for efficient planning. That argument must mean that plant must be ordered seven years ahead and that it would be wrong to plan or order in advance of the full amount being authorised by Parliament.
But is that so? After all, we are told in the documents supporting the Bill that the existing amount of money is running 71 out, has very nearly run out and practically all of it is hypothecated. Has planning and ordering therefore stopped? It would be very wrong if it had, and I do not for a moment believe that it has. Every Government Department budgets on a yearly basis. Many of them carry out great capital works and great investment projects, and they are bound to order and plan ahead of the financial provisions. I therefore cannot think that this argument can be advanced very seriously. The real argument is the argument of convenience, it is done in the interests of what Mr. Osbert Lancaster described astrue bureaucracy, as we in the West understand it.In any case, can we be so certain that the electricity industry can see clearly ahead for the whole of the seven years—so clearly that the House will certainly not want to revise the plan and to vote more money or less money? The prospectus, "Power for the Future," is vague enough. As the Economist very rightly pointed out, we are not even told how much generating capacity it is expected will be in commission after the expenditure of the £2,130 million.
Several hon. Members have mentioned the load factor, which is the most vital thing of all in the economics of any system. There was an argument between my hon. Friend the Member for Kidderminster (Mr. Nabarro) and my right hon. Friend the Paymaster-General as to whether the load factor was 46.8; per cent. and slightly improving or 43.1; per cent. and getting slightly worse. I am not concerned to argue that point. All I would rub in—and my right hon. Friend mentioned it—is that in America the load factor is very much higher. My right hon. Friend said it is 60 per cent. My information is that in 1956 it was 64.4 per cent. In any event, it is higher in America than it is here. Of course, the conditions are different and it is very likely that we cannot reach their level, but the point is that in America they have to raise their own money. They do not have it poured down their throats. They therefore nave this tremendous incentive all the time to drive ahead on every conceivable plan to improve their load factor.
Look at the doubts about the future of atomic plants. I do not think we can 72 now say that we know all the answers for seven years ahead. All we can say with certainty is that in a few years' time —I do not know how many—many of the present plants will be looked upon as impossibly out of date and capital consuming, as well as very doubtfully economic, as my right hon. Friend admitted. Who knows what is the life of the fuel elements in these plants? What about the effects on the economics of the assumed price of uranium and plutonium, both of which very largely depend upon military plans—and nothing could be more difficult to predict than military plans over the next seven years?
We are told nothing in these recent documents about what are the assumed interest rates on which these forward plans are being made. If we are building an atomic plant at a capital expenditure of two-and-a-half or three times that of a normal station, the rate of interest is clearly vital. I would say that the House ought to be very careful indeed before it votes this money, because it may well want to look again at these plans long before the seven years period is up.
What we are up against in all these questions of the control of the capital of nationalised industries is what was done in the 1945 Parliament by the Labour Party. They came into power thinking that nationalisation was the answer to everything, and they dived straight into it. The right hon. Member for Easington (Mr. Shinwell), who was in the Chamber a moment ago but who is not here now, told us, with that frankness which so much endears him, at any rate to his political opponents, that when he arrived at the Ministry of Fuel and Power he was slightly surprised to find that no one had thought at all about any of the problems involved in nationalising an industry. I remember that when we were in opposition, night after night we used to pose all these difficulties. We used to point out exactly what would happen—in fact what did happen—but the larger the difficulty and the more impossible hon. Members opposite found it to answer, the more invariably they simply applied their majority and passed on to the next point. Their mood was that it was slightly indecent to criticise or question nationalisation at all. There is a poem by John Betjeman called "The Planster's Vision" which very much expresses the mood of 73 the time. I will quote the first and last lines of the second stanza:I have a vision of the future, Chum,No Right! No wrong! all's perfect ever more.That was very much the spirit in which hon. Members went into these things, without thinking.
Curiously enough, one of them at any rate had thought beforehand about it. Even more curiously, it was the right hon. Member for Lewis-ham, South (Mr. H. Morrison). In 1933 he wrote a most interesting book called Socialisation and Transport, about setting up the London Passenger Transport Board. As hon. Members may recall, no Government finance whatever was guaranteed to the London Passenger Transport Board. The right hon. Gentleman wrote:The Government did not wish to do this—that is, supply State guaranteed funds—for it might well have encouraged a spirit of slackness, or even recklessness, on the part of the Board in matters of management, on the part of the travelling public in demanding lower fares and uneconomic facilities, and on the part of the workpeople in asking for big concessions as to conditions of labour; all might be tempted to say, 'Well, after all, the Treasury is behind us' …. This is a dangerous frame of mind.How right he was. Unfortunately, in the press of his many duties in 1945, when he was drawing up these nationalisation Bills, he did not have the leisure to reread his book. Had he done so he would have found there, in those few objections, a complete answer to all the nonsense of nationalisation.
Even so, I think he missed one of the points—and I do not blame him for it. He missed the extraordinary difficulty to our economy which the control of this mass of capital expenditure entails when there are a large number of nationalised industries. There is almost always capital hunger. We live in a capital-hungry generation. Every underdeveloped country in the world wants capital and wants loans. Investment in this country is running at a higher rate than before the war. All the new inventions demand new money. Any business man who could get a guarantee of money for several years ahead would be in clover. As T. S. Eliot wrote in a poem:I shall not want capital in heaven,For I shall meet Sir Alfred Mond,We two shall lie togetherWrapped in a 5 per cent. Exchequer bond.That is a very moving thought.
74 In the earthly paradise prepared by Lord Mills for the Electricity Council he has said that nothing less than £1,150 would do to stuff the enormous cushion on which they are to lie. How is this sum arrived at? This is the crux of the matter. Any hon. Member who wishes to study the economics of nationalisation seriously would do well to read a recently published book by Mr. R. Kelf-Cohen, who was until lately a senior official in the Ministry of Power.
We start off with the industry itself. There we have a number of extremely able, enthusiastic technical people all wanting to give fine service, all wanting to expand and all wanting to be quite certain that their own department is not going to let the show down. Gradually, all these claims are added together. I am, of course, not saying in any way that there is no internal check by the area boards and the Electricity Council. The point I am making is that in that industry there is not a single man who has the slightest responsibility for raising the money.
The vast total sum is added up and it is then presented to the Ministry of Power. What does the Ministry do? The electricity department consists of a handful of officials with no technical advice whatever. All those people can do is to argue a little and to look at the total. They have no means whatever of saying whether the demands are justified. Then the sum goes up to the Treasury. Again, no technical assistance and an even smaller staff. They may say on general economic grounds, "You cannot have as much money," but they have no means of knowing whether the demands are justified or not.
Contrast that with the situation before the war, when there were 562 electricity authorities, two-thirds of them municipal, and demands for capital on the distribution side came up before literally thousands of councillors and directors all of whom were responsible for finding the money. They therefore asked the right questions. On top of them—this is the most important point—were the Electricity Commissioners, who had to approve all plans not only for distribution but also for generation.
§ Mr. Frederick Peart (Workington)
Is the hon. Member therefore suggesting—because an hon. Member on his side supports the view—that it would be logical 75 to go back to the system of denationalisation and decentralisation?
§ Mr. Birch
That was not the solution that I was going to propose, although it might well be the best one.
The point I am making is that in those days there was both lay and technical supervision by people fully responsible. Now there is nothing outside the industry itself. The Ministry of Power and the Treasury have no real knowledge. Everything is done simply upon the ipse dixit of the industry itself. I think that to be a profoundly unsatisfactory situation leading as it does and is bound to do in the end, and as it has done in many of these industries, to slackness and waste.
What can be done? It is a very difficult problem and it has certainly not yet been solved. Indeed, it may well prove to be insoluble. However, we ought not to give up trying to get the answer. The first thing is to let in a little light and air. The Select Committee on Nationalised Industries has done its best and has produced some good reports, but it is handicapped by two things. It is handicapped by restrictive terms of reference and by having no staff behind it.
I always noticed when I was a member of the Government that the Public Accounts Committee had far more influence than the Estimates Committee in Government offices. The reason for that was that the Public Accounts Committee had a staff, the Exchequer and Audit Department, headed by the Comptroller and Auditor General. That staff had the right to go to a Government Department, look at the books, read the letters and find out what was going on, whereas the Estimates Committee was simply fishing. Fishing is all that the Ministry of Power is doing now.
The suggestion has often been made that there should be an official analogous to the Comptroller and Auditor General having the task of looking after the efficiency of the nationalised industries. I would like to revive that suggestion in a rather more radical form. I would like to have a Comptroller and Auditor General for the nationalised industries. I think it would be essential that he should be outside politics, that is to say, that he should be like the present Comptroller and Auditor General, paid from 76 the Consolidated Fund and not subject to any Ministerial control. I would like him to have a staff, which need not be very big, and I would like him given the power to call on the part-time services of the best technical people available. His task would not be to carry out a financial audit, to duplicate the work of chartered accountants, but to carry out an efficient audit.
The way in which I see it working is this. The Select Committee on Nationalised Industries would ask him the answers to certain questions, or he might think it right to bring some matter to the Committee's attention. The sort of questions that might be put to him would be these: "What we want to know is on what basis a certain area's capital expenditure is planned during the next few years. Go out and examine the books and the plans and make a report." Or, on the load factor, they might say to him, "We observe that the Eastern Region appears to be trying much harder about the load factor than anyone else. Is this really true? Has it made progress? What further progress might be made?" In the same way he might make an examination of the disproportion between small and large coal.
I, personally, would not be the least frightened of this official trenching upon policy questions and I would not look upon him as a hostile force either to nationalised industries or to Ministers or Government Departments. He would be there to find out the truth and to give Parliament something to bite on. All that Parliament has to bite on now is an occasional slander on a nationalised industry and an ad hoc report on the slander. That does not get one very far. What we want is factual information by unbiased people. Two objections are always made to this. The first is that it would be trenching on the responsibility of Ministers. To a certain extent I think that that is true, but Ministers are in a difficult position at the moment. They are responsible to Parliament for these industries and bound to answer for them in Parliament.
As the right hon. Gentleman noted, every Minister has always spoken to the same brief on any nationalised industry. The brief shows a disturbing complacency about the whole thing, an almost super Panglossian optimism that all is for the 77 best in the best of all possible nationalised industries. They are bound to do that. While they are responsible and have the right to issue directions they are not supplied with any staff or with any means of getting advice outside the nationalised industry itself. That was arranged quite specifically by the party opposite when it set up these boards. Therefore, they are put in a false position. I think that Ministers would welcome some outside reports and they would certainly learn from them things that they do not know at present.
The second objection is to say, "Oh, well, you would be upsetting the management of these great monopolies. They are such delicate flowers that they cannot stand criticism. Therefore, it is wrong to do this." The first thing is that they have no shareholders. We hear a great deal from right hon. and hon. Members opposite about the functionless shareholder. Where shareholders have really been functionless is in the nationalised industries. I would take a long bet that if several of the nationalised industries which I could name but will not had, in fact, been privately owned, the shareholders would have exercised their power of veto long ago and sacked the board. But nothing, in fact, has happened. The nationalised industries can bear the making of losses with Roman fortitude and, whatever happens, they get the capital poured down their throats. There is none of the discipline of the market, the sort of thing that makes businessmen grow old before their time. None of these disciplines apply.
Therefore, some form of discipline must be applied. They may say that it is "all kicks and no ha'pence". I think that the boards of nationalised industries are underpaid. They have a big job and they ought to be paid more. I am all in favour of higher salaries, fiscal privileges and pensions for them. But, once having treated them properly, I would keep them up to the mark.
This is obviously only a sketch and a possible idea of dealing with the situation, but the problem of the control of the nationalised industries and of their capital expenditure, which is a great burden upon our economy, has not been solved. For this reason we should be right to take short steps and not authorise capital expenditure for long periods ahead. 78 Therefore, when this Bill emerges as an Act I hope that it will be modified, if only in a slight degree.
§ 5.41 p.m.
§ Mr. George Darling (Sheffield, Hillsborough)
I am sure the House has enjoyed the trenchant criticisms of the right hon. Member for Flint, West (Mr. Birch), even though I do not think many of us on this side would agree entirely with the solutions he has put forward to deal with the problems which he himself has created in his own mind.
The right hon. Gentleman almost spoiled his case when he hinted that it would probably be better to return to the chaos of the pre-war set-up rather than continue with our large nationally-owned and administered electricity industry. There really was chaos before the war. Not only had we no standardised voltages for the consumers and no standardisation of equipment of any kind, but the whole service was so expensive to run. If we had that kind of decentralisation now on that scale, goodness knows what the cost of electricity would be to the consumers.
The weakness in all the arguments the right hon. Gentleman put forward is that at no point did he ever consider the consumers of electricity. He was concerned only with the financial operations associated with the industry getting its proper capital equipment. I do not want to go into that side of the question today.
I want to look at this problem from another angle. I am not quite sure that the expansion of eleotricity supplies envisaged by this Bill will be sufficient for our needs. If we are to look ahead to a return to an expanding economy, an economy that is going to make this country more prosperous than ever before and which will give our people an ever-increasing standard of life, I am confident that we must have far more electric power at the disposal of our industries than is envisaged here.
A factor which is not properly taken into consideration when the estimates of future demand are made is that a great deal of British industry today is inefficient. There is a great deal of managerial and technical inefficiency. Very few industries are properly equipped with up-to-date machinery, and I refer particularly to the new electronic machinery which many of these industries ought to have 79 and have not got. If they are to be brought up to standard, if they are to be in such a condition that they can provide this country with prosperity and rising living standards, these technical deficiencies must be dealt with.
One aspect of the problem which will have to be considered is the provision of more and more electric power for the modern machines which we hope will be put into industry. The United States worker still has more than twice the amount of electric power at his elbow than the British worker. Goodness knows what the Russian worker will have in the future, because electricity development in Russia is continuing on a phenomenal scale. We cannot afford to be in a position where the economic development of this country in relation to other countries is held up by a shortage of electricity.
Not only must we have better equipment in our industries and more electric power, but we must also consider the rural areas, to which my right hon. Friend the Member for Blyth (Mr. Robens) referred. We have gone to a great deal of expense to take the power lines into the rural areas, but, as my right hon. Friend said, the rural consumers are taking very little electricity. If by the means he proposed or by other means the rural consumers take a great deal more electricity, then again it is very likely that the estimates we are working on here may be insufficient.
If this is the case—and I think it should at least be looked into—many of the arguments which have been put forward by the right hon. Member for Flint, West do not stand up to examination, because this country cannot afford to do without the expansion of the electricity industry. Obviously the electricity has to be produced in the most economical way. Whether or not our present methods of financing the development are satisfactory is something that is well worth examining. I am not convinced that we have found the perfect method. But to suggest that the financial side of this matter is the most important side is to mislead the House and the country. The important side is how to get enough electricity for the needs of the country.
There is another important point which ought to be considered. As the 80 right hon. Gentleman so rightly said, we are looking ahead for seven years, no further. I agree with him that we ought not to have a rigid programme even for those seven years. For what is going to happen after that? In this country we have an ageing population, and we shall see the results of that ageing population in our industries in ten or fifteen years' time. The labour force will become numerically smaller. Yet we want rising living standards. We want a greater output from fewer and fewer workers all the time. We cannot have that unless the electricity supply, which is the modern method of taking power to industry, is sufficient for our needs.
As has been said from both sides of the House, this is an industry of which we can be proud. Its output is now more than three times the output generated prewar with an increase in cost of only 50 per cent. above pre-war. These are tremendous achievements of which we should be proud. In the area that I know best, the Yorkshire Electricity Board area, in the last ten years alone electricity has been taken to nearly 400 villages. There are now only four remote villages in Yorkshire and the northern part of Lincolnshire, Derbyshire and Nottinghamshire without electricity. That is something to be proud of.
The cost has been remarkably small in terms of what the consumer and taxpayer has to pay. In fact, although one would not think so from what the right hon. Gentleman has said, this is a very good public investment which produces very good returns in terms of service to the nation. Financially it is perfectly sound. Of course, the idea that businessmen are to be found only in the City of London was exploded a long time ago. One of the reasons why the Yorkshire Electricity Board can present such good accounts to the public is, I believe, that there is a great deal of shift working in the heavy industries in the area which it covers. That has had a considerable effect upon the load factor.
The right hon. Gentleman the Paymaster-General anticipated criticism about the hire purchase arrangements which the electricity boards make for the sale of appliances. In the course of his rather ambiguous remarks, he said that the Minister and the boards were in consultation about the total amount of money 81 out of the loans to be provided by the Bill that can be used for hire purchase arrangements. He said that the total amount will be decided by sound commercial practice. Whenever I hear those words I shudder a little, because very much depends upon who decides what is sound commercial practice.
I can understand that the restrictionists such as the right hon. Member for Flint, West would lay down very stringent terms about sound commercial practice. He can correct me if I am wrong, but the right hon. Gentleman would probably limit the boards very severely in the amounts which they could use for hire purchase arrangements. Others would say that one of the factors to be taken into account in deciding the criteria for sound commercial practice is the service which is given to the consumer. I see no reason why the electricity boards should be handicapped and prevented from giving a good service to the consumer merely because other people want to get their fingers on the kitty.
§ Mr. Darling
I was coming to that point. As the hon. Gentleman has reminded the House, I am associated with the Co-operative movement, which is all in favour of the electricity boards selling appliances in the best way possible to serve the consumer.
§ Mr. Nabarro
The hon. Gentleman must give the correct quotation. The Cooperative movement has announced that it is in favour of competition with the area boards' shops in the sale of electrical appliances so long as the terms of trade are equal and there is no element of subsidy from the Treasury in the capital employed for the financing of the electrical appliances sold by the area boards' shops.
§ Mr. Darling
If the hon. Gentleman can tell me in what Co-operative publication he has seen that quotation, I should be glad to look it up. Obviously we want fair competition, but not competition that would handicap service to the consumer.
§ Mr. Cooper
The hon. Member has mentioned the Yorkshire Electricity Board. Is he aware that the Yorkshire Electricity Board charges an interest rate of 41½ per cent. per annum? I am credibly informed by a large number of 82 people selling electrical appliances that that figure is below the cost of the paper work alone. Therefore, the actual financing is subsidised by the consumers and not by the board.
§ Mr. Darling
That is a point which one could look into. As my right hon. Friend the Member for Blyth said, apart from one, the boards are coming into line about the amount that should be paid.
There may be a very good reason why 4½ per cent. was charged. It may be to continue arrangements which have been going on for a long time.
§ Mr. Darling
I do not want this to be a discussion. We are on Second Reading, not in Committee.
The terms were probably continued because the Board was misled about how the terms of interest would move, but the board wanted to give the best service to the consumer. I know there was a great deal of pressure from the consumers' council in Yorkshire for those terms to be continued. Whether the board should have given way to that pressure is a matter of opinion.
However, that has nothing to do with my argument. Obviously the point that must be taken into consideration is to give the best possible service to the consumer. It would perhaps be wrong to give to those who buy the appliances a subsidy that is being paid by the consumers of electricity, and that should come to an end.
§ Mr. Nabarro
The point which I am trying to make and which has emerged from the hon. Gentleman's speech is that the board charged an interest rate of 4½ per cent. The board had to pay 5⅝ per cent. to borrow its money. The difference between those two figures, plus the cost of administration, is the element of subsidy given by the board out of its monopoly sales of electric current. That is wholly unfair.
§ Mr. Darling
I question whether it is as unfair as the hon. Gentleman tries to make out. There is another side to the matter.
We must do all we can to improve the load factor, which means selling appliances which will be used outside peak periods. If the board takes the view, 83 which may be perfectly sound, that in order to sell more appliances and therefore get a greater consumption of electricity outside the peak periods it should continue to do this, then I think it is perfectly entitled to do so.
When there was the prospect of a coal shortage two or three years ago, I made a statement in the House which the hon. Member for Kidderminster applauded. He shouted "Hear, hear". I said that in order to get fuel saving appliances in the homes in a big enough way it would almost pay the Government to give them away. In other words, we were pleading for Government assistance to get fuel saving appliances into the homes. This is much the same kind of argument.
§ Mr. Darling
What we are concerned about, and what hon. Members opposite cannot get into their heads, is service to the public. What hon. Members opposite are concerned about is service to the moneylenders.
As I was saying, we have to look ahead and consider our plans for an expanding economy. We should pay a great deal of attention to whether the electricity supply which we are planning now will be sufficient for our purposes. Also, we have to consider the fuel which will be used for the manufacture of that electricity. Here we tend to get into difficulty because we have not a coherent fuel and power policy which covers the fuel and power industry as a whole.
I had a great deal of sympathy with the right hon. Member for Flint, West when he suggested that we had not satisfactory public or Parliamentary supervision over the financial side of these industries. We need not only a better Parliamentary supervision over the financial side; we need a better Parliamentary supervision over the policies for the fuel and power industries. It is altogether wrong to put electricity in a watertight compartment, as we are doing, and consider the borrowing powers for the electricity industry by themselves. Those borrowing powers and the financing of electricity generation should be associated with and be part of a general fuel and power policy.
The oil industry comes into this matter. I am not suggesting public ownership, but 84 the oil industry cannot be left out of a discussion of policy for the fuel and power industries.
We make a mistake if we take our fuel and power industries one by one in examining their finance and operation. They should not be put into separate compartments. They are all part of one national service. Each is complementary to the rest and should operate under one comprehensive policy. We have not a national fuel and power policy today.
I do not want to take up the suggestions that the right hon. Gentleman threw out or to put forward any detailed suggestions of my own about a fuel and power policy except to say one thing. I am convinced that in the national interest we must, pay far more attention to the carbonisation of coal and stop the wastage of coal now going on through the burning of raw coal by old-fashioned methods. By-products which should be available for the nation are now completely wasted. The right hon. Gentleman mentioned the advantages which the United States has, and which Canada has, in having a national gas grid. We could have a gas grid in this country if we paid attention to the carbonisation of coal and stopped the waste which goes on as the result of burning it raw. Moreover, we should associate our policy on carbonisation, which would produce a great deal of gas, with the use of gas in electricity generation. This is but one aspect of national fuel and power policy, but I believe that we could in that way make enormous economies and derive better value from the coal which we produce.
After the experiences we have had under successive Ministers and successive Government policies, I am confident that we shall not achieve a national fuel policy merely by continuing the practice of having debates such as we have today on individual sections of the industry—a debate on electricity, a debate on coal, a debate on gas, and so forth. At some point, we must set up a standing Parliamentary committee which should concern itself with fuel and power affairs, being in a position to call before it in informal session the technicians, the experts about whom the right hon. Gentleman spoke. Of course, such a committee could not deal with finance Bills, but it should deal with the general technical questions which are now so very largely neglected because 85 our Parliamentary system does not allow us to discuss them. I am convinced that on each side of the House there are at least a score of Members who take a deep interest in these affairs and who would welcome an opportunity of discussing such technical matters.
As a result of such regular discussions, it would be possible to force upon even a reluctant Ministry a fuel and power policy which could be of great benefit to the nation. Whether we shall achieve such an arrangement as a result of the report of the Select Committee on Parliamentary procedure remains to be seen, but something on those lines must be done. Otherwise, we shall be in the continuing difficulty of trying to deal with the finances of each industry separately, treating each one without relation to the others and without any relation to an overall fuel and power policy.
Although we shall send this Bill forward from its Second Reading with our unanimous blessing—I do not imagine that it will be opposed by anybody—I cannot, for my part, feel satisfied either that it will provide enough electricity for our needs or that it represents the best way of dealing with the fuel and power problems of the nation.
§ 6.4 p.m.
§ Major Sir William Anstruther-Gray (Berwick and East Lothian)
Before the hon. Gentleman the Member for Sheffield, Hillsborough (Mr. Darling) found himself involved in controversy about hire-purchase agreements with my hon. Friend the Member for Kidderminster (Mr. Nabarro), I was in general agreement with what he said. That is, perhaps, scarcely to be wondered at, since this Bill, I understand, is supported by both sides of the House.
The hon. Gentleman made a very serious point when emphasising the importance of a general fuel policy. My particular concern, of course, is that the maximum possible use should be made of coal in the generation of electricity. Representing, as I do, East Lothian, which contains the Fleets Colliery, at Tranent, which employs 400 miners but which is threatened with closure, I am more than usually sensitive about any possibility of coal production being maintained at anything less than the maximum.
86 From a defence point of view also, I do not at all wish to give a hostage to fortune by depending too much upon the oil-producing countries, where we have found ourselves in difficulty before now. As for nuclear power production, I wish to see it go ahead; that is an element of invention for the future of which we must take advantage.
Before I go further, I wish to refer to the book "Scottish Electricity—Plans for the Future" and say, because it coincides with the point I am making, how much I welcome what is said on pages 5 and 6 about the generation of electricity in Scotland. Of course, all generating stations are welcome, but I wish especially to refer to a new slurry burning station near Barony colliery, in Ayrshire. Mention is made of another station to be established at Kincardine, and a very good thing that is, too. At the top of page 6, it is said:Barony generating station in Ayrshire, completed late in 1957, burns colliery waste or washery slurry at the rate of nearly 200,000 tons a year. Although the capital cost per kW was high compared with larger coal-fired stations the use of waste products as fuel amply justifies the project. The economic possibilities of a second slurry burning station in Fife, where considerable quantities of slurry are available, are being examined.I feel sure that that is a sensible line to take, and I hope that my right hon. Friend the Secretary of State for Scotland, who will, I understand, take part in the debate, will be able to give us encouraging news about how plans for the Fife slurry burning station are progressing.
I rose not to dwell solely on those matters, but to say a word in support of the Bill, with special reference to the South of Scotland Electricity Board, which has justified the high hopes we held about it in 1954, when it was announced by my right hon. Friend the Secretary of State for Scotland that it was proposed to give the South of Scotland Electricity Board independence from English control in London.
I see the right hon. Gentleman the Member for East Stirlingshire (Mr. Wood-burn) sitting opposite. He will remember that that Measure was introduced in the teeth of opposition from Labour Members, including Scottish Labour Members, who opposed the proposal to give Scotland a little control over her own electricity. I said then that I thought the proposal would be well justified by the 87 results, and I believe that we on this side were right in the line we then took. I doubt very much whether any hon. Member from a Scottish constituency sitting opposite will argue tonight very strongly against the performance which the South of Scotland Electricity Board has put up in the few years during which it has had an opportunity to play an independent part.
I particularly wish to call attention to the work done in the rural areas. Representing the two counties of Berwickshire and East Lothian, I know, as do all hon. Members who tour that part of Scotland, how remote some of the upland villages and farms can be. I know how unattractive, from a purely financial point of view, are many of the projects to install electricity. At the same time, I know how very desirable such work has been from a national point of view, and I much appreciate the very good progress we have been making.
The last report, up to December, 1957, of the South of Scotland Electricity Board, said that no less than 12,863 farms in the area covered by the Board had been provided with electricity. That amounted to about 80 per cent. of all farms in the area. The work has proceeded at the rate of 760 farms connected in 1956, 677 farms connected in 1957, and, in addition, another 600 farms, I understand, connected in 1958, bringing the total to well over 13,000 farms, well above 80 per cent. of Scottish farms in the area covered by the Board now being connected to the electricity supply. That is good progress, but I am not prepared to rest content with it. I shall not be content until all farms are connected. I hope that we shall see that state of affairs in due course.
Let us ask ourselves why it is that, in many cases, farms are not being connected. There could be two reasons. It could be that the Board is unable to grapple with the problem. We are really coming to the time when that reason does not apply. The other reason could be that the farmers do not want it. Why is it that the farmers do not want it? I need hardly tell my right hon. Friend that the reason is very largely one of expense. Here I do not see eye to eye with the report of the Consultative Council, which in dealing with this matter said:The Council wholeheartedly support the Board's policy for bringing electricity to rural 88 communities, although it is unfortunate that development schemes can be jeopardised by the reluctance of individuals to co-operate and agree to take supply.I feel that that is rather unfair to some of the individuals concerned. My right hon. Friend will correct me later if I am wrong about the facts, but I think that farmers having about 100 acres find their position very difficult. I do not so much care about those having well above 100 acres, but I understand that, if a man's farm totals 100 acres, a lump sum of £200 has to be put down straight away and, further, there has to be a guarantee of £10 a quarter; he has to pay at least £40 a year for electricity. It is at least £40 a year because it is no use economising in the summer and thinking that one can get away with £5. One is compelled to pay £10 each quarter at least, and that must be added to the £200 lump sum.
However, I should be the last person to be unfair to the Government which I support, and I believe that we have helped in this problem a great deal with our farm improvement scheme, which allows 33 per cent. of the cost to be borne by a Government grant. I do not, therefore, want to make more of the case than it deserves, but, even so, there is left out of the lump sum £134 in the first year, to which must be added £40 or more. That is about £200 in the first year, at any rate. On some of the prosperous farms, that burden can be carried, but on farms of about 100 acres, as most people in close touch with agriculture know, a consideration of as much as £200 in a year can be a very great deal.
I wonder whether either my right hon. Friend or the Board itself could make it a little easier for the smaller farmers to have their electricity and allow the schemes in general to be accelerated so that all the farms in an area could be connected at the same time. I am sure that my words will not pass unnoticed by my right hon. Friend.
§ Mr. Woodburn
It might be desirable for these matters to be covered by the hire-purchase powers of the electricity authorities, so that, instead of a man having to pay the whole £200 in the first year, he could have the amount spread over a considerable period. There is surely no reason why hire-purchase arrangements could not be made which would reduce the annual cost considerably.
§ Sir W. Anstruther-Gray
Yes, I think that that is so. I do not wish to be drawn into the controversy between private firms and the Board because, as the right hon. Gentleman knows very well, some good supporters of private enterprise have felt that the Board, when competing against private firms in the sale of appliances, has had a rather unfair advantage. It has been able to erect large displays and advertise in front windows on main streets, much of the overheads being charged to the Board in general—that is to say, to us also, as taxpayers—and it has been difficult for private firms to compete. The competition has not been altogether fair. I do not want to go too far in agreeing with the right hon. Gentleman, because I do not think that we should support a nationalised board in unfair competition against private individuals.
My next point concerns research. It has been said in this debate and it is, I think, admitted that there is a limit to development in certain directions. That is obviously true. Already in the South of Scotland Electricity Board's area, the number of farms connected is well above 80 per cent. Thus it is not possible to get unlimited increase in the development there.
Ought we not to look for further directions where it is in the national interest to harness electricity? One need not look far without coming across what has now been mooted in the newspapers a certain amount and has also been considered by the Edinburgh Council. I refer to the question of under-road heating. In reading the reports of the Board, I was rather disappointed that the column dealing with research contained no mention of under-road heating. It refers to the floor warming of domestic premises, but not to road heating, which, I am convinced, could make an important contribution to the prevention of accidents.
Although the weather is quite warm today, as it was yesterday and the day before, a week ago is was extremely cold. I had occasion to motor in my constituency and it was dangerous to be on the roads. If one has an engagement, however, one keeps it. Therefore, one drives, albeit to the danger of oneself and of the public, which is not a very good thing to do.
In many cases, there are obvious "black spots" where people again and again get 90 into a skid. The particular "black spot" which has been mentioned is the Mound, in Edinburgh, by the National Gallery, which about 400 buses pass every day. I understand that that is the first spot where sand is sprinkled in a freeze-up. It is a very well-known "black spot". Why should we not press ahead with some kind of road heating there?
There are two methods of heating, each controlled by a thermo-hygrostat connected to temperature-sensitive elements embedded in the road. One system is a grid of perforated expanded metal which operates on low voltage and needs a transformer. The other is an arrangement of insulated wires operating directly from the mains supply. The elements are embedded about an inch to an inch and a half below the surface of the road. Normally, the system would come into operation when temperatures were low enough, only at night, and use low-cost off-peak electricity. The heat would build up in the road and usually be sufficient to keep the road ice-free throughout the day. Under exceptionally cold conditions it might be necessary to use electricity during the day, which would be more costly—that is, in cold conditions such as we had a week or two ago.
The Road Research Laboratory—I do not know whether it is the English Laboratory or the Scottish Laboratory, at East Kilbride—estimates the cost of installation at approximately 30s. a square yard and running costs in the region of 2s. 6d. per sq. yd. per year. It is difficult to tell what that means in terms of an ordinary experiment or an ordinary stretch of road, but I understand that to do it adequately at the Mound would cost between £7,000 and £8,000 a year. That is a rather big bill to face and I wonder whether either my right hon. Friend the Secretary of State cannot intervene, as the road authority for Scotland, with assistance for this experiment or, alternatively, whether the electricity board itself, for the reason that the scheme would help with future developments—if successful, it would catch on and would be widely availed of by other people—would not consider granting a much lower rate of charge in view of the experimental nature of this plan. I hope that my right hon. Friend the Secretary of State might feel able to say something hopeful about this when he speaks tonight.
91 I want to close on a note on which we are entitled to close. The general picture of electricity development is good. In particular, the South of Scotland scheme, with Scottish control and not the remote control of London, is justifying its existence. The Government introduced it in 1954. Government supporters expressed the hope that it was a move in the right direction. I believe that it has justified itself. I wish it well and I shall vote in favour of granting it powers to borrow a further £60 million.
§ 6.21 p.m.
§ Mr. Frederick Peart (Workington)
I am glad that the hon. and gallant Member for Berwick and East Lothian (Sir W. Anstruther-Gray) has given wholehearted support to the Bill. I welcomed also his remarks about the use of coal instead of oil for the generation of electricity. Like the hon. and gallant Member, I have in my constituency two collieries which are closing down, and I consider it to be a wrong policy which has created this situation. My constituency has skilled miners and good available coal which should still be produced for the nation. I am fairly certain that if we had had a proper fuel and power policy, as suggested today by my right hon. Friend the Member for Blyth (Mr. Robens), these circumstances would not have been created.
Because of the political uncertainty of the areas from which we get the oil, it is foolish to rely entirely upon oil for the generation of electricity. I would have regarded that as elementary common sense and would have expected those responsible for Government policy to bear it in mind in their approach to the coal industry. Unfortunately, however, that is not the case. We have had no proper fuel policy over the last four or five years, and the nationalised industries have had to work on a policy of expediency within a framework in which a general policy pursued by the Government was absent. Therefore, we are in the present dilemma.
Although we are discussing electricity tonight, I agree with many of my hon. Friends who have spoken today that we need a general fuel and power policy. In that sense, I welcomed, strangely enough, the remarks of the right hon. Member for Flint, West (Mr. Birch), who made the interesting suggestion that 92 Parliament should look more at our fuel and power policy, including the nationalised industries; and, indeed, the right hon. Gentleman mentioned private industry. Although his political prejudices crept into his speech now and then, he made the interesting suggestion that Parliament should look broadly at the financial policies as applied by the various nationalised industries and private industry and that we should seek to check bureaucracy. Many of us agree that we must do this. The right hon. Gentleman's prejudices against nationalisation, however, rather spoilt a good argument on the broad need of Parliamentary control.
There is danger, too, that we do not have enough Parliamentary control. Tonight, for example, the Minister responsible for this Bill is in another place. The Parliamentary Secretary is not here, and has not been present during the whole of the debate.
§ Mr. Peart
He would not be replying in any case. We are to hear from a Minister who is responsible for Scotland. On these issues the Paymaster-General is always responsible for making major political speeches, while the key Minister is in another place. This is the responsibility of a Conservative Government. I believe that the Minister of Power should be here—
§ Mr. Nabarro
It is not a matter of condemnation for the hon. Member. When the Labour Government were in office from 1945 to 1951 there were plenty of responsible Ministers who sat in another place. I remember how indignant I used to be from the Opposition benches when I got some half-baked answer from a Parliamentary Secretary.
§ Mr. Peart
The key Ministers in the Labour Government, however, were on the Government Front Bench in this House, and the hon. Member knows it. The Minister of Fuel and Power was in 93 this House, together with the Minister of Agriculture, for example, and other Ministers. The Minister of Education was in the Cabinet, but a Conservative Prime Minister took her out of the Cabinet. And so it went on. Ministers should be here in this House, and I wish that the Minister of Power could be here now to answer questions. Instead, we have a delegation of Parliamentary responsibility. I agree with hon. Members opposite and with the "Nabarro" group in the Conservative Party that Ministers should be here in this House and able to answer detailed questions. Indeed, I should like to put some questions tonight concerning my own constituency.
I agree that we need a broad fuel and power policy, and I hope that the Minister who replies to the debate will answer my right hon. Friend the Member for Blyth concerning the build-up of our nuclear power programme, the arguments about the consortium, whether it is right to have four or five groups, whether it is right to stretch our resources, whether it is right to have greater freedom or to allow what is virtually a monopoly by these main groups, what connection they have with the Atomic Energy Authority, the relationship of private industry, and, of course, the full nuclear power programme in relation to electricity generation, its cost, and so on. All these are vital issues. We do not want too much detail tonight. The debate on a Bill of this kind is not the occasion to go into too much detail. Nevertheless, the main questions which have been put forward by my right hon. Friend certainly should be answered.
I wish to stress, however, the importance of rural electrification. I was glad that the hon. and gallant Member for Berwick and East Lothian emphasised this matter. Speaking this afternoon for the Opposition, my right hon. Friend said that opportunity should be given for small farmers to have cheap credit facilities or arrangements whereby they could buy equipment to enable them to use electricity in greater quantity. I do not know the reason for the fact that in some areas electricity is not being used fully by the farmers. It may well be because of expense. Arrangements should be made on the lines suggested by my right hon. Friend.
94 Unfortunately, however, in many areas, as I know in Cumberland, farmers do not have the opportunity to have electricity when they are quite prepared to meet the expense. This is a very great problem in my own area. Globally, the figures are fine. We have made tremendous progress over the last ten years. I could quote figures, as the hon. and gallant Member has done for his own Scottish region, from the North-Western region. Since nationalisation, we have had an increase in farm connections of over 7,000. On the day of nationalisation, there were 12,664 farms on the board's network. Today the figure is 20,080. I could give statistics to show the tremendous progress which has been made—and let us admit it fairly—by a nationalised industry. Hon. Members opposite should remember this.
The right hon. Member for Flint, West seemed in his other arguments to forget that in electricity the nationalised industry has achieved great successes, and we must pay tribute to it. It has not been a burden to our national economy. Indeed, this drive for electrification, which could be undertaken only by large concern devolving responsibility upon regional boards, could be undertaken only within the framework of a nationalised concern. If we had left it to the higgledy-piggledy bodies which existed before, these figures would not have been as good as they are now. The hon. Member for Kidderminster (Mr. Nabarro) knows, of course, as does the right hon. Member for Flint, West, that in this the Authority has achieved success Broadly, I say that it has.
§ Mr. Nabarro
I have not yet spoken, and I have not referred to this point, but we do not dispute that there has been good progress; we do not dispute that there has been a measure of expansion; but what we do dispute is whether it has been achieved with due cost-consciousness and economy in capital investment throughout.
§ Mr. Peart
I think he did, and I think that if hon. Members will read his speech they will see that he was sneering at nationalisation. I understand that, and I respect a man who continues to fight for his ideals, but hon. Members really must admit that in this matter the electricity authorities have been successful. If we look at the national figure we can see that tremendous progress has been made, and in rural areas there is undoubtedly a success story.
I would agree that in various constituencies there are still difficulties, and I would cite my own area. Those difficulties have come about not because of the policy of nationalisation but because of the policies which have had to be operated within the economy which has been dominated by right hon. Gentlemen opposite. In other words, there has been a deliberate cutting of capital investment. There was a period of capital restriction.
I have here an official reply from a Conservative Minister in relation to a scheme of electricity for the lakeland area of Borrowdale. Hon. Members opposite may know Borrowdale. In a reply by letter to me from the Parliamentary Secretary in April, 1956, he had to admit that the scheme was postponed solely because of the restrictions on capital investment. Time and time again when I have pressed for rural electrification in my own area I have been told, and my constituents have been told, that the regional board has to operate its policy within a restrictionist framework. Time and time again I have pressed for rural electrification not only in Borrowdale but at Loweswater and the beautiful area of Buttermere, in the lakeland area in my constituency and the rural areas on the fringe of that lakeland area, places like Embleton, and Ullock, and Bullgill, and my constituents have been told about the restrictionist framework.
Over and over again that has happened. I have letters here to show it. I have the official statement from the Government. I have it now also from the North-Western Eletricity Board, in communications which have been given to my constituents. 96 Time and time again the restrictionist policy has meant the postponement of a sensible electricity scheme. I am sure it is true, for the documents are here.
§ Mr. Cooper
I think the hon. Member is using the word "restrictionist" in the wrong sense. The public purse is not a bottomless pit. There has to be an alignment of priorities. I imagine that on Thursday the hon. Member will be arguing for more money to be spent on education. Other hon. Members will be arguing on other occasions that more money should be spent on roads, and so on. There has to be some balance of priority.
§ Mr. Peart
I can assure the hon. Member that that is true, but the board must decide the priorities. We have to decide what the priorities are.
I have been consistent about this. I raised this matter in 1950, even when the Labour Party was in power, and I questioned the Labour Government about priorities for rural electrification schemes in my own area. There was a specific reason for this, because Borrowdale had virtually been promised a scheme. It was postponed. This policy of postponement has been going on for the last six or seven years. It has been deliberately postponed, as I said, because of what hon. Members opposite know their Government did—because the Government cut down capital investment, because, from their point of view, there was a need for restrictions—
§ Mr. Peart
—and, therefore, Borrowdale, in the period of the Conservative Administration, mainly, has had its scheme postponed.
That was all that I was saying, and now, surely, we wish to expand. Indeed, the purpose of this Bill is to raise the limits on the borrowing powers of the central authorities, to raise the limits and to phase them with an expansionist programme over a seven-year period. I am merely arguing that now a Conservative Ministry should get out of their head the idea of restriction as applied to my constituency.
I will be quite frank. I am fighting for my area. Why should I not? It should be the job of every hon. Member to speak up for his constituency. But 97 that is not the sole reason, for I would fight against injustice wherever it seemed to me to be, and I think there has been injustice in this area, because the lakeland area and that part of West Cumberland which I have mentioned were promised a scheme which was postponed for the reasons I have mentioned also. I am merely asking that in this seven-year period, in this period of expansion, now that we are having this Bill to enable the ceiling of borrowing to be raised, rural electrification should have high priority.
The figure was given by the Minister of £660 million, a very high figure.
§ Mr. Peart
For distribution. This was the figure given by the Minister.
I want to see great emphasis laid on rural electrification because, as I have said, it was promised to my own area, and, too, because in that area we have farming and a great tourist industry which serves not only West Cumberland but the nation. Tourists come to our area from all parts of England and the British Isles. I believe that those people who look after our tourists deserve all modern amenities, and yet in that area, in some of our beautiful lakeland valleys, still there is no electricity supply.
The North-Western Electricity Board announced in September of last year—I have here a Press statement about it—that it was still going to adhere to the zonal scheme covering certain areas I have mentioned. I hope that now there will be more flexibility, and, in view of what has been said by the Minister and in view of this Bill, that this zoning scheme will either be accelerated or that the fringe areas, the zones in my constituency which have been told by the board that they are not going to get electricity for five or seven years, will now get it.
I have mentioned part of my constituency, Ullock and Dean, which lies near one of the zones agreed upon by the board, where my constituents have been told that they cannot hope for electricity for a very long time, despite the fact that the lines run very near to the area. Farmers came to me over the weekend about it, and I appreciate the difficulties which they are experiencing. This would 98 not be a big job, but a small job, and I am pretty certain that the local distribution organisation could do the job provided the Government say to the North-Western Board, "There shall be an expansion scheme and there shall be flexibility".
I am merely asking that the Minister should say to the boards, "Give rural electrification high priority. "I would say to him that I hope that he will use his influence with the North-Western Electricity Board and say to it that this lakeland area should have consideration. I am not asking him to give it a special favour. I am merely asking him to consider the delays I have mentioned. I ask him to consider the delays we have suffered in that area and the area's needs.
It seems absurd to me that my constituents who are deprived of electricity live only a few miles from our first atomic energy power station, Calder Hall. We have a nuclear power station which is now pumping a little electricity into the grid system whilst a few miles away in my constituency men and women are living in the Middle Ages, in the sense that they rely on primitive forms of light. I shall not be satisfied until I have in my constituency 100 per cent. supply of electricity for all my constituents who need it.
§ Mr. Peart
I have raised this matter time and time agin. I have criticised even my own Ministers when they have been lacking in this respect. I shall go on raising the matter. Therefore, today I hope that the Minister will ask the North-West Electricity Board to look again at the points which I have mentioned. It is shocking that in twentieth century Britain my constituents, living so near to the first nuclear power station, should be deprived of electricity. For that reason alone, I hope that there will be more drive and nationally more expenditure on an industry which is so important to our national recovery.
§ 6.41 p.m.
§ Mr. J. Enoch Powell (Wolverhampton, South-West)
If there was a fault in the argument of the hon. Member for Workington (Mr. Peart), it was that he failed to distinguish between the physical contribution of the British electricity 99 industry to our economy and the problems in the way of financing it which are created for us all—for the industry and for the nation—by the fact of national ownership. It is those problems with which this Bill asking for an extension of the limit on total outstanding borrowings confronts us directly.
I do not think anyone could deny that the present statutory limit requires to be increased. That is not really what is at issue. As long as this industry remains in national ownership, undoubtedly the lion's share of the capital which it requires for its development must be raised on public credit, whether the form of raising upon public credit is by advances from the Exchequer or by the issue of stock with Treasury guarantee.
What is at issue is whether in present circumstances it is right that the limit should be extended as far as is proposed in the Bill, and whether that extension should be without qualification. We are, in fact, concerned with the issue of due Ministerial and Parliamentary control over the borrowing and capital investment of the boards—I link these two forms of control, as did my right hon. Friend the Paymaster-General, who introduced the Bill, because unless there is effective Ministerial control it is not really possible to have effective Parliamentary control.
As we approach the question of the extension of the borrowing limits in the Bill, we have to bear particularly in mind the immense proportions of the capital requirements of this industry, which, as my right hon. Friend the Member for Flint, West (Mr. Birch) reminded the House, borrows more in volume than all the other nationalised industries put together. We are therefore dealing with operations whose impact upon the economy and upon the national finances cannot be insignificant.
The extension which is proposed in the Bill is designed to obviate the necessity of a further extension for six or seven years. That period is only somewhat larger than periods which we have encountered in similar Bills in the past. The Coal (Borrowing Powers) Act, 1951, gave an extension which lasted for five years; and the extensions in the Electricity and Gas (Borrowing Powers) Act, 1954, have also lasted for about five years. But I do not believe that we should be satisfied, 100 certainly not in dealing with the electricity industry at this time, with so long a period.
It is true that in theory the House can at any time, and in particular in relation to the Annual Report and Accounts, debate the finances of a nationalised industry. In theory, we can always call the Minister to account on any aspect of the administration and finance of the industries for which he is responsible. But there is a world of difference between the permissive opportunity, as it were, to have a debate upon accounts and the necessity placed on a board and a Minister to come to the House for something without which it or he cannot get on.
There is an immense psychological and practical difference between the two. It concentrates a man's mind wonderfully, to use Dr. Johnson's expression, if he knows that he has to come to Parliament and get something from the House. It strengthens the Minister against a board; it strengthens the powers of control of the Treasury; and it is a real instrument of control in the hands of the House of Commons. For these extensions of the limits of borrowing are the only acts by which the House says "yea" or "nay" to the finances of any nationalised industry. We may debate as we please the Reports and Accounts; but it is only in fixing the limits of borrowing that we have the opportunity finally and positively to pronounce.
I do not believe, taking into account the impact of the vast capital requirements of the electricity industry upon the economy, taking into account the rapid changes which are occurring in the whole fuel and power picture—which have revolutionised that picture in the last few years—and taking into account the state of public opinion regarding the accountability of nationalised industries, that we should be right, by the Bill as it stands at present, to relieve the electricity industry from the necessity of coming to the House again for six or seven years. I do not think we are entitled to vote the industry six or seven years' immunity from access to Parliament. If that be right, it follows that the limit, which has to be extended, is being extended too far by this Bill.
I have referred to the history of the coal borrowing powers. I think that the analogy of coal industry borrowing since 101 1946 is instructive in another respect and may provide us with a useful suggestion for the improvement of the Bill.
In the original nationalisation Act of 1946, the borrowing powers of the National Coal Board were limited in two ways: there was a limit on total outstanding borrowings, and there was also a time limit of five years after which those powers, whether fully used or not, would lapse. When the House came to renew the borrowing powers in 1951, it was proposed to drop the time limit and simply to proceed by a further extension of the limit on outstanding borrowing; but my hon. and right hon. Friends in the House at that time forced upon the then Labour Administration a very important modification of the Bill, which was introduced into it on Report. It was that there should be an annual maximum set to the borrowings in any given year, and that if that maximum was to be exceeded the Minister would have to come to Parliament for an affirmative Resolution to enable him to make the additional advances to the Board.
When in 1956 my right hon. Friend who is now the Minister of Supply applied to Parliament for a further renewal of borrowing powers, this annual maximum, this second leg, was retained with a proportionate increase of the total. One could dispute whether that proportionate increase of the annual maximum was logical; but at any rate the annual maximum was retained in the Coal (Borrowing Powers) Act, 1956. Even then, many of my hon. Friends, including the present Parliamentary Secretary to the Ministry of Power, voted against the Second Reading of that Bill on the grounds that it provided inadequate Parliamentary control. I wonder what the attitude of my hon. Friend to this Bill would have been tonight, if rôles had not in the meantime been somewhat altered.
I realise that this device of the annual maximum, with the requirement of a Statutory Instrument if it is to be exceeded, is not perfect, not entirely satisfactory. For one thing, it is not automatic: it does not mean that automatically every year this House has to concern itself with the capital investment and finances of the industry concerned. It is also not quite logical, because a year's expenditure below the maximum might be less justifiable in fact than another 102 year's expenditure above the maximum which therefore required access to this House. Nevertheless, in practice, it does mean that much closer scrutiny has to be given by the Board to its own capital projects, by the Ministry to the board's policy and by this House to the finances of the industry concerned. I believe that in practice it has proved salutary and valuable; for instance, I doubt whether we should have introduced even the present degree of realism into the finances of the National Coal Board if it had not been for the operation of this device in 1957 and 1958.
However, I should not be suggesting either that the limit proposed in this Bill is too long or that an annual maximum should be added as an additional safeguard if I thought that this would in any way hamper the opportunity of the electricity industry for planning and development. It is true it has been argued—it is argued in the White Paper and, I think, it was argued by my right hon. Friend the Paymaster-General this afternoon—that that might happen. The White Paper for example says, referring to the period of duration of the new statutory limit:A period of about seven years is reasonable for this purpose as a shorter period would prove unduly restrictive in view of the scale on which the electricity industry is required to plan and operate,That is to say, the argument is advanced that the industry cannot plan five or seven years ahead unless it has carte blanche from Parliament for the necessary advances for the next five or seven years. If the argument does not mean that, it means nothing. Now, I cannot believe that this is a sound argument. In the first place, we know and we have been assured again today that each piece of borrowing, each slab of actual borrowing, has to be authorised ad hoc by the Minister and by the Treasury, which means that in each particular case the answer may be "Yes" or "No". We are told by the White Paper that these—investment programmes … are reappraised annually on their merits and in relation to the prospective load of investment in the economy.Again, if that means anything, it must mean that the amount can be varied annually up or down. Finally, we know that at present we are within six or nine months of these statutory borrowing 103 powers running out, though it is impossible to doubt—indeed, this very document, "Power for the Future", proves it—that the Board has been continuing to plan, place orders and develop irrespective of the fact that it knew that it would have to get additional borrowing powers from Parliament.
So I conclude by saying that for the sake of the Government's own real control over this industry, as well as of Parliamentary control, and of the public interest at large, the immunity from a new application to Parliament which is proposed by this Bill at six or seven years is too long and ought to be reduced, and that the device, not perfect but useful, which we have had since 1951 in regard to the coal industry—the device of an annual maximum—should now be applied in this industry also.
§ 6.56 p.m.
§ Mr. Malcolm MacMillan (Western Isles)
I want to say something for an area in which the issue about nationalisation has scarcely arisen at all, because it was taken for granted, and rightly so, that no other method or medium could possibly provide electricity for such an extensive area as the Highlands and Islands of Scotland. Private enterprise had passed it by; because there was no profit for anybody in it; that is to say, no profit in the ordinary private profit sense. So, the argument about nationalisation has never been an argument at all there. It has been something which the people had long been waiting for and wanted to see accomplished, and which has been a blessing to all, including some private enterprises in that area, which have benefited from this enterprise by a public board.
Having said that, I have, at the same time, a certain amount of sympathy with what the hon. Member for Wolverhampton, South-West (Mr. Powell) has just been saying. I must say that he has proved already that not only can he not contain himself on issues of excessive public expenditure, but that even a Government cannot contain him. Nevertheless, we, too, can share his concern about this matter of answerability; and I myself have certainly felt at times that it is a matter to which both parties in the House might pay considerably more attention. I shall give an example or two 104 of the effect of the absence of it; though some hon. Members opposite were not very sympathetic about it when I raised the matter in one particular form on a previous occasion in the House.
There are two things I want to speak about. One is this question of answerability, and the other is the issue of the extension of rural supplies of electricity, which has already been referred to by several speakers. I refer particularly to my own area though it has to be remembered that it is not the only one which is still waiting for supplies of electricity and extensions of this service. I know that there are areas like parts of Cumberland, Northumberland and Wales, which are still in the same position; though that equates their claims, rather than leading to a competition which would eliminate any one of them in favour of any other.
It does seem odd that, in this year of 1959, more than half way through the twentieth century, large numbers of people in these areas are having to manage still with paraffin lamps and lanterns and draw water from wells. It is a scandal. It is almost unbelievable that that should be the case; but there it is. These are people who rightly claim equal citizenship, and are accorded it in theory, but upon whom we pile all the obligations of citizenship in times of peace and war by means of taxation and conscription, and so on, and, yet to whom in other ways, we do not allow the simple amenities and decent comforts of modern civilised living. When we speak of the needs of those rural areas, it is not to ask for any special consideration, but to make the appeal that they should be allowed to have what is enjoyed by the citizens in other parts of the country.
It has to be remembered, admittedly, that it is more expensive to link up the more distant rural areas with electricity. Equally, it has to be remembered that one does not grow plantations of trees in towns for the purposes of industry. It has also to be remembered that we do not develop hydro-electric stations in cities and that we do not grow corn or produce livestock in Pimlico, the Gorbals, or Central Edinburgh; but that town and country are dependent upon each other. Neglect of the countryside is as dangerous as the urban unemployment which has been created by the policy of the present Government.
105 I have never said anything broadly critical of the North of Scotland Hydro-Electric Board. I have defended it from its inception and have praised its activities and achievements, which are many. Without it, these blessings of electricity and industrial development would not have come to the highland and island areas. Even the hon. Member for Kidderminster (Mr. Nabarro) refrains from interrupting me at this point; and to that extent, therefore, we are all agreed.
I hope I can carry the House further with me in wishing we could extend it all the way and finish the job instead of stopping three-quarters of the way through the Board's work. That is really my criticism today of the Board. I know that it has been under pressure and restriction as a result of recent Government financial policy. The members of the Board had been warned; they have had directives thrown at them and they have interpreted them, no doubt faithfully and loyally; but in a way which we in the North have thought was excessively zealous.
I doubt whether the Hydro-Electric Board would have been affected by the 7 per cent. Bank Rate while it operated. The Board took decisions to subject itself to those restrictions before the high rate was effective. Indeed, we thought for a while that the Board had encountered difficulties other than those arising out of Government policy long before, and that it was prepared to some extent to sacrifice the smaller, out of the way, rather costly supply areas in order to try to get itself out of certain financial difficulties. We have a pretty good idea that this is true.
It is a most frustrating experience for hon. Members in this House, as the hon. Member for Wolverhampton, Southwest said, to find that they cannot get what I think this House has a right to have, that is, a breakdown at reasonable intervals of the figures which appear in the Board's annual accounts and reports. The Secretary of State has been asked time after time by the hon. Gentleman the Member for Caithness and Sutherland (Sir D. Robertson), myself and others, to give us an explanation and a breakdown of the items in the annual report. He is not in a position to give that, or he chooses not to do so, I do not know which. I imagine that he is not in a position to give it, and that he 106 is as much frustrated as we are. But there it is: we have either a blank refusal or pure, blank ignorance. Either way it is not helpful to anybody concerned.
Behind the borrowings of this Board has always been the Treasury guarantee, and from time to time the Board comes to this House and asks for an extension of its borrowing powers. More recently, Treasury advances have been the main financing method employed. The difficulty is that we have not been able in detail to scrutinise, and thereby understand, some of the headings with which we have been presented year after year by the Board. Not only that, but we have had only one major debate on its report and accounts in fifteen years.
§ Mr. MacMillan
It is. If the hon. Gentleman wants to interrupt, he might do so with some substance behind his intervention.
§ Mr. Nabarro
I addressed the Scottish Grand Committee on the question of the Scottish Hydro-Electric Board for 55 minutes and later I addressed the House for another 45 minutes on the Report stage of the 1952 Bill.
§ Mr. MacMillan
The hon. Gentleman, as usual, has confused and confounded his own argument. We were not then dealing with the report and accounts of the Hydro-Electric Board; we were dealing with a Bill.
§ Mr. MacMillan
No, it is not the same thing. The hon. Gentleman must distinguish between a Bill and the annual report of the Hydro-Electric Board. I would have imagined even he had that difference clear in his mind. Before that interruption I was about to express the hope that we would not have to wait fifteen years, or even the seven years mentioned in connection with this extension of borrowing powers, before we have a further full discussion and examination of the report and accounts of the Board; and I hope that the hon. Gentleman will agree with me on that point.
§ Mr. MacMillan
I believe that all parties in the House desire greater and more frequent opportunity of examination and a greater answerability to this House by the Board. It is extremely important to have that.
Now I will give an example which may or may not gladden the hearts of hon. Gentlemen opposite. Some time ago I tried to get details of a heading which appeared in the last report and accounts of the Board. It was called "Compensation". By devious means I managed to discover, and of course, had to disclose, that certain informal objections, which it was denied by a Minister were technically objections at all, had been lodged by Lord Lovat. In the case of one scheme, the Strathfarrar-Kilmorack scheme, the sum involved was £200,000. I could not have got that disclosure from the Minister, or the Hydro-Electric Board. It came from a mysterious but reliable source, and it turned out to be fairly correct.
There was £100,000 involved, and also indirect compensation. There was involved expenditure on new roads, on the reconstruction of roads, and on general improvements on the Lovat estate, a sum of over £102,000. Thus, the total amounted in cash and in other ways to over £200,000 of material advantage to one alone of the objecting landlords in connection with this Strathfarrar—Kilmorack scheme. This is one example of the lack of disclosure and of a lack of frankness when hon. Members of the House are asked to commit themselves, to commit the Treasury, to commit the Government, the nation, the taxpayer and his wife. Shortly afterwards another landlord said that in respect of the same scheme he had received compensation of £50,000. We still do not know what the full Lovat compensation amounted to. Sir John Stirling then disclosed that he too, had received £50,000 in respect of the project.
It was discovered then that Sir Robert Spencer-Nairn was fighting it to the last ditch; but the right hon. Gentleman told me "You cannot discuss this. It is sub judice." It was not sub judice. I thought it was at the time, but it was sub-S.o.S., as far as I understand, it was "sub" the right hon. Gentleman the Secretary of State for Scotland who was holding the inquiry. So up he gets blithely and tells me "This is sub judice. You must 108 not discuss it. I am examining it. It would be a most improper thing to do. "In my folly and innocence, I apologised and immediately withdrew from that part of the battle. But we were both wrong. It was not sub judice at all.
It turned out that the Spencer-Nairn decision was made on the responsibility of the Secretary of State; and nobody yet knows what it was, or what exactly was paid out in respect of Sir Robert Spencer-Nairn. No doubt the compensation paid will ultimately come under the heading of a global figure in the annual accounts as "Compensation". There should be more answerability on such things. That is only one example of many one could bring forward; maybe not the most popular one opposite; but it is an example of the need for scrutiny by this House before the extension of borrowing powers for all these purposes is sanctioned.
There are two things under answerability upon which it is important we should keep an eye. One is to ensure that the Board is carrying out the duties laid upon it statutorily by this House; to see that it is spending sufficiently as well as efficiently. In this connection, it is worth while looking again at the remit of the North of Scotland Hydro-Electric Board. It is not exactly the same as that of the South of Scotland Electric Board or the English Electricity Board. The North of Scotland Board was set up in 1943… to develop all further water power resources of the North of Scotland District in such a way that they would be able to supply electricity to ordinary consumers in the sparsely populated parts outwith existing supply areas, and to sell electricity to authorised undertakers and large power users within that District and to the electricity authority in the South. Within the limits of their powers"—this is where it differs from the rest—and duties the Board were also directed"—that is, directed by this House—to collaborate in the carrying out of any measures for the economic development and social improvement of the North of Scotland District or any part thereof.The Board already has wider scope than the other boards in its activities. It has extensive duties laid upon it, and it has a directive by Statute to carry out those duties. The priority is the supply of electricity to the local people, and, in particular, the sparsely populated 109 areas. That is one of the matters on which it is important that the Board should be more directly, thoroughly and frequently answerable to this House. There are other headings, too, in respect of which we ought to be able to demand answerability.
We have a right to know how the money borrowed by our authority is being applied. It is not enough to say that in seven years' time the matter will be reviewed. The hon. Member for Wolverhampton, South-West referred to the insufficiency of an occasional broad, "theoretical" review. He argued, perhaps correctly, that some sort of annual check might be valuable. That may well be true. While the North of Scotland Board has been handing out largesse to landlords, it has been denying electricity to small, sparsely populated areas, contrary to its statutory priority under the directive of this House.
We are told that the Board has run out of money. How can we reconcile their statements when, on the one hand, we are told of the settlement of £100,000 with Lord Lovat and, on the other, that the Board has no resources with which to extend its supply to the islands of Barra and North Uist? Why cannot we have enough information to see whether the Board is being extravagant in its awards on landlords' compensation claims? The awards were informally agreed without any public inquiry and without any Secretary of State's inquiry. In fact, these things were decided by the Board and the objectors who benefited. Today, thousands of my constituents in Uist and Barra are being told that the Board has no resources with which to supply them with electricity, at the same time as the Board is freely handing out largesse to the Highland lairds and new money barons.
Mr. E. Fenyhough (Jarrow)
Could my hon. Friend disclose how much Sir Robert got?
§ Mr. MacMillan
I have no means of telling. As far as I know, the matter is still—in the Secretary of State's sense— sub judice. According to the Secretary of State, there is no means of finding out. Under pressure, the Secretary of State disclosed the information in the case of Lord Lovat. In the case of Sir John Stirling, he himself frankly said what he had received and gave us fully the reasons why he got it.
§ Mr. John Rankin (Glasgow, Govan)
Can my hon. Friend say whether the Secretary of State, when he replies, will be in any way prevented from telling us the amount of money which was paid to Sir Robert?
§ Mr. MacMillan
I am always hoping that the Secretary of State will some day disclose something which will be useful to somebody. This is one of his great opportunities. Let us hope that the right hon. Gentleman will disclose some information. We have head from one hon. Member opposite something about the need for sanding the roads in Edinburgh at the Mound. There is no need for it at St. Andrew's House. Nobody will slip there, since nobody ever moves.
§ Mr. E. G. Willis (Edinburgh, East)
Can my hon. Friend say what percentage of the cost of the scheme is going as compensation in respect of sporting rights?
§ Mr. MacMillan
We expect the Secretary of State to go into detail about that in his reply, after having heard all the questions in which we are interested. A very large sum of money is involved; much more than would be necessary to supply the whole of the island of Barra and some thousands of people in the Uists. Some months ago, when it suited the purpose of the Government to establish a guided missile range in the Western Isles, there was no trouble in estimating for £22½ million. All we are asking about now is the £200,000 and the other handouts. We have a right to that much answerability by the Secretary of State and the Board.
The Secretary of State is, or should be, more answerable to this House than any of the other Ministers. The other boards are answerable in two ways, through the Minister of Power and the Treasury. The North of Scotland Board is answerable only to the Secretary of State, and, therefore, surely, the Secretary of State is even more directly answerable to us. He is Scotland's only Minister in the Cabinet, and we have the right to feel that he has more of a direct responsibility to us than other Ministers have, because there is a second Treasury check in their case.
I am not criticising the Board for its work in general. It has done excellent work in bringing light to the homes of 111 many Highland people and making industries possible where even the hon. Member for Kidderminster, with all his ingenuity and belief in private enterprise, would not succeed in bringing it. The Board has done well in difficult conditions. The chief difficulty now, however, is that, in areas where it is failing to finish the job, it is frustrating all the economic and social development which it has a directive from this House to promote; and until it can supply electricity to Barra and North Uist no industries can settle there and life will continue to be, as was said by my hon. Friend the Member for Workington (Mr. Peart), in respect, at least of lighting and fuel, something like what it was in the Middle Ages.
§ 7.17 p.m.
§ Mr. A. E. Cooper (Ilford, South)
When I first came to the House nine years ago I was advised never to embroil myself in the affairs of Scotland. Consequently, I hope that the hon. Member for the Western Isles (Mr. Malcolm MacMillan) will not think me discourteous if I do not refer to the points which he has raised.
From 1936 to 1940, I was chairman of the Ilford electricity undertaking. In those years I was a member of a committee called Area 10, which had as its chairman the right hon. Gentleman the Member for Poplar (Mr. Key) and as its vice-chairman the right hon. Member for Rochester and Chatham (Mr. Bottomley), two very prominent members of the Labour Party, who would certainly resent the suggestion made by one hon. Member opposite that the distribution of electricity in those prewar years was a higgledy-piggledy business.
There is a world of difference in the electricity industry in the post-war years compared with the pre-war years. In the pre-war years we were concerned largely with a developing industry. We were then endeavouring to promote the sales of a form of energy which, although not exactly new, was trying to make its headway against gas, which was then very largely used for industrial and domestic purposes. The methods by which we were able to encourage the use of electricity, although justifiable in those days, are not necessarily justifiable in post-war years.
112 At the time we were trying to develop we had an off-peak load problem which was a very serious one. If one could create a demand off-peak of an extensive character, one could reduce the price of the current overall very substantially and, in consequence, make a further step forward in the consumption of electricity.
We had this problem in Ilford. It was a problem of an industrial demand which was very much a peak load. Coupled with that was a vastly expanding domestic demand, making for very serious problems. We were able to work out a scheme, which had the support of all the private electrical contractors in the town, whereby the borough council and the electricity undertaking hired water heaters at an uneconomic rate. The water heater was essentially a means of consumption which was off-peak, usually in the middle of the night. After following that policy for two or three years, in 1938 we were able to provide electricity to our consumers for three units a penny, at that time the cheapest price anywhere in the United Kingdom.
The problems of today are very different. There is still the problem of off-peak loading, the solution of which would help us considerably. I now wish to deal with the question of electricity boards supplying electrical appliances on hire purchase to consumers within their areas. As I have explained, before the war we did it for one reason. Today the reasons are different.
§ Mr. Cooper
I will explain to the right hon. Gentleman. The main items of equipment sold by electricity boards on hire purchase today are washing machines and vacuum cleaners, items which consume very small amounts of electricity and which have little effect on the off peak demand. We are concerned with a Bill to increase the borrowing powers of the electricity boards and we must first make sure that the money being advanced will be used properly.
§ Mr. Cooper
Cookers are not normally used at off-peak times, that is, in the middle of the night. From the consumption point of view, cookers are a very bad load for the local undertaking, because it so happens that housewives are usually cooking at times when factories are using electricity. Few men have their meals in the middle of the night. I need not develop that argument.
In December, when the Central Electricity Generating Board approached the Minister of Power asking for the restrictions on hire purchase to be lifted, there were outstanding hire-purchase and deferred payment instalments of no less than £22 million. In 1956, before the restrictions started, the amount: outstanding was roughly £29 million. I am well aware that there has been a substantial increase in hire purchase, but it is not unreasonable to suppose that the amount now outstanding is about £30 million.
§ Mr. Cooper
I have been very conservative in my calculations, but my advice is that the figure is about £30 million. That appears to be the sort of sum which at all times is, as it were, frozen for the specific purpose of hire-purchase arrangements and is thus not used in the development of generation plant and distribution services.
What is equally important is that the rate of interest and the period over which repayment is required are such that the ordinary domestic consumer subsidises the hire-purchase arrangements of electricity undertakings by certainly not less a sum than £500,000 a year, and probably nearer £750,000 a year.
That is an unnecessary subsidy to impose upon the consumer. I have before me complete details of minimum deposits and interest rates being charged by all the boards. I assure hon. Members that I have not gone into this exercise in any partisan spirit. There is no need in the present state of our development for these excessively low rates of interest to be charged which have only to be met by the ordinary domestic consumer.
§ Mr. Cooper
The right hon. Gentleman says not necessarily. Will he be good 114 enough to tell me how the £750,000 will be otherwise found?
§ Mr. Robens
Yes. The hon. Gentleman wants his constituents to pay more for their appliances. I am sure that he will be very popular in his constituency when full publicity is given to that. He forgets that the greater the sale of appliances the greater the consumption of electricity, which must bring down the cost to that extent and which would be a contrary item to that extent.
§ Mr. Cooper
The right hon. Gentleman always speaks from theory and very little from practice. Experience over the last few years has shown that with the nationalised industries the reverse happens in every case.
Let us consider some of these terms. It should be borne in mind that for the average private contractor the usual period for washing machines and vacuum cleaners, even with restrictions out of the way, is two years. Very rarely will anyone be found to offer a period beyond that. In London, the board offers three years for washing machines and two years for vacuum cleaners. The interest rate is 4½ per cent. The paper work alone costs more than that.
§ Mr. Cooper
The right hon. Gentleman should not sit there saying "Nonsense". I have had these figures checked by some of the largest hire-purchase companies in the country. [HON. MEMBERS: "Oh."] I am informed that the paper work alone would cost approximately 4.6 per cent., to say nothing—
§ Mr. Cooper
—of the cost of the money involved. The right hon. Gentleman should not be so petulant and hasty in saying "Rubbish", because some boards charge a rate which is reasonable, so that if the right hon. Gentleman is right in asserting that the people I am quoting are inefficient, will he say that the boards which are quoting a correct figure are profiteering?
§ Mr. Robens
I am saying that to say it costs 4½ per cent. for the paper work on hire purchase is arrant nonsense.
§ Mr. Cooper
I ask the right hon. Gentleman tomorrow to contact, through 115 Transport House or someone else, the hire-purchase companies. I am sure that he will have to return to the House and say that it is he who is talking nonsense.
§ Mr. Fernyhough
The hon. Gentleman must be aware that since hire-purchase restrictions were lifted countless firms have been selling all kinds of household equipment free of interest. Posters advertising "No deposit and no interest" have been displayed on the windows.
§ Mr. Cooper
The hon. Member seems unable to understand that there is any difference between a nationalised industry offering a concession by means of a concealed subsidy and a private trader who, although he may do what the hon. Gentleman says, has to find the money in some way or other in the cost of the article.
The right hon. Gentleman may be interested to know that in the Midlands the charge is 9 per cent. and the normal commercial practice of two years for washing machines and for vacuum cleaners is followed.
§ Mr. Maudling
A charge of 4½ per cent. on the outstanding balance after payment of initial deposit is about the same as a true rate of interest of 9 per cent. on a reducing balance. Is it possible that different boards are quoting different terms, just as personal loans are quoted one way by one institution and another way in a different institution although coming to the same thing? My impression is that the boards charge between 8 and 10 per cent. of true interest.
§ Mr. Cooper
That is true in a number of cases, but not in every case. In South Wales, for example, the charge is 3¾ per cent. per annum on capital but not reducing, but in that case there is an additional concession, something which the private trader would be unable to offer, a minimum deposit of 5 per cent. and a maximum period of repayment of five years in each case.
I happen to be President of the Ilford Chamber of Commerce and Trade, and I know what the small traders in the town think about these problems. They do not fear the competition of the boards so long as it is fair competition. They feel that they can fight provided they do not have one arm tied behind their backs. I beg the right hon. Member for Blyth to recognise that the country owes a tremendous 116 debt to small traders. The small trader is asked to pay a higher rate for his electricity simply because the board subsidies hire-purchase sales with low rates of interest and impossible trading conditions. I ask my right hon. Friend to see that a serious attempt is made to ensure that the trading conditions of electricity boards are within reasonable limits and the same as private industry has to bear.
§ Mr. Arthur Moyle (Oldbury and Halesowen)
Will the hon. Gentleman explain precisely what he means by "small trader" in connection with hire purchase? All the small traders I know are simply selling agents for these appliances. Immediately a hire-purchase agreement is made, the traders cease to act in a commercial capacity and the matter is at once transferred to a finance corporation with which the customer deals. A finance corporation cannot by any stretch of the imagination be regarded as a small trader.
§ Mr. Cooper
It seems that no matter how clear one tries to be it is impossible for hon. Members to understand the simple economics of the matter. The boards do not bother about going to finance companies. They carry all the finance, in the way I have explained, to the tune of about £30 million a year. All I am saying is that that £30 million was not voted by Parliament to enable the boards to sell electrical appliances. It was money intended for the development of electricity.
§ 7.35 p.m.
Mr. William (Houghton-le-Spring)
I do not intend to follow the argument of the hon. Member for Ilford, South (Mr. Cooper) except for one matter. For some years I was chairman of an electricity committee in my town and I found that, prior to the war, the distribution and generation of electricity was in a chaotic state under the different municipalities and private companies—so much so that we got the McGowan Report, which was very critical of the electricity industry. Only with the coming into existence of the Central Electricity Board before the war and nationalisation after the war did we obtain any standardisation of voltage throughout the nation.
§ Mr. Cooper
I do not disagree with the hon. Member on this point, but I would 117 point out that the Report to which he has referred was in connection with generation and not distribution.
§ Mr. Blyton
If the hon. Member reads the Report he will find that the question of distribution played just as important a part in the investigation.
In supporting the Bill, I want particularly to deal with the use of coal in generating electricity and Government policy in relation to the use of oil for generation. The Minister dealt with this important subject very briefly. In electricity generating stations coal is the natural and economic fuel, but this market for our coal diminished by no less than 5 million tons in 1958 as compared with the previous year, whilst the consumption of oil leaped from 578,000 tons in 1957 to 2,189,200 tons in 1958. These figures include creosotes and pitch mixtures. Since 1954 the amount of oil consumed by electricity undertakings has increased from 161,600 tons to 2,189,200 tons in 1958.
In this field we claim that coal is competitive with oil, but, due to the past history of our fuel supplies, the use of coal by some stations is now ruled out because the Government have made an eight-year contract with the oil companies. On 30th January, 1956, in answer to a Written Question, the then Minister said that there were then 227 stations burning coal and only two with oil, and he added:The latter, and the further 15 stations which by 1960 will be equipped to burn oil, are geographically well placed to receive oil supplies in bulk; … the difference in cost of generation as compared with coal is marginal. Most of these stations will be able to revert to coal burning, in periods varying between a few days and about six weeks."— [OFFICIAL REPORT, 30th January, 1956; Vol. 548, c. 69.]If these statements are correct, why was an eight-year contract given to the oil companies when everyone knew that the conversion to oil was due to the fact that we were importing coal in 1955? The reason for dual firing in these generating stations was surely so that we could go back to coal when it was in plentiful supply.
Let us look at the history of the use of oil and coal in our power stations. In the early summer of 1954, a working party of officials of the C.E.A. and the N.C.B. was set up by the Chairmen of 118 both bodies. This followed conversations they had had with the Minister to consider the possibility of the use of oil at certain power stations, thereby releasing coal either for the manufacture of briquettes—in order to relieve the shortage of large coal—or for redistribution as part of general availability.
In June, 1954, the working party reported that it would be technically possible in a short time, to reduce the consumption of South Wales coal—South Wales being an area in which we now have many mines closing—of a quality suitable for briquetting at Battersea and Fulham, and by using more oil at Bank-side. It also reported that by further increasing oil consumption at Bankside B up to the maximum, and increasing the use of the existing oil-fired boilers at Brimsdown, it would be possible to displace further quantities of coal in the North and South Thames areas. At this time it was also suggested that many of the pulverised-fuel-fired stations were capable of being converted to dual firing, and in 1954 the Government authorised the import of 500,000 tons of coal for power stations.
The prospect, as seen then, was that these imports to meet the requirements of power stations and other consumers would have to be stepped up to nearly 10 million tons. In fact, we imported 11½ million tons in 1955. At that time there seemed no prospect that the Coal Board would be able to supply as much coal for power stations as the C.E.A. estimates of future demands required.
It was also in 1954 that the then Minister decided that the gap between the demand and supply of coal could best be met by the import of oil, and it was in these circumstances that the possibility of using oil on a much larger scale was considered. Negotiations then proceeded, and an agreement was arrived at whereby Marchwood Power Station was put to oil, and the design of the station was changed to permit oil or coal being used. Agreements were then made to supply oil to seven stations—Barking, Brunswick Wharf, Littlebrook, Tilbury, Poole, Portishead and Plymouth. It was estimated that by 1960 these stations would need the equivalent of about 4 million tons of coal.
Another agreement was made covering a further seven stations—Belvedere, Bromsborough, Carrington, Cliff Quay, 119 Ince, South Denes and a projected station on the Thames Estuary. This agreement provided for oil supplies rising to the equivalent of 5 million tons of coal. I shall be very critical of what the Government have done in relation to these eight-year contracts. By 1955 arrangements for oil burning in 17 power stations were made, and it was estimated that their total consumption of oil would be equivalent of 9 million tons of coal. I shall not give the names of the stations; I will only say that Carrington, near Manchester, was included in the list but that in 1955 it was decided that this station should remain on coal. That is the background which led up to the Minister's answer to the Written Question of 30th January, 1956.
Shortly after this answer was given we had the Suez crisis, at the end of 1956. This entailed a cut of about 90 per cent. in the oil consumption of the Central Electricity Authority, which lasted for four months and caused a delay in the implementation of the oil conversion programme. In 1957 the Coal Board revised its long-term estimates, which indicated a great increase in the availability of small coal for electricity generation at the end of 1960. We know now that small coal is in abundance. In view of this, and because of the modifications in the capital expenditure programme of the electricity supply industry, the oil-burning programme was reduced to an estimated 7½ million tons of coal equivalent. This increased the estimated demand for coal by 3 million tons by 1965.
I now want to deal with the substance of the Minister's Written Answer in 1956, that conversion to coal would take from a few days to six weeks. Because of the circumstances of the time oil had to be used, and the intention was surely to revert to coal. If that was not so, the answer had no meaning. If it was the intention to use oil there was no need for dual firing.
I now turn to the four stations scheduled to use oil in the near future. They are Belvedere New Station, Plymouth B, Portishead B, which is a partial conversion, and Brunswick Wharf. If the eight-year contract ties us in connection with nine stations, surely coal can be used in these four—or are they also tied up by the eight-year agreement?
120 Why should they burn oil when millions of tons of coal are on the ground, miners are being laid off and mining villages becoming derelict?
Oil comes from the politically most unstable areas of the world. We were caught not so much napping as snoring by the revolution in Iraq. In that case we were committed to support the deposed rulers, but we rightly hastened to make our peace with the newcomers. In the oil areas we have often backed the wrong horse. Our oil supplies are never sure. Are we, then, to see our miners unemployed, although on some future occasion we may find that we cannot obtain oil to maintain our electricity supplies?
During the Suez adventure we had to make a cut of 90 per cent. in the Central Electricity Authority's oil supplies. If trouble breaks out in the oil fields, or if another conflict arises—which no one wants—a difficult situation will be created in connection with our oil-fired generating stations. I want to put forward a suggestion, for what it is worth. The Government ought to call the oil companies, the Electricity Authority and the Coal Board together, with the object of arriving at an agreement to put the four generating stations which I have mentioned on coal. Their consumption would be about 1 million tons of coal a year, which is equal to the employment of 4,000 miners yearly.
This eight-year contract is a hard bargain, extracted by the oil companies when coal was scarce. There was no competitive basis about it at all. Coal can compete with oil in this direction but cannot do so now because of the eight-year contract. I know that the present Minister of Power has told the National Union of Mineworkers, my trade union, that if coal cannot compete with oil it is just too bad for coal; but we insist that where coal is the natural and economic fuel it should be used. That applies to the four generating stations now scheduled to use oil.
In this free-for-all economy, I would ask the Government whether it is their deliberate intention to run down the coal industry. The Government's fuel plan of £300 million per annum is now dead and ought to be revised. We have been told by the Government that coal will remain the main fuel of the country, but what do 121 they mean by that? Are we to supply 55 per cent., 60 per cent., or 65 per cent. with coal, and is oil to supply the remainder? The pattern of fuel consumption is changing every day. It ought to be the policy of the Government not to make the country too dependent upon oil.
I have been informed that 137 large industrial consumers are to go over to oil by 1960 and that another 266 are negotiating prices for oil, yet we are handcuffed by Statute on price policy against oil, and no competition is allowed in respect of the generating stations. If we are to be told that it is just too bad if coal cannot compete with oil, we can at leasts expect the Government to give coal a fair chance to compete. There will have to be alterations in prices, and perhaps in the price structure itself, if coal is to compete with oil. Only the Treasury Bench can help us in this respect.
If it is the Government's plan to run down the coal industry in favour of oil, the Government should say so. They should tell the National Coal Board and the miners what is expected and needed from them in coal production. In the changing pattern of fuel consumption, the coal industry ought to be told what output is needed from it per annum. Is it 200 million tons or 180 million tons? How many men shall we need to produce the amount that is required? I have come to the conclusion, very reluctantly, that the present closures of mines that have taken place are not the last and that there will be more to come very shortly.
I am greatly disturbed at present trends of fuel consumption. If oil consumption is not controlled in some way, our basic industry of mining is bound to retract. It should be Government policy to see that our own coal is used where it is the natural fuel to use. The Government ought to give freedom to the National Coal Board to compete with oil and to ensure that our future economy shall not be dislocated by too much dependency upon oil.
For all these reasons, I ask that the four generating stations now scheduled for oil should revert to coal. That would give employment to 4,000 miners and a market for our small coal. If we now run down the coalmining industry we shall be in a hopeless position if we get into trouble about oil supplies, because we shall not be able to reopen the mines, 122 especially if we are in a recession, and the oil generating stations will be helpless. The constructive approach is to have a plan for fuel and power, with a clear conception of the present situation and its possibilities, in the midst of continuous change.
The oil companies are countering our criticism of the extent to which they are encroaching on our traditional preserves of coal by pointing out that present circumstances are temporary and that before long the fuel demands of the country will increase at a rate that will allow plenty of room for coal, oil and, later, atomic energy. It is apparent to anyone who studies the situation that the conditions of the early post-war years are unlikely to be repeated. I say, as one belonging to the mining industry, that we must expect competition from oil. In the use of oil in industry, generating stations and elsewhere, we must remember that, apart from the social problem, the danger is that if oil is allowed to displace coal, in conditions of recession a large capacity of coal could be lost that might be needed in the future.
On 14th July last year, I tried to put forward what I thought would be a fuel policy for the nation. I have no desire to change one word that I used in that speech. It is the responsibility of the Government to ensure that we have a prosperous mining industry and that the supply of fuel to our generating stations ought not to create unemployment in our basic industry of mining and make us dependent upon oil to the extent that it is doing. I see no policy in making sheiks in the Middle East richer and miners unemployed. I therefore ask the Paymaster-General to give consideration to the suggestions I have made in my speech about putting these four stations on coal.
§ 7.58 p.m.
§ Mr. Gerald Nabarro (Kidderminster)
The opening speeches of my right hon. Friend the Paymaster-General and the right hon. Member for Blyth (Mr. Robens) were characterised by the customary paeans of praise for a nationalised industry, in this case the nationalised electricity industry. My right hon. Friend competes once again with the right hon. Gentleman on the Opposition Front Bench in seeking to 123 demonstrate that one right hon. Gentleman loves the nationalised industry better than the other. Does my right hon. Friend wish to contradict me?
§ Mr. Maudling
I certainly wish to contradict my hon. Friend, but to contradict him fully and to give full justification for my contradiction would involve language not wholly Parliamentary.
§ Mr. Nabarro
I repeat to my right hon. Friend that the correct interpretation of his speech was a paean of praise for the nationalised industry: everything it had done since the days of nationalisation was perfect. Not a single note of criticism was to be found in his speech, notwithstanding the fact that every independent observer of the affairs of this immensely expensive nationalised industry has had a great deal of legitimate complaint to level against its operations. [Interruption.]I see that my right hon. Friend the Member for Bexley (Mr. Heath), the Chief Whip, has just come in to listen to my speech, which is very right and proper. Perhaps I may proceed.
There is a great deal of criticism in connection with the affairs and the finances of the nationalised electricity industry. I conceive it to be of much greater importance in a financial context than any of our other State boards because of the equation which seems to have been established in capital investment during the last few years. Capital investment in electricity is now equal to that of coal, transport and gas combined. Electricity is far and away the most expensive in terms of capital of our State industries. It is evident and manifest, from the speeches made by my right hon. Friend the Member for Flint, West (Mr. Birch) and my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell) that, on this side of the House at all events, there is the view that three desirable reforms might be considered to be within the terms of the Bill and that suitable Amendments to embody them may be moved at a later stage.
The first, as I understand it—and I am wholly in agreement with it—is that we are seeking to authorise an increase in borrowing powers which carries us forward for far too long a period. I have no desire to seek to legislate by an increase in borrowing powers forward to 124 beyond the next General Election but one. My hon. Friend the Member for Wolverhampton, South-West made it abundantly clear that the operations, the development, the planning of the Central Electricity Generating Board would not be inhibited in any way if this period were reduced.
My right hon. Friend the Member for Flint, West also made it quite clear in the remarks he addressed to this particular aspect of the matter, when he said that the suggestion to cover a long period ahead was merely a matter of convenience. I am not concerned with the convenience of the bureaucracy or anybody else. I am concerned with the proper application and utilisation of capital resources which are exceedingly scarce. There is no greater protagonist in the House of Commons or elsewhere than I am of the need for further and continuing expansion of electricity resources for industrial production and productivity, for enlargement of farm output, for commercial purposes, and for labour saving, cleanliness and efficiency in the home. They are all very desirable purposes, but to provide the financial sinews for them is extremely expensive, as I demonstrated a few moments ago, and our primary concern ought to be the correct application of capital and its most efficient use.
I therefore join with my right hon. Friend the Member for Flint, West and my hon. Friend the Member for Wolverhampton, South-West, and I shall endeavour to crystallise what they said. I shall seek later in this Bill to reduce by 50 per cent. the ceiling authorised for the borrowing powers with a view to cutting in half the span of years ahead for which we are seeking to legislate. In doing so, I do not believe that I shall inhibit in any way the legitimate development and expansion of generation facilities.
The second amendment I shall want to see is in connection with Parliamentary accountability. My hon. Friend the Member for Wolverhampton, South-West was quite brief in his references to this. He referred, rather kindly I thought, to the history of the Coal Board's borrowing powers in this House. I say to my right hon. Friend the Paymaster-General that when his predecessor, my right hon. Friend—with emphasis on "Friend"— the Member for Hall Green (Mr. Aubrey Jones) brought the Coal (Borrowing Powers) Bill to this House in 1956. I was 125 very pleased to lead twenty-six Conservative Members into the Lobby against it—for one reason only. I wanted the Coal Board to have the extra money as I want the electricity boards to have the extra money now; but I want an annual Statutory Instrument to be brought to this House in respect of the investment in the same fashion as for the National Coal Board.
In the event, I did not get all I asked for. I did not get an assurance of a Statutory Instrument every year, but what I did get was an assurance that we should have a Statutory Instrument whenever the cumulative borrowing of the Coal Board exceeded in any one year the cumulative borrowing in the preceding year by an amount in excess of £75 million, and thus on 3rd December last we had a full day's debate on a Statutory Instrument in respect of the capital investment programme of the National Coal Board.
If it is necessary for a capital investment sum of £100 million for the National Coal Board, it is trebly necessary for the sum of £300 million per annum contemplated, I believe, in each of the next five or six years in the case of the electricity boards. I am sorry that my right hon. Friend is indicating dissent by shaking his head. He ought to support this admirable piece of Parliamentary accountability.
§ Mr. Maudling
The argument my hon. Friend is making is very interesting, but I was shaking my head about the £300 million, which I think is quite wrong.
§ Mr. Nabarro
Does my right hon. Friend think that? I will deal with him on that point. My arithmetic is always at least as good as his. He gave the figures, £980 million new capital for 1958 to 1965 to be found from internal resources, £1,150 million by new borrowing to be found in six years, a total of £2,130 million over six years. If £2,130 million is divided by six the right hon. Gentleman will deduce the answer is £355 million per annum.
§ Mr. Nabarro
Wait a moment; I have not finished. My right hon. Friend must not be impetuous. He had a long innings and I have sat here for five hours waiting to answer him. Three hundred and fifty-five million pounds annually is the 126 aggregation of what the electricity boards must find from their own internal resources and from new borrowing. I am perfectly prepared to concede that what we debated on the Coal Board Statutory Instrument was new borrowing, whereas now I am talking about the total investment in respect of electricity and I am not therefore comparing exactly like with like. [An HON. MEMBER: "Rubbish."] It is not rubbish. It is an argument subscribed to from all parts of the House.
If my right hon. Friend would like me to do so, I shall put it exactly analogously, the Coal Board versus the Electricity Board. The new borrowing of electricity boards, on his own confession, is £1,150 million over six years. Again if my arithmetic is correct, that to the nearest £1 million is £192 million per annum. That is roughly twice as much as the Coal Board's new borrowing. Therefore, if it is necessary to have a Statutory Instrument every year in the instance of the National Coal Board, it is doubly necessary—[An HON. MEMBER: "Trebly."]—for the electricity boards. Whether it is double or treble does not detract from the principle I am trying to enunciate.
The principle is that this House should have an opportunity every year to debate the capital investment programme of each of the major nationalised industries. It is a matter which I believe finds support equally on the benches opposite and among my hon. Friends. I am glad to see that the hon. Member for Bristol, Central (Mr. Awbery) and the hon. Member for Brecon and Radnor (Mr. Watkins) are nodding agreement with me. I know I have agreement on many of these matters—
§ Mr. Nabarro
Sympathy and support. The third point which I conceive as very important was touched on by my right hon. Friend the Member for Flint, West. It is that we should whether on this Bill or administratively have the equivalent of a Comptroller and Auditor General with a small, compact, skilled and suitably qualified staff to inquire into the affairs of certain of the electricity boards. That system has proceeded very well within Government Departments in dealing with estimates, votes and expenditure for 127 very many years past. Having regard to the fact that the nationalised industries are now most largely financed directly from the Treasury and also very largely as a direct consequence of the Chancellor's budgetry surplus in each of the last few years, it seems to me equally important that there should be a Comptroller and Auditor General specifically to inquire into cases of extravagance, specifically to inquire into cases of misspent funds, specifically to inquire—
§ Mr. Nabarro
I am in agreement. The hon. Member for Western Isles (Mr. Malcolm MacMillan) had a lot to say about compensation paid to landowners in the Highlands. If we had a Comptroller and Auditor General for the Electricity Boards I should be very willing and anxious that one of the things he should inquire into—I should give him very direct terms of reference to go to the Highlands to find out—would be whether the compensation paid to those landowners is excessive, and to report. I would also say that a matter of much greater importance is surely that the Comptroller and Auditor General should be sent off to a number of area electricity boards in England to inquire as to their load factor.
The load factor has been touched on in this debate very inadequately. The right hon. Gentleman the Member for Blyth has an excellent memory. It must be at least six years ago that I intervened—and he kindly gave way as he generally does—in one of his speeches. I said that raising the load factor by 1 per cent. would yield approximately £21 million economy in capital investment in the year that the load factor went up by 1 per cent. That was a rough and ready calculation, but accurate enough for Parliamentary purposes. [HON. MEMBERS: "Oh."] It is accurate enough for Parliamentary purposes, because Parliament is not a technical assembly and nothing bores the House of Commons more than long and detailed technical dissertations. Therefore, all of us who have talked about load factor have endeavoured to do so in the broadest non-technical sense.
There have been two persons who have commented quite impartially on the affairs of the nationalised electricity industry during the last couple of years. 128 One is a man who has been mentioned today, Mr. Kelf-Cohen. He is not a dyed-in-the-wool Tory. He is a scholar and university lecturer who for many years was a Socialist. For many years he served in the Ministry of Fuel and Power, as it was then, in a senior capacity. He tried to make nationalisation work. He was one—no doubt the right hon. Member for Blyth knew him—who would not be biased or partisan.
§ Mr. Nabarro
I do not think that we want to be rude personally about, him. I want to quote from his book "Nationalisation in Britain", which I commend to the House. I emphasise that it is direct borrowing of huge sums of money that we are discussing today, and I wish that the Paymaster-General had not looked down his nose and spoken in such derogatory terms about thousands of millions of £s. One million is important enough for me—it is all the taxpayers' money. I think that the Paymaster-General is much too inclined to underestimate the impact on the economy which the finding of these huge sums is going to entail. I will quote to the House what Mr. Kelf-Cohen wrote on page 103:If the load factor could be permanently improved by 5 per cent. it would mean a vast saving in capital. Electrical engineers are anxious to use the most efficient stations and classify them most scrupulously according to their thermal efficiency—though even the most efficient loses 70 per cent. of the value of the fuel consumed. But to search for ways and means to maximise the use of the vast plant under their care does not seem to concern them. To do so would require some unorthodox thinking and departure from tradition. There would have to be some drastic modifications in tariffs; all this would not be easy and rather unpopular in the industries.Later he wrote:We would, therefore, suggest that the Minister of Power should give the Generating Board and the Area Boards a general direction under Section 8 (1) of the Electricity Act, 1957, to take all steps possible to improve their load factors and to include in their Annual Reports"—I commend these words to the right hon. Gentleman—a chapter showing what steps they have taken for that purpose and what has been the result of their efforts.129 Does the right hon. Gentleman remember—he has been in every electricity debate with me during the last 10 years—that for three consecutive years I drew attention to the fact that the Electricity Board's Annual Reports did not include even a reference to the load factor. Then, when they started printing it, they tucked it away in the Appendix, and finally, as a result of my caustic criticisms and in view of the importance of this figure, they transferred it forward into the" main Report, but even then gave it only a few lines.
Why am I so keen on the load factor, apart from the point which I made in response to the right hon. Gentleman? The other impartial investigation of the industry has been made by Herbert. The hon. Member for Cleveland (Mr. Palmer) never tires of telling the House of Commons and public gatherings that Herbert commented favourably upon the efficiency of the industry. I do not think that he did; not in the context of the employment of capital and not in the context of cost consciousness. He wrote these words. I hope that my right hon. Friend the Paymaster-General will observe them, and I ask the Secretary of State for Scotland, who I understand is winding up the debate, to tell us what steps have been taken by the Government in response to this indictment of the wastage of capital money and the lack of cost consciousness. In Cmd. 9672 paragraph 346, page 91, he stated: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 repeat "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.For an impartial investigating body to use the word "languid" in connection with a State Board is just about as savage an indictment as can be made of its operations and its employment of capital resources. That is why my right hon. Friend the Member for Flint, West and my hon. Friend the Member for Wolverhampton, South-West and myself—I am in exceptionally respectable company today, two ex-Treasury Ministers; it is impeccable company that I keep these days—in the light of the Herbert Report, and in the 130 light of what Mr. Kelf-Cohen published a short while ago, want a much more detailed scrutiny of capital investment, appointment of a Comptroller and Auditor General and a reduction of the scale of the increased borrowing powers proposed in this Bill embodied in an Appropriate Amendment at a later stage.
There is one other matter which I must touch upon. I disagree profoundly with the Paymaster-General—not a new occurrence, for we have different approaches to matters of this kind—on the sale of appliances and hire purchase. I say today what I have said in this House on many previous occasions, that I do not believe that it should be any part of the purpose or policy of a nationalised electricity undertaking to promote the sale of electrical appliances. I believe that the purpose of the undertaking is to generate electricity and to distribute electricity. Within the subject that we are discussing today, which is the increase in financial borrowing powers, this looms especially important and large. My hon. Friend the Member for Ilford, South (Mr. Cooper) rather tended to understate what are the sums of money involved.
I wrote to Sir Henry Self, the Chairman of the Electricity Council, and asked him for the figures for 1958. He gave them to me, with the greatest courtesy and full explanations, almost by return of post. He said that in 1958 the total sale of electrical appliances by the nationalised undertakings, including contracting, amounted to £46 million. Of that, £19 million was in respect of self-financed hire-purchase sales. Since then, however, the credit squeeze has been relaxed. Those sales will doubtless increase very considerably. I would expect them this year to be at least 50 per cent. above the £19 million last year, if not more. I would say that this year the electricity boards will sell about £30 million of appliances on hire purchase.
But the boards do not have to finance only in respect of one year. They have to carry the finance very often for two years or longer. I am informed, reliably and independently, that the cycle for hire purchase for electrical appliances is averaging two years. It is therefore a question of two years' financing, on the present scale at a rate of about £30 million a year. Whether the sum involved in the aggregation for outstanding hire-purchase contracts by these area boards is £40 million 131 in 1959 as an average, or whether it is £50 million or £60 million, does not matter a great deal, in my view; it is the principle which matters.
§ Mr. Nabarro
This is a difficult argument. May I finish it, and then I will give way to the right hon. Gentleman.
This is the money which the area electricity boards are having to find out of their working capital in order to finance hire-purchase transactions. If no such hire-purchase transactions were undertaken by the boards, then an equivalent sum of money would be available to them for essential capital investment. In my view that is an irrefutable argument. If that sum of money were available, at an average of £50 million, for capital investment, it would diminish by £50 million the sum of new borrowings which the board would otherwise require to go to the Treasury to obtain, out of taxpayers' funds. It is for this reason that I say to my right hon. Friend—and I shall come back to it when I get an opportunity later in Committee—that I do not want the electricity boards to finance by themselves any hire-purchase transactions whatever.
May I put a point to the right hon. Member for Blyth? There were exchanges this afternoon between him and my right hon. Friend as to what rearrangements are to be made in respect of hire purchase. Whatever is arranged, one thing should be certain: the hire-purchase terms which an area board gives for an electrical appliance should be the same as those which private enterprise gives. The right hon. Member for Blyth will agree with that. All private enterprise underwrites hire-purchase finance by sub-contracting to finance houses.
As an example, if the right hon. Member bought a motor car on hire purchase, the motor car dealer who sold the car would not himself finance the hire-purchase contract. He would immediately sub-contract it to a finance house. Why should not the whole of this State board burden of £40 million to £60 million for hire purchase on electrical appliances be sub-contracted to finance houses by the area boards, so that the boards can use fully that money for essential capital investment for generation and distribution, 132 which is their primary function, not the sale of appliances?
§ Mr. Woodburn
Is the hon. Member aware that long before the industry was nationalised, the local authorities con trolling these electricity concerns hired out apparatus on the same basis as that on which the present boards are hiring it? Why this prejudice against the system simply because it is done by a nationalised board instead of a local authority board?
§ Mr. Nabarro
There is no prejudice at all. The right hon. Gentleman's point about the pre-nationalisation boards and the municipalised undertakings selling appliances is so hoary that it is almost growing grey whiskers. It is perfectly true that in the early days of electricity, to obtain diversification of load and improvement of load factor, the pre-nationalisation undertakings sold space heaters and water heaters and—
§ Mr. Nabarro
Perhaps the hon. Member will permit me to finish my sentence. As time went on, and immediately before nationalisation, it spread to cookers, but it did not spread, for example, to television sets and radio sets. The right hon. Member for East Stirling (Mr. Woodburn) says, "They were not there". He has given exactly the right answer. Today they are there. The Midlands Electricity Board, for example, sells large numbers of television sets on hire purchase.
§ Mr. Nabarro
But it is using Treasury funds, subscribed at a preferential rate, in order to sell television sets which, as far as I am aware, in no way enhances the business of generating and distributing electricity.
§ Mr. Maudling
On a point of fact, I said this afternoon that any expansion of finance for hire purchase would not come from the Treasury but would come from commercial sources and presumably the banks. I said that there would be no more Treasury money for the finance of hire purchase.
§ Mr. Nabarro
That does not detract an iota from my argument. I am grateful for the intervention. I have pointed out that there is continuing a substantial sum 133 of money which is divorced from the general purpose of electricity generation and distribution—working capital which ought to be applied to new capital investment by the board and which is locked up and sterilised in hire-purchase contracts. This is a highly controversial matter. I would not expect to get total agreement upon it.
§ Mr. Nabarro
I should not expect to get agreement on such a controversial matter any more than we should get agreement upon the reasons prompting the National Union of Mineworkers installing in its headquarters in Euston Road, London, an oil-burning central heating plant, when the hon. Member is bleating about the continuing conversion of plants from oil to coal. He should take charity to his own headquarters and teach them to use coal, not oil, before he says "Hear, hear" to any of my remarks.
I am concerned with the dissipation of capital resources by these area boards. There must be a concerted effort to improve load factor. In my view there must be an end to the diversion of capital to extra, commercial purposes such as financing hire-purchase contracts for electrical appliances. We must have in the House very much better Parliamentary accountability for the huge sums of money which these electricity boards now seek to borrow.
I will support the Second Reading of the Bill tonight, and I assure my right hon. Friend that I shall not repeat my performance of May, 1956, by forcing a Division against Second Reading; but I promise him, equally, that there will be a detailed and meticulous scrutiny of the Bill in Committee, with appropriate Amendments to support the principles which I have sought to enunciate in my short speech.
§ 8.29 p.m.
§ Mr. Denis Howell (Birmingham, All Saints)
I am very happy to have this opportunity to speak in this debate, but 134 I shall not be long because I know that other hon. Members wish to speak.
I should like, first, to comment on the extremely remarkable and interesting speech we have just heard from the hon. Member for Kidderminster (Mr. Nabarro). I think that if anywhere in this country there is room for investigation and for Parliamentary accountability it is in the growing practice of usury and the finance of hire purchase. A general discussion of that would be outside the scope of the debate on this Bill, but it is an interesting fact that hon. Members on the other side of the House have made the point in their speeches today that householders and consumers should be placed more and more in the hands of the finance houses and moneylenders. That is something of which very careful note ought to be taken throughout the country.
I do not claim to be a financier or to understand the multifarious activities of the City, but I am able to understand and appreciate the success of the electricity industry over the last ten years, and its success where it matters most, and that is among the householders and consumers. Chiefly, I want to talk tonight about the success of the industry in the area which I represent, that of the Midlands Electricity Board. It is interesting to note that in the ten years from 1948 to 1958 the Midlands Electricity Board has been able to sell 193,900 cookers, 109,600 water heaters, more than 30,000 refrigerators, 86,400 washing machines and 119,800 vacuum cleaners. That is a total of more than 500,000 appliances sold through the offices of the board since vesting day, in 1948.
I say to hon. Members opposite who are objecting to this very strongly indeed that 500,000 families in the Midlands, many of them, no doubt, in the constituency of the hon. Member for Kidderminster, ought not to be put into a strait-jacket as a result of the opposition of hon. Members on the Government benches.
§ Mr. Howell
I will give way in a minute, if the hon. Member will wait.
There ought to be opportunity of choice, and I do not think that it is a laudable thing for the hon. Member for Kidderminster to tell us that his constituents ought not to be able to buy their 135 appliances through the electricity board s offices if they want to do so, and as, in such large numbers, they have demonstrated they wish to do. Nor, alternatively, ought he to tell us that if they do buy their appliances through the board the cost of those appliances ought to be dearer because the full play of the market ought to be brought into effect in hire-purchase.
That is another interesting example of how hon. Members of the party opposite, who were returned to reduce the cost of living and to mend the hole in the purse, are now busy trying to put all the households, and particularly in the Midlands, into pawn, into the hands of the moneylenders and City magnates. I am prepared to give way now if the hon. Members wants to interrupt.
§ Mr. Nabarro
I do not know that the hon. Gentleman is deliberately twisting what I said, but I merely said that there should be completely fair competition if the boards continue to sell appliances. Personally, I do not think it should be any part of their purpose or policy to sell appliances. As for all those figures the hon. Member quoted about the number of cookers sold in the Midlands, I would say that people would buy cookers from private enterprise shops if there were no electricity board shops.
§ Mr. Howell
I took down the words of the hon. Member. He said it was "not the duty of the board to sell appliances". The point I am making is that that only shows that the hon. Member wishes to restrict the avenues open to his constituents and to consumers generally where they may buy their appliances. Surely the hon. Member and his hon. Friends have not so far departed from the principles of fair competition and free enterprise that they now object to a little bit of honest enterprise on behalf of the electricity boards.
Incidentally, the figure of 500,000 appliances that I gave represents more than £11 million worth, excluding Purchase Tax. I want to make the point that part of the success story of electricity is in the amount of business which has been put into the hands of the manufacturing industry, and in the number of people who now have electricity who never had it before, and in the expansion 136 of the services, compared with what existed in 1948.
That £11 million worth of items sold in the Midlands alone over these ten years represents a remarkable contribution to the economy of the country, and from it the electricity industry can take great heart. I can only regret that I have not the figures for the sale of all appliances over the whole country. If I had they would show a very significant contribution indeed by nationalised electricity to the economy of private industry which is passed on to the country as a whole.
A point has been made from the other side of the House about accountability and how far the electricity industry should be given carte blanche in development and in its borrowing programme. I certainly subscribe heartily to the view that there should be more debates in the House and more accountability. I certainly think that the electricity industry, indeed any industry that is financed mainly by the taxpayer and the Exchequer, should not be straitjacketed to the extent that these services are by annual estimates and annual amounts of money, which cause hardship in planning and, in my experience, some waiting. Six years may be too long. I have an open mind about that, but the other extreme, for example in the Health Service, is far too short.
When my colleagues and I have taken up matters with the Birmingham Regional Hospital Board, for example, we have found that the board is unable to plan sufficiently far ahead because of the existing financial system. I know through my service on a hospital management committee that this system not only restricts the future planning of the Health Service but creates waste, because the regional boards tend to underplan.
The result is that at this time of the year they begin to realise that they will not spend all the money that the Treasury has allocated to them. They then get into a panic and write to various boards and say, "Can you spend this money before 31st March?" It may be spent on important projects. I am not suggesting that it is wasted, but it is bad planning because the sum total of that money could probably have been better used on a major project which could not be finished before 31st March in any one year. That is where the money should 137 go rather than into a series of expensive, higgledy-piggledy items, as I think the hon. Member for Ilford, South (Mr. Cooper) described them.
§ Mr. F. H. Hayman (Falmouth and Camborne)
Will my hon. Friend remember that the rural development of electricity has been hindered by this haphazard allocation which dissipates the resources, technical and monetary, of the electricity boards?
§ Mr. Howell
I am quite prepared to believe that. It is a point well worth making.
There is a very good case for change in the direction to which the Bill takes us, although I am not entirely ready to agree with the extension of powers for six years which the Bill provides. There is certainly a case for investigation on the ground put forward by the right hon. Member for Flint, West (Mr. Birch), that the Bill conceivably could take us outside the next Parliament let alone this one. I agree that there is a great case to be made for more accountability on the part of the nationalised industries in this respect.
As to the success story of electricity, I think it is a convenient time in the debate to have a look at the number of existing tariffs. The hon. Member for Ilford, South, who is not now in his place, said he could not subscribe, and did not think that anyone else would subscribe, to the view that the situation in the electricity industry was higgledy-piggledy in 1948 before nationalisation. I would point out, however, that 302 different tariffs existed then in the area of the Midlands Electricity Board alone. The board inherited 302 different means of assessing charges, and the highest unit price in 1948 was as much as 8d. When the hon. Member for Ilford, South spoke of the situation in 1948, I believe that it was an hon. Member who represents a constituency in South Worcestershire who said "Hear, hear."
There was a very interesting correspondence in the Press of South Worcestershire the other day, in which consumers, no doubt very good Conservatives, complained about the increase in electricity charges in South Worcestershire. They thought that it was a terrible thing, and they were writing to their Conservative Member deploring it. I would point out that with the increase in the price of 138 electricity in South Worcestershire, the price is now at exactly the level at which it was when the board took over in 1948.
Allowing for all the increases in the cost of materials, in wages, for the galloping inflation under this Government, and everything else, the people of South Worcestershire are now in the position, due to the nationalisation of electricity, that they are only being asked to pay the same amount for electricity which they were paying in 1948. There is very little to complain about there in the Conservative area of South-West Worcestershire, which used to languish in the old days under some of the old private companies, which charged 8d. per unit. These are very remarkable figures.
It is the same with rural development, and we all want to see more rural development. Do not let us forget that the more rural development there is, the more these areas are linked up, the more the element of subsidy comes in. None of us complain about that. We are all agreed that electricity has to be brought to the countryside, because a prosperous agriculture is important to the country, but do not let hon. Members opposite remember the impositions on the housewife and the household and forget the subsidies which have been given to make electricity available in rural areas.
Since vesting day, in the Midlands, which is not known particularly as an agricultural area, but is much more an industrial one, 13,000 farms have been linked up to the electricity supply. The number of other rural premises connected is 86,000, so that 93 per cent. of all farms and agricultural premises or rural premises in the Midlands are now linked up—an increase, because of the nationalisation of electricity, of 43 per cent. This is a wonderful achievement. The amount of capital spent on rural development since vesting day is £8,900,000.
I want to give some comparative figures, quite briefly and without a great deal of comment, but which, I think, should be placed on record, because we have now had a decade of nationalised electricity. The amount of money paid by the Midlands Electricity Board in the first year for electricity from the national generating board was £11,620,000. In the tenth year—1957–58—it was 139 £35,641,000. In the same period, depreciation increased from £1,600,000 to over £3 million.
Let us also note the burden of interest that has been put upon the Midland Electricity Board. Interest rose from £745,000, which was the figure when the board took over, to £2,114,000 in 1957–58. In all that time, the expansion of industry, the linking up of rural areas and new household consumers have brought an increase in unit sales from 4,059 million units to 7,837 million units in 1957–58, a magnificent achievement. That is the increase in the amount of electricity that has been sold.
I also want the House to note these figures. In that time, coal costs have risen from 54s. 9d. per ton to 84s. 3d. per ton; and this is an extremely important item in the cost of electricity, because each 5s. increase in a ton of coal costs the Midland Electricity Board £1,360,000 per year, a fact which has to be borne in mind. Turning to wages costs, skilled fitters' rates have increased from 2s. 9½d;. per hour in 1948 to 4s. 8½d.; per hour with 8s. 3d. per week productivity allowance, in 1958, so that it can be seen that increased wages for people in the Midlands Electricity Board's area are equivalent to about 2s. an hour.
There is also a new system of rating coming into operation which will hit the electricity industry but which will be of great help to local authorities. In other words, the industry will bear a much larger share of the rating burden, and whereas, in the Midlands, the rates provided by the industry this year amounted to £980,000, in three years' time the figure will be £1,390,000. This is a formidable increase to be found by any industry in three years.
In spite of all this, the average price of electricity per unit received by the Board in 1948–49 was 1.07d;. and at the end of March, 1958 it was 1.443d;. Those figures are important because they show clearly that if we take comparative figures, although the cost of living generally has gone up in those ten years by 50 per cent., although the cost of labour has increased considerably more than 50 per cent., although the cost of coal has gone up in proportion to the figures I have given, because of the efficient manage- 140 ment of the industry and its expansion the increase in the price per unit in the Midlands is only 35.4; per cent. It can be clearly seen, therefore, that the electricity industry, certainly in the Midlands, is making a great contribution towards stabilising the cost of living—indeed, to reducing it—and the figures are a great testimony to its success.
It is interesting, too, to note that although there has been this great expansion—over 400,000 new consumers in the Midlands have been connected to the supply in the ten years since electricity was nationalised—there has not been a corresponding increase in the number of the Board's employees. We are often told that nationalisation means armies of new workers, yet the numbers have increased only from 9,300 to 13,100, an increase of 3,800. Only 3,800 new employees to deal with over 400,000 new consumers and a great rural electrification scheme. No doubt that is why, to a great extent, the increase in the cost of electricity supplied by the Midlands Electricity Board has been kept well below the cost of all other consumer goods bought by the people of the Midlands.
It is right that such figures should be given in this debate, because there can be no doubt that there is great justification of the conception of this nationalised industry and its performance. There is also great justification of this Bill. If any private industry could tell the same story about costs which the Midlands Electricity Board can tell now, after ten years of increasing costs and of galloping inflation, people would not be nearly so worried about their financial position as they are at present. This Bill, therefore, thoroughly merits an unopposed Second Reading.
§ 8.50 p.m.
§ Mr. J. C. George (Glasgow, Pollok)
I want to deal with only one point, perhaps the most important of all, in connection with the electricity industry, and that is the load factor. Looking at the results over the years since nationalisation, and admitting the great success of many fields of the industry, one sees an absolute failure to do anything about increasing the load factor. In many ways the boards are powerless. In Scotland the South of Scotland Board and the Hydro-electric Board are diligent in seeking off-peak loads and have had some successes but only in small schemes.
141 I suggest there are fairly substantial areas where examination would show how the load factor could be substantially improved. I believe that a great deal can be done in collaboration with the National Coal Board in transferring the whole of the pumping load of the collieries to the night shift. It might pay the electricity boards to meet part of the cost of the extra storage space needed underground. From my experience I know that it is possible to create extra storage space and pump nothing during the day. There is a very wide and substantial field for examination, and I believe the results would be very important.
Much can be done in many works in the country. We have seen how N.I.F.E.S. has succeeded in saving fuel in factories where there was lack of care in the use of coal. There is a lack of care in the use of electricity, and it might be said that we need an electrical N.I.F.E.S. in the future to help with the problem of the load factor and to out down capital expenditure. There are many industries where part of the load could be profitably transferred to the night shift in order to get the cheap off-peak rate in the evening and avoid the heavier charge during the day. Much can also be done in making use of peak load rates for heavy duty motors. There are other ways in which much can be done. For instance, in brickworks it is often profitable to do all the grinding of clay on the night shift, thus taking the motors off the day load.
All these things show that there are possibilities of improving the load factor. If my hon. Friend the Member for Kidderminster (Mr. Nabarro) is right in saying that a 1 per cent. rise means a saving of £21 million in plant, this matter should be pursued diligently. I am sure that a genuine effort is being made, but it is being directed along the wrong lines. I hope that some of my suggestions will be acceptable to the electricity industry and will result in some improvement in the load factor.
§ 8.54 p.m.
§ Mr. Leslie Spriggs (St. Helens)
I am glad to support the Bill. It is very important that we should look at the questions raised in the House, and particularly those raised by hon. Members opposite.
Reference was made to the electricity industry being a monopoly. I do not 142 think we should have much to fear from monopolies if every monopoly were answerable to Parliament as the electricity industry is today. Monopolies do not come under the stern criticism of Parliament as the electricity industry does. When we talk of monopoly, it is important to understand what we are talking about. Hon. Members may not be aware that I.C.I, is producing its own electricity. Hon. Members opposite have criticised electricity boards for their hire-purchase schemes. I wonder why they did not criticise the chemical industry, namely, I.C.I., for producing electricity. I.C.I, has just completed a huge generating station, which is private property.
Hon. Members opposite should be careful when they refer to the waste of money. Some people have memories. Not long ago we had Suez, and now we have trouble in Cyprus. Hon. Members claim to believe in freedom and democracy and they should allow the public at least the right to choose where it will buy electrical appliances.
My right hon. Friend the Member for Byth (Mr. Robens) mentioned the standardisation of electrical appliances, and we can all appreciate the importance of that. In co-operation with many private manufacturers, the industry has been responsible not only for standardisation, but for many safety measures.
I have only a short time, so I shall confine myself to referring briefly to the successes of electrification in rural areas. I wish I had time to give the figures. We have been told that the figures are dry and that it is difficult to sit and listen to columns of figures being read. However, these figures are vitally important and show the success which this nationalised industry has achieved. We are proud of what the Labour Party did in 1948. If it is necessary to do it again, we shall know what to do.
There has been reference to the Government's approach in 1956, when it asked the industry to turn from coal burning to oil burning because of the shortage of coal. While we would never claim that it was right to break short-term or long-term contracts, did the Minister put on pressure for those contracts to be placed? At least he should be big enough to give assistance to the National Coal Board by increasing the use of small coal for the 143 production of electricity, especially when that small coal is merely lying in heaps around the collieries.
In my constituency of St. Helens there is one of the most modern generating stations in the country, Bold Power Station. I should like to see more like it developed. It stands almost in a colliery yard so that coal can leave the pit on a conveyor belt and go straight to the generating station, thus eliminating transport wastage. This is the type of economy which we require.
I go one step further than that. I should not like the country's economy to get into serious difficulties because we could no longer obtain oil to keep industry going. It would take years to switch from oil burners back to coal burners. The country has natural fuel resources and I should not like its economy to be robbed because of the shortsightedness of a Government. Will the Minister confirm or deny that he put on pressure for the placing of contracts for oil burners during the period of the coal shortage?
§ 9.2 p.m.
§ Mr. Arthur Palmer (Cleveland)
The formal proposal in the Bill is to raise the ceiling of the borrowing by the electricity boards in Great Britain, that means England, Wales and Scotland. The debate has provided us with yet another opportunity to consider the electricity supply industry's affairs in general.
It is worth remembering that in the last three or four years we have had a number of debates on the annual reports of the electricity industry. We have also had the Herbert Committee investigation; we have had many weeks of discussion on the Electricity Act, 1957, and, in addition, we have discussed the Report of the Select Committee on Nationalised Industries, on the working of the North of Scotland Hydro-Electric Board. That is all to the good, but if it is suggested, as the right hon. Member for Flint, West (Mr. Birch) seemed to suggest, that there has been some lack of Parliamentary examination or Parliamentary accountability in the matter I will simply say that it might be good for them and the public if some of the large-scale private businesses in this country were subjected to the same kind of open scrutiny every so often.
144 We all enjoyed the speech of the right hon. Member for Flint, West. He made one sound point and one point with which we do not greatly quarrel. He suggested that if the proper machinery can be devised—and he made some suggestions in the matter—there should be greater financial accountability by the nationalised industries, including electricity. He said that we might strengthen the existing Select Committee on Nationalised Industries by giving it the services of an expert adviser. I have served on that Committee from the beginning, and his suggestion might easily be welcomed by it. Certainly, it is a good point, and not, I think, violently controversial between the parties.
But the right hon. Gentleman rather spoiled himself when he expressed the most extraordinary view that the electricity supply industry was better organised when it had 500 separate undertakings. He should remember history. That arrangement was not condemned by the coming into force of the Electricity Act, 1947; it had already been condemned in 1935, when the McGowan Committee reported upon the organisation of electricity distribution. That Committee said that the industry should be rationalised and that the existing arrangements were out of date. I accept that the Committee did not advocate nationalisation, but it did not support the existence of 500 separate electricity undertakings—and it was appointed not by a Labour Government but by a Conservative Government before the war, and it also reported to a Conservative Government.
The right hon. Member for Flint, West rightly did not challenge the main purposes of the Bill. We must all accept that the country must have electricity in abundance. It must have power stations, transmission lines, and distribution systems. It is equally obvious that we shall need these things in increasing quantities and capacities as the years pass, because they are the very foundation of our national productivity and prosperity. It is a platitude to say that in every industrial country in the world, year by year, as living standards advance and productivity increases, labour saving, comfort and leisure are welcomed, and the demand for electricity rises if the price is reasonable—and our country is no exception. The right hon. Gentleman the 145 Paymaster-General seemed to think that there was a possibility of the curve of demand flattening out a little, but for myself I think that it is likely to go on in a straight line.
If we agree that we must have electricity, and the plant, cable systems, appliances and apparatus that go with it, about what, if anything, are we disagreeing today? I wonder whether the charge is seriously being made by some hon. Members opposite that the existing electricity boards, in providing these physical assets which we must have, have been using capital unnecessarily and wastefully. If that is the charge it is a serious one.
The hon. Member for Kidderminster (Mr. Nabarro) quoted in aid the Herbert Committee's Report. He said that I supported it. I support it where I believe it is sound, but where it is unsound in my view it does not have my support. I am sure that the same approach goes for him. It is no use, therefore, his waving the Herbert Committee's Report at me. Although that Committee talked about a certain slackness in the industry's activities it did not produce any actual evidence—
§ Mr. Palmer
I am grateful. Although it used that word, however, it did not produce any hard evidence. Indeed, judged by the facts, everything points the other way.
I have done what other hon. Members have done in preparing for the debate. I have collected a number of points which are very favourable to the electricity boards, but I shall not weary the House by quoting them. They have been quoted already, and, indeed, were given at the opening of the debate by the Minister himself. But there was one particular point which is of great interest, and I was glad that my hon. Friend the Member for Birmingham, All Saints (Mr. D. Howell) brought it out again.
A constant charge is made against the nationalised industries that they use manpower wastefully and that their staff establishments continue to grow. We know that is not the case in the power stations, because in 1947–48, before nationalisation, the manpower per 1,000 kilowatts was 2.74 men—I do not know what .74 of a man is, but that is how it works out 146 when we do the division sum—whereas it is down to 1.73; today. I refer to the figure again to show that Parkinson's alleged law does not seem to be operating in the nationalised electricity supply industry.
On this side of the House I do not think, as I have said already, that we are against having greater financial accountability of the boards to Parliament if acceptable machinery for that purpose can be devised. That is largely the difficulty, as I am sure the hon. Member for Wolverhampton, South-West (Mr. Powell) would agree. But to be fair to the electricity supply industry, I must stress the facts of the record to date. There is no evidence that the industry has been using capital or finance wastefully and inefficiently. Its achievements have to be seen also against the background of the last ten difficult years, when 42 per cent. of its development has been from the industry's own resources.
It is often said that electricity supply has a monopoly. That is true in the territorial sense. For that matter, it always was true that electricity undertakings had a territorial monopoly. But the industry has very serious competition from other fuel sources. It is in obvious competition with its sister nationalised industry, gas, and it is increasingly in competition with oil. Like any other service, electricity supply is in general competition with many other kinds of consumer amenity. I might instance foreign holidays, which are on the increase. The citizen who takes a foreign holiday may not spend so much on electricity during the year, and does not have the new refrigerator that his wife is very keen on, as does the citizen who stays at home.
The House can say that the electricity boards have used their capital very effectively and can with confidence look to them to do the same in the future. That is surely the answer to the Federation of British Industries, which turned out a pamphlet recently about nationalisation. As we might have suspected, the Federation is against it, but cannot find anything really unpleasant to say about electricity so it decides that the boards must have used too much capital because they have had more capital than the railways. That does not seem to me to be an argument.
147 The hon. Member for Ilford, South (Mr. Cooper)—i am sorry I was out when he was speaking—and the hon. Member for Kidderminster, who is not now in his place, talked about unfair hire-purchase schemes by electricity boards. The allegation has been made also that the showrooms and service centres of the boards are unfair to the private traders and are too elaborate. I have tried to meet this argument before. I do not know whether I succeeded. When there is talk about diversion of capital we should keep things in perspective, if we can.
I have the actual figures here. Over the ten years of nationalisation the expenditure on showrooms, service centres and hire-purchase working capital against the total capital requirements of electricity was just 1.1 per cent. which does not seem an excessive drain on capital resources. Even if we include capital expenditure on administrative offices and general administration, it comes out at only 1.3; per cent.
In answer to the attack on the electricity boards for carrying on these utilisation activities, I would say that it is an old-established practice of the industry. It existed long before nationalisation. Consumers understand it and have come to expect it. There is also an agreement with the Electrical Contractors' Association which should make for fair trading. We have now as well the special change which the Paymaster-General announced today.
In addition to all that, it seems that further answers are these. Surely it is a fallacy to argue that showrooms, service centres, retail sales by electricity boards are all necessarily to the detriment of the private trader. The private electrical contracting business has continued to expand in parallel with the general development of nationalisation. They fertilise each other, one helps the other and more progressive contractors, who can stand up to competition, thoroughly recognise this.
I liked the point made by my hon. Friend the Member for All Saints that these electrical appliances which are sold and let out on hire-purchase through showrooms by the electricity boards are products of British private manufacturers. Do they want the boards to give up doing it? Another argument in favour is that it is now the business of the industry 148 greatly to improve the load factor. If it is to improve the load factor it must be in a position to push the sale and hire-purchase of particular appliances. Only in that way can we get the diversity of load which will assist in improving the load factor. In short, utilisation is just as much the business of the power supply industry as is generation of current itself.
I should think that, in any case, in the end the test is the welfare and good of the great majority of consumers. Surely that is the test and what the industry exists for, to give service to the public. If we put it to any representative gathering of consumers that utilisation should be taken from the electricity boards and left entirely to private contractors, that assembly of consumers would be very much against such a change.
In the time available to me I want to touch on one or two other points raised in the debate. The hon. Member for Glasgow, Pollok (Mr. George) and the hon. Member for Kidderminster have given their views on the subject of load factor. As ever, the hon. Member for Pollok was very fair on this matter. The hon. Member for Kidderminster often has the facts, but tends to allow his prejudice to get the better of him, so he was not quite so fair.
On load factor, I would agree that here, perhaps, the area distribution boards, whose responsibility it is, are a little vulnerable. Criticism can be made of them, but surely it is a limited criticism. They could do more perhaps than they have been doing to offer attractive tariffs to improve the load factor, but, when all is said and done, load factor is fundamentally more under the control of the user than of the supplier. That is bound to be the case in the nature of things.
For example, if British industry as a whole improved its load factor, then, automatically, the load factor of the electrical power industry would be improved. I think that in this matter of the improvement of the load factor of the British supply system, Governments cannot entirely escape their share of responsibility because at times they have discouraged, by excessive Purchase Tax, the use of electrical domestic appliances which help to give the necessary diversity.
When we make the comparison—here I agree with the Paymaster-General— 149 between the load factor in this country and that in the United States, we must be quite certain, in the first place, that we are working on a similar set of assumptions. On this issue I think that there is a great case for the electricity boards which now have new opportunities because Purchase Tax has been reduced on quite a number of electrical appliances, to co-operate with the manufacturers of appliances and with every section of the electricity industry, supply and manufacturing, in carrying out over the next few years a kind of combined operation to bring about a vastly improved British load factor. I am sure that in that way great progress could be made.
I want to refer briefly to the changes that have come about in the industry, which have not been touched upon to any extent in the debate, because of the coming into force of the 1957 Act. For just over a year the industry has been living under a new dispensation. By the provisions of the 1957 Act, in England and Wales the area distribution boards have much greater freedom and the wholesale generating side is now able to concentrate on its own job.
The old Central Electricity Authority has gone and we now have in the industry the advisory Electricity Council, which is made up, in the main, of the leaders of the component parts of the industry with an independent chairman. I think that it is within the recollection of the House that we on this side did not quarrel with the broad intention of the 1957 Act. We thought that the case for greater decentralisation in the industry, in the light of experience, had been made out. We felt, however, with the Herbert Committee that in place of the C.E.A. there should have been to deal particularly with matters of national concern a smaller independent executive, but the Government rejected that solution. They made their own picking and choosing in the matter of the Herbert Committee recommendations and they brought in the Electricity Council. I feel that our point of view and that of the Herbert Committee were right and experience will show that to have been the case.
However, the change means, in effect, that in many matters of national electricity policy, the generating boards must make their own decisions and these decisions can be of tremendous national importance. 150 The issue with which they are concerned at the moment is the proper balance to be struck between the various primary sources of energy from which electricity is derived. They are coal and oil and in a little while there will be nuclear fission as well. Until fairly recently the general strategy was based on the assumption that the coal supplies of the country would be insufficient for quite a number of years and that oil and nuclear fission would have to be brought in to fill the gap.
We all know how that assumption has been changed in the last two or three years, in the short-term at any rate, by the mounting surplus of small coal. This fact has been the subject of several eloquent speeches by my hon. Friends today, particularly by my hon. Friend the Member for Houghton-le-Spring (Mr. Blyton). He said that there is something fantastically illogical about a country importing oil to use in its power stations when it has a surplus of small coal which to a great extent can be burned only in those same power stations, and in principle I agree with him. The effect of this policy on the morale and outlook of the mining industry is bad.
I have said that this is probably a short-term problem and that in the long-term the nuclear power programme is just as necessary as ever it was, but I should like to make a comment which possibly the Secretary of State for Scotland will take up in his reply to the debate: need we be in quite such a hurry now with the nuclear power programme, and have we not a breathing space? There is, perhaps, a case for going a little more slowly, because then we can work harder to bring down the high capital cost of nuclear power stations. In addition, there are new developments taking place fast in reactor design, and we want to avoid the mistake of putting all our nuclear eggs in the one basket, if I may put it that way, although it does not sound very well.
§ Mr. Palmer
I am grateful to my right hon. Friend. It would be a great pity if we went ahead too fast with the nuclear power stations, at a time when it is not quite so necessary to go ahead so quickly, and then found ourselves in ten or fifteen years' time with a lot of nuclear power stations which were out of date because of technical developments.
151 My second point concerns the burning of oil. If we could do it without breaking the contracts with the oil companies, surely we should do away altogether now with oil burning in our power stations. It was a temporary expedient and it is no longer necessary. We are not advocating the breaking of contracts. My right hon. Friend was very clear on that. But the electricity industry did not want to convert to oil; it was forced on the industry largely under Ministerial pressure and influence. I am not quarrelling about that; perhaps at the time it was the only thing to do. But if it were Ministerial influence which introduced the change in the first place, it is not fair now to turn to the electricity boards and say, "We leave it to you to make the decision to change back". That is most unfair, because they have already invested a great deal of capital in the change and it is not right to tell them that they could go back but on their own decision.
If this policy were introduced under Ministerial direction, is it beyond Ministerial ingenuity today to find a way out of that policy? I should not have thought that it was. I am not saying that we can go all the way back, but surely there is a case—and here I agree entirely with my hon. Friend the Member for Houghton-le-Spring—for seeing whether we cannot make at least further marginal savings in the use of oil. I am sure that the public think that the use of oil in power stations at a time when there is a surplus of coal is madness. They do not know all the facts which we know.
It is not possible to have a violently controversial debate on a matter in which the common sense of the decision contained in the Bill is obvious to all. Of course, the hon. Member for Kidderminster, as ever, had done his best to bring some controversy into the debate, but, broadly speaking, it has been a quiet affair. We have had a useful and interesting debate which I think has been much to the advantage of the House and of the electricity supply industry in the service of the nation.
But when we talk of the industry we surely mean more than just power stations, cables, plant and machines, which are cold, impersonal things. We 152 surely mean, also, the conscientious and able men and women—I do not think that they have been greatly referred to today—of all occupations who work to make this great industry successful. It certainly is successful, to their credit, and also—and I believe that we are entitled to say this on this side of the House—to the credit of the principle of public enterprise, which, although often assailed, has still a great part, and will always have a great part, to play in the life of our country. For these reasons we support the Bill.
§ 9.30 p.m.
§ The Secretary of State for Scotland (Mr. John Maclay)
I confess, Mr. Speaker, that this is rather a strange experience for me, because, as I think you may have noticed, I am unaccustomed to winding up debates in which there seems to be a substantial measure of agreement with the Bill I am supporting. However, that makes this none the less a very interesting experience. I do not know whether some of the more controversial elements that creep into our Scottish debates may come back into the Chamber shortly. They are not here now. I shall wait with some interest to see.
The hon. Member for Cleveland (Mr. Palmer), who wound up for the Opposition with an interesting speech, finished by putting in one tiny little bit of controversy. I welcome it, because I would say this. He used the words "public enterprise". It seems to me, having listened to this debate throughout, that in the speeches from both sides of the House the main matters of interest have been connected with the fact that no one has yet devised the proper method of keeping control of nationalised industry, and I cannot help repeating what my right hon. Friend the Member for Flint, West (Mr. Birch) said earlier, that this was one of the dangers we always pointed to in nationalisation. I have vivid recollections of doing it myself. I accept that in public utilities there was room for reorganisation, but I was never convinced that State ownership was necessarily the right way, and one of the reasons has been confirmed again today, because of this problem with which we are all struggling.
We ourselves on this side of the House are very conscious of the need to help these industries to be as efficient as they 153 can, and to find the proper solution of the problem of accountability to the consumer and to the House of Commons. I think the whole tenor of a great many of the speeches made today has been that we have not solved that one yet. We have not heard any really constructive proposals from the other side of the House as to how to get farther on that path. From my hon. and right hon. Friends on this side there have been very interesting proposals put forward, which I shall deal with as I come to them.
§ Mr. Maclay
Does the right hon. Gentleman say he does not accept the assumption? He does not agree with me that we have not found the right method of control? A good many of his hon. Friends have raised this same point, as have my hon. Friends behind me. I am pointing this out because, in all seriousness, I think that this is something we need to think about. I would not say that in our efforts we have reached finality. It will take a long time. Whatever may have been the problems presented by this type of ownership, that was my objection to it.
I shall try to deal with some of the questions asked and later to touch on some of the more specific Scottish ones. I think it will be better to deal with them question by question.
The right hon. Gentleman the Member for Blyth (Mr. Robens) and, I think, the hon. Member for Workington (Mr. Peart), asked that one or two questions should be particularly dealt with when I wound up the debate, but it is a point which the right hon. Gentleman made that I want to deal with now, and that was what he described, I think, as the "nuclear power club"—the consortium—who approved it, how it came into existence, whether it was a closed corporation or whether there was a possibility of increase?
Broadly speaking, the position is this. The electricity authorities, with the agreement and blessing of the Atomic Energy Authority and the Government, believe that the consortium team which can do the whole job is the best means of making rapid progress with our nuclear programme in present circumstances. A combination of the Atomic Energy Authority and the electricity authorities 154 came to that view, with which the Government entirely agreed.
A new firm must therefore become a member of a team before it can take part in this work, and that obviously must be to a great extent a matter of the firm's standing with its potential fellow-members of the consortium. That is how a consortium gets built up, by obvious methods. It is equally clear that no firm could become what I might call the nuclear reactor member of a consortium unless it had established its nuclear status, and that, in turn, almost certainly implies that some of its staff has undergone training by the A.E.A. This is a limiting factor, because the A.E.A.'s capacity to train nuclear technicians is limited by the need to use its own very limited manpower to press on with the new research and development that is needed to keep our nuclear industry competitive in this country. Therefore, the "nuclear club" is not a closed shop, but is not for the moment an easy one to get into.
§ Mr. Robens
In those circumstances, how is it that a British firm can secure a contract to build a nuclear power station in another part of the world but is not permitted even to tender for a new nuclear station in Britain? The firm must have experience, otherwise it could not build a nuclear power station elsewhere.
§ Mr. Maclay
I think that one should have more time to investigate the case to which the right hon. Gentleman refers, but the quick answer must obviously be that he is referring to an individual firm which has not for some reason or other gone into one of the consortia. That must be the explanation. There are four consortia at the moment, and I think that a fifth will emerge; but it cannot be a rapid process, for the reasons that I have given.
The right hon. Member for Blyth also placed some emphasis on the question of research by the Electricity Council. All I would say is that Sir Christopher Hinton is there and that with his whole record and background I do not think that anyone can doubt that research must be a matter which will be very constantly in the mind of the Council. The right hon. Gentleman asked specifically whether research was going on into the storage of electricity. I cannot 155 answer that tonight, and I do not think that he expected me to, but we have in Scotland one of the best forms of storage possible. If we could give to the South an odd mountain or two from those concentrated in Scotland, the South might enjoy the same benefit in due course. Cumberland has some mountains, but I do not think that they are high enough for this purpose. There are possibilities in pumped storage, but they depend upon geography.
Hon. Members have raised questions about coal and oil. It was made clear in an interjection, perhaps by my right hon. Friend the Paymaster-General, or from something which the right hon. Member for Blyth himself said, that our oil-use figures would reach a peak in 1960 and thereafter begin to decline. The right hon. Member for Blyth asked about post-1966 thinking and what was going to happen then. I confirm that it is our intention to concentrate on coal and nuclear energy in our thinking about power generation in that period.
A number of hon. Members used the phrase "fuel and power policy". I was reminded of the mystic word "planning". It appears that when one has a problem one says the word "plan" and the problem is solved, but, of course, the truth is that it is not solved, because things change. That is the trouble. There was in this reference to fuel and power policy a little of that mystique of "let us have a policy and everything will be lovely". We are, of course, working to a policy the whole time, but we are working to a policy which must be reasonably flexible. The very fact that hon. and right hon. Members have this Bill and the supporting documents before them shows clearly that a great deal of forward-thinking and, if hon. Members like, "planning" are being done.
I am not frightened of the word "plan," but I do object to the word "plan" being elevated into a sacred cow—I do not know if one can do that—so that it has become a shibboleth which is supposed to solve all problems. The danger about this is that if one says things often enough sometimes people believe them. It is most misleading to argue that everything will be lovely if there is this policy. Of course, there has been a policy all through, but circumstances do change, and I have just explained that 156 in these two documents hon. Members opposite will see the broad outlines of the results of policy thinking. Of course, when it comes to a question whether it was right or wrong to move over to oil at a certain stage, one has to remember that things do change, and that there was all the evidence running for a long time that we needed every possible source of producing power, if we were to be able to compete as things were developing. It is only right that there should be change, and therefore planning must be flexible to meet changed conditions.
May I now turn to the very interesting discussion by speakers on both sides of the House on the subject of Parliamentary control? I think the first point one would want to deal with is whether this is the right length of period for the Bill to apply. I would say to my right hon. Friend the Member for Flint, West and to my hon. Friends who raised this point—
§ Mr. Palmer
Is the right hon. Gentleman now leaving the subject of oil and power stations? Is he not prepared to answer the point which I put to him that the Minister should intervene to see if something further may be done?
§ Mr. Maclay
I have no doubt that what the hon. Gentleman has said has been very carefully noted, and I would not like to go further at this stage. It is not always possible to have plans and policies which one can produce every minute of the day, but they are there and are being worked to, though they are often adapted to circumstances as they develop.
On the question of whether or not this is the right period, I realise that there is great substance in some of the things that my right hon. Friend said, but it does seem reasonable to look at the financial requirements, broadly, for the period in which one can see ahead the development of the programmes. I am often inclined to ask whether, if it is not to be seven years, should it be five, three or even one year?
I do not think it could be argued that there should be an annual Bill of this kind, because that would really put the whole thing into too restrictive a strait jacket. We must be able to think ahead, and I would repeat one phrase of my right hon. Friend in which he said that 157 this is authorised capital and not issued capital, and at all stages the various controls begin to emerge on the actual decision by the Boards to use their authorised capital in the form of issued capital. My right hon. Friend went over four of the controls, and I should like to repeat what he said about them, and to make some comments.
First, he mentioned the Finance Act. I should explain, because my right hon. Friend the Member for Flint, West raised the point, that as things stand the total of Exchequer advances to nationalised industries is governed by Section 36 of the 1958 Finance Act. This system operates as Parliamentary control so long as the system of Exchequer advances, instead of the use of the market, continues. Should circumstances ever arise which produce a change in the method of financing, then what I have said would no longer apply, and there might have to be further examination.
I should like also to mention another Scottish point. Every hydro-electric scheme brought forward is ultimately subject to a negative Resolution in this House, and is debatable on such occasions, and, in my experience, is debated.
Secondly, there is the annual White Paper on capital expenditure which is laid before Parliament and covers prospective expenditure in the coming financial year. That is a debatable paper. This involves the vexed and difficult question of whether there is enough Parliamentary time for debating such reports. Coming back to the point with which I began, one of the things which worries one is that of getting the most effective Parliamentary control, as well as consumer control, of these industries.
Then there is the Select Committee on the Nationalised Industries, which is a relatively new development. I noted with considerable interest the proposal made by my right hon. Friend the Member for Flint, West and by my hon. Friend the Member for Kidderminster (Mr. Nabarro) that there might well be a case for what I think he called an auditor comptroller general. That may be a development which would become well worth consideration by the committee in its experience of how this functions because consideration must be given to how we can 158 improve the system of Parliamentary control.
§ Mr. Nabarro
Would my right hon. Friend allow me to interrupt? I may have got this the wrong way round. I may have said "auditor comptroller general" instead of "comptroller auditor general". It must be a statutory process. As my right hon. Friend has long Parliamentary experience, and this may even be an administrative matter, would he tell the House how he can concede the point made with such cogency and force by my right hon. Friend the Member for Flint, West (Mr. Birch), himself an ex-Economic Secretary to the Treasury, by my hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), an ex-Financial Secretary to the Treasury, and by myself in a modest capacity? How can it be done?
§ Mr. Maclay
My hon. Friend must not use every chance to tell the House the good company he is in tonight. He has done it once already and I think this intervention was designed to emphasise the company he is keeping. I cannot explain that. I am merely saying that this is one of those proposals which, coming from the most illustrious Members—and I add the hon. Member to them—obviously merits consideration. It is clear that the work of the Select Committee will evolve with time, as do all our institutions here. I agree with them that there is every need to ensure that we go on working to get the most effective methods of control.
Now one word about hire-purchase. My right hon. Friend made very clear the position as it stands. Again I recognise that there is room for differences of view, but, on the whole, there is substantial agreement that, in a phrase which has been used once or twice this evening, the terms which can be obtained by the customer from the nationalised boards should be in line with those that can be obtained from private retailers. There should not be advantage one way or the other. I do not think I should go further into the arguments about hire-purchase this evening.
§ Mr. Robens
I hope this will not mean, however, that private enterprise will be able to set the pace so that the consumer's rights are not safeguarded?
§ Mr. Maclay
Equally, as my right hon. Friend said, I do not think there should be pace-making on either side. Neither should take advantage of the other. Nor should anyone use an unfair advantage to set the pace.
Time goes quickly in dealing with so many detailed questions, but I will answer one or two points raised by my hon. and gallant Friend the Member for Berwick and East Lothian (Sir W. Anstruther-Gray). One question he asked was about the use of slurry in Fife. At the moment, I cannot give him much information beyond what he has read already. This is still in an early stage of consideration, but doubtless some proposal will be put to me in due course. His second point was one to which I listened with some interest, having suffered from the same roads as he did. I have only read a certain amount in the newspapers about road heating and I am awaiting further reports to know what there is in it. I have noted carefully what he said.
My hon. Friend also dealt with the question of the small farms and rural electrification. This is a problem which is constantly in my mind, with my responsibilities in Scotland. It is the responsibility of the boards to get on with this work. There have had to be changes in the sanctioned capital investment as the years have gone on and different situations have arisen. It would be no good doing all the things we want to do in regard to electricity, roads, schools, housing and everything else if in the process we brought the nation down economically. It is a question to some extent of relative priorities. The record of rural electrification is not too bad, although there is much still to be done.
§ Mr. Maclay
One cannot instruct in that particular matter, but I am certain that the hon. Member has made his point, and undoubtedly it will be duly noted. He has been almost as eloquent in respect of his area, which has caused him concern, as the hon. Member for the Western 160 Isles (Mr. Malcolm MacMillan) and other Scottish hon. Members have been about their remote areas. This is a problem about which I can certainly speak with first hand knowledge of the Scottish position. Both Scottish boards are doing everything they can and the record is not too bad.
I also want to refer to the load factor. My hon. Friend the Member for Glasgow, Pollok (Mr. George) touched on the Scottish record. It is worth putting on the record the Scottish figures, for they are not generally known. The South of Scotland Board has been making steady, useful progress with the load factor. In 1955, it was 43.7; per cent.in 1956 45.5 per cent. and in 1957 47.3 per cent. As my hon. Friend said, it may be largely due to the encouragement the Board has given to off-peak loads. There is obviously room for continuing work.
The North of Scotland Board has a rather different problem. Its load factor is 38 per cent. There is very much less industry in the North of Scotland and the load factor must be expected to be low. In addition, much of the North of Scotland Board's plant has been specially designed to operate at a low load factor, and one cannot make any direct comparison between that board and other boards. I think I heard my hon. Friend the Member for Kidderminster say that it was an expensive luxury.
§ Mr. Nabarro
No. I was referring to the low load factor at Loch Sloy, which is only 10 per cent. That is why it is so expensive and uneconomic.
§ Mr. Maclay
I take issue very strongly on that. The quick answer is that we have our special Scottish position. I should have thought there was a very good and strong case for the marrying of the low load factor hydro-electric scheme with the high load factor nuclear and coal schemes. There we should get the maximum possible advantage out of both worlds. I can give the figures to my hon. Friend after the debate; it would take too long to give them now. I should be interested in his comments about the actual cost per unit leaving the power stations of the hydro-electric schemes. The whole point about the hydro-electric scheme is the time taken to write off the cost of the dam. The initial capital cost is high, but they are useful things for an electricity board to have about once the 161 years begin to run on and one is getting the cheapest possible production of power that one can have. This is an old argument with the hon. Member for Kidderminster which will go on to everybody's advantage for some time.
I want to give some details of the projects for Scotland which are covered by the Bill. The proposals for South Scotland do not envisage any new major generating stations starting in the period under review, that is to say, between now and the end of 1964. That is simply because the Board is already engaged on two major undertakings, the coal-fired station at Kincardine and the nuclear station at Hunterston.
The position for the North of Scotland is rather different. The Board has to complete a number of schemes which it now has in hand, such as the Shin, Breadalbane, Orrin and Strathfarrar schemes, which have been started or approved. The Board has also to envisage expenditure on schemes which it is still preparing and which might start between now and 1964, if approved. Of those the most important is the Awe scheme costing about £24 million and which includes an important pump storage section. The plan for this has been published and I am at present considering it. The forecast also includes work on the Nevis and Monadhliath schemes costing about £7 million. The Board has those under preparation, and they have not yet been published. Lastly, the money provides for the possibility, and I emphasise the word "possibility", of spending about £20 million on a possible nuclear station which might be started before 1964, if the need for such a station were proved.
Before concluding, I want to deal with the matter of publicity for compensation which was raised by the hon. Member for the Western Isles. Apparently the Labour Party wants nationalised boards to get on with their day-to-day business, and it would be folly to insist on maximum publicity for everything they do. If one is negotiating on terms of compensation, it is clear that if everything one does is done in public, one prejudices the 162 next negotiation with someone else. On business grounds, it would be stark folly to do as the hon. Member suggests and I assume that he and others want the Boards to continue to work as efficient businesses, whether State controlled or not.
I am sure that the Bill commends itself to the House, and I support it with confidence.
§ Question put and agreed to.
§ The Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. Gibson-Watt.]
§ Committee Tomorrow.