ELECTRICITY INDUSTRY (BORROWING POWERS)

HC Deb 13 December 1961 vol 651 cc571-98

10.1 p.m.

The Minister of Power (Mr. Richard Wood)

I beg to move, That the Electricity (Borrowing Powers) Order, 1961, a draft of which was laid before this House on 6th December, be approved. I hope, Mr. Speaker, that with your approval and that of the House, we may consider this Order, which relates to England and Wales, with the Order which relates to the South of Scotland Electricity Board.

The Electricity Borrowing Powers Act, 1959, gave to the Electricity Council and boards in England and Wales and to the South of Scotland Electricity Board power to borrow up to the limits, respectively, of £2,300 million in the case of the English and Welsh boards, and £135 millions in the case of the South of Scotland Electricity Board. It also laid down intermediate limits of £1,800 million and £110 million respectively, which are the limits at present in force, and provided for those limits to be raised by means of the kind of Orders which we are discussing.

The purpose of these Orders is to raise those limits to the final figures which were contained in the 1959 Act. I must remind the House that it was always thought that the intermediate borrowing limits would be sufficient until the present time, 1961–62. Therefore, the making of these Orders fits in perfectly satisfactorily with the forecast which was made three years ago. My right hon. Friend the Secretary of State for Scotland and I, in an attempt to help hon. Members who would like to compare the performance of the industries since 1958 with the estimates which were made in 1958 and in order to try to give the best estimate possible of the years immediately ahead have issued a White Paper, which no doubt hon. Members will have read, which contains figures that are strictly comparable to those in the earlier White Paper issued in connection with the 1959 borrowing Bill.

I draw hon. Members' attention to paragraph 6 of the White Paper where they will see that in the case of the Electricity Council and boards in England and Wales the total capital requirements in the last three years have been rather less than was estimated, £844 million instead of £850 million. In the South of Scotland Electricity Board the probable out-turn to 31st December this year is about £1 million below the estimate. Going back to the Electricity Council and boards, hon. Members will see that rather more than was expected in 1958 has been met from internal resources, £360 million against the expected £355 million. Therefore, in the case of those boards the borrowing required is rather less, about £11 million less than was expected. In the case of the South of Scotland Electricity Board, because the self-financing has itself been a little less than was expected, the borrowing required is exactly as estimated three years ago.

I have made it clear that the financial out-turn so far in the last three years is consistent with the expectations in 1958, but the plans for the remaining years of the period have changed owing to the demand for electricity now growing at a faster rate than was foreseen three years ago. In order to meet the continuing high rate of increase in the demand for electricity, the industries, both in England and Wales and in Scotland, have had to accelerate their plant-commissioning programmes and have had to increase their planned level of investment on main transmission and distribution. Both the industries would have liked to bring the additional generating capacity into commission earlier, but, for reasons which are obvious to hon. Members, this is not physically possible, and, despite this increase in their programmes, the margin of spare capacity in the later 1960s will be rather less than 2½ per cent. in average cold winter conditions and, the margin will be even smaller in the intervening years.

The recent growth in demand and the technical advances of the last few years have made necessary a re-examination of the methods of providing the additional generating capacity which will be necessary during this decade. In the White Paper which I issued in 1960 on the nuclear power programme, I explained the reasons for the revision of the nuclear programme which then took place, as a result of which it is now planned to provide by 1968 about 5,000 megawatts of nuclear capacity, which will probably reduce the industry's capital needs up to 1966 by £90 million.

In conventional electricity generation, there has been great technical progress, too, and the cost per kilowatt installed has been considerably reduced. In 1958 it was £53 per kilowatt, and it is now down to £40; in the later 1960's it may well be down to £35 per kilowatt, or possibly even lower. In addition to the lowering of capital cost there has been, through increased thermal efficiency, a decrease in running costs, too.

The increased demand has not only led to the necessity for increased generating capacity but also to the need for increased capacity on main transmission. The Central Electricity Generating Board is planning to introduce a 400 kilovolt main transmission network, and at the same time the increased demand is also affecting the area boards' distribution system and is adding still further to the investment needed in the areas for distribution.

Clearly, the greater the demand the more important it is that the plant should be used as fully as possible. I am quite satisfied that both the industries recognise the prime importance of a high load factor. The Central Electricity Generating Board recently announced changes in the bulk supply tariff which will encourage off-peak sales, and the area boards, too, are offering off-peak tariffs to their customers.

The financial implications of these changes, which are the changes looking ahead to the next two years, are summarised in paragraph 9 of the White Paper which my right hon. Friend the Secretary of State for Scotland and I have published. It will be seen from paragraph 9 that the total capital requirements over the whole period in the case of the Electricity Council and boards have gone up, for the reasons which I have mentioned, by £210 million. Of that £210 million extra capital investment, the Council and the boards will find from their own resources rather more than half—in fact, the difference between £980 and £1,100 million, which is £120 million extra, leaving the net extra borrowing, to be met in the way that we are providing, of £90 million. Similar figures for Scotland are shown in the lower half of the table, and they are £27 million total extra capital requirement, financed through internal resources to the extent of £11 million and extra borrowing required to the extent of £16 million.

The rate at which the programmes will proceed and the amount of borrowings which will be necessary from year to year will be subject to Government approval and will be reported to Parliament in the White Papers which are published biennially—in April the White Paper on Government Expenditure Below the Line and in October the White Paper on Public Investment in Great Britain. Parliament will also be told, as my right hon. Friend the Chancellor of the Exchequer promised in the debate on last year's Finance Bill, of any major changes in the forecast figures.

For example, the borrowing in 1960–61 in respect of both the industries was £17 million lower than was forecast in the White Paper issued in April, 1960; on the other hand, the industries' borrowing in the present year, 1961–62, seems likely to be over £30 million higher than was forecast in the White Paper issued last April. While there are certain to be fluctuations of this kind from year to year, over the whole period covered by the Orders the industries' self-financing ratio is expected to be rather higher than was forecast in 1958.

This brings me to the question of the financial targets which are to be set the industries under paragraph 20 of the White Paper, which was also issued in April, 1961, entitled, "The Financial and Economic Obligations of the Nationalised Industries." This White Paper stated the Government's intention to agree, after consulting each autonomous board, a framework of financial performance over the next five years, and since the issue of that White Paper my right hon. and learned Friend and I have been undertaking consultations with the industries concerned. My own consultations with all the thirteen boards in England and Wales are not yet complete, but I should like to give the House a general indication of the industries' projected level of performance.

The Government expect from the industry as a whole in England and Wales total surpluses of about £325 million over the five year period between 1962–63 and 1966–67. That is an average surplus for the whole industry of £65 million a year. About half of this is expected to come from the Central Electricity Generating Board and the remaining half from the area boards collectively. On present estimates of capital requirements, this level of performance represents a gross yield on average net assets employed of about 12½ per cent. and a net yield after depreciation of nearly 7 per cent.

A performance at this new level implies a self-financing ratio rising from about 50 per cent. at the beginning of the five-year period to nearly 60 per cent. at the end of it. All these figures apply to the industry as a whole in England and Wales. Figures for each board individually will be published when consultations are complete.

Mr. Gerald Nabarro (Kidderminster)

Self-financing is obviously the nub of the astronomical figures that we are discussing. Are my right hon. Friend's figures for future self-financing up to 1967, rising from 50 per cent. to 60 per cent.—I repeat what my right hon. Friend has just said—calculated on precisely the same basis as the self-financing figures shown on page 7 of the Electricity Council's publication "Finance for Power", which, in retrospect, have been 44.8 per cent. estimated and 45.6 per cent, actual? If so, will my right hon. Friend explain how it is that the electricity industry is proposing to find an increase of as much as one-third in its self-financing facilities?

Mr. Wood

I think that the basis which my hon. Friend has quoted is slightly different, in that the provision for debt redemption is included in one and not in the other. If I may help him, the figures that I have just given are matched in paragraph 6 of the White Paper—

Mr. Nabarro

Which White Paper is that?

Mr. Wood

I appreciate my hon. Friend's uncertainty, because there are a number of White Papers. The White Paper to which I refer is that issued by my right hon. Friend the Secretary of State for Scotland and myself headed "Memorandum on the Electricity (Borrowing Powers) Order, 1961—

Mr. Nabarro

Cmnd. 1564.

Mr. Wood

My hon. Friend is right. The figures to which I wish to draw his attention are in the second line of the first part of the table in paragraph 6 under the heading "Electricity Council and Boards". Has my hon. Friend got that?

Mr. Nabarro

I am with my right hon. Friend.

Mr. Wood

The figures in the table are £355 million and £360 million. The percentages in respect of self-financing are 42 and 43 respectively. I hope that I have made the position clear to my hon. Friend. That is the comparison with which the figures of 50 per cent. and 60 per cent. correspond.

Mr. Nabarro

I am grateful to my right hon. Friend for giving way. If we are to make progress and to understand this mass of publications, it is important that all the statistics should be rendered on a strictly comparable basis. Of course, I am with my right hon. Friend in his publication Cmnd. 1564. I followed what he said about that precisely. But the figures for self-financing which he has quoted do not agree with the figures for self-financing as percentages in the Electricity Council's publication "Finance for Power". I want the two sets of figures reconciled.

Mr. Wood

I have done my best to reconcile them for my hon. Friend. I have explained the reason for the discrepancy between the two figures, and I have tried to give the comparative figures for the years 1958 to 1961 which correspond to the figures that I have given for the five-year period from 1962 to 1967, which are 42 per cent. in respect of the £355 million estimated for self-financing in 1958 and the actual out-turn of £360 million, which is 43 per cent., in 1961. If my hon. Friend is not clear about the matter, perhaps he will raise his doubts later and we can try to clear them up before the end of the debate.

In addition to the consultations which I have been undertaking in respect of the Electricity Council and the boards in England and Wales, similar consultations have been undertaken by my right hon. Friend with the South of Scotland Electricity Board. I should like to emphasise as strongly as I can that the surpluses which I have mentioned amounting to £325 million are not over and above the needs of the industry. They are contributions from revenue to the capital development of the industry which must be ploughed back year by year to reduce borrowing and the burden of interest.

I should like to quote from the other White Paper for the benefit of my hon. Friend, Cmnd. 1337: … there are powerful grounds in the national interest"—

Mr. Nabarro

this?

Mr. Wood

I beg my hon. Friend's pardon. It is the fifth line in paragraph 22: … there are powerful grounds in the national interest for requiring these undertakings to make a substantial contribution towards the cost of their capital development out of their own earnings, and so to reduce their claims upon the nation's savings and the burden on the Exchequer. It is clear from paragraph 9 of the other White Paper, Cmnd. 1564, that the maximum limits which were laid down in the Act of 1959 will be reached rather sooner than was thought at that time. It will probably be necessary to ask Parliament for fresh borrowing powers in respect of England and Wales during the Session 1963–64.

In the South of Scotland the maximum limit will probably be reached about a year earlier. The estimates which were made three years ago proved substantially correct and the intermediate limit has been reached almost exactly when it was expected. The estimates made in 1958 of the Board's borrowing needs between now and 1965 will be exceeded, in spite of greater self-financing, because, as I have explained, the industry has had to expand more rapidly than was expected in 1958.

I think the House will agree that the industries deserve congratulation for the increasing proportion of necessary capital which they are finding and intending to find from their own resources. I hope the House will now agree to provide them with sufficient borrowing powers to enable them to continue to meet the ever-growing demands for electric power, not only by industry and commerce, but also for domestic use.

10.22 p.m.

Mr. G. R. Mitchison (Kettering)

This is a success story. It is a success story which could not possibly have been achieved under private enterprise but has been achieved by this nationalised industry. If that requires any support, I should like to point out one or two things that private enterprise could not conceivably have done. The principal one is the length of the programme which is required in modern conditions for expenditure on capital assets in this industry. The 1959 Act and the last White Paper provide for a seven-year period.

Before I say any more about that, I should like to ask the right hon. Gentleman a question. He referred to the White Paper on the "Financial and Economic Obligations of the Nationalised Industries" and he referred to the part of it which has troubled me slightly. I am looking at page 8, paragraph 24, and this appears to refer to the electricity industry as well as to other industries. It contemplates not a seven-year programme but in this case, so far as I can see, a programme for the next five years ahead, followed by an upper limit on the amounts to be spent on investment during the two years ahead, followed again by an annual reasoned estimate submitted to the Government by the undertaking. In this case I suppose we may call it the Electricity Council or the electricity industry.

Those seem to me to be limits which were put into this White Paper as recently as April, 1961, long after a seven-year programme had been found necessary and had, indeed, been adopted. I suggest that the whole tenor of the White Paper, of the 1959 Act and the arrangements made under it, and, indeed, of what we have heard from the right hon. Gentleman points to a seven-year period. I see every reason for it. I am referring to the Report and Accounts of the Electricity Council, the first chapter of which is in the reprinted version that has been going round lately.

It does not matter very much which reference one makes, so long as it is clear which document it is, and the document I have here is the Report and Accounts of the Electricity Council for the year ended 31st March last. I see that here a firm programme of transmission requirements has already been settled for primary transmission in 1965 and for secondary transmission in 1964, and that provisional programmes have been settled for 1966 and 1965, respectively.

While I agree that these dates do not by themselves pass the five-year limit, although they get uncommonly near to it, it is quite clear from the rest of the Report, with which I will not trouble the House, that foresight on a more provisional basis has to go even beyond the five years contemplated by the Government's White Paper on the nationalised industries. I have no objection to this. It seems to me to be right in all the circumstances, so far as I can judge them, but I emphatically point out that private enterprise could not possibly have planned, either on the national scale which we are now considering, or for the length of period that the Government and the industry are using for the purposes of their programme.

I welcome this, and I see that the Electricity Council, in paragraph 36 of the same Report, says: The record of the past three years is one with which the Electricity Boards can be reasonably satisfied. They are, after all, the bodies which actually distribute the electricity. They have honoured the financial prospectus on which their borrowing powers were increased. The Report then proceeds to consider the future.

I have been through this Report with the care appropriate to someone who does not know too much to begin with about a subject on which he has to speak, and I must say that I am very impressed by the details of what has been done, not that we are going into all of them tonight. The right hon. Gentleman pointed out, and I was glad to hear him say it, that the White Paper makes it perfectly clear that what is now asked for cannot carry the industry to the end of March, 1965. Indeed, the actual figures of the present forecast in the table on page 5 in paragraph 9 of the last White Paper, Cmnd. 1564, actually exceed by small amounts the limit now to be covered by these Orders.

Therefore, it is quite clear that the forecast made in 1958–59 did not provide sufficiently for the growth of the industry, and when one turns from that to a little more detail, to see what has happened in the expenditure during the years since then, we find the reasons for it. The right hon. Gentleman quite rightly said that the figures of capital requirements, the estimate compared with the outturn, showed that the estimate had not quite been reached, but what I think he did not make quite clear, at any rate to me, was that that is only arrived at by a combination of two things.

The first is that the actual expenditure on generating plants and main transmission and distribution has increased beyond the estimate. But that has been more than counter-balanced by two things. One is the phasing of or cut in—whichever one likes to call it—the nuclear power programme, which was the subject of Command Paper 1083 in June, 1960. The other is the considerable change in the working capital figures, which, as I see it, simply means that by the commercial accident, as it were, that always happens in dealing with this kind of thing, a draft has actually been made on the working capital.

It is, therefore, true to say that, apart from the nuclear power change and apart from the change in working capital, there has been, as indeed the Report makes clear in some detail, an excess of growth beyond what was forecast earlier. That excess of expenditure is due to two things, as I understand it. Less than half of it is due to any rise in costs and prices; more than half is due to what is called in one passage in the White Paper "the upsurge in demand".

It is perfectly clear if one looks at this Report that the electricity authorities, by which I mean the Council or the operating boards, including the Generating Board, have found it very hard indeed to keep pace with the upsurge in demand. I would praise the efforts that they have made to do it so far as one can judge them from the Report, but they have indeed required an effort.

What I think is particularly to be commended is that the upsurge in demand and the meeting of it have resulted in an increased production of, for instance, units of electricity, and, though there have in fact been, some tariff increases, we see from the Reports that the average revenue per unit is actually down by 2–3 per cent. or thereabouts. If we look at what is really the same question, although another way round, the cost per kW. is about 10 per cent. down.

That is really a very remarkable and creditable state of affairs. Without coming down on the consumer at a time not only of rising prices but of the usual series of Government financial crises, the electricity industry has managed actually to reduce the cost to the consumer in general to meet an upsurge in demand which, with the best judgment it had, it certainly did not fully foresee when the 1959 Act was passed, and to do this by reducing costs on increased production.

One can, no doubt, find matters to criticise here and there if one looks closely enough, but the general tenor is, I suggest, quite remarkable creditable to those concerned, and creditable to the necessary concept of this industry as the public service which under modern conditions it seems to me it is absolutely bound to be.

I take one other matter which I think may serve as a rough test, and I take it because I notice that it was mentioned in the debates on the 1959 Bill. That is what is called by the experts, I believe, the system load factor. It is quite clearly explained in the Electricity Council's Report, particularly on page 27. There, after what appear to be the proper and appropriate adjustments, we have a continuous history of a rise in the percentage indicating the system load factor from 1948 to 1961, with one very small exception in the early years. This, as I understand it, is the way in which those best versed in these matters indicate the fullness of the use being made of the electrical resources provided. It is a question of not merely providing for peak periods but also spreading the demand for electricity, as far as that can be done, over the day.

When dealing with this the Electricity Council points out that there are limits to what can be done in this matter, because the changes in what it calls domestic and industrial conditions largely dictate what the load factor will be. The Council says in paragraph 113: The adoption of more shift working, a wider use of electricity for continuous processes in industry and agriculture and the greater use of power in the home in off-peak periods would do much to help. In another part of the Report the Council indicates the corresponding difficulties. I mention this and dwell on it because it indicates the character of the industry and the elasticity with which it has to meet the demands on it. The more credit to it that this has been done. It has been done, as the Report indicates, under continuously changing conditions and in the light of developments in industrial and domestic use which are now happening in other countries too.

That is the general picture. There are one or two points upon which I should like to ask the Minister of Power, or whoever is to reply, some questions. I notice that the cost of research in the industry in the year covered by the Report of the Council—namely, the year ended 31st March, 1961—was £4.9 million. I notice, too, that the industry benefited to some extent from the research conducted by its suppliers of plant. However, this is a very small percentage of the money available for the industry to spend on research. This is an industry in which a great deal of research is required and where there is a real danger of falling behind if it is not undertaken.

Passages towards the end of the Report of the Electricity Council emphasise the need for training in the industry, which is closely connected with research. It is pointed out that, if it is not carried out, the industry will not play its part and this country will lag behind other countries in this important respect. I am not for a minute going back on what I said about what the nationalised electricity industry has done, but, after all, it has had in many ways an uphill task.

I want to mention a matter which again shows how much the industry has done and yet how much was needed to be done. I refer to the supply of electricity to farms. In 1948, when the industry was taken over, only 48 per cent. of all farms in this country were supplied with electricity. In 1958 it was 70 per cent. and by the end of March 1961, it was 84 per cent. The comments on this in "Power for the Future"—a statement of a programme that was issued in connection with the 1959 Bill—point out that although something had been done by private industry, a comprehensive approach to the problem of rural electrification was inhibited by the early structure of the industry. It states: Development up to 1948, influenced mainly by economic factors, had been characterised by a gradual spreading out from urban centres rather than a systematic plan to tackle the field as a whole. That seems a fair and reasonable comment and exactly what one would expect from electricity if one attempted to organise it in a set of private companies. It is the sort of social demand which the nationalised industry has been able to meet.

I have asked the right hon. Gentleman about research and I want to ask him a further question. My hon. Friends, at intervals, have complained to him that there is a sad lack of a national fuel policy and I notice a comment in the Electricity Council's Report which refers to the consumption of coal and oil during the year 1960–1961 compared with the previous year. Actually, both have gone up. I see no particular significance in these figures, but I should like to know what steps are being taken to consider the question of what is going to be provided by way of plant using coal and plant using oil for the use of the Generating Board and any other boards concerned with this form of capital equipment. If I am asking a question which the right hon. Gentleman has already answered six times to other hon. Members, I hope he will not bother to answer me but will tell me to look up one of his previous answers. It is far from clear in the Report who is really the deciding authority.

I turn to a picturesque incident of a special character which I find in the Electricity Council's Report. There must be few nationalised industries which publish a career novel. But I notice "Keith in Electricity" is part of the output of the Electricity Council. A career novel is a bright idea and well worth mentioning.

In the extremely interesting venture of linking up with the French electricity system the cash savings appear to be substantial, and whoever thought of that one deserves credit. There is such a thing as public enterprise as well as private enterprise in this case in point. It means that for the reasons given in the Report one can increase the system load factor considerably by pushing over one's electricity to France at the time of the day and in the circumstances in which they stand in more need of it than we do and by receiving electricity from them in converse circumstances.

If the House will allow a personal observation, I find in the reading of the Electricity Council's Report and the other working papers a great many points of extreme interest, and perhaps I speak for the ordinary user of electricity when I say to the Electricity Authority, the boards and the others concerned, "Thank you for what you have done. You have had a difficult job. You may not have done it all perfectly, but it is a very good show".

10.45 p.m.

Mr. Gerald Nabarro (Kidderminster)

I did not intend to resort to party political considerations during a debate dealing with massive electricity finance for the future, but as the hon. and learned Member for Kettering (Mr. Mitchison) has endeavoured to cloak his lack of electricity economics and finance under a shroud of party political polemics, I might, perhaps, be allowed to point out the phenomenal growth of electricity generation during the ten years of Conservative rule since 1951. The rate of increase has been larger in this country than in any West European country with which we are so often compared in economic and industrial matters by hon. Members opposite.

In 1950, the amount of electricity generated in British power stations was 45,717 million kilowatt hours. Eleven years later, in 1961, the output has risen to 111,414 million kilowatt hours, an increase of approximately 150 per cent. The average rate of increase in electricity—

Mr. William Hannan (Glasgow, Maryhill)

My hon. Friend must listen to the hon. Member for Kidderminster (Mr. Nabarro). Everybody must listen.

Mr. Nabarro

Mr. Deputy-Speaker, I appeal to you to ask the hon. Member for Gloucestershire, West (Mr. Loughlin) that if he wishes to intervene in my speech and will rise, I will immediately give way, but not to conduct a private conversation and endeavour to destroy the arguments which I am trying to put to the House. Does the hon. Member wish to intervene?

Mr. Charles Loughlin (Gloucestershire, West)

I was not even interested in what the hon. Member was saying.

Mr. Nabarro

Perhaps I might now be allowed to resume amid silence from the benches opposite. I was saying that in ten years of Conservative rule, electricity generation has increased by about 150 per cent. or at the rate of between 11 and 12 per cent. per annum in arithmetical progression, which is a higher level of increase, taken at an average, than that of any West European industrial competitor of ours. That is the basis, therefore, on which I consider that my right hon. Friend should come to the House this evening for consider-ration of increasing the borrowing powers of the electricity industry, the greater part of the moneys being devoted, of course, to the requirements of generation.

The correct measure of an affluent society, a phrase which has been used on several occasions during the debate this evening, is the amount of electric power consumed both in industry and in the home. I believe that in the next few years we should provide for a rate of increase at least equal to that of the average of the last few years. It is significant that my right hon. Friend, in his opening speech in support of these Orders, and the Electricity Council, in its publication "Finance for Power", quote a large number of technical figures, but at no stage have they stated the anticipated annual growth in electricity demand year by year during the period of five years ahead, for which we are being asked to vote the capital sums under these Orders.

My first question, therefore, to my right hon. Friend is to ask what is the average rate of growth that he is anticipating during the next four or five years in support of these capital investment figures. Am I correct in assuming that he has based the rate of growth on the average of the last ten years, which in arithmetical progression is 11 per cent. per annum, or the lesser rate of growth postulated in the Report and Accounts of the Central Electricity Generating Board for the year ending 31st March, 1961, a rate of growth of only 7–8 per cent. per annum? The difference between the two sets of figures, either 11 to 12 per cent. per annum, which is the retrospective average in the last decade, and the 7 to 8 per cent. for the future suggested in the last Report of the Electricity Council can, of course, make a difference of millions of pounds per annum in the capital investment programme being considered under these Orders.

The second matter I want to put to my right hon. Friend is this complicated matter of self-financing. There are evident discrepancies in the fashion in which the appropriate statistics for self-financing have been presented to the House. Of course, my right hon. Friend correctly, in connection with the White Paper, Cmnd. 1564—it is so much easier to refer to it by its number than by its title—in the second line of the table in paragraph 6, quoted the rates of self-financing. Estimates based on the 1958 basis were 42 per cent., and in out-turn or actual fact have proved to be 43 per cent. They do not, however, compare accurately with the sets of figures in the official publication, "Finance for Power," page 7, where the rates of self-financing were quoted as being derived from "Power for the Future"—in 1958, 44.8 per cent.—and are said in actual fact for the last three years to be at the rate of 45.6 per cent. I have no doubt there is an explanation for these discrepancies. There is a difference of 2 to 3 per cent. in the figures, and I suspect that it may be found in the sum for debt redemption payments annually in respect of certain vested assets.

What I want to say to my right hon. Friend is this. It is frightfully unsatisfactory dealing with these huge sums of money if two different bases for presentation, which do not allow of proper comparison the one with the other, are laid before the House in different publications. The basis of comparison—I repeat, the basis—should always be the same.

I now come to another point in this matter of self-financing where my right hon. Friend is not evidently presenting the figures, again, on a strictly comparable basis. Would he turn, please, to page 5 of Cmnd. 1564. It is estimated that on present forecast up to 31st March, 1965, the total capital requirements of the industry will be £4,039 million. It is further estimated that the sum found from internal financial resources will be £1,659 million. I have worked out the percentage of self-financing in this instance and find it is 41 per cent. Would my right hon. Friend make a note of that figure—41 per cent. of self-financing? Yet in his speech he said that he expected in the next three years the level of self-financing would rise to 50 per cent. and later to 60 per cent. There is evidently, therefore, a grave discrepancy again in the amount of self-financing which is anticipated in this industry.

My appeal to my right hon. Friend is to present his figures on a strictly comparable basis in all official publications and not to use different bases and different formulae in different publications which lead to grave misunderstanding and confusion in the minds of his listeners and the wider public outside this House. These words are addressed to my right hon. Friend, principally in response to his plea during his speech that he was helping me by giving me the appropriate references.

I now turn to the critical point in the huge sums of money which we are now discussing, and that is the growth in thermal efficiency in the power stations which are already in existence. My right hon. Friend hinted that credit squeeze activities which he is obliged to pursue by the Treasury—and I sympathise most sincerely with him—circumscribed the money available for capital investment in this most costly of all public enterprises in the matter of capital investment. Electricity takes about 5 per cent. of the nation's gross capital investment a year. I do not begrudge one penny of that investment so long as the maximum efficiency is being derived from the huge sums invested in the industry. I am not sure that that is so today, and this is not only a criticism of the nationalised electricity industry but also of the industry from which it draws most of its fuel supplies.

Would my right hon. Friend turn to paragraph 82 of the last Annual Report of the Central Electricity Generating Board?[An HON. MEMBER: "Why should he?"] Because it is a matter of economy of capital investment. That is another ribald intervention.

Mr. Denis Howell (Birmingham, Small Heath)

I am glad to have that on record. The fact of the hon. Member for Kidderminster (Mr. Nabarro), above all people, accusing another hon. Member of ribaldry is something which ought not to go unrecorded.

Mr. Nabarro

Paragraph 82 on page 25 of that Report states: Due to the commissioning of new generating plant operating under more advanced steam conditions, and to improvements in operating techniques, the average thermal efficiency of steam stations improved"—

Notice taken that 40 Members were not present;

House counted, and 40 Members being present—

Mr. Nabarro

Perhaps, due to the interruption, I might quote that paragraph again: Due to the commissioning of new generating plant operating under more advanced steam conditions, and to improvements in operating techniques, the average thermal efficiency of steam stations improved from 21.69 per cent. in 1950–51 to 26.80 per cent. in 1960–61. The improvement from 26.53 per cent. in 1959–60 to 26.80 per cent. in 1960–61 was not as great as in some earlier years, due to the need to run older and less efficient plant for longer periods during the colder weather of the autumn of 1960 and to delays in the full commercial commissioning of some of the modern plant due in service; thermal efficiency was also affected by the wetness and quality of some of the coal available from stock. Circumscribing capital investment programmes for new generating plant is wasteful policy, because it leads the Board to keep in commission much older plant that would otherwise be scrapped, which is thereby operated at a low level of efficiency and which causes a loss of efficiency over the system as a whole and is generally extremely wasteful.

The second point I put to my right hon. Friend is whether he will make representations to the National Coal Board, which is desperately seeking to increase its sales, notably of low-grade, high ash coal, to improve the quality of the coal sent to power stations, and thereby raise the thermal efficiency. I hope he realises that these very high figures of capital investment he has come to the House for could substantially be reduced if the thermal efficiency of power stations were improved along the lines I am suggesting.

There is one further point to which I draw his attention tonight. This concerns the load factor of power stations, which is far from satisfactory. He now has a copy of the Report from which I am quoting. Perhaps he will turn to page 19, paragraph 62. There he will see that the load factor of our power stations ten years ago, in 1950–51, was 43.2 per cent. In the ten years to 1960–61, it has increased to 48.5 per cent. That is an increase of only approximately one-half of one per cent. per annum, a rate of increase which is far too low. As a result of the tardiness in the level of increase in the load factor year by year, a great additional cost is, of course, incurred for capital investment purposes.

My right hon. Friend was serving at the Ministry of Pensions and National Insurance at the time, but I would like him to reread and absorb, before he authorises the capital investment for the electricity industry for the next year, some words which I quoted to the present Secretary of State for the Colonies—who then spoke for the Ministry of Power in this House—on 20th January, 1959. They were: 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."—[OFFICIAL REPORT, 20th January. 1959; Vol. 598, c. 128.] What is my right hon. Friend doing about improvement in load factors? The words I ask him to reread were not mine. They were quoted from the book "Nationalisation in Britain" by Mr. Kelf-Cohen, whose authority for using them was that for many years he was the second principal civil servant at the Ministry of Fuel and Power. He therefore had to deal directly, year by year, with these capital investment figures, and was thus singularly well qualified to comment on wastage of investment funds in this most expensive of all nationalised industries.

I hope that my right hon. Friend the Secretary of State for Scotland will he at pains to answer my questions.

The Secretary of State for Scotland (Mr. John Maclay)

I always am.

Mr. Nabarro

I am delighted to have my hon. Friend's assurance that he always is. In that regard he differs from the Minister of Power, who declines to answer questions in debate. I shall look forward particularly to hearing answers to my questions on efficiency matters—on thermal efficiency and on the load factor of power stations—because in all these matters there is the greatest opportunity for economy of funds in this huge capital investment programme that is before the House.

11.5 p.m.

Mr. T. H. H. Skeet (Willesden, East)

My hon. Friend the Member for Kiddermnster (Mr. Nabarro) indicated that the load factor in the United Kingdom is 48.5 per cent. It would be difficult to increase that figure substantially. An international comparison with, for instance, the United States, where it is over 60 per cent., would not be appropriate, because different factors apply and additional fuels are available. If the load factor were very much higher in the United Kingdom, however, the nuclear power stations would be much better placed now. It would be possible on that basis for it to be competitive with other fuels before 1970.

To come straight to the point, when we look at this Order we see that my right hon. Friend is asking for the ceiling to be raised from £1,800 million to £2,300 million, a quite significant rise. This is not an immodest sum. What is more, someone has to provide it, of course, the Council has direct access to the Treasury and in turn the Treasury has to raise it. Either it has to come from the taxpayer or the Treasury has to go to the market in due course. If it fails to secure the necessary funds, there is the question of Treasury bills, which may themselves be inflationary. I should have thought that the time had arrived when my right hon. Friend would be prepared to allow the boards to go to the market for part, if not all, their funds. In times of financial stringency perhaps not all would be secured, but part could be.

He is asking for moneys which could be utilised up to 1965. I am not entirely surprised that my right hon. Friend says that he may have to come to this House again in 1963–64, but on the prior point it may be that we see a glimmer of light in the publication, "Finance for Power". It says: … the Council cannot ignore the facts that the industry enjoys direct access to the Treasury for capital, that a large part of the capital thus lent to it is obtained by the Treasury from taxation, and that the market for fixed interest stocks is far from easy". Here we have a glimmer of light, It continues: But this does not mean that the Electricity Boards and Council would never be willing to face the capital market on their own record and prospects; their view would depend on the conditions ruling at any given time". My hon. Friend the Member for Kidderminster will be prepared to concede that that is an additional point. If industry is prepared to go to the market and raise stocks why cannot this industry at a suitable time do precisely the same?

I make a further suggestion to my right hon. Friend. Her Majestys Government have a 50 per cent. interest in British Petroleum. That private enterprise company went to the market in Switzerland and borrowed funds. If the electricity industry finds the rate of interest in the United Kingdom too unfavourable, perhaps it can go to the Continent where it can borrow money more cheaply. If a company in which the Government have a 50 per cent. interest can go to Switzerland and, I think, also to Western Germany, there is no reason why we should not have a little fresh thinking in this case. The boards may themselves go abroad where they can borrow money much more cheaply. For the size of the problem one has only to look at "Public Investment in Great Britain", published in October, 1951, to find that the approved expenditure of the electricity industry for 1962–3 is estimated at £397 million out of a total of £915 million for the nationalised industries and public corporations. In fact it is 43–2 per cent. of the total. I am not going to say at this stage that this immense investment is unnecessary. On the contrary, this is expanding fast and will require reasonably cheap fuel, certainly to be competitive with Europe But we must be in a position in the United Kingdom to secure what we require and to see that the House has effective control over expenditure.

Miss Margaret Herbison (Lanarkshire, North)

I take it that the hon. Gentleman has read Cmnd. 1337, in paragraph 27 of which the full reasons are given, after very careful inquiry by Lord Radcliffe, why the industries should not and could not go on to the market as the hon. Member suggests.

Mr. Skeet

The hon. Lady should appreciate that we are looking ahead and that we may be on the threshold of joining the Common Market. The trouble in the past has been our inability to do any forward thinking on these matters. There will be a free flow of capital into the United Kingdom from Europe and vice versa if we join. I gave the example of a private enterprise company which had raised funds on the Swiss and, I believe, the German markets. While it would have been impossible for certain deficit industries to do this, there is no reason why success industries should not do it. This is a question of looking ahead.

Mr. Speaker

Order. There is great difficulty about this. I have been allowing the hon. Member as much licence as possible, but the discussion is on an Order pursuant to a Statute which regulates borrowing from the Treasury, and to borrow elsewhere for this purpose would involve amendment to the Statute, which the hon. Member cannot urge in this debate.

Mr. Skeet

I fully accept that Ruling, Mr. Speaker, and I was pointing out, before I was led astray by the hon. Lady the Member for Lanarkshire, North (Miss Herbison), that a heavy burden falls on the taxpayer, because the taxpayer has to foot part of the bill. In these industries we have not noticed over the years any surplus handed back to the consumer in reduced prices.

A surplus can be used in two ways: it can be ploughed back. There is ample reason for that. But the public is placed in the situation that as the years unfold especially as more money will be spent on plant very large sums will be borrowed from Government sources. But the taxpayer has two capacities—taxpayer and consumer—and he will foot both bills. The House must appreciate the significance of these remarks.

I do not want unduly to prolong the debate, but there are one or two economies which my right hon. Friend might bear in mind. He mentioned that conventional power costs had been reduced to about £40 per kilowatt installed, but in even the most up-to-date nuclear power stations the figure is slightly over £100. Does not that indicate that if he wishes to save on expenditure in future the nuclear power programme should be further contracted?

The hon. and learned Member for Kettering (Mr. Mitchison) referred to the link between this country and Europe. It might be a useful step for us to invest in the hydro installations in Europe, because that might ultimately reduce our costs in the United Kingdom.

It has been indicated that the demand for electricity is expanding rapidly; it doubles every ten years. But that does not necessarily give a true picture throughout the country. The expansion has been very much faster in the South than in the North—or, rather, in certain parts of the North. In the South there are only a certain number of points available for nuclear power stations. It is very difficult to bring power south because of public objection to transmission lines and there is little coal south of the Trent. Therefore, my right hon. Friend may have to look increasingly to other fuels. I hope that when my right hon. Friend gets this additional right for the Electricity Council and others to borrow these very large sums up to 1965 he will see that they are properly applied over that period. These are vast resources. We have noticed in the past that errors have been made and we would not like to see those repeated.

11.15 p.m.

The Secretary of State for Scotland (Mr. John Maclay)

May I deal straight away with one point raised by my hon. Friend the Member for Willesden, East (Mr. Skeet) on the question of going to the market for finance at some time in the future. The hon. Lady the Member for Lanarkshire, North (Miss Herbison) was correct in saying that the point was dealt with in paragraph 27 of Cmnd. 1337. One cannot possibly rule it out for the future, and we would all hope that this might be possible.

Miss Herbison

We are discussing the borrowing powers for the present and for a few years ahead. That was all that was being discussed. I should be surprised if this industry, which has such a success story, were not in the position at some time in the future of having to apply to the Government.

Mr. Maclay

We are all in agreement about that. I agree that there is a success story and I welcome the compliments that have been paid on both sides of the House to the industry.

A number of questions have been asked and I will deal with them. My hon. Friend the Member for Kidderminster (Mr. Nabarro) made some pointed comments about comparability of figures in different documents. I took the trouble to look at the speech that I made about two years ago when we discussed these matters. I read the whole of it. I also looked at the speech that my hon. Friend made then. I was hoping that my hon. Friend would compliment us on the very long way that we have gone to implement everything that I said we would do on that last occasion by making available a large number of very useful documents into which my hon. Friend could get his teeth and which he could explore in his usual way. He did not pay us a compliment about that, but he criticised us for a certain degree of lack of comparability. The point is taken and we will examine how far it is possible in this complex matter to ensure that figures are comparable.

Mr. Nabarro

May I apologise to my right hon. Friend for my failure to observe the customary courtesies. I have before me his speech of 20th January, 1959, reported in column 152 of the OFFICIAL REPORT. He has implemented all his promises in laying these magnificent documents before the House, and I am deeply grateful to him. If he would only imbue his advisers with the vital necessity for seeing that all figures are quoted on a comparable basis in all official documents we should all be much happier.

Mr. Malay

I am grateful for that very handsome gesture.

The hon. and learned Member for Kettering (Mr. Mitchison) asked a number of questions, one of which related to the matter of research and development. A very large increase in the scale of research and development by the electricity supply industry is planned for 1962–63 and there are plans for still further increases in years to come, but I am not able to quantify them this evening or to give figures.

The hon. and learned Gentleman also asked a question about Cmnd. 1564, paragraph 24, and asked me to reconcile the five-year operation with the seven-year operation. I do not think they are inconsistent. Clearly we are thinking ahead a number of years. What is stated in paragraph 24 of that White Paper is what happens year by year or at different stages in the operation, and the procedures are not inconsistent. I think we all recognise that this industry has to think ahead a fair number of years.

The hon. and learned Member asked about a national fuel policy, and narrowed the subject down a little to the question of who decides, and what steps are taken to decide, between different fuels—coal and oil. I think that was the substance of his question.

Mr. Mitchison

I dare say that I did not make it sufficiently clear. The point was—what are the reasons for deciding between building stations which will use oil and stations which will use coal?

Mr. Maclay

I appreciate that. The point is that in this case my right hon. Friend and I myself, in Scotland, are in close consultation with the boards when there is a new plant in contemplation. I can say from my own knowledge that there is a great deal of discussion and that a great deal of care is taken to en- sure that each plant is fuelled in the way most appropriate to the area in which it must be situated. I am afraid that that is the only manner in which one can wisely decide this. One is always watching the progress of nuclear developments, but in any case the answer depends very much on the precise area in which the station is needed, and the stations tend to be sited in relation to suitable types of coal that are available. If there were a case where the coal was not suitable, another type of fuel would have to be contemplated. This is a continuing process. It must be examined carefully with every station.

Mr. Mitchison

I trust that the right hon. Gentleman also bears in mind that these stations use, I believe, a rather low-quality coal and that they might be so sited in Scotland as to continue the use of collieries which otherwise might be shut down. I am sure that my hon. Friend and neighbour would have something to say on that.

Mr. Maclay

We are very conscious of that indeed. In fact, we are in one or two instances in Scotland using slurry. Quite a lot of work has been done in that direction. It is not yet altogether certain how much further one can go, but that sort of consideration is very much in our minds.

I turn now to some of the questions asked by my hon. Friend the Member for Kidderminster. He asked about the average rate of growth. As I understand the position, the average rate of growth of electricity demand is 7.2 per cent. over the period of the programme. That is close to what has happened in the past decade.

I am afraid that I could not follow, or check in the time available, how my hon. Friend arrived at the figure of 11 per cent. I should have to do some research into that before I could reconcile the figure of 11 per cent., because I cannot discover where it comes from. But what I have said is correct, that the rate is 7.2 per cent. for the period of the programme, and I repeat that that is close to what has happened during the past decade.

My hon. Friend also spoke about thermal efficiency and the load factor. Everything is being done to use the most efficient stations as fast as we can. He asked specifically why the industry still uses old plant with low thermal efficiency. The short answer is that it uses these stations only for a relatively few hours per year. It may be that it would be much more expensive to invest capital in new plant to operate for what might be a relatively small number of hours over a year. The point of that is obvious. At any stage of development of a programme there are old stations, and one has to use them to meet special requirements at special times of the year rather than go in for major investment which would produce other stations of maximum efficiency.

My hon. Friend also referred to coal quality, and asked why the National Coal Board does not supply better coal. Up to a certain point, the Board can supply only the coal nature provides. But, fortunately, the electricity industry can efficiently use a much lower grade of coal than any other industry can. That is one of the advantages of this industry in relation to coal.

I think that my remarks have covered the questions by my hon. Friend that I can reasonably deal with this evening.

I conclude by saying that I welcome the fact that we are able to put before the House of Commons borrowing powers for such an admirable reason—that we have an industry which is getting itself ready to meet the tremendous upsurge in demand that is coming. It is a very good test, as my hon. Friend the Member for Kidderminster said, of the health of the country that it is demanding this increased electricity. I sincerely hope that the House will now approve these Orders.

Question put and agreed to.

Resolved, That the Electricity (Borrowing Powers) Order, 1961, a draft of which was laid before this House on 6th December, be approved.

Electricity (Borrowing Powers) (South of Scotland Electricity Board) Order, 1961[draft laid before the House, 6th December], approved.—[Mr. Maclay.]