HC Deb 09 July 1962 vol 662 cc1097-116

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

9.40 p.m.

Mr. Bruce Millan (Glasgow, Craigton)

The question I wish to raise tonight is the recent increase in electricity tariffs by the North of Scotland Hydro-Electric Board and, in particular, the circumstances leading up to the increase and the Government's responsibility in the matter. The increase, which was announced about two months ago, represents about 10 to 11 per cent. on electricity tariffs and has given rise to a considerable amount of public concern and controversy.

The Government's decision to force the, Board to increase its prices—because that is exactly what has happened—flows from the Government's new policy contained in Cmnd. Paper 1337 concerning the financial and economic obligations of the nationalised industries to raise considerably more in the future than in the past of the amount of money they require for their own capital development. There are a number of other things in the White Paper, but the one to which I have referred is the significant point with which we are concerned tonight.

I am not going to argue the general case for or against the Government's new policy, because there could be circumstances in which it might be desirable that the nationalised industries should raise more of their capital from their own resources and less by means of borrowing. The important point in general criticism of what the Government have done is that their new policy means—when it comes down to the fundamental facts of the situation—that the nationalised industries must raise their prices. This is not the kind of change of policy that can be accommodated by means of increasing efficiency or any other internal arrangements that the nationalised industries can make. It is the sort of sudden change of policy that because it is so comprehensive, can be accommodated only by increased prices.

We are, after all, still faced with the Government trying to impose some sort of incomes policy with wages and salary restraint. It was when this policy began to come into effect in the winter months that the Government stated that any wage or salary increases were, if they had to take place, not to go beyond 2½ per cent. If that is still the Government's policy, they have a responsibility to see that factors entering into the cost of living—which, in one way or another, are under their control—should not also be allowed to rise.

It is precisely in those circumstances that the Government have been forcing price increases on the nationalised industries, not just of 2½ per cent. but, in the case of the North of Scotland Hydro-Electric Board, 10 to 11 per cent. The same has happened to the South of Scotland Electricity Board. The same sort of thing, although there is a different Ministerial responsibility involved, has happened to gas prices in Scotland, in addition to changes in coal prices. When considering all these things—electricity in both the north and south, gas and coal, the changes made and the price increases—it is obvious that the Government have imposed a considerable influence on the cost of living.

My first criticism, whatever merit there may have been for the Government's policy considered in the abstract, is that it has had a serious effect on the cost of living. This brings me to my second criticism, which applies to the Secretary of State for Scotland. It has been extremely difficult for hon. Members to obtain information about exactly what the Government have been doing with regard to the nationalised boards. The Minister of Power, for the English electricity boards and the gas industry, gave Parliamentary Answers showing what the financial targets over the next few years were to be for these boards, there having been discussions with the industries concerned.

There was no similar statement on the part of the Secretary of State for Scotland. Had I not tabled some Questions on the subject the right hon. Gentleman would have made no statement at all. The information had to be dragged out of him and, in reality, we still have not got this information. I hope that we shall get it tonight and we shall know exactly what these financial targets are, not just in general terms but in terms of money and in terms of the kind of surpluses which the Hydro-Electric Board is to be expected to earn over, say, the next five years. These targets have been fixed for the Hydro-Electric Board as they have been fixed for the South of Scotland Electricity Board and the various gas boards, and I think we are entitled to know what the targets are.

The Secretary of State has never considered it to be part of his duty to give that information to the House. There is a special responsibility on him to do this because these price increases naturally raise public resentment, and it is important that the Secretary of State should observe his proper public responsibilities for having forced the boards to make these price increases. So far we have had from the Secretary of State what I can only describe as an attempt to dodge his responsibility in this respect.

When we come to deal with the Hydro-Electric Board proper there are certain important special considerations which pertain to the Hydro-Electric Board which do not pertain to any other of the nationalised boards, either the South of Scotland Electricity Board or any of the electricity boards in Scotland or any of the gas boards in any part of the country. These are certain financial considerations that we ought to keep in mind. There is the tremendous burden of capital expenditure which the Hydro-Electric Board is bound to have to bear, because it is in the nature of the operation that there should be large capital expenditure and then as the schemes come into operation only very small running and maintenance expenditure.

Certainly the Government have fixed the financial targets for the Hydro-Electric Board, although they are different from the way in which they have been fixed for the South of Scotland Electricity Board. In the latter case it is based on a percentage return of the capital employed. In the case of the Hydro-Electric Board that formula has not been applied. But of course, the Government having admitted that the formula is not appropriate, they have admitted in part that there is a case for treating the Hydro-Electric Board as something separate and distinct and different from the South of Scotland Electricity Board or any other electricity board.

There is another financial point that I ought to mention. The North of Scotland Hydro-Electric Board in 1961 made a profit of £1¾ million. I would consider that to be a fairly substantial profit and not by any means a poor performance. Incidentally, I think that financial surplus is the largest that the Hydro-Electric Board has ever had, but perhaps the Under-Secretary will either confirm or deny it. It makes it all the more remarkable and inappropriate that that financial result having been obtained in 1961, the Government should at this time impose this further increase in prices.

These financial considerations are much less important than the social and economic considerations that one would expect the Government to have in mind with regard to hydro-electric generation. I am not going through all the arguments that we have had on hydroelectric generation, the circumstances in which the Hydro-Electric Board was established and in which it has operated since then, but it is worth reminding the House once again that the Hydro-Electric Board has special social responsibilities which no other board has. They are described on page x of the last Annual Report and Accounts of the Board as follows: In addition, the Board were directed, so far as their powers and duties permitted, to collaborate in carrying out any measures for social improvement and economic development in the North of Scotland. By general admission, the Board has done this kind of work extremely well and done it, moreover, without any sort of Government subsidy. By general consent, the Board has an excellent record financially and in every other way since its establishment.

The North of Scotland Hydro-Electric Board presents one of the few hopeful signs in the Highland scene. Looking at the whole picture of Highland development and what has been happening not just in the last 10 years but for generations, one finds very few very hopeful elements, but the Hydro-Electric Board is one really hopeful element, and, what is more, it is recognised as such by the people of the Highlands themselves. They are very jealous of the rights, duties and privileges of the Board and they are concerned to protect it from attack from any quarter.

The people of the Highlands have had a good deal to be concerned about during the last two years or so. There was the inspired campaign of "Aims of Industry" and other organisations which had previously never shown any interest in Highland development which led to the establishment of the Mackenzie Committee to consider the whole question of hydro-electric development and its possible future. Whatever the merits or demerits of having an inquiry, the circumstances in which that inquiry was set on foot were most inappropriate and inopportune from the point of view of persuading the people of the Highlands that the Government were really concerned to protect and extend the work the Board was doing.

Many people in the Highlands felt that this was just the first part of a campaign to get rid of the Hydro-Electric Board altogether. The Secretary of State has given very little assurance that this is not so. He said that the Mackenzie Committee could recommend, because its terms of reference were sufficiently wide, the abolition of the Hydro-Electric Board. I hope very much that it will do nothing so foolish.

I mention the matter because the whole sorry story of the last two or three years—the treatment of the "Aims of Industry" campaign, the weakening of the resolve of the Secretary of State to resist it, the setting up of the Mackenzie Committee, the way that the Secretary of State dealt with the Glen Nevis scheme and the decision to postpone any final conclusions on it until the Mackenzie Committee had reported—has given no confidence whatever to the people of the Highlands that the Government are really concerned to protect the Hydro-Electric Board and to extend Highland development.

This latest action on the part of the Government is looked upon by many people in the Highlands as another piece in the pattern and they are very concerned about it. One would expect consumers to be concerned about a price increase. Naturally, no one likes a price increase in the North of Scotland or anywhere else. It is natural that consumers should react against it. It may be said that this was to be expected and there is nothing remarkable about it, but there are some remarkable features about the latest price increase which are worth putting on record.

In the first place, the Board itself did not want to raise its prices. In correspondence in the Scotsman, the Glasgow Herald and elsewhere, there has been a tendency on the part of consumers to place entire responsibility for rising electricity prices on the shoulders of the Hydro-Electric Board. It is absolutely essential to make clear that the Board did not want to increase its prices but was coerced into doing so by the Government. I do not think that this fact is disputed. It comes out in the correspondence between the North of Scotland Electricity Consultative Council and the Secretary of State. It is not denied by the Secretary of State in that correspondence that the Board did not want to increase its prices but was forced to do so by the pressure of the Government.

The other remarkable thing is the very strong line taken by the Electricity Consultative Council about this price increase. It wrote to the Secretary of State on 19th April and subsequently met him and expressed its opposition in the strongest possible terms. What is remarkable is that this is the only occasion in, I think, the 14 years' existence of this Council that it has protested about a price increase. On other occasions, however unhappy it may have been about the price increase, it has accepted the Board's explanation and the inevitability of the increase. On this occasion, however, it protested in most strong and vigorous terms because it did not believe that the circumstances warranted a price increase.

The Council met the Secretary of State, and he gave it very little encouragement. The interesting thing about the Secretary of State's reply to the Council comes near the end of it. This is what he wrote on 17th May to Lord Macdonald: I have explained the importance of ensuring that the finances of all the nationalised industries should be put on a sound basis; and you will appreciate that the Hydro Board cannot be an exception. The Board is already an exception in many different ways. I have pointed out that it has certain social and economic obligations which are well beyond those of any other electricity board. These obligations involve it in the expenditure of large sums of money, and it is extremely difficult for the Board to make ends meet. Therefore, it is not the case that the Board has not exceptional features which made it desirable that it should be treated exceptionally. It has these exceptional features. It is one of the few potential and actual sources of Highland development. The Government as well as the Opposition attach a great deal of importance to the necessity for Highland development, for attracting industry and for arresting depopulation, and so on. There are, therefore, these special obligations placed on the Board and these special circumstances.

The case that I want to make—and since we have extra time, I hope that some of my hon. Friends, if they catch your eye, Mr. Speaker, will be able to add to it—is that the Board has these special features and should be specially treated. The Government should be condemned for the action which they have taken. I repeat that it is extremely important for the people of the Highlands, for people in Scotland generally, for the consumers affected and all others concerned about what has happened to electricity prices to know that the responsi- bility for this action is not on a nationalised board.

This is not a case of a nationalised industry, through incompetence or inefficiency or a general "couldn't care less" attitude to the consumers, imposing an unjustified price increase. This is a case of a reluctant board being forced to impose price increases because of the direct policy of the Government which we criticise in the strongest terms as to its timing and particularly as to its effect on this very special board with its very special responsibilities and in view of the very fine work which it has done since its inception.

9.59 p.m

Mr. A. Woodburn (Clackmannan and East Stirlingshire)

I reinforce what my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) has so ably said. I do not want to go over the financial ground because my hon. Friend has been very expert in his knowledge of the Hydro-Electric Board's finances and I am sure that what he has said will have been noted by the Minister. My hon. Friend mentioned the Mackenzie Committee. I agree entirely with him that the circumstances under which that Committee was appointed were extremely unfortunate. A group of people who seemed to be more connected with industry and the beer trade in England formed themselves, curiously enough, into an electricity committee and for some——

It being Ten o'clock, the Motion for the Adjournment of the House lapsed, without Question put.

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

Mr. Woodburn

For some curious reason, that group of people was accepted by the Government as a kind of expert body on electricity costs. So far as I know, none of the people who were at the initiation of the Committee had any connection with electricity or with industry in Scotland and yet those people were given the credit very largely of being responsible for the appointment of the Mackenzie Committee. The connection between this and what my hon. Friend has said is that the setting up of the Mackenzie Committee created a feeling of great uncertainty in the development of the hydro-electric schemes.

I have had a lot of connection with the hydro-electric schemes from the very beginning and was present at the inception of the scheme in the House. It has been subjected to great opposition from vested interests from the start. Tom Johnston certainly carried it through the House without opposition, but that was largely because he did a great deal of hard work to convince all the people who were responsible that it was necessary.

The Board was formed and worked in an atmosphere of economy that has never been equalled by any board established by this House. Tom Johnston would not allow a penny to be spent that did not need to be spent. I should be surprised if the same principle applied in any other electricity board.

The Mackenzie Committee has been appointed. What worries people is that that is about the last we have heard of it. When will it report? When a Minister appoints a committee, he usually has two reasons. It is not usually because he does not know anything about the subject. The chances are that the Secretary of State and his Department knew all that was to be known about the Hydro-Electric Board, its virtues and its deficiences, before the Mackenzie Committee was heard of. It may be that the Secretary of State appointed the Committee to defend himself against this so-called electricity committee in Scotland, or it may be that he appointed the Committee to back him up in doing something to the Hydro-Electric Board. This is what causes the uncertainty.

If a body is to carry on an industry or a great enterprise, it must know what it is doing and where it is going. If it is held up and told "You may be out of existence in two or three years' time. This may be the last scheme which you will be permitted to carry out", uncertainty is caused and the uncertainty and lack of planning lead to extra expenditure.

It would be a good idea if tonight the Minister could give us an idea about what is happening concerning the Hydro-Electric Board. Will the Mackenzie Committee report? I understand that if it tried to digest all the evidence which has been put before it, it would be busy for the next ten or twelve years. I doubt whether anybody is capable of digesting all the information which has been put before the Committee. We are entitled to know the Minister's intentions. Does he intend that the Mackenzie Committee will report in the near future or has he any knowledge that it will do so? Does he agree that when the Committee reports, certainty should be given to the Hydro-Electric Board in the carrying out of its activities?

I agree with my 'hon. Friend the Member for Craigton. The duty of the Hydro-Electric Board is something much more than that of a mere electricity undertaking. The Secretary of State is entitled to be asked to protect it against the vested interests who have been trying to destroy it ever since it started. When the Board was attacked in this House, the late Sir James Henderson-Stewart did a valiant job in giving the facts. It is curious that he was able to give all the facts and to show the justification for the board, whereas since new Ministers have come in there seems to be undue timidity in standing up for the board, for which they are responsible.

One of the criticisms is that the Board is trying to produce electricity which should be produced by coal. It should be explained that that is nonsense. The amount of electricity required in Scotland and the most economical way of producing it for each different circumstance are calculations which are most carefully balanced by the Hydro-Electric Board and the other electricity boards. The Hydro-Electric Board produces electricity for certain peak hours in the most economical way possible. It could not be produced by coal in the same way.

If he has time, I hope that the Under-Secretary will say something about the pump storage schemes which are a very important part of the future. I understand that the economics of such a scheme are not now so urgent and that electricity is now produced so scientifically that it may not be economical to go far with pump storage at the moment. But I also understand that in the long run it will be of tremendous importance to Scotland. I should also like him to say something about the utilisation of electricity produced from atomic energy.

Other hon. Members would like to speak and this is only a short debate, but I should like the Minister to be able to reply to those questions.

10.6 p.m.

Mr. William Ross (Kilmarnock)

We are here dealing with an institution which is highly respected and which is angry about its treatment by the Government, but not one Scottish Conservative Member is present on the back benches opposite—not one Scottish Tory from the Highland areas. The whip is cracked by the Chancellor of the Exchequer and the cost of electricity in the Highlands rises. The consultative committee protests, but the Secretary of State for Scotland brushes the matter aside.

My hon. Friend the Member for Glasgow, Craigton (Mr. Millan) is to be congratulated not only on selecting this subject, but on the way in which he has presented the difficulties of the Hydro-Electric Board. When the Secretary of State excuses this increase by saying that the same sort of thing is happening elsewhere, he completely misses the unique qualities of the Hydro-Electric Board. This electricity authority covers one quarter of the land area of Britain, but only about 2¼ per cent, of the population. It covers about 22,000 square miles of rough and unpopulated country, and yet last year it was able to wipe off a revenue deficiency of about £500,000 and put another £900,000 to reserve and show itself capable of running its own affairs fairly well. It does not get a penny of subsidy from anywhere. It finances its capital development by stock and latterly by loan from the Government, and it pays interest on those loans at 6¼ to 6½ per cent. Anyone who wishes to see the truth of that need turn only to the back pages and appendices of the Board's reports. Such is the profit it makes after paying interest and redemption charges.

This is a Board which has shown itself capable of running its own business, a business which is more than just electricity. It has to run fishery activities and build roads which it hands over to the trunk road authority. It has special industrial and social responsibilities in the Highlands. It was a fight to get those responsibilities and it will be a fight to maintain them.

There are few electricity authorities in this country which have merited what the Electricity Consultative Council for the North of Scotland District said about this Board. The Council, whose members form a cross-section of the community, felt bound to place on record their admiration of the manner in which the Board have carried out their gigantic task; their appreciation of the Board's many valuable contributions to the social and economic development of the Highlands and the impartial and friendly atmosphere in regard to electricity supplies generally which has been created by the Board and their staff throughout the 22,000 square miles of Scotland for which they are responsible. From the Council's intimate knowledge of the special and very difficult conditions peculiar to that area, the Council declare unanimously their conviction that the continuance of the North of Scotland Hydro-Electric Board as a separate body is of vital importance to the future welfare of the Highlands and express the hope that nothing will be done to endanger the Board's independent status. This arose out of the setting up of the Mackenzie Committee. This Council represents the customers, and that is what it said, but there is a double attack on the independent status of the Board. The other attacker is not the Secretary of State for Scotland, but the Chancellor of the Exchequer.

When we examine what the Board has been able to do in the last ten years, probably the most disappointing part of it is the fact that industrial consumption has only doubled, compared with the great strides which have been made in domestic, commercial and other use. What chance have we of getting industries into the Highland areas where there are not only difficulties of transport, but where there is now to be an increase in the cost of electricity? This is what the Government must appreciate. The things that were behind the setting up of the Board are the things which the Government should have had in mind when they directed it to raise its tariffs. The Board has sufficient troubles of its own in relation to increased costs, particularly in relation to the increased cost of borrowing money, without being directed to raise the price of electricity which will affect the people in the Highlands and the prospects of attracting new industries and improving tourism.

The Government ought to wake up. Why do not the people who call themselves Scotsman and who sit on the benches opposite assert all their courage and strength to stop the Board being forced to raise its prices? It is all very well for the Chairman of the Tory Party in Scotland to sit there smiling. He was not smiling when the result of the West Lothian by-election became known. It is little wonder that the Tory Party is losing its deposits in Scotland. It is little wonder also that the Liberal Party, which is not represented here tonight, is also losing support. The people in Scotland are sick and fed up with this weak, compliant attitude. When the Chancellor of the Exchequer cracks the whip because of something that has happened in the Midlands and elsewhere, the poor people of Scotland are made to suffer. When will the Government wake up? When will the Scottish Members of the Government get off their knees and proclaim themselves as Scots?

10.14 p.m.

The Under-Secretary of State for Scotland (Mr. R. Brooman-White)

I am grateful to the hon. Member for Glasgow. Craigton (Mr. Millan) for giving me the opportunity to explain rather more fully than was possible at Question Time the reasons why my right hon. Friend was unable to accept the representations made to him by the Electricity Consultative Council for the North of Scotland District against the various tariff increases which have been introduced by the Board.

To follow the hon. Gentleman briefly over the background—because he raised the question of the general financial arrangements—on 30th May, in reply to a number of question my right hon. Friend said that pending the Mackenzie Report the Board had agreed to apply such tariff changes as will produce a percentage increase in income derived from its own consumers similar to that which is to be achieved by the South of Scotland Electricity Board."—[OFFICIAL REPORT, 30th May, 1962; Vol. 660, c. 1356.] A number of references have been made during the debate to the report of the Mackenzie Committee. As hon. Members know, the Committee is examining the general arrangements for generating and distributing electricity in Scotland. My right hon. Friend expects to receive the report of the Committee next month, and we hope that it will be ready for publication in the autumn at the latest.

Leaving aside the future position in relation to the Mackenzie Committee report, the White Paper on the Financial and Economic Obligations of the Nationalised Industries said, in brief, that the Government had decided that in order to ensure the best use of our capital resources all the nationalised industries must be put on a sound economic basis, and stated that up to now the return on capital employed in them had been unduly low, because their prices had been uneconomically low. It stated that this distortion had been damaging to the economy as a whole——

Mr. E. G. Willis (Edinburgh, East)


Mr. Brooman-White

This is to some extent in reply to the hon. Member for Craigton. It said that this distortion had been damaging to the economy as a whole and must result also in higher taxation or in greater borrowing by the Exchequer. Each of the nationalised hoards was therefore being given a financial objective ensuring an adequate return on its capital, and each board's target has been agreed in accordance with the principles set out in the White Paper.

The North Board was extremely concerned about the requirements to be put upon it on this basis, but after the reasons for the policy had been explained to it on the lines that I have just given, it agreed to its financial objective being fixed in the way that I have described, by an increase in the revenue raised from consumers in its area.

Mr. Willis

It had to agree. It had no choice.

Mr. Brooman-White

The Board first objected, but accepted the necessity for the proposal when the matter was explained to it. The Consultative Council, on the other hand, was unable to accept the tariff increases submitted to it by the Board and, at its request, my right hon. Friend the Secretary of State met a deputation from the Council in Inverness on 11th May. We understand its concern and the general concern felt in the area. I will try to cover, in the rest of my speech, the points it raised, which have been emphasised and expanded by hon. Members tonight.

The hon. Member for Craigton and the hon. Member for Kilmarnock (Mr. Ross) stressed the point that an increase in tariffs at the present time was inappropriate, having regard to the profits made by the Board last year. Without wishing to detract in any way from the Board's general performance, to which we all pay tribute, it is true to say that the heavy rainfall of last year gave the Board so much water that it was able to return a bumper profit, following a number of rather lean years when the weather was dryer than the Highlands normally get. The question of the Board's financial target, however, is something which must be considered over a number of years, and it would be wrong to allow our judgment of what is necessary to be affected by the lucky chance—lucky in this context—of heavy rain last year. We had, therefore, to consider what was likely to happen if the average amount of water available to the Board over the next five years was more nearly normal.

A second point, to which the hon. Member for Craigton also referred, and which all hon. Members Who have spoken tonight have stressed—and with which we entirely agree—was that the Board could not be compared reasonably with other nationalised electricity undertakings because its powers recognised the special problems which it had to meet in providing supplies to the remote areas and islands of the North of Scotland. We have taken account of this.

In the electricity supply industry in England and Wales and in the South of Scotland an average gross yield of 12½ per cent. of the average net assets employed is to be achieved. This money is not in the nature of a profit to be pocketed by the Government, or a surplus available for distribution in other ways; it is a contribution from revenue to the funds required to finance the developments which the boards must undertake if consumers' needs are to be met.

In setting the targets for Scotland the different circumstances of the Hydro-Electric Board are recognised, and instead of applying a percentage to the Board's net assets, which, because of the cost of hydro-electricity schemes, are high relative to those of the other boards, the Hydro-Electric board has been asked to revise its tariff structure so as to produce only a percentage increase of the income derived from consumers in its own area similar to that to be achieved by the South of Scotland Electricity Board.

What, in effect, has happened is this. Let me make the point again in other words. We were concerned to ensure that no change was made which would cause a greater increase in price in the Highlands than elsewhere. Other electricity boards have adjusted their prices to produce a better return in relation to the capital employed in their undertakings. But the capital employed in the Highlands is proportionately much greater. So the Board has really been allowed to leave that out of account. What it has been asked to do is to see that its revenue is increased by a percentage similar to the increase taking place in the South of Scotland Board's area, even though this will produce a lower return on its capital than in the case of any other electricity board.

Accordingly, the Board's tariffs have been increased to produce about 10 per cent. more income but this leaves the relationship between its prices and those in other areas broadly unchanged.

Mr. Millan

May we have the financial target in money terms? We have had that for every other electricity board, but we still have not got it in this case. I have complained about that. When are we to get that information?

Mr. Brooman-White

I am afraid that I cannot give it this evening. I will see what more can be done to work it out.

It has been suggested that certain sections of the Board's consumers have been required to carry an unfair proportion of the increase as between one consumer and another. I must make it clear to the House that all we have asked the Board to do is to increase its income from sales of electricity to consumers in its own area by 10 per cent. How the tariff is adjusted to bring in this amount, and how the burden is allocated between the various classes of consumers, is a matter entirely for the Board, and my right hon. Friend has no authority to intervene.

Mr. Woodburn

Can the Minister explain what happens to the electricity which is exported to the south of Scotland? Is the extra price charged?

Mr. Brooman-White

have stressed throughout what I have been saying that the increases are related to consumers in the Board's own area. If I have time at the end of my speech, I will develop that rather complicated point. But this happens within the area of the Board on the same basis as other boards act and deal with consumers in their areas. There are sales across the boundaries of the Board's district.

To come to another point, what has been called the social and economic side of the question, it has been said that the increased charges might aggravate the problem of depopulation, and be detrimental to agriculture and to the efforts of the Board to attract new industries to its district. An increase of the kind proposed which preserves the relative position of the Hydro-Electric Board's area does not introduce any new factor affecting depopulation, or the attraction of new industry. The relative position is largely unchanged. All the boards do not alter the prices at exactly the same time, but I might mention that every other electricity board in Great Britain has increased its tariffs generally since the last increase by the Hydro-Electric Board in 1959.

We appreciate the difficulties of the farmers and realise that last winter was a particularly difficult one for many farmers and crofters. But that is one of the hazards of farming and it would be quite improper to use the electricity tariff in order to provide a hidden subsidy to help an industry to meet a temporary setback arising out of one bad season.

On the question of the attraction of industry which was stressed particularly by the hon. Member for Craigton and the hon. Member for Kilmarnock it has been argued that, because of the difficulty caused by remoteness, it is essential that power costs should be substantially attractive to those in the south who might be prepared to set up industries in the north. The answer is that the cost of electricity has been variously estimated as representing between 1 per cent. and 4 per cent. of production costs, depending on the industry. Even a 10 per cent. increase in the industrial tariff is unlikely to act as a deterrent to prospective developers thinking of moving to the Highlands.

In any event, as I have pointed out, they would have to meet higher electricity costs elsewhere. They would, one would think, be more influenced by the opportunity of obtaining factory sites and labour in the area than by the possibility of obtaining reduced power costs. It is a fact that the other boards have increased their general tariffs and industrial tariffs since 1959 when the Hydro-Electric Board last put up its tariff.

Coming to the point about the effect on the cost of living and the consumer in the area, of course we are concerned about the position of people on low incomes and in difficult circumstances, but it might put the matter into perspective to point out that the Board estimates that for the small consumer using lighting and nothing else the proposed tariff increase would represent no more than about 3d. a week. For the relatively large consumer of electricity who uses the supply for lighting, for the wireless and for ironing, cleaning, cooking and washing—for the household consuming 3,000 units a year—the proposed increase would represent about 6d. a week.

The hon. Member for Craigton and the hon. Member for Kilmarnock said that this was the first occasion on which the Council had made representations to my right hon. Friend on tariff increases proposed by the Board. My right hon. Friend is most anxious that the Council should realise that his inability to accept those representations is in no way a reflection on the most valuable work which it does in representing the consumer's point of view to the Board and in helping consumers to understand the Board's policies. If in this case these misgivings were felt by the consumers it was absolutely right for the Council to have voiced them.

As the House knows, however, our policy is that the finances of all the nationalised industries should be on a sound basis. As my right hon. Friend said in a letter which the hon. Member for Craigton quoted, it is not our view that the Hydro-Electric Board can be made an exception. The special problems of the Board, its very heavy burden of uneconomic consumers and its special duty to collaborate in the carrying out of measures for the economic development and social improvement of its district are fully recognised. These recent changes have been made in such a way as to take account of them and to maintain the relative position of the Board vis-à-vis their areas. My right hon. Friend considers that in present circumstances the right thing to do was to ask the Board to maintain the relationship between its tariff and that in the South of Scotland until the Mackenzie Committee has reported and a more permanent basis can be fixed for future targets.

I have a moment left in which to reply to a point which is outside the field of this debate. It was made by the right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn) who asked about pumped storage. Work is proceeding satisfactorily for the first 200 megawatts set of the Loch Awe scheme and will come into operation in the 1965–66 period. The second 200 megawatt set will come into effect in the next year.

I hope that the information I have given, if it does not satisfy hon. Members opposite, will at least make the position clear to the House and to consumers in the Highland area.

10.28 p.m.

Mr. James H, Hoy (Edinburgh, Leith)

In the two minutes which remain, I assure the Minister that his reply is quite unsatisfactory. He has tried to explain that the Government and the Treasury, through the Chancellor of the Exchequer, having made up their minds, the Secretary of State is merely cracking the whip and in response to the consultative committee he has told its members not what he thought but what the Chancellor told him to say.

The hon. Gentleman spoke of a concession, but the only concession offered to consumers in the North of Scotland Hydro-Electric Board area was that their increase in price would be no more but no less than in any other part of the country. It comes hard from this Government who apparently think that wage increases should not be more than 2½ per cent. to compel the nationalised boards to increase their charges by 10 per cent. How can they expect the public to restrain their demands when the Government are imposing increases in charges of this kind all over the country? The Government, through the Secretary of State for Scotland, has a great responsibility to this part of Scotland. The Hydro-Electric Board has to supply electricity—

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

Adjourned at half-past Ten o'clock.