YORKSHIRE ELECTRICITY BOARD (TARIFFS) (Hansard, 25 March 1963)

§ Mr. R. E. Winterbottom (Sheffield, Brightside)
Some few weeks ago, the hon. Member for Leeds, North-West (Sir D. Kaberry) raised the question of the increased tariff charges levelled by the Yorkshire Electricity Board, applicable from 1st April this year. He dealt with the problem in a way that I should have thought was rather critical of the Yorkshire Electricity Consultative Council. I do not propose to condemn the Consultative Council, nor the Yorkshire Electricity Board tonight. I do not propose to criticise either of those two bodies. It is true that the Yorkshire Electricity Board is the agency for fixing finally the tariff charges for electricity in the Yorkshire area, but the Board is not responsible primarily for the huge increase. The fact is that the hands are those of Esau, but the voice is that of Jacob. The Board might have been the instrument in announcing the changes, but the villain of the piece is the Government. I want to prove my point.
I distinguish the electricity industry from the other nationalised fuel and power industries, but one feature is common to them all. I exclude the oil industry, because that is not nationalised. As I see it, the nationalised fuel and power industries are the victims of Government's hatred of nationalisation. The Government have denuded them of all those aspects of development that would have enabled them to make a contribution to the development of British industry far more important than anything that the Chancellor of the Exchequer could do by way of concessions in Income Tax or even in Profits Tax.
Had the Government encouraged the nationalised fuel and power industries by giving them the opportunity to develop by a policy of cheap money, it would have been a marvellous investment in every one of our complicated industries. This is a tempting subject to embark upon, and the fundamental background of my criticisms is that I 1086 have to particularise. I must point out that the Government have, in particular, shamefully neglected the development of the electricity industry.
When the hon. Member for Leeds, North-West raised this problem, part of the reply from the Parliamentary Secretary was as follows: One possible view that I would commend to him as worthy of attention is that the reason why the increases were so sharp is that they should have happened before and had been too long postponed."—[OFFICIAL REPORT, 14th February, 1963; Vol. 671, c. 1626.] The Parliamentary Secretary forgets that the main reason for the increases is not the normal increase in costs and in all kinds of overheads which occurs over a period of time, but was a Government decree in the shape of the White Paper, issued in April, 1961, virtually compelling nationalised industries to follow a certain course in financing their development.
In regard to the electricity undertakings, and the Yorkshire electricity undertaking in particular, I cannot see the reason for that course unless it is to price electricity out of the market. Having secured what I might call the full coverage of the total cost of the electricity, the Government intend to sell it, as they have done in the case of some of the other nationalised industries, at a profit to their pals. But I am not suggesting that seriously. I am suggesting, however, that that is imposing upon the present consumers of electricity in Yorkshire a cost which ought to be borne over the years by those yet to come.
Let us look at some of the figures. Until this year the highest surplus for which the Yorkshire Electricity Board had budgeted and had realised was that of the last five years, a £5 million surplus. Seemingly, that was satisfactory. In all comments on the balance sheets issued a great deal of praise was directed to the Board for its enterprise and for the work which it had done. There was no whisper at all of complaint against the Board. But now, at one fell swoop, the Board is compelled to provide for a surplus of £23 million as against one of £5 million, and again over a five-year period. That is an increase, in terms of budgetary surplus, of 340 per cent.
The Board has been compelled by Government decree to increase the estimated revenue from £80 million over the 1087 five years to £94 million, by 17½ per cent. over the previous five years. For many reasons even this 17½ per cent. will be increased, because in many respects there will be more profitable matters which I have not time to indicate now and which will really enlarge that figure.
But there has also been a change in the proportion of that revenue which goes to capital, and this is why I am saying that the inference which the Parliamentary Secretary gave to his hon. Friend the Member for Leeds, North-West was wrong. Nearly all the huge increases in the tariff rates will go to capital development, not to natural increases in the price of electricity due to a rise in the cost of living or anything of that kind; but purely and simply all of it will go by reason of capital development. The previous proportion was half. It is difficult to find an industry in this country where the proportion was as high as it was before this alteration, but now 58½ per cent. of the revenue of the Yorkshire Electricity Board will go to capital development, and it will save the sum to be borrowed, it is said, by the Board. It means that consumers today are paying for those, in some cases, not yet born.
Why is this? Why do I condemn the the Government? Purely and simply because it was the Government's fault; it was the White Paper of April, 1961, that caused this. The reason for this direction to the Board has been that the rapid and continued increase in the demand for electricity involves very heavy capital expenditure and this means that in future the Board must borrow a lesser proportion for new capital than in the past and find for development a higher proportion from income. That is why more of revenue has to go to capital development.
What will the effect be? The Board had a certain formula for the tariff based on the number of rooms per house, and each house had an allowance for each room and another allowance at a rate of 1.25d. per unit and an overall allowance at the rate of 0.9d. per unit. That has been altered. Now for the first 72 units there is a charge of 6d. per unit, and thereafter a charge of 1 1/10d. per unit.
What is the result? Here are some facts. A house with four rooms consuming 500 units per quarter will pay an increase for the quarter of 12s. 2d., or 17½ per cent. A house with five rooms con- 1088 suming 1,000 units per quarter will pay an extra £1 Os. 3d., or 17½ per cent. A house with six rooms consuming 1,500 units per quarter will pay an extra £1 18s. 3d., or 24 per cent.
I have here my electricity bill delivered last week, and here I speak feelingly. I consumed 4,887 units, and this will cost me this time £20 15s. 5d. Next year that would cost me more than £27, an increase of 35 per cent. The Parliamentary Secretary said that most of the increases would fall within 1s. per week. That is not the evidence that I have. In 10 illustrations which I have here and which I have furnished to the Press 1s. per week is easily exceeded. This is a very important consideration.
Does the Parliamentary Secretary think that to institute a Government decree to force an increase of 340 per cent. in the estimated surplus of the Board can do other than reflect itself in the price of electricity in the household and thereby create a demand for higher wages in industry? Does he not think that this huge increase will play a part in the industrial life of Yorkshire?
I come from the City of Sheffield, which is very important, dealing as it does with heavy industry. Most of the letters which I have received protesting against the increase have been from firms in Sheffield. Many of them protest because the ordinary increase in charges applying to factories is almost prohibitive. Many industrialists with electric are furnaces are even more worried. It is true that at present many of them have an agreement involving a time factor and nothing can be done about their electricity charges until the time has expired, but many in Sheffield are wondering whether, when the time has expired, the increase in the price of electricity will not play a very important part in the cost of steel produced from electric are furnaces. If that leads, on the one hand, to demands for increased wages, and, on the other, to increases in the price of commodities, I suggest that the policy which has been pursued by the Government ought to be re-examined from the point of view of what a nationalised industry ought to do in terms of service to the community.
The National Incomes Commission and the National Economic Development Council have to be considered just as much as the price of electricity to the ordinary consumer; and in my district, 1089 and I suspect in many others, this policy is more politically deadly than anything else the Government have done in the last 12 months, and that is saying a great deal, because during that time the Government have been condemned for many things.
The Government have been more strongly condemned over this increase in the price of electricity than over anything else in recent months, and I ask the Parliamentary Secretary to do something to help not only Yorkshire but all the other areas which are feeling the pinch as much as we are. The policy laid down in the 1961 White Paper should be scrapped and replaced by one which is more progressive and more in the interests of the people.

§ The Parliamentary Secretary to the Ministry of Power (Mr. John Peyton)
As the hon. Member for Sheffield, Brightside (Mr. Winterbottom) has fairly reminded the House, my hon. Friend the Member for Leeds, North-West (Sir D. Kaberry) was the first hon. Member to raise the unpleasant and uncomfortable question of the increases in the tariffs of the Yorkshire Electricity Board. It was my unpleasant duty to tell my hon. Friend on that occasion that I had little comfort to offer him, and I can see no possible reason for altering my message tonight in answer to the hon. Gentleman.
The hon. Gentleman started his speech with a slightly cryptic reference to Jacob and the hands of Esau. I got muddled up as to who I was, or whose birthright I had pinched, or perhaps the Board had pinched the birthright—

§ Mr. Winterbottom
The moral of the story was that somebody was twisting.

§ Mr. Peyton
I was not clear who it was, but the hon. Gentleman, to my relief, went on to say that no attack was intended on either the Yorkshire Electricity Board or the Consultative Council. I believe that the Board has put forward these price increases after very careful consideration with the Consultative Council, which is only right and proper. Neither body has been concerned to court popularity. They have been concerned to do what is right in the interests of the electricity industry, and ultimately in the interests of its consumers, and anyone standing at this Box is bound, as I do, to give them his fullest support.
1090 The hon. Gentleman said that this was a deliberate act of malice and spite in pursuit of the Government hatred of nationalisation. He went on to say that we had denuded the industry—a charming expression this—of the ability to contribute to the national economy. The industry is currently borrowing from the Exchequer at the rate of about £200 million a year. I do not think that the hon. Member is justified in describing that as denudation.
He went on to say that we had neglected the development of electricity. Again I remind him of the fact that the electricity industry—

§ Mr. Winterbottom
Is it not true that the borrowing will fall from 54.1 per cent. to 41.5 per cent., and that the amount to be provided out of revenue will increase thereby?

§ Mr. Peyton
I want to make it clear to the hon. Member—I do not challenge his figures—that the Yorkshire Electricity Board will in future be borrowing about 42 per cent. of its capital requirements. He must not say that we are deliberately denuding the industry, bearing in mind the fact that the industry will be borrowing from the Exchequer at a rate of about £200 million a year. This does not amount to denudation, whatever else it adds up to.
The hon. Member was good enough to quote my speech to the House on 14th February, in reply to my hon. Friend the Member for Leeds, North-West. After his reminding the House what I then said, namely, that these increases had for too long been postponed, I can only say that I see no reason whatever to depart from or to qualify that statement tonight. He went on to quote me further as saying that the increases in tariffs now made by the Yorkshire Electricity Board were due partly to increases in costs and partly to the White Paper policy of the Government. That is exactly what I said on that occasion.
I cannot add very much to what I then said. I first made the point that labour and material costs had increased, and then I referred to the White Paper which set out the Government's views on the financial obligations of nationalised industries. I know that my hon. Friend is very well aware of its contents, but I must just weary him and the House with a repetition of its main purposes. 1091 The first purpose, as my hon. Friend knows, was to secure the, so I should have thought, desirable objective that users of electricity should themselves provide a reasonable contribution in terms of capital to meet the demand which they themselves have had and are having a large part in creating. The second purpose was that the level of earnings in a nationalised industry, particularly the electricity industry, should be a little nearer the average earnings of industry on the capital invested."—[OFFICIAL REPORT, 14th February, 1963; Vol. 671, c. 1627.] I repeat that I see no reason to qualify what I then said, or to depart, from it. I entirely fail to follow, to accept, or to agree with the charge that the hon. Member has levelled at the Government, that this policy represents an act of consummate malice against nationalised industries.
He said some obscure things. He was modest, and said that he did not want to press the charge that part of the trouble was due to the profit of the past. I did not understand what he was referring to—and it appeared that he did not understand it, either.
He said that the Yorkshire Electricity Board had in the past five years been making a surplus of £5 million, and that in the next five years it would be expected to make a profit of £23 million—in other words, an average of £4.6 million in each of those years. This represents the earning of a little more than 4 per cent. on the net assets employed. I do not think that he or anyone else could maintain that that is a grotesquely high or optimistic target to ask of an industry which is expanding at the rate at which this one is.
The idea that the electricity industry, of all industries, will be brought to a sudden stop in its expansion because the customer is asked to pay for what he is having, is quite grotesque. The hon. Gentleman must bear in mind that until a few years ago the industry was expanding at a rate of 6 per cent. per annum. Now the industry is expanding at about 8 per cent. per annum. In other words, it has just about doubled itself over 10 years. Even the hon. Gentleman must recognise that this has made a formidable demand on its resources.

§ Mr. Winterbottom
Nonsense!

§ Mr. Peyton
Investment in the industry will not be far short of £400 million this year, and next year it will increase, and 1092 will continue to increase. I do not think it right or reasonable that the hon. Gentleman should disregard the amount of national resources being absorbed by this rapidly expanding industry.
The hon. Gentleman said that the natural increase in cost was not the reason for what had happened. I readily admit that it is necessary to provide for this and that the consumer also should provide for future capital development. What other source has the hon. Gentleman in mind from which to find the resources?

§ Mr. Winterbottom
rose—

§ Mr. Peyton
I cannot give way. I have only two minutes—

§ Mr. Winterbottom
I could tell the hon. Gentleman.

§ Mr. Peyton
The hon. Gentleman has only one choice. It must be the taxpayer or the Exchequer. In other words, he proposes to divert a further proportion of the national resources to the expansion of this industry rather than to spend this money on roads, schools or hospitals, or on the many other competing avenues for expenditure.
The hon. Gentleman said that the consumer today was being asked to pay for electricity supplies which would be enjoyed by consumers not yet born. We must remember that the expanding demand on the industry results from the demands of present-day consumers who are the people who press the switches and bring more and more electrical appliances into their houses. I am telling the hon. Gentleman and, through him, the House, that the present-day customer is responsible. He may have been wrongly encouraged in the past by too low prices, but the present-day consumer is responsible for the sharp increase in demand. The hon. Gentleman has almost entirely disregarded the rate at which the industry is expanding and the fact that a running rate of 0.9d. per unit of electricity is thoroughly uneconomic. He has little regard for the opinion of—