§ Order for Second Reading read.
§ 11.5 a.m.
The Minister of Power (Mr. F. J. Enroll)
I beg to move, That the Bill be now read a second time.
In asking the House to consider the need for increased borrowing powers for two major industries on one day, I know that I am introducing a very large subject, but we shall have valuable help from the two recent Reports of the Select Committee on Nationalised Industries. The Committee reported on electricity this year, and on gas in 1961. Both Reports provide us with clear and comprehensive reviews of the progress and problems of the industries, for which we are all indebted.
I think that it is in any case useful to consider both electricity and gas together, because from the users point of view they have a great deal in common. Both are second-stage fuels made from primary fuels. Both are delivered ready for use in the house or the factory. Neither needs to be handled or stored by the user: he turns a switch or a tap and the fuel, whether it be electricity or gas, is instantly there. This remarkable convenience of supply is the peculiarity of these two industries, and it is one reason why demand is increasing so fast that the industries must make increasingly large investments and will need to augment their own financial resources by further borrowing.
The Bill we are considering does three things. First, it proposes to increase the statutory borrowing limits for the Electricity Council and Boards in England and Wales, for the Scottish Electricity Boards, and for the Gas 644 Council and its Boards. Clause 1 of the Bill proposes that for each industry the borrowing powers should be raised to an initial limit likely to be reached in about three years, and also that my right hon. Friend the Secretary of State for Scotland and I should be able to raise the borrowing powers to a further limit by Order, subject to affirmative Resolution of the House of Commons. The final limits are estimated to cover each industry's borrowing requirements up to March, 1970. These arrangements should provide an opportunity for the House to review the progress of each industry at approximately three-year intervals.
In the case of the two Scottish Electricity Boards, a joint limit is proposed in respect of their present separate borrowing limits, and I shall refer to this later in the course of my speech.
Secondly, the Bill repeals Section 42 of the 1956 Finance Act which now applies to electricity and gas alone, and re-enacts similar provisions in respect of these industries. Clause 2 brings the provisions for financing the nationalised electricity and gas industries into line with those for the other nationalised industries, and in this it follows the precedents set by the Transport and Air Corporations Acts of 1962.
Thirdly, the Bill provides that if a Council or Board member leaves before his term of office has expired, the Secretary of State for Scotland or I may require the Council or Board to pay compensation, and this again follows the example of the Transport and Air Corporations Acts of 1962.
I turn for a moment or two to the electricity industry in England and Wales, and I shall deal separately with electricity in Scotland. The last occasion on which the House considered the borrowing powers of the Electricity Council and Boards was the debate on the Electricity (Borrowing Powers) Order, 1961, which raised the borrowing limit from £1,800 million to £2,300 million. My predecessor then explained that, although the borrowing needs of the industry to that date had worked out almost exactly as expected, the industry's requirements for the three years to March 1965 would be higher than was forecast when the Electricity (Borrowing Powers) Act, 1959, was passed.
645 In 1961 it was estimated that the limit of £2,300 million would be reached by about the end of 1964; in fact, it is likely to be reached in the first half of next year, because, as the House already appreciates, a further acceleration of investment has begun.
The White Paper on the present Bill shows in paragraph 7 that in the next seven years capital expenditure by the industry in England and Wales is forecast at £4,600 million. Of this, £2,230 million will come from internal resources. The House will realise that these forecasts are necessarily tentative. They are the best that we can do at present. The rate at which investment proceeds in the nationalised fuel industries is subject to annual review by the Government, and the amounts borrowed for that purpose in each year are closely controlled by my Department and the Treasury. Each year firm approval is given for the investment programme for each industry, one year ahead, against the background of the estimated capital needs in the ensuing four years.
The figures are presented to Parliament in the autumn White Paper on Public Investment. The borrowing estimates are presented annually to Parliament in the spring White Paper on Government Expenditure Below the Line. At the end of March this year the borrowing of the Electricity Council and Boards stood at £2,009 million. As I have said, the existing limit of £2,300 million is likely to be reached in the first half of next year.
The primary purpose of the Bill as it applies to electricity in England and Wales is therefore to raise this limit to £3,300 million. Provision is also made in the Bill for the limit to be further raised by order to an amount not exceeding £4,400 million, but before this can be done the House will have the opportunity of considering the programme when the order is debated.
I realise that these are very large figures and that they represent a big increase on the previous estimates of capital requirements for the industry. The reason for the increase is that as the economy has expanded and standards of living have risen so the consumption of electricity has grown faster, too. This is entirely to be welcomed as an index of better living 646 in our homes, and greater industrial prosperity—but it means a heavy increase in investment. As the House knows, generating stations take five or more years to bring into operation, and therefore the capacity on which we must depend now was planned in 1958 or earlier.
It is arguable that the industry should have spotted earlier that the demand was accelerating and should have planned for enough capacity to meet it. But it is all too easy for us to be wise about this after the event. The Chairman of the Electricity Council told the Select Committee that there ought to have been a major survey of domestic demand between 1955 and 1961, and I am certain that he is right. But even when, in the later 1950s, higher rates of increase in demand were manifest, many competent observers thought that these higher rates were a transient and not a persistent trend. After all, it would be clearly absurd to suppose that the electricity industry can go on expanding forever by doubling its sales every ten years. I should add here—and I was glad to read this—that the Select Committee was satisfied that the forecasting arrangements of the industry have now been adequately reinforced.
I now want to make a point about the National Economic Development Council. A special allowance is necessary in the Estimates this year to take account of the effects on the industry of the Government's backing for the N.E.D.C. 4 per cent, objective. The result is an estimate of peak demand increasing at a rate of 9¼ per cent, a year, compared with a figure of 6 per cent, only five years ago. In making their forecasts the Boards and the Council look at both the number of units consumed and the maximum demands to be expected. The relation between these is a measure of what is called the system load factor of the industry, which is the average load throughout the year expressed as a percentage of the highest load on the system.
At the moment this figure stands at about 48 per cent., and hon. Members will have seen that the Select Committee considered the reason why the figure for our Boards was appreciably lower than that for other countries. It pointed to 647 the high proportion of total supplies here which go to domestic users, and also noted that the amount of two- and three-shift working by industry in Britain was relatively low. The Boards are now putting a considerable effort into development of off-peak loads. The main advertising campaign is concerned with off-peak storage heaters, and they are also taking measures to encourage industry to use more electricity at off-peak times.
Within the period covered by the proposals now before the House, that is to say, up to March 1970, the Electricity Council expects the load factor to rise to 50 per cent. Within the same period the Generating Board aims to have a plant margin of 14 per cent, above the estimated maximum demand in average cold weather, mainly because some plant will inevitably be out of service when the maximum demand occurs. Last winter the industry started with a margin'of only 7 per cent., because the growth of load was outpacing the installation of new plant. We all know what happened last winter. To this shortage of plant were added the effects of record cold weather, transmission breakdowns from the combination of smog and ice, and labour troubles at certain London power stations.
I have reviewed the prospects for the coming winter with the Electricity Council and the Generating Board. They have done a very great deal since the end of last winter to prepare for bad weather, and I have good hopes that this year they will manage to get through without serious difficulty. I have standing arrangements to keep in touch with them, and indeed with the other industries, to watch progress. Good management and good luck should carry us through the winter without power cuts. But the shortage of plant capacity must be made good as soon as possible. Even with a very large investment programme this will, however, take some years, because of the continued rapid growth of demand in prospect, and because it takes five years or more to build a power station. The largest amount of capacity commissioned in any one year so far has been the 2,725 mW. brought in during 1962. The Generating Board is aiming to bring in more than double that amount
648 in 1967. This gives an indication of the great rate of increase of investment in this industry.
In addition to this vast expansion of generating capacity, the industry must also greatly increase its expenditure on transmission and distribution, to get the extra power to the consumers. As the House can see from the figures, this programme will call for heavy capital expenditure, and will make great claims on the energy and resourcefulness of the Boards and their contractors. In the period covered by the Bill, most of the new power stations will burn coal or oil. With the increase in size of generating sets to 500 mW each, the industry and the contracting firms are making a notable, and indeed daring, jump in technology, so as to win large economies in both capital and operating costs.
Now a word about nuclear power. In this period we shall also see the completion of our present nuclear power programme which will bring about 5,000 mW into commission. The nuclear stations at Berkeley and Bradwell were formally opened early this year; but already in the severe weather of last winter they made a valuable contribution to the heavily loaded electrical system. Hunterston will start supplying power for the South of Scotland Electricity Board shortly, and six other stations are now in various stages towards commissioning. One further point on nuclear power. My right hon. Friend the Prime Minister told the House on 19th November that the Report of the Committee which has been reviewing the future of the nuclear power programme was nearly complete. He undertook to inform the House when the Government had considered the Report.
I turn now, briefly, to the financial objectives for the industry. In the light of the 1961 White Paper, my predecessor agreed with the Boards in England and Wales that the industry should seek to earn over a five-year period an average gross return of about 12½ per cent, on its net assets. The Boards could not be expected to reach this figure in the first year of the five-year period, but they aimed at 12 per cent, in aggregate and they actually achieved 11.9 per cent. I agree with the Electricity Council that this represents a satisfactory beginning.
649 The aim of the Boards in recent tariff revisions has been to make the price each consumer pays reflect more closely the actual cost of supplying him, and to cover their new financial obligations. I must say that for domestic users this has in some cases meant quite substantial increases in the unit charge. This was because at the previous level it had become clear that the relevant costs of the Boards were not being properly covered by unit rates fixed when costs were lower. I admit that a good deal remains to be done to improve the tariff systems of the Boards. Amongst other matters, the Council is undertaking a major study of the economics of supplying electricity for space heating.
I have already referred to the most valuable Reports on gas and electricity from the Select Committee. On electricity, the Committee concluded that the policies now being vigorously pursued, in matters like forecasting and commercial arrangements, offered the best means for the industry to discharge its public responsibilities. These are encouraging words. I can assure the House that the Government do what they can to help the industry to reach a high level of efficiency in meeting fully and dependably the calls made by all consumers.
I should now like to touch on the position of the electricity supply industry in Scotland. Hon. Members will recall that Scottish electricity has been debated more than once during the last twelve months, and I propose therefore to confine my words today to the main issues facing the two Scottish Electricity Boards. The first point to be made is that the sale of electricity in Scotland is continuing to grow by more than 10 per cent, a year and that, concurrently with this expansion in unit sales, there has been a corresponding increase in the maximum demand the industry has had to meet. Looking to the future, and on the best estimates the Scottish Boards can make, they consider that they should plan to increase the amount of generating capacity by some 4,000 megawatts by 1970. This takes account of the N.E.D.C. objective of a rate of growth of 4 per cent, a year in the national economy.
Inevitably a programme of this size means very large outlays of capital. Altogether, the development programmes 650 of the Boards are expected to require additional investment of nearly £500 million during the period from 1963 to 1970. The Boards would hope to be able to finance about £260 million of this expenditure from their own resources, but substantial sums will also have to be borrowed. The Bill, therefore, enables the present borrowing limits of the Boards to be increased from £415 million to £580 million.
I should like to make a further point. This concerns investment in the latter part of the period to 1970, when the Scottish industry will be incurring expenditure of projects which will not be due for completion until much later. The proportion of new capacity that will be provided in the early 70's by different forms of generation cannot be settled now. So choosing that form of generation which will provide electricity in the cheapest and most reliable form, the Boards will be doing the best service to their consumers. This necessary element of flexibility is, I suggest, one of the main advantages of prescribing, as the Bill does, a single borrowing limit, which can be drawn on as necessary by both Boards, in place of the separate limits which have existed up to now. This should also further the close co-operation between the two Boards which was envisaged in the Government's statement on the Mackenzie Report.
I would now like to turn to the Gas Council and its Boards. The present borrowing limits of the gas industry are £525 million. This limit will be reached in the very near future, and the gas industry needs an increase in its borrowing powers to keep its investment programme going. In 1960, the House may remember, the Gas Council supported its request to Parliament for additional borrowing powers by: a pamphlet called "Gas Looks Ahead"; now this year its corresponding title is "Gas Goes Ahead". This expresses very concisely the change in circumstances which has taken place between then and now. At that time gas was very hard put to it to hold its existing share of the fuel market. Certainly, various development were pointing to better prospects for gas, but one could only guess at how much the public would go for gas.
651 Now, three and a half years later, earlier promise is getting close to fulfilment, and quite new developments have arisen to justify the confidence which is spreading from the industry to its customers. Valuable new processes for making gas from oil have been introduced, partly from the industry's own research efforts, and it is possible to forecast significant reductions in the cost of gas manufacture. These will give the industry the opportunity to break the sequence of rising gas prices which has dogged it since the end of the war. I should like to tell the House that the key to this quite dramatic improvement lies in new raw materials. For more than a century gas-making relied on a single specialised feed-stock: namely, coal of special gas-making quality. We are now getting substantial quantities of our gas from a variety of oil fractions, and from the non-coking coals which are used in the two Lurgi plants. Within a few months town gas will also be made from imported liquid methane, in which our gas industry has scored a world "first".
This diversification of gas-making raw materials will be a source of great strength to the industry, and indeed to our whole fuel economy. This is not to be regarded as a flight from coal, but there must be a progressive decline in the use of coal for gas-making because it is not economic to maintain the older carbonising plants. On the other hand, the industry will be maintaining, as long as it is economic to do so, the more modern carbonising plants which produce the qualities of coke which are suitable for the open fire, and therefore of most value for clean air progress. I shall shortly be publishing a review of future supplies of solid smokeless fuels, so I will say no more about it now. Similarly I have only just received the Report of the Joint Study Group on the Lurgi process, and I must postpone any comment upon it until I have considered the views of the Gas Council and of the National Coal Board.
Before leaving the subject of new materials, I must mention the search for natural gas under the North Sea. The Government's proposals for regulating the exploration and exploitation of the resources that may lie beneath the sea bed are contained in the Continental 652 Shelf Bill published last week. There is also the major find of natural gas in Holland. At the moment I can only say that the possibilities now apparent underline the importance of maintaining in this country a progressive and efficient gas industry to take advantage of any opportunities which may arise.
The House will be glad to learn that sales of gas are growing. An annual increase of about 3 per cent, seems to be established, and the Gas Council has estimated capital requirements up to 1970 on the basis that the annual increase in sales may be as much as 5 per cent. It is difficult to be precise when the industry is in a stage of intensive development, but I accept this as a fair basis for the estimates of investment. Fortunately, the industry's investment programme has considerable flexibility. It takes only between one and three years to build a modern gas works and plans can be modified, in either direction, if the growth of demand for gas speeds up or slows down. Happily, the industry has come a long way towards self-financing; the estimated borrowings are therefore only about one-third of estimated capital requirements. While there may be variations in those estimates, I believe there is a reasonable prospect that the additional £125 million which is now proposed will carry the industry on until 1970. I strongly recommend this investment to the House.
I should like to say a word or two about what my Department does by way of co-ordination of the fuel and power industries and of gas and electricity in particular. I would hope to show that "co-ordination" has real meaning in the context of these industries, though unfortunately the word "co-ordination" has become a kind of "U" word which people tend to apply to whatever action in fuel matters they happen to be advocating at that particular time. I am sure that competition between gas and electricity is vital if the consumer is to have satisfaction at the lowest possible cost to himself and the community. But it must be fair competition, and have regard to the national interest. What I have to do as Minister of Power is to see that the National interest is properly reflected in the factors which influence consumers in their choice, and in the development of the industries themselves.
653 The borrowing powers of the industries will be exercised within investment programmes which I approve from time to time for each industry. In approving the programmes my object is to ensure that we shall, in the aggregate, have the supplies of energy we need to sustain the rate of economic expansion we are aiming at, and also to leave room for a reasonable degree of competition between the industries. The investment and rate of expansion for each industry must also be related to its prospects of providing energy on an economical and competitive basis. This means that from time to time I have to review the prospects of the various fuel industries and their relative positions in the total energy held. Coordination in this sense is not only desirable: it is for all practical purposes unavoidable and inevitable.
As a secondary fuel for industry and the home, electricity will continue to dominate both by reason of its size and growth. Its investment must be sufficient for it to compete effectively wherever it has economic advantages. But gas has some actual and potential advantages which we should not overlook. We have just seen how well the industry is now placed for expansion, and for the exploitation of the new processes and possibilities. We have accepted that the industry should turn more and more to oil-based gases, and a large increase in gas investment has been approved. Technical changes are coming in the other fuel industries too. Thus in electricity, bigger generating plant enables capital costs to be reduced, and nuclear power has great potentialities for lower costs in the future.
In trying to keep a right balance between the various fuel industries I have to take into account many factors—including the relative real costs to the community of various types of fuel, the additional security of home based fuels, balance of payments' considerations, and the desirability of providing a market for the growing production of our home oil-refining industry. But the speed of technical change requires us to beware of committing too much too soon to particular courses, and reminds us that we must keep some room for manoeuvre. This I believe is practical co-ordination in a growing and chang- 654 ing economy. I therefore commend the Bill to the House.
§ 11.35 a.m.
§ Mr. Thomas Fraser (Hamilton)
I should like to start by apologising to the Secretary of State for Scotland. On Wednesday morning I went to the Vote Office and asked for all the papers in connection with the Bill which we are discussing. Among others, I got a report of the Electricity Council entitled, "Finance for More Power". On Wednesday afternoon the Secretary of State referred to a brochure and outlined the power stations to be commissioned in Scotland. I asked whether he was aware that the brochure, which I had collected, referred only to England and Wales. Yesterday I went to the Vote Office and then I got the Scottish brochure entitled "Plans for the Future 1963–1970". I assume that it was in the Vote Office when the Secretary of State made his statement on Wednesday and in the circumstances I make the assumption that I was wholly wrong in what I said and I apologise to the right hon. Gentleman. I hope that the hon. Lady the Under-Secretary of State will communicate with the right hon. Gentleman accordingly.
May I welcome the Minister of Power to our debates on these matters and express the hope that in giving the facts about the great success of the nationalised industries he will not find himself too embarrassed. I am bound to say that in his speech, which was competent and informative, the right hon. Gentleman did not strain himself overmuch in paying tribute to the services rendered to the nation by those who manage the great industries which are under consideration today.
I should have thought that by now all of us would recognise that the nationalised industries, certainly including the two under review, are among the best managed industries in this country. I do not think that they are bettered by any industry in the application of science and technology or in their labour relations, provisions for redundancy and all the things which are the hallmark of good industrial management in modern times. Undoubtedly they have far outstripped the best possible service which could have been given to the nation by a multitude of private enterprise and 655 local authority electricity and gas undertakings. That, I think, would be conceded by all hon. Members. If that be so, we must all agree that the nationalisation Acts have been fully justified.
The Select Committee to which the right hon. Gentleman rightly referred has made exhaustive studies of both industries in recent years. The efficiency of the industries has been demonstrated and a vast amount of information about their work has been made available in the Reports of Select Committees. We should express our deep gratitude to our colleagues who serve on the Committees for the painstaking work which they do. I know that they do this because, for a very brief period, I was a member of a Select Committee. The period was all too brief.
I have nothing but admiration for our colleagues who, week after week, study reams of paper and apply themselves with such industry to their task and produce such excellent Reports. It seems a great pity that the House of Commons does not automatically set aside time in which to debate Reports from Committees within a few weeks of their publication. I should like the right hon. Gentleman to have a word with his right hon. Friend the Leader of the House to see whether we can arrange that in future the House will discuss the Report. I am bound to say that if we were to do so. the Conservative Central Office might find it a little more difficult to put such infantile attacks on nationalisation, based on a contradiction of the facts, into the mouths of their propagandists throughout the country. I hope that hon. Members will realise that every time they make an irresponsible attack upon nationalisation they make it just a little more difficult for those industries to recruit the quality of staff which all of us want them to have.
The Minister described the quite colossal borrowing sums for which provision is made in the Bill, sums required because of the energy requirements of the country in the next few years as far as we can look ahead, and in particular to provide the energy required if we are to achieve the N.E.D.C. target of a 4 per cent, increase annually.
No one will deny the need for the capital investment projected, and I 656 should think it unlikely that anyone will argue strongly for any addition to or subtraction from the sums which are set out in the Bill. I hope that no one will suggest that the industry should finance a greater proportion of the developments from internal resources.
The right hon. Gentleman has called attention to the financial objectives which have been agreed between the Minister and the industry. These were set out. in paragraph 142 of the Select Committee's Report on Electricity for the periods 1962–63 and 1966–67. The aim was to get an average gross return of 12£per cent, on the average net assets. This would increase the industry's self-financing ratio, according to the Report, from 50 per cent. at the beginning of the period to 60 per cent, at the end of it. This would have worked out at 56 percent. self-financing over the period. This considerably enlarged and revised programme will change the position. The 12½ percent, will presumably remain, but the degree or ratio of self-financing will obviously come down if the capital investment programme has to rise considerably as it has, and as all of us want it to. I understand that this will probably bring the average for the quinquennium in which we now are down to 46 per cent, and if one looks at the figures for 1970 which are set out in the White Taper one gets the impression that over that period the figure will be about 50 per cent. I hope the House will accept that.
It would be very wrong if we were now to call on the electricity supply industry to increase its self-financing beyond the present point and so put a still further burden on the consumers. The right hon. Gentleman was right to call attention to the considerably increased charges that have been imposed on a number of domestic consumers in some parts of the country, and I do not think any of us would want to increase them at present. In any case, the General Election is not far away and I should not think we are likely to get an announcement in this direction in the immediate future.
The revised programme was worked out against the background of our experience of the past two winters, and of course against the background of the Select Committee's Report. The right 657 hon. Gentleman offered a little criticism of the electricity supply industry for not having forecast the demand more accurately. It is not my job to defend those who are responsible for the electricity supply industry. It is worth bearing in mind, however, that the supply available to us last winter—the most severe winter we have had for a hundred years—was planned way back in 1956 and I understand that for the four years before 1956 the domestic consumer was increasing his take of electricity at about 5½ per cent, a year.
I understand that in the three years before last winter, the increase averaged about 17 per cent, per year, and in Scotland, as a matter of fact, I think the Report tells us that the figure was 25 per cent, in one year. This is not a reflection of a higher standard of living and greater affluence in Scotland because this is a period in which we had the highest unemployment that we have had in twenty years. This increase is due to the changing habits of people who are taking energy and power in new forms. They are going over more rapidly to taking it in the form of electricity. It may be that the electricity industry should have recognised this upward curve in the demand for electricity by the domestic consumer in the late 1950s, but one would have thought that the Ministry of Power and the Government also had some responsibility for recognising what was happening.
The right hon. Gentleman has told us that the electricity industry is concentrating now on off-peak sales, making available night-store heaters and that sort of thing. He will remember that long after the electricity boards were doing their best to increase off-peak sales and to get people to buy night-store heaters the Government still retained Purchase Tax on night-store heaters. I should not be surprised if the right hon. Gentleman was not at the Treasury at that time. Would it not have helped if Purchase Tax had been removed from night-store heaters?
I do not want to claim that the electricity industry has not made any mistakes. I am sure it did. I am sure it miscalculated. I am sure it still sold electricity when it was not certain that it would have electricity to sell if we had a very cold spell. I notice that the Chairmen of the Electricity Council and 658 the Central Electricity Generating Board admitted this frankly before the Select Committee. They admitted that they had made a mistake and they had not installed facilities quickly enough. It is a pity that the right hon. Gentleman did not admit as frankly as the chairmen of these electricity authorities that the Government made a mistake.
After all, in 1958 the Government proposed a severe cut in capital investment by the electricity supply industry. As a matter of fact, during that period many hon. Members on the opposite side of the House were demanding still more substantial cuts in investment by the nationalised industries. As it was, the electricity supply industry had to bear a cut of 10 per cent, in capital investment on generating plant. It is true that it protected the consumers by switching a bit of the capital investment on nuclear stations to conventional stations where a quicker return would be obtained for the investment, and so it would be claimed that the generating capacity was not injured by the cut that was made in 1958.
But what the Select Committee discovered was that the other cut of 13 per cent, that was made in the electricity supply industry's capital investment on transmission and distribution systems seriously affected the position last winter. As a matter of fact, most of the consumers who were left without electricity for short periods last year were without electricity not because of the failure of the generating system but because of the failure of the transmission and distribution system. That was wholly the responsibility of Her Majesty's Government. It is a bit hard for the right hon. Gentleman to tell us once again of the confessions of the electricity supply industry about their miscalculations, and not to mention one word of the responsibility of Her Majesty's Government for what the consumers had to put up with in the severe winter that we had a year ago.
The Select Committee, in urging that we should seek to get more security in electricity supply, showed us in paragraph 640 that other countries, particularly the United States of America, Canada and France, had a greater margin of spare capacity than we had and the Select Committee recommended 659 that our aim should be to achieve a security of supply at least equal to that of other advanced countries.
I doubt very much whether the previous Minister, who is now Minister of Pensions and National Insurance, would have accepted that recommendation of the Select Committee. I recall very well an exchange across the Floor of the House at about the end of last year's severe winter when the former Minister seemed to argue that it would be madness and hopelessly uneconomic for us to try to carry that kind of spare capacity to tide us over difficult periods. That, however, was before the Select Committee reported and perhaps that would have convinced him that he was mistaken in what he said at that time.
In any event, I hope very much that the Minister accepts that recommendation of the Select Committee and that he or his hon. Friend the Parliamentary Secretary will say so today. I hope that if the Minister has any reason to believe that that measure of security will not be obtained by the investment programmes which are now before us and projected, he will not hesitate to authorise additional investment programmes to ensure that our consumers are as protected as are the consumers of electricity in the other countries to which I have just referred. The aim must surely be to ensure an adequate supply when and where required and, I hope the House will agree, at reasonable prices.
The Select Committee dealt with the problem of rural electrification and called attention to its being relatively more costly than urban electrification. The Select Committee set out its views in paragraph 478, in which it thought that the electricity authorities should consider differential tariffs—that is to say, that the rural consumer should pay higher tariffs than the urban consumer. The Minister should express himself on this matter. It is one not simply for the Boards, but for politicians, too. To introduce this kind of differential tariff would be a retrograde step.
I rather regret that we have so many differential tariff systems in operation. We have the twelve Area Boards with their different systems, structures and charges. Then, we have the two Scot- 660 tish Boards, making fourteen in all, with different structures and charges and different charges for different types of consumer. There are many differentials and it would not be a good thing to increase them. We should now be striving to bring about a little more uniformity in our charges for electricity throughout the country.
In any event, we should all recognise at this time that anything which could give a further stimulus to drift away from the countryside to the towns should be avoided. A differential tariff against the rural consumer would have the effect of giving that little bit more encouragement for our country people to move townwards. I hope, therefore, that the Minister will tell us what he thinks about this before we pass the Bill today.
I turn to the proposed merging of the borrowing powers of the two Scottish Boards. The Minister said a little about this, but he did not convince me that there was need for it. It seemed from what he said that there was just a possibility that the Mackenzie Committee's recommendation of a merger of the two Boards having been rejected by the Secretary of State under great public pressure in Scotland, he has now accepted, by the merging of the borrowing powers of the two Boards, exactly the kind of thing to which those who opposed the merger of the two bodies objected.
There are four hydro-schemes outstanding. The North of Scotland Board, apparently, is anxious to get ahead with four hydro-electric schemes. The people in the north of Scotland are very anxious that these schemes should be proceeded with. As I listened to the Minister today, it seemed that what he was saying was that by merging the borrowing powers of the two Boards, the South of Scotland Board will be able to bring such influence to bear upon the Secretary of State that he will not permit the North of Scotland Board to go ahead with its four hydro schemes. This would be a great mistake and it is something to which we will return.
I should like to be told a little more today about why that is being done. What is the real object of it if it is not to allow the South of Scotland Board to meddle in the affairs of the North of Scotland Board? If it is a matter of judging the 661 cheapest way to produce electricity, it depends on the year one takes and the rate of interest. By far the cheapest electricity in Scotland is that produced by hydro schemes. The cheapest of the lot is a hydro scheme owned by the South of Scotland Board in the south of Scotland. It is, I believe, the cheapest in Britain. If, however, the Hydro Board is to borrow money at a 6 per cent, rate of interest, a hydro scheme of today will probably produce electricity tomorrow that will cost a little more to produce than the electricity coming from a conventional station.
That, however, is not always the test. If it had been, we would not have had our present nuclear programme. The South of Scotland Board would certainly never have had Hunterston. The cost of electricity from Hunterston will clearly be at least twice the cost of producing electricity from our modern thermal stations in Scotland or from our hydro stations. I feel quite alarmed about the merging of the borrowing powers of the two Scottish Boards. I know that members of the North of Scotland Hydro Board are also worried about it. People in the north of Scotland wonder whether the Secretary of State is now giving effect to the Mackenzie recommendations by the back door. In any event, all this must be justified.
The gas industry has an excellent record of achievement. Sales are increasing faster than ever before. Domestic sales are rising all the time. One is made aware on all sides of the great popularity of, for example, the modern room heaters which the Gas Council and the Boards have made available. Great strides have been made also in producing safer gas. We might in future, when they complete their detoxification of town's gas, have fewer accidents, many of which, some of us feel, were not accidents at all but none the less have often been recorded as accidents and somehow or other are blamed upon the gas authorities.
To have an energy policy, as we all agree that we must, involves us in having a fuel policy. Planning our energy supply should involve us in planning our fuel supply. The primary fuels for gas are coal and oil and, if one likes to add it, natural gas. The primary 662 fuels for electricity are coal, oil and nuclear; and then, of course, we have some hydro-electricity. We might postpone our discussion of the exploration for oil and natural gas in the Continental Shelf in view of the Bill to which the Minister has called our attention.
The electricity authorities have been increasing their take of coal quite considerably, I understand that the increase this year is. of about 6 million tons over the previous year, amounting probably to 64 million tons or more, and I understand that the prospect is that they will take a further 3 million tons next year. I believe that according to the reports, by 1970 the electricity authorities will be using 100 million tons of coal equivalent, of which, it is anticipated, 75 million tons will be in coal, the other 25 million tons being in oil and nuclear energy.
I am delighted to see the electricity authorities relying mainly on indigenous fuel. We know about Fawley. The Minister was asked yesterday about Milford Haven. I wonder whether we could be told a little more about this, although I am not very hopeful that we shall be. As I understand it, this is a 2,400 mW station which will use 5 million tons of coal equivalent annually. If it is coal, it will be a good thing and will give new hope to the coal mining industry, although I rather think that the fact that it has to be built at Milford Haven means that it will be oil fuelled.
What I am wondering is whether the right hon. Gentleman sees in this and in other developments any great increase in the proportion of the electricity market going over to oil in the 1970s. It will not take place, I understand, before 1970, but it may happen in the 1970s. I am wondering whether, as a compensating factor, the right hon. Gentleman could tell us something about the proposals, which we have often made to his predecessor and to the electricity authorities, that the time has come to plan another coal-fired power station in Durham. If we do that we may be able to keep more miners in Durham doing useful work. Many of us think that it would be much better, and certainly in the national interest, to set about exporting power from Durham to other parts of the country, rather than to con- 663 tinue to increase the export of people from Durham to other parts of the country. There is no reason to believe that this power would be uneconomic. Clearly it would be economic and cheaper, and it would not be expensive. I should like the right hon. Gentleman to tell us something about that if he can.
In Scotland, we were delighted some months ago to be informed that the proposed 2,400 mW power station would be built in Fife, that it would take 5 million tons of coal and secure the jobs of about 10,000 miners in that part of the country. The Scottish market for coal at the present time is about 15 million tons. In 1956, the Scottish miners and the Scottish Division of the Coal Board were told that their target for the future was 30 million tons. It is bad enough to have only half of what we were told only seven years ago we would be producing, but it would be serious indeed if this market for coal were to be substantially reduced. It is in these circumstances that we are a little alarmed to hear that talks are already being entered into with the oil companies, with a view to the construction of an oil-fired power station of 2,400 mW in the west of Scotland.
If that takes place, is it not very likely to affect the total market for Scottish coal, because older power stations that are coal-fired will, no doubt, be going out when this kind of power station comes in? This is a matter for which the right hon. Gentleman, as well as the Secretary of State, has some responsibility for the welfare of the coal industry north of the Border.
As the right hon. Gentleman said, the Gas Boards would seem now to be going over heavily to oil. I thought that it was at this point of his speech that he sounded a little more enthusiastic, and it was at this point when he got "Hear, hears" from hon. Members who sit behind him.
It should be noted—this is important—that the right hon. Gentleman talked about the success of the gas industry being achieved where it is based mainly on coal. We have no methane coming in yet from the Sahara and very little gas as yet from the light oil distillates. The take of coal is still running at about 22 million tons a year, and we under- 664 stand that it is proposed to bring this down in the next few years to 16 million tons.
I ask the Minister to take into account, and to ponder over, the effect of this rundown on the coalfields of Durham, Scotland and Lancashire.
§ Mr. Fraser
I think that the three I have mentioned are the divisions that will suffer most by the rundown proposed from 22 million tons to 16 million tons a year.
The Special Report from the Select Committee on Nationalised Industries of 5th June, 1962, offered the observations of the Gas Council and of the Minister on its Report of 1961. I see in paragraph 6 some words which I have underlined:Improvements in coal carbonisation at gas works and gas treatment are nearly all of British origin. Research in this field has been particularly fruitful …That was eighteen months ago. This sounded very promising indeed. I turn to the brochure that we received in connection with this Bill from the Gas Council and see these words on page 5:The future of coal carbonisation, a process which produces solid fuel as well as gas, must depend on the solid fuel market. It will not pay to make gas (and sell it at competitive prices) by this method unless the demand for solid fuel is sufficient to command an economic price.I should like to know how the Government construe these words. There is great concern, as the right hon. Gentleman knows full well from the Questions which are put each week in the House, about the availability of solid smokeless fuel. We are always being given reassuring Answers. We continue also to receive correspondence from our constituents who contradict what the Ministers tell us at the Dispatch Box. In 1961 we had some encouraging news about coal carbonisation. In the recent brochure we have had some rather discouraging words, but at least some little hope that coal carbonisation will be continued so long as there is a market for solid smokeless fuel. What does the Minister make of it all? I have tried to make something of it, but I have found it quite beyond me.
I hold the view strongly, as I am sure my hon. Friends do, that research into 665 coal carbonisation must continue. We must not allow the industry to become over-dependent—the way things are going, far too dependent—on an imported fuel over which we have no control. We in this country decide at the end of the day the cost of producing coal. We do not decide whether we shall be able to get supplies of a liquid fuel from another part of the world. British Governments might do something quite as foolish as Suez. It is not only the British Government. Foolish behaviour on the part of other Governments can lead to our oil supplies being cutoff. I do not think that we have yet had the last revolution in the Middle East. It would be a great pity if we found ourselves one day without the energy we need because we had placed too much reliance on an imported fuel. Therefore, let research into coal carbonisation continue and let research into coal gasification, even for non-coking coals, continue.
The Select Committee reporting in 1961 told us about the Lurgi process. The Committee reported the setting up of the Joint Study Group. Over the years we have put many questions about the Joint Study Group. The Minister told us today that the Report is in his hands. It is a great pity that we were not given the Report before today's debate. I am not very hopeful that the Report will show the Lurgi process to be something we can count on in the future. In any case, this process has been shrouded in mystery for far too long. I hope that the Minister will waste no time in making the Report available to us. We do not just want his comments on it. We do not want to know merely whether he accepts or rejects it. We want to know what is in it. I hope that he will make it available to the House. I do not know why he is not making it available now. I know that he is asking for comments from the Gas Council and the Coal Board, but that is no reason why we should not see the Report.
The right hon. Gentleman said that in the liquid methane project the Gas Council and the Gas Boards had scored a world "first". Will it not also be a world "last"? Is this likely to be continued? I thought it was already recognised by the Gas Council that its liquid methane project had been overtaken by the production of gas from the light oil 666 distillates. Of course it has. Town gas will be produced much more cheaply from light oil distillates than from methane collected in the Sahara, produced in liquid form, brought here in special tankers, and re-formed in this country and fed into the town supply system.
There have always been doubts about the liquid methane project. I thought that it was a great mistake. I thought that it was very wrong when the previous Minister, six or eight months after the Joint Study Group on Lurgi had got down to work, unilaterally sold the pass to C.O.N.C.H.E., this project for the bringing in of liquefied methane from the Sahara. How many hon. Members on the other side of the House think that we can be assured that natural gas from the Sahara, coming along a pipeline to the Mediterranean and then across the Mediterranean, will continue to come in 1970, 1980 and 1990? It would be a very foolish man who would express any certainty about this business. Even the light oil distillates are available and cheap at present, but for how long? None of us knows. In the circumstances we should play this one a little carefully. I am not saying that we should not use light oil distillates, but let us play them a little carefully. If we could get our enricher from some of these sources and continue to use some coal, we might make our gas supplies more secure.
I wanted to say a few words on underground gas storage, but there is no time now. I will content myself by saying that I greatly regretted the withdrawal of the Bill last year. I regret even more deeply the failure of the Government to bring forward another Bill. This is one of the ways in which the Gas Council can greatly increase its efficiency. What a tragedy it is that the Private Bill was withdrawn last year.
The most important question of all is how in the future we are to meet our energy demand and what primary fuels we are to use. The Minister should be concerned to give guidance on fuels. He should be concerned to give guidance on research into fuel use. The national interest is beyond the scope of any one Board. We in the House should be concerned to ensure that the nation uses all its resources, and at the end of the day we shall achieve the N.E.D.C. target or an 667 even higher target of national production and an increase in the standard of living of the people only if we use our resources—all our resources, material and human. We must watch our balance of payments position all the time. In this connection, I should have thought that the Minister would see as clearly as anyone the need for this country to give attention to what primary fuels we feed into the energy industry.
All this is clearly too big a subject for today. I hope that the Minister will use what influence he has to ensure that we have another opportunity to discuss the larger subject. For the present, as he will realise, we on this side do not propose to oppose the Second Reading of the Bill.
§ 12.17 p.m.
§ Sir Richard Nugent (Guildford)
I thank the hon. Member for Hamilton (Mr. T. Fraser) for his kind words of praise for the work of the Select Committee. I am sure that all its members will be glad to read his remarks. Those of us who are present to hear them will remember with pleasure his own presence as a member of the Select Committee and his work on it. We only regret that other commitments took him away. It is a fact that this Committee has some of the most influential Members in the House, including in the past my hon. Friend the Parliamentary Secretary, the hon. Member for Houghton-le-Spring (Mr. Blyton), who is to wind up, and my hon. and gallant Friend the Member for South Fylde (Colonel Lancaster).
Whilst I thank my right hon. Friend the Minister for his words of thanks to the Committee, I must address a word of criticism to him as the Member of the Government responsible and to my right hon. and learned Friend the Leader of the House for arranging for the debate on this Bill, which asks the House to approve huge sums—an extra £2,500 million for the fuel industry—to be taken on a Friday. This is the first time we have had a chance to debate these two Reports, which were made by the Select Committee over about 2½ years. I am certain that these Reports were of considerable help to my right hon. Friend and his colleagues in drafting 668 the Bill and in forming the policy. It is a poor encouragement to hon. Members who devote much time, energy and enthusiasm to this fairly arduous task if their reports are so lightly treated when they come to the House.
§ Sir R, Nugent
I thank the hon. Member for Hamilton for his support on this.
To prevent my remarks consuming too much time, I will not speak about either the gas industry, although its problems are interesting, or the Report which we made on it, except to say that I agree that there are anxieties and a greater dependence on imports. One must remember that the gas industry had reached the point when it had to find substantially cheaper sources of raw materials. The industry has managed to increase its sales in the last two years, but it must be realised that its future depends on it finding cheaper sources of raw materials. I will leave further comment on our Report on the gas industry to my hon. and gallant Friend the Member for South Fylde (Col. Lancaster).
I wish to concentrate my remarks on the electricity industry and comment on our Report on that industry in England and Wales. The fact that my right hon. Friend is asking the House for an increase in the industry's borrowing powers amounting to an extra £2,300 million over the next seven years, provides justification for a close scrutiny of the industry's affairs. However, we all have well to the fore of our minds the power cuts of the last two winters. These have raised queries both in Parliament and in the country about the health of the industry. Our Report may have been of assistance to hon. Members and the public generally in understanding what has happened in the past and how these cuts could have taken place in an industry which is massively successful on the one hand yet, on the other, has certain weaknesses.
Since some newspaper comments were rather less than fair to the industry at the time of the publication of our Report—in that they tended to deal with criticisms but left out the background—I propose today to fill in that background before dealing with the 669 criticisms. The industry has been massively successful. During the 40 years from 1920 to 1960, it has increased in size thirty-fold. This is a fantastic rate of growth, and it is likely to double in size again by 1970. As far as we can see, it will double yet again by 1980; in other words, to four times its present size. Already the industry is selling about £750 million worth of current annually. Consider this being four times its present size by the 1980s, and one has an indication of its massive size and the huge part it is successfully playing in the life of the nation.
It is on the engineering side that its successes have been outstanding. Its record of success in generation, which was referred to by my right hon. Friend and the hon. Member for Hamilton, has been entirely commendable under the able leadership of Sir Christopher Hinton. Conventional generation has made spectacular improvements in costs in the last 15 years—since 1948, when the industry was nationalised. The new sets, plant and generating equipment have halved the cost of generation in the last 15 years. Considering the cost increases that have taken place during this time this is a remarkable achievement.
The fuel policy of the industry was mentioned by the hon. Member for Hamilton. As is known, the industry was primarily dependent on coal and was able to burn the lowest quality. This proved a great help to the Coal Board. However, its requirements are so enormous that it was necessary to diversify its fuel sources and look to oil and nuclear generation as well.
The consumption of coal during the last year of our review of the industry was about 60 million tons. We were given an estimate projecting its total coal equivalent consumption by 1975 and we were told that if only coal were consumed it would amount to 135 million tons. Since this consumption will probably double by the 1980s, it is clear that by then the electricity industry would be consuming more than the total coal supply of the country. Thus a third fuel was necessary. I have no doubt that this was the justification for the bold experiment of nuclear generation.
We looked into the question of nuclear generation as a matter of great public interest. We found that since 1955 there 670 had been optimism, great pessimism, a little more optimism and finally, today, an objective understanding of what nuclear energy can and cannot do. As my right hon. Friend commented, there are now two nuclear reactors satisfactorily sending our supplies into the main. A number more are in the course of construction.
We are, of course, talking about the magnox reactor, the first type, and the point has been reached when a decision must be taken on what is called the second generation of reactor. This will no doubt be a more sophisticated type, able to produce electricity more cheaply. It is urgent that this decision should be taken. We on the Select Committee were rather anxious about the relationship between the Atomic Energy Authority and the Generating Board about this decision. We were glad to hear that the Government had set up a co-ordinating committee to make the decision, a decision which is of great significance because hundreds of millions of pounds will be involved and we want to be certain that the right decision is taken. The evidence of friction between the Atomic Energy Authority and the Generating Board caused us to have some anxiety as to whether or not the right decision would be made.
The urgency is that although the magnox reactor is operating well, the cost of current from it is a great deal higher than that from conventional generation. Although a considerable reduction has been made, it still costs more than £100 per kW of generation compared with conventional generation which, with the new 500 mW sets, costs £33 per kW. It will not be until the next generation of nuclear generator is in operation that there will be good prospects of the price of generating electricity being reduced to the same level as conventional generation.
The general picture of the development of nuclear generation has improved a great deal with the massive expansion of the capital programme, and I certainly welcome that. I was concerned at the over-capacity of the three consortia of manufacturers of these nuclear generating plants. They had greatly expanded their capacity in the early days, when the Government expected the programme to be very much bigger, and have undoubtedly had 671 a very rough time over the last seven or eight years with the smaller programme then running. However, it seems that there is a good prospect that with the expanded programme of construction of nuclear generators over the next seven years, this over-capacity will be taken up and this unpleasant embarrassment relieved.
The broad picture of the engineering side of the electricity industry is one of massive competence. The management is strong and energetic, the research work is good—and that covers the transmission work which, again, is a huge development, as well as the generating side. The Committee felt that on the record of present performance there was every reason to expect that the industry would be able to match up to the huge prospect ahead.
That is the background to the criticisms we had to make in investigating the health of this great industry. Neither political attack was right; neither was pursued much. One side accused the industry of being incompetent—it clearly is not—and the other side accused the Government of handicapping the industry by capital restrictions. If I may say so, the hon. Member for Hamilton quite correctly and accurately referred to what was disclosed by our Report as to the effect of Government restrictions on capital in earlier days.
The capital cuts of 1958 did not, as the hon. Member has rightly said, affect the generating capacity, because the Board switched its programme from nuclear to conventional generation. There was, however, some effect due to the economy on transmission of those years. That effect was seen during last January, when the work-to-rule action in the London area had reduced generating capacity there and it was not possible to relieve the London shortage to the extent it could have been relieved, because transmission from the Midlands was not as big as it might have been. We did not quantify this effect, but I do not think that it was very great.
The hon. Gentleman spoke of the Ministry's responsibility. The Ministry has, of course, some responsibility to see that the programme is big enough, but I feel sure that the industry—a 672 great, national, independent industry—must accept responsibility for setting its programme at the right size. I do not doubt that in the future, in the light of our Report, the Ministry will ask questions, not only as to whether the programme is too big but whether it is too small, so our Report may have been helpful in that respect.
Let me say a word about what went wrong. The industry's weakness was in its commercial policy—in the area boards. It was due basically to the fact that the area boards are the distributors, the retailers, of the industry. They used what is called the simple promotional tariff; that is to say, as more electricity is used it becomes cheaper per unit to the consumer. This type of tariff has been used traditionally, and quite rightly, by the industry, because experience had shown that with the diversification of the use of electrical appliances in the home, the more electricity consumed the better the load factor. This had held good over past generations and this, therefore, was the tariff structure generally used.
What happened was that during the decade 1950–60, with the growing purchasing power of the affluent society of which we speak, the consumer had, as is probably the habit with us all, turned to higher room-heating temperatures, and there are now millions more electric fires. That has changed the pattern of electricity consumption in the home so that, instead of greater consumption of electricity improving the load factor, the diversification of use had the reverse effect. These electric fires all tend to be turned on at the same time—at the peak hours in the morning and evening. This worsened the load factor and steepened the peak.
That was not found out, as my right hon. Friend said, because the industry had not carried out any major survey of consumer tastes and habits between 1955 and 1961. The result was that the forecasting that takes place annually for five years ahead—it has to be a minimum period of five years, because that is the time needed to plan, build and commission a new generating station—was distorted, because the information the Area Boards had was not adequate to throw up a picture of what was really happening. The forecasting is done by a combination of the Area Boards forecasts, 673 the Generating Board's forecasts and the Electricity Council's forecasts, and all three are brought together.
The result has been that since as far back as 1959–60 demand has been running at about 10 per cent, above the forecast figure. I agree with my right hon. Friend that forecasting is obviously a very difficult science, and it would not be fair to give the industry the stick too much for this. Nevertheless, this was the cause of the trouble. Because the promotional tariff was still in existence, current consumption was tending to be pushed up at peak periods and there was no attractive differential for night consumption of electricity—such as might have been used in electrical storage heaters—which would have spread the load, and so reduced the peak that was presenting an impossible problem for the Generating Board.
The story of the storage heater is a sad one, and we have recorded it in full in our Report. The Government certainly deserve the stick for that, in that they insisted on keeping Purchase Tax on the storage heater, but I am glad to see that the light has now dawned. The Purchase Tax was removed last summer, and I hope that our Report may have had some influence there.
The result is that the 14 per cent, margin of safety on which the industry works was down to 7 per cent, last winter, and is about 5 per cent, this winter. That means that for the next two or three winters we, as a community, will be living with an uncomfortably small margin of security of supply. It will need a certain amount of luck, but let me record that last winter was very bad luck; it was the coldest and longest winter for 230 years. So, on average, my right hon. Friend has a better prospect this winter of getting through. Even so, it will be several years before we have a safe margin. We studied this 14 per cent, margin and thought that it should be kept, and that the right thing to do was to improve the forecasting. At the same time, the greater the margin, the greater the capital outlay and, therefore, the higher the charges that the consumer must pay. We thought on balance that 14 per cent, was right.
I should like to record to the credit of the industry that when we were taking evidence in 1962–63 the industry, under 674 the brilliant leadership of Sir Ronald Edwards, had itself correctly diagnosed the weakness in commercial policy and was taking vigorous action to set it right. This, I am sure, is a big reassurance to the House, as indeed it was to the Select Committee. In the interim, the industry has overhauled the tariff so that it has been reconstructed throughout the Area Boards. It has also overhauled the bulk tariffs and the forecasting, and it has set in motion a massive consumer survey which will run continuously.
The storage heater story has now reached a satisfactory conclusion. The heaters are being made and bought in very large quantities, and they will make a valuable contribution. We were given an estimate of 1,500 mW. to 2,000 mW. relief from peak load to night load to be expected within five years. This is about the amount we were out last winter. If that could be done, it would be a big help in improving the margin of safety.
The fact is, therefore, that commercial policy has now been modernised. This is well set out in the first chapter of the Electricity Council's last Report, which the Council has now reprinted in a separate pamphlet called "Finance for More Power". The Council has done all the things we recommended it should do and it certainly seems to us that the prospect should come out right.
There are one or two secondary points which I should like to mention. The industry has still some way to go on recruiting and training for management. The industry has this most formidable growth prospect, which must be expected within the next 15 to 20 years to be four times what it is today. There is a good career scheme in the industry. The need is to apply it vigorously at all levels, but there are still some dusty corners in the area boards and we recommended the need to adopt the scheme and to pursue it. The industry desperately needs a greater supply of really able men to carry its huge responsibilities.
Another point of considerable national importance concerned the relationship between the Generating Board and the manufacturers. The Generating Board is a monopoly buyer of much of the big electrical gear, the switchgears, 675 generators and transformers. We took evidence from the manufacturers as well as the Board and we found that both sides complained that they were not getting a fair deal. We recognised that there are difficulties on both sides, but both in the interests of the Board in securing full value for its big expenditure and of the manufacturers, who include some of the most important exporters in the country, we thought it essential that these prices should be correctly fixed. We recommended that my right hon. Friend should set up an independent arbitrator who would have the power to send for the necessary papers from both sides and would then fix prices at a level which would be fair to the Generating Board on the one side and the manufacturers on the other, and to give sufficient margin for development and research costs, which are now very heavy.
We looked carefully at the financial objectives to which the hon. Member for Hamilton referred. This was a new development by the Government. We considered whether the Minister had exceeded his powers in setting these financial objectives, but we concluded that he had not. As he was the lender of these large sums of money we considered that he was entitled to say what should be the gross return. We therefore thought that he was within his statutory powers and that on balance the setting of these objectives was a valuable intervention and would give useful guidance to the various nationalised industries and at the end of the day would probably give them rather more freedom than less and be generally an advantage.
I agree with the hon. Member for Hamilton that 12½ per cent, which is approximately the gross interest that the electricity industry has undertaken to make is enough. Although this means that with the expanded capital programme the industry will not achieve the same measure of self-financing, it should not be asked to increase its return in order to maintain the same level of self-financing as it was originally asked to maintain. I hope that my right hon. Friend will bear all that in mind. If it achieves 50 per cent, self-financing over the whole period up 676 to 1970 it will have made a substantial contribution.
I am entirely in favour of unused surplus, as it used to be called. This is over £42 million this year and goes up to nearly double that in the next seven years. This is a most valuable help in financing this enormously large capital sum and it gives some relief to the hard-pressed taxpayers who have to find the other £300 million annually below the line in the Budget. This is about the right balance and the Select Committee as a whole welcomed the arrangement.
We looked in this connection at the possibility of the industry going to the open market to borrow. This has been much discussed in many places, including the House, but we came to the conclusion after we had considered a very able paper given jointly by Sir Ronald Edwards and Sir Christopher Hinton that the pros and cons just about balanced. We accepted that the industry could not be expected to raise more than £25 million per annum on the basis that it could go to the market without Government guarantee and on a fixed interest basis. We considered that this could have no more than a fractional influence on the total borrowing, which at that time was about £200 million and soon would be about £300 million. It could have an advantage in educating the public that this great industry had to find its capital somewhere and it would be of advantage to the area boards in subjecting them to the discipline of the market, but we felt that the balance was very even and that if the industry came forward with a proposal to my right hon. Friend he should look at it carefully and decide. There is not much in it, and I think that that was the answer that Lord Radcliffe gave when he looked at this point a few years ago.
I should like to say something about my right hon. Friend's powers. His predecessor, who conducted his Ministry most ably, was in the habit of consulting the area boards about their tariffs. We took the view as a Committee that he was exceeding his statutory powers in doing so. The area boards undoubtedly believe that they are bound to do what the Minister asks them to do. It does not help to say that they 677 do not have to. The chairmen are appointed by my right hon. Friend, and one of the area board chairmen told us that he felt bound to do what the Minister asked.
I am not disputing that my right hon. Friend should, in the national interest, take an interest in the level of tariff set, but the view of our Select Committee is that if my right hon. Friend wishes to take action with the nationalised industries, the electricity industry or any other, Parliament ought to give him the powers that he needs if he thinks he needs them and then he will become answerable to Parliament for the way he uses them, but that it is not in the interest of the industry or the Government to have vagueness about the responsibility of the Minister and the responsibility of the chairman of the board. I hope my right hon. Friend will look at this point. I am sure it is important.
I refer again to what appeared in the conclusions of our report, which was mentioned by my right hon. Friend, that we felt that the industry was taking all the necessary steps, as far as we could judge, to deal with the huge task which was being put upon it, and we believe that it has a good chance of success. Therefore, I have much pleasure in supporting the very large new borrowing powers for which my right hon. Friend is asking and wish this great industry every success.
§ 12.51 p.m.
§ Mr. James Griffiths (Llanelly)
Those of us who have heard the speech of the hon. Baronet the Member for Guildford (Sir R. Nugent) and those who will read it in the OFFICIAL REPORT will, I am sure, be indebted to him for his remarks. I heartily agree with him that hon. Members who serve on committees of this kind—I have on occasion done so—and give a good deal of time and thought to this service do not always receive fair play from this House. The House tends to throw their reports on one side. We do not have as many opportunities as we ought to have to discuss them. As the hon. Baronet said, very often when we get the opportunity it is a long time after the report was issued, and that detracts from the value of it.
I hope that when we get a new Government, which should not be very long 678 now, they will, among other things, give consideration to how best to use the gifts and talents of hon. Members on committees of this kind and make sure that their recommendations are given greater consideration than is the case now. I express on behalf of all of us grateful thanks to the hon. Baronet and all who served with him for the services they have rendered to the House and the nation.
I gathered from the hon. Baronet that on the threshold of this winter the margin of safety is less than that with which we began the last winter. The Minister said that he hoped to get through the winter. Therefore, he must be relying on luck more than anything else. I hope that he will be very lucky. I welcome him as Minister of Power. Perhaps I might also, as an old miner and a member of the coal mining industry for which the right hon. Gentleman is now responsible, say that he is also lucky in having a very responsible Opposition. If the Opposition were irresponsible they might do what his hon. Friends did in 1947. However, we appreciate 'hat not even a Conservative Minister can be held responsible for the weather. However, I hope that before the end of the debate we shall have some comment on the fact that we are beginning this winter with a lower margin of safety than that with which we faced the last winter. In submitting the Bill to the House and asking for the borrowing powers which are designed to secure expansion of these industries, the Minister said that the Government were guided by the fact that we have to provide sufficient energy to allow for the expansion of our economy at the rate recommended by N.E.D.C. Is he satisfied that the Bill, when translated into substantive terms, will enable that to be done? Is he telling us that if he is granted this Bill and the borrowing powers are extended and used we shall have the energy required to sustain an economy expanding at the rate of 4 per cent, per annum suggested by N.E.D.C?
Declaring my interest as a coal miner, I want to ask about the programme in the future in its relationship to the coal mining industry. Those who are planning the future of our requirements must be asking what the energy requirements are which will be required 679 in 5, 10 or 20 years' time and what fuel we shall require in order to supply that energy. There is another question that we ought to be asking. To what extent is it safe for this country to rely on fuels which are not entirely within our control? That is a relevant consideration.
I have watched the revolution in the use of fuel and the growth of new fuel, and I have seen the effect on my industry, coal mining. I remember the Royal Navy going over to oil. The railways are now going over to diesel engines. I confess that a diesel train takes me to my destination in South Wales in about half an hour less than the time taken by the old steam engine, but I must at the same time say that it is a less comfortable journey and a noisier one. Although we shall probably be travelling much quicker, I have a feeling that we shall be wearing out much quicker too.
I want to say one or two words about nuclear energy and other methods of providing the fuel that we require. I pay great tribute to the technicians and all others responsible for the Ffestiniog station in North Wales, to which I was able to pay a fascinating visit some time ago. I am told that this station is the only one of its kind in this country, though there are others in Europe. Very often the taking of water from Wales arouses deep emotion. In this case we have a mountain with a lake right at the top, and it is exciting to see the water being pumped down and used to generate electricity and then being pumped back to the top of the mountain. I found it fascinating. I should like other hon. Members to have the opportunity of visiting the station.
Not far away is the nuclear station at Trawsfynydd, and it is planned to build another at Wylfa in Anglesey. We shall thus have three stations in a part of my country which over the last century has been losing population every year. There are five counties in the middle of Wales which at the time of the 1961 census had a population 80,000 fewer than it was in 1861. When I look at the development of these nuclear power stations I wonder what they presage for the future of the 680 country. Is my country always to provide the water and energy for industry but never to have the industry? We note that the Minister of Power was formerly the President of the Board of Trade. We can only hope that this means the beginning of an era in which my country will not, as it has been in past generations, be a place from which energy is supplied but will increasingly be a place in which more energy is used than in the past.
I intervene this morning primarily to raise the question of the new power station in Pembrokeshire. I am very fond of Pembrokeshire. I have had very long associations with it. It used to produce the best anthracite coal in the world, but it no longer does. Over many years the county has suffered a very high rate of unemployment. I think at one time it was the highest in the country. I want to see new industries brought to Pembrokeshire and to see the county thriving. It has never recovered from the time in the 1920s when the then Government, for good or bad reasons—that is past history—closed the dockyards. Since the closing of the dockyards valiant attempts have been made to bring economic viability and life to Pembrokeshire. I want to say nothing which would in any way detract from that effort.
I am very glad that use is to be made of this wonderful natural harbour of Milford Haven. It is the best in this country and many think that it is equal to the harbour of Sydney. I am glad that we are finding new uses for it. It has been announced that a new power station is to be built there, and I welcome that. This power station is to use oil. This might be the right decision to make, having regard to its relationship with other developments in Milford Haven and Pembrokeshire.
It is very important that the reasons why it has been decided to use oil should be explained. This is in the heart of a coal field, and when people hear that the power station will be oil fired and not coal fired, they ask why. They are entitled to ask why, and they are entitled to an answer. There may be quite a good answer.
Let me put some questions which have been put to me. I take the opportunity of passing them on to the Minister. 681 First of all, will the generation of electricity of oil by Milford Haven be cheaper than it would be if coal were used? If so, by how much? Secondly, will this cheaper generation of electricity in Pembrokeshire be available to Pembrokeshire and South Wales in order to attract industry? If we generate cheaper electricity there and no advantage is gained from it, what then? Thirdly, will the Minister tell us to what extent this may affect coal production? These are questions which are asked, and I intervened in order to put them to the Minister.
The coal mining industry is desperately fighting for its life. We all know that for many years yet we shall need a coal mining industry. We shall depend on coal for the fuel required to provide us with our energy. I hope that the Government have in mind, and that those responsible for advising them have in mind, that there is a certain minimum coal output below which it is unsafe for the country to decline. I believe that any Government which does not at least try to estimate this would be failing the nation. The Minister said that he wants competition, but it must be competition in the national interest. I argue that it is in the national interest for us to decide that there is a level at which the coal mining industry ought to be sustained, if possible, and that there is a level below which it would fall only at the nation's peril.
I therefore want to put those questions to the Minister. It will be a difficult task—let us face it—to maintain the manpower in the mining industry. If people begin to believe that it is a declining industry, that will affect manpower, and even with all our schemes we may very well find one of these days that we are in a very difficult position.
Good luck to Pembrokeshire. I hope that it will get all the industries it requires. I am not speaking against Pembrokeshire, but I am asking these questions because they have been asked elsewhere and we are entitled to know the answers.
The Chairman of the National Coal Board spoke this week in South Wales. I pay a tribute to the bold and imaginative leadership which he is giving to the industry, and I am very proud of it, and 682 of the new image which he is creating. He said in Cardiff this week:If the industry were allowed to decline by mismanagement or neglect there would be by the 1970's a generation cursing us for our folly. Once pits are closed and the mining force dispersed, the coal is lost for ever.I draw attention to the next words:Those who sometimes urge the contraction of the industry because they look at it from a short-term view do not realise the folly they are committing because of the real need for energy in the years ahead.In pleading for the mining industry, therefore, we are not just pleading for a sectional interest. We freely admit our interest, Why not? But it is much more than that. This is an industry which the country will need for many years to come. If the country will need it, it will also need coal miners. It can have coal miners only if it gives them a reasonable assurance that this industry will continue to play an important par; and a secure part in providing the fuel for the energy needs of the country. I know that we are at the beginning of this great new scientific and technical revolution. I am not speaking as a Luddite. I am not a Luddite. Nor will the men be Luddites. But we are entitled to ask that full consideration should be given to the industry when planning the future fuel requirement of the country.
§ 1.8 p.m.
§ Colonel C. G. Lancaster (South Fylde)
I do not propose to follow the right hon. Member for Llanelly (Mr. J. Griffiths) in the detailed problems of his native county, but I should like to refer to his opening words when he paid a generous tribute to the Select Committee for the work which it has done in connection with the two industries which we arc most particularly considering today.
It is almost ironic that we are discussing these vitally important matters on an occasion such as this. In one connection this is the result of almost 21years of devoted work by the Select Committee and we are moreover dealing with sums of almost astronomical size. And we are dealing with them in a Chamber which, quite naturally, has very few Members in it. This is altogether wrong, and I warn the Leader of the House, through my hon. Friend the Parliamentary Secretary, that if he 683 treats these Reports with such scant attention as to give us a short day to discuss these very important matters, it will undoubtedly have an effect on the quality of the Members who are prepared to serve on these Committees. It represents very hard work. As my right hon. Friend the Member for Guildford (Sir R. Nugent), Chairman of the Select Committee said, the Committee was fortunate in getting some very able Members to serve on it, but I am not sure that they will continue to do so if this matter is treated as lightly as it has been treated on this occasion.
I shall confine my speech entirely to the gas industry, and I say straight away that when we started inquiring into the gas industry, exactly three years ago today, it was struggling with its finances. It was only towards the end of our inquiry that there was any uplift in its surpluses. It is very much to the industry's credit that by its own considerable efforts it increased the amount of gas it was producing and selling. In the last two or three years, some reasonable surpluses have been shown, but not any bigger than were being shown in the early 1950s and they are still surpluses almost on a shoestring. I am sure that the House will be very ready to grant the additional money for which the industry is asking.
Before dealing with the technical problems of the industry, I should like to say that all members of the Select Committee who served on the inquiry into the gas industry were impressed not only with the quality of the Chairman of the Council, but with the very high quality and the very level quality of the twelve-area chairmen. However, despite the quality of the area chairmen and the Chairman of the Council, as a Committee we were not satisfied that the structure of the industry was altogether satisfactory.
The area chairmen are asked to wear two hats; at one moment they are in charge of their own particular interests, and at the next they are sitting on the Council and trying to decide matters of national importance. We found that there had been a clash in those two duties and that in certain respects the interests of the gas industry had gone by the board from the very fact that 684 there was this dual approach to matters of high policy.
That was reported on by the Select Committee, and a year later the then Minister took note of the Report and yet a year later, in answer to a Question, he said that he would consult the Select Committee before deciding what policy to suggest in that regard. We are still waiting for that, and I hope that my hon. Friend the Parliamentary Secretary will be able to say something about it today.
Having said that, I want to deal with the energetic programme of development upon which the Gas Council has embarked and to say a few words about the different methods proposed to be utilised for producing cheaper gas. The hon. Member for Hamilton (Mr. T. Fraser), quite reasonably, was not at all happy that we should become so dependent on outside sources for raw materials for the production of gas. He said that about the importation of natural gas in the form of methane.
However, he rather weakend his case by limiting himself to the statement that we should be for all time at the mercy of the Sahara for our imports. Of course he knows perfectly well that there are important developments in Holland where large areas of natural gas have been found, and that this country is in process of boring for natural gas in the North Sea and elsewhere. It is not correct to say that we should be for all time at the mercy of the Sahara.
We must congratulate the Gas Council on the energetic way in which it has tackled the importing of methane. On the face of it, gas produced by that method will show an improvement of about 3½d. to 4d. a therm against traditional methods of producing gas by carbonisation. That is not to say that the Gas Council or the House is against the continuation of carbonisation, if for no other reason than that for many years we must have the raw material which carbonisation produces for domestic purposes under clean air legislation. But to limit ourselves to traditional methods and not pursue new methods would be wrong.
At the same time, experiments are going on, I believe very successfully, with light oil distillates for the production of gas. We are not aware yet what 685 saving in cost can be achieved, but it will obviously be at a price well below anything at present being obtained by other methods, as the hon. Member for Hamilton said.
I come finally to Lurgi. It is remarkable that in the book "Gas Goes Ahead" no mention of Lurgi is made. For the last 2¾ years, an inquiry has been going on into the Lurgi process, a matter which the Select Committee considered as carefully as it could at the time. As has been repeatedly said, at this moment we are discussing these matters without the benefit of the Report before us. In fact, we are discussing these problems in a complete vacuum, for we do not officially know the price at which gas has been produced from methane, or from the Lurgi system, and we have not been told what sort of price will apply to gas produced from light oil distillates. Some of us may have a shrewd idea of the figures, but we would like to be told by the Parliamentary Secretary this afternoon at what level these various productions can take place, so that the House of Commons as a whole can take a balanced view of which of these developments is most in the country's interests.
I now come to gas storage. Very little to date has been done about gas storage, and in this respect I have to say my one word of criticism of the Gas Council. The problem of gas storage at Winchester was handled without any great ability. I say to the Gas Council and all other nationalised industries that in matters of almost primary research they would be well advised to consult with the best sources of information they can find and not rely too often on their own establishments. These are very technical matters. I know something about them, but I will not elaborate on them. They require very specialised primary research. I hope that we will press ahead with underground storage which is vital to the gas industry not only for traditionally produced town gas, but also for the use of methane.
Finally, I want to say a few words to those who have naturally expressed concern about these developments, particularly in the gas industry but also in the electricity industry to a considerable degree, and their effect on coal mining. 686 No one would suggest that I have any feelings about coal mining other than complete sympathy, and I do not want to see the industry unreasonably and unduly affected by these inevitable new developments.
I think it is becoming quite evident that what the Coal Board may lose—and I think undoubtedly will lose—by way of tonnage delivered to the gas industry under one or other of these new developments which are taking place will be more than made up by the requirements of the electricity industry which, as we have been told, is going ahead at a very high rate. I think that within the next ten to fifteen years it will not only take all the small coals from those parts of England which it takes them from now, but will require to take small coal from the gas producing coal areas of the country such as Durham, Scotland, and parts of South Wales, which regard the diminution likely to be brought about by the recession in traditionally produced town gas by carbonisation as affecting particularly their parts of the country. They will be affected, but I very much hope that any loss in that direction will be more than made up by the requirements of the electricity industry.
Having said that, I conclude by saying that, like every other hon. Member present today, I recognise that the gas and electricity industries require these large sums of money to continue their expansion and development, and I welcome the Bill.
§ 1.21 p.m.
§ Mr. Norman Pentland (Chester-le-Street)
I followed the speech of the hon. and gallant Member for South Fylde (Colonel Lancaster) with great interest. I shall probably return to that part of his speech which referred to the gas industry's future policy and the consequences that it could have on a coal mining industry, but I want first to draw attention once again to the urgent need for a new power station to be built in the County of Durham.
My hon, Friend the Member for Hamilton (Mr. T. Fraser) referred to this briefly in his opening speech, and I want to get certain facts on record. This is not the first time that I have raised this question in the House. Indeed, since 1961 my colleagues and I who repre- 687 sent Durham constituencies have repeatedly raised this issue with the previous Minister of Power at Question Time, in debates in the House, and in discussions outside this Chamber.
We have come to the conclusion that our claim for a power station in the County of Durham has been met by the Government with vacillation and contradiction. I regret that the previous Minister for Power has had to leave the Chamber. I informed him that I proposed to raise this issue, and he told me that he had a very important engagement today and would have to leave for it at lunchtime.
Throughout 1961 we were told that the question of including a power station at Durham in the C.E.G.B.'s programme was under serious consideration. Being encouraged by this, in the Christmas Recess of 1962 I wrote to the then Minister of Power asking him whether he could give me any information on the progress that was being made in regard to this project.
The right hon. Gentleman replied on 18th January, 1962, and perhaps I might quote the relevant part of his letter. He said:The Generating Board is discussing with the Durham Division of the National Coal Board the feasibility of burning Durham coal at a new power station in the county. It is also making a first physical examination of the eastern part of the county to find where a station might be built.We were delighted with that news, and we thought that everything was well under way.
However, as the months went by, we found that no action was being taken in the county, and on 2nd July, 1962, I again tabled a Question to the Minister of Power asking him what proposals had been put to him by the Central Electricity Generating Board following its first physical examination for a site in the County of Durham on which to build a new power station. To our complete surprise, in a Written Answer the Minister said that the C.E.G.B. had told him that the present estimates of demand in this area showed that it would be uneconomic to build a new power station in the county and that the Board had therefore postponed any further consideration of this project.
688 If I say that we were disheartened by the news, that would be an understatement. We were completely staggered by this new development, because if the C.E.G.B. was discussing with the Durham Division of the National Coal Board the feasibility of burning Durham coal, and it was in the process of making a first physical examination for a site on which to build that station, surely all the economic factors applying to this project should have been taken into consideration before that stage was reached?
Nevertheless, my colleagues and I pressed on with our claim, and my next approach was to write to the Minister of Power and again ask him whether he would be prepared to meet a deputation of Members from this side of the House who represented constituencies in the County of Durham. The Minister readily agreed to meet us, and we met him and officials of the C.E.G.B. at Thames House on 11th July, 1962. The meeting was also attended by my right hon. Friend the Member for Easington (Mr. Shinwell), who during the course of his varied and distinguished career had himself been a Minister of Power, and my right hon. Friend the Member for South Shields (Mr. Ede). For almost two hours we discussed every possible aspect of the need for a new power station in Durham.
Just before we left I asked the Minister a question and received what I thought was a rather significant reply. I asked him whether, if Durham coal had been economic, a power station would have been built there, and he replied, "Let us say that if Durham coal had been as cheap as, say, Yorkshire or Lancashire coal, it would have been a more favourable proposition".
In view of that reply, we immediately had inquiries made in the Durham coal fields, and we found that it could supply coal to a new power station at as cheap a rate as the eastern Midlands coal field could. We duly passed on this information to the Minister, but I am afraid that by then it was obvious that he had closed his mind—or someone else had forced him to close his mind—to this project. 689 Even then we were not prepared to sit back and let the matter rest there. My next move was to write to the previous Prime Minister, the right hon. Member for Bromley (Mr. H. Macmillan) requesting him to meet a deputation of Members from this side of the House who represented Durham constituencies. I wrote to the right hon. Gentleman on 6th November, 1962, and in his reply of 15th November, he said:Thank you for your letter of November 6 about the possibility of a new power station to be built in the county of Durham.I have made some inquiries about this and I wonder if I could suggest that you should see the Minister of Power again, and this time he would arrange for the Minister of Labour and the President of the Board of Trade, who are also concerned, to be there as well.I hope you and the other members of the deputation would feel that this would be useful and If you agree perhaps you would get in touch with the Minister of Power about it.I immediately acted upon the right hon. Gentleman's advice. Subsequently we met the then Minister of Power, the then President of the Board of Trade—who is now the Minister of Power—and the previous Minister of Labour, in a room in this building. I am sure that the present Minister of Power will agree that we thrashed out this problem and brought forward every possible argument in order to further our claim for the carrying out of this project. However, this meeting was also useless for us. I am not saying that the Minister of Power or his colleagues were unsympathetic to our claim, but they have been guilty of avoiding the true facts of the prevailing situation.
I know that we shall be told that the Durham coal field has a large market to supply outside the county, for power generation coal. But there is no firm guarantee about this. There is no contract between the Central Electricity Generating Board and the National Coal Board that this is a fixed market. In other words, it is within the realms of possibility that as time passes the demand for Durham coal for power stations will decrease. Indeed, I was informed yesterday by my hon. Friend the Member for Newcastle-upon-Tyne, West (Mr. Popplewell) that a power station in the Thames, which was previously using coal from the North-East, has now converted to oil. This 690 is the kind of thing which might continue to happen.
We have continually tried to impress upon the Government, through the Minister of Power, that a new 2,000 mW coal-fired power station would guarantee security of employment to at least 10,000 Durham miners. But we have added that not only those 10,000 miners would be concerned. Their families would also be concerned. Their spending power would infiltrate to shopkeepers, commerce, industry and so on. All in all, between 30,000 and 40,000 people would be affected by the building of a power station there. Again, the building of such a power station would bring a new upsurge in the activities of the steel and engineering industries in the north-east region. It would give a much-needed boost to the economy of the whole of the North-East.
Everyone in the North-East today is fully aware that the building of a power station would be the easiest and cheapest way to provide employment. But, as my hon. Friend has said, this power station must be planned now. Bearing in mind that it takes five years to build, a power station must be planned now, or Durham pits will close and the manpower will disperse to other parts of the country. Once miners leave the coal industry and go to other parts of the country they will not be regained very easily.
The Government have just brought forward a new plan for the north-east region. Among other things, the plan proposes to bring about large-scale industrial expansion. If the Government are sincere in their intentions about this plan for the North-East they must recognise that new industrial expansion will call for an ever-increasing supply of electrical energy. I know that we shall again be told that that demand can be met from outside sources, but I do not accept that. If industrial expansion takes place as it should in the years that lie ahead, it is possible that by 1967 or 1968 industrial production in the North-East will be threatened because of an inadequate supply of electrical energy. That is an obvious possibility.
In 1961 we were told by the electricity board that as a result of pit closures in Durham the demand for electricity 691 would substantially decrease. But we find that in 1962, as a result of the increased mechanism which has taken place in the pits which are working in Durham, the demand for electricity substantially increased. I am sure that the Minister will also tell us that it would cost between £3 million and £4 million to construct the new power lines which will be needed to push the surplus supply of electricity from a Durham power station to other parts of the country. In view of the countrywide demand for an increased supply of electricity, and the experience we had last year—and also bearing in mind the serious employment position which already prevails in the North-East—I would have thought that this was a very small price to pay.
I could go on. I nave a stack of letters and other evidence from which I could quote to prove the contradictory statements which have been made from time to time by the Government on this issue. But I leave the matter there. I merely appeal to the new Minister once again to investigate our claim for a new power station in Durham, and in view of the urgency which should be attached to this project I ask him to instruct the Central Electricity Generating Board to plan this power station immediately.
I now turn to the proposed future policy of the Gas Council. Here again, if its intentions are carried out they will constitute a serious threat to the Durham coalfield. We are told that in the future the Gas Council will turn away from the coal and will use oil. I am given to understand that the Durham coalfield now provides 5½ million tons of its coal to the gas industry annually. This is one-quarter of the total annual output of the Durham coalfield. Incidentally, 5½ million tons of coal represents the annual output of between 11,000 and 12,000 miners. Therefore, if the gas industry is allowed, without restriction, to turn away from the use of coal and to use oil instead in order to find an answer to its economic problems, the consequences will be disastrous to the economic and social problems of Durham.
As my hon. Friend the Member for Hamilton (Mr. T. Fraser) pointed out, 692 this consideration will also apply in Lancashire and in Scotland. We were always given to understand by the previous Minister of Power that before he allowed the gas industry to turn indiscriminately to the use of oil and liquid methane the social consequences and other economic factors which apply in the coalfields, and especially in Durham, Lancashire and Scotland, would be taken fully into consideration. I therefore ask the present Minister of Power whether he has also taken these issues into account. I hope that my hon. Friend the Member for Houghton-le-Spring (Mr. Blyton), who will be winding up the debate on this side, will further develop the consequences of the Gas Council's policy.
Finally, I want to refer briefly to another source of electrical energy in which I am interested, namely, electricity generated by atomic power. This has already been referred to by the Minister of Power and, in a very fine speech, by the right hon. Member for Guildford (Sir R. Nugent). Like him, I am of the opinion that it is high time that the uncertainties which hang over the future programme for nuclear power development were cleared up completely.
I think it would be in the best interests of all concerned if the Minister of Power and the Prime Minister also called for a speeding up of the Report of the Cabinet Committee which was set up by the Government themselves in 1962 in order to investigate the economic and technical matters affecting our nuclear power programme. I sincerely believe that it is time, indeed past the time when this report should have been brought forward.
We have probably some of the finest nuclear scientists and technicians in the world working on our nuclear power programme, and yet, if rumour has it right, these people are becoming more and more dejected and depressed because of the uncertainty of their future, so much so, indeed, that I understand many of them are leaving the industry, and teams of nuclear scientists and technicians who have worked together over a period of time on our programme are now in the process of breaking up. I suggest that in the interest of our future programme in 693 nuclear energy we cannot afford to proceed in this way.
Incidentally, I would draw the Minister's attention to the fact that Canada and India are going to cooperate in the construction of a Canadian designed and developed nuclear power station. This is very significant for this country because India's acceptance of the Canadian heavy water type of nuclear power proves that she has accepted this system in preference to our system. Everyone is aware that we have poured millions of pounds of capital investment into experiments and the building of certain nuclear reactor systems, and we have always thought that as a result of this we would play a leading part in the export market for nuclear power stations in the countries of the world. I believe that this assignment could mean that many other countries may turn to Canada for their reactor system in order to generate electricity.
I raised this matter some months ago, and the dangers attaching to it, with the hon. Gentleman who was until recently Parliamentary Secretary for Science. I must confess that for my efforts I received a stupid and frivolous reply from him. I only hope that the Minister of Power and others concerned with this matter will look very carefully at what is now happening in this field of research into new reactor systems. However, we shall, no doubt, be discussing these matters more fully in the days ahead and I leave it there. But I repeat to the Minister of Power that I think it is vitally important that he and the Prime Minister should recognise the need for a clear decision to be taken now on our future nuclear energy programme
§ 1.44 p.m.
§ Mr. T. H. H. Skeet (Willesden, East)
I do not propose to follow the hon. Member for Chester-le-Street (Mr. Pentland) on his constituency point, but may I say that I do not fear any great discouragement to the nuclear energy programme, because by 1970 it is estimated that at least 15 per cent, of the electricity in the United Kingdom will be produced from nuclear sources? In the United States the figure will be as high as 50 per cent, by 2000 A.D. We have to take into account what the hon. 694 Gentleman says because by 1970 nuclear energy is likely to be in very strong competition with conventional fuels. I think that this provides a great encouragement to the people engaged in the nuclear industry, but one has to bear in mind that this will not be any great encouragement to people in the coalmining industry because they realise that electricity is their last big customer and the more that is taken into the realm of nuclear energy must be largely at the expense of the coalmining industry.
I wish to deal with several of the points raised by the hon. Member for Hamilton (Mr. T. Fraser) when he said that the gas industry was wrong in depending so largely on the amount of fuels coming from abroad. It is not dependent largely on fuels from overseas. Only 12½ per cent, of the current consumption of gas will be obtained from imported liquid methane, and I think the price is rather advantageous. It is going to cost something between 6d. and 8d. a therm, and is there not a contract for a period of some 15 years? If this is the case, then only 12½ per cent, of local consumption is not going to prejudice the local market.
I think it is advantageous to buy from the West Indies and elsewhere materials which can be converted into fuel in the: United Kingdom. Several contracts have been entered into, among them with Total and Phillips Petroleum, and this has been done to diversify the base of the industry. As my hon. Friend says, the key to the success of the gas industry has been the utilisation of other fuels. How right he is—I will pursue the point later—but I wish he was consistent. About eight years ago the electricity industry was a one-fuel industry, but there has been a certain diversification since and recently it has become part of a three-fuel economy. But difficulties have been encountered all along the line in getting oil powered stations.
To return to gas, the gas industry has made great strides and I think that a considerable tribute should be paid to the chairman. I think tributes should be paid, too, to many others in the gas industry as well. We have heard a lot about Lurgi, and it is deplorable that the Report has not been made available 695 to the House before this. I hope that when my right hon. Friend has read it he will face its implications and give us an opportunity of studying it.
Many of us know from past researches that the two plants, one in operation in Westfield and the other under construction at Solihull, are not likely to be economic compared with other fuels available, and it may well be that the gas industry and the National Coal Board are pursuing a white elephant. It may be appropriate for West Germany and elsewhere where special circumstances operate—and in South Africa—but in the United Kingdom where other fuels are available at economic and competitive prices it would be unwise, taking into account these and other reasons, for us to pursue this policy too far.
The hon. Member for Hamilton indicated the instability of our sources of petroleum and gas abroad and certain difficulties in bringing those materials here. That may have been the case at the time of Suez. But we have many sources now—in the Middle East, North Africa, the Sahara, Libya and Nigeria—and thus the hon. Gentleman will recognise that there are ample sources available. If he will also consider that the reserve/production ratio has been improving yearly he will see that oil will be available not only up to the end of the century, up to 2000 A.D. at least, and well after that. This is not taking into account the enormous reserves of oil in the Athabasca tar sands and in oil shales in other parts of the world. When it is recognised that only 5 per cent, of the geographic surface of the world has been covered by seismic and other surveys, it will be seen what huge reserves of oil may still be available to us. All I am seeking to say is that it is no good trying to frighten the House into believing that there is a shortage of fuels abroad or to point to the instability of the Middle East countries, for, with all their difficulties, those countries have continued to send crude oil to the United Kingdom. More refineries have been built almost annually in the United Kingdom in which large amounts of British capital have been invested. These are British plants and should stand to receive much the same consideration from Her 696 Majesty's Government as the mining industry in this country. I appreciate his point about the sociological conditions. But we should also consider the competitiveness of our industry compared with that of Western Europe. Several mattershave been—
§ Mr. T. Fraser
Does not the hon. Gentleman realise that in Western Europe a good many of the Governments are now putting a brake on their dependence on oil? Even those who have a larger measure of oil and natural gas than we have are increasing coal production, as is the Soviet Union and the United States. I think that their supplies of oil are as secure as, if not even more secure than, our own.
§ Mr. Skeet
I should not agree with the analysis made by the hon. Gentleman. The French are keen to use franc oil and they have arrangements with the Algerian Government to the effect that most of the refineries in France will take a certain percentage of fuel from this quarter. A substantial quantity of the thermal production in France today is going over to natural gas of which there is an abundance at Lacq in South-West France. In West Germany there are certain complications. There is a hefty Deutschmark tax on fuel oil. But in the context of the Common Market there will come a time when that will be eliminated altogether. The West Germans are keen to utilise larger quantities of oil because they appreciate the effect of economic prices.
The hon. Member for Hamilton also indicated that the electricity industry was one of the best run industries in the United Kingdom. But it does not stand up as a perfect example of nationalisation. Let us pay tribute to its achievements and say that it is the most profitable nationalised industry. But let us make a comparison. Taking the question of manpower productivity, approximately 200,000 workers are required in the United Kingdom to sell 104,000 million kW of electricity. In the United States 340,000 workers sell about 600,000 million kW hours of electricity per annum. Thus one worker in the United Kingdom sells 523,000 kW hours per annum compared with 1,765,000 kW hours in the United States. On this assumption the nationalised labour force of the United Kingdom for electricity is 697 less than one-third as productive as the United States private enterprise force. On this analysis in the United Kingdom it should require only 60,000 workers instead of 200,000.
§ Mr. T. Fraser
Will the hon. Gentleman tell us what proportion of the United States electrical supply comes from hydro-stations which may work with virtually no labour at all, and what is the comparable proportion in this country? Does he know that he is not comparing like with like?
§ Mr. Skeet
I think that I can go even further and say that stations in the United States are powered by coal, water, by natural gas and by oil. The fact remains that it is private enterprise which has taken advantage of certain natural assets in the United States, utilises more oil, etc., so that electricity can be much more economic.
Perhaps I may be allowed to read an interesting paragraph in the Report from the Select Committee in 1963. It is directly applicable.…the Minister asked the Central Authority to co-operate with the National Coal Board and oil companies, within existing contracts, moving away from oil and back to coal. The original conversion of the stations from coal to oil cost the industry about £13 million. But as the price of oil has fallen relative to the price of coal, this proved, according to the generating Board, 'an extremely remunerative investment'. The return to coal was not so smooth… According to the Generating Board. the Ministry remained 'sensitive' to the use of oil.They turned from what was a very remunerative investment, and I think the implication must be that they turned to an unremunerative one in order to assist the coal mining industry.
To return to the United States. There the primary concern is to secure a cheap fuel in order to enable industry to be thoroughly competitive abroad as well as in the United States. I appreciate that we have to take into account sociological conditions. The comparison I have made has in fact been borne out in a booklet published by the Electricity Council entitled "Finance for more Power, 1963–1970", The manpower productivity in the American supply industry is higher than in the United Kingdom, and although there is a small nationalised section as I must confess, it is interesting to note that the larger part of it is run by private enterprise.
§ Mr. Austen Albu (Edmonton)
Does not the hon. Gentleman realise that he is not comparing like with like; that the American electricity industry has not to supply so high a consumer load and that it does not supply the consumer equivalent? Would he give us the comparative figures between American and British private industry productivity?
§ Mr. Skeet
The load factor in the United States is higher. It is over 60 percent, in the United States and under 50 per cent, in the United Kingdom. The load factor is stimulated by the type of consumption advocated by the area boards. If they stimulate more consumption at peak load times, for example, and do not spread it over the period when the power is generated, difficulties will be created. It was not until about a year ago that there was incentive given in the United Kingdom towards encouraging the home consumer to take more power at off-peak periods. Therefore many of the difficulties which have occurred in the United Kingdom have been created by the industry itself. We have been told by the Minister that some of these difficulties have been overcome and that is why he is saying that the load factor, will be increased shortly to over 50 per cent. The American industry has been a little more far-sighted.
There is an additional point, that immediately after the war and after the nationalised industry came into being, a number of smaller sets were introduced. In 1952 the Americans moved on to 200 mW sets. We did not. In 1962 America moved on to 400 mW sets when we were commissioning 275 mW plants. The Americans were using the larger type power station. I am glad to find that we are now thinking in terms of 2,000 mWs and beyond. That is a step forward. But over the period the Americans appear to have made fewer mistakes. They have admittedly, certain background advantages. But in judgment they have been more successful, and that reflects to the credit of private institutions in the United States. The achievements in this country, and certainly there have been achievements, do not reflect to the credit of nationalisation.
May I come now to the heart of the problem and say that one of the prob- 699 lems of the British industry is to try to match supply to the area of demand. It is one of the geographic features of the country that we have a small amount of coal south of the Trent. It is more expensive to move current in the form of coal over 40 miles than to take power via cable. The greater the distance the greater the advantage to have a power station on the coal field and have the power transmitted by overhead lines. I think that that will be generally accepted.
The cheapest form of electricity produced in the United Kingdom at least in the South and possibly elsewhere in the country, is from power stations adjacent to oil refineries. It could be said in 1961 that heat from oil was available in the Thames area was 20 per cent, cheaper than heat from coal at that point. My right hon. Friend must know that although the average rate of increase in demand for the whole country is about 7 per cent, the figure for the South is very much higher; it is over 10 per cent. It is in the South that we require oil-fired electricity generation.
The Central Electricity Generating Board is faced with two problems. Where can we put these power stations? Holme Pierrepont is a case in point. An application was made to my right hon. Friend's predecessor. Three years elapsed and I doubt whether he has been able to give his consent. I appreciate that we have to go through all the democratic processes, but something should be done to accelerate the procedure to enable these gigantic plants to be constructed. It takes approximately five years to build one. If it is going to take from two to three years to obtain the authorisation we shall be faced with difficulties later on. If we are to bring power from the Trent down to the South we have also to build expensive transmission lines, and there is almost as much objection to these on amenity grounds as there is to the building of power stations themselves in urban or agricultural areas.
My right hon. Friend must be driven to the conclusion, in the South at least, where the demand for power is 700 expanding so rapidly, that he must authorise more oil installations. He has done so by authorising the construction at Fawley which has a 2,000 mW capacity. I believe the station at Milford Haven is to be oil fired. If I can read between the lines, there are to be two refineries there, so it seems obvious that it will be an oil-fired station. Perhaps my right hon. Friend will say a little more about that later.
§ Mr. T. Fraser
If the hon. Gentleman is calling attention to the distance between the main coalfields and London, will he also refer to the distance between Milford Haven and London?
§ Mr. Skeet
Yes, but a tremendous amount of power is required in South Wales, and that is the place which can supply it. It is adjacent. I want to help the National Coal Board, which appears to be somewhat backward in coming forward. If we run into difficulties in building expensive transmission lines to the South, it might be possible to overcome this impasse by building a pipeline to the South for the transmission of common coal.
Let me give one or two interesting examples of what has been done in other countries. The information which I am about to give relates to projects which are actually constructed, under construction or planned. In the United States of America there is a 108 mile lO¾inch line from the collieries to a Cleveland power station. It carries 70 per cent, of pulverised coal and 30 per cent, of water and operates at 75 cents a ton cheaper than it can be sent by rail. There is a 350 mile 25-inch pipeline from the colliery in Virginia to industrial consumers on the East Coast. These are two United States projects. In Western Germany there is a 280 mile 25-inch line from the Ruhr to the Regensburg area for shipment via the Danube to industrial plants in Bavaria and Austria. This transports pulverised coal at a reduced price and the amount of coal transported each year is 3 million tons. There are also shorter lines in Poland, France and the Soviet Union.
I should have thought that if the National Coal Board had recognised its predicament it would have had its coal stations somewhere near the Trent, as it cannot compete effectively with oil 701 on the Medway or the Southern ports. The price there of fuel oil is much cheaper. There is the difficulty of the cost of coal transportation and public objection taken to transmission lines. Therefore, I suggest the N.C.B. should consider building a pipeline from the North to the South, say, to the coal thermal stations. These are just a few constructive ideas for the Board. There is a possibility that with the new oil pipelines which are being built up to the North, from the East Coast, it may also make it competitive to have oil thermal stations in the Midlands.
I now want to come to the point where my right hon. Friend has not been entirely consistent. He said that the key to the success of the gas industry is that it has been able to diversify its fuels. One of the difficulties is that my right hon. Friend and his predecessors have not enabled the electricity industry to diversify over the years. I suggest, too, that he should be a little more wary of some of the apprehension which comes from the other side of the House. I would refer him to paragraph 352 of the Report, a summary of which suggests that the Board considers that it would be advantageous to burn more oil, and, that if the price of fuels moves as expected they, the Board, would burn as much as they could get consent to burn. Therefore, success depends on consent.
The implication is perfectly clear, that my right hon. Friend and his predecessor—and, I believe, his predecessor as well—have not given the necessary consent, and therefore we have a largely high-cost industry in the United Kingdom. At present—I think I am giving a fairly accurate figure—about 9 million tons of coal equivalent is allocated to the oil industry. The figure for 1970 is to be 10.5 million tons of coal equivalent About 15 million tons of coal equivalent is allocated to atomic power. The one which has been kept static is oil. Many people who have looked into this matter carefully would say that oil as heat can be bought more cheaply than coal in the South. This would reduce the costs of this industry.
The Report goes on to indicate that it is embarrassing to ask the Government whether they are prepared to state if an oil powered station should be built. 702 Would it be wrong in 1970 to increase that figure of 10.5 million tons of coal equivalent to 15 million tons of coal equivalent, if we are going to accept the figure of 15 million tons of coal equivalent for nuclear power? We paid very expensively when we changed over seven years ago when we had to connect some of these stations and put them back to coal firing.
I hope hon. Members opposite will recognise that the lot of the miner is very difficult. How many hon. Members would be prepared to work all their lives in the pits? It is a very difficult life.
§ Mr. Skeet
I should like to see more men engaged in the lighter industries where the life is better, and I would like to see them get more money. I had an opportunity a few years ago of fighting an election with the right hon. Member for Llanelly (Mr. J. Griffiths) and I spent a long time speaking with the miners in the Amam valley. t do not envy their life. I should like to improve their conditions, and I have suggested one way in which my right hon. Friend can do it. There are the hazards of explosion underground which do not arise in the conditions that I am advocating. I am not trying to unsettle the economy—
§ Mr J. Griffiths
I remember the hon. Gentleman coming to Llanelly, where we had a pleasant fight. He left Llanelly and he has not returned. May I put this to him? Knowing the valley as he does, suppose that he had a boy and had to decide whether the boy should go into the mining industry under the apprenticeship scheme. Would he not want to get his boy into a situation where there was a career for him and from which he would not be pushed out on to the road at 50 years of age?
§ Mr. Skeet
Of course, it is right for a father to consider his son's future, and it is the duty of every Government to ensure that there is stability of em- 703 ployment throughout the economy. Many of us recognise that the productive capacity of the mining industry at 200 million tons is a little high and that there must be re-deployment later. It would be to the advantage of the miner if he had a better job, a job which would be more secure, cleaner and liable to less hazard.
My right hon. Friend was not in his present capacity when we had our difficulties last winter, but I think that we can say that part of our difficulties were due to short-time working, which is unlikely to recur. To cope with the shortage I should like to know from him, however, exactly what steps will be taken in the years ahead. We see from a small table that in 1963 spare capacity will be about 6½ Per cent Is my right hon. Friend prepared to say that he has this spare capacity this year? Will it not, in fact, be possibly 1 per cent, lower than this? It may be that the figure for next year will not be achieved.
Will my right hon. Friend do something also about gas turbines? The South-West Area Board has had several of them in operation and they have proved technically satisfactory and economically profitable. The plan is to cover 720 megawatts by this means. Bearing in mind that we may have a shortage of capacity until 1967, when a number of stations will come into use totalling about 6,000 megawatts, would it not be a good idea to increase the figure from 720 to 1,300 megawatts for gas turbines? Has my right hon. Friend considered that they are 40 per cent, cheaper than conventional stations, even though their operating cost is higher, that they do not require expensive transmission lines and that they can be built adjacent to larger stations where there is a heavy demand? If my right hon. Friend has not done so, will he consider these matters?
May we have information about whether it is possible to duplicate the cross-Channel link with France? Is it possible to draw more current in that way to help us in periods of difficulty? Will my right hon. Friend also encourage large industrial owners to have their own equipment to help them out and, possibly, to feed supplies back, or does he consider that he has everything under 704 control? It is right that I should mention these things.
I endorse the point made by my right hon. Friend the Member for Guildford (Sir R. Nugent) that we are talking about big money and it is extremely regrettable that so few hon. Members are present. It has become rather traditional that when a nationalised industry wants cash, we have a debate on it and are able to look over the broad field. Big moneys are being considered and I dare say that we will have a further opportunity of discussing the broad field again in three years' time.
A nationalised industry can go to my right hon. Friend, put up a case and get the money through advances from my right hon. Friend and the taxpayer must foot the bill. There is no question of going to the market.
§ Mr. Skeet
The hon. Member probably recalls that the great American Ingersoll once said that money cannot be manufactured by a printing machine and that what is required has to be produced from somewhere. The ratio of self-financing in this industry is about 50 per cent, and, therefore, the rest must come from borrowing.
§ Mr. Skeet
Very well. We are rather concerned with borrowing and a large part of the money must come from advances unless there is resort to the market. I suggest—it is only a modest suggestion, which is supported by the Select Committee—that something like £25 million should be raised on the market. Why should not the industry do it? It would become more economic. It would not be a bad idea and many people might be prepared to recommend that business consultants should be called in to look at the state of the industry.
§ Mr. J. J. Mendelson (Penistone)
In view of the fact that the electricity industry is an efficient industry which pays back its loans and provides electricity for the people at a cheaper rate than in most Common Market and Continental countries, will not the hon. Member withdraw his remark about the taxpayer having to pay?
§ Mr. Skeet
No. This industry returns approximately 12.5 per cent, on its investment. Those who have had an opportunity of reading the Select Committee's Report, will find that this industry does not compare with Electricité de France, whose return on the basis of English computations would be something like 27 per cent. This is pointed out by the Select Committee. I do not suggest that the figure for our electricity industry should be as high as for manufacturing industry—about 17 per cent, or 18 per cent—but it could be a little higher than it is.
The Select Committee paid tribute to the fact that between 1949 and 1963 the industry raised its prices by about 31 percent, or 32 percent., whereas the price of fuels supplied to the industry rose by about 71 per cent. What the industry has never succeeded in doing is to see that its prices are right and in line with its costs. Therefore, it has relied more and more on borrowing and it is the citizen in his capacity of taxpayer who has to foot the bill.
I am keen to see that the nationalised industries are commercial and can be judged by commercial standards. That is why I suggest that it would not be a bad idea for business consultants to look at these industries, especially bearing in mind that quite a large number of companies have adopted this procedure in recent years with great advantage.
If we could persuade the industry to subscribe a little more of its own money and not come back to us so much in our capacity of lenders in the last resort, it could take on more and more of a commercial complexion. I do not quarrel with the figure for the industry—it is about right—nor do I quarrel with the figure for the gas industry, but there would be a psychological impact upon the industry if it approached its problems in the manner I have suggested.
The key to our progress in the United Kingdom is more electrical power. On it will depend our productivity and our success. It is one thing to have electrical power and it is another thing to have it at the right place. To do this, we must see that we are a truly free fuel economy and not linked entirely, as we appear to be, to coal. If my right hon. Friend is prepared, in the interest 706 of the industry, to do what has been recommended in the past for the gas industry, I would be fully satisfied.
I am prepared to face the social implications of the coal industry because I do not want it to be unduly damaged. Far from it; I want its interests safeguarded. In view, however, of the expansion that is required and remembering that the American worker has three times as much electricity per man as in the United Kingdom, there is room for ill to be considered in the future.
§ 2.18 p.m.
§ Sir Baniett Janner (Leicester, North-West)
I do not intend to delay the House long, but before I come to the subject matter on which I should like to speak I must say a word or two about what has been said by the hon. Member for Willesden, East (Mr. Skeet). The hon. Member contradicted himself considerably, particularly when dealing with coal. He said that he was anxious to help the coal industry, but during his speech not only did he show an anxiety to dispose of the industry altogether, but le did his best to discourage anybody either from remaining in the industry or from coming into it.
If the hon. Member really understood what he must have learned when contesting a constituency in a district where the coal industry is the lifeblood of the people, he must have realised that there are many people who are attached to the industry and others who ought not to be discouraged from entering it, men whose lot should certainly be made much better but who ought not to be, and cannot be, dispensed with. Nor can the production of coal itself be dispensed with.
§ Sir B. Janner
How can the hon. Member have it of the right size if he discourages anybody from remaining in the industry or entering it? That is precisely what the hon. Member was driving at. I am sure that on reflection he will realise that his argument was wrong and should not have been used at a time when we are discussing the important industries of electricity and gas.
707 If we are to consider what was said so well by my right hon. Friend the Member for Llanelly (Mr. J. Griffiths), we must ensure that we do not drive people away from the important industry of coal, which is essential to the country's economy and will remain so for very many years to come. As a matter of fact, I was rather reluctant, after having heard him, to venture on some criticisms which I have to make in relation to the industries and which affect constituencies, including my own, very closely.
We are dealing this afternoon with an advance of from £1,000 million to £2,000 million to be authorised for obtaining loans for the Electricity Council and the Boards alone. We are not dealing with a trivial matter. It is to bean extensive increase in borrowing powers. I hope that the Minister will not regard it as too much coming down to earth if I bring to his notice certain complaints which should be dealt with when these moneys are available.
For some time past I have tried to get the House to consider a very important problem. After all, we are talking today of improvements in a scientific age, a vast expansion of industry, and the method of dealing with it. It is a very large and important programme. While we are considering these matters, I suggest we ought also to realise that success ultimately depends on the lives of the people, their amenities, and their contentment, or lack of contentment, with the circumstances in which they live. It is not correct, in my view, that in our wide and vast explorations of possibilities and essentials, we should overlook the fact that we are human beings upon whom ultimately these plans react. The human element is extremely important in these matters.
We have in Leicester a problem which I have brought to the notice of the House on a number of occasions and which it is perhaps not wrong at this time to ask the Minister to deal with. We are being asked under the Clean Air Act to keep our towns free from smoke, free from fumes and fall-out, as it were, from the use of certain fuels. That is all to the good. Yesterday I read that in a district in my constituency, called the Tudor Road area, it is proposed to extend the imposition of the use of cer- 708 tain fuels, so as to keep the air clean. But what on earth is the use of that, and how are we to get the people in a city which prides itself upon its cleanliness to accept that kind of injunction, if, at the same time, the power station and the gas works in the city are emitting fumes and grit and contaminating the atmosphere? People feel that they are suffering an imposition, and that it is wrong for them to have to observe these regulations, when, in their own districts, public works are not doing anything effective to preserve the cleanliness of the air.
I was told some time ago that a comparatively large sum of money was to be spent on the power station in Leicester in order to stop this evil. But in fact I keep getting complaints in my own constituency, and I propose to read a few letters indicating where we stand in this matter.
One constituent writes about the dust from the power station and states:During April it was very bad indeed again, and the beginning of May I had my painter to wash down the paint of my house, which I had decorated last year, and he complained very much of the state of the black dirt which he said had penetrated into the paint and some of the first coat came off as he was cleaning it. His hands were just terrible with a burning sensation and were red and swollen. In his own words, he said he had never had anything like it before; but at the moment things are very much better.Another writes:Regarding this dirt and filth we get from the power station, and as a parent I am appealing to you to see if something cannot be done. My child is never free from coughs and colds and my wife has suffered for the past three years with her chest, a thing she has never had in her life. All since living in all this dirt. Our windows and bedrooms are covered in black filth also the pantry. You saw this for yourself about three years ago. As you know the rates have gone up something terrible.Another writes:…we in Marlow Road wish to complain about the fumes which spread over us all and must be harmful to the health of ourselves and our children.An old-age pensioner writes a letter saying that it is absolutely impossible for him to live in the same area in consequence of these fumes.
It is perhaps coming into a somewhat different sphere of the debate to deal with this matter at this stage, but it is important. If we are to utilise in a proper way the moneys which are being loaned, there is no reason at all why 709 a power station, or a gas works, should not be so arranged that this kind of contamination of the air can be eliminated. I cannot believe that we are spending enough on research in the industries concerned to deal with this situation. I hope that the Minister will, at long last, realise that people cannot live under conditions of that nature and that it is no excuse to say, "We are doing our best. We have reduced the effect of these fumes". We must go very much further than that and see that the evil is eliminated completely.
I suggest another purpose to which some of this money should be devoted. In some places in my constituency people are complaining bitterly about the lack of lighting. I have taken the matter up. This is the reply I received from the City Engineer and Surveyor:The position is that new street lamps were installed in Buckingham Street and surrounding streets in the area, several months ago, but my Department has been unable to light these up due to the delay by the East Midlands Electricity Board in connecting to the underground supply.The petitioners also mention the trouble that is experienced with the existing gas lamps and, apart from these giving poor illumination, two of the lamps in Buckingham Street have recently been out of commission due to blocked service pipes, which have now been cleared by the local Gas Board and are functioning correctly.In all, there are between 500/600 new street lamps in the City awaiting attention by the Electricity Board and I am in the process of making strong representations to them on this matter. In view of the petition you have received, I am asking the Board to give Buckingham Street area some priority and I anticipate that all the lamps will be in operation in the next few weeks.This may not be a very large matter in the context of £1,000 million but it is important for the people concerned. Such points affect not only my constituency but other areas. I hope that with the granting of these loans improvements will be made on these levels, as well as in regard to the huge projects and vast spending for them which are bound to be carried out when the money is available.
It is natural that I hold a very different view from that expressed by the hon. Member for Willesden, East. I believe that a vast amount of work has been done by the industries concerned. Compliments have rightly been paid to these industries and to the Committees which sat. All hon. Members would agree with 710 the laudatory references which have been made to the Chairman of the National Coal Board. On the other hand, it is not to be expected that the Minister should have an entirely easy passage in a debate of this nature. I hope that, in the carrying out of the vaster progress that is envisaged, the detailed rights of the man in the street which are of importance in constituencies will be adequately dealt with.
§ 2.31 p.m.
§ Mr. Charles Doughty (Surrey, East)
I do not propose to detain the House very long, because I have not heard the last few speeches which have been made, although I heard both Front Bench speakers. That the Gas Boards and the Electricity Boards should have the power to borrow is vital and necessary. Theirs are expanding industries. They supply practically all the power Great Britain uses. Britain is going ahead and requires power the whole time.
The question is: from where should the money be provided? Had these remained private industries, as they well could have done, there would have been amalgamations and the resulting bodies would undoubtedly have been much the same size as the present Gas and Electricity Beards. Then they would have gone to the ordinary loan market, and they would have had no difficulty in obtaining the money. Now the nationalised industries come first to the Government. There is no reason why they should not, provided that the terms upon which the money is lent are the ordinary commercial terms and that the loans do not amount in any sense of the word to a subsidy to industries which require no subsidy. These industries have a monopoly in an article which is required by everybody. They are not in the same position as the British Transport Commission, which has competition from the air, coaches and private cars.
My right hon. Friend the Minister referred to that portion of the capital which was obtained from internal resources. This is only a polite description of the process of charging the customer by way of cost for what is a capital charge. This is not good business. This is not the way in which an ordinary private company would operate. If a private company wishes to expand, as many private companies 711 do, it does not raise the price of its product so as to obtain capital sums with which to build new factories or power stations, for example. I should like to hear a few words from whoever is to reply for the Government to justify increasing the charge to the consumer of the product sold, gas or electricity, particularly electricity, so that the industry concerned may obtain such an amount of money—I will not use either the word "income" or the word "capital"—as to be able to provide its own capital resources. These should be obtained either in the open market or from the Government, and it should be treated as an ordinary commercial transaction.
I want to go one step further and tread a little upon the toes of the Scots. They do not hesitate to speak upon our southern affairs. Is the amount of electricity produced by the North of Scotland Hydro-Electric Board of such a quantity as to justify these vast capital sums? My information is that all the electricity produced by this Board could be produced by one big-sized conventional power station, whereas they are tearing the Highlands to bits to produce this hydro-electricity. I doubt very much whether that is justified as a commercial proposition. I should like to hear the Minister's views on this.
§ 2.37 p.m.
§ Mr. Austen Albu (Edmonton)
I must apologise to the House and to the Minister for not being present when the debate began. I apologise also to my hon. Friend the Member for Hamilton (Mr. T. Fraser). I should particularly like to welcome the Minister as an electrical engineer. I hope that it will not prejudice him too much in favour of one form of energy. I am also sorry that I failed to hear the speech of the right hon. Member for Guildford (Sir R. Nugent), because I sit with him on the Select Committee on Nationalised Industries. I understand that some tributes have already been paid to the Committee. I believe that the Reports of the Committee have very greatly improved the debates in the House. However, that does not prevent the discordant note that we always get from the hon. Member for Willesden, East 712 (Mr. Skeet), with his usual plea for the consumption of more oil, without much consideration for other matters, and his rather unscientifically based criticisms of the nationalised industries.
I happen to think that the fuel and power industries in particular are among the best managed industries of any kind in Britain. The true comparison is not only with what goes on in America. The true comparison is with private industries in Britain. On the basis of industrial training, research and development, economic forecasting, and so on, these industries are today among the best managed industries in this country, though this was not always the case.
The cost of producing electricity is now continually falling. Between 1951 and 1961 the price of electricity rose by only one-half the amount by which other retail prices rose and the Boards have been making substantial surpluses after paying interest on loans. It is perfectly true, as the hon. and learned Member for Surrey, East (Mr. Doughty), said, that they have now been told that they must earn more. I agree with the hon. and learned Gentleman that it is not right to tell them that they should be responsible for a certain fixed amount of self-financing, but it is right to tell them that they should earn a certain amount on their capital. After that, the question whether they have to get more money from the Government or from the market will be determined by the rate of expansion they have to achieve, and their prices must be related to this factor. Although they are increasing their productivity and efficiency, they have been forced to put up their prices somewhat to earn the rate of return which is at present required by the Government.
§ Mr. Albu
I hope that the hon. Member will forgive me for not giving way. I have a considerable amount to say and not much time in which to say it. I wish to refer briefly to several matters which have already been raised; first of all the Lurgi plant and the Report on it. It is interesting to note that several Questions have been asked in the House on this subject. On 21st November my hon. Friend the Member for 713 Houghton-le-Spring (Mr. Blyton) asked the Minister of Power when the report of the joint advisory body on Lurgi plant would be issued. The Minister, in a Written Answer, said that he had received the Report of the Joint Study Group and would be discussing it with the Gas Council and the National Coal Board. He added:Thereafter I shall make the findings of the Report and my conclusions on them known to the House in a communication to the Select Committee on Nationalised Industries."—[OFFICIAL REPORT, 21st November, 1963; Vol. 684, c. 122.]Last May the hon. Member for Willesden, East asked the Minister of Power what modifications to the structure of the gas industry he envisaged and about certain other changes. The then Minister of Power stated in a Written Answer:I shall soon tell the Select Committee on rationalised Industries of my proposals for dealing with the questions it raised, but any change in the industry's present structure will need" legislation."—[OFFICIAL REPORT, 20th May, 1963; Vol. 678, c. 11.]It will be seen from these two Ministerial replies that a new form of communication appears to be arising. Although we have always expected and received Answers from recommendations from the Minister and from the industries, it has never been understood that subsequent communications should all come through the Select Committee. This seems to be a new and interesting principle, and I should like to hear the views of the Minister who will, reply on this important point. The House would be interested to know if important announcements of this kind are first to be considered by the Select Committee. I have a good reason for seeking an answer to this question because what is applied to the Select Committee in this connection could, no doubt, be applied elsewhere.
Another important topic which has been the subject of considerable discussion previously—we debated it last just before the Summer Recess—is that of underground storage. This is not only a question of storage for manufactured town gas because it might be even more useful for storing imported gas. Considering the importance of this matter there seems to have been a great deal of unnecessary delay. We recognise that the matter was muddled and badly dealt with originally by both the Ministry and the industry, but it is about time that 714 legislation was introduced to enable the industry to store gas underground.
When we examined the electricity industry I was surprised to find in what I expected would be a very scientific industry how traditional and inbred it had become. However we found in the Select Committee that substantial changes have been taking place, following the appointment of new Chairmen of the Generating Board and the Council, both of whom have brought in much needed new ideas. In the past it has seemed that the industry was prepared too easily to accept the cuts in capital expenditure imposed on it or the pressure from the Treasury to keep its capital expenditure down.
There can be no doubt that in the past the industry failed to fully recognise the enormous domestic load that was building up. However, when we examined the industry in the Select Committee we found that new techniques were being introduced, particularly of economic forecasting and market research, as well as a noticeable and substantial increase in scientific and technical research.
The scale of the industry's expenditure on research and development has been criticised by some manufacturers of plant and equipment. For my part I welcome the industry's expanded research activities, particularly those being undertaken by the Generating Board, because this has a substantial effect on raising the general scientific and technical level of the manufacturing industry. We saw how important it is to carry out a sufficient programme of research in the case of British Railways which, in the past, was technically incapable of dealing on a technical level with its suppliers. This came out clearly in the Howith Report following the resignation of B.T.C's purchasing officer. It is particularly important in the electricity industry that the buyers of the plant should be in a position to get a commercially good deal.
The changes now taking place are creating enormous problems, especially with the very large stations and the increasingly high tension transmission lines. The quality of engineering skill and management in the industry must continually rise. From our studies in the Select Committee we were satisfied 715 that the industry now has adequate means of recruiting and that its training schemes for engineers and managers are excellent.
There is only one matter on which I agree with the hon. Member for Willesden, East. He asked whether sufficient attention had been paid to the question of using gas turbines for peak load generation. I agree that this question should be answered because I am not sure whether or not this matter has been completely investigated.
I wish to refer to two matters on which Government decisions are required. The first is the future of the nuclear power programme. Hon. Members are not supposed to know the actual terms of reference of the Powell Committee which is inquiring into the programme. The late Prime Minister told us that we could not know them, although they were referred to quite fully in another place and we in the Select Committee were given a good deal of evidence to put us in little doubt as to what the Powell Committee was doing. The time has come when this matter should be cleared up to the satisfaction of all hon. Members, for the point has been reached when an enormous amount of uncertainty exists about the future. This is serious not only for the Atomic Energy Authority and the Generating Board but also for the manufacturing firms. It is also especially important for the development and design teams, who are anxious to know what the future holds for them. It also has an important bearing on our export trade. The whole question of the research, design and development of nuclear power plant and the future use of this method of generation is something which must be made clear by the Government as quickly as possible.
In this connection one must also consider costs. If we are to continue to have nuclear power plant and (particularly to export it, I urge the Government to make their views clear about the Select Committee's statement that it was not satisfied that the cost of the nuclear programme had been shared between the taxpayer and consumer of electricity in the right proportions. The Select Committee recommended that the whole matter should be reviewed in the 716 light of the obligations of the various sections of the community.
Not entirely separate is the question of the pricing of plant to which the Select Committee referred. Here we have a monopoly buyer versus a small number of firms producing this plant who operate a system of level tendering. The Select Committee recommended the setting-up of a tribunal to adjudicate on this matter, but in the end this is a subject on which only the Government can make the decision. It is not possible for the industry by itself to make it.
It is interesting to note in this connection what was said in a recent debate in another place about the number of firms which should manufacture this sort of plant. I refer to the debate opened by Lord Coleraine. These are important matters which cannot be left to the manufacturing industry and the Generating Board by themselves, for they involve matters of serious economic policy. I urge Ministers to make up their minds on them without further delay.
§ 2.50 p.m.
§ Mr. William Blyton (Houshton-le-Spring)
We do not oppose this Bill—we think that it is at present an essential Measure—but this debate has given us an opportunity to look at aspects of the Government's fuel policy. My hon. Friend the Member for Hamilton (Mr. T. Fraser) has forthrightly told us what he thinks of that policy, my hon. Friend the Member for Chester-le-Street (Mr. Pentland) asked about a generating station at Durham, and my right hon. Friend the Member for Llanelly (Mr. J. Griffiths) referred to the oil-fired station at Milford Haven.
In general, these two nationalised industries have done exceptionally well, so I shall deal with those parts of their policies of which I am critical. I am not unmindful of their achievements since nationalisation. We all know that the purpose of this Bill is to provide future borrowings for future development and we have been told that "the Minister has considered the future programmes and has approved the general lines of development". I want to examine those future programmes.
These two splendid Reports from the Select Committee are a fund of information about the forward policies of the 717 two industries. I congratulate the Select Committee on its Reports, and also the Chairman of the Committee, the right hon. Gentleman the Member for Guildford (Sir R, Nugent), on the hard work he has done during the period I have had the pleasure of sitting in the Committee.
It is impossible to talk about the future programmes without considering their effect on the future of the coal industry. One has to ask: are these future plans likely to "down" the coal industry still further, or is it contemplated that our own native coal industry will play a large part in them? Before addressing myself to that question, I want to deal with the supply of electricity this winter because, although reassuring statements have been made this week by the heads of the fuel industries, I believe that we shall get cuts this winter. The Minister depends on good luck, but luck is fickle.
How has all this happened? The Chairman of the Central Electricity Generating Board told the Select Committee that the existing capacity had been planned on estimates made in 1956 that were definitely too low. It was also found that that industry's forecasts had been too low, not only for the winter of 1962–63 but for a number of years. The Chairman of the Electricity Council said that the adopted forecasts of the industry had, in the past, tended to be on the low side, and that Power for the Future, published in 1958, was the prospectus for the years to 1964–65.
That booklet gave estimates of future sales from 1957 to 1965. It was estimated that domestic sales would increase by two-thirds, industrial sales by two-thirds, and commercial sales by half—on the basis of the 1958 figures. But what was the position in 1962—only four years after that forecast? Domestic sales were up by 64 per cent., industrial sales by 30.5 per cent, and commercial sales by 46.5 per cent. In other words, with two years' forecasting still to go, only the industrial sales were in line, whereas domestic and commercial sales were considerably ahead.
Again, the forecast which governed the Generating Board's capacity in 1962–63 was made as far back as 1957, when the figure was 26,400 mW. The 718 actual figure was 29,600 mW. The main inaccuracy of recent forecasts has been in respect of the huge increase in domestic sales, but there was no major survey of domestic demand between 1955 and 1961, when this increase in the domestic load was first noticed. The Select Committee saw that the industry's forecasts had been too low, not only for last winter but for a number of years, as a result of failure to keep in close touch with the movement of consumer demand.
The Chairman of the Electricity Council slated that the industry's reserves of capacity were substantially below the normal level because demand had been under-estimated. The 10 per cent, generating cut compared with the cut of 13 per cent, in the distribution programme did not to any extent affect generating capacity, but most certainly and substantially affected distribution. That being so, I want to ask two questions. First, is the Ministry now pressing the Council to improve its forecasting? Secondly, does the Minister intend to see that the electricity industry allows a greater margin of safety in planning its capacity to meet long-term forecasts of demand?
If the nation is now embarked upon a steady expansionist policy with a target of an increase of 4 per cent, in productivity each year and not the "stop and go" policy of the past, this question has to be faced. The Select Committee at least has said that the industry should aim to achieve a security of supply equal to that enjoyed in other advanced countries. Is the Generating Board to be encouraged to have a bigger margin of reserve capacity from now on?
I should like the House to look at the choice of fuels available to the electricity industry. Up to 1954 the generation of electricity was almost exclusively done with coal. It was when coal was short in 1954–55 that the industry turned to the use of oil. It is estimated that coke and coal consumption will rise to 60 million tons in 1965–66 and to 72 million tons in 1970, that the consumption of oil in generation will rise from 9.2 million tons of coal equivalent to 10.5 million tons, and that the use of nuclear power will rise to 15.5 million tons of coal equivalent per year.
719 I recognise that the Chairman of the Generating Board is not antagonistic to coal. Whilst I should like to see all generating stations using coal, I recognise the economic advantage of using oil where refineries are near the generating stations. I urge the Chairman, however, to give preference to coal at all times, especially in the large coalfields and particularly in Durham, because it would be a boon to us there in view of what we have to face as a result of the new policy in the gas industry outlined in "Gas Looks Ahead". I do not know why the Government did not stipulate that there should be a new generating station in the North-East when they published their plans for that region. If such a station were built in Durham it would help to reduce the redundancy which is certain to occur in the coming years.
Relationships between the Generating Board and the Coal Board are close. We know that the Generating Board will be the largest consumer of coal in the years ahead. Power station consumption of fuel oil has been reduced this year by one-third compared with last year. I do not know how far the size of the coal industry would be reduced if it were not for the Generating Board's policy for the future being based mainly on the consumption of coal. Neither the Generating Board nor the Coal Board has planned the demand for coal beyond 1970, because the effect of the nuclear programme cannot be predicted. But if the assumption is right that the demand for electricity will double over the next ten years, it is assumed that in 1970 the electricity generating industry will want 135 million tons of coal equivalent. If this is so then in the mid-1970s the electricity industry will be burning half the nation's coal output based on the coal industry's target of 200 millions a year. Therefore, the electricity industry is the bright light for the future of the coal industry.
The success of the nationalised electricity industry has been outstanding and it has been profitable. Nothing has impressed me more than that, under the Government's policy of fierce competition between the nation's fuel industries, the electricity industry has had confidence in its ability to compete successfully with alternative fuels even 720 at the higher tariffs which are now ruling. The growth of the use of electricity in domestic, industrial and commercial life has now made security of supply of first importance. I hope that this will be ensured as quickly as possible in the interests of the nation.
The booklet "Gas Goes Ahead" states that in future coal will be carbonised only to the extent to which the coke produced will command an economic price. Does this mean there there is no obligation upon the Gas Council to see that there is a plentiful supply of smokeless fuels to meet demand in the clean air zones? I shall say something about this later in my speech.
For years we on this side of the House have known that the relationships between the National Coal Board and the gas industry have not been so good. Not since the time Sir Hubert Houldsworth was the Chairman of the National Coal Board has there been that pleasantry that we would expect between nationalised industries. Let us be frank and recognise that from 1956 onwards there has been antipathy towards coal on the part of the gas industry.
We have seen the methane project put forward as an experiment. Now it has become a gigantic affair embodied in agreements over many years to bring in liquid methane from Algeria to the detriment of our coal industry. We asked the previous Minister not to sanction that agreement until we received the report about the Lurgi plants, but he refused to heed our representations. We said then—and we say it now—that the methane plant was the alternative to coal, and I think that events have proved us correct.
The agreement contemplates the import of enough methane to make 160 million cu. ft. of town's gas per day. The capital cost to the gas industry will be £105 million, and the project will produce 10 per cent, of the national consumption of gas. To give an instance, the North Thames Gas Board has been using 3.7 million tons of coal per year, but when the methane scheme operates that figure will be reduced by 1 million tons.
After the sanctioning of the scheme with this capital expenditure and the cost of building a liquefaction plant in North Africa, which will be £20 million—and 721 this does not include the installation in the Sahara itself or the pipeline between it and the liquefaction plant on the coast—the astounding thing about the proposal is that it has been constructed by French engineers with French and American capital but underwritten, we are given to understand, by British interests in this country.
§ Mr. Blyton
I shall be coming to that. I am fighting to keep in employment British miners rather than people in Africa.
§ Mr. Blyton
After the agreement has been signed, it is now known that gas can be made from an oil distillate considerably cheaper than from the liquefied methane which we are going to import towards the end of next year, and even now there are some area boards which are becoming reluctant to accept the methane even before it arrives. The first cargoes are expected early next year, but some of the pipelines to the Area Boards are not ready yet and the tanker trials are not finished, and so it will be in the latter part of next year that this will start to arrive.
However, when the scheme is fully operating it will replace the equivalent of about 4 million tons of British coal. The previous Minister of Power, replying to a Question by the hon. Member for Kidderminster (Sir G. Nabarro) on 20th November, 1961, referred to 800,000 tons of coal and 400,000 tons of oil. These figures were also given by the Chairman of the Gas Council on 3rd November, 1961. This matter ought to be cleared up, because the contract figure under the agreement is for 350 million therms a year, and it is calculated on the best information available that to provide this amount of gas by conventional carbonisa- 722 tion would require 4 million to 4½ million tons of coal at the present efficiency of the carbonisation plants that we have now got.
Let us look at what Government policy has done to coal in the gas industry. In 1955–56 the gas industry used nearly 28 million tons of coal. This figure fell steadily to 22 million tons in 1962. The amount which the industry will take in this year—1963–64—has been affected by the need to restock last winter and by the fact that the demand increased at the time when the methane and light distillate schemes were still being prepared, and it will again, I believe, be about 22 million tons. But it is clear from the booklet and also from the Select Committee's Report that coal carbonisation is not to be further developed. No new carbonisation plant is being built or will be built by the gas industry. That has been clear to those of us who have studied the gas industry over the last few years.
The use of oil at gasworks is increasing rapidly. It was 27 million tons of coal equivalent in 1962, but in the first six months of 1963 consumption increased by no less than 2 million tons of coal equivalent compared with the first half of 1962.
In 1964–65 the fall in coal consumption can be more than the 4 million tons which I have already mentioned. However, because gas sales are rising, the gas industry might have to use its existing plant to help to meet the increase until all the methane and oil schemes come into operation. The actual drop next year may be less than 4 million tons. But if the full effect of the 6 million ton cut in the next two years is felt, it will be serious for Durham, Lancashire and Scotland. On the best calculations which I have made, Durham would lose a market for 2 million tons in the first year and another million tons in the second year, making a lost market of 2£million tons for Durham alone. The programme for gas, therefore, means that coal consumption will have dropped from 28 million tons to 22 million tons now, with a further drop to 16 million tons in the near future.
What effect will this have on contracting coalfields? I will take Durham as an example because I know it best. 723 But my arguments apply equally to Scotland and Lancashire as they apply to Durham. Over the last eight years manpower in the industry in Durham has gone down from over 100,000 to 70,000. Next year seven collieries will be closed and there will be 24 partial closures involving a further redundancy of 4,439 miners. We are notified that this decline will go on for a longer period ahead. Anyone knows that when coal reserves have gone, closure is bound to arise. I want to say particularly for those trade union officials who are in the redundancy areas that they have shown patience and tolerance in the last few years to see that their men have been placed elsewhere. In this big change-over, there are many who, like the sick and the compensation men, will now be permanently unemployed in County Durham.
After facing this with patience and tolerance, we now receive another blow from the nationalized gas industry, which is importing liquid methane and using oil, with the backing of foreign capital. This is worsening the position of our native industry. Durham is a gas producing county and its future lies on the east coast where the sea coal lies and where it will last for 120 years. We had looked forward to absorbing some of the men who had become redundant in north-west Durham in the developing collieries of the North-East Coast. Millions of £s have been spent on the development of large coalfields under the sea off the North-East Coast, but if we lose a market of 2¼ million tons, those collieries, where lay the hope of many people whose collieries have closed, will be doomed, because orders for gas coal will be lost and modernisation and development of those pits will have to be halted.
As the Minister of Power must know, the receiving areas of the Midlands are now tightening up on taking men from the redundant areas and saturation point in the Midlands is not very far away. This means a further aggravation of the position in Durham, because it means that we face unemployment without hope of alternative employment in the foreseeable future.
The methane project is not the only one which has hit us. It has been known for a long time that the Gas 724 Council contemplates getting natural gas from Holland. Are the Government supporting this project? If so, the position of Durham, Scotland and Lancashire will be even worse than I have depicted. I can only hope that the Government will consider my arguments on the implications of their fuel policy.
Last week, I put a Question to the Minister about the Report of the Advisory Committee on Lurgi plants. He informed me that he had considered the Report and would let the House know his views through the Select Committee on Nationalised Industries. I am a member of that Committee, but I think that the House ought to have this statement first. We have been pressing in Questions for a long time for this Report. Why has it taken so long? We knew months ago that the Coal Board had finalised its Report on the Lurgi process, but months have dragged on until the Minister received the Report this week. Has it been held up until the methane project was well advanced? It has taken more than two and three-quarter years to get the Report.
The Report of the Select Committee on the gas industry says:The Gas Council's own attitude towards large scale production after the rejection of the Desford Scheme is difficult to define.I may be wrong, but I have the suspicion that, because of its attitude towards coal carbonisation, the Gas Council has no use for the Lurgi plant, and I am sustained in this view by a report in the Yorkshire Evening News of 27th November when it said:Power Minister Frederick Erroll is believed to have decided against the large scale manufacture of gas in Britain by the Lurgi process.That report appeared only two days ago. I shall not go into the sorry history of the Lurgi plant. It is in the Select Committee's Report for everyone to read, and, believe me, it is a dismal story.
Sir Christopher Hinton, when addressing the Institute of Gas Engineers recently, appealed to the gas industry not to give up the search for an economic way of producing gas from low-grade coal. He said—and I take this from the New Scientist—Coal prices are most likely to be held at economic levels if a large market for machine-cut coal can be provided and maintained, and 725 the use of such coal by the gas industry would help the electricity industry also.He offered to undertake, in conjunction with the Gas Council, a new programme of research and development to find a cheap method of coal gasification. Can the Minister tell me what response the Gas Council made to this offer? Can he tell me what has been the investment in coal carbonisation plant since the industry was nationalised, and what proportion of that investment will have to be written off because of the switch to plants using other materials? Why is the Gas Council persisting in its plan to import methane when it has been widely reported that gas can be made more cheaply from oil?
For years there has been a strong case for a national grid in this country. For a long time Lord Robens argued for it from this Box. No attempt was ever made to introduce one when coal was the raw material, but such a grid has now been constructed to supply gas from reformed methane to various parts of the country. Why has it taken the gas industry so long to see the necessity for what has been obvious for a long time?
Can the Minister tell me whether because so little is known of the corrosive effects of sulphur in imported liquified methane at low temperatures, underwriters have refused to carry the risks associated with methane gas?
Can the Minister tell us how many proposed new plants will be based on coal, and how many on oil? Can he tell me how the Government are going to fulfil their solid smokeless fuel policy if the reduction of coal carbonisation takes place to the extent depicted in their new policy? Stocks of gas-producing coal on 10th November were 200,000 tons less than they were last year. We are not building any new plant based on coal, and as coal plants go out to give way to methane and oil, how will we get smokeless fuel? I put it to the Minister that we ought to have an answer to this very important question.
I have been critical of the Gas Council in many respects, but I believe that it has been driven to do what it has done by the Government who lay down that there must be fierce competition amongst the nationalised industries. We have always taken the view that there ought 726 to be a national fuel policy, with coordination between the fuel industries, which would recognise the long-term value of this country's indigenous source of fuel and would take full account of the strategic advantages and importance of coal as an export commodity.
Our hope lies in a change of Government in the few months that lie ahead. [Interruption.] Yes. The by-elections tell us this. When the Labour Party is in power it will ensure that coal plays its full part in supplying the fuel needs of the nation. We shall let this Bill go through, since we believe that these industries must have the capital necessary for further development, but we are confident that before long we shall be able to arrest many of the trends and policies which are being directed against coal.
§ 3.25 p.m.
§ The Parliamentary Secretary to the Ministry of Power (Mr. John Peyton)
In supporting the Bill I first want to pay my tribute to the Reports of the Select Committee. I must be careful not to overstep the bounds of modesty, as I was a Member of that Committee, but in particular I pay a very warm tribute to my right hon. Friend the Member for Guildford (Sir R. Nugent) who was the Chairman of that Committee. All hon. Members who served on it are well aware of the tremendous added difficulties and responsibilities of being the chairman of an all-party committee of that kind, and I am certain that no one would be quicker than hon. Members opposite to support me in what I have said.
As one who comparatively recently changed his position in a somewhat surprising way, I have been greatly impressed by the way in which these Reports have been received and considered by the two industries. Again and again Area. Board chairmen and others have expressed their admiration for the care with which the problems of the industries have been examined, and their great appreciation of the real benefit that has arisen to them from these detailed examinations.
I hope that the hon. Member for Houghton-le-Spring (Mr. Blyton) will forgive me if I do not follow him very far into the details of what he said about the coal industry. I realise the seriousness of its problems, but I must confine 727 myself today to the development of the gas and electricity industries. He asked me two questions to which I should like to reply. First, we, of course, do whatever we can to encourage the electricity industry to improve its methods of forecasting. But the Select Committee, of which he is a distinguished Member, is conscious of the fact that the electricity industry has tackled the problem with some success. Secondly, he asked me whether the Government were in favour of a greater margin of supply over demand. Of course we are. That is the reason why the Government have given their approval to this vastly accelerated investment programme.
The hon. Member went on to deal with the gas industry, and to call attention to what he considered to be the great antipathy felt by this industry towards the coal industry. In my opinion such a suggestion is unfair and unfounded. The gas industry, like others, is bound in these times to search for the most economic way of producing its own main product. It must not allow itself to be diverted from that purpose by any considerations. The hon. Member then referred to what Government policy had done to the coal industry, and what the gas industry was inflicting upon the coal industry. What he said was ill-founded. He must remember that nearly half the present research programme of the gas industry is devoted to means of producing gas from coal. Only a solvent gas industry can possibly be of any help to the coal industry. The gas industry has over recent years—and there is nothing new about this—been finding increasingly that carbonisation as a method of producing gas is uneconomic. If the industry is to survive it must go to newer and more profitable fields.
There is really nothing either new or wicked in what the gas industry has been doing. I willingly echo the tribute paid by the hon. Member for Hamilton (Mr. T. Fraser) and others to the extraordinary achievements of this industry in the last few years and of which it can be rightly proud. May I accept on behalf of my right hon. Friend the Secretary of State for Scotland the very gracious apology which the hon. Mem- 728 ber for Hamilton made at the beginning of the debate? I will see that his very gracious words are passed to my right hon. Friend.
The hon. Gentleman paid a warm tribute, which I think is fully deserved, to those who manage these industries. I would certainly from my own experience bear witness to the fact that their dedication and devotion to the cause of the industries are in no way in doubt. The only point of difference I have with the hon. Gentleman is that I would say that their tasks are not made easier by the fact that the industries for which they are responsible are nationalised. But that is a point of difference between the two sides of the House.
The hon. Gentleman referred, rightly, to the huge sums required now and which will be made available under the Bill to finance these very vital industries. I do not think that I should attempt to expand upon what is said in the White Paper about the way in which the self-financing ratio and other matters will be the subject of annual review. We have already seen some sufficiently dramatic and sharp changes in fuel consumption and needs and in energy problems to warn those who would otherwise be tempted to be unwary about the dangers of prophecy in this field.
The hon. Gentleman referred to the question of the 13 per cent, cut in distribution expenditure in 1958. I think that we must get this into some proportion. In fact, the cut was of under £5 million.* It was a cut made only on the distribution system, the reinforcement backlog of which is now £100 million, so that the £5 million* was at any rate a small proportion of that sum. Moreover, I think it fair to say that the main troubles of last winter came not from the local distribution system but from the main transmission system, which, of course, was not affected.
The hon. Member for Edmonton (Mr. Albu) with his customary shrewdness reminded me of the relations between the Select Committee and the House. May I say at once that of course I will see that the observations which have been made from both sides of the House are conveyed to my right hon. Friend the
* Note: Mr. Peyton has stated that he should have said "about £9½ million" 729 Leader of the House about the opportunities which the House has to debate Select Committee Reports. But I think that I would be unwise if I were to attempt from the Box to lay down what should be the relations between the House and Select Committees. I am in some difficulty, therefore, in answering some of the points made this afternoon. They are points which are due for answer by my right hon. Friend to the Committee. That is the present position and I think that it would be wrong for me to seek to alter it.
I now come to a point concerning which I must indeed tread warily-Scottish affairs. My hon. Friend the Under-Secretary of State for Scotland is here holding my hand and giving me great moral support. But the suggestion was made that in merging the borrowing powers of these two Boards we were, in fact, going to try to get Mackenzie by back-door methods. I am sure that this is not the case and it is purely in the interests of flexibility that this is being done. The four hydro schemes in the North of Scotland will not be affected in any way by these proposals.
I have already referred to the congratulations of the hon. Gentleman to the gas industry on its record achievement, but I should like to take him up on one point. He congratulated the industry on the way in which attractive modern room heaters had been produced. Here is an example of an effective partnership between nationalised and privately-owned industry. The heaters are a product of private industry. They came at a time which enabled the gas industry to make added progress and to cash in on opportunities provided by the adoption of modern methods.
The hon. Gentleman referred to Milford Haven, or perhaps in order to avoid confusion I should call it West Pennar. That is a more accurate geographical description. Here I am again in difficulty. My right hon. Friend has not received a formal application to construct a power station there. No doubt he will, but until he does, and until it is clear how that station is to be fired, I think that I should keep discreetly quiet.
The coal-fired power station in Durham is, as I hope that the hon. Member for Chester-le-Street (Mr. Pent- 730 land) will forgive me for saying, a familiar argument to me. It has been prosecuted by the hon. Gentleman and by his right hon. and hon. Friends with very great vigour, as I can testify. I wish to remind the hon. Gentleman of two points. The matter will be reviewed by the Generating Board during the next year. Secondly, the Generating Board has always said that there would be no purpose, and it would be wrong, to construct a power station in Durham at a time when the local need did not warrant it.
The point has been taken regarding coal and the: use of Durham electricity coal. By 1970 the outlet for this coal will be double what it was last year. I think that that is not a wholly unsatisfactory position and should afford some encouragement, although of course I recognise that the hon. Gentleman and his Friends would be happier if the power station were actually in existence. But I cannot advance further from the position adopted by the Generating Board.
The suspicion voiced by the hon. Member for Hamilton about the apparent undue enthusiasm of my right hon. Friend for the new relations between the gas industry and oil is wholly unfounded. I consulted my right hon. Friend at the time and I can say that he meant nothing of the kind. It was just the natural enthusiasm with which he approaches all his tasks.
I come now to the question of the availability of solid smokeless fuel, and I will say frankly that it is much easier to talk about this problem, which has been before me for about twelve months—ever since I have occupied my present office—than to find the answer. I can promise the House a White Paper, not all the words of which are wholly attractive, but it will be coming before long and will deal with this exceedingly difficult subject. The coal carbonisation process will be continued so long as economic plant is in existence. One of the troubles of the gas industry at the moment is that some of the old-fashioned plant is hopelessly out-dated. It is a horrible thing to work at, and it is in no sense profitable. The danger of too great a dependence upon imported fuel is something which will always have to be borne in mind by any British Government. On the other 731 hand—and I know hon. Members opposite are fully aware of this—we have always got to balance what to this country is of immense importance, the keeping down of its fuel costs.
Reference has been made to the Joint Study Group on Lurgi. This, I admit, has been shrouded in mystery for a long time, but it is a very complicated problem. Hon. Members opposite will be the first to admit that there are two important industries whose views on this kind of problem are bound to be in conflict here and there. My right hon. Friend has only recently received its report. All I would say at the moment is that we will bear in mind what has been said about the desirability of the Report being seen. I cannot say more than that now. My right hon. Friend will take due note of what has been said about the need at least to get his opinion on the Report as soon as possible.
§ Mr. Peyton
I have a lot to say and, therefore, I hope the hon. Gentleman will forgive me if I do not give way.
On the question of underground storage, there again all I can offer humbly to do is to convey to my right hon. Friend the Leader of the House the comments that have been made.
One point which I feel tempted to make is this. It is so easy to advocate the course of telling nationalised industries what they should do, and, moreover, what they should do in highly technical fields, in programmes covering many years. Time and again representatives of my Department at this Box are asked, particularly by hon. Members opposite, to give general directions to nationalised industries. If any Minister made a practice of doing so he would make chaos of these extremely complicated industries in no time at all. Far from serving the public interest, he would damage it very seriously indeed.
I come now to the speech of my right hon. Friend the Member for Guildford. I hope he will not think in any way—
§ Colonel Lancaster
Before my hon. Friend leaves that matter, may I remind him that I asked him three simple questions about gas. Could we be given an answer to any one of them?
§ Mr. Peyton
I should hate my hon. and gallant Friend to feel that I would ignore his speech. Indeed, I am coming to it in a moment.
My right hon. Friend the Member for Guildford referred to the outstanding engineering successes of the electricity industry and I think they should indeed be acknowledged. It is only right that someone at this Box should pay tribute not only to the work of Sir Christopher Hinton but to the work of Sir Ronald Edwards as Chairman of the Electricity Council. I note what has been said about the anxiety felt by the Select Committee and others about the relationship between the Atomic Energy Authority and the Central Electricity Generating Board. I can tell my right hon. Friend that, so far as the nuclear programme is concerned, the decision of the Government will be announced to the House as soon as possible.
My right hon. Friend was quite correct in echoing the criticism made by the Select Committee of the weakness in commercial policy of the Area Boards, but I think he was fair in recognising that this has now been to a large extent rectified. With his usual clarity, he rightly drew attention to the dramatic impact of space heating upon load factor and electricity peak. The margin is uncomfortably low, and I must say to the right hon. Member for Llanelly (Mr. J. Griffiths) that the margin which we have in hand this year is lower than what it was last year. This is because of the inevitable delays in producing new generating capacity.
I accept what my hon. Friend said about vagueness in the line of responsibility. I accept that this is bad for the industry and injurious to the Government. Nevertheless, it is fair to remark how much easier it is to draw lines on paper or in speeches than it is in everyday practice, where the Government must necessarily be in close consultation with those who have the responsibility of managing the industry.
The right hon. Member for Llanelly asked a number of questions. I must leave the position on West Pennar where I did just now. An application will, doubtless, be received soon by my right hon. Friend, and then the matter should be somewhat clearer. The right hon. Gentleman asked what advantages there 733 would be for Wales if it were possible to generate cheaper electricity at West Pennar than elsewhere. Of course, Welsh industrialists would have the advantage of a lower industrial tariff and the bulk supply tariff would also reflect advantage to a wider body of consumers. I accept what the right hon. Gentleman said about coal fighting for its life. This is not a point which can be entirely lost on anyone serving in my Department. I also echo the right hon. Gentleman's quotation from Lord Robens that it would be a terrible thing if this industry were allowed to decline through either mismanagement or neglect.
I come with some relief to the speech of my hon. and gallant Friend the Member for South Fylde (Colonel Lancaster). I am sorry that he should have suspected me of wishing to ignore the points he made. The question of the structure of the gas industry was raised by the Select Committee and I must leave it to be dealt with in the answer which my right hon. Friend will shortly be making to the Select Committee. My hon. and gallant Friend asked about the prospects of various developments. I had best answer him by saying that whereas Lurgi and methane enjoy a definite advantage as against carbonisation, more or less the same measure of advantage is now enjoyed by light distillates as against Lurgi and methane.
In answer to a point made by several hon. Members, I question whether light distillates would now be available at the price they are if the methane project had not been started. I wonder, too, whether a very old-fashioned industry would have received, at the time when it most needed it, a vital fillip and encouragement to go forward, which, undoubtedly, the methane project has produced.
I warmly agree with what my hon. and gallant Friend said towards the end of his speech—I hope that those who espouse so eloquently the cause of the coal industry will draw some comfort from it—that what is lost by the coal industry in gas will be more than made up by the immense gains available in electricity.
I have dealt with the points made by the hon. Member for Chester-le-Street and perhaps I may say a word in reply to my hon. Friend the Member for 734 Willesden, East (Mr. Skeet). He called attention to the slowness with which approval is sometimes given to power station applications. This is a problem which, in classic words, receives constant attention. It is not easy. Most of the difficulties—let us face it—are caused by the need for democratic safeguards, upon which this House insists. If they were circumvented, there would rightly be complaints from our constituents to all of us. It is a question of balance. I merely observe from this Box that very often the public—and perhaps we can all help here—are not aware of the great need to build up supplies. There are experiments being made, and [particularly instance Wakefield Colliery, for pipelines transmitting coal.
My hon. Friend went on to say that our power stations should burn more oil. The debate today shows that that is not always a matter of agreement, nor is it one which will be easy to solve. The hon. Member for Leicester (Sir B. Janner), in my absence, produced the statement, which some might challenge from time to time, that we are all human beings. I am not challenging it now. I should like to say—and I am not doing this in any mocking sense—that these problems are most carefully considered. They perplex and worry the Generating Board very greatly. I know that there is a tendency sometimes to feel that the Generating Board and Area Boards do not consider the genuine interests of our constituents in these matters, but I can assure him that is not the case.
§ Mr. Peyton
I should like to give way if I could, but time prevents me from doing so. I would comment on the speech of ray hon. and learned Friend the Member for Surrey, East (Mr. Doughty), who would like these industries to borrow from the market. I hope that he will bear in mind that there is a huge amount that would fall to be borrowed from the market and that the recommendation of Radcliffe was on the whole against such a course. The attitude of the Electricity Council can I think fairly be described as neutral.
He then went on to make a comment which appeared to me to suggest that it was wrong to say that these industries should plough back their profits. I do 735 not accept what he said in this respect. The objective of the White Paper policy was to bring the earnings on capital in nationalised industries nearer to that earned in private industry.
I hope that the hon. Member for Edmonton will forgive me for not making any more detailed reply to the points that he made. I would only stress the fact that there is no one in the House—I am very well aware of this—who has more knowledge of what has gone on in Select Committee than himself, and no one, I suspect, more sharply aware of the dilemma which he brought to my notice.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. J. E. B. Hill.]
§ Committee upon Monday next.