HC Deb 06 February 1964 vol 688 cc1487-98

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

10.25 p.m.

Mr. Bruce Milan (Glasgow, Craigton)

I am very glad to have this opportunity of raising the question of the public inquiry into the Laidon Hydro-Electric Scheme in Perthshire. This is quite a small scheme in connection with the existing Tummel Garry scheme in Perthshire, a scheme of only 5 megawatts and costing a comparatively small amount of money, I think £1½ million.

The main point I raise is why there is an inquiry into this scheme at all, because, for the first time since the Act dealing with hydro-electric schemes, there is an inquiry into a scheme to which there are no objections at all. There was an objection from Aims of Industry, but that was withdrawn and there are now no objections. Yet the Secretary of State for Scotland has ordered a public inquiry into the scheme by adding the Laidon scheme to the Fada-Fionn scheme which is going on in Wester Ross, which is not physically or in any other way connected with the Laidon scheme.

When I asked why he had ordered an inquiry, the right hon. Gentleman said that he had done so to see whether the Laidon scheme was economically justifiable. This is a completely new departure. There have been public inquiries in the past, but they have dealt with amenity aspects of hydro-electric schemes. No one questions that there is a public interest in amenity and therefore it is perfectly appropriate that there should be procedure for public inquiry into a projected hydro-electric scheme from the amenity point of view, even though in some cases in the past objectors on amenity grounds have not had genuine objections but have simply been landlords and lairds wishing to protect selfish vested interests as against the interests of Highland electricity development.

I admit that there should be procedure for amenity objections to be heard but there is a tremendous difference between that and an objection on the grounds of the economics of a scheme. This is something which in the past has been taken to be a matter to be decided by the Secretary of State. Even after the present inquiry the Secretary of State will still have to make the decision. I want to know why the Secretary of State has tried to avoid his responsibility in regard to the Laidon scheme and in regard to the economics of the Fada-Fionn scheme by putting this on to the shoulders of a public inquiry. The whole question of the economics of different forms of electricity generation is of such complexity and involves so many complicated technical factors that it is just the kind of consideration which is not appropriate to a public inquiry.

Anyone who has read the Report of the Mackenzie Committee, part of whose work was this very question of the economics of different forms of electricity generation, knows that this is an extremely complicated question and not something which can be decided at a public inquiry. The present inquiry has been based on this question of economics, but it is not an appropriate body to decide on the economics of hydroelectricity or any other kind of electricity development. It is the more inappropriate way to have this inquiry into the Laidon scheme because not only did the Mackenzie Committee which took 18 months to do so go into the economics of different forms of electricity generation, but it specifically dealt with the economics of the Laidon scheme in one of the appendices of the Report and came to the conclusion on the tests laid down by the Committee that the Laidon scheme was economically justifiable. Despite that, we have the Secretary of State ordering a public inquiry.

If it is to be the Secretary of State's future policy to have a public inquiry into the economics of every hydroelectric scheme however small the scheme may be—and the Laidon scheme is very small, indeed—he will kill hydroelectricity development. The present inquiry has already sat for 10 days, and it has fixed dates for six further sittings this month and in March. I understand that there is no guarantee that even after 16 days it will have come to a conclusion about either the Fada-Fionn or the Laidon scheme. Even after 10 days, the inquiry has not got to the Laidon scheme.

There could in future be similar lengthy inquiries and delays with every hydro-electric scheme. Some of the objectors to the Fada-Fionn scheme are very rich men indeed. Colonel Whitbread and Major Reginald Macdonald-Buchanan are not just prosperous men, but are extremely rich. If the Secretary of State establishes as a principle that there should be a public inquiry into every hydro-electric scheme, any individual—Colonel Whitbread or any other person—who can afford to employ a lawyer to put a case will be able completely to frustrate our hydro-electricity development. Many of us, and many people in the Highlands, suspect that that is precisely what the Secretary of State intends to do—completely to prevent any further hydro-electricity development.

It is worth pointing out that this elaborate public inquiry, meeting for over 16 days, has called evidence from the Hydro Board and from fishery and salmon interests, and the rest, and still has to hear evidence from the South of Scotland Electricity Board and from the National Coal Board, but this complicated system does not apply to other electricity development. For example, a 2,400 megawatt coal-fired electricity station is to be built in the South of Scotland, and will cost £100 million. There has been no public inquiry, and there will be no public inquiry there. There is no inquiry into the economics of that scheme—whether it should be fuelled by coal, electricity, or something else. I do not object in any way to that new scheme, because it is coal-fired, as it should be. I merely point out that a £100 million scheme can go through without public inquiry at all, yet this Laidon scheme, which will cost only £1½ million, has to be subjected to this elaborate procedure.

Why are we having this inquiry at all into the Laidon scheme, when there are no objections, and why are we to have an inquiry into the economics as distinct from the amenity point of view of the Fada-Fionn scheme? I think I can give the Under-Secretary the answer. The Secretary of State, for reasons which, presumably, appear good to him but which are a mystery to the rest of us, seems determined to stop hydroelectricity development.

This is not something new. There has been a complete standstill on new hydroelectricity development since the Mackenzie Committee was established in March, 1961. It reported about 18 months later. There was another delay of another nine months while the Secretary of State made up his mind about the Committee's recommendations. In the summer of last year, the Secretary of State had to reject the Committee's main recommendation that there should be a merger of the North of Scotland Hydro Board and the South of Scotland Electricity Board. It is well known, I think, that he had hoped to announce acceptance of that recommendation, and only changed his mind because of the tremendous force of public opinion against him. He could not go ahead with it.

If the merger has been turned down, it is still true that the Secretary of State has done everything possible to frustrate hydro-electricity development. Over the years, up to 1962 from 1948, there was an average of about 5,000 men employed on hydro-electricity development in the Highlands and that is a lot of labour to employ, when we consider the serious Highland unemployment situation. What is the figure now? I do not think it is much more than 1,000. Of course, if this continued delay goes on, if the standstill continues on hydroelectricity development, then the labour employed in hydro-electricity development will come to a complete halt, with particular serious consequences on the labour situation in the north of Scotland.

There has been an attempt by the Government to pretend that of course they were not holding up electricity development and that it was something which remained in the initiative of the North of Scotland Hydro-Electric Board. This was the kind of line the Prime Minister took during his election campaign in Kinross, but the Prime Minister, in this as in so many other things, just did not know what he was talking about; he knew nothing about hydro-electricity development. As the Scotsman said in a leading article at that time, on 30th October, The honest way would be for the Government to acknowledge their responsibility and give their reasons for the delay instead of making it appear to be the fault of the board whose activities they have hamstrung since the Mackenzie Committee was appointed as long ago as March, 1961. I think that is a very fair estimate.

To add to the frustration, to add to the difficulties of the Hydro-Electric Board, to make it even more difficult for the Board, we have something new again in this present inquiry. The Mackenzie Committee was meant to give a definitive assessment of the economics of different forms of electricity generation, and there was no sign that the Secretary of State did not accept that part of the Mackenzie Report which dealt with the economics of electricity generation. When the Laidon inquiry started and the Fada Fionn inquiry started we had something new, a memorandum of guidance on the economic issues, given by the Secretary of State to the economists conducting the public inquiry, and this introduced a new element into the situation, the element being that the Hydro-Electric Board would have to show in the future that its schemes of hydro-electricity development would give a net return on the capital expenditure of 8 per cent. per annum.

I have not the time to go into the intricacies of this at the moment. All I am going to say is that it was a muddled document. It was so muddled in fact that there had to be a second memorandum three days later explaining what the first memorandum meant. There are in the second memorandum elementary errors which any second-year accountancy student could point out to the Secretary of State. The fact is that it is not a genuine attempt to get a genuine assessment of the economics of different forms of electricity generation. This is simply one more attempt to strangle the North of Scotland Hydro-Electric Board, because the fact is of the different kinds of electricity generation hydro-electricity is of course capital-intensive. The Mackenzie Committee pointed out that 94 per cent. of revenue costs of hydro-electricity were made up of investment and depredation on the capital employed. Of course, if one raises the percentage on capital return of the electricity boards one inevitably weighs the scales against hydro-electricity development, because it is, as I say, capital, intensive as compared with, say, oil or coal-fired generation.

As I say, I have not time to go into the details of this, but the fact is that this memorandum is I think deliberately designed to make hydro-electricity appear to be uneconomic, and it is not uneconomic, on the Mackenzie tests, or on the test of the Hydro-Electric Board over the years. In fact compared with the South of Scotland Electricity Board in terms of earned surplus in 1962, the last year for which figures are available, and the accumulated surplus earned by the Hydro-Electric Board, that board has been more successful than the South of Scotland Board. Again, if one takes the profit earned not on capital employed but on turnover, which is a perfectly legitimate way of doing it, certainly as legitimate as doing it on the capital employed, the North of Scotland Board has been a more successful board than the South of Scotland Board.

If the assessment is based on capital employed, one is not comparing like with like. There is no real comparison between hydro-electricity on the one hand and electricity produced by coal and oil-fired generating stations on the other. This criterion is simply a way of weighting the balance against the Hydro-Electric Board. This whole memorandum was accurately described by Mr. Michael Grieve in two excellent articles in the Daily Express, and I pay every tribute to them, as "the 8 per cent. plot." That is a very accurate way of describing it. It is a plot against the Hydro-Electric Board.

The Government must make up their minds about this. Will they give the Board the capital it requires to continue to develop hydro-electricity in the North of Scotland? We want a frank answer. We do not want a memorandum given to public inquiries. We do not want inquiries into the economics of different electricity schemes. We have had the Mackenzie Report. An economic assessment is something which should be done by the Scottish Office. If it has not the competence to do it—and I doubt whether it has—it should ask the Central Electricity Generating Board which has the competence. It is the Government who have to take the decision about this. It is not something that can be put out to a public inquiry.

We have the same thing happening with hydro-electricity as we have with forestry. They are the two hopeful features in the Highland scene at the moment, but there must be willingness to spend large sums on capital expenditure in the certainty—not the hope—that it will pay off handsomely in the future. It will pay off in forestry, which the Government have also neglected, and in hydro-electricity.

If they are to be judged by their actions in this matter, the Government apparently have written off the Highlands of Scotland. If the Secretary of State for Scotland had the courage and the guts to say, "I am going to stop hydroelectric development; it is too expensive; it means too much in the way of capital expenditure and we shall do something else in the Highlands", we could disagree with him but at least we could respect his honesty, but he has not done that. He has frustrated the efforts of the Board and demoralised the staff by putting every difficulty in their way. The behaviour of the Secretary of State in this has been utterly contemptible.

10.42 p.m.

Mr. William Ross (Kilmarnock)

It is regrettable that the Secretary of State for Scotland, whose honour is considerably at stake, has not seen fit to attend the debate. We have had over the past three years a saga of deliberate and calculated obstruction, at every stage, of the projects of the Hydro-Electric Board.

I do not want to say any more about the Prime Minister's ignorance. I am more concerned with the blundering and ill-concealed hatred of the Secretary of State against hydro-electric development, and I pay tribute to the comments of my hon. Friend the Member for Glasgow, Craigton (Mr. Millan), who has so actively pursued this subject. We had the Mackenzie Report and after that a long delay while the Secretary of State made up his mind about it. Then we had the reference to the specialists and we had the boards being told to work things out together. Eventually, after a long time, we had, unprecedentedly, an inquiry though there were no objections. This has applied in two cases in Scotland. One thing which the Highlanders value is the railways. Now there is an inquiry at which the passengers are not to be allowed to be heard. Here again, there is something else which the Highlanders want and an inquiry is set up when there are no objections. Even the deer-stalkers of the Highlands have withdrawn. The way things have gone has been absolutely disgraceful and after all that has been said the scheme has not been allowed to proceed.

Everyone else seems to know exactly what the Mackenzie Committee decided and, despite, everything the Secretary of State says, that Committee discussed capital costs in a way which was to the disadvantage of the Hydro-Electric Board. It did not take into account the fact that, after allowing for the amortisation, the hydro schemes still had a life of 20 years, which considerably reduced the capital costs, and since that time the rate of interest on which the Committee based its calculations has fallen.

This is disgraceful and I hope that the Under-Secretary will give some indication that he is at least concerned about the situation. He must know how his constituents feel about it and that the effect on Highland employment has been disastrous and that something which meant employment not for one or two thousand but for a considerable number of thousands of people has been whittled away. This has been the one institution in the Highlands which has worked, a nationalised industry which has become respected as no other institution in the Highlands has, and which is being killed and deliberately killed by the Government. Why?

10.46 p.m.

The Under-Secretary of State for Scotland (Mr. Gordon Campbell)

I am grateful to the hon. Member for Glasgow, Craigton (Mr. Millan) for giving me this opportunity of explaining more fully than is possible at Question Time the reasons why my right hon. Friend has asked those who are conducting the present inquiry into the North of Scotland Hydro-Electric Board's Fada-Fionn scheme to report to him also on the Board's Laidon scheme.

First, I should like to say a word about the statutory position governing hydro-electric schemes. Under Section 5 of the Hydro-Electric Development (Scotland) Act, 1943, as amended, when a Board submits a scheme to the Secretary of State for confirmation it is required to advertise it in the Press. The Secretary of State's consent cannot be given until there has been an opportunity of lodging objections. If an objector asks for a public inquiry, there must be one; otherwise a public inquiry may be held at the Secretary of State's discretion.

However, whether there have been objections to a scheme or not, and irrespective of whether a scheme has been the subject of a public inquiry, the Secretary of State can present an Order to Parliament confirming a hydro-electric scheme only if in his opinion it is in the public interest that the scheme be carried out.

Sir John MacLeod (Ross and Cromarty)

It does not say anywhere in the 1943 Act that a public inquiry is asked for on economic grounds.

Mr. Campbell

The position is that the Secretary of State can confirm a scheme only if in his opinion it is in the public interest that the scheme should be carried out and that covers the economic as well as the other aspects. In this matter, therefore, there is a clear statutory obligation upon him to be satisfied where the public interest lies.

It has been suggested that my right hon. Friend has sufficient information available to him now to enable him to take a decision on the Laidon scheme without referring it to public inquiry; and in this connection the economic tests which were laid down in the Mackenzie Report have been referred to. I have two comments to make on this. The Mackenzie Report laid down for the first time principles on which comparisons of production costs could be made between different methods of generating electricity in Scotland; and the Committee illustrated these by applying them to the two hydro-electric schemes which were then before the Secretary of State. These, as hon. Members are aware, were the schemes the Board wished to develop in Glen Nevis and at Loch Laidon.

In both cases the reports showed that, assuming that no greater return on capital was appropriate than the Exchequer lending rate of 6 per cent. current at the time, electricity could be provided more cheaply from these schemes than from the best thermal alternative that the Committee considered was then available.

But two other factors have to be taken into account which could significantly affect the economics of the Laidon scheme. In the first place, new generating stations, which the Committee could not take account of in its calculations, are now under construction or in contemplation and it may be that these offer a cheaper alternative source of power.

The Committee illustrated its method of cost comparison by selecting as the best alternative thermal source of power the 240 megawatts of capacity which the North Board is bringing into commission at Dundee in 1965 and 1966. Since then, as hon. Members are aware, my right hon. Friend has approved the construction of a coal-fired station in West Fife which will have an installed capacity of 2,400 megawatts—exactly ten times the capacity of the Dundee project. Further, as the Mackenzie Committee recommended, the North Board has examined the possibilities of the Dundee site and has come to the conclusion that it would be possible for it to accommodate a further 600 megawatts of capacity. In the electricity supply industry considerable economies can be gained through the installation of large blocks of generating capacity at the one site, while technical advances and metallurgical techniques have led to greater efficiency in the use of fuel.

I do not wish to suggest that these technical advances have occurred only with thermal stations and that there has been no improvement in the design or efficiency of water turbines for hydro-electric purposes or that there has been no progress in civil engineering methods. What cannot be disputed, however, is that changes have taken place since the Mackenzie Report was published and it is only right that these should be evaluated. The second factor is that of return on capital. As the Committee said in paragraph 86 of its Report, it did not regard it as its task to judge on what terms capital should be offered to finance electricity projects. This question of the rate of return on capital has an important bearing on the economics of a hydro-electric scheme.

My right hon. Friend has already made it clear to the House that, before he can sanction a scheme, he must be satisfied both that the scheme would produce electricity as cheaply to the consumer as it could be supplied from an alternative generating station and that it would represent a proper use of the substantial amount of extra capital which hydro schemes require.

In view of the increasing demand for public investment in a variety of fields it is important to ensure that the nation's capital resources are used to the maximum benefit. Where money has to be spent on bringing electricity to the consumer there is a choice of ways of doing it. Either money can be invested in providing new generating capacity by water power, or the electricity can be supplied by transmitting it from one of the modern thermal stations which are being built elsewhere in the country. In this connection, it is necessary to be sure that an adequate return could be obtained from the capital that would be tied up in a hydro scheme and this is a particular aspect of the Laidon scheme on which my right hon. Friend wishes to have an independent assessment.

To help those who are conducting the inquiry, my right hon. Friend has, therefore, issued memoranda of reference on this aspect of the matter indicating the rate of return which the Government consider that major new investment in the electricity supply industry should earn. As hon. Members are aware, the terms of these memoranda have already been made public and I should draw attention to the last paragraph of the principal memorandum, which makes it quite clear that other factors, as well as the question of the return on capital, will be taken into account in reaching a decision. The fact that all outstanding objections to the scheme have now been withdrawn is not therefore really relevant to the question of whether or not this scheme should have been referred to a public inquiry.

Without going into details of the scheme, which can more properly be brought out at the inquiry itself, I have tried to show that hydro-electric schemes, like those proposed at Laidon and Fada-Fionn, raise important issues of public interest on which a decision cannot be reached without a full assessment of comparative costs. Indeed, I find it difficult to follow the objections the hon. Member has raised against the procedure which has been adopted.

There is no intention here of attempting to prevent a desirable development from taking place. It is simply a matter of trying to make sure where the public interest in fact lies and of finding out the facts about what the most economic methods of providing power are. In this context any suggestion of bias is quite misplaced. I cannot understand why those who have criticised my right hon. Friend's actions should object to his seeking to ascertain the facts.

It has been said that it is bound to cause confusion to introduce evidence about different hydro-electricity schemes. This I cannot accept. My information is that these two schemes are being considered consecutively and that evidence of the Laidon scheme will not be heard until all the submissions in respect of the Fada-Fionn scheme have been completed. It has been implied by the hon. Member for Glasgow, Craigton that there is some plot whereby the Government are seeking to frustrate the Hydro-Electricity Board's proposal.

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

Adjourned at five minutes to Eleven o'clock.