§ 4.8 p.m.
§ The Minister of Power (Mr. Frederick Lee)
I beg to move,That this House takes note of the Report and Accounts of the Electricity Council for 1963–64 (H.C. No. 331) and of the Central Electricity Generating Board for 1963–64 (H.C. No. 332).This is the first major debate that we have been able to have on the electricity supply industry during the course of this Parliament. While, formally, the debate is about the Reports for the year ended 31st March, 1964, which were published nearly a year ago, the Reports for 1964–65 should be available early in October, but at this stage we cannot anticipate their contents. But I hope that, as is customary in debates of this kind, Mr. Speaker, you will allow some latitude both to me and to other hon. Members who will seek to catch your eye so that we may deal with some more recent developments than it was possible for the Reports to cover.
I hope that the terms of the Motion are not controversial, although controversy will probably not be altogether absent from our discussion today. The fact that we are devoting a whole day to the debate shows we are agreed on both sides as to the vital importance of the electricity supply industry to the nation as a whole. It may be a truism to say that electricity is now essential to almost every aspect of modern life, and not only essential in the life of Britain today. All the developments we see for the future depend on the electricity which drives our machines, operates our computers and helps to provide the multitude of complex services upon which an industrial nation like ours relies so heavily.
For much of the time we take electricity for granted. It is something which, we feel, is always there and we rely on it completely. But we should remember that there are vast numbers of men and women working in this great industry, controlling the machines and maintaining all the complex plant which brings the supply to us, and the power which will always be there as demand increases will be provided because of the men who are making and erecting the new plant and planning the development of our complex supply system.
1712 The Reports themselves are about the work of these men and women, about 200,000, who work in the electricity supply industry itself and the others in fuel and the provision of plant and services. The Reports are a record of what these people have achieved, and I draw the attention of the House to some of the facts set out. They are a record of achievement of which the industry can be proud.
Towards the end of the Electricity Council's Report, Appendix VI gives in summary form the results of the industry since 1954–55. Over those nine years, the number of consumers served in England and Wales has risen by nearly 3 million, or by 22 per cent. In the same period, total sales of electricity have risen from less than 58,000 million units to 121,000 million units, in other words, more than double. In Appendix VIII, there is a table showing that the total output capacity of the power stations has risen from 17,000 MW to 33,000 MW, in other words, nearly double again. Appendix X shows that the total number of workers in the industry was 210,000 on 31st March, 1964. The figure nine years earlier is not given in the Report but it was 179,000. Thus, the amount of plant has nearly doubled, the output of electricity has more than doubled, but the number of workers has risen by only 17 per cent. In terms of units sold, this represents an increase in productivity of nearly 7 per cent. per year.
While these great advances were going on, the industry was successfully holding, its prices at a remarkably stable level. As Appendix VI shows, over the nine years the average price of a unit of electricity went up from 1.37d. to 1.62d., in other words, by 18 per cent. In the same period, retail prices generally rose by 30 per cent. I know that there have recently been further increases in electricity prices, about which I shall say something a little later, but for the moment I am dealing with the period covered by the Reports, and over that period, I submit, the industry's record is extremely good.
§ Mr. John Peyton (Yeovil)
I realise that we are debating rather ancient Reports and that the Minister will necessarily be dealing with some of the details in them, but I hope, Mr. Speaker, that, with your permission, he will not feel 1713 inhibited about raising the veil on what has happened since.
§ Mr. Lee
That is fair enough. In what I said a little earlier I tried to make sure that the hon. Gentleman would have the right to do that. I shall myself hope to say something, but I think it necessary, as we are debating these Reports, at least to mention them in passing.
I was giving a summary of what I felt was a fair appraisal of the accomplishments of the industry, suggesting that it was a summary of work well done and something upon which we could congratulate the whole industry. I think that this success is due to advances in labour productivity, improvements in thermal efficiency and, to a great extent, technical advances and economies of scale which have led to a steep reduction in the cost of new plant.
It is a striking fact that the average cost of new conventional power stations has fallen from about £60 per kW in 1955 to about £40 today. Our integrated supply system enables us to take advantage of the economies that can be obtained from large generating sets and from concentration on a relatively few designs. But it is also a great credit to the plant manufacturing industry that such a reduction should have been achieved.
There is no doubt that the story of the industry is one of great success, but, of course, within it there are problems and difficulties. First, the continual growth of electricity demand calls for and will continue to call for very heavy investment. The net assets employed in the industry now stand at about £3,000 million, and new capital investment is needed at a rate now in the neighbourhood of £600 million a year.
Nearly half is provided from the industry's own resources, mainly from depreciation funds and from the balance of revenue which is left after meeting outgoings and paying interest on borrowings. The remainder has to come from borrowings from the Exchequer, and, in times of economic strain such as we are now enduring, it is a very heavy commitment.
At present, capital investment is running at a high rate because the growth of load was underestimated during the late 1950s and the programmes for new 1714 generating plant had to be sharply increased a few years later. Moreover, the cold weather in the winter of 1962–63 showed the need for greater margins of security in both generation and distribution.
The new capacity is being provided, but the effect is that the industry has to bear a heavy burden of expenditure on new plant which has not yet begun to yield a return. During the past two years, the growth of sales has flattened out a little so that revenues have been less buoyant and there have, during this period, been sharp increases in costs, in wages and that kind of thing. I am not sure that we have yet got the answer to why this has occurred, that is, why demand should have flattened, but it certainly has and it will be interesting to see whether it becomes the pattern in future years. Because of these things, price increases have recently been necessary.
Hon. Members who follow me in the debate may wish to refer to this aspect of our work. The need for price stability is very much in the mind of everyone, certainly in this Chamber, and I need hardly say that I regret that electricity prices had to go up. I am sure, however, that they had to. I satisfied myself that there was no possible alternative.
The industry must either earn the money which it needs for capital investment or it must borrow it, and the policy that we are following in this matter is consistent with that pursued by the last Government. Nationalised industries have financial and economic obligations to the nation and an industry which employs such enormous capital assets as the electricity industry does must earn a reasonable rate of return on them.
To emphasise a point in that connection, in the past two years we have had one round of price increases, in which each of the area boards has raised its prices, the last being the London Board on 1st July this year. Because, however, there are 12 area boards and some were able to postpone their tariff increases longer than others, one sometimes gets the impression that prices are going up more frequently than is the case. There has been only one round of price increases.
As I said earlier, over a long period the price of electricity has risen much less than retail prices in general. Even over 1715 the two-year period ending 31st March, 1965, during which time there were these price rises, about which there have been complaints, the average price of electricity went up by 5½ per cent. and the general level of retail prices rose by almost exactly the same figure. I have already mentioned that in years gone by the increases in price were far and away less than the rise in the retail index itself. Even during the recent two-year period when there has been a rather higher rate of increase for electricity, it is still no higher than the advance in the retail index.
In speaking of prices, I should like to mention that the position of some consumers has been substantially improved as a result of our action. I refer to the unfortunate tenants who bought electricity, not direct from the boards, but from those landlords who exploited the opportunity to resell electricity, sometimes at a fairly enormous profit. I do not say that there were a great number of these people, but their number was growing and we felt that this practice had to be dealt with. Certainly, there were many tenants who were being exploited in this way and they could do nothing about it.
The Electricity Act, 1957, enabled the area boards to fix maximum prices for the resale of electricity. When I took office, seven years later, no maximum prices had been fixed. I do not deny that there were many difficulties, but I would have thought that they should have been overcome much earlier. I discussed the matter with the Electricity Council and was able to announce in the House on 22nd March that the area boards had agreed to fix maximum prices. This has been done with effect from 1st July. These maximum prices allow a fair margin for the landlord, certainly enough to cover all reasonable costs, and any tenant who is charged more than the maximum price now has a remedy open to him.
Another problem which has been with us for a long time and which it would be appropriate to mention is that of connection charges for new housing estates. This question arises in the House from time to time. Indeed, it was debated on the Motion for the Adjournment on 8th July. As my hon. Friend the Parliamentary Secretary explained, I am trying 1716 to bring the gas and electricity industries together in an agreement which, I hope, will be acceptable to both of them and will ensure that consumers are free to make their own choice of fuel as far as is economically practicable. I hope that it will not be too long before such an agreement is worked out.
So far, I have spoken of the past and the present and I hope that what I have said will reinforce the impression that the annual Reports give an impression of an industry which is continually advancing in scale and efficiency. But what of the future? In this respect, one thing which is certain is that the industry will continue to be among the leaders of technical progress. It leads the world in the application of nuclear power. We in this country already have by far the biggest output from commercial nuclear power stations of any country in the world. We produce more nuclear power than the whole of the rest of the Western world, including America.
Last week, the Generating Board published details of another British investment that will help to maintain our lead. That is the A.G.R., which I announced in the House some time ago. One of these reactors is to be built at Dungeness and it will make nuclear power fully competitive with our best coal-fired stations.
As I have already informed the House, the Government are reviewing the size of the second nuclear power programme. In April, 1964, it was decided that a programme of 5,000 MW should be adopted for planning purposes for the years 1970 to 1975. This, however, was to be subject to review in the light of the information obtained from the Dungeness tenders. There will be a further statement when the review is completed and I hope to be able to make it before the end of the year.
Whatever the outcome of the review, the industry will continue to need coal for many years to come.
§ Mr. Eric Lubbock (Orpington)
May I interrupt the Minister? Does this mean that the programme for A.G.R. stations might now exceed 5,000 MV? Is this figure the minimum?
§ Mr. Lee
I should not have thought that there was the slightest danger of 1717 its being reduced. With the success of the A.G.R., the hon. Member's assumption is certainly right.
No matter how the change-over comes, for many years ahead there will not only be a need for great quantities of coal, but the need will be for increasing quantities of coal. In 1963–64, the Generating Board used 61 million tons of coal and in 1964–65 it used 64 million tons. Fifteen new coal-fired stations are now under construction, partly to replace the older stations which are closing down. When these new stations are completed, the Generating Board will have a large proportion of its capacity in the form of new coal-fired stations with a working life of 25 years or more. These stations will burn coal with a high efficiency in the 500-MW sets which the Generating Board has adopted as standard for the next few years. Forty-seven of these sets are now on order. They will be able to produce substantially more power than the entire capacity of the industry 10 years ago.
Standardisation of size will yield economies in construction. I emphasise that it is standardisation that we are referring to here, and not stagnation. Prototype sets of 660 MW to operate at supercritical steam pressures of 3,500 lb. per sq. in. are now planned for the very early 1970s.
I turn to the transmission side. Here the industry is introducing transmission at 400 kV. Here again, I should like to say a few words on the subject, in which the House takes a very great interest, and I am glad it does, because it is enormously important. Very high pylons are necessary for transmission at this voltage and they cause some amenity problems, but we must not forget that without this move to a higher voltage the amenity problems involved in long distance transmission would indeed have become even more serious. One 400 kV line will carry as much power as three existing 275 kV supergrid lines or 18 of the standard 132 kV grid-lines.
Nevertheless, very great efforts are being made at considerable cost to reduce the impact of these new lines on the countryside. For example, in North Wales the Board proposed to place 2¼ miles of 400 kV line underground 1718 at the crossing of the Glaslyn Estuary. Following a public inquiry, my predecessor decided that the length of undergrounding ought to be extended by another 1½ miles. The cost of the Board's placing the whole section underground will be about £4 million. Another section of 400 kV lines is being placed underground in the Peak District National Park following a public inquiry, and here the cost will be £3½ million.
I give these instances to show the type of cost entailed in undergrounding. At the same time, the industry is vigourously pursuing every line of research which holds out promise of reducing the enormous cost of placing such lines underground. Indeed, I was discussing the problem with the Council and the Generating Board only the other day and they were telling me about the work which was going forward.
It would be quite wrong and pointless to say there is any easy solution to this very difficult problem. There is, of course, a fundamental difficulty, because an underground line must be both insulated and kept cool along its whole length, and the two requirements are contradictory: insulation tends to keep the heat in. The most we can hope for in the foreseeable future, therefore, is some reduction in the enormous disparity which exists at present between the £50,000 a mile of 400 kV overhead lines and the £1 million a mile, the cost of the equivalent underground cable, but what can be done, I can assure the House, is being done.
I have seen some of the work being done at Leatherhead and other places and I can assure the House that neither the Board nor any of the employees are allowing anything to stand in their way in breaking through in this very important field. Indeed, research on this problem has top priority and every idea which promises to become a step forward is being actively followed up.
§ Sir Richard Nugent (Guildford)
Will the Minister, while on this point of transmission, tell the House what the prospect is of reducing the amenity problem by the use of D.C. transmission instead of A.C.?
§ Mr. Arthur Palmer (Bristol, Central)
Will my right hon. Friend not agree that the industry will get a 12 per cent. to 12½ per cent. return for the increased cost of undergrounding?
§ Mr. Lee
Yes, that is why we have to look at the costing factor of undergrounding as against a huge overall programme. I will say a word or two more while on the question of costing, because, of course, it is a very great problem at a time when all of us, I think, would like to feel that the huge amounts of capital expenditure which are necessary ought to be looked at very closely.
I hope it is clear to the House from what I have been saying that the Generating Board is not simply waiting for research to produce cost reductions. Even at present day costs they are laying a very considerable proportion of their new transmission lines underground instead of building them overhead in order to preserve amenities in the way we want it to do.
If I could give the House some figures on this perhaps it would answer the point which my hon. Friend the Member for Bristol, Central (Mr. Palmer) has in mind. The Board gave me some figures of the amount of money which it spends on underground cables and I give them to hon. Members because they are not generaly known and they may surprise hon. Members. About one-third of the total expenditure by the Generating Board on transmission lines in 1964–65 was spent on underground cables and by 1970 this is expected to rise to over two-thirds. During the three years starting in 1968 the Board expects to spend £39 million on 1,350 miles of overhead lines and £107 million on 500 route miles of underground cable.
These are astounding figures. I do not want to prevent undergrounding, but we must face what it means.
§ Mr. John H. Osborn (Sheffield, Hallam)
Would the right hon. Gentleman explain? I presume you are referring to low voltage transmission—
§ Mr. Deputy-Speaker (Dr. Horace King)
I am not referring to anything. 1720 The hon. Member must put his question to the Minister through the Chair.
§ Mr. Osborn
I beg your pardon, Mr. Deputy-Speaker. Could the Minister explain this figure in so far as it concerns low voltage transmission? How much of total expenditure is on low voltage as against high voltage underground transmission?
§ Mr. Lee
What I am trying to show is that the problem of amenity is being met to a very large degree. I do not differentiate between 400 kV. and 132 kV. The cost was astronomical. If we are to insist on more and more under-grounding, then we have to face the hugely increased percentage of cost in that operation. This puts into perspective the problem that we have to face.
§ Dr. Jeremy Bray (Middlesbrough, West)
Would my right hon. Friend not agree that it is necessary to get into the public mind the size of the savings achieved by using 400 kV. distribution? It is no use simply quoting enormously expensive distribution costs unless they are related to the saving in generating costs and in energy lost in the distribution process. It is rather browbeating the public if one does not set against the cost of underground distribution the comparable savings of very high voltage distribution.
§ Mr. Lee
I am not disputing what my hon. Friend says. I think that the House will know we are very much concerned with amenity. I am not trying to subdivide the issue and discuss what is good and what is not. I wanted to show hon. Members what the Board is doing on undergrounding, because it, too, is very keen about the amenity side. That being so, I wanted to show the House the enormous costs which this is bound to entail.
I have spoken a lot about generation and transmission which are the responsibility of the Generating Board. The work which the area boards are doing is no less important, and if I say less about that it is certainly not because it is more difficult to single out particular developments to mention in the field of distribution.
However, the House may like to know that rural electrification is now approaching completion. Of the 280,000 farms in England and Wales, 94 per cent. have an electricity supply, compared with 32 1721 per cent. on vesting day. Of the 1,800,000 "other rural premises", 97 per cent. have a supply, compared with 55 per cent. on vesting day. I am sure that the House will agree that again is a huge programme, upon which we can compliment the industry. I suppose that it means that it has enabled agriculture to become possibly the most highly mechanised agricultural industry in the world. We pay those in the electricity industry our compliments on the great work theat they have done in that respect.
About 16,000 farms are still without an electricity supply. Last year, rather more than 4,000 new connections were made, and the boards plan to continue for another two years connecting farms at the rate of about 4,000 a year. Thereafter, the rate will slow down considerably, and by 1970 there is expected to be a residue of about 7,000 farms without a supply. Half of those are farms that do not require a supply, which may mean that the farmer is unwilling to pay the connection charges demanded by the board. The other half can be given supply only at an excessively high cost, £1,000 to £1,500. Faced with costs of that order, we need to pause before advocating that the industry should seek to connect 100 per cent. of the farms.
Electricity boards are already incurring a loss of about £5 million a year on rural supplies, which has to be borne by the general body of consumers. At the same time, other uneconomic supplies are given to rural areas by the gas industry, and that is a problem that we are trying to look at now. There may well be room for closer co-ordination between the two industries and some give and take in areas where neither can hope to break even and where the presence of one merely increases the losses incurred by the other. In other words, there are areas in which both gas and electricity seem to be competing for the honour of supplying the greatest amount of subsidy to those concerned, and it may not be a bad idea to question whether the journey is really necessary in the case of one or the other. That is a problem that I am looking at closely.
In distribution, as in generation and transmission, the industry is pressing ahead with its research work. New equipment is being developed and improved working methods introduced to increase 1722 the efficiency and security of electricity supplies. Within the last few days, the industry has announced the setting up of a new laboratory at Capenhurst which will concentrate on research into distribution and on appliances and methods of using electricity. The work done in that laboratory will form part of a research programme covering generation, transmission and distribution on which the industry is planning now to spend £10 million in the current year.
The very fact that research is being undertaken on such a scale is one of the best assurances that we could have of its determination to maintain the rapid pace of development which it has achieved so far. I believe that we can say with confidence that the industry has served the country well in the past. All that I have learned about it since I became Minister of Power last October has strengthened my conviction that it will serve the country just as well in the future.
§ Mr. Peyton
I did not want to interrupt the right hon. Gentleman, but we are very concerned to know about what appears to be a most important point; that is, the effect on the future investment of the industry of the announcement made by his right hon. Friend the Chancellor. It was a very vague hotch-potch of stuff which was put before the House the other day, and this is the opportunity to find out what is its specific effect on and application to this highly important industry.
§ Mr. Lee
I see the hon. Gentleman's point, but these are early days. As a matter of fact, there is no specific effect to which I can refer at the moment. I am having discussions with each of the industries concerned about short-term measures that they can take in the light of the Chancellor's statement. But at present I am not in a position to give any detailed statement of its effects.
If I may put it the other way round, suppose that the Chancellor had first of all gone into detail about each of the industries in an effort, shall we say, to cut them back, and had announced it afterwards. Then there would have been cause for apprehension and disquiet. I think that we did it the right way round. The Chancellor made his statement, and each of the Ministers who have responsibilities for nationalised industries will 1723 now be discussing with the industries concerned how we can put into effect the general principles about which my right hon. Friend was speaking.
§ Mr. Peyton
Does the Minister mean that he anticipates a significant cut-back in investment on the part of the electricity industry? This is a very important and crucial point, and I must press the Minister on it.
§ Mr. Lee
If the hon. Gentleman will look again at what my right hon. Friend said, he was not talking about cutting back, but postponing and lengthening out the period. I have said today that I am quite certain that the figures necessary for capital development which the Board requires must go ahead, otherwise there will be a hold-up through the lack of capital and inability to meet loads, and so on. Within all that, there may well be areas in which we can defer certain capital developments, but there is no intention of deferring anything of an essential nature which might in any way imperil the development programme of the industry.
I was saying that I am quite sure that we all congratulate those who lead the industry and those who work in it on the very remarkable achievement that they have to their credit. It is a great pleasure for me to be able to work with them. In the future the industry will be one of the highly technical industries upon which we can rely with the very greatest confidence. We are all now dedicated to the idea that the national product must increase. It will mean greater demands on energy than the country has needed in the past. The achievements that the industry has to its credit give us the greatest confidence that, no matter what the demand may be on this very fine industry, such is its competence that it will certainly be able to meet it.
§ 4.49 p.m.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
The Minister has given us a very thorough survey, for which we are grateful, of the problems of the electricity industry. Some months ago, the Minister was described in The Times as "one of the three weak Freds". It would be only fair to congratulate him on having got through this rather traumatic summer without undue damage. He looks very well and very fit, despite the late sitting 1724 that we have just had, when, no doubt, he was here until 11.30 this morning.
The right hon. Gentleman has avoided falling into any of the pitfalls of the 200 million tons of coal that have been dug for him. He has avoided all the iron and steel traps which have been set for him. He has avoided setting light to any explosive mixtures of gas during this first Session of Parliament as Minister of Power.
I think that the right hon. Gentleman has even been able to pour a little oil on the troubled waters of his own party. But the moment of truth will come next Session, when he has to face many of the serious problems confronting the fuel industries, and he will have trouble from his own supporters if he pursues the sensible policy which in many respects he has so far pursued. If I might misquote "Gray's Elergy", next Session "the lowing herd will wind slowly o'er the Lee."
Many questions remain unanswered. In previous debates many questions have been asked about the fuel industries, and I am sorry that some of the major issues were not dealt with by the right hon. Gentleman today. My right hon. and hon. Friends have pointed out the enormous amount of capital that we require for the fuel industries. Between 1965 and 1970, £3,500 million have to be found for this industry, and if one adds to that the amount that it is to find from its own resources, there is a total of between £7,000 million and £8,000 million worth of investment which it will require in the next five years.
During the debate on the Gas (Borrowing Powers) Bill my hon. Friend the Member for Yeovil (Mr. Peyton), my right hon. Friend the Member for Guildford (Sir R. Nugent), and many others, asked where this money was coming from. It is no good going on producing borrowing powers Bills and Orders when the Government, clearly, have not the slightest idea of how they are to raise these enormous sums of money; and I am not talking only about these two industries. There is also the public sector, private industry, and other vast fields where capital will be needed. So I must ask the Government where this money is to come from. We have had no answer to this question when we have asked it in previous debates.
1725 By means of the Budget the Government have attacked the gilt-edged market. They have devalued their own credit in the market, and, as my right hon. Friend the Member for Wolverhampton, South-West (Mr. Powell), who I am delighted to see here, pointed out in a recent article in the Director, the Government's credit is not only nil; it is minus. Between 1958 and 1963 the net borrowing which the Government—and this was a Tory Government—were able to achieve was £3 million. Last year the figure slipped to minus £467 million. Not only have the Government got no credit; they are a distinct liability on the market, and they are unable to raise one penny of this sum.
We have to realise that this money will come from overseas drawings, from overseas borrowings, and from the Government's printing presses. There is no other source from which this large investment capital can be found. I know that these are not questions for the Parliamentary Secretary to answer, but they are questions for the Government to answer, and the hon. Gentleman is responsible for assuring us that every penny of electricity investment is vital and cannot be done without. We cannot go on investing money without having absolute certainty that this investment will yield a proper return, is right in its priorities, and is essential to the future of the nation.
It is not only a question whether the investment is correctly made within the electricity industry, but also whether it is properly made vis-à-vis other industries. One fundamental reason why the Government are right to adhere to the target set for the nationalised industries is that it gives some sort of guarantee that at least the investment is being asked to earn a proper return.
The whole of the electricity industry's investment depends on its forecast of demand for the future. We have, first, the capacity forecast which is based on an exponential curve of past experience and about which a lot is said in the Select Committee's Report. It is based on a 4 per cent. per annum growth rate, or a 25 per cent. increase in growth between 1964 and 1970. Secondly, the Electricity Council has decided to increase what is called the planning margin from 14 per cent. over normal capacity to 17 per cent. This is to allow for exceptionally severe 1726 weather conditions, plant breakdowns, and other mishaps.
I should like to consider for a moment whether those two assumptions are valid. We must ask ourselves these questions in the present conditions of scarcity of capital. First, do the Government really think that we are going to achieve a 4 per cent. growth rate? We have been achieving a 2 per cent., or 2½ per cent. growth rate, and I have no doubt at all that since the party opposite took over our affairs the rate has been very much less than 2½ per cent. The First Secretary of State has done all that he possibly can to reduce the rate of growth, and this does not augur well for achieving the 25 per cent. growth which we are expecting over the next six years.
Within this, will the demand for electricity grow as fast over the next five years as it has grown in the past? The Minister said that it had flattened out, and that the demand curve was not going up. It is based on the 7.8 per cent. increase per annum over the last 10 years, which we will not perhaps achieve; so I think that there are serious grounds for doubting whether the Government will, in fact, have such a large commitment as the electricity industry is expecting.
I propose now to deal with the 14 per cent. to 17 per cent. increase in the margin. During the bad winter of 1962–63, which was the worst for 100 years, the kind that might occur only once, twice, or perhaps three times in 100 years, we had a 7 per cent. margin, and we also had a work-to-rule among electricity employees. Even so, we got through. We had cuts in voltage. We had disconnections, and we had some inconvenience and even some hardship, but the hardship suffered during that winter has to be set against the enormous demands on capital, and the difficulties which the Government will have in finding the money, before we can decide what we should do.
In its evidence to the Select Committee the Central Electricity Generating Board said that it would have been all right during that winter if it had had a 14 per cent. margin, and no work-to-rule. If it would have been all right in that winter with 14 per cent. and no work-to-rule, it is arguable whether it is right to bump up the margin to 17 per cent. by 1970, which it is going to do. According to the figures 1727 given by Sir Ronald Edwards, by 1970 the industry will have a capacity of 66,000 mW and a demand of 54,000 mW. If my arithmetic is not incorrect that is an 18 per cent. margin.
What all this adds up to is that the margin will increase from 7 per cent. in the bad winter of 1962–63, to 18 per cent. in 1970, and this large increase in the margin has to be justified by the Government. I am not saying that it is wrong, but, in view of the scarcity of capital, we want to hear the justification for these very large increases in capacity which could be a mis-investment of our money.
A few minutes ago my hon. Friend the Member for Yeovil pressed the Minister to tell us what the Chancellor meant in his statement last Tuesday, when he said:The nationalised industries will be called on to follow a similar course of action.The course of action was not clear and the only bit that can possibly apply is the statement that the Government intend toslow down the rate of expenditure on capital projects."—[OFFICIAL REPORT, 27th July, 1965; Vol. 717, c. 228–9.]What does this mean? Does it mean that the C.E.G.B. will be asked to stop or to postpone projects? What is the extent of the cut-back, and what will be the effect on the margin, and on capacity in the future? It is no good using words and phrases like that unless the Minister tells us exactly what he means. If he gives us the full details of what is implied, we can assess its effect.
It may be that there is some scope for reduction. The difficulty lies in the fact that the next five years are the years when we shall be short of capacity, whereas by 1970–75 we may be making the mistake of over-providing. I very strongly endorse my hon. Friend's question. We expect to have a clear statement from the Parliamentary Secretary as to what he has in mind—what the extent of the cut back will be, and what effect it will have on electricity supply.
The figures for raw materials of the industry show that the consumption of oil, in terms of coal equivalent, will increase, by 1970, from 9 million tons to 12 million tons, that the consumption of coal will increase from 70 million tons to 78 million tons, and nuclear power 1728 from 1.3 million tons to 12 million tons, provided that all the factors which the electricity industry takes into account remain equal.
Indeed, Mr. Brown, the Chairman of the Generating Board, said that he would be surprised if the take of coal ever exceeded 80 million tons. We would like to know the Government's idea of that. The final point that emerges from a consideration of the raw materials of the industry is that the economics have to be decided now as to what power stations will be built—nuclear coal-fired or oil-fired—for the period five, six, or seven years ahead. If the Government are to change the rules between now and then it will upset the economic calculations which the industry has made.
In a previous debate on the Gas (Borrowing Powers) Bill my hon. and gallant Friend the Member for South Fylde (Colonel Lancaster), my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn), my hon Friend the Member for Yeovil and many others, repeatedly asked the Minister whether he would alter the financial target for the gas industry. We asked whether he would do this, or place an oil tax on the gas industry, or reduce the oil tax on the electricity industry, or do something about imported coal and the prohibition thereof. He would then falsify all the economic facts upon which the Electricity Council has been basing its forecasts for the future. So it is of vital importance to have a statement about this. If we are to invest between £7,000 million and £8,000 million in the next five years we want to be certain that we are investing on an absolutely accurate assessment of the costs of competing fuels in the future.
The Minister has chosen to do this by means of his celebrated Energy Advisory Committee. He keeps calling for an integrated fuel policy. The Labour Party's election manifesto talked about having a co-ordinated policy for the major fuel industries. But, whatever he does, it is something of much greater importance than debating the matter across this Table; it is a question of not wasting precious British capital in the future. That is why my hon. Friends have been pressing the Minister. We want to know what the policy will be. We do not believe in an integrated fuel policy, with everything parcelled out and worked out 1729 for years ahead, but we want to know the worst, and what will come from the Government on this subject.
For one who feels as strongly as I do about this matter it is disappointing to learn that the Energy Advisory Committee has met three times during the nine months that the Government have been in office—once for one-and-a-quarter hours, once for three-quarters of an hour, and on the third occasion for an unspecified number of minutes. Perhaps we may be told how long the third meeting lasted. This is not producing the answers. We do not mind how the Minister arrives at them, but we want to know what he intends to do to protect fuel generally.
My hon. Friend the Member for Yeovil referred to the Committee as a useful talking shop, but said that the results would be anything but unanimous. We have some doubts whether this is the right way to arrive at a fuel policy, but that is not so much our business. What is our business is to be told the Government's intentions, and we look forward very much to being told this.
I want to say a few words about the new tender for Dungeness B. There is great interest in this new nuclear power station, and it is quite right to congratulate both the Atomic Energy Authority and the Nuclear Power Group on having produced a design which has been proved cheaper than any other design available in the world. This is a great tribute to British technology, and at a time when we have had some reverses in technological development it is right to pay tribute where it is due.
This represents a breakthrough, and it is reflected in the C.E.G.B.'s forecast that nuclear power which now provides 1 million tons of coal equivalent, will rise to 12 million tons in 1970. A twelve-fold increase clearly indicates that this is something that works, something which is winning and which will gain in importance. There has been some speculation why the American boiling water reactor tender was so high. It is better to face this point, and not to brush it off.
That is why we are extremely glad that the Central Electricity Generating Board has published a booklet explaining in fairly technical but very clear and concise terms the factors upon which it 1730 arrived at its decision. Having read it with great care and interest, I find it a most impressive and convincing document, and one which has done great service to British industry.
To my mind three points emerge. First, the conditions of tender were identical for all tenderers. No advantage or disadvantage was given to any one or the other, with the single exception of the duty upon imported materials and machinery which might have been bought from America. The total cost of the duty, included in the American tenders, was £800,000, which is negligible in a sum of over £100 million, and nobody could claim that the element of duty on imports would in any way have changed the result.
The second point is that the United States' tender was prepared with full freedom to decide where to buy its materials and plant, whether to import or to manufacture in this country, without any duress being put upon it to conform to conditions which did not suit its system. It had a free run.
The third point is that the criteria—the bases upon which the tender is assessed—are stiffer here than in America. The productivity of labour is probably lower in this country, which increases the cost, and the fuel costs may be higher here. The real defect of the American reactor is that its lack of availability has increased its cost to the C.E.G.B.
To anybody who doubts that this has been an honest and a fair process, I would say, why do not the Americans call for a tender for the A.G.R. on the Oyster Creek site in America? If anyone has any doubt—if anybody believes that there has not been fair play—let him call for a tender for a British A.G.R. on the Oyster Creek site. He would come to the conclusion that it would be cheaper than anything which might be tendered for by the Americans, and it would put finally to rest the doubts raised on this question.
There is one other question, which has wider implications. Should not we have a foot in the boiling water reactor camp? Are we right to put all our eggs in the A.G.R. basket? I believe that these are not the same type of reactors. The point is that the A.G.R. is a reactor with 1731 a larger power output than the boiling water reactor. It is suitable for advanced industrial countries, where there is dense population and heavy use of electricity. As such it has potentialities in the advanced countries. The boiling water reactor is suitable for sparsely populated countries where the use of electricity is lower. We cannot confuse the two.
If we were now to try to get on to the boiling water reactor bandwagon, we should be five years too late. We should be pouring our precious resources into something which the Americans have already developed and we should be trying to ride both horses at once. I believe that we have backed a winner in the A.G.R. I congratulate those concerned and I hope that the Government will now turn their attention towards increasing the exports of this product and making sure that we can get a return from our very large investment in it.
The Minister talked at some length about the prices structure of the electricity industry. Clearly, the financial target, the economic obligation, has tended to raise the price of electricity. Sir Ronald Edwards said at the power conference at Brighton that, in the last 10 years, the price of electricity had gone up by approximately 21 per cent. If it had not been for the financial target, it would have gone up by only 18 per cent. So, hitherto, the effect of the financial target has been to replace an increase of 18 per cent. with one of 21 per cent.
This is a small price to pay for the immense improvement and the immense advantages of the targets which I discussed earlier. My hon. and right hon. Friends laid down those targets when they were in Government and we on this side believe that they are vital. We congratulate the Government on sticking to them: we realise that it has been a somewhat embarrassing and difficult decision for them to take. We welcome their conversion. My hon. Friend the Member for Yeovil paid great tribute to the Minister for this. We hope that this can cease to be a matter of dissension and that the targets can now be accepted as an essential discipline for the nationalised industries throughout our economy.
§ Mr. Lubbock
In spite of the fact that the present Ministry has persevered in the policy of the financial targets, would 1732 the hon. Member not think that there should be a uniform policy for reference of price increases by individual electricity boards to the National Board for Prices and Incomes? Is it not anomalous that one case of an increase should be referred to the Board and yet another, which relates to a larger increase, is not referred?
§ Mr. Ridley
I have noticed the hon. Gentleman's Question on this subject and the Answer which he received. I intended to refer in passing to this. There is little point in referring a price increase of this sort to the National Board for Prices and Incomes, when 80 per cent. of the costs of the area boards are represented by the bulk supply tariff which the Generating Board places upon them.
The Generating Board appears to be in a position of immunity from the hon. Member for Orpington (Mr. Lubbock), who cannot ask Questions about it, from the National Board for Prices and Incomes and from the consumers themselves. So this problem is slightly more complicated than he suggests. It is, obviously, anomalous to refer one increase to the Board and not another. But it would be wrong to try to look at this problem as a small one. We may have struck here an administrative weakness which should be considered seriously.
The London Electricity Consultative Council has made a request, as a result of this point, to have a seat on the Electricity Council. What does the Minister think about this? Is this an idea which he will take up? I should like to hear his views. It does not seem a very impressive idea to us, but he may accept it. We on this side of the House feel that the Central Electricity Generating Board managers in the country should have representation on the area boards, so that they can be in closer touch with the protests of consumers and the commercial considerations which are in the minds of the area boards.
Clearly, the C.E.G.B. should be brought into closer contact with public opinion. That is one of the structural problems to which some of my hon. Friends may wish to refer and on which I should like the hon. Gentleman to comment.
§ Mr. Palmer
I hope that the hon. Gentleman is not unaware that this present structure of the electricity industry is the revised structure of the Act of 1957, which his party brought in and which, in many details, was criticised from this side of the House at the time.
§ Mr. Ridley
I would never be dogmatic and assert that any organisation was always right. I can think of sweeping changes which I would make on the benches opposite. Although it is only eight months since they were appointed, I think that the whole organisation should be turned upside down and bundled out through that door.
This would not prevent me from admitting that, every few years, in organisations like the nationalised industries, which are a new experiment in this country—we have had them for only 15 years, which is, in my opinion, too long —any experiment which we can do to improve on them is welcome. The hon. Gentleman and I sit on the Select Committee on the Nationalised Industries and we think about how these things should be better organised. I am making a suggestion which I hope that he will consider favourably.
It would be wrong of me to follow the Minister at any length into the subject of amenity. I should like to sly a few words about it, but I think he gave us such a comprehensive and interesting survey of the difficulties of undergrounding lines, the costs thereof and the increasing share of the distribution capital which will be used for undergrounding lines rather than for overhead transmission.
Some progress could be made with undergrounding the smaller lines, the distribution lines. Nobody believes that the 400 megavolt lines can be undergrounded in any significant numbers, but the forest of smaller wires which festoon our countryside are the ugliest. These are what people are beginning to mind more than the rather magnificent striding pylons which can look very fine over open, hilly country and which can be made a success. In any case, I do not believe that it is practical to put these underground. Much more thought is needed on this subject.
1734 The success of the A.G.R. may enable nuclear power stations now to be put inland. This will mean that they can be put nearer to the load and this, in turn, could reduce the length of transmission line which is necessary. A new approach may be necessary. It may be necessary for the C.E.G.B. to plan its stations, its lines and its loads so better to avoid the areas of outstanding natural beauty.
The new techniques of D.C. transmission—super-conductivity, fuel cells and all the great promise which research and science offer to the electricity industry—may obviate the need for these massive strings of pylons. We urge the Government to proceed with research into this subject. We welcome the Report of the Electricity Council, we congratulate the leaders of the industry and we hope that, in the year to come, it will continue to make the good progress which we on this side of the House recognise.
§ 5.19 p.m.
§ Mr. Arthur F. Palmer (Bristol, Central)
I listened with great care to the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who opened for the Opposition, but I thought that there was a contradiction between his fears that there might be a reduction in the capital allocation to the electricity supply industry in future and his doubts whether the money could be found. I agree with him that all investment in electricity supply must be justified on its merits and properly related to the other fuel and power industries, but I have great difficulty in understanding the argument that the capital cannot be obtained. After all, it is a public utility industry with little financial risk.
It is obtaining 50 per cent. of its new capital from its own resources, and its history shows that it has always expanded in good times and in had. I should have thought that, provided that we maintain full employment and reasonable national productivity, there should be no great problem in devoting a sufficient proportion of the national resources in terms of material and manpower to the continued expansion of the electricity supply industry. Unless it is based on doubtful and academic financial assumptions, I feel that the hon. Member's fear is a little far fetched as an exercise in logic.
1735 I want generally to make a point which I made, as did other hon. Members on both sides of the House, when we recently discussed the affairs of the gas industry, I think for the third time during this Session: the problems of electricity supply, as those of gas, are problems of fuel and power generally. That to me means an expression of fuel and power policy, which is to see electricity, gas, oil, coal, water power and nuclear fission in a consistent and national relationship with each other even if the balance of that relationship changes from time to time. I think that it is fortunate—it was not always the case—that this point of view is beginning to gain supporters within the fuel and power industries themselves.
Thanks to the helpfulness of my Whips and the co-operation of one or two hon. Members opposite, I had the opportunity recently of attending the British Electrical Power Convention at Brighton. I attended some of its sessions; and I serve on the council of that body. It will be remembered that the theme of this interesting conference was "Electricity in the Fuel and Power Future". Leaders of the coal industry, the gas industry and the oil industry attended the convention, and read papers in spite of the fact that the convention is primarily an electrical convention and was organised by the electrical industry.
It is unnecessary to say that there were differences of emphasis and points of view between the leaders of the industries who spoke at the convention, but what was outstanding to me, as one with some experience of the power supply industry and the outlook of its rivals, was that there was a very high degree of unity and agreement between the participants at least on the essentials, and the fact that these fuel industries are growing more naturally together in understanding is a great step forward.
There was agreement, for instance on the proposition that for a long time ahead electricity is married principally to the coal industry, but, if I may put it this way, in a kind of polygamous relationship which does not bar secondary alliances with both nuclear fission and the oil industry. On the other hand, gas is disentangling itself from a long-established marriage with the coal industry 1736 and, for better or worse, is now morally married to a new found partner, oil. If one may put it this way, it seems that the gas industry is fast heading towards monogamy. I have never been able to make out whether polygamy or monogamy are desirable or undesirable states in themselves. It is largely a question of variety against concentration. But I do not think that anyone would disagree that polygamy is always a more complicated relationship, and so it is proving for the electricity supply industry.
In fact, the point which I want to make today—and I hope that my hon. Friend will deal with it in his reply—is that the electricity supply industry is being very much penalised in relation to the gas industry—and this makes it difficult for the country to obtain a national fuel and power policy—because of its broadmindedness. It is asked to sustain the coal industry, which it is glad to do on a fair basis, not simply for the good of the coal industry, although that is desirable in itself, but because, since the two industries are very much joined together, the prosperity of the coal industry in the future is of real and material interest to the electricity supply industry.
The coal-fired power station is cheap in the matter of capital cost, and provided that the right part of the country is selected, usually near a coalfield, it is often cheap in running costs. But since the finances of the Central Electricity Generating Board are all in one, it is only right that the C.E.G.B. should have the opportunity to use oil where oil happens to be cheaper—and that largely depends, as I say, on the siting of the power station. This is not to the detriment of the coal industry, because if the Central Electricity Generating Board is free to use oil when it pays it to use oil, then it is made very much easier for the industry to use coal where the coal cost is marginal in other places, and in that sense I have never been able to see that there is any great contradiction between the continuing use of coal by the electricity supply industry and the ancillary use of oil, or, for that matter, the ancillary use of nuclear fission. In considering the electricity industry in relation to the gas industry, there is the unfortunate fact that the electricity industry has to pay tax on all the oil which it uses whereas the gas 1737 industry is let off scot free. I believe that there is a rather abstract technical processing justification for it, but in fact the distinction is obviously wrong. I hope that my right hon. Friend will pay urgent attention to this, which I think is an anomaly which the electricity supply industry has a right to bring to the notice of the House. It has a right to ask that some relief be granted, especially if it is right to protect the coal industry during a period of redeployment—and I think that it is right to do that. It need not necessarily be permanently protected all the time, but certainly until the coal industry is finally rationalised, and the protective taxation should be applied fairly. Handicapping should be fairly done, if we are to obtain a realistic fuel and power policy with competition between the various parts.
I should have thought that one possible way forward would be not simply to raise the level of taxation on oil for the gas industry to the full extent which is applied on electricity but rather to devise a special public utility oil fuel tax which could be imposed at some moderate level, equally and fairly to both gas and electricity.
Another basic fuel and power proposition which I should like briefly to mention is in relation to this new-found energy source, nuclear fission. When one talks rather loosely about nuclear power one often overlooks the fact that, from the public supply of energy point of view, it can be utilised only through the medium of electricity. This is the other secondary, ancillary, polygamous alliance of electricity which is inescapable.
For this reason, I have always felt that it was wrong that the electricity supply industry was forced into adopting nuclear power as an energy source without it stating that the time had not been reached when it was a sound commercial proposition. Since the development of nuclear power depends very much on electricity power, it is only right that the electricity supply industry should have been able itself to make the decision as to how much nuclear power it should use.
One of my complaints about the former Administration was that in the middle 'fifties they unguardedly and, I believe, wastefully rushed the electricity supply industry into an over-large nuclear power programme. While we all welcome this 1738 form of energy as a new scientific development, until recently nuclear power has tended to make the supply of electricity more expensive than it would otherwise have been, even without it.
I appreciate that, looking ahead, expenditure of this kind is justified. Nevertheless, when it comes to deciding the future size of a nuclear power programme I would rather trust the judgment of the C.E.G.B. than all the pressures which come from outside, including the Atomic Energy Authority. I say that because the C.E.G.B. must necessarily temper its enthusiasm for technical and scientific progress with a degree of commercial caution. Whatever might be said about Government policy, new or old, the C.E.G.B. obviously pays more attention to commercial questions than the Atomic Energy Authority is obliged to do as a non-trading concern.
§ Mr. Lubbock
Would the hon. Gentleman not agree that in the light of the report which we now have on the A.G.R. station, the logical thing would be for the C.E.G.B. not to order any more coal-fired stations but to go in for a complete nuclear power programme from now on? How could we have developed the A.G.R. technique had we not had a nuclear power programme for electricity supply from which to accumulate experience which, in turn, enabled us to make further progress?
§ Mr. Palmer
I am not denying that, and I have not been arguing against the development or use of nuclear energy. I have merely been saying that the size of the nuclear power programme should be largely a matter for the judgment of the C.E.G.B. I am certainly not against nuclear power, but I should have thought that it would be generally acknowledged that there was undue haste at one stage, as was proved by the fact that the industry was obliged to cut back. For this reason the matter should have been left to the judgment of the electricity supply industry itself in the first place. We should have had a more rational nuclear power programme than the one which was forced too fast.
To obtain maximum efficiency from nuclear power plants—and while I am concentrating in this part of my speech on nuclear power, these remarks apply to modern coal and oil fired plants, too 1739 —they must be big and concentrated. At present Government policy is to site nuclear power stations a long way from the centres of population. This means the industry being faced with extra problems, the main one being the transmission of the energy away from the station to the ultimate consumer.
Indeed the transmission of power from one part of the country to another is becoming one of the major problems of the industry. Of the many developments in the electricity supply industry initiated during the relatively short period of office of Lord Hinton, one of the most important has been the understanding of this question of transmission as not just a technical problem. To appreciate what is truly involved in this small, concentrated island, we must see it as a social problem as well.
I do not intend to discuss at length the interesting and technical issue of under-grounding compared with the more conventional overhead method of conveying electricity in large quantities from one part of the country to another. This is a difficult technical matter where the laws of nature are biased against the engineer.
Nevertheless reference was made to the use of direct current. I think there has been some neglect in research into the use of d.c. A good deal of work on the transmission of d.c. has been done overseas, particularly in Sweden, Russia and the United States. A considerable amount is known about it in those countries, but the industry in Britain has become a little too conservative minded, in the technical sense, on this issue. We were one of the first countries to develop the universal a.c. system, and it seems that having been done that we have not considered the new advantages of transmitting by d.c. in a modern setting. Without going into all the technical aspects involved, d.c. may be more easily undergrounded and that it is more flexible from the transmission point of view in some other ways than a.c.
The C.E.G.B. would do well also to remember that the huge central power station may not always be the only way of producing electricity. Growing transmission difficulties may in the end force a return to simpler local methods. I realise that these are fanciful words at the moment, but we must consider this development and, in this connection, I 1740 understand that work is already being done on fuel cells for domestic and factory use. In the end these may be nuclear powered.
While we welcome the exciting developments which are taking place in the nuclear power programme—the new Dungeness B station and so on—I suggest that the industry should not put all its technical methods and resources in one package whatever the label. The case for having diversity technical approach is always strong, because technological changes are taking place the whole time.
I will now deal with a matter which is of considerable financial and organisational interest. Since the war three major Acts of Parliament have affected the industry. There was the Electricity Act, 1947, which was the fundamental nationalisation Measure, followed by the Electricity Reorganisation (Scotland) Act, 1954, a Conservative Measure which broke away the Scottish electricity supply industry from the industry in the rest of the Kingdom—which I have always felt was a mistake—and then there was the Electricity Act, 1957, another Conservative creation.
I played, if I may say so modestly, some active part in the 1957 discussions both on the Floor of the House and in Standing Committee. The Labour Party did not oppose that 1957 Measure in principle, because we accepted that some degree of decentralisation had been proved necessary by experience. My own view is that, provided a Conservative Party accepts the principle of public ownership, I am in favour of its playing a proper part in ideas for the natural evolution of the industry, in bringing about improvements, although I hope that, mercifully, it will not be in a political position to make many changes from these benches. It is the proper rôle of a Conservative Party to accept public ownership after it has lost the battle over its introduction and then to join in the improvements of the way in which it works out in practice.
It was a little in that understanding spirit that some of us were prepared on this side to accept the 1957 legislation as bringing about a necessary measure of reorganisation based on the Report of the Herbert Committee, but that did not mean that all the features of that legislation were accepted by us in detail—
§ Mr. Peyton
That has been the attitude of successive Conservative Governments over a period of years. What we have been waiting for in vain has been some reciprocity of that attitude by the party opposite towards private industry.
§ Mr. Palmer
I would probably not be in order if I went into the interesting question of my party's attitude to private enterprise, but I do believe that in a Socialist economy a Conservative Party has quite a useful and constructive rôle to play, although I prefer that it should do so in Opposition.
In my view, there were faults in the 1957 Measure, and I was therefore delighted to hear the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) suggest that the Central Electricity Generating Board was too far away from the consumers. It was precisely that point that some of us on the Opposition side made in Standing Committee about the new 1957 structure. One of the outstanding weaknesses of the industry today is not decentralisation, in the technical sense, of the area boards, or decentralisation, in the technical sense, of the Generating Board. That was sound, and it was one of the major recommendations of the Herbert Committee.
What is very wrong with the industry—and I make the same point about the gas industry—is that at the head we have this rather vague Electricity Council, this confederal body; that we have not, as the Herbert Committee recommended, a strong central executive to make the decisions that must be made somewhere in an industry of this size on a national basis. Mind you, considering the difficulties it has to face, because of its very nature, I do not think that the Electricity Council does a bad job, and it is very much assisted by the persevering personality and knowledge of its present Chairman, Professor Sir Ronald Edwards, who brings great powers of logic and judgment to bear on the various problems. But, all the time, in order to get a national policy, he has to work very hard. There is a very great tendency on the part of the area boards to look to the Electricity Council as their defender, and they can always join together in the Council to form a majority against the Generating Board. That kind of clash is aggravated by the fact that the area boards are distributors, 1742 while the Generating Board is their sole monopoly supplier.
The trouble shows itself in many ways, but particularly in pricing policies. Not only is the Generating Board the sole wholesaler, but it also fixes the prices. I have never heard of such an extraordinary arrangement, whereby a monopoly wholesaler is able to fix a price to a tied customer. I know that it is supposed to be done in consultation with the Electricity Council, but, in the long run, the monopoly wholesaler has the final word. It is interesting to remember that this was something against which we on this side argued very strongly in 1957. We said that it was wrong that the Generating Board should fix the bulk supply tariff; and that the proper body to make the arrangements was the Electricity Council in consultation with the Minister, but that was not done.
The most outstanding example of this rift in price policy is in the industrial price policy. It is accepted on all sides of the House that our greatest national need is to improve industrial productivity, and there is a very close and well-known relationship between improvement of industrial productivity and the installation of abundant supplies of electricity. Our British use of electricity, measured either in terms of kilowatts installed per worker or kilowatt hours used per worker is very much lower than in comparative industrial countries. That has been the case for a very long time. It would not be too bad if our relative position was improving but, judging from the recent figures, our relative position is worsening.
One of the most disappointing features of the 1964 Report of the Electricity Council, which is supposed to tell us all about everything in the industry, is that it does not devote very much space at all to the question of improved and increased industrial electrification. I know that the reasons for the low present use of electricity per worker in British industry are complicated, and are not all the concern or responsibility of the supply industry. But I believe that the electricity supply industry could do infinitely better than it is doing in the matter of rapid industrial electrification by improved sales and promotional policies, and by closer co-operation with other industries, both nationally-owned and privately-owned.
1743 I should like to see a combined operation undertaken by the electricity boards, British Railways and the electrical manufacturers to make home railway electrification much more attractive than it is. It is nothing short of a national scandal that we should have this direct use of oil on a railway system in a country that is still packed underground with coal and teeming with power stations. We bring in oil for direct use on the railways, and this is having a most serious effect on our export trade in electric traction vehicles. Foreign buyers say that there is not very much practical experience for them to go by in this country if they are to buy goods from British electrical manufacturers.
I am also all for close co-operation between the Central Electricity Generating Board and all large private manufacturers and users of power in order to get industrial electricity prices reduced as far as possible, but the stumbling-block is the general internal tariff structure in the supply industry, which is much too rigid for quotation purposes. In the annual report there is at least news of progress being made, in that the Electricity Council has appointed a working party consisting of members of the Council, the Generating Board and the area boards to look at the basic tariff structure of the industry. The terms of reference include the words:… so that commercial policies can be formulated with long-term trends in mind.This emphasises the point I made earlier about the organisation of the industry. If the Electricity Council was able to work together properly there would be no need for it to appoint a special working party to resolve the differences which obviously exist. It gives emphasis to the the point that what is required in this industry is much more single-mindedness at the top.
I was delighted to hear the remarks of my right hon. Friend the Minister that no capital cuts were contemplated in relation to electricity supply. I hope that this is a firm assurance, because it would be a tremendous error if we cut back on the rising electrification of our country.
Capital is essential but this industry is run and inspired by human beings. The success of the industry—it has had many real success—is largely due to the efforts, the knowledge and skill of the employees 1744 of all grades. It should never be overlooked that the employees have to give a 24-hour service. They are on the job day and night, whether in the centre of a great city or far away in a remote rural hamlet, and they often have to do it under very adverse working conditions of weather a point which is often overlooked by the consuming public.
This House owes it to the employees of the industry to congratulate them upon a very successful year's work. Anything I have said a little critical about the policies of the industry concerning mainly top direction is put forward, I hope, in a most constructive way. That is my intention, because I am anxious to assist the continued success of a publicly-owned industry which I firmly believe is a great instrument for human progress.
§ 5.52 p.m.
§ Sir Richard Nugent (Guildford)
I am glad to follow the hon. Member for Bristol, Central (Mr. Palmer). The House always enjoys hearing his speeches about the electricity industry. We respect his very expert knowledge on this subject. I agreed with the greater part of what he said.
I am a little doubtful about his view that the Council should fix a general tariff instead of the Generating Board fixing it. The Council has ways of making its views effective and the fixing of the tariff was done in an objective way. Certainly it was a way which the Select Committee had no reason to criticise at all. On the hon. Members comments about my party putting the 1957 Act on the Statute Book and the part which he said the Conservative Party should play in reference to the nationalised industries I noted that he said he preferred to see us do so in opposition. I hope that he is making the most of it now because he is not likely to see it for very long. In the rest of his speech, I think he interested the House and made a most valuable contribution to the debate.
The Report we have before us has the defect of being so very much out of date. It is the 1963–64 Report. I had hoped that the Minister would tell us a little more about what would be in the 1964–65 Report, which I imagine will be published in the next month or two. It is difficult for the House to debate the affairs of this great and important industry when our information is so very 1745 much out of date. I join with my hon. Friend the Member for Yeovil (Mr. Peyton) in his criticism of the Minister's statement about the effect of the Chancellor's cuts on this industry. I ended in not knowing what the Minister meant, whether he meant that the capital programme was to stand unaffected or that there was to be some postponement of some of the major items of capital expenditure. I do not know, and I am sure the House does not know either.
I ask the Parliamentary Secretary, when he winds up the debate, to clarify this, because it is of immense importance. Let us be quite plain about it. If it is necessary to postpone some of these major items for six months or more, the effect will be exactly the same as cuts. Past experience has taught us that this is the most unwise kind of cut to make because it throws out of gear a vast programme which has repercussions from which it takes several years to recover. I would sooner see other solutions to the capital problems in which the Government are involved.
In commenting about this industry I feel what I felt when I was Chairman of the Select Committee on the Nationalised Industries and was reporting on it. The vastness of the industry gives me a sense of real humility in making any critical comment on the leaders of the industry who have such huge responsibilities. I say immediately my word of praise for their handling of the gigantic job they have in hand now, not only for running this huge industry, but of contriving to double its capacity in the current seven years up to 1970. The estimate in the Report of a capital expenditure for 1964–65 was £587 million, which is a gigantic sum to spend in new capital. The stresses and strains which must be involved at every level in this huge industry in doubling itself in seven years must be gigantic. I take my hat off to the leaders and all in the industry for their successful undertaking of this task.
I very much welcome the Minister's acknowledgement of the good record of the past 10 years. We occasionally hear from hon. Members opposite something about the last 13 years having been wasted, but the speech of the Minister was on a much better note and a more realistic one. This is one aspect of our 1746 national life where very great progress has been made to the benefit of everyone during the period of our Government. I was delighted to hear the Minister paying tribute to it.
There are four points which the Select Committee commented on in its Report which I wish to comment upon. One is nuclear generation. As the hon. Member for Bristol, Central rightly said, the record on nuclear generation in the 'fifties on the whole caused more anxiety than satisfaction. The Magnox was a wonderful piece of engineering development, but its costs were by no means comparable with coal generation and the prospect was none too good. There had to be a cut back, and we all know the history. The success of the A.G.R. generator to be built at Dungeness is a tremendous venture and a magnificent achievement by all concerned. I am happy to add my congratulations to those which have been offered from all parts of the House. The actual costs of generation there, we are told, will be better than 10 per cent. cheaper than the cheapest coal generation. It is a very big advance indeed. It may well turn out in practice to be better.
I remember that at the time when we were reviewing the industry a couple of years ago when we completed our Report the issue was still very much in the balance with the Generating Board considering whether it would prefer to use the advanced gas-cooled reactor or a boiling-water reactor from America or Canada. It is of great satisfaction to know that the British invention has succeeded and will make such a valuable contribution for us. Any right hon. or hon. Member who has had the interest of inspecting one of these new nuclear generating stations will be lost in admiration at the ingenuity and the skill with which man has contrived to design and build these remarkable generating plants. It really is a great British achievement.
Turning to research, I was glad to hear from the Minister that expenditure on research has now gone up to £10 million per annum. This was a direction in which the Select Committee was somewhat critical, not of the Generating Board, whose research was good and appeared to be comprehensive, but particularly of the area boards, which seemed to have paid insufficient attention 1747 to research in transmission and especially in distribution. Evidently, this is now going ahead fast, and I am sure that it will yield valuable results for the benefit of the whole community. Many tens of millions of pounds a year are being spent on distribution by the area boards, and it is clear that a great deal of research would be valuable.
I was pleased also to see the good progress which has been made in consumer research. The Select Committee was critical of the lack of market research in the consumer sector in the 1950s when the big expansion of space heating was going forward. This undoubtedly contributed substantially to the under-capacity of the industry which came to light in the cold winters of 1962 and 1963. Because the information was incomplete, because consumer trends were unknown, the forecasting apparatus, elaborate though it was, was improperly informed, and, therefore, the programme was insufficient to meet the growing demand. It is good news that this has now been overcome, that consumer research is going ahead on a comprehensive scale and that the Council and boards are now being kept fully informed of how consumption is going and what the likely developments will be.
I was glad to see that the tariff structure is again under review. I am sure that this is essential. We found that the tariff structure of the area boards was woefully old-fashioned when we made our review. They were still proceeding on the basis of the old-fashioned promotional tariff which worsened the peak rather than helped to even it out. This is a direction in which research pays valuable rewards in getting the best possible distribution of consumption over the 24 hours.
My third point concerns the financial target, which is still 12.4 per cent. The financial target laid down in 1961 by the Conservative Government in Command 1337 yielded no less than £70 million of what is called the balance towards the capital expenditure of the industry during 1963–64. This means that to that extent the taxpayer has to pay a lesser sum in finding the necessary below-the-line capital for the financing of the further expansion of the industry. In the year 1748 under review—1963–64—it works out that the Treasury has to find £240 million and that the industry, from its depreciation and from its surplus, has to find £222 million, or nearly 50 per cent. What has been achieved—we see it coming out quite clearly—is what I regard as better balance in the huge capital expenditure for this industry between, on the one hand, the taxpayer who provides money through the Treasury and, on the other hand, the consumer who uses the electricity.
The fourth point to which I should like briefly to refer is one which worried the Select Committee very much concerning the relationship between the Generating Board and the manufacturers. Our worry was that the Generating Board was virtually the monopoly buyer for most of the big electricity generating equipment. There are only a handful of contractors who are still in the field supplying this very heavy gear. As the contracts are so big nowadays, ranging from anything from £5 million to £10 million or even £20 million, clearly, if any of the contractors, so to speak, misses his turn in getting a contract, he may well be in danger of being put out of business.
We were concerned that the relationships between the Generating Board and the contractors was not working too happily at that time. We recommended that an individual arbitrator should be appointed by the Government and should hold a fair balance between the two. The Generating Board insisted that competitive tendering was still the best method, and so it is in principle. When, however, the contracts are so enormous and when failure to get a fair share of the contracts can be calamitous for a firm, this was something in which it seemed to us that independent influence was needed.
I am glad to hear from unofficial sources, and this is confirmed, I think, by a comment in the Report, that the relationship has much improved in the last year or two since we made our comment. I hope that the Parliamentary Secretary will confirm this. It would be the best solution of all that there should be just a little more give and take between the Generating Board and the contractors, so that between them they could contrive to get a relationship in which there was 1749 confidence on both sides, that the contractors were giving good value to the Generating Board and that the Generating Board was giving the contractors a fair crack of the whip.
§ Mr. Walter Harrison (Wakefield)
If it was wrong for the contracting departments or the Generating Board to have the advantage in the first instance, surely it is equally wrong for the contractors to have an advantage as against the boards and the Generating Board. This is a position which applies at the present time.
§ Sir R. Nugent
I do not think that it does. This is a matter of balance between the two. It certainly is the duty of the Generating Board to see that it gets good value in the tenders which it receives and in the contracts which it makes for the equipment it buys.
On the other hand, it is for the Generating Board to see that these people can live. There are all too few of them now. We do not want them all to go out of business. Some of them at times, especially during the nuclear programme in the 1950s, bore heavy losses. My impression is that this situation has happily cleared and this is the best situation of all between good sense and good spirit on both sides. I hope that this will continue.
There are two further points on which I should like to comment and which go rather beyond the industry itself. One is the personnel and conditions of employment and the other is amenity, on which there has already been comment. The Report tells us of the negotiations that were opened by the Council of Europe to upgrade the manual workers to the status of salaried staff. There are some 130,000 manual workers in this industry and the Council set out in 1963 and 1964 to strike a bargain with the manual workers to bring them up to the basis of salaried staff. They made this upgrading subject to the acceptance by the unions of more efficient methods and patterns of working. Those negotiations broke down in March last year and a work-to-rule and an overtime ban were brought in. Most fortunately, it lasted for only a week.
The Minister of Labour came in quickly and set up a tribunal of inquiry, and in the event not too much damage 1750 was suffered. But I should make the point in passing that no less than one-third of all generating capacity in the country was closed down as a result of this working to rule. Had it continued for more than a week, or had the climatic temperature gone lower at that time, the country would have been in very serious trouble indeed. In the event, the tribunal made a helpful report, negotiations were resumed and, as far as I know, successfully concluded. I should like the Parliamentary Secretary to say a word about this.
§ Mr. Palmer
Would the hon. Gentleman not agree that this is really the central argument for giving the manual workers staff conditions? This will give them a greater stake in the electricity supply industry and in its continuing prosperity and should reduce the possibility of friction.
§ Sir R. Nugent
Yes, indeed. This is a point which we on the Select Committee made in our Report, that these men carry such a heavy and vital responsibility to the whole community that they should be put on to a basis of payment and conditions of employment commensurate with the very heavy responsibility that they carry. I was personally much in favour of the Electricity Council's initiative, especially that of Sir Ronald Edwards himself, in doing this. I understand that the first stage of this new scheme of salary status was introduced in July of last year, and the second stage was introduced in February of this year. I hope the Parliamentary Secretary will be able to tell us how it is now progressing. Is all going well? Are the manual workers who are now on a salaried status responding and co-operating? I am glad to see that the Minister is now present.
The point is that this is a matter which goes beyond the industrial field where we can say to the industry "You get on with it and make the best deal that you can". This is something where the Government are bound to take an interest, whether it is the present Government or whether at some future time it is a Government from my party. The electricity supply is really the life blood of the country, not only in the home but in industry, transport, shops and offices. It is the supply of power on which we all depend. No Government can afford 1751 to stand by and watch this supply imperilled. We have learned in the last two or three years how grave the situation can be. Because of that, I feel that right hon. and hon. Members opposite must have a direct interest in seeing these negotiations successfully concluded and a new basis established.
We really need a new form of relationship between this vast army of men and their employers, all of whom are working for the life of this country. I accept the point made by the hon. Member for Bristol, Central that this is a 24 hour service and that that it is not easy to arrange. I have already said that the first responsibility is, as always, with the management from the top to the bottom. There must be a form of management which will induce a sense of leadership and team spirit amongst these men throughout the industry. This is not so easy when we are dealing with about 130,000 people. But at the end of the day we must aim at a form of relationship under which these men who enter the service will make a contractual agreement whereby, in return for good pay, conditions and pensions, they will not withdraw their labour in any circumstances, that they will use the arbitration machinery which is set up to ensure that they will get fair treatment in the light of any claims which they may make at any time.
It really is intolerable today for the workers in this industry in the course of wage negotiations to be in the position to twist the arm of the public even to the extent of endangering life, quite apart from industry, in order to improve their bargaining position. These methods are barbarous and out of date, and I am sure that the vast majority of men and women who work in the industry do not like this. Therefore, it must be the concern of government, and especially of the present Government in view of the particularly favourable position of right hon. and hon. Members opposite in their special relationship with the trade unions, to make a real step forward which will be immensely for the benefit of the whole country. I would not say that any other country has arrangements which are much better than ours, but this is a relationship which must be worked out.
I am sure the people of this country will expect the Government to take a 1752 lead in this matter. I ask the right hon. Gentleman to exert his utmost influence, which I know is considerable, with his right hon. Friends to see that this new salaried status is worked out on a contractual basis between employee and employer in this nationalised industry in order to give security of supply that everybody wants.
Now I come to the question of amenity. I accept the right hon. Gentleman's major point that the cost of under-grounding is prohibitive except in very special cases. I say straightaway that the Select Committee was impressed by the Generating Board's approach, and particularly Lord Hinton's approach in person. I am sure they were doing all they possibly could. The difficulty is that we all want further extensions of electricity supply and the only way to do this at present is by means of these vast overhead lines. The prospect that lies ahead by 1970 of a grid approximately 30 miles square consisting of these 400 kV transmission lines covering the whole area, on pylons 150 ft. to 200 ft. high is really alarming. When the country realises that this is what we have in store for them, they will rise up and look to the Government of the day, and to the Government of tomorrow as well, and say, "We really cannot take this". It will mean that wherever one stands in England's green and pleasant land we shall see these pylons galloping across the countryside. I do not entirely disagree with my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) that they are fun—
§ Sir R. Nugent
Yes, and so long as we do not see too many of them. But they really do become intolerable. I press the point that transmission by direct current has a contribution to make. I was glad to hear confirmation of this fact from the expert mind of the hon. Member for Bristol, Central. This system is much more developed in other countries. It reduces problems of transmission and it would considerably reduce interference with amenity. It makes undergrounding less expensive. This is a method which we should push ahead fast.
The other point I wish to make is that which I made when I was perhaps slightly 1753 out of order on the Gas (Borrowing Powers) Bill, that in working out a national fuel policy the Minister could make a contribution here if he would consider an acceleration of the gas expansion programme so that, as soon as it is practicable, gas carries a greater share of the heating load. Gas is extremely good for heating. It is competitive. It is sometimes cheaper and it has the enormous advantage that it can be put underground simply. There are none of these terrible problems of insulation. As the Minister knows, one 36-inch high pressure gas pipe put underground will carry the entire gas supply of the country.
Therefore, in terms of amenity, gas is surely the answer as far as we can introduce it to carry the heating load. I ask the right hon. Gentleman to give this very serious thought. Obviously it is not a development which can be carried out overnight but, looking ahead, if we can get the gas industry to carry a greater part of the heating load it would relieve the country to that extent of this very difficult problem of amenity which lies ahead. With these comments I should like to pay my respects to the electricity industry and to express my best wishes for its future.
§ 6.21 p.m.
§ Mr. Walter Harrison (Wakefield)
I do not intend to mince many words over the issues to which I should like to draw the attention of the House because I feel that my hon. Friend the Member for Bristol, Central (Mr. Palmer) and the right hon. Member for Guildford (Sir R. Nugent) have adequately covered in their eloquent speeches many of the matters which I had in mind.
I congratulate my right hon. Friend on an excellent Report although, as has been stated already, it is rather late. The Report is a credit to the success of a nationalised industry.
§ Mr. Harrison
No, I shall not give way. It is some time since I have addressed the House. I pay due respect to the House and I hope that hon. Members will not interrupt. The issues which I shall mention may be controversial and if it is intended to contest 1754 each single one of them I shall be up and down like a jack-in-the-box.
It is my intention to bring before hon. Members two controversial issues. The success of this nationalised industry is the result of the success of the Labour Government in 1947 in nationalising it and it has been successful despite the fiscal policies of the previous Administration—and this, I imagine, would have been the subject of the intervention if I had given way a few moments ago. What has been achieved in this industry can also be achieved in another industry, which we intend to nationalise—steel. The attacks on this industry, directed at it in the early stages of nationalisation, are now being directed at the intention to nationalise steel, but in the next few years we shall have the same success in that industry.
We can be assured that with the nationalisation of our basic industries we shall have more than a 4 per cent. growth—a more progressive norm. The supply industry fits in with the economic structure of the nation. It is one of the key factors in our economy. It has a first-class relationship with the coalmining industry and I hope that that relationship will be maintained, despite the utterances of many hon. Members opposite who would throw the coal industry overboard overnight if that suited their vested interests. The electricity industry takes community considerations into account and I sincerely hope that the coal mining industry which has supported the nation for such a long time will be given proper recognition and for many years to come will play a useful part in solving the country's fuel and power problems.
The electricity industry is closely involved with other developing industries. It bears an important relationship to commerce, to civil engineering, to the consumer, to technical education and to the training of personnel. As I have said previously, this is the industry which has progress in its profile, but I now want to deal with the sour aspects concerning nationalisation. I feel that I should try to draw the attention of the House to one or two of the little subtleties which are creeping into the industry and which one could term as counterattacks on very progressive nationalised bodies.
1755 I ask hon. Members to consider who meets the cost of training management in private enterprise. I put ten Written Questions to the Minister last Friday and the reply was that a terrific amount of money is allocated to the training of management in private enterprise by the Minister of Education and Science. I can go along with that, but at the same time I bear in mind the question of who bears the cost of training management and personnel within the supply industry. [Interruption.] Does the hon. Member for Sheffield, Hallam (Mr. John H. Osborn) wish to intervene? The nationalised industry bears the cost and these facts need careful consideration.
§ Mr. Harrison
The hon. Member has missed the boat.
If private enterprise can have the training of its personnel subsidised in this way then equally there should be the same possibilities for the training of management and personnel within the nationalised industries. There is a serious point here which I want to cultivate in answer to the right hon. Member for Guildford. I interjected during the course of his speech, but he did not answer me satisfactorily. I would point out to the right hon. Gentleman that the sinusoidal curve has undergone a complete change. At one time there was room for contracting within the industry, but the curve has now turned subtly in the opposite direction.
I have mentioned creeping nationalisation, but here we have creeping denationalisation, because private enterprise is gradually taking over the functions of the Central Electricity Generating Board and the area boards. I refer specifically to the contracting departments which the right hon. Member for Guildford mentioned. Work is being taken from these departments of the area boards and I would refer especially to the contracting departments of the London Electricity Board. It is generally acknowledged, as has been stated, that over the past five years there has been a terrific amount of capital development, with new generating plants and an enormous amount of new distribution. In 1964, a sum of £135 million was spent on new conventional power stations and 1756 £88 million on nuclear power stations, making a total investment on new generating capacity of £223 million.
As the Report states, there was a marked acceleration in capital expenditure to reinforce and extend the main transmission systems to the tune of £76 million spent on new work alone. Yet, in spite of this, and contrary to what the right hon. Member for Guildford has said, the tendency of the contracting departments of the boards has been to do less and less a percentage of this type of work. It has been the deliberate objective of various boards to permit this work to go out to private contractors. The policy has been to sub-contract not only their own work, but to farm out contract work which they themselves have obtained within their contracting departments. In fact, it is now running at an average of over £100,000 a year.
Earlier this year, in reply to a Question to the Minister, I received the following Answer:I am informed by the Central Electricity Generating Board that the value of contracts placed with private electrical contractors and with area electricity boards in these three years, for work on power stations under construction, was as follows"—[OFFICIAL REPORT, 19th March, 1965; Vol. 708, c. 339.]and then come these figures. In 1962, for private contractors £1,100,000; for the boards £133,000. In 1963, for private contractors £764,900; for the boards, £71,000. In 1964, for private contractors £1,346,500; for the boards, £186,500. These figures prove that the cycle has gone right round. It is a sure indication of where the lion's share of contracting work is going, and, incidentally, this is only on power stations, not on other capital works.
On one of the £65 million power stations at present under construction, the local area board did not receive a pennyworth of work in the entire contract, but men from the local contracting department of the electricity board were being recruited and regularly employed by the private contractors working on the site, although the actual work should have been the electricity board contracting department's work.
§ Sir R. Nugent
May I interject? The contractors I was talking about were the contractors who do the capital works principally for the Generating Board. 1757 Inevitably, they are private enterprise. The Board does not do it itself. The contractors the hon. Gentleman is talking about are the contractors who do private work. Sometimes area boards do some of this contracting themselves, and some of it is done by private contractors. It is a completely different field, and I was making no comment about that whatever.
§ Mr. Harrison
The right hon. Gentleman spoke of contractors. I have given the figures which prove the point. I accept from the right hon. Gentleman that, when he spoke of contractors, he meant building contractors. My point regarding electrical contracting must be accepted. I take it that right hon. and hon. Members opposite accept that my figures are correct regarding the swing-over on electrical contracts. It is proved, and the present policy is turning out to be a very bad one. What should be the electricity boards' work and the Central Electricity Generating Board's work is gradually and subtly taken over by private contractors.
I refer specificially to the contracting section of the London Electricity Board. Here, the facts are devastating. For many years, there was a special department which dealt with power station construction. In 1948, after vesting date, a summary of principles governing the conduct of electrical contracting and retailing was agreed and accepted by all area boards and by the electrical contractors' association, and the Authority's opinion on that occasion was that there should be no restrictions on the contracting activities of the electricity boards as it believed that this principle would be beneficial both to the boards and to the contractors.
As I said earlier, I have accepted this principle all along. The Herbert Committee was set up—there has been reference to this today—and it recommended as highly desirable that the customer should be able to turn to alternative sources of tender if he thought that either the board or the private contractor was charging excessive prices or offering inadequate service, and this was especially so if the customer happened to be the electricity board itself.
To cut a long story short, the London special contracting department was 1758 organised on those lines. Over the years, it worked on about 40 different power stations and, into the bargain, achieved a direct net profit of over £500,000. In 1962, it was working on 14 power stations and had about eight other major contracts in hand. Then came the change in policy. Power station contracts are now left to private contractors. In the London contracting department alone there was a decrease in manpower—the figures have been given by the Minister in answer to my questions—of 555 men from 1962 to 1964. The majority of them are now working for private contractors doing what should be the board's own work. Their training was undertaken and paid for by the Authority. The value of contracting work in progress by that particular department has decreased from £927,000 to £384,000 in the same period. In this respect "contraction" is the appropriate word.
This policy is detrimental to the public interest, and I hope that, in the development of fuel and power policy, the Minister will introduce more competitive public enterprise so that this progressive industry may be made all the more successful.
§ 6.36 p.m.
§ Mr. John H. Osborn (Sheffield, Hallam)
I add my tribute to the work done by the electricity boards and the Electricity Council, and I congratulate them on the success they have achieved. I say this as a Conservative, in spite of the remarks of the hon. Member for Wakefield (Mr. Walter Harrison). As a Conservative Member of Parliament, I was in the United States of America, just before publication of these Reports, outlining the virtues of nationalised electricity and pointing out some of the advantages as well as the disadvantages. When I spoke to an American audience, I tried to be objective.
My first point, appropriately, perhaps, a political one coming from a Conservative Member of Parliament, is that, if I, as a Conservative, appear not oppose nationalisation in the context of this debate only, it must not be thought that I support any extension of it. I say this because our debate today is the focal point or the fulcrum of democratic control of one of the biggest monopolies in the country. Admittedly, it is a State monopoly, but it 1759 is a monopoly subject to control by Parliament under the original Act and the subsequent amending Acts. If I understand the Minister aright, the industry has capital assets to the value of over £3,000 million and we are talking in terms of capital assets of £7,000 million in the next ten years.
We are debating the Reports and Accounts for the year ended 31st March, 1964, and the intervention I sought to make in the speech of the hon. Member for Wakefield was to inquire which Minister he was congratulating. The Reports were published when a Conservative Minister of Power was in office, so I add my congratulations to him, too.
§ Mr. Osborn
The hon. Gentleman was very reluctant to let me interrupt him, but we on this side will welcome interventions.
§ Mr. Harrison
Was it a Labour or Conservative Minister of Fuel and Power who instituted the nationalised industry in 1947?
§ Mr. Osborn
I have given way, and the result is to bring political controversy into a debate which I had hoped would have little such controversy.
We have as supporting information the Report of the Select Committee dated 28th May, 1963, and the Observations on it dated 21st January, 1964. The country should know that the information made available to Members of Parliament particularly as a result of the work of the Select Committee covers three volumes and runs into thousands of pages. That is the reading matter which we as Members of Parliament have to digest. The board of any company would find so much reading matter too extensive to form the basis of a clear judgment.
§ Mr. Osborn
The hon. Gentleman must allow me to continue. I welcome the opportunity provided by a debate such as this for a Minister to give us a review of, in this case, the electricity industry.
I will continue with a personal observation. I have tried to assess by what authority I can intervene in this debate. I have bought electricity for industrial 1760 purposes. I have set up a factory, and this has required close collaboration with the local electricity boards. I have been on various committees of industrialists who have been very much concerned with the difficulties of supply and adaptation of their equipment to electricity. However, I do not as yet claim to be an expert on the industry. We all have interests of various types, including constituency interests. One of the difficulties facing us in Parliament now is probably the lack of the expertise necessary to interpret this information.
There are many ways by which outsiders can influence an industry. The private sector has been spoken of. The private sector can be influenced by shareholders. It might be said that there is 3 per cent. electricity stock. What influence can the holders of that stock have on the conduct of an electricity board? I repeat what I said in the debate on the gas industry. Members of Parliament are trustees for the taxpayer, but we have only a limited chance of challenging the Executive, whether it be the Minister or the bodies which have been built up under him, and whether the Minister be a Conservative, or whether, as in this case, he be a Socialist. One of the difficulties we have in Parliament is to find the equipment and the information with which to challenge the Executive on occasions such as this, and challenge it constructively and not necessarily destructively.
What could have gone wrong in this case? It could be my own fault, but it was not until the business of the House was announced last Thursday that I knew that we would definitely have a debate on electricity supply before the House went into recess. This is part of the parliamentary system. I see the Minister nodding. It would appear that he was in the same position as I was.
§ Mr. Frederick Lee
The hon. Gentleman is right in saying that I was in the same position. Today we debate one of the nationalised industries. It was for the Opposition to take the initiative in determining which industry we should debate. Very properly, they chose electricity.
§ Mr. Osborn
I thank the right hon. Gentleman. I was not saying that critically.
1761 Many organisations outside the House, particularly trade associations and perhaps some chambers of commerce and industrial associations, have very strong interests in electricity supply and have made private approaches to the Ministry. They had no definite knowledge that there would be a debate today. Many of those who over the last few months, have expressed views to me as a Member of Parliament representing a Sheffield constituency would have liked me to deploy a much more forceful case, but they have to have time in which to collect the information. I am not criticising the Minister; I hope that he understands that.
Many people who have very strong views would wish to make them privately to the Minister, or, if not directly to him, to his civil servants, rather than ask a Member of Parliament to do this. This is a feature of the new political-industrial organisation which is very relevant in the case of the nationalised industries. Many trade associations and individual companies take this view, probably rightly so0—I am certain that if I wanted to deal with many of these issues I would not necessarily want to have them debated in Parliament. Industrialists and others with problems go, quite rightly, direct to the chairmen of area boards and to the other two chairmen, Sir Ronald Edwards and Mr. F. H. S. Brown.
I am aware of those problems. It is of interest that I have been specifically asked not to raise them in the House of Commons at present. This is because of a fear on the part of those outside that the normal negotiations would be prejudiced rather than helped by the fact of my raising the issues. I mention this only because it is a feature of the new relationship between industry, the boards which have been established and Parliament.
I must explain this a little further. The Central Electricity Generating Board is both a customer of and a supplier to large sections of industry. My right hon. Friend the Member for Guildford (Sir R. Nugent) pointed out that the purchasing power of a nationalised monopoly commands a great deal of respect. This is a feature of nationalisation which could have undesirable aspects. I do not say that the power is being abused in this case, but the person who has to supply dare not endanger his chance of gaining further 1762 orders by raising matters in a public forum such as this. It can be said that area boards have developed their own relationship both as suppliers and as customers with British industry.
The exponents of nationalisation are also exponents of the virtues of parliamentary control. Do they consider that the present system of Parliamentary control is adequate? Are they satisfied that Parliament has enough influence on the Executive? I should have been happier if, prior to this debate, the Select Committee could have given us a more up-to-date Report than that which we now have. I raise this point because there are hon. Members opposite and, I stress, on this side, too, who have been talking about the reform of Parliament. This is an aspect of Parliamentary activity which should be considered.
My first principal point is the relationship between the industrial user, the domestic user and the electricity industry. I shall not pass comment on the extent to which the costs of production are too high and that there have been recent increases in tariffs. Does a nationalised industry of this size make the best use of its manpower, in spite of the increase in productivity to which the Minister has referred? Paragraph 175 of the Report of the Electricity Council shows that the managerial increment has increased by 3.4 per cent., the technical engineering increment by 7.1 per cent., and total manpower by 2.2 per cent. What yardsticks are there by which we can ensure that we are getting the increase in productivity which we should be getting? What can we in the House do to question this?
I want now to make points concerning South Yorkshire and the Yorkshire Electricity Board. The board points out in its Report that in the last year costs have risen from 1.034d. per unit sold to 1.072d. and that the cost including distribution has risen from 1.412d. per unit sold to 1.445d. The table shows that of the approximately 356 million units sold 94 million were for domestic consumers. The rest went to farms, commercial users and others.
As the hon. Members for Leeds, North-West (Sir D. Kaberry) and for Sheffield, Brightside (Mr. Winterbottom) in debates in the House, have pointed out, there is concern in industrial areas such as Sheffield and South Yorkshire. There has 1763 been an increase in tariff in Yorkshire. Industry there is of the view that it has had to bear more severe rises than has industry in other areas.
Increased electricity charges mean increased costs of production in our factories, and I have been very interested in the discussion we have had on transmission and transmission economy. I think that the greatest economy we could have would be less transmission and more generation near to the site at which the electricity is to be used. But what evidence have we—I notice that there is a £5 million subsidy for rural distribution—that industry is not paying for these extra transmission costs—costs which it ought not to be paying, and, for that matter, what evidence have we that industry in the North and in the Midlands near the coalfields is not paying for transmission costs elsewhere?
I have had the word "postalisation" used to me—that is, averaging, similar to a flat letter rate. In other words, is there a policy of averaging between the Generating Board and the area boards which means that industries near the coalfields are paying heavier charges than they should? If this is so it can distort costs. Under Section 14 of the 1957 Act which relates to Section 37 of the principal Act there comes the whole question of tariffs and the special agreements. In Sheffield the predominant industry is steel. Naturally, electric furnaces are used extensively. One essential for predicting costs of production is stable electricity prices, and the recent increases in Yorkshire, and elsewhere for that matter, have faced the steel industry with immense burdens.
The problem many companies have to face is that under the new special agreement there is both a firm load and a disposable load. The disposable load, I gather, under certain agreements can be charged at as low as half price, but if any of these tariffs and the length of time power can be switched off are being revised it means that long-term estimates of costs can be false. This is but one more instance of a burden which private industry has to bear because of the powers which reside in an authority such as the Council and Board. This point of view has been put to me on various occasions. It has been raised with consultative councils and I would 1764 like this matter to be looked at again by the Select Committee and others. It could well be that industrial representation on the area boards does not carry sufficient weight. Is the Select Committee satisfied that industry—a vital user—has sufficient representation locally and nationally?
The second point I want to make has already been touched on, and that is atomic power for electricity generation. We welcome the fact that atomic energy is now the cheapest source of generating electricity at present. Within the last few months we have had definite confirmation of this break-through. What does interest me, particularly as Members of the House have had a chance of visiting the French project at Rance, is that the costs of electricity generated from nuclear energy can be compared to the best hydro-electric and tidal generating stations. These are international comparisons, but I understand from our French hosts that they believe that hydro-electric generation, particularly in their own project, would still be competitive with the best thermal and nuclear stations.
I welcome the announcement the Minister has made that the 5,000 megawatt programme, referred to in the recent White Paper of last year is liable to be increased. I welcome the two publications we have had from the Generating Board about the costs of nuclear electricity generation, and I also welcome the fact that these costs of generation are 25 per cent. lower than the costs of the Magnox type and 10 per cent. lower than the conventional type power station. Table II, on page 15 of the Report, shows that, dependent on the load factor, the costs of electricity generated by the advanced gas-cooled reactor power station are between 0.457d. and 0.577d. per kWh.
I have had drawn to my attention an article in the Daily Telegraph by Mr. Martin Burn, who quotes figures for the boiling water reactor at Oyster Creek of 0.31d. and possibly as low as 0.29d. per kWh. It is suggested that whereas we have a capital cost of £92 per kW at present, current American atomic power capital costs are as low as £63 and at Oyster Creek as low as £30 per kW. We have the Generating Board's evidence, which I welcome, of course, and I think it is right, even if the benefit 1765 is marginal, that as we have British "know-how" and technique, that in this instance it should be used in the form of the A.G.R. atomic power station.
§ Mr. Lubbock
As to the £92 per kW the hon. Member is quoting, is not that the cost of the Wylfa Station? Because A.G.R. is much lower in cost.
§ Mr. Osborn
No. Martin Burn quotes these figures of capital cost per kW in America. The Dungeness nuclear station, according to the C.E.G.B. appraisal, is quoted at £92. This is the figure I have used in this argument.
I would say that there is a very good case for asking the Minister, the C.E.G.B. and the Atomic Energy Authority to carry out a survey and research on variety of B.W. and P.W. reactors, and I hope he will approach the Minister of Technology about this. What study are we giving to the virtues of a boiling water and similar types of reactor for smaller power stations, bearing in mind that one of the big issues we have been discussing today is the cost of transmission? If by putting in boiling water or similar type power station reactor nearer to the site of usage we could cut some of our other costs this would be an advantage. If there is not a cost advantage, there could be an amenity advantage.
We in this House have not sufficient information to decide the advantages and disadvantages of each type of reactor, but I hope that when the Minister looks into this further he will consult the Generating Board and the Minister of Technology so that we can have a survey of the merits of the other type of reactors. But I welcome the fact that at the present time a decision has been reached. I do not wish to dispute that decision. The next immediate progress forward will be on ground which is firm, and I would not wish to go back on it.
It had been my intention to make but a few observations. I welcome the information the Minister has given us, and the chance not only of contributing towards the debate, but of learning from others what is going on in this complex but exciting field.
§ 6.59 p.m.
§ Mr. Richard Wood (Bridlington)
My hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) has just been very modest about his so-called lack of 1766 expertise, but drawing freely on his business experience, and on his own researches, and evident very hard work, he has made a speech which we have all listened to, I think, with great interest and, I hope, profit.
I should like to follow him in one comment he made about the timing of this debate. It seems to me that the Government, with their unerring sense of occasion, have fixed this debate on the electricity supply industry, whose products and fortunes, after all, affect almost every single person in the land, on a day when, perhaps understandably, a good many hon. Members seem to have decided to desert this place for more congenial surroundings. The Government following the example of other Governments—in my view, the bad example of other Governments—continue what seems to be the general practice, that we discuss electricity in the high summer rather than in the possibly more suitable chill of December or January.
On this occasion, moreover, as has been pointed out several times, we are, formally at least, debating a Report, a little absurdly in this case, which discusses the industry's operations not under this Government but under the previous Government. But at least that fact may have the effect of producing a rather more cheerful debate than the debates which the Government have had to face during the last eight days. At any rate, 4th August is the anniversary of our going into the First World War. It seems very peaceful today, and I dare say it will remain so. I doubt whether I shall disturb the peace very much. But I would like to make a few remarks, and perhaps one or two of them will be a little more controversial than is my usual style.
At the beginning of the last Parliament, when I first became closely associated with the nationalised fuel and power industries, it seemed very evident that of all the nationalised industries, not only the fuel and power industries, electricity appeared to be very much the favourite son. But its natural advantages of cleanliness, easy availability and its monopoly in certain fields of use have thrown into relief the very real problems that face the industry today and are likely to face it increasingly in the future. These natural advantages that I have mentioned—and there are many others—have created not only an 1767 immense demand, as we all realise, but a demand which has been increasing at an accelerating rate.
In 1959, the demand for electricity in Great Britain, I was reliably informed in that year, was thought likely to double within the following decade. But today, only six years later, the demand is likely to double long before 1975, and it is for me at least a very imposing thought that all the generating stations, great and small, which were built before the end of 1963 represent less than half the total capacity that is planned to be available in five years time.
I remember a year or two ago paying a visit to the B station at Ferrybridge and looking out of the window there at the C station, which was then merely ground with bulldozers and earth-moving equipment on it. At that time, the B station had only just been completed, but I was told that the C station was going to be seven times the capacity of the B station. At High Marnham, near Newark, there is a fine monster of the early 1960s which will be completely dwarfed in terms of capacity by the growing stations on the Trent and in the south of my own county of Yorkshire.
This vast total capacity is necessary for that fateful hour, sometimes in December and sometimes in January, of peak annual demand. A few years ago, the public made perfectly clear its wish to be reasonably insured that, during periods of super-peak demand such as we had in that very cold winter a year or two ago, electricity supplies would not fail. In reply, I made it equally clear that the expense of such insurance was certain to be massive, and so it has proved. An investment which is running at the rate, next year, of £650 million to provide a generating capacity in 1970 of 66,000 megawatts is the cost of the premium which must be found in one way or another by the nation if it is going to obtain a reasonable cover against an interruption of supply.
I come now to a point which was rightly raised by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). The size of the capacity to be provided must depend largely on the estimates that the Government have made of the economy's future growth. As my hon. Friend pointed out, the Electricity 1768 Council is already providing for a margin of something like 18 per cent. If growth under the present Government becomes stagnation—I believe that was the favourite word of the right hon. and hon. Gentlemen opposite a few months ago—and the margin of capacity over demand consequently swells considerably, as it would, over the comfortable margin of 18 per cent., surely the people of this country will rightly complain that the Government have done nothing else than extract from them an extortionate premium on a fraudulent prospectus.
I am bound to admit that I feel very uneasy. My uneasiness is partly relieved by the knowledge, which a good many of us share, that the industry is in the hands of men for whom I myself have not only great admiration and great respect but also great affection. I speak of Sir Ronald Edwards, Mr. Stanley Brown and others, and in this context I would not like to forget the name of Lord Hinton, with whom I worked very closely and who has recently retired from the industry. I have no doubts about their capacity and ability but it is obviously essential that they work closely with the forecasts and expectations of Her Majesty's advisers pro tem. I believe that the full phrase is pro tempore. I hope that it is pro breve tempore. If the estimates of these advisers turn out to be wholly false, then the full blame will rest on the Government and not on the leaders of the industry.
It was a common jibe of the Socialists when my party was in office that we could not make a success of the nationalised industries because we were ideologically opposed to nationalisation. That illustrated the narrow, doctrinaire approach which, I am sorry to say, the present Government have continued to follow during the last miserable 10 months. A large section of the party opposite continues to put its party doctrines far higher that the needs of the nation. I never cease to be thankful that it was the Conservative Party which first set precise standards of performance for the nationalised industries, and I believe that the White Paper of 1962 was the most important single step forward in the relationship between those industries and the public.
I would like to give the Government the credit for supporting now the White Paper 1769 policy, whatever some of its wilder adherents may have said when the White Paper was first produced. But I do not believe that the present Government would ever have produced such a White Paper. If the White Paper had not been produced and the nationalised industries had not got their obligations set under it, the burden on the taxpayer caused by the present massive investment would now have reached astronomical proportions. Obviously one thing that the White Paper made necessary was for the electricity industry and the other nationalised industries to find a greater proportion of the money that they needed for their future development out of their own revenue. That in itself provided an incentive, which I am certain the industry warmly welcomes, to force down both the cost of capital development and the cost of producing electricity.
Over the years, the industry has been remarkably successful in reducing its costs, as the right hon. Gentleman the Minister pointed out earlier this afternoon. I am glad to say that that incentive still exists, but again I am beset by doubts as to the policies that the Government may possibly press upon the industry, which may make it impossible for the industry to go on forcing down its costs of production in the way that its leaders would like.
The search throughout the last decade for competitive nuclear energy has obviously played an important part in that cost reduction. Over a number of years it had an astonishing effect on the costs of conventional generation, and with the advanced gas-cooled reactor, as my hon. Friend the Member for Sheffield, Hallam pointed out, it seems to me that a breakthrough of the competitive ability of nuclear power is likely to be achieved. Important though this is—and I think that perhaps a number of people attach too great an importance to it—it is wholly wrong to exaggerate the effects and the immediate consequences of this breakthrough because it is clear—and the right hon. Gentleman made this point this afternoon—that electricity generation will continue to be overwhelmingly conventional and predominantly coal-fired for a good many years to come.
In my opinion the developments which may change the whole face of electricity supply throughout the world are still in 1770 their infancy. The hon. Gentleman is much more technically qualified than I am to describe them, but looking at all that has happened during the first 65 years of this century, including perhaps even the "13 wasted years" since 1951, it would be a bold man who would predict that in the year 2000 we would still be thinking in conventional, or even in nuclear, terms. These, however, are the terms in which we must think for the immediate future, and some of the problems which they pose are formidable. The number, size and siting of power stations and the provision of adequate transmission alone will give the present Minister of Power and his successors quite enough to go on with.
The other night the Secretary of State for Education and Science used some brave words about the despoliation of the countryside. That was when he was doing his best to spin out the debate until Big Ben mercifully struck.
§ Mr. Wood
The right hon. Gentleman was no doubt drawing our attention to the whole question of the despoliation of the countryside, and when I was Minister it was frequently represented to me that the pylons were not an addition to the beauties of the countryside but, as my right hon. Friend the Member for Guildford (Sir R. Nugent) said, the Minister of Power and the electricity industry will find it physically more and more difficult to maintain necessary supplies in the face of the opposition with which most of us here have a good deal of sympathy unless they are rescued by technical developments both in the siting of power stations and in the means of moving electricity from the point of production to the consumer.
Nuclear developments, dry cooling towers and new methods of transmission, including cheaper underground transmission, might—and it is a big might—all come to our aid, but the difficulties, which are only too obvious, underline the essential need for research to continue. We have been told that this is a modernising Government. After the last 10 months some of us have our doubts, but we have been reassured by the right hon. Gentleman that this research is going to continue, and that 1771 he fully recognises the importance of it. I hope that the right hon. Gentleman and his Parliamentary Secretary will not be content with mere words but will continue to give real encouragement to this industry to press on with research because without technological advances in this field their task and that of their successors and of the industry will become well nigh impossible.
The right hon. Gentleman can confidently count on our support for this industry which, I am convinced, as I think he is, is well led by men who are aware of its problems and who are determined to overcome them. I believe that the right hon. Gentleman shares these views, and he can, therefore, also count on our help in the relationship that exists between the Government and the industry. The Minister knows that this relationship is a peculiar one and can be delicate, occasionally perhaps difficult, but I can assure him that we shall continue to give him all our support as long as he continues to be guided only by the national interest in all his dealings with this great industry.
§ 7.15 p.m.
§ Mr. Michael Alison (Barkston Ash)
I rise to speak as one who has the prospect of having within his constituency three large coal-fired power stations. One of them is in operation, one is building, and the third is definitely projected. The first is at Ferrybridge, the one that is building is at Eggborough, and the one that is in prospect is at Drax. The last-named will be the largest power station in Western Europe, capable of producing 3,000 MW.
I therefore have a definite constituency interest, and it is perhaps right to begin by adding my praise to the electricity industry and to the C.E.G.B. for what they have achieved. They have made really solid progress in terms of the economic efficiency of the industry, particularly in relation to labour productivity, of which Sir Ronald Edwards made considerable play in his presidential address. What strikes me particularly is the 19 per cent. increase in thermal efficiency which has been achieved during the last decade. In a country which has pioneered the art of boiling water efficiently, this is quite dramatic.
1772 There is a lot on which we can congratulate the Board and the Council, and we in this part of Yorkshire are proud of the fact that these sites have been chosen for these really stupendous power stations. It reflects credit on the buoyancy of Yorkshire industry, and also on the efficiency and profitability of the South Yorkshire Coalfields.
§ Mr. John Harvey (Walthamstow, East)
Does not my hon. Friend regard it as remarkable that while we on this side of the House are saying these deservedly nice things about this efficient industry, this exhausted Government cannot rally one back-bencher on their side to participate in the debate?
§ Mr. Alison
It certainly is shameful, and I am particularly depressed that so few Yorkshire Members are present. After those few introductory words of congratulation, I should now like to give the House a worm's eye view of the impact of the operations of the Board rather than the bird's eye view we have had this afternoon. I wish to draw attention to the economic difficulties which arise locally—and to some extent nationally—from the scale and method of developing these big new power stations.
I propose to start at the local level because it is relatively easy to pinpoint the impact on a town of the construction of these power stations. Near Selby, and within sight of the centre of the town, we have the cooling towers of the power station at Eggborough, and before long we expect to be able to see the cooling towers at Drax. The basic problem locally is the obvious one of the shortage of labour. Unemployment in my constituency is running at about 0.7 per cent., which is half the national average. This means that the labour situation, already tight, has to digest the impact of the sudden arrival of these colossal power station projects, involving during the constructional period the employment of huge labour forces which fade away when the operation stage is reached.
In the case of Eggbrough we face a demand for about 2,500 constructional workers at the peak, and in Drax a demand for about 5,000 workers. This is sufficient in theory to absorb the total working population of the whole of Selby, taking every man out of his present commercial or industrial activity. The real 1773 rub is that the earning opportunities provided by the construction of these power stations are already proving sufficient to have the effect of drawing off large parts of the working population of the town. In much the same way as the children followed the Pied Piper workers leave to work on these huge projects some miles away. Of course we all know that the actual situation is not quite as stark as I have painted it, because construction is phased and it does not all happen at once. Furthermore, the contractors usually carry round some of their own men, who move from one power station construction site to another, and in that respect there is not so great a great drain on the local labour force.
But the position is still a very severe one locally, and I hope the Minister will consider the way in which it affects some local firms. One long-established chemical firm in Selby, which is extremely efficient and is seeking to expand, has found that one in eight of its labour force has left in the last few months to work either at Ferrybridge or at Eggbrough. Further, a small shipbuilding firm with a large export order business working on the Yorkshire Ouse has had its labour force of about 300 men reduced to 250 in twelve months, entirely by removals to power station sites. If this were to go on indefinitely that firm would hardly be able to carry on.
All this arises from the special power of these huge C.E.G.B. constructional contracts to attract labour by reason of their earning opportunities. The point is not that the power station contractors pay higher hourly rates, because those rates, by national agreement, are precisely the same as those paid by local firms. The attraction is the almost unlimited overtime facilities. Apparently men will almost kill themselves to carry away overtime earnings rising sometimes to £50 a week. Less satisfactory, because there is no commensurate increase in production, are the hidden bonuses given by contractors to persuade men to come and to stay. Lodging allowances are paid to local people who do not need them. Free tickets are given to workers so that they can see their great aunts in Windermere, and that sort of thing.
These perks create what we know as a wage drift, which is really an increase in wage rates unaccompanied by any 1774 increase in production. This, writ large, is the disease which affects two-thirds of the country. That is what goes on locally. Wage earners are drawn away by the auction procedure. The C.E.G.B. is in a very strong position, because of the scale of its contracts, to make bids favourable to itself. Of course the argument can be put forward that this is a beneficial process, that, because it is an economically important project, a power station should have the rights to divert factors of production to what might be considered more productive employment.
Yet I cannot believe that the local power station projects that we have in this part of the West Riding have established so overwhelming an economic priority that they justify the complete dislocation of the current activities of local firms. The problem is aggravated by the fact that the men who go to these power station projects work an extraordinary amount of overtime, which in itself cannot be a good thing for the whole tone of employment in the locality. The snag is that this employment comes to an end in anything from three to five years. The men are than thrown back on the heap. By that time they have lost their original jobs; indeed, the firms that employed them may have been forced out of business.
In this sort of situation I hope that the Minister will consider taking action. I suggest that he should undertake to give directions, as he has power to do, to the C.E.G.B. to ensure that it gives much greater thought to the impact of its operations upon local economies. In this connection I want to make two specific suggestions. First, I suggest that contractors for the C.E.G.B. should be required to recruit a certain percentage of their labour force from outside the locality of their immediate operations. This is quite a reasonable request, because there are certain parts of the country where unemployment is high and where people are looking for work. Under the Ministry of Labour resettlement transfer scheme financial and other incentives for recruiting labour from outside the immediate area of operations are provided.
My second suggestion is that C.E.G.B. contractors should be forced to notify their vacancies to the local labour 1775 exchange; indeed, if possible local labour exchange representatives should have sites representatives so that they can ensure that recruitment is not done "on the nod" by the foreman—because this is where the process of poaching really gets under way. There should not only be recruitment from outside the locality but a definite application to the local labour exchange for labour, with a labour exchange representative on site, if possible.
The Minister should also seriously consider consulting his right hon. Friends the Minister of Housing and Local Government and the Minister of Labour about the impact on housing amenities in this area, where we shall have a large influx of labour. At the peak, we shall have 5,000 workers on site at Drax, which is about half the present population of Selby. Selby is fortunate in one respect but unfortunate in another, in that most of its women go out to work and there is no question of finding casual lodgings in the town. If 5,000 men are going to live on site they will have to find somewhere to live.
I should like to know what thought has been given to this question in respect of one of the projects which I have mentioned. I hope that the Minister will consider the necessity for a rational preparation of the ground for the launching of these huge unprecedented power station constructional projects like that at Drax. I make these local points because they are specific examples of the numerous ways in which the country's overall economic difficulties spring from a series of little local situations where pressures on the supply of labour are very severe. They produce a bidding up of wages without any commensurate increase in production. This is at the root of our inflationary difficulties, and it does damage to our exports into the bargain, because of the dislocation it brings to other, smaller firms.
I want to say a word about the overall operations of the C.E.G.B., especially in relation to capital expenditure. The Minister was very impressive when he referred to the heavy burden that the C.E.G.B. has to bear in respect of capital investment, and the reason why it has to bear it. Many hon. Members have referred to what Sir Ronald Edwards said 1776 in his presidential address at Brighton. He said quite plainly that the Electricity Council would have to borrow £400 million this year alone in England and Wales, quite apart from what it raises internally—about which the Minister has already spoken.
This is a staggering sum to borrow. Not only that; it is a staggering increase compared with its net borrowing from the Exchequer last year. Last year it borrowed £317 million from the Exchequer, so the £400 million for this year represents almost a 33 per cent increase. It is worth reminding the House that the Chancellor quite plainly stated the other day:The Government has decided that the growth of public expenditure between 1964–65 and 1969–70 wil be related to the prospective increase in national production. In the Government's present judgment this means limiting the overall increase in public sector expenditure excluding the investment of the nationalised industries, and taking one year with another, to 4¼ per cent. a year at constant prices."—[OFFICAL. REPORT, 6th April, 1965; Vol. 710, c. 279]In view of a 33 per cent. increase in the borrowing of the C.E.G.B. this year it is quite reasonable to ask where the Board will borrow the money from. Where will they get this extra £400 million? If one looks at this year's Budget Financial Statement, one discovers the sad and sorry but true fact that Government financial credit has gone. Indeed it is not just Labour Government credit: it is, alas, the previous Government's credit as well. In recent years, the Exchequer has had to pay back to the public more than it has been able to borrow from them.
If one looks at the Exchequer borrowing for 1964–65, it is striking that they had to pay back twice as much on repaving outstanding loans as they were able to borrow afresh from the public. They made up the total by a form of raising funds which was either "once-and-for-all" or was directly inflationary. In 1964–65, they managed to get by with their borrowing either by drawing on the I.M.F. interest-free notes or by dipping into the Exchequer equalisation grant, for which there was a good deal of sterling, resulting from the disposal of foreign currency—that is the once-and-for-all method—or they did it by increasing the floating debt by issuing Treasury Bills, 1777 that is, by creating credit, which is directly inflationary.
What will they do this year, with this huge C.E.G.B. borrowing requirement? Unless some very hard thinking is done by the Minister and his colleagues, we shall continue financing C.E.G.B. operations and other capital projects by the old process of depreciating the currency, creating credit and raising prices. How will the Chancellor's measures bite, on the Minister's Department or on the economy at large? And can the Minister give some specific answers to the local questions which I have raised?
§ 7.31 p.m.
§ Mr. R. W. Brown (Shoreditch and Finsbury)
I rise in answer to the challenge of hon. Gentlemen opposite. I am sorry that the hon. Member for Waltham-stow, East (Mr. John Harvey) has chosen to leave the Chamber after he made a silly and childish remark, when he might have heard the rest of the debate. I have sat through the debate and listened to hon. Gentlemen opposite with some interest. It was not very long ago that they were denigrating nationalised industries. We saw posters saying, "No more nationalisation"—
§ Mr. Brown
The hon. Member says, "Hear, hear". He will learn that this sort of thing is what it is all about. I was delighted to hear hon. Gentlemen opposite got arguing the case against the nationalised industries, but squeezing out for it every possible piece of praise and plaudit which they could. I should have preferred to listen to this rather than contribute to the debate.
We have before us today a first-class report of an industry which has shown itself dynamic. It has shown that it is seized of the importance of providing the best possible service to the people at the best possible price it can. This has not always been the attitude of hon. Gentlemen opposite, during the past year. Prices of electricity have had to go up to keep in step with rising prices. One of the things which I liked about the Report, and which brought home to me some memories, was the reference on page 39 to the thermal efficiency of generation in the conventional steam station. It was, 1778 at one time, my job to look after the thermal efficiency and to see that we got it as high as we could. I know the problems especially that of overloading. I read paragraph 97 with some quizzical thinking, in the sense that it says that the increase in average thermal efficiency was not as high in 1963–64 as they would have liked, because of the problems of the machinery, which had been overloaded the previous year.
I hope that hon. Members will understand that this is a serious point. It affects the efficiency of the stations considerably. When I was responsible for efficiency in the stations, it went up eventually to 19.5. When I looked at this figure of 26.7, I was reminded that my station was only a booster station, that is, that we had to bank down after the peak period and we came into peak working in the peak periods, from 7.30 to 9.30 a.m. and from 4.30 to 6 p.m.
The need for research co-ordination in the industry is brought out very clearly, as is the fact that this is an industry which was faced with changing stresses. It had to look to the future and the problems of what rôle atomic energy would play. I recall being at an institution meeting where we had a graph drawn forecasting where atomic energy would play its rôle in 1972 and it was a larger part of the cake than has actually happened. One hon. Member opposite referred to the building costs and the problems of building these stations. I have always felt that one of the reasons why the atomic energy stations have cost so much is because of these outside factors, which are not necessarily the developing costs of the installation itself.
I was pleased to see the five factors which the industry had been looking after in order to try to improve their transmission, generation, and distribution techniques. It seems to me that the Report has highlighted the most important factors. As one reads on, one sees the tremendous attempt they are making to grapple with the problem and face the future, when atomic energy will undoubtedly become an important part of the electricity industry. This brings us much greater problems than just the development of the reactor. It has an effect on the whole station itself, even down to the safety measures, which will vary considerably from the safety 1779 measures which have to be observed in the traditional steam stations.
They indicate that they are on top of the job and are seeing that, by the 1970s, they will be in the front rank of providing us with a service of electricity in accordance with the desire of the nation, when, by that time, we hope we shall have an industry which can be geared up and making the maximum utilisation of electricity. One of the problems is that of peak loading. I was most impressed with the attempt which has been made by the electricity boards to encourage consumers to take their electricity on the new storage heater basis—to get it at a cheaper rate. This is important, if only we could get the people to understand the advantages which are there for them if they do this, and the help they could give to the station.
One hon. Member opposite referred to this very point. It is worth noting that they have to estimate the total capacity per installation and that they have very hazardous means of determining what their demand will be. This means that they err on the side of caution, and it costs that much more on each occasion that the peak demand is required.
I was interested to see that not only has the electricity industry been interested in its own research, in the sense of their technical research, but they are now showing a very real concern for the consumers and their needs. It has been argued from time to time that these monolithic bodies are out of touch with people and never really understand what the consumer wants.
On page 50 we can see the attempt of the industry to understand the needs of its consumers. The industry is using modern management aids to provide the best possible statistics on which to work. We see that the industry has geared itself up in this way, not always with the support of everyone in the country. It has forged ahead and is beginning to make the impact for which many of us hoped who had faith in the industry in the early days. I was delighted to see the results of some of this research into consumer needs and to see that it is showing advantages and being reflected in the work of the industry.
It is also remarkable that the industry should play an important part in international 1780 activities—in the development of Europe and the industrial problems of the electricity industry throughout the world. I was employed in a private part of the industry and was not concerned with the Board, and I therefore need not declare an interest. But we have always believed that the industry could play an important rôle in international affairs, and I was pleased to read of the interest which is being taken in this respect.
The industry has also taken a noteworthy interest in education and training. For many years I have been involved in teaching engineering, and I have always complained that, generally, industry is not aware of the training facilities which are available in this country. In this report the electricity industry indicates that not only is it making full use of the services which are available but it is prepared to go into the training business itself to ensure that it gets staff of the calibre it needs. I did not understand one comment by an hon. Member opposite about an increase of 7.1 per cent. in the technical engineering grade. Was he complaining about that? The more one develops these techniques, the more one needs technical people to deal with them. I was pleased to see the wide range of courses which are being run.
§ Mr. Palmer
My hon. Friend makes a useful point. Perhaps he will also agree that there has been a corresponding fall, both absolutely as well as relatively, in the number of manual workers employed.
§ Mr. Brown
I thank my hon. Friend for that comment. It is a point which I was trying to make—that the industry has made itself efficient and is using these technical aids.
I was seized of the importance of the reference in paragraph 208 to careers development. This is a point which industry does not always understand. Industry complains that it cannot get executives and that it has no top men coming along, no captains of industry. It does not seem to understand that it is its responsibility to select its staff and to plan a career for executives so that people may see a future in the industry and may see themselves moving to jobs which are well within their capacity. Then we find happy employees working to their maximum efficiency. The return to industry clearly is very great. I am 1781 very pleased that the electricity industry has introduced this system of careers development. In 10 years' time the reward for doing this will show clearly in the status of executives and top executives in the industry.
I do not want to detain the House too long, because there is not much that I can add to this outstanding Report. I am proud that the industry has been able to submit such a report. A headmaster would have written, "Well done".
§ Mr. Patrick Jenkin
Surely the hon. Member recognises that the whole of the period covered by the Report which he is praising so lavishly was under the auspices of a Conservative Minister.
§ Mr. Brown
What the hon. Member believes he said, I do not know. What we are talking about is the people in industry—the electricians, the technologists and the scientists. We are not talking about hon. Members opposite. They spent their time fighting the Finance Bill on the Corporation Tax and Capital Gains Tax. I am talking about those who dedicated themselves to an industry to give a supply to the country in the most efficient way and at the most efficient price. This has nothing to do with politics. Many of us on these benches have spent years trying to explain to hon. Members opposite that industry is industry and politics is politics. Time and again we have to ask them not to bedevil industry with silly political comments. The silly comment which the hon. Member made epitomised that very thing.
I hope that, having read the Report, we can say to the hon. Member that if he wants a little extra tutorial we will give him the help he needs to understand the Report. If we are to ask industry to gear itself up for the future of the country, we must ensure that industrialists, workers and management know that they will be allowed to get on with the job without being bedevilled by people who are guilty of political sniping and carping. When they have done a good job, let us have the courage to tell them so. Let us tell them, "Well done. We hope for more improvements, but we are thankful for what we have received. We look forward to an ever improving industry in the future."
§ 7.47 p.m.
§ Mr. Eric Lubbock (Orpington)
The hon. Member for Shoreditch and Finsbury (Mr. R. W. Brown) must learn that because hon. Members on these benches—I am not entitled to speak for the Conservative Members present, although I think I may do so on this occasion—praise the electricity industry, they are not necessarily advocating further nationalisation. That would be a complete non sequitur and a confusion of thinking which he ought to adjust. I agree that we should avoid bringing politics into discussions of the nationalised industries, but that was very much what he was doing in his speech, although he blamed Conservative Members for it.
He says that this is a very fine report. I think that it probably was a year ago. Will the Minister tell us why it has not been possible to produce the up-to-date report before we rise for the Summer Recess? This question applies not only to the Central Electricity Generating Board because it happens in other nationalised industries, too, and it is very inconvenient. The year end for most of these industries is 31st March but they seem not to manage to produce their annual reports in the four months before we rise for the Summer Recess.
There may be some vital point in one of these reports of which none of us is aware. If we were aware of it there might be some Parliamentary action which we desired to take. I urge the Minister to see whether there is anything he can do to speed up the preparation of the annual reports of the nationalised industries for which he is responsible. Let him do a bit of modernising. Let him see whether he can cut down the period between the year end for the nationalised industries and the production of their annual reports.
§ Mr. Frederick Lee
The hon. Member will agree that this is not the fault of the industries. This report has been available for 10 months. They may well turn to us and say, "We get our report out but if you do not debate it you must not blame us."
§ Mr. Lubbock
I am talking about the report for the year ending 31st March, 1965. Although it is too late this time, I hope that the Minister will see whether these reports can be produced in the four months before we rise for the Recess. 1783 Most large companies manage to work within this sort of time scale. I see no reason why the C.E.G.B. should not manage it. I hope that the Minister will discuss this matter with the C.E.G.B. and the Electricity Council to see if means can be found to speed up the provision of these annual reports.
§ Mr. Palmer
I have considerable sympathy with the hon. Gentleman's point and, as one who reads these reports in considerable detail, I assure him that the facts and details which the industry includes in its reports represent the sort of information which would not be found in the average company report.
§ Mr. Lubbock
The hon. Gentleman knows a great deal about management and will be aware that frequently it pays to produce information quickly, so that it may be acted upon, rather than produce it in minute detail but too late for action to be taken. I would be prepared to see a limited reduction in the amount of detail presented if we could get the information more promptly.
Many questions have been asked about the industry's capital expenditure programme and whether the Chancellor's recent announcement will mean any scaling down of the C.E.G.B.'s investment programme. I do not see how such a scaling down could take place. Indeed, it would be unthinkable for it to happen and I hope that the Minister will make a less equivocal statement at the end of the debate than he made at the beginning. To relieve the anxiety which exists, I hope that the right hon. Gentleman will assure the House that there is no question of any scaling down taking place in the capital expenditure programme of the industry which might affect the amount of electrkity generated in future years. I hope that he will also assure us that whatever studies may be going on in the industry they are being confined to items of capital expenditure which bear no relationship to the capacity of the industry.
It may be practicable to do something about office blocks and ancillary expenditure which will not affect the total output of the industry. I have no objection to that sort of thing happening as part of the Chancellor's measures. Nevertheless, we should be given a categorical assurance 1784 that no restrictions will be placed on the investment programme of the industry which will affect its output in future years.
What a magnificent achievement for Britain the A.G.R. station is. The documents which we have been sent by the C.E.G.B. prove that we are in advance of the world in this new development. I disagree with the remarks of the right hon. Member for Bridlington (Mr. Wood) on this subject. I regret that the right hon. Gentleman is not in his place because I would like to have addressed my remarks to his face. We in this country tend to play down our achievements far too often. I was particularly disappointed, therefore, to hear the right hon. Gentleman say that a number of people had attached too great an importance to this new development and that it would be wholly wrong for us to exaggerate its future potential. He went on to say that we will be depending on dominantly coal-fired stations for a long time to come.
If one considers the time-scale of capital expenditure in electricity generation I suppose that the right hon. Member for Bridlington is partially right because the Minister said earlier that there were 15 coal-fired power stations under construction Naturally those will go ahead. Nevertheless, the implications of this new development for the future type of station which we will have in the C.E.G.B. are, I should have thought, very much more important than the right hon. Member for Bridlington seemed to think.
I heartily congratulate Atomic Power Constructions Ltd. on winning the recent tender and the Atomic Energy Authority for the pioneering work it has done in this sphere, work which has enabled us to lead the world. The hon. Member for Bristol, Central (Mr. Palmer) suggested that perhaps we had had too large an atomic energy programme, but I assure him that without the foundation of the magnox stations we would never have been able to develop the A.G.R. system. The Magnox programme was of an absolute minimum size to keep the three consortia in business. At one time it looked as though one of them would have to fold up. A dangerous situation occurred a few years ago because of the contraction in the nuclear power programme.
1785 Initially we had five consortia. Two of them went out of business and we were left with three. There was only just enough work in the Magnox programme to keep those three in business pending the arrival of the A.G.R. programme. Therefore, although economically one may criticise the Magnox programme—or, from the point of view of the profit and loss account, of the C.E.G.B., too—it is now beginning to pay off and we have an industry which cannot only produce A.G.R. stations for the electricity industry of this country but will, I hope, be able to export these stations to all parts of the world.
I am an optimist about this, particularly when I look at the conservative assumptions which have been made in the document which has been presented to us by the C.E.G.B. I note that the comparison of costs between the A.G.R. and other types of stations the C.E.G.B. assumes a 20-year amortisation life and a 75 per cent. load factor. That compares with the design of the components used in the station of 30 years and 85 per cent.
§ Mr. Patrick Jenkin
Technically speaking, to have a 30-year life and a constant 85 per cent. load factor is theoretically possible but practically almost impossible. Would the hon. Gentleman, therefore, not agree that the figure of the potential cost of electricity based on both those assumptions cumulatively is wholly unreal?
§ Mr. Lubbock
With respect, I do not think that the hon. Gentleman is right. Conventional stations depreciate over 30 years. I hope that he will go with me that far. It is equally true that the prototype A.G.R. station at Windscale has been operating at a load factor of over 85 per cent. and, for that reason, I suggest that the estimates of performance are quite conservative.
§ Mr. Ridley
Is it not also true that the Oyster Creek criterion is an 88 per cent. load factor and a 25-year amortisation, which is one reason why the cost is so much higher here than in America?
§ Mr. Lubbock
I wondered earlier why the Oyster Creek figures were mentioned because they seem rather meaningless unless one knows all the assumptions which have been made in arriving at those costings.
1786 Even if there is a difference of opinion between the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) and me as to the pessimistic or optimistic nature of these assumptions, I refer him to the part of the C.E.G.B. document which deals with the development potential of the A.G.R. We are told that the first A.G.R. will have a coolant gas pressure of 450 lbs. p.s.i. and that there is every hope of raising that pressure to 600 lbs. p.s.i. at future stations. It is pointed out that great benefit will also be derived from increases in reactor sizes. The C.E.G.B. suggests that this will mean a reduction of as much as 10 per cent. in the cost of generating electricity if the later reactors in the A.G.R. programme are double the size of the ones being provided at Dungeness B.
This raises an important point, for the Minister said in response to an intervention which I made when he was speaking that he thought that 5,000 megawatts, which was the minimum scale thought to be desirable by the Atomic Energy Authority in its Annual Report last year, was the minimum and that we were going to think in terms of a programme with a substantially larger figure than that. I hope we can be given more information about that, because the whole of the 5,000 megawatts envisaged by the Atomic Energy Authority would be taken up by four stations of the size of Dungeness B, and we are already talking of a station twice as big as that. It therefore seems that we shall have to think of an A.G.R. programme considerably larger than the 5,000 megawatts mentioned.
What does the Minister think about this? How long will it be before we get a fast breeder reactor in production operation? Do we still stick to the time scale we had in mind a few years ago, when it was said that by 1975 the fast breeder reactor would be fully tested, that the prototype would have been in operation for a sufficient number of years to bring the station into a nuclear power programme, and that it would probably be the only type of station we would order from then onwards, because if the Atomic Energy Authority's hopes were realised it would be considerably cheaper ultimately even than the A.G.R.?
Will the Minister tell us his thoughts, in the light of these costings, about the 1787 relative position of nuclear and conventional means of generation for the future power programme? It would be quite impossible so to adjust the programme as to change the 15 coal-fired stations that have been ordered, but what about the future orders that will be placed by the C.E.G.B.? If these figures are absolutely reliable, as I am sure that they are, should we,, not be ordering any more new conventional stations at all, and should not future stations be entirely nuclear? That is the logic of the figures in the Report—
§ Mr. Palmer
The hon. Gentleman is overlooking something that should never be overlooked in relation to a large electrical transmission system. Everything depends on the siting and costing of the station, which means that it may be economical to use a nuclear power station on one side and equally economical to use a coal-fired power station somewhere else.
§ Mr. Lubbock
There may be more geographical limitations on the siting of a nuclear power station than on the siting of a coal-fired station. We have not yet got to the stage where nuclear power stations can be placed inland, but the time may well come when there is no real difference in the criteria to be applied in siting an atomic reactor and any other kind of power station. The problem of cooling water also applies to conventional stations, which is why so many have been placed along the Trent for example. I think that this difference in cost is so striking that there would have to be very strong reasons for placing further orders for conventional stations, and this should be one of the basic parameters of the Minister's fuel policy which he hopes to develop, I think, between now and the autumn.
Let the Minister tell us how many tons of coal will be consumed by the Central Electricity Generating Board. The Minister should add on to the 65 million tons he mentioned the consumption of the 15 coal-fired stations under construction, and then tell the Coal Board that that will be the total amount required by the C.E.G.B. in the early 'seventies. It is important that the Minister should come clean on this, and at least give the National Coal Board some idea of what 1788 is expected of it. It is much worse for the Board to have no target whatever than to have a target that is less than it might hope to get.
Another aspect is the sales potential of the A.G.R. abroad. What are the Government doing to promote the sales of A.G.R. stations? I take it that the C.E.G.B. is doing something there, because of the following sentence in the technical and economic appraisal:It is hoped that the results presented will be of value to electricity supply undertakings throughout the world.I take that to mean that the C.E.G.B. is meeting its responsibility for distributing information to people in other countries who may wish to place an order for an A.G.R. station. This is so important that the Minister himself should be taking an active part in seeing that these facts and figures are put before every electricity undertaking in the world, and that there is a hard selling campaign of the A.G.R. in all countries where there is a possibility of its being ordered.
It was, I think, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) who said that the area boards could not be blamed too much for the vast increases they imposed, because 80 per cent. of their costs were determined for them by the C.E.G.B. Whether or not that is true, it appears to me that the machinery for the representation of consumer views is totally inadequate. I have complained of one matter before, and I will complain of it again to the Minister now, because I do not think that he has heard of it. The London Electricity Board increased its charges by between 9 per cent. and 10 per cent., and his right hon. Friend the First Secretary referred that increase to Mr. Aubrey Jones. The South-Eastern Electricity Board increased its charges by 13.3 per cent., and when I asked the First Secretary why that increase, too, had not been referred to the National Board for Prices and Incomes, he replied that the consumers' representatives had not asked for it to be referred.
That indicates that the consumers' representatives are not doing their job. I am upset about it, and my constituents are upset about it, and I can tell the Minister that I have had a good many letters about these increases. We have here a very anomalous position when this Board that has been set up to protect 1789 the public against unreasonable price increases looks at things in such a very arbitrary way, and it is a matter of luck whether the supposed representatives of the consumers are doing their job properly. The Minister should try to persuade his right hon. Friend to reconsider what he said to me on this subject, and refer the matter to the National Board for Prices and Incomes.
If we are to have a policy for prices and incomes we must realise that people will demand wage and salary increases if they find that their own living costs are going up. I do not mind if the First Secretary thinks that people are prepared to stand increases of 13 per cent. in electricity charges without asking their employers for a rise. I only say that he is wrong and that this happens, or that people instruct their representatives to try to negotiate a rise on their behalf.
I very much agree with those hon. Members opposite who have said that a pricing policy must come before an incomes policy, that until we have managed to control prices we shall never get people to moderate their demands for wage and salary increases. Here is a glaring case where the Minister should intervene.
A final point concerns the regulation which came into effect on 1st July preventing landlords from charging over a fixed maximum amount for the resale of electricity. The Minister said in his opening speech that the area boards had no power to enforce this and that it was necessary for the individual consumer to look after his own interests—by which he meant that the consumer has to take the landlord to court and can then recover the excess amount from him. How many cases have come before the courts since 1st July? If the Minister cannot give that figure, can he tell me how many actions are pending? It would be interesting to know whether consumers are using their new rights and whether sufficient publicity has been given to the machinery available to them to do so.
If the Minister finds that there are very few cases, it indicates that consumers are not aware of their new rights, not that exploitation and over-charging is not taking place. I am aware of several cases of people still charging over the fixed amount and appearing to get away with 1790 it. Unfortunately, in all these cases the person who is overcharging is the operator of a caravan site. There is very little one can do in these cases because, if any person brought an action and recovered the excess, the operator would retaliate by increasing the charge he makes for the plot.
One case which I have drawn to the attention of the Minister of Housing and Local Government is of a site operator who immediately on 1st July raised the charges for the plot so as not only to recover the amount he was overcharging for electricity and was no longer entitled to but actually to make an increased profit. He sees this as an opportunity to fleece people on the site. I say with great regret to the Minister that, welcome as this move was for people living in rented accommodation, it will have no effect at all on people who live in caravans.
I have said some fairly harsh things about the slowness of the C.E.G.B. and the Electricity Council in introducing their reports, but I conclude my speech by echoing the best wishes which other hon. Members have offered to them for the coming year.
§ 8.14 p.m.
§ Mr. Patrick McNair-Wilson (Lewisham, West)
I wish to correct the hon. Member for Orpington (Mr. Lubbock) by saying that the price increase announced by the L.E.B. in June was 11 per cent. not 9 per cent. to 10 per cent. as he suggested. This underlines the fact that this debate, while not affecting my constituents from the point of view of power stations, directly affects them from the point of view of cost of electricity as consumers. Therefore I welcome the opportunity of discussing the industry.
It is rather sad to reflect that by the time we come back after the Recess we shall have had a Labour Government for rather more than a year. The promises made about a co-ordinated fuel policy will still be unfulfilled. When we remember the fighting words in the Labour Party's election manifesto:We will have a co-ordinated policy for the major fuel industriesand similar noises which have been made subsequently, we have also to remember that a year will have passed in which nothing has happened.
§ Mr. McNair-Wilson
The Minister disagrees, but the fact is that the Fuel Advisory Council has met only three times and my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) stated the number of minutes spent in meetings of that body.
§ Mr. McNair-Wilson
That is good fighting stuff, I let it go to return to the Minister's other comments. As yet we have no co-ordinated fuel policy, and I do not see one coming. We remember the famous, almost infamous, words:Labour is ready poised to swing its plans into instant operation,We see that they were not true.
We have had a number of debates in the last few weeks, on the fuel industries, notably the gas industry. It is useful now to be looking at another of the great industries which competes so acutely with the gas industry. The electricity industry is unusual in some respects in that it is essentially a capital-intensive industry. I was interested to note when reading yesterday's Evening Standard an article headed: "Look, No Hands". It told about a guide showing a party of visitors round the Rugeley Power Station in Staffordshire who was stumped by one question: "Please", said a small boy, "may we see some men working?" To keep this capital investment at a level at which the industry can take advantage of all the technological advances made is an enormous task. The Minister has told us that the industry will have to borrow about £400 million in the next year. I do not want to go over the ground traversed by my hon. Friends, but I must ask the Minister to make sure that whoever winds up this debate shall give a definitive answer about where the money is to come from.
We have had three Budgets this year from the Labour Government and each has been tougher than its predecessor. We see a cutting down of public expenditure at various levels. It is not enough for the Minister in his opening remarks to make bland comments to the effect that he did not think there was any need to suppose there would be any 1792 cutting back in the electricity industry. He managed to satisfy the hon. Member for Bristol, Central (Mr. Palmer), but he certainly did not satisfy me, and I do not think he satisfied any of my hon. Friends. We shall look forward to a definitive statement later.
This debate is taking place against a background of uncertainty. That was a point made by my hon. Friends in the debate on the gas industry. All the fuel industries are undergoing very considerable change. Great and welcome advances are being made, and I wish to be associated with everything that has been said in congratulating the electricity industry on its advance, but while those changes continue and there is this uncertainty the need for some clear lines of approach from the Government are made the more necessary. One of the greatest questions which have to be faced by all the fuel industries, and notably the gas and electricity industries, is the use of the primary fuel in future.
The electricity industry is at the moment almost entirely coal-based. If we take the figures given by Sir Ronald Edwards at Brighton in June, we see that in 1963–64 the 1 million ton coal equivalent for those years in the electricity industry accounted for 61 million tons, which is 86 per cent. and in 1970–71 it will still be high at 78 million tons, although falling in this case to 76 per cent. The oil industry's contribution to the manufacture of electricity remains fairly static, from the 1963–64 figure somewhere around 7.8 million tons and, therefore, about 11 per cent., to a 1970–71 figure of about 12 million tons, or 12 per cent. The nuclear energy aspect shows a startling steep increase, but coal is still the basic primary fuel.
I shall refer to the comparative competitive position of nuclear energy. I hope that the Minister, realising that coal is still the primary fuel, will give consideration to seeing that it is used as cheaply and as efficiently as possible. I suggest, for instance, representing a London constituency, that large bulk loads of coal should be brought into the Port of London in large ships—say, of 22,000 tons—and then taken by barge up to Battersea or Fulham to ensure that we get the freight side of this primary product carried out as cheaply as possible. Much could be done to help 1793 to make the industry more economical by improving the transport arrangements.
Something has been done about big power stations. Of course these are more economical, but it is always difficult to equate the big station which is economical to the power station located at the load, because the two are in a sense contradictory. If it is desired to have power stations with the shortest possible transmission lines—that is, as near to the load as possible—the stations will be scattered. Those, too, as near as they can be matched, will be the keys to economy.
My hon. Friend the Member for Cirencester and Tewkesbury spoke of his artistic appreciation of transmission lines and pylons. I do not share that view. I know that my hon. Friend is an artist and therefore entitled to his view. I hate the steel cobweb which is going up all over the country, this pylonitis from which we are suffering. I was delighted to hear that the research figure has risen from nearly £6 million to £10 million this yea I hope that research will be carried out into the most effective ways of burying cables. The direct current has advantages, because the current tends to travel in the centre of the cable rather than on the periphery, as is the case with alternating current, and direct current helps to avoid short circuiting.
I was delighted to read these words in paragraph 264 of the Report, admittedly a year old:The use of high-voltage direct current transmission, as in the Cross-Channel link, has many advantages, including reduced cable costs and short-circuit levels … research is therefore being undertaken to develop better and more economic methods.It is extremely costly. At a minimum, to bury a 400 kilovolt cable will cost about £1 million a mile. According to the Report, we shall need about a single track of the M.1 to cope with the cable weight. While recognising the needs of industry, I want to see Britain preserved as much as possible. I am not one of those who are prepared to sacrifice everything without trying to see what can be done to preserve Britain.
I turn to the nuclear programme. Every hon. Member who has spoken has praised the nine Magnox reactors and their performance. They have been a great success. They are enormously expensive to 1794 build, but comparatively cheap to run. For the very reason that they are so expensive to build, they have never been fully economic and able to compete with the best of coal-fired stations.
A totally new situation has arisen with the arrival of the advance gas-cooled reactor. I will quote the figures supplied in these excellent booklets which have been sent to hon. Members. The electricity so generated is 25 per cent. less expensive than that from the most powerful new Magnox reactor and 10 per cent. cheaper than that from the most up-to-date coal-fired station, that at Cottam. We are now in a totally new situation where electricity can be made more cheaply, more efficiently and more cleanly by this new process.
It raises for the Minister a new question mark. After all, in the second nuclear programme—that is, the programme for 1970–75—the Minister has accepted the 500 megawatt output at a cost of about £400 million. This was before A.G.R. If A.G.R. is so much cheaper and more effective, I should like to know what the Government's plans are. In view of this new cheapness, will they increase the figure of 500 megawatts and build it up to get more from the same £400 million? Will they cut their coat to the £400 million and leave it there? If they are to increase their programme beyond the original figure, a completely new situation will be created for the coal industry. With this new cheap power at the Minister's command, will he institute a totally new programme of nuclear power stations, perhaps almost totally at the expense of the coal industry?
We recognise the problems involved in constructing a co-ordinated fuel policy. It is made even more difficult by the fact that these technological changes are taking place. However, this does not alter the fact that the Government made some pretty sweeping promises. Indeed, the Minister in his election address in 1964 made the sweeping statement that Labour would attack persistent rises in prices. As I said at the beginning of my remarks, we in London are not so happy about rising prices in the electricity industry. In the last ten months Labour's pledges have been very largely discounted. However, I still hope that we can see the policies. The policy for fuel is as important today 1795 as it was when the promises were made. I hope that when we return after the Recess we shall be able to see the beginnings of a co-ordinated policy which will give a fair place to the electricity industry and the gas industry and take into consideration all the new fuels which are at our command.
§ 8.27 p.m.
§ Mr. Merlyn Rees (Leeds, South)
The hon. Member for Lewisham, West (Mr. McNair-Wilson) will forgive me if I do not take all the points he raised. I shall comment later on his remarks about amenities.
A short while ago an hon. Member asked whether the fact that the nationalised electricity industry had been a success shows that there was some particular virtue in nationalisation justifying its spread to other industries. I well recall two of the arguments which were advanced many years ago in all the discussions which took place on public ownership of the Morrisonian type, with boards and so on. The first argument was that this type of organisation would encourage technical advance and that there were particular advantages therefore in industries such as gas and electricity being taken over. The second argument was that the vast sums of capital involved could not be raised through the normal channels of joint stock companies. I only say this because it is my strong view that the success of public ownership in this field does not mean that public ownership of this type is applicable in other forms of industry. There may be other forms of public ownership which it would not be in order for me to develop tonight.
All I argue is that in this form of industry public ownership of this type has proved its worth; and, in spite of all the badinage of politics, it took a good many years for all the plans which were set on foot in 1947 and 1948 to come to fruition. When it comes to elections and when the former Leader of the Opposition uses folish words about public ownership, it does nothing but denigrate the country. Both public and private enterprise have a part to play in this country. The Report which we are considering shows the great success of the electricity industry in general, and proves that when it was 1796 decided to take this industry into public ownership it was the right thing to do.
This does not mean that there are not many questions that have to be answered by Ministers in the years to come. This is a time when new fuels are appearing on the market. I was looking the other day, in another connection, at all the estimates that were made on fuel needs in the 1950s, and most of them have been wrong. With due deference to any statisticians, it is likely that the most that the Minister and the various boards can do is to make as intelligent a guess as possible. But whatever is done in this respect, it must be a flexible policy because constantly new factors have to be taken into account.
In this respect—and I am sure that everybody present is interested in this question of fuel policy—I would commend the brief pamphlet recently produced by P.E.P. called "Questions of Fuel Policy". Some very interesting points were raised which are the direct concern of the electricity industry. The question of amenity is raised in this way. The pamphlet asks:Is the balance between amenity and efficiency rightly struck at present in the lengthy procedure of licensing, public inquiry and the like that required …?Is not this a great weight on the back of the electricity industry? I would be the last person to want to ruin the countryside, but the electricity supply industry has this great burden on it at the moment.
Another question is raised, which brings in the other fuel industries:Is the consumer adequately informed of the price trends in the various fuels?Many people are now moving over to central heating. This is a relatively new development in this country compared with the United States and Canada. When I talk to people about this, the most preposterous figures are put forward in favour of gas or electricity. People say they have looked at Which? and that they have written to various consumers' organisations. Bearing in mind that the figures will not be proved accurate over the years, it would help very much if more accurate figures, given the weaknesses involved in them, could be provided.
The other question that was asked in the pamphlet was:Are research and development adequate and properly organised in these industries; 1797 in electricity, in particular, is the balance of activity between the Central Electricity Generating Board and the Atomic Energy Authority the right one?I am not suggesting that these questions are capable of immediate answer, but, to come back to my original point, I think public ownership is the right sort of organisation for this industry to solve these questions. But, having said that, the problems are there, and they are very great problems with which my right hon. Friend has to deal.
I intervened shortly in this debate to raise two questions. The second one is of a constituency nature; at least, it affects an area near to my constituency. The first one is of a more general nature. Nobody looking at the nationalised industries—and this is equally true of some of the bigger private firms, the oil companies and so on—could do anything but praise the training schemes that they provide. They are excellent. They lead the way. What sort of training is provided in the electricity industry at management level? Looking through the Report, I see that at Buxton there are facilities for this. However, I am particularly concerned with one aspect.
What training is provided for shop stewards and people of that kind? Many private industries provide excellent schemes of training, not within the firm—this is the point I wish to emphasise but outside the firm, provided by the local colleges of technology and in some cases by extra-mural departments in universities. The extra-mural department of the University of Leeds provides such schemes. I know of schemes in other parts of the country and they are growing, but I find that when I visit some colleges of technology and ask whether the nationalised industries participate in this the answer is, "No". This is a mistake. The answer when I check it is that the nationalised industries provide training themselves. I ask, first of all, whether they provide training for shop stewards. It would be advantageous sometimes for people in the nationalised sector to mix with people from other parts of industry, and particularly with shop stewards from other industries. I know how valuable this can be in the mingling and mixing of ideas.
In the Yorkshire and Humber area from the regional planning point of view, 1798 there is a close connection between electricity supply and the coal industry. All the power stations mentioned by the hon. Member for Barkston Ash (Mr. Alison) are coal-fired and are in a very successful area of the N.C.B., an area which can look forward for many years to come to full working. There are not the same problems were as there are in other parts of the country. There are shortages of labour, but for reasons other than those which apply elsewhere. Further, given the vast extension by the electricity industry, it is nevertheless poaching, if that is the right word, electricians from the coal industry.
The question is which comes first? The coal must be provided to fire the stations, yet despite all the money spent by the N.C.B. it finds itself short of electricians. Is it not possible for some sort of co-ordination in that area? There will be a close connection between the two for many years. I made some inquiries here and the plain answer which I had was "No". I wonder whether this could be looked at again. I grant that the electricians must be under the full control of the N.C.B. and the pit managers for safety reasons, but, nevertheless, I am sure that something could be done.
I come back to the general point. It has been a great pleasure to look through the reports. The electricity industry last year and this year provided, and for many years to come will provide, a large bulk of power in this country whether coal-tired or atomic energy-fired. We should all be proud of this and we should "take a self-denying ordinance" at the next General Election and realise that if we denigrate any part of industry for political purposes we do great harm to the country. I despair sometimes at the way in which people are prepared to run our country down. We lead the way in so many fields—in the coal industry and in the electricity industry. The least we can do, wherever we are, is to praise the electricity industry which is a credit to us all.
§ 8.38 p.m.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
The hon. Member for Leeds, South (Mr. Merlyn Rees), in his concluding remarks, said something with which I am sure all of us can agree. We have taken part in a number of debates 1799 on the nationalised industries in this Session. So far, we have had several on the gas industry and now we are having one on the electricity industry.
I think that it has been common ground between both sides of the House that the performance of these industries has been of a very high order and that no one has wanted to make any political points on whether or not they were nationalised. The trouble has always come when we on this side of the House have offered praise to the nationalised industries on the progress which they are making and the way in which they are grappling with serious problems and we are immediately taunted by hon. Members opposite who say, "You are in favour of nationalisation if you are honest with yourselves." This does not follow at all, as the hon. Member for Orpington (Mr. Lubbock) made clear.
The only other point I take up following the speech of the hon. Member for Leeds, South is his reference to the amenity problem and the prospect which my hon. Friend the Member for Lewisham, West (Mr. McNair-Wilson) graphically described as a vast steel cobweb enmeshing the country. Taking up a constituency point for a moment, I express my thanks to the Generating Board for having agreed to bury two miles of the Brimsdown-Barking transmission line which is to replace the existing one which runs partly through my constituency and partly through that of my hon. Friend the Member for Waltham-stow. East (Mr. John Harvey).
When the proposal for an overhead line was first mooted, it caused grave concern locally because people would have had these enormous pylons actually stuck in their back gardens, with the foot of the pylon just a few feet from their back windows. One can imagine the despondency with which such a prospect was viewed. I am happy to say that the Generating Board saw the point very quickly and agreed to bury that part of the cable.
This debate comes at a significant point in the history of the electricity industry because of the announcement and figures recently published with regard to the advanced gas-cooled reactor proposal for the Dungeness B power station. I shall return to some of the 1800 details of that in a moment. I agree with those who have said that, however much one may question some of the assumptions made and the figures published in this connection, it nevertheless represents a factor of considerable consequence. The picture of forward demand for coal, for instance, must have changed as a result of this event.
The increased demand for capital which a nuclear generating programme will undoubtedly bring will be of the utmost importance because nuclear stations, capital-wise, are very much more expensive than coal-fired or oil-fired stations. I reiterate the question, and I hope that the Parliamentary Secretary will deal with it rather more adequately than did his right hon. Friend: where is all the money to come from? Hundreds of millions of pounds will have to be raised over the next few years, and it is very difficult to see how the money will be found.
There is also the problem which a nuclear programme brings of dealing with peak load demand. A nuclear station is essentially a base load generator, and, if an increasing proportion of total generating capacity is to be in the form of nuclear stations, there will be the growing problem of dealing with peak load demand. We have the gas turbines now increasingly being installed as a relatively inexpensive means of meeting peak demand, and it may be that this method will have to be considerably extended as the old coal-fired base load plants go out of commission.
This raises the question of the fuel duty. There has been a considerable argument about whether the gas turbines used to meet peak load demand should have to bear fuel duty on the feedstock. It would be even more remarkable if, in these circumstances, our electricity industry had to pay it whereas the gas industry was exempt.
I disagree with the suggestion of the hon. Member for Bristol, Central (Mr. Palmer) that there should be some sort of public utility tax applied to both these industries. In my view, there is no justification at all for a tax on fuel in this connection except in the shortest possible term to ease the transition problems of the Coal Board in the resettlement of miners displaced by technological advance. This must be in the shortest 1801 possible term, and I hope that it can be shorter than the five years mentioned in some quarters.
Turning to the specific problems raised by the choice of the advanced gas-cooled reactor for Dungeness B, may I say, first, a few words about the background and how we find ourselves where we are. The Atomic Energy Authority developed the Magnox gas-cooled reactor, and nine stations have been built broadly adopting the same technology, though, of course, with many improvements and developments, from the Berkeley Power Station on the Severn Estuary in 1962 to the latest in course of construction at Wylfa, in Anglesey, due to come on steam in 1968. Berkeley had only a 275 MW designed output. Wylfa has a designed output of 1,180 MW, which gives an indication of the development in the size of reactors which has taken place. Similarly, the cost has come down substantially. Berkeley cost about £180 per kW of installed capacity whereas Wylfa is about £100 per kW of capacity.
While these developments have been going on in this country, the Americans have also been advancing but on a much broader front. They have been developing different sorts of reactors, not only the Magnox gas-cooled, but the boiling water reactor. Work has been done on the pressurised water reactor and in Canada on the P.W.R., also.
Early last year, President Johnson announced that the American nuclear industry had established what he called an economic breakthrough. He was referring to the tender which had been accepted for the construction by the General Electric Co. of America of a power station at Oyster Creek, south of New York for the Jersey Electric Company. It was due for completion in 1967.
The breakthrough took the form of what one can only describe as an astonishingly low capital cost for the plant. Compared with our own latest plant at Wylfa of £100 per kW of capacity, Oyster Creek, which has a designed output of about 515 MW had a turnkey contract price in the tender which was accepted of £48 per kW installed. The anticipated output of the plant—again, to use the technical term—when the output is stretched will be 640 MW instead of being 515 MW and the cost will be down to £38.5 per kW.
1802 These figures include the interest on the capital during construction. They include the land and the training of operatives, but not the initial fuel charge, which is a substantial extra amount. The significance of these very low capital cost figures is that electricity can then be produced at a much lower cost than anything which had hitherto appeared possible from nuclear stations.
The production cost for Oyster Creek in English equivalent is 0.34d. per unit. At stretched capacity it will come down to 0.31d. per unit, falling, perhaps, over the years to 0.29d. per unit. That is why President Johnson hailed it as so remarkable a breakthrough since it would mean that electric power could be available anywhere in the United States at the same cost as, or even lower than the cost of, power from a coal-based power station situated right on top of a coalfield. When one bears in mind the vastly cheaper American price of 20s. to 28s. a ton compared with the comparable price here of about 60s. per ton, one begins to realise the extent and significance of this breakthrough in America.
It is against that background that we come to the tender which was sought by the Central Electricity Generating Board for Dungeness B. The Atomic Energy Authority has been doing work for many years on the A.G.R. and has for about two years been operating a pilot plant with a 30 mW plant at Windscale. Originally, I understand that the intention was that the tender should be only for A.G.R., but, in view of the published facts about Oyster Creek, inevitably it was necessary to widen the scope a little and the C.E.G.B. undertook to consider tenders for a boiling water reactor, because that is the nature of the reactor at Oyster Creek, provided that it satisfied all the conditions required for a reactor operating in this country.
Tenders were received in February this year. They were examined exhaustively. One cannot but be impressed by the quality of the assessment that has been done on all the tenders that came in this highly complicated matter to make sure—and I have been much impressed by this—that the ultimate figure could be really compared like for like so that the best possible choice could be made. It turned out that there were two principal coil-tenders, Atomic Power Construction, for the advanced gas-cooled reactor, and the 1803 Nuclear Power Group, which tendered for the boiling water reactor designed by the American company. In the upshot it turned out that the capital outlay for the A.G.R. was £78.4 per kW installed capacity and for the boiling water reactor £70.9 per kW.
So it immediately appears that these figures are substantially higher than the American price, which was about, as I say, £48, or, alternatively, £38. Production costs of the boiling water reactor and the A.G.R. are significantly different. A.G.R. uses a less enriched fuel and, therefore, has a lower operating cost, and has higher availability than the particular one because of the new engineering advances which have been made in design and the lower labour cost and the result of taking both capital cost and the operating cost and putting them on the same basis and comparing them was that A.G.R. came out marginally higher.
Some rather extravagant language has been used about the A.G.R., not, I think, wholly justified when one bears in mind that the ultimate advantage which A.G.R. had over B.W.R. was about three-hundredths of 1d. per unit. If we have a power station producing about 1,200 MW, three-hundredths of a 1d. per unit represents, over several years a considerable sum of money, but that is, in fact, the margin one is talking about, and I am not at all sure that it qualifies—
§ The Parliamentary Secretary to the Ministry of Power (Mr. John Morris)
Will the hon. Gentleman accept it from me that the margin is a difference of 10 per cent. on generating cost?
§ Mr. Jenkin
As I understand the matter, 10 per cent. is the figure for the comparison with coal-fired stations. I am following the figures in Table I in the Appraisal Paper immediately above the double underlining. Whereas with the A.G.R. it is 0.457d. per unit with the B.W.R. it is 0.489d. a unit and, taken to two decimal points, that is three-hundredths of 1d. That is the difference between the competing tenders.
The Minister, in his announcement on 25th May, described it as the greatest breakthrough of all time and said that we had hit the jackpot. But, quite apart from the narrowness of the margin, what has puzzled all commentators is why the tender in this country for the boiling 1804 water reactor designed by General Electric, the same people who built Oyster Creek, and who, since then, have tendered for boiling water plants at comparable prices, should be so wildly higher, for a plant in this country, than it was for a plant in the United States. This is a question which, I think, does require an answer, and, of course, there is no answer in this assessment at all.
Oyster Creek, as I said, even at design capacity was at £48 per kW and Dungeness B was £71 per kW capacity and that represents an increase of 66 per cent. I appreciate that there may well be parameters and assessments of length of life and perhaps of some of the safety requirements and some of the civil engineering problems which could account for part of this discrepancy, but the discrepancy is of such a fantastic size that it really does begin to raise major doubts. One begins to wonder whether the Nuclear Power Group really wanted the contract.
Was it really trying? Are we sure that its tender is the lowest possible one that could be submitted for a boiling water reactor in conditions in this country? It is the discrepancy between the figure at Oyster Creek and subsequently at Dresden II—which is an American power station where the bid is slightly higher than at Oyster Creek, but which is in the same range—and the figure put in by the Nuclear Power Group for a boiling water reactor designed by American General Electric which makes one ask these rather searching questions.
It has been suggested by some people that General Electric, in America, is losing money and will not be able to make it pay and that all it is doing is bringing up the figure in this country to what would be necessary to make it pay. But, look at Dresden II power station. The design capacity is 755 MW at £42.5 per kW. If it is stretched to 820 MW, the price per kW becomes £39.
Oyster Creek was not a once-for-all project. It was a perfectly realistic price, and it can be compared with figures in Germany, where total inclusive prices in tenders for a 600 MW power station look like coming out at between £50 and £54 per kW, compared with the figure here of £70.
One is forced to conclude, if one of the reasons that I have suggested is not the 1805 right explanation, that here is one more example where we find that costs of construction in this country are markedly higher than those in the United States or in the countries of our neighbouring European competitors. One hears of one of the major components for the boiling water reactor which was to be made in this country to exactly the same design as had been put in in America, and the cost was to be two and a half times as much. That is perhaps the real explanation of why the boiling water reactor is so much more expensive in this country than in America.
One is led to ask: why have we got ourselves into this position? We were undoubtedly leading technologically some years ago, but now we find that the Americans, once again, have caught up and are now able to build an economic power station substantially cheaper than we can here to the same design, and at almost exactly the same price as that of one of our own design. We must not sit back and congratulate ourselves on this technical advance, striking though it has been. I do not wish to denigrate the work that has been done, because it has been of a very high order. But we must recognise that there is still a long way to go. The problem of trying to design and build nuclear power stations cannot be worked out in a country as small as our own in competition with a continent the size of America.
The hon. Member for Bristol, Central (Mr. Palmer) put his finger on one problem when he said that with the Central Electricity Generating Board we have only one major purchaser, whereas in America there are several major electricity suppliers who can bid and who are the customers. It gives an opportunity for competition, not only in the construction of power stations, but in the design and development of whole reactor systems. That is something that we have not got in this country. The Atomic Energy Authority is the only body which designs reactor systems, and, naturally, to conserve its resources, it is never able to advance except on a very narrow front. It has confined itself to gas-cooled reactors.
That is one more example where it will be important for us to join up with Europe and become part of the European market on a continental scale. We could 1806 get very much closer to Euratom. Good work is being done on the Dragon project, at Winfrith Heath, and at C.E.R.N., in Geneva, but much more needs to be done in Europe as a single market for atomic reactors and generating equipment, so that we can have here the same conditions as those which have allowed the Americans to make their very striking advance over the last few years.
The necessity for doing this has been underlined by the "three Budgets" announced by the Chancellor, because we are still struggling to pay our way. We are still having to go on griping about the economic performance of this country and the stability of the £. That is why it is essential to get this sort of sub-structure to our industry right. If we get our energy costs right, the chances are that we will get the rest of industry right.
§ 9.0 p.m.
§ Mr. John Peyton (Yeovil)
It seems rather sad that we should be debating electricity at this time of the year, towards the end of what seems an almost interminable succession of Parliamentary activities, at a time when electricity is not in the forefront of people's minds, and that we should be doing so on the basis of reports which are very old history indeed.
I was disappointed that the Minister appeared in the House today much more in the rôle of an historian than that of a prophet, because, despite the indulgence of the Chair, and the rest of it, there was very little attempt on his part to raise even the slightest corner of the veil so that we could have a look at future prospects.
I am sure the hon. Gentleman will not think that I am being unduly partisan if I say that I am very disappointed that the back benches of a party which is wedded to the creed of public ownership and nationalisation have shown so little interest in the progress of this immensely important publicly-owned industry.
The Minister referred to the increases in productivity which had taken place, particularly during the year under review, and he indicated that we were to have an increase of productivity of 7 per cent. per annum. What he did not say was what we have paid for this, and before we congratulate ourselves on increases in 1807 productivity I think we should be quite clear about the amount of investment that we have had to find to achieve that result.
The Minister told us that the capital cost per kilowatt had fallen during recent years from £60 to £40. Does the hon. Gentleman expect that trend to continue? The Minister was referring to the capital cost per kilowatt for conventional stations, and I should like to know whether the hon. Gentleman expects that downward trend to continue for conventional stations, and if so, on what grounds, because I believe that it is likely to be reversed.
As the Minister told us, it is clear that the increase in demand has begun to flatten out. He was disarmingly frank when he said that he had no idea of the reasons for that, and I do not think that I would be able to explain it either. What it is important to know is whether there is a likelihood of that flattening out tendency to continue, because it is going to govern the whole investment policy of this industry and, of course, of the Government.
One of the things that I find it very difficult to accept is the way in which in this House, with microscopic attendances, we pay such scant attention to the huge sums of money that are drawn from our overstrained resources. The assumption is that our rôle is that of a lender or provider, which is always a comfortable one, free of any embarrassments.
It is very important for the Government to make it clear that they will watch the position carefully, and not to say, in that time-honoured phrase, beloved of all Government Departments, that the matter "will be borne in mind". These trends will have to be watched very carefully because of the importance of this investment and its effect upon our scarce resources.
I repeat what some of my hon. Friends have said. I congratulate the Minister once again on having had the courage to adopt as his own the policy which we created when in office—the policy of recognition of the financial obligations of the nationalised industries. I do not believe that the Government would have created this policy themselves, but they have adopted it, which took some courage on their part in view of what some of their colleagues had been saying.
1808 The Minister was a little vague in some of the things that he said. He told us that there might be an agreement on the question of connection charges, and he suggested that freedom of choice for the customer was a desirable thing as far as it was economically practicable. I hate the idea of Ministers interfering unduly with the natural processes of competition between these industries, not because the industries are infallible but because this interruption by Ministers is only likely to make matters a good deal worse.
I want to deal with the question of our position in nuclear power. My hon. Friend the Member for Wanstead and Woodford (Mr. Patrick Jenkin) has just produced a learned and expert argument on the respective merits of the two competitors—the boiling water reactor and the advanced gas-cooled reactor. I am sure that all hon. Members will unite in expressing warm congratulations at the fact that the A.G.R. was successful. This is a great boost for British technology, and we should take every opportunity to proclaim it rather than to throw doubt upon it.
What we must do is to tell the Government that things cannot go on very much longer before we have a full debate, with the full facts deployed, and when we can be given some idea of what are the Government's intentions. The intentions of the previous Administration in this matter were based upon a situation which has now been replaced by a quite different one. Therefore, if the Government are still in power in the autumn, we expect them to tell us clearly what their ideas are and to give the House a full opportunity to debate the question of the next step in nuclear power.
I want to deal for a moment with the question of coal consumption by the electricity industry. The Minister said—in one of those soothing speeches which, one feels, are carefully tailored to meet the needs of some of his hon. Friends who were not, on this occasion, sitting behind him—that there would be a need for increasing quantities of coal forever and forever.
I doubt this. The Government would do very well to read most carefully and then read again the remarks made by the Chairman of the Central Electricity Generating Board in Brighton, about 1809 where the limit stops, that the maximum coal consumption of the Generating Board is likely to be nearer 80 million tons than 100 million tons. If the Parliamentary Secretary cannot give us a clear answer—we understand that he cannot expect to be completely right—he may be able to give us a reasonably well-informed guess about what is likely to be the top limit of coal consumption by the electricity industry in the future.
I was very disappointed that we did not hear more from the Minister about large sets and their work and what is the latest view of the industry and the Government on this question. The Minister said that there is a very real prospect of considerable working economies. We must hope that these are realised. Nevertheless, I am sure that the Parliamentary Secretary will not challenge me if I say that we are taking a certain amount of risk in that large sets involve placing quantities of bigger eggs in fewer baskets. I hope that the hon. Gentleman will be able to give us a little information on that subject.
I was astonished that any Minister of the Crown could come down to the House of Commons for a debate on a nationalised industry—following as shortly as this one does upon the statement, which was apparently of great importance, by the Chancellor of the Exchequer—without any details at all, without the slightest indication in his own mind as to what would be the effect of those proposals upon this industry. When I heard these proposals from his right hon. Friend the Chancellor of the Exchequer, my reaction was to think that this was a rather crude hotchpotch put together by a lot of incompetent cooks. I do not want to be misunderstood so I will explain that that word is spelt without the R: C-O-O-K-S.
We have these proposals and today the Minister spoke on behalf of a nationalised industry apparently without the slightest clue of what the effect might he. When I asked him what the effect of these proposals might be on the industry, he said that it would not involve cutting, though it might involve some postponement. But these are largely similar things in practice. He then said that there was no intention to defer anything of an essential nature.
1810 We must hope for something very much better than this, because this shows an utter lack of grip and comprehension. My right hon. Friend the Leader of the Opposition charged the Government in the censure debate on Monday—an absolutely justified charge—with producing policies and then proceeding to deny their validity. This is what they have done. They have made it clear again. I hope that the Minister will be able at least to indicate the kind of lines on which he will proceed in his approaches to the electricity supply industry.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), in his interesting and effective speech, asked once again where the money is to come from—a question which we have asked repeatedly and to which we have had no satisfactory answer. Most of us recall having heard time and again jibes that the Tories never talk about anything but money. Now we very much hope to hear from the Government, embarrassed as they are, how they intend to finance these industries and deal with all the other claims upon our limited resources. My hon. Friend reasonably remarked—and I hope that the Parliamentary Secretary will bear this in mind—that it is not only a question of justifying his expenses within the context of the industry itself but also a question of justification within the context of the economy as a whole.
My hon. Friend raised, and I want to deal with it for a moment, the question of the relationship between the growth rate and the investment plans. To what extent are the Government committed to a 4 per cent. or 3.8 per cent. growth rate? What is the effect likely to be on their investment plans if we fail to achieve that growth rate or anything like it? Clearly it would be a great waste of our resources to embark on a programme which assumed a 4 per cent. growth rate and had as its aim an 18 per cent. margin for the electricity supply industry. I hope that the Parliamentary Secretary will enlighten us on this point.
Some of my hon. Friends mentioned the Energy Advisory Council. I say frankly to the Minister that it is very sensible that Ministers should avail themselves of all the expert advice possible, but it is crazy to expect advice with any kind of unanimity to come from a body of this kind which, as I have said 1811 before, is composed entirely of people who are bound both by duty and by interest to differ from one another. We all look forward with interest to hearing what kind of policy comes out of these deliberations. We have been told often enough that if the Labour Party were returned to power—and that horrifying event has happened—we could expect co-ordinated policies for fuel and for transport. So far we have heard not a squeak of them. It is more with relief than with disappointment that I say that. Still, we shall await what comes out of this machine with a great deal of interest and apprehension.
The hon. Member for Bristol, Central (Mr. Palmer) was good enough to say in a rather condescending way that he thought the Conservative Party had a useful and constructive rôle to play in the affairs of the nationalised industries. In fact, we have taken a much more constructive view of the need and the rôle of the nationalised industries than has the Labour Party, but we should be very glad to welcome any evidence of its awareness of the needs of this industry, and, if it is able to play a constructive rôle in its turn, I shall be well prepared to pay a far more generous tribute to it than we received from the hon. Member for Bristol, Central. I do not understand what he meant by his remarks about more single-mindedness at the top. This industry is fortunate that it has a great single-mindedness at the top. At this stage perhaps I should echo what was said, particularly by my hon. Friends, in tributes to some very remarkable men who bear the responsibilities of this immense industry.
My right hon. Friend the Member for Bridlington (Mr. Wood), with his long experience at the Ministry of Power, paid an eloquent tribute to Sir Ronald Edwards and successive chairmen of the C.E.G.B. I echo every word he said. The industry is fortunate indeed to have the services of such people and I look for rather more willingness on the part of the Government not to take the credit themselves but to let these people have it.
My right hon. Friend the Member for Guildford (Sir R. Nugent) asked for clarification of some remarks of the Minister. I hope that that will be forthcoming. In an imaginative and intelligent 1812 speech my right hon. Friend showed himself well aware of the stresses and strains involved in the expansion of such an immense industry as this. I will remind the Government of some of the questions he asked. What progress is being made on the status proposals? It is clear that the working out of these proposals—the merits of which I in no way challenge—has cost a good deal of money. Has the progress made been worth while? I hope that the Parliamentary Secretary will deal with the point made by my right hon. Friend, when he said that the industry is the life-blood of the community and that the point at which we should aim, from whichever side we look at the matter, is the establishment of a contractual relationship, the breaking of which by strike is impossible, and that the supplies of this vital industry are safeguarded at all costs.
A part of the debate was, naturally, devoted to Yorkshire. I have already referred to the speech of my right hon. Friend the Member for Bridlington, in which he made some important comments to which I will refer. He posed a question which we do not put to the public often enough. It is easy to ask, "Do you, in all circumstances, wish your supplies to be quite safe in the most exceptional winter?" To that question people will reply, "Yes", but they must then be faced with the cost of making that supply secure against any possible eventuality. One of the most important questions to face is the cost of sustaining supplies at time of exceptional peak demand.
I agree with everything my right hon. Friend the Member for Bridlington said about the need for research and the necessity to consider developments which will solve our problems—and that goes for developments which may today be in their infancy. I hope that the Government will do all they can to urge the industry along the road of research and so to deal with some of the problems which otherwise will, in the light of today's technology, be wholly insuperable.
My hon. Friend the Member for Barkston Ash (Mr. Alison) was perfectly right to bring to the attention of the Government and the industry the effect of leviathan power stations going into thinly populated rural areas. The distortion of the local economy by such an event is 1813 considerable. It should be considered by the Government and it is something which must be handled with great care by the C.E.G.B.
Reference has already been made to the anticipations we all feel about the arrival of the Minister's co-ordinated fuel policy. I agree that we now find ourselves facing a totally new fuel situation with the evolution of the advanced gas-cooled reactor, and I hope that in the autumn we shall hear from the Government what their reactions to that situation are.
I fully and warmly agree with the hon. Member for Leeds, South (Mr. Merlyn Rees)—who is, unfortunately, not in the Chamber at the moment—when he says that most estimates on these matters are bound to be wrong. He expressed the need, as he saw it, for a flexible policy. These things are in themselves sufficient for us to accord the hon. Gentleman a very warm welcome, should he ever wish to come to these benches, and if that attitude of mind has spread to hon. Members opposite we shall be very pleased, indeed.
I should like to mention one or two points that are part of the harvest coming from the British Electrical Power Convention at Brighton. We congratulate Sir Ronald Edwards on that gathering, and on taking charge. I would particularly draw the attention of the Government to the caution with which Sir Ronald himself approaches the question of future demand. In page 5 of his Presidential Address, he says:We are, however, acutely conscious of the fallibility of estimates.We would be quite wrong, if our estimating goes awry, to put great blame on the industry—these are the chances we all have to take—but what would be wholly wrong would be to doubly insure by increasing our investment beyond what is reasonable or right in this industry in order to produce an immense margin.
I should also like to draw attention to what Lord Hinton said in page 31 of the paper he read at Brighton, in which he nailed the thing down in a very important way. He said:The electricity industry will win only if it keeps capital and operating costs down; scientific and technological developments are 1814 worth while if they help to do this but anything else that helps is equally worth while even if it is less scientifically exciting.There is a very real temptation in a technological, modern, go-ahead industry like this to chase attractive will o' the wisps at great expense. I hope that the temptation will be resisted; that heed will be taken of Lord Hinton's counsel and that other and duller means of saving money will not be despised. Lord Hinton also said:And there are less exciting ways of reducing costs. The Central Electricity Generating Board have about £750 million locked up in capital work in progress and a return of 12 per cent. must be earned on this money, though the works on which it has been spent are earning no revenue. If construction periods were shortened to what is known to be achieved in some other countries and if commissioning could be done on the programmed date, the Board would save about £15 million a year. If the availability of new plant in the early years after commissioning could be increased by ten points per cent. above its present figure, the Board would save about £5 million a year.They are all good, ordinary commonplace ways of saving money even in an immense industry like this, but they are appropriate. I hope the Government will lose no opportunity of urging on this industry the importance of seeing that the huge investment we are making fructifies to the maximum.
I say frankly and with dismay that I feel the present Administration's approach to the handling of our resources is irresponsible and ill-informed, but, in common with everyone who has spoken in this debate, I say that the progress of this great industry over the years is something which far too many people take entirely for granted. It is a remarkable phenomenon and one for which those responsible deserve the highest praise.
§ 9.30 p.m.
§ The Parliamentary Secretary to the Ministry of Power (Mr. John Morris)
We have heard the hon. Member for Yeovil (Mr. Peyton) criticising "the irresponsibility of the Government" so many times that we begin to wonder what is the main qualification for occupancy of the Front Bench opposite. Hon. Members opposite have chosen as their leader an expert on the organ; perhaps the hon. Member is a barrel organ player, as he has repeated this charge on so many occasions.
1815 Although all of us are looking forward immensely to the Recess, I am sure that we have felt this debate has been very well worth while. We have been dealing with a vital industry which, as the right hon. Member for Guildford (Sir R. Nugent) said, is the lifeblood of the country. I immediately, on behalf of my right hon. Friend and the Government, pay very warm tribute to the leaders of this great industry. The country is very fortunate in having such outstanding public servants in the persons of Sir Ronald Edwards, Lord Hinton and now Mr. Stanley Brown to shoulder what the House undoubtedly appreciates are fantastic burdens. They operate on an immense scale.
It is a privilege to be able to pay this small tribute to them and, indeed, to all the workers in the industry, operating, as my hon. Friend the Member for Bristol, Central (Mr. Palmer) said, on a 24-hour basis. Without them we know not what would happen. They are seldom paid any tribute for the hundred and one occasions when everything goes right, but on the rare occasion, perhaps one time in a million, when something goes wrong, the industry is criticised. The industry is the keystone to our industrial progress today.
It is a necessity to every form of life in the country in whatever type of activity we are engaged upon. Whether one is a domestic consumer, a commercial undertaking, or in any kind of industrial undertaking, it is essential that electricity should be available as easily and cheaply as possible.
Electricity has to be fitted into the pattern of all the other fuel industries. My right hon. Friend has ultimate responsibility for all the fuel industries. He not only has to look at this industry, but at all the other fuel industries together, to take decisions concerning them all having regard to the short-term and the long-term needs. At the end of the day, because of the wisdom of the founding fathers in 1947 and 1948, it is the nation as a whole which comprises the shareholders in the coal, electricity and gas industries.
I have very great pride in the achievements of this great publicly-owned integrated electricity industry. I cannot imagine what would be the state of our 1816 economy today had not that vital decision been taken in the days of the 1945–50 Government to bring the industry into public ownership. Because of the scale on which it operates it has been able to take decisions in the national interest and not in the interests of the few.
During the last few years sales have more than doubled and capacity has nearly doubled. At the present rate we envisage a further doubling of capacity in an even shorter period. This is a great industry. It has an impressive record of expansion. It has a highly commendable record of productivity. All this is the direct result of integrating the whole of our electricity industry under one system, with responsibility in the Minister of Power of the day.
Having regard to the immense demands of industry today, great capital sums are involved. The net assets in the electricity industry stand at £3,000 million already and capital is now needed at the rate of £600 million a year. I listened very attentively to the remarks of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). Unless I misheard him, he referred to a new capital need over the next five years of between £7,000 and £8,000 million. The hon. Gentleman will correct me if I have misstated him. I am sure that, on reflection, the hon. Gentleman will find that that figure is much too high. As my right hon. Friend the Minister said, capital investment is running at the rate of £600 million a year. The figure over the next five years wil be about £3,000 million, if it continues at this rate. We cannot be more precise than that, because, as hon. Members know, capital investment programmes are subject to annual review, and a review is now in progress. At the end of the day the figure of £3,000 million or so may be about the right figure.
Of this about half will, under present policies, come from the industry's own resources. The remainder will be borrowed from the Exchequer under the Electricity and Gas Act 1963 which was passed by hon. Members opposite when they were in power. I imagine that what the hon. Gentleman has done is to take the figure of £3,000 million and doubled it, because of the other statement that the industry is finding half of the investment from its own resources. The mistake that the hon. Gentleman has made— 1817 it is a mistake which many of us have made in the past—is to confuse borrowing with investment. The hon. Gentleman has arrived at a figure double the amount envisaged for the investment in this industry over the next five years. In other words, the amount to be found from borrowings will be about £300 million a year.
The hon. Member for Yeovil asked me very specific questions about the statement of my right hon. Friend the Chancellor of the Exchequer.
§ Mr. Ridley
I apologise for perhaps getting the figures wrong. Can the Parliamentary Secretry attempt to answer the question as to where even the £300 million is to come from? We have had no answer to that point.
§ Mr. Morris
The hon. Gentleman will pardon me, because he exonerated me in his remarks, which I am sure he will read carefully. He said that these were general questions for the Government to answer and not for the Parliamentary Secretary to answer. He said that my job was to ensure that I gave an assurance to the House that every penny needed by the industry would be properly spent.
I have outlined to the hon. Gentleman, first, the amounts involved, and, secondly, the machinery under which the money will be lent to the industry, under the Act passed by the former Administration. As regards the wider question of the financing of publicly owned or any other form of activity which receives its money directly or indirectly from the Government, having regard to his original remarks the hon. Gentleman will not expect me to transgress on the Chancellor's own ground.
The hon. Member for Yeovil was asking what is meant by the postponement of projects in accordance with the statement of the Chancellor of the Exchequer. All I would say on that question is that consultations and discussions are taking place between my right hon. Friend the Minister and the industries about the short-term measures they can take in the light of the Chancellor's statement. I am not in a position to make a detailed statement at this stage. The short answer, which I am sure the hon. Gentleman will be glad to 1818 hear, is that the measures will not affect the electricity industry's plans for power station construction, transmission and distribution.
The impact on the industry's non-industrial capital projects—for example, showrooms and the like—is being discussed with the industry and it is not yet possible to give an estimate of how much this will amount to. Perhaps that answers the questions which were asked by the hon. Gentleman. I cannot at this stage give him any further details.
§ Mr. Peyton
What the hon. Gentleman is really saying—I take it that he is making this statement after some consultation—is that the effect of these proposals, whatever it may be in other spheres, will be very marginal indeed on the electricity supply industry. They will have no serious effect at all?
§ Mr. Morris
I am sure that the hon. Gentleman, having spoken from the Dispatch Box on this side of the House, would not expect me to make a statement without adequate consultation. I am sure that he will accept from me that I have taken advice before uttering my words. Surely that cannot be in dispute.
On the second point, I cannot give any firm estimate, but I agree with the hon. Gentleman that so far as the whole of the capital needs of the industry are concerned no great sum seems to be involved. However, these matters are being discussed with the industry and these are the types of projects under discussion.
§ Mr. Morris
I am sorry, but I cannot give way again now.
The hon. Member for Yeovil asked about the capital costs of conventional stations and asked what would be the likely forecast of costs in the future. I am advised that the trend of capital costs per kW will probably not continue downwards in future at anything like the same rate as in the past. The two reasons for this are, first, that further economies resulting from the size of generating sets will in future be realised more slowly and, secondly, that it may be harder to find suitable sites for generating stations. I cannot give any better estimate and I cannot turn myself into a better prophet than that.
1819 Questions were asked by the hon. Member for Cirencester and Tewkesbury about the safety margin and the raising of that margin from 14 per cent. to 17 per cent. I am not sure whether the hon. Member was criticising the margin and saying that it was excessive. Perhaps all he wanted was an explanation, and I am sure that I can give him that. The original margin which the industry had was criticised by the Select Committee, and perhaps I may read briefly the final comment of the Select Committee. It appears on page 42 of the Report, and is as follows:After the overhaul of forecasting methods and the reconsideration of margins of capacity, Your Committee consider that the industry should aim to achieve a security of supply at least equal to that enjoyed in other advanced countries.That is the aim of the present exercise, to increase the margin and to bring it up to 17 per cent. Of course, that figure of 17 per cent. is set five years in advance, and it not only has to take into account the need to have an adequate margin but it has to take into account also the risk, that has been faced, of underestimating the load at that time, five years ahead.
I would say to the House that this margin is needed. It is in accord with the spirit of the recommendations of the Select Committee and it is reasonable having regard to the margins in other countries. I am sure that at the end of the day, in the light of these considerations, it will be worth while.
Other questions were asked by a number of hon. Members, including, in particular, the hon. Member for Cirencester and Tewkesbury, on whether the generating capacity will be needed. The present forecast of the industry is based on the Government's own view of the growth of the economy and their assessment of the needs of a detailed part of it. If there is this growth, which I hope will be achieved, all this capacity will certainly be needed.
My right hon. Friend dealt in some detail with the issue of amenities and their preservation, about which a number of questions were asked. He gave a number of details of the very large amount involved in the undergrounding of cables. All the points which have been made in the debate on this subject will be borne in mind. There will always 1820 be an attempt to ensure the preservation of amenities as far as possible, having regard to the vast sum of money involved.
My hon. Friend the Member for Bristol, Central raised a number of points First, he raised the question of fuel duties and of gas being let off scot-free, in his own words, I am sure that my hon. Friend will not expect a reply from me tonight in that this is a fiscal matter where there obviously would have to be consultations between my right hon. Friend and the Chancellor of the Exchequer, and my hon. Friend's questions might be more appropriately addressed to the Chancellor.
§ Mr. Palmer
I take for granted that my hon. Friend's Department is making strong representations to the Chancellor of the Exchequer on this point.
§ Mr. Morris
My hon. Friend will not expect me to tell him what are the kinds of representations which are being made from time to time between one Minister and another.
§ Mr. Morris
I am sure that if the hon. Member for Cirencester and Tewkesbury had held office, as has his hon. Friend the Member for Yeovil he would accept that as being a correct indication of what happens.
§ Mr. Morris
My hon. Friend the Member for Bristol, Central said that the expansion of nuclear capacity should be a matter largely for the commercial judgment of the Central Electricity Generating Board and not a matter for the Atomic Energy Authority. I appreciate why my hon. Friend makes this remark, but perhaps, on reflection, he will consider that it is not a matter for the C.E.G.B. or the A.E.A. It is a matter for my right hon. Friend in that, at the end of the day, it is he who has to approve the capital investment of the industry, and it is not solely even his responsibility. It is also a matter for the Chanceller of the Exchequer, the Minister of Technology and, it may well be, other Ministers whom I cannot remember offhand. It is certainly not a matter only for the C.E.G.B. or the A.E.A.
My hon. Friend also asked a number of questions about the structure of the 1821 industry—the area boards, the Electricity Council, and the C.E.G.B. All I would say is that this system seems to be working adequately at the moment, but no system can be perfect and I would be interested in any representations which my hon. Friend might make from time to time.
I have dealt with some of the points raised by the right hon. Member for Guildford. Like several hon. Members, he paid a great tribute to the British nuclear energy industry. It is a matter of great pride to us all that the tender for the Dungeness B station has been successfully arranged. The right hon. Gentleman told the House of his pride when he visited British nuclear power stations. I hope to visit one myself next Monday at Trawsfynydd, in the Principality. It is a matter of great pride to the whole House that, as a country, we are playing such an important rôle in these matters.
The right hon. Member for Guildford, as did his hon. Friend the Member for Yeovil, referred to the Status Scheme for manual workers. It will be recalled that the Pearson Report commended such a scheme. All I can say at the moment is that we are in the early days of the Scheme, and I am advised that it is progressing reasonably well. I cannot add anything further at this stage.
My hon. Friend the Member for Wakefield (Mr. Walter Harrison) asked several questions about contracting. Contracting has never wholly been done by the boards, and contracting in general, looking at all the boards, has not been reduced. If my hon. Friend has any points to make on this aspect of the industry's activities, I shall be delighted if he will call to see me to speak further on these matters.
Several points were raised about the price tariff of the industry, whether the views of the customer were adequately made known, and what the rôle played by the Generating Board was. The 12 customers, through the chairmen of the Area Electricity Boards, are represented on the Electricity Council, along with the independent members. The 12 chairmen are the most interested parties of all, and the Generating Board comes to the Electricity Council to justify itself. All the consumers' consultative councils are able 1822 to make representations to the Electricity Council—one has done so recently—and ultimately they have the procedure of appeal to the Minister.
Various observations were made on the subject of research. All hon. Members are agreed on the importance of research and the adequate spending of money in the industry for this purpose. My right hon. Friend is satisfied with the programmes to date, and he watches this matter very closely. Recently, greater co-operation and co-ordination between the gas, electricity and coal industries has been instituted. All three have joined together to co-operate further, and this is an innovation which has been started by my right hon. Friend.
In addition to some points about research, which I have already covered, the hon. Member for Sheffield, Hallam (Mr. John H. Osborn) made a comment about the short notice of this debate. All I can say is that the debate was arranged in the normal way through the usual channels. If any trade associations have not been able to make their representations in time, there is the usual machinery of the consultative councils open to them, and my right hon. Friend or one of his officials is always at the disposal of trade associations if anyone is minded to make representations.
I was not present when the hon. Member for Barkston Ash (Mr. Alison) spoke, but I understand that he made a number of references to the use of labour by private contractors of the Central Electricity Generating Board, advocating—I may have the wrong impression here, as I was not present—what appeared to be the revolutionary doctrine that there should be ministerial intervention as regards the kind of labour employed by private contractors vis-à-vis the C.E.G.B. I will read carefully the hon. Member's remarks in the morning. If that was what he was advocating, it has wide implications and I was surprised to hear his remarks. I had a Question some weeks ago from the hon. Member and I tried to reply fairly fully to him. If anything further has been dealt with which is outside the Question that was asked, I will write to him in due course.
A number of questions were asked by the hon. Member for Orpington (Mr. Lubbock). He asked what would be the 1823 effect of recent developments on the second nuclear power programme. The answer is that the Government undertook that after the Dungeness tenders had been examined, they would put in hand a reappraisal of the nuclear power programme. This they are doing and we will let the House know the outcome as soon as possible. The review will cover the size, cost and composition of the programme.
Among his other questions, the hon. Member asked how things were going since maximum prices for the resale of electricity were fixed, whether any cases had been taken to court and whether my right hon. Friend was satisfied that consumers knew adequately about the arrangements. As the hon. Member knows, maximum prices have been in force only since 1st July and it is much too early to pronounce upon progress. I have asked the chairmen of the consultative councils to let me know how the new arrangements are going. We shall certainly be prepared to look into abuses and to reconsider the question if it is shown that there is genuine need for strengthening the means of enforcement.
A number of other questions remain to be dealt with, but there is not the time for me to do them justice. I listened intently to the remarks of the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) when he compared the tenders which had been submitted for the Dungeness B station with some American tenders. I, too, read the series of articles in the Daily Telegraph by Mr. Duncan Burn. All I would say is that the Dungeness B tenders were competitive under British conditions. When Mr. Burn compares 1824 the price of the British tenders with what is done or may be done in America, he is not really comparing like with like. There may well be quite extraneous matters, which have little to do with the nuclear field alone, in the tenders that were put in for the British installation.
§ Mr. Morris
I am sorry that there is not time to give way.
I have looked carefully into the matter because I had forewarning that the hon. Member would raise it during the debate. All I would say is that we are comparing like with like. These contracts for Dungeness were put out to competitive tender. I am sure that there is no hon. Member opposite who would not strive to maintain that kind of system.
We are dealing with a great industry which has done great service to the country. We are dependent upon it day and night for the continuance of our economy. I pay tribute once more to the enormous amount of work that has been done over the years by the servants of this industry. I commend the Report to the House.
§ Question put and agreed to.
That this House takes note of the Report and Accounts of the Electricity Council for 1963–64 (H.C. No. 331) and of the Central Electricity Generating Board for 1963–64 (H.C. No. 332).