§ Order for Second Reading read.
§ 11.33 a.m.
§ The Minister of Power (Mr. Frederick Lee)
I beg to move, That the Bill be now read a Second time.
It is nice to see the enthusiasm of the party opposite for this legislation, which is of the utmost importance to the future of the gas industry.
When I presented the Gas (Borrowing Powers) Order to the House last December I spoke of the fundamental changes that were taking place in the gas industry, changes which are very much for the better. That took place not very long ago, but nothing that has happened since suggests that the optimism then felt about the future of the industry was in any way misplaced. Indeed, after a long period of virtual stagnation the industry's sales are on a rapidly rising curve. From a modest 1 per cent. increase in 1961–62 the pace quickened to an 8 per cent. increase in 1964–65.
The major problem confronting the industry in the 50's, that of fighting to avoid a loss in sales, has completely disappeared. Instead it has now embarked on a broad programme of expansion to meet a buoyant demand. It is to provide the capital needed for the expansion that an increase in the industry's borrowing powers is now needed. The industry expects to increase its sales in the next few years by an average of about 7½ per cent. each year, from 3,055 million therms in 1964 to 4,750 million therms in 1970. This means that the growth in a single year is expected to be as much as one would have expected in a whole decade not long ago. The growth in peak demand is put at 10 per cent. a year up to 1970. This is the measure of the additional capacity that the industry has now to provide. Not only must gas production capacity be expanded but heavy expenditure will also be needed to reinforce and expand the distribution system.
The resurgence in demand has been due to several factors. It has been 1997 founded on improvements in space-heating appliances which the consumer has found bath attractive and economical and the transformation in the public mind from the idea of gas as a traditional but declining industry to one producing a fuel of the future. The new and more efficient processes for making gas from oil, the growing availability of cheaper oil feedstocks surplus to refinery requirements, the importation of natural gas from the Sahara and the prospect of perhaps even more and greater supplies of natural gas to come have all played their part in bringing about the very changed attitude towards gas.
The processes for producing gas from oil by continuous steam reforming have many advantages. They use a wide variety of feedstocks ranging from natural gases to petroleum light distillate spirit, and they produce less toxic gases, often of high calorific value, and at very high pressures. The new plants are relatively cheap to build and to run. They are compact and can, if required, be located near main centres of consumtion. They can be built fairly quickly, in just over two years from the placing of an order, and only a handful of skilled supervisory staff is required to run each installation. The lower capital and running costs and their potential flexibility in operation make these processes very suitable for supplying economically the winter peak demand for warmth in the home.
In addition to the technical breakthrough in methods of gas making, the industry is moving towards more efficient methods of distribution, and I believe that the next few years will see a substantial advance towards the system of high pressure distribution of richer gases. This will increase the capacity of existing mains and facilitate the concentration of production. The higher pressures will also mean that more gas can be stored in the mains to help smooth out the fluctuations in demand. The new oil-based manufacturing processes will play an integral part in this advance—a necessary development if further supplies of natural gas were to be deployed in an efficient way.
§ Mr. Peter Emery (Reading)
The right hon. Gentleman referred to the higher pressure distribution of richer gas. 1998 Would he make quite plain to the House that this would not be of higher thermal capacity than town's gas for domestic use but is only, as I understand it, for the purpose of the distribution of a richer gas to industrial plants? Is there any intention that the actual thermal capacity of town's gas would be increased?
§ Mr. Lee
Not necessarily. It is a matter of the blending of the richer gases with the lean gas.
Looking beyond the 1970 period, possibly the most significant development may be the large-scale use of natural gas either as feed stock for manufacture or for supply direct to consumers in its natural state. The only substantial supply of natural gas at present comes from the 350 million therms a year—which is rather less than 10 per cent. of the current gas consumption—of Algerian methane which is being imported in refrigerating tankers but there are prospects for further increasing this with the use of natural gas by importing from other sources and there is the possibility, of course, of gas being found in the British part of the Continental Shelf.
It is unlikely that any discovery in the North Sea could lead to any large additional supplies of cheap gas much earlier than 1970. The industry must, of course, be ready to make the necessary modifications to its plants, particularly those for distribution, in good time. Hon-Members know that a great effort is being made in the North Sea and, whilst as yet we have not heard of anyone striking oil, we are very optimistic that this will take place. Present developments are designed to enable additional quantities of natural gas to be absorbed into the supply system when available as smoothly as possible.
It is not only in the distribution of gas that may be found in the North Sea that the industry is interested. There is the Gas Council-Amoco group, which was awarded five licences to drill for oil and natural gas in September last year. The group has already completed extensive survey work and is hoping to begin drilling next year.
All these new developments are a tribute to the initiative of the gas industry. Not only has it seized and exploited the opportunities presented—for example, by natural gas—but it has 1999 also made a major contribution by its own research efforts to the development of the new gas-making processes. One must ask, therefore, whether it would be right to imperil the progress of an industry which is making such obvious progress by in any way retarding the economic processes available now for gas making. The Government believe that it would not be right for the industry, the consumer or the country.
I am keenly aware that the greater use of oil and natural gas as feed stocks has its disadvantages. But the use of coal for gas making has been declining and inevitably that decline will continue. Indeed, one asks whether it really would help coal or the country to deny the gas industry access to cheaper materials and processes. I am satisfied that it would not.
The cost of gas produced in the most efficient conventional carbonisation plants now in service is about 12d. to 14d. a therm compared with 7d. to 9d. a therm in modern oil-based plants. To insist, therefore, that the industry should adhere to coal would only lead to higher prices which would then jeopardise the growth of sales and might even result in the decline of the industry. That is a process which would not serve anyone's interests.
§ Mr. John M. Temple (City of Chester)
The right hon. Gentleman has given figures of the cost from oil and coal bases. What are the figures for the best plants?
§ Mr. Lee
I have not those figures with me but I will ask my hon. Friend the Parliamentary Secretary to give them.
For the short term, as I have already informed the House, as one of the measures to help the coal industry, the Gas Council and the boards have been considering to what extent it would be possible to increase consumption of coal this year. The gas boards seem likely to use some 300,000 tons more coal in 1965–66 than was expected at the beginning of the year. This reflects modifications in plant programmes and increased demand estimates and will, of course, assist the coal industry. It is not expected to have any significant effect on the finances of the gas industry as a whole.
§ Mr. Ness Edwards (Caerphilly)
When my right hon. Friend says that the figure will be 300,000 tons more than expected, can he relate it to consumption last year rather than what was expected?
§ Mr. Lee
I cannot give my right hon. Friend the figures for last year but there has been a decline. I think that the industry is using about 18 million tons of coal. Whatever was the estimated consumption for this year will be exceeded in actual consumption by about 300,000 tons.
In the longer term, this trend towards the newer processes is one of the factors that is being taken into account in the review of fuel policy which is now in progress, the results of which I hope to announce shortly. Looking further ahead, the industry is pursuing its longterm research into the possibility of finding new and economical methods of producing gas from coal, but it will be a long time before any assessment can be made of the prospects of a technical breakthrough which would restore coal to a competitive position with oil and natural gas in the field of gas supply. But many experiments are in progress and we hope in the long term to achieve a technical breakthrough in that respect as well.
Although I have dealt at length with technological developments in the industry, I have not yet mentioned that important subject—productivity. Here, the gas industry is also playing a most important part. In the five years ended 31st March, 1965, sales of gas rose by over 20 per cent. whilst, during the same period, the total number of employees in the industry fell by 5 per cent.
In the publication, "Growing Gas Industry" it is forecast on a very conservative basis that productivity will rise by about 25 per cent. over the next five years. However, there are many ways of calculating productivity and on the basis used for the National Plan—net output per employee—productivity is forecast to rise by over 60 per cent. in the six years ending 31st December, 1970, and, measured in terms of therms distributed per employee, by 56 per cent.
I now turn to the financial side. In "Growing Gas Industry," investment from the 1st April, 1965, to 31st 2001 December, 1970, is estimated at £780 million of which £320 million is to be spent on gas production and £460 million for distribution and other purposes. With additional working capital of £50 million this brings the industry's estimated capital requirements over this period to £830 million. It is further estimated that some £430 million or 52 per cent. of this will be found from internal resources. The remainder will need to be met from new borrowing.
The investment of £830 million is substantial by past or any other standards. The average annual rate of investment when gas sales were relatively stable was about £50 million a year. In the past two years, it has been around £90 million a year and is likely to rise from £117 million this year to £140 million in later years.
This rapid rise in investment is at once a reflection and, to some extent, a cause of the greatly improved prospects of the industry—a reflection in that the growth of demand requires heavy investment in new capacity a cause in that the rapid exploitation of new technologies has engendered new confidence in the future of gas as a competitive fuel. The question must be asked, is this a proper application of scarce resources? Will it pay?
The record of the gas industry in the past few years is a very good one. Despite rising costs there has been over the past three years a fair degree of price stability. The average revenue per therm has risen by only 1 per cent. a year, a very moderate increase bearing in mind the heavy investment needed to meet the winter peak loads for space heating. This is partly due to the effect of rising consumption under the two-part tariffs, but also reflects the industry's success in absorbing higher costs by greater efficiency.
The financial objectives agreed with the boards under the policy set out in the White Paper on the Financial and Economic Obligations of the Nationalised Industries required an average gross return for the industry as a whole, including depreciation and interest, of 10.2 per cent. This may seem low but it must be remembered that at the time no one could possibly foresee the changes that have since occurred in the industry's prospects. Although not all the boards 2002 have had the same degree of success, there is every possibility that the industry generally will achieve its objective and will end the period earning a higher rate of return than at the beginning.
The objective for the next five years has not yet been agreed.
§ Mr. David Webster (Weston-super-Mare)
Could the right hon. Gentleman analyse for us the different boards and their returns, because some of them are now connected with the Canvey Island grid? Could he say what percentage increase of return there has been?
§ Mr. Lee
I said the industry generally would meet its objectives. As the hon. Gentleman pointed out, some boards are in a better position than others. I do not want to make any specific declaration that all the boards will meet their financial targets. I think that that would be wrong. That is why I kept to the general proposition that the industry is meeting the target which was put to it and, as a matter of fact, will, we think, at the end of the five-year period be earning at a higher level than at the beginning.
However, in making its estimates of capital available from internal resources the industry has provided for a somewhat higher rate of return in the years 1967–68 to 1969–70 than in the preceding five years. I think that this is a very proper attitude. It is right that an industry which is expanding rapidly and whose needs for capital are increasing should demonstrate its ability to earn a proper return on the capital invested in it and provide a satisfactory share of its new capital from its own resources; otherwise there is a serious risk of misapplication of resources.
The rapid rise in investment, and consequently in borrowing, has meant that the industry's borrowing powers are becoming exhausted much more quickly than had earlier been expected. At 31st March, 1965, the total borrowing counting against the limit was £585 million. It is expected that the limit of £650 million will be reached before the end of this year. This is why it was necessary to bring in the Bill now.
The estimated additional borrowing of £400 million up to 31st December, 1970, would bring the total up to £985 million. The Bill proposes to set an initial limit of 2003 £900 million with provision for the Minister to raise this to £1,200 million subject to approval of the House of Commons. The size of the initial limit under the Bill will ensure that if the growth of the industry continues as we now expect, Parliament will have another opportunity of examining its progress in about three or four years' time.
The difference between the estimate of £985 million for borrowing required and the final limit of £1,200 million may seem large. This is, as the memorandum points out, to allow a margin of reserve borrowing to meet possible increases in investment consequent on, for example, the discovery of gas in the North Sea.
§ Mr. John Peyton (Yeovil)
I wonder if the right hon. Gentleman could tell me—I am asking the question genuinely for information—if there is any precedent in previous borrowing exercises, for which all Governments have been responsible, for allowing such a thing as a borrowing margin in a Bill like this?
§ Mr. Lee
I should have thought that there were plenty such precedents, but I could not quote one offhand. This is not something which has not yet begun to mature. The actual work in the North Sea is proceeding. The people now investing are confident to the tune of £80 million up to now, and if we do not make provision for a distribution to take place it may well be that, although they find gas, many years would have to elapse before the gas industry got the necessary borrowing powers and for operations to begin. I should have thought that to allow a margin of this sort against the probability of finding gas in the North Sea was right. I think that we need this degree of margin to meet that situation.
§ Captain Walter Elliot (Carshalton)
I rather gathered from what the right hon. Gentleman said that the industry was going ahead and using its hardware on the possibility that gas would be found in the North Sea. Is that so?
§ Mr. Lee
I did not say that. I said that the industry was going ahead—feed stocks and so on—and was now at work in the North Sea. The Gas Council with Amoco has already done exploratory work there. I was pointing out that a pretty substantial time lapse will take 2004 place from the moment when gas is found to the time when we can get the distributive system right. Therefore, we are asking for this margin so that, instead of waiting for the permission of the House for further borrowing, the industry could go ahead once gas was discovered in effecting its distributive system. It is highly unlikely that a discovery now could lead to additional gas supplies from the North Sea before 1970.
§ Mr. John Harvey (Walthamstow, East)
I am much obliged to the right hon. Gentleman for giving way. He dealt with the question of the North Sea and with that of coal. I hope he will also feel able to say something about the electricity industry, because, in planning the expansion of the gas industry, there must naturally be some side effects for the electricity industry.
§ Mr. Lee
Yes, of course there must be. However, we must remember that we are on a constantly rising curve of demand for energy. This is one of the things that we take into account when planning ahead. Although in domestic spaceheating gas is making great progress, I do not believe there is any question of a diminution in the amount of business which the electricity industry will do. It may be that in domestic spaceheating it would, but I doubt whether the demand for gas increasing in this way makes the need less for capital development in the electricity industry as such. I am grateful to Mr. Speaker for allowing me to go this far, because at the moment we are not dealing with the electricity industry.
I should like to emphasise that raising the borrowing limit does not in itself authorise any expenditure at all. That is not the purpose of the Bill. The industry's investment plans will, as hitherto, be subject to the existing procedures for annual review and approval.
I have tried—and I hope succeeded—to present the gas industry as one with very good prospects for growth, with go-ahead management and certainly well able to justify its claims for more investment resources. I have no doubt that the industry is in extremely good heart and that the investments which it proposes to undertake represent a proper use of resources in accord with the general development of the economy which we 2005 are now planning. I therefore commend the Bill to the House.
§ 12 noon
§ Mr. John Peyton (Yeovil)
I am sorry to say that I find the right hon. Gentleman's speech more remarkable for what it did not contain than for what it did. He has told us very little in detail of the future plans for the industry which demand this enormous expenditure of money. He gave us what amounted to a précis of the brochure produced by the Gas Council, "The Growing Gas Industry". He did not shed very much light on the future plans which his Department and the Government have for the industry. He referred to the rising curve of energy demand and said that the Government took that into account in their planning ahead, but he gave virtually no information about what those plans were. We believe that we are entitled to it.
I have never heard a more cursory introduction by a Minister to a Bill involving such huge sums of money. The Minister merely touched on the relationship of the gas industry with coal. He gave a piece of information which I have been seeking for some time: I hope to develop this point a little later and to give to the right hon. Member for Caerphilly (Mr. Ness Edwards) the information which the Minister seemed not to have available. The Minister was a little obscure in dealing with the point raised by my hon. Friend the Member for Reading (Mr. Peter Emery) who asked him whether or not the gas industry was contemplating a higher thermal content in the gas sold in the future. He said there were no plans for this. However, as I understand the position, there is a very real possibility of this happening, and, of course, it would involve considerable planning ahead by the gas industry. I am sorry that the Minister was not able to deal with this point at greater length. Perhaps the Parliamentary Secretary will.
The Minister referred to the modest rise in revenue per therm. This is very important. What I was not clear upon was whether he thought that that modest rise was sufficient or whether he was looking for an improvement. Perhaps he would like to clear that point up.
§ Mr. Peyton
The right hon. Gentleman used the adjective "modest" in referring to the increase in revenue per therm which has taken place. I was not sure whether he regarded that as an achievement worthy of congratulation or whether he was looking for something more. I do not know his view on this. Obviously, this is a root point in judging the performance of the industry and one must always look for planned improvement here to justify the amount of investment which we are contemplating.
§ Mr. Peyton
I was on a narrower point than that. I was referring to the point which the right hon. Gentleman raised himself and which is of great importance, the rise in revenue per therm. I hope that, even if he does not want to elaborate on it now, he and the Government will give it their constant attention in the future.
The right hon. Gentleman referred to return on net assets, a point to which I should like to return later on. I hope that I may follow the right hon. Gentleman in his adventure into the North Sea. For the first time, a Minister from the Treasury bench is talking about the "probability" of gas in the North Sea. Obviously, more is involved than newspaper comments in making Government spokesmen—in particular, a Minister—appear so sanguine on this matter. If he is justified in doing so, of course, we on this side welcome it absolutely. We are only human and the right hon. Gentleman will now learn for a few short moments just how human we are. It would be contrary to human nature if we did not congratulate ourselves on the speed with which these licences were allocated and, at the same time, recall to the House the way in which the then Opposition spokesmen criticised and attacked our handling of this matter.
It is now our turn to ask them firmly when they will get on with the next steps 2007 in the North Sea. We already know that the Dutch are making arrangements and, if Ministers are now so hopeful of early developments, it is incumbent on them to get on with the remainder of the arrangements, instead of hanging about. One suspects that the main cause of the delay—which is beginning to become culpable—is that Ministers are hanging their heads in shame at the prospect of having to do exactly as their opponents did some months ago.
The right hon. Gentleman referred to the fact, of which we are already well aware, that the mere raising of borrowing limits does not, in itself, involve expenditure. But when the raising of borrowing limits is passed by this House, that is the end of the matter so far as the House of Commons is concerned. Whatever arrangements are made by the Treasury or the Minister of Power are quite another matter. So far as we in the House are concerned, the matter is ended. The Minister perhaps has not given sufficient weight to the very proper anxieties which the House of Commons feels in the authorising of such large expenditure as is now requested.
We find it somewhat surprising that, after the Government have been nine months in office, a major Measure of this kind is moved by the Minister of Power which comes from a party which both boasted and threatened of its ability to produce a co-ordinated fuel policy. We now have no sign of such a Measure. The present Minister of Transport castigated the previous Government on a number of occasions for their failure to have a co-ordinated fuel policy. I should like to believe that the present Minister would not have said such hard things, but I am afraid I believe that he would have used much the same words. Instead all that the Government have been able to produce in these nine months is an Energy Advisory Council composed almost entirely of people who are in interest- and duty-bound to disagree with one another.
I should be very interested to see, if it ever becomes available to me, the kind of advice which the members of the Energy Advisory Council—I do not wish in any way to appear disrespectful to them—will give to the Minister. It is certainly like to be anything but unanimous. 2008 I suppose that, in due course, we can expect that this Council will give some form of advice to the Minister, who will then, perhaps, formulate it into a policy. He will pass it on to the First Secretary of State—here the nightmare comes to its peak—who will incorporate it into the national plan which, if rumour is to be believed, has already run into considerable difficulties. I should like the Parliamentary Secretary, when he replies to be good enough to say whether the Energy Advisory Council has ever been asked to advise on the Bill and what advice it gave.
Before we agree to pass a Bill of this kind, making, as it does, immense demands upon the Exchequer, I should like to ask the Minister straight what important modifications he and his Government have made to the previous Government's fuel policy. Perhaps the right hon. Gentleman will now accept that contrary to what his right hon. and hon. Friends said when in Opposition, we had a valid policy and that he is now, to the best of his ability, carrying on with it. It is not at all easy for the right hon. Gentleman to answer.
§ Mr. Peyton
The Minister has advisers available to him and I suggest that he listens to them. What astounds me is that after all the promises and threats that we had of a new policy, there is not a vestige of a movement except a few minor tamperings. The Bill proceeds on similar lines to what we would have done and in principle, at least, we do not oppose it. We would, nevertheless, be glad of recognition from the Minister that what he is doing is substantially, with very few exceptions, a continuation of the previous Government's policy.
I recognise with some trepidation—I hope that it is not justified—that the Minister intends to produce a new policy and that the industries will no longer be free to compete with one another but will be allotted certain markets or shares of markets. I hope, however, that if ever that time comes and the right hon. Gentleman is tempted or unduly affected by some kind of nostalgic longing for Socialist doctrine, he will recall that not only are the problems of tomorrow most unlikely to yield to the technology of 2009 today, but that room must be left in any valid fuel policy for the unforeseeable and the unexpected.
If the Minister wants an example of what I mean, it would be hard to find a better one than the gas industry itself. The right hon. Gentleman will recall that if, 10 years ago, he had assembled any six or more wise men round a table for the special purpose of judging and assessing the prospects of the industry, virtually none of them would have given it a chance. Only a few fanatical devotees had the faith and courage to cling to the belief that in this, as it appeared, moribund industry there were still the germs of hope and promise of the kind that we see coming to development and fruition today. I stress this as a good example of the fallibility of forecasting and I hope that never will the country be subjected to a plan of a kind which trammels or makes difficult the kind of progress that we now see.
Discussion of the Bill falls under roughly three heads. First, there is the place of the industry in the national economy, the demands which it makes upon it and the conditions under which those demands should be met, and the contribution that the industry is able to make. Then there comes the question, touched upon by the right hon. Gentleman, of relations with other fuels and, finally, the developments which are now taking place in what can fairly be described as the new gas industry. I hesitate to use the word "new", which is applied ruthlessly with the utmost abandon to every toothpaste or detergent powder that anybody cares to sell. Nevertheless, in the case of the gas industry the use of the word "new" is abundantly justified.
On the first point—the place of the industry in the economy and its effect upon it—I am tempted to ask the question which headed an article by Mr. Harold Wincott in the Financial Times of 6th July:Where is it all coming from?It is so easy to pass Measures of this kind. Borrowing and lending are much less painful subjects than taxation. It would be easy to find oneself with a congested demand upon the limited powers of money-raising which the country has.
The estimated borrowing by the nationalised fuel industries for the cur- 2010 rent year is nearly £500 million. To this must be added the contemplated transfer of a further £32 million a year in respect of the proposals which the Minister made the other day for the coal industry's capital. This year's estimate for gas borrowing is £67 million. Despite this considerable sum, the latest Exchequer returns show that in the first three months of the present financial year, only £5 million of the total of £67 million had been borrowed. Perhaps the Parliamentary Secretary will be able to make inquiries about this and say why, in one quarter of the year, only so small a fraction of the total has been called upon.
I have made some slightly rough remarks to the Minister and it is only fair that I should applaud him for his courage in what cannot have been easy for him: that is, the adoption of the financial objectives for the nationalised industries. I recognise that this is a matter which those who are not responsible for the industries who are more interested from the viewpoint of the customer or the consumer, will find it a little difficult to digest. I recognise that a party who have come into Government and accepted responsibility for the first time for a number of years might have found it hard to enforce those objectives. I am extremely glad that the Minister has done so. I am sure that an important step forward was taken when we started this policy. I hope that the Minister will always continue it, because I am certain that in the long run it is in the interests of both the industries and the economy and, therefore, ultimately, even of the consumers as well.
We are all aware of—indeed we welcome—the dramatic revival that the gas industry is now experiencing and we share to a large extent the confidence of its leaders. It is, however, proper that we should pause to take note of the extent of the remarkable increase in borrowing powers. In 1948, as the Minister will recall, they were first fixed at £250 million. After six years, they were put up by £200 million to a total of £450 million. After a further six years, in 1960, they were increased by a further £50 million to a total of £500 million, with a possibility of a further increase of £25 million by order.
In 1963, after a further three years, the borrowing powers were increased by 2011 a further £75 million to a total of £600 million, with the usual provision for, in that case, another £50 million by the procedure of affirmative Resolution. Now, after only a two-year lapse, we are asked to increase the industry's borrowing powers by £550 million to a total of £1,200 million. That is a steep increase and it is in a different category to all previous increases.
In its admirable and clear brochure "The Growing Gas Industry" the Gas Council stated on page 16:An extension of borrowing powers to £1,000 million would, on the evidence of Boards' present capital programmes, cover requirements to the end of 1970.At the end of the page, it was stated:In this situation it would facilitate the future planning of investment if a reserve borrowing margin of say £200 million were provided to meet possible major fluctuations in investment in the later years, bringing the new limit of borrowing to £1,200 million".Is there a precedent for allowing, in a Bill of this kind, what is called a "reserve borrowing margin", particularly of the order of £200 million? When Governments present Bills of this kind they should be prepared—not necessarily in great detail, but certainly in rough outline—to give the investment that is contemplated.
The mere fact that one is talking about a borrowing margin means that the money is not hypothecated, is not pledged to any particular purpose, and although the Bill itself may justify some provision being made which should not in any way jeopardise the industry in making its future plans there should be a provision made to come back to the House of Commons for further authority. The right hon. Gentleman is justified in saying that up to a point he has done that. While I do not wish to go into this point at length on this occasion, and while we will consider anything that the Parliamentary Secretary says later, the degree of Parliamentary control offered by the Bill is wholly inadequate. It is almost certain that my hon. Friends and I will move an Amendment in Committee providing for Orders at, say, £850 million and £1,000 million. My hon. Friends would probably agree with me that there should be an Order particularly at £1,000 million, if only because of this margin point which has been specifically made 2012 by the industry and the Minister. I suggest that it is not right to authorise a margin of this kind without a very special procedure attached to it.
I end this part of my remarks with the question with which I started: from where is all this money coming? It is easy to make large and extravagant plans, but I beg the Government to realise that they could be doing no greater disservice to the industry or any of the other fuel industries if they commit themselves and those industries to programmes of capital development which the resources of this country will subsequently prove inadequate to sustain. I hope that the Parliamentary Secretary may be induced to comment on this all-important aspect of the problem which is before us.
I give notice to the Government that in Committee we will move an Amendment of the kind I have indicated and that we shall probe this problem a great deal further. I urge the Minister to give on that occasion the fullest possible information and—although I realise that this is not a point which the House would wish to prosecute at length at this stage—I express the confident hope that the Government will, in accord with precedent, take the Committee stage of so important a Measure on the Floor of the House.
§ Mr. Arthur Palmer (Bristol, Central)
Was that procedure, of taking Committee stages of borrowing powers Bills on the Floor of the House, adopted by former Conservative Administrations?
§ Mr. Peyton
I thank the Minister for confirming what I said. When one is dealing with such large sums of money it is of the utmost importance that there should be an opportunity for discussing the matter on the Floor of the House.
I come to the relationship of the gas industry with the other fuel industries. I will first quote an authority far greater than myself, Lord Hinton, who last week at Brighton, in that admirable forum arranged by Sir Ronald Edwards for the fuel industries, said:I suggest that it"—2013 that is, the gas industry—ought to be considered as part of the oil industry.He went on to welcome the competition… between the oil industry, of which the gas industry is part, and the electricity industry, upon which coal depends".That is an admirable and lucid summary, from a distinguished man with a great record of service to the fuel industries, of the position as it is and as it is developing in the fuel industries—not necessarily, I recognise, as some people would like it to be.
It is clear that, from the point of view of the coal industry, gas will enjoy only a diminishing relationship. A look at the figures—and I hope that in mentioning these figures I will be supplying the right hon. Member for Caerphilly with the information he sought—shows that in 1954–55 the gas industry used 27½ million tons of coal, that in 1963–64 the demand had gone down to 21,800,000 tons and that in 1964–65 the demand had gone down to 19} million tons. This declining trend is still sharply visible. In the first half of 1964 the total used was 10,986,000 tons and in the first 26 weeks of this calendar year the demand had gone down to 9,758,000 tons. It is clear that there can be no replacement or renewal of carbonisation plant, any repetition of Lurgi or anything of that kind in the light of present knowledge.
When does the Minister expect the gas industry to cease being a major user of coal? I imagine that that stage will come, probably in the early or mid-'seventies. The right hon. Gentleman announced earlier this year certain measures—and he referred to them again today—calculated to sustain the coal demand at a level of about 4 million to 7 million tons above what it would otherwise have been. I found that a rather odd figure, particularly in view of that large margin. I have on a number of occasions asked the right hon. Gentleman what response he has had from the coal and gas industries and he said today that 300,000 tons is all that the gas industry has been able to offer him. I hope that at some time we will be told what the electricity industry has been able to offer.
§ Mr. Frederick Lee
I can bring that figure nearer. The figure of between 4 million tons and 7 million tons I now expect to be about 5 million tons a year.
§ Mr. Peyton
I am much obliged.
I believe that such actions as this are fraught with peril. It is very wrong for any Government to seek to influence the commercial judgment and prudence of these industries, which have immense responsibilities on their shoulders. If an industry falls down in the performance of its duties, it is up to the Government—and I am sure that they have adequate powers—to sack the chairman or any one else whom they consider to be blameworthy. In the meantime, the Government should refrain from what I recognise to be a very real temptation to interfere or seek to modify the judgments of the industries.
I say at once that our willingness to support such a Measure as this would be very greatly modified, to put it no higher, if we had grounds for believing that the freedom of the industries who act as they thought best in the interests of their own and their customers' future was to be seriously trammelled by restrictions, or informal advice amounting to restriction.
I do not want to deal at any length with the relations between the gas and the electricities industries, but I certainly believe that competition between them is quite vital to the nation, to the industries themselves and, above all, to the customer. The only guarantee the customer has of any real standard of service is a certain degree of competition. I believe that this factor of competition is so immensely valuable that it would be wrong for us to be unduly upset by arguments that are bound to break out from time to time over such things as connection charges or advertisements which from time to time strike one industry or the other as being grossly unfair. One does not want to yield to the temptation to keep everything very orderly and tidy. If rows break out from time to time we have to learn to live with them. I am sure that these tremendous, robust and growing industries can face these problems, and solve them for themselves without too much Ministerial intervention.
2015 I am glad that the Minister referred to the target earnings on net assets for the two industries, and we shall look forward with a good deal of interest to hearing the Government's conclusions on what would be a fair return to set the gas industry in the future as opposed to the past. We all admit that previous targets were set in very different contexts. It is not for me to make these decisions now, but the right hon. Gentleman, with all the information before him, has a very important decision to make. We shall await the outcome with a good deal of interest.
An important difference between the two industries is that one pays tax on its raw material and the other does not. I recognise that this is not a matter for the Ministry of Power alone and per- haps the Parliamentary Secretary will prefer to be rather coy where the Treasury is concerned. Nevertheless, we shall be interested to hear the Government's opinion on this aspect. It is for the Minister and for the Government as a whole to come to a decision on these two points. It is very unlikely that the right hon. Gentleman will get co-ordinated or unanimous advice from the Fuel Advisory Council.
Turning now to the gas industry—
§ Mr. Temple
Perhaps my hon. Friend, while dealing with a question of competition, will be able, out of his great know- ledge, to inform the House of the comparative capital expenditure per unit in the two industries. In other words: which is the higher, and what is the relativity?
§ Mr. Peyton
I am flattered by my hon. Friend's searching for information. The Minister will correct me if I am wrong, of course, but I think that the comparative figures are £32 per kilowatt of electricity and £8 for the gas equivalent.
One sees in the new developments in the gas industry a very good ground for confidence. Demand in each of the previous four years has increased by 1 per cent., 3 per cent., 5 per cent. and 8 per cent.—a very remarkable record. It may well be that when the right hon. Gentleman said that he expected that the annual growth to be at an average of 7½ per cent., he under-rated rather than exaggerated 2016 the pace. That, however, is something about which no one can be exactly right.
The advent of natural gas has brought a new hope and breath of life to the industry, and I should like to pay a very warm tribute to my right hon. Friend the Member for Bridlington (Mr. Wood) who made the extremely courageous decision, much criticised at the time, to start on this development. It may be that the price we pay is slightly higher than processes or supplies from other sources now available would offer, but it marked an extremely important step forward for the industry. My right hon. Friend is to be warmly congratulated by the House on the courage and wisdom he then showed.
There are other possible sources in Algeria and Holland, and perhaps the Parliamentary Secretary will give us some details of the prospects as he now sees them. The Minister himself touched on the North Sea as a possible source, and I understand and appreciate that the industry would need to be mentally ready to accommodate any large find that there might be. Naturally, though, there is need for the greatest exercise of prudence and caution, and for guarding against being swept into excessive investment that might prove quite redundant should gas not be found.
I entirely endorse the right hon. Gentleman's comments on the new works and their importance to the industry—the low capital cost, and the fact that two years covers the period of design and construction. We have the authority of Sir Henry Jones, also speaking at Brighton last week, for saying that 92 per cent. of the heat value of the raw material is available in the gas produced. That is a very remarkable standard of efficiency, and one that is bound to redound greatly to the advantage of the industry.
Production under pressure, which the Minister also mentioned, is of great importance in that it makes possible a cheap and efficient distribution, and also offers, as this brochure points out, very important storage facilities by making adjustments in the pressure. All these things give the industry new opportunities. They offer the characteristics of flexibility and efficiency, coupled with the very welcome prospect, at least, of relative cheapness.
2017 I believe that the management of nationalised industries is an extremely difficult and delicate task, and I am not being partisan when I say that public ownership increases the amount of pressure with which modern management has to cope.
From time to time formal tributes are paid to those who are responsible for the industries. I hope that what I am about to say will not be taken in any way as merely complying with tradition and custom. I believe the gas industry is singularly fortunate in having had, and still enjoying, the leadership of Sir Henry Jones and Sir Kenneth Hutchison. Both have adhered with great strength to the conviction that this industry could survive and grow out of all its problems and offer a real contribution to the national economy. They deserve great credit from the House of Commons for the courage they hale shown and for their wisdom. I associate with them the chairmen of the area boards and those responsible for the management of the industry.
When we are considering these immense industrial problems, I do not see any reason at all for us on this side of the House—I do not think we have done so—to refrain from paying these kind of of tributes which are well deserved. I hope very much that some time an answering echo will come from the benches opposite about privately-owned industry. We have all to live together, as the hon. Member for Liverpool, Walton (Mr. Heffer) observed. So long as we have this nagging and barren controversy about the achievements or failures of industry instead of a far more constructive approach to its problems we shall add to our difficulties rather than diminishing them.
I have nothing more to say about the Bill itself. It is undoubtedly a necessary Measure. It is both a matter for congratulation and for caution. Immense sums of money are involved. It would be wholly wrong for the House of Commons to part with control to the extent that the Government have asked us to do. That in itself is not a reason why we should oppose the Bill. Indeed, we shall be glad to give it support on Second Reading, but we take very seriously the possibility of its amendment during Committee.
§ 12.42 p.m.
§ Mr. Ness Edwards (Caerphilly)
I wish to associate myself with the remarks of the hon. Member for Yeovil (Mr. Peyton) about the skill, integrity and drive that the leaders of the gas industry have shown. I come from the other side of the industry, but we approach these problems in no Luddite manner. We want to see what is best in the national interest and not in the interest of any particular section of the nation. When we miners see a Bill of this sort, asking for very substantial sums for a section of the fuel industry, we must have regard to its effect upon our own industry. In having that regard for its effect I hope we will not behave in an obstructive way, but that we shall seek to find what is best in the national interest.
Like the hon. Member for Yeovil, I have been concerned about the degree of Parliamentary accountability, not only by this nationalised board, but by all nationalised boards. When we vote very large sums in this way it is essential that this House should be able to examine from time to time the purposes for which that money is being spent. It is not a question of looking at the matter at certain periods when additional sums are asked for. By an entirely different Parliamentary procedure whereby hon. Members could examine every six or 12 months the purposes to which the money voted by this House are being devoted, an eye should be kept continuously on the matter. One sees more and more power passing out of the Chamber and, to a degree, passing out of the hands of the Executive into the hands of nominated people.
I was rather amused when the hon. Member said that there should be no interference with the skill of those people. In an earlier part of his speech he said "Let us have Parliamentary interference: let us have Parliamentary supervision." The first part of his speech was concerned with the complete lack of Parliamentary supervision, while the latter part was concerned with trying to advocate the complete independence of the boards from criticism by this House.
§ Mr. Peyton
I never went so far as the right hon. Member would have the House believe. I was concerned to say that the Government should not involve 2019 themselves closely in the running of an industry, but I am equally concerned—I see no reason to believe that there is any contradiction here—that Parliament should exercise a reasonable degree of control over the money of which it disposes. That is all: there was no contradiction there.
§ Mr. Ness Edwards
This is an old argument which has gone on from the days when Herbert Morrison, as he was then, was in Opposition. It is an old argument as to whether or not nationalised boards should be accountable to this House in exactly the same way as is a Minister.
For some years I was a Minister. I had to answer for every postage stamp which went wrong and every letter which went wrong. I never thought that when the eyes of hon. Members were on the operations of the Post Office that in any way impeded my function as Postmaster-General. In fact I was glad to have it so. In that way hon. Members were able to find from the Postmaster-General exactly what was being done, not only on his behalf but on behalf of this House. In the development of the fuel industry over the next dozen or so years the closer we can examine these questions the greater will be the possibility of our avoiding social hardships and making the kind of financial mistakes which hon. Members opposite made when they told the coal industry to plan for 250 million tons a year and in that way wasted vast sums of our capital resources.
I have been amazed to read the Memorandum on the Gas (Borrowing Powers) Bill. It has been written by someone who does not believe in a co-ordinated, integrated fuel policy. It ties this industry and our conception of the industry to the famous Butler policy on the economic obligations of the nationalised industries. In paragraph 4 the Memorandum lays down:The industry's future investment will be conditioned by the need to ensure its earning power is adequate to enable the Boards to achieve the financial objectives agreed in accordance with paragraph 20 of the White Paper.That is the White Paper on the Financial Economic Obligations of the Nationalised Industries. Surely it is the view of right hon. Members on this side of the House that these industries are not to be regarded 2020 in isolation but are to be integrated. It should not be 8 per cent. for one at the expense of great losses in the other. I thought that the whole thing was to be considered together. However, under this, the isolation and the intense competition between the four sectors of the fuel industry are to be maintained. The four sectors are to be encouraged not to co-operate in order to reach the 8 per cent. objective, but to denigrate each other and cut each other's throats in the process.
That is the sort of thing which has been going on. This is an "I'm all right and to the devil with the consequences upon the other sectors of the industry" type of outlook. I hope that my right hon. Friend will consider this matter a little more closely than he has done. I hope that he will ensure that memoranda associated with Bills of this sort should at least recognise that a General Election took place last October and also that the phraseology and outlook of the old order are not expressed in the way they are expressed in this Memorandum.
We must examine how the gas industry will play its adequate part in the general supply of fuel. Last week my right hon. Friend made an announcement which I thought was the most important announcement in relation to the mining industry which has been made since nationalisation. Then he was trimming the industry to fit it into a fuel policy. Today he is asking for vast sums of money for another sector of the industry which does not appear to have the same social purpose as that which he is now giving to the mining industry. The advantage of doing it in the way he is doing it for the mining industry is that at the same time as he is trimming the industry he is also providing a special fund to deal with the social consequences of his economic action.
None of us wants to send men down the pit for the sake of sending them there. I am much more concerned about the miners than about the mining industry. This is extremely important in relation to the Bill. If the Bill is to kill the Durham mining industry, we are entitled to know how the economic viability of the areas in which pits are to be closed is to be ensured. What special funds are being made available? What help is to be given to the men whose work is being 2021 taken away from them because of the developments foreshadowed in the Bill?
Those are the things about which miners are concerned. My right hon. Friend's pronouncement has never received the appreciation it ought to have had from the mining industry and the miners themselves, because they have not realised that the social consequences will be considered. I am certain that most mothers, especially in places like the Rhondda Valley, in view of what has happened there, would rather see their sons in white coats than with dirty faces. I do not approach the problem of the Bill with any inhibitions about what ought to be done to provide the best forms of fuel and the best sources of energy. What advantage will it be to relate the development of the gas industry to an overall fuel policy if a little is saved on the therm but a great burden is added to our balance of payments? It appears, as I think the hon. Member for Yeovil hinted, as if the gas industry more and more is inclined to become the handmaiden of the oil industry. I wonder how far this is a hangover from the previous Administration.
§ Mr. Peyton
The right hon. Gentleman must not go too far. This is merely a question of natural forces, ordinary evolution and development. I did not hint at this. I spelled it out in very clear terms. I quoted the words of Lord Hinton. I see no reason to quarrel with what he said last week, namely, that the gas industry should be considered as part of the oil industry.
§ Mr. Ness Edwards
Obviously the hon. Gentleman was approving the statement which was made. I wonder whether the £550 million provided for in the Bill is geared to the development of the gas industry in relation to the oil refinery programme. It is generally known that the oil refinery programme in this country will incease by 60 per cent. over the next six or seven years. I wonder what relation the provision of all this money has to the oil refinery programme. Is the progress of a nationalised industry to be governed by the development of the private enterprise oil industry? Has consideration been given to the effect of all this on the balance of payments?
§ Mr. John Harvey
One of the great imponderables in all this, but yet one of 2022 the considerable probabilities, is that gas may be found in appreciable quantities under the North Sea. That would not involve any balance of payments problem. It may be very near.
§ Mr. Ness Edwards
I am much obliged for that intervention. Then why gear the gas industry to the oil industry? If it is geared to the oil industry today, is it to be dissociated from the oil industry if natural gas is found? The use of natural gas, if found under the North Sea, should be welcomed. It would be highly desirable. It would not affect the balance of payments.
§ Mr. Webster
I am following the right hon. Gentleman's argument with much sympathy. How does he square it with his support of the programme to abolish the TSR2 and be dependent for reserves on American aircraft?
§ Mr. Ness Edwards
I do not spread myself over everything. I try to confine what contribution I have to make to those things of which I have some knowledge. I think that the abandoning of the TSR2 was right and that it would have been done, had there not been a General Election, by the Conservative Party. However, I will not be side-tracked by that intervention.
We agree that the gas industry has a place. I would have liked to have known from my right hon. Friend what its place is. What part is it to play in the general fuel policy? Very soon we shall be providing vast sums for the electricity industry. We shall be providing vast sums for the A.G.R. The hon. Member for Yeovil should be reminded that the A.G.R. may knock out even the gas industry and may, indeed, be the greatest rival to coal in the next 10 years.
Therefore, we cannot plan too far ahead. We ought not to commit ourselves to spending so much money on the importation of methane in a long-term sense, in view of the new scientific possibilities within our own country and the possibility of gas being found under the North Sea. One would like to know whether or not the Minister is tied to the terms of the White Paper, that each one of these industries must endeavour to meet the 8 per cent. objective—that is the old Butler policy—and do it irrespective of what happens to each other part of the fuel industry. That seems to 2023 be fundamental to whether or not we are to get an integrated and co-ordinated fuel policy in this country.
I hope that the Parliamentary Secretary will give an indication that this borrowing power, which is permissive, will not be used for the purpose of enabling the gas industry to escape from the general pattern that a co-ordinated and integrated policy will impose upon it.
§ 1.1 p.m.
§ Sir Richard Nugent (Guildford)
I differ from the right hon. Member for Caerphilly (Mr. Ness Edwards) in his attack upon his own right hon. and hon. Gentlemen for adopting the philosophy, if I can call it such, embodied in Cmnd. 1337 which is referred to in the White Paper which goes with this Bill. This is a useful step forward for the nationalised industries, for the Government of the day to define the financial targets for each industry in the light of their circumstances and then leave them as free as possible to compete with each other to serve the consumer interest. I believe that has served us well already. It is a policy which the industries themselves have welcomed, and I do not mean to be patronising in any way when I congratulate the Minister on adopting this idea. This in no way conflicts with having a national fuel policy, and that is something on which I look forward to hearing soon from the right hon. Gentleman.
I shall not follow the right hon. Member for Caerphilly far with his point about the probability of the diminishing use of coal by the gas industry, except to say that I sympathise with his concern about the position of the miners in the high-quality coal-producing areas in Durham where the best gas coal comes from if and when in the future it is necessary for some of these mines to be closed down. But I feel sure that enlightened Government policies can cope with switches of skilled manpower of this kind, and surely this is what we must face as a nation if we are to deploy our valuable resources and skilled manpower to our best ability and in the best interests of the nation as a whole. Here in Parliament we should face this squarely, and be prepared to make these switches when they are obviously in the national interest.
2024 I now turn to the Bill, in which the right hon. Gentleman is asking us to agree to a very large sum of public money being set aside and authorised for the gas industry—a sum of £550 million which is expected to last the industry until the end of 1970, including a large reserve margin to which my hon. Friend the Member for Yeovil (Mr. Peyton) has referred. This large sum provides for a very much faster rate of capital expenditure than the industry has required in the past 10 years. We in Parliament have a direct responsibility and duty to examine very closely this very large provision of public money, for two reasons. The first reason is that this is money that the taxpayer has got to pay—
§ Sir R. Nugent
Pay. In this year's Budget £712 million is the below-the-line provision, the net sum provided for the nationalised industries, including the Post Office. This sum comes directly out of the taxes paid by the nation this year. Let us make no mistake about that. This amounts to something in the order of 2s. 6d. to 3s. in the £ on the standard rate of Income Tax. It is a very heavy burden that the taxpayer must pay. It is, therefore, our direct responsibility to see that this money is properly spent, and spent only if it is in the national interest on something which will give good value and benefit to the whole community. To say that it is money lent is really a euphemism. Does anybody think that this money will ever be paid back to the taxpayer? Of course it will not. We know that every year a similar sum has to be paid again by the taxpayer.
§ The Parliamentary Secretary to the Ministry of Power (Mr. John Morris)
With respect, the hon. Gentleman must be living in cloud-cuckoo-land. This money is constantly being repaid. He only has to read the reports of previous Ministers of Power to this House year by year to discover that these loans are repaid over periods of 25 years in 50 instalments.
§ Sir R. Nugent
The hon. Gentleman is dealing with this on an accountancy basis. The taxpayer pays this year the equivalent of an extra 2s. 6d. to 3s. in the £ in order to finance the nationalised 2025 industries, and he will pay that sum again next year and probably every year thereafter. This is the way that we provide capital for the nationalised industries. I do not complain about it. We on these benches have done it ourselves in the past and, on the whole, I think it is the best way of doing it. But let us make no mistake, this is an annual burden that the taxpayer has to bear. Of course the interest is repaid, but more capital is required.
Secondly, there is only a limited amount of capital formation available within our national resources each year. Therefore, if capital is directed to a wrong kind of development it means that some other development which might be better for the economy and more in the public interest will be deprived of capital. There is only a limited amount available. Therefore, it is of first importance that we should see that this money that we are being asked to authorise is going to the right place.
If we compare what we are doing here today with what happens in the private sector when private industry wishes to raise capital, we shall see what are the right tests to apply in the light of our responsibilities to our constituents. In the private sector, private industry must either make private arrangements amongst its friends and with the banks, or it goes to the market to raise the capital that it requires. Then it must meet what we generally call the disciplines of the market, which are pretty tough. Men and women do not lend their money to any industry unless they think the prospects are good. That means that they look at an industry, and the tests they apply are, first, "Is it secure?", secondly, "Is it efficient?", and thirdly, "Does it have an expansion prospect?" Those are the tests that we all in this House should apply to this industry today.
With regard to security, we all know that the security of money invested in a nationalised industry is roughly equivalent to the security of Her Majesty's Government itself. Therefore, I do not think it is a topic that I should be allowed to discuss today, but it might be sufficient to say that there are two views about it.
Let me pass to the next point, the expansion prospect, which is fairly easily 2026 dealt with. The right hon. Gentleman gave the House some figures of the rapid rate at which the gas industry is now expanding. This is something which warmly welcome. In the last decade the gas industry has become, as the right hon. Gentleman said, a stagnant industry. In the present decade, since 1960, expansion has begun and now it is going ahead at a rapid rate—last year at a rate of 8 per cent. The figure which the Minister gave for the period from this year to 1970 indicates that the expansion prospects in this industry are very good. Therefore, this meets the second point and the general principle in providing capital is satisfied that when there is an expanding industry fresh outside capital is fully justified.
As for the third test—efficiency—I feel that we in Parliament are always in an immense difficulty in judging the efficiency of a nationalised industry. Each of these industries is vast and complex and we can only have a very slight view of what is going on inside it. I believe that the right hon. Member for Caerphilly referred to the point that the Select Committee on Nationalised Industries plays a valuable part with its reports on the industries, but it makes one report every year and therefore this means that each industry is likely to be examined only once in seven or eight years.
However, the last Report on the gas industry made by the Select Committee in July 1961 is still quite a useful document. I do not doubt that hon. and right hon. Members will get from it some indication of what the industry is like, how efficient it is and how well it is facing its problems. That Report is still quite a valuable document as an independent light on the industry. We have valuable documents from the gas industry itself which have been most helpful to us, but even more helpful is to have comments from a relatively expert body, and especially Members of Parliament from both sides of the House, looking at the industry independently. This Report stands up remarkably well.
The picture that we saw there was that in the 1950s the gas industry was still a 19th century industry, getting its gas in the main from coal by 19th century processes. It was largely stagnant in the total volume of production because its basic raw material, coal, had risen steeply 2027 in cost. The industry not only requires coal but very high quality coal which is in short supply and therefore the price rise was steeper. The general picture was of a stagnant industry, handicapped in competition with electricity and oil because of its steeply rising costs, but despite the stagnant nature of the production the industry seemed to us to be efficient.
We were then made aware in the Select Committee of the urgent researches which were going ahead to find new and cheaper sources of supply of gas to give the industry a better chance of competing. We commented at the end of the Report that the urgent need of the industry was for a 30 per cent. price reduction if it was to compete effectively with electricity and oil. We saw then than the gas industry was very much at the crossroads and that if it continued with its traditional methods of gas production by the carbonisation of coal it would inevitably and gradually fade out in the 1960s and 1970s. It would be priced out of the market, but it had prospects of finding new methods of production to make it competitive.
Here was an instance where need is the great educationist, and the men who led the industry reacted to the acute needs of the day, just as private business does. Anyone who has run a private business knows how sharply one reacts to need. These men found new forms of production which are now beginning to make the industry competitive. In a recent speech in the House I commented on the problems of management in nationalised industries and therefore it would be fair to say that I warmly agree with my hon. Friend the Member for Yeovil that this industry is very well served with leadership, both in the Council and in the boards. These men seem to me to be both vigorous and enterprising.
They had three choices before them then. They had the choice of improving production from coal by such means as the Lurgi process, of improving production from oil-based methods, and of using natural gas, presumably imported methane. Just at the time when we were examining the industry, they had had some experience of the Lurgi method at Westhill in Scotland and at Coleshill in England. Although there was a cheapening 2028 through this process, it was only about 2d. a therm cheaper and it was not enough to bring down the cost of production to a competitive level. But, as the Minister has told the House, the new oil-based processes have substantially reduced the cost of production. His figures were 7d. to 9d. per therm cheaper for the oil-based process, and the figures for imported methane were not very much more. Therefore, these new processes have achieved exactly what we on the Select Committee thought was necessary—a price reduction of 30 per cent. In fact they go further.
This is the prospect which now lies before the industry. As the new processes come more and more to replace the old carbonisation process so gas will become progressively fully competitive with electricity and oil—and not only that. In so far as these new processes are coming in, the industry is becoming a 20th century industry, a scientific industry with many white coats as opposed to men using hand implements. It is becoming a highly productive industry. The Minister gave a figure of 18 million tons of coal used this year. This was a new one to me. I was given a figure for last year of 19½ million tons. I assume therefore that the run-down of coal consumption will proceed at the rate of about 1½ million tons to 2 million tons per annum.
I hope that the Parliamentary Secretary will assure us that, despite all the problems of making the necessary transfer of manpower in the coal-producing areas and all the attendant difficulties of the coal industry, the natural development of the gas industry in the switch-over to these new processes will not be inhibited but proper economic development will be allowed so that the industry can become as competitive as possible.
I add this comment on the question of the rate of development. I have felt that the Gas Council, though admirable in many ways, is not really a very convenient structure for promoting new developments and research, and I remain unpersuaded by replies not so much from hon. and right hon. Members opposite but from my own right hon. and hon. Friends then in Ministerial positions who told us that the Council was the right body to continue. I shall consider that these developments would be made better if there 2029 were a new body, preferably a thirteenth board, something on the lines of the Central Electricity Generating Board, responsible for major development and major production as the gas grid develops and the actual production of gas becomes less a local affair and more a national one. I ask right hon. and hon. Members opposite to consider this point.
The whole picture indicates to me that the industry has a very fair measure of efficiency of production, and for that reason I feel satisfied, on my third test, that it qualifies for the capital for which it is asking.
There is another major point which is worth making in this debate. The gas industry, strangely enough, has a contribution to make in the preservation of amenities. All of us have suffered in the past from having to look at gasworks, thinking them the most hideous objects it is possible to see, but gas holders and the like will rapidly become things of the past and, compared with the electricity industry, the gas industry has, by its transmission methods, a great contribution to make in the preservation of amenity. It is a fact, as one of these admirable documents tells us, that one 36 in. diameter high-pressure pipeline can carry 4,000 million therms of gas per annum, which is equal to the total net gas supply of the country. This is to be compared with the position in the electricity industry. We have been told by the Generating Board that, within the current 10 years, the whole country is to be covered by a network of high tension transmission lines slung on pylons 150 or 200 ft. high, on a 30-mile square grid. All of us in our constituencies know of the complaints we already receive about the destruction of amenity by these high tension lines and pylons which go galloping across the country. Many hon. Members will be aware of the great outcry which we had, and some of us still have, about what was called the desecration of the South Downs through Kent and Sussex where a new transmission line is going.
I have heard many complaints about this myself and I sympathise with them, but, if we want these extra supplies of power, this is the only way to get them—except by gas. Gas can take over, to 2030 a very large extent, the spaceheating load of the nation, and it can do this through a relatively small pipeline which goes underground, which no one has to see, and which, of course, is immeasurably cheaper than the huge electricity pylon network. I put this point with all the force I can to the Parliamentary Secretary and I hope that he will deal with it in reply. I do not believe that the public are yet aware of just what our beautiful countryside will look like in less than 10 years. In about eight years now, the whole country will be covered by a network of high tension electricity transmission lines on, roughly speaking, a 30-mile square grid.
§ Mr. Webster
I do not want to stop my right hon. Friend in spate on that subject, but there is another aspect of the matter which worries me. I am to present a report on smokeless fuel to the Council of Europe. Now that the carbonisation process is ceasing, it is very difficult to secure an adequate supply of smokeless fuel. My right hon. Friend seems to be very pro-gas today, but this is another aspect of amenity which, I suggest, he ought to bear in mind when he strikes a balance on the question of amenity.
§ Sir R. Nugent
I thank my hon. Friend for his very good point, but I am at present asking the Minister to deal very seriously with the point and assure us that, in the consideration of a national fuel policy, this particular aspect of amenity will be given full weight. I am sure that our people as a, whole are not aware of just what England will look like when the whole country is covered by a vast grid of high tension electricity transmission lines. Gas could relieve this situation, and I ask the hon. Gentleman and his right hon. Friend to give full weight to the contribution which it can make.
The current financial target is 10.2 per cent. over five years, compared with the electricity financial target of 12.4 per cent. It seemed to me that 10.2 per cent. was about right when the target was laid down under the last Government. At that time, of course, the industry was relatively stagnant and production was not increasing, but the whole picture has changed in the past few years. Production is now going up rapidly, and it is an 2031 expanding industry. I suggest that, when the current five years comes to an end, we should review the level of the financial target, in the light of the rapid expansion which the industry is now making, to see whether it is properly set. It is vital for the whole national economy to have the right level of self-financing. These financial targets determine the level of self-financing that an industry can provide, and it is of the utmost importance that they should be set at the right level in each of the nationalised industries related to one another. There is a good case for looking at the financial target of the gas industry when the review takes place at the end of the five years. I suggest that it might be a little higher, without handicapping the industry's prospects.
With those few comments, I have much pleasure in supporting the Bill.
§ 1.28 p.m.
§ Mr. Arthur Palmer (Bristol, Central)
I suspect that there is a feeling abroad that we should not extend our remarks on this Bill at too great length today, and in any case it so happens that this is the third debate on the gas industry which we have had in this Parliament so far. It works out at one debate on gas every three months. We have not, I think, discussed electricity, coal or oil, and we have certainly not discussed energy generally, but we have certainly made a meal of the gas industry. The result may be to distort a little our fuel and power perspective if we are not careful.
The hon. Member for Yeovil (Mr. Peyton) began very fiercely, and I almost admired an hon. Member who could wring quite so much passion out of a Gas (Borrowing Powers) Bill. But he ended in a fairly conciliatory spirit, and I hope that I shall not embarrass him—I wish he were here to hear me say it—if I agree with his comment that the greatest weakness of today's debate is that we are discussing one aspect of the fuel and power situation without any really up-to-date official information about what is happening elsewhere in fuel and power generally.
I am inclined, therefore, to ask exactly what is the purpose of this kind of debate in the House of Commons. I ask the 2032 question in, if you like, a House of Commons spirit, because, after all, Parliamentary time is very precious these days. We can't know about the achievements of the gas industry, which are very considerable, because this is the third debate we have had on the subject since last November, as I said just now. I do not agree with the right hon. Member for Guildford (Sir R. Nugent) that we are discussing the gas industry today because we are voting public money. I could not follow his argument. It seemed extraordinarily theoretical because, after all, the public purse does invest money, and I should have thought that investment in the nationalised gas industry, as in many other nationalised industries, was a fairly profitable investment.
§ Sir R. Nugent
The hon. Gentleman would not deny that we are being asked to approve of public funds providing no less than £550 million for this industry. That does not seem to me to be in any way theoretical.
§ Mr. Palmer
The right hon. Gentleman must know that the original intention was that the nationalised industries should raise their money on the capital market. It was his Government that changed over to the system of borrowing money from the Treasury. Those of us who have been fairly closely connected, as I have, with a nationalised industry, sometimes feel that we might possibly get our money more cheaply—certainly we might for electricity supply—if we could raise it on the public market. It is wrong to consider that sound public investment of this kind is a heavy charge on the taxpayer, because it is nothing of the kind.
No, the true reason why we are discussing the affairs of the nationalised gas industry today in the context of the Bill is that we need to check the expansion programme. If we are to do this properly, I for one would like to have much more information, particularly about other possible ways of achieving the same end. My complaint is that all the information given is from the gas industry. There is no assessment of their request in terms of the fuel and power situation generally. I do not blame my right hon. Friend for this. It has been the common practice of all Ministers of Power, and he is simply treading the worn path of precedent. 2033 But now that we have the Energy Advisory Committee, I think it would be useful if in future their appraisal of requests of this kind could be in front of us.
The members of the Energy Advisory Committee are high-powered chairmen of nationalised industries in their own rights. If it turns out, as I fear may be the case, that they agree to differ between themselves, then I have other suggestions to make for providing information so that we can have a better-informed debate.
The first is that the Minister should explain in detail under his 1944 Act co-ordinating responsibilities how he has reached his conclusion that the expenditure is warranted. I do not think any Minister of Power since the end of the war has done that. My second suggestion, which I consider to be better still, is that if the gas industry makes a request—and it is the gas industry which is making the request now—then the electricity and coal industries, the oil industry if they will do it, and the nuclear energy industry should supply their comments on the request of the gas industry, and we could change it over when we came to debates on the borrowing powers of the other nationalised industries for which we have responsibility. If we had comparative evidence of that kind, we could get a little nearer to the truth.
I agree that one runs into trouble if one tries to predict the fuel and power future by taking, unguardedly, the present evidence of fuel use and extend it into the future in a straight line projection. None of us has been completely free of delusion in this respect, and I would admit my own guilt from time to time. In the 1950s it was said that coal would be scarce and that the demand for coal for a number of years ahead would remain greater than the supply; that oil would have to fill the gap as best it could until nuclear energy in massive quantities became available; and that gas and electricity did not enter into the equation because they were regarded as purely secondary fuel sources.
In practice, the total demand for energy as it has developed over the last decade has been roughly as expected, but, instead of coal being placed under strain, there has been an embarrassing surplus, in spite of the still slow advance 2034 of nuclear energy, due to the original nuclear energy programme of 1955 being somewhat curtailed. The mistake made in the prediction was to classify gas and electricity as rival secondary energy sources equally derived from coal.
I agree with what the lion. Gentleman the Member for Yeovil said in referring to the most interesting paper read recently before the British Electrical Power Convention by Lord Hinton. The true competition, at any rate for the future, is between the coal industry linked with electricity—and I believe the electricity industry can make use of all the coal that the country can produce in the years ahead—and the oil industry linked with gas. If that kind of balance is understood, provided the coal industry continues with its present course of improving efficiency and concentrating on the economic pits, it has very little to fear. It may be that there will be a secondary clash between nuclear energy and coal, with oil standing on the sidelines, within the electricity supply industry itself, but I believe that is the kind of secondary clash which the electricity industry can be left to work out successfully for itself.
In other words, for the future this country can see the two fundamental sources of energy: the indigenous sources, coal and electricity together—and that is allowing for electricity that is being made not only directly from coal but from the little hydro-power that we have in this country and from nuclear fission—and the imported source largely connected with oil. A sound balance that should be struck between the fundamental sources if the price is right. The aim of a national fuel policy should in fact be to keep these two sources, indigenous and imported, in proper balance so as to give the greatest overall efficiency.
It is often said in criticism of hon. Members on this side who want a fuel policy that we want to restrict consumer choice. Anyone who could succeed in restricting consumer choice in a free society would be a remarkable person; it simply does not work. But it is equally a mistake for it to be argued, as it sometimes seems to be argued by hon. and right hon. Gentlemen opposite, that competition in the fuel and power industry where there are vast territorial monopolies can operate as it does between, say, milliners' shops or off-licences.
2035 We can read from the excellent literature that the gas industry has generously provided for us, that the industry is now benefiting tremendously from the consumer demand explosion for adequate heating in British homes.
For this purpose I think that even electrical engineers like myself are prepared to admit that technically gas has advantages in competition with electricity. There is no serious maximum demand problem. There are flexibility and ease of operation. On the other hand, electricity is always on the spot. One must have electricity for lighting, and certainly for television, and mechanical devices in the home, of which there are many, depend on electricity. But gas is now being helped additionally by a public instinct that it is likely to become relatively cheaper in the future and electricity relatively dearer.
Yet, the electricity supply industry has achieved tremendous economies in production. I think that the reason why electricity is finding some difficulty in competition with gas in space heating is that electricity is expected, and has been expected for some time, to earn 12½ per cent. on its investment capital, while the gas industry is let off, for the moment at any rate, with 10 per cent. Also, electricity has bulk supply transmission problems which are likely to increase in intensity in future. I must not go too far in discussing the affairs of a sister nationalised industry when we are supposed to be discussing gas, though I think this emphasises the point that I made earlier that it is very difficult to discuss one of these power industries these days in isolation, but the electrical situation is aggravated by the way in which the transmission problems of the Central Electricity Generating Board are passed on automatically to the area electricity boards through the arbitrary working of the bulk supply tariff.
Therefore, to talk of true competition in relation to the fuel and power industries is nonsense. There is bound to be a vast amount of handicapping in the nature of things before the race even starts. The real argument in fuel and power and energy policies is not over handicapping as against an open race but is rather over just how the handicapping should be placed at any given 2036 time to obtain a fair race. To me, this is the justification for the fuel tax which assists the coal industry to rationalise itself. When it has done that, there might of course be a case for lifting that fuel tax as a special protection for that industry.
It may be argued in relation to the point that I have just made about competition between gas and electricity that it is necessary in the national interest to encourage gas for space heating and by this means relieve the pressure on the national electricity grid. But I am equally sure that it is in the national interest to improve the industrial electrification of the country in terms of kilowatts installed.
Therefore, I would make an appeal to my right hon. Friend, and perhaps the Parliamentary Secretary will deal with this when he replies. Can we have an assurance from the Government that they will look very closely at the earnings which the nationalised industries are expected to achieve and at the surpluses arising from the return on capital generally? I suggest that we should give up attempting crudely to divide these nationalised industries on an overall industry basis so far as earnings are concerned and try to relate the amount that is required to be earned to the varying needs of different classes of load. I believe that this could be done if there was a really intensive search for a solution.
I have, I hope, been mercifully brief. I support the Bill, but I much regret that we have not had up-to-date information about the fuel and power picture generally, for that would have made for a much better informed and more useful debate and I as a Member of Parliament should have felt that I was doing my job with greater efficiency and effectiveness.
§ 1.45 p.m.
§ Colonel C. G. Lancaster (South Fylde)
The hon. Member for Bristol, Central (Mr. Palmer) preambled his remarks, very sensibly, by saying that gas could not be dealt with in isolation. I shall return to that theme.
First, I want to say a word about the actual borrowing requirements of the gas industry. They are prodigious. It may well be that they are fully justified, but I 2037 agreed with my hon. Friend the Member for Yeovil (Mr. Peyton) when he said that he thought that during the Committee stage we should be wise to adopt a more modulated approach to the problem and not try to deal with it in one bite.
I join my hon. Friends in paying tribute to the gas industry for the very big technological advances that it has made in the last few years. The Minister said that these had been going on for about four years. It was only 2½ years ago that the capital requirements of the gas industry were about £650 million. One must assume, if what the right hon. Gentleman said was right—that these technological advances were occurring four years ago—that the forward planning and estimating of the industry was not on a very efficient scale, because today, only a short time afterwards, we are talking about almost double that amount.
Before I deal further with the gas industry, I should like to say a word in regard to an aspect of capital expenditure which lies ahead of us. We have recently dealt with a Bill concerning the storage of gas. When the idea of storing gas at Winchester was first mooted and during the various stages of that Bill I warned the Government that the progress of geological knowledge had not reached the stage where storage under natural conditions could be foreseen with equanimity. My most recent advice—I am fortunate enough to be connected with some of the foremost geologists in this country and on the Continent—is that that position still remains. It may well be, therefore, that the emphasis may in future be in the direction of man-made storage rather than storage under natural conditions. I think that the House may have to face the fact that the prospects of storage under natural conditions are still somewhat remote.
Having said that, I want to say a word about the subject of competition, which my hon. Friend the Member for Yeovil mentioned in particular. I think that every hon. Member of the House welcomes competition between various nationalised industries in regard to the country's energy requirements. If that competition is to be fair, however, surely it must be on a basis of some form of equality. I cannot see that there is any longer justification for the electricity in- 2038 dustry having to pay a higher return on its capital requirements—slightly over 2 per cent.—than does the gas industry, while, indeed, the gas industry has the advantage of obtaining oil requirements without tax. That does not seem the basis of fair competition.
When we embark on competition all sorts of other aspects begin to show themselves. Is it sensible that we should import fuel into this country, in the form of methane, for the purposes of the gas industry producing a cheaper end product when, at the same time, we deny to the steel industry the advantage of importing its fuel requirements with which it could produce a cheaper end article as well.
There is no doubt that the contribution of the steel industry to the national economy, both internally and by exports, is on a far larger scale than anything the gas industry can hope to do. We are importing, and paying for in foreign currency, a fuel from overseas to enable one industry to lower its costs while denying the same thing to another industry—admittedly not a nationalised industry but at any rate one equally important. Of course, the distortion goes further. The whole of industry's economy is distorted by the fuel oil tax. There is no like for like in any direction.
I want to turn to the impact on the problem of the cost of coal. We are somewhat overshadowed by the very large concession made by the Government to the coal industry, which must have a considerable inflationary effect on the national economy. It means a loss to the Government of about £32 million a year by way of interest. I do not say that it was unreasonable to do this. Indeed, on the whole, it was sensible. But it should be recognised that what the Government are doing is to reduce the National Coal Board's indebtedness by £400 million, which was concerned in great measure with the reconstruction of the coal industry.
Whether or not the mass of that money in the industry was wisely spent is a matter of doubt. If a more intelligent approach had been made, I cannot but feel that a greater proportion would have been spent in those areas and pits which could have given the greatest economic return. However, there it is. The Government 2039 have decided to do this thing but we are entitled in return to ask them what their intentions are towards the production of coal.
Is it to be left to the market to decide? Do they intend to try to hang on to 200 million tons a year? I hope that I may be considered as great a friend of coal as any other hon. Member, but I find it difficult to believe that, in attempting to integrate fuel policy for the country as a whole, we are wise to expect a retention of production of 200 million tons a year.
Of course, the Parliamentary Secretary may not wish—and he would be wise in that view—to be too precise in his reply, but it is high time that the fact was recognised that trying to maintain what is a purely artificial level of coal production is no longer wise. It will be argued that, unless something of the order of 200 million tons a year is produced, it will be impossible for the National Coal Board to deal with its overheads. I do not agree.
If there is, as there should be, a concentration of production in the most economic areas, and if technology goes ahead as it has been, there is real opportunity to reduce the cost of production by at least 10s. a ton. That, in its turn, would deal with the problem of the overheads which at present seem to confuse the whole problem of whether there should be 200 million tons a year or not.
If this debate has served any good purpose, I think that it has been to bring into the open the fact that we cannot deal with gas in isolation. If, as a result of the debate, we get before long an indication of the Government's view of the energy requirements of the nation as a whole, our time will not have been wasted. Indeed, if we adopt an attitude of realism the logic of events should begin to hold sway.
§ 1.56 p.m.
§ Mr. Robert Woof (Blaydon)
In following the hon. and gallant Member for South Fylde (Colonel Lancaster) I wish to express some thoughts on the Bill, which is designed to increase the borrowing powers of the Gas Council and the area gas boards, thereby raising the limit from £650 million to £900 million or to a greater sum if the Minister specifies by order, with an upper limit of £1,200 million.
2040 I appreciate the desire of my right hon. Friend the Minister of Power to keep a close watch on the progress of the gas industry, and I realise that the industry is an important supplier of our heat and energy requirements. Industrial processes for which gas is and can be used are many and varied and in pursuit of economic plants many obsolete and uneconomic works have been closed. Therefore, loans for any huge consumption of future capital expenditure should enable the Gas Council to bring the industry up to efficiency.
It is always much easier to state objectives than to achieve them. Although we are bedevilled by prolonged crises, it is our business to sustain a definite commitment to raise the standard of living and elevate our national life which, to a large extent, depends upon our power industries and industrial expansion. But if we consider the general tone in which modernisation is advocated—the way it comes and the way it is seen—then the State-owned and State-controlled industries will depend on how public money is loaned. In bringing forward this Bill it is difficult to speak about the gas industry in a reasonable frame of mind without making some reference to the making of gas from coal.
Considering this matter in a very broad perspective, I should like to stress that gas works in Northumberland and Durham take their supplies from the two coalfields. In addition, the Northern Gas Board takes large quantities of gas from nine of the Durham Divisional Coal Boards 12 coking plants and it is needless to say that the majority of them are the most modern design. The ability to get gas from coal at a cheaper price may be a determining factor in coal's fight against competition. Likewise, the gas industry has to compete with electricity.
One may have all sorts of imaginations, but I think it is relevant to recall the words used by the right hon. Member for Bridlington (Mr. Wood) when he was Minister of Power. In the debate on the Gas Bill on 8th March, 1960, he said:What the coal industry needs is a thriving gas industry. If imported gases enable the industry to compete more effectively, such imports will not harm coal but will be to its very great benefit."—[OFFICIAL REPORT, 8th March, 1960; Vol. 619, c. 253.]2041 I have always respected the sincerity of the right hon. Gentleman and the courteous way in which he conducted many of the debates on fuel involving the industry's industries under his responsibility was something to his credit. However, when we come to examine what has happened to gas coal making in recent limes, I believe that some facts need to be stated clearly. In 1960, it was understood that the Gas Council agreed to consult the National Coal Board on major gas making projects to enable coal production to be based on long-term forecasts.
The Gas Council's experts gave the following requirement figures to the National Coal Board. For the year 1964–65 the estimated tonnage was 27 million tons; for 1965–66 it was 26.8 million tons; for 1967–68, it was 27.35 million tons. Although my right hon. Friend the Minister said today that the Coal Board is taking 300,000 tons more than expected in the estimate this year, for 1964–65 the gas boards took only 19.7 million tons. Their latest forecasts now are, for 1965–66, 16.43 million tons; 1966–67, 14.9 million tons; 1967–68, 12.7 million tons; 1968–69, 11.3 million tons; 1969–70, 9.4 million tons. The significance of these figures means that all the long-term forecasts over the years of the Coal Board of how much coal would be needed have proved grossly over-estimated and the present forecasts mean that the gas boards have completely abandoned their estimates of a few years ago. Already, they are taking 7 million tons less and in two years' time, fears will be circulating that the gap will have widened to nearly 15 million tons.
The gas boards are, of course, taking less coal than they thought they would need a few years ago because of the development of new and cheaper processes of gas making, and, in particular, the importation of methane. There is no doubt that the imports of foreign methane aggravate our balance of payments difficulties. It is estimated that the annual foreign exchange cost of North African methane will probably be about £7 million. A very substantial part of the operations, including the field cost of gas, is in foreign hands. The gas comes from Algeria and, as everyone knows, the recent political events there following the deposition of Mr. Ben Bella must throw 2042 doubt on the security of supplies and probably on the price.
In consequence, this is an appropriate moment to question the effect which new gas-making processes are having on the coal industry. I would remind the House that the National Coal Board told the Select Committee on the Nationalised Industries in the Session 1960–61 that it believed that gas could be made in large-scale Lurgi plants at a delivered cost to the gas boards of 8½d. to 8¼d. per therm. The Board proposed and it was agreed that, therefore, detailed studies of the Lurgi process should be carried out jointly by the National Coal Board and the Gas Council.
In its Report to the House on 31st July, 1961, the Committee welcomed this decision and, in considering the relative merits of Lurgi and imported methane, it had this to say:Your Committee agree that it would be prudent to see whether the two schemes are enabling the industry to expand before proceeding in one direction or another.This advice was ignored, as the then Minister of Power authorised the Gas Council to proceed with the importation of Sahara methane on the 3rd November, 1961, and, further, he told the House that his decision would not prejudice the building of a large scale Lurgi plant but the effect of this decision was to render the study useless.
§ Mr. John H. Osborn (Sheffield, Hallam)
I think that the hon. Member ought to be aware that many on this side of the House were enthusiastic about the likely potential of Lurgi. Some went to Coleshill and I have been to West Fife, but the hard fact—this was stressed in the last Select Committee—is that the costs are high. Is he suggesting that there is justification for the Gas Council to continue to install a plant which has not, as yet, been sufficiently developed, to produce gas at high cost to the consumer? Is that the basis of the hon. Gentleman's argument?
§ Mr. Woof
No, decidedly not. My evidence is that the Lurgi study group confirmed the view expressed by the National Coal Board that a large-scale Lurgi plant could produce gas enriched to town standard at 8¼d. per therm. On the other hand, on 28th November, 1961, the Parliamentary Secretary to the 2043 Ministry of power told the House that imported methane reformed into town gas would cost 8¼d. per therm. Therefore, there was no economic advantage in imported methane.
§ Mr. Peter Emery
I am sorry to interrupt the hon. Gentleman, but he is making a considerable point which we ought to have cleared up. The references which have been made are, of course, to the study group of 1960–61 and what happened then. I would ask him whether he knows, and, if not, if he would ask the Minister to confirm or deny whether he believes that, today, the manufacture of gas by the Lurgi process in any way comes near to competing at the price of imported methane or anything else—
§ Mr. Woof
I hope that the hon. Member appreciates that I do not have at my fingertips the information which he seeks. If anyone can answer that, I hope that it is my hon. Friend the Parliamentary Secretary. I am merely trying to establish the case put by the National Coal Board by its acceptance of what was said in discussion about the setting-up by the Gas Council of large-scale Lurgi plants.
The former Minister of Power also told the House on 20th November, 1961, that in 1965–66, as a consequence of importing methane, about 800,000 tons of gas-making coal previously allowed in the industry's development plans would not be needed. The gas industry has, however, contracted to import 350 million therms a year, which is equivalent to 4½ million tons of coal. One cannot help but feel that such a decision leaves the Coal Board with millions of tons of capacity which was installed primarily for the benefit of the gas industry, and at a cost 2044 to the Coal Board of £210 million, capacity, however, which is now unlikely to be used for the purpose for which it was developed.
It is on the long-term estimates such as I have quoted that the coal industry based most of its plans and invested millions of £s in pits, reconstructing them for major ventures, plants and machines, the recruiting and training of workers and encouraging the supplying industries to expand. As the industry cannot turn coal on and off like a tap, the Coal Board, already faced with heavy competition from imported oil, must now struggle to find new markets to make good the losses resulting from the speed with which the Gas Boards are withdrawing from the gas-coal market.
Coalfields which specialise in gas coal, such as County Durham, are particularly badly hit. The whole edifice of the county's trade and industry was built upon the foundation of the ready availability of coal. I take the classic example of Westoe Colliery, in County Durham, to which a great number of my constituents are forced to make long and weary travel every day as a result of previous redundancy in the area. Bearing in mind the need to strive for greater efficiency and the introduction of more efficient methods of mining coal through intense mechanisation, more than £6 million was invested in the course of a major reconstruction at this colliery. This was done on the assumption that 75 per cent. of the pit's output would go to the gas industry. Today, however, instead of such an objective being achieved, it is with the utmost disturbing regret that little more than 25 per cent. of the pit's output is used for gas making. This is not an isolated example by any means.
Ninety-three thousand men are employed by the Durham Divisional Coal Board. The majority of them are engaged in the production of gas-making coal, and, quite naturally, the industry wants to assist the gas industry in every possible way with the minimum disruption. The Coal Board has highly-skilled technicians who set great emphasis on the use of our great national resource, which must be made to convince the gas industry to carry on with its efficient work by working together, hand in hand, to build up the country's economy.
2045 In introducing the Bill, my right hon. Friend the Minister said, in effect, that the demand for gas-coal making had declined and inevitably would continue to decline. It is disturbing and distressing to hear this, because we in Durham—the Durham Divisional Coal Board, the miners' leaders and the miners themselves—want to see the gas industry and the coal industry in the vanguard of progress.
The right hon. Member for Guildford (Sir R. Nugent) said that we should ensure that the money went to the right place. While the Bill is very short and says nothing about the purpose for which the money will be spent, I am of opinion that it is important that the increased borrowing powers which the gas industry now seeks should not be used to finance doubtful schemes like the liquid methane project. After all, one must accept our fears of what the effect of all this will be.
§ Mr. Woof
Yes, certainly. The hon. Member knows the reason why. We have fears of what the effect of all this will be on coal if it is done at the expense of scrapping what the Coal Board has invested, having to close more pits and involving difficult social and economic problems for whole communities.
That is the keynote on which I conclude. This should be a searching test of the Government's determination to avoid more redundancy than is necessary. What is vitally important today is that no decision should be lightly taken which will gamble with the livelihood and future of those who are dependent upon gas-making coal production. These men and their forebears not only have served the nation and contributed in large measure to our great industrial progress. We cannot, we must not, forget this. If we do, we will fail those who paid so much for what we now enjoy and treasure.
§ 2.18 p.m.
§ Mr. Bernard Braine (Essex, South-East)
The hon. Member for Bristol, Central argued that in recent months we had focussed a great deal of attention upon the gas industry to the exclusion of electricity and coal. To a considerable extent, the hon. Member for Blaydon 2046 (Mr. Woof) has rectified the balance. He has spoken up well and truly for the coal industry. Whatever may be the merits of his argument, we know that he speaks from the heart on behalf not only of his constituents, but of that very large number of men who work in the coalmines, following a difficult, arduous and, as we were reminded only the other day, dangerous occupation. The hon. Member spoke up very well for that valuable section of our community.
This has been an interesting debate and I intervene more in a spirit of inquiry than anything else. I agree entirely with all that has been said from both sides about the remarkable progress that the gas industry has made in recent years—the development of the new oil-based processes, the introduction of liquid methane, the early possibility of importing gas from Holland and the prospect of non-toxic gas. All this is very exciting.
I have an interest here in the sense that the fine new methane plant on Canvey Island is in my constituency. This plant was referred to by the hon. Member for Blaydon. It is now producing at a level of 354 million therms per year which, I understand, is about 10 per cent. of the current output of the gas industry. In view of what the hon. Member for Blaydon said, it would be helpful if, when the Parliamentary Secretary replies, he would give some up-to-date comparative costs of producing gas from the carbonisation of coal, from methane and from light oil distillates.
I may be wrong, but my information is that gas from the carbonisation of coal is costing 1s. 2d. a therm, from methane 8½. to 9d. a therm and from light oil distillates 6¾d. a therm. These margins of difference are considerable. In view of the questions which have been put on this matter today, the House would appreciate an answer from the Parliamentary Secretary.
Of course it is right to extend the borrowing powers of the gas industry, an industry which has expanded far more rapidly than any of us thought possible. Indeed, it is only a year ago that the N.E.D.C. anticipated an annual growth rate of 5 per cent., as against 3 per cent. in its 1963 report. We have, therefore, awaited this Bill with interest.
When the right hon. Gentleman asked the House to approve the Gas (Borrowing 2047 Powers) Order last December—which raised the limit to £650 million; which, incidentally, was the figure which at one time was thought to be adequate to serve the industry's requirements up to 1970—he indicated that new legislation would soon be introduced. This was a measure of the unexpected growth of the industry, a growth which we all welcome.
I may be speaking only for myself when I say that I am surprised that we are now being asked to approve an extension of borrowing powers up to the level of £1,200 million, which is nearly double the current limit. It is not until the level of £900 million has been reached that the Minister will be empowered to make an order, and Parliament will have an opportunity of discussing the matter again. Thus, but for different reasons, I agree with much that was said on this subject by the hon. Member for Bristol, Central (Mr. Palmer), the hon. Member for Blaydon and the right hon. Gentleman the Member for Caerphilly (Mr. Ness Edwards), whose comments require a clear and frank answer from the Government.
I understand that the Gas Council assumes, on present expectations of capital development, that these vastly extended borrowing powers will carry the industry up to the end of 1970. The House will have noted that the Gas Council is not clear on this issue because it argues that, in the face of present uncertainties, a reserve borrowing margin of £200 million would facilitate future planning. It should be remembered that that figure alone represents one-third of the total borrowing of the industry during its 16 years under public ownership.
The Minister, with a wry smile, conceded that this was a somewhat large figure. It may be that the right hon. Gentleman and the Gas Council are right on this issue, but I recall the Minister telling the House last December how in this industry forecasting was "a pretty risky business". I listened carefully to what the right hon. Member for Caerphilly said on this subject. Parliament is indeed too often accused these days of exercising too little control over public expenditure. It is right, therefore, that we should look at this important Bill extremely closely. After all, we are being 2048 asked to authorise borrowing on a massive scale and I suggest that we need a great deal more justification for doing so than has been given so far in either the explanatory memorandum or in the Minister's rather short speech.
I admire the candour of the right hon. Gentleman when he spoke about the riskiness of forecasting in this industry. He has a number of disarming qualities, one of them being his honesty. But, while we may admire his candour, we must also consider in this context the requirements not merely of the gas industry but of the other fuel and power industries. The necessity for doing this has been made clear in every speech today.
We all know what happened in the land of Shinar, at a place called Babel, where those who made the most monumental miscalculation of all time were punished by being made to speak in a multitude of tongues. There is a grave danger that those who speak a multitude of tongues on fuel and power policy—and they are legion in this House and outside—may bring us all to confusion.
It cannot be denied that the fuel and power industries are developing fast, but however well they may be doing in their particular spheres, all of them are in a state of uncertainty. My hon. Friend the Member for Yeovil (Mr. Peyton), in his forceful speech, said that there was no clear sign of a coherent policy emerging, although I am not criticising the Government on this because these industries have been in a state of flux and development for a considerable time. For the moment all is sweetness, light and buoyancy in the gas industry, and good luck to it. We must remember, however, that only 10 years ago it was in the doldrums. Then, with the encouragement of Conservative Ministers of Power, there was a great leap forward. But what is the current relationship between electricity and gas and its implications for the future?
On 25th May the right hon. Gentleman announced in the House that the advanced gas-cooled reactor system would be adopted at Dungeness "B"—the second nuclear power station at Dungeness, which is due to come into service in 1970. The right hon. Gentleman described the A.G.C.R. system in the most 2049 glowing terms. The system offered electricity 10 per cent. cheaper than its nearest rival, the American boiling-water reactor. He said that it represented the greatest break-through of all time. These were wonderfully cheering words, although whether or not they are accurate we do not know.
§ Mr. Braine
It was, he said, an occasion for rejoicing. I agree. Since the end of March Britain has been generating nearly twice as much electricity by nuclear means as the whole of the rest of the world. This further advance—this sudden fulfilment of hopes long deferred—was certainly a matter for very great rejoicing. Nuclear power has suddenly become competitive. It has been a long and expensive effort, but the heavy investment appears to have paid off.
All this has great relevance to the proposals in this Bill. It is clear that, whatever Government is in office, large-scale investment in the various sectors of our industry will have to be highly selective. From now on, an increasing proportion of new electricity generating capacity, not only in Britain but in the world, will come from nuclear power. This is the implication of everything the Minister said on 25 May.
This means that there must be a shift away from coal. I concede what the right hon. Member for Caerphilly said this morning. He was not standing rigidly in defence of the coal mining industry. He was saying—and I have great sympathy with him, and I think that every reasonable person would agree with him—that though we may have to face a reduction in the coal industry, we must face the social consequences of that reduction. We must decide what is to happen to the men in this great industry who have served the nation so well for so long.
That is another question, but there is obviously an obligation on the Government of the day to see that the social consequences of economic change are softened; and that it is made easy for men to move from a reducing industry into other and developing fields of economic activity. We may also see a shift away from oil. The successful utilisation by the gas industry of methane and of light oil distillates will have a great 2050 effect on coal, but the successful production of electricity by nuclear means is bound to have an impact on gas.
What will be, and what is now, the true balance of advantage between these industries? It is quite clear from this debate, and it has been clear for some time, that no one really knows the answer to this question. Is it right, therefore, that we should take decisions on borrowing powers on this scale for one industry, important and expanding though that industry is—before we have a great deal more information? Yet decisions as to where the emphasis shall lie cannot be long delayed. The latest success in nuclear development opens up vast export possibilities for Britain—possibilities, that is to say, outside the generation of electricity for feeding into the national grid.
This development could lead to massive exports. A fascinating article appeared in the Financial Times on the day following the announcement of the right hon. Gentleman's decision. Mr. Christopher Tugendhat, the Energy Editor, wrote:… a decision on the future of the nuclear power programme cannot be delayed indefinitely if Britain is to display the confidence in the new design that is essential if it is to capture the important export markets before the Americans recover from their setback. The number of possible markets is limited since the new design is really only suitable for very large stations which virtually confines its saleability to the industrialised countries.For that reason alone, decisions cannot be delayed much longer.
I submit, also, that at home these developments open up, for the first time, the possibility of establishing an aluminium industry of our own. We all know that aluminium industries have developed, not where the bauxite is located but where low-cost electricity is available. For the very first time in this country, this latest development opens up the possibility of low-cost electricity being produced by nuclear power stations specially built for the purpose, serving a particular industrial complex and not linked with the national grid. I understand that quite a number of industrialists are now thinking hopefully about this.
There is also the question of competition between the gas and the electricity industries. There should be such competition. We on this side have always urged it, but we are now being asked 2051 to approve borrowing powers for the gas industry which in regard to the servicing of its capital already enjoys substantial advantage over the electricity industry.
The hon. Member for Bristol, Central mentioned that under the arrangements governing the financial and economic obligations of the nationalised industries, the electricity industry is required to earn 12.4 per cent. on its net assets while gas is expected to earn only 10.2 per cent. The leaders of the electricity industry have pointed out—it is not for me to argue the point, but I am hoping that the Minister will answer the charge—that this difference leads to distortion of competition, and that it is economically indefensible.
That advantage may have been justified in the early days, when the gas industry was in the doldrums. Is it justified now? What advice has the right hon. Gentleman been given? The gas industry would obviously resist—and so it should—any suggestion that in order to make the electricity industry more competitive the gas industry should bear a heavier burden of taxation. There will have to be a political decision in the end. So what advice has been given to the right hon. Gentleman, and what conclusion has he reached? What, in short, is the Government's policy on this subject?
All this adds up to the conclusion that while there is undoubtedly a very strong case for increasing the industry's borrowing powers, no case has so far been made out for raising the limit to the level proposed in a period of uncertainty about the future of fuel and power industries generally. It would be better to make the industry more accountable to Parliament by lowering the suggested limit, and I was very glad to hear what my hon. Friend the Member for Yeovil said about the action we ought to take on the Committee stage.
I hope that the Minister and the Parliamentary Secretary will take note of the deep anxiety—indeed, the disquiet—in the House about the continued absence of any coherent plan or strategy for the fuel and power industries, and will not seek to brush this aside. The House is worried because the nation is worried, and we are entitled to a much fuller explanation than we have so far had.
§ 2.39 p.m.
§ Mr. W. E. Garrett (Wallsend)
I shall speak briefly, as I see present the hon. Member for Weston-super-Mare (Mr. Webster) and the hon. and gallant Member for Winchester (Rear-Admiral Morgan Giles) who have served on a committee dealing with some aspects of the industry. I am sure that they will wish to contribute to the debate, and as far as I can I want to assist in that direction.
I am pleased to support a Bill to increase the borrowing powers of the Gas Council and, ultimately, of the area boards. These added powers will be welcomed by none more than by the Northern Gas Board, which provides a splendid example of initiative and enterprise. Such terms are not generally used in relation to publicly-owned bodies, but, in this case, the accolade is well deserved.
We must never forget that the industry itself was to the fore in recognising the immense importance of the new I.C.I. technique of producing gas by an oil process. Immense commercial possibilities have been fully developed in many regions of the country. I will not bore the House with details about this new process. Suffice it to say that it has been a good example of private enterprise and public enterprise working together for the good of the nation.
The Northern Gas Board has been rightly praised for its initiative. This was especially recognised when it decided to build new offices in south-west Northumberland in the new town of Killingworth in the middle of a coalfield. The Board decided to employ northern architects. It showed a degree of skill and individuality which seem to be lacking elsewhere, particularly in London. The monstrosities which we see in the London area are appalling. One has only to sit on the Terrace to see what has been done to the South Bank. The offices of the Northern Gas Board are an example of the higher standards of public building which can be provided by a public authority. I should like to see more initiative displayed by other public authorities in this direction.
The industry has got rid of its Victorian image and by its determination has made itself the main competitor against the other fuel industries. Today 2053 more and more homes are heated by gas. In the Northern Region most of the houses built by local authorities have a central heating system based on gas. In the next few years I foresee that virtually every household in the country will have gas as the main basis of central heating. That will mean that anyone who retains the open fire system of heating will find it difficult to sell his house.
I do not share the pessimism of my hon. Friend the Member for Blaydon (Mr. Woof) and my right hon. Friend the Member for Caerphilly (Mr. Ness Edwards) in relation to this industry. I speak with a fair degree of knowledge of the industry, having started my career in the coal industry and having had a very close link with it since. The coal industry has to recognise that it must associate itself primarily with the electricity industry. Such an association must be for the ultimate good. Coal is produced at enormous expense of human effort. The best use of coal is in conventional power stations where it can be used cleanly and efficiently. There is too much pessimism in the coal industry itself. It has its part to play, and will play it, but it will have to recognise that in the domestic use of coal the industry's life is limited and if that is relied upon the industry will die away.
Most hon. Members will know that in the North-East we are in the vanguard of the search for oil and natural gas. Millions of pounds are being invested "speculated" might be the proper term This justified optimism in the North-East should do much to alleviate some of the distress of the Durham coalfield, because we have this source of natural gas by which the North-East will be the first beneficiary. Then there will be more attraction for industrialists to go there with more enthusiasm than they have so far displayed because there will be cheaper capital and production costs in the area. There are tremendous possibilities for the North-East in the use of gas. I am confident that most industrialists have realised this already and they will pay close attention to this factor when they come to the region.
Credit must be given to the Northern Gas Board. It has fully used its commercial possibilities, even to the extent of the man who sinks a hole in the road 2054 to instal a gas main. Passing through a town the other day I saw a hole in the road. Most people, when they see a hole in the road, wonder what it is for. On this occasion I saw a notice saying:This gas main is being installed so that high speed gas can be of benefit to you. We apologise for any inconvenience.That showed the kind of initiative displayed by the industry right down to the man who digs a hole in the road.
I support this Bill. The mere fact that borrowing powers are being extended will bring about the result that capital, when it is required, will be used wisely. The industry has tremendous possibilities and I congratulate it on its efficiency.
§ 2.45 p.m.
§ Mr. John Harvey (Walthamstow, East)
It is a pleasure to follow the hon. Member for Wallsend (Mr. Garrett), who, unlike one or two of his colleagues, has given a reasonably optimistic appraisal of the future, not only of the gas industry but of the coal industry and the energy pattern as a whole. It is a picture of justifiable optimism.
When we consider the problem before the House today, we find ourselves up against the hard fact which The Times Review of Industry and Technology summarised in April by saying:On purely economic grounds all coal carbonisation plants from the oldest to the most modern works could be scrapped tomorrow. Unless an entirely new and revolutionary process for coal is found, coal will soon cease to be a basis for gas.This is a matter of understandable concern to many hon. Members and their constituencies. It is, therefore, understandable that today we should have devoted a great deal of attention not only to the problem of the gas industry, but to the problem of which it is a fundamental part, that of fuel policy.
I do not share the alarm which has been voiced in one or two quarters about the apparent lack of fuel policy because I believe the policy is clear enough. It is just a question of trying to decide how best one fits various interests into the policy. The policy surely must be this. It is greater than merely the question of power generation itself. The policy is how best to serve the consumer—the consumer as a private individual and user in his own home and, more important, 2055 the consumer as British industry. If we can ensure by our energy policies that British industry gets its power as cheaply as possible, this is the greatest contribution we can make to making our industry effective, making it competitive in the vital markets of the world in which we as a nation have to earn our livelihood and our people their standard of living.
We can see, if we face this frankly, the context within which our energy policy has to be set. It is that of trying to make available to British industry the cheapest possible power and, to a degree, this requires that the various providers of power should compete with one another. The right hon. Member for Caerphilly (Mr. Ness Edwards) this morning expressed some fear about competition between the different sectors in the industry. If there is no competition, if all of them are to be protected, or if all of them are to be restricted to protect coal, British industry will have to pay the price of that restriction and our goods will, by that measure, be less competitive in the markets of the world. This is an inescapable fact which we must face up to, whether we are considering gas or any other part of the power programme.
Today we have discussed the question of gas and electricity, the question of coal and oil, and all these are related. Today's subject cannot be discussed in isolation from the other aspects. We must try to ensure that there is as little artificial restriction of competition as possible between any of these energy creating industries. It has been pointed out that electricity may be somewhat handicapped in its borrowing powers by comparison with gas. It has been pointed out that gas tends at the moment to enjoy certain other advantages over the electricity industry. It must be remembered that it is not all that long ago—from 1955 to 1960—that gas was at a complete standstill, in the doldrums.
This was primarily because the rising price of coal was making gas uncompetitive. Then, from 1960 onwards new policies, for which we on this side can take some credit, and new technological discoveries, which are an eternal boon, together revolutionised the position of gas. Now gas is a rapidly expanding industry. 2056 It is a highly efficient industry. It is to be congratulated on its efficiency and its expansion. We do not want to put anything in the way of that. It is fair that electricity should ask that it should be allowed to compete on equal terms with gas, and I am sure that the Minister will apply his mind to that. It is within that sort of context that he unquestionably has responsibilities in working out a fuel policy.
I shall cut my remarks shorter than I had intended them to be. My main point this afternoon is that we shall all make a fundamental mistake if we start thinking of a fuel policy, a policy, an energy policy, as something which can be set forward in precise terms, built around nuclear energy or anything else. It cannot. The excellent booklet issued by the Gas Council, to which reference has already been made, is very frank about this. It says:Despite the care with which demand estimates have been formulated they could easily be proved wrong by developments within and outside the industry—for example, by changes in the expected rate of growth in the economy, by changes in the requirements of industry for fuel and power to support a given rate of growth, and particularly by such new developments as the discovery of commercial deposits of natural gas under the North Sea. There is, moreover an inherent difficulty in foreseeing all the requirements of capital expenditure in the years ahead.This is an honest assessment of an unquestionable fact, namely, that no one in the Chamber this afternoon can be certain about the lines along which efficient energy production will present itself as a feasibility over the next 10 or 20 years. Only 10 years ago we thought that nuclear energy was the answer. Then it appeared that oil and gas became at least highly competitive with nuclear energy, which itself was having teething troubles. Now we think we may be at a point of break-through in terms of nuclear energy. However, there is no telling how all these things would be revolutionised if next week, or next month, or next year oil or gas came up out of the North Sea, as very well they may. We cannot predict.
The only policy for Britain at the moment is a policy of adaptability, making the best possible use of the resources we have, mindful of the need constantly to be looking for new resources and greater efficiency. In so far as 2057 making money available to the gas industry will help in this regard, that money should be made available. The only serious reservation we can have this afternoon is that which has already been voiced by a number of hon. Members, namely, the question: are we making too much available too easily? Is there need for a little more Parliamentary control, bearing in mind that what seems right and appropriate for the expansion of the gas industry as we talk this afternoon may be invalidated six months from now by some completely new and unforeseen technological development elsewhere? I think that the gas industry will be a booming industry for some time to come, but I think, too, that it is important that Parliament, in advancing vast sums of money, should keep a most careful scrutiny over the way in which the money is spent—the use to which it is put.
§ 2.56 p.m.
§ Rear-Admiral Morgan Giles (Winchester)
In essence, the Bill involves huge investments in a most exciting and interesting new technology. The House is called upon today to examine in very broad principle indeed the advisability of committing the taxpayer, without any option at all on the part of the individual, to an investment of £550 million. To see this huge financial programme in the proper perspective it is necessary to take a broad look, as hon. Members have today, at the developments in technology which, according to the Government, justify an extension of borrowing from the £650 million which was considered adequate less than two years ago to the £1,200 million envisaged in the Bill.
On the subject of this technology, which has been well covered today, there are many significant developments. The discovery of huge supplies of natural gas on the Continent has changed the whole picture radically and may involve pipelines from Holland or elsewhere to this country, obviously a very expensive business. The possibilities of supplies of natural gas under the North Sea have also been mentioned. If gas is found there, it must be exploited as rapidly as possible. Nobody who has spent a lifetime at sea will minimise the difficulties and great expense involved in any such operations carried out in those bleak and inhospitable waters.
2058 Many hon. Members have referred to the shipment of natural gas from Algeria to Canvey Island, which seems to me to be an excellent example of getting on with the job. This remarkable operation has taken place, I think, almost unnoticed by the general public. The success of this operation so far, incidentally, is a great tribute to the British Merchant Navy and to its record of safety, reliability and regularity. I hope, Mr. Speaker, that you will not think it out of order if I pay this tribute in this context to a body of men to whom tribute is not often paid in this House.
As regards distribution, in the pamphlet to which there has been frequent reference today, most interesting developments are foreshadowed—high pressure bulk transmission and storage by line packing. We are also told of the buried pipelines and the immense advantage which this industry has over any other power industry in that there is no interference with agriculture once pipelines have been laid, and no spoliation of amenities in the countryside, no pylons or anything of that nature.
Those of us who support free enterprise may perhaps be forgiven for permitting ourselves some slight ironic amusement at the very keen competition now arising between the electricity and gas industries. We can only hope that the healthy breezes from this competition will be good for both of those industries.
On the subject of underground storage, which has been much discussed in this country—and nowhere more, I suppose, than in my own constituency of Winchester—this technique is widely used abroad where it has proved safe, efficient and economical. Unfortunately, this technique receives only one small paragraph in the pamphlet, but that paragraph particularly emphasises the economy of this method if and when it is found practicable in this country. I, for one, would like to express to the Parliamentary Secretary my hope that in the future his Ministry will do more burrowing and less borrowing.
On finance, these are huge sums to be committed—committed in principle, anyway—more or less on the nod on a Friday in a nearly empty House. I feel that this might be an illustration of Parkinson's well-known law that it is easier to get 2059 many millions of £s voted on the nod than it is to get a new bicycle shed put up outside the works.
If we give this Bill a Second Reading today we shall be making a compulsory investment now totalling some £24 for every man, woman and child in this country or, say, £75 per adult. Those of us who believe in private enterprise, as well as those who subscribe to the ideas of nationalisation, must at least agree that very few members of the public really understand that we are today making this compulsory investment on their behalf. Of course, I am not saying which is the right way to do it. It may not, in fact, be in the national interest to unscramble this nationalised omelette now, but I for one would prefer that any investor should make his investments for himself on his own assessment and with his eyes open.
I hope that as a matter of principle, these huge amounts of public money will not be committed without very serious and detailed consideration of the Bill in Committee.
§ 3.3 p.m.
§ Mr. Peter Emery (Reading)
In considering this Bill I want to take the House through one or two aspects of the way in which I hope this money, when borrowed, will be used. Whilst welcoming the great progress that the gas industry has made, which has been evident in every speech from both sides of the House today, I am critical of the fact that not enough money is being spent on research by the industry as a whole.
In the last Report of the Gas Council one sees that a sum of £1.8 million is being spent on research by the Council, with another sum of about £.16 million on underground storage research. I believe that the real benefit that should come from this Bill is the reduction of the price of gas to the consumer in the long run. Insufficient stress has been laid in the debate on that possibility, and it is purely for that reason that I want to draw the attention of the House to some aspects of research which might be undertaken.
In following the helpful speech of my hon. and gallant Friend the Member for Winchester (Rear-Admiral Morgan Giles), I strongly support his plea for a much greater degree of research into the use of 2060 underground storage than has been done in this country so far. More money should be spent in trying to ensure the safety of schemes, and this, I believe, is of the greatest concern to my hon. and gallant Friend. There should be research into this aspect of the storage of gas by displacement of water and cavernous storage in the chalk pits of Cheshire and elsewhere.
Immense quantities of natural gas can be stored either for peak shedding or for supply to the various gas boards at periods of high consumption. The Gas Council and the industry as a whole could buy in the summer months feedstocks at cheaper prices to be used by the industry when it needs those stocks most. This is not being done, and although we talk with pride of the national grid for the gas industry, the grid is connected with the plant of only eight out of the 12 gas boards. This is not enough.
I am delighted to see a picture in the Annual Report and Accounts of the Gas Council of part of the grid in my constituency of Reading. The benefit which can accrue from the grid is considerable. Will the Minister ensure that in the building of new plant a little extra money is spent in investment to ensure that all plants in future may be easily adapted to the use of any of the feedstock processes which are now available, so that the industry may use any of the feedstock which at a particular moment might be in immediate supply? At Reading gas works it is possible to switch from the use of propane to methane when this is necessary. This flexibility means extra expenditure on capital output but I believe that it must pay off in the long run. Provision for flexibility whereby C1, C2, C3, or C4, can be used has not always been evident in the building of new capital plant in the past.
I turn to two aspects of research. The first is the use of gas in ways which we in this country have never considered it would be used at any time. I wonder how many hon. Members present realise that almost every taxi-cab in Geneva runs on gas. How many realise that all the public transport system of Chicago runs on gas? How much research has been done by the Gas Council on the use of gas, if only from the clean air aspect to deal with the problem of hydrocarbon 2061 fumes in traffic? It is not enough for people to say that this is an unnecessary project. In this country, and even more so in America, the use of propane or methane for the propulsion of the ordinary engine is always demanded where fumes can contaminate.
At plant run by Heinz or in the Walls factories the engines of fork-lift trucks are not run by petrol or electricity but by gas. These are new uses of gas which are not being considered by the public or the industry as a whole, and I hope that some of the money to be provided under the Bill will be spent specifically in directions of that kind. To take just one more example, Tokyo, which has no "smog" problem, has a public transport system operated entirely on propane or other natural gases. In this sort of advance we in this country ought to be leading rather than following the rest of the world.
Now, a subject which it is most unusual for me to raise in the House, the use of gas in agriculture. There is great use of gas in the United States for various flaming processes, particularly in the killing and control of weeds. A small portable 250-gallon trailer attached to a jeep or car and supplying gas through a flexible hose for flaming can give a method of controlling weeds far more effectively than any chemical or other process of equivalent cost has ever done in the past.
It may appear that I am particularly well informed on this aspect of the matter, and I have to admit that I have a slight—I hope that will be understood—interest here. But it is when people can speak from their own personal knowledge that we in the House can bring to industry, whether nationalised or otherwise, and to the country as a whole experience which can often be of the greatest value.
Apart from weed control by flaming, there is also the process of burning off the tops of root crops, particularly sugar beet, and this could be of particular interest in East Anglia. This process now being adopted in America has brought two specific benefits: an increase of productivity per acre and a much greater ease of lifting the beet. The whole of the top foliage is burned away two or three days before the beet is raised, and 2062 in this way it is found that the average size of beet is increased and the flavour is improved, quite apart from the saving of time because the foliage does not have to be cleared from the machine.
I see no mention of these aspects of research in the Gas Council's report, but there must be much greater development in such directions than there has been so far. Specifically with this aspect of the matter in mind, I turn now to my last point, the question of costs in the industry.
We have had a long debate about coal versus other feedstocks. I suggest, with great humility, to the hon. Member for Blaydon (Mr. Woof), who is not here at the moment, that, if it had not been for the use of other feedstocks in the gas industry, both the gas industry and that part of the coal industry which supplies it would have been absolutely in the doldrums now. Only by the injection of these much cheaper feedstocks has the gas industry been able to continue its vast usage of coal for gas production. It ill behoves anyone in the House to criticise the use of these feedstocks when, as a result of their use, it is possible for the social problem of the coal miners and the coal industry to be dealt with over a very much longer period than would have been possible if the gas industry had collapsed because of the very high price of coal evident in the period 1950–60.
I return to the point with which I began. By the injection of these new feedstocks, we must, in the long run, ensure not only that a proper balance is maintained for the coal industry but that the price of gas to the ordinary consumer is brought down. The borrowings underlined by the Bill would allow research for new processes, wherever they are, to be carried on in a proper manner. If that is done, I believe we will find, perhaps not next year but certainly it ought to be within five years, that the price of gas is kept constant. If that is the case, we can rejoice, but it ought to be reduced.
§ 3.15 p.m.
§ Mr. David Webster (Weston-super-Mare)
I congratulate my hon. Friend the Member for Reading (Mr. Peter Emery) on delivering some high-speed gas. I also congratulate the Gas Council on 2063 the way it has adopted new technical methods and brought the industry from the middle of the 19th century to the middle of the 20th century in the space of 10 years. I congratulate it on that and, in principle, I support the Bill.
On the other hand, I very much hope that my hon. Friend will pursue his proposed Amendment and alter the Bill so that the ultimate borrowing powers shall be £1,000 million and that the interim stage will be £800 million. We in this House have a duty to the people who have to find the money and, having listened to the whole debate, I think that that emphasis has been somewhat forgotten. We have a situation today where, on the one hand, the Chancellor of the Exchequer is saying there is going to be a squeeze on the private sector of the economy, and, on the other hand, we have the tremendous increase of nearly 100 per cent. in the borrowing powers of a nationalised industry.
I am aware that the nationalised industries require to have an increase in their borrowing powers, and in the last few years the gas industry has had a considerable increase in its borrowing powers. On the other hand, if we are having this tremendous increase in the public sector and, at the same time, the Chancellor states that the squeeze on the private sector has not yet begun, where will it all end?
We have a duty to the taxpayers, who have to raise the money. We have a duty to the country to keep confidence in our currency. For these reasons, I hope my hon. Friend will table his Amendment, and I hope it will meet with the approval of the whole House. I have looked at the affairs of the nationalised industries, and I have read Reports of the Select Committees with considerable interest. I also note that on 31st March the Minister of Transport said that he was going to increase manufacturing powers not only in railway workshops but in the whole sector of the nationalised industries. To what extent this will be using the taxpayers' money against himself, I do not know. There is no ability to apportion facilities. With this possibly jarring note on what my hon. Friend the Member for Essex, South-East (Mr. Braine) has called "all sweetness and light" may I say on behalf of the people 2064 who have to raise the money that, while I approve of the Bill, I should be glad to serve on the Committee, if I am allowed to, which is to look in detail at how the money is to be used.
§ 3.18 p.m.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
As has been said, we have had a large number of debates on the gas industry both in the House and in Committees upstairs. It is all the more creditable that so many hon. Members have wished to take part in this debate. It has resulted in a much wider knowledge and understanding of the problems of the industry, and we have had a very informed and very useful debate on the subject.
I was glad that the right hon. Gentleman the Minister did not, as he has done on countless occasions both as shadow Minister of Power and as Minister of Power, use up the time available to him in a sort of slanging defence of nationalisation. That sort of approach is not appropriate to a serious debate on the fuel problems of the country, and I congratulate him on having got away from that sort of approach to a constructive discussion of our problems.
I would join with all hon. Members in congratulating the gas industry on their great achievement. Much tribute has been paid, with which I would certainly like to associate myself, to the very remarkable way they have pulled the industry out of the doldrums. I think it is the management who deserve the primary credit and got it into the forefront of successful industries.
I should also like to echo the tribute which my right hon. Friend the Member for Guildford (Sir R. Nugent) paid to the very great contribution towards amenity which the gas industry has made. The difference in this respect between electricity and gas is very striking. The gas industry does not cover the countryside with transmission lines and other installations. In this respect it has been most careful and most sensitive.
Many of my hon. Friends have drawn attention to the fact that the tranche of borrowing which we are now debating for the gas industry is very much bigger than anything which has ever gone before. It has risen by stages in the various borrowing power Bills from £250 million 2065 to £450 million, to £525 million, to £650 million, and suddenly it is to jump under this Bill to £1,200 million. We on this side of the House feel that this is too great an increase and that the Bill offers the House of Commons too small an opportunity to scrutinise the affairs of the industry from time to time.
I am certain that this debate will have proved to the Minister how important it is to have these opportunities to discuss our great fuel industries. The right hon. Gentleman is now, by the terms of the Bill, denying us more than two opportunities in the period up to the end of 1970, or so he says, but when in addition to that we hear that there will be a borrowing margin of £200 million which might last another one and a half years, it may be well towards the end of 1972 before we have used up our two chances to debate this industry. That makes perhaps only two chances in seven years. I believe that that period is too long. I agree thoroughly with what was said by my hon. Friend the Member for Essex, South-East (Mr. Braine) about the need to give Parliament opportunities on frequent occasions to debate the fuel and power industries.
I am fully aware that the electricity limit is supposed to last until 1970 in the same way as the gas limit, although I believe that gas will probably be allowed to go longer because of the £200 million margin. But I think that the difference between gas and electricity is that gas is at a very interesting stage. As so many of my hon. Friends have pointed out, it is at the crossroads in technological change and the great unknowns of what will be found in the North Sea, what bargain may or may not be made with Holland about a pipeline under the Channel, and the effect of all this on coal production. This suggests to me the need to debate this subject at more frequent intervals than those provided for in the Bill. I think, therefore, that when we come to the Committee stage we shall suggest a lower limit, or perhaps two lower limits, and try to have more opportunities by reason of our Amendments to debate the industry's progress. There is no hostility towards the gas industry or lack of understanding of its need to borrow. The purpose of our action will simply be to assert the right of this House to control 2066 and to debate the great industries for which it is responsible.
I also echo the point made by my hon. Friend the Member for Weston-super-Mare (Mr. Webster), that inside this £1,200 million there is a very large amount of scope for some possible extension of the activities of the Gas Council. We heard the Minister of Transport say that he will allow the railways to engage in wider activities than transportation. We have heard the Minister of Power say that he will introduce legislation to enable the fuel industries to extend their powers of manufacture. We do not approve of any attempt at widening the scope of the nationalised industries by the back door. If the Government wish to do this, let them bring in legislation, and we can then challenge it—and, indeed, we shall. We feel that any attempt to allow this to happen, as it were, through too wide an extension of borrowing would be a great mistake.
I should like to ask one or two questions about the way this enormous sum of £550 million will go. I cannot believe that the cost of underground storage will be very much. Nor do I believe that investment in the North Sea drilling will cost very much in relation to that sum, nor that the pipeline to Holland will be a really expensive project if it should come off.
It is rather surprising to be told that the new gas works which produce gas from oil processes are very cheap indeed. One wonders whether such a large sum is necessary. I imagine that there will be some capital to invest in distribution networks. Perhaps the hon. Gentleman will tell us something about Lurgi in answer to his hon. Friend the Member for Blaydon (Mr. Woof), and whether there is to be any investment in Lurgi plant within this sum.
It is strange that the Gas Council and the Minister have told us so little about what this investment is to be primarily used upon. In the Gas Council's booklet, we are not told where the capital is mainly to go and of the future of all the different activities of the Council and the boards. We are entitled to more information about what is expected to happen.
I want particularly to ask whether the Gas Council has a large investment in construction of plant which is not yet 2067 earning. I understand that the Central Electricity Generating Board has an enormous investment which yields no profit because it is tied up in construction which is not yet earning a profit. Perhaps there is an element of this in the Gas Council's operations, as this too is an expanding industry.
Is any of this sum to be spent on automation? In any industry, from farming to the most modern and prosperous technological industries, there is room for the new ideas which computers and automation techniques have brought. I hope that the Gas Council, which leads in the drive for modernisation, is not neglecting the possibilities of this as well.
The Gas Council will use in the next five years, according to the Bill, as much capital as it has used in the past 17 years, and this is a measure of the growing capital intensity of industry, to which the modern fuel industries are no exception. The average in the earlier years was £50 million. This has grown to about £90 million at present and it is expected to rise to about £140 million a year and to remain at that level.
As my hon. and gallant Friend the Member for South Fylde (Colonel Lancaster) said, this is a prodigious investment. If one adds to that the capital needs of the oil industry and the expectations of the electricity industry—now running at £500 million a year and expected to rise to £700 million a year—one gets a feeling that the capital requirements of the fuel industries alone will be quite colossal. To this, we must add the rest of industry and the public sector as well. One then begins to realise how we are switching to a capital intensive economy throughout and to wonder how we are to raise these enormous sums of money to invest in our future.
If, as my hon. Friend the Member for Essex, South-East stated, we have a very large investment in nuclear power stations, then the total will be higher still because it is between double and treble the capital cost per megawatt to build nuclear rather than conventional plants, so if there is a breakthrough and a great amount of investment in it the total investment we need to provide will be even larger than expected.
2068 This does insist that we get our decisions right as to the use of the capital if it is to be required on this scale. We must be certain that the needs of these industries are justified compared with other claims upon capital and that they will show a proper return for the money invested in them. There are only three sources from which this vast sum of money can come. They are the taxpayers, the lenders to the Government through the gilt edged market, and the consumers, through self-financing. I would like to discuss these three sources of capital for the gas boards.
I hope that the taxpayers will not be asked to contribute 1d. of this sum. The fact that the Minister has had to write off £400 million of Coal Board capital, putting a load of £32 million a year on the taxpayers, must not be taken as a precedent for any other industry. It is not my purpose to discuss that: we shall have an opportunity later. I hope the Parliamentary Secretary will confirm that it is not the Government's policy to allow this to be pursued or asked for by any of the other industries under his control. I am sure that it will weaken the respect for capital and the assessment of its value by those who are running our fuel industries if we allow it to be written off too easily.
This is a time when the investment of capital must be viewed with the greatest care and to the greatest effect, because of the apparent scarcity which there will be in the future. I am sure that the bulk of this money must be obtained from the gilt-edged market. When one sees that the existing capital of electricity and gas is only paying 4 per cent., one begins to appreciate that rates at which these industries are able to borrow will have to rise in the future. It reflects the periods of cheap borrowing in the past, but, in future, the sort of rate at which they will be able to borrow will be nearer 7 per cent. or, if the strain on the capital market continues to grow, we might expect it to rise to about 8 or 10 per cent. as in Japan. That is the sort of standard rate of interest on which money can be borrowed from the public.
Hon. and right hon. Members opposite must realise that what they have done in the Finance Bill is make it less easy to raise money on the gilt-edged market and their Capital Gains Tax will, in the 2069 end, haw, to be paid by such consumers as the fuel industries when they come to borrow capital. They will have to adjust the rate of return so as to attract the savings. After all, the Government are just like one big building society. They cannot lend more than they can borrow from the public. They are running the risk of getting into the same muddle as the Minister of Housing and Local Government has got into with the building societies, whereby, through his interest rate policy, he has caused the funds to dry up and is at the same time encouraging the building societies to lend more and more. They just cannot do it, and the Government will have to watch themselves to see that they do not get into the jam with regard to finding this money despite their high interest rate policy.
Thirdly, there is self-financing. The oil industry is 80 or 90 per cent. self-financing and to make the consumers pay in this way is the result of the financial and economic obligations of the nationalised industries. I would congratulate the Government in accepting this argument, which I see has caused some unhappiness among their supporters. The right hon. Member for Caerphilly (Mr. Ness Edwards) was not at all happy about it. He felt that there had been no change of policy since October. We welcome this, and congratulate the Minister on his conversion to the policies which he was so busy attacking for the last 13 wasted years—wasted on his behalf. The hon. Member for Faversham (Mr. Boston) has a Question about this down for next Tuesday, asking him to reverse this policy. I hope that the Minister will resist him.
However, it is time for the House to examine those targets and to think a little more deeply about them. As circumstances change, so should those targets be changed. The electricity industry is asked to find 12.2 per cent. of net assets. It has been roughly on target and, after paying interest at 4.2 per cent., it is left with 8 per cent. for reinvestment. It has now reached 48 per cent. self-financing ratio in the last two years for which we have accounts. The gas industry is slightly off target at 10.2 per cent. and has only reached 42.5 per cent. self-financing in those same two years. I was glad to hear from the Minister that in the present year it is expected to reach 2070 a self-financing level of 52 per cent. That is progress which we on this side welcome.
The Minister must, however, justify the differences in target. Many of my hon. Friends, as well as hon. Members opposite, have asked what was the justification in having a difference in target of between 12.2 per cent. for electricity and 10 per cent. for gas now that the circumstances have changed so favourably for the gas industry. I should like also to know what percentage of self-financing the Government expect the gas industry to achieve over the bulk of the period which we are discussing.
Is it the Government's policy to end this discrimination between these two prosperous and similar fuel industries? There is in the White Paper no agreed procedure for revising the targets, whether they should be revised at the end of the quinquennium or from year to year if circumstances change. Clearly, with the alteration in the Coal Board's debt liability, the target which it should be asked to find is liable to be changed. Do the Government intend to start the alteration of targets now or to wait until the expiry of the quinquennium?
As many of my hon. Friends have pointed out, that difference is not the only discrimination in our fuel policy between the gas and electricity industries. Gas is not charged fuel oil tax on its oil feedstocks, whereas electricity pays tax on the oil which it consumes. It would, I think, cost the gas industry something like £4½ million if it had to bear this tax. This could only have the effect of increasing its prices and affecting the whole balance of our fuel economy.
The other difference that I should like to mention is that the gas industry is allowed to import methane without tax or duty, coal is protected and electricity is not allowed to import foreign coal. These two differences clearly distort the picture. Is it the Government's intention to do anything about this, or are they leaving the situation exactly as it is? This is all part of their fuel policy which they have so far failed to declare to us. As we expected to be told something about the co-ordinated fuel policy of which hon. Members opposite have spoken for so long, I am surprised that there appear to have been no statements about the Government's intentions.
2071 I agree with the hon. Member for Bristol, Central (Mr. Palmer) that we must look at all these problems together; they are all one. The hon. Member made a valid point in asking that we might have the views of other fuel industries on a Bill such as that which we are discussing today or that we might be given a statement on the general fuel situation when we discuss a particular industry. That would help us. At the moment, however, we have been left very much in the dark by the Government about their intentions.
Competition can be made more equal either by pushing up the cost of gas or reducing the restrictions upon electricity and oil. Presumably, this is what the Minister is thinking about in his Advisory Committee. There are many anomalies, such as the gas industry being allowed to escape from the yoke of the coal industry. We would like an authoritative estimate about what the Government's policy will be. I hope that as gas has been let out of the yoke of the coal industry, the Minister will not dare to try to force it back again.
The hon. Member for Blaydon (Mr. Woof) gave some figures showing the decline in the take of coal in the gas industry. The hon. Member for Wall-send (Mr. Garrett) capped those with what I thought was a brave and sensible appreciation of the need for gas to get off the hook of the coal industry, with its ever rising costs, and for it to launch out with new techniques and make itself competitive again. As my hon. Friend the Member for Yeovil (Mr. Peyton) said, the gas industry is becoming a subsidiary, so to speak, of the oil industry, whereas coal and electricity are going to come together.
We have not had a chance today to talk about the future of the coal industry. Several of my hon. Friends have mentioned it, but I will leave that subject for another occasion which I hope the Government will provide.
My hon. Friends and I welcome the Bill. We welcome the progress of the gas industry. We will, as I say, move in Committee that we should be given further opportunities to discuss its progress as the years go by. In the meantime, we wish it the very best of good 2072 fortune and progress in future and we do not intend to oppose the Second Reading of the Bill.
§ 3.42 p.m.
§ The Parliamentary Secretary to the Ministry of Power (Mr. John Morris)
We have had a very wide-ranging debate, ranging from the use of gas for weed killing in agriculture—that matter was raised by the hon. Member for Reading (Mr. Peter Emery)—to the problems of the coal industry. A large number of questions have been posed and, to the best of my ability in the time available to me, I will answer as many as possible. If I am unable to deal with them all I hope that the House will not accuse me of any discourtesy, but I will endeavour to get in touch with hon. Members who I fail to satisfy in my answers.
To any one taking part in a debate on the gas industry a few years ago it would have been almost impossible to imagine that today the Government would be asking for increased borrowing powers for the industry on the scale set out in the Bill. The reason for these powers is obvious to all. This industry has indeed been fortunate to make a major breakthrough. As a result, there has been immense consumer demand, and that will inevitably go on. Finance is, therefore, essential for the industry on the scale envisaged by the Bill.
The existing power is for £650 million. It is envisaged that the total of borrowing powers for the industry should be £1,200 million, as will be the position if the Bill is passed. It is further envisaged that there should be an interim limit of £900 million. When that interim level is reached the Minister would then ask for the approval of the House for the next amount.
The Bill sets out the position. After the figure of £900 million has been reached the next amount may be any sum exceeding that £900 million but not exceeding £1,200 million. So it will be open to the Minister of the day, when he asks for more money for the industry, to specify that the sum shall be a smaller sum than £300 million, which is the difference between the £900 million and £1,200 million.
Although it may be treacherous to forecast these things, one envisages that there 2073 will be a fast demand for the first amount and then, perhaps—unless there is a major discovery in the North Sea; we know not—the demand will flatten out after the first £900 million. Although hon. Gentlemen opposite may wish to ensure some greater safeguard, as I understand they now seek to do, I trust that they will look extremely closely at the terms of the Bill. These sums in excess of the £900 million will be at the discretion of the Minister when he asks for any Order—
§ Mr. Peyton
The Parliamentary Secretary must remember, because not long has elapsed, that quite a different view prevails on this side when Ministers' discretion is under discussion. Whichever party is in opposition, Ministers' discretion can look all right from over there, but not from this side of the Chamber.
§ Mr. Morris
That depends on who is on what side of the House.
A number of questions have been asked about self-financing. Obviously there are very real difficulties in the self-financing of an expanding industry such as that outlined in the document produced by the Gas Council. From May, 1949, to March, 1965, self-financing averaged 41 per cent., and in 1963 the industry and the Government hoped that by 1970 there would be a substantial increase in the ratio of self-financing. The amount of expansion that has meanwhile taken place has obviously limited that increase, but the average from 1965 to 1970 will run at 52 per cent. That is a substantial improvement on the 41 per cent. I have just mentioned, and it conceals the fact that self-financing will rise from about 44 per cent. in the current year to 62 per cent. in 1970. I am sure that the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) will agree that this is a substantial achievement.
There was some argument earlier between the right hon. Member for Guildford (Sir R. Nugent) and myself about the taxpayer having to pay, and the nature of the borrowings. The House should always remember that these are borrowings. The industry has to pay interest on them, and has to repay those sums over a period of 25 years. My right hon. Friend's predecessor in his Report 2074 on the industry for the year ending 31st March, 1964, stated in paragraph 14:Repayments of earlier advances during the year amounted to £7,160,000 and payments of interest to £8,873,819.
§ Sir R. Nugent
Of course, I accept that this is a borrowing by the industry from the Government, but it is not a borrowing by the Government from the taxpayer. It is a tax which is never repaid.
§ Mr. Morris
In the time available I do not wish to pursue this matter. The right hon. Gentleman has made his views known, as I have mine. I have made it abundantly clear that these are borrowings. Whether the moneys come from the Government or the taxpayer, they come from the same source. They are not a gift, as the right hon. Gentleman suggested.
Capital investment in the industry for the 10 years up to and including 196162 averaged £50 million a year. Last year the amount was £87 million and, in the present year, £117 million is planned. Thereafter, it is estimated that capital investment will run at an average of £140 million a year. These figures indicate the immense growth of the industry.
The hon. Member for Yeovil (Mr. Peyton) asked for precedents for the margin of £200 million. I concede at once that there are no exact precedents, but we are here dealing with an unprecedented situation in that, in part, this £200 million may well be required for North Sea development. The House will have an opportunity in three years' time or so—I cannot say exactly because there may be an accelerated demand—to look at this again. Capital investment for electricity as compared with gas runs at £40 per kilowatt sent out from coal and oil-fired stations against, for gas, £8 per kilowatt equivalent.
I was asked about prospects in Nigeria and Holland and how the Government now see them. The Gas Council, in association with Dutch interests, is carrying out a study of the feasibility of bringing natural gas from Holland to the United Kingdom by pipeline, or possibly by ship. We must await the results of the study which is taking place. I am sorry, but I cannot add to what I have said.
§ Mr. Morris
I am sorry, but I cannot give way again. I have given way a 2075 number of times and hon. Members must be reasonable.
There are plans for a plant for the production of liquified natural gas in Nigeria. This has been reported in the newspapers but it remains to be seen whether transport by ship over such a distance would be economic. That is all the assistance I can give to the hon. Member for Yeovil on these points.
A question was asked by the hon. Member for Cirencester and Tewkesbury about how the total amount would be split up. As to the total needs of the gas industry for capital development, the figures given in the brochure are: production £320 million, distribution £430 million. Nothing is set out for the Lurgi process. The hon. Member also asked about capital not earning any money. He will know that there is a certain amount of locked-up capital in the industry, even though it takes only two years for a plant to come into production from the time the order is made.
There were a number of questions from hon. Members about coal. There has been a tremendous change in recent years in the use of fuels for the production of gas. The present level of coal consumption is about 18 million tons a year. It has fallen from a peak of 28 million tons in 1955, but coal plants still provide much of the base load gas. Last year coal carbonisation and Lurgi together accounted for two-thirds of the total gas produced, and with coke oven gas purchased provided over half the gas available from production and purchases. Most of the increasing demand for gas occurs only in winter for heating. This is being met, because of technical considerations, by newer and more flexible types of plant which are capable of using a wide range of feed stocks including natural gas.
Of the two processes for making gas from coal, the coal carbonisation process is the more costly. It produces a toxic gas at low pressure. We are trying as best we can—we have had a tremendous advance in this field—to get away from gas which is toxic. For technical reasons this kind of plant has to be run throughout the summer as well as the winter. The two Lurgi plants I have been asked about use comparatively little coal per ton of gas produced compared 2076 with the traditional carbonisation plants. The coal is completely gassified and the process produces a lean gas which requires enrichment by the use of substantial quantities of natural or petroleum-based gases.
The coal industry accepted last year that there is not an economic case for further investment in Lurgi plant. Gas production from coal can play only a diminishing part in the present phase of the industry's expansion. Coal usage in the future will be concentrated more and more on the larger and more modern carbonisation plants and the number of smaller and older plants will continue to be reduced. The industry currently estimates that coal consumption will fall from the present level of 18 million tons to roughly half that level in 1970, though the phasing of closures of ageing carbonisation plant will depend upon the development of demand for gas and on the future economics of coke production.
I am sorry that I have not been able to deal with a far larger number of points. I have here a mass of material. I could keep the House going for a very long time dealing with the large number of points which have been raised. All I would say in commending the Bill in the House is that this has been a most useful debate. The hon. Member for Cirencester and Tewkesbury congratulated my right hon. Friend in not indulging in a slanging match in defence of nationalisation. I was not aware that my right hon. Friend ever indulged at any time in slanging matches. Having regard to that remark of the hon. Gentleman, I am sure that I can rely on him to send his congratulations to the Leader of the Opposition on desisting recently from one of his old border country battle cries when he makes remarks about the junk yard of nationalisation. I am sure that by now the Leader of the Opposition will have been deeply ashamed of that cry. I would merely say to him that there is a real danger if one plays with matches when there is gas around.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. Howie.]
§ Committee upon Monday next.