§ Mr. J. H. Osborn
I beg to move Amendment No. 24, in page 4, line 5, leave out:'or any area gas board'.This is a probing Amendment which, I understand, we are taking with Amendment No. 29, in page 4, line 9, leave out "or producing gas".
The Clause provides £45 million for reimbursing the additional cost of using coal to generate electricity or produce gas, and I want to deal particularly with the latter. Is it logical to provide this money to distort the developments now taking place in the gas industry? I have before me the Annual Report and Accounts of the Gas Council, produced in July, this year. On page 6, there is a very good description of the development of natural gas, particularly in Sheffield, where 50 million cubic feet a day went into the national system completed in 1964 for Algerian gas.
In the very comprehensive review of the fuels for producing gas, it is shown that total consumption of coal for all purposes last year was 16 million tons, compared with 17½ million tons and in the Annual Report of The Gas Council, on page 11, there is a review of sources of gas, and particular reference to the uses of oil by modern gas-making techniques which are also outlined in that section of the Report. For instance, the quantity of oil used for gas making in 1965–66 was 2,529,000 tons and in the following year, last year, was approximately 3,492,000 tons. This is the background of the development made by the Gas Council which has been revealed as very able.
In the White Paper on Fuel Policy, on page 5, there is the statement:In recent years the traditional methods of making gas from coal have been rapidly superseded by oil-reforming processes and, by this year, planned gas production was about two-thirds from oil and only one-third from coal.On pages 7 and 8, the development of natural gas is dealt with and paragraph 16 says:Natural gas, produced and delivered on shore through sea-pipes by the producing companies, must be carried to the distribution networks.1389 It goes on to outline the extent to which the networks have developed and says, in paragraph 17:Sales of town gas last year were equivalent to about 1,000 m.c.f.d. of natural gas.On page 9, it says:The Government's studies have suggested that the saving in resources from introducing natural gas is likely to be highest where it commands the greatest price premium.This is a study of the techniques and economics of generating gas. Is it right, and, therefore, relevant, that a Clause of this type should so affect the policy of the Gas Council, not only of using gas produced from oil, but from natural gas? I hope that the Minister will answer this question: to what extent will this clause distort development of the gas industry and to what extent is it contrary to the cheap energy policy, hearing in mind that £45 million are involved? There could well be distortion of that development plan, admittedly for good reasons. We have had debates on electricity with which I am not dealing, where there might be a good case for allowing distortion but we must be told to what extent development will be distorted by this Clause.
I propose the Amendment at this hour by way of question and look forward to the Minister's comments.
§ 5.0 a.m.
Mr. Edward M. Taylor
I and other Scottish hon. Members have expressed concern that the price of gas in Scotland is 24 per cent. above the average for England and Wales. I and others support this Amendment because we are a little concerned that if gas is included it could adversely affect the Scottish position. The Scottish Gas Board uses a great deal of coal. The increase in the price of coal last year, according to the Board's Annual Report, cost it £300,000. I am told that the reason is that, for social reasons and to support the industry, the Scottish Gas Board has given preference to coal. If we have done this off our own bat in Scotland, and if, because of this particular clause, the other area boards will put an emphasis on coal and will get the extra pay for it, this appalling differential of 24 per cent. could become even worse.
I want an assurance that people in Scotland, who already pay a quarter more 1390 for gas, will not have to pay an even larger differential.
§ Mr. McGuire
I wish to speak to this Amendment because the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) said that it was in the nature of a probing Amendment. I think that by that he meant to try to find out how much coal the Gas Board would take which it would not take if left to its own devices.
When my right hon. Friend introduced this conception of making the gas and electricity boards take extra coal in the July debate, I think I am right in saying that the figure he mentioned was an extra 300,000 tons to help the mining industry in this period of consolidation. I want to know whether it is, in fact, that figure or a much higher figure. I hope that it is a higher figure, because, although I have criticisms of the C.E.G.B., which I have made before, I certainly have some criticisms of the Gas Board.
First, I think that its estimates of the amount of gas that it has to sell to treble the existing sales in the very short period of time mentioned in the White Paper are absolutely fantastic. I do not see how the market will absorb it. If it is not to be absorbed in the market, but in the power stations, then it will displace even more coal. Therefore, we should look carefully at this matter.
There is another reason why I think that the Gas Board owes a debt to the coal industry. I am not saying that in the context of producing cheap gas it is not right, but the trouble is that we have never had a co-ordinated energy policy. We have had each corner of the energy market fighting for its own share, but no part of the energy market has run away from its commitment to coal as fast as the gas industry did.
Goodness knows, we have heard enough talk last night and this morning about optimistic forecasts of coal to be taken by various sectors of the energy market—we have heard ad nauseam how wrong and optimistic they were—but if one looks at the forecasts made years ago, whether in the so-called Ridley Report or in the general estimates, of 250 million tons coal production in the period 1965–67, contained in those reports—and hon. Members will be able to check this—the requirements of the gas industry were put at a figure of about 27 million 1391 tons now and going up to about 31 million tons. The coal industry planned for this kind of requirement, and, because the gas industry requires a special type of coal, a huge investment was made to satisfy these forward estimates.
We all know the history now. We have had the methane out of the Sahara and we have had this new bonanza of the North Sea gas. I cannot understand why we should be going mad to get rid of what I consider to be a valuable asset as quickly as we can, not in the nation's interest, but in the interests of the people who say, "The quicker we take the gas out the less you pay for it". The price has not yet been determined. During my Second Reading speech—and this was reported in The Times of 21st November—I forecast that the oil companies who control the gas head would demand a higher sterling price because of devaluation. We can assume that the estimates of cheap gas based on a price of 2½d. a therm landed ashore will be a little bit out, and that it will be dearer than that, and after adding the conversion costs it will be dearer still. Thus, this bonanza which everybody seems hell-bent on dissipating as soon as possible might not be the bonanza that people think it will be.
How much of the £45 million will go to the gas boards, and how much will go to the C.E.G.B.? If we can get some answers to these questions we will have a better idea of the extent to which the market is being distorted to help the coal industry.
The gas industry owes a debt to the coal industry, and if it helps out in a difficult period it will go some way to repay that debt.
§ Mr. Freeson
Perhaps I might start by referring to the question asked by the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn). The hon. Gentleman wanted to know what will be the effect on the future development of the gas industry. I do not think that it is possible to quantify in exact terms the effect of the additional coal burn which the gas industry is undertaking to assist the slowing down the rundown in the coal industry. It is so small compared with what the C.E.G.B. will be doing to help that it is not possible to give exact figures now. I am not necessarily quoting a figure to which my right hon. Friend has 1392 previously referred, but in round figures it may be about 300,000 tons this year.
This must not be taken as a hard and fast figure. It is a very small figure in relation to the 6 million tons or more per year which will be burned additionally, chiefly by the C.E.G.B. It will be appreciated, therefore, that in terms of such a range, whether it be an accurate figure or not, there cannot be the slightest marginal effect on the future development of the gas industry.
What will happen is that in particular localities where plant might have been switched to oil consumption ahead of the advent of natural gas this will not now take place if it is practicable to keep to coal burning until the natural gas arrives. But the amount is so small that it will not affect the advent of natural gas, which is essential for the development of this industry in the years ahead.
The hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor), in almost a traditional exercise, asked what would be the effect on Scottish gas prices. I do not blame the hon. Gentleman for raising this, but I had hoped that by now, from a study of the policy outlined in the White Paper, and reflected in the Bill, he would have appreciated that areas such as Scotland which have had to pay higher prices for fuel—the hon. Gentleman tends to exaggerate at times, but I do not blame him for that, either—will benefit to a degree from the policy being put forward, because the cost will be carried by the Exchequer when coal is being burned specifically to assist the coal industry, whether it be for electricity generation, or for the production of gas.
Any additional coal burn required by Government policy as outlined in the White Paper will be paid for by the general body of taxpayers, whereas until now that particular additional cost in the case of Scotland, or any other particular locality, has had to be carried by consumers. I hope this will at least make the hon. Member a little happier than he has been in the past, and satisfy a certain amount of doubt.
I have answered the points so far as I am able which were put to me by the hon. Member for Ince (Mr. McGuire). I have indicated the rough figure for the amount of additional coal the gas industry will be taking. As my right hon. 1393 Friend the Minister said in the debate on 18th July, the electricity and gas industries have agreed to use additional coal. This was not a Government edict; it arose out of genuine consultation. The famous private conference at Selsdon Park was one such occasion when this matter was discussed at some length, and the Bill reflects the policy of assistance which the electricity and gas industries will be giving to coal, and in turn, the assistance being given by the Exchequer which will carry the additional cost involved.
§ Mr. Emery
May I, first, bring us back to what is the basic point of the Amendment, and, indeed, of the Clause itself. It is the extra coal burn which is being projected by the £45 million subsidy over this period. I am amazed. I had not believed that the amount the gas boards would be taking would be as low as 300,000 tons. I know that this had been rumoured, but it did seem to me that if the figure was as low as that—and the words of the Parliamentary Secretary were that this would have the smallest marginal I effect on the coal industry—the disruption this might well bring about for this very minute amount was something which might be the position; but it has been confirmed by the hon. Gentleman in answering the direct question.
May I suggest that we have again to realise that the matter comes back to the question whether it is right—particularly with this very small amount—to keep uneconomical pits open. That is really the position, and it allows me on that line—because the argument is equally the same on this Amendment as the other—to answer the point made by the hon. Member for Dearne Valley (Mr. Edwin Wainwright). I do not come to this Dispatch Box, and nor does any other hon. Member, without being highly and completely conversant with the human and social problems that closures mean. Nobody in the House ought to accuse anybody of not considering that. I do not believe that there is any hon. Gentleman who does not realise the immense problem that is involved.
But—and this is the important difference between soma of us—some people think that the ordinary miner will benefit from a fast rundown as opposed 1394 to a slow rundown; and that is a quite basic matter which ought to be faced and is not, so far as this Amendment is concerned, faced at all.
I believe that the sooner those miners who it is established will be made redundant are retrained and are in new jobs, the better for them, the better for the mining industry and the better for the country. The better for them, because the younger they are in a new job the greater their chances of being able to settle down. They will not have reached 55, at which it will be more difficult to retrain them, and they will stand a better chance of having a new life. It will be better for the industry because it will be competitive if we use the most economic pits—
§ 5.15 a.m.
§ Mr. Edwin Wainwright
When he talks of a rapid rundown, does the hon. Gentleman realise that it is very difficult to provide the jobs for the retrained men? He should remember that a Tory Government closed down many pits without help being provided. Those closed by this Government represent a responsibility of the Coal Board to find jobs for the men concerned.
§ Mr. Emery
I was trying not to make any political point. That rundown under the Conservative Government was greater than what we are discussing now, but there was no major unemployment in those areas above the national average. Once target figures for a rundown have been set, the faster that they can be achieved the better for everybody—the miner, the economy and the industry.
Something which particularly affects coalburn was raised by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), on Second Reading. He said, in column 385, that the spending of the £45 million was to get 10,000 more men in the pits in a year and that if the Clause were not passed, after the first year the rate of decline would go back. That is so, so if the Minister does his sum again he will find that the first year produces the extra 6 million tons and it is these same people who go on producing.
The Parliamentary Secretary must realise this, since he tried, in column 392, to contradict my hon. Friend. For the first year the rundown will decrease from 1395 45,000 to 35,000, but from then on it will revert to the original level. This was my hon. Friend's clear point and no one should be in doubt. This is a marginal amount for the gas industry and I am sorry, because the trouble it has caused makes one think that it must be greater.
I am surprised that the Minister has felt it worth while to continue with a disruption in the gas industry for this small amount of tonnage. However, if he feels that it is essential, I would not urge my hon. Friends to divide on this matter.
§ Amendment, by leave, withdrawn.
Mr. Edward M. Taylor
I beg to move Amendment No. 33, in page 4, line 19, leave out '£45,000,000' and insert '£25,000,000'.
I will not detain the Committee because, having spoken to my fellow sponsors of the Amendment, I can sum up the case by asking two questions. I notice that the hon. Member for Liverpool, West Derby (Mr. Ogden) has assisted us again by suggesting in a later Amendment that £45 million should be deleted and £60 million inserted. My Amendment, on the other hand, would reduce the £45 million to £25 million.
The two questions are these. First, is it wise, when having such a new development and paying substantial amounts of money, to subsidise the use of coal in circumstances when it would not be used? In other words, is it wise to spend £45 million without Parliament having an opportunity to review the position in the interim? The Minister might take the view that if we were to reduce the amount to £25 million, the job could not be done because the money would run out.
When discussing previous Amendments we were told that certain amounts could be changed by Order, but I gather that that would not be possible under this Clause. If £25 million were inserted and the money ran out in, say, two years' time, could not the Minister approach Parliament for more? I suggest that it would be wise to devise a form of words which would enable Parliament to review 1396 the progress made in the interim, and certainly before 1st November, 1971.
Secondly, we have tried to leave out the gas boards to prevent their modernisation plans from being disrupted. Our efforts have not proved fruitful. Will the right hon. Gentleman review the progress of this entirely new venture between now and 1st April, 1971?
§ Mr. Emery
We would like to have seen more direct control over this large sum of money, with Parliament having an opportunity to discuss the matter in the interim. Would the Minister be willing to make a statement in the House, or publish details in the OFFICIAL REPORT, to show when £25 million of the £45 million has been used up? If he will give that assurance I am sure that my hon. Friend would find it possible to withdraw the Amendment.
§ Mr. Freeson
I see no reason why this cannot be done. There is no reason why, by way of a Question at the appropriate time, a statement should not be made.
It might be helpful if I were to indicate the basis on which the figure of £45 million has been arrived at. It is based on the assumption of assistance at a rate of 6 million tons a year for a period of three years and eight months—a total of 22 million tons of additional coal use over the period. It is possible that this quantity may be increased, and that is why we have said, "six million tons or more." The quantity may also be affected by the availability of other fuels as it is not intended that the additional costs of using coal in place of other fuels expected to be, but not, in fact, available, will be eligible for reimbursement.
There is no precise estimate of cost per ton available at present, but it is presumed that £2 per ton will be sufficient. The actual cost at the margin will be higher than the average and the costs will themselves be affected by movements in the costs of the fuels displaced; for example, by the continuation or the removal of the 2d. a gallon Middle East war surcharge on fuel oil. The provision of £45 million is regarded as sufficient to cover a range of possible variations in costs per ton and in the quantity used over the period to March, 1971.
Mr. Edward M. Taylor
The hon. Gentleman has not said how we shall know when the £45 million figure has been reached, but he has tried to be most helpful and I beg to ask leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause ordered to stand part of the Bill.