§ 4.31 a.m.
§ Mr. Edward M. Taylor (Glasgow, Cathcart)
The importance of the subject of high fuel costs in Scotland is reflected 572 in the substantial number of hon. Members present on both sides of the House at this hour of the morning. One may fairly say that we have present on these benches the cream of the Scottish Conservative Party as well as the mainstream of progressive Conservative thought in Scotland.
Our main problems in Scotland are three. First, emigration, which is running at the rate of over 47,000 a year. Next, an over-concentration on heavy industry, on shipbuilding, on steel and on engineering, the consequence of which is that we have not the growth potential in our industry which other parts of the country have. Moreover, the high fuel element in our costs tends to make the difficulties of these industries even greater. Our third basic problem is the simple one of costs, high costs of transport, of rates and of fuel.
Almost all the fuels used in Scotland by industry, commerce and the people come from the nationalised industries. It is the duty of Governments to decide, in principle, on the pricing policies of our nationalised industries. But we have wide differentials in various parts of Great Britain, and in almost every case we pay considerably more in Scotland.
It is sometimes asked why one part of the country should subsidise another, why, for example, consumers of coal in Yorkshire should pay more and Scotland should pay less. The same argument can be applied within Scotland. Why should consumers in Lanarkshire subsidise consumers in Stornoway, Perth, Angus or anywhere else? In Scotland we have uniformity of pricing.
We have to decide either to go for the full rigours of the market discipline in the capitalist system and say that prices should follow the market or to go for equal prices, by and large, throughout the country.
We put forward the argument in favour of uniform steel prices on the Report stage of the Iron and Steel Bill. This proposition was bitterly opposed by the Government and they went into the Lobby to vote against it. What has happened since? Only a few days ago we heard of the decision to have uniform prices for steel in Great Britain, and competition only in servicing and delivery. I look upon that as a triumph for the point of view we put forward. 573 But if there are price differentials in coal how can the Government justify uniform prices in the nationalised steel industry?
We know that John Summers and Colville's pay the highest prices for coking coal in the United Kingdom. Clearly their costs will be high, yet the price of steel provided by them has to be the same as that of other firms. I am glad about this, but I wish that we could apply the argument to other nationalised industries.
Then we had the strange episode of the late night debate on the coal industry in which the Government put forward the view that the electricity and gas industries would be asked to use even more coal, and that the community would pay the difference. We can have a polarisation of coal prices in the country but we cannot have this status quo in respect of the power boards. Where do the differentials stem from? In coal they stem from the decision made on 1st January, 1962—which was an unfortunate one—to increase the price of industrial coal in Scotland. At that time the Coal Consumers' Council pointed out that this would have a bad effect in Scotland and would also have a great effect on the prices of gas and electricity. Since then differentials have grown substantially, when precise information is extremely difficult to obtain from the Government. One might almost think that there was a conspiracy either of silence or ignorance.
Let me give two examples. First, in Committee on the Iron and Steel Bill we pressed the Minister for information about the price of coking coal in the various regions for the steel industry. It was not possible to obtain any information. Eventually I obtained the information myself and provided it in Committee. On 23rd January of this year I asked the Government for the up-to-date information they had and they told me that they had no information more recent than that which I had quoted in Committee. It is disgraceful that in respect of a matter so serious as this, affecting Scottish industry, the Government apparently did not have the resources to obtain the figures.
What were the figures I provided? Colville's in Scotland was paying 133s. 6d. 574 per ton for its coking coal at the turn of the year and the price is still the same, I believe. United Coke—a competitor firm in Yorkshire—was paying 100s. ld., a differential of about 33s. The Steel Company of Wales and Richard Thomas & Baldwins were paying 115s. In Derbyshire, Stantons, Staveley and Stewarts and Lloyds were paying 105s. and the nearest competitor to Scotland in coal—John Summers of Lancashire—had a differential of only 7s. 7d. That firm, like Colville's uses about 2 million tons of coal a year. The differential, compared with United Coke, comes to about £3 million. If the Parliamentary Secretary says that the effect of the differentials is not considerable let him remember that in this case the differential means that the Scottish firm had to make £3 million profit before it could come level with its competitor English firm.
Similar problems have arisen in other sections of the nationalised fuel industry. The Scottish electricity industry pays 20s. per ton more for its coal than is paid elsewhere in the country. The 1966 Report of the South of Scotland Electricity Board pointed out that the 1966 surcharge would cost the Board an extra £4 million. Meanwhile, the Board is being required to use more coal and its new stations at Longannet and Cockenzie burn a great deal of coal. The Board has pointed out that while the per therm cost using oil is 4d., the per therm cost in the existing coal-fired stations is 5.8d. This gives some idea of the differential that exists.
The same can be said of other industries, including gas. A fortnight ago I asked, in a Parliamentary Question, for up-to-date information about the price of gas in Scotland compared with the price in the rest of Britain. I was told that no information, except for the year 1965–66, was available. Apparently there are no monthly or even six-monthly figures. Considering the serious situation that exists, it is shocking that up-to-date information is not available. Not even an estimate was given.
However, we see from the 1965–66 figures that the average revenue per gas unit in Scotland was 25.92d. while for the country as a whole, including Scotland, it was ls. 10½d. This meant that the average revenue per therm—which 575 is the price for all practical purposes—in Scotland was more than 15 per cent. more than the national average. Since then the price of gas has increased in Scotland by 19 per cent. In no other part of the country has it increased by even half that amount. Today the position is even worse, for the average revenue must be at least one-fifth higher than the national average.
I have received an interesting letter from a colleague containing figures worked out in consultation with the Board. Between 17th February, 1964, and 17th February, 1967—these figures are based on the consumption of 363 therms of gas per quarter on the Board's optional two-part tariff—one's gas bill would have increased from £24 17s. 9d. to £33 Os. 9d., an increase of 32½ per cent. Examples could be quoted to show how consumers have suffered smaller increases, but, on average, it stands out a mile that the price of gas in Scotland is much higher than the national average.
The same story can be told of the price of smokeless fuel, Gloco and other smokeless fuels costing more in Scotland than elsewhere in Britain. It even costs more to have a domestic cooker installed—£3 7s. 6d. in Scotland compared with £2 10s. in the North Thames Gas Board's area. Although for the domestic user the price may not be unreasonable, most industrialists take the view that the price for electricity is considerably higher in Scotland than in the rest of the country. A Clyde shipbuilder told me that on an average ship of about 12,000 tons he had to allow more than £5,000 extra for electricity costs alone compared with one built on the north-east coast of England.
I was amazed to receive an Answer from the Minister not long ago that to remove differentials would make a difference of only about 2 per cent. I should like to know where that figure came from. It was not clear whether it was 2 per cent. on industrial costs or fuel costs, but I think there is room for a much more careful scrutiny. If it is 2 per cent. on industrial costs as opposed to fuel costs it is a considerable burden on the Scottish economy which must be overcome if we are to begin to compete with the rest of the country.
576 We are not asking for special treatment but for equality within the United Kingdom. I can see the argument against this. If we had uniformity some prices would go up and some would go down, but the time has long past when we could have one pricing principle for the steel industry, another for the coal industry and so on. The Government have to come down on one side or the other on this question. It might be that any change would have to be made gradually over some years, but there is just as much justification for uniform prices within Great Britain as within Scotland, within Glasgow, or within Cathcart. The principle can be justified and must be accepted for the sake of the Scottish economy.
We have more than 80,000 unemployed in Scotland, our population is going down, emigration is soaring and business confidence is weak. If we are to have a leap forward or a break-through in our economy, the Scottish economy must not start with a ball and chain around its feet. I hope that we shall have an assurance from the Parliamentary Secretary that this matter will be considered carefully by a committee of those who know business and can look at it in depth, or that general pricing policies will be reviewed and differentials removed as a matter of Government policy.
I thank you, Mr. Deputy Speaker, for the opportunity to raise this subject and I thank my hon. Friends and hon. Members opposite for listening to me. I hope that together we can achieve something for Scotland on the lines I have suggested.
§ 4.48 a.m.
§ Mr. Alex Eadie (Midlothian)
I congratulate the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) on bringing before the House a very important aspect of the whole Scottish economy. It is a little ironic that he should have referred to the fact that at this late hour the cream of the Conservative Party is present. When I was speaking at 4.14 a.m. in a debate on coal, with the exception of the hon. Member for Dumfries (Mr. Monro) the benches opposite were empty. I do not make much of this as a debating point, but to some extent it was allied to the points raised by the hon. Member for Glasgow, Cathcart. He knows that since 577 I came to this House I have opposed the selective coal price policy. I believe that it is nonsense.
It does not help much to realise that the policy was initiated by the party opposite when in office, and that is no excuse for the Government cultivating bad habits of the Opposition. I will not pursue that point, however. The case put by the hon. Gentleman was very strong. The policy is damaging to the whole of the Scottish economy. But he let slip his view about the discipline of the free market.
I was a miner for many years before coming to this House and I welcome opportunities to debate fuel prices because I noted when I was in the mines that, whenever people talked about coal prices, the miners got the blame. Editorial after editorial in the Press would appear saying that, if only the miners worked harder, we should be able to solve this problem of solid fuel prices. I cannot lay that charge against the hon. Gentleman. He argued his case clearly and I do not suggest that he tried to blame the miners. But such blame has been cast at them and I welcome the chance to answer the accusations in this debate.
It is ironic that it costs more to distribute coal than it costs the miners to produce it. Fuel pricing in Scotland is a ridiculous situation. It is right that the House should discuss this subject even at this hour because it must bear some responsibility for the situation. I remind the Opposition that on 10th June, 1958, the right hon. Member for Barnet (Mr. Maudling), as Paymaster-General, announced, with somewhat indecent haste, decontrol over coal supplies and prices.
It was on the very day that the Robson Report was published and Parliament did not even have an opportunity to discuss that Report, which dealt with the whole aspect of prices which was material to Scotland's economy and Scottish consumers. It is interesting to know that when the statement was introduced the then Paymaster-General said something that was allied to what the hon. Gentleman the Member for Cathcart has said. He said that the reason that the then Tory Government had decided to operate this policy of decontrol was, 578The restoration of free competition and freedom for the householder to buy from any merchant should encourage producers and distributors to offer the public the qualities of coal they need at the most competitive prices. With the ending of control, administrative expenditure of nearly £1 million a year will be brought to an end.That statement was challenged by the then Labour Opposition. The specific question put to the then Conservative Government was:Does that not mean that under this new freedom which the Minister is imposing on the industry the Coal Board is to be the prisoner in this matter while the distributors will be entitled to charge what prices they like for the qualities they offer?The reply made by the Paymaster-General was:The right hon. Gentleman has not observed that, while the Boal Board is a monopoly, the distributors will be subject to keen competition."—[OFFICIAL, REPORT, 10th June, 1958; Vol. 589, cc. 42, 43.]In developing this argument about prices that affect Scotland it is interesting to examine the Robson Report which Parliament never had an opportunity to discuss. It went on to deal with the whole distributive aspect of coal. For example, the National Coal Board, according to the Robson Report, was responsible for 3 per cent., the cooperative societies 16 per cent., and other traders 81 per cent. The other traders came to the global number of 16,778, although they were not all engaged exclusively in the distribution of hard fuel.
Hon. Gentlemen opposite will remember that when the National Coal Board asked for £80 million additional revenue to help it in its financial difficulties, a report was called for and refered to the National Board for Prices and Incomes. This is Report No. 10, not No. 5 which the hon. Member for Glasgow, Cathcart mentioned.
§ Mr. Eadie
I apologise to the hon. Gentleman. I am wrong, too. It is report No. 21. A report was called for which revealed some of the reasons for high costs. This exonerated the miners, but it did not give them any consolation.
Chapter 3 of the Report breaks up the trade in relation to pricing. This is material to the argument developed by 579 the hon. Member for Glasgow, Cathcart, because I am talking now about the wholesale trade. Of the wholesale trade, 50 per cent. was in the hands of the National Coal Board and just about half was handled by private wholesalers. About three-quarters of that trade was in the hands of about a dozen firms.
The Robson Report shows that in 1956 the wholesale gross profit margin was Is. 2d. a ton, of which 9d. met costs and 5d. profit, whereas the Report of the Prices and Incomes Board shows that by 1966 the wholesale gross profit margin was an average of Is. 6d. a ton, 1s. 1d. for costs and 5d. for profit. That showed that the profit margins for wholesalers had changed very little in the 10 years, although the margin was probably slightly higher with domestic coal.
The Report also showed that the National Coal Board had between 3 and 4 per cent. of the retail trade, the cooperative societies, about 14 per cent.—spread among about 500 societies—while the rest of the trade was in the hands of about 12,000 private traders. Between 1st January, 1958, and 1st January, 1966, the average cost per ton to the domestic consumer rose from 155s. 2d. to 207s. 2d., an increase of 34 per cent. That is the result of decontrol, of the free market, a process which was to go ahead on the philosophy that everything would be all right in the long run; but that 34 per cent. increase has to be compared with an increase of 24 per cent. in the Ministry of Labour retail price index. During that period the pithead price increased by 28 per cent. which is substantial, and transport charges by 8 per cent., but the greatest increase was in distribution charges, which affect domestic consumers.
The Report says:The greatest relative increase took place, however, in distribution charges and particularly in retail gross profit margins—i.e., the difference in the price at which the retailer buys and sells. From our enquiry into the margins of firms handling over 2,000 tons a year and a more limited enquiry among firms handling lesser tonnages we would estimate the average increase in retail gross margins between 1958 and 1966 to have been between 65 and 70 per cent. This increase reflects an increase both in profits and costs.At 1st January, 1958, retail margins were still controlled by the Government; they were decontrolled later in that year. The net profit margin fixed by the Government at the beginning of 1958 was 2s. 9d. a ton (rising to 580 3s. 3d. in certain circumstances), including bank interest and hire purchase interest. At the time, the trade thought the profit margin was unduly low, and that it ought to be increased to 6s. a ton. After decontrol, profits per ton rose; according to our inquiry they were 6s. 6d. a ton in 1965. (Bank and hire purchase interest have been added in to place the figure on a comparable basis with the 1958 figure.).The Report concludes that net profit margins had doubled since the date of decontrol, while a decline had taken place in the total tonnage distributed.
The Report mentions that in five years the amount handled was 745 tons, falling to 715 tons. Profits rose, and in order to maintain them the prices to the consumer were increased. That this was happening with no increase in productivity is a matter for investigation. The hon. Member for Cathcart is entitled to draw the Parliamentary Secretary's attention to the outstanding anomalies about coal pricing in Scotland, but I am entitled to reinforce his argument by calling for some investigation into why the consumer is being fleeced.
We have heard about fancy phrases such as the question of coal distribution needing rationalisation. My hon. Friend has said in many Parliamentary Answers to me that the whole market is under investigation. I will probably anger hon. Gentlemen opposite, but this is a clear case where private enterprise has failed. It is a clear case when allowing the market to go ahead has not, in the long run, benefited the consumer. I hope that my hon. Friend will consider not only rationalisation, but some form of public ownership. The Co-operative Movement is a form of public ownership, and according to the figures that I have given, would be capable of handling coal distribution. It could not make any more of a mess of it than private enterprise. I trust that we shall consider this because it would be beneficial to Scotland's economy.
§ 5.9 a.m.
§ Sir John Gilmour (Fife, East)
A great deal of the industrial heart of Scotland was built on the coal industry. I was very interested to listen to the hon. Member for Midlothian (Mr. Eadie) because, although he represents a constituency on the other side of the Forth from mine, he lives in the same county as I do and he and I served together on the same county council.
581 It is interesting to reflect that a Socialist-controlled county council, living, one might say, on a coal mine, quickly came to the conclusion in the post-war years that it was cheaper to fit up all the schools that it was building with oil-fired central heating than to use coal.
§ Sir J. Gilmour
That is exactly what happened. Almost all the schools that were rebuilt and re-equipped after the war were fitted up, although there was coal underground beneath the schools, with oil-fired central heating. That is the sort of thing that we now have to compete with.
§ Mr. Eadie
I am sure that the hon. Member would not like to make a point which is not correct. What he has said about all the new schools in Fife is not true. I can speak with authority as a former education committee chairman in the County of Fife. Some schools are heated by oil at the behest of the Government because a shortage of fuel of all kinds was expected.
§ Sir J. Gilmour
I know that the hon. Member is knowledgeable on the subject, but this matter came up in the county council when he and I were there and there were many occasions when we approved schemes for oil-fired heating in schools although there was sometimes coal within literally hundreds of yards of a school.
One of the troubles about bringing industry to Scotland is that at any new town, such as Glenrothes, which the hon. Member and I know very well, none of the new industries which are being set up is putting in coal-fired installations to provide the heating. They are all putting in oil heating. At the same time, in spite of the fact that the coal industry is running down, we are pursuing a policy of imposing a surcharge on oil to make it more expensive.
My hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) stressed very well the difficulties which industry experiences, but I should like to draw attention to the effect on the individual consumer. Whilst we argue about whether we should have oil, coal or any other form of firing, many 582 thousands of people, particularly old-age pensioners, living in houses which have simply a coal-fired grate, have no other means of heating than coal, and they must buy the coal at whatever price is set down by the Government. That is surely something in which we should have a good deal more interest than we have had in the past.
My hon. Friend mentioned the cost of smokeless fuel. It was brought to light last year that smokeless fuel manufactured in Scotland, after bearing transport charges to the Midlands, was selling at a cheaper price in England than in Scotland. That can only be because a bureaucratic system says that, because there is a surcharge on coal in Scotland, the coal in Scotland must be more expensive than coal in England.
I hope that the Parliamentary Secretary to the Ministry of Power will explain why an edict is issued that coal must be more expensive in Scotland as a result of which people who have to look after themselves and keep themselves warm are forced to pay more for it. The consequence is that people cannot continue to buy this fuel because it is expensive and they decide to change to some other form of heating. As soon as they go to some other form of heating they find that the surcharge on coal puts up for them the cost of electricity and the cost of gas. So there is that spiral the whole time, and it is having its effect.
Certainly we know the difficulty this is to industry, but it is having a much more telling effect on the old-age pensioners, people who, after all, have to exist on exactly the same amount of money whether they live in Scotland or in England. I do not know that the Order the Home Secretary is imposing upon us, so that we shall have summer time all the year round, will be very helpful. I asked a Question of the Secretary of State for Scotland the other day to find out what time sunrise would be in various parts of Scotland in midwinter. In certain parts of the north of Scotland sunrise will take place at 10 o'clock in the morning, so that people will have to get up and keep themselves warm in the dark, and that will add to the expense. In Scotland we have some 45 or 50 minutes less daylight in midwinter than they do in the South. As 583 a result, we need more fuel and more light than people do in the South, and yet we have to pay a surcharge on our heating and our light, and to the ordinary citizen in Scotland this is becoming intolerable, and it ought to be redressed.
What otherwise is the use of saying that we have a universal system of benefits? Hon. Gentlemen on the other side of the House say it is inconceivable that we should discriminate in any way, and that everything must be absolutely the same for everyone and all must be equal. How are all the people to be equal unless account is taken of the differences there are in daylight and temperature? But these appear to be forgotten entirely by hon. Gentlemen opposite.
So quite apart from the effect on the location of industry, quite apart from the difficulties of the shipbuilding industry and the other industries which have been the strength of the Scottish economy, I hope that the Parliamentary Secretary will pay attention particularly to the effect on the ordinary citizens who live in the small houses and on small incomes, and who are being penalised by this discrimination in fuel prices in Scotland.
§ 5.17 a.m.
§ Mr. Alick Buchanan-Smith (North Angus and Mearns)
I should like first to congratulate my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) upon raising this very important subject.
I want particularly to deal with some of the problems in the remoter areas in Scotland. Certainly, the farther we go down the line, or, to put it another way, the farther we go north, the greater these difficulties and problems become, and the much more serious become these impositions.
This is particularly true, of course, in relation to transport, with which my hon. Friend did not deal in quite so much dertail. The farther north, and the farther into the remoter areas of the north, the greater becomes the proportion of a person's expenditure on transport in one form or another. As my hon. Friend the Member for Fife, East (Sir J. Gilmour) said, this expenditure is very important for the individual ordinary citizens living in rural areas. For getting to work and for social pur- 584 poses they depend upon their cars, and those who rely on bus services have generally greater distances to travel than do those who live in the industrial areas farther south.
The same argument applies to the basic industries of agriculture and fishing. Supplies have to be brought in for those industries, and their produce has to be taken out. Take a case we all know—potatoes from the north of Scotland; their price is much lower than prices are in the south of Scotland, because of the transport costs of getting the produce to the areas where it is consumed. The same is true of industry; raw materials have to be taken in, finished products have to be taken out.
It is to the credit of many of the industrial firms, small and large, in the North-East and in the Highlands, that they have overcome this great obstacle of higher transport costs. One firm in my constituency makes tractor cabs, and in spite of the problem of transport costs, it sends its products to Devon and Cornwall. Another firm there makes prefabricated joinery fittings for houses, and sends its products to, and competes with firms in, central Scotland. That shows the initiative and enterprise by which firms in the remoter areas have overcome the ball and chain problem to which my hon. Friend referred. In contrast to what the hon. Member for Midlothian (Mr. Eadie) said, I pay tribute to our private road haulage industry, the private firms which help to keep down the costs in these remoter areas, and thus help to maintain a sound economy in the face of many difficulties.
The problem of coal prices becomes relatively greater the further north one goes in Scotland. In my constituency, for example, the River North Esk marks the line at which the price of coal increases still further compared with the price paid further south. This extra cost means, of course, that there is an extra charge to industry and to private individuals.
The same is true of electricity charges, and in reply to a Question which I asked yesterday the Secretary of State for Scotland said that in the area of the South of Scotland Electricity Board charges were going up by 10 per cent. and by 11 per cent, in the area of the North of Scotland Hydro-Electric Board.
585 I remind hon. Members that this is not a true picture of the burden which ordinary people have to bear, because a householder not only has to pay increased charges on domestic consumption, but has to pay for the increases incurred by his local authority in the provision of street lighting, and of course this will be further increased as a result of the change in summer time. He also has to pay for the increased costs incurred in heating and lighting schools. It will be seen, therefore, that the percentage increase which the average person will have to pay will be very much higher than the bare percentage increase which the Secretary of State gave me.
With regard to the agriculture industry, we see from a reply which the Ministry of Power gave on Monday that the increase in electricity charges will mean an additional burden of £400,000 a year on the industry, and if we add to that the recent increase in fuel oil prices it means that the industry will have to find another £250,000 a year, amounting to a total increase of £650,000.
When we consider this tremendous increase in charges, and when we consider at the same time the difficulties facing the agriculture industry, particularly the livestock sections of it, those producing store stock, and those sections of it in the remoter areas which have to bear a greater proportionate share of the increase in transport charges, we realise that they are in great difficulty, especially as they have little prospect of getting any increase in return from the market.
The fishing industry is in a particularly serious position. Late yesterday evening I received a copy of a letter sent by the Scottish Trawlers' Federation to the Department of Agriculture in Scotland. It is plain from this letter that the Secretary of State has rejected an appeal from the Federation that he should offset the effect of the surcharge of 2d. a gallon which the oil companies had imposed on all fuel and lubricating oils. I am disappointed that the right hon. Gentleman has rejected this plea, particularly as later this morning we shall be debating a reduction in subsidies to our fishing fleets. They will be placed in an extremely serious situation.
The letter says:The imposition of over £2 per ton on fuel may constitute the last straw for many vessels 586 and these may be forced to tie up at the quay wall.That is what faces our fishing industry in Scotland. As the hon. Gentleman said in reply to another Question of mine, it is costing our fishing industry—the inshore fleet and the trawling fleet—£250,000 a year. I hope that the Minister will pay attention to the letter, and that later in the debate he will show that he will do something positive about it. The letter adds that immediate action is necessary to avert what appears to be growing into a major disaster for the trawling industry.
It is not just a question of the trawling industry. The inshore industry is also very important in certain parts of my constituency as a source of work where there is very little other employment. In areas such as Aberdeen it is one of the major industries and an imposition like this and the other extra charges, at the same time as the Government are reducing the amount of assistance they give to the industry, put it into a very serious situation.
I should like to end by briefly stating the effect on industry as I see it. In reply to a Question of mine on Monday, the Secretary of State said that the increase in electricity charges would mean a rise of £500,000 in Scottish industry's costs. The increase in the price of fuel oil is adding £5 million a year to industry's costs in Scotland. That is bad enough for existing industry, but it will be much worse in its effect on the attraction of new industry to Scotland, at a time when new industry is desperately needed.
The two main industrial towns in my constituency are Montrose and Brechin. The most recent unemployment figures at the beginning of June show that the percentage in Montrose was over 4 per cent., the highest for many years, having risen from 2½ per cent. a year ago. In Brechin it has risen from 2½ per cent. a year ago to 3.8 per cent., a very alarming figure when we are trying to attract new industry and when we see the tremendous imposition of higher charges on industry.
Some of the extra costs are not the Government's responsibility. We cannot blame them entirely for the increase in fuel oil costs. But electricity, coal and gas charges are the responsibility of the 587 Government. If the Government are sincere in their wish to help industry in Scotland—and not just manufacturing industry but agriculture, fishing and the ordinary citizen—there is room to help through those fuel industries for which the Government are responsible. There is time to take action now, before it is too late.
§ 5.30 a.m.
§ Mr. George Younger (Ayr)
We are fortunate to be able to discuss fuel prices, although it is midsummer, when people feel their impact less. There is time between now and next winter—which we know will be difficult for the economy and for many people, especially in Scotland—for the Government to take some action to mitigate this heavy burden. My hon. Friend's case that the cost of fuel in Scotland is higher than in the rest of the United Kingdom needs no reinforcement.
One point which is evident from Members' postbags is the public's bewilderment because fuel charges seem to continue to rise when incomes are frozen. The object of the freeze was supposed to be a standstill in wages and in prices. The whole policy depended as much on a freeze of prices as of wages, which is why people are bewildered by increases in fuel prices when the freeze still affects the wage earner. Electricity prices increased by 6 per cent.—
§ The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson)
What increases in fuel prices have there been during the wage and price freeze?
§ Mr. Younger
I am coming to that. There have been increases in the price of electricity. The Central Scotland Electricity Board's prices were raised by 6 per cent. on 1st April, 1967—
§ Mr. Freeson
I put a specific point, because we should not distort the situation. The measures were announced in July last year and it is now 12 months later. I asked the hon. Gentleman what 588 increases in fuel prices there have been during the period of the standstill and he gave none.
§ Mr. Younger
It is very late in the debate, but either the hon. Gentleman misunderstood me or he did not heir me, because I have just given both the increase and the date on which it was done—
§ Mr. Younger
I should be grateful if the hon. Gentleman would explain how 1st April, 1967, is before the freeze. What is the Ministry of Power's revised date of the freeze?
§ Mr. Freeson
The hon. Member must not mislead the House quite deliberately on this point. There have been no fuel price increases in this country during the period of the 12 months' standstill. The only increases he refers to took place, by his own statement, before the freeze or have been announced to take place at the end of the 12 months' period.
§ Mr. Younger
I think the hon. Member and I must agree to differ on this point. I have made what I am informed is a correct statement that the increases in South of Scotland Electricity Board prices take effect on 1st April, 1967.
Turning to the Hydro Electric Board, there the increase in price is about 10 per cent. and the charge is effective on 1st July, 1967, and, as the Parliamentary Secretary will no doubt say, that is just after the end of the freeze period.
§ Mr. Buchanan-Smith
May I give a quotation from The Scotsman of 25th March in support of my hon. Friend?The South of Scotland Electricity Board have secured the Government's sanction to introduce their suspended six per cent. tariff increases on April 1—eght months after the board first agreed to freeze them.…
§ Mr. Younger
I am grateful to my hon. Friend for reinforcing, for about the fifth time, what I said in exchanges with the Parliamentary Secretary.
The whole of industry was asked in the freeze to co-operate by keeping its charges down and avoiding price increases, and hon. Members have been on record many times since, saying that 589 they are grateful for the co-operation of industry in avoiding prices increases. We know, from the activities of the First Secretary of State, of the Department of Economic Affairs and the Prices and Incomes Board, that they have tried to persuade industries all over the country to avoid putting up prices. What sort of example is it, whether increases come just after, before or during the squeeze, for all industry throughout the country to increase its prices by between 6 and 10 per cent.? What would the outcome have been if all groceries had gone up 10 per cent. in the last six months? There would, quite rightly, have been a great outcry. If the Government reply "We have to balance our books because the costs to the electricity industry have gone up", I say to them that no private industry anywhere in the country has not had to face exactly these problems in the past year. All industries face rising costs and difficulty in keeping down prices.
If we take a straight comparison between the performance of industry generally and the Government's own industry, it is pretty clear where the best support for keeping prices down has come from. I hope that the Government will take this much to heart, because people throughout Scotland are disturbed to find that their electricity bills are higher than before although wages are frozen and they are continually preaching to industry to keep prices down. There is nothing very remarkable about the idea of keeping a straight price level over the country. Most private industry does this. One pays the same for a certain brand of biscuits in one part of the country as in another. One pays standard prices all over the United Kingdom for all sorts of products although it costs more to transport an item further away from the factory. So there is nothing particularly remarkable about the suggestion that we should have a straight cost for fuel as we have for so many other items.
I hope that those who are anxious to see the remoter areas and the development areas given preference and help to bring their economy up to the general standard of the country will bear in mind that nothing could give such great encouragement to the bringing in of industry and discouragement to emigra- 590 tion and the other ills that we are trying to solve as a clear statement that a flat rate fuel pricing policy was the policy of the Government.
Can the Parliamentary Secretary say anything about the likely performance of prices for North Sea gas in this connection? If we are not to have the principle of a flat rate for fuel prices over the country and assuming that North Sea gas were found off the coast of Scotland, are we to have a cheaper rate for the gas nearby in Scotland than in the rest of the country, or shall we have a flat rate price for all these products just the same as we ought to have for all the fuel that is produced? This is an interesting point, and I should be glad if the Parliamentary Secretary could comment on it.
This has been a most interesting subject. In raising it we are voicing the concern of many people about rising fuel bills, and I hope that the Parliamentary Secretary will be able to reassure us.
§ 5.42 a.m.
§ Mr. Hector Monro (Dumfries)
I join in the congratulations to my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) on initiating the debate even at this early hour of the morning. There is no doubt in the minds of most of us that power and transport are probably the two future suppliers of lifeblood to the Scottish economy. At the moment it is obvious that the situation in Scotland is serious in the extreme and that the action that the Government have taken or intend to take will not rectify it, particularly bearing in mind the very high unemployment figures in Scotland.
Like the hon. Member for Midlothian (Mr. Eadie), I participated in the coal industry debate last week. It is unfortunate that an important industry has to be discussed at very odd hours of the morning. For all that, it was an important debate. Because the Government promised that the views put forward by hon. Members that night would be considered when the White Paper on fuel policy is being drawn up I will not touch on more than one or two points that we discussed then.
Much of the debate today touches on the differential price of coal in Scotland. This is the crux of the argument. In fact, it is more of a complaint. This is one of the reasons why industry is not 591 being attracted to Scotland as we would like. Despite the large number of advance factories announced for Scotland in recent years, they have so far produced only 181 jobs, and when one sets that against 80,000 unemployed, it is clear that we are not moving rapidly towards the incentives to bring industry to Scotland that we must have.
I want the number of jobs for miners in Scotland to be kept as high as possible, provided that there is a margin of profitability. Efficiency has risen progressively in recent years. Output per manshift has gone up. Although there is still room for more, and there will be more between now and the 1970s, it has been a commendable effort. But, because of this increase in productivity, there are now huge stocks of coal above ground, and this is causing grave concern to the industry.
One of the reasons for the size of the coal stocks is the differential coal price. We had a mild winter, which in its way helped to keep unemployment down, but, at the same time, the lower demand for domestic fuel brought a dramatic increase in stocks during the early part of this year. Moreover, the high cost of domestic and industrial coal, coupled with the stagnant economy, made people feel that they just could not afford to buy as much as they would have liked.
Large stocks above ground and a lack of profitability have led to more pit closures. In areas of already high unemployment like South Ayrshire and Lanarkshire, this is aggravating an already worrying situation. Last week, the Minister of Power told us of one or two proposals to help elderly miners and to help to reduce coal prices to the electricity boards. But we have to go a great deal further than that if we are to deal properly with the situation, which is now approaching a critical stage. Although Ministers have said a lot about what the Board of Trade, the Scottish Office and the Ministry of Power will do to help miners displaced by closures because of lack of profitability, an enormous amount more must be done actually to provide the jobs before closures. I have voiced this complaint to the three Ministries over the last two or three years.
592 Translating the high cost of coal into terms of other forms of energy, we can see just how worrying the situation is for the mining industry. There is atomic energy and the A.G.R. programme. We have two stations in Scotland now, and one recently announced. We have our conventional generation of electricity, we have conventional gas and chemical gas —I pay high tribute to the gas industry for its development of non-toxic chemical gas—and, as my hon. Friend the Member for Ayr (Mr. Younger) said, we now have North Sea gas. It is time that Scotland was told when North Sea gas is to be piped across the Border into Scotland. It seems to me that, as usual —whether it be in connection with the B.B.C., the gas industry, or anything else —Scotland is low down the priority list for distribution.
I could not understand the intervention of the Parliamentary Secretary on the price of electricity. We know that the freeze began last July, and that the electricity board had to contain itself and not put up the price of electricity when it wished to do so, but on 1st April—eight months after the freeze begap—the price was increased by 6 per cent. Whatever the hon. Gentleman says, like every other person and industry in Scotland I have been paying 6 per cent. more since that date. I cannot see why the hon. Gentleman complains about our statements to that effect. We are having to pay rather more than we would had the price increase been allowed last July. Perhaps when the hon. Gentleman replies to the debate he will be able to explain what he meant by his intervention.
The Minister of Power last week held out some hope for the coal industry into the 1970s. We know that 160 million tons were produced last year and that the Minister has indicated that, all being well, it could be 155 million tons by 1970. He gave various indications and expressed various opinions and hopes that as much coal as could be produced economically would be. This will help to boost the morale of the industry—a morale which has been somewhat shaken over the last two years.
I naturally am not in favour of keeping open a hopelessly uneconomic pit for an indefinite period, but over a short period I hope that the Minister realises that there may be a social advantage in 593 doing just that, if the jobs are not available and the only alternatives open to the miners affected are to emigrate to the collieries in the Midlands or stay at home and be unemployed. A miner with one or two children would receive about £12 or £14 a week, with his wage-related unemployment benefit, and it is probably cheaper to keep a mine going at a loss than it is to pay out large sums in respect of unemployed miners. It is also very much better for the men to have jobs than to stand around doing nothing.
To attain these objectives we must try to sell more coal, and there are three things that the Minister should do in this regard. First, he should reduce the price differential in Scotland to the English price level. This would be an immediate benefit to the steel and electricity industries, and to every other industry in Scotland that uses coal to produce its power.
Secondly, the Minister must look urgently at the possibility of making a reduction in the price of domestic coal in Scotland. If the stocks are there it is better to sell them at a slightly lower price than to have them piling up and tying up huge amounts of capital.
Thirdly, there is a great deal to be done to help the merchants sell more coal. There has been continual difficulty over the past with British Rail closing down coal depots at its stations and the merchants having to travel much greater distances to collect coal. They have endless difficulties. This is a question that the Minister and British Rail should sort out, and it could be done right away. If coal production can be efficient and profitable, as many miners as possible should be able to work in mines near to where they live.
My hon. Friends have illustrated the high cost of fuel oil and petrol in Scotland. From the point of view of buses and other forms of public transport, this must increase the cost of living. The differential exists the wrong way round. The further north one goes, into the Highlands and Islands, the cost of fuel becomes higher, when it should be lower. If we could bring it down we would attract more industries to the area. The cost of fuel in Scotland is of primary importance to the country's economy and I trust that immediate action will be taken to remedy the present differential.
§ 5.56 a.m.
§ Mr. Ian MacArthur (Perth and East Perthshire)
This has been an interesting debate and my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) is to be congratulated for initiating it. I think we should also thank the Parliamentary Secretary to the Ministry of Power and the Under-Secretary of State for Scotland for being here, although it is right that they should be here. It is also pleasant to greet the Scottish Whip, who is seated on the Government Front Bench counting his chickens, although there is only one Mother Carey's chicken for him to count on the benches behind him. We are also honoured by the presence of the Leader of the House, who is paying us one of his little visits, rather like the absentee landlord come to visit his tenantry.
§ Mr. MacArthur
On that occasion I took the sensible course of being fast asleep in bed, having been awake and in attendance for almost the whole of every night that week.
§ Mr. MacArthur
No, not every night. In October, 1964—not long ago—the Labour Party said in its election manifesto that a vote for the Socialists could guarantee… that the British again become the go-ahead people with a sense of national purpose, thriving in an expanding community.…It is sad to quote those words today—part of the slick salesmanship that helped the Labour Party to come to power. It was a false prospectus if ever there was one. Are we thriving—with the real value of wages in Scotland down, unemployment up and with worse to come this winter? Are we living in an expanding community—with migration soaring and probably running at a higher level this year, and with the population of Scotland falling sharply? Emigration has gone up and population has fallen for a variety of reasons, but one is the higher prices and costs which people have 595 to face in Scotland despite the promise in the 1964 manifesto under the heading, "Plan for Stable Prices". We know what has happened to the Plan. And the Retail Price Index has gone up 12 points.
An important factor in the costs we have to face in Scotland is the incidence of the cost of fuel, petrol, coal, gas and electricity. My hon. Friends have reminded the House of the amounts by which these fuels have gone up and the times at which they went up. I was surprised that the Parliamentary Secretary did not know that the South of Scotland Electricity Board put up its prices on 1st April. It is surprising that the Secretary of State for Scotland did not tell him that. If the hon. Gentleman finds that he was wrong in what he said, I hope that he will make a personal statement before we rise for the Summer Recess. He should do that in his own interest, because there will be a sense of shock in Scotland when it is known that he does not know what is happening there.
The effect of increased costs runs right through the economy. Increased fuel costs and the increased cost of living which follows hits everyone, but those who are hit particularly hard are the old and the poor. Increased costs, particularly of coal, and to some extent electricity, account for a very large proportion of the expenditure of old and poor people. Earlier today I was looking at the Family Expenditure Survey, 1965. It relates to the whole of Britain and possibly the amount spent on fuel in Scotland is higher than in the rest of the United Kingdom because of the climate and the shorter winter days.
It is interesting to note one of the statistical comparisons emerging from those figures. In households with a weekly income of £5—which surely means one person only—the amount spent each week on fuel, light and power is 17s. 5d. In an equivalent house where the head of the household is 65 or over, a pensioner, the expenditure jumps sharply to 22s. 9d. How much the pensioner is dependent on fuel is illustrated in the pattern of spending. There are some other interesting comparisons. People over 65 with an income of £5 a week, spend £3 6d. on food. In better-off households where the income of the head of the family is 596 £15 or more, the amount extra spent on fuel is very little more—30s. 3d., which is only 7s. 6d. more than hard-up pensioners. Of course, it is on food that the greatest increase occurs, from £3 6s. to £5 3d.
What I am trying to establish from these figures is that the proportion of total expenditure spent on fuel by the old age pensioner on a very small income is very high. Examining the figures closely, one sees the dependence of the pensioner on coal. It is surprising to see that the pensioner household with an income of under £5 a week spends more on coal per week than the average of all households. It spends half as much again on coal as the household with three times the income or more. Similarly, of course, the better off the home, the more is spent on electricity.
On fuel, light and power, therefore, 22s. 9d. is being spent by the average pensioner with an income of under £5 a week and that figure is likely to be higher in Scotland for the reasons I have given. Roughly speaking, these costs are going up by 10 per cent. or something approaching 2s. 6d. a week.
We have all had the experience of seeing in our constituencies pensioners who, recognising the heavy cost of fuel, have to make some weekly provision for it, particularly for the electricity charge, which comes in quarterly. They cannot meet such a bill in a lump sum so they save pennies or shillings every week to provide for it.
In the north of Scotland, served by the Hydro-Electricity Board, the increased electricity charges took effect from 1st July and pensioners are putting aside money each week for the next quarterly bill on the assumption, no doubt, that it will bear some relationship to the last bill they received. But they will find it up by 10 per cent. Indeed, I believe that it will be up by more than that. This is where these rough and ready estimates can be so misleading.
The tariff of the North of Scotland Hydro-Electricity Board is rather different from those in other areas. The cost of the unit depends on the number of units used. The first 80 units used cost no less than 6d. a unit; the next 350 units cost 2d. a unit until 1st July and now cost 2¼d. a unit; units used thereafter are going up from 1¼d. to 1⅜d. It does not 597 take much electricity to use up 80 units. The increase at the next stage is the sharpest in proportion and it is in that range that many pensioners and old people are mainly affected. They do not use a lot of electricity and it is in that centre range that their consumption falls. That being so, their bills will be up by more than 10 per cent. and it will be a heavy blow to them.
The dependence of elderly people on fuel and light was demonstrated evocatively and dramatically to me during the winter when I called on a constituent, an old lady pensioner living, in a small house in the country. As it got dark in the middle of the afternoon, she asked me, "Will you have the light or the fire?" The light or the fire—that is the choice which still has to be made by some homes in Scotland—perhaps by more homes than we know. The light or the fire—an evocative reminder to us all of the need to identify hardship and channel larger help to ease it within our social security system. It is these people who are the hardest hit by increases in the cost of coal, electricity and gas. These increases affect everyone in Scotland directly, and indirectly through the additions that they make to the cost of living. Through these increased costs on industry we find a system of charging, with Government encouragement, which hampers our progress.
§ 6.10 a.m.
§ Mr. Michael Noble (Argyll)
This is the second debate that we have had during the course of tonight on the problems that affect the less lucky parts of the country. We are all grateful to my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) for inaugurating the debate and giving it a start and for the contributions from my hon. Friends and the hon. Member for Midlothian (Mr. Eadie) in bringing the whole problem of fuel and fuel costs before the House at this stage in the Session.
There are two questions about the future which I should like to raise with the Under Secretary. One is the same as that raised by my hon. Friend the Member for Ayr (Mr. Younger), namely, whether he can give a firm guarantee about the Government's policy on the North Sea gas. The second question, which is also one for the future, concerns 598 the problem of coal for Longannet. This is a matter with which I was closely concerned a number of years ago. At the time there was a great deal of apprehension on the part of the mining community—and if the hon. Member for Midlothian had been in the House then I am sure that he would have made very long speeches, and I should have listened to them—that, if possible, this big new power station should be fired by coal. I have read reports put out by the South of Scotland Electricity Board that it does not believe that the Coal Board will be able to provide coal at the price which was arranged for Longannet without enormously putting up the price of the coal that is delivered to every other station. If this is true then the negotiation which was carried out in my time, and which was done specifically to help the mining community by providing 7,000 extra mining jobs in Scotland, was carried out by the Coal Board under totally false pretences. I should be grateful if the Under Secretary can give some information about that.
While paying tribute to the wide range of important points which my hon. Friends have raised—industry, agriculture, fishing and so on—I should like to concentrate on the immediate problems which face us in Scotland over the next nine months. This is something which, when we are to be away for three months, the indicia we have been able to look at show that the picture is almost certain to get steadily worse. We should like to make certain that the Government appreciate our worry and our hope that they will not talk pretty complacently, as in a debate a fortnight ago, but will really begin to take action to try to save Scotland from another very grim winter. I say "pretty complacently" because, two days after our debate, the Scottish Office statistical people put out the figures for production. Not only were they stagnant, but they had gone backwards. Nothing of that sort was admitted by the Secretary of State, and within a week we had the unemployment figures which were a good deal worse than anything that we had reason to expect.
The cost of fuel is a very important part of industrial costs. It is certain that in the next few months many firms will have to make up their minds about how they are to cut costs. They cannot 599 increase profits, as is perfectly clear from report after report from almost every industrial concern in the country. Therefore, in the next six months, if the Minister of Power and the Secretary of State for Scotland, who has some responsibility in this respect, allow fuel costs to rise, one of the only ways in which firms will be able to maintain their viability will be by considering what can be cut from their labour forces.
There are not many ways in which costs can be cut quickly when fuel costs are rising other than getting rid of people who can be spared, however inconvenient that may be. I ask the Government in their thinking about what action to take over the next five or six months to help the Scottish economy not to load it with extra fuel or other costs which will immediately have the reaction of increasing unemployment.
I should like to make certain that the Government realise, and of course they do, when they think about it, that the toughest time for any community is when unemployment is high. It always means a shortage of money not only among those who are unemployed and among the widows and pensioners, but over a wider range, among those who own small shops and so on, who find that there is not sufficient money about to keep them going. For these people, too, next winter will be tough if the weather is cold and fuel prices continue to rise and are apparently encouraged by the Government to rise.
§ 6.17 a.m.
§ The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson)
If I do not pursue the somewhat wider aspects of the subject which have been raised in the course of the debate, it will not be because of any lack of interest in or concern for the broader issues which are involved in the problems of unemployment and regional development generally, but because I want to confine myself to the more particular aspects of the situation in Scotland to which the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) referred. There have been, and will be, occasions when, although it is not the direct responsibility of the Ministry of Power, we shall nevertheless have views to express and comments to make about 600 the wider aspects of fuel policy in so far as it interlocks with other economic policies and needs in Scotland and elsewhere.
The general principle behind the pricing policies of the nationalised fuel industries is that prices should reflect the costs of supply. There is nothing magical about that and there is no hard and fast rule laid down in any ideology or creed which says that there must be a particular pricing policy, whether a postalisation policy, or a regional variation, or any other kind of variation. It must be related to what we are seeking to do by the present policy. There is no implicit truth.
However, there have been several studies and reports about this aspect of policy, and the idea of maintaining regional differences in cost where reflected in regional differences in prices has been endorsed by all the independent committees, in this country by the Ridley Committee of 1952, and, internationally, by the Robinson Report to O.E.E.C. in 1960.
As to the facts, most fuels do cost more in Scotland than in England and Wales as a whole. Electricity in Scotland has tended to be cheaper on average than in England and Wales. In 1965–66 the average revenue per unit from electricity sales in Scotland was 1.598d. compared with 1.737d. for England and Wales, although the average level for industrial sales was higher, a point made by the hon. Member for Glasgow, Cathcart.
Since then Scottish electricity prices have gone up by way of the April increase of 6 per cent., which was, as one hon. Member indicated, rather hurriedly, a suspended increase from the point of view that the July announcement was made, and there is this special consideration. In other words, the increase was already in process at the time that the Government made their decisions of July last. This was suspended.
§ Mr. MacArthur
The hon. Gentleman will accept that, however much he may care to dress this up in coloured clothes, the fact remains that electricity prices in the South of Scotland went up on 1st April, 1967—within the period of the freeze.
§ Mr. Freeson
I have explained what happened. One should not do logic-hopping on a thing like this. There is a "gelling" together of many aspects of what has gone on over the past few months, and to take out little items does not get us very far.
§ Mr. Noble rose—
§ Mr. Freeson
Let us not get into another ragged exchange, it is not necessary to make a meal of it. The hon. Member for Perth and East Perthshire (Mr. MacArthur) went on to imply, it seemed, that the 10 per cent. increase more recently announced would bring added hardship and burdens to the people of Scotland. He went on to talk about the elderly people. That is not so, because the subsequent increase announced on 12th May will affect only those in England and Wales.
§ Mr. MacArthur
I am sorry to intervene again to explain the Scottish position. We have two Scottish electricity boards, the North of Scotland Hydro Board and the Southern—
§ Mr. Freeson
I understand the position about the two boards, and the 10 per cent. increase. I was making the point that there could have been some misunderstanding about what the hon. Gentleman was saying. I had the impression, perhaps it is wrong, that he was saying that the 10 per cent. increase announced by the Minister on 12th May imposed additional burdens in Scotland. [Interruption.] I am making the point, quite clearly, that there is no additional burden in Scotland as a result of that announcement. The hon. Member for Perth and East Perthshire can go to bed happy.
If I may now turn to gas. Although the Scottish Gas Board has raised tariffs twice since the beginning of 1965 the average income from gas sales in Scotland is not the highest tariff in the country. I think that the hon. Member has on more than one occasion, perhaps mistakenly, indicated that this was so. The highest tariff area in the country is south-west England. Coal prices in general are higher in Scotland, as has been pointed out. In particular coking coal costs more in Scotland than England and Wales. This has implications for the 602 steel industry to which hon. Members have referred.
Let me turn to the question of the coalfield price differential. Under the April, 1966, coal prices increases, pithead prices of coal for industry, for power stations and gas-making were raised by 15s. a ton in Scotland. The range for other coalfields was from nil in the East Midlands—which is understandable for that area—to 30s. in South Wales, Kent and Somerset. In all, in three fields the changes were less than for Scotland, in four fields they were higher and in the other two they were the same as for Scotland.
The National Board for Prices and Incomes approved the policy of selective increases. Against the background of what I have said, one gets a better sense of proportion about this. I do not try to belittle the difficulties for Scotland in pointing out these facts. The selective increases help to prevent the good coalfields from being priced out of their markets by having to subsidise those with higher production costs. This is the key economic fact for the coal industry against the idea of postalising prices in the industry, apart from the comments that one might make about the other fuel industries.
Postalisation in the industry in Scotland would seriously distort the economics of the industry to such an extent that the process of modernisation and rationalisation in the industry, which will eventually produce much more economic operation, would be put out of joint so that at the end of rationalisation and the reshaping of the industry we would not get the results which undoubtedly will come. With all the difficulties which the industry faces, that will come if the process of reshaping is allowed to continue.
At this stage I should refer to distribution costs, of which my hon. Friend the Member for Midlothian made great mention. I can only repeat briefly the points which have been made on previous occasions when we have discussed the matter or Questions have been asked. The Report of the National Board for Prices and Incomes on this aspect of the industry indicated that the profit margins were not excessive.
The big problem in the industry, to which my hon. Friend referred, is the 603 structure of the distribution industry and the wide range of activities of companies in it. This points very much to the need, to which the Prices and Incomes Board referred, for rationalisation and concentration and modernisation of distribution, in which the National Coal Board is playing an increasingly bigger role and will continue to do so. Fortunately, the Department is very concerned to encourage that kind of process.
The figures were queried about the effect of postalisation of a uniform system of pricing in Scotland. I was asked whether the figure of about 2 per cent. which has been quoted in the past referred to the economy, to industry generally or to fuel costs. It refers to fuel costs. All I can say is that the figures have been put into the machine and have been worked to the best of the ability of the economists and the statisticians, and this is the result. One could be amazed at it, as the hon. Member for Cathcart was, but that is the resultant approximation of the effect of any uniform pricing system in Scotland were it to be introduced.
We take the view, however, that it would be wrong to single out Scotland for such a policy, bearing in mind what I have said recently in reply to Questions on this matter that, were there to be uniformity of pricing and a postalisation policy, while it would benefit Scotland to the approximate level of 2 per cent. on fuel prices, other development areas would suffer. On the other hand, prosperous areas would benefit. The South and the South-East would benefit by postalisation. In other words, certain areas which need assistance and help would suffer while people in prosperous areas would benefit, although in this context Scotland would benefit to a certain degree.
We have, however, to look at the policy as a whole, and if a postalisation policy were to produce a worsening of the balance between the prosperous areas and the development areas, we would not achieve for the country as a whole what the hon. Member seeks to achieve simply for Scotland. We must go about regional development policies by other means, and it is not for me at this hour of the morning to go into the detailed activities with which other Departments are concerned.
604 I was asked about natural gas policy. I am afraid that the two hon. Members who raised this question are about a month out of date. I made it quite clear in the House on 19th June that natural gas sold to area boards by the Gas Council will be at a uniform tariff with variations only for load factor.
With regard to Longannet, it is not for me, in a debate here, to start intervening in the negotiations and discussions going on between the two Boards concerned. I prefer them to continue their discussions. I am sure they will produce satisfactory results in the end, if we do not interfere by entering into the negotiations by open debate in the House.
§ Mr. Freeson
I was not here three years ago, and nor were the present Government, so if there was any responsibility three years ago it rests with hon. and right hon. Members opposite.
I think I have covered all the points to the best of my ability—at any rate, the points particularly germane to the matter introduced by the hon. Member for Glasgow, Cathcart. I have no doubt we shall be hearing from him again on this score, and from other hon. Members.