GAS INDUSTRY (BORROWING POWERS)

HC Deb 19 June 1967 vol 748 cc1297-372

Order read for resuming adjourned debate on Question [7th June], That the Gas (Borrowing Powers) Order 1967, a draft of which was laid before this House on 31st May, be approved.

Mr. David Webster (Weston-super-Mare)

On a point of order, Mr. Deputy Speaker. May I ask your guidance? We are now to debate the expenditure of £300 million of taxpayers' money. The House has been sitting for 12 hours in order to expedite activities. Is it your opinion that we are in a fit physical condition to form an adequate judgment in the limited time available on whether this money should be spent?

Mr. Deputy Speaker (Sir Eric Fletcher)

As the hon. Member is well aware, that is not a point of order.

Question again proposed.

Mr. Deputy Speaker

Mr. Taylor.

Mr. John Peyton (Yeovil)

On a point of order. I think we should ask you, Mr. Deputy Speaker, if you can find out from the Leader of the House—[HON. MEMBERS: "Where is he?"]—whether there is any information from the Government as to how long they wish us to carry on this discussion tonight. A very long time ago it was made clear by the Leader of the House that contentious business would not be taken in morning sittings. The whole idea of having morning sittings was that we should not have late sittings at night. We are faced with a very important Order which was launched against the wishes of the House in a morning sitting and now we have the hangover at night. This shows that the Government are as usual practitioners of bad taste and incompetence. I ask for some guidance as to how long we are to go on tonight.

Mr. Deputy Speaker

The hon. Member is perfectly well aware that that is not a point of order for the Chair. This business appears on the Order Paper and it is my duty to call Mr. Taylor, who was in possession of the Floor when the debate was adjourned two weeks ago.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

Further to that point of order. Mr. Speaker, when putting the Question on the last business, suggested that the Aden independence Bill was to be taken formally. There might be less objection if that had been done, but it was not so. We now have to enter upon discussion of this Order at a quarter before midnight. It is twelve days since the first half of this debate took place, on 7th June, in the morning. It is very difficult when one half of a debate takes place for two hours in a morning and the other half at midnight several days later. Surely there should be some means whereby the House could inquire of the Leader whether it is the intention of the Government to proceed further with this business tonight. Through you, Mr. Deputy Speaker, may I draw attention to the fact—

Mr. Deputy Speaker

Order. The hon. Member must be aware that he is not raising a point of order. Mr. Taylor.

Mr. Edward M. Taylor (Glasgow, Cathcart)

On a point of order—a genuine one, I can promise you, Mr. Deputy Speaker—[HON. MEMBERS: "Unlike the others."]—as were also the ones my hon. Friends raised. Is it not a fact that you are responsible for protecting the independence and freedom of Members of this House, and is it not also a fact that many hon. Members who wish to make lengthy points on this Order feel unable to do so because they would be detaining so many of their hon. Friends at this late time of night?

Mr. Deputy Speaker

The hon. Member is well aware that the Chair is not responsible for arranging the business of the House. This is business which was arranged and announced, and we must continue with the debate.

Mr. Patrick Jenkin (Wanstead and Woodford)

Further to that point of order.

An Hon. Member

There is not a point of order.

Mr. Jenkin

With respect, there is a point of order. As I understood him, Mr. Speaker indicated to the House that it was his view that the Aden Bill, which we have just taken, would be taken formally, in which case this Order on the gas borrowing powers would have come on immediately at 10 o'clock. It is now a quarter to 12, and it really must be a question of the protection of the rights of the House—[H0N. MEMBERS: "Hear, hear."]—whether we really are to continue to debate this Order, by which, as my hon. Friends have said, £300 million of public money is at issue, at this hour of the night. It really is, if I may say so with respect, playing ducks and drakes with the House that this sort of matter should have to come on at this hour of the night. I would seriously request that there should be some way in which the matter can be debated at a more reasonable time in the evening.

Mr. Deputy Speaker

The hon. Member is well aware that he is not raising a point of order within the control of the Chair. The House was perfectly entitled to decide to debate the Second Reading of the Aden Bill. It having so decided, that matter consumed a certain amount of time. Having done that, the House now proceeds to the next item on the Order Paper.

11.47 p.m.

Mr. Edward M. Taylor (Glasgow, Cathcart)

I feel very guilty indeed at detaining hon. Members—[HON. MEMBERS: "Oh."] I do indeed, because I know that many of them have had a very full day discussing very weighty affairs, and I am also conscious of the fact—

Mr. J. J. Mendelson (Penistone)

Get on with it.

Mr. Taylor—

that by speaking on this Order we are delaying consideration of another vital Measure affecting the safety of seamen. I think it is an outrage that we should be having to discuss this very vital problem at this late hour, but I think that another point which in itself shows the contempt which the Government have for the honourable representations of Members on this side of the House is that they must have known that I would be making certain important points about the effect of this Order on Scotland when the debate was adjourned, and yet now we are resuming it, and I look across at the Government Front Bench, I see there not one member of the Scottish Office team who, though not primarily responsible for the Order, should be showing a much greater interest in the affairs of Scotland.

It makes one wonder what indeed is the point of trying carefully to prepare reasoned arguments to put to the Government when, obviously, they are not prepared to give consideration to them. I would suggest with all humility to the Government that if they are going to carry on in this way they can indeed look out for trouble, and real trouble at that, because if we on this side of the House get the impression that the Government are not giving careful consideration to the arguments put forward from this side there are various means whereby we can harry the Government, and harry the Government we will, till such time as we are convinced that they are giving real, proper consideration to our representations.

As my hon. Friends have mentioned, we have before us tonight an Order which is going to permit additional borrowing to the extent of £300 million. Now of course, it is true that we are, in present circumstances, becoming rather immune to millions; we talk glibly in this House about £10 million, £20 million, £30 million, and so on, as though they were in themselves not directly relevant to the taxpayers. But £300 million is an enormous sum, one which we should carefully consider.

We are asked to increase the borrowing powers from £900 million to £1,200 million, a rise of one-third. This is at a time when private industry is finding its capital schemes and aspirations gravely cut back by the Government's financial restrictions and the curbs on credit and it is an outrage that we should be asked to approve this increase at such a time. The Government will probably argue that this is good Keynesian economics, that it is a good thing that demand should be stimulated in the public sector and be held back in the private. There has been an enormous increase in public spending, however. This is not a good thing in present circumstances. However, it is possible that the fairminded Members on this side of the House—and in them I certainly include myself—and others who are present and who have shown concern for the gas industry, might agree to the increase in borrowing powers if we have a clear idea of the pattern of spending which will be carried out and of the direction of the Government's fuel policy.

We have closely questioned the Minister, the Parliamentary Secretary and others about the direction of the Government's fuel policy and there have been no relevant answers. My hon. Friend the Member for Yeovil (Mr. Peyton) has ceaselessly been questioning and probing into it.

Mr. Webster

Does not my hon. Friend agree that, since the 1965 Act, there have been so many changes among Ministers and Parliamentary Secretaries that it is difficult to get a consistent policy?

Mr. Taylor

How right my hon. Friend is. But, even so, in the Government there are Ministries which have had no change of Minister and it is still difficult to find a trend of consistent policy. Whether the Government change Ministers of Power every six months or do not, we encounter difficulty in ascertaining policy.

At this late hour, it is not my intention to concentrate on the national aspects but on the Scottish aspects. The Minister has not shown acute awareness or real interest in fuel affairs in Scotland. He has only paid two brief visits to Scotland. Before I approve this extra borrowing, I want to know precisely how it will affect fuel policy in Scotland. How much of it is for Scottish projects? What long-term effect will it have on Scottish fuel policy? Many questions have been put on this matter but there have been no adequate answers. The result is genuine concern among consumers and alarm among those who produce energy. The hon. Member for Midlothian (Mr. Eadie) is here. He is an advocate of one section of the fuel industry in Scotland and his questions have remained unanswered. This is one of the few Parliamentary opportunities we have to get answers. The Minister is under an obligation to say precisely what he intends to do with this extra money.

First, I want to deal with the consideration given to cost operation in Report No. 7 of the Prices and Incomes Board, which was concerned with the increase in the price of gas in Scotland. The Board made clear that it would only agree to this massive rise in the price subject to certain administrative changes being made within the fuel industry in Scotland. I want to know from the Minister whether, in asking for this additional borrowing power of £300 million, it is his intention to implement fully the recommendations of the National Board for Prices and Incomes which will involve some capital spending and which therefore are directly relevant to the Order. We have had no indication that it is the Minister's intention to do so and it is high time that we did. Before the Order is agreed to I want to have a clear undertaking that the Minister is to implement the proposals.

In its recommendations the Board made clear that it was approving this substantial increase in the price of gas in Scotland Only on the understanding that this would be carried out. The Board said on page 15 of its report: We therefore recommend that the Government should clarify the future relationships between the Scottish Gas Board and the South of Scotland Electricity Board, and our conclusions on Scottish gas prices rest on the assumption that this will take place. In other words, the Government were asking for an extra £300 million when the rise in the price of gas in Scotland was agreed to by the Board only on the understanding that certain administrative changes covering capital spending, and no doubt included in the £300 million, would take place. Can the Minister say if the changes will take place?

There was another recommendation that the financial obligations of the gas industry should be more closely related to those of the South of Scotland Electricity Board. There is a strange position in Scotland in which the Secretary of State, for no apparent reason, is responsible for electricity. The first loss of the South of Scotland Electricity Board was announced this week.

Is it the policy of the Government that the financial obligations of the two industries, with the help of the £300 million, should be more closely related? The Report went into this in great detail and pointed out that in the White Paper on the Financial Obligations of the Nationalised Industries there was a reference to the artificial stimulation of the demand for electricity due to the different financial obligations of the two industries.

Therefore, we have to have an answer to the question: will any of this £300 million be used to carry out the appropriate capital works to ensure that there is equality in the financial obligations of the two power industries? We also want to know whether part of the £300 million will be used to make the administrative changes and whether the happy state will be reached in Scotland in which the gas and electricity industries are under the responsibility of one Minister. Whether that Minister should be the Minister of Power or the Secretary of State for Scotland is a matter on which there are conflicting views, but it is important that this division of responsibility should end.

Mr. Ridley

Can my hon. Friend tell the House which of these two solutions appears to be the most satisfactory? He is on a very important point.

Mr. Taylor

It is an important point and I am glad that my hon. Friend who has constantly shown his real interest in the affairs of Scotland should continue to demonstrate this interest. I should like to go into it and give my own views and the arguments for and against, but I feel that I would be stretching the bounds of order by so doing. For those reasons only I will not do so. My own view, bearing in mind the present occupants of the Ministry of Power and the Scottish Office, is that I would find it difficult to make a choice between the two. I am of the opinion—

Mr. Deputy Speaker

Order. I do not think that this is an aspect of the matter which should be pursued.

Mr. Arthur Palmer (Bristol, Central)

The hon. Gentleman will not overlook the fact that it was his own party which gave home rule to the kilowatts, and left gas with the Ministry of Power?

Mr. Taylor

That is precisely the point that I was making—that when we had men of the calibre of my right hon. Friends in the Scottish Office this problem was not so acute. I am afraid that at present my difficulty is in making a choice between the Ministry of Power and the Scottish Office; between two people, neither of whom are working for the best interests of Scotland.

As you say, Mr. Deputy Speaker, we are concerned only with the matter relating to the adding of £300 million to the borrowing powers of the Gas Council. The second question that I should like to put in relation to these additional powers is whether any of this expenditure will be used to carry out capital works, or to finance projects to remove the appalling differential in the price of gas throughout the country.

On 23rd January of this year I asked a Question of the Minister of Power, relating to the price of gas. At that time the Minister revealed the most recent figures he had available, which were in respect of the year—[Interruption.]—I hope that hon. Members, since they have been so kind as to wait in the Chamber, will listen to this as it is a very important point, and I hope to persuade them to support my point of view on this Order.

Mr. Webster

Does my hon. Friend not find it rather sad that the Government party should find it extremely amusing to be approving the expenditure of £300 million at this time of night?

Mr. Taylor

How right my hon. Friend is. Words fail me when I think of the amounts of money which this House agrees to without thought and careful consideration. I would suggest to hon. Members opposite, particularly the hon. Member for Aberdeen, South (Mr. Dewar), who is always complaining about the drain from Scotland and Great Britain, that if he and his colleagues paid a little more attention to the passing of vast sums of money, which have a direct relationship to the increased taxation of this country, the drain of people would not be so great. If the hon. Member for Aberdeen, South wishes to carry on with this particular argument, I would suggest that he and his hon. Friends should pay more attention to the Order and its implications.

Mr. Alex Eadie (Midlothian)

I appreciate the anxiety and sincerity of the hon. Member, but is he aware that he is the only Scottish Tory Member present?

Mr. Taylor

I must apologise for being detained on this matter, Mr. Deputy Speaker, but I must answer this point. The fact is that, before this debate took place, I had a very full consultation with a good number of my hon. Friends representing Scottish constituencies, and they have expressed their confidence in me—[Interruption.]—I am sorry to say that hon. Members opposite do not seem to agree—and my ability to present effectively the argument on their behalf.

They are very fully engaged tomorrow morning in the Scottish Grand Committee, furthering the interests of Scotland, as they have been furthering the interests of Scotland in the House today. There is no question at all that, if hon. Members were to discuss this at a reasonable hour, we would have had a larger proportion of my hon. Friends here. They have shown their confidence in me by asking me to speak on their behalf.

Mr. Michael McGuire (Ince)

Could the hon. Member tell us why they were not here, excepting himself, when this Order was being discussed on 7th June?

Mr. Taylor

I am sorry to say that the hon. Gentleman, with whom I usually agree, is wrong. I took a careful note of Scottish Members present. Among them were the hon. Member for Banff (Mr. Baker), the hon. Member for Dumfries (Mr. Monro), the hon. Member for Edinburgh, West (Mr. Stodart), the hon. Member for Midlothian (Mr. Eadie), and the hon. Member for West Stirlingshire (Mr. Baxter). The hon. Member for Aberdeen, South was not in his place when I took the count. The fact is that of the five Scottish Members who were present—six including myself—four were from the small band of Scottish Conservative Members and only two came from the massive representation which the Socialist Party temporarily has in Scotland. There is the answer.

Mr. Gwilym Roberts (Bedfordshire, South)

Was the massive statistical analysis which the hon. Member has placed before the House based on a long-term count of hon. Members who were in the Chamber for a substantial period, or was it taken opportunely at a point chosen by the hon. Member as the time to record which Members from Scotland were present?

Mr. Taylor

The hon. Member implies that it is a loaded and planted question. I admire his argument. It happened, however, that in the course of debate I thought it significant that so few Scottish Labour Members were present that I took a note of them. If he wishes to see my note, he will see inscribed the constituencies of Dumfries, Edinburgh, West, West Stirlingshire, Midlothian and Banff: four Scottish Conservatives out of a tiny band of men who work tirelessly for Scotland, and only two out of the massive band of Scottish Labour Members. The Scottish Labour Members should be ashamed of themselves. I include the hon. Member for Aberdeen, South, who is always persistent on the few occasions he favours us with his company in the House.

Mr. Donald Dewar (Aberdeen, South)

Does not the hon. Member realise that I appeared in the House on that occasion for a short period but was driven away by the prospect of listening to him?

Mr. Taylor

If the hon. Member's interest in Scotland and in Scottish gas is so insignificant that one of my brief interventions was enough to drive him away from consideration of this vital topic, he should be ashamed of himself. In following the interests of Scotland, some of my hon. Friends from England—for example, my hon. Friend the Member for Yeovil (Mr. Peyton) and my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley)—have sat through long harangues from Scottish Labour Members simply to protect the interests of Scotland. The interest of the hon. Member for Aberdeen, South in Scotland and his commitment to the best interests of Scotland are so slight that it appears that a brief intervention from me will drive him away from his bounden duty to stand up for Scotland, which he certainly is not doing. I am sorry to say it, but it must be said. The hon. Member's commitment to Scotland, which he advanced so furiously in the election campaign in South Aberdeen, has been shown to be a shadow.

I hope that I will have the attention of hon. Members opposite in making some serious points on the Order. We are being asked to approve an additional £300 million of capital spending. My second question to the Minister is whether this—

Mr. Ridley

The Minister is not here.

Mr. Taylor

I am aware that the Minister is not here. The Secretary of State for Scotland is not here. None of the Scottish Office team is here. As for Scottish Members, we have to be happy with the hon. Member for Aberdeen, South, who is not in a position to represent the best interests of Scotland. I am advancing these points in the hope that when HANSARD becomes available, the Minister of Power will give the arguments and questions careful scrutiny. Bearing in mind the courtesy and consideration which we invariably receive from the Parliamentary Secretary to the Ministry of Power, I hope that he will make a point of putting these arguments to the Minister at the earliest opportunity.

If I might come to the second point again—and I am grateful to my hon. Friend the Member for Cirencester and Tewkesbury for having put that point to me—I would ask whether any of this additional money will be used to remove the appalling scandal of the differential fuel prices which have existed for a long time in Scotland and which have now become very much worse. Indeed, it is having its effect on the Scottish economy. When my party was in power and my hon. Friend the Member for Yeovil was responsible for some of these affairs, I put these points to him as vigorously as I am trying to put them tonight. The situation is bad now and one would have thought that action would have come without my asking for it. We have this serious problem, but action has not been there; no action has taken place.

Mr. Dewar

In fact, the Scottish economy has never been stronger for many years, as the Scottish Council is always telling us.

Mr. Taylor

It is remarkable that the hon. Member should make that sort of interruption when the Scottish economy is crumbling, there are no fewer than 82,000 people out of work—many, no doubt, in his own constituency—and there is a situation in Scotland with which he appears to be so happy but which gives me no cause for happiness.

Mr. Deputy Speaker

The hon. Member really cannot go into this sort of argument.

Mr. Taylor

The hon. Member for Aberdeen, South and others of his hon. Friends seem determined to distract me from making these important points in relation to the economy of Scotland and I hope, Mr. Deputy Speaker, that I may seek your help. But I will tell the hon. Member that, however much he and his hon. Friends try to distract me, and interrupt me all the time, I will continue to demand an answer from the Minister.

I am drawing attention to the failures of the Government in their Scottish policies but hon. Members opposite are only concerned with trying to draw me from these vital points.

I will try once again to return to my second point. It is whether, of this additional £300 million, any will be used to remove the appalling differentials which exist in the price of gas in Scotland. On 23rd January last, I asked about the price of gas in different parts of the country, and the Minister of Power gave me a reply in which I was able only to get the average cost per therm for the financial year 1965–66; but it disclosed the amazing difference as between 18.31 pence per therm in some areas and 27.59 pence in others; and a national average of 22.47 pence per therm, while the average revenue per therm for Scotland was 25.92 pence—or, if my arithmetic is right, a difference of about 15 per cent. more for Scotland than the national average in Britain as a whole.

When presented with figures like that, hon. Members opposite must surely realise the frustrating effect this must have on the Scottish economy.

Mr. Deputy Speaker

The hon. Gentleman really must not pursue this line of argument. He is entitled to ask about the £300 million and how it will be spent, but he must not continue as he has been doing.

Mr. Taylor

Mr. Deputy Speaker, it was not my intention to do so. I was simply pointing out that this 15 per cent. differential existed then, and asking the Minister if part of this additional borrowing power will be used for capital works or for the financing of studies leading to the removal of the differential.

Since October, 1964, we have had a rise of over 19 per cent. in the price of Scottish gas, and in no other area of Great Britain has there—

Mr. Deputy Speaker

Order. I have told the hon. Gentleman that he must not pursue this.

Mr. Webster

On a point of order, Mr. Deputy Speaker. My hon. Friend is discussing Table 5 of "Gas Goes Natural", and the price per therm. Would he say if he has any views on whether the amortisation rate which gives this figure varies very much in Scotland, compared with the rest of the country?

Mr. Deputy Speaker

I cannot allow the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) to answer that question or to pursue this matter in any detail. He is entitled to ask how the £300 million will be spent, but I think that he has asked enough questions about that already.

Mr. Ridley

Further to that point of order, Mr. Deputy Speaker. Surely my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor) is entitled to answer a question about the rate of amortisation which is to be applied to these investments. If we are to invest these large sums of money through the Gas Council and the gas boards, it is highly relevant to consider whether we shall get quick returns, high returns, low returns, or whether the money will be written off after long or short periods. The effect which this money will have on gas supplies in the future seems to have implications not only for the Treasury and the borrowing side of the account, but for the Gas Council. I should have thought that any debate, even at this late hour, would not take place in the most helpful way if we were not able to consider matters as widely as this. On a previous occasion, I seem to remember that the debate went very much wider. I hope that it will not be circumscribed in this way, because I myself have many points which I wish to make.

Mr. Deputy Speaker

I hope that I have made the position clear. It is competent for the House, in discussing this Order, to inquire into the capital structure of the gas industry and matters related to it, but hon. Members cannot go into details about the price of gas per therm in Scotland as compared with other parts of the United Kingdom.

Mr. Taylor

I shall relate my remarks directly to the Order, Mr. Deputy Speaker, because I appreciate that we cannot have a general debate on fuel policy.

In the Report of the National Board for Prices and Incomes, there is a story relating to the Scottish Gas Board about the expenditure of considerable capital sums on what was called a two-part tariff, and it suggested that, as a result, demand was over-stimulated and a lot of capital was lost. If much of the £300 million is to be used on capital developments in Scotland, there is a danger that much of it will be lost as a result of the continued differential in prices. It mentions specifically that the loss of revenue attributable to what is referred to as "this error of judgment" in the current year was £1¼ million.

If it is the Government's intention to spend a lot of this £300 million in Scotland, probably to stimulate demand and probably to compete with the electricity supply industry, they are wrong if they think that it can be done so long as the principle of differentials remains. So long as it remains, no matter how much capital is poured in, no matter whether two-part tariffs are introduced, and no matter whether new schemes are introduced, demand will not be stimulated on the basis of very high prices. It was for that reason that I wanted to draw attention to the existence of this big differential and to the fact that, in the previous two years, there had been an increase of 19 per cent. in Scotland, when in no other area in Britain had there been an increase of half that amount.

While I am most anxious that a fair share of the £300 million will be spent in Scotland, if it is to be spent on capital schemes with the intention of promoting more demand, no purpose will be served in Scotland so long as we have the appalling drain on our economy of a high price of gas compared with the rest of the country. That is the only point I shall make, and I hope I have related it to the Order we are discussing.

Then we come to the third question which I wish to ask the Government in relation to this Order to permit the spending of £300 million. I have read very carefully the remarks of the Minister when he was introducing this Order, in which he indicated that most of this money would be spent on the supply of, and the adaptation of our gas industry for, natural gas.

I think that the Minister is under an obligation to the Scottish Members in this House, and to those who have a special interest in the promotion of the gas industry in Scotland, to indicate how much of this £300 million he envisages over a good period of years will relate to Scotland and natural gas.

I was very disappointed that, although we had some small concessions, only a very minor amount of the exploratory spending is related to the Scottish area. There are movements afoot, but if we look at page 7 of "Gas Goes Natural", there are lots of black dots in the sea off England and Wales, and none off Scotland, and this, I think, is very unfortunate indeed.

The black dots relate to the amount of money spent in going ahead to drill for natural gas—

Mr. Webster

Does my hon. Friend realise that there is a red line denoting existing high pressure pipelines and planned pipelines winding up to Edinburgh, then it goes west to Glasgow, but Cathcart is not even on the map?

Mr. Taylor

We do not need to have our name put on the map to persuade people that Cathcart is a place of great importance—and to the future of Scotland in particular.

As I was saying, we have no black dots off Scotland, but we have a red line going up to Scotland. This is the route whereby gas is going to go. If the gas goes directly from the black dots to England it is a short journey, involving little capital expenditure. I hope I am not boring my hon. Friend the Member for Yeovil. I am so sorry—I will try to make my remarks as brief as possible, but I would not be detaining the House if it was not a very important point.

Mr. Peyton

I am very much obliged to my hon. Friend for giving way. I assure him I am listening to him with the greatest of interest. I hope he will give us the benefit of his wisdom for as long as he likes.

Mr. Taylor

It is not my intention to detain the House more than is necessary. I hope I am not in any way boring my hon. Friend because I know he has a very real interest in Scotland.

To return to my point, the black dots are off England and there is a relatively small journey between these dots and the places where the gas is to be used. We do not see any black dots off the Scottish coast, however; we see instead a long red line going up to Scotland, and I would ask the Minister what are the implications of these black dots and this red line.

Mr. Dewar

Chicken pox.

Mr. Taylor

This is a very serious point. Is the implication of this long red line and these black dots that Scotland is going to get a supply which, in relation to this £300 million, will have to carry the full cost of that capital spending? If we find that £50 million has to be spent in getting this gas up to Scotland, will it be in relation to the Government's professed policy that natural gas will be supplied at a higher price in Scotland?

I should like to draw the Minister's attention to a splendid article in that excellent English journal, the Evening Standard for Monday, 10th April. The headline is Gas prices may be slashed by a third. The report says: The price of gas … could well come down by 6d. a therm in the 1970's. This is because of the £300 million which is to be spent on exploiting natural gas. As the Minister says, it appears that we have the prospect of gas being 6d. a therm cheaper. Does this long red line mean that Scotland will not get the benefit of this reduction in the price of gas? We have been lucky enough to find natural gas off our shores. If we allow the Government to spend this money, will they at least ensure that all the area boards receive this natural gas at the same price?

On 17th April of this year I asked the Minister of Power whether.

it is his policy that natural gas from the North Sea should be made available to the various gas boards at a uniform price? I did not ask for a subsidy for Scotland. I did not ask for special treatment for Scotland. I simply asked for equal treatment in the supply of natural gas. The Minister replied: I am not yet in a position to say what will be the terms for supply of natural gas to the Gas Boards."—[OFFICIAL REPORT, 17th April, 1967; Vol. 745, c. 28.] I do not want to know the price at which it will be supplied. I want to know what the long red line means. Will this be a red line on the finances of the Scottish economy? Will this be a further drain on our economy? Will we be prevented from having our fair share of this bonanza off our shores?

Before we approve this additional borrowing of £300 million, which according to the Minister will be spent largely on exploiting natural gas, surely he can at least say whether he agrees in principle to supplying this natural gas to all the area boards at the same price. We must be given some satisfaction about this. We should not consider our responsibilities so lightly that we approve this borrowing power without having some idea of how the money will be spent, and what policy the Government will pursue.

These are vital questions, which the Minister must answer. I hope that if we approve this sum, and we may or may not, depending on the answers which we receive, the Minister will answer these vital questions. He cannot say that he has not had notice of this. I have repeatedly put down Questions, and questioned him privately, in correspondence, and in the House. I want him to tell us where we are going in our policy in relation to the gas industry, and in relation to pricing policy. We have not been told about this.

I appeal to hon. Gentlemen opposite, who have shown their interest in this matter by staying here while we have been discussing it—and I appreciate their staying, even the hon. Member for Aberdeen, South, with whom I have had words, and I think rightly and justifiably, but I hope that we will have his support—

Mr. Speaker

Order. The hon. Member must confine himself to the Order. I would remind him that he has addressed the House for nearly 50 minutes already.

Mr. Taylor

I apologise to the House. I had not appreciated that I had been speaking for so long.

I should like specific answers to the three questions which I have asked, and which I think are important. Scotland cannot rest under this intolerable burden. I suggest that the House ought not to give the Government these powers until these questions are answered. If they are not, I hope that my hon. Friends, and indeed some hon. Gentlemen opposite, will ensure that before long these questions are answered, and that justice and equity are restored to Scotland.

12.30 a.m.

Mr. Alex Eadie (Midlothian)

I wish that the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) had been a little more helpful in his discourse and had assisted some of us who have questions to ask arising from this Order. I make no apology for speaking at this late hour. I was one of those who sat right through the morning sitting and listened to the debate with great interest, with some of my hon. Friends who did not apologise for saying that they were associated with mining. They made it clear in the debate that they all had some reservations to make, and they called for a national fuel policy, which is outside the terms of reference of the Order.

I hope that we shall not be hypocritical this evening. I hope that when we have had a chance to study the speech of the hon. Member for Cathcart—which lasted for 50 minutes—we shall find that his remarks were more accurate than his mathematical calculations concerning the number of hon. Members attending the House when we last discussed the Order.

He told us that he is very diligent in reading HANSARD. I address this question to some of his hon. Friends who, at the outset of the debate, indulged in great protestations about the number of hon. Members attending at this late hour. I would refer the hon. Member for Cathcart to the report of the debate on 7th June, which is more accurate than his own statistics. The question was posed as to how many hon. Members opposite were present during the debate—

Mr. Webster

rose—

Mr. Eadie

I will give way if the hon. Member will allow me to finish my point. My right hon. Friend the Minister of Power said: Before the hon. Gentleman works himself into too much of a frenzy, will he consider this? Given the importance of the Order which we are discussing and the vast size of the sums involved, does he still think that, even on Derby Day, more than six of his hon. Friends would have turned up?"—[OFFICIAL REPORT, 7th June, 1967; Vol. 747, c. 988.] I assume that HANSARD is capable of correct mathematics—[Interruption.] I accuse the Opposition of being hypocritical in their attitude to the Order.

Mr. Webster

rose—

Mr. Peyton

rose—

Mr. Speaker

The hon. Member must decide which of the contestants he wants to give way to.

Mr. Eadie

I will give way to the hon. Member for Weston-super-Mare (Mr. Webster).

Mr. Webster

I was not here during that debate. I was upstairs in a Standing Committee on the Road Safety (Driving Instruction) Bill, and am on record as having been there. I am grateful to the hon. Member for having given way. Many of my hon. Friends were there, keeping a quorum for the Government back bench Member who was trying to get his Bill through the House.

Mr. Eadie

The hon. Member has given me my case. Hon. Members opposite were not present, and I assume that there were more Opposition Members in the Standing Committee than there were in the House. I accept that the hon. Member cannot be chastised for not being present.

Mr. Speaker

Order. We cannot discuss the presence or absence of hon. Members. The hon. Member must come to the Order which is in front of us.

Mr. Eadie

We are discussing money for our energy requirements and must therefore put the Questions which the Minister put in introducing the Order. There is some inconsistency and what appears to be inaccuracy in the figures which we are given. For example, we are told that the natural gas output will amount in the 1970s—this is a Government estimate—to 2,000 million cubic feet a day, or 25 million tons of coal equivalent. But this gives rise to a difficulty, because the Gas Council talks about 30 million therms a day, which would be 50 million tons of coal equivalent, or double the Government's estimate.

We are talking about the money required and the expected consumption and yield of natural gas, and 50 million tons coal equivalent is a very small proportion of our requirements. I have never felt that coal need fear the competition of other fuel, provided that it has its proper share of meeting our energy requirements.

I must challenge the Government's policy and figures. The Parliamentary Secretary will be aware that there have been accusations that the coal industry is paying for the experimentation on a nuclear engine. The Guardian on 12th June had a headline which read: Scientists Denounce Waste in Nuclear Plant Programme and said that coal would be cheaper to produce than nuclear energy envisaged for the present or near future.

Therefore, are the figures which the Minister gave us inaccurate? Who is right and who is wrong? We must remember that we are discussing spending money on energy requirements. When he introduced the Order, the Minister was pressed by the Opposition about the cost per therm of gas. When the figure of 2½d. per therm was rumoured, my right hon. Friend the Minister of Power said that a decision had not been reached, one way or the other. In that debate my hon. Friend the Member for Ince (Mr. McGuire) pointed out that the cost should be based on 2½d. per therm and he demonstrated that the British coal industry was today able to produce 12 million tons of coal at an equivalent of 3d. per therm, and 127 million tons at less than 5d. per therm.

Mr. J. D. Concannon (Mansfield)

Is my hon. Friend aware that in my constituency there are 10 pits, four of which are producing coal at an equivalent of 2.3d. per therm and that two of these pits produce 1½ million tons of coal a year?

Mr. Eadie

I am grateful to my hon. Friend for those figures. Like myself, my hon. Friend came straight from the coalface to this House and has vast experience of the coalmining industry.

My right hon. Friend the Minister of Power has referred to Algerian gas. If we are to authorise the spending of these vast sums of money, we should be told precisely how the money is to be spent, and I understand that we will not be able to obtain Algerian gas. As we can produce energy from coal on a big scale for less than 7½d. per therm, it is a scandal that we should be doing away with our own resources.

Mr. McGuire

To prevent clouding the issue, will my hon. Friend make it clear that no more than 2 million tons of coal is produced at anything like an equivalent of 7d. per therm? We produce it for much less than that; and my hon. Friend mentioned 127 million tons at between 3d. and 5d. per therm.

Mr. Eadie

I was coming to that. I first wanted to make it clear that to charge the consumer more for energy obtained from outside this country than we can produce it ourselves is lunacy. The Government must explain the reason for this state of affairs. Is it because the former Tory Administration entered into contracts of this description?

The requirements of the nation are sometimes exaggerated. That is true not only of the amount of gas we are likely to consume, but the amount of money that will be necessary to develop it. We should remind ourselves all the time that we produce about 60 per cent. of our requirements from coal.

There is something unrealistic about this debate. Is it right that the House should be discussing approval of the borrowing of £300 million from the point of view only of the Ministry of Power? There must have been some consultation between the Minister of Power and the Secretary of State for Defence, because strategic considerations also are involved. If oil and Algerian gas are cut off, strategic problems arise in connection with building up our indigenous resources. Some of my hon. Friends have argued for years that the whole philosophy of profitability is wrong, and that defence and strategic questions should also be borne in mind. If we are not to get oil because of the Middle East crisis we must take a hard and cool look at the means of supplying the nation's energy requirements—

Mr. McGuire

Would not my hon. Friend agree that the biggest weakness here, and what makes the argument rather lopsided, is the fact that we are discussing only one small part of our total energy requirements, and that only when we have the whole picture can we best determine what is in the nation's interest?

Mr. Eadie

I could not agree more. That point was very adequately put in the earlier part of the debate by the hon. Gentleman the Member for Worcestershire, South (Sir G. Nabarro), who said there was something unrealistic about the discussion and that we should be debating every aspect of our energy requirement. But as £300 million is involved, the House is entitled to be told whether the Minister has had any discussions with the Ministry of Defence. Perhaps the borrowing should be shown under defence expenditure rather than as it is here. I can see hon. Members nodding their agreement. Should not the building up of the nation's indigenous resources be discussed and costed in relation to defence? If the nation cannot be supplied with the energy necessary for its industry and economy, we could be crippled in a fortnight.

Some of us, including myself, have been very aggressive towards my right hon. Friend the Minister of Power and towards my hon. Friend, but unless something happens very quickly I give my personal assurance that we will be very very much more aggressive. We shall roast the life out of them unless we get a sensible policy for our indigenous resources. What has happened so far is that my right hon. Friend has already managed to lose virtually all the good will of the mining fraternity by his pronouncement that 140 million tons of coal will probably be all that the miners will be asked to produce. He must not be surprised if the miners say that it is a gross betrayal by a Labour Government, because some of us consider that such a policy would be a gross betrayal by a Labour Government.

Another thing he has managed to do—the hon. Member for Cathcart will appreciate this—has been to fragment and split up my area so that this week the miners there have said that there will be no more co-operation with the National Coal Board. I never thought that a Labour Government would do this. They have disappointed the miners and accused them of disloyalty so that they say they will no longer co-operate with the Board.

These are very important questions. We should not stay up until this time at night regularly, but we do so tonight because we are determined to fight on behalf of the people we represent. I hope that my hon. Friend the Parliamentary Secretary will reply saisfactorily. I hope that he has taken a warning from this debate and that he will heed it in future, or he will be in for a stormy passage.

12.51 a.m.

Mr. John Peyton (Yeovil)

I am certain that the whole House will appreciate the sincerity and warmth with which the hon. Member for Midlothian (Mr. Eadie) has spoken. I feel certain, also, that the time will come when he and his hon. Friends who feel like him will be able to show their feelings in the Division Lobby.

The Parliamentary Secretary must feel diminutive at this time of night when hearing one of his hon. Friends say in the absence of the Minister that unless something is done very quickly they will be more aggressive. The hon. Member complained that there is something rather unrealistic about this debate. He called for consultation between the Minister of Power and the Secretary of State for Defence. Mr. Speaker, you would not wish me to follow that line of argument, but I am sure that the Minister of Power would be far better left to his own devices than to endanger himself in the horrid experience of consulting his right hon. Friend the Minister of Defence, for whose opinions I have little regard.

The Minister opened this debate the other day as one of those little informal issues which could be disposed of tidily in a morning sitting, in breach of what the Leader of the House had told us. Now at this late hour we are still debating the Order. The Government have only themselves to blame for that. When we introduced the Order, the Minister treated the House to one of those Ministerial prophecies with which no one could possibly disagree and in which he is almost certain to be proved right. He said: I shall almost certainly return to the House with a Bill to provide for still higher limits which will give an opportunity for a much wider debate on the whole subject."—[OFFICIAL REPORT, 7th June, 1967; Vol. 747, c. 978.] That will be next year.

Mr. Edward M. Taylor

Too late.

Mr. Peyton

We are discussing an Order concerning £300 million of public money. If this does not give a full opportunity for a wide debate covering all the affairs of the gas industry, I do not know what does. There can be no gainsaying this. The odd thing is that the House is asked to agree to the means of financing what the Foreign Secretary once described as "a squalid hand out to the Tory Party's oil companies".

Of course, the Government are to be congratulated on having swallowed those words with almost convulsive haste and proceeded with the policies which were initiated by their predecessors. [Interruption.] The hon. Gentleman says "Shame" from a sedentary position. Would he like to say it from a standing position? He carries a little more weight when standing up; not much. We are very pleased that the Government have decided to go ahead with this very important development in the North Sea and to encourage it by every means in their power, but I am and always have been disturbed by the complete lack of generosity which is so inherent in right hon. and hon. Gentlemen opposite that they can never acknowledge either that they were ever wrong or that their opponents were ever right.

They have never given even a word of acknowledgement to the Administration which really hurried up this very important process, whose importance they themselves now acknowledge. Nor have they ever, in my hearing at any rate, paid any tribute to the civil servants who, above all, were responsible for the speed with which this operation was carried out. I had some personal experience of this, and I have many times seen the matter go to many people, but I have never heard a word of credit given publicly and willingly by the present Government to the incredible efficiency and speed with which areas of the North Sea were allocated, and the whole procedure laid out, before any other country, equally interested in the North Sea, even started to get its thinking cap on.

It is a great pity that the Government have been so ungenerous, not only to their opponents—we do not expect any generosity from them; nor cannot we live without it—but to the officials. I am surprised that the Government have never seen fit to acknowledge the immense debt which this country owes to those officials concerned, whose number can be counted on the fingers of one hand.

Mr. Gwilym Roberts

Will the hon. Gentleman agree that it is hardly a sign of generosity on the part of the oil companies that they should be negotiating as they are on whether it should be 2d. or 3d. a therm, when it is estimated by so many experts that the cost of producing this gas, the exploration and development cost over a 20-year period, is probably ½d. a therm? Surely that is not the hallmark of generosity?

Mr. Peyton

I am sure that we are very grateful to the hon. Gentleman for his dissertation about generosity and the attitude of the oil companies in this matter. I have no doubt that, as the debate goes on, at some weary hour of the morning, the hon. Gentleman will be able, Mr. Deputy Speaker, to catch your eye, and I am sure the House will be privileged to hear his contribution.

I wondered this afternoon when I was pondering upon this subject whether anybody had ever really applied his mind to the serious fact that here we are talking about methane in the North Sea, and that the other name for it is marsh gas. It seems not inappropriate that someone should at last draw the attention of the House to this significant fact. I do not wish to dwell on it. But there it is. Neither will I weary the House with chemical definitions. Nor with some of the other things which, the dictionary says, come out of stagnant pools. It would be unseemly if I were to do that.

One of the really serious points here, though, is the question of the huge sums of money which are involved. The Minister gave some very interesting figures the other day. Some of them are repeated in this excellent booklet issued by the Gas Council, "Gas Goes Natural". The Minister very fairly stated that for 1966 alone the estimated shortfall was £69 million—in one year and for 1967, so the Minister told us, we were to be £130 million short; the requirement would be some £130 million more than estimated in 1965. Page 14 of this interesting booklet gives the requirement for the quinquennium 1967–68 to 1971–72 as £1,450 million, of which only £205 million, which is applied to production plant, is not really concerned with the business of producing natural gas from the North Sea.

These are huge sums. Bearing in mind the inaccuracies, for which any Government and certainly the gas industry can be forgiven, what price a fuel policy now? Supposing the present Chancellor of the Duchy of Lancaster had listened to the advice he got from high quarters. Supposing he had done so terrible a thing as to ingest some of the Prime Minister's speeches on the need for a fuel policy, for planning of fuel, and had embarked the country on a fuel policy. What would have been the consequences, with this sort of error being there all the time?

Now the Minister—and I respect him for it—preaches how important flexibility is in fuel policy. It is a notable conversion. He said the other day that the growth of the gas industry over the past two years amounted to 9 per cent. per annum as against an estimate of 7½ per cent. It is apparently estimated that the growth over the next five years will be 12½ per cent. per annum. This is a huge rate of growth for any industry.

The industry is faced with adapting a new material, with all the difficulties of conversion and the rest, and having to judge, in an agonising reappraisal, the moment at which to discontinue its investment in production plant. The possibility of its guesses being wrong or anything other than wasteful is huge. I make it clear that I make no reflection on Sir Henry Jones and those who share his responsibilities. I have immense regard for him. He has served the industry wonderfully. It is strange that Ministers do not find the time to say a word of appreciation of men like Sir Henry, who are not big publicity seekers but whose service to the industry in this period of change is going to be of incalculable importance.

Nothing that Ministers can do or say has anything like the value of service like that of Sir Henry Jones and his colleagues. The nation owes them an enormous debt of gratitude and appreciation. That is not to say that I agree with all Sir Henry's judgments. On North Sea gas prices I have even expressed some slight difference of opinion with the views which, I gather from the Press, he has.

The real point, that cannot be stressed too much, is the enormous investment that will be necessary. The right hon. Gentleman referred to the fact that, over the next five years, transmission and distribution costs will be in excess of £800 million. The fact that we are discussing the destiny of some £300 million gives the Minister an opportunity, which the Government have not yet taken, to deal fairly fully with this important question. We have had very little so far on the subject of exploration. The Minister said in one of those famous phrases that Ministers use when they do not wish to deny something categorically, that there was no evidence that the delay in reaching agreement on price was holding up the physical work of dedevolpment of the fields and the bringing of the gas ashore. That is the sort of partial denial which puts an awkward fact on one side. But if agreement is not soon reached and the price is not encouraging to those who do the drilling, presumably it will have an effect. I do not think that the Minister or the Parliamentary Secretary would deny that.

One of the points that one has to consider, and on which I should like to know the Government's thinking is the price. This would enormously effect the issue in the long run. Have the Government considered the possibility of a two-stage price arrangement in which the price in the initial three, four or five years, as is the case with B.P., is higher than the Government would wish but lower than anything which has gone before in energy? Would it not be reasonable to contemplate paying a higher price for a short period pending a higher load factor on the pipelines, which would encourage the maximum exploration? I believe it to be of the highest importance in the national interest that the country should know what is in the North Sea.

It is no good hon. Members opposite babbling every now and again about nationalising the whole affair. I would like to see some of them going and drilling a hole in the North Sea. The consequences make the imagination boggle. [Interruption.] I hear one of my hon. Friends suggest that this would be one way of producing by-elections, but it would only muddy up the issue. I would not be so cruel as to ask the Government to dispatch hon. Members in that way. We must leave it to their constituents.

Mr. Eadie

Has the hon. Member ever drilled a hole?

Mr. Peyton

No. I am not saying that I am an expert in this, but to a large extent there are only certain people who are competent to do this operation and it seems to me that it would do this country a lot of good to encourage them to get on with it as quickly as possible so that we may know the extent of one of our most important assets.

In his speech the Minister said: … there is ample scope for a commercial agreement which will meet the legitimate interests of all the parties, …"—[OFFICIAL, REPORT, 7th June, 1967; Vol. 747, c. 980.] We must all hope that this will come fairly soon. I think that the Gas Council may have been optimistic in its first bid for a low price. I can understand its desire to achieve, even at this early stage, a price low enough to enable a new fuel to be injected into the fuel economy with speed and thoroughness. The wiser course is, in the initial years, to have a rather higher price.

The Minister told us, in a moment of charming candour, that he has a preference for being criticised by the Opposition rather than by his own party. I am not quite certain as to what extent he will be able to exercise any right of election here, because it is quite clear that, although the Opposition will always treat him with mildness and courtesy, and certainly would not dream of threatening him with the aggressive conduct which the hon. Gentleman the Member for Midlothian hurled at him just now, he will inevitably be caught between two fires.

Another point which I hope he will deal with is the question of storage. This will greatly affect the whole programme. There are seasonal swings in loads, referred to on page 12 of the brochure to which I have already referred. This refers to five methods of dealing with storage—the manufacture of substitute natural gas, varying the rate of flow from the producing wells, underground storage, storage of liquefied natural gas and interruptable supplies to specified consumers. These are ally methods of storage, and what one would like to know is how much of the money that we are now concerned with, the £300 million, is to go into storage facilities. This booklet refers to two underground storage sites, which are under investigation. It says that more sites are being examined. These are things about which we should be given more information.

We have also to consider the effect that the sudden injection of this new fuel into the economy will have upon other fuels. No doubt the Parliamentary Secretary has experience of this. Lord Robens seems to be able to lecture everyone on almost everyone's job. He tells the Government, very freely and publicly, how they should run their fuel policy. I do not doubt that he gives very free advice to his colleagues who are chairmen of the nationalised fuel industries.

What hon. Gentlemen who defend the fuel industry have to face, and Lord Robens has to face this too, is that if the fuel industry is to retain for itself any significant share of the fuel market, it has to be able to show how it is to do that. It is no good simply asking other people to put up artificial defences, which the tides of time and nature will surely sweep away. I recollect saying, when we had just become an opposition, that the coal industry must be content to shrink itself into those areas where it was capable of economic production, where highly capitalised pits could be worked 24 hours a day, on a seven-day week. I remember at the time that some hon. Gentlemen who had spent a lifetime in the pits told me that I did not know what I was talking about, but I notice now that the view is becoming a little more fashionable.

I do not believe that anyone does the coal industry any good by simply saying that these new developments must be held back in the interests of the industry. The most important contribution that can be made to the health of the coal industry is by and from the industry itself.

Mr. McGuire

Would the hon. Member not agree that no other industry in the energy sphere, gas, electricity, and certainly not nuclear power, which has been feather-bedded all the way—and this has come to light recently—has had to adapt itself to such traumatic changes?

Mr. Speaker

Order. The hon. Gentleman has made his speech. He must intervene briefly. We cannot debate the coal industry tonight.

Mr. McGuire

All that I want to do is to point out to the hon. Gentleman that the coal industry does not expect to be feather-bedded for ever and a day. In 1954, under the Tory Government, the Coal Board was commissioned to find out what would be the maximum—

Mr. Speaker

Order. I cannot allow the hon. Member to make a speech on the coal industry in the guise of an intervention. He must intervene briefly.

Mr. McGuire

With respect, Mr. Speaker, if an hon. Member gives way and allows me to intervene, it must be permissible for me to reply as briefly as possible; but if I stray and go wrong, it is fair that I should be called to order. I am trying to point out to the hon. Member that in 1954 the then Conservative Government commissioned the Coal Board to arrive at what was the maximum production—

Mr. Speaker

I am sorry to interrupt the hon. Member, but I am doing exactly what he would ask Mr. Speaker to do. If he wants to intervene and an hon. Member has given way so that he might do so, he must intervene briefly. He cannot make a second speech.

Mr. McGuire

Within the limits you have laid down, Mr. Speaker, I will return the compliment by asking the hon. Member for Yeovil (Mr. Peyton), who has been good enough to give way, whether he can tell me of any other industry which has had Government action forced upon it in the way that the Coal Board has done.

Mr. Peyton

I do not know of any fuel industry which has not had enormous difficulties. If the hon. Member cares to look at the one which we are discussing—the gas industry—he has only to go back in years to get to a time when, if the most intelligent people—I am not, of course, talking about myself—had got round a table with a view to formulating a fuel policy for the future, there would have been complete unanimity that the gas industry was for the scrap heap; it was no good, it had no future. If that was not facing a fairly gloomy prospect, I do not know what it was.

Of course, the coal industry has had, and has, its difficulties. I am prepared to concede that it also has a tremendous emotional past and that there is a great deal too much bitterness in it. It is no good, however, the industry seeking to live in the past, because the future will have no mercy with it if it does.

Mr. McGuire

Would it—

Mr. Speaker

Order. Again, I point out that we cannot debate the coal industry tonight except as it is related to the figure of £300 million.

Mr. McGuire

Would not the hon. Member, who has instanced the writing-off a few years ago of the gas industry, agree that what seems to be the trend to write off the coal industry could equally be dangerous?

Mr. Peyton

I should not pursue that argument, but I am human and I yield to the temptation to remind the hon. Member that only last year we wrote off nearly £500 million worth of capital debt of the coal industry, which should have been of substantial assistance to it. Does the hon. Member wish to intervene?

Mr. Speaker

Order. The hon. Member should not offer temptation to which others might yield.

Mr. Peyton

I am obliged for your guidance, Mr. Speaker, but you would, I am sure, be the first to agree that the hon. Member for Ince (Mr. McGuire) took me slightly away from the rules of order, to which, naturally, I wish to return.

We should have had more from the Minister about the effect upon other fuels of this enormously important development. We also should have had at least a slightly coy reference to the gas price. Our memories may not always be long, but we can all remember that shortly before we parted for a recent recess, there was an announcement of a sharp rise in electricity prices. The reason was given that because of a very mild winter and because of an overestimate in demand which was not realised, there had been a lot of capital expenditure which had not been justified. The only course which the industry was able to put to customers was an increase in price. Here we are, faced with a very steep capital investment programme for the gas industry, and one just wonders if the Government are satisfied that this is sufficiently near to the right tenor and the right balance to avoid a very sharp increase in the price of gas because of expenditure which turns out subsequently to be unjustified.

There is another big step into which I will not be tempted to go in any detail—but I am a director of a manufacturing company—and that is the conversion of appliances. This, added to the rest of the issues which I have raised, means that there is a vast sum of money and national assets in skill and energy going into the great North Sea adventure. The Government owe it to the House to recognise their duty to keep the House informed of the progress which is made. In addressing ourselves to this problem it is incumbent upon the Government to keep their mind clear of prejudices and not, for example, to worry too much about being bullied by Tribune. The hon. Member for Ebbw Vale (Mr. Michael Foot) is not with us, but I would tell him if he were here that I am terrified of the effect he might have on the Minister. He might frighten his right hon. Friend into all sorts of errors of judgment which one would hope the Government would do their best to avoid.

I hope that the Parliamentary Secretary will not make the mistake of thinking that I am anxious only to remain on my feet. The Government can fall into error, and I ask the Parliamentary Secretary and, through him, the Minister, not to treat this matter lightly. No less than another £300 million is being borrowed, and dishing out this Order at this hour of the night is a point of which I hope the Parliamentary Secretary will make a note. I hope that his right hon. Friend the Leader of the House will be told of the opinion already expressed from this side of the House that we do not like this kind of treatment. Of course, I acquit the Parliamentary Secretary, but the Government as a whole do not appear to appreciate the complexity nor the transcendental importance of this issue so far as the country's economy is concerned.

1.23 a.m.

Mr. Eric Ogden (Liverpool, West Derby)

Even at this hour I would say a kind word to my hon. Friend the Parliamentary Secretary and take up the point made by the hon. Member for Yeovil (Mr. Peyton) that this Order has been brought in at a late hour of the night. The hon. Gentleman may have his little frivolities, but at least he is consistent; for, on 8th December, 1964, he complained when a similar Order was introduced at 10.20 p.m. The hon. Member for Barkston Ash (Mr. Alison) complained on 7th June last when the Order was introduced in the morning; so, it would seem that it is wrong in the morning, and wrong at night. The hon. Gentleman complained on that occasion that it was wrong for the Order to be debated in the morning because the House had been up all night. This type of Order began in 1961, and when the then Conservative Minister of Power introduced one at 11.6 a.m. there were no complaints—and that was on a Friday morning.

Having made that point, I think that hon. Members will agree that it is unfortunate that a debate on the gas industry and the fringe areas should be taken almost by chance because the Gas Council has come to the limit of its borrowing powers and has to be revitalised with extra funds. I suggest that it should be a regular part of our Parliamentary business to have at least one day a year devoted to debating each nationalised industry, with two or three further days set aside for us to consider how they are related one to another.

If we had the opportunity, we might want to go into detail on this Order about the structure of the Gas Council, the composition of area boards, the capacity of the industry, the effectiveness of its operations, and the validity of the Gas Council's advertising claims. For example, to repeat something which has been said outside the House, "High Speed Gas is simply an old flame tarted up a little." Some of its claims are misleading, and might even be referred to the Advertising Council for comment.

However, that is not to deny the real progress which has been made by the Gas Council in the last six or seven years. The industry was considered to be an old, dilapidated and dying one, but it has made a tremendous recovery. The new look began on that Friday morning, when the then Minister of Power announced that he had authorised the Gas Council to begin the importation of natural gas from the Sahara, and the forecast was that one-tenth of our gas supplies would eventually come from that source.

Have recent events in the Middle East and North Africa resulted in any break of supplies of natural gas from Algeria? For a long time now, we have had contracts with the Algerian Government for the supply of methane. Frozen methane ships have been provided, and so on. We are told that oil supplies have been stopped from North Africa, but there is some doubt about whether supplies of natural gas from the Sahara have stopped. Even more important, I should like from the Parliamentary Secretary an unequivocal assurance that his Ministry has accepted the lessons which we have learned in the last few weeks from the events in the Middle East, that the only secure, reliable, and dependable sources of fuel are those which we have in the British Isles and the waters surrounding us. They include hydro-electricity, coal, natural gas, and atomic energy. However safe supplies of fuel from abroad may seem, they can never be 100 per cent. reliable.

I want now to take up one point which was referred to by the hon. Member for Yeovil. I always listen carefully to what he has to say, though I do not always agree with him. He makes many points which are always interesting to read afterwards. However, he has no cause to preach efficiency to the coal industry. I do not think that he meant to, but people outside may read that into what he said.

Can my hon. Friend tell us if any part of the funds which are now to be made available will be used for the provision of underground natural reservoirs for methane from the North Sea? I have seen it reported that final tests are being made by the Gas Council on the possibility of building Britain's first underground reservoir in a porous rock formation at Sarsden, near Chipping Norton, in Oxfordshire. Such a natural container will give rise to no town planning difficulties, as there would be in the case of a container above ground. It is estimated that by drilling two or three manholes, a reservoir could be provided to hold many millions of cubic feet of gas. This is to provide a storage space so that the gas can be stored down below in the summer time and leaked out again later to meet demand.

I would point out to the Minister that there is a strange anomaly here. The gas is already in a natural reservoir under the North Sea; why spend £5 million of taxpayers' money putting in another reservoir on this site? I expect the argument in reply is that if we can guarantee continuity of pressure through the pipelines we can ensure steadier supplies and get a better price.

Mr. Palmer

Would it not be wise to burn some in the power stations?

Mr. Ogden

No, with respect to my hon. Friend, I think this is a most wasteful way, and I will return to that point later. I am just making the point that it is said that we can use the taxpayers' money to store the gas underground in one reservoir when we already have it stored underground in another under the North Sea. This does not seem to be the best use to which to put the taxpayers' money.

I should also like the Minister to have a look at the real difficulty which lies in the leases and licences allocated by the previous Administration. When these leases and licences were made, I think I am right in saying they were for periods of seven years for exploration and 30 years for exploitation. We could make a study of how much it would cost the Exchequer to buy back from the companies, on full and fair terms of compensation, the leases that have been let for exploration or exploitation, so that supplies can be best used in the national interest.

Particularly I would make the point that if I—and it is highly unlikely—had a hole in the sea bed of the North Sea with gas down there, and I had only got the right to exploit it for 30 years, I would want to make very certain at the end of the 30 years that there was no gas remaining in that area. I think a study could well be made with the object of finding out the cost and the feasibility of getting back into national control the areas covered by those leases that have been let out.

I hope the Minister may possibly be able to comment on the progress of the £100 million national grid that is to be laid. The hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor)—and I would not comment on the content of his speech though I congratulate him on the manner in which it was delivered—spoke about black dots and red lines. It was, of course, the grid to which he was referring. This is supposed to cost £100 million and to be completed by 1970. Could we have some reference to its progress?

Can the Minister say how effective the conversions of town gas appliances to natural gas have been in Canvey Island? I understand it took 250 fitters about 70,000 man hours to complete this particular operation and within a month 7,000 complaints had been received about the conversions of appliances and 2,500 about gas leaks. How long would it take to convert the 12 million households of Britain to the new system?

I finally come back to the point that this is not the best way—at this hour or in these circumstances—for the national fuel industry to be discussed. We should have opportunities from time to time throughout the year—full days—on which to consider matters of such importance.

1.34 a.m.

Mr. David Webster (Weston-super-Mare)

The hon. Gentleman made a point regarding the length of life of the gas field, and he was talking of his own hypothetical gas field. But I think this is one of the points which the House would wish to consider very thoroughly before we decide on prices.

Having been to Holland and seen the Dutch company N.A.M.'s concentration on pricing, I realise that it is so complicated and difficult when it is tied up with a hypothesis that the field will still last approximately 40 years. I think that this is a sensible basis on which to work, and I should like to hear what the Minister thinks about it. This is a difficult problem, because if we make it for more than 40 years the type of fuel might become redundant because of the reduced cost of nuclear power, and if it is—

Mr. Edward M. Taylor

I hope that my hon. Friend will look at the estimates given for the price of nuclear energy. All the past estimates have proved to be wildly inaccurate, particularly in relation to the Hunterston plant.

Mr. Webster

I used to be the rapporteur on nuclear energy matters in the Council of Europe. One problem which worried us was the rate of amortisation of these tiny capital-intensive operations. My hon. Friend is trying to seduce me from the straight and narrow by raising the question of nuclear energy. I do not think that I must allow myself to be tempted out of order by him. We in this country write off our nuclear power stations in 20 years—

Mr. Speaker

Order. The hon. Member must correct himself. I thought he was going to, but he is now wandering off.

Mr. Webster

My hon. Friend did rather take me off the line.

We also have to consider for how long we will use natural gas as a form of energy, because this is part of the cost. If we give the exploring firms a reasonable price, they will develop the supply quickly, but if we impose a price below the 3d. level, they will not do so, and much of the resources will remain at the bottom of the sea instead of being used. It is, therefore, a fine judgment, quite apart from some of the political doctrines involved, and the sincere and honest points which have been put forward by the coal mining industry.

There is, too, the question of the amortisation of the vast expenditure which the House is being asked to approve. I must add my protest to that of my hon. Friend the Member for Yeovil (Mr. Peyton), and agree with what was said by the hon. Member for Liverpool, West Derby (Mr. Ogden), that we do not like morning sittings. We are supposed to discuss non-controversial business during morning sittings. One can hardly say that spending £300 million of taxpayers' money is non-controversial. I am not sure that the early watches of the night is the right time to discuss this matter either, and I agree with the hon. Gentleman that the Government should provide time to discuss this more adequately during the day.

Prior to the 1965 Gas (Borrowing Powers) Act the level of the borrowing power was £650 million. It was then raised to £900 million, with a top level of £1,200 million. I appreciate that the capital requirement of the industry is about £1,450 million, and that some of it is generated within the industry, but this is a tremendous increase. I appreciate, and pay tribute to, the way in which the Gas Council went ahead and developed the fields and exploited our indigenous fuel. Perhaps I might tell the hon. Member for Midlothian (Mr. Eadie) that this is an indigenous fuel, and it is right that we should exploit it. Events in the Middle East have shown that it is right to exploit it quickly.

The question of price is a matter of fine judgment. At the moment it is rather a political judgment as well. When one reads again the document "The Growing Gas Industry", produced two years ago at the time of the Borrowing Powers Bill, and the Gas Bill, two Measures which went through the House at about the same time, it is almost like reading ancient history. It is very interesting to compare the forecasts made then with what we are doing now. Development is so fast. One cannot but have sympathy for those who are trying to arrive at a good and sound economic judgment. This is what the House must do.

Some hon. Members have spent their lives in the mining industry and are here to defend the rights of those in that industry. It is right and proper that they should do so. There are also those who take the political view that all North Sea gas should be nationally controlled. I accept that that view exists. I happen to oppose it. I would have thought it much better for the Government not to involve themselves in risk exploitation. They should leave it to the companies to make the attempt—but those companies should be paid a realistic and reasonable amount to take the risk.

My hon. Friend was talking about the amount set aside in the Order, or the document accompanying it—£190 million for the adaptation of existing space heating equipment, and equipment both in the home and in industry. It is a considerable amount. Can the Parliamentary Secretary say how much this will cost in the next few years? We know from what the Minister has said in the document "Gas Goes Natural" that we shall have another Bill next year, and shall have to debate the matter again. It is becoming an annual matter.

Like others who resisted the Gas (Borrowing Powers) Bill in 1965, and sought to amend it afterwards, I thought that it was wrong to bring such a Measure in at a time when the industry was undergoing such acute change. I hope that we shall be given an indication how much of this £190 million will be spent in the next five years. I shall be grateful if the Parliamentary Secretary will let me have a note later, if he cannot give me an answer tonight.

The hon. Member for West Derby raised the question of underground capacity. My hon. Friend the Member for Yeovil will recollect that when we discussed this matter in the 1965 Bill my hon. and gallant Friend the Member for Winchester (Rear-Admiral Morgan Giles) was very reasonable in trying to assist the Government and to show his constituents that this type of gas storage was safe and reasonable. But is it still necessary? Must we do what is almost the equivalent of what the Americans are doing when they get gold from South Africa and take it to America and bury it at Fort Knox? We are running a risk in taking natural gas from Algeria and burying it in Winchester and in the Cotswolds. I wonder whether this is right, in view of developments since 1956. We should be given the relevant figures.

We have heard talk about substitute natural gas. Everybody should know that there is no substitute for natural gas. Could we be told how much will be required; how much it will cost, and how much equipment is needed to make it? I am grateful to see my hon. Friend the Member for Ilford, North (Mr. Iremonger) coming into the Chamber. I do not know whether he is going to talk about the Order.

I notice that at the time of the publication of "The Growing Gas Industry" in 1965 the Parliamentary Secretary to the Ministry of Technology—then Parliamentary Secretary to the Ministry of Power—produced a document called "The New Economy", referring to the use of computers. Some of the documents we have before us refer to a computer grid within the industry. How much this will cost I do not know. I should like to know whether the whole economy of the country can be controlled by computers, including those used in the gas industry.

In view of the number of documents that my hon. Friend the Member for Ilford, North has brought in I had better cut my remarks short.

1.45 a.m.

Mr. John H. Osborn (Sheffield, Hallam)

Although I did not attend the previous debate on the Order, and thus rise with diffidence, I have spoken on gas before, and made by maiden speech on the subject.

What I debated in my maiden speech and what the Conservative Government of the day prophesied is materialising in my constituency, so the Order is significant particularly to the Sheffield area, where the pipelines which are the subject of the Order are being laid rapidly. Construction work and immense excavations can be seen around the city. Bearing in mind the lateness of the hour and the fact that my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) is waiting to make an important contribution, I will curtail my speech—

Mr. Ridley

My hon. Friend need not hurry: the night is yet young if he wants to speak at length.

Mr. Osborn

I thank my hon. Friend but do not want to speak for too long.

Under the Order, the Gas Council wishes to borrow an additional £300 million. As I said on 8th December, 1964, in the debate on Gas (Borrowing Powers) Order also at the late hour of 11.48 p.m.: We are trustees for the taxpayer and the taxpayer's money."—[OFFICIAL REPORT, 8th Dec., 1964; Vol. 703, c. 1491.] This is public money. The 1,300 miles of pipeline will be 24 inch or 36 inch in diameter and will cost about £200 million, although some hon. Gentlemen opposite have spoken of £100 million. This vast sum is being incurred.

The accounts show that the industry's capital assets, on 31st March, 1966, were £893 million. The valuable publication, "Gas Goes Natural", which I would recommend to a wider audience than this House, and for which the Gas Council deserves congratulations, shows that the average capital outlay for five years has been £78.2 million and the total projected capital investment is £1,450 million, which means that, allowing for depreciation and so on, double the amount invested in the industry at present will be spent on it in the next five years. We, as the taxpayers' trustees, must be satisfied that this vast sum will be well spent.

The first essential is that the rate of expansion predicted in "Gas Goes Natural"—we were talking in previous debates of 10 per cent. and other figures were predicted—will materialise.

In the Sheffield area heat treatment is a problem. Calorific value is one feature of the gas, but constant flame size is another. This is a mere problem for industrial rather than the domestic consumers because flame size is vital in certain heat treatment processes especially where the control is sensitive. To what extent is the transition from manufactured town gas—from reformed gases shipped from Africa and other sources—to North Sea gas supplied as natural gas providing a variable which is tolerable to industry? The flame size differs with the different type of gas as today we have gas with a lower carbon monoxide content, with a variation in hydrogen content and varying methane content. Industry requires a gas with stable and consistent properties. To what extent is the transitional period proving difficult for industry and to what extent will the forecasts for natural gas requirements demanded by industry have to be altered?

We are debating this subject in a period of uncertainty. My hon. Friend the Member for Yeovil (Mr. Peyton) mentioned the problem of waste. We are embarking on a huge capital investment programme, on the part of the Gas Council and the oil companies, and the price for further natural gas supplies has not been agreed. It is not often that industrialists or companies go ahead with a project of this immensity without an agreed price having been reached. There have been arguments about whether the price should be 2d. per therm or more or less, and it has been stated in this debate that 2½d. or 3d. would be too expensive.

One feature of these negotiations is that a single large consumer is negotiating with virtually one supplier; that is, the Gas Council, with the grouping of oil companies supplying gas from the North Sea. Would not it have been better to have had a number of customers buying from a number of suppliers, with, of course, a degree of planning and supervision by Government, rather than the stalemate which now exists? One must wonder whether we are paying too high a price for having a nationalised gas industry.

I understand that permission under the town and country planning legislation has been given for developments at Bacton on the Norfolk coast, and that the construction of the pipeline is going ahead well. However, we still rely to a certain extent on frozen petroleum products coming from elsewhere. A good analysis is provided in "Gas Goes Natural" of how money is spent on consumer services. The production tables in this document show that 791.8 million therms come from refinery gas and liquefied petroleum gas, 409.7 million therms from coke oven gas and 289.1 million therms from other gas, including natural gas. This is part of the breakdown of 4,125 million therms available.

Mr. Deputy Speaker

Order. I find it difficult to see how any of this arises on this Order.

Mr. Osborn

I have stated the amount of gas which is coming from outside this country, other than North Sea gas, and which is being shipped in the "Methane Princess" and other vessels. It would be no good spending money on new capital projects if it is not known where our raw material is to come from, so we should have an explanation from the Parliamentary Secretary about alternative sources of supply of frozen or liquefied petroleum gases and how reliable is the supply from Algeria.

We may find, and I am sure that his Ministry has thought of this, that outside circumstances have made the normal commercial progress somewhat less certain. I am dealing with uncertainty at the moment, so the second aspect on which I want to touch is what certainty we have of continuity of supplies of liquifield petroleum gas or natural gas from other sources until we can harness and secure adequate supplies from the North Sea. We want to know about our supplies from North Africa and elsewhere, and it is reasonable that I should ask these questions.

I said that I would not prolong my remarks. I have welcomed the growth of the gas grid. I have welcomed the continued and expanding use of natural gas. There are problems to be overcome. As the Minister is allocating considerable sums to the gas industry, it is very reasonable that he should be asked to answer these two main questions, and the, others that have been raised during the debate tonight and on an earlier occasion.

1.56 a.m.

Mr. Edwin Wainwright (Dearne Valley)

This has been a rather long debate on a very small Order—[HON. MEMBERS: "A lot of money."] It all depends on what is termed a lot of money. I have sometimes found that 20s. is a lot of money, and there are some to whom it would be a tremendous amount. But with a huge business such as the Gas Council controls £300 million will probably be too little for its future work—does the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) wish to intervene?

Mr. Edward M. Taylor

I was just trying to convey to the hon. Gentleman that I did not agree with his remark that £300 million is an insignificant amount. It is an enormous amount.

Mr. Wainwright

I said that £300 million would probably be found to be insufficient for the work to be carried out.

Mr. Taylor

The whole fact of the debate is that £300 million may not be enough for the work to be done. We on this side are asking what work is to be done—and we do not know.

Mr. Wainwright

If we find gas in the North Sea and convey it so far, and do not continue with pipelines and conversions and all the other things, it is like bringing fuel to a house and not having the means of lighting it. I had thought that the hon. Gentleman would have realised that but, if he has not, we had better have a little chat on the subject at some time in the near future.

Like most other hon. Members who have taken part in this debate, I give the Order my wholehearted approval. It is essential, and must be given the full blessing of the House, so that we can take advantage of the indigenous fuels that have been found in the North Sea. Hon. Members opposite have mentioned what they call a lack of haste in settling the price of natural gas and have pointed out how quickly the Tory Government in their last few months passed the Measure that licensed the various oil companies to search for gas. The hon. Member for Yeovil (Mr. Peyton) mentioned this, and was quite proud of it. Everybody knows why it was done. It was a political move. The licences were issued just before the 1964 General Election to make certain that the friends of hon. Members opposite had power to search for gas in the North Sea.

Mr. Peyton

I know that the hon. Member loves indulging in these nightmare whimsies, but he must depart from the habit. He knows perfectly well what happened. The Conservative Government, quite openly and above board, allocated licences in accordance with the Act of Parliament. They did not waste time. The point was to get as much exploration carried out as was possible. The Opposition of the day, which the hon. Member supported, made a great fuss and palaver about how they would tear the whole thing up when they came into office. They said that this was a squalid hand-out. The sort of allegation which the hon. Member is making is not worthy of him. We knew that if they got into power the duffers who followed us would waste time and we would get nowhere.

Mr. Wainwright

I do not stress the point too much, but the experience was there and the knowledge was there. Everyone knew that there was a great probability of gas being found in the North Sea. Thank goodness that there is, and that we shall be using it in the very near future. That is the reason for this Order. If we are to take full advantage of the resources of gas in the North Sea, the £300 million which the Order gives the Gas Council power to borrow will not be too large an amount.

Hon. Members opposite have been querying why the money should be granted. We know why they query it and why they have staged a full length debate on this issue, although when the time comes they will support this Order. They should be careful when they criticise the way in which the money is to be spent, because they are criticising not the Government but those on the Gas Council.

Mr. Peyton

If the hon. Member had been present when I made my speech he would have heard me express my profound admiration for Sir Henry Jones. I went out of my way to praise him. The hon. Member should be careful about what he says is in other people's minds.

Mr. Wainwright

That interjection does not amount to a great deal. It is all right to say to someone, "You are an excellent gentleman; your efficiency is marvellous" and a little later to criticise the actions of that individual. I advise the hon. Member for Yeovil and his hon. Friends to be careful of how they make statements criticising the spending of this £300 million.

Mr. McGuire

I ask my hon. Friend the Member for Dearne Valley (Mr. Edwin Wainwright) not to fall into the error, such as when the hon. Member for Yeovil (Mr. Peyton) gave way to me and I took up the point, of making oblique, disparaging remarks about the head of one nationalised industry and praising another. I hope that he will not fall into the error of praising one to the detriment of another.

Mr. Wainwright

Well, of course, each industry has to stand on its own feet—

Mr. Peyton

Hear, hear.

Mr. Wainwright

—and we have said that for a long time; but sometimes some persons' feet are on shifting sands and they have got to be supported. Therefore, in so far as they have to be supported, they need extra money—perhaps grants: we know industries run by private enterprise which, from time to time, get grants from the Government.

North Sea gas is an indigenous fuel. We ought, therefore, to make certain it is used to the fullest extent. I am not too happy about the speed of the settlement of the price. I may be dissatisfied with the price when it is settled, but I think it is well nigh time the Government decided what they are going to pay for this gas so that everybody knows, and industry and commercial users can speedily be enabled to have the gas. Why is the Minister not moving so quickly? What is holding him hack? Is it because there is too great a difference existing between the producers and the Gas Council on this issue? My right hon. Friend ought to look into that matter very quickly and try to arrive at a settlement.

Of course, even if the price of the gas from the producer is to be much below that of that from Algeria, the cost to the consumer will have to be similar to that being charged for other forms of gas now being used. Let us look at Algeria. I think I heard one of the hon. Members opposite mention it I am not certain now which hon. Member it was. It was their Government who, when they were in charge, formed the contracts, and the price we were paying for gas there was 4½d. in Algeria, 6½d. per therm landed price in this country—far greater than what will be paid for North Sea gas. The contract is for—I think—15 years. That will cost the Gas Council a tremendous amount of money. It was a Conservative Government who gave the permission for the contracts to go through. Had it been a Labour Government, then during this debate there would have been strong criticism by hon. Members opposite about these particular contracts. It is no good anybody being wise after the event, and I do not want to criticise those contracts too harshly because at that time we did not know about North Sea gas as we do now, though it had been discovered, and on the Continent was being used in industry.

Mr. J. H. Osborn

I do not know whether the hon. Member is criticising the point I put forward. We had this contract. Is this going to be implemented by the other side because of international considerations? Are there certain circumstances in which the Gas Council might be released from that contract? It would be very useful to have the views of hon. Members opposite.

Mr. Wainwright

I will come to that point now. It was to have come later in my speech, but I will come to it now.

As things are in the Middle East, as this difference exists between the Arab countries and this country, oil will be cut off; indeed, it is already cut off, as we know. There has been a threat to cut off gas supplies. If Algeria does that, Algeria will break the contract. Though I cannot speak on behalf of the Government I would say this quite bluntly to the Minister, that he ought to see that a message is conveyed from our Government to the Algerian authorities, that if they do break that contract by not supplying gas we shall take it that we are entitled to break the contract in its entirety, which, I feel sure, would save this country some money. It would save this country money but I would not do it hastily and without careful consideration, because I believe that it is up to all of us, no matter on which side of the House we sit, to try to create a better relationship between the Arab States—not forgetting Israel—and Britain. But if such action were necessary I would take it. In the Middle East—

Mr. Deputy Speaker

Order. I must ask the hon. Gentleman not to pursue that line of argument. We are concerned only with whether the Gas Council should have power to borrow another £300 million.

Mr. Wainwright

I am grateful for that correction. But one must bear in mind that the question of Algerian gas can have some bearing on the amount of money the Gas Council may be able to spend on making certain that North Sea gas is brought to this country.

Mr. Webster

A large installation on Canvey Island processes methane from Algeria. Does the hon. Gentleman feel it possible to reduce the intake of that methane and not proceed with the construction of other such terminals? Would that reduce the borrowing?

Mr. Wainwright

That could be so. One has to consider whether the gas would continue to flow from Algeria and whether the terminal equipment could be be used for North Sea gas. I believe that it could be used for it quite easily. I am sure that the Gas Council will consider all these aspects and that its judgement will be wise.

I should like to have continued the debate. I should not like hon. Members opposite to think that they had said all that could be said about the Order. These borrowing powers will be used for the benefit of the nation. We have also to consider other forms of fuel because it is essential, in granting these powers, to ensure that we do not allow them to be used to the detriment of the nation in so far as they hurt our other sources of power, coal and nuclear energy. I do not accept what some of my hon. Friends say about nuclear power. Through coordination of gas, coal and nuclear power, with oil coming in at the back, we can make a fuel and power policy for the country.

Mr. Eadie

The mining industry does not object to a 50 million tons coal equivalent. But in The Guardian on 12th June an article dealt with the question of nuclear energy, pointing out that it was more expensive to produce than coal. The point is that coal is an indigenous resource which should be used rather than that we should have to pay such a ridiculous price for nuclear power.

Mr. Wainwright

My hon. Friend must realise that it is not always easy to cut round so many corners to get to the point. I notice that you, Mr. Deputy Speaker, have been watching me keenly and acutely. My hon. Friend said something about gas being wasted. Everything that is consumed can be said to be wasted eventually. The issue here is the economy of the country and the different sources of energy which can be used to the advantage of industry and the users of power.

Nuclear power will, of course, be very important in the future. I do not think that anyone is entitled to retard the developments which are taking place in that form of energy which, in the next two or three decades, will be the cheapest form of fuel throughout the world. The development of nuclear power could be held back for a little in order to save the nation some money, but it must not be retarded so much that it becomes dearer than gas from the North Sea. We have a tremendous lead in nuclear energy and I hope that we will retain it. But it is another form of power which will do great harm to the coal mining industry.

I know that I cannot continue on this line any longer, Mr. Deputy Speaker—

Mr. Deputy Speaker

I think that the hon. Member has gone on long enough. He must come back to this Order.

Mr. Wainwright

I was going to say something last Wednesday about the coal mining industry, but I will save it for the next similar debate which will be on the coal mining industry. We in the industry which I represent wholeheartedly support the endeavours of the Ministry of Power to ensure that gas from the North Sea is brought into the country as soon as possible. We also want to see the Minister use the energy he uses for this to make sure that we have a fuel and power policy, so that each of the sources of power will know the part they have to play. Each of these sources must be used to its fullest extent taking into account the economy of the country, the cheapest form of power, and the social obligations which we have to those whose industry may be taken away. If the Minister bears all this in mind we will give him our wholehearted support.

One hon. Member talked about being aggressive. I am being kind and gentle, but I must warn the Minister that if he does not give the coalmining industry due consideration I will use all the weight I can in criticising him for his failure to look after those people who have made a tremendous contribution in the past to the economy of the country. I give this Order my blessing.

2.20 a.m.

Mr. Nicholas Ridley (Cirencester and Tewkesbury)

The hon. Gentleman the Member for Dearne Valley (Mr. Edwin Wainwright) made a most thoughtful and interesting contribution, and I would defend his right to make it, on this vital question of the future of our energy resources. It is a peculiar thought that morning sitttings were devised to save us from having to debate these important matters at this hour of the night.

If I may make one observation on that, it is that, by my calculations, if we had embarked upon a normal afternoon's debate on this very important Order, we would only just have arrived at 8 o'clock. We would have expended the same amount of time as we have expended during the morning and evening sittings, so that my hon. Friends, and hon. Gentlemen opposite, who have contributed to this debate, in equal measure, have not yet had the equivalent of an ordinary day's debate. The hon. Gentleman the Member for Liverpool, West Derby (Mr. Ogden), said that we complained both of morning and midnight. Could we please have an afternoon next time?

I regret the absence of the Minister, who has not attended the second half of this debate at all. Those of us who were on the Steel Bill Committee remember that there were, on occasions, midnight Cabinets, which he had to attend—

The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson)

The Minister is ill, and that is the reason why he left early.

Mr. Ridley

I am very grateful to the hon. Member for having said that, because I was not aware of it, and it should be on the record, so that those of us who wondered where he was now know.

I should like to add my tributes to the leaders of the gas industry, particularly to Sir Henry Jones, and if I have something critical to say it is a criticism of the Government's handling of this situation and not of the industry, or its leadership, because I believe that this tremendous opportunity in North Sea gas has not been entirely correctly exploited in the last few years.

Before coming to that, I want to make one constituency point. My constituency is very near to Sarsden on the boundaries between Oxfordshire and Gloucestershire, and I should be grateful if the Parliamentary Secretary will tell us a little more about the procedure for storing gas, because it is obviously of great importance to the inhabitants. It is not so much a question of the danger—I entirely agree that there is no danger whatever from this—but we do not want to have a lot of eyesores and structures cluttering up the surface of the ground. This would be resisted in an area of outstanding natural beauty, such as the Cotswolds. I hope that the greatest attention will be paid to that.

I was interested to read in the document "Gas Goes Natural", on this question of storing gas: The use of stored liquefied natural gas is gaining wide acceptance in the U.S.A. for peak shaving purposes. I have heard of shaving by electricity, but I did not know that one could shave by natural gas, and it would be interesting if the Gas Council, at a later date, would tell us how this exciting new dimension works.

Mr. Patrick Jenkin

Exactly the same thought struck me, but I wondered whether this was to do with singeing the King of Spain's beard.

Mr. Ridley

I had not thought that we would be getting such things from Spain. We seem to get them from many countries, but not Spain. We will, no doubt, find out in due course about this. The Minister has said that there will be at least 2,000 million cubic feet of gas a day. The Chairman of the Gas Council has said that it might be as much as 4,000 million cubic feet a day. Other people, with knowledge of the situation, feel that it could be even greater still. Whatever the quantity, it is a considerable amount which will be available.

When one considers that at present we use only the equivalent of 1,000 million cubic feet a day, that means that we are to have either double or as much as four times that quantity. Therefore, it would be difficult to find uses for this very large quantity of gas, at least in the near future, although in the long term uses will be developed.

If we are to use anything like this quantity, it will not all go into the ordinary Gas Council networks. It will have to go into power stations and direct to large industrial users, otherwise we will not use it up. Now that we have this wonderful asset, let us plan to use it. This is an occasion for rejoicing, for being jolly. The faces of gloom on the other side of the House throughout the whole debate have been one of the most depressing things about one of the biggest discoveries of the century.

Mr. Eadie

The hon. Member is referring to resources. Is he aware, for example, of the statement by Lord Wynne-Jones, head of the chemistry department of Newcastle University, when he expressed his view in the other place that if we are able to get a rate of production of natural gas corresponding to, let us say, 4,000 million cu. ft. per day"—

Mr. Deputy Speaker

Order. The hon. Member must not quote what was said in another place.

Mr. Eadie

The point was made in that statement that there was a great deal of speculation. If we can get a find like that of the Groningen field in Holland, which is extremely doubtful, it can last for only about 25 years if we use it, as the hon. Member suggests, at the rate of 4,000 million cu. ft. a day. Therefore, although we on this side welcome it, it is a limited resource.

Mr. Ridley

I have with me a copy of the noble Lord's excellent speech. He sent a copy to me as well as to the hon. Member for Midlothian (Mr. Eadie), and we are both the wiser for it. I notice that the first page of the noble Lord's speech is devoted almost entirely to the Report of the Ridley Committee on fuel supplies. I cannot help feeling that it needs to be brought up to date.

Mr. McGuire

In the phasing-in and making the fullest use of natural gas, the hon. Member has suggested its use in industry. Would he prefer that oil, which is now used in power stations, should be replaced by natural gas? If he does, he is on a winner. It is easier to convert an oil-burning than a conventional coal power station. Is the hon. Member advancing the argument that we should phase in natural gas and phase out oil in power stations? Economically, this is sound.

Mr. Ridley

I will develop my argument about what we should do. Whatever happens will be as a result of the right decisions being taken because of the interplay of the market and oil prices. I would not be one for planning who should burn what in what appliances.

The point which I was making before those two interruptions, which must necessarily prolong slightly what I have to say, was that this is not an occasion for depression—"revolution" was the word used on two occasions on the last occasion when we had this debate. It is more an occasion for joy and gratification.

Natural gas—methane—is not a secondary fuel such as town gas or electricity. It is a primary fuel, such as crude oil or coal. It can be burnt directly, but it is almost certainly in need of some form of treatment or alteration before it is suitable for any form of consumption in burning appliances.

Hitherto, the Gas Council and the gas boards have been distributors of secondary fuel competing directly with other secondary fuels, and principally electricity. What is now proposed is to add to the Gas Council's responsibilities the total provision and supply of an extra feedstock. This reinforces my point that methane is a primary fuel, because we talk about feedstocks—naphtha, coal and methane. These are the feedstocks for the secondary distributed energy supply which is done by the gas goards. So, we are going now to give to one of two main competing fuel industries a total monopoly right of supply of a primary source of energy—that is, North Sea gas, or methane from Algeria—and I hope that we shall not buy Algerian methane if we can avoid it without dishonouring our contract.

The Gas Council will become the sole distributor of this North Sea gas as well as of traditional supplies such as of town gas, but this monopoly is no new thing, because for years the Gas Council has discussed whether or not it would be wise for it to undertake the provision of the feedstock supplies. I have no doubt at all that all of these calculations are upset by the fact that we are introducing into our energy market a large and new form of primary energy. The area boards, whose responsibility it is to supply the large number of consumers who are connected to the boards' mains, should be in the position to shop about for the cheapest forms of feedstocks. Some hon. Members may say that one must think of the plant available to the different boards, but some have the plant, and some will have to install new equipment.

The point is that they should not be forced to take methane or to buy natural gas but should be allowed to buy the cheapest feedstocks which are available. That is what should happen, but instead of that we have the Gas Council dictating how much, and where, and when, the area boards shall take of natural gas. There are 12 area boards, and there could be no better opportunity—

The Deputy Speaker

The structure of the area boards cannot possibly arise under the terms of this Order.

Mr. Ridley

I was attempting to point out, Mr. Deputy Speaker, that the best and most economic use of our resources would be made if the area boards were allowed to exercise their own discretion—or, as I have just said, to shop about. We might then introduce competition into the different parts of the gas supply industry, and the area boards could properly deal with technicalities, practical security, and so on.

There is another grave objection to the course being pursued by the Government, and that is that the Gas Council is the monopoly supplier of methane and will consequently supply not only its own boards in the areas, but will also supply its main rival, the electricity generating industry. To put two competitors into the position where one of them controls the supplies of the raw material of the other is, I suggest, bad business practice, as well as being completely opposed to all known anti-trust legislation in other parts of the world.

I believe that we should take the Gas Council out of North Sea gas. What, then, should we do? The Labour Party has published an account of some meetings of its National Executive at which it was proposed that there should be set up what is called a national hydro-carbons corporation. I am not clear what it is to do, because I have not been able to obtain the report, but, clearly, it is relevant to this discussion.

A national hydro-carbons corporation would go some way to meeting my point. It would be able to take over the marketing of this primary fuel and could sell it to industry direct, to the gas boards or to the electricity boards, depending upon who offered the best price and on whether the supply and demand conditions were right.

However, I should be against such a corporation, because it would seem to me to be putting the public, nationalised industry into a position which could very well be occupied by private industry. The better solution to the problem which has to be faced eventually would be, instead of putting in this extra State body, to put in a whole row of competing wholesale merchants. They exist already in the consortia and the oil companies. The simple device of allowing the consortia and the oil companies to sell direct to customers, be they gas boards, electricity boards, private industry, or any other wouldbe consumer, including export—and why not export our natural gas if we have too much of it for the coal mining lobby; let us export it and make a profit—

Mr. Eadie

How can the hon. Gentleman say that we on this side have said that we have too much of it, when we have tried to point out that there will be only about 50 million tons of coal equivalent taken away in 1970, if we agree with the Gas Council's Report, and when the energy requirements of the nation by that time will be another 100 million tons of coal equivalent? How can it be argued that we on this side see any danger from natural gas? We have repeated this point about half a dozen times.

Mr. Ridley

The fact that the hon. Gentleman has repeated it does not make it sound any more true. However, I shall be dealing with fuel policy and the place of coal in relation to the finds of gas. I will answer the hon. Gentleman's point at length if he will bear with me—

Mr. Archie Manuel (Central Ayrshire)

It is very hard to bear.

Mr. Ridley

If we had the set-up which I have described, the price would be determined by the market, and not the cost. That is a state of affairs which would be highly preferable. In addition, there would be no need for all this working out of it and trying to balance one interest against another. There would be no need for this fuel policy, for which we have been waiting for nearly three years, which has been pressed for by hon. Gentlemen opposite, and about which we have had near revolution threatened unless we get it.

Why has it taken nearly three years to produce anything? It is taking so long because no such thing exists. The party opposite must make up its mind about the place of coal in the future. The hon. Member for Ince (Mr. McGuire)—

Mr. Deputy Speaker

Order. I must ask the hon. Gentleman to relate his argument to the limited purpose of the Order, which is whether the Gas Council shall have power to borrow another £300 million.

Mr. Ridley

Certainly, Mr. Deputy Speaker. The effect of borrowing this money is undoubtedly that there will be an increase of natural gas upon the market, which will have a deleterious effect upon the position of coal. We have heard sincere and strong sentiments expressed by hon. Gentlemen opposite that the coal industry must be assured for a place in the future, and must have a slice of our energy requirements assured to it.

The hon. Member for Ince (Mr. McGuire) said: That is not to give an absolute priority to coal, but to fit it into fuel policy in the nation's interest and in the interests of the miners. A little earlier, he had said: I am interested also in trying to get lower prices by importing this natural gas. This is the schizophrenic attitude which the party opposite have brought to this whole debate. In the same speeches all of them say they want an assured place for coal and yet they want a minimum price for natural gas. I ask them to ponder how they can possibly achieve both these objectives, because they are not mutually compatible.

If one ensures a slice of the market for coal, and has a very much lower price for gas, the only way one can do this would be to ration the cheap price or insist that all consumers burn at least a quota of dear coal. This would mean not only a return to rationing, but would have the much worse effect that some people would have to burn coal and others gas. It would mean that quite arbitrarily some consumers would be loaded with extra costs while others were allowed cheap fuel, because it is obviously not possible to have two series of firing equipment, one for coal and one for gas, alongside one another in the same industry.

Mr. Edwin Wainwright

I think the hon. Gentleman ought to take into account what we did say, and what we were not allowed to say. We were not allowed to say what he has said—he was only assuming it. Our main argument on this side is that if coal is going to be reduced in its output then it should be phased out, and the hon. Gentleman should not read into our statements something that was not there.

Mr. Ridley

The hon. Gentleman succeeded in discussing the Middle East crisis, so I cannot imagine what it is that he was not allowed to include in his speech and that was not within the rules of order. I quote again from the hon. Member for Ince: That is not to give an absolute priority to the coal, but to fit it into fuel policy in the nation's interest and in the interests of the miners."—[OFFICIAL REPORT, 7th June, 1967; Vol. 747, c. 1016–18.] This inevitably means ensuring for coal a bigger slice of the market than it would otherwise have. This is a perfectly respectable policy for hon. Members opposite to have—I have no quarrel with them having this policy; but I insist on pointing out to them that it is not compatible with their demand for a cheap gas price.

Mr. McGuire

The argument that has been advanced the other way, not to have a cheap natural gas landed price, means that one would have a very high one and this would favour the oil companies. There is nothing incompatible in our view that we should have a fuel policy to take care of not merely the cost of producing coal but the social cost as well, and at the same time have natural gas delivered at a proper price.

Mr. Deputy Speaker

We really cannot pursue this debate on this Order.

Mr. Ridley

I have made my point two or three times, and I do not want to have to make it again at this late hour, but the more the hon. Gentleman repeats his arguments to me, the more I am tempted to repeat mine to him.

I have shown that there is no need for the Government to fix any price, and this is where they get into their dilemma because they have insisted on taking unto themselves this arbitrary determination of a price which would have been far better fixed by the supply and demand position in the market. They can affect the market by taxes, subsidies and by paying the social cost of the coal miners, but once they take arbitrary powers to fix the prices they will, as sure as day follows night, fix them wrong. What are the consequences if they fix the price too high—

Mr. Deputy Speaker

Order. I do not think that this question of the fixing of prices arises on this power to borrow another £300 million.

Mr. Ridley

I only wish to refer to the remarks of the Minister on 7th June, at column 981, when he devoted some considerable space to the question of fixing a price for North Sea gas. I thought that it would be in order to touch briefly on this because I think that it would be better not to lend the £300 million to the Gas Council if the price is determined in the way that is suggested.

If we put the price too high, we will not have enough gas consumption. We will have a smaller market than we might otherwise have, because it will not be sufficiently competitive. We will not succeed in bringing down energy prices, and we will have a revolution from hon. Gentlemen opposite who say that the oil companies will make too much money. It is therefore clearly undesirable to fix the price too high.

If we fix it too low, we will dry up further exploitation and exploration for gas in the North Sea. The oil companies will turn dejectedly away and look for gas in other people's territorial waters. Secondly, we will knock hell out of the coal industry. Gas will flood the energy market. People will convert wholesale, and the momentum of change will be so great that the coal industry will take an even bigger knock than hon. Gentlemen opposite fear. We will have a revolution from hon. Gentlemen opposite—they have threatened it—on account of the declining fortunes of the coal industry.

Mr. McGuire

At what price would you fix it?

Mr. Ridley

I am glad that I am protected from sedentary invitations of that hostile nature. I have no intention of fixing a price, nor, I imagine, are you Mr. Deputy Speaker, since the remark was addressed to you.

I have great sympathy for the Minister. He is faced with the judgment of Solomon. He cannot please both halves of his party, and whatever tiny error he makes, either too high or too low, in fixing the price he will make a major economic blunder. This is the argument for letting the market determine the price. Not all the 1,729 civil servants in the Ministry of Power working overtime for the 15 months they have spent on this problem will find the right price.

I therefore suggest that even at this late hour, a quarter to three, the Parliamentary Secretary, would do well to accept my advice and allow the oil explorers to sell the natural gas directly to anyone who wants it, be he State or private individual, be he gas, or eletricity, or industrial board of any sort.

That would have one great advantage. Not only would it determine prices and avoid the Minister being put in this invidious position, but it would have the effect of breaking up the monolithic structure of the Gas Council and electricity boards and it would make them compete, make them think for themselves, and make them behave as highly competitive animals. In this way, hon. Gentlemen would eventually achieve what the whole House has asked for throughout the debate, lower gas prices. It is competition which will achieve this, not Socialism.

2.48 a.m.

Mr. Patrick Jenkin

We have had two bites at, and a lengthy debate on, what is by any standards an important Order. I want to reiterate firmly the strong objections which have been raised from this side of the House that the Government set this Order down for debate at a morning sitting and found it necessary to pursue the matter into the watches of the night and the small hours of the morning. This subject has aroused wide interest on both sides of the House, and, judging by some of the language which has been used, particularly by hon. Gentlemen opposite, it is one of deep controversy. To have treated it as though it were a minor, non-controversial Order seems to have been a gross misjudgment.

I hope that when the Government are considering Orders of this nature, which come up from time to time in relation to all the nationalised industries, they will recognise that they provide for the House one of the very few occasions during the year when the House can deal with the problems facing the nationalised industries fairly fully within the rules of order, and that the matter should be debated in the normal debating hours of the House—in the afternoon and evening.

Adverting to the question of controversy, I want to take up briefly a point made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). I, too, was struck by the curiously ambivalent attitude which some hon. Members opposite adopted to the question of a policy for phasing-in natural gas in terms of our fuel economy.

I was interested to read in The Times this morning how a group of hon. Members, a number of whom have spoken in the debate—I thought that they had set themselves up as a national fuel efficiency study group, but that is a list of anonymous nuclear scientists whom they are trying to contact by advertising in The Times—including the hon. Member for Ince (Mr. McGuire), the hon. Member for Chesterfield (Mr. Varley) and the hon. Member for Dearne Valley (Mr. Edward Wainwright)—are all pursuing that hare, and they have pursued this one, with other hon. Members, tonight.

My hon. Friend described their attitude as schizophrenic. That is the only word which will describe it. On 7th June the hon. Member for Tottenham (Mr. Atkinson) exhibited this to a marked degree when, at column 1008, he threatened the Minister, saying that If the price ultimately amounts to anything like 2½d. a therm, there will be the biggest row on this side of the House since 1964, and quite rightly. Later, he went on to say, of the Minister: He will not last long in the job if his reputation is so tarnished that we no longer have faith in negotiations of this kind. We would regard anything like the rumoured figure above 2½d. a therm as a complete sell-out."—[OFFICIAL REPORT, 7th June, 1967; Vol. 747, c. 1008.] Yet elsewhere hon. Members opposite were demanding that this should be phased in with coal.

The attitude came to its most extreme and astonishing form in the speech of the hon. Member for Chesterfield he said: While I am in favour of bringing it ashore as quickly as possible, it should be phased into our fuel economy in a proper manner. The Minister interrupted him, and then the hon. Member went on: What I am saying is that once it is exploited and brought ashore it can then be turned off."—[OFFICIAL REPORT, 7th June, 1967; Vol. 747, c. 995.] One has the most astonishing proposition that hon. Members opposite appear to recognise it as desirable, in the interests of the national economy, that North Sea gas should be exploited as rapidly as possible, but they cannot accept, as a corollary, that that means that the stuff should be used, burnt and sold to industrial consumers, domestic consumers and even, for certain purposes, for the nationalised fuel industry.

Mr. Eric G. Varley (Chesterfield)

I was using that analogy with the coal industry. I said that we could not turn off a pit as we could turn off a tap, but that we could turn off natural gas to ensure that it was phased properly into the system. That was my only point.

Mr. Jenkin

I am grateful to the hon. Member for his explanation. It was not wholly clear from the passage I have just read. If I have done him an injustice, I hope that he will accept my apology. It appeared to me that, running like a thread through the speeches of hon. Members opposite—we had it again from the hon. Member for Dearne Valley this evening—was the suggestion that they recognise that this gas must be exploited, but are reluctant to recognise that a major part of this exploitation will take the form of saying to our fuel suppliers, "You must take the form and substance of existing sources of energy." It is preposterous to imagine otherwise.

The Minister, who has a hard enough task reconciling the conflicting objectives of different interests, was threatened in no uncertain terms by a group of hon. Members, whose sincerity no one doubts but who are woefully misguided. The Times tells us that this group is now chasing the hare of extravagance on the nuclear programme which might be more useful than inflicting on the Minister and the Gas Council their Alice in Wonderland logic. The Minister is acting rationally and sensibly, and I hope that the wild threats from behind him will not deflect him.

I detected and deplored evidence of marked antipathy to the oil industry by hon. Members opposite. The hon. Member for Dearne Valley referred to oil "coming in the back", as though it was an extra make-weight. In view of that industry's technological skill, exploration and enterprise in this country—British Petroleum is half Government-owned—and in Western Europe and America, it is nonsense to imagine that it can be relegated to a minor position in our fuel economy—

Mr. Edwin Wainwright

rose—

The Chairman

Order. We cannot pursue a discussion on the oil industry now.

Mr. Jenkin

I am prepared to debate it with the hon. Gentleman any time. But I deplore the attitude.

This gas pricing is essential to penetrate the market which the Order presupposes and when "Gas Goes Natural" spelled out in detail, and within the existing framework we are bound to accept that the price should be low enough to penetrate the industrial as well as the domestic market—where is the benefit otherwise?—but not so low as to inhibit exploration. I take seriously the statements of North Sea consortia that, if the Minister fixes as low a price as some which have been mentioned, when they complete their contracts they will invest in oil elsewhere rather than in our indigenous natural gas.

The Minister must fix a reasonable price and these must be his main considerations and I am happy to leave it to him. It is hard enough. He knows the facts and will have eventually to perform his statutory duty if agreement cannot be reached.

I now turn to the industry's capital expenditure programme, of which this £300 million will form part. The first item in Table 6 on page 14 of "Gas Goes Natural" refers to production plant and we see that £205 million is budgeted over the next five years for this purpose. The explanation for this appears on page 15, but I will not delay hon. Members by detailing the facts. The Minister of Power referred to this subject briefly in the debate of 7th June, when he said: … investment in production plant is being subjected … to very special scrutiny, but the bulk of the investment is already Committed".—[OFFICIAL REPORT, 7th June, 1967, Vol. 747, c. 984.] Is this so? The bulk of £205 million seems an enormous amount to spend over the next five years; that is, if it really has been committed. And is this naphtha or oil based plant for making town gas, and how much of this amount will be spent on plant which, on any view of the position, is bound to have a very short life? The penetration by natural gas, which, it is estimated, will have taken over almost the whole of the market within 10 years, will displace almost all the existing sources of town gas. To now spend £205 million on plant which will be almost useless within 10 years requires more than "careful scrutiny". It needs very solid justification indeed.

In a Written Answer to my hon. Friend the Member for Barkston Ash (Mr. Alison) last week, the Parliamentary Secretary made an interesting comment. My hon. Friend had asked … how much … he estimated sales of gas to the domestic sector will increase … how much of this increase will be in natural gas supplied direct to consumers at 1,000 calorific value, and reformed before distribution at lower calorific value. … The Parliamentary Secretary replied: … the objective is to convert to direct supply in such a way as to obviate the need for further town gas manufacturing plant".[OFFICIAL REPORT, 14th June, 1967; Vol. 748, c. 102.] That may be the objective, but we are told in "Gas Goes Natural" that £205 million is being budgeted for the next five years for this purpose. We are, therefore, entitled to be given a fuller explanation of how the Gas Council intends to spend this money and the justification for this expenditure.

I come to the growth assumptions. A study of the figures in "Gas Goes Natural" reveals that the Gas Council is anticipating an astonishing growth in demand in the next five years. As my hon. Friend the Member for Barkston Ash pointed out, it is banking on a huge upsurge in domestic octane, with domestic sales doubling in the next five years. What is the basis for this assumption? Is it being assumed that, quite suddenly, people will demand much higher standards of domestic heating than they have been prepared to pay for up to now?

Does it assume a widespread substitution of existing forms of energy; that the pricing structure will be such as virtually to compel consumers to turn over from electricity to gas for their peak load heating? Many people would welcome such a change because the peak load demand for electricity is an expensive demand to supply in view of the equipment that is needed to supply that heavy demand for only short periods during the year.

We have been told little about future gas prices. I regard the Minister's view as a dismal one because when asked by my hon. Friend the Member for Worcestershire, South (Sir G. Nabarro) whether prices would come down, the Minister of Power replied: Without wishing firmly to commit any successor of mine, I would certainly hope that they would not rise as rapidly in the future as they have done in the past".-[OFFICIAL REPORT, 7th June, 1967; Vol. 747, c. 986.] That is carrying caution too far.

One recognises that heavy capital expenditure will have to be met. The Minister has said, and we accept, that in a period of rapid expansion it is right that a higher proportion of the finance should be found from external rather than from internal sources. The question is: is it right that part of this should be financed by higher prices? I cannot believe that any private firm, facing a rapidly expanding market and hoping to build on it in order to move into a very much higher level of overall sales, would start by putting up the prices of its product. I cannot conceive of anything more calculated to frustrate the desires of industry to achieve the penetration it is hoping to get.

If the gas industry is to penetrate the market to the extent envisaged in the Blue Book, it seems to me that it must depend on keeping prices stable, or virtually stable. This may involve taking a somewhat longer view of the financial obligations of the industry, and I would venture to suggest and this is not and would not be an improper thing for the Minister to consider.

In this context, I would draw the attention of the Parliamentary Secretary to Report No. 7 of the Prices and Incomes Board, to which reference has already been made.

Mr. Peyton

I hope that my hon. Friend will not substitute the judgment of the Prices and Incomes Board here for something which has only with great pains and difficulty been established as agreed criteria for the nationalised industries. He seems to be going very near throwing over one of the very few criteria for disciplines there are.

Mr. Jenkin

I accept entirely the value of the financial target as an essential objective for the management of the industry. The only point I question is that when an industry is in a phase of very rapid expansion, very heavy capital expenditure and rising, as it were, over a short period of time from one plateau to another plateau, it is reasonable for the industry to comply with the target each year.

I was about to draw attention to that part of paragraph 79 of the Board's Report in which the Board adverts to the financial obligation in relation to the desirability of maintaining price stability. It states: We are therefore of the view that for the future an attempt should be made to secure greater financial and managerial discipline by an attempt to combine an appropriate target of return with some requirement with regard to costs. And: In the case of the gas industry, where a new technology is making for falling costs, we consider that the requirement should be more stringent: it should be required to meet its target rate of return, including a higher rate on new investment, without increasing prices even though costs arising from outside itself may have increased. That was introducing a new factor into the financial targets which the Minister should set the industry, and it was reported on as long ago as December, 1965.

I should like the Parliamentary Secretary to tell the House what progress has been made towards fulfilling the recommendation there made by the Prices and Incomes Board. I am entirely at one with my hon. Friend the Member for Yeovil (Mr. Peyton) in believing that we do not want to substitute the judgment of the Board for any other form of financial discipline that has worked. Indeed, some of the Board's recommendations have been plainly silly but, on the whole, this one does not seem to be silly. To impose a financial obligation of itself is not everything, but when dealing with a monopoly industry which, in the last resort, can charge what it likes, and combine with it an obligation to maintain stability of prices seems worth exploration. I should be glad if the Parliamentary Secretary would tell us what steps have been taken towards exploring this suggestion for the fuel industries—it refers to electricity as well. This is absolutely crucial to the spending of this £300 million.

If the gas industry is to say that because it is spending more capital moneys it must, therefore, have higher prices charged to the consumer, what sort of sense does that make to a country which was told only a few weeks ago that because the electricity industry had over-budgeted its capital expenditure the consumer must pay more for electricity? It is a case of heads I win, tails you lose. The consumer is looking for at least stable prices and is entitled to expect falling prices in this industry when one considers the advance from the days of low temperature carbonisation to present methods of production. The Minister has to impose this target on the industry and to initiate talks. Is the industry waiting for an invitation from the Ministry of Power on this obligation?

My hon. Friend the Member for Barkston Ash and other hon. and right hon. Friends made valuable comments and have asked a number of pertinent questions. We are entitled to have answers to them before we pass this Order. The Order is one which involves a big sum of money, although the Minister described it as a stop-gap and no doubt there will be another Bill next year. The industry is going through a period of rapid change and transition. The House is entitled to an explanation, which has not so far been given, of the circumstances surrounding the Order. I agree with what was said in the Economist on 10th June. I read a short comment on the first half of the debate: What is very badly needed is the full-scale fuel debate (not a sly morning sitting like Wednesday's) now apparently due for late July. And a good meaty White Paper, which is sadly only due for the early autumn. Without such a debate it is really very hard for Parliament or anyone else to approve extra borrowing powers for the nationalised power industries. We cannot have a full scale debate yet, but we are entitled to an answer.

Mr. T. I. Iremonger

rose in his place and claimed to move, That the Question be now put, but Mr. DEPUTY SPEAKER withheld his assent and declined then to put that Question.

3.12 a.m.

The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson)

This debate has gone so wide that it will be extremely difficult for me to deal with all the points put by hon. Members, particularly as so many have related to matters which come under the fuel policy review now being undertaken by the Department. I hope I shall be forgiven, therefore, if I do not deal with all the points hon. Members have raised. I shall do my best to deal with as many as possible. For the rest, so far as they are matters to be dealt with under the fuel policy review—this is pertinent to the closing remarks of the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin)—we must await the statement the Minister has promised he will make before the Summer Recess and the subsequent White Paper which will be published before the end of the year, and on which there will be major debates in the House.

Mr. Edwin Wainwright

Does my hon. Friend mean that he will not even give any views on how the Department is thinking? Do we have to wait, and wait, and wait?

Mr. Freeson

I must ask my hon. Friend to await the comments I shall make on various points raised in the debate. I repeat that I cannot deal with all the points raised both tonight and on the morning of last Wednesday week, which relate in a major way to the fuel policy review. There is just not time available.

A great deal of reference was made last Wednesday week and again this evening, particularly in the latter part of the debate, to the question of the future price of gas. It was understandable that when the electricity price increases were announced a short while ago many people were asking what was to be the future of gas price levels.

I have to state, as has already been said in the debate, that the industry is passing through a period of very heavy borrowing, the level of which has increased. The Order before us deals directly with this point. This coincides with rather low net earnings in the industry. It is a matter of judgment as to how long the industry can continue to wait for earnings to recover and how far it is right for it to saddle itself with avoidable debt in future years. There are limits to this and one cannot preclude the possibility of revisions in price levels. One can say this of any industry.

One has to look at the industry—and this was indicated in the exchanges a few minutes ago—against the background of the financial incentives set for it, and whatever its future objectives may be must be considered, of course, with the fuel policy review. One cannot go beyond what the Minister said the other day, that as a result of the changes—of the second revolution, if hon. Members like—going on, and continuing to go on, in the gas industry, we can expect a greater restraint of price increases in the future than in the past.

This was not a cynical remark to make. If one examines it one realises that one can look forward to a period in which the level of real prices, in relation to the economy as a whole, will be that much more satisfactory; they will not rise so quickly. One cannot be more specific than that at this stage. It has been the position in the past with both the electricity and gas industries, and one can say that there is an improved possibility, with the arrival of natural gas, for the future.

Mr. Ridley

How does the hon. Member square that with the 10 per cent. on electricity prices?

Mr. Freeson

I was referring to the industry over quite a number of years. It remains a fact, whatever feelings there may be about the announcement made by the Ministry on electricity tariffs recently, that, I think it is broadly correct to say, the increase in price levels in the electricity industry has been something like 60 per cent. of the level of price increases generally over 20 years, since 1948. It is in that sense that one may refer to real levels being an improvement over the rest of the economy.

Much reference was made by the hon. Member for Glasgow, Cathcart (Mr. Edward M. Taylor) to the question of a uniform price for natural gas. It is not the first time, as he said, that he has questioned us on this matter. There will doubtless be pleasure in his heart when I tell him that it is proposed to supply natural gas to area boards at uniform prices—

Mr. Edward M. Taylor

Hear, hear. Splendid. Well done.

Mr. Freeson

—subject only to load factor.

This does not imply a departure from the general principle that prices should reflect costs. The only variable will be transmission costs since the gas to and from all sources is necessarily pooled. Investigations have shown that because gas transmission costs are low differences in bulk supply costs to area boards will be too small to justify straining to differentiate prices for gas coming from several sources of supply to many bulk supply points. [HON. MEMBERS: "Hear, hear."] I hope that I am as well received in the rest of my remarks.

The hon. Gentleman also dealt with the question of postalisation—uniform prices generally. He asked whether my right hon. Friend intended to review the differentials in gas prices throughout the country. This subject has been discussed before, with the hon. Gentleman in particular. As I have said, natural gas will reduce differences in costs between the areas but varying distribution costs and load factors will remain.

While such a policy might benefit a particular area, such as Scotland, it does not follow that the introduction of postalisation would benefit the development areas at the expense of the prosperous areas. Our calculations indicate that, were there to be postalisation, some of the more prosperous areas would get a reduction in prices whilst prices in some development areas would go up. It is not as simple as, understandably, the hon. Gentleman makes out. One can commend his advocacy for Scotland, but more than one development area or region is involved. It would not follow that all would benefit as he wishes Scotland to benefit from such a policy.

The hon. Member for Barkston Ash (Mr. Alison) referred to the cost of conversion. He feared that it would prove higher than the £400 million estimated by the Gas Council and which the Ministry has quoted, chiefly because of the large expansion which was assumed in the domestic market and in the sale of appliances. He put down a Question about this and I hope that he is satisfied with the reply, which shows that, as from 1st September, 1966, all gas-burning appliances put on the market are readily convertible to the use of natural gas by a small adjustment. Thus, the present increase in appliance sales should not affect future conversion costs as estimated by the Gas Council.

Mr. Michael Alison (Barkston Ash)

But even a small adjustment will entail a visit to the premises to do the work. The Minister has talked about there being 13 million consumers and he is planning for a larger number by 1970 because of the new houses and the new appliances involved by then.

Mr. Freeson

In considering growth in domestic consumption it is not just a matter of the number of domestic consumers but the use to which they put gas in their new homes compared with the old ones. But the point the hon. Gentleman has raised—the home visit to adjust the appliance—has been taken into account in the figures estimated by the Gas Council.

My hon. Friend the Member for Ince (Mr. McGuire) raised the question of the cost of conversion per consumer. He suggested that this may be underestimated. One must bear in mind that the Canvey Island conversion was a pioneer scheme. It does not follow that the cost of £40 per consumer experienced there will necessarily repeat itself. Indeed, the Gas Council estimates that it will not be repeated as a result of experience elsewhere.

A number of hon. Members have queried the level of self-financing of the industry. On current expectations—which, of course, are open to uncertainties, including the actual level of future investment—the self-financing ratio should be about one-fifth in 1968–69 and average about one-third over the five years from 1967–68 to 1971–72, working out at one half at the end of that period.

The hon. Member for St. Ives (Mr. Nott) asked whether we should encourage the industry to go into the private market for raising its money for capital expenditure. I do not want to pursue this at any great length. The subject is not as simple as he suggested. It is a complex matter to decide the balance between Treasury borrowing for a nationalised industry or other public service and the raising of capital on the market. Anyone with extensive experience of local government will know that there are just as many probems facing local authorities raising most of their money on the private market as there are for the nationalised industries which obtain their money from the Treasury.

There has been discussion on the different financial objectives and the cost of electricity in Scotland. In his speech which started on 7th June, and ended with great gusto tonight, the hon. Gentleman the Member for Cathcart made considerable reference to this. He said that nothing had been done since Report No. 7 of the National Board for Prices and Incomes. He suggested that this was an urgent matter for the gas industry in Scotland because of the different objectives given by the Minister of Power and the Secretary of State for Scotland.

What aroused the concern of the Board was not the difference in the financial objectives, but the difference in the degree of urgency attaching to the fulfilment of them. Having noted in earlier paragraphs that the Scottish Gas Board's objective was a gross return of 10.9 per cent. and that of the South of Scotland Electricity Board was 12.5 per cent., the Board went on, in paragraph 51: We have no reason to believe that an attempt by the Scottish Gas Board to move towards a rate of return consistent with its financial objective should lead to an uneconomic distribution of resources provided that the South of Scotland Electricity Board is also required to meet its financial obligations. Since the publication of that Report there have been discussions between the Secretary of State and the Scottish electricity boards about financial objectives. Various occurrences such as variations in the price of coal and the introduction of the freeze last July, have delayed progress with these discussions. This answers the point made by the hon. Gentleman the Member for Wanstead and Woodford. The discussions on the financial objectives in relation to the Board's report are being resumed with a view to agreeing new financial objectives consistent with the Government's prices and incomes policy. This does not mean that this matter will not be dealt with as part of the general review of fuel policy.

One cannot separate financial objectives of the industry from other aspects of fuel policy with which we are concerned, and consideration will have to be given to this. We are concerned for the most part with maintaining financial objectives; studying their validity, where they need to be changed or adhered to, and how they can be achieved. I can give only a general assurance that this is in our minds as much as it is in the minds of hon. Members.

Mr. Peyton

I do not want to make it more difficult for the hon. Member, but it seems astonishing that he should come here to defend a proposal to give a £300 million loan to the gas industry and that all he can say is that all these matters will come out in the wash in the fuel policy for which we have been waiting for years.

Mr. Freeson

I said that we were seeking to maintain financial objectives as at present laid down. I went on to say that one cannot separate issues of this kind from the major aspects of fuel policy and that the question of financial objectives will be one of the matters to be studied in this connection. In the meantime, we are as much concerned as other hon. Members with maintaining the objectives, to the best of our ability, against the background of the freeze decisions of July of last year, and the Prices and Incomes Board report.

Reference was made to the sales of gas. Not only did we have questions from the hon. Member for Barkston Ash, but also from the hon. Member for Wan-stead and Woodford, about the expected growth in consumption, and differences in the figures that the Gas Council and the Ministry have been quoting as to the level of natural gas, which will be available by 1970 or soon afterwards.

The hon. Member for Barkston Ash asked whether gas sales had been affected as a result of the freeze, as have electricity sales. I am glad to say that gas sales have retained a very good buoyancy, and have not suffered substantially by the July measures. Industrial sales were affected by a slowing-down in the economy, but domestic sales are buoyant and the final estimate of the 1966–67 sales increase over the previous year is now put at nearly 9 per cent.—very close to the figure forecast a year ago, though well above the estimate made at the time that the Borrowing Powers Act was going through Parliament in 1965. We see no reason, on present evidence, to suppose that industry will not continue to attain or exceed its sales targets.

Sir Douglas Glover (Ormskirk)

Are those constant prices or are they taking account of inflation?

Mr. Freeson

I was not speaking of prices, I was speaking of growth in gas sales by the industry. The question was whether, in the past year the industry had been hit by the economic position and the answer is, "No."

I go on to deal with the question of gas sales to industrial consumers, raised by the hon. Member for Wanstead and Woodford, and others, all of whom stressed the need to go ahead with sales of natural gas to industry, especially in the light of lessons to be learnt from the Middle East crisis. I will not go into the various matters raised in connection with the Middle East crisis, except to say, as so many Members referred to Algiers, that at this stage the position is obscure. I am not in a position to say what it will be in the near future. As regards the cutting-off of supplies from Algiers—

Mr. Eadie

This is a very important point. Can my hon. Friend tell the House whether the supply is stopped?

Mr. Freeson

I cannot go beyond what I have already said, that the position is obscure. I hope that hon. Members will accept that the position in the Middle East, and matters arising from it, is so delicate that it is not something to be bandied about freely on an occasion like this. I am trying to be Quite serious—[HON. MEMBERS: "Oh."] I am not giving way on this point. I have made it perfectly clear that I am not going beyond what I have already said.

Mr. Ridley

Would the Parliamentary Secretary give way?

Mr. Freeson

On this point? No. I have already said, and I say it for the second or third time, that I cannot go beyond what I have already said—that the position is obscure. There is nothing further that I can say about the threatened cut-off in Algiers.

Mr. Patrick Jenkin

I will not press the hon. Gentleman on the immediate position, and the immediate interruption of supplies, but I think that a number of his hon. Friends, and certainly a number of hon. Members on this side of the House, have asked what was the intention with regard to contracts. Was it intended to terminate these contracts as soon as possible, because if it had been found that Algeria had unilaterally terminated the contract, would advantage be taken to regard all of the contracts as rescinded? That is a somewhat different question.

Mr. Freeson

It is very closely connected, but, again, it is not something that I wish to pursue. It is a matter for the hon. Gentleman to raise on another occasion, if he thinks fit.

Mr. Ridley

rose—

Mr. J. H. Osborn

rose—

Sir D. Glover

rose—

Mr. Speaker

Order. The hon. Gentleman is obviously not giving way, even to three hon. Members.

Mr. Freeson

Turning to the industrial consumer sales of natural gas, I can say that the Department, together with the industry, is studying the possible implications of any prolonged interruptions in supplies of feedstocks and natural gas from abroad, again in the wider context of the energy market as a whole. Certainly, it is the policy, Middle East crisis or not, to avoid excessive dependence on imported fuels wherever this is possible. This aspect comes right into the centre of any consideration of natural gas policy and its absorption into the economy.

It would, however, be quite wrong for any hon. Member to assume that sales to industrial users will increase at only half the rate of sales to domestic users, as suggested by the hon. Member for Barkston Ash a week or so ago. Although the absolute increase in domestic sales will be the greatest, the rate of increase in industrial sales will be as fast or even faster. It is rarely possible to separate domestic from industrial consumers. They will all be fed by one system and all must be converted from town gas to natural gas supply. In the blue booklet "Gas Goes Natural", the Gas Council's industrial sales estimates specifically exclude any sales to bulk consumers or the electricity industry for load balancing.

It was said that the chemical industry could use about 3,000 million therms by 1970 if the price were right. This would be for fuel uses as well as for petrochemical feedstock. One has to be careful about the use of these figures. They can be easily misused. In such applications, natural gas must compete with other fuels, including coal, although the gas should command a premium value. The scope for expansion in these markets is being closely studied by the industry and is being watched by the Department.

A number of points were made by the hon. Member for Worcestershire, South (Sir G. Nabarro), who is not with us tonight, who complained bitterly and eloquently about the failure to accurately forecast levels of investment in the gas industry and that the levels forecast in 1965 were about half those now proposed. It is true that investment was underestimated in that year, but the circumstances were slightly different. The point needs to be made, because several hon. Members have touched on it, that nobody could have known at that time what would be the level of potential natural gas supply. This was discovered only later after the investment forecast had been made.

I will go quickly through a number of other points which have been made in the latter part of the debate tonight. The hon. Member for Wanstead and Woodford queried the rate of industrial consumption of natural gas assuming that it is available at the beachhead to the extent of 2,000 million cubic feet per day by 1970 or soon after. There is no question that this is an area of close concern by the industry and, of course, the Department. A major job will be involved particularly in the next four or five years to absorb the natural gas rapidly as it becomes quickly available to that level.

The position, broadly, is that about 1,500 million cubic feet per day of the 2,000 million cubic feet per day will replace existing town gas and allow for a rate of growth of about 12 per cent. per annum. That is the estimated growth. It is the remaining 500 million cubic feet per day which must be absorbed as rapidly as possible into the bulk user market. As my hon. Friend the Member for Liverpool, West Derby (Mr. Ogden) said, this was technically a wasteful method. It could often be a wasteful method of using natural gas in power stations and the like.

Even where that is so in some industries, it is economically essential that the industry absorbs into the economy the natural gas which will be available, because it will obviously have a marked impact on the price negotiations which are taking place. I do not have to reiterate that point. I believe that the hon. Member for West Derby also referred to underground storage, as did the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). The storage project at Sarsden is going through its final feasibility tests, and we shall have to see where else this procedure might be applied.

The question of leaving the North Sea gas raises the whole issue of the best methods of storage at peak periods and, having reached a decision on that, we shall have to consider how best, technically, to supply it to consumers.

Time is getting on. This has been a long debate, and I would end by saying that most of the broad points of debate raised during tonight and last Wednesday week, must be considered as part of the fuel policy review. There will be a debate before the Summer Recess, and there will be the White Paper. There will be ample opportunity for this debate to be continued, with all the valid points about the relationship of the gas industry to other industries, and the related matter of overall fuel policy, about which the Minister himself will speak.

Sir D. Glover

Before the hon. Gentleman sits down, I would say that I have no wish to delay the House, but he has not given a very satisfactory answer to the points about the long-term contract for Algerian gas. Because of the international situation there is the question of whether we are going to continue or whether, because relations are broken off, we shall get out of this contract.

Mr. Freeson

The hon. Member may not consider that I have given a satisfactory answer, but I have said more than once that I do not propose to discuss this specific subject this evening.

Question put and agreed to.

Resolved, That the Gas (Borrowing Powers) Order 1967, a draft of which was laid before this House on 31st May, be approved.