§ 12.4 a.m.
§ Mr. William Hamilton (Fife, West)
I recognise that the debates this evening have been restricted to the Supplementary Estimates that are before the House. Therefore, I cannot say all that I might have said on the possibility of the provision of aluminium smelters in Scotland, or anywhere else. There is in the Estimates provision for the Ministry of Power to reimburse the electricity and gas boards for using more coal than they might otherwise have done.
In page 13 of the Supplementary Estimates, presented to the House on 30th November, £45 million is shown as being the likely provision of moneys for this purpose between July, 1967 and April, 1251 1971, but since that Estimate was presented there have been important developments, arising principally from the speech made by the Prime Minister at the Labour Party conference in October last.
The House will recall that my right hon. Friend then said that the Government were ready… to discuss with the aluminium industry the provision of one or more giant smelters, competitively powered with nuclear electricity.He went on to say that the coal industry had nothing to fear from this development. Indeed, he went further. He said:… there is a possibility—which I am now discussing with the Chairman of the N.C.B.—of associating the coal industry with this type of project.This is a new development which might conceivably influence the figures given in the Supplementary Estimate.
No one would, or could, seriously object to the thinking and the principles which inspired the Prime Minister's statement of policy. The implications of its implementation would have an enormous impact on our balance of payments problem. I understand that we imported about 340,000 tons in 1966—I have seen varying figures—and it will probably be in the region of 400,000 tons by 1970, with figures rising by about 8 per cent. a year. On current imports, our bill could be reduced by about £70 million a year. But before the Supplementary Estimates were presented devaluation was announced, and that has increased the balance of payments advantage, since the cost of the raw material—alumina—will have risen less than the price of the metal itself.
The smelters should, I suggest—and I believe that this is the view of the Government—be sited in development areas, and Scotland, the North-East, and various parts of Wales have been mentioned. Big new male-employing industries with prospects of rapid future development and growth are precisely the kind of industries required and desired by those areas. There is an urgent need to get these projects started, and I do not think that this ought to be prejudiced by the unseemly squabbling going on between the Chairman of the Electricity Council, the Chairman of the N.C.B., and now the National Steel Corporation.
1252 The Government have to find the right answer to this extremely complex matter, whilst at the same time safeguarding the legitimate rights of the miners—and we who represent them have the duty and the obligation in the House to protect their interests—the electricity consumers, the aluminium users, the people in the development areas and, not least, our E.F.T.A. partners.
It is a tall order to satisfy all these legitimate interests, and the Government may find it impossible completely to satisfy all of them. I was going to outline the developments in this in the last 18 months, but suffice it to say that proposals recently put forward by Alcan Aluminium (U.K.) Ltd. for the provision of a smelter and coal-fired power station to fuel the smelter; the announcement that they had made an agreement with the National Coal Board at a price per therm which has never been disclosed, but has been generally estimated to be about 3d., as against an average of about 5d. a therm currently being paid by the Electricity Generating Board, may throw into serious question the figures in the Supplementary Estimate we are now discussing.
We who represent Scottish constituencies are anxious that this project should have serious consideration. Aluminium smelting at Invergordon, with a coal-fired generating station fired with Scottish coal, would make an enormous impact on the entire economy of Scotland, and not least the Scottish mining industry. Being a representative of one of the Fife constituencies, I have a great interest, as has my hon. Friend the Member for Dunfermline Burghs (Mr. Adam Hunter), who is a N.U.M.-sponsored Member of Parliament. We are anxious that there should be at least an examination of the possibility of reopening the Michael Colliery in Fife, and using that coal, not necessarily to fire this power station, but to use it for domestic purposes. A lot of domestic consumers now get unsatisfactory coal which might conceivably be used to fire the aluminium smelter at Invergordon.
§ Mr. John H. Osborn (Sheffield, Hallam)
It may be unfair at this late hour to ask whether the hon. Member has any idea of the pithead cost of producing that coal. The answer would help 1253 now, but otherwise he could put down a Parliamentary Question.
§ Mr. Hamilton
One difficulty in this debate is that we have just not got the facts on which to make this estimate. One purpose of this debate is that before the Government reaches a decision, not after, this House ought to be acquainted with all the relevant facts on which the decision is based so that we may be in a better position to assess the merits or demerits of the Government decision. We ought to be in that position before the decision is taken, and that is why I am making this plea tonight. I know that the Industrial Reorganisation Corporation has been busy examining the various tenders and proposals put forward for smelters, and I understand that the report of the Corporation was placed in the hands of the Board of Trade two or three weeks ago, early in January.
But the new Alcan proposal, which is now based on coal as distinct from a power supply by the Hydro-Electric Board, is a new factor in the situation. I should not have thought that the Minister will be in a position tonight to give us a categorical statement of policy on this matter. I hope that he will not do so since the House is entitled to many more facts before any pronouncement is made.
§ Mr. Deputy Speaker (Sir Eric Fletcher)
As to whether or not the Minister is able to give an answer tonight, I must point out that the hon. Member is raising a very wide subject, and it is only relevant to this debate if it has some close connection with the particular Supplementary Estimate.
§ Mr. Deputy Speaker
I thought the hon. Member was doing well up to a certain point. He was entitled to raise this, but it would not be right for me to allow in this debate on the Supplementary Estimate a general discussion about this proposal for aluminium smelters, because it does not strictly arise out of the Supplementary Estimate.
§ Mr. Hamilton
I entirely agree, but the-e is provision in the Supplementary Estimate for £45 million between now and 1971 to help the electricity and gas industries to consume more coal than they otherwise would have done. I fear 1254 that what is happening now is that the Coal Board is in bad odour with the Electricity Council because of the deal which it is alleged to have made with Alcan, and this might affect the validity of the figures in the Supplementary Estimates.
§ Mr. Deputy Speaker
It might be for the assistance of the House if I pointed out that, although in this Supplementary Estimate there is reference to the fact that the total which may be granted up to March, 1971, is £45 million, it would not be in order to discuss on these particular Supplementary Estimates how the whole of that £45 million is going to be spent between now and 1971. All we are concerned with tonight is the Supplementary Estimate on page 13, which is for £5,250,000.
§ Mr. Hamilton
I fully accept that, Mr. Deputy Speaker. I think I have made my point, and I hope that the Parliamentary Secretary will be able to make a suitable reply.
§ 12.18 a.m.
§ Mr. John H. Osborn (Sheffield, Hallam)
I should like to congratulate the hon. Member for Fife, West (Mr. William Hamilton) on the skilful way in which he has presented the case and kept himself in order. Although the global figure is £45 million, this particular Estimate is a matter of concern, but I accept that tonight we shall have to concentrate on the smaller figure.
The whole concept of this discussion at present is on the decision to embark on an aluminium smelter programme and on the competition between nuclear energy and conventional power from coal fired thermal power stations. Since our debates on the Coal Industry Bill, I have elicited a good deal of constructive information, mainly from the Parliamentary Secretary who has answered all my questions very fully, and I should like to express our appreciation.
In the context of aluminium smelters and of the requirements of industry as a whole, any trend providing us with cheaper electricity is to be welcomed. We are told that, when the fast breeder reactor is implemented, the nuclear power programme will give us that, and, whatever we may say now or later on, the advent of cheap electricity will be of benefit to us all.
1255 Another feature is that we have two sources of electricity in the future. One might even include oil-fired stations, because it is quite obvious from comments in the Press that, had the fuel tax been eliminated, oil-fired conventional power stations would have also helped produce electricity cheaply. The consequence of all this is that the Government have found it opportune to introduce new industries using cheap electricity.
Mr. Deputy Speaker, I hope that I shall catch your eye in the debate on the Industrial Expansion Bill, and I should have liked to discuss the merits and demerits of the Government's decision to take an active interest in introducing an aluminium smelting industry to the country. Instead, I think that it would be more useful to refer to some of the Questions which I have tabled recently.
Naturally enough, in a complex issue of this sort, the problem is to know which Ministry is to shepherd projects of this type through their early stages. The Parliamentary Secretary to the Ministry of Power is to answer this debate, because it deals with an Estimate with which he is involved. However, the original statement from the Prime Minister was accompanied by a Press release by the D.E.A. on 4th October, and this is the purpose of a Question which I have now tabled to the Prime Minister.
An interesting and relevant feature is that the Government have decided that, in selected cases where they consider it to be in the national interest to supply a new or possibly to avoid the loss of an existing very large demand for electricity arising at one place for a particular industrial development, they will authorise the Generating Boards to negotiate special contracts for long-term supplies. This is where the £5 million comes in in the short-term and the £45 million in the long-term. Furthermore, the statement envisages that, under these contracts, the user will provide finance equivalent to the capital cost of the specified power generating capacity. That was thought of originally in terms of nuclear energy, but now it could be in terms of coal-fired thermal power.
I was concerned about the rôle which the I.R.C. would play. Quite obviously, the D.E.A. started this off. But, of course, the decision will not be given by the 1256 Minister of Power or his Parliamentary Secretary. On 25th January, I asked the Secretary of State for Economic Affairs:… what role he has asked the Industrial Reorganisation Corporation to take in assisting the setting up of an aluminium smelting industry in this country.His Joint Under-Secretary of State replied:My right hon. Friend asked the Industrial Reorganisation Corporation last October to undertake a full evaluation of the proposals for aluminium smelters which we expected to receive from the aluminium companies on the basis of the special electricity arrangements. My right hon. Friend the President of the Board of Trade, subsequently referred to them the proposals received on this basis, and they have submitted a report to him."—[OFFICIAL REPORT, 25th January, 1968; Vol. 757, c. 160]So, in this connection, the I.R.C. has reported to the Board of Trade.
If I may refer to the background to this debate, I believe the first company in the field was Rio Tinto Zinc. It produced a well thought out scheme and explored every possibility, both following and before the Prime Minister's statement, using nuclear energy. But that scheme had to take into account the fact that the fast breeder reactor will not be available for perhaps 10 or 15 years, and therefore the possibility of an element of subsidy certainly arises.
We also have the White Paper on Fuel Policy, which we debated in December——
§ Mr. Osborn
I am grateful for my hon. Friend's correction. But, although it was withdrawn during the debate on the Coal Industry Bill, we debated some of the facts—
§ The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson)
The White Paper was not withdrawn. That has been made clear on several occasions, both in the House and elsewhere.
§ Mr. Osborn
I stand corrected. I think the Parliamentary Secretary is right. The facts in it are probably accurate, and certainly here we have the facts in it to consider.
§ Mr. Peter Emery (Honiton)
I think this point should be cleared up. A debate was arranged on the White 1257 Paper, but the Leader of the House decided that that debate would not proceed. Instead we had the Second Reading and the stages consequential to that of the Coal Industry Bill, when many of the paragraphs and conclusions of the White Paper were considered. The White Paper on Fuel Policy is supposedly under revision and many of us want to know when it is coming back and what are the conclusions of the Ministry.
§ Mr. Osborn
I will accept that. But this shows that the hon. Member for Fife, West (Mr. William Hamilton) was right when I intervened and asked about tile price. We want to know the facts; we want to know much more than is available in this particular White Paper. Undoubtedly one element is that we have over capacity of electricity generation. We shall want to know the facts about the extent of that over capacity and the extent to which cheaper electricity will be made available.
When the Prime Minister made his announcement at Scarborough, there were many articles in the technical and financial press dealing with the price of electricity and we had the subsequent debate on the Coal Industry Bill concerned with this £45 million.
The background to aluminium smelting is that in Norway, Canada and elsewhere —I will try to illustrate the position and the House should bear these figures in mind—the cost of hydro-electricity used for aluminium smelting is 0.2 pence per unit from existing hydro-electric power stations, some of which are very old. It is also true to say that the newer power stations will not have quite the ready supplies of cheap water for hydroelectricity generation and will probably be more costly to build, but they could be depreciated over a further range of time.
Before the Chairman of the Coal Board moved in and before the debate on the £45 million, Press comment was to the effect that at 0.37 pence per unit Rio Tinto Zinc should find this reasonable for use for smelting aluminium in this country. The figure I have from the Annual Report of the C.E.G.B. is that 1258 the production cost of electricity was 0.67 pence per unit and the average selling price 1.19 pence per unit.
Today I asked the Parliamentary Secretary:To ask the Minister of Power what is now the average generating cost per unit of electricity, as produced at the power station, and the average selling price per unit of electricity to the user whether domestic or industrial….The reply was:The average cost of electricity sold by the Central Electricity Generating Board to Area Electricity Boards in 1966–67 was 1.28 pence per unit, of which about an eighth was accounted for by the cost of transmission and C.E.G.B. overheads. The average cost to final consumers was 1.78 pence per unit.The country must bear in mind that the lower bracket is now 0.2 pence—or 0.25 pence to be generous—against 1.78 pence, which the Parliamentary Secretary gave me in answer to my Question today. This needs further investigation, and shows that we need to be given more facts.
The aluminium smelting industry must bear in mind that it is not so much the cost of electricity now that affects it, but the cost in future. This comes back to the proverbial debate on the comparison of cost between nuclear and conventional power stations. On 23rd January of this year I asked the Minister of Power two Questions. First,what is the capital cost per kilowatt and cost per unit produced based on most recent estimates of the most advanced nuclear power station offered to the Central Electricity Generating Board",and the Minister replied:The C.E.G.B.'s estimate of the construction cost of Hinkley Point B is £73/kW and of the base load generating cost, including capital charges, is 0.52d./kWh."—[OFFICIAL REPORT, 23rd January, 1968; Vol. 757, c. 78.]Based on Drax, we have a conventional power figure of 0.60d./kWh. I appreciate that at this hour of the night these figures will take time to absorb, but this is the sort of problem that we are up against.
In reply to my hon. Friend the Member for Louth (Sir C. Osborne), the Prime Minister said on 14th November:The arrangements now being discussed between interested companies and the generating boards would neither involve an Exchequer subvention nor an increase in the cost of electricity to other users …".—[OFFICIAL REPORT, 14th November, 1967; Vol. 737, c. 213.]1259 We are debating an Estimate for this very purpose, and we have here a contradiction of it by the Prime Minister's statement in November. I had hoped to discuss other matters, for instance the Norwegian Minister of Trade, Mr. Willuch, has been here. The Norwegians and our other E.F.T.A. partners are concerned about this element of subsidy in fuel costs, and what is likely to be the cost of fuel, whether with a subsidy or conventionally? It is reported that Rio Tinto Zinc might accept a slightly higher figure, but we come to various important conclusions, some of which I shall have to elaborate at some other time.
This week we have had the spectacle, as the hon. Member for Fife, West has shown, of the Chairman of the Steel Corporation, or someone acting for him, negotiating with the National Coal Board in view of the Board's offer to ship coal, presumably from the North-East coast or the Midlands, to a site in Scotland for a coal-fired thermal power station. We have no evidence on which to work, but one newspaper report says that the Steel Corporation is paying 1.2d. per unit. This is assuming that the cost of the coal is about 3.25d. per therm.
§ Mr. William Hamilton
On a point of order. Mr. Deputy Speaker, I do not want to appear difficult, but I was pulled up by your predecessor who said that we were discussing a very narrow Supplementary Estimate. I think that the hon. Gentleman is being allowed much more scope than I was.
§ Mr. Deputy Speaker (Mr. Sydney Irving)
The hon. Member will realise that I have just taken the Chair. I shall listen carefully to the debate. I understood that the hon. Member was kept very narrowly to the Supplementary Estimate. I shall attempt to do the same with the hon. Member who has the Floor.
§ Mr. Osborn
I think, Mr. Deputy Speaker, that you will have to be guided by me. I have discarded about three-quarters of my notes.
§ Mr. Osborn
Yes, Mr. Deputy Speaker. We are dealing with an expenditure of £5 million out of a figure of £45 million.
There is an interesting regional aspect which we should consider. Following the Second Reading debate on the Coal Industry Bill I was concerned about the pithead cost of coal from the collieries, and on 19th December last I asked a Question to which I received the interesting Answer that there were 14 collieries with a cost range per therm up to 3d. and a cost per ton at the pithead of 56s. 4d. The point is that there are thermal power stations near cheap coal, which should enable us to have cheap coal-fired power stations.
I should like to know not only which are the most efficient 14 collieries but which are the most efficient 25. On 23rd January I asked the Minister of Poweron the assumption that the average cost of coal supplied by the National Coal Board is 3d. per therm, what estimate he has made of the generating cost of electricity per unit, based on generating costs for the most advanced coal-fired power stations in the country and on the fact that the power station is sited near the pithead."—[OFFICIAL REPORT, 23rd January, 1968; Vol. 757, c. 79.]His answer was 0.55d.
Yesterday I asked the Minister the further Questionon the basis that the average pithead cost per ton of coal of the 14 most efficient collieries is 56s. 4d. what estimate he has made of the pithead cost per ton of coal suitable for use by the Central Electricity Generating Board from those collieries; and on the basis that this coal is supplied to a power station sited near the pithead and that generating costs are for the most advanced coal-fired stations what estimate he has made of the generating cost per unit from such a coal-fired power station.The interesting Answer was that it was 0.52d. per kWh.
The interesting feature of all this is that the discussions going on between the Coal Board and the Ministry of Power and the users indicate that with a little subsidy the most efficient coal-fired thermal stations, where the cost is cheap, give a generating cost very close to that calculated for the latest nuclear power stations. That is very interesting to hon. Members with constituencies in the centre of England—in Yorkshire and the East Midlands. That is why the industrialists in the Sheffield area—particularly those 1261 in the steel industry—have been concerned about having to pay too much for their electricity.
It could be that in the centre of England, where there is no development area and there is no benefit of the 45 per cent. grant, and industrialists are struggling in a competitive environment, the Yorkshire and Humberude region—and especially South Yorkshire—could negotiate terms which would be realistic in respect of costs.
What is the position now? Because the Government decided at Scarborough four months ago to bring in the aluminium smelting industry an economic situation has become a political issue. We have unnecessary interventionism by the Government. If the Prime Minister's statement to my hon. Friend the Member for Louth (Sir C. Osborne) accurate, he made a promise that there was no element of subsidy, but we are talking about a subsidy of £5 million from the Coal Board to electricity users or the Central Electricity Generating Board. With these reservations, any viable project for aluminium smelting—whether nuclear powered or thermal powered—is to be welcomed. What is to be scrutinised is any project subject to heavy subsidy.
Is this a 25-year contract the Chairman of the Coal Board has offered? What guarantee has he of a 25-year contract for transport of coal? And what guarantee has he of stable prices?
Now the Government will be making a decision, and I hope the hon. Member for Fife, West (Mr. William Hamilton) will agree with me that what we want are more facts—facts about the generating costs of nuclear-powered electricity, facts about how this subsidy will be used.
I hope the Parliamentary Secretary will respond to the initiative I have taken and take this opportunity of presenting these facts in concrete form so that the country can understand them.
§ 12.49 a.m.
§ Mr. Adam Hunter (Dunfermline, Burghs)
I understood when I saw the title of the subject of the hon. Member For Fife, West, tonight—"Implications of the construction of aluminium smelters for the national fuel policy"—that this could be a wide-ranging debate on the coal mining industry, because the coal 1262 mining industry is, after all, a very integral part of the fuel industries of this country. I was very sorry, Mr. Deputy Speaker, to find that your predecessor restrained my hon. Friend considerably in his approach to this subject. However, I am very conscious of rules, I have always conformed to rules, and tonight I wish to abide by them.
But I would like to point out that the whole of the total Supplementary Estimate from now to 1971 is £45 million, while the supplementary estimate mentioned here is £5,250,000. Now this may seem coincidental, but to me this is just the amount required to open the Michael Colliery in East Fife.
Now this, I understand, has been a matter of considerable pressure upon the Minister of Power. Lord Robens, the Chairman of the National Coal Board, has said he cannot open the Michael Colliery at this time. He says this in view of the fact that he thinks the marketing prospects for coal in Scotland would not be sufficient to justify the reopening of this colliery.
Mr. Deputy Speaker, I have no wish to carry on this debate in an out of order fashion, but I think it is plain to see, and I should tell the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn), that in East Fife the Michael Colliery has been seen as a viable unit of production for many years, and Lord Robens himself has indicated to several hon. Members that it would still be a commercial proposition in the future if it was reopened.
So I sincerely hope, Parliamentary Secretary, that when the time comes you will seriously consider the question of reopening Michael Colliery and that if the Chairman of the National Coal Board cannot find the money to do so you, as Parliamentary Secretary, will use your influence to get this carried out.
§ Mr. Deputy Speaker
Order. The hon. Member must use the customary and traditional forms of address when addressing the Parliamentary Secretary or any other hon. Member of the House.
§ Mr. Hunter
I am very sorry, Mr. Deputy Speaker. I would just say this in conclusion. I feel that it is the responsibility of this Government to see that the Michael Colliery is reopened. I think, like the hon. Gentleman opposite, 1263 that this project put forward by Alcan is a wonderful set-up. There could be no better business venture than coal being hauled from the colliery by rail, put into ship at Methil Docks and from there ship hauled up the East Coast to Invergordon. That would be a splendid industrial complex. I hope that the Minister will consider reopening Michael Colliery to provide jobs and security for the miners and their families in the area.
§ 12.45 a.m.
§ Mr. Peter Emery (Honiton)
I will raise only a few points so as to stay in order. Only a week ago, we had no answers from the Minister to similar questions so I congratulate the hon. Member for Fife, West (Mr. William Hamilton) on raising a matter of such interest to the whole country, not only to Scotland. We must make it clear that the Alcan offer and the subsequent agreement with the Coal Board for the smelter does not rule out a smelter for Scotland, even if not fired by coal. This seems something which the local Press does not fully understand.
If the Government's policy is to have aluminium smelters, there is every reason to have one in Scotland and British Aluminium has also made suggestions for this. Economic balance in fuel policy is important, irrespective of how the smelter is fired. I hope that the Minister will make that clear.
The hon. Member for Dunfermline Burghs (Mr. Adam Hunter) has a close constituency interest in seeking the welfare of his constituents and I bow to him in this, but I am sure that he understands that, in furthering the policy of aluminium smelters, there will probably be two. Scotland and Wales, or perhaps one in the North-East, have been mentioned as sites. But if there were two, whether nuclear- or coal-powered, there would be one in Scotland.
I would like the Parliamentary Secretary to re-state what I thought the Prime Minister made clear in answer to my hon. Friend the Member for Louth (Sir C. Osborne) just before Christmas. As so often with the Prime Minister, what seems clear at one moment may not be clear a few months later, which is why I want a clear answer now. Is it still Government policy to ensure that there 1264 is no direct or hidden subsidy for an aluminium smelter borne by other fuel users? There could be little doubt from his reply that, as long as coal could compete economically without a subsidy, it should be considered, but there would be no consideration with a subsidy.
I now begin to wonder, because my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) and I have put down certain Questions to the Prime Minister about the subsidy which, for some strange reason, I was notified today, have been transferred to the President of the Board of Trade.
That immediately casts doubt in my mind. Perhaps I am suspicious, but when considering this Estimate, and particularly the fuel smelters within it, it is clear that, within the fuel White Paper and in our consideration of the fuel policy, there should be no hidden subsidy. I want it made clear that there will be no fuel subsidy in considering any aluminium smelter.
I again ask the Parliamentary Secretary to consider this matter and explain how it can possibly be in the nation's interest to have voted by Parliament sums of £45 million and £8 million for high-cost coal and yet stand a chance of agreeing that coal can be supplied for 3d. or 3¼d. a therm for a smelter in Scotland. This is no equalisation of the overall price for coal.
The Parliamentary Secretary will know that his right hon. Friend told me, in effect, "The Chairman of the N.C.B. must be allowed to make a commercial deal". What about commercial deals with other people? If cheap fuel is to be provided, why not provide it to the Central Electricity Generating Board to reduce its overall prices so that the ordinary consumer, the taxpayer, may benefit, and not one specific firm? It has been made clear by the Chairman of the C.E.G.B. that he would welcome fuel at the price that the Chairman of the N.C.B. is considering in the aluminium smelter deal between Alcan and the N.C.B.
We are, therefore, considering if not a direct subsidy in fuel costs, then a hidden subsidy by suggesting in the present arrangement that coal shall be supplied at a price lower than that at which other industries can obtain it, and which the electricity authorities and gas boards can 1265 obtain it for the generation of their secondary fuels. We must be given the facts and tonight the Government have an opportunity to provide them.
In considering long-term contracts for fuel—as have been outlined by the Chairman of the N.C.B.—I asked the right hon. Gentleman if there was any escalation clause in the price. On a commercial matter, this is of the utmost importance because if we do not have this information, it means that a set price for 20 or 25 years would be an ever-increasing problem for the N.C.B. Indeed, as inflation goes on over that period, we it might find the subsidisation growing beyond all proportion. If such a long-term deal were arranged, would the Minister insist that a proper escalation clause was included to protect the income of the N.C.B.?
In consideration of any fuel smelter project, what is the thinking of the Government about industry doing its own building of a power plant and thereby obtaining an industrial development giant for that building as opposed to the original scheme whereby this would be done in conjunction with the Central Electricity Generating Board or the Atomic Energy Authority? This is of importance because of the amount of money that would have to go to aid industry in generating electrical capacity. If a fuel smelter project goes forward with a firm building the plant, an industrial development of £20 million may be involved. If not, the cost would be thrown back on to the nationalised fuel boards and this Estimate would be related to the fact that the cost would be borne by the nationalised industries with a contribution from the smelter firm. It is of the greatest importance, particularly concerning our friends in N.A.T.O. and E.F.T.A., that we should not be providing a hidden subsidy which they are so concerned about in any smelter policy.
I sum up my four basic questions. Can the Parliamentary Secretary make clear that whatever happens, Scotland will be looked after? Can he make absolutely clear the position about subsidisation? Will he give an answer on the question of escalation and can he let me know the Government's thinking on industrial development grants which could be given on one of the two methods of approach to smelter policy? If we can have 1266 answers to these questions, we shall be a little further on than we were before this debate.
§ 12.57 a.m.
§ Mr. Edwin Brooks (Bebington)
My hon. Friend the Member for Fife, West (Mr. William Hamilton) is to be congratulated and thanked for initiating this most important debate. I think I speak for hon. Members in all parts of the House in expressing regret that he was struck down in his prime when opening the debate and, owing perhaps to rigid rules of order, was temporarily suspended from defending his views in this House. We trust that this will not become a regular pattern.
The debate this evening is one of the most important debates which have come before the House for some time. Although tonight we are necessarily restricted to looking at the matter from one or two special aspects, it nevertheless raises extremely fundamental questions about the whole future relationship between the Government and private industry in a field which is as intricate as it is important for the future well-being of the country.
The Supplementary Estimates we have before us refer specifically to an extra demand under the heading, "Assistance to the Coal Industry". It is surely quite proper that we should discuss tonight some of the implications of what we can loosely call a subsidy to one of the fuels which competes with others in our national energy programme. This particular payment also refers specifically to pit closures. Those who have been following the now quite violent exchanges over the proposed Alcan smelter will know that one of the allegations is that a pit, or pits, which might have been closed because of high costs of operation and production may survive if the agreement between Alcan and the N.C.B. is confirmed. Therefore, it does seem to me perfectly appropriate tonight to discuss some of the implications of the current controversy over the aluminium smelting suggestions.
The hon. Member for Sheffield, Hallam (Mr. J. H. Osborn), referred to some of the apparent conflict of information which has been made available to Members of this House, the conflict, for example, regarding the relative costs of generating electricity from nuclear fuels 1267 and from conventional fuels. This is, of course, a particular difficult problem, and the more one goes into it the more one finds the horizon recedes as one pursues the truth. For example, in the Thirteenth Annual Report and Accounts, for 1966–67, of the United Kingdom Atomic Energy Authority there is confirmation, more or less, of the cost comparisons which were drawn by the hon. Gentleman some time earlier. I think he referred to a contrast of some 0.08d. per unit between the A.G.R. station at Hinckley Point and the most efficient current conventional power station. In paragraph 19 of the comments of the Comptroller and Auditor General on the Report and Accounts of the United Kingdom Atomic Energy Authority he states as follows:The first A.G.R. station was assumed, even on conservative estimates of its future performance and operating life, to have a unit cost advantage of about 0.07d. per unit over conventional power stations.He goes on to point out that there was an advantage of about 0.03d. per unit over the best nuclear power station of foreign design, a figure relating, I think, to some two or three years ago. It is likely, of course, that as time goes on, as the A.G.R. stations themselves, in the present phase of development up to the mid nineteen-seventies, are improved, this differential will tend to widen still further.
When we talk about a subsidy to the coal industry—and considerable play has been made with that tonight, and is implicit in the Estimate before us—then it is worth remembering that the Central Electricity Generating Board may well have been subsidised effectively by the taxpayer as the result of the extremely low royalties which have been charged on the A.G.R. stations and which is described in considerable detail by the Comptroller and Auditor General. For example, thought it is the case that there is a differential of 0.07d. per unit, as we have seen, between the conventional power stations and the A.G.R. stations, the royalties chargeable to the electricity boards will amount to a rate of only 0.014d. per unit, one-fifth of that differential, and indeed, only about one-half of the differential which exists between the A.G.R.s and their most efficient American competitor.
1268 To put this in gross terms, the Atomic Energy Authority's expenditure up to 31st March, 1967, in developing the nuclear system was some £89 million. If one works out the royalty payments which are now anticipated by the agreement of approximately a year ago—the agreement I referred to a moment ago in quoting the 0.014d. per unit rate—one finds, calculating this on a discounted cash flow at 8 per cent. per annum compound, that the recovery will represent a present worth of £20 million in 1967, or £69 million of effective subsidy to the A.G.R. programme.
So I think we ought to keep these facts in mind when we talk of subsidy element in the fuel and energy programme in this country. Remember that there is a considerable burden of research and development costs of nuclear energy policy which could, I suppose, in the context of the aluminium smelting proposals, equally be called by the Norwegians a subsidy as that one they are now protesting about in relation to coal.
I have a number of brief questions to ask arising out of the theme of this debate. I think it would be interesting to know why the Government apparently changed their mind, some time in December, it would appear, over the coal-based power source. Although there was originally a suggestion that the National Coal Board would be involved in discussions I think that it was quite clear from the whole of the informed discussion last October and November that a nuclear programme was anticipated. Yet we now have an opening for the N.C.B. through which it has readily jumped.
One appreciates the difficulty of asking for information on what might purport to be a straightforward commercial proposal. But these are questions to which we should know answers before irrevocable decisions are taken by the Government. Has Alcan offered speedy repayment of the £50 million which I understand it has on loan, and which was not repayable for some years, in an effort to get permission for the Invergordon project? While on the face of it this would appear to be a very understandable carrot for the Government, there would seem to me to be rather serious implications in a trend whereby, apparently, a sort of bribe is offered to 1269 the Government to do something they would not do on the merits of the case.
It would be interesting to know a global figure for the extent of the investment grants payable to Alcan in the event of its developing on a commercial basis its Invergordon project with a coal-based power source, and what price would be sought for the N.C.B. coal supplied to Alcan. We have heard various figures tonight. This is a point on which we unquestionably come very close to the Supplementary Estimates. If we are talking of subsidies to the coal industry, which are a charge on the taxpayer in order to ensure that the rundown of the industry is not as catastrophic as it might otherwise be, it is important to know whether, when the N.C.B. offers coal at a much lower price than that at which it offers it to other consumers of its product, the price reflects the marginal cost of the pits from which it is being sent, or whether it is a sort of bonus to this relatively late consumer and is, in effect, a form of disguised subsidy from the taxpayer in the long run.
When we talk about the marginal costing policy suggested for this aluminium smelting programme, it would be interesting to know whether it is the Government's considered view that this is not hostile to the spirit and set-up of the European Free Trade Area. Discussions are taking place now, but we should know their outcome, and to what extent there is no danger in pursuing this matter further.
It would be useful to know at this stage, before we swallow the N.C.B. case hook, line and sinker, what criteria will be employed in the future in giving preferential treatment to a particular firm or industry when coal is offered to it at cheap rates. It seems to me that this opens the door to a very dangerous possibility. One can understand a flat subsidy across the board from taxation going to all those who are using coal or any other material. But it is a dangerous trend when those supplying a product in which there is a large element of subsidy are given apparent discretion to determine which supplier shall be favoured. We need to have the criteria defined precisely now, and not find ourselves in great difficulties later.
The final point that it is important to make on the problem of coal versus 1270 nuclear fuel in the Invergordon project is that although there are many ambiguities about costs it is broadly true that all expert opinion expects that as the years go by the differential between the costs of nuclear and conventional energy will widen.
Therefore, there seems a case for arguing that the benefits of this cheaper nuclear energy as it becomes available might well be provided to growth industries so that they could establish themselves on a secure basis. That would clearly be advantageous for the aluminium industry, in which there is a great demand for cheap energy.
But if we are to have a situation, for perhaps the next ten years, of extreme competition between coal and nuclear energy, in which the N.C.B. is empowered to charge differential rates to supplier which in no way correspond to the efficiency of pits but reflect the juggling of figures by the Board, then the community as a whole will suffer, and it will in many ways be damaging to the long term development of the nuclear programme.
§ 1.11 a.m.
§ Mr. David Lane (Cambridge)
I welcome the debate because it is an opportunity to probe the Government on a major issue while they are still in the throes of taking a decision about it instead of our being presented as usual with a fait accompli. I hope that we have more opportunities of this kind.
This Supplementary Estimate springs out of the Coal Industry Act, which in turn sprang from the White Paper on Fuel Policy, and I hope that the Parliamentary Secretary will tell us when the White Paper will reappear and when we shall be able to have a debate about it. On my reading of the White Paper, its theme was that we must have cheap energy, with strictly limited assistance to coal from public funds—and this is where the Estimate comes in—for the purpose of giving special help to miners and making it possible for the industry to contract in an orderly fashion. Many of us supported the White Paper on the understanding that that was all the extra burden on public funds envisaged. On that understanding, too, we passed the Coal Industry Act and accepted the original supplementary Estimates.
1271 Against that background, I find myself exceedingly alarmed by this reported offer of a long-term coal contract to Alcan at a very low price. I want to give three grounds for my alarm. First, it seems to me that such a low price must increase over the years the losses of the N.C.B.—out of which this current Supplementary Estimate has arisen—which will lead to another borrowing Bill. That would be wholly wrong.
We challenged the Minister about this on Monday last week but all we got was a courteous series of non-answers. On one aspect which I wish to emphasise, the right hon. Gentleman said:No details are available, and no contract has been signed. It is a question of straight, commercial negotiations between the two parties, and it would be quite wrong for me to disclose details of commercial negotiations."—[OFFICIAL REPORT, 22nd January, 1968 Vol. 757, c. 153.]That is a very different story from that of the negotiations which have been going on in the light of day for months between the Gas Council and the oil companies over the price of North Sea gas. Month after month, we have had figures bandied about concerning what the Gas Council was prepared to pay, and we are entitled to an explanation as to why there is this secrecy about the N.C.B.'s offer to Alcan when there was no secrecy whatever over the Gas Council's wishes for North Sea gas. I beg the Minister to stop sheltering behind a bogus screen of secrecy. This issue is of intense concern to the public and I warmly support what the hon. Member for Fife, West (Mr. William Hamilton) said about the need to get the facts in the open as soon as possible.
Secondly, there is a real danger, through this reported offer, of getting at odds with our E.F.T.A. partners in Norway, and I am sure that none of us wants this. Thirdly, even if the National Coal Board could demonstrate that this contract would be justifiable commercially, we cannot possibly look at it in isolation, whatever the Minister appeared to have implied in his answer, or half-answer, to our questioning last week.
We have in mind the Prime Minister's answer last November which the hon. Member for Honiton (Mr. Emery) has 1272 mentioned. I, too, have had a Question to the Prime Minister transferred to the President of the Board of Trade, and I am extremely suspicious that the Prime Minister may be moving his ground again from what he said as recently as the middle of last November. We shall watch this carefully.
We have seen the reactions of the C.E.G.B. to the Coal Board's offer. What about the steel industry and other large users of electricity? What about chemical manufacturers? This is a very much wider issue than one particular contract which has been reported in the Press. If this comes about on the lines that we have heard, it will lead to a great upheaval in the whole fuel pricing structure, and we should want to debate a new version of the right hon. Gentleman's White Paper.
One reason for the Supplementary Estimate is the very strong competitive position of oil in comparison with coal. Members will be aware that it was reported only at the end of last week that Alcan would have been very interested in oil as a fuel for the power station but was deterred by the current tax on fuel oil. I put a Question to the Chancellor of the Exchequer asking to what extent devaluation had caused the Government to modify their proposals in the Fuel Policy White Paper for the continuance of the fuel oil tax. I got an uninformative Answer, saying that this, like all taxes, was coming under review before the forthcoming Budget.
The Minister of Power was a little more forthcoming on this last week, when, replying to the hon. Member for Ince (Mr. McGuire), he said:Devaluation increases the schedule price of fuel oil by 0.75d. per gallon…."—[OFFICIAL REPORT, 23rd January, 1968; Vol. 757, c. 77.]I would like to ask the Parliamentary Secretary whether the Ministry would not reconsider this whole question of the fuel oil tax from the point of view of industrial users. Industry has had very little for which to thank this Government in the past year or two. Would they not now offer some crumb of comfort to industry by recommending the Chancellor at least to halve the fuel oil tax, if not abolish it?
In coming to a decision about the smelter, I hope that the Minister will be very wary of the buccaneering of the 1273 Chairman of the Coal Board and the blandishments of the mining lobby. Let Lim stick to his White Paper principle of very limited assistance to the coal industry. Let him remember the interests of industry generally and, above all, let him avoid any additional burdens on the taxpayer.
§ 1.19 a.m.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
Once again those hon. Members interested in power and fuel matters find themselves on the night shift. I hope that soon we shall have an opportunity of debating the revised White Piper on fuel in the broad light of day. I was grateful to the Parliamentary Secretary for his interjection to the effect that the White Paper had been withdrawn, which presumably means that it will be Nought forward soon, for proper debate, at a proper time of day ——
§ Mr. Ridley
I apologise, and I will not touch on the subject again.
The hon. Member for Fife, West (Mr. William Hamilton) has performed a valuable service in raising this subject tonight. I could not go entirely with him when he said—I took down his words: "No one should complain about import substitution." We have to take into account our E.F.T.A. partners, and we must consider whether we are breaking any of the international trading rules that we have undertaken to observe. That is one consideration that has been raised tonight.
We have to decide whether it is economical for us to produce at home those things that we have hitherto imported. I have not the least doubt that one could quite easily grow coconuts on St. Kilda's, but I am sure that it would be far from economic to do so. On the figures produced by my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn)—his rather startling comparison of,he 0.2d. cost of fuel in Canada and Norway as against the 1.28d., wholesale, in This country—one is entirely justified in asking, before these very large sums of money are committed, whether smelting is an economic proposition here. That is why hon. Members on both sides have asked for a lot of information. I hope 1274 that the Parliamentary Secretary will give us that information now, because what my hon. Friend the Member for Cambridge (Mr. Lane) has called "non-answers" will not be accepted if the House is to pass this Supplementary Estimate with an easy conscience.
The first and most important question is: is the price which the Coal Board has tendered one which contains a subsidy, or is it not? One of the main purposes of the debate is to find out what the price is. One cannot decide the question without having the knowledge of what the contract which the Board has offered is. The rumour is that the Board offered 3¼d. for the coal for the Seaton Carew power station. The Sunday Times has reported that Mr. Elton, the managing director of Alcan, has said that the delivered price of the coal will be rather higher than the 3d. a therm that has been generally reported. That probably means that it is about 3¼d. a therm. Since that figure has not been denied anywhere, I suppose we must accept that it is in the region of 3¼d.
The average price of coal is about 5d. a therm, so there is clearly a case to answer. As the hon. Member for Bebington (Mr. Brooks) said, we cannot accept enormous discrimination in a coal price unless it is open policy we can all understand, and is based on some rationale, like development areas or development industries—it is not for me to suggest what it should be, but it should be some rational structure that we can understand.
The question which the Central Electricity Generating Board and the Steel Corporation are asking cannot go unanswered, namely, if the smelting industry is to receive this cheap coal, are they to receive it, too? The steel industry's case is particularly strong, because that industry is a competitor with the aluminium industry in the finished product. If its competitors in aluminium are to get cheap fuel supplies, steel has every right to demand the same treatment.
I have studied the latest White Paper on the nationalised industries for any help that it may give us on pricing policy. It says:… pricing policies should be devised with reference to the costs of the particular eoads and services provided.1275 That is an unexceptionable statement, but we want to know what its relationship to the Coal Board is. If we are to sell coal from the low-cost pits—the pits producing at 3d. or 4d. a therm—the present high-cost pits are bound to need to be subsidised from somewhere else. If there is not a profit on low cost pits, that subsidy will have to come by means of the deficit in the Coal Board accounts which will have to be made up by this House. If we have to take this buccaneering which we suspect is taking place, we would like to know on whose authority it is being done and how much public money is to be committed in so doing.
§ Mr. Arthur Palmer (Bristol, Central)
Is there not another possibility, that the Generating Board and the South of Scotland Electricity Board will be overcharged for their coal?
§ Mr. Ridley
That is most certainly a possibility, and it could apply to the steel industry, a major competitor. We must have answers to these questions.
The Prime Minister gave a pledge, as my hon. Friends the Members for Honiton and Sheffield, Hallam have said. On 14th November, he said:The arrangements now being discussed between interested companies and the generating boards would neither involve an Exchequer subvention nor an increase in the cost of electricity to other users, Sir."—[OFFICIAL REPORT, 14th November, 1967; Vol. 737, c. 213.]That is the reply to the hon. Member for Bristol, Central. There has been this pledge, that no taxpayers' money will be used, and that there will be no increase in the price of electricity over what it would otherwise have been. Does this mean that if a deficit is finally presented to this House in the Coal Board accounts it will be an Exchequer subvention even though it occurs 15 to 20 years from now? This contract is supposed to last 25 years. We trust implicitly every word and pledge the Prime Minister has uttered, and we would like to know that this applies to the future as well as the present.
It is difficult to see if this is the case. Is it not true that Alcan would provide its own power station for the Invergordon smelter? If this is true, it will presumably attract the 45 per cent. in- 1276 vestment grant, whereas if the North of Scotland Board were to build it it would attract no investment grant because nationalised industries do not get the grants. This would give a 45 per cent. advantage to privately-owned stations, and it is a departure in electricity policy. It is an odd one if it is so, and we have to think of the coverage if the Alcan power station were shut for maintenance. Presumably supplies would have to come from the North of Scotland Board. Although I would not complain about this departure of providing electricity from private industry with this advantage, it is an odd way to bring it about.
We have heard so much about the unity of the grid and how impossible it is to cut the grid up and have power stations owned by major users, that it is a little difficult to see why the much vaunted advantages of the unified grid can so easily be dropped because 45 per cent. investment grant is attracted by this power station. I am sure this was not in the mind of the Government when they set up the 45 per cent. investment grants. It is an anomaly which appears to have arisen. I make no comment, but I think the Parliamentary Secretary would like to say how he intends to take it from here. My hon. Friends have touched on this point and the apparent distortion which follows from having a discriminatory investment grant which does not apply right across the board, but only to private industry of this sort.
The result of this policy will be more and more to lead to denationalisation of electricity supply by encouraging other large consumers of electricity all over the country to apply for the 45 per cent. grant if they are in development areas. or the 25 per cent. grant if they are not. to get what must be cheaper power. despite the fact that they will lose the advantages of the economies of scale under the unified grid. This is no time to discuss this policy, but it should be drawn to the attention of hon. Gentlemen opposite.
The question in this probing debate is not so much about whether there should be a smelter in Scotland, but about whether the smelters, wherever they may be built, should be based on coal-fired 1277 power stations or on nuclear-fired power stations. The actual number of jobs in the Invergordon smelter is in the region of 900 and, wherever the fuel for the power station comes from, it is unlikely that this will result in further jobs in Scotland itself.
It has been said, "Why not use Scottish coal? Why not supply the new smelter with coal from the Fife coalfield?" I also would ask "Why not?" If we are to depart from the economics which we have hitherto known for a unified Coal Board to the extent that certain customers can be singled out with greater preferential offers, it does not matter a fig whether the coal comes from Kent, from the North-East Coast or from Fife. All the Coal Board has done is to make al offer of 500,000 tons a year for 25 years to supply coal to a particular part of Scotland. If that offer were accepted, it would be cheaper for the Coal Board to take coal from the Fife coalfield because transport costs would be less. If they were to sink money in a brand-new pit in Fife it might be a better investment than to sink money in a pit in Durham.
But this is not a matter for us. It does not matter to hon. Members where this coal comes from. The fact that certain coal costs a certain amount to mine is not connected with the price at which it is to be sold. We know that some coal is to be sold at 3¼d. a therm, whereas other coal is going to cost 5d. or 7d. a therm.
The whole economics of the offer are upside down. Once one departs from uniform prices and the reality of the economic situation which faces the Coal Board, then the multiplication of difficulties and the confusions which result will become more than any of us in this House can master.
I hope that the Parliamentary Secretary will throw some light on this matter. I agree that it is wrong for us to press for the disclosure of commercial secrets or to interfere in the internal affairs of the Coal Board, but on this occasion there is a strong suspicion that a tender has been made which will result in a charge on public funds being made at some stage in the future. We may be wrong, and surely the best way to clear up the matter is to make public the offer the Coal Board have made so that we can get to the bottom of the matter. I 1278 hope that this discussion will yield some information which will be of real value to those whose best interests are the Scottish coalfields and other coalfields in the country.
§ 1.35 a.m.
§ The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson)
A great number of questions have been raised this evening, and, if I attempted to reply to them all, we should be here a long time, quite apart from the fact that, if I sought to answer them, on at least 50 per cent. I should be ruled out of order, because they should be directed to other Departments which have a direct concern with the points raised in them. However, I will deal with as many of them as are relevant to the debate and to my Department.
It is fair to say that there has been no commercial contract between a nationalised industry and a private concern which has excited so much interest and comment as the current negotiations between the N.C.B. and Alcan. The precise terms of the Board's offer of supplies have been the subject of much speculation, and there have been requests to which I do not intend to accede to make them public. They are commercial negotiations covering matters which it is not normally expected to reveal in public. It is not just a matter of a nationalised industry, because a large private concern is involved. I shall not depart from normal practice, although, surprisingly, many hon. Members opposite have insisted that the details of these private negotiations should be stated in public.
That is not to say that I shall not deal with a number of the questions raised. However, on that score, I cannot differ from the answer given by my right hon. Friend on an earlier occasion. These are commercial negotiations, and to make them public might prejudice other negotiations of a similar kind.
§ Mr. Palmer
It is a matter of public interest when the Generating Board and the Scottish Electricity Boards are obliged to publish full details of their commercial transactions.
§ Mr. Freeson
I have stated the position, and I am in no different position from that of my right hon. Friend on the matter.
1279 The main lines of the offer are well enough understood. There will be an initial annual supply of half a million tons of coal, which will rise to one million tons subsequently. The contract will be for a period of 25 years, subject to various conditions. The price at which the coal is offered is a very low one, and necessarily so if coal is to compete and receive serious consideration by Alcan.
§ Mr. Ridley
The hon. Gentleman has got himself into some difficulty. There is no other nationalised industry product whose price is not available and published, so that everyone can know what it is. I have in mind such matters as the price of steel and gas, rail fares and freight rates, air fares, and so on. How does it come about that we have this departure in public industry policy that some prices can be kept secret? It is a completely new policy. How is it justified?
§ Mr. Freeson
It is not new policy. It would be if the House of Commons debated the details of commercial contracts which are subject to negotiation. I am sure that the hon. Gentleman would accept that this is a principle which should not be varied. It is not correct to say that details of contracts and prices in all nationalised industries are published. There have been exceptions in the past, and I am sure that there will he again.
I want to make it clear that I do not intend to reveal the details of commercial negotiations which have been going on between Alcan and the N.C.B.
§ Mr. Emery
I take the hon. Gentleman's point completely. Whether we disagree with him, we understand what he says. However, would he publish the prices when the contract was negotiated? One can understand the argument that it is difficult to reveal prices while a contract is in the process of negotiation, but, if agreement was reached, would the prices and other aspects of the agreement be made public?
§ Mr. Freeson
No. I am not here to state whether a contract of that kind will be published in detail. Hon. Members opposite know very well that it is not the normal practice on the floor of 1280 the House. I will make it clear again. I do not intend to reveal the details of commercial negotiations. The price which has been put forward by the National Coal Board is a very low one. That is as far as I can go on that point.
Let us get to the main point which arose from this, namely, the question whether there would be a subsidy. Before doing so, I should make it clear that there is no connection between the Alcan and the National Coal Board negotiations and the Supplementary Estimate of £5 million which has been quoted several times as if it were part of what might become some kind of subsidy in the Alcan—National Coal Board negotiations should that project be selected as being the right one to adopt. The Supplementary Estimate has nothing to do with the Alcan negotiations. The supplies to Alcan are unlikely to begin until 1971, were the project to be adopted. The £45 million, of which the £5 million odd is a part to be provided under the Coal Industry Act, would end in March, 1971. The small figure in the year's Supplementary Estimates has nothing to do with the Alcan project.
§ Mr. Brooks
When my hon. Friend referred to the first stage in the Alcan coal requirement happening in 1971, surely it would be true to say that if the Alcan—N.C.B. deal goes through now, this will affect the closure or otherwise of a particular pit or pits in one part of the country and that decision will certainly affect the costs of the N.C.B. before the end of the 1960s.
§ Mr. Freeson
Neither I nor my right hon. Friend is in a position to state whether this will be the result. The kind of subsidy arrangements which were put forward in the course of the Coal Industry Act relate to the transitional period during which the coal industry will be contracting and reshaping itself with the objective of becoming a fully economic and viable industry in the early or middle 1970s. Concerning any long-term contract in terms of 25 years, or whatever point in time it were to start, the figure speaks for itself. One is going well beyond the period with which the Supplementary Estimate is concerned. To suggest that there is any connection between the Alcan scheme and this is stretching the debate beyond what my 1281 hon. Friend the Member for Fife, West (Mr. William Hamilton) initiated earlier.
On the point about whether any breach of the pledge concerning subsidy is involved here, I want to make it clear that there is no question of a subsidy involved. I think that this answers a particular question from the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). the hon. Member for Honiton (Mr. Emery), and a number of other hon. Members who raised the point. As I have said, if this project were to be selected, the period of time involved would see the coal industry well on the road to paying its way. If, in 25 years, the industry is not able to reshape and get itself into the position of being fully viable, there will be no point to the discussions that we have been having in the House, and the consideration that we in the Department have been giving to this matter, over the past few months.
The issue of investment grants was raised. Hon. Members seem to think that it these are paid they might be another form of hidden or open subsidy. The issue of investment grants is not for my Department. It is not, as the hon. Member for Cirencester and Tewkesbury implied—if he did not say it—a question to be dealt with on the score of this one project. There is a general policy involved, and it is a matter for the President of the Board of Trade, not the Minister of Power.
Arising from the question of subsidy, or non-subsidy, or investment grant, I was asked whether there would be an escalation in price over this long period. The general answer is that if one takes account of the fact that the industry will become more viable and more cost-conscious—I chink that this is the common phrase—if there is any change, or a provision in the contract to allow for a change of price, it will not be an issue of escalation, but of taking the benefit of an improved, more efficient, and modern industry which is holding and containing its costs.
I do not know why the hon. Member for Honiton is smiling, because this is the kind of issue, and not one like Alcan, that we have been discussing on other aspects, for several months. The whole object of the exercise is to enable the industry to re-shape itself and become thoroughly modern and viable. It is not 1282 a matter for laughter, but a serious one for the industry.
§ Mr. Emery
It is a matter for laughter when we are discussing a commercial undertaking and the Minister, having said that we would all welcome a proper commercial cost method of producing coal, then says that over 25 years there will not be inflation which will be reflected in the cost of coal, and the N.C.B. should not be protected by proper escalation. The Minister shows he does not understand the commercial aspects of pricing in the nationalised industries.
§ Mr. Freeson
I take due notice of my incapacity to judge matters, but if the hon. Gentleman had contained himself he would have heard me say that the negotiations will take account of any inflationary process. I think that this will be accepted in any kind of contract on that kind of scale. It was not necessary for the hon. Gentleman to get so excited or indignant about it, either just now or earlier.
I return to the issue of the low price, because several hon. Members have asked whether the N.C.B. should even have gone in for this. In reply to my hon. Friend the Member for Bebington (Mr. Brooks), it is not true to say that the Government have changed their mind. The position, as my hon. Friend the Member for Fife, West said earlier, is that virtually an undertaking was given at the beginning of October—it was publicly announced in a speech, and in a Press release—to the effect that it was open to the N.C.B. to start negotiations if it had the opportunity to do so. This is what the industry has done. There has been no change of mind.
§ Mr. Freeson
Like other projects which come before the Government for their consideration, this will be considered, and since October it has been open to the N.C.B. to put forward a project.
§ Mr. Brooks
I was referring to an article in The Times of 26th January which said:it was not until December 15 that Alcan received a reply from the Government saying that it would consider a coal proposal.
§ Mr. Freeson
I am not able to comment on what might have appeared in The Times. I do not know why there should be any argument about this. There was a Government statement in October that it was open to the N.C.B. to put forward its proposals, and they would be considered. That is what has happened.
Among the more solid and tangible reasons for the low pricing involved in these negotiations we should take account of the changes in productivity and costs which the industry should expect over the years. The negotiations have taken account of the scope of economies in transport arising from the use of large vessels and newer methods of traffic flow, and of the advantages of securing a market. The prospect of securing a longterm contract is attractive to most business concerns, and especially to a coal industry which has been losing markets for years now. Finally, negotiations have taken account of the stock position, in Scotland and elsewhere.
Reference was made, in connection with sources of supply, to the possibility of Scottish coal, and the Michael colliery was referred to as a possible source if the project should go ahead. This is a matter for the N.C.B. I should make it clear—and I say this in no unkind spirit —that it is for the Board to decide whether it is a question of the general supply of coal or of keeping open or reopening a certain colliery. We have not received a specific request from the N.C.B. in respect of the Michael colliery. It is a matter for the Board to decide. There are many factors which will influence the Board's decision where to draw its coal should the scheme go ahead.
The fuel policy implications of the industry's bid for business can be considered at two levels. Taking first coal industry policy, it has been represented quite forcibly in the Press that the proposed contract raises the question of undue preference in the Board's pricing policy. It is well to remember the wording of the nationalisation Act, namely, that the National Coal Board ischarged with the duty of making supplies of coal available … at such prices as may seem to them best calculated to further public interest in all respects, including the avoidance of any undue or unreasonable preference or advantage".That is the basis upon which it operates, and I hope that hon. Members will agree 1284 that negotiations have proceeded on that basis.
It may be that further consideration should be given to the question whether a Board or a Government should determine the national interest, and generally to the criteria by which preferential tariffs are fixed in the public industries. I do not want to enter into controversy tonight; it is not particularly relevant. I do not want to dodge it. It is a real issue, which inevitably, as the industry changes and development area policies proceed and industrial changes take place, will become more and more an issue to be considered. I do not want to enter into controversy whether these negotiations involve undue preference, or about the general issue of the Board's pricing policies—a matter that has been touched upon by several hon. Members.
Whatever view may finally be taken on the merits of the offer which has been the subject of discussion, the Board should have commercial freedom in its negotiations for business in the private sector. Were it to be deprived of this right, and if coal were sold on a "take it-or-leave-it" basis at a fixed price—as some hon. Members, including the hon. Member for Cirencester and Tewksbury have suggested—the Board would be failing in its duty to make the best use of the assets vested in it in the most difficult period that lies ahead.
Finally, a word on national fuel policy. This bid and Alcan's statement that coal is preferred to nuclear power for this particular project have no bearing on the broad judgment set out in the White Paper on Fuel Policy. I would remind the House that this Paper assumed that the coal industry would achieve major increases in productivity and that if it fails to do so the demand for coal will not be as high as postulated in the White Paper. I must also make clear that this is not quite the straight confrontation between coal and nuclear power that may appear at first sight, and as was indicated, I think, by the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) and my hon. Friend the Member for Bebington.
The Scottish Electricity Board's quotation for supplies was not based on nuclear stations in the first years of a smelter, and even in the later years it 1285 assumed a modest element of conventional stand-by supplies. In addition the company has made clear to my right hon. Friend that a power station on the site has managerial and operational advantages for the enterprise as a whole which it considered important. 'There are more factors than just a confrontation between coal and nuclear power.
It has to be borne in mind that the price quoted by the Board is one which reflects the rather special circumstances attaching to the envisaged sale. It is because the price is exceptionally low that such criticisms have been made of the Board's offer. But the fact that the price is exceptionally low is not in itself something to be criticised.
It is cow the task of the Government, and I should make this clear, to consider the various proposals and all that they imply, which have been made to construct aluminium smelters, and to reach judgments which reflect a full assessment of the national interest. The issues underlying the decision are important and the implications of the various points of view which have been expressed during the public debate on the coal offer are probably of greater significance than the amount of coal in issue, and I hope hon. Members will accept that I have accepted that in the course of my remarks.