§ 11.49 p.m.
§ The Minister of State, Ministry of Technology (Sir John Eden)
I beg to move,That the Gas (Borrowing Powers) Order 1970, a draft of which was laid before this House on 14th July, be approved.The House will be familiar with the subject of gas. The hon. Member for Swansea, West (Mr. Alan Williams) will, doubtless, recognise this Order. I am glad to see him opposite me tonight, and I look forward to taking part in a number of debates with him, though I hope that not too many will be about gas.
The purpose of the Order is to raise the limit on the Gas Council's borrowing powers from £1,600 million to £2,100 million. The amount of £1,600 million was fixed by the Gas and Electricity Act 1968. That Act prescribed an upper limit of £2,400 million and provided that any increased borrowing required above £1,600 million would have to have the approval of the House. Since 1968 the gas boards and the Gas Council have invested about £550 million in the further development of the industry. New capital is being employed at the rate of £200 million a year. Against the figure of £1,600 million, outstanding borrowing is now about £1,500 million. It is therefore necessary to extend the permitted borrowing limit.
It would have been possible to go straight forward to the maximum of £2,400 million prescribed by the 1968 Act, but that would have been rather a big jump. I think that it is right to move by stages. In this way the House is given an opportunity to debate the progress of the industry and to consider the direction in which it is going.
As it has done on similar occasions in the past, the Gas Council has most helpfully prepared a booklet, which I gather has been made available to hon. Members. Copies have been placed in the Library. The booklet gives quite a considerable amount of detail on the background to this borrowing Order, on the progress of the industry so far and its plans for its further development. Hon. Members will not wish me to recapitulate all that is printed in the booklet, which 895 they have been able to study carefully for themselves. The booklet sets out what is being done and what is planned to be done to enable the industry to continue exploiting the discoveries of natural gas. With the Order the industry can continue on its present programme within the guidelines laid down and in respect of the volume of gas already proved. The aim is still 4,000 million cubic feet per day by 1975.
The Order seeks to establish a new borrowing limit. The extent to which the industry will need to call on the permitted level of borrowing in any one year is another matter. That depends on many factors—on the success of its marketing policies, its ability to control costs, the kind of surplus it can earn, and the accuracy of its investment judgment. The boards and the Gas Council submit plans in the form of a five-year capital expenditure programme rolled forward annually. These are then co-ordinated to form a nation-wide scheme for the distribution of natural gas, which is an enormous operation involving the expenditure of large sums of money.
The industry has been set the task of quadrupling its pre-natural gas sales by the middle of this decade. This means the construction of terminals for the reception of gas, the development of a national transmission system and storage system, and the conversion of appliances. The industry is well up to its programme. The biggest single item of natural gas expenditure has been on the reception and bulk transmission facilities. The Easing-ton and Bacton terminals have been in operation for some time, and a third terminal is planned at Theddlethorpe in Lincolnshire. This will shortly be under construction. The national grid system has been expanded by means of loops to carry North Sea gas in its far greater volume to all area boards, including Scotland, which was reached by the new trunk line earlier in the summer. This is a skilled and costly business. The extension from Leeds to Newcastle alone cost £10 million. The total cost of the national transmission projects, including the on-shore terminals, has been roughly £150 million. About £100 million a year will be needed for the next three years to complete them and to install the necessary 896 compressor system and storage facilities.
For some people the benefit of all this expenditure may not be immediately apparent. Many associate the advent of natural gas with the problems of conversion. This is probably the biggest single conversion operation which has ever been undertaken. Inevitably there will be a number of difficulties, and there has been. But, in spite of the undoubted hardship which some individuals have experienced, on the whole it is fair to say that the operation has been carried out with great competence. Considerable efforts are still being made, and will continue to be made, by area boards and contractors alike to minimise the disruption inseparable from an operation of this magnitude and complexity.
So far just over 2 million domestic consumers—that is, 15 per cent. of the total—have had their conversions completed. Conversion of existing appliances cost about £50 million last year. It is planned that this will rise this year, due to the increased rate of conversion work, and it will run at approximately £80 million a year over the period to 1973.
Undoubtedly it has caused considerable upheaval and much inconvenience. Some people have been concerned about the safety aspects of natural gas. As hon. Members will recollect, the then Paymaster-General, the right hon. Member for Manchester, Cheetham (Mr. Harold Lever), caused an inquiry to be made into the safety of natural gas as a fuel and invited Professor Morton of Manchester University to conduct this inquiry. Professor Morton has just completed his inquiry and presented his report. I was able to look at it for the first time last night. I can say that it is generally favourable to the safety of natural gas as a fuel. It is obviously a carefully prepared report, and I hope that hon. Members will understand that I should like to reserve my detailed comments until I have had time to give it proper study.
Some hon. Members may ask whether all this great operation of converting to natural gas is worth while. I can best answer that question in two ways. First, the benefits were evaluated in 1967. It was estimated then that the present value of the net benefit would be about £300 million over the ten-year period 1968–78.
897 These savings have recently been recalculated on the basis of current costs as well as forecasts of rates of conversion, and using the present test discount rate of 10 per cent. compared with the 8 per cent. rate used in 1967. The net benefits are still expected to be about the same.
Secondly, there is a great benefit to the balance of payments. The increasing use of North Sea gas is of benefit to our balance of payments, first because most of the North Sea gas at present being used is used in the displacement of oil at the reforming plants for making town gas. Its sale for direct use by industry is almost mostly in place of oil. The net foreign exchange saving from these sources is already appreciable and is estimated to rise to about £100 million a year by 1975. The cost of conversion is nonetheless considerable.
The original estimate of £400 million provided for the conversion of the 1966 total of 12.8 million domestic and smaller commercial and industrial consumers. Since then extra costs such as labour and materials have added about £50 million to the figure. New customers and a change in the arrangements by which conversion costs of large industrial and commercial customers are to be met add a further £80 million to the original estimate, increasing it in all from £400 million to £530 million. There is a need to try to keep a balance between the cost and rate of absorption and the economic incentive to further exploration.
I am glad to say that the search for gas goes on. The full extent of the reserves in the United Kingdom or the Continental Shelf is not yet known. Already the 1967 figure of proved reserves, put then at 25 trillion cubic feet, has increased to 29 trillion cubic feet. I thought that the hon. Member for Ebbw Vale (Mr. Michael Foot) would be interested in that figure. The largest and most promising structures have naturally been drilled first, but there are many other areas which have proved fruitful.
It is highly unlikely that there will be no more finds. There is certainly enough gas to enable the industry to meet its objective of 4,000 million cubic feet per day by the middle of this decade. Hon. Members can be assured that, whatever 898 the results of future exploration, all this expenditure and effort will not have been wasted. There is no question of this country, having equipped itself to use gas of a high calorific value, being converted back to town gas. Meanwhile the industry's plan to provide an integrated gas system by the middle of the 1970s must be financed. It will continue to need substantial amounts of capital for investment in fixed assets. It also needs additional capital to finance the costs of conversion and other activities.
The industry has so far raised over £100 million from its own resources, representing 7 per cent. of its requirements. It borrows varying amounts from banks: in 1969–70 it was £18 million, and this year £13.6 million. It has already borrowed abroad about £32 million in DM, but the bulk of its borrowings, which in recent years have been mainly for capital expenditure, comes through the National Loans Fund. Its forecast requirements are just over £2,000 million by 1973. Since the gas industry has to pay nearly 10 per cent. for its money, it is encouraged to examine closely the need to spend it. Boards are also becoming increasingly cost-conscious and are seeking savings without reducing their standards of service to the public.
As hon. Members know, the National Board for Prices and Incomes has recently been investigating the industry. This is the fifth reference concerning the industry since March, 1967. It is not surprising that it is feeling a little punch drunk. I hope that we shall be able to spare it a few punches in future. I hope to have the report of the board by the end of this month, and we will then see immediately to its printing and publication.
The House will wish to consider the financial results of the industry as a whole and the prospects for the future. For the five-year period to 1966–67, the industry was only 0.4 per cent. below its objective of an average gross return of 10.2 per cent. on net assets employed. In 1967–68—that was the year of the Middle East war and devaluation—it went into deficit and its gross rate of return fell to 7.7 per cent. In 1968–69 gas sales picked up and gas prices were increased. The industry then earned a record surplus of £17.5 million, representing a gross return of 10.9 per cent. on average net assets.
899 Provisional figures for 1969–70—that is, the first year of the new financial requirement to earn a net return of 7 per cent.—indicate a net return of 6.4 per cent. earned. Immediately ahead, the financial results of the industry obviously depend on the movement both of costs and prices. Clearly, this will also govern the extent to which it can increasingly finance its own capital requirements.
Meanwhile, I have no doubt that the development programme should continue broadly as planned. Natural gas has come to stay. Further investment in the industry is needed. I invite the House to approve the Order.
§ 12.7 a.m.
§ Mr. Alan Williams (Swansea, West)
I welcome the opportunity to be discussing the gas industry yet again with the hon. Gentleman the Minister of State. When he referred to the biggest single conversion operation ever undertaken, I thought that he was referring to himself and the Parliamentary Secretary. It is poetic justice that I should perhaps, with other hon. Members, be delaying him here at this time in view of the 25 sittings which he and his hon. Friends imposed on me when I was trying to steer the Gas Bill through Committee. I was glad to hear from his speech tonight that all my efforts then were far from wasted. I was delighted to note how many views which he then found questionable, deplorable or unacceptable have now become part of the standard Conservative philosophy. It re-establishes the confidence of many of us in the processes of this House. It was a hard haul, but a worth-while haul. I look with some trepidation at the Parliamentary Secretary, who will be winding up the debate, because he does not believe in the same educative processes and he may, therefore, not have the same benevolent view of the needs of the industry.
This is an Order which we on this side of the House, had we remained in government, would have brought forward. It was anticipated in 1968 when my right hon. Friend the Member for Southwark (Mr. Gunter), who was then the Minister, set the present absolute ceiling of £2,400 million but also imposed the interim ceiling of £1,600 million. He said that he hoped that in moving from the interim to the absolute ceiling the House 900 would be given the opportunity of maximum scrutiny of the industry. I am therefore glad that the hon. Gentleman has seen fit to approach the absolute ceiling not in one great leap but more casually. On the other hand, I could wish that it had been an even more casual approach.
I did some arithmetic during the brief spell when the hon. Gentleman was speaking. He referred to the expenditure being about £200 million a year. It is intriguing—I am delighted at the conversion—that we are here authorising the biggest-ever increase in the borrowing powers for this industry, bigger than we gave on the last occasion or, prior to that, in 1965. On the basis of £200 million a year, the House may well be denied the opportunity of scrutinising the expenditure of this industry for two and a half years.
I recognise, as the hon. Gentleman said, that it is not predictable how much will be spent in any given year, but I hope that when his hon. Friend the Parliamentary Secretary replies, he will intimate when he envisages that the next Order may be required. I suggest that if it is anything beyond a year from now, it will be an unsatisfactory answer. It is imperative that we should have an annual scrutiny of expenditure programmes of this magnitude by the nationalised industries.
On an earlier Order tonight on which I spoke briefly, I was pleased to hear the Minister of State, Treasury indicate his support for annual scrutiny. I hoped that we would be assured that annual scrutiny would be guaranteed for this industry. Having heard the figures from the hon. Gentleman, however, I have great doubts.
I therefore put forward four reasons why I think that annual scrutiny at this stage is imperative. The gas industry is going through a singularly dynamic change in its industrial structure and its investment programme. In the Gas Bill Committee I indicated three areas of a converging dynamic in the activities of this industry. On the exploitation side, I indicated that there was to be a five to six-year build-up in exploitation of natural gas. I was pleased to hear the Minister say that he still believes, as we then did, that 4,000 million cu. ft. a day by the mid-1970s is attainable. I am convinced that this is correct. That, 901 however, is a five to six-year build-up that we are envisaging in exploitation.
On conversion, while the programme is for 10 years the peak will be in the next two to three years. That is another major increase in the rate of advance and the rate of change in the industry. Thirdly, by the mid-1970s consumption will be trebled compared with 1968.
Thus, on exploitation, conversion and consumption, exceptionally rapid rates of change are envisaged. At a time of such dynamic change, it is imperative that the House should have maximum opportunity to scrutinise the way in which that change takes place, because substantial sums of money are involved. That is my first argument in support of an annual opportunity to scrutinise the expenditure and the borrowing powers of the industry.
The second factor—and possibly I may have an assurance from the Parliamentary Secretary when he replies—is that, while the hon. Gentleman may tell me that we gave two years between the last opportunity for scrutiny and this occasion, between the Gas and Electricity Act, 1968, and tonight's Order, we knew at that stage that we should be introducing the Gas Bill, which gave a marathon opportunity for investigation of the industry. Are we, therefore, to have another Gas Bill during this intervening period to afford us an equal opportunity to discuss the development of the industry in depth? If not, then again it becomes imperative that we have the opportunity to discuss the financial programme.
The third factor in support of an annual scrutiny is that when we were the Government not only were there the normal scrutiny opportunities in the House and Select Committee opportunities but there were the opportunities presented for public scrutiny by the Prices and Incomes Board, and the hon. Gentleman has already said that he hopes that in future the industry will be spared punches from the P.I.B. This, at this stage, I would suggest, is not necessarily a proposition with which the industry would go along, because while I am sure it would be only too happy to be spared what the hon. Gentleman described as the "punches" of the P.I.B., at least they were impartial interventions, impartial punches; and there have been indications from hon. and right hon. Gentlemen from the Despatch Box in the last week 902 or so that in place of the P.I.B. they intend to substitute the partial intervention, the biased intervention, of Conservative Ministers, instead of the board. I have a feeling that the industry, while it may be glad to feel that possibly it may not have to face the detailed scrutiny of the P.I.B., may have considerable reservations about the degree of impartiality with which its operations will be investigated by hon. Gentlemen opposite. But if the P.I.B. is to be abolished—and as yet we do not know, though there were firm indications in what the hon. Gentleman said that there is to be a reduction in outside scrutiny of the industry—then it becomes again more imperative that this House should be given extra opportunities to carry out scrutiny.
The final factor in support of annual scrutiny is that if, as the Government have intimated, it is their intention to hold back prices in the public sector, then it is absolutely essential that the opportunities should be given to this House to check the impact on the viability of the industry of these politically motivated interventions in its commercial practice, and, in particular, to ensure that its ability to carry out investment is not impaired to the point at which it will not be able to compete effectively, particularly with the oil industry.
So I hope that the hon. Gentleman will give us an assurance either that there is to be a Gas Bill between this debate and the next bringing forward of an Order, or that we shall have full opportunity to debate in this House any interventions which he or his right hon. Friend may undertake into the pricing mechanism as it applies to this industry.
This Order is, after all, our first chance to explore in depth the present Government's thinking in relation to the gas industry. The hon. Gentleman made reference to the borrowing abroad by the nationalised industries. I am sure the House would be interested, and I can see that some of his hon. Friends would be interested, to know how far the Government intend to encourage or to discourage such borrowing abroad, by all the nationalised industries—though this now is not the opportunity to pursue that—but I hope we may have an indication 903 of the Government's thinking on that in relation to this Borrowing Powers Order.
Equally we need to know, in view of its impact on investment decisions in the industry, whether or not the Government accept our fuel White Paper or whether they envisage a new one. Are they contemplating a new White Paper in relation to fuel? This is of critical importance in relation to the investment programme of all the industries, especially this one. If they are envisaging a new White Paper, is it to be soon? If it is not to be soon, this will create major uncertainty within the industry. I am sure the Government do not want to create that sort of uncertainty for major investment.
In this context I was interested to see in The Times yesterday the news of a contract for conversion of Hams Hall to natural gas. I shall not comment on the actual project, for obvious reasons. Do the Government envisage any change in policy on the conversion of coal-fired power stations to natural gas? We need to know this in assessing the future demand for this fuel. Will the Minister explain the thinking behind the reduced period of the contract involved in this conversion? Is it to absorb current surpluses of natural gas while at the same time enabling the industry in five years' time to look for higher price customers elsewhere? This may well be the case. If so, I urge the Minister to beware of the consequences of converting what could be long-term coal user power stations to short-term gas supply. I suspect that his could be used as a steppingstone to future oil conversions in the electricity industry.
In another sector in the next few years the Gas Council will be operating as an exploration company on the Continental Shelf. It is essential that we and the industry should know whether it is the Government's intention to limit this exploration activity. What expenditure on exploration is envisaged during the next few years? Will the industry be allowed to search for oil, bearing in mind the difficulty of trying to stop it obtaining oil when it is looking for gas because of the structural similarities? This is important in view of the debate on the introduction of the Gas Bill. The Labour Government did everything they could to encourage both aspects of exploration, 904 and we need to know whether the Conservative Government intend to give that same encouragement.
In particular we—and the public, because their money is involved—need to know whether, in the event of oil being found, the same commercial freedom will be given to the Gas Council as is given to any other operator in the North Sea or on the Continental Shelf to exploit that oil to its full economic potential. The Gas Council would be taking the same risk as other companies, and it must have the same right and the same freedom to exploit any success it achieves from those searches. There must be no arbitrary or doctrinally motivated limitation of the commercial practices of the industry. We heard earlier this evening that the Government of the day wanted to see the industry put on a proper commercial basis. Let them tell us tonight that they intend to see these exploration activities in the North Sea put on a proper commercial basis.
Will the Government, therefore, reintroduce the old Clause 2 of the Gas Bill? I need not spell out the Clause. Every word and every comma are engraved in our memories, and it would not be proper at this time of night for us to engrave them in anyone else's. As an ex-lecturer, I have an enthusiasm for education and I am quite willing to do so, but I am delighted to see that hon. Gentlemen are all familiar with the old Clause 2. If the Clause is not to be reintroduced, how can the industry operate commercially, as hon. Gentlemen have said they want the industry to do, in relation to its exploration activities? What would be the effect of failing to reintroduce the Clause in the event of a joint find by a joint exploration activity not of gas but of oil?
Switching to another aspect of the industry and its finances, the Minister has decided to keep certain gasworks open during the next twelve months to improve the supply of smokeless fuel, and I agree with him completely on this. Will he tell the House how he justifies making the gas consumer bear part of the cost of these supplies of smokeless fuel? I do not say that there should not be some form of subsidy, but how can the hon. Gentleman justify the gas customer subsidising the solid smokeless fuel consumer, which I understand he envisages 905 in part since the gas industry will be meeting part of the cost of keeping open uneconomic units?
Before approving a further £500 million in borrowing powers, the House should recognise that for the investment to be efficient there must be a change in the structure of the industry. I revert to a point which I put to the hon. Gentleman earlier, and I hope that we shall have an answer. Does he intend to bring forward a Bill to deal with the structural inadequacies of the industry and, if so, when?
The House will know that the present federal structure of the industry was arrived at as an attempt to improve on a structure consisting of over a thousand manufacturing units and a series of local distribution networks. Now that we have a single source of supply, we are moving towards a non-manufactured form of gas and a national distribution system. To optimise the benefit not only of the reserves but of the investment that we are authorising and the borrowing that we are authorising during this dynamic phase, there must be some central strategic control of the planning of the industry. Investment policy and priorities must be decided at the centre. Pricing policy, consequentially, must also be decided at the centre, and, therefore, it is equally appropriate that the financial duties imposed on the industry should be borne at the centre. We cannot rob the areas of many of their sectors of authority and still leave them with responsibilities for the financial objectives of the industry.
Similarly, will the hon. Gentleman bring forward legislation to remove the limitations of Section 53 (6) of the 1948 Act on undue preference? The hon. Gentleman knows these well; it is just that the name is slightly different. These again we debated at length, and I believe that there was quite a degree of understanding and acceptance of the need to remove these limitations. But the industry needs to be told whether it is now the intention to reintroduce legislation with this objective. If that is not done, the industry will not be able to exploit fully the benefits of the investment that the House has authorised. It will not be able to compete with the practices of the oil industry in the bulk market. It would 906 be to the benefit of the whole range of consumers, including domestic consumers, if these 1948 limitations were removed. In a capital-intensive industry, that would enable the high overheads to be spread more widely.
I congratulate the industry on the unique rate of introduction of natural gas. It is astonishing that it is only just over four years since the first find was made in our sector of the North Sea. In this context, I am delighted to hear the hon. Gentleman's first reactions to the inquiry which we set up into the safety of natural gas. It will go a long way to clearing obstacles to the full utilisation and realising the full potential of this remarkable new fuel.
The large sum of money which I hope that we shall be authorising is one of unique proportions for this industry, and it is right that this House and the industry should be given the answers to all the questions that I have asked. Before deciding whether we can support the Order, we shall listen very closely to the hon. Gentleman's answers.
§ 12.30 a.m.
§ Mr. T. H. H. Skeet (Bedford)
I certainly agree with the hon. Gentleman when he indicates that there should be an annual review to see how it goes, particularly in view of the fact that my hon. Friend may not be introducing a Bill immediately.
One thing I have looked for carefully is this: not a word has been said by anybody tonight on price. The cost of gas is 23d. per therm. Buying it from the North Sea producers costs 2.87d. and a lot of oil is used as well, but we have not been told by either speaker what it to be done on price. Every customer wants to know whether moving into a dynamic age will see some reflection in price. So far there has been none.
This industry has had examples in Holland, West Germany, Canada and the United States of how to convert to natural gas, but so far in Bedfordshire, my own area, we have had a great number of problems which have accumulated in dealing with conversions. Fitters have been arriving and going away, forgetting what they should have done. These troubles have been repeated, and I hope that the Eastern Gas Board, its officers, staff and sub-contractors will be much 907 more responsible in future about the demands of the public, demands which they have every right to make.
It was mentioned by the hon. Member for Swansea, West (Mr. Alan Williams) that he would like to see some structural alterations. We can agree that structural alterations would be most desirable. I have noticed in a little publication by the gas industry these words appear:The change from a manufacturing based industry to a transmission and distribution based industry follows from the introduction of natural gas.So far, we agree, but is it not advisable to see that this industry is maintained on a transmission distribution basis and is taken clean out of exploration and production?
We are talking about big figures in raising the borrowing limits to £2,100 million. These are the big spenders. Would it not be better to hand over to private enterprise and let them raise the money in the usual way, as it is done in other countries, and not via the taxpayer?
There are ample precedents for this. If one takes the case of Holland, the O.S.M. has admittedly got a stake of 40 per cent. investment in Gasunie: the State has 10 per cent. and private enterprise the balance. In Belgium, in Distrigaz the State has an interest in conjunction with private enterprise. In West Germany, on the production side it is almost entirely private enterprise, while transmission is left largely to the oil companies and coal interests. It might be not simply unique but advantageous to the taxpayer if some way is found of reducing his liability.
The nationalised industries in the past years have been instrumental in building up large requirements of capital which have been spent like water running into the sand. We are told they are cost-conscious, but we find no real indication of this. Return on capital invested is still remarkably low.
They have one or two advantages. I find from the accounts that in 1967–68 the gas industry was paying 6.9 per cent. on average for the money it raised, and in 1968–69, on £240 million, interest rates advanced from 7⅜ per cent. to 8⅜ per cent. This may be high. I am not disputing that. Interest rates are high in the 908 United Kingdom, but if the industries went to the open market, I dare say they would pay a substantially larger figure. Are they therefore not receiving a considerable subsidy which private enterprise does not get?
I accept that if the industry raised money in the Federal Republic it would get it at 6 per cent. That would be advantageous, and I recommend this course.
It may be argued that the private enterprise companies have the benefit of investment grants. This indeed they have. On the other hand, a Board of Trade handbook indicates that nationalised industries do not receive them. But this is not strictly true. If they work in partnership and set up a commercial subsidiary they do. The Gas Council has done this. Where it works alone it operates under the heading of Hydrocarbons (Great Britain) Ltd. and when it operates in partnership it comes under the august name Gas Council (Exploration) Ltd. Under this guise it can thus obtain cash grants. If it works under the general umbrella of a commercial enterprise, it can have all these advantages as well. The hon. Member for Swansea, West suggested that it should not be discriminated against. But it is given a preferential position.
Why should the Gas Council be engaged in exploration when it is a monopolistic buyer? Everywhere in the world, so far as I understand, the buyers pay the market price—a willing seller and a willing buyer. Here it is virtually a dictated price, because there is only one buyer under the Continental Shelf Act, 1964. It would be most advantageous if there was a truely negotiated price, a price which could easily be fixed by the law of supply and demand.
With the abundance of natural gas which is becoming available—the reserves are now 29 trillion cubic feet—prices will tend to fall. Prices have already been falling in Western Europe. I should think that this was the simplest way of reaching the correct price.
I do not think that 2.87d. per therm, or the most recent deal with British Petroleum of 2.9d. per therm, is realistic enough to persuade private operators to move on to the Shelf to locate more gas, which is urgently required.
909 I will leave those points and move on to one or two other matters which have arisen. It is late and it might be important to curtail my remarks. But let us bear in mind that we are dealing with £2,100 million, which is not a small sum. This is the only opportunity that we shall have of debating this matter this year; this is the only opportunity that we shall have before the recess. It may be suggested that this should go through on the nod, but I would not be prepared to concede this.
§ Mr. Skeet
I am glad to find hon. Gentlemen opposite giving me some support in this, even though they would not support ideas of wresting control from State agencies on the Shelf and handing it over to the agencies of private enterprise which can do the job so much better.
I hope that the Minister will bear in mind that while the industry was right to shut down its carbonisation plants, through lack of collaboration with the National Coal Board the industry has got itself into a delicate situation with the steel industry and domestic consumers. We have a fuel crisis of the first magnitude. This could have been foreseen three or four years ago, but no steps were taken to avert it. We have now got ourselves into the ridiculous situation whereby we are exporting to France and receiving the processed material back here for our consumers to buy. However, I must concede that it is possibly the only thing that we can do in the circumstances.
I welcome the suggestion that one or two uneconomic carbonisation plants must be kept operating for the time being. I hope that the Minister will also watch the market for liquid natural gas. The price is tending to fall since we negotiated the contract with Algeria many years ago. It may be that in future years more advantageous prices will be available.
I hope we shall be given information, if it is available, about the Ekofisk, an area of advantage where a well has recently been discovered on the Norwegian side of the median line. This will probably make vast supplies of natural gas available to the United Kingdom; that is, if the Gas Council is able to buy it.
910 In my view, the chemical industry should have the right to buy not merely its chemical feedstock directly from suppliers on the Continental Shelf, but also any fuel it requires for its own steam raising. This would get rid of the middleman and probably do a lot to bring down the industry's costs.
I fully back the contention about converting one power station, Hams Hall, in Birmingham, to dual firing. There is, however, a difficulty. Gas is a premium fuel and there might be a tendency, particularly in the early days, to over-sell, so creating a major problem. I hope that this power station does not experience the fate of another plant in Birmingham some years ago. The authorities then tried to use low-grade coal for making gas and the plant had to be shut down as uneconomic. That was a failure. I am certain that on this occasion the project will be a success.
I welcome the progress that the Gas Council and the area boards have made generally. This is a great industry with a great future. However, if the industry goes on spending as it is now, parliamentary checks will be necessary, and prices will have to be watched. I do not put much by the Prices and Incomes Board in this context. That will go, with the result that, in the end, the checks will have to be made here in this House, and not through consumer councils. Or perhaps the market forces will settle the matter. However, market forces cannot operate when there is a sole monopoly. Ultimately, we might get a few conversions on the bench opposite. Perhaps even a few hon. Gentlemen opposite will accept that competition can have advantageous results.
§ 12.43 a.m.
§ Mr. Rafton Pounder (Belfast, South)
Although the hour is late, I would not have missed the speech of the hon. Member for Swansea, West (Mr. Alan Williams) for anything, bearing in mind the trials and tribulations of former weeks and months.
Instead of 25 sittings on one Bill, I formed the impression that he wanted 25 separate Bills. When he talked about not wanting an industry that was doctrinally motivated, I reckoned that his conversion was total. Meanwhile, it is important that we have an annual examination of expenditure and borrowing 911 powers, and I hope that these occasions will continue at regular intervals.
Did I understand the Minister to say that the borrowings which we are envisaging will be at the rate of 10 per cent. from the National Loans Fund? My hon. Friend quoted so many statistics that it was difficult to sort one from the other. If this is the case, and I welcome it, it means that at long last we are having borrowings at something approaching the market rate.
My hon. Friend referred to the publication of the P.I.B. report on the gas industry. Since this will not be the first such report—indeed, I believe it will be the fifth—could it be published along with the views of the Government and the gas industry, rather than allowing the whole matter to be presented in a less than clear state?
It is customary when talking about the Continental Shelf to use the area as a blanket phrase for both the North Sea and the Irish Sea. I wonder whether any of this money for which borrowing power is being granted to the gas industry will be used on ventures in the Irish Sea. In winding up, could my hon. Friend give some idea of the progress made in explorations for natural gas off the coast of Lancashire and North Wales?
§ 12.45 a.m.
§ The Parliamentary Secretary to the Ministry of Technology (Mr. Nicholas Ridley)
There are some questions I think I should deal with in reply to the debate. The hon. Member for Swansea, West (Mr. Alan Williams) seemed to think that the long sittings in Committee on the previous Gas Bill had not been wasted. I assure him that is so. My hon. Friend the Minister of State has come refreshed from that exercise full of ideas into the Ministry. There will be all sorts of signs of these ideas appearing in due course as a result of his discovering the errors of the ways of the hon. Member.
It is, of course, a little soon for me to tell the House exactly to what conclusions my hon. Friend has come. When the hon. Member asked many wide questions concerning the future of the gas industry, nationalised industries' financing and Continental Shelf activities, I am sure he did not expect me to give detailed 912 answers, because these matters are very much under consideration.
§ Mr. Alan Williams
I fully accept that it may not be possible on the spur of the moment to answer all these detailed points, but that is all the more reason for the hon. Gentleman to give the assurance, for which I asked, that we shall have the opportunity of debating the gas industry within the next 12 months. I would be quite happy if he could give that assurance.
§ Mr. Ridley
The hon. Member anticipates me. I was about to deal with that aspect of his speech. He said that this is the biggest ever increase in borrowing powers of the industry and that it is designed to last for a longer time than ever before. His right hon. Friend the Member for Southwark (Mr. Gunter) said in June, 1968, when increased borrowing powers became necessary, that he would seek an amount sufficient to last for three years. That was very much longer than this Order is sought to last. It should last probably to the beginning of 1973. The Gas Council, in its booklet, confirmed that then it expects to have to come to the House for further powers. This was not the practice of the past Government, but a rather shorter period.
The hon. Member is a glutton for punishment. He has just finished 24 Sittings on the Gas Bill. What more does he want? He could have a Supply Day at any time to debate the gas industry, or he and his hon. Friends could put down Questions. I should have thought that ample opportunity for hon. Members to debate the industry whenever they want. The idea that the Government should provide a regular day for every nationalised industry to be debated after the spate of nationalisation such as we have had would pre-empt most other subjects from being discussed. I suggest that he should exercise his right to choose a Supply Day for the purpose.
§ Mr. Alan Williams
The hon. Gentleman has denied the idea of an annual scrutiny. For that reason I suggest that this is an occasion for a scrutiny and that he should give answers to the questions I put to him. He should do so in courtesy to me.
§ Mr. Ridley
The hon. Gentleman anticipates me. I have suggested that 913 an annual debate would not be particularly appropriate for any industry. I come now to the rather different question of scrutiny. Nobody could claim that this debate was scrutiny of the gas industry. Many questions have been asked, but they have not been related to the very complex reasons which lie behind this huge investment. There have been the inquiries of the National Board for Prices and Incomes and of the Select Committee on Nationalised Industries. There is continuing Government scrutiny and much public comment on the industry.
The hon. Gentleman must ask himself whether he thinks it is right that there should be further bodies—or, indeed whether that number of bodies should continue—to examine this one industry. He will find on checking with the Gas Council that it would be very relieved if it did not have to subject itself to inquiry by the National Board for Prices and Incomes in the future. I do not believe that it is right that there should be annual scrutinies by further bodies. If the hon. Gentleman wishes, he can always call for a debate by the usual procedures.
The previous Government made arrangements for the terms of the contract in relation to Hams Hall to be switched from one type of fuel to another. I am satisfied that the arrangement that they came to ensured that the position of the coal industry is not prejudiced by those terms. The precise terms are confidential to the two industries concerned, but I assure the hon. Gentleman that whichever way it goes in the future the coal industry has not suffered. I believe that should be the model for any further arrangements of that sort.
The Gas Council is rightly contributing to easing a national shortage of smokeless fuels. We have inherited a difficult position. By keeping open some of its gasworks, the Gas Council is playing a useful part in meeting the possible shortfall which can be expected this coming winter if things do not go too well. It is only fair that everybody concerned in this shortage—the National Coal Board, the Gas Board, and the Government—should contribute. That is the arrangement which my hon. Friend announced in an answer today.
§ Mr. Alan Williams
In that case, what contribution will the hon. Gentleman be receiving from the private producers of smokeless fuel?
§ Mr. Ridley
Everybody is trying to increase their production. This may well not be economic because the shortage cannot continue for a long time.
§ Mr. Ridley
To increase plant beyond perhaps what one's own forecasts suggest to be wise can be a greater financial contribution than the hon. Gentleman realises.
My hon. Friend the Member for Bedford (Mr. Skeet) was not quite fair on the question of the price of gas. In many cases the price has reduced. This applies mainly to large industrial consumers. There is what is called the gold star tariff available to many consumers, if they opt for it, at 15d. a therm, which is a great improvement on what would have happened—
§ Mr. Ridley
I think my hon. Friend would be the first to recognise that it is economies of scale which determine pricing policy. If large consumers can take gas much more cheaply, that is strictly in accordance with the economics of the matter. That is all that I have claimed. On the other hand, I do not think my hon. Friend can say that there have not been price reductions as a result of what I have said.
I should like now to deal with the points made by my hon. Friend the Member for Belfast, South (Mr. Pounder). The Government have not charged the industry 10 per cent. on money which it borrowed, but they have set a 10 per cent. test discount rate for new investment. The cost of borrowing is just under 10 per cent., which is the Government's going rate for new borrowing. My hon. Friend will publish the report of the National Board for Prices and Incomes, and he will also publish his own views on the report as soon as he has formulated them.
915 My hon. Friend asked about drilling in the Irish Sea. I do not have much information to give him. The extent of the Gas Council's exploration operations on the Continental Shelf as a whole is quite small—only £19 million in total so far. That is also the answer to my hon. Friend the Member for Bradford.
Hon. Members on both sides of the House have tried to lead me into discussing the future structure of the industry, whether it should search for oil, the question of undue preferences in prices, and all sorts of matters which I should be only too pleased to discuss but on another occasion. We have had quite a lot of gas today in the House of Commons. The hour is late, and I think that those matters go well beyond the Order before the House, the purpose of which is to increase the borrowing limits for the immediate tasks in hand by the Gas Council. These tasks were set by the hon. Gentleman's Government and, as he said, he would have laid the Order had it not been for the change of Government. I commend the Order to the House.
§ Mr. Alan Williams
Before the Minister sits down, may I raise one matter with him? The hon. Gentleman said that the Order is necessary to enable the Gas Council to fulfil the tasks which we set the industry, but to fulfil those tasks we proposed certain structural changes. These were implicit in the Gas Bill. We were giving powers in relation to oil. This was part of the programme which necessitated an increase of £500 million in borrowing powers. The hon. Gentleman has failed dismally to answer the points put to him. Equally, he has failed dismally to answer my question. The hon. Gentleman said that everyone was contributing to the loss which will be incurred in obtaining this extra smokeless fuel. Does "everyone" include private smokeless fuel producers, or does it mean only the nationalised fuel sector?
§ Dr. J. Dickson Mabon (Greenock)
On a point of Order, Mr. Deputy Speaker. Surely it is straining your natural courtesy a great deal to allow the Minister to reflect so badly on the Chair by his comment that certain things mentioned by my hon. Friend and by other hon. Members were out of order? Surely that is wrong of the hon. Gentleman? 916 Unless you feel that those matters were out of order, the hon. Gentleman has no right to make such a comment.
Mr. Deputy Speaker
I did not take it that way. I did not notice anything particularly offensive to the Chair. The hon. Member often sat under my chairmanship upstairs, and he knows that I would have called the Minister to order if I had noticed anything wrong. I did not really notice anything of the kind.
The Question is—
§ Mr. Alan Williams
On a point of order, Mr. Deputy Speaker. Is it in order to put the Question before the Minister has completed his speech?
Mr. Deputy Speaker
It is in order if no hon. Member rises to speak. The Minister did not rise. If he wishes to do so now, I shall call him again.
§ Question put and agreed to.
That the Gas (Borrowing Powers) Order 1970, a draft of which was laid before this House on 14th July, be approved.