ELECTRICITY (FINANCIAL) PROVISIONS) (SCOTLAND) BILL

HC Deb 14 October 1976 vol 917 cc644-81

Not amended (in the Standing Committee), considered.

Motion made and Question proposed, That the Bill be now read the Third time.

4.5 p.m.

Mr. Arthur Palmer (Bristol, North-East)

On a point of order, Mr. Speaker. As I understand it, we are embarking on the Third Reading of this measure. It has not previously been before the House. The Bill has had no Second Reading in the Chamber. It was considered in principle in the Scottish Grand Committee and I assume that "in principle" means virtually a Second Reading.

I was not a member of the Scottish Grand Committee, although I believe that I could have been appointed to it had the Committee of Selection wished it. I made no application to the Committee. The advantage of a Second Reading of a Bill, I am sure you would agree, is that not only can a Member discuss what is in the Bill, but he can suggest what should be in the Bill. When it comes to a Third Reading, that is not the case. Is it possible, on this Third Reading, to look at the Bill in a broad Second Reading sense?

Mr. Speaker

I fear not. The Third Reading rules must be adhered to. It was open to the hon. Gentleman and his friends, if they felt strongly about this, to ensure that the Second Reading was held in the Chamber. It needed only 10 hon. Members to rise in their places. I must, therefore, observe the rules of the House.

4.7 p.m.

The Minister of State, Scottish Office (Mr. Gregor MacKenzie)

Perhaps it would be for the convenience of the House, the Third Reading having been moved formally, if I later pick up points made in the debate.

4.8 p.m.

Mr. Ronald Bell (Beaconsfield)

I feel that I should start by explaining that this Bill comes before the House for debate on Third Reading because I and five of my colleagues tabled a motion to the effect that the Question be not put forthwith. This brings me to the point that was raised by the hon. Member for Bristol, North-East (Mr. Palmer). It was what I will call my general interest in the day's business which prompted me to look at the various Orders on the Paper. I must say that I was rather shocked when I looked at the first. It was because of my reaction that I tabled this motion. This is important in itself, but it also illustrates the kind of thing that is happening in the House these days.

This does not sound a very interesting Bill. I suppose that from the literary point of view it is not very interesting. But when we read the Explanatory and Financial Memorandum we see that the purport of the Bill is to authorise the Scottish electricity boards to borrow up to a maximum of another £750 million.

Clause 2 authorises the Secretary of State to make advances out of the Consolidated Fund of the United Kingdom of a wholly indeterminate sum which is, I will not say a forecast, but the figure of £200 million has been mentioned—with the caution that this is not an estimate but the sort of figure that might be reached on a fairly gloomy estimate. But it might also be exceeded. The Bill therefore authorises the contracting of loans up to £750 million and, in addition, expenditure out of the Consolidated Fund of the United Kingdom of perhaps £200 million, but it might be more.

The Bill went straight to the Scottish Grand Committee where it would have obtained the attention of Scottish Members. Some English Members would be added to the Committee to redress the party balance. However, I have been one of those added Members in the past, and I know that such Members have to be very diligent to turn up and very brave to dare to speak. Therefore, the Bill did not have the attention of any but Scottish Members, and it then went to the First Scottish Standing Committe, where it had solely the attention of Scottish Members. But for my general interest in the day's proceedings, it would never have come on to the Floor of the House at all. That is wrong.

The view has obviously been taken that because the money will be spent in Scotland the Bill is solely concerned with Scotland and is really for Scottish Members only to consider. But the money will be raised in the United Kingdom. Clause 2 refers to payments out of the Consolidated Fund of the United Kingdom, as replenished by the National Loans Fund. This is a budgetary matter. The loan will not be raised in the constituency of the Minister of State, for example, or of that of my hon. Friend the Member for Ross and Cromarty (Mr. Gray). When it comes to raising sums up to £750 million, the loan will not be floated, for example, in Dundee, East.

Mr. Gordon Wilson (Dundee, East)

It is possible. We have a money market.

Mr. Bell

There may be a money market in Dundee, East, but I doubt whether it would run to £750 million.

There are two ways in which that money can be raised. One is by internal borrowing in the United Kingdom money market, which in effect means London. If that happens, it enhances the competition for capital in the United Kingdom. We are all worried about the 15 per cent. minimum lending rate. The interest rate which prevails in a country reflects the balance of supply and demand for capital money. Every time the demand for capital is increased, interest rates are forced up.

Interest rates are not decided mainly upon political considerations. The country which has in mind more good causes than it can finance is inclined to have high interest rates. One of our problems since the war is that this country, and perhaps even the world generally, has had so many projects which might be described as well worth doing that there has been enormous competition for cash.

Mr. Nick Budgen (Wolverhampton, South-West)

Does my hon. and learned Friend agree that interest rates are not decided only by the supply and demand of money? They are also partly determined by the Government of the day exercising their monopoly control over interest rates. The Government take into account both the internal rate of inflation and the external demand for money. While I agree with my hon. and learned Friend that the factor he has described is one of the causes of high interest rates, I hope that he will agree that it is not the only cause.

Mr. Bell

I was not suggesting that it was the only cause. I was saying only, and particularly in relation to the sum in Clause 1, that not enough attention is given in the discussion to the role of the balance between supply and demand for capital money.

I should perhaps at this point make it clear that we are not actually talking about £750 million. The existing limit of £1,200 million under the current legislation has not yet been reached. The forecast has gone wrong. It will be reached a year earlier than was expected, and that is in about a year's time. We are therefore contemplating borrowing on the United Kingdom market perhaps £850 million, which even these days is quite a lot of money.

When I first began taking a practical interest in politics, the total national budget was only £600 million. Now in a Bill which was never to have come before the House, but was only to have been dealt with upstairs, it is proposed to authorise expenditure of nearly half as much again under Clauses 1 and 2.

I appreciate that we are talking about different sorts of pounds, but why are they different? They are different precisely because we embark upon these vast expenditures without bothering too much about them. Some hon. Members have asked me in the past few days "What is £800 million or £900 million in the context of the Government's present borrowing requirement?" But that is how the requirement builds up, and that is why the sum is regarded as so unimportant that the Bill should pass through two Committees and never bother to come on to the Floor of the House.

The alternative to the borrowing is that the moneys provided for in Clause 1 should be borrowed overseas on the Eurodollar market. We know that that is the idea. The money is borrowed abroad and thus adds to the overseas debt of the United Kingdom. It is not that the sum cannot be raised in Dundee, East, but that it cannot be raised in the United Kingdom either. It must be raised abroad. That brings us back to the balance of payments.

So much for the importance of the Bill and so much for the fortuitous trend of events by which it comes before the House.

I now turn briefly to its intrinsic significance. There is the Financial Memorandum and there was the debate in the Scottish Grand Committee to guide us. I doubt whether any but the Scottish Members knew until now, but the Bill is largely concerned with the development of an aluminium industry in Scotland. That may be an excellent thing. The Bill is also concerned with the generation of electricity from nuclear fuels in Scotland. That may or may not be a good thing. But what certainly emerges from it is that the forecasts made about the costs of both those undertakings were grotesquely wrong.

We are told something of the nature of the deficits which are accumulating. We are told, for example, that Clause 2 represents a revised estimate of the needs for electricity generation in Scotland, which is substantially lower than the original estimate. Then we are told that this is derived from a decision of the Government in 1967 that there should be a viable aluminium smelting industry in this country. I gather that in the short period since 1967 that particular operation has lost £40 million for the taxpayers. The deficit expected next year is £13,500,000 and there is hope that this will come down to a steady £2,500,000 a year by the beginning of the 1980s. I do not call that a viable aluminium smelting industry—I call that an industry which survives only because the Government are pumping the taxpayers' money into it at a pretty fantastic rate.

Mr. Norman Buchan (Renfrewshire, West)

I think that the hon. and learned Member has made a quite unworthy comment. The aluminium smelting industry is an extremely worthy venture, and as far as taxpayers' money is concerned, I, for one, hope that taxation will be put into every worthwhile project. The first generation of an industrial base for the Highlands is extremely important and worth while.

Mr. Bell

I am not necessarily qualifying that. I do not really claim to have the prospectus to make the judgment necessary in order to reach a decision on whether this is justified. But I did pick out the phrase that the purpose was to establish "a viable aluminium industry." We are told by the Minister responsible that there is now a deficit of £40 million in the smelters' account and that the total requirement is unlikely to be less than £100 million. Taking a gloomy view of the future, the total at the end of the day could reach or exceed £200 million. One can hardly describe that as a viable aluminium industry.

Let us look at the interest charges on £200 million. One does not need to assume a 15 per cent. rate of interest on this amount. One could be charitable and assume an average rate of interest at the end of the day of 10 per cent. That works out at £20 million a year, and it would have to be a very good aluminium smelter to run up £20 million a year to pay off its interest charges. Apart from this, there are the charges incurred on capital account by this enterprise.

We are told that this project has all gone rather sour financially for three reasons. The first is that Hunterston B, the power station on which it was to be based, in common with other AGR stations, has suffered problems in construction which have delayed its commissioning by three years. In this period electricity which should have come from Hunterston B has had to be supplied from alternative sources, and this has proved very expensive because of the steep rise in costs of oil and coal over the past three years.

The second reason is that although Hunterston B is now beginning to produce electricity, there is a possibility—and this is one of those most agreeable phrases—that the assumptions about the basic level of output on which the contract charges are based, which were reasonable in 1968, may now prove to be optimistic. That is a convoluted phrase but what it means is "It ain't as good as they thought it was". In addition to the losses already accumulated, therefore, losses may continue, albeit at a lower level, throughout the remaining period of the contract.

The third reason is that there is a further particular problem arising as a result of the risk of corrosion of boiler components, which may necessitate restriction of the operating temperature of the reactor and reduce the output of the station. The level of this so-called de-rating which may be necessary cannot be determined until the station has been proved in operation over the next few years. Initially it is being operated at 20 per cent. de-rating while the level of corrosion is monitored, and thereafter it will be watched.

It was regarded as unreasonable that the British Aluminium Company should carry the loss resulting from that, and the subsequent increase in the cost of electricity provided, so the taxpayers have to carry it. Then, of course, we have the cautionary comment in the White Paper about the best estimates which can be made by the board, but the Minister emphasised that these were no more than an indication. For this reason he did not feel able to insert a financial limit in the Bill. Instead, each payment will be prescribed by an Order, subject to affirmative resolution by the House.

I emphasise that this is Clause 2 to which I am referring, not Clause 1. Clause 1 authorises extra capital borrowing of £750 million. Clause 2 is a direct payment out of the Exchequer annually to finance the borrowing deficit.

Mr. Gregor MacKenzie

Perhaps it might help the hon. and learned Gentleman in his consideration of the Bill if he looks at the Second Reading speech that I made in Scottish Grand Committee when I indicated that the borrowing of Clause 1 is in two stages and that hon. Members will have the opportunity to come back once again and review this.

Mr. Bell

I have been reading extracts from the Minister's Second Reading speech in the Scottish Grand Committee; but I am talking about Clause 2. If I have given the impression by implication that the whole of the £750 million increase of Clause 1 is subject to that order of affirmative resolution, I will correct that. But I am talking about Clause 2, where there is no financial limit at all and the matter is dealt with by an order subject to affirmative resolution.

If the Bill had never come before the House of Commons at all, but had been dealt with totally in Committee, what sort of safeguard would there be in these orders? We all know the amount of paper descending on hon. Members from all directions. We are deluged with it, especially with EEC documents adding to everything else. The amount of documentation teaching us every morning is beyond digestion, and when hon. Members see something which appears to relate solely to a Scottish financial provisions Bill, it is not surprising that they do not give it much attention.

It has been said that there was good reason for having consideration of this Bill elsewhere, and I do not dispute that. It may well be so. But this is a United Kingdom Exchequer liability on the current account side and it is a straightforward payment from it.

The Minister is right to say that the figure in Clause 1 is a bracket. I think that the old bracket was £650 million to £1,200 million. The new bracket is £1,200 million to £1,950 million. The amount that can be borrowed without the Minister's coming to the House again goes up from £650 million to £1,200 million. The maximum figure of £1,200 million in the 1947 Act will be exhausted in about a year's time. When we have gone above the new unconditional £1,200 million, the Minister has to return to the House for an order for the remaining £750 million. There is an increase of £550 million in the basic figure and the maximum figure has gone up by £750 million. If that is the history of the Bill, why should we regard the so-called safeguard on the capital borrowing account as of any great value?

The hon. Member for Renfrewshire, West (Mr. Buchan) made the fair comment that the smelter was valuable for the development of Scotland, particularly the Highlands of the north. It is probably fair to add that it has been hoped that the enterprise will have a certain trigger effect and lead to some proliferation of industry and increased employment in the North and West of Scotland. I do not feel able to weigh one fact against the other—the financial burden and the possible ultimate advantage to the Scottish economy.

My first point was my absolute astonishment that a Bill of this magnitude and significance was to slip through with no debate on the Floor of the House, without most hon. Members even knowing that it existed. Secondly, I wish to express my considerable anxiety about the number of such schemes where the estimates have been hopelessly adrift and the loss to the taxpayer in relation to the size of the scheme has been astronomi- cal, and where for as far ahead as one can see there will be a very big continuing loss on the operating, current revenue side from 1967 or 1968—£40 million and, it is believed, another £160 million to come, making £200 million—and a borrowing requirement of a staggering magnitude.

The public sector borrowing requirement is running at about £12,000 million and the Chancellor of the Exchequer hopes to bring it down—with what success I do not know—to £9,000 million a year. I do not see its coming down if this kind of thing is to go on. Everybody has his pet project and is inclined to say of it that the money will be well spent. But a sufficient accumulation of pet projects and money from the taxpayer well spent is enough to drag down any country, to push up its interest rates and push it to the point where its burden of overseas interest and the general burden of internal interest is so great that all enterprise and investment are stifled.

The Minister of State should explain where he sees the light at the end of the tunnel in respect of these projects and how he establishes the balance—it may be a favourable balance, although I do not see it—between the social and economic advantages to Scotland in the long term and the undoubtedly heavy capital and current commitment involved in the financial provision of the Bill. I am glad to think that I have perhaps torn him away from some other activities this afternoon and given him the opportunity to give that explanation in this public place.

4.35 p.m.

Mr. Arthur Palmer (Bristol, North-East)

The hon. and learned Member for Beaconsfield (Mr. Bell) made a valuable point when he said, to put it shortly, that the money to be paid out under Clause 2 is to be paid out exclusively in Scotland—in fact, to the North of Scotland Hydro-Electric Board—but is raised from the United Kingdom taxpayer, whether he lives in Scotland, England or Wales and presumably Northern Ireland, although I do not quite know the Northern Ireland financial situation these days. If it is not to be raised from the United Kingdom taxpayer, it is to be obtained on his credit if overseas borrowing is made but it is to be paid out exclusively to Scotland or Scottish interests.

Clause 2 is intended to reimburse the North of Scotland Hydro-Electric Board for extra expense it has incurred in supporting, through a lower rate for electricity, the aluminium smelter project at Invergordon. If it is a sound principle to reimburse the electricity authorities in such circumstances, after the passage of eight years or so since the project was conceived, at the expense of the United Kingdom taxpayer or on his credit, then I suggest all the electricity authorities in the United Kingdom should be treated in the same way.

The idea of making a marriage between aluminium smelting in the more difficult employment areas and electricity generation from the nuclear fission process was one to be applied as widely as possible at the time of its conception. The Central Electricity Generating Board was as involved as the North of Scotland Hydro-Electric Board. The CEGB, which is responsible for the wholesale supply of electricity and its transmission south of the border, was asked to supply electricity at a special reduced rate based on the expected costs of nuclear power generation. I do not think that it was anxious to do it. but it was placed under Government pressure to do so. My right hon. Friend the Member for Huyton (Sir H. Wilson), then Prime Minister, was particularly keen on the idea. In the CEGB case the generation source selected was Dungeness B nuclear station to supply electricity for an aluminium smelter at Anglesey in Wales through the grid, a somewhat artificial approach.

Therefore, on the principle of not making fish of one and fowl of another, if the North of Scotland Hydro-Electric Board, has a claim for recompense, surely that makes the Ceneral Electricity Generating Board equally entitled. If we are talking about Dungeness B and basing the electricity price on its output, I am afraid that it has taken much longer to bring that station into use than the station as Hunterston.

It could hardly have taken longer as Dungeness B is not yet operating. There have been tremendous technical difficulties and costs have mounted year after year. So some public explanation should be given of the different treatment of the electricity authorities in Scotland as against England, and, indirectly, the different treatment of the electricity consumer in the two countries—that is what it amounts to in the end.

I have done my small best to probe this matter. I tried to get a statement from my right hon. Friend the Secretary of State for Energy. After all, it is his writ ministerially which operates south of the border. I tried to obtain information about the Anglesey aluminium smelter agreement. I shall not weary the House with the matter, but there is still a great deal of secrecy about the agreement. The contract is between the Central Electricity Generating Board and the Anglesey Smelter Company, which I believe is a face organisation for one of the large international aluminium combinations. The terms of the contract have never been made public. The only information I could obtain on its duration from my right hon. Friend the Secretary of State was that the contract runs for an unusually long term. I suspect that the use of those words means that it is for a very long term indeed.

I tried to find out whether the Central Electricity Generating Board has protested to the Government about the difference in treatment between United Kingdom electricity authorities. I have been told that it has protested but to no avail. It seems that the Government have ignored CEAB protests. I shall quote the last paragraph of the statement which was given to me by my right hon. Friend. It states: As a result of the increasing capital cost of Dungeness B, the delay in its commissioning, and the prospect of derating"— that is the same difficulty as with the Hunterston B station— when it comes into operation, the agreement is working out unsatisfactorily from CEGB's point of view, but such a phase is a normal risk with a commercially negotiated long-term contract. That is sheer rubbish. The Central Electricity Generating Board really had no option. Its members are appointed in the same way as those in other public corporations, that is, by the Minister. Therefore, when the Government asked them to enter into a contract they could not approach it in a genuinely commercial way. They could not say "We do not think that it will pay us over the years." That is unsatisfactory and for myself I believe that the agreement should not have been entered into if the result would be to put publicly-owned electricity supply authorities at a disadvantage for many years.

Nevertheless, it sems that the agreement was very much to the commercial advantage of the aluminium company, which is an enterprise well able to take care of itself financially. In the end it means that the electricity consumer and the taxpayer has been helping out financially an international aluminium combine. No doubt it did not particularly wish to go to Anglesey, but having been induced to go there is made certain that the Government paid it well for doing so.

It would be interesting for the House to investigate through a Select Committee just how much aluminium has been produced at Anglesey. Also it would be interesting to investigate how many jobs have come about as a result of this arrangement and how much money has been loaded on to the electricity consumer under the guise of the board entering into a commercial agreement.

I can see no reason for the terms of the agreement not being made public. Surely they should be made public. However, I confine myself now to raising a point, thanks to the hon. and learned Member for Beaconsfield who has ensured for the first time that the whole House has been able to probe these matters. Why, if it is right to reimbuse the North of Scotland Hydro-Electric Board, is it not equally right, on the same principle, to reimbuse the Central Electricity Generating Board? Surely the House deserves some explanation of the discrimination.

4.47 p.m.

Mr. Ivan Lawrence (Burton)

I shall be brief because I do not seek to delay the House in its consideration of other legislation.

I am not privileged to be a member of the Scottish Grand Committee. I hasten to add that that is not a privilege that I seek. Like most privileges that come my way, I give notice that I should reject it if it were offered to me. I always think that others are more worthy of such privileges.

I ask the hon. Member for Bristol, North-East (Mr. Palmer) to forgive me if I do not take up the energy industry ramifications. Undoubtedly the hon. Gentleman is an expert on those matters whereas I am an undoubted ignoramus. I should add nothing to the discussions by trying to take up those issues.

I commend my hon. and learned Friend the Member for Beaconsfield (Mr. Bell) for raising this matter for public debate. We in this place, especially at this time, owe something to those who sent us here to raise a note of public caution whenever any Department says "We should like another borrowing requirement of £750 million for this part of our work"—that is in Clause 1—"and perhaps £200 million taxation for other matters"—namely, those in Clause 2.

Never mind my hon. and learned Friend's recollection of when he entered politics: it was as recently as 1964 that the country was so appalled at the thought that we had a balance of payments deficit of £800 million that it decided to elect a Labour Government. Therefore, a £750 million borrowing requirement is not to be sneezed at as a paltry sum, especially at this time.

My main reason for supporting my hon. and learned Friend is that if ever there were a time when we should display attitudes of conservancy, economy and alarm at suggestions of increased expenditure it is now. Whether we like it or not, and whatever the differences between one side of the House and the other on policy, the country is sinking economically. However, we are proposing a measure that will increase, to some extent, the pressure of inflation.

We do not borrow £750 million without increasing the national borrowing requirement. That is something that we can ill afford to do. We have had plenty of debates on this issue and we shall continue to have them until the Government give way. We are trying to force the Government to cut public expenditure, and that means reducing the borrowing requirement.

The Government must realise that what we borrow will have to be paid back with interest by the taxpayer. We are debating a branch of the British economy that is not making a profit. Under Clause 2 these deficits will have to be taken directly from the taxpayer. Undoubtedly that means a reduction in the amount of money that can be spent on behalf of the taxpayer on other social needs, and there are plenty of those on the priority list.

I think it excellent that my hon. and learned Friend the Member for Beaconsfield, with great assiduity and care, spends time reading Bills which would otherwise not see the light of public debate here. If ever there were a measure calculated to encourage right hon. and hon. Members who do not represent Scottish constituencies to deal with their correspondence or to attend their various meetings in other parts of the building, a Bill entitled the Electricity (Financial Provisions) (Scotland) Bill is it.

I concede—again, because there are those wiser and better than I who think that it is important—the necessity, if the money be available, for these enterprises in Scotland to have the proposed facilities. No doubt, there will be longterm benefits to Scotland which would please us all, but the present competition for scarce monetary resources is very substantial, and my hon. Friends and I want to sound notes of caution. We want to be satisfied that the increase in the borrowing requirement is justified at this time.

So long as it is easy for enterprises of this kind to come to the House, through the Scottish Grand Committee and our other procedures, to ask for an expansion of borrowing facilities or for a tax upon the taxpayer, so long will it be easy for them not to apply their minds to more stringent processes of cost-effectiveness. Therefore, we must never make it easy for them. We must make it difficult for them, for in the last resort we are the protectors of the public purse. That is what we are here for.

I ask the Minister for an assurance that there is no sloppy attitude towards finances on the part of any organisation, be it State or quasi-State, connected in any way with this enterprise in Scotland, that the proposed burden upon the borrowing requirement is the absolute minimum, and that the burden upon the taxpayer is the absolute minimum. I want an assurance that every possible effort is being made by all parties to make sure that they do not have to come again to the House and ask for still more money or a still wider borrowing requirement, which in the end means still more money.

4.52 p.m.

Mr. Norman Buchan (Renfrewshire, West)

I am pleased to be able to take part in this Third Reading debate. Representing a Scottish constituency, I was fortunate in being able to attend the debate in the Scottish Grand Committee, but the two points which have emerged on this occasion—at some length, if I may say so—merit comment.

We have provision in the House for Members from all areas to take part in discussion on Scottish affairs, though I agree that it is a blocking provision in that one can, if one wishes, make such debates take place on the Floor of the House. However, if it is a significant subject, and revenue-raising is a significant matter, attention should be paid to it. The arrangements are there, and all one can recommend is that in future hon. Members should perhaps pay a little more attention to them.

I think that part of the reason for the question being raised in this way—I do not recall its being raised previously—is the present political climate in the country, and I have no doubt that one of the reasons for that climate is the concentration on the position of Scotland and the feeling that, although the Scots may wish to go their own way to an extent, or their own way completely, hon. Members here nevertheless have an interest and concern, and we ought not to treat one human being south of the border differently from the way we treat another human being north of the border.

I concur in that principle, and I hope that the hon. Member for Dundee, East (Mr. Wilson) will, too, though I have no great hope of that. However, that would certainly be my position, and I believe that in the present developments in Scotland most decent Scottish people would not wish to seek unfair advantages over others in a similar situation elsewhere in Britain.

The principal purpose of the Bill, however, was not based primarily upon the revenue problem. The object is to provide the right amount of electricity generation and to improve the generating system in Scotland in order to supply energy, energy for Scottish needs or energy to serve needs elsewhere. It is not surprising, therefore, that the matter was dealt with in the Scottish Grand Committee. Indeed, I think that that was appropriate.

In passing, I wish to take up the point made by my hon. Friend the Member for Bristol, North-East (Mr. Palmer) about the difference of treatment between our aluminium smelter in the North and the smelter in Anglesey. I do not intend to pursue inquiries about the nature of the agreements made, but I am surprised to learn that a similar provision was sought for Anglesey, too and refused. To the extent that we claim certain privileges or at least certain differences of treatment for ourselves in Scotland, we should at the same time be as keen as others to ensure that those differences or advantages are applied to other areas in need.

Equally, to the extent that we have a Scottish Grand Committee with the right to discuss such matters, or we want a Scottish Assembly with a right of discussion—or, in the view of the hon. Member for Dundee, East, there should be a separate Scottish country with a right of discussion—we should at the same time be eager that an even-handed justice prevails, because, if it does not, the backlash will be helpful neither to us in Scotland nor to England.

The matter before us is of particular interest because those of us who supported the Bill and the extension of borrowing powers did so because we felt that it was necessary for employment and future industrial purposes in Scotland. Therefore, although I find it interesting, I totally reject the suggestion that there is somehow a vast expenditure going on here which will he worthless. The argument used by the hon. and learned Member for Beaconsfield (Mr. Bell) that in some way this proposal runs counter to the needs of the country today, because of our financial situation, cannot be sustained. On the contrary: these provisions are necessary precisely because of our financial situation. The hon. and learned Gentleman looked at the matter entirely from the point of view of borrowing money and not from the point of view of what the industry or country requires.

The Government's present strategy—as hon. Members know, I do not agree with their strategy in economic policy—is directed to cutting expenditure on the social services, and other public expenditure of that kind, in order to release resources for manufacturing industry, and I had assumed that that strategy was not just supported but was enthusiastically supported to the point of over-kill by the Tory Party. Now, however, when we reach the point of seeking to use some of the resources which are being saved by a standstill in the social services precisely to put them into energy production in order to increase manufacturing capacity, the Tories object.

Moreover, they object for a simple dogmatic and ideological reason, since the Tory Party calls for cuts of about £10,000 million in the social services, with consequent effects on old-age pensioners and the disabled, cuts in council housing, schools and the rest, so long as the money released is slanted towards private manufacturing. What gets under the Tories' skin is that the purpose here is to direct resources towards public manufacturing in the form of electricity generation, which, thank heaven, is in the hands of the people of this country and not those who share the views of some hon. Members opposite.

Mr. Ronald Bell

Clause 2 makes clear—indeed, I think that it is made clear in the Explanatory Memorandum, or, if not, it was certainly in the Minister's Second Reading speech—that the money is wanted to pay for the deficits of the electricity board in supplying current to the privately owned British Aluminium Company. I do not say that it is entirely a subsidy paid to that company, but it is a kind of subsidy because it was asked to go where it would otherwise not have gone. The hon. Gentleman is wrong about that. I intervene, because he has taken me to task on a narrow financial approach to the subject, to ask whether he would explain the nature of the benefit which he expects to arise socially and economically in Scotland, despite the fact that the Minister looks forward to this enterprise, which has lost £40 million, losing another £160 million over the coming years?

Mr. Buchan

The main clause is Clause 1 which provides a general increase in expenditure which, apart from supporting the public sector, will also maintain the private sector. I take up the point made by the hon. and learned Gentleman in order that he may teach some of his hon. Friends. It is often on expenditure in the public sector that the private sector depends. Therefore, the Opposition should stop their continued demands for cuts of £10,000 million. They have created a bogy in the public mind of the public sector drawing in money, whereas the poor old private sector, which would love to help us all, cannot get under way. The hon. and learned Gentleman is right that ordinary workers are paying taxes to buttress the private sector. I am glad that he has made or reinforced my point.

Sir John Hall (Wycombe)

As I have just come into the Chamber, I must apologise for not having heard the early part of the hon. Gentleman's speech. Does he believe that it is right to subsidise private industry in this way? I am against subsidising private industry. It does not seem a reasonable approach that figures of this kind should be made available so that electrical power can be obtained below normal cost. Does the hon. Gentleman agree with that?

Mr. Buchan

I wish that the hon. Gentleman had been in the Chamber a little earlier. I hesitate to give way to him because he had only just arrived. That was in some ways a side issue, but it was dealt with at some length by the hon. and learned Member for Beaconsfield. I was not keen on being side-tracked. The answer is that, so long as we have and maintain a mixed economy, I am in favour of the Government, where necessary, in the interests of the country, helping to support private industry, especially when we cannot persuade it for other reasons to come to some of our regions. I should have preferred the aluminium smelter to be owned by the people of this country who are helping to finance it. However, in their wisdom, Governments of both parties, have not chosen that course. Above all, I certainly prefer to have jobs rather than no jobs. It means a great deal to people in the Highlands. I was born in that area which was devastated by those who were on those Benches opposite in the previous century.

I now turn to the expansion of the generating programme in Scotland. I represent the area which has the main boilermaking factory in Scotland—Babcock and Wilcox. That factory employs 5,000 workers. If we do not have a generating programme, many of those workers will be out of work starting in the middle of next year. The problem does not stop there. Within three years, with the present programme, they will all be out of work. The rub-off of a complete closure of Babcock & Wilcox would be that about 22,000 to 24,000 workers throughout Scotland—mainly in the West of Scotland—and in parts of the rest of the United Kingdom would be paid off. The consequences are immense. Therefore, the Bill is required to begin to introduce more money into the generating programme.

Again, the problem does not stop there. In this kind of industry, as with Clarke Chapman in England, the levels of technology are extremely high. Babcock and Wilcox is going into new boundaries of technological development in high pressure vessels. For example, the welding skills are unique in the world. Advice is given by technologists in that factory to other factories throughout the world. The skills of the welders in this new plateau of technology are applied in the oil industry. Therefore, the technology itself will also be destroyed.

I understand that if we keep to the present programme, it is argued that we can pick it up again in the 1980s when we shall require a new power station. Workers, middle management and top management recognise that there is over capacity at the moment. But if we wait until there is a demand for a big expansion in generating capacity in the mid or early 1980s, not only the workers, but the industry itself will have gone. There will be no means whereby in eight to 10 years we shall be able to reopen and start again. We shall be 10 years behind in technology, and the highly specialised skills will have been lost. We shall not be abe to reopen at that stage without another five years of building up the necessary skills. We shall need to import foreign technology, if we can get it. Therefore, it is essential that we bring forward the generating programme. It is no use thinking in terms of five to 10 years. We must plan ahead 25 years and phase forward the programme. In that way we can save our industry.

Mr. Ronald Bell

Does not the hon. Gentleman think that a sounder base to the developing industry of Scotland would be if coal-burning generation were given much greater emphasis? Here is a real risk for that derivative industry in which the hon. Gentleman is interested, because of the uncertainty and disappointment of the AGR station.

Mr. Buchan

If the hon. and learned Gentleman had allowed me to continue, I should have said something not dissimilar. I have been arguing—it has been publicly recorded—about the importance of bringing forward a new coal-fired power station in Britain. But that is not sufficient. I should like a decision to be made by my right hon. Friend the Secretary of State for Energy on which kind of reactor programme we should be going for. I favour the AGR, despite some of the past difficulties. It is not surprising that some corrosion, and other problems, has developed, because we are dealing with a totally new ball game. Despite that, I prefer the AGR.

Of course, the key requirement is a coal-fired power station. We have resources of that fossil fuel for centuries ahead. But the oil, as Professor Macrae of Broadford University suggested, whatever the predictable levels of consumption and exploitation of reserves, will almost certainly be finished by the end of the century. Hence, everything points to coal. We are trying to save an industry in Britain.

In that context I am irritated by the Tories, but never surprised. However, I am surprised that the hon. Member for Dundee, East (Mr. Wilson), the spokesman for the Scottish National Party, chose to use the opportunity of the debate on principle and of the Committee stage to question the need for any development of the generating programme in Scotland. Indeed, the hon. Gentleman questioned going ahead with Torness. At column 7 in Committee and at column 25 in the debate on principle, the hon. Gentleman argued for a pull-back in the programme and in the Torness power station which, by definition, would push the start of the whole power station development programme beyond the 1980s and almost into the 1990s. That would close Babcock and Wilcox tomorrow.

When we have a rally in defence of the factory in my area, I resent hearing some SNP members, no doubt in ignorance of the hon. Gentleman's own speeches on the subject, arguing the matter on a Scottish basis when they themselves are seeking to prevent the programme of generation taking place. Talk about being anti-Scottish—scratch a Scottish Nationalist and one finds this kind of nonsense.

Secondly, while pretending to support the Babcock and Wilcox workers, the SNP is making demands for a separate Scotland. I have a simple lesson for the hon. Gentleman. If we had a separate Scotland, Babcock and Wilcox would close tomorrow, because the main customer of the boilermaking industry is the Government's generating programme. Our main customer is the Central Electricity Generating Board. Without the Government as our customer, we cannot exist. We close tomorrow. We cannot exist with the bits and pieces of diversified work that we are doing, or by the exports that we are trying to achieve, important as they are. In order to survive we require the orders that come from the Government and the nationalised CEGB.

By definition, if we cut off Scotland from England, an English generating programme from a nationalised board would have to go to English firms—in the same way as the hon. Member for Dundee, East demands that orders from the Scottish Office or a future Scottish Government should go to a Scottish factory. Therefore, the hon. Gentleman would cut us off from nine-tenths of our programme—and on only one-tenth we would die.

Mr. Palmer

I am sure that my hon. Friend would not overlook the fact that the electricity supplies of Scotland and England are fully integrated and that electricity flows both ways. Does he think that the SNP would cut the lines at the border?

Mr. Buchan

To be fair, I do not think that the Scottish people would allow the SNP to be as crazy as that. However, in the process of the hon. Gentleman's questioning of our energy policy, he was complaining about the fact that it might be helping to produce energy in Scotland in order for that to be sent to England. I do not know how crazy one can get. It is cutting off one's nose to spite one's face. The hon. Gentleman wants to cut off the energy production and the employment that this would mean for Scotland to prevent it from going to England. I do not think that he would physically use his scissors to cut the cables. However, he is using his political position to do precisely that. Therefore, I resent it and I reject it.

It is even more stupid in a way. I do not blame SNP Members for their stupidity. Their views come from a dogma, a kind of curious chauvinism, but the conclusions are stupid even if SNP Members are not. The argument is that the Scottish generating programme is over-large already. The hon. Member for Dundee, East said: we have sufficient capacity to meet our needs."—[Official Report, Scottish Standing Committee, 6th July, 1976; c. 7.] In other words, the hon. Gentleman has analysed matters not only from the point of view of refusing to sell to England but from the point of view that the Scottish requirements do not require a new station at Torness or the other developments. Therefore, I ask the hon. Gentleman to tell his friends elsewhere in Scotland to be a little more careful with their honeyed words of support for the Babcock and Wilcox workers. Will the hon. Gentleman repudiate or withdraw his statement? Will he do one or the other thing—either reject his policies as enunciated in the debate on the principle and enunciated in Committee, or say openly that he seeks the death of Babcock and Wilcox? He has no other choice, and I wish that he would make up his mind.

Finally, I think that the Bill is necessary not only in the Highland situation but for those who have some faith in the future of Scotland. Those who have faith in the future of Scotland are not the doctrinaires of the SNP but the ordinary working people of Scotland, on whom our strength and future must depend.

5.15 p.m.

Mr. Gordon Wilson (Dundee, East)

When I heard of the intention of certain English Members to take over the debate on a Scottish measure, my first reaction was one of irritation, particularly as I had understood that the reason for so doing was not out of any interest in the legislation concerned but, rather, in pro- tracting the business of the House so that the legislation on seat belts would be taken at a very late hour. On the other hand, having heard the comments made by English Members, I must say that they have been reasonably brief and fairly open minded in the way in which they have approached the Bill.

For perhaps the only time in this debate I can echo the remarks of the hon. Member for Renfrewshire, West (Mr. Buchan) when he said that for English Members who wished to be involved in Scottish legislation—I should prefer them not to be involved—the rules of the House laid down the ways in which they may do so. For instance, objection to a Bill being dealt with in the Scottish Grand Committee can be made by a certain number of Members rising in their places. Only recently the Opposition Front Bench spokesman, the hon. Member for Ross and Cromarty (Mr. Gray), who has a double interest in the Bill in view of his constituency interests, stood un along with others and blocked two Scottish Bills that were to be sent to the Scottish Grand Committee, with the effect, as we heard from the Leader of the House, that they will be discussed on the Floor of the House in about 10 days' time.

When the Scottish Grand Committee has completed consideration of a Bill in principle, it reports to the House, and it is then open for a vote to take place. Admittedly, no debate would occur in those circumstances. However, I think that it is accepted that those English Members who wish to he members of the Scottish Grand Committee, in the absence of many volunteers, would he accepted. I can only hope that those who have taken part in this debate have shown by their interest in Scottish affairs that they wish to be included when the Whips come to make their choice in future.

The idea of Scottish business being taken outside the realms of this House is one that will have to be appreciated if the Government's devolution plans go ahead. The Scottish electricity industry is already under the responsibility of the Secretary of State for Scotland. The Scottish Assembly will have an interest in it. Unfortunately, the nationalised industries will not go to the Assembly, so that this House, whatever else happens in the devolution debate, is still likely to have an interest in generation matters in Scotland. Many other matters will go from the Floor of this House and not be dealt with here thereafter. Hon. Members will have to accept that that is part and parcel of devolved Government.

Likewise, I can make this point in relation to the aluminium industry. When I stretch my memory back to when I was not a Member of this House, I seem to remember that the reason for the aluminium smelters being created in the United Kingdom was to help the balance of payments. That was the commercial reason for going ahead. This led to a secondary consideration. That was the division of the giant smelter that I think had been envisaged into three, which were then located in different areas.

If the North of Scotland Hydro-Electric Board, in its wisdom at the time, entered into an arrangement with the Government of the day that it should be recompensed for any loss made on a contract, it ought to be congratulated. If the Central Electricity Generating Board, in turn, did not make such an arrangement with the Government, it ought to be criticised. If the Government had not made the promise that it did make to the North of Scotland Hydro-Electric Board, it ought to be condemned. If English Members feel that the Government made a promise in the past to the CEGB, they should condemn the Government for their actions. It is certainly not for Scottish Members to do the work of English Members.

Mr. Ronald Bell

The hon. Gentleman is complaining that we are not doing it, and here we are, making a complaint, and he resents it. The balance of payments is a valid point. The estimate is that this saves £20 million a year on the balance of payments. However, when that is set against a borrowing, in total, of £1,950 million, it looks like an awfully bad bargain.

Mr. Wilson

The hon. Gentleman is entitled to make that point although I am sure that the workers in Ross and Cromarty might perhaps take a different view. However, the fact that the Government of the day made a bad bargain in financial terms is something which should perhaps be considered.

It was interesting to hear the hon. Member for Bristol, North-East (Mr. Palmer) suggest that a Select Committee ought to be set up to examine the position. I made the proposal in the Scottish Grand Committee that a Select Committee on Scottish Affairs should look into the Scottish electricity position, but not to deal with the same subject as that which the hon. Member for Bristol, North-East has mentioned.

Mr. Palmer

The hon. Gentleman referred earlier to the wisdom of the North of Scotland Board in making a special arrangement with the Government. If he examines the situation he will find that exactly the same arrangements were reached between the Government and the electricity authority at the time. It is clear that the North of Scotland Hydro-Electric Board is included in the legislation but the CEGB is not.

Mr. Wilson

A special proposition which ought to be looked at in relation to this is that the power stations effectively supplying the power will be based in the South of Scotland area because the pricing would be based upon the Hunterston B rower station, whereas the North of Scotland Hydro-Electric Board would have very little control over the pricing. However, I do not think we ought to spend too much time on this issue, particularly since it was discussed in the Scottish Grand Committee.

I would have liked to take this opportunity of posing a few questions to the Minister but, in his absence, I would hope that the Scottish Whip will be able to perform that service in an excellent fashion. The questions are, first, what delay will occur in relation to Torness because of the dispute over the SGHW reactor? Is the time scale affected? When we discussed this matter in Committee, whatever points were put to the Minister about the SGHWR position he skipped over them and indicated that there was no problem at that time, whereas most of us knew that serious doubts were then arising. However, the time scale is of particular interest to the lion. Member for Renfrewshire, West because, naturally, if there is a prolonged dispute over the type of technology then the order for a power station will be delayed. That is quite separate from whether consumption and time factors are involved.

Mr. Buchan

The hon. Gentleman is now beginning to make some sensible comments. There would be no such delay if a decision were made to continue with the AGR programme rather than adopting a new technology for the steam heavy water generator. One solution would be to bring forward a coal fired station and an AGR, which would give time for the Secretary of State to make the right kind of decision about a long-term nuclear programme.

Mr. Wilson

Leaving aside the offensive comment, which I should have expected from the hon. Gentleman, if he will take the time and trouble to study the speech that I made in Committee he will find that reference was made to the possibilities of fossil fuel power stations. That leads me to the point that we have no figures about power consumption in Scotland. The object of my exercise in Committee was to get some indication from the Government about what the prospects were for increases in consumption. I am still waiting for that information, but both boards have reduced their estimates from 6 per cent. to 5 per cent. growth. That figure in turn differs from the CEGB figure. I still think that the House is entitled to an answer on that question.

Mr. Buchan

rose—

Mr. Wilson

I shall not take any further interventions from the hon. Gentleman. I have taken several so far.

I am not sure whether the hon. Gentleman is aware of the intention of building a pumped storage power station at Craigroyston. It is mentioned in the report published by the electricity boards in Scotland, but it was then indicated as being a fairly long-term proposition. Recently, however, the hydro-electric board has produced further outlines in relation to it, and has indicated that the commissioning time would be about 10 years before the go-ahead was given. When is it likely that that particular power station will be given the go-ahead, because that, too, will certainly have an effect on the capacity of the electricity industry?

Mr. Gregor MacKenzie

I apologise for interrupting the hon. Gentleman but I would remind him that we are on the Third Reading.

Mr. Wilson

Yes, indeed. As I understand it the Third Reading of the Bill relates to the clauses in the Bill. One of the clauses contains a proposal to increase the borrowing powers of the electricity boards. Since so many other hon. Members have raised matters which are not directly connected with the Bill, it is pertinent to ask the Minister what that money will be used for. Will it be used at Craigroyston and when?

As I was saying before the Minister got to his feet, the decision to go ahead with Craigroyston could have an effect on the overall capacity of the electricity industry in Scotland and, indeed, on the capacity of Babcock and Wilcox mentioned by the hon. Member for Renfrew-shire, West. [Interruption.] I was trying to ignore the comments of the hon. Gentleman because they are not worthy of a Member of Parliament. I quite frankly said in Committee that the hon. Gentleman did not seem to follow the argument at all in relation to patterns of consumption and demand in Scotland. However, if he wishes to ignore such important matters, that is for him.

In his comments in relation to Babcock and Wilcox it seemed that he was more concerned about maintaining his own job as Member of Parliament than he was at keeping the jobs of the members of the work force at that firm. I would point out what the Secretary of State for Scotland said yesterday. He said that in addition to the Scottish situation, the British situation was improved, and that exporting from Britain was an important consideration if the future of Babcock and Wilcox were to be safeguarded.

The hon. Member for Renfrewshire, West will know that the latest export order which went to Babcock and Wilcox went to the German factory. Babcock and Wilcox is a multinational company and it would be well for the hon. Gentleman to address some of his argument to the company in relation to its exporting policy. I do not believe that the hon. Gentleman is serious in his insinuations that Babcock and Wilcox is an inefficient company, uncompetitive, unable to tender for business in Scotland, or in the United Kingdom and abroad, and to get it. I am sure that that is not the hon. Gentleman's position, and he should have much more confidence in the skills of the men, and the ability of the management, to help the company out of its difficult position.

Mr. Buchan

I have.

Mr. Wilson

As the hon. Gentleman is well aware the decision which is coming up in relation to Babcock is unlikely to be solved by the Scottish ordering position because the Torness site is being delayed. He should have asked the Minister when that order was to be given the go-ahead. The hon. Gentleman may well be right in relation to the SGHW technology, but again that was a matter which I discussed in Committee and on which the hon. Gentleman was silent.

Finally, I would commend the Bill. I think that had the Government not kept their bargain in relation to the North of Scotland Hydro-Electricity Board in particular it would have been a very bad thing indeed, particularly for my constituents who would then have had to pay for the cost of subsidising an aluminium smelter which was of no immediate benefit to them. It has been argued that the smelter was of national benefit. I presume that that is the reasoning behind the Government subsidy for the whole project. I suppose at the end of the day, whatever the Government may think in relation to the smelter, that there is a contract. The Government have to honour their word and fulfil that contract even if they may have made a bad deal.

I have felt many times in considering the Bill that it is a pity that there was no parliamentary scrutiny of the arrangement for the smelter when it was first set up. I know that questions were probably asked, but it should have received detailed scrutiny four or five years ago and not now.

5.30 p.m.

Mr. Hamish Gray (Ross and Cromarty)

I do not propose to make a long speech today. I spoke for almost half an hour on the Bill in the Scottish Grand Committee and as it was not amended in Committee I should merely be repeating what I said then.

I hope that my hon. and learned Friend the Member for Beaconsfield (Mr. Bell) will return, because I have an explanation that I should like him to hear. It is significant that anyone who wishes to take part in a debate on legislation can do so. We are all grateful to my hon. and learned Friend for giving us that opportunity today by putting down the motion.

However, I would take issue with my hon. and learned Friend on his suggestion that there had been some Scottish conspiracy to push this measure through without other United Kingdom Members being able to comment. He has every right to rise in his place when any Bill is called to ensure that it is debated on the Floor of the House and does not go to the Scottish Grand Committee.

I am glad that my hon. and learned Friend has just come back. We are indebted to him for his motion, but I was suggesting that his insinuation of a Scottish conspiracy to push the Bill through is misplaced.

Mr. Ronald Bell

I did not use the word "conspiracy", of course, and I did not wish to imply anything of that kind. I said, indeed, that it was perhaps natural that it should be assumed that this was a matter of entirely Scottish interest because the money would be all spent in Scotland, but that the United Kingdom interest was an important one because the money would be found from this end. I had no intention of criticising anyone on either side of the House. I think that I referred to it as a rather bad habit that we get into because of the deluge of paper which overwhelms us and which means that some of these things often do not get the attention they deserve on the Floor of the House.

Mr. Gray

I take the point and I will not dwell further on that matter. If my hon. and learned Friend reads my Second Reading speech he will see that I made the very point that sometimes, probably because of inflation, we tend to talk of sums like £600 million or £700 million as if they were unimportant. But we are all grateful to my hon. and learned Friend for his contribution.

The official Opposition attitude to the Bill is one of acceptance. We did not oppose it on Second Reading and we discussed it at considerable length in Committee. We wish it well and hope that it will be given a Third Reading in a few minutes.

As a constituency Member, I lived in the Highlands in 1967 when discussions were taking place about the possibility of an aluminium smelter being sited at Invergordon. As I recall it, there were two competitors—British Aluminium and Alcan. Whether the project ever went through depended largely on the terms on which the North of Scotland Hydro-Electric Board could supply electricity. I think that BA managed to do a very good business deal with the board.

As a good Conservative, I say good luck to the company. It managed to obtain terms from the board which it thought made it economically possible for it to go to that area. In addition, of course, development area status meant considerable Government assistance. I have always believed in development area status for certain parts of the country. Otherwise, everything would simply he located in the South-East of England; those of us who live and work here see the results of such decisions daily. If development area status had been introduced a long time ago, we might not have the present frightful congestion in the South-East.

A number of hon. Members have mentioned accounts. The hon. Member for Dundee, East (Mr. Wilson) put down an amendment in Committee to try to ensure that more information was obtained. In answering the debate, the Minister explained that it was very difficult in the board's accounts to set out everything related to the smelter without revealing commercial confidentiality regarding the terms originally negotiated.

I accept that, although I agree with those who still have reservations about the way in which the accounts are set out. I hope that the board, whose representatives will unquestionably read these debates, will take note of that and that a system will be devised to give us a little more information in due course.

I was pleased that my hon. Friend the Member for Burton (Mr. Lawrence) also took part in the debate and that even my hon. Friend the Member for Wycombe (Sir J. Hall) made an intervention.

The hon. Member for Bristol, North-East (Mr. Palmer), to whom we always listen with interest in energy debates, naturally drew attention to the terms obtained in connection with the Anglesey project. Like the hon. Member for Renfrewshire, West (Mr. Buchan), I feel that it is a pity that the advantage obtained by BA in the north of Scotland was not extended to that project as well. But that was a matter for negotiation.

The hon. Member for Renfrewshire, West, in one of his exchanges with the hon. Member for Dundee, East, mentioned people throughout the United Kingdom benefiting from the things available in one particular area. The result achieved by the then Secretary of State for Scotland in getting the BA smelter to come to the Highlands is significant in terms of devolution. There is no doubt that his influence at Cabinet level gained for Scotland something which it might not have had without his voice.

I will not try to answer all the points raised because I am sure the Minister will try to do so. But it is sometimes very easy for hon. Members representing constituencies in the South-East of England to fail to appreciate the great difficulty experienced in the past by certain areas of Scotland in trying to attract industry.

The whole question of development status and of companies being able to obtain grants by going to certain parts of the country must essentially be part of a pattern laid down by the Government in order to try to spread more evenly the benefits of development and not to concentrate them in one area. In a certain way, this Bill does just that. But the one point that my hon. Friends who have tended to criticise the Bill forget is that the Government have little or no option but to do exactly what they are doing in this Bill, because a commercial contract was entered into. If the North of Scotland Hydro-Electricity Board is to honour that contract, the Government must be prepared to back it in this Bill.

I hope that the House will see fit to give the Bill its Third Reading. I am grateful to my hon. and learned Friend the Member for Beaconsfield for his initiative in putting down the Third Reading motion so that hon. Members sitting for non-Scottish seats could have an opportunity to discuss the Bill.

5.41 p.m.

The Minister of State, Scottish Office (Mr. Gregor MacKenzie)

The important point made by the hon. Member for Ross and Cromarty (Mr. Gray), which is what we as Scottish Members are particularly concerned about—although I know that others share that concern—is that the Bill is part of the wider interest we have in the improvement of life in Scotland and more particularly our attitude to employment there.

I think that the hon. and learned Member for Beaconsfield (Mr. Bell) was taking me to task in his concluding remarks by suggesting that I did not altogether welcome his motion for a Third Reading debate. He said that I might well want to be elsewhere. There are, I concede, times when hon. Members do want to be elsewhere. I could well want to be in Scotland now, as he will understand.

I say to the hon. and learned Gentleman seriously that, to many of us in this House who are dedicated to the proposition that we should retain the unity of the United Kingdom, it is important that hon. Members, no matter from which area of the country they come, should take part in deliberations of this kind. For example, in the past, as a Back-Bench Member or as an Opposition Front Bench spokesman, I have spoken on things that have happened south of the border. I do not see the border in Iron Curtain terms. I am always willing to listen to comments made by hon. Members from different parts of the United Kingdom.

Mr. Ronald Bell

I am obliged to the hon. Gentleman for saying that. Indeed, it is the United Kingdom consideration which is pre-eminent. Will the hon. Gentleman also bear in mind that many of those who live south of the border and perhaps represent constituencies in South-East England have originated north of the border and are only English Members representing English constituencies because there was no such development north of the border in the past and our forebears did not have much choice but to come south?

Mr. MacKenzie

I said that I did not disapprove of any comments by any hon. Member, irrespective of the part of the country he represented. After all, we are asking in the Bill for a lot of money, and since that money is being raised throughout the United Kingdom, it is right and proper that it should be subject to questioning. I have said the same thing in opposition in dealing with various borrowing powers Bills.

I have taken no exception to the hon. and learned Gentleman's comments. Indeed, if he or some of his hon. Friends chose to join us in the Scottish Grand Committee, I am sure that the Conservative whips would be glad to have their services. I can recall an hon. Member from an English constituency speaking there, and he made an interesting speech.

The Bill has two distinct purposes. Clause 1 makes provision about the limit of the borrowing of both boards to be increased by two or more stages from the existing level of £1,200 million to £1,950 million, and a substantial proportion of the boards' capital requirements is financed from revenue. The boards estimate that over the period to 1982, when it is expected that a further increase in the statutory borrowing limit may be required, the level of internal financing will amount to about 40 per cent. of the total requirement. This proportion could be substantially increased only by means of what would be to me and to many others an unacceptably large increase in tariffs.

If, therefore, the boards are to be in a position to make the substantial investment in new generating capacity which will be necessary to enable future demands to be met, the existing borrowing limit will have to be increased. This Bill will enable the boards to borrow the sums required to permit the necessary investment to be undertaken.

The boards' proposals for new investment are set out in their brochure "Plans for the Future, 1975 to 1982", which I am sure many hon. Members have studied with interest. The principal provision in the investment programme relates to the construction of a nuclear power station at Torness in East Lothian, which is part of the steam generating heavy water reactor nuclear programme announced by the Government in 1974.

Since then, decreasing demand for electricity has given rise to questions by a number of hon. Members about the need for Torness, and the future of the SGHWR programme as a whole is under examination as part of our current review of energy policies. Whatever the outcome of that review may be, it is quite clear to many of us that additional generating capacity will be required to meet the increased demands for electricity in the mid-1980s.

I am, therefore, satisfied that there is adequate justification for the increase in the borrowing limit in this Bill, and I hope that hon. Members have the same sort of confidence in Scotland and its future as I have in making a decision of this kind.

Clause 2 will enable the Secretary of State to make payments to the North of Scotland Hydro-Electric Board in reimbursement of deficits which it has incurred in supplying electricity to the Invergordon smelter. As I said on Second Reading, the contract between the board and the British Aluminium Company provides for electricity to be supplied to the smelter at a price related to the expected cost of generation at Hunterston B nuclear power station, and it was designed to cover all the hoard's costs over the life of the contract.

Deficits have, however, been incurred and will continue to be incurred in the future, because of the delay in the commissioning of Hunterston B which has made it necessary for more expensive electricity to be supplied from alternative sources, because the basic level of output of the station may be lower than was assumed when the supply contract was drawn up, and because recognition of the risk of corrosion of boiler components has led to a decision to restrict the operating temperature of the reactor and thus to reduce, at least in the short term, the output of the station.

Recent reports I have received from the South of Scotland Board indicate that the initial problems at Hunterston B have now been largely overcome. The first reactor was commissioned earlier this year, and I understand that the second is likely to be synchronised into the grid in December. Already the first reactor has produced 75 per cent. of the output of the two reactors for which the board has budgeted in the year ending March 1977. Until the station has been fully proved in commercial operation, however, it will not be possible for me to make a final assessment of the liability to make com- pensation payments to the hydro-electric board.

For this reason the Bill specifies no limit on the payments to be made. However, I want to stress that Parliament will exercise control because Orders will be placed before the House of Commons, they can be discussed and there will be ample opportunity for hon. Members to make their views known.

These payments are to be made in fulfilment of an undertaking that the board's other consumers will not suffer as a result of the aluminium smelter's supply arrangements given to the board in 1968 when the contract was drawn up. I emphasise that no payment will be made under the provisions of the Bill to the British Aluminium Company, which will continue to pay for the electricity supplied to the smelter in accordance with the terms of the supply contract.

The hon. and learned Member for Beaconsfield said that we were asking for a great deal of money. That is true, but we foresee an increase in the demand for electricity in Scotland and we look forward to increased industrial activity.

My hon. Friend the Member for Renfrewshire, West (Mr. Buchan) did not make a purely constituency speech because the matters he raised as a Renfrewshire Member also involve the area represented by my hon. Friend the Member for Dunbartonshire, West (Mr. Campbell), who also has constituency interests related to Babcock and Wilcox. Therefore, this important matter must be thoroughly examined.

Mr. Buchan

I thank the Minister for that comment. I must inform him that an analysis shows that only 10 per cent. of the 22,000 to 24,000 jobs would be in my constituency.

Mr. MacKenzie

I am glad that my hon. Friend made that point. I know that he has been concerned about the steelworkers in his constituency, as have many other hon. Members with similar constituency interests. I hope that the House will appreciate that the company concerned has a high reputation not only in Scotland but throughout the whole of the United Kingdom. It has a good export record, but it has also been a supplier to some important concerns in England. I would never do anything to stop that process because it must be to the benefit of a great number of people. Because of our concern about the industry of which Babcock and Wilcox is part we have commissioned studies in the industry and we hope that those studies, in conjunction with examinations of other energy questions, will provide many answers.

My hon. Friend the Member for Bristol, North-East (Mr. Palmer) asked for the CEGB to be treated in the same way as the North of Scotland Hydro-Electric Board. I should stray out of order if I were to trespass on that territory since it is primarily a matter for my right hon. Friend the Secretary of State for Energy. As my hon. Friend explained in a Written Answer to the hon. Member for Bedford (Mr. Skeet) on 21st June, the North of Scotland Hydro-Electric Board's losses under the aluminium smelter contract have an overwhelming significance for that board and the general body of its consumers which is not present in the case of the CEGB's contract. Moreover, CEGB's losses on its Anglesey smelter contract have been absorbed in the board's general revenue account and have therefore hitherto been offset directly or indirectly by the payments made by the Government to the electricity boards under the Statutory Corporations (Financial Provisions) Acts 1974 and 1975.

To put the matter into perspective, the total electricity revenue of the industry south of the border in 1975–76 was more than 30 times that of the North of Scotland Hydro-Electric Board's. While the smelter contract absorbed a quarter of the hydro-electric board's unit sales, it accounted in the case of the CEGB for less than 1 per cent. In the circumstances the Government decided that the situation was different from that in the north of Scotland because other consumers would not have to bear excessive burdens and, accordingly, that compension for CEGB's smelter losses could not be justified. I understand that that is still the view of my right hon. Friend the Secretary of State for Energy.

Mr. Palmer

What the Minister is saying is that if it is a big concern it is not accorded the same ration of justice.

Mr. MacKenzie

I said nothing of the kind. I said that it was 30 times more difficult for the hydro-electric board to operate.

My hon. Friend also asked whether we could set up a Select Committee to consider employment, job creation and so on. That is a matter for the House of Commons and not a matter for me. No doubt my hon. Friend will pursue, the point in other ways.

The hon. Member for Dundee, East (Mr. Wilson) has never been very enthusiastic about the electricity industry in Scotland. He asked whether we were having discussions about the future of the SGHWR and whether there would be considerable delay. I hope that there will not be delay because I know that the board is still anxious to have such a station in operation in the mid-1980s.

The hon. Gentleman asked about Craigroyston. He is asking me to go further than I would want to go at this time. The Craigroyston scheme is not yet finally before the Secretary of State. I understand that the scheme is still subject to discussion between the board and district and regional councils, conservation organisations and others. In any event, whatever payments are required for Craigroyston would not fall within this Bill.

I was surprised to hear the comments made by the hon. Member for Burton (Mr. Lawrence), who clearly had not read the board's annual reports with his customary care. I know that he often makes such documents the subject of midnight reading, but if he rereads those reports he will be delighted to learn that both boards in Scotland made a modest but nevertheless nice profit over the last year. We in Scotland are pleased about that outcome.

I conclude by saying that I believe that a Bill of this kind displays confidence in Scotland and in Scottish industry. One of the reasons for the inclusion of Clause 2 was to provide much needed jobs in Scotland. If the hon. and learned Member for Beaconsfield is worried about the situation, he should discuss it with the hon. Members concerned who have shown considerable enthusiasm on this score, not just in this debate but on previous occasions.

I think that the Bill is good for the industry and for the domestic users in Scotland. It is good for Scottish industry. I hope that the House will give the Bill its Third Reading and wish the two boards well in future.

Questions put and agreed to.

Bill accordingly read the Third time and passed.