HC Deb 19 July 1977 vol 935 cc1384-94
The Secretary of State for Energy (Mr. Anthony Wedgwood Benn)

With permission, I propose to make a statement about the structure of the electricity supply industry in England and Wales. The structure of the industry in Scotland will not be affected by my proposals.

I have given very careful consideration to this subject in the light of the findings of the Plowden Committee, which reported last year. I pay tribute to the work of that Committee. Since that time I have had extensive consultations with both management and unions in the industry.

Hon. Members will recall that the Plowden Committee found that the main weakness of the industry was a lack of strategic control and direction, and that the Electricity Council, whose role is mainly advisory, was not equipped to give the industry the strong leadership that it requires. The Committee accordingly recommended that the industry should he unified under a single statutory body which could take over the responsibilities of the Council and the existing boards.

The electricity supply industry does, of course, make very heavy demands on national resources and has to make far-reaching decisions on technical and financial issues of immense complexity. I fully accept that the industry needs a structure which promotes more effective policy-making and decision-taking. There is also a need for a legislative framework which provides greater flexibility for the industry to adapt its internal organisation in response to changing circumstances.

At the same time, however, I regard it as essential to provide adequate safeguards against the dangers of excessive centralisation. The Plowden Committee was right to point to these dangers, but it would not be enough, in my view, simply to place the industry under a general duty to devolve maximum authority to operating units as the Committee recommends.

I accordingly intend to bring forward in due course legislation that will abolish the Electricity Council and boards as at present constituted and create a new central body, which will have responsibility for the industry as a whole. The new central body will have powers and duties similar to those of other nationalised industry boards, including a requirement to prepare corporate plans, and will be responsible for the industry's financial, commercial, engineering, research and development and industrial relations policy. The Bill itself will not, however, go on to prescribe the industry's internal organisation. It will instead include provisions enabling this to be prescribed from time to time by the Secretary of State, after consultation with the new central body, in subordinate legislation which would, of course, be subject to specific parliamentary procedure. These proposals for primary legislation enjoy the support of the management and unions concerned.

My intention would be, after further consultations with the industry, to bring an order into operation on vesting day to set up a board for generation and boards for local distribution whose members I would appoint after consultation with the industry. These boards would operate in the same areas as at present and would have delegated to them broadly those functions now exercised by the present boards, although the capital and revenue budgets and tariff proposals of each board would be subject to approval by the new central body as part of an overall industry plan.

Although a stronger centre is required to deal with the major strategic decisions facing the industry, I believe that it is equally important to find a solution that also preserves vigorous and effective local boards enjoying statutory authority under the initial order.

The proposed legislation will also place the new central body under a duty to promote industrial democracy, and will make provision for safeguarding the interests of the consumers. My right hon. Friend the Secretary of State for Prices and Consumer Protection will be making a statement later today in a Written Answer about his plans for an electricity consumers' council.

I hope that these proposals will commend themselves to the House and bring to an end the present uncertainties in the industry. The changes proposed will, I believe, meet the need for greater coherence in policy and planning in the industry. I hope that the industry will co-operate in introducing in advance of legislation some of the more desirable changes in the working relationship between the existing boards and the centre. This whole approach—essentially an evolutionary one—will avoid a major upheaval in the industry. My proposals will also help to ensure that the industry remains fully responsive to the needs of consumers, in particular by retaining a recognisable and real identity at the local level.

Mr. Tom King

Is the Secretary of State aware that we welcome this statement on the Plowden Report, if only because it has at last been made? The report was submitted in January 1976 and it is important for the industry to know what the plans for the future are.

Is he also aware that we have the gravest doubts about the solution that he is adopting? We believe that there is a case for either an efficient unified structure or for competitive area power boards. Is the Secretary of State aware that the solution that he has adopted, which retains for him the power of patronage of over 100 jobs at area level, may be damaging to the industry? Will the right hon. Gentleman confirm that his latter proposals do not in fact have the support of the management or unions in the industry? We shall, of course, await the Bill when these matters can be discussed at rather greater length.

Mr. Benn

I am grateful for the hon. Gentleman's general points, though they were somewhat qualified by later comment. It has taken time to discuss this matter, because it is a very important issue. It has been under public discussion since my right hon. Friend the Secretary of State for Northern Ireland was, I think, Minister for Power, in about 1968–69 and it has gone through various stages. The primary legislation will provide an opportunity for successive Governments, with the consent of Parliament, to come forward with the proposals that they think best in subordinate legislation.

The hon. Gentleman asked me about the views of the management and the unions on this proposed Statutory Instrument. I thought it wrong to go into detail, candidly, with the unions and management on the provisions of a Statutory Instrument until I had been able to make a statement to the House about the primary legislation. The discussions that I have had so far have been of a very restricted character on the primary legislation, but it would clearly be my intention to publish a draft Statutory Instrument, which would be before the House so that it could discuss the the primary legislation in the light of what was in my mind. That legislation could be amended later, and there would be very wide discussions on these issues.

Mr. Cledwyn Hughes

Is my right hon. Friend aware that I must reserve my welcome until I know precisely what he has in mind for Wales? Is he also aware that his statement was excessively vague? He said that he was against excessive centralisation. Is he aware that I entirely agree with him about that matter and that it would be in line with the spirit of the Government's policies on devolution if he were able to assure the House that the proposed decentralisation should give an appropriate body with statutory authority for Wales in this matter? It is clear that Scotland is excluded from these provisions. Why is Wales not similarly treated? I think that it would be in line with the Government's general policy if it were.

Mr. Benn

My right hon. Friend will know, of course, that the South of Scotland Electricity Board and the North of Scotland Hydro-Electricity Board have been enjoying totally independent status from the general England and Wales structure. In looking at the Plowden recommendations I had in mind, of course, considerations such as those my right hon. Friend mentions, and so, indeed, did Lord Plowden and his colleagues. All that I can say to my right hon. Friend is that the Bill, as brought forward in due course—the primary legislation—will give a very great degree of flexibility for the organisation of the industry within this new framework.

Without wishing to encourage any particular view as to how the matter might be handled let me say that at least the House will not be in the position of being unable to change the structure of the industry save by a massive Bill with hundreds of clauses every 20 years or so. The whole arrangement will be capable of adjustment in accordance with the needs as they emerge.

Mr. Grimond

Is the right hon. Gentleman aware that while there is a very strong case for the decentralisation of area boards, it is not clear that by taking the power to appoint these boards he will necessarily increase their local accountability? He may be merely increasing his patronage and possibly frustrating the main recommendation of the Plowden Committee.

I welcome the statement that the needs of the consumers and workers will be taken into account, and I trust that this will be fully implemented in the coming legislation.

Mr. Benn

I take the point about patronage. I think that the House knows my view—that there is much too much ministerial patronage. [HON. MEMBERS: "Oh."]. I think that that view is very well known. The question is whether one secures what is intended by transferring that patronage to others who are not even accountable to the House. The argument was whether it would be right, having appointed a CEB, to give all ministerial patronage, with which at any rate there is a degree of accountability, to an appointed board, so having subordinate patronage on a very large scale. That was one of the issues that led me to the view that the status quo might be preserved in this respect, at any rate in the first Statutory Instrument.

However, if in the course of the debate the House can assist in finding a better way than the present way—which I do not personally like; I am speaking for myself—in which powers of patronage are exercised on this scale, subject to what my colleagues may say, I would certainly listen most intently. What I do not want is to have one massive industry with no really effective way of establishing its relationship with local communities, which in my opinion most hon. Members find valuable, through their regional supply boards.

Mr. Peter Walker

Will the right hon. Gentleman's requirements on employee participation be of a general or a specific nature? Is it his intention to use part of his patronage to see that a specific proportion of existing employees are put on the board?

Mr. Benn

I am grateful to the right hon. Gentleman for giving me a chance to clear up that matter. It is not intended that the primary legislation, when published, would be the instrument by which the board would respond to what are generally called the Bullock proposals. However, it would seem sensible, as in the case of the Aircraft and Shipbuilding Industries Act, where we have a new authority being set up, to charge that authority with a general responsibility. Beyond that it would be handled by a statement by my right hon. Friend the Secretary of State for Trade covering a much wider range.

Mr. Palmer

I congratulate my right hon. Friend on reaching a decision on this very complex matter. However, has he not been a little less than frank in the second part of his statement about the attitude of the trade unions? The trade unions are, in fact, extremely hostile. They have told him that on a number of occasions. On this proposal to divide the command structure they take the view that there must be either a unified structure or a genuinely autonomous structure. One cannot mix the two. Will my right hon. Friend bear in mind that if he pursues this, he will have to pursue it in the face of much trade union hostility?

Mr. Benn

I think that my hon. Friend is rather less than fair to me. All that I have said in my statement is that the proposals for primary legislation enjoy the support of the management and the unions, and so they do. What I have said is that the further consultations that will take place will be around a draft Statutory Instrument. How my hon. Friend can forecast bitter opposition to words that have not been drafted escapes me.

The fact is that I am anxious to reach an understanding that preserves the accountability of local boards to local communities and at the same time to do it in such a way as does not impair the efficiency and central direction of the industry. To say the least, my hon. Friend is very pessimistic if he thinks that these twin objectives would not be reasonably met.

Mr. Skeet

Will the right hon. Gentleman be frank with the House? Does he intend to reserve for himself in the Bill power to make specific directions? If he proposes to do this, as he reserved the right under the Petroleum and Submarine Pipe-lines Act or the BNOC, will this not be excessive centralisation and excessive control?

Mr. Benn

The hon Gentleman heard me in the debate the other day saying that there were two issues with which I was particularly concerned. One of them was a specific directive and the other was whether civil servants should be members of the board. The hon. Gentleman will notice that there was nothing in the statement about that, because the Ministers looking at this matter under the provisions of the NEDC recommendation feel that any change that might be made should be made across the board and should not be made in legislation affecting one particular industry that happens to have to come before the House.

The hon. Gentleman knows my view on this matter. It is that there is an advantage in modernising the Morrison provisions. In trying to build upon the undoubted success that has come from the limited experiments in having civil servants on the board, as with BNOC and the Atomic Energy Authority—[Interruption.] I hope that the hon. Gentleman will do me the credit of agreeing that I have not made reference to that today and I am not basing my statement on it because this is a matter that has to be looked at by the Government across the whole board.

Several Hon. Members rose——

Mr. Speaker

Order. I propose to call those hon. Members who were on their feet just now.

Mr. Wrigley

Further to the very valid points made by the right hon. Member for Anglesey (Mr. Hughes) and the Secretary of State's own comments on the need for greater democratic accountability, is the right hon. Gentleman aware that there is strong feeling in Wales that there should be a more coherent organisation in the electricity industry, particularly on the distribution side, but also in the weaving in of distribution and production? In view of the Government's proposals for a Welsh Assembly to have greater democratic control over bodies such as that for the water industry and other nominated bodies, will the right hon. Gentleman give an assurance that he has not shut the door on the possibility of the same accountability in Wales for electricity?

Mr. Benn

I appreciate what the hon. Gentleman has said and what my right hon. Friend the Member for Anglesey (Mr. Hughes) said. In the energy industries there are a number of countervailing pressures that any Secretary of State has to bear in mind. One is that which the hon. Gentleman mentions. Just as strong among Bristol consumers is the desirability of maintaining the identity of the South-West Electricity Board. It is not a cultural identity and it does not begin when one crosses the Channel.

The other matter to be taken into account is that in the fuel industries there is a very powerful demand for an integrated national energy policy. It is to find a way of achieving an integrated energy policy that makes the maximum use of the nation's resources for the benefit of the nation, combined with proper, efficient management in the industry and local accountability, that I am legislating in this way, with a primary Act and then subordinate legislation to try to reflect what at different times may seem a different balance between these different arguments.

Mr. Hatton

What effect will my right hon. Friend's statement have on the regional structure of the CEGB? Does he envisage that there will be any further regional amalgamations and consequential loss of job opportunities?

Mr. Benn

That is a matter for the electricity industry itself. None of the discussions has borne upon that matter. But I am aware that any changes in organisation inevitably raise anxieties about employment, and the trade unions are very well equipped and ready to take up such matters. But they would not flow specifically or directly from the short, primary legislation Bill that I said today will come forward in due course.

Mr. Rost

Does the right hon. Gentleman accept the important recommendations contained in paragraphs 422 and 424 on energy conservation, criticising the industry for its waste of fuel and low thermal efficiency, and recommending the removal of the statutory restraints and obstacles at present preventing a more extensive application of combined heat and power? If so, how can he reconcile that with the development of Drax B, which is to have a thermal efficiency of only 35 per cent. without the application of the reject heat?

Mr. Benn

I think that the hon. Gentleman is confusing two points, one of which is in the Plowden recommendations. Plowden was looking at a whole range of issues, some of which would require legislative changes and some of which were more general. As the hon. Gentleman knows very well, since the Plowden Committee reported we have had the report on combined heat and power and a number of statements about energy conservation. I do not carry each paragraph of Plowden in my mind, but I know those to which the hon. Gentleman refers. I shall not be dealing with paragraphs 424 and 425 in the primary legislation that I hope to bring forward in due course.

Mr. Loyden

In view of my right hon. Friend's keen interest in the democratisation of our institutions, what steps will he take to introduce the long-overdue democratisation of the publicly owned industries? To what extent will democracy be established in the regions so that the people in them have a part in decision-making in the electricity industry, particularly on the distribution side? This has been the subject of argument in the regions as part of the devolution debate in the English context.

Mr. Benn

My hon. Friend has correctly identified one of the reasons why I was not prepared to go along with Plowden and wind up all the regional boards and put all the power in the centre, simply hoping that the centre would devolve some of the management power downwards. Democratisation falls into two kinds. One is accountability to the local community that is served, accountability that I hope will be preserved. The other is the extent to which industrial democracy can develop. This largely depends on the initiatives taken by the unions, initiatives that I have made absolutely clear I would encourage. It is not possible for blueprints on this to be drawn up in a Minister's office, but I should like to see an advance made in that direction.

Mr. Forman

Does the right hon. Gentleman accept the point made by my hon. Friend the Member for Derbyshire, South-East (Mr. Rost)—that the Plowden Report made strong recommendations for relaxing the statutory provisions governing the electricity generating boards? Does he also accept that it would be appropriate, in the secondary legislation if not in the primary legislation, to relax these controls so as to make it easier to have matters such as combined heat and power schemes on a viable basis?

Mr. Benn

I shall examine that matter. It would be open to the House in amending the primary statutes to give power by the subordinate legislation to amend any other primary legislation that might be a barrier to that. But it is a point of detail. I am not saying that it is not extremely important, but it is a point of detail that does not bear directly on what I said today, which is that we shall pro- vide a central structure for the industry, subject to parliamentary approval.