§ 3.55 p.m.
§ Debate on Second Reading resumed.
§ LORD LATHAM
My Lords, we pass from a consideration of a grave situation in Central Africa to consider, by way, I hope, of counterpoise, the Bill which is before your Lordships' House, introduced by the noble Lord, Lord Mills. I am sure we are all grateful to the noble Lord for his clear exposition of the single purpose of this Bill, and more so for the informative and interesting, if brief, survey that he gave of this great expanding industry. One could have hoped that the Bill before your Lordships' House would be the Bill which was introduced into another place. Unhappily, it is a mutilation of that Bill. Under pressure, as it seems to me, of the hatchet-faced opponents of all national industries, the noble Lord, with the Secretary of State for Scotland, has retreated ignominiously from the terms of the original Bill and from the categorical statements made by the Paymaster General on its Second Reading in another place.
I hope I heard the noble Lord aright when I gathered him to say that he had decided that it was appropriate that Parliament should be consulted as regards the limited powers of borrowing in the year 1962, and not 1965, as was in the original Bill. It would be interesting for the House to know, and indeed for it to be known in a wider sphere, at what date the noble Lord came to that decision. Clearly, it must have been after the Bill was introduced in another place and received a Second Reading.
I propose initially to consider the original Bill. That Bill was intended to increase the borrowing powers of the Central Electricity Council and its subsidiary Boards, the North Scotland Hydro-Electric Board and the South Scotland Electricity Board, from respectively £1,400 million to £2,300 million, £200 million to £400 million and £75 million to £110 million. When the Bill was introduced in another place the Paymaster General, the voice, I suppose, of the noble Lord, the Minister, and of the Secretary of State, said that the amounts were necessary for the expanding activity of the industry and that the period of seven years was an appropriate period. The Paymaster General paid a deserved 674 tribute to the successful, efficient and economical conduct of the industry. He said that seven years was the shortest period, although we are now told that at some unspecified date the noble Lord, the Minister, came to the conclusion that three and a half years was appropriate and that at that time, or subsequent to that period, the Minister should consult Parliament by way of an Order.
Following the Second Reading, the opponents, not only of the electricity industry but of nationalised industries generally, got busy and the Bill was eviscerated, no doubt under the orders and under the authority of the noble Lord, the Minister, and his colleague the Secretary of State for Scotland. It is a wretched story, this surrender to these doctrinaire opponents of any nationalised industry. In this connection I hope my noble friends from Scotland will not charge me with any disrespect for Scotland if I do not particularise as regards the two Scottish undertakings which are dealt with in the Bill. My remarks as regards the Electricity Council will, generally speaking, mutatis mutandis apply to the two Scottish undertakings. The Paymaster General told another place, as indeed the noble Lord has said here, that the present borrowing limits were likely to be exceeded in or about 1960, and that it was anticipated that some £2,300 million would be spent, including what has already been spent, by March, 1965. That expenditure was essential (and nobody questioned it) in order to provide for the expanding demands of industry and of other consumers.
It is gratifying to know, and complimentary to the industry, that at the present time no less than 92 per cent. of the households of this country are wired for electricity which, in relation to what the situation was some twenty years ago, is a signal mark of progress. In order to assist the load factor, we need to stimulate consumption in those households, apart from which we want, and indeed should seek, to take more power into the kitchen—put more power behind the woman who has to do the domestic chores by providing her with and making it easy for her to acquire the various electrically-driven labour saving devices.
I gather it is expected that in the next seven years there will be an increase in 675 demand as regards industry of something of the order of two-thirds; that the demand by commerce will increase by some 50 per cent.; that domestic consumption is estimated to go up by two-thirds and consumption on the farm will be doubled. Nothing could be of greater help in arresting the movement from the countryside to the cities and the urban districts than the provision of all the facilities which electrical power and electric light make available to those living in the rural communities. Last week we were discussing conurbations. As was clearly indicated, one of the contributory factors of the movement from the countryside into the cities was the greater facilities available and the attractions. If industry is to expand in the way it should, then new and additional plant will be needed, and it is for that reason that the limits of borrowing are to be increased. Any money wisely spent in this industry is a good investment. Not only is it a good investment in terms of its immediate return, but also it makes a great and important contribution to the economy of the nation.
I gather that of the money to be borrowed some £1,470 million, including what has already been spent, will be in regard to and for the purposes of the generation of power. But as regards £660 million, it will be for distribution. The money necessary to finance hire purchase, I gather from what was said in another place, is not included within the borrowing powers now sought in this Bill; the industry will be required to go to the market for that money, which is regarded as working capital. I think there is something to be said for that. I understand that the amount to be borrowed, and the terms of borrowing, for that purpose are to be approved by the Government—that is to say, by the Minister. I sincerely hope that in his giving such approval the industry will not be required to pay an excessively high rate of interest, and will be enabled to compete with outside organisations in the provision of equipment on the hire purchase basis.
I say this—and I think the noble Lord will confirm the correctness of what I am about to say—because the industry has supplied power and light to rural districts at a loss (in many cases initially and, I think, in quite a number of cases 676 for some considerable time and, it may well be, will do so for an indefinite period) as a contribution to the social amenities of the countryside. If that be the case, it would be singularly unfair to the industry if it were placed at any disadvantage in reaping the reward from the sale of the maximum number of fittings and equipment to be driven by electricity.
So I come to the Second Reading of the Bill in another place. It received the cordial support of Her Majesty's Opposition, and the Second Reading was carried without a Division. It had been sponsored in its original terms by the noble Lord and his colleague the Secretary of State. Yet when the Committee stage opened we found that there had been an ignominious surrender by the three Ministers—the noble Lord the Minister, the Secretary of State and the Paymaster General—before these opponents of nationalised industries. Instead of the original proposal of an increase from £1,400 million to £2,300 million, the Bill was amended to limit the sum to £1,800 million, with the proviso that anything in excess of that had to be by order of the Minister. In fact, it reduced not only the amount in the way I have indicated, but also the period from seven years to three and a half years. The Paymaster General forswore on February 17, when the Committee stage was taken in another place, all the statements which he had made of the necessity for the £2,300 million and that the period of seven years was the right period, instancing that the Government would have through its Ministers adequate and proper control. All those statements, including a quite proper and deserved tribute to the efficiency of the industry, were forsworn; and, acting no doubt under directions, the Paymaster General retreated from the position he formerly had occupied.
The so-called ground upon which this opposition to the proposals of the original Bill was based was the old one of public control and accountability, which of course has become the King Charles' head of those who are opposed to nationalised industries. Notwithstanding that the Paymaster General had stated on the Second Reading that there was adequate Parliamentary and Government control (he instanced the four stages at which the 677 Government and Parliament would be able to control the borrowings within the limits prescribed by this Bill—I will not delay the proceedings of your Lordships' House by reading what the Paymaster General said), the Bill was amended in the mariner which I have indicated. I should like to advance the notion that at the present time the nationalised industries of this country have not too little control but too much control; that many of those who are responsible for the conduct of these industries are bound, in coming to decisions, to be looking over their shoulders and trying to estimate and evaluate what might be said in one or other House of Parliament. After all, it is the case that most prices, most charges and most fares charged by the nationalised industries are subject in one way or another, to ministerial control, so that the bodies concerned are responsible to Parliament.
I well remember what happened in 1952, when the British Transport Commission, having been to the independent Tribunal established for the purpose, and having obtained authority to increase fares in London on certain transport facilities, and outside London on British Railways, the Government, through the Minister of Transport of that day, interfered and forbade the British Transport Commission to institute the proposed increases of fares. In the result, London Transport lost £1¼million of income for several years, and British Railways in the area outside London, what we call the London lines, lost an additional £660,000 a year; and that loss went on for quite a number of years. The real reason, in my view—end I say it as one who was there at the time—for that interference was the fact that local government elections were taking place at that time, including those for the London County Council.
Moreover, the price of coal has been settled by ministerial order for quite a long time; and coal has for several years, until quite recently, been sold at less than world prices. It is, I think, to be very much deplored that the desires and the views of the noble Lord, the Minister, and of his colleague, the Secretary of State for Scotland, as to the increase of borrowing powers and the period over which they should operate should have been opposed and should have been 678 nullified—that is the circumstance—by the unreasoning opposition of those people who never seem to miss an opportunity of sabotaging, hampering and harassing the conduct of the nationalised industries.
If I may, in conclusion, refer to another aspect of this public accountability, why is it that, when the Government are lending large sums of money to private enterprise those people do not insist upon the measure of public accountability and control which they do if the loan is to a nationalised industry? I recall all the facilities which were placed at the disposal of industry in this country between the wars, under the Trade Facilities Act and one other Act, the name of which, for the moment, I do not recall. There, Government credit was pledged; the Government gave guarantees for money raised; but there was no demand that there should be an express degree of public accountability or public responsibility or public control.
Then recently we have had another instance of that disregard of the need for public responsibility when money is being advanced to private enterprise. I would cite, in this connection, the case of Colville's. I have no criticism to make of Colville's. No doubt they are a progressive, go-ahead, honest, well-established, well-respected and indeed, important concern. But the Government have recently undertaken to lend them £50 million. Already the Government, through the Iron and Steel Agency, have £4 million worth of preference shares in Colville's, and £10 million worth of debentures, and it is now proposed, by a series of tranches, to lend them £50 million. So it will fall out that, of the £80 million share and loan capital of Colville's, the nation will own £64 million. Is that not a case where there should be some accountability to the nation and some control?
As I understand it, no provision is made in the agreement for any such control. According to the information given by the noble Lord to your Lordships' House, the agreement provides that, if necessary, the Government can have a debenture ranking after the existing debentures of which £6 million are held by the public. The chairman of Colville's has said—I do not dissent from it; I merely refer to it as a 679 fact—that, of course, that £50 million will rank behind the existing debentures, and the expenditure of this £50 million will increase the value of the security of those debentures. That is inevitably the case unless the money is completely wasted; and, as I say, I do not dissent from that statement. Yet nobody has come forward to suggest that there should be some measure of public accountability. There could have been, but for the policy followed by the Iron and Steel Agency at the instance of the Government, for it is a Government-created organisation—it is a creature of the Government. The Agency held the whole of the ordinary share capital, and with that ownership of the share capital went control. But the Agency, no doubt acting on the instructions of the Government, disposed of those ordinary shares and rests now with preference shares which confer no right of control, except when the preference shares are in default in the payments of dividend, and debentures which give them no power of control except there be default, when they have the right to appoint a receiver.
I wish very strongly, both for myself and for my noble friends on this side of your Lordships' House, to make the point that it is a great pity, and is unworthy of democratic government, that the Minister should have introduced a Bill with certain provisions, which no doubt he had considered with care and on which he had reached a decision—with prudence and wisdom, and should then, because of opposition from those who are not really, in my submission, concerned about this particular Bill, but are using it as an opportunity of opposing, hampering and harassing nationalised industry, have been so weak as to yield to them and alter the Bill contrary to his original intentions. However, there it is. The Bill, as emasculated, is now before your Lordships. It is necessary that the electricity authorities and the two Scottish authorities should have this enlarged borrowing power, and for those reasons, although we dislike most intensely what has happened, we shall not oppose the Second Reading of the Bill.
§ House adjourned during pleasure, and resumed by The LORD CHANCELLOR.
§ 4.25 p.m.
§ LORD FERRIER
My Lords, I feel that I owe your Lordships some explana- 680 tion for addressing the House a second time in so short a space; but I make no apology, and I offer an excuse which I trust your Lordships will accept. The excuse is that the subject now before the House, like that of last Tuesday, is one of which I have some experience and in which I feel that I can contribute to the proceedings. Later in my speech your Lordships will trace some thread of connection between what I said about railway electrification and some of the suggestions I have to make—indeed, one of the suggestions that I have to make about this Bill.
I feel that we can thank the noble Lord, Lord Mills, for the full and informative speech with which he expounded the reasons behind his Ministry in putting forward this authorisation, and we have all been interested in the views expressed by the noble Lord who has just spoken. But in saying that I have been interested, I should not like either the noble Lord opposite or any other noble Lord, to imagine that I was one who approved of nationalisation, or felt that the nationalising of the electricity industry was the best way of providing power to this country. Far from it. I well recall, with some sadness, the fact that ten years ago the follow-on rate in my house was something under a halfpenny, and that to-day it is a penny. There would have been, I feel absolutely confident, a better way of co-ordinating the efforts of private enterprise and of canalising it in the service of the nation. However, we have a nationalised electricity supply industry, and I think I can safely say that the Electricity Authority is working well. The fact that it is working well is a tribute to the direction thereof; and our energies should, I feel, be turned to seeing how we can make it work better.
But, my Lords, if omelette is on the menu, we must see to it that the chef (to whom I liken the chairman of the Electricity Authority) has the best equipment for his kitchen, the best eggs and the most tasty and nourishing ingredients. And have not the consumers at the same time the right to have every opportunity to encourage or to chide, if only by a message, as it were, through the maître d'hôtel? That would not be harrying or harassing, would it? In my view, far from it. Many noble Lords have more experience than I have in matters of this 681 sort, but I sense some uneasiness in Parliament, especially in another place, on this particular score—not of wanting to harass or harry, but of demanding, as the right of the consumer and, in the case of a nationalised industry, the providers of the wherewithal, to have some closer oversight than is provided in the Bill, and the power under the Bill, for supervision of what is going on. That is my view; and that being my view I welcome the proposal that not seven years but a much lesser time is to elapse before the Minister returns to Parliament for further powers. After all, these powers are only a ceiling, as I think the noble Lord said in introducing the Bill.
My Lords, I have a few suggestions to make and a question or two to ask. My first question is: has Parliament sufficient power under the Bill to encourage or to chide? Is the Minister satisfied that, in bringing forward the date, as he has done, to 1962, he is providing as much opportunity as he would like for laying before Parliament his day-to-thy proposals? On the other hand, Parliament may not require that. A letter in The Times today indicates that, at least in another place, estimates are perhaps rated lower in importance than more sensational and, comparatively, much less important matters. Nevertheless, I, for one, feel it prudent that Parliament should have as much opportunity as is possible and reasonable to watch over the expenditure, not only in terms of limiting but also in terms of encouraging the expenditure of these vast sums of money.
Accepting this to be, as it were, a "blanket" authorisation, I should like to inquire of the noble Lord the Minister whether his Ministry will see that the money is spent as generously as possible and as early as the available treasure and the physical resources at the command of his Ministry permit. If the result of doing so is that the authorisation now before us is fully employed before the minimum period the noble Lord has in mind, I suggest that the Minister need make no apology to Parliament for coming to ask for more.
On a more technical basis, this authorisation is measured in terms of an estimate of growth of load. The amount of money which Parliament is asked to provide is calculated against an estimated growth of load, and I ask myself: is this estimate 682 based on present tariff structures? I believe that the answer is, Yes, I say that, having turned to Power for the Future, which states at page 4, paragraph 8:Estimates of future requirements in each of these fields is based on the assumption that electricity prices will continue their present relationship to the general structure of prices.Does the noble Lord not think that a bolder tariff policy would increase the rate of growth? If so, could not such a policy be adopted? What I am saying now is in keeping with what was said by the noble Lord, Lord Latham, to the effect that no money spent on electrical expansion at a time and in a country like this is money wasted. That may be restating in a rather general way what the noble Lord said, but I am in full agreement with him over that arid I am aware that tariff formulation is a very complex matter. Indeed, it is a science in itself; and the Electricity Authority's power to create tariffs is, in some respects, circumscribed by the Act itself. Along those lines it would be interesting if the noble Lord the Minister could indicate how it was that, within the Act—quite rightly I should say—the Electricity Authority were able to quote tariffs at a loss in order to develop rural electrification.
My thesis is this: if the growth of load to-day is the measure of the amount for which we are being asked, if it is considered prudent and wise to push on with expenditure on electrification, could it not be arranged that, by varying tariffs downwards, the growth of load could be so increased that expansion would be speedier than is visualised at the moment? The range of tariffs about which I have specific suggestions is the range of off-peak tariffs. It is the off-peak load which has prime effect upon the load factor, to which the noble Lord the Minister has referred. It is a very important part of the whole consideration of improving the load factor. That is improving but it is still too low, as the noble Lord has himself admitted.
I believe he has indicated that it could be estimated that by 1960 the adjusted load factor, over all, would be in the neighbourhood of 49 per cent., compared with 60 per cent. in the United States of America. My own view is that this load factor is too low. I believe that that can be accepted. One of the contributory reasons is that the tariffs, especially off-peak tariffs, are too high not only for 683 domestic power but for agriculture, particularly in terms of horticulture, and for industry. I turn to the report of the Herbert Committee where in paragraph 404 the following words appear:We consider that many boards are to be complimented on their progressive attitude towards the use of tariffs to attract all classes of consumer from peak to off-peak periods, but not all boards have considered that the differential they are able to offer justifies publication of special tariffs for off-peak use.A little later in the paragraph it is stated:In our view there should be a greater zeal among boards to take this risk and to experiment where necessary with various forms of off-peak tariffs covering all consumers, industrial, commercial, farm and domestic.Then in paragraph 408 it is stated:Despite the progress made in introducing off-peak tariffs we do not think that every individual area board is pushing as enthusiastically as it should the development of off-peak loads. Most boards still do not offer off-peak tariffs to the larger domestic consumer.I believe that my own off-peak domestic tariff is nearly double what my ordinary follow-on rate was ten years ago; and even then the off-peak tariff for domestic space heating would have been too high. May I ask the noble Minister this question: why cannot all domestic users obtain thermal storage heaters? I understand that, so far, their use as a domestic amenity is prohibited.
In horticulture a prominent grower who is president of the Chamber of Commerce in Edinburgh told me only this week that the present off-peak tariff in his neighbourhood, which is in Midlothian, is too high for him even to consider changing some load from the ordinary tariff to the off-peak tariff—because the difference between the two is too small to warrant the heavy capital expenditure necessary to instal the equipment required by off-peak consumption. Yesterday I heard of a grower in the Clyde Valley who, as I understand, has just changed from coal to oil for the heating of his glass-houses which stand on ground beneath which are substantial coal measures. His reason for going to oil was that coal had priced itself out of the market and the tariff for electricity was not low enough to warrant his spending the necessary capital on putting it into his very substantial establishment.
Industrially I myself am concerned with two large wholesale warehouses in 684 Glasgow. These warehouses are now in a smokeless zone; and the heating equipment in one, which had to be renewed in any case, we have converted to oil. In this respect I feel that it is proper for me, as it were, to declare an interest, because we are now faced with the problem of what to do with the other one. As an electricity enthusiast, I have, of course, said "Electricity every time!" But the tariff for space heating for such loads simply does not make it an economic possibility to put it before a board, in face of the price which oil would cost. In this respect one must remember, first of all, that electricity is no monopoly; and the other point is this: a load lost to-day is a load lost for years. I am conscious of noble Lords' anxiety about the use of oil. Is it not fair to think that here is one way of competing with it? As the noble Lord the Minister said, in the expansion there are no further oil-burning power stations contemplated; and the authorities are contributing in this way to the use of indigenous fuel resources.
What about a special tariff which would attract church heating? I am not suggesting any special provision for church heating, but whereas I know that it is not possible to differentiate between premises in tariff formulation but only between loads, I am suggesting that here is a load right off peak—in fact right at the bottom of the load curve—which might well be fostered. I cannot believe that it is beyond the capacity of the experts to devise a tariff which will suit a load of this nature. There are over 50,000 churches in Great Britain and if half of these were electrified and only averaged 40 kilowatts per installation, there is a million kilowatts of load in the early hours of Saturday and during Sunday which would help very considerably to contribute at least towards the filling up of the "valley" at the bottom of the load curve. If All Saints' Church in Hurstmonceux had electrified its heating arrangements I feel we can safely say that the noble Viscount the Lord President of the Council and his family would not have had the alarming experience which they had some three weeks ago, when the congregation were affected by the fumes from an ancient coke stove.
On the subject of week-end off-peak tariffs, I would point out that there is another load which is worth bearing in 685 mind, if I may be so bold as to press a point which has already been mentioned in another place: a special week-end tariff which would attract pit-pumping in the coal industry. A really low tariff with restricted hours which would suit the supply authority might make it worth while for the milling authorities to justify considerable capital expenditure to increase the storage of water below ground which could be pumped out during off-peak hours. Could central tariffs for bulk supplies have an off-peak slant? This has just occurred to me, my Lords, and I am searching and fumbling in my mind, but I think that in the Herbert Committee's recommendations this is included: that bulk tariffs should also have an element of off-peak in them. The other factor which I should like to bring to your Lordships' attention, and with which the noble Lord the Minister I have no doubt will agree, is that this load factor problem is going to assume greater and greater importance as the generation of power by nuclear fission becomes more universal.
I have already mentioned heat storage equipment, which of course is one way of conserving energy derived from electricity. We know that the Electricity Authority are going ahead with pumped storage schemes, but I cannot resist a quiet Scottish dig at this pamphlet, because on page 16 in the second paragraph from the last it says:The first pump storage scheme in Britain is being constructed at Blaenau Ffestiniog in North Wales".Perhaps there is some misprint. Perhaps for the word "first" the word "second" should have been read, or for the word "Britain" we should read "England and Wales"; for, of course, a pumped storage scheme has existed at the tweed-mill at Walkerburn on the River Tweed since 1922. It has worked satisfactorily for all these years and is still contributing very well to the economic rate which that mill has to count in for power in its production costs. That was done by private enterprise, and it might interest your Lordships to know that that particular installation was only the second in the world, the first having been in Sweden.
I am confident, as I have said—and I trust that I shall be agreed with—that a bold tariff policy should be adopted. Indeed, to hold tariffs at their present rates until load grows is not altogether 686 fair on existing consumers To my mind it is somewhat of an error similar to that of ploughing back into the industry too much profit. Now this is an operation which is criticised in the Herbert Report as penalising the existing consumer and making him pay for development which is going ultimately to benefit the consumer who comes later on. Hearing the noble Lord, Lord Mills, talking of intentions of ploughing back in the future—I believe he mentioned 46 per cent. from internal resources—my reaction at once was: is this not too high, in terms of the line adopted by the Herbert Committee that, as I said, it may not be prudent or fair to the existing consumer to plough back too high a percentage of earnings?
May I also appeal for a bold tariff policy for railway traction? Here again could not an off-peak element be brought into hulk tariff for railways? Admittedly, the railway traction load to-day is only a small percentage of the total load, but this will grow: we know it will grow. And, as I contended last week, railway electrification has a function over and above its purely railway value. It would mean work for a widely-spread range of electricity, and it would relieve pressure on road traffic. But what I am suggesting is that the Electricity Authority, by keeping the railway tariffs at rock-bottom, can make a contribution out of all proportion to the actual cost to the nation.
Such a proposal would also mean more work. I am thinking of the reference which was made by the noble Lord, the Minister, to expenditure on distribution, and the fact that more will have to be spent on that now, when the expenditure on generation seems to be in hand. I am thinking of pockets of unemployment, particularly these closed-pit areas, such as Douglas, in the neighbourhood of my home, which might suit the railway or the Electricity Authority very well as sites where steel could be fabricated and perhaps put aside, and stocks of gantries and similar repetitive steel equipment put together ready for electrification, whether it be of power distribution under the Electricity Authority or of railway electrification under the railway authority. We also know, of course, that to electrify a railway means extensive electricity distribution development.
I trust that I have not detained your Lordships too long with my few points. 687 If I may, I will summarise them. My first is whether the Government has indeed enough power to encourage or to chide the Electricity Authority until another authorisation comes round. If not, is it necessary or, in fact, is it desirable? My second point is: will the Minister see that the money is spent with diligence? My third is: could off-peak tariffs be revised downwards—not just a little, but boldly and quickly, primarily to improve load factor? My fourth point is: could the tariff for railway traction be cut to the lowest possible limit?
§ 4.54 p.m.
§ LORD MERRIVALE
My Lords, the purpose of this Bill, as was stated earlier, is to increase the authorised capital of the industry, and, if I understood the noble Lord, the Minister, aright, the investment proposals are for a seven-year period, with a break in 1962. In another place it was stated that £660 million was to be spent for distribution, and I understood the Minister to say that over £700 million would now be spent on it. Will that cut down the amount of £1,470 million that was said in another place to be available for generation? With regard to the amounts, I understand that £1,150 million will be borrowed in two stages. As has been stated during the course of this debate, the basis of this plan for expanding the industry must be the assessments that have been made of the demand over the next seven-year period. With the high capital cost of nuclear generation, which is still two and a half times greater than that of conventional generation, the need for a profitable plant investment is greater than ever.
With those very brief opening remarks, I should like to come to what I think is the crux of the matter, and that is the load factor problem. The estimates of the Electricity Council for the next seven years with regard to the various categories of consumer were given in detail by the noble Lord, Lord Latham, earlier on. They were referred to as the industrial consumer, the domestic consumer, the farm consumer, and the commercial consumer, so I will not weary your Lordships with the figures. These, indeed, are large estimated increases, which are based, as has been stated by the Minister, on peak load demand at any time. At this point, I should like respectfully to 688 ask the noble Lord, the Minister, whether he does not fear that greatly increased generating capacity will tend to lower the load factor—proportionately, I mean. He has defined exactly what is the load factor, so I will not mention that.
It seems to me that the provision of such vastly increased generating capacity may not engender a corresponding improvement in the load factor, thus widening the gap between the total generating capacity, the peak demand at any period of time, and the actual demand over the year, and thereby defeating the object of the industry, which must be to make the fullest possible use of its plant and equipment. The problem of intensity of employment with regard to this plant and equipment is surely well realised by the electricity supply and distribution industries. I would therefore respectfully ask the noble Lord, the Minister, what incentives he has in mind with regard to this question of attracting peak load consumption.
The publication Power for the Future, which has been quoted during the course of this debate, states that trends in rising off-peak consumption have been stimulated by promotional restricted hour tariff rates and in other ways. Are these other ways mainly concerned with the question of pump storage to which the noble Lord, the Minister, referred? The Paymaster General stated in another place on January 20 last—and I should like to quote his precise words [OFFICIAL REPORT, Commons, Vol. 598 (No. 39), col. 46]:… it would take a very big tariff variation to encourage industry to alter its habits as regards shift work, and so on, …This question of encouragement to use off-peak electricity is certainly a very important problem indeed. In terms of generating capacity and load factor, I should like to refer to some figures, going back to 1920, which I have extracted from the Power for the Future publication. In 1920, 2.1 million kilowatts was the total generating capacity figure, and the load factor was then 30 per cent.; in 1947–48 the generating capacity was 11.6 million kilowatts, with a 43 per cent. load factor; and in 1958 the total generating capacity was 24.3 million kilowatts and the load factor 46.8 per cent. In 1964–65 it is estimated that the total generating 689 capacity will be 34½ million kilowatts, and the noble Lord, the Minister, has stated that the load factor will then be 49.2 per cent. It would seem, therefore, that there has been a large increase in the generating capacity, but not a corresponding increase in the load factor. Greater incentives certainly appear to be required. A tariff one (and that is a point the noble Lord, Lord Ferrier, mentioned) may be found on the lines of the works of Eric Shankleman of the Central Electricity Authority (as it was then, because this was in 1956), in the April, 1956, issue of Steel Review, He said:Today most consumers are charged on the number of units of electricity they consume. In the era of nuclear generation it may well be that their maximum demand on the supply system at a particular time of the year will largely, if not wholly, determine the size of their electricity bill.What are the possibilities for the future, from the point of view of alternating current consumption which cannot be stored?—and I intend to come on to the question of direct current. I want to mention three categories of consumers—namely, industry, the domestic consumer, and the consumer from the traction point of view. An increased use of electricity has occurred, and is still occurring, in industry, mainly from the point of view of heat; and by that I mean electrical processes in industry for heating purposes. Possibly that could be intensified by a greater amount of shift work in this country and a greater degree of staggering of working hours.
In the home, no doubt a greater use can be found for the thermo-storage heaters to which the noble Lord, Lord Ferrier, referred; and I have in mind under-floor heating. In that regard, I may say how pleased I was yesterday when I called in at my local electricity board office. They were most helpful and said straight away that should I be interested in this form of heating in my home they would immediately send round a service engineer to advise me on the matter; and they told me that he was well qualified because he had just returned from a course.
§ LORD FERRIER
My I inquire whether that under-floor heating offered by the district authority is an off-peak load, or is it only for heating on an ordinary tariff? Is there not a special tariff obtainable for under-floor heating as well as for storage?
§ LORD MERRIVALE
As I understand it, the Electricity Development Association suggested that this form of heating should remain switched on constantly; in fact, in a pamphlet they state that it should be used for a period of 210 days a year. What I gathered from the office of the electricity board was that this was really an off-peak load, which would be brought into operation only at night, with a preferential tariff—and the tariff given to me was 1d. a unit—with a time switch which would bring it on only during the off-peak period; and the heat would come up through the floor during the day by means of storage capacity. There are other forms of storage heat: there is the storing of water and storage heaters for offices and flats.
There is one category to which I would particularly refer, and that is in the realm of traction. According to this publication, Power for the Future, more electricity for street traction was used in 1920 than in 1958; in fact, that category is the only consumer which has not shown a steady increase throughout the years. In the realm of rail traction it is interesting to note that the British Transport Commission state that when their rail electrification plan is in full operation the mean load factor will be 53 per cent., while within certain areas of the scheme the load factor will reach the high figure of 70 per cent.
Coming now to the question of direct current, which can be stored, I would particularly commend the efforts of the British Transport Commission in so far as they are using battery-driven vehicles. That, I think, is an important point, for these batteries can be charged during a period of minimum demand. Incentives could possibly be found for the commercial user to use to a greater degree these silent-running battery vehicles. I live not far from Peter Jones's, and the other day I happened to see an attractively designed, modern and quiet battery-driven vehicle. The German postal authorities operate over 1,000 of these battery-driven delivery vans, and in Switzerland over 400 are used for a similar purpose. Much, however, still remains to be done on this question of battery design in the direction of lowering weight and reduction in volume. I have in mind here its application particularly with regard to battery-operated rail cars, which are so satisfactory and extensively 691 used in Germany. While not wishing to weary your Lordships too much on this question of electricity—I was not certain whether this was a suitable debate to raise this point or whether it should be reserved for a debate on transport—I thought it was important to bring to your Lordships' attention the favourable extent to which electricity can be used in railway operation.
Finally, I should like to draw your Lordships' attention to what I consider to be the excellent work undertaken by the British Electrical Development Association, with the proviso that to me it seemed that at their stands at trade fairs there was a regrettable lack of information available on electricity for traction purposes. Information and literature was available for the industrial and commercial consumer, and it was of a most interesting nature, but on this question of electricity for traction, the only information that I was able to get was from seeing an electric fork-lift truck. No printed matter was available. This is no criticism of the staff of the British Electrical Development Association, for I have always found them most courteous, keen and obliging. This specific lack of information on matters of the use of electricity for traction may be due solely to a question of policy, and I would leave it at that. To end, I should like to say that surely any application to which this clean, odourless, fumeless and practical form of power can be put deserves considered investigation, effective development and every promotional effort.
§ 5.13 p.m.
§ LORD MILLS
My Lords, I am grateful to the noble Lord, Lord Latham, for giving me the opportunity of removing, I hope, a misconception in his own mind, and certainly a view that was held by honourable Members of his Party in another place in regard to the Amendments in Committee on this Bill in another place. He has given me a novel conception of the value of debate. I thought debate was for the purpose of listening to arguments and, if necessary, altering one's mind as a result of those arguments. I myself in your Lordships' House have on more than one occasion agreed on Second Reading to consider a matter, and have in fact amended the proposal to take account of the wisdom 692 of noble Lords opposite. That is precisely what happened in another place. The noble Lord shakes his head, but I happen to know, because I myself—
§ LORD MILLS
—proposed the Amendments, since I was satisfied that it was not right that we should run the risk of going through the next Parliament without an opportunity of debating the matter. Therefore the suggestion which came from me was not due to any pressure by anybody, but was a solution to the difficulty which I saw in reading the debates, and a solution which I discussed from a practical angle with the Electricity Council itself. So I hope the noble Lord will amend his view on that matter.
The noble Lord also took the opportunity of referring to the case of Colville's in this connection, although it really has nothing to do with it.
§ LORD MILLS
The case of Colville's, as the noble Lord pointed out, is a proposal to lend money to a company where the equity is in private hands. The noble Lord can be assured that every proper safeguard and every care will be taken to see that the money is properly used. I think the noble Lord may have forgotten the existence of the Iron and Steel Board, which was set up to watch the capital expenditure of companies to see that it is wise and in the national interest.
The noble Lord then referred to the question of hire purchase, and here I can agree with his view. There should be, and is in fact, no restriction as to terms which may be offered by the electricity Boards. They realise, and the Government realise, the importance of being able to get as large a consumption as they can of the electricity they are selling; and in fact the terms upon which they borrow money are quite advantageous. There is only one thing I should say, and I hope the noble Lord will not think this is wrong. I was able to secure the agreement of the electricity Boards that they would not compete in hire purchase terms either with the gas industry, which is also publicly owned, or with private firms which are serving the public, in their distribution of appliances.
§ LORD LATHAM
Would the noble Lord pardon me a moment on that question of hire purchase? What exactly does he mean "not compete with private firms"? Does he mean that the electricity Boards are forbidden to undercut arid must charge the most onerous charges within the field of private enterprise?
§ LORD MILLS
That is not the case at all. The point is that their terms for hire purchase should be seen to be fair, reasonable and businesslike. The Boards are quite satisfied with the terms.
§ LORD MILLS
That is quite correct. The noble Lord was also of the view that their borrowings for hire purchase purposes were not covered by this authorisation. That is not the case. Their borrowings for hire purchase, like their working capital, are all included and covered by the authorisation for which we are asking your Lordships' House.
I was very impressed with the emphasis made by the noble Lord, Lord Ferrier, and the noble Lord, Lord Merrivale, on the tariff policies of the Boards. I think that everyone realises the importance, or rather the effect, of tariffs on the consumption of electricity, and the Generating Board have now given a valuable lead with their new bulk supply tariff which comes into force on April 1 this year. Under this new tariff the running rate, or the unit rate, has been much reduced; and Area Boards are now planning to adapt their tariffs so as to encourage still greater off-peak use, which the new bulk supply tariff enables them to do. Several Boards have, in fact, already announced their intention in this respect.
The noble Lord, Lord Ferrier, raised several individual matters which I will see are brought to the notice of those concerned. The individual Scottish cases which he mentioned will be brought to the notice of my right honourable friend the Secretary of State for Scotland. The noble Lord, Lord Ferrier, inquired whether I was satisfied that there is as much opportunity as I should like for Parliament to be consulted. I believe that I can answer that question in the affirmative. There are the Annual Reports of the various 694 Boards; a White Paper is published annually on the capital expenditure. All these give Parliament opportunities of debating the industries for which I am responsible.
The noble Lord also asked whether the estimate of the growth of load is based on present tariffs. I did in the course of my remarks say that we had not yet taken into account the alteration in the bulk supply tariff and the consequent alterations of tariffs by the Area Boards. We have not yet taken these matters into account because one would have to wait and see what would be their effect. Believe me, my Lords, this question of tariffs is kept closely in mind by every Board in the country, because their surest way of becoming more efficient is to deal with the off-peak situation; and anything they can do to bring that about I am sure will be done.
I found your Lordships very exhilarating, and I am sure that all connected with the electricity supply industry will read what has been said this afternoon with great interest, and I hope with much benefit, too. I am sure that if they want suggestions they have only to have a debate started in this House to get them. We have had some suggestions this afternoon, about a low off-peak rate for churches, storage heaters and glasshouses. As I say, I will not attempt to deal with them all now, but I will certainly commend to the electricity authorities what has been said here to-day.
Then the noble Lord, Lord Ferrier, raised the question of ploughing back profits; and he reminded us of what had been said on this subject. I agree that it would be wrong to penalise present users by ploughing back too high a percentage of the profits. I do not think that is the case. I have examined the position very carefully, and in present circumstances I think what is being done is just about right.
§ LORD LATHAM
I agree with the noble Lord. As a matter of fact, the element in the internal financing which arises from depreciation is not ploughing back at all. It is the mere provision for the replacement of assets that are being used up.
§ LORD MILLS
I thank the noble Lord. I agree that there must be ploughed back 695 sufficient profits to cover replacements and a proper proportion of the expansion which is envisaged.
§ LORD MILLS
And increased cost of replacements too. The noble Lord, Lord Ferrier, also asked whether I would see that what money could be spent was spent efficiently and urgently. Here, I think the reply is an obvious one: that in so far as the amount of capital expenditure requires my approval it is my duty to see that the amounts are adequate yet not too large.
The noble Lord, Lord Merrivale, talked about railway traction. That is a very important matter, and I should like to say this about it. The supplies to the railways are given direct by the Generating Board, and it is up to the British Transport Commission to make their case with the Generating Board and to secure the tariff which best suits their purposes, provided that the Generating Board agree that it is also a reasonable one for them. But it is expressly provided in Section 28 (5) of the Act of 1957 that the terms and conditions on which electricity is supplied to railway undertakings must not result in a financial loss to the Board. So the very question of a subsidy is, of course, precluded.
The noble Lord, Lord Merrivale, also asked whether I considered that the greatly increased generating capacity would tend to reduce the load factor. I do not think that follows at all. It depends, on the one hand, on consumption, and, on the other, on the reserves which it is necessary to carry and which do not count against the load factor. Both Lord Latham and Lord Merrivale mentioned the question of thermal storage heaters. I do not think it is a fact that thermal storage heaters may not be used domestically, but they attract purchase tax. In that respect such representations as I can make I have made. I think that I have dealt broadly with the questions which have been put to me. I have found the debate a most interesting one, and I think the electricity authorities, too, will benefit from it.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.