HL Deb 05 April 1960 vol 222 cc686-700

3.30 p.m.

Order of the Day for the Second Reading read.

LORD MILLS

My Lords, I beg to move that this Bill be now read a second time. The provisions of this Bill fall into two clauses, and I do not thinks that the House will wish me to deal at any length with Clause 2, which provides for the recovery by the Minister of Power of certain expenses which he incurs in connection with the testing of gas. This is an administrative provision of which the financial implications are fairly small and it corrects an inadvertent deficiency of the Gas Act, 1948. I will therefore address my remarks to the first clause, which provides for an increase in the borrowing powers of the Gas Council from £450 million to £500 million or to such greater sum, not exceeding £525 million, as the Minister may by Order specify.

I think that the fundamental question which your Lordships' House will expect me to answer can be briefly put in this way. The output of the gas industry has been approximately static over the last few years, and it might therefore be supposed that the normal depreciation revenues of the industry should be sufficient to sustain the present and expected level of production. Why therefore must Parliament be asked to approve more borrowings?

To answer this question I think that we must consider what I might call the strategic position of the gas industry in our fuel economy. It occupies a key position, but the industry has to meet severe and very vigorous competition, notably from the oil and electricity industries. Not only have the Gas Boards at least two adversaries, but they must also fight on two fronts, because at present and for a long time to come the industry will need to produce two fuels—gas and coke—as the production of coke and other solid smokeless fuels is likely to be a very important part of the business of Area Gas Boards for a period which will stretch far beyond the time covered by this Bill.

We have, I submit, an important national asset in the existing underground distribution system which carries gas to premises of all types in all areas of the country, except in purely rural or semi-rural districts. It is perhaps not generally appreciated that about 12 million households in this country use gas. It is not too much to say that coke and other carbonised fuels produced by Area Gas Boards are vital to our progress towards clean air, which is so important. Coke has been criticised as to its suitability for this purpose and I would not claim that in the past progress in coke preparation and marketing has always been as good as it should have been.

Your Lordships may remember that between the wars some of the most progressive gas undertakings paid a lot of attention to coke preparation and marketing and greatly enlarged their coke revenues by so doing. After the war, for a number of years, the general shortage of fuel made it possible for coke to be readily sold in spite of inconsistencies in quality. More recently, I am glad to say, there has been a return to competitive selling and a British Standard Specification for open fire coke has now been introduced. In addition, with considerable enterprise, some Area Boards have produced highly reactive cokes which have secured a very ready sale at prices which appear likely to offer an economic return.

Although there are substantial quantities of excellent solid smokeless fuel now also being produced by both the National Coal Board and private enterprise concerns, I must emphasise that the wide creation of smokeless zones cannot succeed unless coke is acceptable to householders who wish to retain the comfort of the open fire at a cost comparable to that to which they have been accustomed when burning coal. There is now ample evidence that when good quality coke is supplied and burnt in a suitable appliance, these conditions can be met.

Apart, however, from its importance to the very large body of gas and coke consumers, the industry is a large consumer of coal: it is second only to the electricity industry. In this respect the Area Gas Boards have also the responsibility of securing markets for the substantial volumes of gas which are produced at coke ovens associated with the steel industry. The carbonisation of coal by conventional methods produces coke as well as gas, and a number of Boards have already found that the disposal of coke sets a limit to the amount of coal which they can use for gas making by the carbonisation process. It is against this background that the introduction of two large plants using the Lurgi process of total gasification of coal is especially significant.

The Lurgi plants will produce no coke, and they will have the additional advantage of being able to use a wider range of coal than that required for carbonisation. These plants, therefore, represent an important milestone to the industry, but it should be recognised that the Lurgi process is not, and cannot be, a universal solution to making town gas economically from coal. To produce gas at a competitive price these plants must be large and situated close to abundant supplies of suitable coal. Capital cost is relatively high, and the plants must be operated at a high load factor. Thus the construction of Lurgi plants on or adjacent to coal measures will depend not only on the economics of each project but particularly on the extent to which markets for base load gas can be secured within the area served by the plant. In some territories the existing base load is entirely, or almost entirely, covered by supplies of gas from coke ovens.

It is quite possible that in the course of time we shall see something in the nature of a national grid, associated with large scale underground storage. This, however, is for the future. In the short term, and as a first step towards a national grid, there will be opportunities of transferring gas from one Board to another, to their mutual advantage. In mentioning the important Lurgi developments I should not like to give your Lordships the impression that all hopes of gasifying coal by new methods rest in that process. The Gas Council are pursuing important experiments aimed ultimately at the hydrogenation of coal. There are important possibilities here, but a great deal of work remains to be done, and it is necessary first to develop the process first on an oil-feed stock before attempting in the final stage to hydrogenate coal.

Some natural concern was expressed during the debate in another place about the increased use of petroleum in its various forms for making town gas, and it has been assumed, rather prematurely, that such use is invariably at the expense of coal. This is not so. The production of gas to meet the heavy seasonal peak demand has for many years been assisted by the use of oil in the carburetted water gas process. Such plant can be brought into use and shut down very much more quickly than carbonising plant, and, indeed, the erection of carbonising plant to meet these comparatively short-duration loads would be entirely uneconomic. Most of the newer plants now being used for the catalytic gasification of oil are meeting these peak loads and are producing gas at a lower cost than could be secured by the older carburetted water gas process. At the same time, the use of oil refinery gases transmitted by pipe line from refineries to gas works and then reformed into town gas has provided several Boards with useful quantities of gas at low cost. These developments have undoubtedly helped the Gas Boards to restrain the cost of production and the reduction in coal usage which they have caused has been relatively slight.

Now, however, it is alleged that a much more serious threat to the coal interests arises with imported methane. I should like to put this matter into true perspective. First of all the experimental quantities so far imported by the small experimental ship, the "Methane Pioneer", are almost negligible, even compared with the total volume of gas sold by the North Thames Board, which is the only Board to have used this material so far. These have been experimental cargoes, and no proposals have yet been made to the Government for large-scale imports. It has been wrongly assumed that methane imports, if authorised, would be entirely at the expense of coal now being used for gas making. It is likely that if methane proves to be attractive it may also be a substitute for oil gas or an ideal enriching agent for lean coal gas. It may also help to retain markets for gas in areas remote from the coal fields which would otherwise be lost to the gas industry and thus to the coal industry. Cheap therms obtained from methane may enable Gas Boards to enlarge the market for gas and thus retain substantially unimpaired the outlet for gas produced by carbonising plants. I would suggest to your Lordships that until proposals are made for commercial imports, we should keep an open mind on the possible advantages and disadvantages which they might bring.

It has already been stated, and I am glad to have the opportunity of stating it again, that in taking account of any proposals which may be put to them the Government will take full account of the national interest in the broadest sense, including the interests of the coal industry. It is also, I think, worth pointing out that if, as seems possible, natural gas ultimately becomes an important commodity in international trade, then there may be strong arguments of broad economic interest for this country to have some share in it.

Last year, for the first time since nationalisation, the gas industry was in revenue deficit, and it may be asked what are the prospects of the industry successfully performing in the years ahead its important rôle in our fuel economy. Although gas has been used in this country since the beginning of the nineteenth century, it is still for many purposes the most suitable fuel available. Its inherent advantages must, in the present competitive state of the fuel market be buttressed by the production and distribution of a good and clean gas at competitive prices. At the same time, the improvement in coke production and marketing must continue to take advantage of the very important opportunity which the clean-air policy offers to the gas industry.

In industry, increasing quantities of town gas have been used since the war, and the present large consumption is expected to go on increasing continuously during the period covered by this Bill. In the domestic sector the position is more difficult, largely because gas has to compete against electricity. A great effort is being made to secure for gas certain domestic loads, such as space heating, for which it is a particularly attractive fuel, and I believe that these new loads can be won while the requirement for cooking purposes, which has provided the industry with its bread and butter for so many years, can be retained. The gas industry has no guaranteed customers. This expresses the difficulty of the task before the industry and the stimulus under which it works. The Boards will require to sustain a virile competition, virile competitive effort right through the period covered by this Bill, and the increase in authorised capital which this Bill represents should provide them with the tools to support this effort.

This, then, my Lords, in short, is the answer to the question which I posed at the beginning of my speech: that the higher limits which we are now asked to sanction will provide for the completion of the modernisation of the industry and for the inception of new developments, some of which I have very briefly indicated. The industry has been consistently modernising its efforts, reducing the number of gasworks, erecting better and modern gasworks, and giving a better service to the community. Your Lordships will be aware that the actual disbursements will, of course, be subject to the annual scrutiny which takes place on the capital development programmes of the Boards, and it is estimated that the initial limit of £500 million will be reached in about three years' time. There will thus be an opportunity for further reference to Parliament after a comparatively short period. I invite your Lordships' House to accept the need for this increase in the borrowing limits of the Gas Council and thus to signify your support of the efforts of this industry to make a worthy contribution to our fuel economy. I beg to move.

Moved, That the Bill be now read 2a.—(Lord Mills.)

3.54 p.m.

LORD DALTON

My Lords, in approaching this Bill, the Second Reading of which has been moved in such an interesting speech by the noble Lord, Lord Mills—such an interesting and such a technically informative and, on the whole, such a hopeful speech—we are confronting an interesting situation. I am tempted to say that this is, in the strict sense of the term, a Socialist measure, for the operative clause, Clause 1 of the Bill, proposes to facilitate the financing of a large and rapid expansion in a nationalised service—namely, the gas industry. But it is interesting to observe, looking back upon the debates of yesteryear, that atlhough there was much discussion when this industry was first brought within the public sector in (I think it was) 1948, since that time the industry has upon the whole been so successfully and efficiently conducted that there is to-day no serious demand for its denationalisation, even among the most devoted and dedicated doctrinaire supporters of anti-Socialist dogma in the Conservative Party. For this increasing agreement on what is desirable in the national interest we must surely all congratulate ourselves.

The Minister of Power in a speech in another place, and again the noble Lord, Lord Mills, here to-day, have, in terms of much interest to those of us who follow these matters and to the general public, praised on the whole, in very handsome terms, the performance of this publicly-owned industry. Great technical advances have evidently already been made since vesting day. The technicalities are such that not many—certainly not I and perhaps not many other Members in your Lordships' House—can discuss them in the way of pronouncing judicial assessments of just how much has been done. But I read with great interest what the Minister of Power said in another place and I have followed what the noble Lord has said to-day, and it certainly seems that not only have technical advances been achieved in the recent past but many others are, as it were, within the zone of possibility of achievement in the coming years that will be covered by these financial provisions.

It is interesting to recall that in 9 of the 10 financial years that have elapsed since vesting day this industry has made a profit or, if you prefer, a surplus, and in only one of these has it incurred a deficit. I was very interested to read that in the plans for the near future two-thirds of the finance required is to be furnished by the industry itself from its own internal resources, and only one-third of the sums required will need to be borrowed. That, I think, is a considerable achievement in the virtue of self-finance and is much to be welcomed. I think we may also say that the labour relations in this industry are, and have steadily been, excellent and that no friction has arisen through industrial disputes or difficulties in that field. We were also glad to hear—the noble Lord, Lord Mills, has repeated it to-day and the Minister of Power initially stated it in his speech in another place—that there are to be regular consultations between the chairman of the National Coal Board and the chairman of the Gas Council and other members, no doubt, of the National Coal Board and the Gas Authority, particularly when some new process is under consideration which might have adverse reactions in particular upon the coal industry, the representatives of which are naturally still sensitive in the light of past experience and eager to be assured that the legitimate interests of the coal industry are taken into account in any substantial new departures. I am sure we are all pleased to hear that.

I was rather surprised to notice that nothing was said in another place by any speaker in any section of the House about the price of gas; that was left unmentioned. I suppose it seems obvious, and no doubt it is borne out by statistics, that the prominent factor in the price of gas must be the price of coal. But I remember that in ancient days, before the nationalisation of the industry, we used to hear about the so-called "gasworks clause". If I recall correctly, what this provided was that if a privately-owned gas company desired to increase its dividends to its shareholders, this was permissible only if there was a corresponding reduction in the price of gas to the consumer—and the old Gas, Light & Coke Company, and others, worked on that basis for many years.

I should like to know what is happening now in this field of the price determination of gas. The pattern has changed. There are now no longer private gas companies, nor private shareholders, and, as I understand the matter, the effective accounting units are the Area Boards, each independent within its own field, which contribute towards the financial net surplus or deficit, as the case may be, on the working of the gas industry under its present constitution. But it would be interesting to hear something—and perhaps the noble Lord could say a word about it later on—as to the trend of gas prices in recent years, and also whether any hope can be held out that, with these various new inventions and technical developments on which he has discoursed with such ease and such knowledge, there will be any effect in the direction of enabling the gas consumer to participate in the technical progress of the industry through lower prices.

However this may be, I am sure that your Lordships' House will not desire to resist the passage of this Bill into law. I think we shall all judge it to be necessary and wisely conceived; and I believe that my noble friends on these Benches can sincerely welcome it as a constructive Socialist measure of which, both in principle and in practical detail, we wholly approve.

4.3 p.m.

LORD HAWKE

My Lords, I am not going to make a speech but only a few remarks prompted by my interest in this particular subject, by the speech of my noble friend who proposed the Bill and by the last accounts of the Gas Council. Gas is a very interesting commodity in that it is the method of piping coal into the home; and I understand that, through the bringing into force of new tariffs, gas is going to make a special effort to try to capture some of the space-heating and water-heating markets which it has never really had. So that, as gas is also the producer of coke, which is one of the three competitors for this market—the third being oil—the Gas Council must be in a very considerable dilemma as to which horse to back on which course: because, clearly, if they cheapen their gas and make their coke dearer, they are going to lose markets wherever there is not a gas main; and if the reverse holds true they will never be able to break into this particular market with gas.

At this stage I should say that I cannot understand how the present price of coke can be justified. It is at least five times the pre-war price; and, from the table in paragraph 463 of the last Annual Report, we see that, whereas sales of gas produced 66 per cent. more cash over the last ten-year period, coke receipts have gone up 80 per cent. I should not have thought that that was a justifiable burden on the coke consumer as against the gas consumer. But that does not help resolve that extremely difficult dilemma of what is the right tactical and strategical policy between gas and coke prices to gain this particular market in space-heating and water-heating.

Another interesting point that arises out of these accounts is the steady shrinkage in domestic consumers, the increase in industrial consumers, and the overall, slight increase in gas consumers. From that one would seriously wonder whether it pays to connect the vast majority of domestic consumers to a gas supply at all—consumers who possibly use it for cooking only, or for a gas fire, and who use other fuel for all other purposes. Now when we get two nationalised bodies, backed by the State with, I was going to say, unlimited capital behind them—that would not be correct, but, at any rate, it is easier for them to get capital from the State than it is on the private market—there is a temptation, I believe, for gas and electricity to indulge in uneconomic competition with each other. The noble Lords opposite tend to be very much against all competition: noble Lords on this side of the House tend to be the opposite. I suggest that often the golden mean may be correct, and that it may be uneconomic for gas and electricity both to go into the same housing estate where, from the facts and figures I have given, it would look as if the domestic load is not one which is particularly paying to gas.

My noble friend, in moving the Bill, gave a hint that he knew of coke of such quality that, when burnt in certain appliances, it would give the same effect as a coal fire. My Lords, I have seen these things in the Ideal Homes Exhibition for years, but never outside the Ideal Homes Exhibition; and I should very much like to have details of such a fuel and of such an appliance which burns steadily without going out, does not give anybody in the room a headache, and does not smell. My Lords, the gas industry is one of enormous interest for the future, because from it come so many raw materials, other than gas, which are so urgently required in the chemical industry.

4.9 p.m.

LORD GREENHILL

My Lords, before the noble Lord deals with the matters raised by my noble friend Lord Dalton, may I put forward a personal point of view? I speak as a small, domestic consumer of coke, and I am at the moment a little perturbed, for this reason. In anticipation of the area in which I live shortly becoming a smokeless zone, I have had installed one of these coke-burning stoves, and I am feeling that perhaps I have been a little deceived, partly as a result of the competitive advertising which appeared in the Press. There were illustrated certain coke-consuming appliances, and one in particular showed an artist's sketch of an open, coke-consuming fire or it may be solid fuel consuming fire, in which no bars were shown, and the picture was, as an artistic production, quite attractive. In actual practice what I find is this. First, there are several kinds of coke and smokeless fuel, none of which appears to have been either strongly recommended or even in ready demand; all of it appears to take up a considerable amount of space and to attract high contents of moisture, which not only makes it difficult to store but adds considerably to the cost. Then there is a third fault which has been brought to my notice—namely, that if the flue or chimney or whatever it is called does not work properly there is a danger of carbon monoxide coming into the room.

On the whole, one is given the feeling that this attractively advertised but dangerous piece of domestic furniture needs very careful handling. I wonder whether the noble Lord can give me, as a domestic consumer, some indication of what advantages there are; what prospects there are of coke being sold at a reasonable price; whether the coke is available, and, if so, which kind of coke he is prepared to recommend and when it may be available. These are thoughts that passed through my mind as I listened to the noble Lord's speech, and since I am only one of a considerably growing number of house occupiers in the country it may be of interest to others, too, to know what the Government's point of view is on this matter.

4.12 p.m.

LORD DOUGLAS OF BARLOCH

My Lords, I should like to support the point which my noble friend Lord Greenhill has made with regard to coke. The Minister has said that it is desirable to increase the production of coke in order to carry out the policy of the Clean Air Act; and no doubt it is. But I think that should be qualified by saying that it produces cleaner air, not clean air: it may be smokeless, but the fumes of the coke still go into the atmosphere and tend to settle at ground level. So it does not produce an entirely innocuous air but only one which is freer from smoke. It is well known, too, that coke which is sold to the consumer frequently contains a large amount of water—I am told that in some cases it may be as much as 30 per cent. or 40 per cent. of the weight—and the consumer has to pay for that as if it were fuel. That is entirely wrong and something ought to be done to put a stop to it. Other fuels are not subject to a disability of that kind, and if it is desired to encourage the consumption of coke, steps ought to be taken to see that it is of a uniform quality, and that it is free from moisture so that the consumer gets every time what he is paying for.

4.14 p.m.

LORD MILLS

My Lords, I am grateful to the noble Lord, Lord Dalton, for his helpful speech in relation to this industry and this Bill. He described it as a Socialist measure. Well, I do not want to deprive the noble Lord of the satisfaction he derives from that, but I look upon it as a national measure, because this industry, which is now a unified industry, is doing a great national work. It is true that it has generally made a profit, or a surplus, whichever the noble Lord prefers. I think that it just shows how wrong was the remark made yesterday, that we should seek to denationalise a prosperous industry. Here is a prosperous industry, and there is no proposal to denationalise it. It has made great technical advances; in fact, it had to make great technical advances to survive.

I referred in my opening to the inherent quality of gas. It is true that a great number of our fellow countrymen, or perhaps, even more so, fellow countrywomen, prefer gas for domestic use and in industry, too, it has a considerable place. I would stress the importance, not of telling people what they must have but of trying to meet their wishes in this matter. Reference was made by the noble Lord, Lord Hawke, to the fact that it does not pay to connect the great majority of consumers. I do not think that is quite right. It may be thought to be a pity that electricity and gas should be used in the one house, but I think it is only natural that it should be. If people prefer gas for one purpose and electricity for another, why should they not have it? After all, as I pointed out, there are 12 million people who use gas in their homes, and that is a consideration to which I think we must have regard.

LORD HAWKE

If I may interrupt the noble Lord, I think he slightly misinterpreted what I said. What I intended to ask was: does it pay to connect all the small domestic consumers? It would be entirely wrong to use the taxpayer's capital in order to subsidise those consumers, which would be the effect if it does not pay to connect them.

LORD MILLS

I think the short answer to that point is that it has hitherto paid, and the steps which the gas industry are taking to keep down the price of gas can be carried out only provided they have a sufficient number of customers. I think it is undoubted that large numbers of people do prefer gas for certain purposes, just as they prefer electricity for other purposes.

I am glad that the noble Lord, Lord Dalton, referred to the question of labour relations in this industry. They have been excellent, due to the wisdom on the part of the trade union leaders and of the gas industry leaders. I hope, in spite of what we read, that that condition will continue, because without harmony in industry we cannot get success in industry. The noble Lord also referred to the value of consultation, and I am glad, as I know my right honourable friend the Minister of Power is, that there is the opportunity and the desire for consultation. Before any steps are taken which might affect one industry as against the other, the Ministry of Power arranges for consultation on such matters. The noble Lord also referred to the price of gas and said, quite rightly, that in large measure it is related to the price of coal. That is something the gas industry have had to contend with, and it has been the spur for many of the new arrangements they have brought in to cheapen the price of gas.

This question of prices and tariffs is a very important one. I think it must be obvious that the first duty of the Gas Boards, and of the Gas Council who look at their tariffs—which is a good thing, too—must be to see that the industry does not become a burden on the State. Therefore they have so to arrange their tariffs that they can sell the maximum volume of gas and coke and remain competitive, and I think the gas industry has done a good job in this respect. It is true that it has been up against the mounting price of coal. That has enabled conditions in the mines to be better, but it has also affected the gas industry. What the gas industry itself has done in order to overcome these handicaps, I am sure reflects great credit on it. It has got rid of, or is getting rid of, large numbers of old gas works and putting in modern plants and modern distribution throughout. I am glad to be in a position to say that.

The noble Lord, Lord Hawke, referred to the question of space heating and water heating, and then went on to talk about the relation of the price of gas with the price of coke. They are very important matters, and I am glad the noble Lord drew attention to them. But they are a matter for the commercial judgment of the industry itself, and that is why it is always so important that whatever Government is in power will see that the management of those industries is first-class and qualified to exercise the best commercial judgment; because such matters require a very keen judgment, a very nice balance, of whether a little more should be charged for gas and a little less for coke, and vice versa.

LORD GREENHILL

What about the consumer interest?

LORD MILLS

My Lords, the consumer is taken care of, because any pro- posals for alterations of prices go to the consultative councils, who represent the consumer. I can assure your Lordships, from my own knowledge of this industry, that the question of the consumer is never away from the minds of the management of the Gas Boards. After all, they have to live on the consumer, and unless they satisfy the consumer they will not succeed.

I am glad that the noble Lord, Lord Greenhill, interjected that remark, because it brings me to his own individual complaint. I think it would be doing a great service if he would write to the Gas Council (or I should be happy to see that any letter is forwarded to the right quarter) because so much has been done to improve conditions. I informed your Lordships that there was now a British Standards specification for coke, and that is the coke which it is sought to supply to these smokeless zones. Perhaps I could refer to what the noble Lord, Lord Douglas of Barloch, had to say about pure air. I am sure he would admit that in a smokeless zone the position is very much better than in a comparative zone which is not smokeless. Efforts are constantly being directed to supplying the best fuel, and coke sold under these standard conditions is a very desirable fuel, and I am sure the industry will go on improving it. I should not like to pretend that the creation of smokeless zones can go forward at the pace we should like unless coke is there to its aid. But I hope that conditions are not so bad as the noble Lord apparently has experienced, because coke is sold under standard conditions which I laid down under a standard specification.

My Lords, I hope that I have dealt fully with the points that have been made. I should again like to thank the noble Lord, Lord Dalton, for what I am sure the gas industry would consider an encouraging contribution on his part. He referred to the amount of self-finance by the gas industry. This Bill asks for an increase in the authorised amount, and I hope that your Lordships will give it your blessing and pass it.

On Question, Bill read 2a: Committee negatived.