§ 4.54 p.m.
§ Order of the Day for the Second Reading read.
§ LORD CRAIGTON
My Lords, under the Electricity (Borrowing Powers) Act, 1959, borrowing by the South of Scotland Electricity Board up to March 31, 1965, was authorised up to a limit of £135 million; but it is now clear that, because of an increase in demand from 1960 onwards—an increase that they had not anticipated—they will need more. Under this Bill the Board are authorised to borrow another £40 million to carry them up to March 31, 1965. The money is needed primarily for the completion of the generating stations at Hunterston and Kincardine, to accelerate the work at Cockenzie and Methil, and to strengthen the transmission and distribution network.
This Bill in no way affects the Government's deliberations on the Mackenzie Report, and it does not extend to the North of Scotland Hydro Electric Board, since they can manage until 1965 on the limit authorised for them in the 1959 Act. My Lords, I beg to move that this Bill he now read a second time.
§ Moved, That the Bill be now read 2a.—(Lord Craigton.)
§ 4.56 p.m.
§ LORD HUGHES
My Lords, the expansion that has taken place, and is taking place, in the demand for electricity in Scotland at the present time I believe exceeds the rate of expansion anywhere else in the United Kingdom. For that purpose it would be wrong for me in any way to impede the passage of this Bill. Of recent years there have been certainly a number of innovations in the normal process of producing electricity in Scotland, and these have added to the difficulties of the Boards; and it is quite obvious that in the immediate future the South Board will require a great deal of money if they are going to be able to fulfil fresh obligations to supply customers, both domestic and industrial, in the South of Scotland with the electricity that they require. For example, if there is a decision in the near future in relation to 1065 the establishment of the station of upwards of 2,000 megawatts, whether coal fired or otherwise, this in itself will be a big increase in the requirements of finance by the South Board.
In paragraph 3 of the Explanatory Memorandum it is interesting to see that there is a reference to the fact thatThe Treasury are authorised to guarantee the principal and interest of stock issues and temporary borrowing by the Board and any sums required for fulfilling the guarantees are payable from the Consolidated Fund.I presume that your Lordships are aware of the fact that for some years now, with the exception of comparatively small sums which the Board are enabled to borrow temporarily from banks on overdraft, the whole of their requirements have been provided by the Treasury. I wonder whether the reiteration of this paragraph indicates any intention on the part of Her Majesty's Government to depart from this procedure, because there is no doubt that in recent years Boards have been under a severe disability in being required to go to the Treasury for any moneys that they require.
In the first instance, it has placed them in the difficult position that, on occasions when this money has been received, the public have been confused, and have sometimes been misled into the opinion that the Boards were being subsidised when in fact they were merely receiving their operating capital from the Government and having, in the last two years in particular, to pay very sweetly in the process. The rate at which this money was advanced by the Treasury has been as high as 7 per cent. or thereabouts. It was particularly disconcerting to these Boards to have to borrow at these high rates for long periods, sometimes for as long as thirty years, when obviously it would have been much more in their interests to increase their short term borrowings through the banks, a procedure which I know the banks would have been most happy to have facilitated, at any rate at certain times. If that had been done the cost of electricity would have been less. For instance, there have been a good many millions borrowed and committed for twenty years or more at rates of between 6 and 7 per cent. which, if the borrowing could have been done on a short-term basis, might have been 1066 now repaid and reborrowed at 5¼ or 5½ per cent.—a substantial saving to these Boards.
I should like to ask the Minister, Lord Craigton, to indicate whether there is any intention on the part of the Government to restore some measure of freedom to these Boards to borrow their money in the best possible market rather than to require them to come to the Government for all they need. After all, in so far as the Government are lending to these public bodies and others the proceeds of taxation at 5½ per cent. and upwards, they are making a very useful profit indeed out of it. It seems to be a rather iniquitous process that people should be taxed and then charged interest when they are lent their money back. If there is, in fact, no intention to give any measure of freedom to the Boards, what is the purpose of paragraph 3 of the Explanatory Memorandum?
§ LORD CRAIGTON
My Lords, the position of the Board here is the same, of course, as that of all the Electricity Boards. They can borrow in three ways: by the issue of stock, by temporary borrowing from the bank, or from the Exchequer. Paragraph 3 does no more than set out the present position, which the Government have no intention of varying. I think that where the noble Lord does not look quite widely enough is at the fact that one must realise that the Electricity Boards are going to the public for very large sums of money indeed, and that such sums are too large to raise upon the open market without the Government's underwriting of them. So I think I would be giving the correct answer if I said that the money will be borrowed from the Exchequer simply because there is no other practicable method but I think that the Board are legally entitled to borrow by issue of stock if they are able to do that in the market.
§ LORD CRAIGTON
I think that they need the Secretary of State's consent, but I should need notice on that point.
§ LORD HUGHES
My Lords, am I to understand from what the noble Lord had said that the Secretary of State's consent would not be unreasonably withheld if the Board could show that it is 1067 Likely that they can borrow on the open market? After all, many large local authorities have recently demonstrated that it is possible to borrow on the open market at terms very much more favourable than those required by the Treasury.
§ On Question, Bill read 2a: Committee negatived.
§ Then, Standing Order No. 41 having been suspended (pursuant to the Resolution of December 13), Bill read 3a, and passed.