Lords Sitting of 8 December 1964

Preamble
The House met at half past two of the clock, The Lord Chancellor on the Woolsack.
Prayers—Read by the Lord Bishop of Coventry
The Lord Ashcombe—Sat first in Parliament after the death of his father.
Several Lords—Took the Oath.

EGG IMPORTS
2.37 p.m.
LORD RUSSELL OF LIVERPOOL: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government why they intend to continue the importation of eggs from Poland and other countries when there is an ample supply of this commodity in the United Kingdom and an adverse gap between imports and exports.]
THE PARLIAMENTARY SECRETARY, BOARD OF TRADE (LORD RHODES): My Lords, I would refer the noble Lord to the Answer I gave him on November 24. In order to relieve our balance-of-payments difficulties the Government decided to restrict imports by means of the temporary import charge of 15 per cent. They decided, for good reason, that this should not apply to
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foodstuffs. In these circumstances it would not be justifiable to prohibit the import of eggs because domestic supplies are plentiful.
LORD RUSSELL OF LIVERPOOL: My Lords, I am grateful to the noble Lord for his reply, but I should like to ask him this further question. Are the Ministry of Agriculture aware that at the Government inquiry into the British Egg Marketing Board's second scheme last week evidence was given by a director of a large chain of food stores that because of the withdrawal of these eggs from the home market over 3½ million eggs had to be imported for the making of cakes, increasing the cost by something like £15, 000? Would the noble Lord agree, having regard to the fact that the eggs were available in this country, that this was quite unnecessary?
LORD RHODES: My Lords, I noticed about the withdrawal of the second-grade eggs, but I do not think the reason suggested by the noble Lord is quite the correct one.
LORD RUSSELL OF LIVERPOOL: My Lords, may I ask the noble Lord what is the correct one?
LORD RHODES: My Lords, the fact that the second-grade eggs were withdrawn has no bearing on the arrangements we have made for the import of eggs, and, in the circumstances, we cannot change them.
THE EARL OF DUDLEY: My Lords, could the noble Lord give us any idea what the percentage of the importation of eggs is as compared with the home market consumption?
LORD RHODES: Yes, my Lords. It was 2-2 per cent. in 1962, 2-4 per cent. in 1963, and it was running at the rate of 1-8 per cent. in the first nine months of 1964.

PROCEDURE: REPETITION OF GOVERNMENT ANNOUNCEMENTS
LORD BRECON: My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government why important announcements concerning Government administration in Wales by the Prime Minister in another place have not been made in this House.]
THE LORD PRIVY SEAL (THE EARL OF LONGFORD): My Lords, as the House is aware, the Government usually make arrangements for important Statements which are made in another place to be repeated in this House. The Statement to which the noble Lord refers was, in fact, the oral answer to a Question for Written Answer in another place, and was consequently not repeated here. I appreciate that the noble Lord may feel that the House has been deprived of hearing an important Statement by what he may regard as a procedural accident and I am sorry if he should feel that that is so. I am looking further into the implications of the matter.
LORD BRECON: My Lords, I should like to thank the noble Earl for his kind reply. It seemed odd that an oral answer to a Written Question should turn out to be a Statement in another place. As I did not mention "Statement" in my Question, I rather hope that in future any replies to Questions of this nature, particularly relating to Wales, if they are Statements, may be repeated in this House.
THE EARL OF LONGFORD: My Lords, I will certainly pay great attention to what the noble Lord has said, and we are only too glad to hear his views on this subject at any time. Although my grandmother came from Llandeilo, I cannot promise special treatment to Wales; but we will do everything we can.
LORD BRECON: My Lords, I only hope that those who have ties with Wales, and have left us, will not forget us.
THE EARL OF SWINTON: My Lords, is there not a perfectly well-known and established way to deal with these things? Even if a Question is on the Order Paper and the matter is one of an important pronouncement on policy, or an important announcement, it is perfectly competent and usual for the Prime Minister, or the Minister who answers the Question, to say in answer to the Question: "I propose to make a Statement at the end of Question Time". That is constantly done in another place. Then a similar Statement can be made here. Could not that procedure be followed? The noble Earl has given a most courteous Answer, which is what we should naturally expect from him.
THE EARL OF LONGFORD: My Lords, I will pay great attention to what the noble Earl has said. It certainly would not seem to be impossible or without precedent to do what he has said. On the other hand, what the Prime Minister did on this occasion was not without precedent. However, I agree with the noble Earl that this matter should be gone into further.

GOVERNMENT ADMINISTRATION IN WALES
LORD BRECON: My Lords, I beg leave to ask the Second Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government what are their proposals for Government administration in Wales.]
THE MINISTER WITHOUT PORTFOLIO (LORD CHAMPION): My Lords, the interests of Wales are now represented in the Cabinet by my right honourable friend the Secretary of State. My right honourable friend will have a Welsh Office in Cardiff, which will be adequately staffed, and a small Ministerial Office in London. He has already taken over responsibility for all issues affecting Wales which do not fall within the responsibility of any other Department. He will now take over virtually all the executive responsibilities of the Ministry of Housing and Local Government in Wales. In particular, my right honourable friend will be responsible for housing, new towns, town and country planning and the organisation of local government. In view

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of the close link between policies on urban planning and on road planning he will also take over from my right honourable friend the Minister of Transport responsibility for roads, including trunk roads, in Wales.
In the vital field of regional planning my right honourable friend the Secretary of State for Wales will co-operate closely with his right honourable friend the First Secretary of State, and the Welsh Department will provide the Chairman of the Planning Board for Wales. The formulation and implementation of the plan for Wales will be done in conformity with the overall national policy for which my right honourable friend the First Secretary of State is responsible.
With reference to the work of other Government Departments, the application of national policies in Wales will be for the Ministers centrally responsible; but my right honourable friend will have oversight within Wales of the execution of national policy by the Ministry of Agriculture, Fisheries and Food, the Department of Education and Science, the Ministry of Health, the Ministry of Transport, the Board of Trade and the Ministry of Labour. For this purpose my right honourable friend the Secretary of State will maintain close and regular contact with the heads of the Welsh Offices.
As regards Parliamentary Questions in another place, my right honourable friend the Secretary of State will deal with all those relating to his executive responsibilities and with those arising out of his responsibility for regional planning. In addition, by arrangement with the Ministers concerned he will answer in another place on matters of special concern to Wales arising out of the work of other Departments. Comparable arrangements will apply in this House. Consideration is being given to improving arrangements in another place for the Parliamentary discussion of matters concerning Wales. My right honourable friend will review the present arrangements for the publication of information about the activities of Government Departments in Wales. These changes achieve the object of giving Wales a strong voice in Government counsels and a strong hand in her own administration.
2.45 p.m.
LORD BRECON: My Lords, I should like to thank the noble Lord for his full and courteous reply. I should also like to say how delighted I am to see him answering for Wales in this House. But, as the Government have failed to fulfil the promises made by them in their Election Manifesto, when they said they would give the Secretary of State executive responsibility over a very wide field, which included education, science, health and agriculture, and even now he does not have full executive responsibility for housing and local government—certain parts of that are retained—will the noble Lord tell us why the Government have found it convenient to break these promises, and why they have led the people of Wales up the garden path and the Welsh Office over Offa's Dyke back to Whitehall?
LORD CHAMPION: My Lords, despite the kind remarks of the noble Lord, I hope this will not develop into a war between Pontypridd and Brecon. What has been done is a significant step forward by reason of the fact that there is now a Secretary of State for Wales in the Cabinet with exclusive responsibility for the needs of the Principality. Her Majesty's Government, before arriving at the new arrangements, have given the most careful thought to securing the right degree of constitutional devolution to Wales, as well as guarding against the breaking up of existing Departments where that would appear to have been inimical to the interests of Wales. The new arrangements appear to Her Majesty's Government to represent the right answer at the moment, but if changes in any direction appear to be needed in the future, we shall be prepared to make those changes.
THE EARL OF SWINTON: My Lords, can the Minister say whether the purpose of this rather complicated co-ordination (if that is the right expression to use) is to accelerate or decelerate business?
LORD CHAMPION: My Lords, the main point of it is to give Wales the satisfaction of realising that her voice will be more strongly heard in the Cabinet, and we think this will be achieved by this method.
LORD BRECON: My Lords, as the noble Lord has really propounded the

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policy of the Conservative Party during the General Election, when we said that we did not want to break up Government Departments as proposed in the Labour Manifesto, I am very glad that he agrees with us. But, as the Secretary of State has taken over responsibility for roads and trunk roads in Wales, I should like to ask under whose direction and authority the Traffic Commissioner and the Divisional Road Engineer will now exist.
LORD CHAMPION: My Lords, this is rather a difficult point for me to answer without previous notice, but if the noble Lord cares to put it on the Order Paper I will certainly reply.
LORD BRECON: My Lords, I will certainly do that. But does the noble Lord not agree that what the Government have done at the present moment means that, instead of the promised co-ordinated transport plan for Wales, we shall have divided responsibilities for railways, roads, buses, docks and airports?
LORD CHAMPION: My Lords, I do not think the arrangements at which we have arrived will work out too badly. The roads, clearly, will have a direct bearing on regional planning, and because of this regional planning aspect it was thought advisable to place roads immediately under the Secretary of State for Welsh Affairs. We rather think it is the right thing to do. With regard to the noble Lord's reference in his previous supplementary to Conservative policy as against Signpost for Wales, I am not afraid occasionally to accept anybody's policy if I think at the moment it is the right one.
LORD HASTINGS: My Lords, the Statement mentioned close co-operation with the first Secretary of State and with a number of other Government Departments, but I do not think it was clear what rôle, if any, the existing Ministry of Housing and Local Government and the existing Ministry of Land and Natural Resources will have in respect of Wales. Are they to be relieved entirely of all responsibility, or will some responsibility still be left to those two Ministries? Or is it really a question of passing the statistics to the Welsh Office from those two Ministries?
LORD CHAMPION: My Lords, the Ministry of Housing and Local Government, so far as executive responsibility is concerned, will come completely under the new Secretary of State for Wales. I think it will be very much more than an exchange of statistical information. I think that this plan will work out well, but if it does not, clearly we shall not hestitate to alter it.
LORD WOLVERTON: My Lords, may I ask the noble Lord whether the Secretary of State will receive a special allocation for roads, apart from the Ministry of Transport allocation?—because Scotland now gets its allocation for roads through the Scottish Home Department. Will they get a special Vote for that, or will it have to come through the Ministry of Transport?
LORD CHAMPION: My Lords, there will be separate expenditure by my right honourable friend the Secretary of State for Wales. This will inevitably be the subject of a special Vote, and the special arrangements for the actual transfer of financial responsibility are at present being prepared. Having a separate Vote for Wales will be quite a departure.
LORD HASTINGS: My Lords, I apologise if I am being slow in picking it up, but I am still not quite clear and should like to revert to my previous question. Will the policy for housing and local government still reside with the Ministry of Housing and Local Government or will it lie with the Secretary of State for Wales?
LORD CHAMPION: My Lords, policy, of course, will be decided, I would imagine, so far as Wales is concerned, jointly between them. Executive responsibility for the Ministry of Housing and Local Government in Wales will pass to the Secretary of State for Wales. Obviously, there will have to be close-co-operation between the two on matters affecting Wales.
LORD HASTINGS: I thank the noble Lord.
LORD BRECON: My Lords, there is just one further question that I should like to put to the noble Lord. Did the Statement made by the Prime Minister in another place really mean that no

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deputation from Wales will be allowed to see the Minister in charge of a Government Department, and that they will all have to be channelled through the Secretary of State? I think this is an important question which people in Wales are already asking.
LORD CHAMPION: My Lords, this question about exactly how deputations will go is another matter which needs looking into. But I should imagine that the Welsh authorities, and so on, would like to approach the Minister directly responsible for Wales, who has access to the Cabinet. I am sure that my right honourable friend the Secretary of State for Wales, if some particular deputation feel they would like to go through him to the Central Department, would look very sympathetically at any such request.
LORD BRECON: By Lords, the Prime Minister did make the statement that these deputations would go, first of all, to the Secretary of State.
LORD CHAMPION: My Lords, that seems, first of all, to be the correct approach, but, as I said, I think that there would be a suitable arrangement arrived at in the circumstances suggested by the noble Lord.

FUTURE OF SMALL GENERAL HOSPITALS
2.55 p.m.
VISCOUNT BRENTFORD: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
[The Question was as follows:
To ask Her Majesty's Government whether they will define their policy with regard to the smaller general hospitals and whether they agree that these hospitals do fulfil a very genuine need in the best traditions of the medical and nursing professions.]
THE PARLIAMENTARY UNDERSECRETARY OF STATE FOR COMMONWEALTH RELATIONS AND FOR THE COLONIES (LORD TAYLOR): My Lords, Her Majesty's Government's policy is to improve all our hospital services. Many smaller general hospitals fulfil a genuine need, in the best traditions of the medical and nursing professions. As more district general hospitals are
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developed, each with more facilities for diagnosis and treatment than can be provided in smaller hospitals, some smaller hospitals will have to be closed; others will be retained, but their use will be changed. None will be closed without the personal decision of my right honourable friend the Minister of Health or the Secretary of State for Scotland.
VISCOUNT BRENTFORD: My Lords, while thanking the noble Lord for his reply, may I ask him to invite his right honourable friend, when considering these matters, to take into account the fact that so many patients and their friends and relatives are greatly convenienced by being able to attend their local hospital, which is virtually around the corner, as against having to go some five miles or so to attend a general hospital? Also, will the noble Lord take into account the fact that the friendly, private and very sympathetic atmosphere of these smaller general hospitals is vastly more conducive to recovery than the atmosphere which is frequently found in the major and larger hospitals?
LORD TAYLOR: My Lords, I think that both the noble Lord's points are good ones. In the case of the proximity to the hospital, the problem is that we are short of diagnostic facilities and of experts to work these facilities. In these circumstances it really is more economical to use them in one place rather than to have them scattered in several places, if that is the choice, and it is a reluctant choice. With regard to the noble Lord's second point, the very pleasant and good atmosphere in many smaller hospitals—what the Americans call "T.L.C.", tender, loving care—is something very important. Our problem is to preserve and develop this in the district hospitals as well as keeping it in the smaller hospitals which are retained.
VISCOUNT BRENTFORD: While again thanking the noble Lord for that reply, may I ask him also to bear in mind that when the smaller general hospital finds itself unable to cope with some particular case or complaint, customarily and invariably it sends the patient on to the larger general hospital where the diagnostic ability is available.
LORD TAYLOR: My Lords, that is indeed true for the less acute conditions.

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But in acute emergencies tragedies sometimes happen through patients going to a smaller hospital which cannot cope with all emergencies.
BARONESS SUMMERSKILL: My Lords, may I ask my noble friend this? In view of the fact that there are many people like the noble Lord who are particularly attached to these smaller hospitals, could not his Department give more publicity to the fact that, with the increasing specialisation in medicine today, it is not in the interests of the patient to encourage these smaller hospitals?
LORD TAYLOR: My Lords, this is really a difficult problem because one has so much to balance the value, which is a real value, of the smaller hospital as a social unit as against the known medical efficiency of the larger unit. We anticipate that these smaller hospitals will continue to play a rôle as geriatric units, and possibly as maternity and minor illness units, in remote localities. However, I would agree with my noble friend that it is important to teach the public that good medicine needs proper facilities and these are not necessarily always provided in the smaller places.
LORD AMULREE: My Lords, can the noble Lord tell me, in view of what he said, why an old person should not get proper and good facilities? If you are going to turn these hospitals into geriatric departments, does this not mean that these old people are going to receive second-class medical care?
LORD TAYLOR: Certainly not. The answer is simply that most old people, as the noble Lord well knows, suffer from lingering complaints where speed is not of vital importance, except occasionally. By and large, old people can properly and very well be looked after in small units, provided that there is good geriatric supervision. One knows there are many excellent small units doing this work, and I am sure the noble Lord knows them, too.
LORD BRECON: My Lords, may I ask the noble Lord who will have the final say about the closing of small hospitals in Wales? It was the Minister of Health in England, and, I presume, also in Wales and Scotland, as the noble Lord said earlier.
LORD TAYLOR: I am afraid that I shall have to consult with my noble friend to answer that.
BARONESS WOOTTON OF ABINGER: My Lords, does not the Minister think that a rather false antithesis is being made in suggesting that tender loving care can be obtained in a small hospital but not in a large one. Is not the real solution of this problem to develop a different atmosphere in the large hospital and is it not perfectly possible, provided that we are determined to do it?
LORD TAYLOR: I entirely agree with my noble friend Lady Wootton of Abinger. I am sorry that I did not make myself clear. It is more difficult in a large institution to develop this atmosphere, but even more important.
LORD NEWTON: My Lords, may I compliment the noble Lord on the answers he has given to these very difficult and sensitive questions? Is he aware that I am very glad to know that, so far as the small hospitals are concerned, it would appear that Her Majesty's Government do not propose to change the general policy of the previous Government?

BUSINESS OF THE HOUSE
LORD SHEPHERD: My Lords, I should like to inform the House that there will be two Statements this afternoon at a suitable moment after 3.30. I shall be making the first Statement on the subject of capital gains and corporation taxes, and my noble friend Lord Mitchison the second on the subject of leasehold enfranchisement.

HOUSE OF LORDS OFFICES
Order of the Day read for the consideration of the First Report from the Committee.
The Committee's Report was as follows:
1.—Appointment of Sub-Committees
(a) Library
The Sub-Committee on the Library was appointed as follows: E. Attlee V. Simonds (Chairman), V. Soulbury, L. Amulree, L. Burden, L. Carrington, L. Chorley, L. Merthyr, L. Reid, B. Wootton of Abinger and the Lord Great Chamberlain, with the Clerk of the Parliaments.
(b) Refreshment Department
The Sub-Committee on the Refreshment Department was appointed as follows: E. St. Aldwyn, L. Amulree, L. Macpherson of Drumochter, L. Strang, L. Sainsbury, L. Shepherd, B. Swanborough and the Lord Great Chamberlain, with the Clerk of the Parliaments. The Sub-Committee was given power to co-opt further members and to appoint its own Chairman.
(c) House of Lords' Estimates
The Sub-Committee on the House of Lords' Estimates was appointed as follows: E. St. Aldwyn. L. Shepherd, L. Amulree and L. Merthyr (Chairman).
2.—Revised Scales of Pay
The Committee approved revised salaries for the post of Clerk of the Records and the combined posts of Secretary to the Lord Great Chamberlain, Yeoman Usher of the Black Rod and Serjeant-at-Arms.
3.—Parliament Office
The Committee authorised the appointment of an additional Personal Assistant and a Clerical Officer on the staff of the Department of the Clerk of the Parliaments.
4.—Hansard Reporting Staff
The Committee reviewed the agreement with Haynes Secretarial Services for the supply of typists for the reporting of debates and approved an increase in their charges with effect from 1st January, 1965.
5.—Estimates
The Estimate for the House of Lords for 1965-66 was laid before the Committee and approved.
6.—Retirements
The Committee sanctioned the payment of the following superannuation awards under the Superannuation Acts:—

(a) Death Gratuity to legal personal representatives of the late Leonard Carter, Principal Doorkeeper, who died on the 9th September, 1964. The Committee instructed the Clerk of the Parliaments to convey to his widow their warm appreciation of Mr. Carter's valuable service in the House.

(b) Gratuity to Mr. Sydney Baden Randell, Senior Custodian, on his retirement on the 7th December, 1964.

(c) Gratuity to Mrs. Rose Winifred Killington, Housemaid, on her resignation on the 14th November, 1964.

THE CHAIRMAN OF COMMITTEES (LORD MERTHYR): My Lords, I beg to move that this Report be now considered.
Moved accordingly, and, on Question, Motion agreed to.
LORD MERTHYR: My Lords, I beg to move that the Report be now agreed to.
Moved, That the Report be now agreed to.—(Lord Merthyr.)
On Question, Motion agreed to.

THE ELECTRICITY, GAS AND ATOMIC ENERGY INDUSTRIES
3.2 p.m.
LORD HAWKE LORD HAWKE rose to ask Her Majesty's Government: What are their policies in regard to future investment in the generation and distribution of electricity, gas and atomic energy and to call attention to the annual reports of the Electricity Council, Gas Board and Atomic Energy Authority; and to move for Papers. The noble Lord said: My Lords, a recent article in the Statist concluded with words to the effect that no one expects to guess the future pattern of energy needs. History is littered with erroneous predictions. Certainly the history of the last twenty years is littered with unfortunate prognostications. Nevertheless, somebody has to assume the rôle of Old Moore; otherwise there will be no power in the future. It is easy to scoff at the planners, but both in Government and in private industry someone has to plan for the years ahead.
Power represents the investment of big money, and the decisions involved are possibly second only to those involved in Defence programme estimates. It is unlikely that plans will turn out to be right. One can only hope that they will not turn out to be too wrong. At the moment the future of power is most intriguing, for we have many horses in the race and the most exciting of them all is a very recent entry. In 1963 we used about 283 million tons of coal equivalent energy, of which coal represented 190 million tons, oil 90 million tons, and others 3 million tons. As to the future there are two problems to speculate about: first, the total energy needs, and, secondly, the pattern within that total.
We talk to-day about a national growth figure of 4 per cent. annual increase, though many people think that 3 per cent. would be a more realistic figure. The consumption of energy tends to go up at a rather slower rate than the national income. Based on a 3 per cent. national growth rate and an energy growth figure of rather less than 3 per cent., I suggest that the energy figure for 1975 should be in the neighbourhood of 360 million tons of coal equivalent, as against 283 million tons to-day. If one accepts this

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360 million tons as a basis for discussion, then the problem is to guess what will be the pattern within that total having regard to economic, social, strategic and other considerations. On that pattern we have to base our investment plans for the next ten years. The Government have got to take the lead, but in the private sector, too, important and expensive decisions have to be made.
First let me take a glance at the various runners. I think that in my Motion I should have referred specifically to the National Coal Board, because one cannot ignore coal when discussing future energy. At the moment the coal industry seems hard pressed to find markets for 200 million tons of coal of which about 190 million tons are for the home market. They are producing a large quantity of coal at a profit and a small quantity at a loss. They make quite clear in their annual report that any reduction in the total quantity produced would lead to an immediate increase in their overhead charges per ton. But, at the same time, they go on to say that they could increase production quite considerably at a proportionately smaller increase in overheads.
The high cost production is in parts of Scotland, Durham, Wales and Kent. The first question is how far this high cost to the Coal Board is offset by lower transport charges, because it is ultimately the price in the grate which matters rather than the price at the pithead. How far is this losing production required to meet specific requirements, and if it is why do not the requirers pay the cost price for it? If the answers to these questions are unsatisfactory, then the production from these losing pits must be for social reasons. In that case, is it right that the whole coal market should be saddled with the cost of coal won at a loss for social reasons? In the short term I suggest it may be tolerable, but in the long term it would clearly be intolerable.
I now turn to electricity generated from coal, oil, uranium and water power. The Central Electricity Generating Board just managed to get through our horrible winter two years
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ago on a capacity of 32 million kilowatts, with a good deal of voltage cutting but no major power cuts. Last March the installed capacity was nearly 36 million kilowatts, and during this calendar year another 4 million was due to come into production.
THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE, HOME OFFICE (LORD STONHAM): My Lords, I want to be quite clear. Did the noble Lord say that last year installed capacity was 36 million kilowatts?
LORD HAWKE: Last March it was nearly 36 million kilowatts, and 4 million are due to come in this year—4 million in 1965 and 1966 and 6 million in 1967 and 1968, making some 55 million at the end of 1968 (after allowing for some withdrawal of older plant) which is nearly three times the capacity which existed ten years ago; while by 1970 the Board expect to have a capacity of about 67 million kilowatts in action, after withdrawal of some older plants. I do not know what the plans are beyond 1970, but there is talk of 5 million kilowatts of an atomic plant, and if conventional plant were to continue to come in at about the same 5 million kilowatts a year we could have a capacity of over 90 million kilowatts in 1975.
Capital costs have been coming down, and are now about £40, per kilowatt for conventional stations. But people do not think that there is much more margin for a fall, because we have reached practically the maximum temperatures and pressures. Fuel consumption is running at about 60 million tons of coal, and measured in coal equivalent, oil, 4½ million tons, hydro and atomic, 5 million. This brings me to the generation of electricity by atomic power. The existing programme started in 1955, and provided for 5 million kilowatts by 1969. Those stations are included in the rough figures I have already given for electricity generation. These stations are all the Magnox type, using carbon dioxide gas to transfer the heat from the uranium, moderated by graphite. Berkeley and Bradwell cost about £180 in capital per kilowatt; Size-well is expected to cost only £107 per. kilowatt, and Wylfa £100 per kilowatt. In that case, Wylfa would be generating at about two-thirds of a penny per unit, against ½ d. for a conventional station.

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I wonder how far these figures will prove realistic? I have been told that our costs are based on a twenty-year life and an availability of 75 per cent. Many people think that thirty years for the life would be nearer the mark, and I understand that at Bradwell the availability has been over 90 per cent. I should like to know what are the costs of generation, actual and estimated, at our latest Magnox stations; on what life and availability they are based; and what would be the difference if we took the thirty-year life and a 90 per cent. availability as a basis. I have mentioned these questions to the noble Lord who is going to reply.
A new generation of atomic power stations is in prospect at which lower costs are anticipated. Can Her Majesty's Government say whether any particular system has been chosen at the moment? As your Lordships are aware, the great feature of atomic energy is that the costs are about two-thirds capital and one-third running, whereas for conventional power precisely the reverse is the case. Can we be certain that inflation will not so put up running costs that in twenty years' time the high capital and low running costs of atomic stations will not have the advantage over the low capital and high running costs of the conventional station? I emphasise that the capital costs of the atomic stations are fixed to-day. when they are built. This, I suggest, might be particularly relevant if the 4 per cent. gross target should in practice be achieved partially by inflation.
I now turn for a moment to gas, which up to date has been rather a slow runner, but recently has received such a pep pill that it may run away from the field. Gas was always a good fuel for cooking and certain industrial purposes in urban areas, but was rather expensive for space and water heating. To-day, the outlook is completely altered by reason of two important developments: the ability to make gas from oil, and the import of natural gas. All this has been made still more exciting by the fact that in Holland there has been discovered what may prove to be the second largest natural gas field in the world. North Sea exploration is busily developing, and there is quite reasonable hope, I am told, that we may wake up one day and find that we have natural gas within our own curtilage.
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The Dutch are working hard to export their gas to Germany and to Belgium, and I understand they have made an offer to us. If we found our own gas, this offer might well prove to be superfluous, but if we did not it could be most advantageous. Presumably it would need a pipe-line under the North Sea. I presume that such a pipe-line will be required in any case, either to import the Dutch gas or for us to be able to export our own gas if we find it in large quantities.
With such exciting possibilities for the future as these, the existing gas figures are rather prosaic and academic. But the Gas Board use about 22 million tons of coal, 2 million tons of oil in coal equivalent, and they buy about 3½ million tons of coal equivalent of gas from refineries and coke ovens, to send out about 3,000 million therms of gas. In some of these new processes from oil, gas can be sent out within 90 seconds of manufacture—a most important point in regard to meeting a peak load. Gas can be stored.
The capital cost of adding to gas production is not so great as with electricity, but it needs expensive buried mains for distribution; and to expand fast, a great deal of money will have to be sunk under the ground in mains. At the moment, gas is connected to about 12 million consumers, whereas electricity goes to 17 million consumers. One major snag on the horizon is that the Dutch gas is double-strength gas. The result is that it cannot be burned in their existing appliances. If it could be mixed with an appropriate quantity of leaner gas, of course it could be burnt in existing appliances: but if you are going to rely to a large extent on this particular sort of gas you will not want to make a lot of leaner gas to mix with it. The Dutch are hastily changing all their appliances. That is a problem that might face us here one day.
Gas and electricity, then, are obviously going to play an increasing rôle in our energy pattern. The problem is, how much? To-day, with the same 33 million kilowatts of electric capacity, we are using some 70 million tons of coal equivalent. If, in 1975, we were to go up to 90 million kilowatts, as I said was possible, and use it to the same intensity, it seems that we could be using

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something of the order of 180 million tons of coal equivalent, or half the total energy figure I suggested as appropriate for 1975; while gas, which might well double over this period, would then be using 15 per cent. of our energy. Transport is expected to take about 12 per cent.
The sum of these figures, my Lords, would be 77 per cent., leaving only 23 per cent. of the total energy field for all industrial and domestic uses other than electricity, gas and transport. This figure seems obviously too high, if not absurd. The calculation is, of course, disputable on several grounds; but, even so, it seems that either total energy requirements for 1975 are under-stated at 360 million tons of coal equivalent, or we could be over-invested in electricity by that year if we go on building generating plants at the present rate.
Based on the figures I have described, our 1975 fuel consumption could look something like this. Coal, 190 million tons; oil, 140 million tons of coal equivalent; others (that is, atomic energy and water), 30 million tons. The figure of 140 million tons of coal equivalent of oil represents something like 90 million tons of oil, which is an awful lot. If our figure of 360 million is too low, the oil might well have to go up still higher.
Is the oil position secure? The world reserves of oil are ample for the foreseeable future, but some are situated in politically unstable parts of the world. As against this, the reserves are very diversified; the production of Canada has hardly been scratched; and, in the last resort, the consumers have the whip-hand because the oil countries get no revenue if they cannot sell their oil. Nevertheless, oil has to be paid for. Oil companies all emphasise that they earn a great deal of foreign exchange for Britain and that they buy much of their equipment here. One feels that we should recognise that oil is the fuel of the future, and see whether we cannot arrange that a still larger proportion of the oil companies' requirements should be bought here in order to help pay for it. If we do not find gas, then we may have to increase coal production from the economic coalfields and put more of our money into atomic energy.
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We come now to the main object of this exercise, which is to ask Her Majesty's Government how they see the future, taking into account the following considerations. I wonder whether we shall be over-invested in electricity by 1975. Is it economic to make such immense investment in plant which may be required only at peak periods? What can we do to spread the Lord by off-peak consumption? What are the latest developments in that direction? Can we extend the Ffestiniog type of project, which pumps up water at off-peak and generates very quickly at peak-load. If we decide to slow down on generating capacity beyond 1970, will it be a better bet to give preference to the next generation of atomic power over conventional stations? Shall we, in any case, require a North Sea pipe-line? If we find the North Sea gas, and it is the same type as the Dutch gas, how are we going to deal with the question of our burning equipment? If our gas industry turns over almost entirely to oil or natural gas, how are we to supply the substantial but shrinking market for coke? Then, if the gas industry is going to expand at the sort of rate I have indicated, how about the gasfitters of the future? Are we training enough? They are a retiring class on the whole, and since Mr. Hosmer Angel used the gas-fitters' ball for his nefarious purposes, and finally met the horsewhip of Holmes, we have not heard much about gas-fitters in our economy.
Our decisions on investment have to take account of all the decisions which I have mentioned, and others as well. We have to look to the balance of payments without condemning industry to use uneconomic energy. We have to support our suppliers of capital equipment at home at least to the extent that they can expect to secure orders abroad. We have to keep in being our teams of atomic engineers so that they may keep in the forefront of science and at the same time be able to secure export markets. We have to remove as much uncertainty as we can, so that the heavy capital expenditure of the oil industry can be directed to the right projects. My Lords, all these questions are very difficult ones. We must not expect any human agency to give all the right

21
answers. We can only hope that their decisions will not prove to be too wrong. I beg to move for Papers.
3.27 p.m.
LORD STONHAM: My Lords, I am not at all certain about the success of the noble Lord, Lord Hawke, in the rôle of Old Moore, but I am quite certain that your Lordships' House is indebted to him for bringing, forward this very important Motion and for the manner in which he has presented his case. I was somewhat relieved to hear him say, almost in his last sentence, that he felt that no human agency could possibly guarantee to answer successfully all the questions he had put. Certainly this particular human agency does not aim at answering all of them, but I will do my best in the course of my speech, if perhaps less fancy-free and more pragmatic, to deal with most of the points which have been raised by the noble Lord.
Her Majesty's Government fully recognise that both our economy and our planned expansion are dependent on the production of power. Our power policy is therefore designed to satisfy, and as far as possible to anticipate, the progressively increasing demand for power—and to satisfy that demand as to quantity, quality and variety in as efficient and economic a manner as possible. The fulfilment of that policy requires investment on a massive and increasing scale.
Last year the gas industry in Great Britain spent over £90 million on capital account; and the nationalised electricity industry in England and Wales (including nuclear power stations) spent nearly £490 million. But with growing demand annual capital expenditure in the electricity industry will increase substantially, and the figure of £673 million has been approved for the next financial year. The Gas Boards, too, have to expand their capacity, but as their new processes are less costly in capital their expanding quantitative investment will not, for the present, cost more than around £100 million a year. At the moment, as your Lordships are aware, the Government are engaged in a review of public expenditure and investment, in the light of our general plans for national economic growth. Until this is completed it is not possible to give, in financial terms, precise forecasts of the gas and electricity industries' longer term level of investment. It is certain, how-
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ever, that although the £770 million which we shall be investing next year in gas and electricity is a large sum, this, and more, will be necessary in the years ahead if we are to support the growth of the economy and provide for domestic requirements. More power is essential, not only for increasing production but for increasing the efficiency of industry.
The capital requirements of the power industries have to be met from the resources available from public investment as a whole, but we are convinced that they must be granted the highest priority. And, in addition to the industries which the noble Lord, Lord Hawke, mentioned in his Motion, as he very properly said we must take coal and the privately-owned oil industry very fully into account. They have vital parts to play in meeting national energy requirements. The capital needs of coal have to be met out of the total pool. The Government regard it as essential to the proper assessment of priorities to operate a coordinated fuel policy. To this end my right honourable friend the Minister of Power has already begun discussions with the chairmen of the nationalised fuel industries, including, of course, coal. It is as yet too early to go further than that, but when our reassessment is completed Parliament will be informed. Turning to the individual industries and, first of all, to the gas industry—
LORD HAWKE: My Lords, may I ask the noble Lord one question? I imagine that oil is represented in this committee to decide the future, because the oil industry's investment is very big indeed.
LORD STONHAM: Yes, my Lords. I had actually mentioned the privately-owned oil industry a few sentences before, and in any consideration of fuel policy oil must be taken into account.
The gas industry, as the noble Lord mentioned, has recently seen a marked upsurge in its fortunes; indeed, it has taken its place in the forefront of the technological revolution. The confidence expressed in the Gas Council's publication Gas Goes Ahead has certainly been justified. In 1963 the industry's plans provided for an increase in gas sold of 5 per cent. a year. This contrasts with the position in the 1950's when they were hard put to maintain the level of gas sales. It is not easy to forecast with certainty, but now a 5 per cent. annual increase

23
seems much too low. Much of the Gas Boards' new business is for seasonal heating which is very much affected by the weather, but it seems likely that the rate of increase in gas sales, which is now of the order of 7 to 8 per cent. a year—50 per cent. more than expected last year—is likely to continue.
This spectacular resurgence has come about because the public has taken a new view. of gas prospects. The first tanker carrying liquid gas from Algeria arrived on October 12, and a substantial quantity of gas from this source has already been reformed and supplied to consumers. This, the world's first venture in the large-scale transportation of gas beyond the seas, is working smoothly. When fully operational it will supply some 350 million therms, or 10 per cent. of our town gas requirements a year. It is a useful addition, therefore, to our supplies of cheap non-toxic gas which will help to meet the rising demand for gas this winter. In total, however, it amounts to only two years' increase in sales, so it has had no significant effect on the requirements from other sources. But this is an outstanding example of enterprise by a nationalised industry, brought to fruition in co-operation with private concerns and international partnerships. The Gas Council's investment in this project is limited to the £13½ million cost for the grid which carries gas to the eight Area Boards and to the terminal at Canvey. In addition, during the last few years two important Lurgi plants have been brought into operation for the total gasification of coal, and some very economical processes for making gas from light oil have been introduced.
As the noble Lord mentioned, the industry is also participating in the search for natural gas. The Gas Council-Amoco group was awarded five licences in September to drill for oil and natural gas in the North Sea. Extensive survey work has already been completed and drilling will start next year. But as well as its own drilling, our gas industry, with its statutory monopoly of the distribution through pipes of the public supply of gas, has an interest in other potential finds because it will have first option on any natural gas which becomes available for use as fuel. Any money spent on North Sea exploration is being charged to revenue account and, therefore, capital-
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wise it will not affect the remainder of the industry's programme.
As the noble Lord mentioned, Dutch natural gas affords another very large potential source of supply. Indeed, the natural gas reserves at Groningen have been estimated at 1-1 million million metres—roughly a hundred years of United Kingdom consumption at the present level. Discussions were initiated in June, 1963. between the Gas Council and the company developing the Groningen reserves, but progress has been slow because the project involves a number of difficult economic and technical problems including, as the noble Lord said, the proposal to lay a pipe-line under the North Sea. On this last question there is now hope that the terms for a feasibility study for a pipe-line may be agreed in the reasonably near future. But agreement for a joint study does not imply a commitment to supply or to take gas at any future date, and in any case a scheme for importing Dutch gas would be subject to the approval of my right honourable friend.
Under the stimulus of these new developments gas will play an increasingly important rôle in our economy, in providing fuel supplies at competitive prices, and our investment in this field will unquestionably bring rich benefits. Gas is ideal for many sophisticated heat processes in industry, and in the home it is the most suitable and reliable fuel for meeting the seasonal heating load. We shall need more gas and our planned investment will ensure that it is produced and distributed as economically as possible.
I turn now to the electricity industry. The supply industry in England and Wales is at present planning its investment on the basis that the total sales of units of electricity will increase over the next six years at the rate of 10 per cent. per annum. Translated into calls on generating plant, that means that the demand for electricity around 1972—eight years hence—is likely to be double what it is now. As major production units take some five years from conception to commissioning, we have a very great deal to do if we are to double our capacity in some seven years and thus begin to create reserve capacity. But the most urgent task is to close

25
the present gap between maximum capacity and peak demand, and here I might say a word about electricity supply prospects for this winter. The industry is working on estimates which put the expected peak demand in "average cold spell" weather at 33, 600 megawatts, and the demand in weather of extreme severity at 36, 600 megawatts. The noble Lord quoted his figures on a somewhat different basis. I hope he will not mind if I use this standard which is the one most commonly used.
According to the law of averages, there is a fifty-fifty chance of weather being worse than "average cold", but only one in a hundred of its being worse than "extremely severe". To meet these possible loads—the two extremes, I may call them—the Generating Board expect, by the end of this month, to have a total capacity of 35, 000 megawatts. In recent winters the Board has managed to have about 90 per cent. of its plant available to meet the peak, so that, assuming this figure can be achieved this winter, and that demand and capacity have been correctly estimated, there will be this winter a plant deficit of about 7 per cent. in an average cold weather spell and a deficit of 14 per cent. in extremely severe weather. On these estimates, in an average cold spell the Generating Board expects to be able to cope with the deficit by reducing voltages—I understand that the lights get a little dim: in very severe weather actual disconnection of some consumers may be necessary at peak hours.
These demand estimates were adopted by the Electricity Council in May, but, so far, sales are running somewhat below the forecast. It is now thought, therefore, that demand may not turn out to be higher than 33, 000 megawatts, and, if all possible measures are used to relieve pressure on the system, the deficit in average cold weather could be of the order of 3 per cent., and, in extremely severe weather, 11 per cent.
LORD DERWENT: My Lords, I am sorry to interrupt the noble Lord, but I think I have taken these figures wrongly. I thought he said that in normally cold weather 33, 000 megawatts were required, and that we were in fact producing 35, 000 megawatts. That does not seem to me to be a deficit. I did not quite understand the figures.
LORD STONHAM: My Lords, what I said was that in an ordinarily cold spell it would be 33, 600 megawatts; in very severe weather it would be 36, 600 megawatts. They are the peak loads. Then I went on to say that by the end of this month the Board hopes to have plant capacity available for 35, 000 megawatts, but that normally they are able, even at peak, to produce at best only 90 per cent. of that capacity in terms of power to be consumed.
LORD DERWENT: I am much obliged to the noble Lord. I quite understand.
LORD STONHAM: That brings us to the point that, if we have the ordinary, "fifty-fifty" winter, during the cold spell of that winter we shall be 7 per cent. short, and, if it is very bad, during that time we shall be 14 per cent. short. I was going on to say, however, that since May, when those estimates were prepared, the level of consumption has been less than anticipated, and we now therefore think that it may well be that, at best, we shall have a 3 per cent. deficit, and, at worst, 11 per cent., and therefore the chances of having to disconnect consumers would be reduced. But, of course, we must not ignore this.
The Generating Board may face additional difficulties in certain areas because of delays in completing important sections of the transmission system. So far as the Area Boards are concerned, they have taken all practical steps to accelerate the reinforcement of their distribution networks, and the chances of local interruption are expected to be less than in recent winters, although they cannot be ruled out. Your Lordships will also be aware that the shortage of generating capacity arises mainly because, under the previous Government, the rate of growth of demand was seriously underestimated. Another important factor has been the serious delays in commissioning new plant this year.
All possible steps are of course being taken to avoid breaks in electricity supplies. The Boards have made special arrangements with owners of private generating plants to operate them for short periods when otherwise Lord shedding might be necessary, and they have secured the co-operation of large industrial consumers to reduce, without serious loss of production, their demands on the

27
system at peak hours. It is expected that the increased investment programme will improve the supply situation in the next two years; and, under the Generating Board's present proposals, we should have an adequate reserve margin of plant by about 1970. That is how the point of a reserve margin applies: we must have more than the peak demand. The Board now aim at a reserve plant margin of 17 per cent. compared with the figure of 14 per cent. formerly thought adequate. The achievement of this target will require maximum effort by the Board and the heavy electrical industry. It will also involve investment totalling £4, 000 million over the next six years.
My Lords, I have at this point reached a stage in my speech at which it might suit the greater convenience of your Lordships if the two important Statements were now made. I could then resume my speech on the nuclear power programme. With your Lordships' agreement, therefore, I will sit down now and allow these two Statements to be made.

PROPOSED CORPORATION TAX AND CAPITAL GAINS TAX
3.46 p.m.
LORD SHEPHERD: My Lords, I am most grateful to my noble friend. With your Lordships' permission, I should like to repeat a short Statement which my right honourable friend the Chancellor of the Exchequer has just made in another place. I think it would be convenient if I were to use his own words.
"The House will recall I promised that as soon as I was able to do so I would provide further details of my proposals for a corporation tax and a capital gains tax. I am accordingly circulating in the Official Report, in reply to Questions on the Order Paper to-day"—
that is, in another place—
"information about certain features of the proposals which, as at present advised, I have it in mind to put before Parliament."
My Lords, I am arranging for this information to be circulated in the House of Lords Hansard, but your Lordships might like to know that 50 copies are
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being made available and will be in the Printed Paper Office after 4 o'clock.
Following is a copy of the Chancellor of the Exchequer's reply referred to in the above Statement:
"The task of working out all the provisions of these major schemes of tax reform will be long and complicated. But I am anxious that there should be no unnecessary doubts and I set out below certain features of the proposals which, as at present advised, I have it in mind to put before Parliament. It must be understood that these outline proposals are concerned with ordinary transactions and the ordinary conduct of business affairs. Special provisions may be necessary for special types of corporations such as, for example, life assurance companies: and the full details of the schemes I shall present next April will, of course, have to take account of, and guard against, any dangers of action that might be taken to avoid or artificially to reduce the normal liability to tax. I am, of course, ready to consider any ideas arising out of my outline proposals which representative bodies may wish to put forward and representations should be addressed to the Board of Inland Revenue at Somerset House. Meantime, the House will not expect me to give any further details, pending the examination of representations and the formulation of my detailed proposals.
Proposals as to Corporation Tax General
The essence of my proposals is that the income of all companies and of other bodies within the scope of the profits tax shall become liable to a new corporation tax and shall cease to be liable to income tax and profits tax. Income arising to individuals and partnerships will be liable to income tax and, where appropriate, to surtax also.
A corporation tax will be charged at a flat rate on the total income of companies for each accounting period. A deduction will be given for normal interest (including normal debenture interest) and other charges paid in the accounting period. No deduction will be given for dividends on either ordinary or preference shares Such dividends will be liable to income tax and surtax when received by individuals and partners. Capital allowances will be given for corporation tax purposes on the same lines as for income tax. It is a natural corollary of the separation of company taxation from personal taxation that a company which enjoys overseas income that has suffered overseas tax should receive credit for overseas tax only against the corporation tax to which it is liable. I realise that this will create special problems for certain companies and I am considering whether, whilst adhering to the principle set out above, these problems could be eased by some transitional arrangements.
Basis of Charge
In general, the first charge of corporation tax will be on the income of the accounting period following that which was the basis of income tax liability for 1965-66. The rate of

29
tax appropriate to income up to April 1966 will be fixed in the Budget of April 1966. For new companies corporation tax will be payable in one sum nine months after the end of the accounting period, but for existing companies which keep the same accounting date the tax will be payable in one sum on the 1st January in the financial year following that in which the accounting period ended.
The last charge to income tax on trading profits will be for 1965-66. As regards other sources of income, the last income tax charge will also be on income charged for 1965-66. The last charge to profits tax will, in relation to a particular source of income, correspond to the last charge for income tax; thus, in the case of trading profits, the last charge will be on the profits of the period that formed the basis for the 1965-66 income tax assessment.
Dividends
Companies will be required to deduct income tax at the standard rate from dividends and other distributions of profits, and also from interest and other charges, and to account to the Revenue for the tax as and when it is deducted. These provisions will apply to dividends and other payments after 5th April, 1966. Special provisions will be introduced to deal with possible attempts at forestalling as regards dividends.
Provisions will be required as to the treatment of dividends paid by one United Kingdom company to another, and these require further consideration. But I can give an assurance now to investment trust companies and unit trusts that such dividends will not be charged to corporation tax in their hands if they are passed on to their shareholders in the form of dividends. I can also give an assurance that dividends received by parent companies from their United Kingdom subsidiaries will be treated as "franked" income for corporation tax purposes.
Special Cases
Because the new scheme will tax undistributed profits at a lower rate than the present scheme, there will be special provisions to ensure that certain types of companies, including the so-called 'one-man' companies, do not retain profits for the purpose of enabling shareholders to avoid personal taxation.
Charities and approved superannuation funds which are at present entitled to exemption from income tax will not themselves be chargeable to corporation tax and will continue to be entitled to exemption from income tax, and will therefore be able to claim repayment of income tax suffered by deduction.
Proposals as to Capital Gains Tax Occasion of Charge
The new tax will be imposed only on gains which are realised after next Budget day. Such gains will be chargeable whenever the underlying assets were acquired. There will, however, be no retrospection; the gain to be charged on disposal will not exceed the difference between the value of the particular asset on the 1965 Budget day and the amount realised when it is disposed of subsequently. Moreover, the charge to tax on a gain realised after next Budget day will not be on an
30
amount greater than any gain that is realised. As I have already indicated, provisions will be included to prevent avoidance by creating artificial values on Budget day.
For the purpose of the tax, realisation will include disposal by sale, long lease, exchange, forfeiture and the transfer of ownership by gift or on death. In the last two cases the asset will be treated as realised at its market value. However, the first £5, 000 of gains realised on death will be exempt; and any capital gains tax paid will be deductible from the amount of the estate for estate duty purposes.
Where stocks, shares or securities are treated as realised involuntarily, in such circumstances that new stocks etc. are received in place of those formerly held, as a result of a conversion operation or a scheme of company reorganisation no tax will immediately be chargeable: for cases of this kind I propose that there should be rules broadly comparable to paragraphs 10 to 14 of the Ninth Schedule to the Finance Act, 1962.
Assets Chargeable
The tax will extend to all gains realised on the disposal of assets of whatever kind, whether tangible or intangible, with the following exceptions. Gains realised from the disposal of the taxpayer's only or principal residence will be exempt. Capital gains realised in respect of Savings Certificates or National Development Bonds will also be exempt, as will sums received on the maturity or surrender or normal policies of life assurance. Premium Bond prizes, football pool dividends and betting winnings, where there is no disposal of an asset, are outside the scope of the tax. Gains arising out of the sale of chattels will not be within the charge to tax except where the price realised from a single transaction standing alone is £1, 000 or more. There will be restrictions on relief for losses on chattels.
Persons Liable
Persons, including companies, who are resident in the United Kingdom will be liable to tax on all realised gains wherever the underlying assets are situated. Non-residents, whether individuals or companies, will not be liable on gains realised from assets situated in the United Kingdom unless those assets are used for the purposes of a trade or business carried on in this country by a permanent establishment which they maintain here. Thus, gains realised by non-residents from portfolio investments in the United Kingdom will be exempt. Gains realised by charities and approved superannuation funds which enjoy exemption from income tax will also be exempt.
Basis of Charge
The tax will be charged on net gains realised in the year to the extent that those gains are not already chargeable to income tax. Relief for realised losses will be given primarily against any gains realised in the same year, any excess of losses being allowed to be carried forward without time-limit and set against future gains. For assets acquired before next Budget day relief will be given only for the due proportion of the loss which accrued after that day.
The relationship of the new tax to the existing short-term gains tax is under examination."
THE EARL OF DUNDEE: My Lords, we are very grateful to the Government for this extraordinarily prompt and most welcome reaction to the requests which your Lordships made on Wednesday and Thursday of last week. We shall look with great interest in the Printed Paper Office or in Hansard tomorrow in the hope of discovering that the Government really do understand what they are trying to do.
LORD SHEPHERD: My Lords, I am most grateful to the noble Earl. I hope that Her Majesty's Government will always be prompt and that, in time to come, the noble Earl will not think it is extraordinary.

LEASEHOLD REFORM
3.48 p.m.
THE JOINT PARLIAMENTARY SECRETARY, MINISTRY OF LAND AND NATURAL RESOURCES (LORD MITCHISON): My Lords, with your Lordships' permission I should like to repeat a Statement on leasehold enfranchisement which my right honourable friend the Minister of Housing and Local Government has just made in another place. Perhaps your Lordships will allow me to use his words. He said:
"This is a subject which is causing concern to many people. The Government have already announced their intention to introduce legislation to enable householders with an original lease of more than 21 years to purchase the reversion of their leasehold interest. By giving this matter priority in their legislative plans they have shown the importance they attach to it.
"But the provisions required raise important issues of policy and also some complex problems of a technical nature. For these reasons, and because of the other demands on Parliamentary time, it will necessarily be some time before a Bill can be introduced.
"Meanwhile, anxiety has been expressed by those living in houses where a long lease is due to expire. They
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fear that they may lose the opportunity of purchasing the freehold of their homes if the lease expires before the new legislation comes into force.
"The Government sympathise with the anxieties of those whose leases are due to expire shortly; and I can give an assurance that in framing the new legislation the Government will ensure that whatever enfranchisement rights are conferred on a leaseholder whose lease is still running will similarly be conferred on a leaseholder whose lease expires after December 8,1964, and is still in occupation, on whatever terms, when the legislation comes into force.
"This assurance cannot apply, of course, to those who have lost possession of the property before the Bill comes into force. But most occupying lessees are already entitled to remain in possession when their leases expire. They cannot be displaced save on specified grounds which are examined by the county court. It is therefore likely that when the new Bill comes into effect a leaseholder whose lease has expired will still be living in his old house though the terms of his tenure will be different.
"What I have said does not apply to Scotland where the land law is very different. The Government are not aware of any anxiety in connection with house property held on long term leases in Scotland. But Scottish interests will be kept in mind while legislation for England and Wales is being prepared."
LORD HASTINGS: My Lords, we are much obliged to the noble Lord for giving this Statement to the House. It is, of course, a most important and significant Statement. It makes quite clear the Government's decision to proceed with the legislation which, admittedly, was promised in the gracious Speech at the beginning of this Parliament. On the other hand, I had rather hoped that, after mature consideration, this would be one of those cases where the Government would come to the conclusion that discretion was the better part of valour, and that they might, perhaps, change their mind in this respect. But we are grateful for small mercies, in that the Government have at least

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recognised the very important issues of policy which are raised by their proposal and that there are very complex problems of a technical nature to be solved. I directed attention to one or two of these problems when I spoke during the debate on the humble Address, and I do not propose to say any more about them at the moment.
Turning to the latter half of the statement, it is made quite clear that the Government intend to preserve the rights of existing leasholders who may find their leases expiring before the Act comes into force; and since the Government have made it clear that they propose to introduce a Bill compulsorily to enfranchise these long leases of over 21 years, I would not dissent from the intention indicated in the Statement. I agree that it is a perfectly logical thing to do. Therefore, so far as that part of the Statement is concerned, I do not propose to criticise it in any way.
In the last paragraph or two, however, the Government point out the very considerable protection already afforded to leaseholders, but remind them that they can be displaced, on specified grounds, by order of the county court. That raises in one's mind the question as to whether the Government propose to alter in any way the terms of this sort of protection, which, I would remind your Lordships, is a protection for the landlord as well as for the lessee. It makes one wonder how much tampering there will be with the rights of private ownership, with the necessities for redevelopment and, of course, with the basic laws and rules of private contract. These are matters which we shall have to consider and to discuss very thoroughly when we see what legislation is brought forward. I thank the noble Lord for his Statement.
LORD MITCHISON: My Lords, may I thank the noble Lord for the tone of his comments and for his readiness to accept that complex legislation of this kind does require careful consideration and preparation. That is what is going on at the moment, and I think it would be unwise to say anything about how far amendment of the Landlord and Tenant Act, 1954, will be required. I would add that we make a practice of keeping our Election promises.
Several Noble Lords: Oh! Oh!
LORD SILKIN: My Lords, might I ask whether the proposed interim protection will require legislation?
LORD MITCHISON: My Lords, I do not so understand the Statement. I think this is a warning that rights which are to be given in the future will be extended in the future in certain circumstances.

THE ELECTRICITY GAS AND ATOMIC ENERGY INDUSTRIES
3.55 p.m.
Debate resumed.
LORD STONHAM: My Lords, after that genial, or nobly genial, interlude, I hope that it will be in order if I try to shed a little more light on the general proceedings. Your Lordships will remember that I had reached the point where I had expressed the Government's hope that in seven years the power plant construction programme would have reached parity with the demand that we then expect; and I said that to do that would entail, as at present estimated, an investment of some £4, 000 million. In that programme the production of electrical energy from nuclear plants will play an increasing part. It will be recalled that the first nuclear power programme suffered, under the previous Government, from several drastic changes of heart, but it managed to survive as a programme to provide 5,000 megawatts of nuclear generating capacity by 1969. Three stations are already supplying power to the Grid. Wylfa, the last station, will be commissioned in 1968 and 1969. All nine stations, including the Scottish station at Hunterston, are of the Magnox type developed by the Atomic Energy Authority at Calder Hall.
Last April, the previous Government announced "The Second Nuclear Power Programme", which planned to provide a further 5,000 megawatts of nuclear capacity to come into commission between 1970 and 1975. This programme which had been agreed by the C.E.G.B. and the A.E.A. was intended to be flexible, and subject to revision at regular intervals in the light of new information. We are all glad to know that the noble Lord, Lord Sherfield, who was until recently Chairman of the Atomic Energy Authority, will be able to take part in

35
this debate. The A.E.A. and the C.E.G.B. having made a joint study of the available reactor systems for the new programme, agreed that the main contenders were: the advanced gas-cooled reactor (A.G.R.), which has been developed by the Atomic Energy Authority; the American water-moderated reactor systems, especially the boiling water reactor (B.W.R.); and, pressurised water reactor (P.W.R.). We really ought to congratulate the experts on providing such initials for these things that a layman like myself can understand what they represent. So often one has to have a special inquiry to see what the initials mean.
It was decided that the C.E.G.B. would invite tenders for an A.G.R. station to be built alongside the Magnox station now under construction at Dungeness, at the same time making it clear that it was also ready to consider tenders from British industry for "water-operated reactor systems of proved design". The previous Government intended to review the tenders with the C.E.G.B. and the A.E.A. before a decision was taken as to the type of reactor to be built. The tenders are to be submitted by February 1 next, and the Board, in consultation with the A.E.A., will then have to assess them and consult the Government. A decision, therefore, cannot be expected until well into the summer of next year. It must be borne in mind that whilst the capital cost of a conventional station is expected to fall to £37 per kw. by 1969, compared with an estimated £100 per kw. at the latest nuclear station at Wylfa, the running costs of a nuclear station are substantially less than those for conventional stations. Indeed, it is possible—some say likely—that by the early 1970's nuclear power may become cheaper than conventional power for the generation of the base load. But because of the many uncertainties it is obvious that the programme must be flexible and subject to review.
Electricity now accounts for an increasing proportion of the nation's total energy requirements. Between 1953 and 1963, it rose from less than 17 per cent. to nearly 30 per cent., and this increase is expected to continue. Last year, nuclear power contributed around 4 per cent. of the total units of electricity produced, but if the two nuclear programmes are com-
36
pleted as planned, the proportion by 1975 will be over 16 per cent. But by then the fuel requirements for electricity generation will have doubled, and ten years hence coal will still be the major fuel used by the industry.
It is understandable that your Lordships' House and the industry are anxious to secure answers to a number of important questions, but my right honourable friend has not yet had an opportunity to consider "The Second Nuclear Power Programme." Meanwhile, arrangements for tenders for the first station are going forward, and it is likely that it will be designed and constructed by one of the three consortia, all of whom have been invited to submit tenders for a comprehensive contract. The consortium method enables the novel design and construction problems of a nuclear station to be tackled as a whole. In the course of time, as standard designs become feasible, it may be found preferable to have direct contracts with specialist firms, as is now done with the building of conventional stations. How soon this may be depends on the way the technique of building these stations develops.
The noble Lord, Lord Hawke, suggests that nuclear stations have a longer life than the present assumption of 20 years, and that the availability is not 75 per cent., but more than 90 per cent. There is one staggering example quoted—I believe it was at Calder Hall—where the availability at one time was 99 per cent. These are points of vital importance in assessing the relative costs of power from nuclear and conventional stations. The noble Lord asked me what was the estimated cost of the latest nuclear station—and I take it that he was referring to Wylfa. I understand that, with less conservative grounds—that is to say, a life of 25 years and 85 per cent. availability—the cost of Wylfa will be virtually the same as the cost from the conventional means of production.
LORD HAWKE: My Lords, before the noble Lord leaves that point, has he by any chance worked out what difference a 30-year life would make? He has jumped up the availability from 75 to 85 per cent., and if he jumps the life up from 20 to 30 years, what difference in cost would that make? Has he the figures?
LORD STONHAM: My Lords, I think that in something so new as this, where there are so many imponderables and where our experience is so limited, one cannot be precise about these matters. I have said that it is possible, perhaps even likely, that in the early '70s generation by nuclear means may be cheaper than by conventional means and I have given the noble Lord the forecast by adjusting the ground rules to the extent which I suggested—25 years and 85 per cent. availability. But we must not forget that this is a hypothetical example. If we adjusted the ground rules up to 30 years, that might lead to the assumption, which might prove quite false, that these stations have a life of 30 years. In any case, these points will be fully considered by the Board.
We are also fully aware that a programme of.5, 000 mw. is insufficient to keep the three consortia fully employed, and in the light of this situation the future organisation of that part of the industry is under review inter-departmentally. Meanwhile, whilst awaiting the results of the inquiry for tenders, all these relevant matters are being constantly and closely considered. Obviously, however, I cannot go further in anticipating the Government's decisions.
The noble Lord, Lord Hawke, said that coal should have been included in his Motion and that it cannot be ignored. Coal must form the basis of the production of a great deal of our energy for some years to come. The noble Lord also said, if I took his words down aright, that continuous production from losing pits would be intolerable unless there were very special reasons for it.
LORD HAWKE: I said that in the short term it would be tolerable, but in the long term intolerable.
LORD STONHAM: My Lords, the noble Lord is aware that I was not trying to misquote him. I was just trying to get the sense of what he said. The National Coal Board's policy is aimed directly at the elimination of uneconomic production. This of course, involves the modernisation and reconstruction of existing pits and the closure of pits which have no prospect of covering their operational costs before deprecia-
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tion and interest. This process has been going on a long time and is continuing now. When I say that, I exclude, of course, those pits which are running at a loss just at the particular moment—for example, because of temporary geological difficulties, or because they are in process of reorganisation and construction. Pits will not be closed unless modern methods cannot make them viable.
The major part of the Coal Board's reconstruction programme, which was undertaken in the 1950's, when the demand for coal exceeded the capacity of the industry to produce, is now completed. The annual expenditure on major colliery schemes has been reduced by nearly 50 per cent. since 1959 and is expected to decline still further in the next few years. Indeed, in recent years the coal industry has done well in adjusting itself to mounting competition from other fuels. But despite the present level of production, it is still facing a difficult task. Because of the change in the pattern of its markets, the lower-priced electricity coals providing an even greater proportion of its outlets, the coal industry needs a higher annual increase in productivity than most other industries to meet the inevitable increases in wages and other costs, and to keep prices stable. Thus, there is a continuing need for modernisation to improve the efficiency and profitability of existing collieries.
A growing proportion of capital expenditure, now running at about £90 million a year, will be needed on schemes, such as the reorganisation and mechanisation of existing collieries, at the pit face and away from it, and the replacement of existing worn-out or uneconomic machines with more modern and improved equipment. The Board's investment programme includes expenditure on processing coal, for houses, for research and development projects, for brick-making and other ancillary activities. Legislation will be needed to extend the Board's borrowing powers, and that will have to come before the end of next year. As my right honourable friend stated in another place on December 1, he is reviewing, in collaboration with the National Coal Board, the prospects for the coal industry in relation to a coordinating policy for fuel. All matters

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concerning the Board's long-term investment programme will come under review. The possibility of a capital reconstruction to relieve the coal industry of some of its capital charges has been widely canvassed. That will have to be borne in mind in the course of the review to which I have referred; but this will require legislation. I have no doubt that the objective of securing our fuel supplies on the most economic terms will be viewed against the probable social and economic consequences of declining coal production.
The noble Lord, Lord Hawke, asked what would be the effect of the present interest rates on the power programme. Bank rate naturally has a direct immediate effect upon the structure of short-term interest rates, but its effect on long-term rates, such as those charged to the Electricity and Gas Councils, is less immediate and much more limited in effect. The Councils will already be paying a higher rate of interest on their overdrafts from commercial banks as a result of the recent increase in bank rate, but these overdrafts are not used to finance the capital investment programmes: they are employed for working capital. As far as long-term borrowing is concerned, however, the rise in bank rate will have no effect whatsoever upon existing loans, and the rates for new loans have not been increased. Whether the rate on new loans will be increased depends upon the effect bank rate has upon long-term rates of interest in general; and as it is in the interest of the Exchequer and the industries to avoid frequent changes, it is the custom to await such time as a level establishes itself before making a change. Such a level is not at present established.
The noble Lord also asked about the effect of inflation on generating costs over the next 25 years. It is not possible, of course, to forecast—even Lord Hawke's Old Moore could not forecast it—what inflation will take place over the next 25 years. It is part of the Government's basic policy to seek stability of prices, but much will depend on the success of their incomes policy. However, if the value of money does continue to fall, there is no reason to think that the costs of electricity will increase more than prices generally. Indeed, the probability is entirely the other way. Over the last ten years, while the general
40
price index has increased by about 32 per cent., the average price of a unit of electricity has increased by only 18 per cent. This is because the use of vastly larger generating equipment has brought great economies in capital cost per unit generated, and increased sales have proportionately reduced overheads. Rising coal costs have been offset by more efficient generating plant, by the use of poorer grades and relatively less expensive coals, and by rationalising the transport of coal to power stations. These factors should continue to operate, and, in the long run, nuclear power may also bring economies to offset price inflation.
The noble Lord, Lord Hawke, also mentioned the prospects for pumped storage. Here I cannot hold out hope of any great expansion. We fully recognise that pumped storage stations have a longer working life than the conventional generating plants that would otherwise have to be installed to meet peak demand, and the quick response of hydroelectric plant is especially valuable in coping with sharp fluctuations in electricity demand and emergency conditions. Unfortunately, although the outlook is favourable in Scotland, the topography limits the number of suitable pumped storage sites in England and Wales.
The noble Lord, Lord Hawke, mentioned the pumped storage scheme at Ffestiniog which was brought into operation in December, 1961. Its eventual capacity is 360 mw., and the Generating Board say that the project is providing peak period Lord power efficiently and economically. In North Devon the Generating Board have started exploratory surveys, including trial borings, at two sites to assess their suitability for pumped storage. Then the North of Scotland Hydro-Electric Board have a project at Cruachan which, with a capacity of 400 mw., will be the second largest pumped storage project in the world. It will be commissioned next year and in 1966. The Hydro-Electric Board are also considering the possibility of a pumped storage scheme at Loch Sloy near Loch Lomond. The capacity, at 1,200 mw., would make it the largest in the world. Those are the projects that we have in mind.
With regard to the future of pumped storage, like nuclear generation costs,

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pumped storage costs have been reduced, but they have to compete with the steady fall in the capital cost per kw. of conventional power stations. However, further gains from advances in the technology of conventional generation are likely to be less spectacular than they have been in the past. This may make pumped storage schemes more attractive, as will the growing availability of nuclear power, when the capacity of nuclear power plant is sufficient to supply the minimum Lord on the system and surplus low cost nuclear energy begins to be available for night pumping. But this is some way in the future. Meanwhile, the Boards are ready to examine any projects where the circumstances are likely to be favourable.
As I said when I began, this is one of the most important items—if not the most important—in the foundation of our economy. On the generation and production of power rest the whole of our hopes for a steadily increasing national productivity, our standards of living and, indeed, our power, in a different sense, in the world. It is impossible to overestimate its importance. The Government realise this, and everything that can be done will be done in order to ensure that the power is there as and when it is required, and that it is produced in as diverse a fashion as required and in the most efficient and economic manner possible.
4.19 p.m.
LORD WOLVERTON: My Lords, I am sure we are all grateful to my noble friend Lord Hawke for initiating this important debate in your Lordships' House this afternoon, because after the policy on Defence, the power policy, or fuel policy, of this nation is in my opinion—and I think in that of all your Lordships—the most important. It is only right, with a new Government in office, that we should examine this policy afresh. My only excuse for getting up to speak this afternoon is that I want to say a word or two on the atomic energy programme for the next five years. I was delighted to see (he has gone now) the noble Lord, Lord Snow.
Following me is the noble Lord, Lord Sherfield. I understand that responsibility for the Atomic Energy Authority will now pass from the Minister for Educa-
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tion and Science, whose responsibility it was in the late Government, to the new Ministry of Technology. I think this is a good thing, and that they will be able to study this great problem afresh.
We have made tremendous advances as pioneers in developing atomic power stations. The noble Lord, Lord Hawke, and I were privileged to go down last summer and spend a day at Bradwell, and we are most grateful to the Generating Board for the time they gave to us in explaining everything to us. It is a wonderful station. At that time it was the largest station in the world. It has now been superseded by Dounreay, in Scotland.
LORD HOBSON: Hunterston.
LORD WOLVERTON: I think that that one is now the largest station in the world. All these nine stations are based on the Magnox system, and their cost of generating electricity is about ⅔d. per unit, against ½ d. with coal. That is a big difference. As your Lordships know, coal has made a tremendous advance in the last few years on high steam pressures. The noble Lord, Lord Hawke, said that probably we are beginning to see the end of the advancement that can be made on that.
The point I wanted to make this afternoon is that the General Electric Company consortium have nearly completed a very large station in Japan. That is based on the Magnox system. We have an order for another one in Italy, which is, I think, running now and the one in Japan is about to run. I read in the Press the other day that the Japanese are thinking of giving some more orders for stations, but are now looking to America for the boiling-water reactor system. We had a great debate about this in your Lordships' House on June 10. We were assured then that the Atomic Energy Authority had made great advances with the advanced gas-cooled reactor, and that specifications would go out to British manufacturers to quote for a station of the advanced gas-cooled reactor type, to be placed side by side with the station of the Magnox type which is running this autumn at Dungeness.
If the Japanese are now thinking of turning to America for their next stations, it will be a great disappointment

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to this country. We must do a great deal more research. I think it was agreed last summer that the Generating Board, if they wished, could import one set of American design of boiling-water reactor, to be put up and tested against our own advanced gas-cooled station, in order to see which was the more efficient type. Obviously, we must have greater efficiency if we are to compete with America.
In my view, there is a tremendous future in atomic energy power stations, but so often, as I said in the debate in June, pioneers get left behind. So I am hoping that, as Her Majesty's Government have said to-day, the programme will continue to be flexible, as the late Government said it would be. I also hope that a great deal more research—urgent research—backed up by the new Ministry of Technology, will be carried out by the Atomic Energy Authority, in consultation with the manufacturers and the Generating Board, to see whether we cannot get astride of the Americans. I understand, from a very good speech which the noble Viscount. Lord Caldecote, made in June, that although the Americans have not built any commercial station, the big companies in America have spent a large sum of money on research and confidently expect their boiling-water system of reactor to be the best in the world. We must try to get as good as they have, and it is a problem, in my humble submission, which needs a tremendous amount more research.
We must go on with the present programme of stations which for some years to come, presumably, unless they make big advances at this experimental station on the Magnox system, will not be as economical as the most efficient coal station. We have recently seen an instance of that in these very large power lines, one of which is almost completed. It passes all through East Anglia and Eastern England, coming down from Yorkshire to Waltham Cross.
It is a huge line, a 400, 000-volt line, with four conductors to each phase, and carries a very large Lord to bring the power down from Yorkshire coalfield stations along the Trent to London. I think it has been tapped twice—or it will be, eventually—near Cambridge and
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King's Lynn. But primarily it is for London, and with this great increase in voltage which they have now been able to develop, it is cheaper to bring down power from the generating station on the Trent, using the East Midlands coalfield, rather than to bring down the coal, even by sea, to the Thames-side station. But these great pylons are very ugly. They are something like 160 feet high, and dominate the landscape. I have great sympathy with some of the views expressed in the debate we had in your Lordships' House the other day on this problem. It is out of the question to put the cables underground, owing to the enormous cost.
I hope that we shall be able to develop more of these atomic energy power stations, which are admirably suited to the South. We already have some, on the East coast, on the Severn, and on the South coast. We must get on quickly with this important research to see whether we can get the reactors to stand up to higher steam pressure, so as to be able to produce the current required at a cost that is more in competition with that of the most efficient coal station.
4.28 p.m.
LORD SHERFIELD: My Lords, if I limit my remarks this afternoon to atomic energy, it is because this aspect of the subject is the one with which I have the larger acquaintance, and not because I wish to press for the preferential treatment of nuclear fuel over other fuels. With the ever-increasing demand, each fuel has its part to play, and the problem for any Government is to strike the best balance between them. There are three points to which I should like to draw particular attention. They are the selection of the type, or types, of reactor to be introduced into the electricity generating system in the United Kingdom between 1970 and 1975; the rate at which atomic energy should be introduced into the United Kingdom electricity system, and, perhaps more particularly, the question of our organisation in this field. On the first point, a procedure for the selection of types has been laid down and, as has been said, we have to await the submission of tenders by the consortia and their assessment. Therefore,

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no more can be said on this matter this afternoon.
But I should like to make this observation. There must be a very strong presumption in favour of choosing for the next stage of the nuclear power programme a system which has been developed by our scientists and engineers in the Authority, in industry, and in the Central Electricity Generating Board and of which we now have profound experience. The chosen line of development for British power reactors, the graphite gas-cooled system, has technically been extremely successful. After some avoidable and some unavoidable delays, the early stations are working well. For example, Hunterston, to which the noble Lord, Lord Wolverton, referred, at one time almost written off as an expensive failure, was, within two months of the second of the two reactors being commissioned, reported as already achieving an output of electricity some 7 per cent. more than its design capacity. The Tenth Annual Report of the Atomic Energy Authority gave the most encouraging information about the progress of the prototype of the second generation of reactors, the advanced gas-cooled reactor at Windscale.
I have been much concerned by the way in which public statements and many articles in the Press have over three or four years now tended to cast doubt on the products of the British system. Why this is so I do not know. Perhaps it is part of a general tendency to self-depreciation and denigration of our own performance which has recently become rather fashionable. I deplore this, not only because I think it is fallacious, but also because full advantage has been taken of it by our enterprising and vigorous competitors to press the merits of their own systems. My belief is that not only will the present generation of graphite gas-cooled reactors prove to be successful technically, but also that they will, in practice and with greater operating experience, give a much better economic return than at present is expected of them. The noble Lord, Lord Hawke, gave some of the reasons, and, without being dogmatic or going into the various ground-rules which are laid down from time to time to calculate these matters, I am convinced that these reactors will, in fact,
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perform much better than has been estimated.
As regards the advanced types, there seems very little doubt that any of them could, if built on a sufficient scale, produce power at substantially cheaper rates than that which would be available from any other contemporary source of electricity. Secondly, I think in forecasting their likely economic performance the result in each case and I refer, of course, to the British, American and Canadian types of reactor—would be the same within the margin of error. If this is so, the presumption in favour of the British system must surely prevail.
My Lords, the question of the rate at which atomic power should be introduced into the United Kingdom involves both technical and non-technical considerations. Technically, atomic power stations have a number of advantages over coal and oil stations. They are free from grit, dust, fumes and sulphur dioxide. They can be fuelled by a few tons of fuel elements a month, which can be brought in in a single load, and they are. therefore, almost immune to transport difficulties, for example, in very cold weather. The main hazard associated with them is some catastrophic accident resulting in the release into the atmosphere of radioactivity. But a great deal of research and development has gone into making nuclear power reactors safer than safe, and there is now every assurance that the effects of even the most improbable failure in a nuclear installation would be contained within the building in which it occurs. This improvement in safety devices should lead to a relaxation, where this is necessary, of the restrictions on the siting of nuclear power stations which were drawn up in the days when experience with nuclear reactors was a fraction of what it is to-day. The criterion of that time was what was known as the "maximum credible accident"—and it will be clear, I think, that anybody who regulated his life on such principle would never get out of bed.
It seems, therefore, that atomic power has now proved that it is technically efficient, safe and reliable, and that it has certain advantages over other types of energy for power production. But there is a major problem of finance. Broadly speaking, a nuclear power station costs about three times as much to build and

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about one year longer to construct than a conventional power station. On the other hand, a nuclear power station costs about a third as much to run as a conventional station. Nuclear power is, therefore, highly capital intensive. As the noble Lord, Lord Hawke, implied (and I know this is a sensitive point) it could be argued, on the assumption that inflation is likely continue at a more or less steady ra that it would be desirable to build a large number of nuclear power stations as rapidly as possible. On the other hand, the nuclear power programme has to compete with other capital projects, such as roads, education and the other huge commitments which successive Governments have assumed.
My own view has been that the target figure of 5,000 mw. of additional nuclear power by 1975, tentatively recommended in last year's White Paper, having regard to the effect of economics of scale on the cost of nuclear power is on the low side—certainly at the bottom end of the desirable bracket. Clearly, there are difficult questions of priorities and national interest, and I am not surprised to hear that the Government need more time than they have had to examine all the aspects of this question before they are able to reach a conclusion.
There is, however, one point of special importance. Most of the systems at present under consideration for future nuclear power generation require the fuel to be uranium enriched in the isotope Uranium 235. It is therefore essential to prepare a source of supply. We have at Capenhurst an isotope separation plant of the diffision type which provides us with a source of indigenous material. Construction of this plant against time some fifteen years ago represents one of the great post-war triumphs of the British engineering industry, little publicised, but, in comparison with the experience of similar plants abroad, highly significant. At present, it is working at a low level in the absence of military demand for enriched uranium, and, for reasons which are fairly well known, its product would not at present compete in price with that which is now available from the United States. However, at the cost of a relatively small further capital investment it could be brought up to date and its
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product would be, if not equal to, at least within range of, the American price, and no doubt in practice both sources of supply would be drawn upon.
In the past have been suggestions that the factory at Capenhurst should be closed down. It seems to me imperative that this should not be done. Here is a technological process of the most advanced kind in which we have a leading position. Here is a semi-processed material which, quite apart from its military importance, will become increasingly required for civil purposes. It would seem to be to be an act of folly to discontinue this process in the United Kingdom or to fail to bring it up to date and thus leave the production and supply of this material in the hands, however friendly, of the United States, of France, of the Soviet Union or perhaps of some other country in the future.
The rest of the nuclear fuel cycle is now fully provided for by an efficient fuel element factory at Springfield and efficient fuel processing plants at Windscale and Dounreay. All these plants have ample capacity for the foreseeable needs both at home and abroad. With these facilities the production group of the Atomic Energy Authority has in the last year or so been successful in obtaining foreign business worth many millions of pounds. This is an indication that though these facilities were primarily designed for domestic purposes, both civil and military, they are producing a return in the export field which is far from negligible. Clearly a decision on the United Kingdom programme in favour of a British system would greatly help these activities.
I now turn to organisation. At the present time our own nuclear industry is, I think, in a state of uncertainty and transition. There is, I believe, much to be said for the view that this is due mainly to the way in which we have organised ourselves for the production of nuclear plant. In retrospect it seems unfortunate that when it was decided to exploit the graphite gas-cooled reactor system commercially no fewer than five different industrial consortia were formed for the purpose and that five different applications of the system were ordered. Accordingly five different design and development teams had to be established, and the Atomic Energy Authority was given the difficult task of developing

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simultaneously five different types of fuel elements. No doubt the extent of the market was at that time overestimated. No doubt it was right not to put all our eggs in one basket, or perhaps I should say one pressure vessel. There was perhaps an assumption—fallacious in my opinion—that the existence of five different groups would preserve a degree of real competition for the generating boards.
But, however good the reasons, the fact is that our competitors in other countries have managed to concentrate their industrial effort and their resources from the outset, whereas our effort and resources have been dispersed. The Americans have taken advantage of the economies of scale while we have persisted in the policy of the "one-off"; and although certain changes have now been made, I do not think that on the production side we have yet recovered from the handicaps which our system of organisation has imposed upon us and which certainly in the export field have robbed us of the highest prizes.
On the demand side, the two Generating Boards were already established as monopoly purchasers and the Atomic Energy Authority became, in practice if not as a matter of policy, a monopoly supplier for fuel elements. I believe that the concepts of a monopoly purchaser and a monopoly supplier are bad in principle. Both tend to the exercise of excessive influence, though of course a monopoly supplier is in a weaker position than a monopoly purchaser, since it is always open to the latter to look overseas. The Electricity Council and the Central Electricity Generating Board have single-mindedly pursued the laudable object of cheap power for the electricity consumer. But a single criterion does not necessarily resolve a problem, nor does it follow, to borrow a transatlantic expression, that what is good for a public board is good for a country. Other factors of a political, strategic and social nature have to be brought into the assessment, which only the Government of the day can make. Such matters cannot be settled by public boards, in this case, for example, by the Atomic Energy Authority alone or the Central Electricity Generating Board alone, or by both together.
And let me say, in parenthesis, that this latter contingency is by no means
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as remote as might be supposed. Indeed, I wish I could do something to lay the ghost of the supposed bitter antagonism between the Central Electricity Generating Board and the Atomic Energy Authority, of which I have read so much. I believe that the supply of fuel elements is now entirely satisfactory both to the Authority and to the Board, and, as far as development is concerned, it is quite natural and healthy that there should be some difference of approach and judgment between the developer and the operator. But I believe that the relationship between these two bodies is now good, and in fact the issue lies, in my observation, much more between the Generating Boards and industry than between the Boards and the Authority, and although some changes have been made I doubt whether this situation is even yet satisfactory.
The Central Electricity Generating Board has built up its own team of scientists and engineers with prime experience of the graphite gas-cooled system, and this has, not unnaturally, created a tendency to multiply the requirements, the specifications and the paraphernalia of tendering, which imposes an almost intolerable burden on those concerned with the designing of nuclear power stations. The curious thing is—and I stand open to correction on this—that the Generating Board seem prepared to take on trust from foreign suppliers what they are not prepared to take on trust from British suppliers. This means that the foreign tender costs less to make, and there is a built-in temptation for United Kingdom firms to take the easy way out and accept the foreign designs. This state of affairs is discouraging both to the industry as far as overseas orders are concerned and to the foreign purchaser in regard to his confidence in the British product.
LORD STONHAM: My Lords, may I interrupt the noble Lord? Can he give any evidence of the C.E.G.B. being less rigorous in their requirements in respect of foreign reactors than those of our own production?
LORD SHERFIELD: Since the C.E.G.B. has intimate experience of the graphite gas-cooled reactor system, they know much more about it and therefore are much more particular, whereas so

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far as foreign systems are concerned, since they have not been involved in the research and development they are more inclined—and I am not saying it is not quite natural—to take what is offered on trust; and this appears to produce a situation of some inequality, which I think is regrettable.
I know of no way of moderating the power of a large public monopoly otherwise than by governmental influence. I suggest that the present situation is having a harmful effect on the chances of our industry competing with foreign suppliers or maybe even of staying in business and that there is a prima facie case for Government intervention; and I was glad to hear from the noble Lord, Lord Stonham, that this situation is under review. I think the least the Government ought to do is satisfy themselves, in assessing the different systems of nuclear power generation, that the conditions and assumptions made are precisely the same in the case of the domestic and of the foreign systems in comparison.
Too often in the recent past we have led the world in early research and development of a new invention or process, and then at a later stage of the development have allowed the ball to be taken from our hands and carried off by our American or other competitors. This may sometimes have been due to lack of resources, sometimes to faulty or wasteful organisation, but perhaps also to a certain failure of will and resolution. Are we going to allow this to happen also in the civil applications of atomic energy?
Important decisions lie before the Government here, and they will need to be taken in the next few months. There are the decisions about the nuclear power programme to which I have referred. There is a decision on the construction of a prototype fast reactor power station, in the design and development of which we are, thanks to the experimental facility at Dounreay, still, I believe, ahead of the rest of the world. There is a decision about the future of the diffusion plant at Capenhurst. The Government have proclaimed their strong interest in the technological advance of this country. Here is a field in which we are in all respects already in the forefront, and in some
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respects still, though perhaps not for much longer, ahead of other countries. The moment of decision is near, and the issue is whether to push the machine over a dead centre and go forward, or allow it to fall back and watch our competitors reap the benefit of all the effort which has been put into equipping ourselves with the capital works and the scientific and engineering know-how for the production of nuclear power and the other benefits of the nuclear age. I hope that we shall have the courage and the confidence to back our own horses.
THE EARL OF BESSBOROUGH: My Lords, before the noble Lord sits down, I wonder whether I could ask him one question. He made a most interesting suggestion about the conversion of Capenhurst. Can he give us a rough estimate of what this will cost for the purposes he has in mind?
LORD SHERFIELD: My Lords, I would prefer not to do that, because I am a little out of date as regards some of these calculations.
4.53 p.m.
LORD FERRIER: My Lords, I propose to confine the few remarks I have to make to a much more pedestrian subject than that with which the noble Lord has dealt in such an interesting way, and to confine myself to electricity supply in general terms and within the four corners of the Motion of the noble Lord, Lord Hawke, in respect of future investments and in drawing attention to the Annual Reports of the Electricity Council, et cetera.
As has been clear to your Lordships from what has been said in the debate, electricity is no longer a matter which can be dealt with in isolation when one is considering the power requirements of the nation. But it is a highly efficient section of our nationalised industry. I am sure I am speaking with your Lordships' sympathy when I say how pleasant it is to see with us to-day the noble Lord, Lord Citrine, who presided during the difficult years of the formation of this nationalised industry, which is most efficiently run, although, of course, it is well to remember that another method of employing and harnessing the electricity power of the nation might be found to operate more easily, and more economically in the long run.

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But I want to draw particular attention to a paragraph in the Report of the Electricity Council where, in referring to the announcement in January last that there will be further upward charges in the bulk tariffs, it says:
"This was to enable the Board to meet the higher costs associated with the expansion of their capital programmes and with the increased use of the older and less efficient power stations due to the shortage of plant."
This seems to me to call into question a matter of principle. If it means that existing tariffs are not high enough to cover depreciation and amortisation of existing plant, then certainly the tariffs are too low. If that is the case, they must be raised. Perhaps in that measure the increased tariffs may stem from inflation, as other noble Lords have said to-day; but that again is another matter. In my view, it is not correct to contemplate the raising of tariffs to enable the Board to meet the higher costs associated with the expansion of their capital programmes.
We have had some glimpse, not only in the speech of the noble Lord, Lord Sherfield, of the enormous figures which are involved when we come to generation by atomic power. It is fair to bear in mind that to increase tariffs to-day in order to meet increased capital costs in the future can well be interpreted as charging existing consumers higher rates so that future consumers can benefit. As the noble Lord, Lord Stonham, made plain at the end of his speech, we must remember that power tariffs are the life blood of the economy of this country, and increased rates now may well mean increased costs for industry now, and such might have long-term effects, including the restriction of industrial expansion. Another effect of reduction of industrial expansion is a curtailment of future Lord requirements in relation to electricity supply.
One matter, which perhaps the noble Lord who is to reply might deal with in his speech, and which has confused me and may well confuse other noble Lords, is that on the one hand we have a statement that increased costs must be met by higher tariffs, and yet it is perfectly plain—the noble Lord, Lord Hawke, made this point in his speech—that as atomic power develops in efficiency, and as thermal stations develop in efficiency, so the cost per kilowatt goes
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down. My mind is not clear on where that affects an approach to electricity tariffs in respect to this intimation that they may have to be raised in order to meet increased costs.
On my next point, which to my mind is not of the same weight but is of general principle, I think it is easier to turn to Scotland and to the problems of the Hydro-Electric Boards. I think that perhaps the best thing to do is to turn to the Mackenzie Report where, at page 9, it says that the Committee envisaged that the Board would co-operate in schemes for the regeneration of the Highlands. To my mind, and in my own personal experience, there is here a big problem in regard to how much of the cost of general social benefits, rural benefits—call them what you will—is fairly chargeable to the cost of electricity. Here I believe that a great deal of careful thinking may still be required.
Other noble Lords have indicated that there is going to be plenty of thinking ahead for those who are going to plan our power development. The point I wish to make is that in their thinking let it be borne in mind (and I am not belittling the achievements of the Hydro-Electric Boards or anything like that) that the cost of any amenity other than what is specifically related to the production of electricity could well be said to be chargeable to the State and not to the consumer, which is where it ends up, if it is included in the cost of the production of power.
I should like to turn to what has been mentioned about off-peak generation and pumped storage. No mention has been made to-day—and I do not recall having seen anything about it in the Board's report—of the fact that the gas turbine can produce a "peaking" unit which is very rapidly capable of being placed on load, but pumped storage equipment provides for the consumption of off-peak power. The price which hydro stations can supply for peaking at the present rate is, I know, equal to or below that at which the thermal stations would have to supply into the system if old plant were to be used. But is this particular approach low enough? Should it not be the case, if, as I suggest, there is an element of social cost in the price output of hydro power, that the lower cost at which they can supply should be the measure at which a hydro station could feed into the system at peak hours? On the subject of

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pumped storage the Cruachan plant is of wonderful construction, and had the advantage of being completed a month or so ahead of time. One additional advantage, which it is well to bear in mind, is that it has a catchment area which of itself provides many kilowatts of power.
As for off-peak load, suggestions have been made of various outlets for this power. I, personally, feel that not enough attention has been given to the possibility of pumping water, both for water supply and for the de-watering of mines and the like, on off-peak tariff. There must be a stage at which off-peak tariffs can reach a rate at which double or triple shift working may be possible with electric power in various industries, though not all of them. Has that stage been reached in any of our industries? Are our off-peak tariffs really attractive enough to bring on Lord all the industries and all the apparatus that might be brought on load?
I feel that it is worth turning to the matter of thermal storage heating, which has been referred to in various reports. There has been a remarkable growth in 1963-64, amounting to a 70 per cent. increase in the use of unit plant storage heaters for space heating in domestic establishments. This is a remarkable growth, and it is well to remember the fact that the domestic storage type heater was made available to domestic users stemming from a Question and Answer in this House. But an increase of that measure cannot be expected year by year, because this related to a time when domestic storage type heaters were not available.
I may have spoken in a very theoretical and perhaps rather pedestrian way, but I have spoken on these matters of basic principle which, within their limits of practicability, remain principles. I urge the Government in their thinking to keep these matters of principle in mind. Listening to your Lordships to-day has certainly given me the feeling that the thinking which needs to be done—and which in the light of what the noble Lord, Lord Sherfield, has said must be done—will be a fascinating adventure. Certainly more time is needed to study the matter. The point which I wish to make is the relationship between finance for the future
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and tariff formulation to-day and in the years to come. This is of paramount importance.
5.5 p.m.
THE EARL OF DUDLEY: My Lords, I should like to congratulate most heartily the noble Lord, Lord Hawke, on the admirable way in which he presented his important Motion. I should also like to congratulate the noble Lord, Lord Stonham (I am sorry to see he is not in his place), for the very satisfactory reply which he made to many of the questions raised by Lord Hawke. It has been a most interesting debate; it has covered a very wide field, but it has clarified a great many problems which we all want to know something about.
In my younger days, before the nationalisation of the coal and gas industries, I was closely in touch in many directions with the gas industry. I still follow its progress through the Institute of Gas Engineers, of which I was for quite a long time President. I had not intended to take up too much of your Lordships' time to-day, but I should like to ask four questions of the Minister—three of which have already been raised by Lord Hawke and have been dealt with by Lord Stonham, which is rather frustrating for me. However, if I repeat them again it is only to try to elicit from the noble Lord who is to reply to the debate something more in regard to £s. d.
Of the three sources of energy which have been referred to to-day, namely, electricity, gas and atomic energy, gas is the most economical and we hope that it will become cheaper still. It is, however, important to remember where gas comes from. At present we are dependent largely on the old-fashioned method of producing gas, by the carbonisation of small-sized British coal. This is a costly process and, by the time the local gasometer has been filled, I would say, at a guess—and it is a pure guess, for it varies up and down the country—that on average it costs something in the region of 1s. to 1s. 1d. a therm. This process which we use to-day is rapidly being superseded by new methods of producing gas from petroleum or by natural gas.
We have heard from the noble Lord, Lord Hawke, about the frozen natural gas which is already being transported from Algeria. It comes from the Sahara, it is transported by pipe-line to the

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Algerian coast, and is brought to the Thames in two specially constructed insulated gas containers. The United States-British-French combine has just opened a 64 million dollar plant at Arzew for this purpose. The noble Lord, Lord Stonham, replied to that. But I should like to know whether it is proposed to increase that method of production and transportation, if we can get the gas, and how much more economic the price is going to be compared with production by carbonisation. I am under the impression that it costs about 7½ d. a therm, delivered to the Thames. I wonder whether the noble Lord who is to answer this debate can clarify that, and say how much more of the gas we are likely to get if we require it.
The new field in the Netherlands has already been referred to by the noble Lord, Lord Hawke, and the noble Lord, Lord Stonham, and I am very glad to hear that progress is being made with N.A.N. who are the Dutch group handling it. I read somewhere recently, that a pipe-line from the Netherlands to the British coast would not pay unless the gas could be delivered to this country at about 5½ d. to 6d. a therm, which seems to be a very low figure. I wonder whether any estimate has been made of what the gas would cost to come from the Netherlands if a pipe-line were built.
Also, we have heard about the fact that twenty of the great oil companies, as well as the Gas Council, have already commenced operations with a view to proving petroleum deposits close to the British coast, thus providing natural gas or petroleum oil from below the North Sea. I wonder whether the noble Lord can give us any idea what the gas is likely to cost per therm, if it is proved. Fourthly, certain other processes have been developed under which light petroleum distillates from our British refineries can be easily and cheaply converted into gas. I am told that the cost of that is about 7d. or 8d. a therm. Is that the right figure; and how much more gas are we likely to get from that means of production?
All these petroleum-based fuels are efficient and cheap to produce, and I believe that the British Gas Council has quite properly concentrated its attention on all four of these possibilities. It follows, of course, that coal gas will inevitably be displaced by petroleum or
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natural gases as their production, which is already well advanced, proceeds further. In that case, as the production of coal gas is reduced so the production of coke will likewise be reduced, and we may have to face a shortage of solid smokeless fuels for our new smokeless zones. That matter was also referred to by the noble Lord, Lord Stonham, but my hearing is a little imperfect and I could not quite hear whether or not there would be sufficient coke for that purpose. Obviously, difficulties would arise at this stage if a further strain were put on electricity and gas in the smokeless zones.
LORD STONHAM: My Lords, it is not anticipated that there will be any shortage.
THE EARL OF DUDLEY: My Lords, coke ovens in steelworks are also gradually being superseded by other methods, and it seems that the production of coke will eventually almost disappear, with a permanent adverse effect on our coal industry, owing to the loss of a large and long-established market for coal. But that point, again, has been referred to by the noble Lord.
Finally, there is the question of what might happen if this country were again to be engaged in a continental war, and we were relying on gas piped from abroad or brought here in a frozen state. But I suppose that, in any case, the questions that I have raised this afternoon would form only a very small part of a very large problem in a petroleum-starved country such as we are.
5.15 p.m.
LORD CITRINE: My Lords, my first words must be to congratulate very sincerely the noble Lord, Lord Hawke, upon introducing this subject this afternoon. His remarks were fair and temperate, and quite well informed. But the impression, which I have had almost from the time I first came into this House, is confirmed, about how careful one should be to avoid generalities, because it is almost certain that in some part of the House there will be an expert, or a series of experts, who will demolish the premises upon which a speaker has raised his case.
I cannot claim to be an expert, but I am one who has been associated with two of the three industries mentioned in

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the Motion. Both of them I found were efficient, and there was a degree of enthusiasm which was inherited by nationalisation. It was not evolved with nationalisation, but I hope that it was improved and stimulated, and it seemed to permeate the officials. The engineers and the commercial people believed in the service they were performing, and that made my ten years of chairmanship of the British Electricity Authority and its successor, the Central Electricity Authority, a very happy time indeed. Then I had five years as a part-time member of the Atomic Energy Authority. I found the engineers and scientists and members of the board with a progressive outlook, always wanting to embark upon some experiments or some new phase of work, but always restrained by the indirect but none the less effective shadow of the Treasury.
With gas I have nothing to do. I am a small consumer, and I try to be as small a consumer as is consistent with my household requirements. But I have long been an admirer of the ingenuity exercised by those who belong to that industry in fighting what I have long believed to be a losing battle—though I do not feel quite so confident of that to-day, in the light of recent developments which seem to have given the Gas Council, and the industry generally, a new lease of life. They are embarking upon a new era, the outcome of which I sincerely hope will prove successful; and I hope that it will provide an additional stimulus to the electricity industry further to increase its efficiency and so retain what is, I think, its well-deserved lead.
The noble Lord, Lord Hawke, performed a service in a direction which I think is particularly useful. I often writhed, when I was Chairman of the Electricity Council, at the perfunctory way in which the Reports of my own Board, and those with which I was associated, were dealt with in Parliament, not because of lack of interest but because of lack of opportunity fully and properly to investigate and examine the detailed matter set out in the Reports. The Annual Reports of all these bodies are literally packed with information. Indeed, I would say that the summaries of the Tables, particularly the Financial Tables, would repay study even by an expert accountant.
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Infinitely fuller evidence of the activities of these Boards is given in those Annual Reports than is ever given by private companies in their reports. And in saying that I am not unmindful of the fact that a number of the larger companies produce admirable reports, usually well illustrated and quite expensive and attractive in their "get-up", which describe to a much greater extent to-day than was the case, say, 20 or 30 years ago the activities in which they are engaged, and the results of those activities. Those private companies have not the ordeal of periodical scrutiny by a Select Committee of another place. I think many of them would view with horror the prospect of anything of the kind, and would, to some extent regard it as a handicap. I say that because what is not realised is that when one is conscious that a periodical review will come along, or that some ad hoc committee may be appointed, a considerable number of people are looking over their shoulders and preparing data for when that time arrives. The freedom which one hoped for the public corporations has, in my opinion, been gradually whittled away over the years since nationalisation was introduced in 1947.
What should not be lost sight of is that, so far as gas and electricity are concerned, and to a lesser extent atomic energy, these industries are fiercely competitive. That is a curious thing to say about monopolies, but it is the fact that all of these industries are, in some sense or other, meeting fin the case of atomic energy, only at marginal points with the Central Electricity Board, but wholly in the case of the gas and electricity industries) open, keen and constant competition. I know more about electricity supply, of course, than I know about the other two; but, as this Motion is calling the attention of the House to the Reports, it may not be out of place to remind noble Lords who have looked at the Reports of the Electricity Council of some of the achievements.
There are now 16¾ million consumers of electricity in England and Wales; and, if we add the South of Scotland (which, when I was Chairman, up to 1925, at least, was served by the British Electricity Authority), there are over 18 million consumers of electricity to-day. That figure, of course, excludes the North of Scotland. The revenue for the

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industry last year was £912 million, and there was what I would call a surplus (and it was so called during my period), though it is now euphemistically described as a "balance of revenue", of some £70 million, after meeting huge sums for depreciation and interest.
An instruction was given by Parliamentary Resolution to the Electricity Boards to speed up the development of electricity on the farms and rural premises generally. A promise was given that 85 per cent. would be connected by 1963. But that promise was exceeded, and to-day some 92 per cent. of all the farms which are in any way eligible—some are too far away from the system to make it, by any sort of imagination, economic to serve them—are connected up. I should like your Lordships to think for a second of what that means. In pre-war days, some 3,000 farms a year were being connected to the public supply, either by private companies or by municipalities which had sufficiently large boundaries. That total was raised during my chairmanship—though not due to any effort of mine—to 15, 000 a year; and the price of electricity to the farmers and the farming communities is exactly the same as the Board's charge to their consumers in the various cities and towns and other urban areas.
The policy which was pursued by the electricity authorities in my day was to keep prices down. We believed that prices were rising too rapidly altogether throughout our community, and we thought we had some small contribution to make, as an Electricity Authority, by producing electricity as cheaply as we could and by selling it as cheaply as we could. We had a huge capital programme, and the stage was reached when the Government came along and said, "You must raise more of the capital you require from your revenues". In other words, we were required to engage in self-financing to a much greater extent than was traditional in the industry. We eventually agreed to about half of the total capital being raised from our revenues, and that policy has been continued since by all the Boards.
Noble Lords may remember the White Paper published by the Government which required the Boards to earn something like 12½ per cent. on their net assets. That position was reached last year, so
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that half the total investment comes from the Board's own resources. The remainder comes from borrowing from the Government, on which they have to pay the current rate of interest, which has been as high as 6¼ per cent., and, I rather think, at a particular period, 6¾ per cent., though I am not sure of the latter figure.
Reference has been made this afternoon by the noble Lord, Lord Stonham, to the capital cost of the power stations. Construction costs are going up, as they must go up in response to the various calls upon manufacturers. They went up by 44 per cent. over the ten-year period from 1954 to 1964: but the cost per kilowatt of the plant went down by 36 per cent. This, I think, is a remarkable achievement, and is the result of initiative and of a good deal of courage and boldness in installing untried generating sets—boilers out of all comparison, in size and capacity, with those that had been utilised before—and, by that means, getting the cost down.
The thermal efficiency of the industry, too, has been raised enormously. When I became Chairman it had been, I think, 2019 per cent., or, something of that kind; that is to say, of the heat extracted from the fuel, only some 20 per cent. was being turned into useful energy. Last year, according to this Annual Report of the Electricity Council, the average thermal efficiency was 27-67 per cent. Those of your Lordships who have looked over the Report may have said that this is not much of an increase because the previous year it was 27-44 per cent. These figures can conceal some very dramatic results. In my day on the Electricity Authority a saving of one-tenth of 1 per cent. on our then coal consumption meant a saving of 180, 000 tons of coal a year. With the greatly increased consumption of to-day it means far more than that. In the later days of my association with the industry I heard a chairman use the expression that there were no foreseeable limits to the development of electricity. I know that that sentiment was not shared by the officials of the Treasury who exhibited a pessimism that has long since been falsified.
My Lords, to turn to atomic energy, the noble Lord, Lord Sherfield, has given your Lordships various principles and

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a great deal of the details as to how the Authority is carrying on. I should like to remind your Lordships that the 1955 programme, which was published as a White Paper and debated in Parliament, was based on the premise that by the end of 1965 there would be insufficient coal available from the National Coal Board to provide our power stations with their requirements. Subsequently that estimate was very much revised. But the programme was based on the assumption of an impending coal shortage; and some day or other that shortage must arrive. That was the basis on which it was decided to go ahead with the 1955 programme. And I personally was in favour of that programme, although it could not, as it were, produce any economic results better than those we were then obtaining, or indeed anything like as good as those we were obtaining, from our conventional plant.
LORD SHERFIELD: My Lords, if the noble Lord will allow me to interrupt, I was not so much criticising the size of the programme, or referring to the size of the programme, as referring to the dispersion of effort between different types.
LORD CITRINE: Yes, my Lords, but I am not on that point, although I think I could put another side of the case. The point I was on was this. The first programme was a small one, 1,500 to 2,000 megawatts; that was the 1955 programme. It was received by the general Press almost like a fairy tale. Here was a new fuel coming along just at the time when we needed it, a fuel that was going to resolve all our problems. I knew that in many quarters suggestions were made that in five years' time or thereabouts no more conventional stations should be built; that all should be atomic energy stations. The enlarged programme that came along, it should be remembered, was propounded by the Conservative Government. It was not the programme of the British Electricity Authority or of its successor, the Central Electricity Generating Board. We knew very well that there was an element of risk in any programme of this size—technical risks and also financial risks. But we were told by the Government of the day, a Conservative Government, that they were most anxious for the enlarged pro-
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gramme, that the Cabinet themselves wanted us to go up to 5,000 or 6,000 megawatts; whereas our estimate of the maximum that we could safely produce from the economic viewpoint was some 3,500 megawatts.
I am not giving away any secrets, because all this was stated in the Report of the Select Committee which two years ago, I think, went into the electricity supply industry. The programme, of course, was slowed down subsequently and, as stated by my noble friend Lord Stonham, the target is not expected to be achieved until 1969. I want to say this about the Atomic Energy Authority. They have always loaded the dice against themselves; their estimates have always been on a very conservative basis—and that should please noble Lords opposite. Their expectations were always toned down and, from a promotional point of view, the worst possible case was put forward. A life of twenty years for the station! Neither Sir Roger—when one has sat at a table for five years calling a man "Sir Roger" it is difficult to remember that he is now the noble Lord, Lord Sherfield, and I apologise for that slip—nor anybody can say whether the life of the stations will be twenty years, thirty years or forty years. I have seen estimates of that kind from very reliable sources.
A Lord factor of 75 per cent. has been given for the calculations. Yet your Lordships have heard this afternoon that there are stations doing 87 per cent.—Chapel Cross station and Calder Hall station. Some have for a period of three months been up to 92 per cent. A high rate of interest has always been included in the estimate, higher than was available at the time the estimates were made. And the life of the fuel used, uranium, has always been underestimated. And very wisely so, because in dealing with experimental fuels it was wise to take very careful estimates of the results. But the 3,000-megawatt days which figured the estimates and on which these Magnox stations have been built has already proved to be well below what can be achieved. The Atomic Energy Authority and its officials have no doubt whatever as to the future. They believe—and they have solid evidence for this—that their advanced gas reactor is probably as efficient as any in any part of the world. I hardly like to risk quoting from memory

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the capital cost of that station, but I believe it was in the neighbourhood of £82 10s. a kilowatt. But they are confident that an enlarged station can be built which would be able to generate electricity at 0-4d. per unit.
Then there is the Dounreay fast reactor, now up to its full heat output. I do not think the world will ever realise what ingenuity has gone into the building of that plant. It was a most difficult job. Yet the predictions of the scientists and engineers have been fulfilled. Then they have two other types of reactors. They have the steam generating heavy water reactor which I believe will be a winner. I saw the plans of it, I heard discussions on it and I saw the estimates, and I am very much in favour of it, as I was of the 100 megawatt prototype. Your Lordships have heard from the noble Lord, Lord Sherfield, about the essential character of research. But it is a terrible thing for scientists who have embarked upon some plan for the future, perhaps for several years ahead, perhaps for a decade ahead, to find those plans frustrated by reason of a Government policy which feeds them only from year to year with the capital they desire. You cannot run an industry on that sort of basis successfully. So I hope it will be possible to give in extended measure the capital necessary to carry on an extended research by the Atomic Energy Authority.
So, my Lords, I reach my conclusion. These industries are, all of them, confident and efficient. They are vigorous and they are alert; they are viligant, they are enterprising and they are in competition—that competition which is so dear to the hearts of noble Lords opposite. They have an enthusiastic: belief in the commodity and the service they are rendering to the community. Speaking for myself, the happiest years of my life—and I have had many in other services—were those spent in public service in the nationalised industries.
5.41 p.m.
EARL FERRERS: My Lords, we are greatly indebted to my noble friend Lord Hawke for putting this Motion down and enabling the House to discuss this important, highly technical and complex subject. I am particularly glad that the noble Lord, Lord Citrine, took part in this debate. He says that he is not an expert; but when I know that he was
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Chairman of the British Electricity Authority for ten years and a member of the Atomic Energy Authority for five years, it makes a mere novice, such as I am, wish to regain his seat with quite unprecedented rapidity.
When I first saw the Motion which my noble friend put down, I was surprised at the scope and enormity of the debate which it depicted, because each of the industries which he mentions could well occupy your Lordships' attention for all of one afternoon and evening on its own. But it is right that in discussing the policy for the production of energy as a whole, we should discuss these methods together. I agree with the noble Lord, Lord Stonham, that this question is the basis of all our existence. We talk gaily about increasing productivity and about building new roads, new houses and new factories, and take for granted that the power to light, heat and energise these places will be there for the asking. It is right that it should be there for the asking but it requires careful thought and long-range planning, and we have constantly to be prepared to alter our plans and our predictions if in any way they are shown to be inadequate.
It is necessary to know exactly what we are aiming for in a power policy and exactly what our principles should be. I suggest that, first, we must ensure that there is enough fuel of all kinds to meet the needs of British industry and the domestic consumer as a whole; secondly, that the price of the fuel must be such as not to put our industrialists out of line with their competitors; thirdly, that the supply must be secure, and fourthly, that there should be sufficient supplies to allow the consumer to choose the form in which he wants to take his energy, whether it is coal, gas, electricity or oil. To achieve these principles requires well-founded fuel industries which are modern and up to date in their technique and which are not subject to erratic and sudden changes of policy.
The first thing I would do is to impress upon Her Majesty's Government that, in developing our fuel policy, we should expand on a broad front and encourage every facet of these industries. We may well find that it is dangerous to develop

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excessively one form of power production at the expense of others, by spending too much of our national resources on the production of what looks like, at any one time, the cheapest form of fuel. If one type of fuel or, indeed, one type of production of a fuel were to be unduly cheapened, an excessive demand for this would be stimulated and we should find that much of our national resources was being spent on developing a particular branch of the fuel industry at the expense of the others. This does not mean that every effort should not be made to encourage the cheap production of fuel. But, when we consider the investment to be placed in industry as a whole, we should keep a balance, I would suggest, between the various methods of production and types of fuel, expanding where possible and encouraging new methods, but not necessarily at the expense of the more conventional, and equally not discarding too quickly an industry or method of production within an industry which appears at the moment to be not so economically successful as some of its rivals. At the same time, we must not tolerate out-of-date methods.
Of all the power industries, the electricity industry takes by far the largest proportion of capital investment—some £650 million, of which the taxpayer provides about half. So Her Majesty's Government have a big and loaded interest in the electricity industry. But this enormous amount of capital expenditure is in order to ensure that our electricity supplies are adequate for the future. As the noble Lord, Lord Stonham, pointed out, our capacity is only just within the bounds of the demand—in fact, it is not quite within the bounds. Everyone has the right to expect in cold weather and in hard winter to be able to call for more fuel. Bearing in mind that electricity demand increases by some 10 per cent. a year and that it takes some seven years for a new power station to become operative after the decision to build it has been taken, long-term planning must be accurate and must not fall down.
We have heard a great deal from the Chancellor of the Exchequer of how he is going to review Government expenditure in order to counteract the state of affairs which at the moment exists in the economic sphere. There are a num-
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ber of questions I would ask the noble Lord, Lord Hobson. Do Her Majesty's Government intend to cut the investment programme of the electricity industry? If not, will the noble Lord give an assurance that this will not be cut? What, in fact, are Her Majesty's Government's proposals for the future building of power stations? How many stations are going to be built, when are they going to be built, and where? By what methods are these to be powered? Are we going to see more use of nuclear energy or are we going to continue to see them powered by steam? And, if by steam, how is that to be generated: by oil, by coal or by pulverised fuel?
I was interested to hear the noble Lord, Lord Stonham, say that for future nuclear stations it had not been decided whether to use the British advanced gas-cooled reactor or the American water moderated reactor. And I was delighted to hear the noble Lord, Lord Sherfield, put so clearly the advantages of nuclear energy and of the British system. I should like to endorse very much his remarks when he said that the Central Electricity Generating Board has the duty of providing electricity at the cheapest possible rate, but that this should not be the sole criterion in deciding what type of reactor should be used. If, indeed, the Government decide in the end that the American water-moderated system should be used, I hope that they will bear in mind the possible bridling of research that that decision might make inevitable on those who are already engaged in the designing and perfecting of the advanced gas-cooled reactors.
LORD STONHAM: My Lords, may I interrupt the noble Earl? Nothing that I said should be interpreted in any way as suggesting that the American reactor was going to be selected. Indeed, I indicated the exact terms on which tenders have been invited.
EARL FERRERS: I did not think that for one moment, and I was not aware that I gave that impression. If I did, I apologise. I accept entirely the fact that the noble Lord said that this decision has not been arrived at. The point I am trying to make is that when the Government come to make that decision they should have regard to the fact that production of the cheapest form of electricity is not necessarily the sole

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criterion on which the decision should be taken.
It is expected that nuclear power stations should be able by the early 'seventies to compete in cost with conventional power stations for the production of electricity. As noble Lords have already pointed out, the capital cost of erecting nuclear power stations is far in excess of that of erecting conventional power stations, although the running cost is considerably lower. We have seen in the last five years, since the construction of the Berkeley Station, that the capital cost per kw. of capacity has dropped from something like £177 to £106 at the Sizewell plant. What I should like to know (I do not know whether the noble Lord, Lord Hobson, can answer this) is whether it is anticipated that the capital cost of building nuclear power stations in the future is still likely to decrease on anything like the scale which it has in the past, and whether, when we have arrived at the point where nuclear power stations can compete with conventional power stations for the production of electricity, it is anticipated that the nuclear-powered system will become cheaper, or whether it will remain merely competitive.
In all industries the larger the unit of manufacture the cheaper tends to be the end product. This is so with electricity. There are the vast 500 mw. generating sets to which the noble Lord, Lord Citrine, referred; and, of course, they produce electricity more cheaply than the smaller sets. That is a substantial argument in favour of having them. But when one of these monsters breaks down, the chaos that results is considerably greater than if the set were of a smaller dimension. Therefore I wonder whether the noble Lord can throw any light on what might be expected in the future. Are we likely to see more of these large sets, or are they likely to be smaller—or bigger?
Continuity in supply is vastly important in the electricity industry, as in any fuel industry, and will become more so in the future as industry depends more on electricity and as the consequences of breakdowns become ever greater. One of the greatest causes of failure in the electricity industry is the process of reducing the electricity from high voltage to low voltage. This is of a technical nature. When
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this happens, frequently the fuses tend to blow one after the other—what is technically and rather graphically described as "cascading". This is a problem of some magnitude and is a great cause of the breakdown in electricity supplies. I wonder whether it is possible for more to be spent on research into this particular aspect, so that the continuity of supplies can be more readily available. What I should like to know, also, is what are the Government's plans—if, indeed, they have any—to deal with the situation caused by the fact that many of the underground cables in our big cities, and particularly in the West End of London, are rapidly becoming too small, in view of the vastly increased demand put upon them by consumers requiring more electricity. Is it intended that these should be replaced with bigger cables of adequate size, or is it intended that they should continue to be overloaded, with all the trouble that this causes?
My Lords, these are real problems which the electricity industry has to face, and problems which become the more acute when electricity is compared with any other form of fuel, and particularly with gas. In this connection, I wish to touch upon one very real disadvantage to electricity when compared with gas, and it is one that is best illustrated by two advertisements that one frequently sees, particularly in agricultural papers. One is by the Central Electricity Generating Board which depicts a person placing a pylon in a field or on the landscape and which says at the bottom: "Where would you put it?" The other is issued by the Gas Council, and depicts a field of barley growing quite beautifully, and underneath it says: "Last year a gas main was laid under here". I do not want to labour the point, because it was discussed some three weeks ago, but this is a problem; and I feel that much more money should be spent on research to see whether it is not possible to lay underground cables more cheaply and more effectively. It is done in other countries, and it should be done in this country, if our ever-depleted countryside is not going to become bogged down with a mass of wires. I suppose one cynical observation might be that all praise should be given to the Gas Council for not inflicting upon us a mass of monster black pipes, travelling over our heads about 100 feet high all

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over the country. I hope the Government will do all they can to see that more research is put into laying cables underground.
One of the disadvantages which electricity has is the fact that the capital cost of making gas in the new oil-reforming plants is only 25 per cent. of the capital cost of making electricity. The gas industry, of course, has revolutionised itself from being an almost defunct relic of the Victorian era into a modern, highly efficient, high competitive, highly productive industry, all in a matter of seven to eight years. There is in operation, as has been mentioned already, the very ambitious scheme of bringing Algerian methane to this country; and there are many other possibilities, such as methane from Holland, and the drilling for gas in the North Sea, not to mention the cheapest method of gas production, which is that from oil. At the moment, only about 6 per cent. of our energy requirements in this country comes from gas, whereas in the United States the amount is 30 per cent. So obviously, whilst one does not want to draw too close an analogy, there are vast possibilities for gas to fulfil a large part, and an increasing part, of our energy requirement over the next decade or so. But if gas is to be used on a greatly increased scale, one of the problems that is bound to arise is the question of storage. I hope that the noble Lord, Lord Hobson, will be able to tell us precisely what are the Government's views about underground storage. Will they permit it? Indeed, will they encourage it; and, if so, what will be the scale of the investment?
In all these considerations over the gas industry one must remember one significant fact, and that is that the gas industry has no built-in monopoly of any kind. There is nothing that can be done by gas that cannot be done by some other fuel. This means that it is essential, if the fullest use is to be made of all the potentials open to the gas industry, that the greatest freedom of choice must be allowed in the methods of gas making and in the use of raw materials.
The answer, I should have thought, is that each of these industries, whether gas or electricity should be given a great deal of rein so that they can develop whatever technique suits them best. We hear a great deal about
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planning, particularly from noble Lords opposite. Overall planning is certainly necessary. We must plan what our energy requirements will be for the future. We must plan the investment. But replacing enterprise with planning could well be a disaster, and I cannot help recalling the words in the Labour Party's pamphlet which I thought was rather offensively entitled as Twelve Wasted Years. It said:
"In spite of representation from the coal industry, the gas industry is being allowed to go ahead with the production of gas from oil. These are the complications resulting from making two public authorities compete, when a positive programme of co-operation (for example, siting Lurgi plants on coalfields and distributing the high pressure gas by pipe-line) could satisfy both the nation's fuel requirements and the stability of the industries concerned."
My Lords, I wonder whether that is really the view of the Labour Party now that they have had a few weeks' experience of government. I wonder whether they really believe that it is wrong for the Gas Council to make gas from oil, even though it is cheaper, just because they might be damaging the coal industry by not using the other alternative of coal. I wonder, indeed, whether the new Minister of Technology would not prefer to make a meal of those words, and admit that it is by being competitive that these new processes have been evolved for the benefit of the gas industry and the country as a whole. We cannot afford to have doctrinaire views about essential industries. The main thought should be so to set the conditions that each industry can make the best possible use of the resources at its disposal and give of its best to the nation.
If we are entering a new era where modern technology is to be released to play a full part, I ask the noble Lord, Lord Hobson, to explain what are the Government's views about the production of gas. Are they going to insist that the Gas Council should make its gas from coal, even though gas can be produced at two-thirds the cost from methane, and at less than half the cost from oil? Or are they going to sanction and bless an increased investment in the gas industry to make the best use of the most up-to-date and modern forms of production? These are real problems and I, for one, would be the first to say that they are by no means easy of solution. But they are

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problems on which we in this House wish to have the Government's views, and I hope the noble Lord will not be content to brush your Lordships off with the answer that these matters are under review. The Government must have an opinion, and I invite the noble Lord, Lord Hobson, to give us that opinion.
We want to know what is the Government's intention with regard to capital investment in these basic industries. In this regard I hope that the noble Lord, Lord Hobson, will give a clear and concise indication on one other point of great importance. In April, 1961, the Government published a White Paper entitled, The Financial and Economic Obligations of the Nationalised Industries, in which clear objectives were stated with regard to the finances of the nationalised industries—for instance, that surpluses should be at least sufficient to cover deficits over a five-year period, and that allowance should be made in the accounts of the industries for interest and depreciation on capital. Do Her Majesty's Government adhere to the principles as laid down in this White Paper?
I am not asking these questions of the noble Lord to score a few debating points, but because I genuinely want to find out what the Government propose to do. We have had a change in Government—mistakenly in my view—and we have had new minds put into the top positions: not necessarily be;: ter minds, not necessarily worse minds; but fresh minds. What we want to know is what view these minds have taken, and whether the views are the same as they were when they were in Opposition; for if they are, we are in for some surprises. But it may be that they have been mellowed after a period, even a slight one, of responsibility. But whatever decisions may be taken, we must remember that the results of these decisions will not be made effective over the next year, or the next two years: one may not see them for the next five, six or seven years. Therefore the important thing is that these decisions should be as near right as we can get them.
6.7 p.m.
LORD HOBSON: My Lords, I think we shall all agree that we have had a most interesting and informative debate, and we are grateful to the noble Lord. Lord Hawke, for raising this very important question of a fuel policy, which is
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of paramount importance to the economy of the nation and the wellbeing of all of us. In your Lordships' House we are exceedingly fortunate in having among our Members noble Lords who have had a lifetime of service either in the gas or electricity supply industry. One has only to look back this afternoon at the contributions that have been made by the noble Lord, Lord Wolverton, the noble Earl, Lord Dudley (who has associations with the gas industry), the noble Lord, Lord Sherfield (who was a prominent Chairman of the Atomic Energy Authority) and the noble Lord, Lord Citrine, who was probably the founder of the Central Electricity Board, over which he presided so successfully for ten successive years.
It will be my object this evening, in the time at my disposal, to endeavour to answer seriatim the questions that have been raised—and they are many. There may be sins of omission and commission, but in that event I will write to the noble Lords, and give them, I trust, not an evasive reply but the answer which, though they may not like it, they perhaps require. When we are dealing with fuel and power (and I do not make a political point here) one cannot help remembering that these industries, coal, gas and electricity are very successful nationalised industries; and not even the present Opposition had any intention, while in power, of denationalising any of them. One of the advantages of these nationalised fuel industries, as has been pointed out by several noble Lords this afternoon, is that they are competitive one against the other; and that is one of the reasons why we have such successful fuel industries.
The noble Lord, Lord Hawke, in so far as he dealt with the coal industry, dealt with something—and I am not making a debating point here—which was outside the terms of this Motion. The noble Lord raised certain specific questions on this aspect, and I have been successful, I trust, in getting the required information. But the whole gravamen of his speech was that he was asking for a national fuel policy. It is precisely the intention of the present Government to supply one. But this cannot come about overnight. I think that anyone who is devoid of any political aims would agree that prima facie this is something that is

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absolutely essential and vital to the economy of our country. We shall endeavour to achieve this national fuel policy, but, as I said, it cannot be done overnight. I am very pleased to know that we shall have the support of the noble Lord, Lord Hawke on this policy.
The noble Lord, Lord Hawke, raised one specific query: was the oil position secure? With respect, I think he answered his own question. Apart from the resources that are now known and are operated, there are, of course, vast deposits of oil in another part of the Commonwealth which are largely untapped. We know that they are there, and I think we can say with firmness that the oil position is secure.
The noble Lord was also concerned with over-capacity of power-generating plants. Of course, it depends on what is meant by over-capacity. There must always be adequate spare plant, but engineers may differ as to what it is necessary to regard as spare plant. But with the whole development of the Grid, and the development now of the Super-Grid, the amount of spare capacity which is required is less than heretofore. Certainly, I think it is safe to say that at the present moment there is not spare capacity, because in certain winter conditions we should need every kilowatt we can generate. But the aim, as my noble friend Lord Stonham has pointed out, is that eventually we should have spare capacity which is considered by the engineers to be adequate.
The noble Lord, Lord Hawke, also raised the question of off-peak loading and the question of tariffs. This is a very complicated question, but I shall deal with it. I assure noble Lords that I am not dodging this question, which was also raised particularly by the noble Lord, Lord Ferrier. But I can say straight away to the noble Lord, Lord Hawke, that the question of off-peak tariffs is a matter which is always being considered both by the Central Electricity Generating Board and by the Area Boards.
My Lords, at the outset of his speech, the noble Lord, Lord Hawke, raised the question of coal output. Coal output was 195 million tons for the year ending March, 1964. Future prospects of the coal industry in relation to the co-ordinated
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policy for fuel are being reviewed by the Minister of Power in collaboration with the noble Lord, Lord Robens, and his colleagues. Until the new review is completed it would be unwise to make any predictions about the level of coal output in future years, certainly not as far ahead as 1975, the year mentioned by the noble Lord, Lord Hawke.
I come back to electricity. The noble Lord, Lord Hawke, raised the question of the cost per unit in conventional power stations and the cost at Wylfa. I do not think this figure has been given. I am taking the Wylfa atomic power station, because this is the largest and, we trust, the most modern. The cost per unit at conventional stations is 0-54d. per unit and the cost per unit at Wylfa is 0-68d. It is interesting to note, and I think I ought to give this information here, that the output of Wylfa station will be of the order of 1,180 mw.
LORD HAWKE: Before the noble Lord leaves that point, will he confirm that these figures for Wylfa are, as I believe, based on what is termed the conservative basis of a 20-year life and 75 per cent. availability?
LORD HOBSON: That is perfectly true. I think the noble Lord, Lord Citrine, answered that point. I think we all agree.
LORD HAWKE: I was merely seeking information.
LORD HOBSON: At present, on what is known as ground assessments, it is on the basis of a 20 to 25-year life. They may last thirty years like the conventional station. Quite frankly, the answer to this is that we just do not know. We are in the field of a modern and new science. Let us take pride that it is the British who have developed it. I just cannot categorically answer that specific question and, frankly, I do not think anybody, even the experts, the engineers and the physicists can give a direct answer to it.
LORD HAWKE: The noble Lord has got me mixed up. Nobody is asking the noble Lord to say what the life of these stations is. We are only asking him to say on what life these particular figures are based; that is all; and the noble Lord has answered twenty years.
LORD HOBSON: These things are based on a 20 to 25-year life.
LORD HAWKE: There is a big difference between 20 and 25 years.
LORD HOBSON: I cannot be adamant about this. I am not prepared to be committed, but the noble Lord can take it as twenty years.
I now come to the question that has been raised by the noble Lord, Lord Wolverton, about the types of reactor and, in particular, about the boiling water reactor. The fact of the matter is that at the present moment there is no British made boiling water reactor. On the other hand, the noble Lord, Lord Wolverton, is entirely wrong in saying that the Central Electricity Generating Board have been given permission to import an American reactor. That is not so. The type of reactor that we are to have in the future has not yet been decided. Indeed, the policy of Her Majesty's Government at the present moment is precisely the same policy as was enunciated in April, 1964. I believe it was debated in your Lordships' House in July, 1964, just before the Summer Recess. It is made perfectly clear in paragraph 6 of the White Paper.
What the Central Electricity Generating Board have done—and I paraphrase their words—is to ask for tenders for an advanced gas-cooled reactor and also for a boiling water type reactor. The question of choice has got to be made. Obviously Sir Christopher Hinton, who was then the Chairman of the Central Electricity Generating Board, wanted to be absolutely sure which was going to be the most economic, because it was part of his statutory duty to provide a reliable source of energy to Britain at the lowest possible price. This is a question ultimately of prudence, and this is precisely what is going to take place. Tenders are being called for and a decision will have to be made. As the noble Lord, Lord Sherfield, mentioned, that decision will have to be made in conjunction with the Central Electricity Generating Board and the Atomic Energy Authority, who together will make the reappraisal. But the final decision will be with Her Majesty's Government, and, of course, we shall await the outcome of those deliberations.
LORD WOLVERTON: My Lords, may I interrupt the noble Lord for a moment? I quite understood, because I myself took part in that debate which the noble Lord mentioned, that the boiling water reactor is not made in this country, but I thought that the Generating Board were anxious to try one out, and therefore would ask the British manufacturers to give a quotation for it, which, as I understood it, they would have had to do under licence from American firms. If they had given a quotation for that against the advanced gas-cooled reactor it would, of course, be under licence from America. Is that not right?
LORD HOBSON: That is perfectly true because, as I said a few seconds ago, we do not make a pressurised water reactor. Therefore, we should only hope—and I am sure it would be the policy of Her Majesty's Government—that it would be made here in Britain under licence. I only hope that a time will rapidly approach when we ourselves have a successful pressurised water reactor.
EARL FERRERS: My Lords, before the noble Lord leaves that point—which is rather important—as he said the final decision would be taken by Her Majesty's Government, can he give an assurance that the cheapness of the production of electricity will not be the sole criterion by which the final judgment will be made?
LORD HOBSON: In matters like this, the Government will obviously have to take into consideration every factor regarding the reactor; its cost, whether it is made in Britain, and the expected ultimate price per unit. I think those are the main points that were raised by the noble Lord, Lord Wolverton.
I now come to the questions raised by the noble Lord, Lord Sherfield. He is, of course, a very eminent ex-Chairman of the Atomic Energy Authority, and he certainly made a very authoritative statement. In looking at The Second Nuclear Power Programme the Government will obviously take into account every consideration which he has raised, particularly the questions of safety. We must, I think, pay a tribute here to the work of the Atomic Energy Authority, in conjunction with the Central Electricity Generating Board, in regard to the safety of modern atomic

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power stations; touch wood! we have had no major trouble whatever, and this is a very fine record.
As to what the programme will be, the White Paper has stressed that The Second Nuclear Power Programme will have to be flexible. Obviously, we cannot go ahead with new nuclear power stations until such time as we have assessed which is the most suitable reactor, whether advanced gas-cooled or pressurised-water. The noble Lord mentioned the question of the relations between the Boards. I know there was a great deal of talk in the Press about alleged trouble between the Atomic Energy Authority and the Central Electricity Generating Board. Frankly, I do not think that many people believed this; but of course it made a good story. When these questions are being discussed in an atmosphere such as that, I always feel like saying that there is complete harmony only in the graveyard, and there is not much life there. Here very important technical questions had to be discussed. But relations between the Central Electricity Generating Board and the Atomic Energy Authority at the present moment are most amicable. I do not think paragraph 6 of The Second Nuclear Power Programme can be said to be a compromise settlement; it was nothing of the sort. It was a settlement which was agreed as the noble Lord, Lord Derwent (I think on July 20), made abundantly clear when we addressed your Lordships' House.
The noble Lord, Lord Sherfield, made a very important point about using Capenhurst for enriching uranium. I think that is something which will have to be borne in mind. I am sure Her Majesty's Government will pay particular attention to that point. If there is to be a run down of fissionable material for war purposes, and if we can use the plant for enriching uranium for use in more advanced reactors, that is of considerable advantage indeed.
I come now to the points raised by the noble Lord, Lord Ferrier. He referred to paragraph 64 of the last Report of the Electricity Council, which dealt with the effect of bulk supply tariff and the high cost associated with the expansion of their capital programmes. This arises
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from the policy of the previous Government when they set financial objectives for the nationalised industries in the 1961 White Paper on Financial and Economic Obligations of the Nationalised Industries. This was issued in the form of a Command Paper, No. 1337. The nationalised fuel and power industries, for which the Minister of Power is responsible, will continue to work for financial objectives agreed from time to time between the Government and the Board.
Then the noble Lord raised the question of what was being done in case we had a very severe winter. For example, should we have auxiliary generating stations? I am very pleased to inform him that the Central Electricity Generating Board are at the present moment well ahead with the programme for gas turbines to cover these emergencies. It will be essential for these difficult periods should we get a very severe winter. I think that answer will satisfy the noble Lord. It is a very important point and it is one on which action has already been taken; this is not a question of hope deferred.
I now pass to the question of rural electrification. My noble friend Lord Citrine saved me a lot of work, because I think he answered the noble Lord. It is running now at 92 per cent., which is a marvellous achievement, and even in the most difficult areas of Merseyside and North Wales a figure of about 89 per cent. has been reached. This is a wonderful achievement of which the C.E.G.B. can be very proud indeed. I think we ought to pay a special tribute to the Area Boards who deal with this as a matter of top priority. There are going to be very few areas without electrical power within the next year.
LORD FERRIER: My Lords, I agree that the record is very remarkable and excellent. I think that some parts of Scotland have the most extensive rural electrification in the world. What I was worrying about was the cost to the consumer, now that saturation has nearly been reached. Is proper attention paid to the social side of this matter, and the last few connections to be made, which are the most difficult?
LORD HOBSON: Unquestionably. I can categorically answer that such considerations are continually being looked

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at. The noble Lord dealt with the question of tariffs, and raised the matter again by way of interjection. At the beginning of his speech he really put in a plea for higher tariffs, because he was questioning the wisdom of having non-base Lord stations to come in at peak periods. He was arguing whether they were really necessary and what effect they had on the cost. That is as I understood the noble Lord, and I took a full note. Obviously, we want the most equitable tariff as between industrial and domestic consumers. One cannot be dogmatic about this question—conditions vary from region to region because of geographical positions—but with the transmission of electricity of high voltage it has become of less and less importance. I can assure noble Lords on both sides that the question of tariffs for electricity—particularly for off-peak periods, and that is when we want people to consume eleotricity—and the question of space heating storage is continually being looked at.
It is not an easy problem. It was a problem in my early days in municipal electricity. I am sure the noble Lord, Lord Wolventon, is perfectly well aware of this. It is not dodging the issue and ducking for cover when I assure noble Lords of that, and I am prepared at any time to face a debate on electricity tariffs. I must stress the fact that this is a most difficult problem indeed, because of the nature of the industry where it has to meet this heavy demand at peak periods only. If it is coupled with high domestic demand, the cost really is increased. It is a question of alternating the Lord factor. If we can get more people to go in for space heating storage and so reduce the peak load, the question of tariffs will always be to their advantage.
LORD FERRIER: My Lords, the noble Lord misunderstood something I said, but we need not worry now; we can talk about it on some other occasion.
LORD HOBSON: We shall have a nice, pleasant chat about the whole problem.
Now I come to the question raised by the noble Earl, Lord Dudley, on priorities in regard to nationalisation and the question of gas. He said that gas was the most economical form of power. It is, in certain places, but not all the time. So far as the future of the gas industry is concerned, I think that the previous
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Government, and certainly the Gas Council, seeing that these nationalised boards are free from political interference in day-to-day management, have done a valuable job. There has been the construction of the two tankers to import methane, the purification plants at Canvey Island, and to-night we can probably look forward to burning gas from Algiers.
So far as the question of importing natural gas from Holland is concerned, I must ask noble Lords not to be too pressing on this matter, because negotiations are at the present moment taking place. Obviously, if the Gas Council can get Dutch gas at a price which is worth looking at, they will. They are progressive. Their sales since 1950 have gone up considerably. It is a dynamic industry, and any source of supply of natural gas that we can use, we shall use. Of course, we cross our fingers and hope that the explorations that are now taking place in the North Sea will show that there is a continuation of the natural gas field from Groningen in Holland.
I now come to the speech of my noble friend Lord Citrine. I should like to pay tribute to his speech. He gave us a short but comprehensive history of the industry. It is one that he may look back on with great pride. It has certainly been a success story, and in his retirement he must, I think, feel proud. It is an industry that has done well for the nation. It is a progressive industry. So far as conventional and atomic stations are concerned, I think we can say that we are just in front of any other country. I do not think that any other country has the edge on us, and this is largely due to the drive of the original Chairman of the Board, Lord Citrine.
I now come to the specific questions—they were almost frightening—of the noble Earl, Lord Ferrers, who wound up on behalf of the Opposition. I shall be able to answer some of them, but not all. I can give him a categorical assurance that we are keeping the same investment programme—namely, £673 million for electricity and £100 million for gas. As to what the future will be for next year, considerable deliberations are taking place at the present moment. It is quite early in the lifetime of even this dynamic Government to say precisely what the figure of vast sums of capital expenditure are

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going to be in the industries. No doubt there are ways and means open to the noble Earl from which he can ascertain as time goes by if he thinks we have been rather slow in coming forward. Noble Lords will no doubt take the usual Parliamentary steps to find out. My intervention here is to give the noble Earl a categorical assurance that it is the status quo ante that prevails at the moment. That is not to say that it will continue as such, because obviously we have certain hopes.
He dealt with the methods of power. There are no prejudices in these matters. I cannot tell him what the conventional stations are going to do—whether they are going to burn oil, pulverised fuel or coal. That really is a question of day-to-day management for the Central Electricity Generating Board. It may be that at certain stations in the North or in Scotland it is more advantageous to burn coal. There may be certain other stations where oil is preferred. This is entirely a question of day-to-day management, and I certainly cannot give the noble Earl an assurance of that kind, any more than I could with regard to the future atomic programme, other than what I have stated.
He said that he hoped that there would be a decrease of cost for atomic power stations. That is already being brought about. The capital cost per kilowatt of Wylfa will be less than that of the existing atomic power stations. The lower we can get the capital costs the more competitive will they become with the conventional stations. But I must enter a caveat here. It is not fair to say, or to give the impression, that only the atomic engineers are making headway. The development that has taken place in steam pressures and the temperatures of superheat in my time has been tremendous; and we might even, to use a phrase which I detest using, get a break-through from the conventional engineers. Those are all things for which, in a progressive industry, we have always to be on our guard.
Then the noble Earl dealt with the question of breakdowns and having all the eggs in one basket. The fact of the matter is that with the super and high Super-Grid there is less chance of getting
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a flatout if the 500-megawatt set goes down. Judging from what happened in the past, from one's own experience, the tendency is bound to be for sets to get larger. It is not so many years ago that Battersea was the show-place of Europe on 100, 000 kilowatt sets—and somebody told me they had chromium plated rails there because there were so many visitors coming to see it. I think one can safely say that the tendency will be that we shall have to keep to 500, 000 kilowatts for a little while, but that, progress being what it is, output will get larger.
The noble Earl dealt with the difficult question of cascading. That is a problem which occurs quite frequently in times of bad weather, where short-circuits occur on the switch gear, the switches drop and certain sections are put out; and of course, the higher the voltage stepped down to 240 volts domestic supply, the more difficult it becomes to ascertain which one has crept out. But this is a matter which the engineers are studying. So far as strengthening the distributing network is concerned, this is going on all the time. We know that there are certain black spots in the Metropolis, but the London Electricity Board is doing what it can, allowing for the capital resources at its disposal, to strengthen the distributing network. This arises from the terrific demand for electricity which is continually taking place.
I have endeavoured to answer most of the points that have been raised. If I have not succeeded, certainly my right honourable friend or myself will write to any noble Lord on any point that we may find, having read the Official Report to-morrow, we have omitted to deal with. I want to conclude by saying a word on the future of atomic stations. This is an interesting subject. It is something to which (one almost hesitates to use the words) fashionable attention is paid to-day. Point one is that tenders are due in February. Point two is the type of reactor, whether advanced gas-cooled or boiling-water type, that will be decided. An assessment will be made by the Central Electricity Generating Board and the Atomic Energy Authority and the Government's decision will be final.
I think the whole House was pleased to have the assurance that should there be an interim period, so far as the work

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of the consortia is concerned this question is being actively considered. On the other hand, all consortia are hopeful. I fail to see why they should not secure contracts from abroad, because our atomic power stations, which have been proven, are first-class. The difficulties are certainly not those of design; they are certainly not due to the failure of the skill of our engineers or technicians; and if we can export atomic power stations abroad nobody will be more pleased than the consortia, on the one hand, and Her Majesty's Government, on the other.
I will conclude by congratulating the noble Lord, Lord Hawke, for initiating this most interesting and informative debate. I am sure that even those noble Lords who know the industry from A to Z cannot have helped but glean some information from listening to the debate to-day.
6.40 p.m.
LORD HAWKE: My Lords, I should like to thank "the usual channels" for their permission to bring forward this debate at this time, and noble Lords for taking part. We have heard a major speech from the noble Lord, Lord Sherfield, which I hope will be studied at home and abroad where there are chances of export orders for atomic energy plant. With those few words, I beg leave to withdraw my Motion.
Motion for Papers, by leave, withdrawn.

NATIONAL INSURANCE &c. BILL
Brought from the Commons on Friday last, and printed pursuant to Standing Order No. 44A; read 1a.
FINANCE BILL
Brought from the Commons, endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act, 1911; read la, and to be printed.
EDINBURGH CORPORATION ORDER CONFIRMATION BILL
Brought from the Commons; read la, and (pursuant to the Private Legislation Procedure (Scotland) Act, 1936) deemed to have been read 2a and reported from the Committee.