FUEL AND ENERGY POLICY

HL Deb 13 April 1967 vol 281 cc1417-514

3.58 p.m.

LORD WYNNE-JONES rose to call attention to the fuel supply of the country and the need for a national policy for energy; and to move for Papers. The noble Lord said: My Lords, I should perhaps say at the outset that I do not claim to be an expert on fuel, I am certainly no economic expert, and consequently I am not concerned with trying to put before your Lordships a policy. I am not trying to tell the Government what should be done, but rather to call attention to the need for a policy. Your Lordships will remember that it is now about 15 years ago that the Ridley Committee reported, and the Ridley Committee, which in my opinion did a magnificent job, was set up at a time when we were desperately short of fuel in this country and when energy was not available in large enough quantity either for industrial purposes or, as we shall all recollect, for domestic purposes.

The Ridley Committee, in its Report, mentioned that it considered that it had been set up to provide the general aims of a national policy; to promote the best use of fuel and power and to meet in full the demands of the community for the different fuel and power services when those services are sold at prices which closely correspond to the relevant cost of production and distribution; to provide for export fuels (this may to-day sound somewhat strange) on such a scale and of such types as can be sold abroad with most gain for the country; to promote the maximum economic efficiency in each use of each fuel, and to encourage the use for particular services of the fuel which gives the best returns on the resources consumed. They stated that they were working at a time when we were short of supplies. As they said: At the present time, fuel and power supplies in the United Kingdom are not sufficient to meet in full all demands at ruling prices. This shortage exists in different measure in coal, oil fuel, gas and electricity supplies. In this Chapter we survey present shortages and consider future demand prospects on present and foreseeable trends.

As your Lordships will recollect, the Ridley Committee proposed that there should be a considerable increase in the production of coal; that we should certainly aim in the immediate future at producing 220 million tons of coal a year, and that this should rise to 250 million tons of coal a year. To-day it seems strange that it was only 15 years ago that, on perfectly reasonable grounds, such a policy was put forward, and I am afraid that the consequence of the changing circumstances from that day to now have meant that people have assumed that all planning for fuel must be vain and that one is unlikely to be able to produce a policy which will be of any use.

I remember quite clearly that in the period from five to ten years after the Ridley Committee Report one did not dare mention the words "fuel plan", because everyone who had any knowledge at all of the fuel industry realised how far in error, in inevitable error, were the proposals that had been put forward by the Ridley Committee. Yet we have to plan. Even if we are unable to foresee the future with exactness, we nevertheless are always faced with the problem of planning for the future; otherwise we shall live entirely from hand to mouth. We all, I am sure, appreciate that a plan must be formed. The question is, how does one form a plan? What are to be the guiding principles of this plan?

As I think we must all realise, the failure of the plan of the Ridley Committee arose primarily because of the changing pattern of our energy demands and our fuel resources. At that time, 90 per cent. of the energy of this country was produced from coal. To-day, it is about 65 per cent.; and an estimate which I have seen, admittedly produced by a rival industry, the oil industry, but nevertheless I think not an unrealistic one, is that by 1975 coal will be supplying 40 per cent. of our energy. This changing pattern naturally means that any plan that was based then, and any plan that is based to-day, upon an existing ratio of the fuel resources will inevitably prove in a short time to be erroneous.

I am sure we all appreciate that the pattern of change is nothing new. From time immemorial, we have been moving from what one might term the naturally available sources of energy, such as wind and water, and in some cases hot springs and muscular power, all of which are under relatively poor control, although sometimes they are abundantly available. We have been moving from this through, first of all, what one might refer to as the sources of energy which exist in the form of vegetation or in the form of other organic matter, all of which can be, and have been, used—wood, for example. We have moved from this on to the fossil fuels; which are still the main source of energy, both in this country and in the world as a whole. Now we are moving on to a further field—nuclear energy.

This change, which has been going on throughout the whole recorded history of man, has been accelerating in recent years, and we can be quite certain that any change of this type always accelerates as technology advances; consequently, what might have taken one, two or three centuries now takes one, two or three decades, and may quite soon be taking an even shorter period of time. So inevitably we are faced with a rapidly changing pattern of fuel resources.

But, despite the change in the pattern of fuel resources, there is one thing which does not change, except in the sense that there is a growth which can be approximately predicted; that is, the overall consumption of energy. If we look at the consumption of energy over the last fifty years or so, we shall see that in this country, for instance, overall the consumption has been rising steadily—something of the order, I believe, of about 3 to 4 per cent. per annum over the whole period.

The pattern of distribution, however, has been changing enormously. I have some figures on the change since 1900. In the year 1900, our total consumption of energy was 162 million tons of coal. Nowadays we refer to this as "coal equivalent", because it is not always coal; but in those days it was almost entirely coal, because it was 161 million tons of coal and 1½ million tons of oil, measured as coal equivalent. In the year 1920 the consumption of coal had increased to 180 million tons and the consumption of oil to 3.1 million tons of coal equivalent, giving us a total of 183 million tons. In 1938, immediately before the last war, coal had remained fairly steady—it was at 176 million tons; but oil had increased to 12.4 million tons, and our total had increased to 189 million tons of coal equivalent. In 1950, coal had gone up to 201 million tons; oil had increased to 22 million tons coal equivalent, and the total was 224 million tons.

In 1960, coal was beginning to drop—it was down to 196 million tons. There was a maximum between 1950 and 1960. Oil had gone up from 22 million tons to 66 million tons; and nuclear energy was then just beginning to push up, and was up to 2.7 million tons. I should say that in the statistics one practically always finds nuclear energy lumped together with hydro-electricity. This is not very serious, because the amount of hydro-electricity is relatively small compared with nuclear energy. So we had a total consumption of 264 million tons. In 1965, the last year for which figures were available, coal consumption was down to 185 million tons—that is practically back to the position in 1920—and oil was up to 103 million tons, compared with 3.1 million tons in 1920. There one sees the big change. Nuclear energy was up to 8.3 million tons, and natural gas was just beginning to come in, at the equivalent of 1.2 million tons. This gave a total of 297 million tons. The estimate which I have seen made from the oil side—it may be slightly optimistic from the oil point of view, but on the whole it is not unreasonable—is that by 1975 40 per cent. of our energy will come from coal, 43 per cent. from oil, 13 per cent from natural gas, and 4 per cent. from nuclear energy, a total of approximately 330 to 340 million tons of coal equivalent.

It is interesting to note that in the period since the last war the increase in our energy supply has not been as great as the increase in our production. Our gross national product over the years 1951 to 1964 increased by something of the order of 42 per cent. In the same period the increase in production of energy was only 23 per cent. This country is rather different from most other countries in this respect. On the European Continent the energy co-efficient, as it is sometimes referred to—that is, the ratio of the rate of increase of energy to the rate of increase of the gross national product—is approximately a figure of one, whereas in this country it has been running at something like 0.6 to 0.7. This is rather remarkable, and I have seen no exact explanation for it.

My own suspicion is that in the past we were extravagant of energy and that over the last fifteen years or so there have been considerable economies in the use of energy which have helped us achieve this very favourable ratio. It is rather an important matter, because your Lordships will appreciate that in order to attain this increase in the gross national product we should have to have the same rate of increase in energy production as has been common on the Continent, and we should need to undertake a vast investment programme—much vaster than it has been, even though it has been considerable—in our energy industries. Therefore, one has to realise that economy plays a very important part in energy policy, and there is a great deal to be said- for the proper and economic use of energy.

That is really the main theme of what I have to say. If we are going to consider a policy for energy, we have to look at all our different sources of energy, and we have to consider how they are to be worked together into an overall policy for energy. We have to look at the consumption of energy and ensure that that consumption is reasonable and not extravagant. I am sure that many noble Lords in this House, and I know many others, have commented on some of the competition between certain national Boards which have been vying with one another in trying to persuade the consumer to use more and more energy. It is quite sensible to persuade people to use more energy if the result of the use of that energy is to improve production, or to get sensible improvement in living conditions, but it is madness to do it if the only result is to waste energy instead of using it effectively.

If one looks at the overall position, one finds, first of all, that this country is largely dependent upon importation for its sources of energy, save in the case of coal. Coal—and, we hope, natural gas—will not mean importation of energy. This means, of course, that both coal and natural gas are of great value and importance to us. It is surprising to notice, when we come to look at the oil position (I speak now not as an expert on oil, but as one who has tried to find out what he can about the facts of the case), that it is probable that we in this country use our oil rather better than the Americans do. The oil that comes into this country is largely distilled here. We have our own refineries, and the balance of the refinery product corresponds very largely to the natural composition of the oil which comes into the country. In consequence, we get our oil cheaper than the Americans. I know that this is not the actual result to the consumer, but that is due to taxation.

The figures which I have relating to America show that in regard to petroleum about 22 per cent. appears as fuel oil, whereas in this country over 40 per cent. appears as fuel oil. This is the more natural result of a straight distillation of petroleum. The Americans get a much smaller percentage of fuel oil and convert much more into gasoline because they want the gasoline for their motor cars, and they carry out processes at the refinery which are expensive. I am told that the cost of an American refinery is very much greater than the cost of a British refinery because of these other processes which have to be carried out in America. We shall undoubtedly find that, as time goes on, we shall have to do more in the way of changing the composition of the balance from our refineries. This inevitably means that we shall have to install more expensive equipment at refineries, and this will certainly be reflected in the cost of oil.

When one looks at the gas industry, one sees that there has been a dramatic change over the last ten years. Whereas gas was perhaps beginning to be regarded as a waning industry, it is to-day an extremely buoyant industry and one that is doing a magnificent job. I feel that this is the case for the reason that they have got away from the use of coal and turned to the use of oil, naphtha, and imported methane—natural gas. Because of this, the gas industry has been able to reduce its prices of production considerably, and consequently has made itself extremely competitive. The gas industry to-day, as everyone knows, is looking forward to a vast supply from the North Sea of gas which will enable it to move forward even more rapidly. I think it has been developing at the rate of 9 per cent. per annum for several years now, and expects to go forward at at least that rate, if not more rapidly, with natural gas.

It is, however, important to remember what the real position is with regard to natural gas. I have no more information than any other Member of your Lordships' House, but from what I have seen it is fairly clear that if we are able to get a rate of production of natural gas corresponding to, let us say, 4,000 million cubic feet per day, and if there is under the North Sea, which is very doubtful, a field of the extent of the Groningen field in Holland (which, with the field in the Sahara, I think I am right in saying, is the biggest gas field in the world, with a total capacity of about 40 million million cubic feet—I shall not say "billion", because nowadays one is misunderstood if one uses that word), we will use up this field in about 25 years. So one can see that however big the North Sea gas field is, it is no permanent answer to the fuel problem. It is something which will help us in the immediate future, but it cannot possibly give us a guarantee for ever or for even 100 years of fuel resources. That is one point.

There is another point: we do not know—at least, I do not think we know—what is the right way to use the North Sea gas. It is possible that the right answer is to put it immediately into the gas mains and to supply it to the domestic consumers all round the country. If this were done there would be the cost of conversion of all existing burners, because the calorific value of methane is approximately 1,000 B.T.U. a cubic foot, whereas the calorific value of ordinary town gas is about half that value. Methane will not burn in the ordinary burner, and therefore there would have to be replacements of all the burners. This is a fairly simple problem, but it is not a cheap one. That is one way in which we could use the natural gas, and indeed it is the way in which the Gas Board wants to use it.

But there is another way. If one looks at the chemical industry to-day, one finds that it uses a good deal of hydrogen. It uses hydrogen for a variety of purposes. One of the most important is the preparation of fertiliser, ammonia, and this is a very simple thing to do. It has been done now for about fifty years or so, and I.C.I. do this extensively at Billingham. The cheapest source of hydrogen to-day is methane. At the present time the chemical industry derives its hydrogen from naphtha and it uses, I believe, something like 4 million tons a year in order to get hydrogen. If one instead were to get it from natural gas, and if one were to use natural gas for certain other purposes for which naphtha is used in the chemical industry, and if in addition one were to use the natural gas as a supplier of heat and energy for those processes—that is, still keeping it inside the chemical industry—I am informed that, at the present rate of consumption, this would take up something like 860 million cubic feet of natural gas a day.

The production that is talked about from the whole of the North Sea for some years ahead is around 2,000 million cubic feet, so one can see that it would be possible to use practically the whole of the natural gas for at least the next five years for the chemical industry. This is a possibility. It does not answer all the problems of the chemical industry, because it also has to have higher hydrocarbons. Methane, which is a very valuable hydro-carbon for making hydrogen, and is also a good hydro-carbon for burning and giving energy in that form, is a pretty hopeless hydro-carbon for general chemical synthesis. It happens to be one of the most stable of our hydro-carbons, but because there is only one atom—if I may bore your Lordships with this—of carbon in a molecule of methane, you cannot really do much with it without splitting it up, whereas if one takes the higher hydro-carbons one is able to carry out synthesis from these, and they are very valuable in the chemical industry for other purposes. But methane still remains of unique significance as a source of hydrogen. Here is a balance which must be struck between the possible use of natural gas industrially and the possible use of natural gas as a general domestic fuel. I do not give the answer; I merely pose the problem. There is a problem which has to be tackled.

Another problem which arises, again connected with the chemical industry, refers to fuel oil. As I have said, fuel oil is used quite extensively, and at the present time it is quite heavily taxed. I think I am right in saying that the actual cost of fuel oil for industrial purposes is of the order of 2.7d. per therm. But the price at which it is supplied is more like 4d. a therm (although I know that various users can get special rates by special negotiation) and the difference is made up of tax. Now this tax has been justified, and I think it was first imposed in order to ensure that fuel oil did not displace coal. I suggest that this is the wrong way to do the job. I quite agree with taking steps for the protection of the coal industry, but I do not think that the right way to do it is by putting a tax on fuel oil because that distorts the pattern of pricing.

I may be wrong here, but I have a suspicion that part of the fight to-day over the price of natural gas is due to the fact that fuel oil is priced too high; and if fuel oil were being sold at its natural price I believe that natural gas would have to be sold at under 2½d. a therm. I may be quite wrong, but my suspicion is that the whole battle over natural gas pricing is linked with—I do not say it is directly the result of—the price of fuel oil. If this is true, then it makes the case for getting rid of the tax on fuel oil stronger still. In my opinion, it would be much preferable, if one is wanting to do something for the coal industry, to do it directly and avowedly rather than to do it through this peculiar method of taxation, which, as I have said, seems to me merely to distort the pricing arrangement.

The next important matter in connection with our energy supply is the production of nuclear energy. Here a great step forward has been made with the development of the advanced gas-cooled reactor. With this development we are now in a position, so we are informed, to get energy at a price which is going to be something of the order of 0.3d. per therm. At least, that is the figure that one sees quoted. However, a Question about it was put in another place the other day, and it is interesting to note that this figure of 0.3d. per therm is not borne out, apparently, by the latest statements. The Minister of Power was asked: … what is his estimate of the cost of generation of electricity for the latest type of nuclear power station planned and for a conventional power station, respectively. Mr. Freeson, replying, said: Allowing for cost increases since the Dungeness B tender, the total cost of generation for early A.G.R. stations is expected to be about 0.5d. …"—[OFFICIAL REPORT, Commons, 2/3/67, col.145.] That is a different figure from that previously put forward by the atomic energy people.

If one is using nuclear energy, one of the troubles is that the capital cost of building the original station is so great that one's estimate of how long a station is going to last determines very much what the cost of production is going to be. Moreover, unless the station is run at near its maximum load it is not being run efficiently, and so the question of the load is very important there. But the present cost for a conventional station is estimated to be between .5d. and .6d. per therm compared with this figure of .5d. per therm for the A.G.R. This makes it clear that we are not really yet in a position in which we can state definitely at what time the production of electricity by nuclear energy will be cheaper than its production by a conventional coal-fired station. This, to my mind, makes it extremely important to continue the proper development of coal-fired stations, at least over the next 15 years. If we do not do that, then we run the risk of finding that we have put a great amount of money into nuclear energy stations without a clear certainty that they will be more economical than the coal-fired stations.

Your Lordships will remember that at the end of the last war the average thermal efficiency of a coal-fired station in this country was of the order of 22 per cent. The thermal efficiency of the most recent stations is, I believe, something like 35 per cent. In other words, there has been a sensational improvement in the efficiency of our ordinary conventional stations over the last twenty-odd years, and this has made a tremendous difference to the whole cost of our energy programme. Incidentally, this was one of the reasons why the original estimates for what is called the first run of nuclear energy stations was so far wrong, and why it has turned out that, instead of being cheaper than coal, they have been more expensive. It was due to the fact that the estimates were all made upon the basis of the relatively inefficient coal-fired station of 20 to 25 years ago.

LORD STRATHCLYDE

My Lords, I wonder whether I might interrupt the noble Lord for one moment in the most interesting speech he is making. If the Government were to remove the tax on oil, would not the position of nuclear stations be even worse than he is suggesting?

LORD WYNNE-JONES

This could very well be. I thank the noble Lord for this point. It is one more example of the danger of distorting the pricing by the taxation system.

My Lords, there is another side of the fuel problem to which I should wish to call attention. I admit that it is not a major one, but in view of the setting up of a nationalised iron and steel industry I think that it is essential that the coking position should be properly examined. I have had some connection with the coking industry for some years now, and the position is that we still produce too much coke in too small stations; that it would be very much better to make our coking batteries bigger than they are. Furthermore, there is not a lot of sense in shovelling coke around the country when nowadays the main use of coke is in the blast furnace. Therefore there is a great deal to be said for producing the coke in the main centres of iron and steel production; and if this were done one could probably set up a relatively small number of major coking units in order to cope with the iron and steel industry's requirements.

Incidentally, efficiency in the use of coke has improved sensationally in the last 25 years. I think I am right in saying that it was only about 20 years ago that one required a ton and a quarter of coke for every ton of iron. To-day, it is being obtained for something like 13 cwt. This is a sensational improvement. I do not suppose we can go a great deal further, but there is hope that we may continue along these lines. Nevertheless, it is pretty clear that, even with an improvement in efficiency in coke use, we shall continue to need something of the order of, I think, 15 million tons of coke a year for the iron and steel industry, and this means that we shall have to coke about 25 million tons of coal.

The reason why I think this is the time when the matter should be considered is that most of the existing coke ovens will have reached the end of their natural life by the early 1980s. Many of them will have reached the end of their life in the 1970s. It takes some years to design a coke oven. It might be imagined that it is a very simple job. It is true that some of them are extremely simple. About 15 years ago I had the delight of going into what I think was the last Beehive oven in this country. It was a most fascinating experience, to be able to walk inside a Beehive oven which had only just had its charge of coke taken out. One could walk and stand inside it. Then the coal was pushed in, it was luted up, and it began to burn the coal and go ahead all on its own. It was always considered wasteful because it did nothing with the by-products, but it produced the finest coke I have ever seen. Nevertheless, it is now out of date. In the same way, the ovens that were built 15 years ago are out of date from the present point of view. Consequently, now is the time to be planning the next range of coke ovens; and, I would suggest, bringing the steel industry under one control supplies another reason why now is the time to plan it, for, in my opinion, the coke ovens ought to be no longer under the Coal Board but under the Iron and Steel Board, as that is the logical place for them.

I have tried—I am sorry to have wearied your Lordships—to give you a run through the energy picture. I explained at the start that I had no solution, but I should like to put forward one or two proposals. One proposal I have already made; that is, that the method of differential taxes on these fuels should disappear. I am not now referring to a revenue tax like that on petrol—that is rather a different matter—but to the tax on fuels which are protective taxes and which should, I think, disappear. My next suggestion is that there ought to be—and I am sorry to put it in these words—a Ministry of Energy. One might say that there is already a Ministry of Power. There is a Ministry of Power; but I must admit that I am not satisfied that that Ministry is sufficiently high-powered. I am making no comment on individual Ministers or anything like that, but upon the structure of the Ministry. I do not believe that the Ministry to-day is well-enough equipped scientifically to be able to deal with the problem of devising a proper energy policy for this country. It may make itself so; in which case, well and good. I use the term "Ministry of Energy" only because I want to stress that emphasis must be put upon the proper devising of an energy policy.

My Lords, we now have a nationalised coal industry, a nationalised gas industry, a national electricity industry. We shall have a national steel industry, and, of course, nuclear energy, in its control, is also national, although the actual production of units is not. In all this we have a pattern which, I believe, has been highly successful. I would make no criticism of the way in which the Boards overall have functioned. What I would criticise is the lack of co-ordination between them, and that matter ought to have been the business of a Ministry that was prepared to be not merely negative but absolutely positive in its proposals. I suggest that there is one gap in this. We could not have a nationalised oil industry because we do not produce oil; but I believe there ought to be a national oil board which could control licensing in order to see that the amount of oil products coming into the country and the balance of refinery products is right for this country. That is all I have to say on this matter. I beg to move for Papers.

4.44 p.m.

THE EARL OF BESSBOROUGH

My Lords, we must all be grateful to the noble Lord, Lord Wynne-Jones, for having put his Motion down on the Order Paper. And who more appropriate could have done so? His wide and distinguished academic career as a chemist, and now as Pro Vice-Chancellor of Newcastle (and he was also, I may say, although he did not mention it himself, Honorary Director of the Coke Research Laboratories) makes him highly qualified to speak, and he certainly impressed your Lordships by his wide knowledge and his convincing method of expression. At all events, I strongly contest his claim that he is not an expert. We may be fossils in this House, but we discuss fossils extremely well.

I am particularly glad that the noble Lord has raised these problems of fuel supply and described to us the changing patterns, for it is now well over two years since your Lordships discussed these problems, on a Motion by the noble Lord, Lord Hawke, who I believe will also be speaking this afternoon. Therefore I think this is the first occasion on which we have had the opportunity of discussing the Government White Paper, Fuel Policy, which I think the noble Lord did not mention directly. This was published in October, 1965, and we now have the opportunity of looking at it and of discussing what has happened since. Incidentally, during this period there seems to have been no debate in another place on this subject, so that I hope that our debate will prove doubly useful.

To consider first this White Paper, I should say at the outset that it does not appear to provide any detailed policy framework; therefore its sins, if it has any, are more those of omission than of commission. However, it does, in paragraph 10, certainly endorse the Conservative approach to the nationalised fuel and power industries which was laid down in our own White Paper in 1961. It rejects the possibility of further protection for coal and, instead, advocates the further development of economic pits. It recognises that the East Midland and the Yorkshire pits are in fact subsidising the other regions, and it holds out the hope that there might be a better correlation between prices and costs of the various coalfields and, of course, the various coals.

It recognises the likelihood of the continuous although rapid growth of the oil industry; but it does not go into any details regarding the potentialities of North Sea gas, to which the noble Lord referred and about which there have been a number of allegedly inspired leaks—I do not know whether they were actual leaks—or inspired reports. I shall ask the noble Lord whether they were inspired—particularly those in The Times and Evening Standard on Monday last. As I say, I should like to ask the noble Lord, Lord Stonham, whether he is in a position to confirm these reports, particularly that the price of gas to millions of homes using it for central heating could well come down by 6d. a therm in the 1970s, and whether the Government are, in fact, insisting on a price of roughly 2½d. a therm. I do not know whether the noble Lord will also be able to give us any indication—although this is changing the subject to some extent—of what the Labour Party Committee are likely to report on ways of nationalising North Sea gas, and what his views are about that. Perhaps the noble Lord, Lord Blyton, will also be able to illuminate us on this.

But, my Lords, I am glad, in so far as the White Paper is concerned, that it accepts, in paragraph 100, the value of competition between the electricity and the gas industries, and I am very happy that to this extent a Socialist Government endorses the value of such competition. But, that having been said, there are also areas where the White Paper can be criticised. For example, there is no mention of diversification by the fuel and power industries, which I think is important; and the White Paper is also complacent about the way in which ministerial oversight of the industry operates. Even if I do not agree with everything the noble Lord said this afternoon, I think there is a weakness here. I might observe that by all accounts the present Minister seems to have little knowledge of developments within the National Coal Board. There have been indications of that of late.

There is also the implicit acceptance in the White Paper of the Ministry of Power's responsibility for the social problems of the run-down of the coal industry, and I wonder whether, from the strictly economic point of view, this acceptance is wise. Also I might add—I am skipping through the White Paper rather rapidly—that the "Conclusions on coal" in paragraph 54 now look highly optimistic in the light of the North Sea gas finds, and I wonder whether the noble Lord would agree with me about this.

Although the White Paper recognises the dangers of over-selling domestic consumption of electricity—and I think that several of your Lordships would agree that this probably has been done—the recommended solution, in paragraph 96, that: … electricity tariffs should take full account of the extra cost to the economy of using direct-acting electric space-heaters instead of other means of heating is hardly more than a very generalised pious hope. Then, while admitting the anomaly of imported oil being taxed but imported methane being duty free, the White Paper appears to advocate as a solution the imposition of new duties on methane rather than freeing oil from the present duty—and I was immensely interested in what the noble Lord, Lord Wynne-Jones, had to say on this point. I wonder whether the noble Lord, Lord Stonham, will be able to comment on our remarks on the matter of the oil duties.

What is perhaps the White Paper's most obvious fault, apart from its being out of date, is its abstract and generalised approach, even if most of its abstract generalisations may be broadly in line with Conservative thinking. The general criticism of the White Paper must be that it adds little or nothing to the sum of our knowledge about the intentions of the Ministry of Power. Where it draws attention to problems, such as over initial charges in paragraph 99, it proposes no solutions. Furthermore, such forecasts as it makes of the industries' development are derived from the work on the National Plan which, without going into any detailed criticism of the Plan—which would be easy enough to do—we must all now confess has been overtaken by events, to put it mildly.

The White Paper itself admits that the guide-lines laid down in Section V on the objectives of fuel policy may conflict with each other, but it gives no indication at all as to which of these five objectives—they are on page 13—the Government regard as the most important. The objectives in themselves are all self-evidently desirable—so much so, I might add, as to be almost vacuous—and it would indeed be difficult for anyone to quarrel with them in the generalised form in which they are presented. In fact, the White Paper's proposals are in my view too vague to be assessed or attacked in any detail.

I have mentioned some of the specific areas where we may disagree with the White Paper's approach. However, I should particularly like to ask these questions of the noble Lord. First, what has actually been done since the publication of the White Paper to implement its unquestionably worthy objectives? Secondly, should the Government not provide more detailed estimates of the likely developments of the industries, so that those interested in fuel policy may have material to work on. The uncertainty must surely place the industries concerned in a very difficult position.

While I agree that too many detailed policy proposals are obviously dangerous (we have heard from the noble Lord how difficult it is to make estimates in all these fields) is it not fair to ask for at least a few indications as to the direction of Government thinking? The Government have announced that they are producing a fuel policy review. Should not this be published as soon as possible to give the public a more detailed picture of the Government's thinking on such questions as North Sea gas utilisation, electricity investment and the future of the coal industry? We have been waiting quite a long time for this review which has been promised to us. Will the noble Lord also comment on the articles which I mentioned earlier in The Times and the Evening Standard? Are the Government really using what The Times describes as the iron fist with the Gas Council and the oil companies regarding the price of North Sea gas? Also, may I ask whether these were in fact inspired "leaks"? We are always complaining in your Lordships' House about Government information being "leaked" before it is discussed in Parliament, and some of your Lordships have been very critical about the present Government's disrespect for Parliament on these occasions. I ask most sincerely whether these reports were inspired or not.

Still on the subject of gas, and North Sea gas in particular, while the short-term benefits to our balance of payments may be slight, in the long term they could amount to several hundreds of millions of dollars per annum. At the present time I think I am right in saying that the United Kingdom uses 1,000 million cubic feet of gas a day; but, as Sir Henry Jones, the Chairman of the Gas Council, said recently, it is not unduly optimistic to expect that reserves sufficient to support 3,000 million cubic feet may be discovered in a very few years, and that the industry's present plans will be developed to handle as much as 4,000 million cubic feet a day. Surely this will occur only if a satisfactory price is paid to the producers, who will then bring forth the necessary supplies, and thus afford maximum benefits to the consumers and the economy.

If the Gas Council, and ultimately the Minister of Power or the Government as a whole, are, shall I say, parsimonious, they will quickly realise that the majority of oil companies engaged in exploration may have equivalent or better investment prospects elsewhere. Might they not well have to cease exploration? Britain stands on the threshold of great and exciting benefits associated with the development of a new source of energy. She cannot afford to throw away the advantage of this immense potential. I am sure that no oil company wishes to exploit the consumer. Likewise no Government, for political or other reasons, should risk holding back further exploration by insisting on too low a price.

Another point I might mention is that if the Government meddles too much in the price of gas to its own advantage by forcing the price down by edict, there are other well-known countries, for example in the Middle East, who might feel at liberty to do so also. They would feel that the could easily impose a larger contribution to themselves which would automatically raise the price of oil in this country. It has been argued, I think by more than one expert in the matter, that electricity generation has been a pampered industry in Britain and that diversion of investment resources to the gas industry could bring major economies and drastically scale down electricity's massive expansion plans. It was argued particularly, I think, in an article by Mr. George Wansbrough in the Statist in November of last year. He maintained that electricity's capital expenditure should not be sacrosanct. He pointed out that domestic and commercial use of electricity between them now absorb over 20 per cent. more publicly produced electricity than industry. I have the breakdown figures here but I will not go into them this afternoon. Does the noble Lord consider that this is economically sound policy from the country's point of view?

It is interesting to note that we are planning to increase our generating capacity very much more than Germany and France put together, despite the fact that these countries together plan twice as great an increase in the industrial consumption of electricity. I have already mentioned the use of electricity for heating purposes. It is now clear that we have developed this to an extent which is not paralleled in any other country. I wonder whether it should continue to be the policy of the electricity generating industry to favour the domestic consumer. I am sorry that my noble friend Lord Hill of Luton is no longer with us, because, as chairman of I.T.A., he would no doubt have some interesting views on domestic consumption. I wonder whether we ought to continue to encourage this domestic consumption to the extent we have done, and whether we should not, perhaps, draw in our horns to some extent. In the past, the gas industry has never been able to reduce charges to anywhere near present-day marginal costs. It has never had the margin of surplus revenue to do so.

At all events, I would ask the noble Lord: would it not be wise to postpone new orders for generating plant until, say, 1969, at the earliest? I put this merely as a suggestion. Should not the Government also announce revisions in electricity tariffs for domestic supply and, at the same time, introduce new gas domestic tariffs? I gather from Mr. Wansbrough's article that his aim would be to spread the present electrical investment of about £3,000 million for the years 1967 to 1970 as far into the '70s as possible, and that if we did so the annual saving from 1968–69 onwards could be at least £400 million a year. There seems to be a strong argument for pressing the Government to save, rather than to waste—a line of criticism which could apply in several fields of the present Government's expenditure. However, I do not wish to add too much Party political fuel to the flames in this debate on fuel policy. No doubt other speakers will be stoking the fires later. I hope that the noble Lord who is to reply will be able to give us some indication of the Government's policy regarding capital expenditure in the electricity industry, which is vast by any standards.

Finally, I should be most interested in any comments he may care to make about the use of atomic energy for electricity generation, with particular reference to the new advanced gas-cooled reactor, to which the noble Lord, Lord Wynne-Jones. referred and about which we have heard so much, and which it is believed will generate electricity more cheaply than what I may call fossil-fuelled stations of light water reactors. I wonder whether the noble Lord still considers that this claim holds good.

When I was in Washington recently I paid my regular call on the Atomic Energy Commission at Germantown, and my friends there were drily—and indeed humorously—ironical about the C.E.G.B.'s choice of the advanced gas-cooled reactor. How could a British Electricity Generating Board choose anything other than a British reactor? I may say—and I think your Lordships will be glad to hear this—I jumped down their throats at once. I replied that the C.E.G.B. were a hard-headed group which would certainly not be biased in favour of any particular reactor merely because it was made in Britain. They were just as liable to say that an American boiling-water reactor would do the job as effectively, as B.O.A.C. might say that for certain runs they had to order American aircraft. I hope that my American friends accepted this argument. At any rate, they believe that the A.G.R. is a good reactor: I was able to get that from them. Despite its high capital costs, I think that we are backing the right horse here. And I can assure noble Lords that during my recent tour of South America I extolled the virtues and advantages of the A.G.R. in all the countries which I visited. However, if coal gets cheaper—and I think that the noble Lord, Lord Blyton, will agree that it could—will the A.G.R. retain its estimated advantage?

I have burdened your Lordships long enough. I am happy to say that my noble friend Lord Redmayne, who has much greater knowledge of the industry than I have, will be dealing in detail with the coal industry later. May I say how grateful I am to the noble Lord, Lord Wynne-Jones, for putting down his Motion. May I also say how eagerly we await the maiden speech of the noble Lord, Lord Jackson of Burnley, who is better known to us as Sir Willis Jackson. I am sure that in the course of the coming months and years he will become well known in your Lordships' House, to which he is a most valuable addition. I have read and heard him on many occasions on the subject of scientific and technical manpower, and he is bound to make a useful contribution to debates on these and kindred problems.

I hope that the noble Lord, Lord Stonham, will be able to answer some of the questions that I have put to him this afternoon. Within limits, I agree with the noble Lord, Lord Wynne-Jones, that we need a national policy for energy; though I would not perhaps agree that the Ministry should be too high-powered. In a sense it is surprising that a Socialist Government have not imposed such a national policy by further nationalisation. The present policy seems to me to be neither Conservative nor Socialist. The ensuing muddle means, I am afraid, that fuel policy is just another department in which the Government are failing not only their own Party, but the nation as a whole.

5.8 p.m.

LORD HENLEY

My Lords, we have heard two speeches which show how extremely complex this problem is, and during the rest of the afternoon we shall be hearing other speeches on the same lines. I want to discuss the problem from a different angle, one which, I am afraid, because of the number of distinguished speakers who know so much about fuel, may get left out—that is, from the angle of the distribution of fuel, particularly in its relation to land use. If I devote my speech to this aspect of fuel policy, I hope that I shall not be accused of forgetting the most important fact about fuel—that is, that there is a direct relationship between the increase per head in our use of fuel every year and in our productivity. In pointing out some of the problems facing us in the distribution of fuel, I am not forgetting that its economical use is central to the whole argument.

Nothing has made for the squalidness of certain aspects of our life more than the way in which we sell petrol. I feel that there is no good reason why a petrol pump should be any uglier than any other kind of pump or why advertisements for petrol should be bad. Nevertheless, there is a proliferation of filling stations—I think this is partly due to the Government's rather curious relationship with the oil companies—and there is a proliferation of advertisements, which are self-defeating. There is a sort of mess about the whole business of selling petrol which gives one a feeling of the utmost squalor.

The United Kingdom is a small country, and if we are not careful we can easily wreck it in the course of our winning and distribution of fuel in a sort of headlong rush for a short-term gain. So, first of all, it seems to me that in deciding on their fuel policy in relation to land use one of the first things the Government must do is to decide where they are going to put these nuclear power stations. They will need a great deal of water. Have there been consultations with the newly formed Water Resources Board? Or are they going to manage without the vast amount of cooling water?—because it may be possible to devise some way of using this waste heat in a way which has not yet been properly done.

Next, need these nuclear power stations always be in places like Dungeness? There may have been a debate in your Lordships' House when the first A.G.R. was prepared. Here you have a case in which something of the greatest importance, from the point of view not only of amenity but of biology and so on, had to be set on one side because it was felt that this was the only possible place for a nuclear power station. Need that always be so?

Then we have the problem, which has been aired in The Times this last week, at Abingdon. Perhaps I should remind your Lordships that what has happened there has happened in many other places. A nationalised industry, in this case the South Eastern Gas Board, wishes to put up a gasometer in the middle of the town. The local planning authority, the local authority, the local amenity societies and the local inhabitants all think that this is unwise. But the South Eastern Gas Board, unlike most other bodies, is not subject to planning permission, and can, as has been pointed out by one of the correspondents in The Times, ride roughshod over other people's wishes and, indeed, over proper planning, in a way that is really outrageous. I think the Government must set a good example with regard to this sort of thing, and not allow nationalised industries or similar bodies to be completely without control in this way.

The same applies, to some extent, to pylons going across the country. We have had one small concession in this respect, in that they are now painted a curious kind of green, which I suppose is meant to make them harmonise with the country. This sort of thing is not good enough. One has to think a good deal more than that. In making use of land for the distribution of power, whether for electricity, gasometers or nuclear power stations, one has to consider matters of this sort with the greatest attention to their importance. I think there is a tendency to say: "Oh, well, this does not matter. We must have power, and the rest can go by the board". As I have already said, I hope that I shall not be accused of forgetting the fact that we must have power, but I would urge the Government, in formulating their fuel policy, to bear these matters relating to the use of land very much in mind.

One of the most interesting and difficult problems in this sphere is on top of us now. What is going to be the effect on the North-East Coast of the new natural gas plant? Obviously, industrialists will go to the North-East, because gas will be cheaper there than it will be in the rest of England. But they may overplay this, and go there in larger numbers than that situation will warrant. This will have an extraordinary effect on the North-East Coast. Again, what will the Government decide in regard to the processing plants needed for the natural gas? It was first suggested that natural gas could be piped, without any transformation, direct to consumers all over England. I think it is now suggested that probably a certain amount of processing will need to take place. And whereas, again, it was suggested that this processing could take place near the industrial sites, it is now suggested that it will have to take place on the coast itself.

Here we have on the North-East Coast of England, just where natural gas is due to come in, long stretches of coast which are, and ought to be, scheduled as places of natural beauty and which should not be developed. But what is the Government's attitude to this going to be? Concurrent with this, there are new suggestions for what I think is called Humberopolis and the new dwarf city. All of these can be tied up in the normal way with the new development of natural gas. But if they are left uncontrolled, we may have a mammoth slum. I cannot urge too strongly that the Government should bear this in mind in deciding on their fuel policy.

It is not only amenity that is important; there are other aspects of the winning and distribution of fuel. There is the question of physical danger, and that of physical damage. I do not think I need go further than to mention the "Torrey Canyon". This is one problem the Government must have in mind in deciding on their fuel policy. On the law of averages, I think it is certain that an accident of this kind must happen again, and probably on a larger scale, unless something is done. The number of tankers sailing to this country will increase all the time, and sooner or later another such accident will happen. I would suggest that the same thing is likely to happen with regard to tankers, whether going by road or rail. Sooner or later there will be an explosion in an urban area, and a fire on the sort of scale which, in its way, will be as shocking to the public conscience as the Aberfan disaster has been. What happened at Aberfan is another aspect of the winning and distribution of fuel and energy, and shows how much thought and care has to go into any fuel plan that we are to have.

With regard to the actual fuel side of the plan, I only have one thing to say, and it relates to what I have been saying about land use. The first thing to be done with regard to the new natural gas is to decide at what price it is to be sold. The noble Lord, Lord Wynne-Jones, put forward some interesting thoughts about this. Until the Government have made up their minds exactly what price is to be charged for this gas, the rest will not fall into line. The whole thing stands or falls on the price they charge for the natural gas.

This discovery of natural gas has totally revolutionised the whole problem, but I hope that consideration will not be given only to how cheaply we can get this gas. It will be the cheapest fuel we have, and should remain so. But cannot something from the returns be set on one side from the point of view of amenity, so that we do not foul the land with processing plants and gasometers, merely because this would help us to get the cheapest and most convenient form of fuel? There are other considerations. At any rate, as I say, there cannot be a fuel policy until the Government have decided this one central point.

Lastly, I would refer to one point on which I disagreed with the noble Earl, Lord Bessborough; and that was his hope that any new Ministry of Power would not be too powerful. I rather take the opposite line. It seems to me that, whoever is going to be the Minister in the Cabinet in charge of fuel and energy, he is going to carry weight which will make some of his more traditionally important-looking colleagues, such as the Chancellor of the Exchequer and the Home Secretary, seem almost small. A great deal of what we do in the next few years will be determined by what the Ministry of Power says and does. For that reason, I should like to see this Ministry made as powerful as possible. I would go further, and say that I hope the Ministry of Power and the Ministry of Technology will be amalgamated. They could perfectly well have separate Ministers of State to deal with the two aspects, power and technology. But all power industries will be undergoing such rapid technological change, and one wonders whether in the future this split between power and technology might not lead to duplication of effort, and, indeed, political competition between Ministers in their capital programming.

I do not want to discuss aspects of fuel policy, except in so far as they touch on where I am interested in them; namely, land use. But if we are to have a Ministry of this kind, which will deal with the kind of problems I mention, it must be a very powerful Ministry, even having a National Energy Board for advice and other matters of that kind which Boards undertake. I think it should be almost as powerful as it very well can be. My Lords, I have nothing more to say. I have said what I have said about land use because I thought that this aspect might be left out. I beg the Government not to put it on one side, but to consider it as one of the most important aspects of fuel policy.

5.23 p.m.

THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE, HOME OFFICE (LORD STONHAM)

My Lords, I join with other noble Lords who have spoken in thanking my noble friend Lord Wynne-Jones for introducing this debate, for the broad survey with which he opened it, and for the forward-looking views which he expressed. Like the noble Earl, Lord Bessborough, I decline not to regard my noble friend as an expert, and I thank him for an extremely interesting and erudite speech, which had an added interest for me because of some things I disagreed with in his conclusions. But I am glad that my noble friend emphasised the need for an energy policy, and distinguished this from a fuel policy.

The Government have never doubted the need for a national fuel or energy policy. Within a year of taking office, as the noble Earl, Lord Bessborough, reminded us, we published a White Paper which set out a co-ordinated framework of policy. The noble Earl seemed to be in two minds about the White Paper. He said, on the one hand, that it seemed to embody Conservative thinking; then he came to the conclusion that our policy was neither Socialist nor Conservative—which some people might think was just about right. But I would remind him that, despite thirteen years of continuous office of the Party opposite, this White Paper marked the first time any Government had set out a co-ordinated framework of fuel policy.

From six or seven years' experience, I know that it is usual in power debates in your Lordships' House for noble Lords to express the claims of the particular sources of energy of which they have most experience. This is entirely understandable and extremely useful. My own task, however—and it is a very heavy one—is to present a comprehensive case from the standpoint of the responsible Minister; in fact, to survey the whole fuel economy and strike the balance between the various sources of energy which will best serve the interests of the nation.

In the course of that survey I shall do my best to answer the main points which have been raised so far, leaving my noble friend Lord Winterbottom, when he comes to wind up, to answer any which I do not cover. And these will include the very interesting suggestion of the noble Lord, Lord Henley, with regard to land use in respect to fuel production. I am bound to say that as I listened to the earlier part of his speech it reminded me of the inevitable experience we have at the Home Office whenever we want a new prison, detention centre or borstal. Everyone agrees that we should have it, but people are unanimous in saying, "But not here". That is the great problem we are up against when we come to have in mind the considerations which the noble Lord very properly put forward.

I should like to deal with the suggestion of my noble friend Lord Wynne-Jones that the Ministry of Power was not well enough equipped scientifically to devise a satisfactory energy policy. The total technical staff of the Ministry of Power is some 680—over one-third of the total staff; and of this 680 about 350 are qualified scientists, engineers and technologists, and their number is fives times greater than the number of administrative staff of graduate status.

LORD WYNNE-JONES

My Lords, can my noble friend explain the discrepancy between the figure he has just quoted and the figure given recently in the Blue Book published on the relations between universities and industry, where the number, apparently, of scientific officers employed by the Ministry of Power is given as 47?

LORD STONHAM

My Lords, most certainly. I am sorry that my noble friend should have fallen into that error. The number of 47 scientists is the number employed by the Ministry of Power research establishment, the Safety in Mines Research Establishment. The Ministry of Technology have more than ten times that number of research establishments, and their total number of technologists is 806. It is a sobering thought, Lord Henley may think, when one considers the suggestion of adding together the 806 scientists from the Ministry of Technology and the 680 from the Ministry of Power. It must be an enormous and most powerful concentration.

My noble friend will recall that in 1961 the Committee presided over by Sir Solly Zuckerman said that the Ministry of Power was one of the Departments whose responsibility was overwhelmingly scientific and technological; and I think, on the figures I have quoted, the staffing more than reflects that responsibility.

I hope that it will be convenient if I begin my survey by stating the objects of fuel policy and the review on which the Minister of Power is now engaged. Although the pattern of fuel supplies must be geared mainly to the requirements of fuel consumers, Her Majesty's Government consider that it is our function to see that national considerations, which individual consumers would not otherwise take into account, are brought to bear through fuel policy. We are concerned not only with the pattern of fuel supply in relation to such broad considerations as adequacy and security of supply, fuel costs and prices, but with the balance of payments, the technical progress and efficiency of the fuel industries, and also with social considerations as they affect the fuel industries themselves and the community at large.

I am bound to say that, listening to my noble friend Lord Wynne-Jones, and some parts of Lord Bessborough's speech, it seemed to me that they were not looking at the national considerations as a whole, still less in particular at social considerations, which I think they must consider in this important industry. The single-minded pursuit of any one of the objectives of the fuel policy, for example cheap fuel, would not necessarily be the best policy for the nation if we thereby prejudiced the attaining of other objectives, such as the security or adequacy of supplies. This is important. I hope that noble Lords, whatever their own particular views as to the advantage of one form of energy over another, will have regard to the fact that the Minister of Power and Her Majesty's Government must look at this picture as a whole. That is the first element of an energy policy. The balance of advantage between possible alternatives will, of course, change from time to time, so that the policy can never be static, as was so clearly demonstrated by my noble friend at the beginning of his speech. The Minister of Power must plan ahead, but flexibly: his policy must be one which can be adapted to the trend of events, to technological change in the fuel industries, to changes in the balance of supply and demand, and to the discovery and development of new sources of energy.

The story of natural gas underlines the wisdom of this. When the White Paper was written, the existence of North Sea gas in commercial quantities was still uncertain; it is now abundantly established. In 1965, when the White Paper was published, nuclear power had only just been proved likely to become fully competitive as a source of electricity; to-day we know it will. The plans for streamlining and modernising the coal industry which were then set in train have gone forward. But with coal, too, the forward path has not followed quite the course then foreseen; a year ago the industry's manpower losses soared to a rate which seemed, for a time, to threaten its ability to supply its markets.

Now we know differently, but these were some of the main elements of change which led my right honourable friend to set in hand, shortly after he took office, a new and comprehensive review of fuel policy. Such an exercise, conducted under rapidly changing circumstances, inevitably takes time, and I am not able this afternoon to give your Lordships any firm conclusions from the review or even, in answer to the noble Earl, the date when it will be published, for the simple reason that the Ministry is still at the stage of measuring and evaluating the vast array of information which has been fed into it.

I should like to say a little about the way in which this work is now being carried out. The review is centred on a statistical exercise undertaken in full collaboration with the fuel industries from which the Ministry is constructing a number of possible pictures of the fuel economy in the 1970s. This statistical exercise is breaking new ground. The discovery of natural gas has given us a new and substantial source of indigenous fuel and this, added to the promise almost, indeed, the certainty, of nuclear power, has inevitably meant a discontinuity in the trends of fuel consumption. Moreover, at the moment we are still not certain how much gas will eventually be available to us from the North Sea or what its price will be. For these reasons the new review is having to examine a wide range of assumptions and to assess the probability and consequences of several possible outcomes, including their different implications for costs and prices, for manpower and capital requirements, for the balance of payments, and so on.

The assessment of each combination of assumptions involves considerable detailed work. On this occasion the work has had to be done by conventional methods because, in the time available, it was impracticable to prepare even a simple computer model to assist in their examination. But even with the relatively crude methods the Ministry are using on this occasion, the review represents a step forward in economic analysis which will enable policy to be looked at against the background of a series of comprehensive pictures of the fuel industries taken together.

LORD WYNNE-JONES

My Lords, will my noble friend forgive me for interrupting him, because it is an important matter? Can he tell us whether the model to which I understand he is referring now, covers the whole of the energy problem, or covers—or attempts to cover—simply the incidence of North Sea gas?

LORD STONHAM

No, certainly not, my Lords. I was just coming to that point. I hope my noble friend will feel that I shall answer all these points in due course, and any which I do not cover will be answered by my noble friend Lord Winterbottom. We propose to make an even bigger advance in economic analysis for the future. The Ministry, again in co-operation with the fuel and power industries, is in the process of developing an integrated set of computable models of the complete fuel sector of the economy. When fully developed—and it may take a year or two—the new integrated model will provide a much fuller understanding of the inter-action of the various factors relating to supply and demand for the various fuels and will enable a much better assessment to be made of the effects of possible courses of action.

I wonder whether I may take noble Lords—who probably know as much as I do about "models" in the sense that I have used the term—into my confidence, so that they may learn with me about them. What we are talking about is a mathematical simulation—

THE EARL OF BESSBOROUGH

Econo-metric.

LORD STONHAM

—where computers are used. After the scientific and technical staffs have gathered the enormous amount of information, it is, as it were (within a framework which is devised, again by scientists and technicians of the Ministry) fed to computers. The Ministry staff ask the question and the end result will be something which will provide an understanding of the interaction of the various factors relating to supply and demand for the various fuels, and will enable a much better assessment to be made of the effects of the possible courses of action. One of the great difficulties (and I must emphasise this again) to be overcome in constructing such a model is that it must be fully flexible, and capable of reflecting changing circumstances, otherwise, it will rapidly become out of date and of very limited value. A mathematical model, however sophisticated, will not give us all the answers. But it will provide us with an important additional tool for use in the continuing review of fuel policy.

I do not want to leave your Lordships with the impression that we regard economic analysis—or indeed fuel policy—as ends in themselves. They are the means of examining and moulding the fuel economy to changing opportunities and national needs, and of ensuring that the development of each of its constituent parts is co-ordinated into a coherent whole. We are not engaged in a mere theoretical exercise. Hand in hand with economic analysis will go a detailed reexamination of the physical plans and future prospects of each industry.

Perhaps I may now say a little about each of the primary fuels beginning with natural gas, one of the fossil fuels to which Lord Wynne-Jones referred. It is now little over two years since drilling first commenced in the North Sea. In that time 52 wells have been drilled; ten of them started this year. We have set a very fast pace. Results have come more quickly than we could have hoped for. The concentration of effort in the North Sea is probably greater than in any other exploration area in the world. The financial and technical resources of virtually the whole of the international oil industry have been brought to bear on the problem in the North Sea. British enterprise, both private and public, is playing a full part. The Gas Council has from the beginning had an important stake in the search.

THE EARL OF BESSBOROUGH

My Lords, the Labour Party have made certain suggestions which seem to conflict completely with that. I entirely agree with the noble Lord; it is so international that it certainly could not be nationalised.

LORD STONHAM

My Lords, I think the noble Earl said that the Labour Party (and I do not know to which arm or limb of the Labour Party he is referring) has not yet published this Report. I think it is a little premature to ask me, a Minister, to pronounce on a paper which is not official, and which has not yet been published.

The National Coal Board, which already has options to participate in licences held by Gulf Oil and Allied Chemical, has announced that it is joining forces with another leading American enterprise, the Continental Oil Co. In practice the exploration will cost a great deal more than the present total of £100 million, and on top of this must come still heavier expenditure on production facilities and pipelines. As a result of this intensive exploration effort, at least four and possibly five commercial gasfields—not just holes in the ground, but gas fields—have been discovered. Already one pipeline has been laid from the first field a distance of 45 miles to the shore, and we are hoping that a second line, which will bring gas a distance of 35 miles, will be laid this summer. We are now convinced that the North Sea will produce at least 2,000 million cubic feet a day by 1970 or soon after. I know my noble friend quoted 3,000 million cubic feet a day, and in the article to which the noble Earl referred it said 5,000 million. Speaking responsibly, I am saying what we are convinced can be produced by 1970 or soon after. This would then represent a little under 10 per cent. of our total energy requirements. It is a national achievement of great significance to have secured within two years the certainty of such a substantial indigenous contribution to our energy supplies.

As to the pricing of natural gas, the noble Earl asked me about these two excellent newspaper articles, and I assure him at once that my right honourable friend the Minister of Power has no sort of responsibility for either of those articles. There have been no official gas leaks. Indeed I think the noble Earl, with all his experience, would have credited us, if we had a leak, with leaking a little more precisely than these two articles. One article talks about the Government deciding that they should be paid no more than "roughly 2½d. a therm". That is not very accurate or precise. Another article quoted the Shell spokesman as saying that no price has been fixed at all. That is the Evening Standard article, to which the noble Earl referred.

THE EARL OF BESSBOROUGH

My Lords, I am very glad to hear the noble Lord say that. But there has been a very generally accepted feeling among informed people in the country that there was a leak. I do not know whether it came from the Ministry of Power or where, but there has been a leak. These articles are too well-informed, too precise, for one to be happy about this. I hope the noble Lord will look at it again to see what happened, because I am rather well informed on this point and I think I might be able to help him. But I would not say anything more in your Lordships' House.

LORD STONHAM

My Lords, we may one day know how well informed the noble Earl is when the decisions are finally published. All I am saying at the moment is that I hope the noble Earl will accept my assurance that so far as my right honourable friend and his Department are concerned there was no leak, and that he will also accept my assurance that the price at which gas is to be supplied is still under discussion. In the first instance it is a matter for negotiation between the oil companies and the Gas Council. But in view of the noble Earl's obvious interest, I would point out that my right honourable friend has made clear his view that, in the interests of the national economy, the price should be as low as possible consistent with a reasonable return on the producers' investment and encouragement to further vigorous exploration. This remains the Minister's policy.

It is not just a question of settling the price, but all the complex and interconnected provisions of the gas supply contract, which in turn affect the economics of the operation for both sides. Both parties have an obvious incentive to reach a satisfactory conclusion as soon as possible, and there has been no unnecessary delay. Meanwhile, plans for developing the fields and bringing the gas ashore are going forward, and the continuing negotiations will not delay the planned introduction of natural gas. My right honourable friend has had discussions with the Gas Council and some of the producers in order to inform himself of the difficulties facing them, and to put before them considerations of Government policy. There have also been technical discussions with some of the companies concerned to elucidate more fully the relevant considerations as they see them. The Minister hopes that negotiations will now proceed to a satisfactory conclusion.

My noble friend Lord Wynne-Jones made some very interesting observations about the utilisation of natural gas or, perhaps I might put it, the absorption of these large supplies. Of course, there must be a period during which natural gas supplies are built up, both off-shore and on-shore, but we hope to make it as short as is consistent with orderly and sensible development. There are two main requirements to be met if we are to succeed. First, we have to provide, on time, the physical facilities necessary to transmit the gas to where it can be distributed to consumers; and secondly, to develop the markets to absorb these amounts of natural gas. Initially the supplies available, let us say in 1970–71, will be at least double the present average daily demand for gas in the United Kingdom of roughly equivalent to 1,000 million cubic feet of natural gas. To bring into use twice that amount over the next four years or so would mean a more rapid build-up of natural gas supplies than has been achieved in any other European country, but we believe that the potential benefit is such that it is right to be ambitious.

My noble friend Lord Wynne-Jones gave some very interesting information about the possible use of natural gas for the production of hydrogen, as feedstocks in the chemical industry, and as a source of energy in the chemical industry. I noted what he said about their possible consumption. These matters, with major industries like the chemical industry, the steel industry and others, are being investigated, and none of them will be neglected. Apart from this the gas industry itself will be a major consumer of natural gas. My noble friend spoke about striking a balance between industrial uses of natural gas and those for the domestic consumer. That, of course, is one of the objects of the review and of continuing policy.

The gas industry will consider this as a primary fuel, because coal is no longer a contender as a feedstock for new gas-making plant. Before even the prospect of large supplies of North Sea gas, the gas industry was turning over to the more economic oil-based processes of gas-making. Natural gas will thus displace oil rather than coal in gasmaking. Three ways are being examined in which the industry would use natural gas; first, gas reforming plants to make town gas; secondly, direct supply to consumers who are now receiving town gas (this would require the conversion of their appliances) and, thirdly, there is direct supply to new industrial loads. Incidentally, it does not look as if the Liberal Party has much interest in power!

Because natural gas has twice the calorific value of town gas, consumers' appliances have to be converted before they can operate satisfactorily. If all consumers were converted to direct supply, the estimated cost of conversions, including all associated expenditure, would be about £30 a consumer or some £400 million in all. These are matters that we have to bear in mind. No final decisions have yet been taken about conversion, but the gas industry is undertaking a number of pilot schemes.

The noble Lord, Lord Henley, mentioned a pipe-line. I have mentioned that the Algerian gas pipe-line, running from Canvey Island to Manchester and Leeds, already links eight of the twelve Area Gas Boards and will form the backbone of the natural gas transmission system. It will be connected to coastal landing points by feeder lines. The first of these is already being built. There are plans to link the remaining Gas Boards with this backbone system, but I cannot give a specific timing for the supplies at the moment. The value of natural gas to development areas is recognised and will be taken into account in the programme.

I turn now to another field where this country has been ambitious: the field of nuclear power.

LORD STRATHCLYDE

My Lords, before the noble Lord moves on, may I ask this question? He talked about various possible consumers of natural gas. Is natural gas going to be made available for the firing of boilers, or to the Central Electricity Generating Board, or is it to be denied them?

LORD STONHAM

My Lords, perhaps the noble Lord will allow me to deal with that when I come to electricity, as I intended to do in any case.

It is only ten years since the first nuclear power station in the world, was opened at Calder Hall in Cumberland, giving Britain not only a "world first" but a lead in the field of nuclear electricity generation which we have never lost. We now have over 3,300 Mw. of nuclear plant in service and have generated more units of nuclear electricity than all the rest of the world put together.

THE EARL OF BESSBOROUGH

My Lords, I believe it is twice as much.

LORD STONHAM

My Lords, I accept that correction. When the last station in our first nuclear power programme is completed in 1969, this country will have over 5,000 Mw. of nuclear plant, and by 1970 nuclear power will be contributing 5 per cent. to the nation's total energy requirements—rather more than the estimate of my noble friend. An additional 8,000 Mw. will come into service in the period from 1970 to 1975 under the second programme, which is based on the advanced gas-cooled reactor—another triumph of British nuclear scientists and engineers.

With the A.G.R., nuclear power has come of age as fully competitive with the best conventional power stations, and the pay-off from the advances in nuclear technology will not stop there. Nor are our horizons limited by the performance of the A.G.R.; further ahead lies the promise held out by the fast breeder reactor which the Atomic Energy Authority is now building in prototype at Dounreay. Its special attraction is that it will use for fuel the plutonium produced as a by-product from the thermal reactors built under the first and second nuclear programmes. Here again, with the fast reactor Britain has a long lead over any other country.

Now I come to the question of the noble Earl about costs per unit. Most of the information has already been given by my noble friend Lord Wynne-Jones. I will just confirm it. The figures refer to the Dungeness B power station. Allowing for cost increases since the tender for the Dungeness B power station, the total cost of generation from early A.G.R. is expected to be about 0.5d. per unit. This compares with costs of 0.5d. to 0.6d. for conventional stations. With later A.G.R. stations the cost is expected to fall.

With regard to the noble Earl's reference to his American visit, I would point out that these costs are calculated by reference to a 75 per cent. load factor and a 20-year life, which, as he knows, are quite conservative by American standards; and we are confident, whatever the laughter of our friends overseas, that, compared with a similar site and the same sized reactor, our costs per unit will be no larger but will be even better than those of the boiling water reactor. We can compete. Our nuclear power prospects are such that we may look forward to increasing cheapness in nuclear generation, and there is little doubt that from now on nuclear power will meet a large part of this country's additional requirements for electricity.

Nuclear power stations up to now have been ordered on the basis of comprehensive (or "turn-key") contracts with one or other of the three nuclear consortia who have been responsible for the design and the placing of individual contracts. This procedure is in contrast with the one used for conventional stations, under which the C.E.G.B. itself undertakes the general design and places contracts. The consortia system has been criticised mainly on the grounds that the number of orders is insufficient to keep three separate nuclear design teams occupied, and costs are therefore substantially higher than they need be. The Ministry of Technology has started discussion with the consortia with a view to reducing to one the number of design teams. The consortia have also been given notice that the system of turn-key contracts may be brought to an end. My right honourable friend the Minister of Technology has had preliminary discussions with the consortia, but conclusions must await the outcome of further talks.

I now turn to coal. Against the background of these new indigenous supplies my right honourable friend is also considering the future place of coal in the energy economy. Inevitably the analysis depends upon judgments about the future, about the proper use of competing technologies, about the rate of economic growth, rates of increase in productivity, movements in relative prices, and the extent of the reserves of natural gas. Views have to be taken, but as everyone knows who has had the chastening experience of comparing actual results with forecasts he has made, the existence of uncertainty has to be frankly recognised. We have to face the fact that consumption and exports in 1966–67 at 172½ million tons were already down in the range of 170 to 180 million tons mentioned for 1970 in the Fuel Policy White Paper of 1965. Natural gas is another new factor, and at the time of the White Paper no one could possibly have foretold the size of prospect from this source. Naturally, we welcome the benefit to the economy of cheap fuel. A few years ago the price of fuel to British industry was well below that of its competitors in Western Europe, but this cost advantage has now largely disappeared and we cannot afford any loss of competitive advantage.

There are, however, other very serious considerations which have to be weighed. Again I repeat that these are national considerations, which must be taken into account, other than the immediate point of whether at this moment one particular fuel is cheaper or more efficiently produced and so on. First, when we use coal there is no danger of an interruption of supply resulting from action in other countries and there is no direct balance-of-payments cost whatever. In both of these factors coal has clear advantage. Second—this is most important from the point of view of the Government—the lives and aspirations of over 400,000 miners are linked to the future of the industry. Where the forces of the market may give rise to waste, high unemployment and social distress, it is right that they should be moderated. In this respect our policy has been very successful, and over the last six years the national level of unemployment among miners has consistently been within the average rate of unemployment for men in the country as a whole.

Third, coal is an industry with potential. The National Coal Board are convinced that big increases in productivity are in prospect. These will result from the concentration of output in the best pits, from the use of self-advancing supports, which will be available in all collieries by the early 1970s; from the completion of work on new pits and major reconstructions, and from the exploitation of proved techniques which give great promise for advance in productivity behind the coal face and on the surface. The Board's aim for the longer term is to develop a capital-intensive and highly automated industry with rates of productivity far in advance of anything thought feasible in the average colliery of to-day, despite the great advances already made. This is the potential to which I referred; of course there is a long way to go before it is realised, but it must be taken into account.

It is because of these factors, not directly reflected in market prices, that coal is already a heavily protected fuel. It benefits, as the noble Lord, Lord Wynne-Jones, pointed out, though apparently with regret, from a tax on oil products which at present stands at 2.2d. a gallon, equivalent to about 25s. per ton of coal used for steam raising. And it is not only coal which benefits, of course. Natural gas and nuclear power also benefit from the protection afforded to coal in relation to oil. There is special further assistance for coal at power stations. Imports of foreign coal are virtually prohibited. In addition, the industry's finances have been helped by the capital reconstruction and the Exchequer is contributing towards its social costs of redeployment.

What my right honourable friend has to consider, therefore, is not whether there should be protection for coal, but whether the existing level of protection is right. The responsibility of the Government, I repeat, is to manage the whole fuel economy in the national interest, to bring the necessary influence to bear so that we employ so far as possible the right quantities of the right fuels at the right time and give the country the best overall result. Much further study will be needed before my right honourable friend can reach a conclusion.

I now turn to the place of oil in the fuel economy. While it is right, in our view, to base fuel policy firmly on indigenous fuels, this does not mean that we can rely on them alone. For many uses, indeed, we could not—even if we wished—do without oil. Much of the increase in oil consumption in recent years relates to uses for which oil is unique. In fact some 40 per cent. of our oil consumption is for such uses, which include road and air transport, petrochemicals and refinery fuel. The growth of oil demand is also due to its efficiency and convenience as a fuel and its comparative cheapness. We cannot afford to deny ourselves these substantial advantages which oil brings us. It does, however, cost foreign exchange; and, inasmuch as we depend on foreign sources for our oil, there is some degree of risk that supplies may be interrupted. This risk can be reduced to an acceptable level by maintaining adequate stocks in this country and by diversifying our overseas sources of supply. The Government's policy of encouraging the companies to provide home refining capacity sufficient to cover inland demand and bunkers, in total, helps to keep down the foreign exchange costs of oil imports and also promotes security of supply.

Finally I turn to the subject of electricity. The electricity industry is likely to provide an expanding market for the primary fuels. Coal can be seen as retaining a lot of business here but, as nuclear power becomes increasingly competitive, it will be able to earn a large share of the market. The C.E.G.B. plan to provide a plant margin of 17 per cent. above estimated demand in average cold spells, stands. It should be achieved by the winter of 1968/69. Last year the summer overhaul of plant was completed by October in good time for cold weather demand. A similar target will be aimed at this summer.

The noble Earl asked me a question with which I did not immediately deal. I am afraid that it is too early to say whether natural gas will be used in power stations, but various possibilities—particularly for seasonal and interruptible supplies—are being examined. The gas and electricity industries are carrying out joint studies, and a very considerable amount of coal-fired generating capacity is coming in over the next few years.

The noble Earl, Lord Bessborough, asked me a question about the capital programme. In particular he was interested in the heavy electrical industry, which, as he knows, is largely dependent on orders from electricity boards. The C.E.G.B. rates of ordering reached peak levels in the early 1960s, when about 7,000 Mw. of plant was ordered annually for commissioning in the late 1960s, partly to give the Board an adequate margin of plant, and partly to provide for a faster rate of growth in electricity demand. In fact, as the noble Earl knows, the demand has been growing much less rapidly than forecast. The rate of ordering therefore has fallen. I think the noble Earl suggested that we should call a moratorium on the ordering of new plants until 1969.

THE EARL OF BESSBOROUGH

My Lords, I think I referred to putting a brake on it. I did not use the term "moratorium". I said that we should delay bringing plant into action.

LORD STONHAM

If we do not have any new plant between now and 1969, that is a halt.

THE EARL OF BESSBOROUGH

I meant that there should be a slowing up of the rate at which capital plant comes into use.

LORD STONHAM

The position is, of course, that the rate of ordering has fallen. Only one new power station a year was ordered in 1965 and 1966, and only one, Hinckley Point B, has so far been released for ordering this year. The effects of this decline have been felt by the manufacturers, and they have made representations about redundancies and about the effect which a poor home market has on exports. The Board is conscious of the need for a healthy plant manufacturing industry, but this must be balanced against the Board's needs for cheapening electricity supplies.

There is no easy answer to this problem. The number of orders is bound to be dependent on the expected growth in demand, and for Boards to order in excess of requirements would be a waste of resources. But with regard to the overall capital programme for the electricity industry, the Minister has now given his approval for total expenditure in 1967–68 of £620 million, which is only £10 million less than the industry's latest estimate of their requirements. The formal letters of approval will be sent to the Boards within the next few days.

THE EARL OF BESSBOROUGH

My Lords, so the noble Lord does not think that the estimated saving of, say, £400 million a year if we delayed this programme, which were in the article by Mr. Wandsworth, could be achieved? I mentioned that in 1968–69 we could be saving about £400 million a year. I can show the noble Lord the details if he wishes to see them.

LORD STONHAM

I should not like to commit myself to a figure for 1968–69 now, but from what I have already said it will be seen that there has been a slowing down in ordering, which means a reduction in capital outlay.

If I may now sum up my remarks and my right honourable friend's views on the future of the fuel industry as a whole, the longer term prospect is of an expanding fuel economy within which the total contribution of the indigenous fuels—coal, nuclear power and natural gas—will increase. What the individual share of each fuel in the total supply will be it is too early to judge, but all the four main primary fuels—coal, oil, nuclear power and natural gas—have substantial parts to play. For coal, the future lies with an industry transformed by the new technology into a highly mechanised, competitive producer of fuel, employing fewer, but highly skilled people. For these technician-miners, for the scientists and engineers who are needed to carry out this transformation and to manage the modernised mining industry of the future, there is beyond doubt a challenging and worthwhile career ahead.

The task of the Ministry of Power is to see that we make the most of the rich resources on which we are able to draw to satisfy the nation's essential and growing fuel requirements. This is the practical aim of all the work being done in the fuel policy review. The results will emerge over a period, but when the prospect is so rewarding it is an effort for which the time and trouble we are taking is supremely worthwhile.

6.10 p.m.

LORD JACKSON or BURNLEY

My Lords, it is with a sense of great privilege that I rise to speak in your Lordships' House for the first time, and I should like to say to the noble Lord, Lord Wynne-Jones, how grateful I am to him for affording me this opportunity. May I also thank the noble Earl, Lord Bessborough, for his very kind remarks, because whether or not they were justified they served, at any rate, to relax my anxiety. The noble Lord's admirable and very comprehensive introduction, and the remarks which have been made by later speakers, make it evident that the subject of a national fuel and energy policy not only embraces a wide diversity of scientific and technological disciplines but also raises questions of economics and sociology of increasing difficulty and complexity.

I hope your Lordships will forgive me if I speak from the somewhat limited standpoint of an electrical engineer; but I also hope that what I shall say will reflect, in some measure at any rate, my recognition that the problems to be resolved are not merely electrical ones, and, indeed, that many of them will call for other considerations than apply to what I have to say. But before developing this point may I, at risk of telling your Lordships what you already know, mention some of the developments which have resulted in recent years from the work of scientists, technologists and engineers, and to a considerable extent qualified people educated and trained in this country?

May I say that the installed electrical generating capacity of the coal and oil-fired stations in the United Kingdom has increased between 1948–49 and 1965–66 by a factor of three; that the number of units of electricity generated in 1965–66 was 3½ times the 1948–49 figure; that the rating of individual electrical generators has increased over this 17-year period by a factor of almost 20, from 30 megawatts to 550 megawatts; that the present-day capital cost per kilowatt of these generators is less than 40 per cent. of the corresponding 1948 figure when the 1948 figure is converted to present-day money values; and that the thermal efficiency of these latest generating stations is of the order of 40 per cent., compared with about 27.5 per cent. in 1948.

In parallel, and, of course, overlapping these essentially electrical and mechanical engineering developments, there has been the development of nuclear power which has been referred to quite frequently this evening. I need only say, as has been said, that the nuclear station to be commissioned in 1970–71 at Dungeness is expected to generate electricity at a cheaper price than the best coal and oil-fired stations then in operation, depending, of course, on the prices which are then attached to coal, oil or gas fuel. This is within less than a decade of the commissioning of the first nuclear power station at Bradwell, which is indicative of the pace at which development is occurring.

Technological innovation and progress has not, of course, been limited by any means to the essentially electrical engineering part of the fuel and power situation, and I should like to take this opportunity of paying a tribute to the Coal Board in respect of the attempt which it has made during recent years to incease the efficiency and the economy of coal production. One of the outstanding examples of this is afforded by the automatic control which has been introduced in recent years into the colliery at Bevercotes. In case your Lordships are not aware of the fact, may I say that this colliery was originally planned to produce 1¼ million tons of coal a year at an output per man-shift of three tons, with a total manpower of 2,000. The planning of this colliery and the introduction of automatic control processes anticipated that by 1968 it would be producing 1½ million tons of coal per year, as distinct from the 1¼ million tons which I mentioned, with a labour force of only 770 compared with 2,000, and at an output per man-shift of eight tons compared with the figure of three tons.

I am not in a position to tell your Lordships of the present output position, because I understand that there have been considerable labour difficulties, notwithstanding the very serious attempt which I know was made to anticipate and prepare for the resolution of such difficulties as might arise. But by any standards this is an immense technological achievement, and it is not, of course, the only one for which the Coal Board has been responsible. I need not say much about North Sea gas, except to say that this, also, has involved some considerable technological achievements. But these have been well-publicised and I think they really speak for themselves.

May I now concentrate on electricity supply? The potentialities associated with nuclear power, with the Dungeness advanced gas-cooled reactor and what lies beyond it, may seem to justify the conclusion that all further new major electricity generating stations should be nuclear powered ones, whether these additional stations be to deal with increasing demand or to replace obsolescent coal-fired and oil-fired stations. However, the inevitable consequence of the increased use of nuclear-powered stations, of which I myself should be greatly in favour, would nevertheless have a considerable impact on the Coal Board's situation, because in 1965–66 the use of coal by the Central Electricity Generating Board was over 60 million tons out of a total coal production of, I think, between 170 and 180 million tons. Any reduction in this demand for coal by the Central Electricity Generating Board would inevitably raise for the Coal Board complex economic, organisational and sociological problems.

I nevertheless feel obliged to say that in giving, as it has done in recent years, a considerable degree of preference to coal, as against oil, in the interests of helping to maintain a competitive coal industry, I believe that electricity supply has been carrying an inequitable proportion of the national cost of maintaining this industry. In consequence, the price of electricity to consumers has not reflected, either adequately or justifiably, the consequences of the technological progress to which I referred previously. According to the annual reports of the Electricity Council and of the Central Electricity Generating Board published in 1965–66, 45½ per cent. of the overall recurrent expenditure of the C.E.G.B. in 1965–66 was on fuel and 86 per cent. of this fuel was coal. The price of electricity to consumers is, therefore, very sensitive to the price of fuel, and particularly of coal. I do not wish at all to question the obligation of the electricity supply industry to assist the coal industry to pass successfully through its present difficulties, but I do feel bound to say that a continuance of the present obligation of this industry on the present terms could have a damaging effect on other sectors of the economy.

I shall refer to this a little later, but may I mention that this is not the only handicap to which the electricity supply industry has been subject in recent years? It carries the additional handicap of being required to pay a duty on oil fuel, which amounts to about 14 per cent. of the coal equivalent of the total fuel consumed. This duty is not applied in a similar way to the Gas Boards. In 1965–66, the C.E.G.B. paid £11.6 million in fuel oil tax; yet in spite of this the cost of heat from fuel oil was lower than the cost of heat from coal in the whole of the South of England. One may judge what the effect on the price of electricity might be if (and I am not arguing against the thesis of the noble Lord, Lord Stonham, that we must look at this situation as a whole) the electricity generating stations were wholly fuelled by tax-free oil. Still further, the electricity supply carries a burden to local rates costing the consumer 7d. per £1 of the electricity bill, which I understand compares unfavourably with the corresponding demand on other sectors of the public services.

Finally, I must refer—again taken relative to the other public sectors—to the heavy capital obligations which the electricity supply industry carries, as detailed in the White Paper, The Financial and Economic Obligations of the Nationalised Industries. In conformity with this White Paper, the supply industry was required to earn a gross return of 12.4 per cent. on its average net assets in the five years up to March 31, 1967. It in fact earned 12.3 per cent. up to March 31, 1966. It will no doubt be a part of the Minister of Power's obligations to look at these capital obligations and to revise them in one direction or another, or, it may be, to leave them the same. My concern—and I am sure it would be the concern of the electrical industry as a whole and of the general public, in so far as they are aware of the possibility—is that the revision of these obligations, combined with a continuance of the other obligations I have mentioned, may lead in the near future not to a decrease but to an increase in the cost of electricity, and, at the worst, a substantial increase.

It is against this background that I see the North Sea gas situation. It is against this background that I would wish to argue (and I was a little disappointed, it I may say so, with what the noble Lord, Lord Stonham, said) that a primary use of North Sea gas, at least in the near future, should be as a replacement fuel for coal and oil in electrical generating stations. If this does not occur—and I shall repeat this towards the end of my remarks—I, for one, shall wish it to be explained very clearly in any Government statement of fuel policy why this is not to be the case.

Your Lordships may feel that I have not given evidence of the breadth of outlook on fuel and power policy which I may have appeared to promise at the beginning. May I say that this is not because I want to claim any special privilege for electricity supply or for the electrical manufacturing industry, but because I want to ensure (or I hope the Government will ensure) that whatever is done in the formulation of a national fuel and power policy will not impede in any way the progress of the electricity supply industry and the electrical manufacturing industry by imposing on these industries an inequitable proportion of the burden of responsibility which must be carried within a national policy. Not only would a substantial increase in the price of electricity be embarrassing to the general public, but I think the general public may see it as a contradiction of the Government's prices and incomes policy. My main concern would be its impact on manufacturing industry, on both the capital equipment and the consumer goods side.

I hope that I do not appear to lack sympathy for the problems of the coal industry when I say that the electrical industry as a whole is at present employing about a million people and is contributing over £300 million a year to our export achievement. We must be very careful that we do not jeopardise this situation. I appreciate the problems with which the Minister of Power and the Ministry of Power are faced in reaching, or at any rate preparing the ground for, decisions on these very complex problems in the face of all the uncertainties to which the noble Lord referred. It may well be that within this policy, when formulated, electricity supply and the electrical industry will be required to continue to carry what some of us feel is an inequitable proportion of the total burden. I should not be surprised if this proved to be the case. I would then say that the statement of this national policy must make crystal clear why it is necessary in the national interest that electricity supply and the electrical industry should carry this inequitable burden.

I therefore hope that, in the formulation of this policy, the Minister of Power will make crystal clear how the balance is to be achieved between the different components of fuel and power policy and why there needs perhaps to be a different distribution between them of the responsibilities for implementing it. so that the public will not assume that a worsening situation in electricity supply and in electrical manufacture represents a failure on the part of the people responsible to fulfil their responsibilities within the circumstances in which they are required to operate.

6.28 p.m.

LORD HAWKE

My Lords, it has from time to time fallen to my happy lot to congratulate a noble Lord upon his maiden speech. Sometimes my words have come from the heart and sometimes from the head. This evening, I can assure the noble Lord who has just sat down, they really come from my heart, because I found his speech most fascinating—all the more so because I agree with about 75 per cent. of it. I hope that the noble Lord will favour us with his attendance on many suitable occasions.

In December, 1964, I moved a Motion to ask Her Majesty's Government what were their plans for future investment in power. I emphasised that one must have a plan, though the plan would certainly be wrong and one could only hope that it would not be too wrong. In the outcome, I did not get very much change out of the noble Lord, Lord Stonham, who replied for the Government, because the Government had clearly not made up their minds on the subject. However, in October of the next year they produced this White Paper on Fuel Policy, which ventured a few prognostications amidst a forest of platitudes. But now the time has arrived to take fresh stock of the situation, which has changed in many marked respects.

There seem to me to be three main factors which have made for this change. First of all, there is the realisation that growth of the economy without inflation is not quite so easy as people thought, and the realisation that in the minds of thinking people stability of currency may rank equally with growth. Second, the actual confirmation of the existence of natural gas under the North Sea and, third, the falling cost of nuclear power plant.

Let me take, first of all, the growth. In the former debate I suggested that a 3 per cent. per annum growth was rather more realistic than the National Plan rate. This is still being assumed to-day, although we have already fallen behind. The noble Lord, Lord Wynne-Jones, said that there was a steady growth over the years, and he gave a figure for power output in 1900 and one for to-day which is approximately two-and-a-half times as great. I cannot do compound interest in my head, but I have a feeling that it is a good deal less than 3 per cent. compound over this period. Against my estimate of inland energy in 1975 of 360 million tons of coal equivalent, we now come down to 356 million tons as against the 297 million tons which we used last year.

Natural gas, for which I was hoping, has now become a reality, and we talk about 2,000 million cubic feet a day as being fairly assured, with the possibility of more. But it presents a problem. One must make up one's mind what to do with it. Obviously, it could displace coal and oil in the traditional field, the domestic, commercial and process industries. The trouble is that nobody knows what quantity will be available. We are working on 2,000 million cubic feet a day, but one just does not know. In very rough figures this would represent about 26 million tons a year of coal equivalent or, say, the present equivalent of total gas production.

The cost of converting the system is estimated at £3 million and it produces some technically great problems. First of all, all the present appliances have to be ferreted out and altered. It would be quite an undertaking to make sure that all the various conversion fittings are on hand. One hears the story of the gas fitter who always has to go home for the bit of plant that he has left behind, but I remind your Lordships that the present gas would have to be replaced in one go, area by area, with gas twice as strong; so there is no time for the plumber to go back to find something he has left behind. The actual process of conversion must be an extremely difficult one. It cannot all be done at once; but the great advantage is that the mains capacity will be automatically more or less doubled when the new gas goes through them. We shall be able to get rid of this nonsense called "High Speed Gas"; the Gas Board will be able to claim "Double-Strength Gas", which will be honest advertising.

I should like to say a few words about a possible policy for the use of this North Sea gas. If we assume 1,000 million cubic feet by 1970, all this could be absorbed in the traditional gas markets, which are domestic, commercial and process industries. But if there were 2,000 million cubic feet available by that year there would be a temporary surplus in the traditional fields. In the longer term this surplus would undoubtedly be used up, because the traditional fields would expand very rapidly, particularly that of domestic space heating. It would be a short-term problem, for it would be unwise to contract this gas to other industries until it was known what were the reserves under the North Sea and what long-term output they could support, for one might have to default on an extraneous use when the traditional field started expanding.

One thing we must be careful about is turning the existing electricity generating plant over to gas. Some of my noble friends appear to think that a good idea; but I think it an extremely doubtful one. Of course, if the gas were plentiful it could be done and it might pay at something under 3d. a therm. But I would argue that it is not the most strategic use for gas. The power stations are already running on our cheapest fuel. Most of them are sited on the coal fields, and they are getting cheap oil. It would not be logical to displace our cheapest fuel by a still cheaper one until we have displaced the dearer fuels, coal and oil, still in use in places other than the power stations. It would be much better, in my view, to stick to the traditional outlets for gas and let them build up.

Another possible outlet, of course, as was mentioned, is the chemical industry. I have not been into that and I cannot express an opinion; but at first glance I am a little dubious about the theory of the noble Lord, Lord Wynne-Jones, that gas could replace naphtha. I am not a technician, but I have an idea that this will leave somebody else with a big problem of naphtha disposal; so one might not be much "forrarder" in the end. I personally should prefer a more cautious policy of conservation of the gas, and would stick to the traditional uses with a gradual extension.

Then there is the question of price. One has to remember that the Treasury are past masters in killing geese that lay golden eggs; they have a peculiar streak of short-sighted parsimony that runs under all their thinking. We all remember how after the war, by using Britain's powers as a monopoly buyer of food, they got the price of food down so low that overseas farmers found that it was not worth while to supply Britain, with the result that when the Labour Government left office in 1950 the food ration was deplorably low. Any Chancellor of the Exchequer who knows his business must make it one of his chief objects to curb these tendencies of the Treasury, which in the short-term may look profitable but which in the long-term are unprofitable for Britain.

We want people to take the very big risks of drilling in the North Sea. The price of gas fixed must be such as to make the return sufficient to reward them for their risks. It is not a question of reward for risks for drilling into a field known to exist; it is reward for drilling into a field that nobody knew whether it existed or not. Unless we do that, we may well find that interest will peter out and we shall not get the reserves we need for the future.

The other new factor I mentioned is the cheapening of nuclear power. In the former debate I challenged the assumption of the Government that a 20-year life and 75 per cent. availability was the right calculation for costing nuclear power. The noble Lord, Lord Stonham, was willing to go to 85 per cent. availability but not beyond 20-year life, so this time I have brought my own figures. These are based on the newest plant planned at 1966 prices. Nuclear costs are down to .38d. per kw. based on 85 per cent. availability and a 30-year life; or .46d. on the conventional calculation—and a conservative calculation—of 75 per cent. and 20-year life. Coal is .58d. at 3½d. a therm; oil is .52d. including tax, or 41d. excluding tax. On that basis, by all counts nuclear should be the cheapest of the lot. Moreover, nuclear capital costs are falling and the conventional costs are tending to rise.

In 1964 I wondered whether we were going to be over-insured in electric generating plant. Admittedly I took the maximum of the programmes, and it is now agreed that something less should do. Last February the Board had 38½ million kw. and by 1971 they expect an average cold-weather demand of 54 million kw. and a generating capacity of 63 million—that is, a margin of about 17 per cent. Of this the nuclear element will be about one-tenth, and by 1975 one-fifth.

It is at least satisfactory to have more or less got rid of the power cuts—and I hope, my Lords, that these will not prove to be "famous last words". But it has been a very expensive operation, about £250 million a year for the capital cost of generating plant alone. The new stations, being cheaper, will tend to be used more, but the overall position cannot be called very satisfactory when one thinks that the total quantity of generating plant is generating for less than half its life. The load factor is too low, and we must not be complacent about it. Of course the new night-storage heaters help to spread the load. Electric cars may help in ten years time. Gas turbine generators coming in at peak times are a great help, and pumped storage schemes such as that at Ffestiniog are also very desirable.

My Lords, in our last debate the noble Lord, Lord Stonham, mentioned the possibilities in North Devon and Crewkerne and Loch Sloy. How are all these getting on? And what about other sites? If I were the Minister, I should tell my experts to do a paper exercise on the following assumptions. First of all, that after the present programme is completed, we build no more conventional generating stations, but go on building, say, 1,000 million kw. a year of nuclear plant until we have a nuclear generation equal to the base load; that we should exploit the pumped storage to the maximum and that any short fall for peak demand should be met by gas turbines or similar devices.

In paragraph 199 of the Generating Board's Report one sees a statement that the older plant and gas turbine plants are very useful for peak load but that it does not become economic to run them for more than 250 hours a year. If one takes the extreme peak load in a year, it cannot last for more than six hours a day, at the very most. That would give forty occasions on which these things could be switched on—a minimum of 40 occasions. If I were the Minister I should very much query this calculation, because it seems to me that a great deal more could be made of this type of stand-by plant; and there are so many different methods of doing the calculation that I should want to make absolutely sure that my experts had got the most correct one. We must explore every avenue to make more by existing capacity, because the new capacity is so appallingly expensive, and, in any case, Government expenditure is much too high.

When we turn to coal the situation is not promising. The latest estimate of energy demand includes 174 million tons of coal. Roughly 100 million tons is produced at a profit, and roughly 75 million tons at a loss. The demand for coal is shrinking much faster than was visualised. The gas industry is moving right away from coal, and the railways have almost gone. Electricity clings on to its total amount, but the share of the total electricity market is smaller; and with more and more smokeless areas, the domestic market is shrinking in favour of various special fuels which cost more and more, and so pave the way for conversion to oil or gas. My private estimate for coal demand for 1970 is about 150 million tons inland. Any more than this would, I believe, be most difficult to sell.

The only coal fields which will ultimately survive are the low-cost ones, those producing special coals or coal that is specially strategically sited. Social problems will pile up faster than expected, and they must be met. Industry must be brought within range of the colliery villages. It is no use taking away some of the miners, and allowing the rest of the young population to drift away and the old ones to stay behind. Retraining schemes are very important. If I had to make a guess about the 1975 energy balance, I would put it this way: coal, 123 maximum; oil and natural gas, 197 (of which gas would be 40); nuclear, 33; and hydro, 3. My main plea to the Government is to think carefully over the price and use of natural gas and to see how far we can economise on capital by using our generating plant to better advantage.

6.50 p.m.

LORD TAYLOR OF MANSFIELD

My Lords, if I may be permitted to refer to yesterday's business, I should like to join with those who paid what I thought was a wonderful tribute to the late Lord Williams of Barnburgh. This is the only opportunity that I have had of doing so, and I feel that I should be very remiss if I did not take the opportunity to join in the words of tribute to a man who was a very dear friend of mine for forty years. Before he was Minister of Agriculture, and before he came to another place, he was a coal-miner, and I am sure that if he had been here he would have been only too delighted to have participated in this debate on fuel and energy requirements. He was a capable man, a sincere man, a competent man; in every respect the late Lord Williams, whom I knew better as Tom Williams, was one of nature's gentlemen.

I should like to join the noble Lord, Lord Hawke, in congratulating the noble Lord, Lord Jackson of Burnley, on an excellent maiden speech. He made reference to Bevercotes Colliery. The Chairman of the East Midland Coal Board, in a Press statement on March 21, said: Coal production commenced on the first coal face at Bevercotes on January 30 this year. Work is proceeding for the development of a second face and the completion of other works in the bed bottom. May I also express my appreciation to my noble friend Lord Wynne-Jones for initiating this debate. I do not propose to say much about his speech. I thought that it was a wonderful dissertation on some of the technical matters that arise in getting our energy requirements. I would refer to the proposals he made at the close of his speech, which were three in number. He put forward the idea of the disappearance of the oil tax. The coal industry, particularly during the last decade, has needed protection. It has had its difficulties, and still has them. I propose to confine my remarks in the main to the coal industry and the difficulties it has experienced during the last few years.

One thing on which I am sure we would be unanimous is that the provision of fuel and energy is a very important matter, and it is timely that your Lordships should be discussing it to-day. No one would deny that it is basic to our economy. It means everything to our prosperity and to our living standards. Without the energy provided by the various kinds of fuel extracted from the treasure house of nature, life as we know it in the society of to-day would just wither and die. Energy to produce goods, to drive our machines, to sail the oceans of the world, to penetrate and fly through space, to provide means of communication, is priority No. 1 in a modern society.

If we wanted to look deeply in retrospect to what has happened in this field, I think that we could describe the picture simply and shortly in these words. For centuries the only known form of energy was the brawn, the physical strength, of man. Long before oil, gas, electricity and nuclear power appeared, coal—black diamonds—was discovered, and for many generations it was the basic fuel for domestic purposes: to keep us warm and do our cooking, for the generation of steam, and for the supply of energy for our factories, our steel works and our railways. Fortunately for Britain this precious commodity of coal was beneath our feet, and resources were plentiful enough to meet all the needs to which I have just referred. If I may use a colloquialism, coal was king. And until very recent times it had no rival.

My noble friend Lord Wynne-Jones spoke about the changing patterns of fuel production, and if ever "change" applied to anything it certainly has to our fuel industry. In 1913 the output of coal was 287 million tons. That figure had never been reached before; it was a record, and it has never reached that figure since. Almost 100 million tons of that 287 million were exported. So on that alone we can see the soundness of my noble friend's words when he talked about changing fuel patterns.

To come a little nearer in time, within our own memories, during the last war and for a decade after the demand for coal was insatiable. Every pit capable of production was needed. The yardstick that was then applied was capability, and not whether a mine was economic or not. The test was whether it had resources, and productive potential. Between 1947 and 1956 there was a general energy shortage and the coal industry was exhorted, rightly, to produce the maximum output possible. In this period—and I think this should be said—the industry was restrained from exploiting its monopoly position by Government control of prices. When it was unable to meet the demand that was being made upon it, the industry even had to meet the losses on imported coal, which reached the astronomical figure of £70 million. All that was an indication that the supply of our basic fuel in that period was not meeting the energy demands of the nation. For these reasons, and others which I do not propose to go into at this hour, the industry was unable to accumulate a reserve fund.

So far as the coal industry was concerned in the period to which I have referred, the law of supply and demand did not apply. Further, it was in this period, to which the noble Lord, Lord Wynne-Jones, referred, that a plan for coal was produced. In 1952 the Ridley Committee went into the whole matter, as was lucidly explained by my noble friend, and it was estimated that between the years 1961 and 1965 a supply of 250 million tons of coal would be needed to meet the energy requirements of the nation. That was only 15 years ago.

What action was taken upon the proposals made by the Ridley Committee? The National Coal Board planned on this estimate. They made very heavy investment and a large capital expenditure in bringing the industry technically and mechanically up to a state that would meet the requirements in the years that I have mentioned, laid down by the Ridley Committee. There was not only the burden of capital expenditure arising out of the planning that was done by the National Coal Board, with Government encouragement at that time, to supply this energy market up to 1965 of 250 million tons; there was not only the interest payments on the capital involved, but also the interest payments to the old coal owners, the royalty owners and subsidence costs. There is a story about this which is not often heard but which has some significance. So far as the coalmining industry is concerned, subsidence costs, which is a charge wholly upon the National Coal Board, must now be reaching something in the neighbourhood of £10 million per year.

But the situation to-day is vastly different from what it was when that estimate was given by the experts. The history of the coal mining industry in the last decade is of such a character that I am a little sceptical about the estimates that were given by these so-called experts. It is questionable whether they have been anywhere near the target that they laid down. However, in 1956 and 1957 the situation changed radically and dramatically. As regards the years 1957 to 1959, I should like to postulate three points. First, there was a world-wide surplus of energy. Secondly, energy consumption in Britain from 1957 to 1959 was below that of 1955–56. And between 1947 and 1956, with Government encouragement, steps were taken to increase consumption of imported oil.

Again, let us look at the actual statistical position, as I understand it. For the year ending March, 1967, so far as total consumption, production and manpower are concerned, in the light of the estimate that was given by the experts we find this situation. Consumption for 1966–67 was 172,472,000 tons; that is, 12 million tons less than it was in the previous year. These figures add some strength to the prognostication by the noble Lord, Lord Hawke, of what he thought might be the situation in 1970 and 1975. What about output? The figure of deep-mined coal for 1966–67 was only 165,845,000 tons; that is, 10 million tons less than in the previous year. This shows the impact that oil, particularly, is having upon the coal industry, creating economic difficulties and social upheavals.

What about manpower? At the end of March, 1967, there were only 409,427 men in the industry. In 1966 the number was 435,000. That is a drop of nearly 30,000 in the manpower in the industry.

LORD HAWKE

My Lords, is the noble Lord putting that as a good or a bad thing? Several miners' leaders, in my presence in this House, have said that they hope nobody would ever have to go down the pit to dig coal.

LORD TAYLOR OF MANSFIELD

The reply to the noble Lord is this. If I could make myself believe at this stage that other fuels could provide our energy requirements, I would put up both hands for closing down the mining industry, but I do not see this happening at the moment.

With all the difficulties that began to appear, nothing was done to help the industry to adjust itself to the conditions of the post-1956 era until 1965. The industry, unaided, has borne heavy social costs in this particular decade and the burden of investment in collieries now regarded as uneconomic. No help was forthcoming until 1965, as was mentioned by my noble friend Lord Stonham. And instead of there being organised retrenchment in the light of this changing pattern, so far as requirements are concerned, the industry has suffered a gradual beating back which has affected morale and strewn the pages of the accounts of the National Coal Board with red ink. If responsibility lies anywhere, it is with past Governments which have failed to develop a positive policy towards the energy industries.

In the first decade of nationalisation, when coal had no effective competitor, it was regarded as a social service—and I make no complaint about that—but now that it is no longer a monopoly, and has all the imposed handicaps and burdens, the size of the industry will be determined by its ability to compete with other energy industries.

My Lords, it is clear, to me, at any rate, and I put this forward on the evidence of the past decade, that year by year demand for coal declines. The global output goes down. Collieries have closed, and other closures are contemplated. We are still not at the end of the road so far as this business is concerned. Concentration is going on (I make no complaint about that), and manpower is declining. Whole areas are affected socially, and the signs are that there is a lack of co-ordination—on this point I would agree with my noble friend—in the energy industries. Instead of a scramble, a "dog eat dog" philosophy, the coal industry is likely to contract still further. Owing to the experience of the past decade and the prospect of further contraction and colliery closures, morale among the workers in the industry is, believe me, very low, and confidence has been shaken to a very high degree.

Now may I make just a few observations about oil? While the consumption of coal declines, that of oil increases, as has been pointed out. May I quote just one figure? In 1956, coal consumption was 217½ million tons; at the end of March this year it was 172½ million tons. Oil consumption in 1956 was 37½ million tons; in 1964, 93½ million tons. I am of the view that we are placing too great a reliance on a fuel that is not indigenous.

There are three considerations so far as oil is concerned. The first is reserves. Reference was made by my noble friend to the White Paper of 1965. It was therein stated that, in the present state of our energy requirements, if there was no increase in that sphere, reserves would last for only about 35 years. It may be—who knows?—that our geologists may be so enthusiastic that they will find other sources when the present ones begin to taper out. The second consideration is the places from where the oil comes. One would not say that those places were politically stable, and in that particular sphere anything might take place. The main reason why I mention this point is that, if oil ceases to flow, for a number of reasons, two of which I have mentioned, economically, so far as our energy requirements are concerned, we could find ourselves in difficulty.

One word now about the balance of payments, because I do not think we should rule this out. Many figures have been bandied about during the past two years or so. I have heard the gross figure put as high as £500 million. Again, the White Paper in 1965, in paragraph 58, said that the net effect is likely to be much less. I would ask my noble friend who is to reply to the debate, can it be stated accurately what the figure is? Is it £100 million; is it £200 million; is it £300 million? What is the figure? No one seems inclined to say what is the effect of imported oil on our balance of payments.

On the question of North Sea gas, as has been said, it is early days yet to be precise about the size of this supply. My noble friend Lord Stonham mentioned the figure, but, at the best, he intimated that by 1970 it would be making a contribution of only 10 per cent. towards our energy requirements. On oil and gas I say this. The imported oil is not indigenous, but North Sea gas, in my view, is in a different category. Coal is indigenous. North Sea gas should replace imported fuels and not other, indigenous supplies of fuel.

May I say this in conclusion? The coal-mining industry during the past few years, particularly in the field of productivity, has a record of which it has every reason to be proud; and the contribution that has been made by the miners for many, many generations, and is still being made, to the energy requirements and the prosperity of this country has been great. What the industry needs in these circumstances is a proper understanding of its difficulties. I hope that before long we shall have a co-ordinated fuel policy, and that all those who are responsible for meeting the energy requirements of the nation, instead of being in competition one with the other, will be co-operating.

7.19 p.m.

LORD FERRIER

My Lords, although I was concerned with the electricity supply industry for a number of years, my only interest in it to-day is as a consumer. But it is in terms of Scotland's situation at the present moment that I want to address my few remarks in this most interesting debate, for which we owe thanks to the noble Lord, Lord, Wynne-Jones. I can best illustrate what I want to convey by actual figures concerning my own supply. In 1947 my follow-on rate on my domestic tariff was 0.48d.—under a halfpenny a unit. That stemmed from the enterprise and efficiency of the Clyde Valley Hydro Scheme which at that time had also developed into assisting other steam power stations based on ample supplies of coal close by. At that time a friend of mine in Suffolk was paying 4d. per unit for his electricity. To-day my follow-on rate is 1.25d. and I am informed to-day that in Suffolk the follow-on rate is 1.7d. In brief, that is the illustration which I want to put before your Lordships.

That means that whereas my rate has gone up by two and a half times, the rate in this particular area of East Anglia has gone down by 50 per cent. However, it is fair to say that my rate is still low—probably one of the lowest in the world—so I suppose I must not grumble. A good proportion of the increase which I pay has gone to reduce the Suffolk rate. I suppose this is fair enough in terms of bringing electricity to the people, and I agree very much with the noble Lord, Lord Stonham, that this problem must be regarded as a whole, including the social element, as the noble Lord, Lord Taylor of Manfield, has just said with such emphasis.

I contend that this problem, as it is to-day, is a serious one where Scotland is concerned. Is it fair that the latest increase in the South of Scotland Electricity Board's tariff should be based on an additional freight charge of 15s. per ton on coal brought from England? That is unfair, surely, when it is compared with what happened with certain of the English tariffs in the 1950s. In any case, this present development does not ring true to us in Scotland. The power houses at Kincardine, Portobello, Cockenzie, which is just coming on to load, and Long Gannet, now in process of construction, are all based on Scottish coal which is mined practically at site, and it is fair to say that at the moment we do not feel we are getting a fair deal in South Scotland. I think this position should be thoroughly examined.

One of the difficulties is that the price of smokeless fuel has gone up through the ceiling. Anthracite, which cost £4 10. per ton in 1947, now costs £19, having gone up from £17 within the last year owing to the cost of freight from Wales. I am not grumbling at the fact that the anthracite comes from Wales. All the Scottish pits have now been closed down. But I am grumbling at the high cost of freight which, if the whole problem is to be seen as one, should surely be spread out both in terms of smokeless fuel and in terms of supplies of electricity in Scotland, just as the rates for electricity were spread out when nationalisation brought the power supplies for the whole country under one umbrella.

I have a few comments to make on the general situation, beginning with Scotland. Hunterston atomic stations is on load, hydro-power is widely used in the North and, with its figure of 3 million equivalent tons, is small compared with the other sources of energy. But as I see it the whole question of tariffs is related to policy. It is not my intention to go into tariff details at this late hour. I am only giving an illustration of my main theme by painting a general picture.

I believe that the related subject of domestic space heating—and I am relating this to atomic development—requires special consideration. This subject has already been mentioned this evening, and thanks to the Questions and Answers in your Lordships' House some five years ago, in which I think the noble Lord, Lord Stonham, and I collaborated, it is as well to remember that the Electricity Board's policy in regard to off-peak tariffs for space heating was completely changed. Thermal storage apparatus was made available for domestic premises and off-peak tariffs, which were very low, were urged upon consumers in a sales drive. What has happened is that the off-peak valley in the daily load curve has begun to fill, and now off-peak tariffs are being raised. Is this to check expansion of load? If so, is this wise?

Here I come to a matter which has already been mentioned in the debate this evening. How much better it would be if some of the energy which is now being dissipated at atomic stations could be used for space heating in our homes. The noble Lord, Lord Wynne-Jones, emphasised the importance of a high load factor to the cost of nuclear energy, and this is my point. If the present demand for domestic space heating is filling the valley in the load curve, I urge that a long view should be taken about the prospects of more atomic stations coming on load, more off-peak load being needed to feed those valleys, so that the load factor on the atomic stations is such that they will be able to produce power at a really competitive price. As other speakers, including the noble Earl, Lord Bess-borough, have said, it is the load factor on which the economy of the atomic station depends. It seems to me this is another illustration of the importance of a national policy, the social approach to a problem, and its intimate relation to the production of power.

Some reference has been made by the noble Lord, Lord Hawke, to Cruachan and to pumped storage. Of course Cruachan is on load and is operating, but I have my doubts whether a proper review of the subject of pumped storage plants should not include a larger measure of the cost of mains. The enormous power line which lies between Hunterston and Cruachan is an exceedingly costly affair. I am not against the idea of pumped storage because, of course, the second pumped storage undertaking in the world was a private one in a mill on Tweedside. But when the pumped storage plant is a long distance from consuming centres, I sometimes wonder whether peaking by gas turbines or the like would not be a more economical arrangement, and instead of using the off-peak power to fill pumped storage reservoirs, for extra low off-peak tariffs to fill the "valleys" in the middle of the night.

I now turn to the overall Motion, and I have one or two questions to ask. First, is proper consideration being given to the availability of oil for power stations? Obviously, from what we have heard this afternoon, that is the case. Serious consideration is being given to this matter. There is very little more to be said than has been said this afternoon. But is the price of electricity to be dependent on the Coal Board's costs? And here we are coming up against the next point, which the noble Lord, Lord Wynne-Jones, made so well—that of the problem of the tax on oil beginning to have a bearing upon costs.

My next question is, to what extent is the North Sea gas going to be used for generating electricity? We have heard various views on that this afternoon. The noble Lord, Lord Stonham, mentioned it, in a fairly cursory way, if I may say so. But the noble Lord, Lord Jackson of Burnley, whose maiden speech was so impressive—and how much I hope he will speak to us again1—took the view with which I entirely agree. I should like to know whether real efforts are being made to overcome the technical difficulties which must arise from using natural gas as a heating energy in electrical generating plants, not only on the technical side but on the social side—the whole question of whether it is not better to use it that way than perhaps for hydrogen in chemicals. Several noble Lords agreed with him when he said that he believed this is a matter which ought to be thoroughly examined.

This would also fit in with what the noble Lord, Lord Taylor of Mansfield, said: that natural gas is probably the best alternative to indigenous fuel like coal, which of course it is. Heaven forfend that the Coal Board and the Gas Board and the Electricity Generating Board and the Atomic Energy Authority should be tempted to play a sort of pull-devil-pull-baker game! That, I think, is, in a few words, what the noble Lord, Lord Wynne-Jones, seeks. As the noble Lord, Lord Stonham, said, the thing must be looked at as a whole. It is such a complex subject that one has only to try to grasp the problem of tax on fuel oil and its impact on the whole situation to feel sympathy for those who have to work it out.

I was sorry to hear confirmation from the noble Lord, Lord Jackson of Burnley, when he said that he felt that electricity is unfavourably treated as compared with oil. If one wished to be mischievous in the terms of the noble Lord's Motion in the widest sense, one could say that we are pumping gas out of the North Sea and pumping heat in the form of hot water out into the Bristol Channel and the Firth of Clyde. This is in fact what is happening. Of course, it is not as simple as all that, and I should be the last to suggest seriously that it could be looked at in such simple terms. Nevertheless, it gives point to the noble Lord's Motion when he says that we must have proper economic use of thermal energy. That is all-important. I support the Motion.

7.34 p.m.

LORD MAELOR

My Lords, I think we can all feel grateful to my noble friend Lord Wynne-Jones for initiating this useful and timely debate. Time was when we would think of fuel and energy only in terms of coal, and we in this country can never estimate the debt we owe to the coal-miners of these Islands for their heroic contribution to the economy of this country. Taking a long-term view, I think it must be obvious, for a number of reasons, that the coal mining industry as a major industry is on its way out. Apart from the exhaustion of the old seams in the oldest pits, thousands of miners leave the mines every day. Personally I have no regrets for this, for I have always regarded coal mining as the most hazardous and inhuman form of industry that we have in this country. It is the only industry I know where accidents and fatalities are taken for granted and are expected, although they have been considerably reduced since the inception of nationalisation.

A paragraph in Lord Sankey's Report, published in 1919, has remained on my mind to this very day. If ever there was an indictment of an industry run by private enterprise, here it is. I am quoting from memory. These were Lord Sankey's words: Every time the hand of the clock moves three minutes a miner is injured. Every time that hand moves six hours a miner is killed. Listen to this damnable statement: Most of these accidents could have been avoided had it not been cheaper to pay compensation than to provide means to prevent them". Those were the words of Lord Sankey, Chairman of the Royal Commission appointed to investigate the industry.

I said that fatalities were simply taken for granted and were even expected. Lest noble Lords may think I am rather exaggerating in my remarks, let me relate a true story. About thirty years ago a friend of mine was killed in the coal-mine about seven miles from my home. Another friend undertook, on behalf of the family, to arrange for the funeral and provide a coffin. After the coffin was made my friend learned that it was the custom at that particular colliery for the management to provide a coffin following every fatal accident, and the custom was followed in this instance. My friend thereupon went to apologise to the manager for having inadvertently caused two coffins to be made. "Don't worry", said the manager, "the spare one will be available for the next fatal case". I ask your Lordships whether that remark would have been passed in any factory in this country. And it is this murderous aspect of the industry, as we have known it, which makes me glad that before the end of the present century only collieries with modern machinery and means of production will be kept going.

The research establishment of the N.C.B. are working hard on the development of machines to do the hard, laborious and dangerous tasks. Indeed we can expect the disappearance of men from the coal-face itself in the getting of coal. This is miraculous, because the long wall face will be remotely operated, and two things will follow: far fewer men will be exposed to danger and, at the same time, productivity will rise. In spite of what I have said about the nature of the industry, let me add this, in case I am quoted: I am against closing a single pit until alternative occupation has been provided for the redundant miner. The miner is not usually a mobile employee, because generations of his family have been working in the same pit and he is not readily prepared to leave the area where he has been living.

Before I turn from coal to the other media of energy—nuclear power, gas and water—may I express amazement that although we are living in the middle of the 20th century a geographical or geological survey of Britain has never been carried out: this, in spite of the fact that 20 years ago, in 1946, the Ministry of Fuel and Power appointed a Committee to investigate and report on mineral development in Britain. The Report of that Committee has been pigeon-holed for 20 years. That is not good enough for a country which is spending £150 million annually on the import of minerals.

On the authority of my noble friend Lord Arwyn, we have it that in Britain we have samples of every type of rock formation known in the world's crust. Indeed, I am told that in Anglesey we have the oldest rock in the whole world. In any event, throughout Britain we have samples of every known rock in this world. If that is so, am I being too optimistic or naïve in believing that an inexhaustible supply of oil and gas may be lurking somewhere among those rocks? If the same rocks are found in the Middle East, why is it not possible for us to have the same oil? If there is gas under the bed of the North Sea, why cannot there be gas also under the same rocks in Britain? We shall never know the answer until we do some boring. To-day, boring is a simple matter as compared with only 20 years ago. In those days we had only the 11-foot auger drills. To-day, we can easily drill deep down into the earth at least 10,000 feet. We can do that simply.

Before a comprehensive survey is carried out, however, we need to overcome another problem, one which a Labour Government should have great pleasure in solving. I refer to the mineral landlords, of whom we in this country have thousands. I have never understood the term "mineral rights". Believing, as I do, with the psalmist, that "the earth is the Lord's"—and not the landlord's" and the fulness thereof", I would say that that includes the minerals, too. Believing that, I have never been able to appreciate how any man can claim the right to the minerals in the bowels of this country and of the world. How far does this right extend? Is it to the centre of the world; or does it go beyond that, towards the Antipodes? I should be most interested to know to what extent these mineral rights can be claimed.

Under the present law before a thorough survey could be carried out it would be necessary to get prospecting licences from all these landlords, many of whom can never be traced. But the present Government would have no difficulty in dealing with that problem, and I greatly hope that before the end of this present Parliament we shall have this all-important survey.

The need for energy is expanding annually. That is why a realistic fuel and energy policy is necessary. I am sure that that is why my noble friend Lord Wynne-Jones introduced this debate this afternoon. To meet the expanded demand for energy we must make every effort to utilise the other energy-producing media; namely, nuclear power, gas and water. One of the greatest discoveries of the 20th century was that of natural gas under the North Sea. Nevertheless, that discovery should not make us too complacent. The Chairman of the Gas Council has calculated that from this source alone we can count on receiving 400,000 million cubic feet of gas per day, and that for the next 30 to 35 years—am I wrong?

LORD STONHAM

My Lords, I think my noble friend said "400,000 million". I venture to suggest that the Chairman of the Gas Council could not have mentioned a figure like that. He might, possibly, have mentioned 4,000 million, but not 400,000 million.

LORD MAELOR

My Lords, I am sorry. My noble friend Lord Stonham is correct: I meant to say 4,000 million. As I am later quoting my noble friend Lord Robens of Woldingham I should like to correct my statement to 4,000 million cubic feet of gas per day for about 30 to 35 years. But the Chairman also said something else, which should shake our complacency. He said that it might take ten years—another decade—before the work of connecting this gas to all the Area Gas Boards is completed. Unfortunately, too, this natural gas from the North Sea cannot he put to a domestic use in our homes until the present-day appliances are converted to make them suitable for burning it. And this will cost another £400 million. As my noble friend Lord Robens of Woldingham said, in an admirable address which he gave to the Miners' Conference last year: Natural gas produced at the rate of 4.000 million cubic feet a day is roughly equal to 50 million tons of coal a year. So if the gas is used at this rate, and exhausted in 35 years, it could not even meet half the extra energy which will be demanded in 1980 and beyond. Lastly, my Lords, another source of energy is water. This has been steadily neglected in this country. Until recently we in North Wales could think of electricity only in terms of water. All our electricity schemes in that part of the world are hydro schemes. In the town of Blaenau Ffestiniog, in the County of Merioneth, we have a hydro scheme the like of which is not to be seen anywhere in Europe. It is a pumped-storage scheme, and I would crave your Lordships' indulgence just to give a brief account of it.

Blaenau Ffestiniog is situated at the foot of the Moelwyn mountain—a steep and precipitous mountain. At the summit there is a large lake, known as Llyn Stolan—in English, the stolen lake. The lake is so high that it was rarely visited. The Electricity Generating Board arranged to form a reservoir bed at the foot of the mountain, and every day the water from Llyn Stolan is emptied down great pipes to the reservoir below, and it goes through great revolving turbines on its way down to generate electricity. Each night every drop that has passed down to the lower reservoir is pumped back again to the summit of the mountain. When one thinks of all the lakes we have on mountain tops in this country, I should imagine that it would be a profitable thing to make a similar use of them. In any case, we get enough water in this country to supply every reservoir: enough water has fallen on London this morning to fill any decent size reservoir. I feel thankful to my noble friend for initiating this debate, but I apologise to him. I have just mentioned Merionethshire, and I am anxious to get near there tonight. So, my Lords, having had my say, I am now leaving to catch my train.

7.52 p.m.

LORD BLYTON

My Lords, I hope my noble friend will forgive me if I do not follow him into the hills of Wales, but I should like to thank my noble friend Lord Wynne-Jones for initiating this debate on the necessity for a national energy policy, although I may not agree with some of his conclusions. At least he has given us the opportunity of discussing this very important subject. Some years ago a colleague of mine, Sir James Bowman, who was Chairman of the National Coal Board, said, looking to the future, that coal mining was not a Cinderella industry; it was the key to Britain's economic future. To-day, instead of security and prosperity, which we expected would be a feature under nationalisation and public ownership, we have an industry riddled with frustration, cynicism and great doubts as to its future. There has been a terrible loss of confidence in it and as a result of the National Plan which cut the industry back to 170 to 180 million tons per year and the Government's announcement about "A", "B" and "C" pits, thousands of men, many of whom came into coalmining as juvenile recruits, believing that it had a future, are to-day, with half of their working lives still before them, turning their backs on the industry.

I do not want to dwell too long on past history, but in the early years of nationalisation we faced three things. We faced the incessant pressure for more and more coal to meet the increasing demands for energy and power due to the upsurge of industrial activity in the post-war period. Secondly, there were problems of the reorganisation of the industry foreshadowed in the Reid Report. Thirdly, there was the shortage of manpower, which was so serious that, in conjunction with the Ministry of Labour and the National Coal Board, a costly recruiting programme was conducted which held out the prospect of a job with a good future to it. All this was held out to people to come into mining. We increased production by some 20 per cent. in the first ten years, but it was not enough to meet the ever-growing demand. So the Government aimed at securing a more efficient utilisation of fuel, and encouraged the use of alternative fuels, particularly oil. Coal was imported to reduce the gap between production and demand. In 1956 we were told by the then Conservative Minister of Power that, on the assumption of economic growth, by 1965 inland demand for all forms of primary fuel would exceed 300 million tons of coal equivalent, and the manpower requirements of mining would be about 672,000. Yet, less than three months after this announcement of policy, it became clear that 1956 had seen the post-war peak in the demand for coal.

In 1957 the changing pattern of fuel consumption become more apparent. It showed clearly that solid fuel was getting an ever-diminishing share of the total energy requirements. Over the next three years from 1956 the mining industry experienced a tragic and, in the light of the forecast which had been made in the previous year, a quite unexpected slump in the demand for coal, a fall of 33 million tons in the annual demand. So after ten years of pressure up to 1957 for more and more coal and a continuing demand designed to attract more manpower, the industry faced for the first time a deliberate and calculated contraction of its productive capacity to bring it in line with demand. This meant not only the closure of collieries but, in order to adjust the manpower to the industry's requirements, arrangements to retire compulsorily all men over 65; and the recruitment of manpower, including juveniles, was banned or discouraged in all pits.

Looking back over the last 12 months, we find that the Government have written off £415 million of the industry's capital debts. This was a contribution to its health and viability, in that it removed the unfair burden of debt under which the industry had laboured since it was nationalised. The Government also gave up to £30 million to meet part of the social costs of reorganisation, a cost previously borne by the industry itself. The Government's resistance to pressures of certain consumers for the importation of coal, and the tax on fuel oil, are regarded as substantial and positive assistance to the mining industry.

Yet, massive though the assistance has been, there still remains the situation that the industry faces a crisis of confidence. Since the National Plan, the Minister's announcement of "A", "B" and "C" pits and that each pit will stand on its own financial basis—something never contemplated when we nationalised the mines—shows to-day an indiscriminate contraction of nationalised mining; and arising from this we have seen a substantial increase in voluntary wastage, with men leaving this industry to take up alternative employment. Side by side with this there is a considerable fall in the recruitment of juveniles. In mining, which is very hard work, even with machines, it is essential to get an intake of juveniles to reduce the average age, since when men get towards 55 and 60 years of age they are looking, after years at the coal face, for lighter work. Also, we must have juveniles to be trained to take their place if the industry is to carry on.

The pattern which I have described has been visible for some time now. Last year the men were leaving at the rate of 1,000 a week, and the number of men employed is now down to 409,000—a reduction of nearly 100,000 in the last two years, of whom nearly 43,000 have left in the last eighteen months. The last few months have seen a change in the pattern, and in the light of past experience I do not attach any special significance to it. Even so, it is fair to say that the wastage is getting less.

That men should be concerned about what the future holds is not surprising when we look over the events of the last twelve years. The industry has had a difficult time. In the past it was possible to cushion the effect of the loss of manpower by increasing efficiency, and the N.C.B. has done a wonderful job in this field. But the extent to which we can rely on this method is limited. The industry has reached the stage when the shortage of manpower is seriously impeding production at many pits, and the efficiency of some of these pits is suffering as a consequence. It is therefore not in the national interest that in the present circumstances the Government should, as many suggest, stand by and watch this industry go to disaster. In the light of these developments over the last ten years, the Miners' Union has been concerned not only to avoid the kind of industrial and social consequences associated with too rapid a contraction but has in the national interest, together with the Parliamentary Labour Party, over many years consistently stressed the need for a national fuel policy and the importance of avoiding the indiscriminate contraction of mining.

What is the future of coal? With industrial expansion the overall demand for energy and power should increase substantially, and what must be decided is: will coal be required twenty years from now? For it must be understood that, because of the nature of this industry, because it is inflexible and requires long-term planning, our ability to produce coal in the required quantity in the '80s will depend largely on policies pursued over the next few years. It is understandable that in an economy such as our own, which depends so much on the export of manufactured goods, there is always the incessant desire for cheap energy and power. But will it not be a great mistake for British industry, public utilities and services to become too dependent on an imported fuel? Will it not be a false economy if we increase our reliance on imported fuels, forcing a further contraction in mining, only to find ourselves, years ahead, powerless to resist the unreasonable price demands of the suppliers of imported fuels, once they have gained a captive market in this country?

A policy which permits the abandonment of our coal-mining in order to gain some marginal short-term advantage can well be disastrous to us all. I recognise and accept that coal no longer has the monopoly in the energy market. But America and the Soviet Union are planning to increase their coal production, which must surely lend support to our argument that our valuable and abundant fuel resources should not be allowed to go to waste or be lost for ever.

Much has been said about North Sea gas, and much exaggerated opinion has been expressed about it. The most optimistic estimate that I have seen is that it will be no more than 5 or 6 per cent. of this country's energy needs over the next 10 to 15 years. We must accept this new sort of energy and power as a welcome addition to our natural resources, provided that it is seen within the total energy requirements of the country; not as a replacement of coal, but as a substitute for imported fuels. If that is done, then I believe it holds no serious risk for coal at all.

It was the discovery of natural gas in the North Sea which led the Government to engage in an intensive review of our fuel policy, though no declaration has yet been made. But even without this discovery I consider that the Government would have had to have a review, because all the estimates contained in the White Paper of October, 1965, have been discredited by events, especially in total production so far as mining is concerned. We are now in 1966 and 1967 at the estimated figures projected for 1970. The figure of 170 to 180 million tons was estimated for 1970. But in the last 12 months we have seen only 165 million tons of deep-mined coal, and when the open-cast production is added to that we are just about at the estimate which was projected for us in 1970. So events themselves have thrown up the necessity for a review of the whole fuel policy of the nation.

Now what are the Government intending to do? We met the Minister recently as a miners' group of the House of Commons. The Minister intends to build an econometric model of fuel economy, and of the way in which individual industries fit into this pattern. The econometric model is a new economic term, so I understand, and as I am not an economist I have tried to see what it means. It means that the Government are to project the existing trends in energy production, in energy supply, in price, in export trade and in the balance of payments. It means a projection of existing trends in all aspects of the economy which affect the energy market to 1970 and 1975 and, on the basis of building such a model, to be able then to see what protection is necessary for certain industries, what has to be done, what has to be held back, and what has to be stimulated. To sum up this procedure, it reveals the question: What has to be the basis of a completely new policy?

To me—and I say this to the Minister on the Front Bench—this projection seems a far more sensible one than that which took place before the publication of the White Paper on Fuel Policy of October, 1965, and also the National Economic Plan. These two policies were based mainly on questionnaires sent out to consumers and to various bodies inquiring what was their estimate of consumption in 1970 and 1975. The result of that inquiry was submitted to the Energy Advisory Council; it was considered by the Department; it became the fuel policy of the Government, and was embodied in the National Plan. It appears to me that, if planning is to take place, whether it is general planning or in the energy industries, then there has to be a much deeper study of all the factors that are involved as they affect the energy position in the determination of future policy.

The Minister has said that they are concerned with inquiring and determining what type of industry will be necessary in 1970 and 1975. The question I would pose is: Is the coal industry one that will need protection? It is being protected to-day. is that protection adequate? Ought there to be more protection? But knowing that from the Government's standpoint there is a limit to the amount of protection that can be provided to coal, and knowing the Government's decision that the size of the coal-mining industry will be determined by its ability to compete in the energy market—a doctrine we opposed for years in Opposition in another place—we are given the impression that the coal industry will be down to 130 or 140 million tons a year by 1970; and that is our great fear.

The Government have also emphasised that the price of coal must be brought down to a level where it is competitive in the energy market with rival fuels. A formidable task lies ahead for the coal industry. I consider that Lord Robens of Woldingham, who has great drive as Chairman, is fully cognisant of this, but it is a tremendous task for him. He will need all the help he can get in this task, and I for one wish him well.

I now come to natural gas in the North Sea. There have been all sorts of speculations. There has been talk of 4,000 million cubic feet of gas coming out of the North Sea. This will mean 50 million tons of coal equivalent. In an expanding market this need not have any significant impact upon the mining industry. While we have to guard against exaggerating the possible output of gas from the North Sea, it is worth while noting that it is not only natural gas that we see as a factor against coal in an expanding energy market. There is the question we have always had to face: that the Government's policy on fuel is to engage in a massive expansion of oil refinery capacity inside our country. It is justified on the ground that it is cheaper to import crude oil, to refine it and to get all the refined products from it. A massive expansion of oil refining here means an equally expansive production of fuel oil. We do not see this as a static situation, because other fuel industries, as well as natural gas as it develops, will be making their impact upon our increased energy needs within our economy. What the coal industry has faced in the past is that, in a period of increase in our requirements for energy, coal has been declining and fuel oil not only has been getting the increase in energy demand, but at the same time has been making inroads into the domestic markets of coal.

One important matter arises in the exploitation of natural gas, in that 25 international oil companies have licences to drill and exploit any reserves of natural gas in the North Sea, over an area of 42,000 square miles. It is also being said that oil is likely to be found off Aberdeen, in the North. We have faced competition from the oil companies because they produced fuel oil, and the same companies will exploit the natural gas from the North Sea. These people are a powerful, international, political force, and we should not underestimate the attempts they will make to impose upon the economy of this country the maximum utilisation of the products in which they have their investments, which are natural gas and oil.

My Lords, we need a fuel policy if this situation is to be controlled. We need a fuel policy if the energies—both the old and the new that have been discovered—are to be conserved in the interests of the nation, not this year or next year but over the next twenty years. It is the basic philosophy of "big business" that they are not concerned with what the energy position will be in twenty years' time so long as—and this is their job—they can get their dividends out of their investments to-day and to-morrow. That is the approach we have to fear in this situation. It is important, if we are to have effective fuel planning in this country, that this new source of energy should come under public ownership, because I do not think it is possible effectively to plan in the fuel field so long as so much power rests with these tremendously powerful economic entities—that is, the big international oil combines.

In the general and industrial commercial markets coal has been meeting severe competition from oil in recent years, and in order to capture the markets from solid fuel oil companies have, over the years, heavily discounted the prices of their fuel oils to industralists, local authorities and others. It is rather significant that within days of the spectacular cuts in petrol prices a few weeks ago two of the largest suppliers of the United Kingdom have sent out letters warning industrialists that they will soon have to pay higher prices for their fuel oil. The discounts hitherto given on fuel oil are to be reduced in size. Although the companies stress that there is no connection between the cuts in the petrol price and the threatened increases in fuel oil prices, the Energy Editor of the Financial Times differs from this. He writes: There are signs that the major oil companies may shortly recoup some of their losses in the petrol market through charging higher prices for fuel oil which is widely used by industry. It is known that buyers have been receiving letters from the two largest suppliers of this product informing them that prices will be up in the near future. While they will not increase the official price of 14.45d. a gallon in what they call the "outer zone", they will reduce the size of the discounts now being granted. This may help coal a little in its competitive struggle against fuel oil.

My Lords, I should like to say a word or two about electricity generation in relation to coal and nuclear power. It looks as though nuclear power will be the coal industry's biggest rival in the electricity generating market of the 1970s. This has to be proved. The first nuclear programme amounting to 14 million tons of coal equivalent certainly has not been competitive on price with the modern coal-fired plants. The nuclear power chiefs claim that the second programme, based on the advanced gas-cooled reactor, will produce electricity at a price 10 per cent. cheaper than the latest conventional station. If the forecasts of the nuclear chiefs are correct—and at this stage they are only forecasts—the coal industry, to be competitive, would have to put coal on the power station boilers at 3d. a therm; that is, at about 15s. a ton less than now.

Is this possible? I have been informed that it is possible. In fact, the industry is now producing 12 million tons at under 3d. a therm, 60 million tons at under 4d., and 120 million tons at under 5d. There are three main ways by which many more millions of tons of coal can be produced at 3d. a therm. The first involves a continuing drive to raise even higher than at present the levels of output and productive efficiency throughout the industry by a better use of the existing machinery, by the roster system and by the development and application of improved machines. Secondly, 50 pits have been marked off for priority in recruitment, capital investment and managerial know-how. These pits produced 35 million tons in 1965–66, and with the increased manpower and capital equipment they can produce another 16 million—which will add another £50 million to the coffers of the Board.

We are now conducting a campaign with British Rail to rationalise the transport of coal to the power stations and so to reduce costs. Already nine out of ten tons of coal delivered by rail to the power stations comes in single cargo trains or in smaller blocks within the trains. By the end of next year 12 "merry-go-round" schemes, as they are called, will be completed. By 1970, 40 pits are expected to be equipped to load 21 million tons of coal to 12 power stations; and eventually this tonnage will reach 40 millions. We are confident that we can reach this position in relation to nuclear energy.

My Lords, all I want to say in winding up is this. The Government should make it clear that the present tax on fuel oils will remain as long as necessary, and the gas industry should be asked to phase its reduction of coal consumption over a longer period. A better climate of confidence should be created in the coal industry than exists to-day. I think that over the period of the few years in which the reorganisation is taking place the electricity industry could help us by reducing their use of oil to a lower level than it is to-day. I think that the Government should press the local authorities to give preference to solid fuel and should initiate a research programme into the energy sector—one in which they should participate themselves and provide the funds—and that priority should be given to investigation into the fullest economic utilisation of the nation's coal reserves.

There is a terrible fear in the coalfields that there will be a further cutback in coal mining to 130 million tons. We should know as quickly as possible where this industry is to stand in relation to the energy requirements of the future. Another cut-back will be a serious blow that will add to the present lack of confidence in the industry. The young men will not look to mining as a career. If the Government accept that a sound and efficient coal-mining industry is essential in the national interests they will have to take steps to stimulate the industry. It is my firm belief that if it is given the chance, the British coalmining industry, with some of the most modern mines in the world, can make a worthwhile contribution to the national economy.

My Lords, in thanking my noble friend for introducing this debate, and remembering that the production of the pits now is where it was forecast to be in 1970, we await the next declaration on fuel policy with a certain amount of fear that the coal industry will be cut again. I hope not. But the fear is there in the coalfields. I trust that the Minister, in any new policy he may determine, will give us some assurance and some hope for the future.

8.29 p.m.

LORD RITCHIE-CALDER

My Lords, I want to join all other speakers in thanking my noble friend Lord Wynne-Jones for giving us the opportunity for this debate, and also, I may say, with great personal satisfaction, for giving us the opportunity to hear the noble Lord, Lord Jackson of Burnley, make his maiden speech. I think that all noble Lords will agree, however sparse the numbers may be on the Benches of this House at the moment, that to-morrow's Hansard will be mined for and quarried for as a source of information for a long time to come.

I want to follow my noble friend Lord Wynne-Jones in emphasising the need not for a fuel policy, but for a policy of energy. I think the distinction is tremendously important, because one of the difficulties, as we have heard from the discussion to-day, is that our concern with fuels, qua fuels, neglects the fact that these fuels are largely the primary source for important secondary developments which are the essentials. I think it is tremendously important because, while I share, with noble Lords who have spoken, their deep concern about the mining industry, of which I have long and tragic recollections, I still feel that if we are to have a comprehensive energy policy the various fuels must be regarded, not as competitive but as supplementary and essential to each other. I do not see how, in the expansion of our energy requirements, we can have any other attitude.

My Lords, the prosperity of any country depends on its use of energy—not of fuel but of energy, in whatever form that energy is expressed. It is possible to correlate the per capita wealth of a country as accurately to units of energy as to the coinage. The per capita income in the United States is one and half times as high as in this country and so is its per capita energy. The average American is a hundred times better off than the average Indian because the average available energy is a hundred times as great. One can define industrial development very succinctly: less and less muscle power for more and more work. To-day the British industrial worker can with the finger-flick of a switch, command the equivalent of a hundred human slaves. To put it another way, if the "Queen Elizabeth" were a galley ship, it would take three million galley slaves to row it across the Atlantic in four and half days.

The British housewife, although she will not believe it, has a staff as great as those in the stately homes of a century ago or the "gentry", as we should say. She has slave electrons; the electric fire and the cooker, instead of the open range which had to be stoked; a vacuum cleaner instead of a housemaid; a washing machine or a visit to a launderette, in stead of a washerwoman and linen maid. and so on, with all the refinements one can afford. It is one of the bitter ironies of mankind that the poor can afford only the costliest form of energy. A hungry peasant with a hungry water buffalo trudging backwards and forwards to haul buckets of water from a well for irrigation purposes is using energy food calories which per unit cost 20 times as much as a unit of electricity or a unit of atomic energy. We are still conditioned to think in terms of muscle power. We still express motive power as horse-power and we still convert all our sources of energy into "coal equivalent". We glorify muscle power when we think of the prowess of our noble colleagues, Lord Wakefield of Kendal and Lord Hunt, but we should leave muscle power to the athletics, in the interests not of indolence but of efficiency.

My Lords, Aneurin Bevan once described Britain as "a lump of coal entirely surrounded by fish". The "lump of coal" is no longer self-sufficient. We are dependent for our domestic needs on sources half a world away. However we have arrived at this situation, and whatever feelings noble Lords may have about imported oil, we are still dependent on it—and enormously dependent. I am not going to talk about how long supplies will last. I think that entirely fruitless. I am quite cynical about any estimates that I have ever heard. I travelled with an oil prospector in the Sahara in 1950, and he was regarded as a madman. I have been to the Sahara since to see the great oilfields and the fields of natural gas which now supply our Gas Boards, and provide gas to cook our fish and chips. I was in an expedition which discovered an Arctic oilfield stretching right through the Canadian archipelago. It is ice-locked now, but it is there when we want it, or if we care to use submarines as oil tankers. I would not worry about supplies, but I would worry about how we are going to get it and this is where I feel that into the econometric model we are devising we must see a great many more factors than are determined by what might be called a national fuel policy, since our national fuel policy depends very considerably on our international trade.

I want to look briefly at the world power situation and at Britain's role in its development. A happy conjunction of coal and iron in this country gave us a lead in the steam revolution. That revolution in Britain, Europe and America, and in Russia, depended on access to fossil fuels—coal in the first instance, and then natural oil and natural gas. Because countries had access to such fuels they became industrialised. Industrial prosperity meant that they could invest in education, science and technology, which is the conversion of laboratory discoveries to the factory floor; and for these reasons, and as a product of this, originating in the steam revolution, they became wealthy. They became highly advanced countries. Some people have the illusion that the man in the Northern temperate zone—which comprehends many countries, including Japan—somehow has, or had, innate qualities which set him apart and above what we used to call the backward countries, and what we now call the developing countries. This superiority, this scientific technological civilisation, about which we are, or tend to be, so arrogant, is no more than 200 years old, the product of the breakaway in the first Industrial Revolution which would not have been possible if we had not been on "a lump of coal entirely surrounded by fish". That was a Revolution in which two-thirds of the world could have no share.

Consider the facts that we overlook, although world power conferences have reminded us of them over and over again. Nine-tenths of the world's coal reserves and four-fifths of the world's oil reserves are in the Northern Hemisphere, North of 20 degrees Latitude North. This is a geological irony which has meant that countries ill-provided with fossil fuels could not get into the act in the 19th century. They could only provide the raw material, the fodder for the factories of the steam revolution, or become, as they did become, the compulsive colonial markets for the products thereof. Some of them had and have fossil fuels, but the operative word is "accessible". Paradoxically, if we think of the map, most of the countries South of that latitude are extremely well endowed with another source of energy, hydro-electric potential, which in the case of Kariba, Owen Falls, and the like, is now being developed. Most of them are also well endowed with that other abundant source, solar energy, which we still have not got around to harnessing properly.

But—another paradox—countries without fossil fuel can have another geological source, geothermal energy. We know it, and have known it for thousands of years, as geysers, thermal springs, bubbling mud-pools and vents of hot gases. These open "showings" have been harnessed as energy sources, as in Iceland, in the entirely automatic electricity generating stations in the geyser region of California, in the mud-pools of Wairekei in New Zealand, and at Larderello, near Sienna, in Italy, where geothermal sources produced electricity equivalent to the needs of a city of two million population. But geothermal energy is not confined to open vents. Indeed, it has been shown that boring into the geothermal formations gives heat at temperatures 20 times as high as in the open vents. According to what we have been told at United Nations conferences: …all recent volcanic regions with post-pliocene volcanoes active or extinct have geothermal possibilities. My Lords, I am not going to elaborate on those areas of geothermal energy. I want to emphasise that in this case, as in the case of atomic energy, in the case of solar energy, in the case of geothermal energy and of hydro-electric energy, the world is a total unit. That is to say, we are increasingly dependent on, and competitive with, sources of energy required by other countries. And we have, I say seriously, as an industrial country that will depend eventually, even for its sources of energy, on imports from abroad, seriously neglected the oportunities of helping the rest of the world to develop its energy. This is what I want to see as part of the answer to something which is a national policy but which, at the same time, must be international.

8.40 p.m.

LORD REDMAYNE

My Lords, this has been a very enjoyable but long debate, and in mercy to your Lordships I propose to discard a large part of my excellent speech and devote myself only to the subject of coal. I do so because I was billed to do so by my noble friend Lord Bessborough. I should like to say how much I enjoyed the speech of the noble Lord who moved the Motion and also the maiden speech of the noble Lord, Lord Jackson of Burnley. I compliment the noble Lord with a certain sense of pride, because he and I are divided only by a matter of months in our membership of your Lordships' House.

My noble friend Lord Bessborough said that I was an expert on coal. This is wholly untrue. I have dined out for years on the fact that my father's cousin was well known in the coal industry for a great many years. I can see that the noble Lord, Lord Wynne-Jones, is aware of that, because this same man was not unconnected with northern universities. This stood me well in the House of Commons for many years—or rather, for those years when I was not Whip and was able to speak—and I hope it will stand me in good stead in your Lordships' House for many years to come—and much good may it do your Lordships.

Some people believe that coal is fighting a losing battle. The evidence seems very strong indeed, and it has been adequately deployed by the noble Lords, Lord Blyton and Lord Taylor of Mansfield, this afternoon. Coal is over-subsidised, protected, given special favour in more senses than one; it is of no further use on the railways; it has largely lost the gas market; it has been slow, much too slow, in competing in the demand for smokeless fuels and it is in terribly low repute with the ordinary consumer, partly because of faults in the system of distribution. Yet it remains a fact—and nobody denies this, and I hope that the noble Lord, Lord Blyton, in his heart, will know how true it is—that good coal at the right price, for industry, for generation, certainly for the smokeless fuel market and for export, will remain in steady demand at well over 100 to 120 million tons, perhaps even, if the price is right, at up to 170 or 180 million tons, for as long as we can see ahead.

It has always been a tricky political problem. The mining Member or mining Peer will always take his stand on the social need of the miner, some times sensibly, as has been done in your Lordships' House to-night, sometimes less than sensibly. Though I am a little out of order in quoting some words from another place, I would quote these few words of a supplementary question asked in the last few days of the Minister of Power: …will he take steps to protect the national investment in coal and electricity from nuclear energy and that sort of thing? This is not the sort of approach we ought to have from those who wish to support the industry in this day and age. Frankly, in spite of the appeals that have been made by the noble Lord, Lord Blyton, we must take a more realistic view of the coal industry to-day.

I think the Chairman of the Coal Board has done a good job, but he has done it single-handed. He has had the goodwill—sometimes the impatient goodwill—of a long succession of Conservative Ministers of Power. He has had protection for his industry, it is true, and he would be the first to admit it; but the tactical battle within that protection of refining the shapeless, top-heavy mass which he inherited from the earlier years of nationalisation has been his alone. Incidentally, if I may say so, the noble Lord, Lord Stonham, who is not in his place, seemed to me to say that the modernisation of the coal industry started from 1965. I hope that I misheard him, because this completely misrepresents the facts. The job has been going much longer than that.

The fact that it has been a lone battle within the material resources of the Coal Board has meant that it has been too slow, and it still is. Men have to be worked into new pits, to be compensated, to be rehoused; price structures have to be rescaled; earnings have to be adjusted to mechanisation, and only now this year has the management structure been revised, a scheme which has been on the drawing board for many years, as may well be known to the Minister who is going to reply. Yet it is remarkable that so much has been achieved with so little strife and, largely speaking, from within the resources of the Board, at least materially if not financially.

For many years I was a Member of Parliament, not for what may be called a mining constituency but for one with one or two pits and many others nearby, both ancient and modern. One of them was Cotgravel, one of the most modern in the country. I had many miners among my constituents. The noble Lord, Lord Winterbottom, was my near neighbour at the time and he knows the quality of these people. Therefore I can speak with some feeling of the frustration and sourness of those early years of nationalisation, and the remarkable smoothness of the reorganisation that followed, slowly but surely, after the appointment of the noble Lord, Lord Robens of Woldingham, as Chairman.

The point I am making—the one point I really want to make to-night—is that this is too slow. The best coal produced at the best cost, largely from the East Midland and Yorkshire areas, is still wholly in the fight, and it will remain so if these areas can more quickly shed the burden of the uneconomic pits. The time has come when this Government, or any other Government, must take a more active hand in the redeployment of men and resources which are no longer competitive, and thereby change our whole attitude to coal, so that we do not look upon it as a sacred cow, as some do, but as a lively factor in fuel policy.

Admittedly the Government claim "to have taken short-term measures to relieve the industry". I do not think that capital reconstruction of the coal industry and the relaxation of the financial objectives set out in the White Paper of 1961 are anything more than book entries, palliatives, to make this nationalised industry look more respectable in the public eye. Nor in the present circumstances is preferential treatment for coal in respect of electrical generation and of use in Government offices and so forth more than a palliative.

Paragraph 49 of the Report is full of good intentions. I will not now quote from it at length, but in it the Government continue what has been for a long time the policy of the Conservative Government to support the areas in which employment is difficult. But I would ask the Minister who is going to reply to what extent this has been beamed specifically on the re-employment of uneconomic miners. The Board, of course, continue their own policy of internal redeployment. This is the lone battle to which I referred. I would ask whether at this moment of time the Board are getting sufficient help, for example, with the housing that is required for immigrant miners; miners immigrant to the Midlands, Yorkshire, from Scotland and so forth.

In that connection, I should like to say that, in so far as I have knowledge of these matters, it has always been my opinion that in the Midland area at least (and so far as I know, in Yorkshire) the Midland miner is happier and works better if he lives cheek by jowl with the Joneses in non-mining communities. I think that possibly the noble Lord who is to reply knows this from his own experience. The colliery village, at best, was not a very good sociological development. I think it is wholly out of date to-day. As I say, my experience has been that mining men who are living in the ordinary industrial suburb of a great city, not too far from their work, but far enough to be separate from it, are far more content and far less introspective about their job; and their productivity is far higher. For that reason (again I am really digressing on the point, because it is a hobby horse of mine), there is a good case for the rehousing of miners, in the reorganisation of the coal industry, to be taken over as part of the urgent housing problems of the Government, and not for it to be left to the Coal Board.

In paragraph 49 of the Report two years ago, the Government said that they would provide special funds to assist internal and external redeployment. I should like to ask the noble Lord specifically what are those funds. Have they in fact been provided (I am not now in this speech making a political "thing" about this; I have left out the political part of it), and, if so, to what specific purposes are they applied? I believe—as I hope I have managed to put across in this speech—that it is most urgent that these matters should be put in hand.

Frankly, I can see no need why we should await the result of this review. The review is no doubt well based and extremely scientific, but there are certain facts of life about fuel policy in this country which I think we should accept to-day, and get on with it. I would say that I would have none of this play by the National Coal Board with natural gas. I think this move by the Coal Board is bad for the morale of the industry and for the reputation of its product—that is, that its management should appear to lose heart in the prospects and to seek alternatives.

Something was said by my noble friend Lord Bessborough about diversification. Diversification has a magic sound, but it is often very false. It may have some magic for companies with cash to spare, but too often it dissipates the proper concentration of management. To my mind, diversification in the coal industry should be directed only to those industries which are ancillary to the sale or use of coal and its by-products. As good an example as any of that, although a comparatively minor one, was the acquisition by the Coal Board of Sankeys for the purpose of fostering the installation of coal-burning appliances.

Further, I would say that if the process of streamlining the industry was speeded up, with direct help from the Government on a larger scale, we could certainly start to remove some of this protection. I was pleased that the noble Lord, Lord Stonham, made some tentative proposition in this direction. But I should like to see this announced as part of a practical plan. In conjunction with the speeding up, modernisation and streamlining of the coal industry, it should be said that the reduction of this duty will take place over the next two years.

If I may say so, it is really little use any political Party talking airily about going into Europe unless we are prepared to face up squarely to the conditions of competition which will then arise. When that day comes—as, indeed, I hope it will—there will be no protection for coal; and it will go ill with the industry if it is not wholly ready for it. I wish that the noble Lord, Lord Blyton, had stayed for a few moments longer, because it is in this sort of theory that the real future and health of the coal industry lies. If the industry is ready, and has really been stripped to fighting form, then its export possibilities will be very considerable indeed. They will be a long way beyond what they have been throughout these last rather sad years. If I may say so—and this is quite relevant—we cannot face European competition in general unless our fuel costs all round are at their lowest possible level; and I believe, as I have said, that the coal industry has a part to play in this.

I am sorely tempted to deal with other points. But may I say quite briefly that I was fascinated by what the noble Lord, Lord Wynne-Jones, said, first of all about the possible limitations and scope of the natural gas that is likely to be discovered in the North Sea, and also about the great and profitable contribution which could be made by the use of that gas if it was used as a feedstock for the chemical industry. I think it is a pity that the whole of this business of natural gas has been so boosted as bringing the millenium to the householder, when in the national interest, if it is diverted to the uses of industry, either as a fuel or as a base product, this is where the profit lies. I was happy to hear the noble Lord make this point.

On the electricity industry, perhaps I might ask this one question. I do not believe that I shall receive an answer tonight, although I should be grateful if I could have one later. In the past, I had a great interest in the matter of the chemical cooling (I may have the term wrong, but I think the noble Lord will understand); that is, the cooling of electricity generation other than water cooling. I know that experiments were going on at Rugeley. If in fact it became possible through this device to site conventional power stations in close proximity to coalmining it would offer a great "saving in costs, and at the same time be a great saving in amenity. In that respect, it runs parallel with the point made by the noble Lord, Lord Wynne-Jones, about the siting of coke ovens.

I am afraid I have gone on too long, but I see that the noble Lord, Lord Blyton, has returned to his place, and I should like to make one comment on what he said. I should like to make a lot of comments on what he said, but I want to make just this one. I do not understand how you can nationalise the international. When some day some Socialist Party tells me how that can be done, I shall truly believe that what we have is Socialist world government.

The White Paper set out admirable objectives. The Minister, frankly, did not say very much, although he said it very well. The fact is, as indeed the noble Lord, Lord Wynne-Jones, said at the beginning of the debate, that, like war, fuel policy is based only on uncertainty. However technically perfect this new review may be—and I am as puzzled about it as the noble Lord, Lord Blyton—and whatever magic of mathematical simulution is brought to bear, still, after all that, in fuel and power only uncertainty will really be certain. In that circumstance I believe that a little action, and a little less review, will produce more good for the nation.

9.1 p.m.

THE PARLIAMENTARY SECRETARY, MINISTRY OF PUBLIC BUILDING AND WORKS (LORD WINTERBOTTOM)

My Lords, this has been a long but, to my mind, very interesting debate. I personally am very grateful to the noble Lord, Lord Wynne-Jones, for having triggered off this discussion. The hour is somewhat late, and I think I should bore your Lordships if I tried to answer all the points made in the debate. However, I should like to start with the same point as Lord Wynne-Jones started on when he referred to the Ridley Report of fifteen years ago. I remember asking a Question in another place at that time about the adequacy of coal supplies in this country to supply the energy requirements which we should need if we were to be competitive in the world.

At that time, we saw coal, some oil, and some hydro-electric power as the only way to salvation. But since then oil has been found under every desert, and under other places; nuclear power has been developed to a very high state of perfection; and natural gas has mercifully appeared from under the North Sea and so the options open to us are very much more substantial than they were. Nevertheless, I agree with those who have pointed out that we must not be hypnotised by these new discoveries. Nuclear power can provide us only with our base-load; natural gas can provide only about 10 per cent. of our energy requirements—and that for a not unduly long period. We must still base our fuel plans on the old, hard, primary fuels to which we are accustomed. These new discoveries do, however, help us in our problems of getting through the next ten years as best we may.

I hope that I may answer a few points of key importance in the discussion. I think that the importance of the speech of the noble Lord, Lord Wynne-Jones, was that he threw up a series of ideas which those who are studying the future of the energy industry in this country must consider. I think that his posing to us the various alternative uses of natural gas is of great help to us at this moment. But this is a tremendously important subject, and one on which I think we should not hurry our decisions. The gas will not flood ashore in enormous quantities in the next year or two.

We should make up our minds whether we should give this gas to the housewife, burn it under a boiler to produce electricity, or use it as feedstock for hydrogen production. The last is interesting; it would save substantial import bills for naphtha, and this might indeed be the best way of using part of our receipts of this substance. I am certain that the debate will be studied not only by those in the Ministry of Power who are considering the future, but also by the informed public in general. The noble Lord's speech was for me a fascinating speech, as I am certain it will be for others.

To turn to the speech of the noble Earl, Lord Bessborough, I think that most of his points were answered by my noble friend Lord Stonham. One point, however—and it was also raised by the noble Lord, Lord Hawke—was omitted; that is, whether the price that will ultimately be paid for natural gas will be the right one. Of course, as the noble Lords have pointed out, we have here two balancing factors. On the one hand, the price must be sufficiently high to enable us to exploit to the full the resources of natural gas under the North Sea; on the other hand, we must as a nation struggle to maintain our place among the industrial nations of the world, many of whom are better endowed with energy resources than we are, and we therefore want to get this bonanza as cheaply as we can.

This is basically what the argument is about: why the oil companies and prospectors are arguing with the Ministry of Power about the price to be paid. I can only repeat my noble friend's assurance to the noble Earl. There has been no inspired leakage by the Ministry. Many people indeed are concerned in these negotiations, and the leakage can come from anywhere. I believe, as in all negotiations, that the tightest lips are the best way of achieving the best results. I am certain that my noble friend's Ministry has not been guilty of any indiscretion. However, that is what the argument is about and why time is being taken. In due course, I am convinced, a proper price will be agreed which will give us our energy reasonably cheaply and yet enable us to ensure that we exploit the North Sea to the full.

One point, I think, stood out from my noble friend's speech when he was speaking on behalf of the Government: it is, I think, a key, and explains much else: that is, why the Government are doing certain things in a certain way. The two noble Lords, Lord Wynne-Jones and Lord Jackson of Burnley, both spoke as technocrats. My noble friend spoke as a man who is regarding the interests of the country as a whole. I would agree fully that we want adequate energy supplies as cheaply as we can get them, but we cannot regard this as the only criterion by which to judge a fuel policy. This was a point made by my noble friend, and picked up by the noble Lord, Lord Henley, in a speech with which I have very great sympathy.

We cannot forget the direct relationship, as he said, between productivity, energy consumption and the social needs of the country as a whole. I had sympathy with him when he was talking about the powers of public Boards, for instance the South Eastern Gas Board, with their powers to override the planning powers of local authorities. I have had some experience of this in the Ministry of Defence and elsewhere, and although this power exists I can assure the noble Lord that it is used with great discretion. A Government Department which is considering the acquisition of land for a certain purpose in every case consults closely with the local planning authority, and endeavours to behave in the responsible way which honourable Members in another place and noble Lords here ensure. They make certain that the Government behave in a responsible way and make a responsible use of their existing powers, which are great but which must be watched. I am certain that the powers of electricity boards and gas boards will not be abused, and that if they were noble Lords would see that the matter was brought to the attention of the public.

May I now turn to the maiden speech of the noble Lord, Lord Jackson of Burnley, which I found extremely interesting and presaging great things for the future. If I may, I will answer in some detail various points which he made, even though the hour is late. He made the important point that the electricity industry is perhaps bearing more than its fair share of the cost of supporting the coal industry in this country. I think this is something that we in this House and in the Government must consider. The noble Lord recognised the severe problems of the coal industry; and the problems would indeed be very severe, as my noble friends have pointed out, if the industry lost the substantial market for coal at power stations.

I think the noble Lord also accepted that the electricity industry has a close and continuing interest in the coal industry, and certain obligations towards that industry as its principal supplier of primary fuel. But he argued that electricity consumers were perhaps being asked to bear more than their fair share of burdens in helping to sustain not only the coal industry, but also the electricity industry's own higher levels of financial obligations and its liability to pay tax on the oil it uses, which places it at a competitive disadvantage with the gas industry.

The Government are fully cognisant of the electricity industry's position in these respects, all of which were discussed in the 1965 White Paper which we have before us. But one of the hard facts of life is that electricity generation is one of the most effective ways of using the small coals produced by mechanical mining. As we mechanise our pits we shall get more and more small coal, and we must use it or throw it away. This is a good way of using it. In view of the difficulties which the coal industry was facing, the interdependence of the coal and electricity industries, and the implications for the balance of payments, the Government took the view in the White Paper (in my view rightly) that the electricity industry should, for the time being, give some preference to oil. The case for this preference is one of the matters being considered in the review of the fuel policy, so this subsidy is not the law of the Medes and the Persians but a temporary policy decision which is under consideration.

This is also true of the effective subsidy on oil being used for gas production, where I believe at the present moment the gas manufacturers are exempt from paying the 2.2d. per gallon tax. Here, too, the position will be kept under review and, what is equally important, the gas industry has been advised that its plans for investment ought not to assume the indefinite continuation of this preference.

I think it is the feeling throughout the House to-day of those people who regard the coal industry with objectivity that distortion of the price structure of the raw materials for energy is something which it is necessary to reconsider. However, having said this, I am sure that all of us in this House are aware of the social significance of the coal mining industry. In this House at the moment my noble friend Lord Taylor of Mansfield, the noble Lord, Lord Redmayne, and myself, have all worked, operated and lived in the East Midland mining regions. We have friends in the industry at all levels and we know what the life of a miner is, whether he is living in the closed community of a mining village, whether down the pit, or whether living within a larger community.

Perhaps I may jump over one or two speakers and come to the points made by the noble Lord, Lord Redmayne, in his speech towards the end of the debate, for I should like to give a few points about the problems of the coal industry to-day. I agree completely with the noble Lord, Lord Redmayne, that if we take the hard core of the coal industry, where there are good seams, modern equipment and a number of years' reserves ahead of them, those areas of the British coal industry have a good future, and, what is more important, still a good future as an export industry, which it once was, as my noble friend Lord Taylor of Mansfield pointed out.

There is a great deal of coal in this country that can be got easily and cheaply, that is required, and that can be exported. This, of course, as noble Lords must be well aware, is under study by the National Coal Board. They have published a list of pits with a sound future, pits with a doubtful future, and those they expect to have to close. If we take these three categories, 281 pits have a sound future, 81 pits have a doubtful future and 150 pits have no future at all. In regarding this problem, I think the figures might be repeated: 281 with a certain future and 231 with a doubtful or completely negative future. So something over half the pits in the country have a good future. Two hundred closures are expected in the period up to 1970–71. This is the critical period which we have to consider, and which the noble Lord, Lord Redmayne, raised when he referred to paragraph 49 of the White Paper.

LORD HAWKE

My Lords, I do not doubt that these particular pits will be able to produce coal at a price which is believed to be competitive, but what I doubt is whether a demand will be found in the market for that coal, in view of the vast change over to oil, gas and so on. That is my point.

LORD WINTER BOTTOM

My Lords, I think none of us in this House to-day can forecast that. We have a group of experts studying this problem. There is no doubt whatever in my mind that we shall have to use coal for a long period to come, and that coal represents a substantial proportion of our energy sources. The world also demands coal as an energy source, and if we cut back to the efficient core of the industry, as the noble Lord, Lord Redmayne, suggested, I am certain that there is a future for the coal industry in this country for as long as we are concerned with its problems. This is the belief of the Government.

But the critical year is 1970–71. By then something like 200 out of the 231 doubtful pits will be closed. The steps being taken are these. The White Paper, incidentally, mentions capital reconstruction, but I agree with the noble Lord, Lord Redmayne, that this is basically a bookkeeping transaction. It does not help the coal industry in terms of human beings and production, though it makes the accounts look a little better. But something much more practical is being done. Fifty advance factories have been allocated to areas mainly dependent on coalmining where closures are expected in the period up to 1970–71. Increased provision has been made in Government training centres and rehabilitation units to deal with any increase in the numbers of miners wishing to use these facilities. Up to the present—and this is regrettable—miners have not been coming forward in the numbers expected. But I am certain that when the critical time is approaching they will come forward, and we must be certain that re-training facilities are available to them.

The Government are encouraging industry to develop in those areas by such inducements as investment grants and by their policy on the location of industry. This is done, of course, by industrial development certificates. And this is an important point: Government grants of up to an additional £30 million are available to the National Coal Board as a contribution to social costs connected with colliery closures. This is over and above the £30 million which has been mentioned in the annual saving to the industry from the capital reconstruction. I hope the noble Lord, Lord Redmayne, will feel that this is at least an indication of the way in which the Government's mind is working during this critical period.

LORD REDMAYNE

My Lords, I do not want to detain the House, and I do not want to be too critical of the noble Lord, who is certainly doing his best. But this special fund of £30 million to which he has referred has not yet been used. He says that it is available; but none of it has yet been used, although it was announced two years ago. This is what I call the lone battle of the Coal Board that has been going on for years. The whole thing ought to be speeded up so that coal is put on a really competitive price and could come into the battle now.

LORD WINTERBOTTOM

My Lords, I am afraid that the problem is so big that between to-day and to-morrow is not possible, but between to-day and 1970 is possible.

LORD REDMAYNE

Five years?

LORD WINTERBOTTOM

We are working in the long term. This is something that I have learned since I have come into the business of Government. In Government we have to think in long-term cycles. You cannot shut down or open an industry; you have to merge your policies. As something fades away, something else has to be brought in. It is necessary to think in long-term cycles, and five years is not a long time in these circumstances. The point is, however, that this programme is under way.

The hard fact is that at the moment miners are not being turned away from the industry. For a time prior to July of this year the coal industry was hampered by a shortage of miners. So at the moment we have no social crisis caused by unemployment in the mining industry. But as we get down to the job of making the mining industry completely competitive with other forms of fossil fuels and new types of energy, then, of course, the crisis will come into the mining industry, and we are preparing to deal with it.

I have tried to answer as many points as I can which have been raised in the course of the debate. I should like to make one final point in regard to exports which was touched upon by the noble Lord, Lord Jackson of Burnley. We talk of our exports in coal. That is of great importance. But also the energy industry of this country is a great exporting industry. I had a rather encouraging experience within the last month, when I went to Utrecht and opened the British Day at the Utrecht Trade Fair. As we all know, there has been a great natural gas discovery in Holland, and there is a Dutch State trading organisation to sell equipment to use this natural gas. The key exhibit in the middle of the stand, which was the biggest stand in the whole exhibition, was British natural gas equipment. I think this is a great compliment to our people.

The Central Electricity Generating Board, because it has been able to think ahead in large units, has encouraged the British construction industry to become extremely competitive in large generators. This is of importance; this is of encouragement. In 1950, when I asked this question of my colleague, the Minister of Power, I felt that we had a long row to hoe if we were to compete with the other nations with their adequate fuel sources. By the ingenuity of our scientists and the bounty of nature, we are now able to compete with the rest of the world in adequate and cheap energy supplies. We must use the opportunity given to us. I am confident that we shall rise to the challenge.

LORD HAWKE

My Lords, before the noble Lord sits down, could he say something on the question that I asked in regard to extra pumped storage schemes, because they are really quite important?

LORD WINTERBOTTOM

My Lords, the noble Lord will forgive me. Indeed, there are two in Scotland already earmarked. One is at Loch Sloy, and I think the other is called Fermoy.

LORD HAWKE

No more?

LORD WINTERBOTTOM

No more; just two.

9.24 p.m.

LORD WYNNE-JONES

My Lords, the hour is late, and I shall do no more than take the opportunity to thank all noble Lords who have taken part in the debate. Personally, I found it extremely interesting to listen to. I should like to pay special tribute to the noble Lord, Lord Jackson of Burnley, to whom we shall be fascinated to listen on all occasions. I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.

House adjourned at twenty-five minutes past nine o'clock.