HL Deb 02 March 1972 vol 328 cc1202-13

4.8 p.m.

Debate resumed.


My Lords, we now return to the Electricity Bill. I wish to say straightaway that we welcome this Bill. We are grateful to the noble Earl for the careful explanation he has given us and for some additional information which he has made available tentatively—I understand the reason for that very well. Nevertheless, we feel that there are matters in the Bill which require fairly careful scrutiny. There is no problem in this case of differing philosophical approaches. Indeed, there is no great philosophy in the Bill. It deals with nuts and bolts—rather big ones, rather expensive ones; but nevertheless with machinery, as opposed to any new principle. Therefore, I turn, as the noble Earl did himself, to the respective clauses, and I shall ask one or two questions on them.

The first clause deals with borrowing, and we understand the reasons for increasing the borrowing powers. But the noble Earl did not say anything about the recent coal strike, which has undoubtedly affected the earnings and the profits, or probably the losses, of the Electricity Boards. Could the noble Earl, in replying to this debate, give us information, if any is yet available, as to the likely additional cost falling on the electricity supply industry as a result of the interruption caused by the coal strike; and can he say whether the borrowing he is proposing is affected by that in any way? I assume that the figures of borrowing are so large that they are not likely to be affected, and that the only result would be that the Government might have to come to the House earlier than otherwise anticipated. Nevertheless, I should like to give him the opportunity of supplying this valuable piece of information.

Then the noble Earl referred, properly I thought, to the way in which prices had been artificially kept down. He referred to 'the C.B.I. arrangement which had been acceded to by the electricity supply industry. That, as he made clear, will undoubtedly have meant that income which would otherwise have been earned has not been earned. I want to pursue this matter a little because I am interested in knowing where the cost of artificially keeping down the prices is ultimately going to fall. It can fall either on the general body of taxpayers by the process of Government subsidising in one way or another or on the existing consumers. I think that all electricity consumers would like to know whether or not the method of keeping down prices artificially is merely a method of postponing an increase in the price.

Your Lordships will immediately appreciate that if the present system continues under which a target of profit has to be achieved by the industry, and that target has to be irrespective of additional small borrowing. then the additional sums which have been borrowed as a result of the artificial keeping down of the prices are merely going to fall on the consumer, albeit at a later date. So the question I am putting to the noble Earl is a simple one. What, according to the arrangements which are prevailing. is happening about the additional cost of keeping down the prices? Are those prices merely being kept down temporarily or is the benefit of that reduction in price an all-time benefit?

Next, I should like to turn to Clause 2 which provides for a subsidy of up to £25 million. The noble Earl made it clear that this was a fair compensation for accelerating, work to the tune of £60 million. I should be grateful if your Lordships would compare those two figures. What the Government are doing—and they are not the first Government to do it—is bringing forward work to provide additional employment. The amount of work brought forward is worth about £60 million and the additional cost involved in that bringing forward is £25 million. That is a very large proportion. It presumably means that this work, which would have cost £60 million if it had taken place in the normal way at the normal time, will now cost £85 million. That is a very large increase. Of course, it could mean that work which would have cost £35 million will now cost £60 million; and that is an even higher proportion. So I am being generous in assuming the first calculation to be the more accurate one. In either event it is a very high proportion, and what it is doing is providing, in what I hope I may truthfully, but possibly optimistically, call the relevant period of 1972–73, an additional 5,000 jobs. So there is to be £25 million additional cost, wasted cost, to produce 5,000 jobs in the relevant period.

We are all anxious that where circumstances of unemployment at the rate which we have achieved have arisen, where those tragic circumstances apply. methods should be adopted of alleviating them as far as one can; but it is to be considered whether this is an appropriate method, and whether it is not such an expensive method that other methods ought not to have been used in its place. This is not an unemployment debate and I cannot go into all the alternatives, but many have been put forward. I am asking: within the principle of providing work at some additional cost. is this a good bargain, is it value for money? Is it worth doing in comparison with other methods?—and I am speaking of £25 million on £60 million worth of work to provide 5,000 jobs only in the relevant period. Of course, it will provide additional jobs a year later; although I hope that the pressure for additional jobs a year later will not be so great. I hope that the Government are not contemplating one million unemployed in 18 months' time. So that is the question I am putting to the noble Earl about the £25 million and whether the Government have exercised their judgment wisely in spending that amount in this way as opposed to another way in order to achieve additional employment.

The Bill refers in Clause 3 to transfers between Electricity Boards. I note the noble Earl's statement, although it was hedged about a little, that the Government have no intention of restructuring this industry in the immediate future; that in that period they are not proposing to pull it out by the roots to see how it is growing. But I consider that that statement was not sufficient in itself and certainly not sufficient in relation to a similar statement made by the noble Earl's colleague in another place. I am still assuming, although this assumption has been challenged many times in the short period I have been in this House, that it is not surprising for Government Ministers to speak with the same voice in the two Houses. I am referring to the speech of the Under-Secretary of State for Development at the Scottish Office, the hon. George Younger, in the debate on this Bill on February 1, in the other place, when he said: … we do not have any proposals in hand just now for any major reorganisation of the electricity industry. I wish to make this clear because we do not want those concerned to feel that they are operating in an atmosphere of uncertainty…".—[OFFICIAL REPORT, Commons, col. 379.] That is fine.

I now go on to the following sentence: The hon. Gentleman then asked about hiving off. I wish to make it clear that the consideration of whether, and to what extent, parts of the industry can be hived off is still very much under way and that no decisions have been made at this time."—[col. 380.] I do not know how much satisfaction those who have the duty of operating this industry can draw from that statement. The Government have made it as plain as a pikestaff that those operating the industry need to act with certainty, and need to have the cloud of uncertainty removed from them so that they may make sensible decisions regarding the future. But with this bad habit of considering hiving-off proposals wherever they can in regard to nationalised industries, the Government have not been prepared to make that clear statement. Therefore I hope that the noble Earl will widen the statement he has just made to include a similar comment about hiving-off.

Precisely the same principle disturbs management and creates inefficiency as underlies the uncertainty about major reorganisation. It is exactly the point, and I hope the Government will soon learn their lesson. The lesson I refer to is, of course, that taught by the coal strike, which started off when a Bill just like this came before your Lordships' House, and under which parts of the whole industry were hived-off, much against the wishes of those running the Coal Board and much against the acceptance of the then Chairman of the Coal Board. I refer to a Member of your Lordships' House, the noble Lord, Lord Robens of Woldingham, who refused to continue his appointment. The result was dissatisfaction and a lack of confidence among the miners. They knew that the Government were "going for" their industry and that their representative, in the sense that he was the Chairman of the industry, was leaving the industry and was therefore no longer present to protect them.

A train of events followed which led to a greater distance between Government, the industry and the miners. It resulted in the absence of a chairman who could stand up to Government bullying as we all know that the noble Lord, Lord Robens, could do very well. It enabled a chairman to say two things that I doubt very much whether the noble Lord, Lord Robens, could ever have been persuaded to say: first, that lie could not possibly afford another farthing—and we can see how much that has cost—and also to say that as the offer made by the Board had not been accepted it was withdrawn, and that those negotiating would have to start again from the bottom. That infuriated the miners, their union and their negotiators. I am saying that the costly trouble which resulted in the loss of electrical supplies, and which has had its effect on this very Bill, started with a provision to hive-off part of the coal industry and it had a material effect on the attitude of the miners and the chain of events which caused this disaster.

It is to be hoped that the Government have no intention of carrying on with this dogmatic approach to every nationalised industry, including the electricity supply industry which has been praised by most Members of the Government for the way it handled matters during the coal strike. I hope that the noble Earl will be able to make absolutely clear that those charged with the responsibility of running all the parts of their industry may go ahead with a clear conscience and with the same keen endeavour that one would expect to find in all kinds of industry, public or private.

Finally, my Lords, I would turn to the larger question of the choice of fuels. The noble Earl did not say anything about that. I wonder whether he is in a position to say whether the Government have reached a conclusion on that all-important question. In the meantime it is right to maintain flexibility. We have all seen how forecasts have been belied and how impossible it is to be sure of the future. I understand that at present some three-quarters of the electricity generated comes from coal. That may sound a high figure, but such information as I have from those connected with coal and with other forms of energy supply indicates that they take the view that it is none too high a figure and that in twenty years' time we shall be leaning more on coal than we do to-day. That, my Lords, is one of the many subjects about which my ignorance is profound, but I think it is a subject about which we must know more. As the Government are coming forward for these very large sums, they should let us know whether they have reached any conclusion on this very difficult and baffling question of the choice of fuels.

I hope that the noble Earl can give a clear affirmative on this question. When comparing the cost of the different fuels will the Government take fully into account the anti-pollution costs? We all know that when we are dealing with different fuels inevitably there is a pollution element. We all know that we are moving to a period when that pollution element will have to be removed, or reduced, at some additional cost. There is no longer any need, therefore, to omit that calculation, and the cost should be included. No proper comparison will be achieved unless the anti-pollution costs are included in all comparable cases. I hope that the noble Earl will be able to deal with that question, and the other questions which I have put to him. I have made clear that we thank him for giving us the information, and that we shall do our best to expedite the passage of the Bill.

4.28 p.m.


My Lords, may I intervene, very briefly? I wish to ask the noble Earl, Lord Ferrers, a couple of additional questions which I hope he may be able to answer. We have been waiting a very long time for the Vinter Committee to report. This has caused a state of uncertainty among those working in nuclear industry about what type of reactor will be chosen for the next generation. Is it the intention to proceed with the advanced gas-cooled reactors which are the mainstay of the existing programme or should we change over to the steam generating heavy water reactors, as the Institution of Professional Civil Servants and others have recommended, partly on the ground that there may be a very good export market for this particular type of reactor? Or should we move as fast as we can to developing the sodium-cooled fast breeder, of which I believe the prototype comes into operation next year? Until these questions are resolved it seems to me very difficult to undertake with any degree of precision to say what the capital expenditure of the Electricity Council and the Boards is likely to be in the time-scale with which we are concerned in this Bill.

As I understand from the noble Earl, we are going to 1978, and the orders for power stations coming into operation in that year would not normally be placed until late 1973, or even early 1974. So the decision of the Vinter Committee and the questions which the noble Lord, Lord Diamond, was discussing, about what is to be the basis of our fuel policy in 1978, raise an extremely important matter. I do not think it is good enough to pass this over by saying that in a Bill of this kind the uncertainties are so great that they are covered by the limits that we have chosen. Ideally one would like to have a new edition of the 1967 White Paper so that we may see what contribution is to be made by each of the four fuels to the energy economy of this country eight year ahead, as was done at that time.

When the 1967 White Paper was issued we were talking about the contribution to be made by gas, coal, oil and nuclear energy in 1975. Similarly, at the time when we produce a Bill of this kind, which talks about the expenditure of thousands of millions of pounds, I think we should have some idea of the relative proportions of fuels which are going to contribute to make up the energy economy generally, and in the case of the electricity supply, in particular, in 1978. It was asserted in the other place that the decision on Ince B was not to be taken as committing the Central Electricity Generating Board to any particular policy in the future. It just happens that it is one of the projects to be brought forward as a result of the need to create employment.

I should like to endorse what the noble Lord, Lord Diamond, said. It seems to me to be a very expensive way of doing this. I listened carefully to the figures quoted by the noble Lord, and I did a little division. The £25 million which has been allocated under Clause 2 to create 5,000 jobs means that each of these jobs will cost £5,000 to create. I am not aware that the workers in the electricity supply industry are paid £5,000.


My Lords, the noble Lord is doing me a great courtesy by supporting me in these figures. Perhaps he will forgive me for saying that I think the position is even worse than that, because the £25 million is only the wasted element. The full cost of providing the jobs is probably three or four times as much as that.


I am grateful to the noble Lord for pointing that out, because the £25 million in fact relates to capital expenditure brought forward in the case of the Boards, as I understand it, of £60 million. Am I correct in saying that there is another £40 million on top of that for the Electricity Council itself? That is how I understood the noble Earl's explanation, but perhaps he will say a few more words on that when he comes to reply.

The final question that I want to put to the noble Earl is this. Can he say what rate of growth of electricity demand and of maximum simultaneous demand these capital expenditure figures represent? For a long time—I think almost 15 years—if the maximum simultaneous demand on the C.E.G.B. system was plotted on logarithmic paper it fell on to a beautiful straight line—8.6 per cent. per annum growth. Then at the beginning of the 'sixties it slackened off. Argument continues among the technological forecasters as to whether we shall ever return to that growth rate again. Certainly we have not done so in the last few years. This has an effect on the manufacturers who supply turbines, generating equipment and so on. They are unable to depend on a regular programme of work, and this increases the costs of the electricity industry, because they have to carry additional overheads which manufacturers incur in periods of slack. Of course, as the noble Earl will be aware, a thorough investigation of this was undertaken under the previous Government which said that, so far as possible, steps should be taken to even out the flow of orders by the C.E.G.B. and the Scottish Boards. This is why the question that I am putting to the noble Earl is an important one. If manufacturers know what the rate of growth of maximum demand is going to be, this tells them how much plant is going to be ordered. They can then arrange their manufacturing capacities to suit, and the Electricity Boards will get a better deal from their suppliers.

4.34 p.m.


My Lords, I am grateful to the two noble Lords who have spoken, and particularly to the noble Lord, Lord Diamond, for saying that there was no difference in basic philosophy, because of course this is a Bill merely enabling the Electricity Boards to have their borrowing powers increased. The noble Lord, Lord Diamond, asked what was the effect of the coal strike on the Electricity Boards. I think he will understand if I say that these are very early days. It would be difficult to say precisely what the effect in cash terms has been upon the Electricity Boards; and no decisions have been taken on coal prices following the strike. The implications of the coal strike on the finances of the electricity industry cannot yet be determined, as I am sure the noble Lord will realise.

The noble Lord also referred to the fact that, because electricity prices had been kept down, this was in fact preventing the Boards from obtaining a higher revenue, and therefore from making a higher profit, or less of a loss, than otherwise they would have done. Of course the electricity industry has been a most profitable industry until recently. It was as a direct result of policy, in order to try to keep down the rate of inflation—upon which electricity has a great effect—that the Boards did not increase their prices as much as they would otherwise have done. But the noble Lord will realise that this price restraint was also shown by a number of other industries, not least of which was the Coal Board. When the noble Lord asks what would be the difference had they been allowed to increase their prices, again it is difficult to say because the assumption would be that the Coal Board would have increased their prices as well, and therefore the cost to the Electricity Boards would have been correspondingly higher had there been no restraint on prices.

Both the noble Lord, Lord Diamond, and the noble Lord, Lord Avebury, were concerned about the figure of £25 million and how it is arrived at in view of the £60 million worth of projects being brought forward. The limit of £25 million allowed in the Bill has been set to cover all proposals likely to be approved, with a margin for unforeseen contingencies. I think it can be reasonably said that the Ince B project and the associated work that goes with it does extend over a five-year period, and it is of course the biggest single project which is being brought forward. As I explained to the House in my original speech, the object of the £25 million is to reimburse the Electricity Boards or the Electricity Council to the extent of the interest required for bringing the projects forward; and the fact that the Ince B project will be brought forward and will extend over a period of five years will account for the largest proportion of the sum of £25 million.


My Lords, I am grateful to the noble Earl for allowing me to interrupt. This is an important issue and it is something that we may have to come back to in more detail. Meantime, may I ask the noble Earl whether it is the case that, although the Ince B project is being brought forward and will take five years, it is not being brought forward five years.


Only one year.


Exactly. So the additional employment about which we are talking at a cost of £25 million is perhaps from one year's to eighteen months' employment. I want the noble Earl to be good enough to consider whether there is not a better and less expensive way of creating additional employment.


My Lords, I take the noble Lord's point. As usual, with his clinical accuracy he has put his finger on a very germane point. The Ince B project is in fact being brought forward some eighteen months and, as I said, it accounts for the largest proportion of the money that is being spent. But it does not account for the whole of the £25 million.


My Lords, we can return to this point on the Committee stage, but perhaps the noble Earl will let us have a note of the calculations before that stage is reached.


Yes, my Lords, I shall certainly do my best to see that noble Lords have the facts they require. The noble Lord, Lord Diamond, and the noble Lord, Lord Avebury, referred to the choice of energy and of fuel. As the noble Lord, Lord Avebury, mentioned, the Vinter Committee has been studying this problem and is due to report shortly. It would therefore be imprudent of me to anticipate what this Report is likely to say; indeed it would he imprudent for the Government to anticipate any long-term position until the Report has been received and considered. Of course, as the noble Lord, Lord Diamond, recognised, any energy policy has to be flexible and must be considered as a whole; and the choice of the type of power stations to be built in the future depends on taking a long-term view, not only on operating costs but also on the anticipated performance and construction costs. There are very long-term social, economic, engineering and pollution aspects to be taken into account. These the noble Lord has raised again, as he did on an earlier Bill. I can assure him that these aspects will be considered.

I hope that the noble Lord, Lord Avebury, will not wish me to go into too much detail over the long-term fuel requirements and the way in which these will be split up between various methods, because this depends very much on the Report of the Vinter Committee, and indeed on the decision as to the type of nuclear fuels which should be used in those power stations which will be powered in the future by nuclear fuels. I trust that your Lordships will agree that this Bill be now read a second time.

On Question, Bill read 2a, and committed to to a Committee of the Whole House.