§ 3.6 p.m.
§ Moved, That the Bill be now read 3a.—(Earl Ferrers)
§ On Question, Bill read 3a.
§ Clause 2 [Contributions by Secretary of State towards expenditure intended to promote employment]:
§ LORD DIAMOND moved the following Amendment:
Page 2, line 41, at end insert—
("(5) In calculating the amount of the contributions referred to in subsection (1) due account shall be taken of the benefits accruing to the Electricity Council or any Electricity Board by reason of the advancement of the project.")
§ The noble Lord said: My Lords, in the short interval between now and your Lordships' having your glamorous photographs taken, may I direct your attention to a matter which has come up before but which is still under consideration by the Government? This provides a use- 598 ful opportunity for hearing the Government's views. Your Lordships will remember that Clause 2 of the Bill, at the end of which this Amendment would appear, provides for contributions to be made by the Secretary of State towards expenditure intended to promote employment. As our previous discussions at earlier stages of the Bill have shown, the method by which this promotion would take place is by, for example, expediting the building of power stations. The Government are empowered under the clause to contribute towards additional expenditure incurred by the Electricity Council or any Electricity Board. It emerged from our earlier considerations that this was likely to prove a most expensive way of promoting employment, and it was for that reason that I made clear—and I was supported by the Liberal Benches on those two occasions—that we were not intending to discourage the promotion of employment; on the contrary, we were urging the use of the £25 million which the Government were going to make available, in the most efficacious manner possible so as to increase employment wherever convenient and possible to do so. If, therefore, one were to use the whole of that sum of money to promote a small amount of additional employment in a single area, one would be denying oneself the opportunity of promoting employment over a larger area. We are all at one in wishing to promote employment, but in wishing to do so over as broad an area as possible. When one has a limited sum of £25 million available it means spending the money as effectively as possible.
§ The question we have to consider is: is the £25 million, if spent in the way the Government have been considering in relation to the Electricity Council, going to be spent at unnecessary cost? The noble Earl, Lord Ferrers, was good enough to explain earlier, both by letter and in discussion, what the Government's thinking was; but unfortunately that did not entirely remove our anxiety. The Government's thinking, as it was explained made it clear that they were paying attention only to the additional cost to which the Electricity Council would be put in the early stages in bringing forward a project of this kind. One does not wish to deny an adequate, even a generous, compensation for those who meet the Government's wishes in bringing forward 599 a project and thereby promoting employment at a time when such promotion is urgently needed. All one wants to say is that the Electricity Council is not a "lame duck" and therefore one need not squander money upon it, as is apparently the present policy of Her Majesty's Government. The Electricity Council should be considered fairly; that is to say, the additional cost to which it is put in the early stages should be taken into account in the compensation, and the additional benefit accruing to it in the later stages should also be taken into account.
If a power station is built two years earlier than would be the case—that is to say, if it is built in five years from now instead of being built in seven years from now by having its starting date brought forward two years—clearly the Electricity Council is going to gain benefit from the advancement of that project. This would not necessarily be the case if the power station could not sell its product; but happily the noble Earl made that matter clear by saying, at col. 330 of the OFFICIAL REPORT when we last discussed the subject on March 14:
But as the noble Lord knows, the Electricity Generating Board will be grateful for all efficient generating stations, as indeed their accounts show.
So it is clearly right for us to assume that the bringing forward, the advancement, of the particular project which the noble Earl gave as an example will be of advantage to the Electricity Council or any Electricity Board—to use the words which are used in the Bill. It is for these reasons, and because the Government did not seem sufficiently aware of their responsibility to protect the public purse or of the need to take into account accruing advantages as well as disadvantages, that we thought it necessary to put down an Amendment which would give them an opportunity of making the point clear and, as I hope, of showing that their view coincides with the responsible view on all sides of your Lordships' Chamber; namely, that advantages as well as disadvantages should be taken into account.
§ The Amendment is in general terms. It refers only to due account being taken of any benefits; it does not tie the Government down unduly in the way that 600 benefits should be measured, but merely reminds them and those concerned with negotiating with the Government that benefits as well as disadvantages have to be taken into account, especially when you are dealing with the public purse. It is for these reasons that I thought it right to delay your Lordships on the only item which is outstanding on the Third Reading of this Bill. I hope that the noble Earl will say that as this is such a sensible proposal the Government see no reason to reject it. I beg to move.
§ 3.13 p.m.
My Lords, I am grateful to the noble Lord for giving me the opportunity of explaining to him, possibly a little more fully than I did at the Committee stage, the Government's view on this matter which I said I would look into. Before I do so, I wonder whether I may be permitted to congratulate the noble Lord, Lord Diamond, as I understand that he has been chosen as part of a Parliamentary ski-ing team to ski against the Swiss. I wish him well. I hope he will use the same prowess in chasing his athletic opponents as he does his political opponents—and I hope he will do so with more chance of success. In this context I hope he will go like a human dynamo.
§ LORD DIAMOND
My Lords, I am most grateful to the noble Earl for his embarrassing reference. My only duty in this connection is to go downhill as fast as I can.
My Lords, I hope that will refer only to the noble Lord's athletic career and not to his political one.
The noble Lord has drawn attention very clearly to the point which he has in mind. There is no dispute that a new generating station will use less fuel than would the older capacity which would otherwise have been used. Quite rightly the noble Lord asks that these facts should be taken into account when calculating the Government contributions to the additional costs of the Boards. I can assure the noble Lord that there has never been any question of not taking such benefits into account, and this point was most carefully considered in reaching agreement over the advancement of Ince. Benefits will also he taken into account in all other agreements concluded 601 by my right honourable friend under Clause 2.
But we must not overlook the fact that there are also serious risks of potential losses when bringing forward investment. First, it commits the Board concerned to an agreement on compensation which assumes that the station would have been ordered had there been no advancement of the project on a particular date. If circumstances were to change—for example, a reduced forecast of demand—it may well be that the Board would, when that date was reached, have decided to defer the order for the station: and to that extent the period of advancement in the agreement (which is to be used to calculate compensation and to define the Government's commitment) may be an underestimate. In other words, the Board may be advancing the order by a longer period than that actually agreed with the Government and the additional premature interest costs will therefore be greater than those assumed.
Secondly, by ordering early, the Board may be losing an opportunity to incorporate later design modifications which would have brought benefits in further reductions of fuel costs or increased reliability. Thirdly, there are premature and additional salary costs in the earlier manning of the station. Even the benefits themselves are to some extent uncertain in both timing and amount. For example, the commitment to a particular fuel in a station order would deny the opportunity to take advantage of any relative changes of cost and availability between fuels which may later occur.
For all these reasons, my Lords, it has been thought right in the case of Ince to conclude that these risks of potential losses offset the potential benefits. The agreement of the notional period of advance of 18 months also takes into account the uncertainty of the true period of advance. As the noble Lord, Lord Diamond, will no doubt acknowledge, the techniques of discounted cash flow can be used—and they have been used—to ascertain the likely outcome of the accelerated investment and to compare it with the original proposal, taking into account all the additional costs and benefits. The Government have agreed with 602 the Electricity Council that in the case of Ince the method adopted of making payments to the Council of sums to cover the interest on the total capital which it will have to borrow over the period of advance is a simple method of calculating a contribution which is at once fair to both parties and at the same time is not a disproportionate sum for the Government to pay for providing so much employment so quickly. I can assure the noble Lord, Lord Diamond, that these benefits have been and are being taken into account together with the risks of additional losses. I hope that this assurance will enable the noble Lord to withdraw his Amendment.
§ LORD DIAMOND
My Lords, we have had a most clear assurance from the noble Earl that the object desired in the Amendment is being met and will be met. I particularly note the fact and agree with the noble Earl that the 18 months is a very relevant point in this connection. Having regard to that ample assurance, I am grateful to the noble Earl and ask your Lordships' leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Moved, That the Bill do now pass.—(Earl Ferrers.)
§ On Question, Bill passed.