§ Order for Second Reading read.
§ Mr. Speaker
May I announce to the House that I have selected the Amendment in the names of the hon. Member for Finchley (Mrs. Thatcher) and a number of her hon. Friends?
§ 4.1 p.m.
§ The Minister of Power (Mr. R. J. Gunter)
I beg to move, That the Bill be now read a Second time.
The main purpose of the Bill is to raise the Gas Council's power to borrow money by £1,200 million. The reasons for this are explained both in the Memorandum on the Gas and Electricity Bill and in the Gas Council's brochure "Investment in Natural Gas", copies of which are in the Vote Office. It may be helpful, however, if I explain the position briefly.
The last Act to extend the borrowing powers of the gas industry was the Gas (Borrowing Powers) Act, 1965, which set a limit of £1,200 million. It was expected at the time that this would suffice until 1970, but of course, no North Sea gas had been discovered then. Now that we have this gas, which should be of great benefit to the British economy, it is essential to develop its use as rapidly as possible, as it offers gains in terms of relatively low-cost industrial fuel, savings in balance of payments, and security of supply.
As the House knows from the debate at this time last year on the Gas (Borrowing Powers) Order, we are planning on the use of 2,000 million cubic feet a day of natural gas in 1970–71; and the Fuel Policy White Paper envisaged that, beyond this, it would be reasonable to plan on the basis of 4,000 million cubic feet a day by 1975. The effect of this is to double the sale of gas by 1970-71, and to double this again by 1975. This involves massive increases in investment.
The Gas Council estimates that the rate of investment is likely to average just over £300 million a year for the period up to March, 1973. This compares with only £50 million a year in the 10 years up to and including 1961–62, though there has, 544 of course, been a rising trend to the present level since.
Total capital requirements in the five years up to March, 1973 are expected to be about £1,600 million, of which about £500 million will be met from the industry's internal resources, leaving about £1,100 million to be met from external borrowing. Three-quarters of the estimated capital requirements of £1,600 million—i.e., £1,200 million—comprises expenditure on fixed assets. Of this, almost half, £546 million, is on bulk transmission and storage, while almost another half, £532 million, is on distribution and consumer service.
About one-sixth of the total, £276 million is for the conversion of consumers' equipment to burn natural gas instead of town gas. The remainder, £246 million, comprises £44 million for North Sea exploration and development, £63 million for increased working capital, £90 million for gas manufacture, and a residual of £49 million for offices, land, vehicles, etc.
At this point, I must emphasise that this vast expenditure is far from being fully committed. I am not asking the House to agree that this money should be either borrowed or spent at this stage. I am asking the House to agree that, if our expectations about the gas available are fulfilled, the gas industry should be allowed to make the necessary investment to utilise this new fuel.
§ Mr. Eric Lubbock (Orpington)
Could the right hon. Gentleman clear up one matter which is puzzling me? He said that the total for five years to March, 1973 would be £1,600 million. However, in the figures submitted by the industry to the Select Committee on Nationalised Industries on Wednesday, 10th April, the industry's total figures for capital investment and fixed assets add up to only £1,221 million. If one adds the right hon. Gentleman's figure of £63 million working capital to that, it comes to £1,284 million, and not £1,600 million.
§ Mr. Gunter
If the hon. Gentleman will allow me to continue my speech, I will deal with that point presently.
If it became clear that more, or less, natural gas would be available or sold than has been assumed, the programme would have to be adjusted accordingly. While the industry has broad five-year 545 plans, firm plans are made only one year ahead, with provisional plans for a second year. The industry can, therefore, check on the programme as it rolls forward, and, subject of course to Ministerial approval, only commit itself to expenditure in the light of the most recent knowledge.
In view of the need for flexibility, however, I have incorporated in the Bill two special provisions about the borrowing limits. On the one hand, I have allowed for the possibility that expenditures and borrowings may exceed the current estimates, by including a sizeable margin for contingencies. I think that this is the point puzzling the hon. Member for Orpington (Mr. Lubbock). The sum chosen—which due to rounding of other figures comes to the precise-looking £237 million—is large by any standards, but it is not out of line with the scale of the gas industry's operations and with the length of the period—five years—which the borrowing provision is aimed to cover. As the House knows, it is less than three years since the last Borrowing Powers Bill for this industry, despite the inclusion then of a margin of £200 million for contingencies.
On the other hand, I have proposed an interim borrowing limit, equivalent to only £400 million of new borrowing, which should ensure that the finances of the gas industry come under consideration by the House within two years of the passage of this Bill. I hope that the hon. Member for Finchley (Mrs. Thatcher) will note that, in view of the Amendment tabled by her and by her hon. Friends.
§ Sir Gerald Nabarro (Worcestershire, South) rose—
§ Mr. Gunter
No, I will not give way. The hon. Gentleman has threatened me with an hour-long speech. I hope that I shall be allowed to get on with mine.
We shall be able to decide then precisely what provision should be made for borrowing in the ensuing three years or so. If a smaller provision than £800 million seems appropriate, it would be possible for an Order to be made for that, with a second order for extension to the final limit, if the House so wished, as was done in the case of the Electricity Borrowing Powers Order, 1966.
546 I see that the hon. Member for Worcestershire, South is getting edgy again. There is one thing, and one thing only, on which I have agreed with him in the past—that is, that there is the greatest necessity for Parliamentary scrutiny of the use of public money and I would have thought that this provision would satisfy him.
§ Mr. Gunter
The hon. Gentleman can make his own speech.
In addition to the control exercised by the House through the borrowing limits, the industry's capital expenditures are subject to control through the Government's annual review of the investment programmes of the Gas Council and area boards.
Moreover, the Select Committee on Nationalised Industries is at present examining the industry's plans for natural gas and we also have the National Board for Prices and Incomes looking into its efficiency.
This very heavy capital investment reflects a vast programme of work on the ground. The main pipeline system from Canvey to Leeds has already been supplemented by a feeder from the North Sea—from Easington to Sheffield—and a second is due to be commissioned this year, from Bacton to near Rugby. A third, from Bacton to near Hitchin, is being laid, while two more are planned, to make an average capacity of about 3,000 million cubic feet daily. The backbone main is also being extended to the remaining four area boards so that North Sea gas can be supplied to all of them by 1970.
The quickest way for the boards to use North Sea gas is to take it into reforming plant at present fed by oil, since this enables them to supply it to the consumer as towns gas, for which, of course, no conversion is required. This substitution of oil feedstock by the new gas will also be especially helpful to the balance of payments in the next few years.
In the longer term however, it will be cheaper to convert everybody to take North Sea gas "neat" rather than to put up the additional reforming plant which would be needed to convert all this gas to towns gas. Moreover, by virtue 547 of the higher calorific value of the natural gas, the capacity of mains and storage is greatly increased. The total cost of the necessary conversions to enable the consumer to take North Sea gas direct will be about £400 million. Nevertheless, there is expected to be saving compared with reforming, of about £300 million at present value.
As the House knows, the gas industry's take of coal has been progressively reduced as a result of the development of the more economic oil processes. This trend is expected to continue, with the result that, by the early 1970s, coal will no longer be used in the industry. At present and in the immediate future, however, the industry, is doing its best to assist the coal industry in its difficult problems, by using more coal—an extra 800,000 tons this year—than it otherwise would. As provided in the Coal Industry Act, 1967 the Exchequer will contribute to the industry's additional costs flowing from this, to the extent of about £2 million.
This heavy programme of investment must be geared to the needs of the consumer and I should now like to turn to the industry's plans for selling this gas. In order to double its market by 1970–71, and double it again by 1975, clearly an immense effort will be required. Recently domestic consumption, which represents about 60 per cent. of total demand, has been increasing rapidly—by about 10 per cent. a year—and the industry is confident that substantial further increases will be obtained, especially in space heating and central heating. It will also, however, have to penetrate the industrial market, which currently accounts for about 28 per cent. of total demand, and do so on a substantial scale.
§ Mr. Arthur Palmer (Bristol, Central)
Is my right hon. Friend satisfied that there will be an adequate return on this enormous investment without any large increases in prices to the consumer?
§ Mr. Gunter
I am assured of that, and I shall be dealing with prices later.
The industry expects to make most progress in the premium markets where the special qualities of natural gas—for example, its cleanliness and high calorific value—are of most value, and, inciden- 548 tally, where the gain to the balance of payments is greatest since the fuel displaced is likely to be oil. But other industrial outlets will also be required to help secure a good load factor and rapid build-up. In order to make the most rapid possible progress on marketing, the industry has been strengthening its marketing staff and the House will be aware that my predecessor appointed Mr. J. A. Buckley, formerly Chairman of the East Midlands Board, to the Gas Council itself, with effect from 1st May.
Clearly, to expand sales at this rate, the price of gas will have to be attractive in relation to other fuels. There is great hope, to put it no higher, that North Sea gas will prove a cheap fuel and the gas industry will be under severe commercial pressure to make it so. But it will be four years or so before the new system of supply is fully established and most consumers converted, and in the meantime there will be the very heavy capital investment which I have described. While, therefore, we expect prices eventually to fall it would be over-optimistic to expect this in the near future.
Certainly, most householders are likely to get a modest reduction as they are converted, but the real immediate beneficiary as natural gas becomes available in each district is likely to be industry, in so far as special terms can be negotiated for large-scale demand with a good load factor or on a seasonal or inter-ruptible basis.
I now come to Clause 6 of the Bill, in which I seek power to appoint up to another two full-time members of the Gas Council. The Clause needs to be considered as part of the process of development of the organisation of the industry to cope with the major change to natural gas. As I will explain in a moment, I will expect to make further proposals to the House during the next Session of Parliament.
There is no doubt that the industry as organised under the Gas Act, 1948, has acquitted itself well. It took over about 1,000 gas undertakings and has welded them into concentrated supply systems in each area based on large and efficient gas-making plants. It was in the throes of a revolutionary change to more efficient plant based on oil when the wealth of findings in the North Sea was 549 established. In the 'sixties, the image of the industry has changed and demand for gas has grown rapidly. Morale is high. All this is to the credit of the industry.
As the industry becomes basically a distributor of North Sea gas, the manufacturing functions of area boards will gradually be phased out and it will become increasingly important and, indeed, necessary for decisions to be taken on a national basis and not area by area. Within the present statutory framework, the industry is itself strengthening its machinery for such national decisions.
At the same time, my predecessor and I have been giving very careful thought to the question whether any statutory changes are now called for. We have had very full consultation with the leaders of the industry, including representatives of labour.
We now have in mind changes intended to strengthen the central powers and duties of the Gas Council while leaving the area boards with their continuing and essential rô1es of bringing gas to the consumer and of providing the accompanying services. The Gas Council will need to have responsibility for the main policy decisions of the industry, including its investment decisions and financial performance, and the area boards will need to become responsible in those matters to the Gas Council.
The area boards will remain as statutory bodies with their responsibilities for supply—subject to the general policies of the Gas Council—and for safety, and their chairmen would remain members of the Gas Council and would be appointed by me.
These changes will require legislation, and I have it in mind to seek a place for the appropriate Bill in the programme for the next Session of Parliament.
The two further full-time members of the Council for whom provision is made in the Bill, are a further and urgent step in the evolution of the organisation of the industry, following the strengthening of the Council by the 1965 Act. It will enable me to appoint at once, without waiting for the more far-reaching legislation which I have outlined, new Council members to fill key posts at the centre, for example, to take charge of the industry's finance and economic planning.
550 Clauses 2 to 4, relating to borrowing in foreign currencies, take up a great deal of the Bill's space, but, I hope, will not take up much of our time today. Both the gas and electricity industries have expressed interest in being able to borrow in foreign currencies, in the expectation that, from time to time, this might be beneficial to them. The House will know that the Air Corporations were given a power to borrow in foreign currencies in Section 6 of the Air Corporations Act, 1966, and that the Greater London Council has been given a similar power.
No borrowing by the gas and electricity industries in foreign currency is intended at present, but Clauses 2 to 4 have been included in the Bill so that the power will be available for use if needed. In view of the great size of their investment programmes, however, it is unlikely that either of the industries will ever be able to raise any substantial part of their requirements for new money in this way.
Apart from the practical limitations of the supply of funds, the House will see that control is maintained through the requirement in the Clauses that the borrowing must be from persons, and on terms specified by the Minister with the approval of the Treasury.
The opportunity of the Bill has also been taken to seek a power for the gas and electricity industries to make their special skills and experience available to developing countries through agreements with my right hon. Friend the Minister of Overseas Development.
There is nothing in Clause 5 obliging the industries to give assistance against their inclination, or to incur any expense on their own account. To the extent that the costs of any technical assistance are not recovered from the benefiting country or from one of the international aid agencies, they will be recoverable from the Minister of Overseas Development under agreements with him in accordance with his powers under Section 1 of the Overseas Aid Act, 1966.
I hope that the House will welcome the removal of the legal impediment to the flow of technical assistance from our gas and electricity industries, whose technical eminence makes them so well placed to give help in this way.
551 If I may reflect for a moment upon the Opposition Amendment, I would say that I accept immediately what it says in the first part of it, that there has been no debate on the White Paper on a specific Motion. I am bound to say that the White Paper seems not to have escaped the attention of the House, and that there were three or four occasions when it was discussed at some length. I wonder whether, in view of the history of this, and however cogent the argument that we should have had a specific debate on the White Paper, this would be a real reason for voting against the Second Reading.
More specifically, I would like to say to hon. Members opposite that I agree entirely with the last sentence of the Amendment, that there is the greatest necessity for Parliamentary review and consideration in detail of the expenditure of public money. I would have thought that the provisions in the Bill met this point. The Amendment says that considerable borrowing is necessary. The £400 million will have to be reviewed in two years and there is no reason at all why we should resist any clamour that this £800 million should be examined.
As we say in the Memorandum, we can have another Order to provide whatever it may be, another £400 million if it is working out that way, and then perhaps a final Order for another £400 million. I would have thought that this, allied to the other instruments that we have to review expenditure would be sufficient. The Opposition would have a continuing scrutiny of these large sums of public money. I am wondering whether, even at this stage we could not have this Bill without a vote against it.
§ Mr. Gunter
All I am saying is that the hon. Lady the Member for Finchley might give consideration to this, since we have gone out of our way to meet her legitimate fears.
§ 4.26 p.m.
§ Mrs. Margaret Thatcher (Finchley)
I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:this House, while recognising the need for a considerable increase in the borrowing powers 552 of the Gas Council to use North Sea gas, declines to give a Second Reading to a Bill which, by permitting a further increase in public expenditure of up to £1,200 million, doubles the existing powers at a time when the White Paper on Fuel Policy, Command Paper No. 3438, from which it stems has not been debated, and when the most rigorous Parliamentary scrutiny of all public expenditure is especially necessary.I greatly enjoyed the Minister's speech, as we almost always enjoy his speeches. In a way, he is one of the most difficult of right hon. Gentlemen to battle with, because he is so nice about everything. It would make one's job a lot easier if he were not so nice. I hope that he will listen carefully to what I have to say, because we have tabled this Amendment in a very serious manner.
There are very good reasons for not doing what he said, namely, allowing the whole amount, and then saying that it will be all right because we have control and that there will be opportunity for another Order. I can well imagine what would happen if we let the whole amount go through. The right hon. Gentleman would be back to the House with an Order and he would make the same sort of speech and say, "There cannot be much doubt that industry should have this amount as well".
May I now develop the argument which we wish to deploy over the Bill? First, we must look at it—the Bill requires enormous extra sums to be provided— against the general economic background. It is one in which we require, in the coming years, stringent control of public expenditure. We have had many debates on this, and the Government have had to go through some careful and close examinations and come up with decisions which have been very unpalatable to hon. Members opposite. There is no question but that we have to have stringent control of public expenditure.
We also have to have stringent control of public sector expenditure. For example, the Chancellor said on Budget day:Looking further ahead"—that is, after mid-1969—… we shall ensure that the claims of the public sector are compatible with the total resources available as compared with other calls upon them. This will be the central task of this year's review of public expenditure."—[OFFICIAL REPORT, 19th March, 1968; Vol. 761, c. 259.]553 We are to consider a very large new claim from the public sector. We must consider it in relation to other claims and see whether the full amount of this claim is justified under the very criteria which the Chancellor set out. There is also in the economic background the undertaking given by the Chancellor to the International Monetary Fund, that the central Government's operating requirements should not exceed £1,000 million next year. I note, in passing, that it would have exceeded that this year but for vastly increased taxation.
The Minister is putting forward to us for approval an enormously increased amount of extra borrowing for this particular industry—up to £1,200 million. It is pertinent to see how this borrowing can be financed. There are not many ways in which borrowing for the public sector can be financed. The first possibility is by taxation. The Minister is suggesting that one way of financing £1,200 million extra would be from taxation; that would put no extra charge at all on the Government's borrowing requirement. So we have to consider it against that background. Money does not just come from nowhere. Someone has to provide it.
The second means would be by genuine Government borrowing. Anyone who has read the debates on the National Loans Fund will know that there has been very little genuine Government borrowing over the last six to 10 years; and I know that part of that occurred during the lifetime of the Government of my party. The third method of financing this enormous sum is by inflation, or by printing the money. That, too, has serious consequences for individuals or for the economy. It is against that background that one must look at this particular demand for new expenditure, bearing in mind that the likely ways of financing it are by taxation or by inflation, with a little borrowing in between.
So much for the general economic background, which is extremely important. Let us look for a moment at the general fuel background to which the Minister has referred. First, there is the White Paper which he mentioned. This purported to plan the change from a two-fuel to a four-fuel economy and its objective was to re-assess the balance 554 between the fuels. We all know that one cannot have a policy for one fuel which does not have very extensive effects on others; and one of the Ministry's most difficult jobs is to co-ordinate the programmes of the nationalised industries and assess their investment programmes. I am quite sure we have not yet learned in politics how to deal with the nationalised industries. I know full well there is a Select Committee sitting on this subject which has not yet reported but in the meantime we have to try to coordinate the several programmes and to produce some coherent results.
That fuel policy said that one of its purposes was to lay down long-term policy guide lines which could be modified and adjusted in response to new developments. Broadly speaking, going through that White Paper, one sees that it was really done in two slices—planning up to about 1971 and then projections forward from that period. I note, again, that the Bill goes beyond the immediate planning period up to 1971 and goes very far indeed into the realm of conjecture. The period to 1971 was particularly significant in regard to the effect of this policy on coal, because the provision we made for coal terminated in 1971, before the provisions of this Bill have come to an end, so that it is important to consider the two together.
We must also consider the White Paper on Fuel Policy in relation to the future for gas, because there were extensive sections on this and all had certain characteristics. One of those characteristics, which was scarcely touched on in the Minister's speech, one of the outstanding things about natural gas, is the uncertainty of the amount, the uncertainty of the rate of depletion and the uncertainty about sales. Indeed, whenever we look in the White Paper at comments on natural gas there are conclusions about the uncertain strategy, the uncertain amount, the uncertain field. On the face of it, this does not seem at all a recipe for approving £1,200 million.
Let me give specific examples. Paragraph 14 of the White Paper said:For the longer term, much more needs to be known before it will be possible to establish precisely the rôle to be played by natural gas in our energy supplies.It went on to deal with the uncertainties 555 and in paragraph 24 it returned to the same theme:The uncertainties are too great for it to be possible to settle the long-term strategy on gas absorption.The White Paper returned to this again in Appendix II, when it talked about the uncertainty of the total amount and went on to speak of another uncertainty which we are always up against in fuel policy —uncertainty as to whether this fuel will be displaced by another which may be cheaper. So we have to keep in the back of our minds the thought that the expenditure which we may or may not approve today may prove abortive in 20 years' time because another fuel or another system has been discovered.
The whole of the White Paper is really shrouded in uncertainty so far as its passages about natural gas are concerned and in looking at the Gas Council's case and the Memorandum accompanying the Bill I had the feeling that they had taken the tentative conclusions without the qualifications which the fuel White Paper made at every stage.
§ Mr. Ted Leadbitter (The Hartlepools)
In an interesting debate of this kind, to dwell so much, in the manner the hon. Lady has, on uncertainties, is not quite a fair presentation of what is in the White Paper. Would she agree, so as to amplify the point she has made, that the words following those she has used are:But we know already that the reserves are very substantial and this is the reason for the Government's decision to authorise construction"—of pipe lines, and so forth? The hon. Lady has stressed only the uncertainties.
§ Mrs. Thatcher
I do not dispute what the hon. Gentleman says about the sentence which follows in the White Paper. We already know that the reserves are very substantial. What we do not yet know is the ease with which those can be got to the consumer. We have only one small field which is delivering, and that has come up against far more difficulties than were expected because of the uncertainties in any new operation of this kind.
Turning to the point to which I was coming, past investment policies in relation to the fuel industry; again we are looking at an enormous sum to be spent 556 to produce more energy, to get more sales. We have not been very successful, as a House, in our judgment of past investment policies in relation to other fuel industries.
We have, for example, poured capital into coal to produce coal at any price and the result has been that an enormous quantity of coal, about 28 million tons, is now on the ground and cannot readily be sold. There we have an enormous investment a large part of which has proved abortive because we have already had to write off a lot; and one of the things we shall want to know is how much more has to be written off if the gas policy goes througn.
Then we went into electricity and poured enormous sums into that industry. Its borrowing limits are in excess of £4,000 million. This was a great new technology and we invested enormous sums in it; and according to last year's report, the industry is short of sales. It has more investment than sales would have warranted and the result has been an increase in the price to consumers because the cost of investment had to be spread over smaller sales. That is the record against which we are looking at this new investment. There have been these failures properly to assess the investment in particular fuel industries, failures which have led to surplus stocks or surplus electricity. The Minister cannot blame us if we are very wary when we look at this new Measure to ensure that we are not doing exactly the same again, particularly against the background of a totally new industry and the uncertainties which I have outlined.
§ Mr. Lubbock
Would not the hon. Lady agree that there is this very substantial difference between the two examples which she quoted, that the market for coal is declining and perhaps vanishing, whereas the market for electricity is ever increasing? If one made some small errors in one's capital investment in the past, one would catch up with them later with the growth of demand.
§ Mrs. Thatcher
I do not disagree that the market for electricity is expanding. But it does not alter the fact that we could have avoided some of the price increases now had our assessment of the amount of investment been better. The load forecasts were badly wrong.
§ Sir G. Nabarro
May I reinforce my hon. Friends argument? I am grateful to her for giving a lesson to the right hon. Gentleman in Parliamentary courtesies. My hon. Friend quoted the undistributed stocks of coal at 28 million tons. She might have added that in terms of the nation's resources another 14 million tons of distributed stocks are lying on the ground, making a total of 42 million tons, worth about £220 million of the nation's finances sterilised and wrapped up. Why does not the Minister apply himself to that factor?
§ Mrs. Thatcher
I am sure that my hon. Friend has the figures absolutely right. I do not usually quote the distributed stocks, for one reason, which my hon. Friend will be the first to appreciate. The distributed stocks have usually been paid for, so that the Coal Board has received an amount of money for them. They do not enter into the deficit.
There is one other background factor regarding the attitude of the public to the great development of North Sea gas. Most ordinary members of the public would have taken the view that there appeared to be a large supply. Therefore, because the raw material costs are negligible, they would have it in their homes at very much cheaper prices than any other fuel. It is slowly emerging that this is an absolute myth, and that the cost of getting the gas to their homes and of converting the equipment in their homes is so great that it will negative the advantages of the cheaper raw material.
We shall be very wise to make it clear to the public that there are not substantial price reductions coming in gas. Indeed, they would not believe us if we said that there were. They have just suffered an enormous increase in the price of gas. It does not help very much if we say, "We shall increase the price a lot now, but take it down a ½d. a therm when you get the natural gas".
We must look at the matter from the consumers' viewpoint. The costs of conversion are very great. In theory, they are not borne by the consumer; in practice, they are. Equally, in practice, what happens is that somebody comes to one's house, shakes his head sadly over one's gas cooker and says that it is unconvertible because it is too old, although it is working perfectly well, and shakes his head sadly over the gas fire, which gives 558 perfectly good service, and says "You should have a new one". This is happening on quite a large scale, because people carry on using equipment for a very long time.
§ The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson) indicated dissent.
§ Mrs. Thatcher
Perhaps the hon. Gentleman never reads the women's pages in magazines and newspapers. He should. He might then know more about gas and electricity and the public than he does. People carry on using their equipment for far longer than manufacturers or gas boards would approve.
§ Mr. Frank Tomney (Hammersmith, North)
There is another side to the story. The gas boards do not install central heating systems; they have not the gas fitters to do the job. These jobs are let out to contractors. That is all right if the contractors are efficient. Usually they are, because they are qualified. But what happens afterwards when it comes to making repairs? The gas board sends along a sub-contractor. I have had this experience. The subcontractor charges 100 per cent. more than the gas board.
§ Mrs. Thatcher
May I give one of the examples to which I was referring when I told the Parliamentary Secretary that he should read the women's pages. There was a very amusing article in the Sunday Express on 21st April by Veronica Papworth entitled,I am going to be converted—and there's nothing I can do about it.She gives an account of how the gas man called. The article states:… we looked at the gas fires in the bedrooms and his face grew graver and graver. 'I'm afraid', he advised me, rather in the manner of a doctor diagnosing smallpox, 'that we shall have to take them away'…. How much … was a new one?' Roughly £20'.He looked at something else in the dining room.'Out of date', said the young man firmly, 'there's nothing to be done with that'. 'But it goes like a bomb', I protested.I had some gas fires in my old house before I went into the one where I am now in which gas is not laid on, so I have not a vested interest in the Bill. The 559 public should be told, and told plainly, that reductions in gas prices are a myth and totally unlikely to come about.
I turn to the case which the Minister quotes for the increased powers which has been put to us by the Gas Council in the brochure to which the Memorandum refers. I will take it point by point, because there is a very convenient summary at the beginning. This is the case for which the gas industry is asking for extra borrowing powers. The first point I take was:The Government state in the White Paper on Fuel Policy that they expect natural gas to meet about 15 per cent. of the total demand for energy in Britain by 1975".That is a direct, authoritative statemen. It gives no hint of the background uncertainties to which I have referred.
Point No. 2 is very important:… this policy involves ' the wholesale displacement of existing gas-making plant and methods, a nation-wide conversion programme, and an expansion of sales by nearly fourfold between now and the mid-1970s'.What we shall be doing if the programme goes through is writing off not obsolete equipment, but brand-new technologically up-to-date equipment which is now being installed to meet demands and will continue to be installed for the next 10 years. Certainly, the coal carbonisation plant is being written off, but so is the oil feed stock plant, which has already caused a revolution in technology. This is one of the costs of introducing natural gas and one of the reasons why it will not be cheap.
We are entitled to ask the Minister whether it is wise for the economy that new, up-to-date equipment should be written off much faster than it should be when it would give many years' service and is itself a tremendous technological advance for the gas industry. But the right hon. Gentleman has accepted that it should be written off over a period of 15 years, which is far less than its normal life, and he appears—
§ Mr. J. T. Price (Westhoughton) rose—
§ Mrs. Thatcher
May I finish my sentence? It will be an unusual experience for me in this debate.
560 I understood from the evidence given to the Select Committee on Nationalised Industries, of which the hon. Member for Westhoughton (Mr. J. T. Price) is, I note, a member, that the period was 15 years or the rest of the natural depreciation life, whichever was the less. There seems to be some discrepancy. Some documents say 15 years and some say 10 years. In any event, it is being written off whilst it is still comparatively new and would give many years of service. The Minister seems to have accepted, even in our present economic conditions, that that is good for the economy of the country. I question it.
We then come to "a nationwide conversion programme", on which I have already commented.
Concerningan expansion of sales by nearly fourfold between now and the mid-1970s",the Memorandum submitted by the Gas Council to the Select Committee on Nationalised Industries said that that fourfold expansion to the mid-1970s could not take place on existing proven reserves; more would have to be discovered before that expansion could take place. We are here in the realm of supreme uncertainty. I will give the exact quotation from the Select Committee on Nationalised Industries, Sub-Committee B, Wednesday, 10th April, 1968, paragraph 5, on page 19:The Government's White Paper on Fuel Policy, Command 3438, accepted that it would be a reasonable assumption for planning purposes to set the 4,000 m.c.f.d. target as early as 1975, although for this quantity to be produced the discovery of additional reserves to those already found will be necessary.Here is a policy based on the finding of additional reserves and assuming that they will be found. We are being asked to approve £1,200 million depending on the finding of additional reserves.
I turn to the third point:The changes in production technology have kept gas a competitive fuel and sales have grown at an average rate of 9 per cent. per annum in the last four years.They have. On the oil technology, gas has done very well. I have been impressed by the rate at which the new technology has been accepted and the efficiency with which it was produced. If the Minister accepts the rate of obsolescence which has been mentioned, he will have a tremendous problem of redundancy in the 561 gas industry as well as in the coal industry. There will not be jobs of the same calibre in the gas industry under the new natural gas as there have been under the technology which depended on oil feedstock.
The fourth point is:Natural gas is likely to make the largest contribution to import saving when supplied as a premium fuel.This is one of the great conclusions of the White Paper. It is really saying that we are embarking on probably £1,000 million of expenditure to get a different sort of gas to cookers and central heating systems on the assumption that the sales will go up fourfold.
I am not prepared to accept that assumption. I think that when a number of these fires have to be changed, at considerable cost and people realise that the price will not come down, the demand will not be there to the same extent as in the past. The demand will not rise at the same rate. I question whether we are wise in spending this enormous sum on getting a different gas to fires, central heating systems and cookers which are working well and being supplied with town gas at the moment.
The fifth point is:Bulk sales to industry and possibly some power stations will help to build up quickly the total flow of gas from the North Sea fields.There is probably some point in saying that to get the benefit of natural gas to the economy we have to get it cheaply into industry. If that is the economic benefit, we do not need to get it to every cooker and central heating apparatus in the country. If we want to benefit the - economy we go to the industry; we do not need this enormous conversion and distribution network.
I suspect that we are getting the costs all ways up. We are getting the expenditure on the domestic conversion network and we are having to write off modern plant. This will have its effect on coal, in which we have already invested a lot, and will produce further redundancies. Does the Minister now see where some of our doubts arise? Whatever happens, we are pouring investment into every aspect. I doubt whether the economy will ultimately benefit to the extent indicated by the Minister.
562 Just a word about, "and possibly some power stations ", because it is said that gas will go into power stations. I am not a member of the Select Committee and, as right hon. and hon. Members know, one cannot get the transcripts of evidence until long after the evidence is given. However, from what I can make out, the question of the supply of gas to power stations is in a bit of a muddle. It could only be with the Minister's consent and it could not be before 1971. After 1973, according to the Government's White Paper, the power stations will be entitled to choose the most economic fuel, but they could not choose gas, because gas has first to be offered to the area boards, and they could get it after that only with the Minister's consent.
§ Mr. Palmer
The hon. Lady can take it from me that natural gas is being used at Hams Hall power station, near Birmingham, and being used successfully.
§ Mrs. Thatcher
I take that from the White Paper as well. I think that there is also one other which is being converted. Presumably, that has been done as an experimental project with the consent of the Minister.
I want to inquire about the other implications of putting gas into power stations. Lord Robens gave evidence to the Select Committee the other day. I have not got the transcript, but I thought that he asked a cogent question, which we should also ask. The provision that we made for redundant miners to help the coal industry expires in 1971. If we put gas into power stations—which may be very advisable, but I leave that to the judgment of others—what will be the effect on the coal mining industry? Are there to be other redundancies in addition to those we already expect, and shall we have to make further provision for them because we burn natural gas to the boilers? Are we to make further provision for the write off of more pits and further provision for social benefits for miners? These are questions the Minister should ask.
I also understand, dealing with the period 1971 to 1975, that this policy was not discussed with the Chairman of the National Coal Board. I understand that upstairs he said that the White Paper's figures up to 1975 were done without any 563 consultation of any kind at his level in the Board. It does not seem to be carrying out the Minister's duty of co-ordination between the fuel industries and the duty of the most effective investment of people's money if there was not that consultation and not the requisite amount of co-ordination.
The sixth point concerned the amount spent on fixed assets and other things. It transpires that the gas industry wants £1,600 million to carry out this uncertain programme. As more evidence comes before the Select Committee more doubts seem to arise about how far the programme could have been thought through because of the uncertainty. We have seen only a comparatively small part of the evidence. The part in Point 6 which takes my breath away, although it seems to have no effect on the Minister, is that, when it has said how much extra it wants, over an extra £1,000 million, it goes on with this immortal sentence:The industry is aware that the next five years will be a period of rapid change and that its planning must remain flexible. In view of all the circumstances, the Council considers it would be sensible to have a reserve borrowing Dower of £237 million.Just £237 million extra between friends! It is quite incredible, at a time when we need stringent control in the public sector, to say, "Please, we want £1,000 million. There are so many doubts and uncertainties. We must be flexible, but we must not be flexible in reducing the amount. You must give us flexibility in case we have made any great errors of judgment so can we have another £237 million?" But that £237 million would have to be found in taxation, savings or inflation; on top of everything else, £237 million for the mistakes that have been made or the calculations which they could not do.
§ Mr. Leadbitter rose—
§ Mrs. Thatcher
Please let me get on.I am taking up far too much time, although it is not really my fault. It is other hon. Members who are taking it up.
That is the case which the gas industry makes for requiring the extra £1,200 million. The Memorandum before the House then points out, as did the Minister, that this could be done in two slices. It could be done with a first slice of an extra £400 million. If this extra £400 million 564 were added to the borrowing powers which have not yet been used, there would be over £500 million available in borrowing powers to the Gas Council.
In view of the uncertainties which I had described at length and the possible effect on other fuel industries, that is, I suggest, absolutely as much as we should let them have at present. Then the Minister should have come back to the House, not with an Order late at night but with another fuel Bill. By that time we should know the result of the investigation of the Select Committee on Nationalised Industries into the Gas Council's case, which is being conducted by my hon. and gallant Friend the Member for South Fylde (Colonel Lancaster); we should know the effect upon coal; we should know the other possible uses of natural gas. I think that it would be unwise to go beyond that extra £400 million, which is, in fact, an extra £500 million above what they have used at present.
The Memorandum also refers to other new borrowing powers, which the Minister, I thought, skated over rather quickly. It is, of course, very unsual for a utility undertaking to have power to raise money in foreign currency. The right hon. Gentleman mentioned one other case of a nationalised industry having such power, but that industry is a substantial earner of foreign currency; therefore, it can repay in the coin in which it borrows. This industry is not a substantial earner of foreign currency; therefore, someone else will have to find the foreign currency with which to repay.
By permitting foreign borrowing the Minister is defeating part of his own argument. Part of his argument for natural gas is the great saving in foreign currency that its injection into the system will produce. That is already partly modified by the fact that a lot of the capital which has gone into developing North Sea gas has been foreign, and that foreign capital has to be serviced, which means a lot of money going out annually. The right hon. Gentleman is now further defeating his own argument by saying that the industry can borrow foreign money, which means that that loan will have to be serviced annually in foreign currency. So if his argument is foreign exchange saving he is partially defeating it by the provisions in his own Bill. If he wants to save foreign exchange he ought not to replace coal with gas.
565 I should like to tackle the Minister on another point. It is said in the Memorandum and in the Bill itself that any foreign borrowing would go against the total borrowing limit. Two points arise out of this. First, the foreign borrowing would not be done through the National Loans Fund. Therefore, it would not affect in any way the Government's central borrowing requirement. I suspect that this is a way of getting round the central borowing requirement, of spending more money but not having it enter into the calculations of that requirement.
Second, the amount borrowed would go against the total, but there is a provision in Clause 2 with regard to the Electricity Council, and it is reflected in other Clauses with regard to the other councils, that the borrowing limit can be exceeded to redeem the loan. So the £1,200 million is not the full extent of the borrowing which, if the Bill goes through, we shall be asked to consider. It would be greater than that by whatever amount the Treasury said the loan could be.
I hope that I have said more than enough to express the great uncertainty which surrounds the development of North Sea gas. I am the first to admit that we must get some of it into the system, but, in view of the uncertainties —the fact that the Select Committee is now investigating it, that new problems arise every day—we should be unwise to give the total amount which the Minister is asking. No harm would be done by giving the lesser amount. Indeed, I think that it would be greatly to the advantage of the nation in the present economic circumstances, if we stopped at a further £400 million. I hope that the Minister will consider what I have said, as I have considered what he has said.
§ 5.7 p.m.
§ Mr. Arthur Palmer (Bristol, Central)
The House enjoyed enormously the speech of the hon. Lady the Member for Finchley (Mrs. Thatcher), who used a number of very sound arguments with which I agreed, but she did not convince me that the Opposition Amendment was necessary. There is a very strong case for the House debating the White Paper, but I do not see why the gas industry or the electricity industry should have to wait for its money until the House of Commons arranges its business better, 566 which seems to be the implication of the Amendment.
I want to raise three points on this Bill. The first is in connection with the proposal that the electricity industry and the gas industry should have the power to borrow capital from abroad if necessary. I welcome this because I think that it will lead to a more sensible approach generally to the whole question of raising capital for the nationalised industries. I will try to explain why.
I have always been a critic of the way in which electricity prices to consumers were increased last autumn by the area electricity boards. There were increases of 15 per cent. to 20 per cent. in some cases, and increases of that magnitude are obviously no laughing matter at a time when electricity is used extensively in homes by every social class in the community, quite apart from the effect on industry and commerce. In my own constituency—and I am sure that this has been the experience of hon. Members generally and certainly of my hon. Friends on this side of the House—this increase did much to diminish public confidence in the prices and incomes policy.
The principal reason for those increases was that it was necessary to allow for the; situation which had been brought about by the earlier growth rate in electricity consumption proposed in the National Plan. At that time, several years ago now, looking ahead to a vastly increased growth rate, the electricity supply industry borrowed a great deal of money in order to make plant, equipment, transmission lines and distribution systems available.
Then there followed the deflationary policy of my right hon. Friends, as a result of which there has been a cutback in the rate of electricity growth. Therefore, there is at the moment in the industry a good deal of unremunerative capital. As the hon. Member for Orpington (Mr. Lubbock) said, this does not matter too much because it is a temporary difficulty; it is only a matter of time before the natural load growth overtakes the surplus generating and transmission capacity. As we used to say when I worked in the electricity supply industry, it is always a good thing to get extra copper into the plant 567 or into the ground; sooner or later the load will follow it.
Hence, a sensible policy for the electricity boards, and one which most of them would have preferred to follow— something which my right hon. Friends who are responsible for fuel and power policy have never disclosed—would have been to spread the costs reflected in increased prices over three or four years ahead. Instead, the industry was required to get back on target in only one year. That meant to maintain its standard financial rate of return on assets, which is fixed for the electricity industry —no one knows why this figure was chosen, since it is different from that for the gas industry—at 124 per cent. That is the magic figure which the electricity industry must work to.
Since increased borrowing from the Treasury was forbidden—I suspect that this was a Treasury policy anyway—the consumers had to find the money immediately. In short, today's consumers are having to pay the charges on the capital for equipment which tomorrow's consumers will use. Had the electricity boards, through the Electricity Council, been able to borrow overseas, as they were prepared to do, to cover the charges of their temporarily unremunerative capital, that would have helped considerably to steady prices.
I am not of course suggesting that favourable term overseas borrowing would by itself have avoided entirely the sizeable increase in retail tariffs, but it would have done something to modify it. To modify it further, two other steps would have been necessary, neither of which the Government had yet taken. I had some correspondence with the previous Minister on this issue. It was, first, necessary to equalise the rate of return expected on assets as between the gas and electricity industries. As I said, electricity is expected to return 12.4 per cent. The gas industry, which we are told is a bright, prosperous and flourishing industry, is still required to return only 10.4 per cent. There must surely be some kind of argument somewhere for the difference, but it is hard for those in the electricity supply industry to understand what it is. Would my hon. Friend at least try to explain the reason for the difference when he replies.
568 Another argument which could be used in support of my thesis that these steep increases were not necessary all at once is to be found in the Report of the National Board for Prices and Incomes on the Central Electricity Generating Board's bulk supply tariff, which points out that, in electricity supply, because of the sharp division between generation and distribution, the C.E.G.B. has been able, over some years, to balance its books by pushing some of its costs on to the area boards and, thus, on to the consumer.
The sensible suggestion of the Prices Board—it is a pity that we had to wait for it to suggest it—is that the industry should be taken together and that the C.E.G.B., for which I have the highest technical respect, should understand that it too should make economies. Else it is all too simple for the Generating Board to push the obligation on to the area boards, which naturally, since they have to buy their electricity from the C.E.G.B., can all too easily go into the red and therefore they increase prices instead to the consumer.
If the electricity supply industry and the gas industry—the argument applies to both—were allowed greater flexibility in borrowing policy, they could decide these complicated tariff questions for themselves, and some of the recent steep price increases might have been avoided.
The second issue may be a constant theme of mine, but that does not mean that it is not a good argument. It is about investment in the electricity supply industry. The industry is often treated as a great spending villian because it invests so much capital, but it is bound to do so. Electricity is basic to the whole economy. One cannot run a modern industrial economy without vast quantities of electric power; if our productivity and standard of life is to advance, investment in electrical plant and power facilities generally must also advance.
But I regret that my right hon. Friends in charge of the Ministry since the present Government were elected are still following the bad road which their predecessors followed. That is, they are still allowing investment in electricity supply to be dictated largely by narrow Treasury considerations. We are likely again, in a few years, when the economy 569 begins to expand, to face a shortage of electrical plant capacity. But, apart from the danger of an actual shortage of capacity in three or so years, because of what I think are the present shortsighted economies, a too narrow margin between electrical maximum possible demand and actual installed capacity tends to inhibit commercial investment, and hampers the industry in building an economic and well-balanced load pattern.
I believe that the intention now is to stabilise on a 17 per cent. margin of installed capacity over possible maximum demand. To most people outside the industry—I am sure, to those in charge of the national finances—this may seem an ample margin, but it does not, of course, allow for emergencies. It particularly does not allow for what can happen all too easily when large power station installations such as the 500 megawatt sets which we are installing now go out of service because of breakdown or enforced maintenance.
It is one thing to have a 17 per cent. margin when using 60 megawatt machines, but when using 500 megawatt turbo alternators it is taking a considerable risk. Most European electricity undertakings—this remark allows for a substantial measure of interconnection, which on the Continent does not go quite as far generally as it does in Britain— work on an average margin of about 20 per cent. Apart from the question of the security of supply, and apart from the occasional dangers which are involved because of the new techniques of generation where much larger machines are used, it does not allow old plant, which is very expensive to run, to be taken out of service. By taking old plant, which is very expensive when run on peak load, out of service electricity can be made cheaper to produce.
The exporting of electrical plant is important to Britain. I do not want to seem to be in any sense biased against the gas industry, but that industry does not export much plant. The electricity industry taken as a whole—manufacturing and supply—does. There is a direct relationship between exports of electrical plant and investment at home. It is doubtful if we can export everything that we were previously using at home. It is generally recognised that there should be at least a ratio of 40:60 between home use and 570 foreign sales. If we are to export 60 per cent., we should still be installing about 40 per cent. of the total output at home. In two countries whose economies are roughly comparable to ours— West Germany and Japan—the growth rate of electrical plant installed up to 1980, as far as one can obtain figures, is much greater than it is here.
I hope therefore that my right hon. Friend will not take too easily for granted the old financial argument that, when it is desired to cut national investment, we should cut into electricity supply investment on a large scale. I regard this as short-sighted, both from the home expansion point of view and from the point of view of our export trade.
The third issue I want to raise was talked about at some length by my right hon. Friend and by the hon. Lady. I have real doubts about the activity of the gas industry in the matter of natural gas use. The present Ministerial policy appears to be to give the Gas Council as quickly as possible natural gas so that it can be used profitably by the Gas Boards. I take the view that the Gas Council should not be organising the direct marketing of natural gas in the wholesale sense. I would like the system to be that which is used in the rest of Western Europe, namely, a marketing agency. The marketing agency would acquire the gas as it was produced and would resell it to all those who could make use of it, including the Gas Boards.
Such a State marketing agency would be able to hold the balance fairly in the use of natural gas as between all the fuel and power industries. After all. natural gas is a new source of primary energy. Why should it automatically go to the gas industry for them to use it in competition with the other fuel industries just because it happens to be in this form processed by nature? It should be available generally for the use of the economy. Has this sensible proposal been considered seriously in the Ministry? Last year the Labour Party conference carried a resolution to this effect.
Recently I asked my right hon. Friend the Minister if he would tell us the total capital cost of using natural gas on present policy assumptions. He gave me in answer the figure of £400 million. 1 appreciate that he was referring simply to the conversion of domestic appliances. 571 I have been told that the true total cost is £1,500 million. The Minister gave the figure today as £1,600 million. This is the first time this figure has ever come out in the House, I believe.
§ Mr. Palmer
I am glad to hear that. The hon. Gentleman is always well informed. Is a proper return on this capital expenditure certain? Has this question been studied. My right hon. Friend said little about the return on the money. If this enormous expenditure is to be justified, there must be an adequate financial return on it. It probably means, in terms of resources, that the natural gas reserves will be depleted in about 15 to 20 years since the gas will have to be sold to give the return. This means that a larger market must be created very quickly for the gas industry. As the hon. Lady said, this will probably be at the expense of the coal industry. It will be also at the expense of the electricity industry and thus, indirectly, at the expense of the coal industry. It will be at the expense of the oil industry. I am not saying that I shall shed too many tears about that, because the oil companies are mainly in the natural gas industry, anyhow, and can switch from one source of profit to another.
We can understand why the gas industry is now casting a jealous eye on the domestic space heating and cooking load. But should we allow this behaviour? There is such an enormous national investment already, quite properly on the basis of competition, by the electricity industry in this domestic sphere.
I think the right policy would be to use natural gas mainly in industry in bulk. The electricity supply industry can be treated like any other industrial consumer. Let it buy natural gas on a commercial basis and distribute the converted energy. At Hams Hall this is being done at present. That contract was negotiated freely between the local region of the Generating Board and the appropriate organisation on the gas side on a straight commercial basis. It does not necessarily mean the displacement of coal. Pulverised coal and natural gas 572 can be burned together in the same furnace at the same time. The mix can be varied.
We can explore this question when we debate the Report of the Select Committee on Science and Technology tomorrow, which deals with the nuclear power industry. I do not think that my right hon. Friend even mentioned nuclear power. What is to happen 15 to 20 years from now when there has been this vast expenditure on gas networks and on the conversion of apparatus? The supply of natural gas then runs out? We should then have the fast breeder reactor available, with electric power in abundance to do all that gas can do. Will we then use scarce foreign currency to import natural gas in bulk from Algeria or elsewhere simply because we have put money into the apparatus? Or shall we discard it as we have mining capacity?
I suggest that the gas industry is being given its head far too much. It is the duty of the Minister to use his statutory powers to co-ordinate these matters more sensibly and I hope that greater thought will be given to the need for co-ordination in view of the vast investment in natural gas and the parallel vast and appropriate investment for the future in nuclear fission. I regret—I appreciate that hon. Gentlemen opposite may not support this view—that from the beginning the State has not taken a greater public holding in natural gas because that would have made it easier for these matters to be adjusted.
There is talk in the electricity supply and gas industries of a new reorganising Measure. I suppose one is due because the 10-year legislative itch has applied certainly to electricity since about 1919. The last Electricity Act came in 1957, so I suppose that we are about ready for another one. If this is to happen, I trust that it will happen quickly because uncertainty and indecision is bad for morale, especially for an industry such as electricity supply, which I know well. It has built up fine teams of men and women who are working well for the benefit of the industry and the country. Their morale is bound to suffer when there is uncertainty about the future of what has hitherto been an expanding industry. Thus, if a decision is to be taken, it should be taken quickly.
573 I would be out of order today in suggesting the type of decision that might be taken. I would like to see a more flexible organisation for gas and electricity which would make it possible for these industries to evolve according to changing; circumstances without having to seek a new Act of Parliament on each occasion. There must be Parliamentary accountability. I have always favoured the mechanisms which have been established, such as select committees. However, to place industries which must change with changing times in a legislative cycle operating every 10 years, alternating from one Act to another, is no way to run these modern industries. They should make their own decisions, according to the circumstances, about the organisational forms they should take. We need self-adjusting arrangements for the gas and electricity industries which will fit into the second half of the century instead of tying them in a legislative straitjacket they have outgrown.
§ 5.33 p.m.
§ Colonel C. G. Lancaster (South Fylde)
I will not comment on the remarks of the hon. Member for Bristol, Central (Mr. Palmer) about the electricity industry because the Bill is mostly concerned with the gas industry. Like hon. Members on both sides, I find myself in an invidious position today. We are in the midst of an investigation into the impact of North Sea gas on the power industries. The evidence before us at present is incomplete and if we came to any decisions in this debate we would detract from the objectivity with which we must apply ourselves in writing our final report and submitting it to Parliament. There are, however, certain aspects on which one is entitled to comment, even at this stage. They are of a factual nature and, therefore, not subject to the matters I mentioned in connection with our report.
It is too easily suggested at this stage that we have as yet found natural gas in the North Sea on a scale which will be necessary to take advantage of the large amount of borrowing to which we are asked to agree. One hon. Member seemed to think that a great deal had been found. That is not so to date. If we have found one-third of the existing resources in the Dutch coalfield, that is as far as we can claim. It is to be 574 hoped—indeed, this may be so—that we shall find other deposits on the Continental Shelf, but they have not been found yet and, therefore, we are in a state of conjecture. As my hon. Friend the Member for Finchley (Mrs. Thatcher) pointed out, we are being asked to agree to a great deal of borrowing in a situation which has a considerable degree of conjecture attached to it.
The inquiry into North Sea gas is the most complicated investigation in which I have taken part, and I have taken part in every inquiry since the present Select Committee was set up. It makes an impact on so many aspects of our fuel and power industries, as well as on the economy of the country, that it will be an extremely difficult matter on which to reach a clear decision on the right recommendation to put forward.
We all hope that natural gas will be found in abundance, and it is fair to say, on events so far, that from the national point of view the more quickly we exploit it the better, for that will give a faster and better return on the capital that is required. Although that may seem an imprudent policy, I suggest that it is the right one considering that, with the exhaustion of these resources, atomic energy and other sources of power may be available to take its place.
My hon. Friend the Member for Finch-ley was wholly justified in the line she took. We need to be prudent. We cannot hand out monies just on the request of Departments. Departments are entitled to ask for reasonable sums meanwhile, and I believe that the request made by the Minister—for about £300 million a year for the next few years—should not be denied him, because if we are to find this gas we must undoubtedly undertake some heavy expenditure in view of the possibility of the required amount of gas being present.
The physical requirements are expensive and we must adapt ourselves as time goes on. We want to get the main grid system into being and we need storage. Yesterday I went to Canvey Island to see the progress being made in the storage of imported Algerian methane under frozen conditions in the strata. That storage has nothing to do with the storage which will be required for North Sea gas. That comes under a different heading. It is 575 germane to our discussion only because, on this occasion, Sir Henry Jones, when speaking to the Press—perhaps he was rather more cautious than he might have been because of my presence—about the price to the consumer in the premium market could only claim that it would be less than the price of gas made at present by conventional methods; that is, by carbonisation, which will undoubtedly tend to increase with the rising costs which carbonisation must attract to itself. It is not a very strong claim to make that it will be cheaper than the existing method of producing town gas by carbonisation, but he may have been cautiously wise.
I warn the House, however, that we may be putting our hopes a little too high on the benefits to be attained by the consumer in the premium market when this gas is forthcoming. I think it is wise to give that advice. That there should be a proportion used in the bulk market is evident, if and when it is forthcoming. That will tend to balance the cost in the premium market. I do not think we are entitled to say that none should go into the bulk market any more than we should say that it should all go into the bulk market and none into the premium market.
I am sure that my colleagues on the Select Committee will not resent my saying that we find ourselves in an invidious position and that we cannot be categorical in the views we express. My hon. Friend the Member for Finchley has made a good case for the Amendment. It is not that we want to deny the Minister any reasonable amount of money, but it was obvious from his speech that a great deal of this expenditure is to be incurred in a situation which at the moment it still full of uncertainty and doubt. There is no reason why a further Bill should not come before the House if, as we hope, our doubts may be set on one side and natural gas is forthcoming in great quantities from the North Sea; but the idea of 4,000 m.c.f.d. is a long way off.
There will be plenty of time for a further Bill to come before the House and then, if great quantities are forthcoming, I am certain that my hon. Friends and hon. Members opposite will be ready to see that the money is available. But we would be imprudent to say now that 576 we are prepared to provide all that is asked for. I therefore strongly support the Amendment.
§ 5.42 p.m.
§ Mr. Alex Eadie (Midlothian)
My curiosity has been aroused by the wording of the Amendment and by the attitude of the Opposition to the White Paper on Fuel Policy. Although I enjoyed listening to the hon. Lady the Member for Finchley (Mrs. Thatcher) when she talked about the wording of the White Paper, it was a little of a surprise to my hon. Friends and I, because we were under the impression that the Opposition was more enthusiastic about the terms of the White Paper than those of us on this side of the House. If there has been a change of 'heart among hon. Members opposite, some of my hon. Friends and I may perhaps believe that there is still some hope.
We made it clear that we found the White Paper on fuel not acceptable. We advanced the argument, but received little sympathy, that the White Paper was inconclusive and did not represent a fuel policy because it left so many gaps and that we as miners could not accept it. Like my hon. Friend the Member for Bristol, Central (Mr. Palmer), I cannot see that this debate merits an Amendment to the Motion. There may be a good argument that we should have a debate ranging over the whole question of fuels.
It is a pleasure not to be debating this subject late at night. This is the first time I have taken part in a debate on this subject early in the day. In the last four or five debates on fuel I have spoken at seven or eight o'clock in the morning.
I do not see any Scottish hon. Members present—
§ Mr. Eadie
I am glad to see that one hon. Member from Scotland has now arrived. Reference has been made to the monumental and epoch-making speech of the Leader of the Opposition. The Opposition should note that, in view of the activities of the North of Scotland Hydro-Electric Board, the Amendment will not endear hon. Members opposite to the Scottish people. When they read the document and the Amendment it will 577 take the sting out of that so-called very important speech.
There is an element of hypocrisy about the Opposition putting forward this Amendment. I say this in the nicest possible way, because the hon. Lady said such nice things about my right hon. Friend. We always like listening to her because, whether we agree with her or not, she tries to argue a case and she is a very pleasant personality, but she said some things which we could not accept. When she referred to vast sums of money being written off in the power industry, perhaps her memory was a little at fault.
I always suspect when hon. Members opposite talk about capital being written off that they are referring to capital written off in the mining industry. If the mining industry had been treated in the way which some hon. Members wanted it to be treated on the basis of profitability, there would probably be about £2,000 million additionally in the finances of the National Coal Board. It was hon. Members opposite who in the early days, particularly up to 1956, treated the mining industry as a service industry and the question of profitability never entered into it. Coal as a fuel was sold to private industry below cost of production.
I think I am entitled to remind the hon. Lady, who talked about wrong investment, that it was her party which was responsible for embarking on the gigantic magnox system in relation to nuclear power. That was a terrible mistake, and it ill behoves hon. Members opposite to talk about writing off vast capital sums as if they can escape responsibility. It may be that hon. Members on both sides of the House made mistakes, but hon. Members opposite were in power longer than we were.
Time and time again in debates on power my hon. Friends and I have spoken about the gas industry and gas prices. I have incurred the wrath of various Ministers. I have said at Question Time and in speeches over the past 18 months that I have always believed that gas was over-sold. There have been vast advertisements about the bonanza of North Sea gas. It was said that this great bonanza would mean a substantial reduction in prices for the housewife and the consumer. The hon. Lady was quite right to say that it is time it was said 578 from this House that "there ain't going to be a great bonanza" for the consumers of this country.
The consumers have been duped on this. They have been putting in gas appliances wholesale because of the mass advertising, in the hope and so-called knowledge that gas would be very much cheaper. I hope that at least from this debate, arising largely from what the hon. Lady said and what some of my hon. Friends will say, we shall be able to let the people know what will happen about gas prices.
There are very serious repercussions. Local authorities, largely because of the mythology of cheaper gas prices, have been concentrating more and more on gas in their housing programmes. I receive quite a lot of mail, probably as much as any other hon. Member, sometimes running into 100 letters a week. I have been discovering from my mail that old age pensioners are having great difficulty in meeting heating costs where they have gas space-heated houses. I believe that the local authorities acted in good faith, believing that installing gas would give the consumer some advantage. I wonder whether the fact that gas is to be used has influenced Government Departments when giving their approval to certain housing designs. If it has, it is time somebody was told that gas will not be all that helpful on the question of costs. There is a need to have an overall look at the whole question of fuel and its costs.
North Sea gas is a new-found source of energy that we should exploit. It is a source of wealth to the country, but for a long time I have wondered whether we may be destroying the chemical industry for our grandchildren and great-grandchildren. I am not sure that we are using North Sea gas properly and wisely. It seems to me nonsensical that in using this new-found wealth we should be writing off vast sums of capital spent on other industries, such as the mining industry, and creating unemployment problems. If the debate serves no other purpose than to highlight this, it will have performed a useful function.
§ 5.55 p.m.
§ Mr. Nicholas Ridley (Cirencester and Tewkesbury)
The hon. Member for Midlothian (Mr. Eadie) adds one more voice to the hon. Members who have 579 not been at all welcoming to the Bill. I think that it is the first borrowing powers Bill to be opposed on a reasoned Amendment, and therefore, the Government have real cause to think deeply about whether they are not making a mistake in bringing it forward at this time.
The gas industry is asking for the biggest draft of capital it has ever had this year. It is bigger than that for which the electricity industry is asking. That in itself is something we should look at. How do we know whether this amount of investment is correct? We have no means of telling by judging the amounts of investment in relation to market forces. We cannot say that demand is so much because we do not know what it is, and there is no means of determining the correct pricing structure to reflect demand.
Therefore, the Government must make arbitrary decisions, and they have decided that it will be 15 per cent. by 1975 of the national fuel take. So it seems to me that it is vitally important in assessing this huge amount of investment to be quite certain that the gas industry is selling its products at the correct price.
In a nationalised industry it is very difficult to discover what the correct prices should be. The White Paper, Cmnd. 3437, sets out how to determine prices. The first statement I came across was… the principle that nationalised industries' revenue should normally cover their accounting costs in full—including the service of capital and appropriate provision for its replacement.Judging the gas industry's proposals by that criterion, we find that the entire cost of conversion is being capitalised in this tranche of borrowing, £276 million. Why should the cost of conversion be a capital charge? It may well be argued that it should be. But it seems to me that it is something which the consumers should pay for, or at least pay the greater share. When one instals a telephone the cost is not met from the G.P.O.'s capital. One pays the cost of installing it. On the other hand, when one has a new gas installation it is to be provided free and paid for out of taxpayer's capital.
A vast amount of early obsolescence is to take place in the existing gas-making 580 plant, which will be written off long before its life has come to an end. This is another large capital item which must be reflected in prices.
Next, we read that the interest on all the heavy capital expenditure on constructing the network of pipes will be capitalised. This means that the true costs of installing the network will not be charged to expenses.
Depreciation of this equipment is to be based not on a straight line method, not on a historic costs method and not even on a replacement costs method. A new method of depreciation is invented, based on the throughput of North Sea gas. Nothing will be paid out in depreciation until the gas starts to flow, and then only as the build-up starts to take place. Perhaps 10 years hence this new equipment will be depreciated. Here is another clever financial way of concealing the true costs of this vast expenditure on North Sea gas.
The White Paper also says:Two-part and differential pricing systems are also used to improve financial results without distorting the allocation of resources when there are important elements in costs which cannot easily be allocated to specific services or products …That is very sensible. It says that one tries to keep the price as near as possible to what a service costs. Have we done this with North Sea gas? For instance, will it be as expensive to buy North Sea gas in Norfolk or in the East Riding as it will be in South Wales, or on the west coast of England? It must cost more to take the gas across, because pipelines have to be laid. I would like to know whether or not the extra cost will be charged. If this is to be evened out, it will mean that some consumers will have to pay more than they should and some will have to pay less than they should. In fact, a distortion is set up in the economic system, inducing more investment in pipelines and plant on the west coast than would otherwise have taken place; this is another part of the reason for this vast investment.
What about the premium market consumers? What about power stations, factories, and steel works which will consume vast quantities of the gas? Will they be charged less per therm than domestic consumers, or not? It is clearly cheaper to supply a large industrial consumer than 581 domestic consumers. One must know what the answer to that question is.
The next item on pricing concerns the price which will be paid to the producers of North Sea gas. One contract has recently been fixed at 2.87d. per therm, If this price is too low it will have a cumulative, lowering effect on the price at which North Sea gas is retailed and keep the price of gas too low throughout. It will also have the effect of tending to choke off further exploration because the profits on the exploration will be too low, while, at the same time stimulating too great a demand by having a very low price for the gas.
I do not know whether this price is right or wrong, but the dangers in the Gas Council using its monopoly bargaining position to drive the price of gas down too low are immense. Not only will the supply be cut off by making it uneconomical to look for new gas but demand will be increased, because the gas will be so cheap that everybody will want to consume it, and that in its turn will bring a huge further investment in its train.
§ Mr. Lubbock
Is not the hon. Gentleman disagreeing with his hon. Friend on the Front Bench who said that there would not be any price reductions arising from natural gas?
§ Mr. Ridley
I am not at all disagreeing. I thought she made an absolutely admirable speech. I am trying to demonstrate that what is happening is that the gas industry is trying, by any means at its disposal, to get its prices down so that it can become more competitive. The result is that the price is far lower than it should be. Of course my hon. Friend is right. There may still not be much reduction in gas prices despite the fiddling about with depreciation and interest and the various other factors which I have mentioned. And they are leading to such a great demand that it will result in our having to provide this enormous sum of capital; it is subsidising natural gas to a very large extent.
The gas industry is not the only industry which is doing this. The nuclear power industry, the coal industry and the electricity industry have all done it. There is enormous competition between the different forms of fuel, which results in the 582 pouring out of the taxpayers' money and does not make any sense at all.
How will the Government control this enormous expenditure? The Government have laid down in their White Paper two forms of control for nationalised industries. One is to raise the test discount rate. They say that if the capital investment of the nationalised industry gets out of hand the remedy must be to raise the test discount rate. Yet the Government have no plans for doing so. The Minister made it quite clear the other day that he is not intending to do this. That is clearly something which will not be done. The second form of control stems from self-financing. The gas industry hitherto has been running at about 30 percent. self-financing, and the forecast for the next five years is that it will again be 30 percent. self-financing. The figure which is given in the gas booklet indicates that it will be 30 percent. self-financing in the future. In a Committee stage debate on the National Loan Fund Bill the Financial Secretary to the Treasury said that he thought that 30 percent. was inadequate, and yet we are told that the gas industry will only have to find 30 percent. of its new money in the future.
The Government's main weapon to increase the self-financing ratio is the operation of the financial target. We learn with astonishment that the financial target for the gas industry has not been fixed. This enormous investment is taking place in a situation where there is no fixed financial target for the gas industry. This is of such fundamental importance that I must labour the point for one moment. If the target is fixed at 8 per cent., 10 per cent., or whatever percentage it is, this in its turn will affect the prices which the industry has to charge, which in turn will affect the amount of investment which is sucked in. It is foolish to present the House with a bill for £1,200 million without telling the House as a result of what rate of target this has been calculated. The first part of the equation is the rate of target, working from that to the prices which would result, and working from that to the amount of the investment. It is quite clear to me that the price of North Sea gas has not only not been published, but is not known, and has not been taken into account.
583 The Gas Council has used every conceivable means to reduce the price at which it can sell gas; by bludgeoning the oil companies, by writing off its depreciation 10 years hence, by failing to cover costs which should properly be covered in estimates and by getting all this done before the financial target has been fixed. The result is, of course, this huge capital sum which we are asked to find.
Nobody would deny to the Gas Council the funds to develop North Sea gas, but the ultimate decision here is the speed at which gas is to be brought into the market. It can be brought in so that it is used up over 100 years, or so that it is used up over 10 years or anything in between. This is a decision which only the Government can take. The Government are supplying the capital, the Government own the industry and the Government alone can decide. In these circumstances, I cannot understand why the Government appear to be setting all the financial controls so that the gas is brought on to the market and used up with the greatest possible speed. Think of the damage that this will do to the existing fuel industries, coal, oil and electricity. Think of the waste of the existing gas-making plants based on oil and coal feed stocks. We have what seems to me to be a situation of no control at all.
I would like to end by saying what are the consequences of this rash, headlong scramble for cheap State capital which is being indulged in by all the nationalised industries.
The Post Office wants £2,000 million in the next few years, the Gas Council wants £2,400 million altogether, and electricity will have its share. We know the enormous sums of money which are being brought forward. As the hon. Member for Finchley said, this is beginning to have a serious effect on the national finances. For many years we have assumed that the money which we voted so happily for borrowing powers Bills for nationalised industries is in fact borrowed by the Government on the market, but it is not. I have figures here which show that over the last eight years the Government by all their borrowing efforts on the market have only raised £870 million net, whereas they have lent £7,453 million. 584 They have applied taxation surpluses, which amount to £3,153 million. That leaves uncovered a total for the last eight years of £3,400 million. This is uncovered by borrowings at home, by taxation or by any conceivable means of financing. It has been either borrowed from abroad or printed.
The need now is not only to look at the Government's current expenditure on revenue account but to supervise their capital programmes as if they were every bit as important as prescription charges or any other item of revenue. It is totally irresponsible to have tremendous battles over £5 million here or £20 million there, and then allow sums of money like that proposed at present to go through unchallenged.
I believe that the Gas Council has based its plans on too rosy a prospectus and too fast a rate of development. The least that we in this House can do, which is all that we are asking in the Amendment, is to ensure that it comes back very much sooner asking us to give it another tranche of capital against a progress report. At that time, I hope that all the factors dealing with prices, the target, the rate of return and the rate at which gas reserves are being used up will be made known. Without that knowledge, it is impossible to make a proper assessment of the proposition. To my mind, it is certainly one about which the House should be very careful before giving its agreement.
§ 6.12 p.m.
§ Mr. Michael McGuire (Ince)
I want to echo the sentiments expressed by my hon. Friend the Member for Midlothian (Mr. Eadie), who said what a great pleasure it was to be debating some part of our fuel policy on the day shift. On this occasion, we are ready on the afternoon shift. It is a pleasant change from the last occasion on which we discussed the coal industry, which we did in the early hours of the morning in a debate initiated by an Opposition Member on the Consolidated Fund Bill dealing with all aspects of the White Paper. It is very pleasant to be doing this on the afternoon shift.
I need hardly remind hon. Members that Mr. Speaker's and Mr. Deputy Speaker's brains were just as alert on that occasion in the small hours of the morning as they are in the day, and they 585 were quick to bring hon. Members to order and remind them of the need for short speeches. Without any reminder, I intend to comply with their unuttered request today.
The hon. Member for Finchley (Mrs. Thatcher) usually makes the most charming speeches and, in addition, they are always very able and well documented. She does her homework, and her remarks are always worthy of attention. In her speech today, she referred to the lack of co-ordination of fuel policy. I think that the present policy could be summed up by saying that each section of the gas, electricity and coal industries is, most of the time, engaged in flogging it own briefs. That is what happens and the effect of the resulting lack of coordination is a demonstrable and shocking waste of public money.
The Opposition Amendment refers to the fact that we have not debated the White Paper in its entirety. However, hon. Members will recall that, on the Thursday preceding devaluation, it was announced that we should be debating the White Paper on one day during the following week and would take the money Bill which flowed from the consequences of the Government's fuel policy on the following day. In the end, what happened was that we condensed the debate into one day and had about 1½ hours on it. But it is not quite true that we have never debated the White Paper. What he have done is to debate it piecemeal when borrowing powers Bills and Orders have come before us.
Most hon. Members accept, as the Amendment says, that there is a great need all the time to scrutinise public expenditure carefully. I am sure that no one would disagree with that proposition.
I have said already that we have debated the White Paper piecemeal, and I have found it to be a most frustrating experience. Although one gets the pleasure of being able to point out the contradictions and inconsistencies in the White Paper, whenever we debate a borrowing powers Bill or Order, as a miner's Member of Parliament, I am usually reminded that the real sufferer from this lack of co-ordination amongst the elements of our fuel energy distributors and producers is the mining industry. I believe that that will be demonstrated more and more.
586 Like the hon. and gallant Member for South Fylde (Colonel Lancaster), I am a member of the Nationalised Industries Committee, and I agree with him when he says that members of the Committee should guard against making statements which indicate a closed mind on the impact of natural gas on the economy. If one commits oneself to a certain line of thought, one cannot be said to be objective.
Even observing that wise advice, it must be said that members of the Select Committee have had presented to them by the various nationalised bodies papers which to my mind have created considerable doubt about the optimistic forecasts which have been made for the absorption of natural gas into the economy. We are left with the impression that tremendous problems will be created and that the forecasts of the Gas Council have been outrageously optimistic.
My hon. Friend the Member for Midlothian said that the public has been "conned" about cheap natural gas. That is undoubtedly true. We all remember how the first forecasts of the price of natural gas produced headlines in the London evening newspapers predicting slashing reductions by the early 'seventies. We now know that that is not to be the case and that, instead, there have been massive increases.
As a miners' Member of Parliament, I am strengthened by those optimistic forecasts in my belief that what we need is a completely co-ordinated fuel policy which will have as its objective the best possible utilisation of natural resources, including natural gas, although some of the arguments advanced about it resulting in a saving in foreign currencies are found to be a little specious when they are examined A good deal of the capital invested in natural gas comes from abroad, unlike the investment in our coal industry in which the capital has been invested already and, if we had a wise policy, we could recoup.
This borrowing powers Bill demonstrates more than anything the futility of making outrageously optimistic forecasts and the need for a proper co-ordinated fuel policy which will allocate a proper place to every industry within these sectors. The Government should, for instance, have asked the mining industry 587 —which will be affected by the advent of natural gas—" How much coal can you supply at this indicated price?" It is suggested that the National Coal Board could not deliver the goods but I say that this would not be catastrophic because substitutes for coal are easily available for power stations. But when other industries do not fulfil their optimistic forecasts, their fuel cannot be replaced, in nuclear power stations, for instance, by cheap coal. The result of the present policy for fuel is catastrophic for the coal industry.
This Bill and most of the debates about fuel so far have indicated the need for a properly planned and co-ordinated fuel policy in place of the present system, in which every Department flogs its own brief and in which the real sufferer is the industry in which I have been proud to work. That industry will not suffer so badly if we have a proper fuel policy.
§ 6.21 p.m.
§ Sir Gerald Nabarro (Worcestershire, South)
The sums contained in this Bill are astronomical. The borrowing of the gas industry up to 31st March last was £1,063 million. Since then, of course, further sums have been committed. The statutory limit on the borrowing powers of the industry is at present £1,200 million. The Minister has explained that the Bill will carry the limit of borrowing powers to £1,600 million and, subject to Statutory Instrument thereafter by easy stages, cruising along—I suppose he meant to imitate the Chancellor of the Exchequer's "easy as she goes"—up to £2,400 million.
The right hon. Gentleman made his speech, listened to my hon. Friend the Member for Finchley (Mrs. Thatcher) and left the Chamber. He has heard no more of the debate. It will be interesting to see whether he returns to hear any part of my speech. I doubt whether he will. I castigate him publicly for his poor manners, coupled with the fact that he refused to give way to me in the middle of his speech when I wanted to ask him a perfectly reasonable and innocent question having regard to the astronomical sums of money entailed in the Bill.
I wanted to ask the right hon. Gentleman why he considers that it is appropriate, in contemporary circumstances, to 588 run for the next two years—that is, raising the limit of the borrowing powers from £1,200 million to £1,600 million— without resort to Parliamentary scrutiny. What I should require is scrutiny after one year. I wanted him to deal with that in his speech. Perhaps the Parliamentary Secretary may be authorised to deal with it when he replies to the debate. But, as £200 million is involved, it is slightly more than the brief of a Parliamentary Secretary. It might be considered the brief of the Minister responsible.
However, this again emphasises the contempt of senior Ministers for the genuine anxiety of my right hon. and hon. Friends and myself about the pace and size of the expenditure of public funds. My hon. Friend the Member for Finchley, in her characteristically charming fashion, talked, I thought a little casually, of the taxpayers' interests. Let us be perfectly certain about this. No part of the money under this Bill is being obtained from elsewhere than the taxpayers' pockets.
§ Sir G. Nabarro
No part of it is being obtained by resort to traditional channels of finance in this country. There might be some question of borrowing abroad, as my hon. Friend the Member for Ciren-cester and Tewkesbury (Mr. Ridley) prompts me—and I am grateful to him —but all the money which is borrowed in the United Kingdom will come from the taxpayers and the surpluses budgeted for by the Chancellor of the Exchequer once a year. It is below the line expenditure. Yet the Minister talks casually of not having to resort to Parliamentary scrutiny for two years, whereas I require one year.
Therefore, when the right hon. Gentleman included in his peroration a pained expression of surprise that the Opposition were moving a qualified and reasoned Amendment against the Bill, he could not have known of my forthcoming statement. I wish he were here to listen to it. It is that, in the next few days, I shall move to reduce the £1,600 million in the Bill to £1,400 million and, in Committee, a long debate will ensue. There is no question of catching Mr. Speaker's eye in Committee. I shall speak half a dozen times—and I shall refer to the coal industry as well.
589 The hon. Member for Ince (Mr. McGuire) referred to the midnight debate on the coal industry. I initiated it. It was not on the Consolidated Fund but on the Coal Industry Act, 1967, because the only opportunity we get these days, with the indigestion of Government business and having regard to the huge sums of money invested in the nationalised industries and the chronic strain on the country's financial resources, is when I move Amendments to borrowing powers Bills.
§ Mr. David Webster (Weston-super-Mare)
Does not my hon. Friend agree that, when he is doing what he proposes, he should be careful to ensure that he is not trimmed by the Guillotine?
§ Sir G. Nabarro
It might be, but I hope not. These things have happened before and will happen again. I think that, during the Committee stage of the Bill, my hon. Friends might consider joining me in demanding a one-year scrutiny of the borrowing powers for the gas industry.
My second point is simply this: I wrote to the leaders of my party a few days ago, saying that the Tory Party as a matter of principle, never votes against the borrowing powers of nationalised industries on Second Reading. It has always taken the view that the nationalised industries have to be financed and that it is therefore appropriate periodically to have a borrowing powers Bill, since these industries must not be denied funds. I told them that, if they did not table a reasoned and qualified Amendment, I would, even if I were a minority of one, divide the House at 10 o'clock tonight.
§ Sir G. Nabarro
I always have tellers. There are always financial purists who will come with me on Measures of this kind because, like me, they are appalled that, at a time when the Chancellor of the Exchequer argues that he cannot afford £500,000 to abate, for example, the Purchase Tax on greetings cards, or 590 £4 million to reduce the marginal top level of taxation on incomes from 18s. 3d. in the £ to 15s. in order to give financial incentives to the nation's best brains. Yet he comes to the House and casually demands, through, his instrument and tool, the Minister of Power, £400 million for North Sea gas, a major part of which is not yet justified.
I sneered at the Chancellor on 14th May. It was a calculated sneer, always appropriate when there is humbug and hypocrisy from the Treasury Bench. I said:Does the right hon. Gentleman consider that it would be unpatriotic to observe that many of us think that the balance of payments position is steadily deteriorating and not improving?"—[OFFICIAL REPORT, 14th May, 1968; Vol. 764, c. 1020.]The critical financial condition of our country is due, in the main, to gross over-expenditure on domestic financial needs. The nationalised industries have heavy responsibility to bear in this important regard. "Squandermania" is my single word for it. I will justify to the House why I am using these stern terms about the proposed increase in borrowing powers, from £1,200 million to £1,600 million.
About 80 per cent. of this money is required for capital equipment by the gas industry for the purpose of financing the intake of North Sea gas. It is said that 2,000 million cubic feet per diem is required by 1971 and that 4,000 million cubic feet per diem is required by 1975. The financial sinews to generate that rate of introduction of natural gas from subterranean North Sea sources into this country are those delineated in the Bill—so says the Gas Council. How much of this gas has been discovered so far? Neither the Minister nor my hon. Friend—no speaker in this debate—has yet said how much of this gas out of the 4,000 million cubic feet estimated to be brought in in 1975 has so far been discovered, contracted for and the price agreed.
§ Sir G. Nabarro
He has not. I can give the figure now, obtained from private sources. The only agreement as to price has been made in the Philips agreement at 2.87 pence per therm. That covers 325,000 cubic feet per diem.
§ Sir G. Nabarro
I am, Sir. I am gyrating—that is my trouble. I get stiff if I look straight in front of me all the time. The figure of 325,000 cubic feet per diem is the sole subject of price agreement to date. That is, 325,000 out of 4,000 million cubic feet per diem. If the hon. Member for Orpington (Mr. Lubbock) is as good at arithmetic as I think he is, and he puts 325,000 cubic feet per diem over 4,000 million cubic feet per diem, he will find that the first figure is about 8 per cent. of the second figure—roughly one-twelfth.
What has so far been negotiated is a contract price for one-twelfth of the total of the North Sea subterranean gas which we propose to bring in by 1975. We are now intending to legislate to lend the Gas Board all the money it requires to finance the position as it will exist in 1975, notwithstanding that a price contract has been made for only one-twelfth of the total. Will the price contract be made for the other eleven-twelfths? I doubt it. There were a large number of oil companies negotiating with the Gas Council as to the price for North Sea gas.
We all know the dismal course of these negotiations. For almost three years I have been asking Parliamentary Questions about it. Only one agreement has so far been made and that is in respect of only 8 per cent. of the need six years ahead. So low is the price that the other oil companies are now scared off. My hon. Friend the Member for Cirencester and Tewkesbury touched on this matter. He said, "Yes, the price is sufficient for existing operations, but what the oil companies have to have is a price that not only covers existing operations, but that also covers the very heavy cost of exploration for future development in order to cover the remaining eleven-twelfths of the requirement by 1975."
I am not prepared to vote money forward for a period of six years on that scale, in view of the huge demands made on capital in this country—notably upon public capital—when what we ought to do is to peer one year ahead only, vote £200 million of additional borrowing powers and review the position one year hence to ascertain then whether 592 additional contracts have been made with the other oil companies on a mutually acceptable basis. They may well not have been made 12 months from now. I shall therefore, in Committee, seek to reduce the figure in the Bill of £1,600 million to £1,400 million, which will seem to me a reasonable cumulative figure to last until mid-1969.
Before leaving the subject of the price of North Sea gas I would say that the figure of 2.87 pence per therm is un-realistically low and will scare off future exploitation. The oil companies are already threatening to decamp elsewhere, in Europe and North America, where they can obtain a better return on the huge sums of capital involved in operating their large drilling rigs. We should be unwise to cast away the first piece of mineral luck we have had in this country for many years.
I want to turn for a moment to the speech of the hon. Member for Ince. He talked about the impact on the coalmining industry. If this Bill goes through it will put a large additional number of coal miners out of work.
§ Mr. Freeson indicated dissent.
§ Sir G. Nabarro
I see the Parliamentary Secretary nodding his head in dissent. I will give him the figures. I never make statements of that kind without having all the figures in my armoury, available to support me.
In 1966–67 the gas industry used 16 million tons of coal. In 1967–68 the industry will be using 13 million tons of coal. By 1975, if the whole of the gas industry rests, as the White Paper says it will rest, on natural gas from the North Sea and elsewhere—because there are finds under the land, in Yorkshire—then no coal will be used, and therefore the whole of the 16 million tons used in 1966–67, the 13 million tons used in 1967–68 will not be required. How can that do anything other than to put coal miners out of work? They may find alternative employment but they will not be employed as coal miners.
§ Mr. McGuire
The hon. Gentleman is confusing the two things. This process of not using coal in the carbonisation plants would have gone on irrespective of the introduction of natural gas. That is why I said that the impact of natural 593 gas would only be felt by the Coal Board from 1971–72 onwards. The process of not using coal for carbonisation had already been accelerated and was gaining ground fast. Natural gas has nothing to do with the forecast contained in the White Paper.
§ Sir G. Nabarro
The hon. Gentleman is not basing his argument on facts. If one does not use natural gas for providing gas suppliers and does not use gas from coal carbonisation, that is, for manufacturing town gas, the only alternative is gas from oil and from methane.
There are only those three supplies, other than water gas which is relatively very small. But the fact is that gas from oil consumed 3.5 million tons of oil in 1966–67 and 4.7 million tons of oil in 1966–68, compared with 16 million tons of coal in the first of those years and 13 million tons in the second of those years; and were it not for natural gas the gas industry would undoubtedly have used slightly more oil. It would also have used, I suppose, slightly more methane. I remember when the hon. Gentleman and his hon. Friends opposed the introduction of methane by all the means at their disposal. But, very largely, the gas industry would carbonise coal had it not been for natural gas, and they would have used 8 million, 10 million or 12 million tons of coal and that market would have gone on for a long time. As it is, with natural gas supplying the entire field by 1975, there will be no further coal supplies required.
I believe, therefore, that the right hon. Gentleman the Member for Ince and all his colleagues who are said to represent the mining lobby here may as well make up their mind that coal supplied for the gas industry will be entirely out within six years from now.
§ Sir G. Nabarro
Largely because of this.
This is a financial Bill. I shall reserve my detailed arguments in connection with North Sea gas for the Committee stage. I am sorry the Minister has not returned at any stage during my speech. [An HON. MEMBER: "Wise man."]. The hon. Gentleman may consider it wise for his Ministerial colleagues to treat the 594 Opposition in this cavalier fashion but at least I am informed on fuel and power matters—at least as well informed as the hon. Gentleman and I expect to be listened to by somebody of rather greater importance than the Parliamentary Secretary. That is, of course, in deference to you, Mr. Speaker. But I shall canvass these arguments in greater depth and greater detail when we come to the Committee stage.
I want to add a further word about foreign borrowing. What a disgraceful state of affairs for one of the sacred cows of the Labour Party, the nationalised gas industry—for it was the right hon. Gentleman the Member for Easington (Mr. Shinwell) who nationalised coal, gas and electricity which were to be the great towers, the visual evidence of a Socialist Britain, the commanding heights of the economy, with British money, British capital resting on the accumulation of British savings which were to promote dynamic industries in the 20th and 21st centuries; and here is the Labour Party bringing to the House of Commons a Bill to cause one of their nationalised fuel industries to borrow money from the gnomes of Zurich whom they despise.
What are they using as a precedent? They say, "But the nationalised Air Corporations have authority to borrow money abroad". I would remind you, Sir, that the national Air Corporations are in international competition with scores of foreign airlines. They earn large sums in foreign exchange. But here is an indigenous British industry not selling £1-worth of its products abroad unless it exports occasionally a couple of bottles of aspirin, a little naphtha, some tar or some other by-product of a gas works. It makes no contribution to the export trade whatever. It has this huge call on capital and it now proposes to borrow it abroad. That represents a direct drain on our balance of payments as to capital and as to repayment, a direct drain; and it puts the gas industry in mortgage to the gnomes of Zurich, because the foreigner will require guarantees. He is not going to put money into the Gas Council. Do not believe it! He does not like the Gas Council very much, if he has ever heard of it at all. It is nothing to laugh at. The foreigner does not like the Gas Council but in any event the Gas Council could not borrow this money without a Bank of England 595 guarantee, without a Treasury guarantee for the loans.
I regard this as a wholly misguided exercise. What the Treasury ought to be doing is stimulating personal savings in this country, which as you know well, Mr. Speaker, are the proper base for capital accumulation and public finance —not going overseas for money and mortgaging British industry to the foreigner. There are three Clauses in this Bill dealing with this. In terms of verbiage it is most of the Bill. These are Clauses 2, 3 and 4. Within a few days there will be on the Order Paper of the House my Motion to delete all three Clauses. I shall seek to reduce the money under Clause 1 and to remove Clauses 2, 3 and 4. I might let Clauses 5, 6, 7 and 8 through, those being relatively inoccuous; and my party will come with me, I feel confident.
§ Sir G. Nabarro
Did somebody say "A nice change"? We have heard a word from a Whip. No, not a nice change. I lead my party for if I had set down a reasoned Amendment to deal with it it would have gone down in my name and my party would have voted with me.
§ Sir G. Nabarro
Certainly, I would have had the support of my hon. Friend the Member for Cathcart (Mr. Edward M. Taylor).
§ Sir G. Nabarro
It may be the tail wagging the dog, but what a tail! Look at it! I am always delighted that my party comes with me and eventually recognises the wisdom of my ways. I support the reasoned Amendment. I shall walk briskly through the Lobby tonight glad of heart that I am doing the right thing and that I am rejecting utterly the spurious and slightly ridiculous appeal of the Minister who in the peroration of his speech thought it appropriate to try to appeal to me not to vote on the reasoned Amendment to his Bill.
§ 6.50 p.m.
§ Mr. J. T. Price (Westhoughton)
The House is well aware that the hon. Member for Worcestershire, South (Sir G. Nabarro) enjoys the use of flamboyant and extravagant language. The House makes due allowance for his exaggerated statements. We are often entertained by him, but we are rarely enlightened by what he says. In the few minutes during which I wish to detain the House, I want to put forward a few ideas of my own in perhaps more temperate language. If ever the House were televised, which I should deplore, I should have no wish to compete with the hon. Member for Worcestershire, South as a substitute for "Coronation Street".
This is an important debate and I do not approach it in any frivolous fashion. Any debate which deals with the granting of borrowing powers of £1,200 million is important. I listened with great interest and close attention to the speeches of my right hon. Friend the Minister and the hon. Lady the Member for Finchley (Mrs. Thatcher). My right hon. Friend delivered his Departmental brief with his usual Pickwickian charm The hon. Lady responded in similar terms, but the use of the word "Pickwickian" would be a misnomer in her case. I should have to use another synonym of one of Dickens's characters, but I hesitate to do so. [HON. MEMBERS: "Why?"] I do not wish to be critical. I want to approach the debate in a non-polemical way. However, the hon. Lady made some telling criticisms which we must answer.
I am not sure that on these occasions, when we are dealing with a comparatively narrow Bill consisting of five pages which involves the issue of Parliamentary authority for vast borrowing of public money, we can resist the temptation to widen the scope of the debate to a general debate on fuel policy. This may be a good thing. It would be out of order at any other stage of the Bill.
The hon. Lady drew attention to a number of things which have been engaging our attention in the Select Committee on Nationalised Industries, of which I am a member. Since we are dealing with the Bill in the absence of the report which will ultimately emerge from our deliberations, I am not sure 597 that we are doing so in the right context. I should have preferred, if it had been consistent with Parliamentary arrangements, that the Bill could have followed the issue of the valuable report which we hope to submit to the House in the next few months. Nevertheless, I make no complaint.
I notice that my right hon. Friend the Minister has returned to the Chamber, and that his presence is being noted with great approval by the hon. Member for Worcestershire, South just leaving us. I was certain that when I made that remark he would leave the Chamber. Now he is returning. He is quite able to "deliver the goods" and to take what comes from this side of the House because he is a good Parliamentarian. I hope that I am in order, Mr. Speaker, and that you are not getting apprehensive about anything I am saying.
I want to return to the main issue which concerns some of us in the light of the Bill and the arguments advanced by the Minister in supporting it. First, I wish to reply to what was said so eloquently and charmingly by the hon. Lady the Member for Finchley. We are not dealing with a vote of supply for £1,200 million. We are merely dealing with borrowing powers which extend the existing borrowing powers of the Gas Council by £400 million in the first place and a further £800 million at a subsequent date, subject always to the Minister's approval. Therefore, it is not correct for the hon. Member for Worcestershire, South to say that there is no Parliamentary control. There certainly is, because when this money is deployed and granted in various instalments for the development of North Sea gas and the purposes of the Gas Council it is done under strict Parliamentary control as it must be submitted in a vote of Supply.
§ Mr. Ray Mawby (Totnes) indicated dissent.
§ Sir G. Nabarro
I must be very careful in asking for consent to an intervention. It is perfectly true that the money is covered by a vote of Supply at the time of the Budget annually, but there is no opportunity to debate it, as we know to our cost year after year, and the arrogance of Ministers in refusing us these opportunities is a cause for real concern.
§ Mr. Price
That may be the hon. Gentleman's view. I should be out of order if I allowed myself to be deflected into a debate on Parliamentary procedure. But since the hon. Gentleman may think, in the absence of a reply, that I am unable to answer his question, let me remind him that when votes of Supply are under discussion they are discussed, as a rule, on Opposition days and that the votes chosen are a matter of consultation between the Front Benches through the usual channels. It is open to the hon. Gentleman and his colleagues to have any vote discussed on a Supply day, which is an Opposition day. That disposes of that.
§ Mr. Peter Emery (Honiton) rose—
§ Mr. Price
Just a moment. I shall be on my feet longer than I wish if I am subjected to too many interruptions. I do not wish to be discourteous to anybody.
I listened to the Minister's good natured speech and the brief prepared so meticulously in his Department. But, as I listened to him, I got the impression that if the backroom boys of the gas industry or the boffins or the people who decide the policy and programme of the gas industry are as successful in selling their product in future years as they were in selling hook, line and sinker their ideas to him, they will be very successful indeed. I say that with a sense of responsibility. It is not always desirable that the Minister should swallow the departmental interests of any industry or nationalised industry, however important it is, because obviously they are dealing with their own function in society. They are not concerned with the repercussions of their activities on the other nationalised industries or sectors of other industrial operations, including private industry.
599 My hon. Friend the Member for Ince (Mr. McGuire) used the phrase "flogging their own brief". Those of us with any experience of the House are familiar with low pressure groups can flog their own brief. They do it very successfully, and unless Ministers are extremely sceptical and alert about the weight of evidence submitted to them in support of ideas, they can be, and often are, "taken for a ride".
I am not a miners' representative in this House, although I represent part of the County Palatine of Lancashire where there is a great mining tradition. I am not making a constituency speech. However, some of my hon. Friends, who have a more direct interest in the coal-mining industry, have for years pleaded for a proper Government policy dealing with the nationalised industries and our fuel policy. We have never got it. We are complaining today that this is a further piece of evidence that we are not likely to get it. Whatever this country's political leadership might be when we get down to considering how our natural resources shall be applied and our reliance on other countries to supply raw materials, the better pleased I shall be. I see no evidence of this happening, because we have the bill submitted by the Gas Council being met.
I have listened to all kinds of expert opinion on these matters in other connections, as have other right hon. and hon. Members. When we look at the evidence on which these massive projections about the likely demand for a particular product are made—gas, in this instance—and the capital needed to finance its distribution, there is little to fortify us in any firm conviction that the demand is reasonable.
The hon. Member for Finchley addressed us at considerable length. She spoke of the uncertainty which existed about the known reserves of gas and how long they will last. The best estimate I have heard from any reliable sources on present geological discoveries is that it cannot be said with certainty that they will last for more than 15 years. The engineers hope that further exploration will reveal further treasures. This is the atmosphere in which geologists, particularly oil men and gas men, always work.
600 If one goes to an oil rig in the Middle East, as I have, one will find an oil rig man from Texas on his rig at 6 o'clock in the morning, before the sun gets high. He will probably say, "If you come down to my rig in two hours I shall have something interesting to show you." He has probably been drilling down to 4,000, 5,000 or 6,000 ft., or even greater depths, for the past three months and brought up only muck and slurry. However, he is always hoping that the next hour or the next week he will strike oil. No one can say with certainty.
It appals me to hear people being polemical: condemning something because it is nationalised, but praising it if it is private enterprise. This kind of talk does not mean anything to me. If there has to be large-scale enterprise it must be a mixture of both public and private activity. Drilling for gas in the North Sea is carried out mainly by private enterprise oil companies which have the know-how and expertise to tackle the job. They do not know whether their investment will pay off. They invest hundreds of millions of pounds—maybe thousands of millions of pounds—in the hope that they will strike gas or oil and make a rich return to their shareholders. The hon. Member for Finchley did not say that such companies were misguided, in putting private capital at risk in trying to find oil in the North Sea. They are following the traditional pattern of enterprising people. My right hon. Friend, therefore, should not be criticised too strongly. I am criticising him, but, I hope, carefully and fairly. He should not be criticised from a party polemical point of view for giving consent to public money being placed at the disposal of the Gas Council for the purpose of developing the gas industry of this country. It is not a fair, logical or valid argument. I will not labour that point any longer.
How are we to deal with this great bonanza, as it has been called, in the North Sea? When these discoveries were made a couple of years or more ago, they were big news. They filled all the headlines of the newspapers and gave great optimistic feeling to many people who were rather doleful about our position as a nation because of our lack of natural resources, apart from coal, which was in great trouble. Everybody got the impression that here was something on our doorstep that only needed engineering 601 skill to hiring it into our homes and factories and we should have much cheaper energy than we ever had before. Some of my hon. Friends have already addressed the House and pointed out that this bonanza is largely an illusion, because, unless it is related to a real economic advantage to the consumer, we are merely replacing the activity of winning coal from the soil, of which we have 200 years' known supplies under our feet, by another.
This country, with its 52 million people, has not inexhaustible demands on energy. I am familiar with the papers put before us by economic wizards. I discount a lot of them, because most of the economic opinion given to the House during my 18 years has been a lot of nonsense and has been proved wrong. I say this seriously. When the Tories were in power they were led up the garden path with all kinds of false witness, false information and false prophecy. We are in the same boat. I ask my right hon. Friend and other members of the Government to be more sceptical in swallowing, hook, line and sinker, the sort of stuff that is poured out from Ministries and their uninspired experts. We must have professional opinion, but so often it: has been proved wrong.
This very considerable and exciting find of gas in the North Sea could have been, and may still be, of great advantage to this country if it continues to flow at the prophesied rate. But if it merely means that it is to substitute the already highly developed elecricity industry and that it will close a great many more mines, in the long run, when the total sums are made up in the national accounts, there may not be any net advantage.
I am not saying anything out of school, because I have taken part in discussions on these matters upstairs and elsewhere. The opinion of the National Coal Board, which has had its own advisers and professional experts at work on the problem, is that the present discoveries of gas, once they are piped through to the point of consumption, will represent the closing of another 28 coal mines These may be extemporary guesses or rough estimates, but they are an attempt to show that this great discovery in the North Sea is not an unmixed blessing to the coal industry which 602 had already suffered grievous contraction with the closing down of many of our mining communities. The National Coal Board has already taken steps to anticipate this situation. It has taken a large block of financial responsibility for the oil drills in the North Sea. It is part of a consortium working on the exploitation of North Sea gas. They say that this may be a countervailing factor so far as the accountability of the Government for the coal industry is concerned.
Another thing which rather astonished me when I became aware of it quite recently—and the hon. Lady made passing reference to this in her speech, I think—is that North Sea gas has meant that the Government have had to lay down lines of policy as to how it shall be distributed in the country and through what channels. It was decided some time ago that there should be only one purchaser of North Sea gas, the Gas Council, and that it should distribute it through its area boards, through the machinery already in existence. The Gas Council has been at work, because it has come to the conclusion, probably fairly on the evidence available, that North Sea gas is going to take the place completely of towns gas so far as domestic consumption is concerned. This means that all the apparatus, all the gas works, many of them modern because they have recently had very large capital sums put into them to bring them up to date, are going to be obsolescent within the next few years, because they would be quite useless for the exploitation of North Sea gas.
The Gas Council estimates that the capital value of the assets in the gas industry which are going to be written off within a period, I am told, of 10 years, is something of the order of £300 million. In other words, the gas consumer, the domestic consumer, has got to pay over a period of 10 years at the rate of £30 million a year for the one item of writing-off the existing assets of the gas industry. This is a very serious matter and that is why my hon. Friend the Member for Ince and my hon. Friend the Member for Midlothian (Mr. Eadie) said so critically that this idea that had been peddled to the public that they are going to get cheap gas is a lot of nonsense because the consumer is going to be called upon to pay for the writing-off of the existing 603 assets and because there will be so many other repercussions.
This does not mean that I am so stupid, so reactionary or so blind to the development of these things that I think we should not develop North Sea gas. It is one of the facts of history that these discoveries have been made and we must deal with them to the best advantage of the country.
§ Mr. Lubbock
The hon. Gentleman will recall that Sir Henry Jones said in answer to a question in the Select Committee on 10th April that this £300 million which is to be writen off is largely attributable to the oil reforming plants, which make gas from oil. Therefore, I do not see that this is going to be any skin off the nose of the hon. Gentleman the Member for Ince (Mr. McGuire).
§ Mr. Price
I should have liked to say something more about that, but I may have an opportunity of saying it in greater detail on a future occasion.
I want to deal with the capitalisation involved in the future development of the gas industry. This has been considered in isolation from its repercussions on the electricity industry. If the Gas Council and its advisers are successful in their endeavours during the next few years, as they prophesy, this can only mean a reduced demand for electricity and oil, and in the long run the consumer will have to pay for this because they come in the budget below the line.
I should like some reassurance on this point when my right hon. Friend, or whoever is going to reply to the debate, does so. There are many lay people in this country, as my right hon. Friend knows, who are very critical about the increased charges for gas and electricity and all the other power charges which fall on domestic consumers. They want to know as regards the gas industry—and I isolate it from the other industries because we are dealing with a gas Bill tonight—how much capital the industry is supposed to generate from current revenue. A good deal of the increase in gas charges arises from the fact that the previous Administration in the period when they were in office—and I do not want to debate the merits of what they did—required the electricity and gas industries to generate 604 a considerable part of their capital requirements from the current revenue. I believe that at the present time the gas industry is required to use about 12 per cent. of its current revenue for capital requirements. This is a very high proportion and is reflected in the domestic price of gas. It is even higher in the electricity industry, and it is rising all the time.
I want to be told, as a matter of Government policy, if not tonight then on some future occasion, where the country is going with this process. If an industry has to charge the domestic consumer an ever-increasing share of the cost of its product—whether it be gas, electricity or anything else—to finance the future capital requirements of that industry, to pay for assets which may be in existence 40 or 50 years hence in many cases, this is unfair to the domestic consumer. It is quite unsound, and I am glad that I have the nodded assent of an hon. Gentleman opposite who understands these matters.
§ Mr. Ridley
What does the hon. Gentleman think would be a fair proportion of new capital for an industry to find from itself? At present, the gas industry is finding 30 per cent. from these new resources. Would he think like the Parliamentary Secretary, that it ought to be 40 per cent., or even 50 per cent.?
§ Mr. Price
I would not like to guess: there is far too much guesswork in this place. It is like a man who is giving evidence after witnessing a road accident in which somebody has been killed or injured, and is asked by learned counsel what speed he thinks the vehicle was doing. He says, "I do not know, about 60 miles an hour". He has no idea, of course, and I have no idea what would be required, but it ought not to be an inordinately high part of the revenue. When the hon. Gentleman talks about 30 per cent. he is taking a composite figure. At the present moment they take roughly 12 per cent. out of current revenue and the rest is their own borrowing. The hon. Gentleman the Member for Worcestershire, South is wrong in saying that the gas industry does not borrow except from the Government, and he had better look up his authorities. The industry can borrow, just as the private gas companies such as the North Thames Gas Board could—much of which money 605 is still being paid back and serviced. However, I will not go into that tonight.
§ Sir G. Nabarro
Would the hon. Gentleman like to know what the exact figures are? British gas stock £286 million, Government finance £763 million, temporary borrowings £14 million, making £1,063 million up to 31st March last, all of which I quoted in the course of my speech.
§ Mr. Price
I will consider those figures when I read them in HANSARD tomorrow.
I want to wind up this speech, which has been much longer than I thought it would be, with another serious plea to my right hon. Friend the Minister. He is not the first Minister to whom I have made it, either. I made a similar plea some time ago to one of his predecessors about the financing of nationalised industries. I think that the present system is all wrong. I have always supported nationalised industries in principle, for my own reasons, because with certain reservations I believe in nationalisation: so long as it is efficient, I believe in it. I am not a crude nationaliser but I believe in large-scale nationalisation and not in a polemical sense. It is right for the State to control the basic industries. If we had not done so, there would be no coal industry today, since it was bankrupt when we took it over—
§ Mr. Speaker
Order. With all respect, we cannot debate nationalisation on the Second Reading of this Bill.
§ Mr. Price
Perhaps I have been led astray, Mr. Speaker, by the hon. Member for Worcestershire, South, who is always doing that kind of thing. I was going to talk about the railways, but that would probably be out of order as well, so I will get back on the rails.
We are almost the only country which finances its nationalised industries in this way. Some of the polemical speeches of hon. Members opposite suggest that we are the only country with nationalised industries. Bless my soul, Italy, for example, had them long before us. They were the first, and Germany and France 606 —all these are advanced countries—also have large sectors of their economies within public control. They have ceased to debate nationalisation in Italy. The Italian Parliament does not have this sort of debate—
§ Mr. Speaker
Order. The hon. Gentleman must listen to what I say. We cannot debate nationalisation; we are talking about its financing under the Bill.
§ Mr. Price
As I have said to previous Ministers, it is about time that my right hon. Friend considered the processes of our international competitors. For instance, in Italy, there are great financial, trading and commercial institutions. One is the I.R.I., the Istituto per la Ricostru-zione Industriale. The other is the E.M.I., which deals with the power industries, in particular fuel and oil, since they have no coal. These organisations, under the aegis of the Italian Government, are largely financed from the market. They control large sectors of the Italian economy so successfully that Italy has been described by leading economists as the miracle of Europe, having pulled itself up off its knees from complete bankruptcy at the end of the war to become a leading operator in world affairs and export markets.
I might incur the further displeasure of the Chair if I said any more on this aspect, but I should be much happier if the Government could find the flexibility to break away from the crude idea of requiring these vast sums of public money from below the line in the Budget. There is much to be said for raising this money from the market under proper safeguards. There is no difficulty in Italy for the nationalised industries. If hon. Gentlemen opposite who do not share my political views—they are just polemicists and ideologists—[An HON. MEMBER: "YOU are."] I am not ideological about this. I try to decide on observation and evidence—[Interruption.] I cannot read that paper and I cannot see too far tonight. If I have too many interruptions, I shall speak for a 607 long time, so long as I am in order, but I want to conclude.
The Italians have no difficulty raising money on the market. These State organisations, the E.N.I. and the I.R.I., have weekly meetings with the Minister of Economic Affairs, who tells them the priorities for capital. They might ask, just as our Gas Council is asking for £1,200 million in this Bill, for perhaps £500 million. After a little haggling, the Minister may dig his heels in at £300 million, and say that the Government will guarantee 10 per cent. and that they should go to Lombardy's, to the market, to raise the £270 million from private sources.
Every time I.R.I. bonds are issued on the market, they are over-subscribed in hours. Private funds are poured like water into their nationalised industries. I want to see us, not do exactly the same, but at least approach the matter with an open mind and not continue by this rigid method—
§ Mr. Webster
Is the hon. Gentleman saying this in connection with Clause 2, about borrowing money from abroad, thus giving these foreign undertakings an investment in the British Gas Council?
§ Mr. Price
Not at all. I am not referring to Clause 2, but am saying that this is a matter of policy which should be discussed at the highest level by the British Government.
I agree with the hon. Lady the Member for Finchley in something she said about financing the nationalised industries. The end result of this process, which I have supported for a long time —I am getting critical, because it must now be considered—is that most of the money required is borrowed abroad and much of our deficit on overseas account, which is the Government's constant worry, is in that borrowing. Everyone knows it, but does nothing about it. The major item of our overseas deficit is the result of the requirements of nationalised industries.
This is a debatable question, which I will not pursue. I have spoken longer than I intended, but I shall naturally vote for the Bill, with some reservations, because it is not a vote for supply but 608 merely gives facilities for the money to be available from Government sources, subject to the approval of the Government. I hope that serious notice will be taken of some of my critical, but moderate, points, because the future welfare of this country depends not only on our success in overseas markets and the export trade but also, ultimately, on our making the fullest and most efficient use of our home resources and stopping the waste of money wherever it can be discovered.
§ 7.28 p.m.
§ Mr. Eric Lubbock (Orpington)
I am relieved that we do not have to debate the borrowing powers of the I.R.I. and the E.N.I. on top of all our other business this week, because, on top of an afternoon shift on this Bill and an evening shift on the Town and Country Planning Bill, we would need a third shift. However, if the bonds raised by I.R.I. on the open market are fixed interest, there would be no advantage in debating such a system for financing our nationalised industries, because the people of this country have gathered—rightly, I think—a suspicion of fixed-interest securities in general, whether issued by the Gas Council, the Treasury or anyone else, because they know that, whatever Government are in power, the rate of inflation will continue as in the past and the value of their money will be whittled away. I do not think his suggestion would really be very helpful in financing this enormous borrowing need for the Gas Council.
The hon. Gentleman also said how much he agreed with the hon. Member for Ince (Mr. McGuire), who had drawn attention to the pressure groups which flogged their own briefs, particularly those whose interests were with the various nationalised industries and the oil industry, and whose interests were conflicting and to some extent irreconcilable. I thought the hon. Gentleman would like to know that I have Calor gas in my own home and therefore cannot have any personal interest in the borrowing powers of the Gas Council.
§ Mr. McGuire
I just want to make clear that in talking about flogging their own briefs I just meant nationalised departments, not hon. Members, flogging their own briefs.
§ Mr. Lubbock
Yes, I realise that that was what the hon. Member meant when he used that phrase, which was taken up by his hon. Friend the Member for Westhoughton, that the Gas Council, the Coal Board, the Central Electricity Generating Board and so on all have different interests and want their points of view expressed. I think that when the hon. Member made his point it was in connection with the need for a much more co-ordinated energy policy than we have had in the past and the unsatisfactory nature of the debates which we have had since the White Paper was produced, for that while it has been possible to discuss energy matters from time to time we have not been able to draw all the strands together. Again tomorrow, as the hon. Member for Bristol, Central (Mr. Palmer) said, we shall be discussing another facet of the problem, the Report of the Select Committee on Science and Technology on the nuclear power programme.
§ Mr. Palmer
The hon. Member would agree that unless individual points of view are expressed we cannot easily coordinate them, can we?
§ Mr. Lubbock
We have to have these individual points of view expressed, but what was worrying the hon. Member for Ince was that we do not consider them in a single debate, in a general debate on fuel and energy policy. We have debates on Reports of Select Committees and on Bills for borrowing powers, which we get at fairly frequent intervals, and also on Orders, but we do not have debates in which all those various strands are brought together so that the House can see what kind of energy policy the Government are pursuing, or whether they have an energy policy at all, and I very much agree with what the hon. Member said about that.
The hon. Member for Westhoughton said that there was no net advantage if all we are doing is to substitute natural gas for other fuel, and he mentioned that he had been told that 28 coal mines would be closed if natural gas were introduced at the rate planned in the White Paper. Well, of course, he made the same mistake, if I may say so, as the hon. Member for Worcestershire, South (Sir G. Nabarro). The introduction of natural gas is not going to make the 610 slightest difference to the amount of coal produced in this country, for if it had not been for the fortunate discoveries in the North Sea, by 1975 the whole gas industry would have changed over to oil. This was happening at a fantastic rate before the discoveries in 1966.
§ Colonel Lancaster
I think that that is against the weight of evidence. [HON. MEMBERS: "No."] As has been suggested, already 24 million tons of coal were likely to be replaced by 1975. That had nothing to do with gas being replaced by oil.
§ Mr. Lubbock
What we are talking about now are the 16 million tons which the hon. Member for Worcestershire, South mentioned as the consumption of the gas industry in 1966–67. I was pointing out that, over the period before natural gas had had any effect at all, the consumption of oil was increasing to such an extent that by 1967–68 the number of therms produced from oil gasification plants would be greatly in excess at 1,617 million therms of the amount produced from coal, which was 976 million therms. So that already, before natural gas has had any effect whatever, this process has been happening and would have continued till the middle 1970s; the whole of the gas used in this country would have been derived from oil if no other changes had taken place. I honestly think that the hon. and gallant Gentleman has not got this one straight, nor the hon. Gentleman the Member for Westhoughton.
It is important that miners should not think that their employment is being jeopardised by the introduction of natural gas and that they therefore should be persuaded to oppose it. If it is for the benefit of the country—and that is what we are here to discuss—we should not unnecessarily alarm people into thinking that some moves taken by the Government and which are for the general benefit of the community would have an adverse effect on them in particular.
§ Mr. J. T. Price
The hon. Gentleman will at least pay me the compliment of agreeing that I have never, either in this House or elsewhere, opposed the introduction of natural gas, will he not? I have regarded the discoveries as a good 611 thing in themselves, if they are properly exploited. It would be quite wrong to create any impression that I am an opponent of natural gas. I am nothing of the kind. I want proper use of all our resources, properly planned by the people responsible.
§ Mr. Lubbock
I accept that, but I thought that the effect of the hon. Gentleman's remarks could be that some miners would think that their employment would be jeopardised and that, therefore, they would be brought to oppose Government policy on this issue. That would be harmful to the interests of the community as a whole without in any way benefiting those miners' employment.
I come for a moment to the speech by the hon. Member for Worcestershire, South. He interested me very much in what he had to say about the genesis of the reasoned Amendment, and how it was at his instigation that the Tory Party put it down. I am glad to see that he is assuming the mantle of the leadership of the Tory Party. I always thought he had it in him. I am glad that now my impression has been confirmed. I agree with him that it was a great shame that on the other side of the House there was nobody of more importance than the Parliamentary Secretary listening to his speech. What was worse was that there were only six of his hon. Friends here. I think that showed shocking disrespect to the hon. Member.
§ Mr. Lubbock
Yes there were. I was listening to the hon. Gentleman, and with my usual care, as I always do in these debates, for I always enjoy his speeches greatly. Although I think some of what he said was nonsensical he is always enjoyable to listen to.
To disagree with him on one issue, he said that the gas industry could not contribute to exports. Of course, in the direct sense that is true. It is not selling gas to the Belgians or the French any more than we are selling electricity to the Germans, though we may sell some to the French. The point is that the industry is the basis for the production 612 by other industries of goods for export. The hon. Member may laugh, but it seems to me that if this country is to get out of the economic mess which it is in and has been in for some years past it has got to concentrate much more than it has done on promoting exports.
I have always been a strong supporter of the use of electricity for smelters if an economic case can be shown for that, and I would be an equally strong supporter of gas in the chemical industry. It is one of the sectors in which the rate of growth will be most rapid, from now, at the end of the 1960s, into the 1970s, and it can make a very substantial contribution to exports through the use of its products in the chemical industry, thereby leading directly to the earning of foreign currency for this country of ours. Moreover, I would expect natural gas to replace oil. As we see from the table of figures presented by Sir Henry Jones to the Select Committee on Nationalised Industries, it will progressively in the 1970s be important in promoting exports and also, what is equally important, in reducing imports. Perhaps if we concentrated more on that —which, in the long-term, would not be as difficult to secure as an increase in exports—we could put our balance of payments right quickly. This means that the industry could be extremely vital to the restoration of our balance of payments.
The argument advanced about the Bill, particularly by Conservative hon. Members, is that we should not let the gas industry have these enormous borrowing powers extending over a period of years but should consider the matter as a short-term problem and force the industry to return to Parliament more frequently so that we are able to review the progress it has made, discover whether the uncertainties to which the hon. Member for Finchley referred have been removed, whether the extent of the supply has reached the figures mentioned by Sir Henry Jones and his colleagues and whether the movement of prices which we were led to expect some years ago has, or is likely to, come about. I disagree with this argument, not because there should not be, in the words of the Opposition Amendment… the most rigorous Parliamentary scrutiny of all public expenditure …613 but because I question whether the Floor of the House is the right place to conduct such an inquiry. I have listened to the whole of this debate and while I have enjoyed the speeches, I cannot pretend that I have learned a great deal about the gas industry since half past three this afternoon. Our discussion has not added to the total sum of human knowledge.
§ Mr. Lubbock
My hon. Friend is too kind.
If we are to subject the public industries to the scrutiny which the hon. Member for Finchley wants, then let the Select Committee on Nationalised Industries do that upstairs under the able guidance of the hon. and gallant Member for South Fylde (Colonel Lancaster). Let the members of that Committee get on with the job because they have the time to do it while we, faced with a crowded Parliamentary timetable, are not able to go into the figures provided by the Gas Council and the rosy and other predictions that are put forward. We should allow our colleagues to go into the matter in depth and then present us with their report on which we can form a conclusion. This is better than having an endless success of general borrowing powers debates because they do not get us any further and few questions are answered. I would like the answers to some questions and, in asking a few, I hope that the hon. Member for Westhoughton will pass them on to his colleagues on the Select Committee and to Sir Henry Jones.
The hon. Member for Finchley spoke of uncertainties about supply. It is safe to predict, I suggest, that 4,000 m.c.f.d. will be available as a basis for the Government's and Gas Council's policy. We have an assured supply of 3,000 m.c.f.d., as Sir Henry Jones has shown, and it would be unusual geologically if, having made these discoveries and knowing what the rate of success of drilling has been since we began in the North Sea, we did not increase the supply figure to beyond the 4,000 m.c.f.d. target mentioned by Sir Henry Jones.
My view is the opposite to that expressed by the hon. Member for Finchley. I consider that we have vastly underesti- 614 mated the resources of the North Sea. We have explored only a tiny fraction of the area and, as we go north, we may find oil as well as gas—as predicted by some geologists—and that would have a profound effect on our economy. Having studied the literature on the subject, I have come to exactly the opposite conclusion to that reached by the hon. Member for Finchley. I believe that the sources of supply mentioned by the Gas Council are conservatively estimated and that the reserves which exist under the bed and not yet discovered may amount to double the figures so far announced.
§ Mr. David Lane (Cambridge)
Would the hon. Gentleman agree that whatever the geological prospects—nobody is disputing that side of the question—it is essential that the price negotiated is high enough to encourage the further exploration that is necessary? My hon. Friend the Member for Finchley (Mrs. Thatcher) made that point.
§ Mr. Lubbock
The hon. Gentleman has anticipated my next remarks. Two inconsistent points of view have been expressed in the debate. First, the hon. Member for Finchley said that we would not get the enormous price reductions we had been led to expect. Some hon. Members agreed with her and said that the whole thing was a fraud and a sham and that the 13 per cent. increase imposed this year, with the approval of the Prices and Incomes Board, had shown how unwarrantably optimistic everyone had been when the discoveries of natural gas were first made.
Secondly, the hon. Member for Cambridge (Mr. Lane) and the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) believe that the companies exploring for gas in the North Sea are not being paid properly for their efforts and that if the price were restricted to as little as 2.87d. per therm—the price which Phillips is being paid—they will be driven to the other side of the North Sea or the Middle East and this exploration will cease.
Hon. Members cannot have it both ways. Either the price will come down and we will be screwing the poor wretched oil companies until oil runs out of them—with the result that the British gas consumer will be receiving gas at 615 too generous a price—or the price reductions will not take place, so that perhaps we are being too generous to the prospecting companies. If the Gas Council has arrived at this agreement with Phillips, I suggest that one can take it that it was an arms length transaction and that if gas is coming ashore at that price it is bound to lead to some price reductions when it gets into the consumers' stoves and heaters.
Hon. Members may ask how one can say that when the nation has been faced with the recent tremendous gas price increase. I will explain why the Government made a serious mistake in this matter but first, to prove that my remarks have some basis, I commend to hon. Members a news item in The Times Business Supplement of 7th May about the introduction of natural gas into the South-East in the coming year. The article commented that in a Press announcement made by the South-Eastern Gas Board, Mr. Nigel Bruce had said that nearly 100,000 customers in the area would be able to take natural gas in the next year and that the conversion rate would build up to 300,000 customers by 1970. It went on to point out that since these people were changing over, there would be a reduction in price at the time of conversion. The hon. Member for Finchley is, therefore, wrong in saying that these reductions are a chimera. In fact, they will happen the instant that consumers' appliances are converted, and this is proved by the announcement of the South-Eastern Gas Board.
§ Mrs. Thatcher
If the hon. Gentleman had been listening to my speech as carefully as he said he was he would recollect my remark that it is of little use to tell the consumer that she will get a reduction of about a half-penny when she has just suffered an increase of 11 per cent.
§ Mr. Lubbock
I dispute that there is force in the hon. Lady's argument. I was about to query whether this large price increase, approved by the Prices and Incomes Board, was justified. I had some correspondence with the Parliamentary Secretary on this point and I am not satisfied with the justification for the increase as put forward by the Prices and Incomes Board.
First, however, I must make a general point about the Board's Report, since this 616 is of fundamental importance. The Board was asked to look at the tariffs for the gas industry in the light of the financial target fixed for one year. At the same time, it was asked to take into account the Government's policies for the nationalised industries, which include the Fuel Policy White Paper which required the gas industry to vastly expand its output in the next few years.
The N.B.P.I. said that it had to consider to what extent these two objectives were reconcilable. I do not think it possible to ask the Gas Council to achieve a 10.2 per cent. return on capital in 1968–69 and also to have regard to what the price of gas will be in the system once all the old coal-fired plant has been phased out of existence and the oil reforming plant has been scrapped and £300 million invested in it written off.
The industry would not be able to do these two things. By doing the arithmetic in those two ways the two prices would be different. First, there would be the price caused by 10.2 per cent. return on capital and then the quite different price of looking at the long term plans of the industry and finding what happens when the pipelines are in to take natural gas into consumers' homes. If the two figures are different, the N.B.P.I. could not adhere to the terms of reference given to it by the Government.
I turn to the table of costs on page 9 of the N.B.P.I. Report, which is the basis of the price increase which has been imposed. I shall make comments to show that there is serious doubt whether the figures can be trusted, not that the N.B.P.I. cooked the books, but that the assumptions made are so cautious that it appears that we could have got away with a much lower price increase even within the rather confusing terms of reference.
In 1968–69, for example, we have 0.6d. per therm on account of devaluation and the Middle East situation. I noticed in his annual report the chairman of B.P. said the other day that the effect of the closure of the Suez Canal resulting from the Middle East war would by 1972 be small, and by 1975 minimal. The chairman meant that the company is constructing 200,000 ton tankers which can go via the Cape and which would be too bulky to go through the Canal, even if navigation could be restored.
617 The cost per ton of bringing crude oil from the Middle East in those large vessels would be less per ton than bringing it through the Suez Canal. That is why Sir Maurice Bridgeman said that as these vessels came into service the closure of the Suez Canal could be taken in one's stride. The 0.6d. per therm on account of the Middle East crisis will not, therefore, be a lasting burden on the costs of the gas industry. It will disappear as its crude oil comes in in very large tankers. Once the industry has phased out the use of oil for reforming, it will not arise at all because then we shall not be using oil. Here is a short-term cost which the industry faces which ought not to be taken into account in the arithmetic.
Then there is the cost of converting domestic consumers' appliances, about which the hon. Lady was very amusing. I read the article from which she quoted. It is difficult for the consumer to see why he ought to throw apparatus away when he considers that it has many years of useful life left in it. I am amazed that the cost should be as enormous as has been quoted. The N.B.P.I. was apparently told that the average cost per consumer is £30. Sir Henry Jones told the Select Committee on Nationalised Industries that conversion of a very old gas cooker would cost up to £10, but if it were a modern cooker the cost would be only a few shillings. If £30 is the average cost per consumer it appears that everyone has either three very ancient gas using appliances, or about 30 modern appliances. I wonder if the figures are grossly exaggerated.
At this early stage when conversions have been practical only on an experimental basis at such places as Canvey Island and Burton-on-Trent, we cannot get at the final figure for costing all the conversions throughout the United Kingdom. I ask the Minister to look carefully at the figures and to see whether they are exaggerated because, if £400 million of the borrowing powers we are discussing is to meet the cost of conversions, perhaps the figure could be whittled down.
I have given these examples to show that I am not at all happy about the price increase imposed with the approval of the N.B.P.I. Just as it has been said that the borrowing powers of the gas 618 industry should be justified to the public and just as the hon. Member for Worcestershire, South suggested, that this could be done by coming back every year to the House, and as I agree that this should be done in the Select Committee on Nationalised Industries, so it is even more important where price increases are imposed by nationalised industries and the consumer has to carry a great burden at a time when his wages or salary is fixed that that should also be justified by the figures the Gas Council has in its possession.
I appeal to the Minister to think carefully before allowing price increases based on such flimsy evidence, which upset many people, particularly old-age pensioners who have to meet heavy charges further increased as a result of the N.B.P.I. Report. Does not the Minister think that they should be justified up to the hilt and further increases by the gas industry or any other nationalised industry justified, not only to the House but as publicly as possible, so that people will know that they are not being fleeced?
I do not think it sensible to move reasoned Amendments to borrowing powers Bills. I look upon this as a political device. I certainly will not support the hon. Member for Worcestershire, South in rushing through the Lobby in opposition to the Gas Council's requests.
§ Mr. Lubbock
I want to see gas prices reduced as rapidly as possible. If the Gas Council tells me that at this stage the borrowing powers have to be increased by this amount to do so and can promise that the rewards will be there in the end, I will go along with it.
§ 7.58 p.m.
§ Mr. Ronald Atkins (Preston, North)
I am sorry that I was not here at the beginning of this debate. I came in to listen when the hon. Member for Worcestershire, South (Sir G. Nabarro) was on his feet. Everyone knows that he is an extremely able and entertaining speaker. I never fail to be delighted by his speeches. He never fails to enthuse me when my enthusiasm for the Government 619 is lagging. May I not disappoint him too much by saying that if he fails to get his hon. Friends to follow him into the Lobby, he drives a greater number of my hon. Friends into the Government Lobby? He has objected that the sum which the Bill seeks to enable the Gas Council to borrow may be much greater than is needed because only one-twelfth of the supplies of natural gas have been contracted for at 2.78d. per therm.
§ Mr. Atkins
That is worse. This is the clue to the hon. Member's objection. Like many of his hon. Friends and people outside, he has a doctrinaire objection to the Government bargaining well to have the public money if it means that foreign companies or British companies do not get such high profits.
The hon. Gentleman referred to the balance of payments. I am not certain about the figure, but I read that even at this figure when all the natural gas resources are being exploited it will mean a payment of £60 million a year to foreign companies because they, rather than our own companies or our Government, are exploiting the natural gas. That is a considerable loss of revenue on the balance of payments. It would be even worse if the figure per therm were to be increased. The figure which has been arrived at is fair. The Government have consulted United States experts, where the amount paid per therm is even less. If the figure is satisfactory to Phillips, it should be satisfactory to us, because it is likely that that company knows what it is doing.
It is not the coal industry that will suffer from this, because in recent years gas has been increasingly produced from oil. The amount of coal that will be used in future will be negligible. Since this is a national resource, the more gas that is used the less oil we shall use. This is one of the worries of the oil companies. They are afraid that they will lose by getting less money for the natural gas which they are able to exploit and by selling less oil. I know that hon. Members opposite represent the British oil interests very strongly.
§ Mr. Atkins
That is true. One intervention might be taken to be representation of such an interest.
§ Sir G. Nabarro
That is a most impertinent suggestion to make after these copious references to my speech. I declare my interest at once—absolutely none; no interest as shareholder, direct or indirect, in any oil company operating in the United Kingdom or elsewhere. Perhaps the hon. Gentleman will now withdraw his scurrilous innuendo.
§ Mr. Atkins
I am sorry that the hon. Gentleman has misunderstood me. I said "at least one intervention in the. debate". I did not refer to the hon. Gentleman. I know well enough that the hon. Gentleman represents no vested interests.
§ Mr. Atkins
Some of the objections made from the other side are concerned not so much with excess borrowing by the Government as with price. To say, as the hon. Gentleman did—I think that I quoted him correctly in this instance— that eleven-twelfths of the supplies are not being exploited, and, by implication, that they may not be exploited is being very pessimistic. Very conservative estimates have been made so far of the supplies. It is likely that much larger quantities than are envisaged at present will be exploited.
Let us suppose that eleven-twelfths of the supplies will not be exploited. Are we right to assume that the Gas Council will not need to borrow any further capital? It is likely that, if the natural resources of the North Sea are not exploited, the Gas Council will require to borrow much more than is envisaged in the Bill for installing new plant to produce gas by conventional methods. This method of supplying gas is much cheaper than having to install plant to produce gas. It is not to be assumed that the Gas Council will not require the sum mentioned in the Bill if eleven-twelfths of the gas supplies are not exploited.
The gas industry is a supreme example of successful public enterprise. When the industry was nationalised after the war, some of us objected to its nationalisation, because we regarded the industry as a worthless asset. Most of us thought that 621 it was already quickly decaying and would not take long to die. The Gas Council, with remarkable enterprise, set about producing gas in new ways and stimulating the demand for gas. It succeeded remarkably well. It has turned a decaying industry into one of the most prosperous growth industries in Britain. This remarkable achievement should be acknowledged more frequently.
Some objections have been made by, among others, the hon. Member for Worcestershire, South, to the effect that the Government are spending too much. This kind of Government expenditure— investment in productive capacity—is surely best of all. Some of my hon. Friends and I have objected to Government expenditure on military equipment abroad. I agree that there has been too much of that type of expenditure in the past. We think that expenditure in the form of investment in nationalised industries is be:ter than gifts to private industry which will not always be used to the best advantage. Expenditure of the type covered by the Bill is the best of all.
Our chief problem for many years has been that there has been insufficient investment in industry. If the Government show the way, as they do in the Bill, by increasing such investment, they require and deserve the greatest possible commendation from us.
§ 8.8 p.m.
§ Mr. G. B. Drayson (Skipton)
The majority of speakers have dealt, in the main, with the vast sum of money involved in the Bill. Far too little time has been devoted to consumer problems. The Minister stressed three points. One was the effect that developments in the gas industry were likely to have on the coal industry. The second was the part that North Sea gas would play in the future of gas consumption. Then the right hon. Gentleman talked about the improvement of marketing.
In connection with North Sea gas, which is the main issue in this debate, the Minister said that £44 million would be devoted to North Sea developments. Will £44 million be necessary for additional services or matters arising out of the discoveries under the North Sea, such as pipelines or other installations; or does this refer to joint ventures which the Gas Council will exploit with com- 622 mercial companies? Does the £44 million refer almost exclusively to offshore drilling to discover further gas fields under the North Sea? A certain amount of apprehension has been expressed about the amount of development work going on in the North Sea. The price of 2.87d. per therm for North Sea gas is very much lower than many of the oil companies originally expected, and it is thought that some are removing their rigs to the coast of Europe, where they feel that their exploratory work and discoveries may be more generously rewarded.
At the beginning of the North Sea development some of us gained the impression that the oil companies had been told that if they found gas in the North Sea an acceptable price would be one that was competitive with what the Gas Council was then paying for Sahara gas, which I believe was about 5d. a therm. It was felt that an agreement had been reached with the National Coal Board that whatever the price of gas coming into the country the price to the consumer would be brought up to a figure equivalent to that at which gas could be produced from indigenous coal.
I believe that at that time the Gas Council faced very substantial profits, because there was a substantial difference between the price it paid for Sahara gas and the cost of producing gas from coal from our own pits. It embarked on a very costly advertising campaign, not only to stimulate the demand for gas but to show on its accounts that it was not making a substantial profit, which would result in the consumers asking for a reduction in prices.
I believe that the price of 2.87d. per therm which has been agreed with Phillips does not take fully into account the enormous amount of money that has been expended on the exploration work. It may discourage a number of companies from continuing their efforts in the North Sea, which must be ultimately to the detriment of the national economy.
I saw from my own gas bill from the North Thames Gas Board the other day that it was charging me 27d. per therm, and with the standing charge the total price per therm must be well over 28d. Therefore, the consumer in the London area—and no doubt this applies over the rest of the country—is being asked to 623 pay 10 times as much for his gas as the figure agreed with Phillips.
The Bill will obviously be passed, and the money will be available for the requirements of the Gas Council. What hope do the Government hold out to the consumer that there will ultimately be a decrease in the price he pays for his gas? That is what the public are really interested in. When the figure the Council is paying for North Sea gas is one-tenth the price charged to the consumer, there must be scope for a price reduction.
Is any time limit set to repayment of the amounts concerned in the Bill? Is it thought that from the profits of the industry these large sums will be liquidated over a period of time? Does the Minister expect that in two or three years' time, or perhaps in only a year, his Department will ask for additional borrowing powers?
The Bill would be acceptable to the public if they really felt that the cost of gas to the consumer would be reduced. But the disparity between the prices the Gas Boards are demanding from the consumers today and the price agreed with one company for its discoveries in the North Sea is so vast that there must be a scope for a price reduction. That is what we have been looking for.
When a settlement was assumed to be near in April, 1967, a headline appeared in one of our national evening newspapers saying:Gas price may be slashed by a third Central heating rates could come down 6d. a therm.Was there any truth in that headline at the time? Can the Minister hold out any hope of a reduction in the cost to the consumer when gas costing 2.87d. a therm is flowing through the mains?
I hope that the Minister's reference to strengthening the marketing organisation concerns only the marketing of the gas and not the sale of appliances, and that the money will not be used to subsidise the gas showrooms at the expense of private enterprise, which must compete. I see that the Bill also deals with electricity. Electrical traders up and down the country are having to compete with a subsidised State industry in retailing goods to the general public, and I hope that 624 the borrowing powers the Bill confers will not be used to the detriment of the private trader who is supplying goods in both the gas and electrical industries.
§ 8.18 p.m.
§ Mr. Ted Leadbitter (The Hartlepools)
I might have been happier if we had been discussing what might be called the National Fuel Board (Borrowing Powers) Bill, because that would have shown me that we had taken possibly the final step in the evolution of fuel policy towards integration, which would imply that in capital investment and capital expenditure programmes there would be proper observation of the fair and rightful share which the four sources of fuel might have in the national interest. I am afraid that that will not be for some time, because any Minister of any Government is bound to face a major dilemma, particularly in giving any of the nationalised industries borrowing powers.
Not long ago the possibility of talking about fuel was relatively easy. We were talking then of two fuels. Now we are talking about four fuels, and the most activated forms are nuclear and gas. While we have not reached a stage of talking in terms of financing a properly integrated fuel industry, nevertheless, we have to be cautious about the extent to which we give borrowing powers to each industry when they work in many respects quite separately.
I was impressed by the hon. Lady's comment about the need to take care. There is no quarrel about this on either side of the House. There is a great need for scrutiny, and to that extent the words in the Amendment appear to be reasonable. I agree with the hon. Member for Orpington (Mr. Lubbock) that this is perhaps not the place to do it, and that it is better, wiser and more efficient to discuss the detailed estimates and programme of such an industry in another place, preferably upstairs, where the books can be looked at. The use of the words in the Amendment arises from the need to have a rigorous Parliamentary scrutiny of all public expenditure, but, in the context of a debate in the House of Commons, that is political play.
The other reason why hon. Members opposite do not want to give a Second Reading to the Bill is that, according to their Amendment, they have not had 625 the opportunity of debating the White Paper on Fuel Policy. This is not a very good reason for refusing a major and expanding industry the borrowing powers that it needs. The important question before the House is, does the gas industry require these borrowing powers?
The existing borrowing powers arose from an Act of 1948, with a lower limit of £900 million rising to £1,200 million. The Bill seeks to give added borrowing powers to the Gas Council and to the area boards of £1,600 million at the lower limit. I presume the maximum of £2,400 million refers to a term of several years ending in 1972–73. The condition between the lower and upper limits is under Parliamentary control. Beyond the limit of £1,600 million the Minister will have to make an Order, which will have to come to the House. In that sense there is Parliamentary control. An objection to Second Reading on the grounds that are put before us in the Amendment does not appear to be valid.
We have heard a lot today about the enormous expenditure that the Gas Council and the area boards are to be allowed to embark upon. There have been expressions of deep concern, but of the 630 Members of Parliament, there are very few present today who are as concerned as the hon. Lady suggested.
§ Mr. Leadbitter
I have heard that excuse before. It is not legitimate to convey to the public deep concern when that deep concern is only truly felt by some of the Members of Parliament who are here.
§ Sir Harmar Nicholls
The hon. Gentleman must not denigrate hon. Members of the House in this way. As he knows perfectly well, the attendance has been decimated because of the silly way in which business is arranged. They are upstairs.
§ Mr. Leadbitter
I will not pursue the point any further. I have made the point that it is not fair to the public to express concern when the concern is not there. The Gas Council has submitted estimates to the Government based upon programmes which have been seen to be acceptable, and which reflect the ex- 626 panding nature of the industry arising from the exploitation of gas in the North Sea. That is a true picture of the situation. It is wrong to express alarm in terms of public expenditure which is not true and when Members of Parliament have shown that that is not the position.
The hon. Lady the Member for Finch-ley (Mrs. Thatcher) has told the House that the costs of conversion would amount to £400 million. The hon. Lady forgot to mention that if natural gas is not distributed to the 13 million existing consumers and the 80,000 existing industrialists, they must continue to use town gas. Town gas is conveyed to users through gas-making plant. If there is no conversion, gas-making plant and replacement of gas-making plant are needed at a cost in the order of £600 million. It was not quite fair to say that the £300 million or £400 million required for the cost of conversion was an expenditure which could be taken by itself. The hon. Lady should have gone on to say that the cost of keeping gas-making plant, newly commissioned plant and replacement plant, was much higher.
The choice for the Government and the Gas Council is quite simple. It is to take advantage of the great new discovery in the North Sea and, before production gets into full swing, provide for the means of distribution, so that in the next 10 years there is not a programme of capital investment in new gas-making plant, but a less costly project of conversion of heating systems for the domestic user and industry.
It follows, however, that the comments on this subject, unfortunately, were very much belated. Even now, the distribution services for natural gas are well on the way to development. The pipeline from Easington to the north and that from the south-east terminal to the central north-south line are pretty well on the way. Some 1,300 miles of piped distribution services for natural gas represent the programme on which the Gas Council has already set its course.
The capital programme arising out of the discovery of natural gas cannot be stopped, and the question for the Gas Council and the area boards to answer is, what is the best rate of development which is in the true interests of the industry and of the other industries which supply fuel?
627 Having asked that question, I hope that I can ask the Minister if this rate of development has been attended to properly. If we go too fast, we may create an imbalance in our fuel servicing. If we go too slow we may create a great deal of uncertainty among the companies which are exploring. It is a vitally important question and its examination requires the most careful study, because it is a matter which is extremely sensitive and finely balanced.
At the moment, something like 3,000 m.c.f.d. is being produced from the gas fields in the North Sea and, as the hon. Member for Orpington said, in the near future that may increase to 4,000 m.c.f.d. In terms of evaluation, the significance of this can be determined very briefly by pointing out that we import 100 m.c.f.d. from Algeria and, therefore, the fields in the North Sea are by no means small. There are millions of pounds worth of capital invested and it is incumbent upon the Government and the Gas Council to look ahead and plan distribution services, conversions and the capital programme in such a way that consumers and suppliers are not affected adversely at any point. It requires a careful and continuing watching brief day by day.
In the last analysis, in an area where the tendency is to talk in terms of economics and technical jargon, it should be borne in mind that we are discussing the men and women who are both producing and consuming. We are not the judges of what is best in material terms when we address ourselves to the problem in that sense. Men and women work in the coal industry, the electricity industry and the oil industry. Ancillary to those industries there are many other services upon which men and women depend for their livelihoods. I hope that what I have read in the White Paper on Fuel Policy will help me to urge the Government to be cautious about the rate of capital investment in the gas industry or, for that matter, in any other industry. They must move away a little from strict material terms of profitability within an individual industry and try to look in social profitability terms at the whole fuel industry, comprising gas, coal, oil and nuclear energy.
628 The weak child in this quartet is coal, and it is the only long standing indigenous fuel that we have. The men in that industry have given their lives to the country, and much of our wealth has flowed from the loyalty of the mining communities. At times, when one considers work conditions and wages, it has been more than their loyalty.
In considering our overall fuel policy, a careful study must be made of the part which coal is to play in the national interest, what percentage of growth it is to have, and so on. As we have seen in recent weeks, there is a productivity element even in an extractive industry which in material, social and economic terms can be beneficial to the country.
When we are dealing with the borrowing powers of individual elements of the fuel complex, while it may be easy to say to the Government that the Gas Council has justified its case for increasing the limits of its borrowing powers, at the same time we must not delude ourselves about the need to marry our thinking about it with the other elements in fuel policy.
I have tried to understand why we want to give borrowing powers to the gas and electricity boards to raise foreign currency. The hon. Lady mentioned this and when she sat down I tried to see what advantages we would gain. The House has not been enlightened about it. What are the advantages, both to the industry and to the country, in having power to borrow foreign currency? This is a most important question and too little has been said about it today. I hope that my hon. Friend the Parliamentary Secretary will give us some information on this.
I hope that my right hon. Friend understands that hon. Members on both sides, apart from the general political banter which goes on from time to time, are anxious that, when we give the Government certain powers, it should be realised that it is on the understanding that we have not had the benefit of looking at the details of capital programmes and costings and cost effectiveness. Because we often lack such information, it would be better if a White Paper, in addition to the brief memorandum attached to a Bill, were issued to explain these details more fully.
629 It is easy and interesting to talk about principles and programmes in general but sometimes we in this House would like to look upon ourselves not so much as laymemn but rather as intelligent and interested people who want information which we can scrutinise with care, so that we may have the opportunity of being able to advise the Government against the advisers whose advice sometimes lead to shortcomings in the Government's proposals.
§ 8.38 p.m.
§ Mr. David Lane (Cambridge)
I agree with a great deal of what the hon. Member for The Hartlepools (Mr. Leadbitter) has said. But I thought that, at the beginning of his speech, he took too lightheartedly the huge sums of public money we are talking about. We are also discussing one of the most exciting and significant events in this country this century—the discovery and introduction of indigenous natural gas. That is not immediately obvious from the sparse attendance at the debate, but the poor attendance is one of the regrettable symptoms of the clogging of business which means that many hon. Members who would like to have been here are upstairs dealing with other Bills.
I support the Amendment. This is a difficult issue. On the one hand, we want to give the strongest encouragement to the growth of natural gas consumption. On the other hand, we have the duty to watch the spending of the taxpayers' money on this scale, even if it is still in the future. My support for the Amendment is in no way a criticism—and I hope that this goes for my right hon. and hon. Friends—of the way in which the gas operation has been done so far.
I am thinking primarily of the North Sea search, done mainly by private enterprise. It is good that we should pay tribute to this. It has been made possible by the 1964 Act, passed promptly by the last Government, which paved the way to what has happened since in the takeover by technology. We have seen technology at work brilliantly in the North Sea search and we are seeing it this summer, particularly in East Anglia, in the pipeline laying.
We see it in a small but important detail of the future—the radio control of the flow of gas. I am pleased that 630 part of the work for this is to be done by a company in my constituency. We should pay tribute to the technology making possible what we are discussing. We do not wish to hamper the enterprise of the exploring companies, the Gas Council and the consumers in their plans to make use of the gas. The gas will be introduced year after year, very quickly in several parts of East Anglia. It will give an extra development fillip to that area. As it is a non-toxic gas we hope that it will lower the rate of suicide, not least in my own constituency.
I cannot welcome this Bill however. These big new powers for which we are being asked to vote, cover a five-year spread and there are enormous uncertainties over the whole business. As has been said, we have not had a real debate on this fuel policy White Paper, except at odd moments of the night. I hope that with a new Minister of Power and a new Leader of the House, we may still get the chance for a full debate on the principles before long.
In several places the White Paper mentions the uncertainty of these forecasts. A second uncertainty has to do with the beach price to be paid by the Gas Council for the gas. We know there are delicate negotiations in progress and trust that it will not be long before a settlement is reached which all parties regard as fair.
The aim must be, as the White Paper says:… that the price should be fixed as low as possible, consistent with encouraging exploration.I hope that the zeal for a low cost form of energy will not force the price so low that further exploration is discouraged. Enormous cost is involved for these further reserves to be proved. I have not time to go into the figures, but it is vital that nothing should be done to put off further exploration into the more difficult areas of the search. At its lowest, it is a little disquieting to read in the Press that, compared with the end of 1967, when 14 rigs were at work in the North Sea, this week there are only four. There are signs of these moving elsewhere. I hope that these important considerations will not be lost sight of in the remaining and crucial stages of the price negotiations.
631 I turn to the market for the gas. There is a tremendous debate going on this week involving a parade of all the power barons, about the different possibilities for using natural gas. The Chairman of the National Coal Board has been talking about it, leaders of the electricity industry want to get their hands on more gas; there is the question of how far beyond the premium markets natural gas should go into industrial markets. This is a major question mark.
I have a point to raise about conversion. I have seen two reports in the evening papers. One was about the enormous plans for introducing the gas in many parts of the country, and the other was a letter from a constituent of mine who had read about the difficulties of conversion in Canvey Island, asking if these technical snags had been overcome. If the Parliamentary Secretary can reassure those who are to have this conversion that such snags have been overcome, we should be very grateful. So, given this large area of uncertainty, we have the main financial request of the Government to the House for powers to go straight to an extra £1,200 million of borrowing.
This, on my arithmetic, is £5 per year per head of the population, men, women and children. This is an enormous sum of money and I suggest, as my hon. Friend the Member for Finchley (Mrs. Thatcher) said earlier, that it would be far more satisfactory in this situation if we could be certain in two years' time, which happens to be the time when the coal borrowing powers expire, of having a full discussion in the House and not necessarily an abbreviated discussion on an Order.
Summing up, may I say why I support the Amendment? We are being offered by the Government a very attractive cherry, but I do not think we should take it at one bite. We want to go forward enthusiastically with natural gas but we have to show a proper concern for the use of national resources and for the taxpayers' money; and the danger seems to me to be that the progress may be rather over-enthusiastic and there may be inadequate protection for the taxpayers' interests. For that reason, I hope the House will not give an unqualified Second Reading to this Bill tonight.
§ 8.46 p.m.
§ Mr. John Lee (Reading)
Sandwiched rather incongruously in this Bill concerned with borrowing powers is Clause 5 which empowers the authorities concerned to provide technical assistance for overseas aid. It is incongruous that it should be there, but none the less I welcome this because it is a subject very dear to my heart. I see that it makes very little difference to the financial position of the industries concerned. Indeed, it does not in any way represent an addition to the amount of money that is available for overseas aid since the cost of such assistance, which cannot be very much, is to be borne by the Vote under the control of the Minister for Overseas Development. Whatever other reservations hon. Members may have on either side of this House with regard to this Bill, I would have thought that that Clause at least would meet with unqualified approval.
It is strange that a statutory provision of this kind should be necessary in order to make that permissible. I suppose this points to the fact that one of the difficulties that have dogged nationalised industries for some 20 years is that whenever one of them needs to enlarge the scope of its activities that cannot be done by any internal method but must necessarily mean recourse to this House. Whatever view one may hold about the need for scrutiny and supervision of nationalised industries—and I would be second to none in believing it most important that they should be made as responsible to this House as possible—I should not have thought that a small matter of that kind really ought to have to go through this kind of processing in order to be made possible.
I suppose one can say the same to some extent of the members of the Board. One of the Clauses of this quite short Bill also requires a statutory provision in order to add to their number. When one compares this with the position of a public company which can make alterations in its objects and aims quite simply by internal process, it seems to be strange that this should be necessary. This Bill is mainly concerned with the question of borrowing powers. I have some sympathy with those who claim that we sanction borrowing powers with very 633 little debate and subject them to only intermittent scrutiny. I suspect that the right remedy for that in many ways would be for this House not only to keep more rational hours and avoid midnight debates but also to spread its activities over a more reasonable period of the year.
This is not the time to debate the procedure of this House but one can say in pasing at least that if we conducted our business in the same way as occupations outside this House and did not have three-monthly interludes and so much of our time punctuated by recesses we would not need to discuss matters at late hours and early hours and would be able to discuss them more frequently, and I suspect a great deal more efficiently, than they are sometimes discussed at the moment.
I approve of the extension of the borrowing powers, although I am bound to say that I share the view expressed by my hon. Friend the Member for Westhoughton (Mr. J. T. Price) that there would be no objection to a nationalised industry issuing equity shares—that may come as a surprise to the hon. Lady the Member for Finchley (Mrs. Thatcher) and the hon. Member for Honiton (Mr. Peter Emery)—provided that they carried no voting powers and that they were like "A" class voting shares at present permissible under the Companies Act. Then there would be no derogation from the ownership of the title of the State in the nationalised industry. This would provide the industry with the flexibility which sometimes is lacking in the system of borrowing which prevails. There is no reason why this should not be run in double harness with the borrowing which exists under this and the previous system.
Hon. Members should be prepared to consider all methods of financing nationalised industries and not be unduly hostile to that kind of device. However, none of us can say that there is any real objection to the extension of these borrowing powers. I welcome them very much, particularly in relation to the North Sea gas proposals. As the hon. Member for Cambridge (Mr. Lane) said, this is an exciting new departure in our technological advance. We should all rejoice in the fact that this is the first major 634 indigenous resource which has come to hand for many years.
I hope that the Ministry of Power will give thought to setting up its own exploitation system so that it will be less given to deferring to the power of the international oil companies and not be unduly worried if they are being frightened off, as the hon. Member for Worcestershire, South (Sir G. Nabarro) seemed to suggest. We know that there is a world surplus of oil. We know that oil resources are still being discovered, and we may well find that our bargaining power in relation to international oil concerns improves.
There is obviously a conflict of interest between the oil companies as producers from sources outside this country and their undertakings in the North Sea. Of the two, it is obvious that they are more likely to take heed of their main sources of wealth, which are outside this country, which, in many cases, are in the sterling area and, in many instances, situated in chronically unstable countries. Therefore, we should be much more inclined to put ourselves in a position to exploit these resources ourselves.
Often, nationalised industries have been declining industries, like coal or the railways, or they have been bedevilled by under-capitalisation, like the steel industry. The electricity industry is a modern and expanding nationalised industry of the first magnitude. I should like to see the State come in on the ground floor in relation to this form of nationalised venture. I hope that my hon. Friend the Parliamentary Secretary will say rather more about what we can do by direct exploitation of the resources in the North Sea. Whatever modest contribution they make in the immediate future, they present an exciting future for the country as a whole in years further ahead.
§ 9.0 p.m.
§ Mr. Edward M. Taylor (Glasgow, Cathcart)
I think that the Minister of Power will be distressed to hear from his hon. Friend the Parliamentary Secretary about the speech we have just heard from the hon. Member for Reading (Mr. John Lee), because he said that in his opinion Clauses 5 and 6 were rather unnecessary. I would counsel the Minister and any Member of Parliament not to 635 have this attitude, which seems to be growing in the party opposite, of becoming a little tired with the Parliamentary process. These are important provisions and I do not wish to see any system, no matter how much the Government may want it, whereby decisions can be made without being brought before the House for approval.
The main part of the Bill is concerned with a great deal of money. In the first part we see a straight extension in borrowing powers of £400 million with an additional £800 million, which can come periodically by order.
The first point I raise is whether this is not too much at this time in our economy, bearing in mind the history of the nationalised industries. It is a sobering thought that since October, 1964, we have had price rises in the public sector of exactly 20 per cent., whereas, if we take a comparable period, the index of household goods has risen by only 7 per cent. In these circumstances there is a need for careful scrutiny at all times of the capital expenditure of the publicly-controlled industries. I, therefore, feel that £400 million is too much to take at one time.
In the debate on the Gas Industry (Borrowing Powers) last year, the former Minister of Power, on the question of natural gas, said:The total cost will be about £400 million, and over the next five years it will be about £190 million."—[OFFICIAL REPORT, 7th June, 1967; Vol. 747, c. 985.]It is clear from these figures that this amendment will cover a considerable period of time—too long, I suggest— before we have Parliamentary scrutiny.
I raise two points. First, I hope that no Member of this House will agree to a major extension of borrowing powers which gives commercial freedom of capital expenditure until we do two things. First, to fully review the pricing policies in the nationalised fuel industries, with particular reference to gas.
I was interested to see what was said in the Evening Standard of 10th May, 1967. This might be of interest to the hon. Member for Midlothian (Mr. Eadie) who takes a great interest in the amount that we spend on natural gas compared with competing fuels. The headline read,Gas price may be slashed by a third".636 That was the indication at that time. I wonder whether this figure is still true. I doubt it, because things change very dramatically and quickly on the fuel front.
On the other hand, it has changed in another direction. The Parliamentary Secretary, who takes a great deal of interest in the matter, will be aware of the other policy question about which we in Scotland are concerned—namely, the price of gas in Scotland. I am not prepared to give a Second Reading to a Bill which gives freedom to spend £400 million while we have escalation in the differential prices between different areas of the country.
In Written Answer to me on 13th May, the Parliamentary Secretary indicated that in the last annual period for which figures are available, 1966–67, the average revenue per therm of the Scottish Gas Board was 27.8d., and the average for the English and Welsh Gas Boards was 22.2d. In other words, the average consumer in Scotland is paying 25 per cent. more for gas compared with the average in England and Wales. If this trend had continued for many years, it would have been one matter; but it has got worse and worse. When I first came to the House I asked the then Minister if he was satisfied with a situation whereby the differential was about 10 per cent. I asked when it became 14 per cent. and I asked again when it became 19 per cent. Now we are at the stage when the price of gas in Scotland is 25 per cent. more than the average for England and Wales, that answer being given in official figures on 13th May. I would suggest in all seriousness that it is an outrage for this Minister or any other to suggest that Scottish Members should give freedom of action for several years to the Gas Board to go merrily on with their policies—and highly efficient I am sure they all are—until there is a reconsideration of the policy of differential fuel prices, which are having such a savage effect on Scottish consumers and Scottish industry.
§ Mr. Taylor
That is not my information, but I have great respect for the 637 hon. Gentleman's opinions so I will check on it. That is not the information I was given nor is it what I got from the reports. If this is the case, then for the domestic user the differential must be still greater because the figure I quoted was the average price per therm. I know that the hon. Gentleman always does his homework, and if he is right the differential for the domestic user is even greater.
This is; a serious question which I hope the Minister will reconsider before we approve this Bill.
On the question of electricity, there is the proposal that the South of Scotland and North of Scotland Electricity Boards should be able to borrow money abroad. I would suggest that one of the main reasons why it is necessary for this industry in Scotland to look for money abroad and why it cannot be self-financing is that the Government policies on fuel differential are adding so substantially to their costs. I will quote briefly from the Annual Report of the South of Scotland Electricity Board, published recently, where it is stated on page 3 that:The average price of coal to the Board is about £1 a ton higher than the average price paid for coal used in electricity generation in England and Wales…In an article in the Scotsman at about the same time it was said that the differential between the coal prices to the Scottish Electricity Boards and to the English and Welsh ones was between 20s. and 34s. lOd. per ton.
Is the Minister happy with a trend in which the South of Scotland Electricity Board has; to go to the gnomes of Zurich to ask for money which it would not require if we had a reasonable, sensible, just and fair policy of coal prices and differentials? This problem is getting worse and I, for one, am not prepared to approve of the Bill while such a situation continues.
As the hon. Gentleman the Member for Midlothian (Mr. Eadie) knows, this is not a problem created by this Government. It has existed for many years, but it has been getting worse. When we consider the facts as regards another industry, that in the Benson Report on the steel industry, it was said that:if British fuel prices go on climbing as they have over the past ten years, ' some 638 long-established United Kingdom steelmaking areas—for example, Scotland—may be put in hazard.'The effect is seen of the policies which are being pursued at the present time and which have been pursued for years, but which are getting worse. I appeal to the Minister, before he goes ahead to ask for such a large sum as this, to reconsider the whole question of differential prices. It is no joke for the Scottish consumer, it is no joke for Scottish industry, and it is rather foolish for the Government to give generous assistance, as they do and as previous Governments have, to Scottish industry if so much is taken away by the present policies of the nationalised industries.
We also see the gas industry looking for money which will be used in connection with making coke and smokeless fuel and we have exactly the same problem of differentials with this. Many of my own constituents in Cathcart—and I am sure this is true of the constituents of the hon. Gentleman the Member for Midlothian—have had to convert recently because of smoke control orders. They have been put in the position, encouraged by the Secretary of State for Scotland, with all his enthusiasm, of having to convert freely to the use of smokeless fuel. Yet we have a situation in which the price of that fuel in Scotland has greatly increased as compared with that in England and Wales. I am sure that the Parliamentary Secretary has heard this on many occasions. I ask him to accept that this is a serious problem for Scotland, which his own figures about the gas industry show is getting worse. The temporary effect of this price increase or the next does not matter a great deal. We know the facts, and the problem is desperately serious, so I hope that, before the Government approve this Measure, they will seriously consider the prices of gas, coal, smokeless fuels, all these products of nationalised industries in Scotland.
I hope that it will be accepted that I am attacking not the Labour Government in particular but a policy which I think is wrong. If we accept the need for differentials, why do we say that Scotland is one area and that there will be a uniform price for gas there? If we accept the implications of an economic price everywhere, there should be different 639 prices in Glasgow, Aberdeen, Inverness and Stornoway. Surely the time has come to say, "If we have a national industry, let us have a national price, and let the appalling differentials, which are causing so much concern and damage in Scotland, disappear once and for all." I make the Minister a simple offer: if he will accept my views on price differentials, I will accept his Bill.
§ 9.6 p.m.
§ Mr. Peter Emery (Honiton)
Without fear of contradiction, I can say that the Second Reading of this Bill has provided a wide-ranging debate on nearly every aspect of fuel policy. The Opposition Amendment has ensured that certain speeches showing specific concern for the problems of the coal industry have been considered in the context of the Bill when they might not otherwise have been. It is surprising how not one speech has given outspoken support to the Bill. I must declare an interest, in that I am associated with companies concerned with gas, producing heating equipment and many aspects of fuel. These contacts may allow me to speak with some knowledge and perhaps a little authority.
The Conservative case in this debate is practical and clear. We believe in cheap fuel and also welcome the discovery of natural gas, and we want it fully used and exploited to the benefit of the nation, of industry, business and the domestic consumer—and, I say to my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward M. Taylor), even in Scotland.
However, we say plainly that, in the nation's present financial and economic position, after three and a half years of Socialist Government, a drastic reduction is needed in the level of Government expenditure both above and below the line. We must ensure a greater increase in the overall level of investment in the private sector and, therefore, obviously, a corresponding decrease in the ratio of investment in the public sector. Lastly, we believe that an increasing control and investigation by Parliament of public expenditure and investment should be encouraged rather than limited. It is against these criteria that I wish to judge the debate.
I first of all pay a tribute, which has not been paid yet, to the previous Minis- 640 ter of Power. Whatever we may say, it took a particularly courageous Minister to introduce this White Paper and it is fair and proper that the House should pay tribute to him. Of course, we did not have a debate on the White Paper. The present Minister said that we have been around this in many ways, and we have, but he and the House must agree that there has not been approval or a full discussion of the electricity, gas or nuclear power concepts of that White Paper. It is with that as a background that this Bill must be considered.
This Bill increases the borrowing power of a single nationalised industry by 100 per cent.—100 per cent. It increases its immediate loan authority by one-third and then, with that sum, allows a standby borrowing of another 50 per cent. of the authorised sum. I have done a little research into this and I do not believe that I can be corrected when I say that this is the biggest single percentage standby which has ever been given. It is not the biggest amount—the electricity industry had that previously; but it is the biggest percentage standby, a 50 per cent. standby. I believe that this is more, in the economic situation, than this Labour Government or any Government ought to ask the House to consider.
We are considering a reasoned Amendment. My hon. Friend the Member for Worcester, South (Sir G. Nabarro) said he had demanded that the Opposition shall have a reasoned Amendment. I am delighted to say, although he is not here at the moment, that he found himself in very good company. We were ahead of him, and, indeed, my hon. Friend the Member for Finchley (Mrs. Thatcher) had been discussing the exact wording of the Amendment for some while.
However, it is important that it should be made most clear that the reasoned Amendment is not an attack on the gas industry or indeed the electricity industry. The gas industry, after all, over the last five years has been a fast speed example of brilliant marketing, while managerially and industrially what earlier might have been considered a depressed or out-dated industry has resurrected itself, and I believe that it deserves considerable credit and considerable congratulation for what it has achieved.
I should like to attempt to clear up one matter which seems to have been 641 in doubt during the debate and that is the question of the reserves of natural gas which appear to be evident in the North Sea. As I understand this matter, all the four commercial fields have recoverable reserves estimated by the Gas Council at about 23½ trillion—that is the American figure, which is a million million—cubic feet, enough to maintain an average flow of over 3,000 million cubic feet a day. This is on a depletion of 20 years. It is probable, I believe—and these are the figures which have been used by the Gas Council—that the reserves will last from between 25 to 27 years. In addition to this there are significant discoveries by other companies Signal, Placid and B.P., in addition to the West Sole, Leman Bank, Indefatigable and Hewett fields. It is important to have these figures on the record and they are substantiated by paragraph 13, although not in as great detail, of the White Paper on fuel policy.
I turn to the matter of investment forecasting. This is, after all, the basis of the Bill. If it is possible to forecast future requirements accurately there is no reason why the Bill should not be given a Second Reading. But what are the examples? Let me use one or two.
A Government publication only two and a half years old says quite blandly in paragraph 55 thatthroughout the public sector estimates of expenditure represent programmes rather than forecasts.It goes on to propound that the fixed investment in gas is expected to rise sharply in 1966 and then to remain about the same level for the rest of the decade. The figures are £140 million in 1968, £143 million in 1969 and £149 million in 1970. Although only about 30 months old, those figures have little relevance—indeed, they have no relevance at all—to the arguments now being adduced by the Gas Council.
I admit that the figures come from the National Plan of the right hon. Member for Belper (Mr. George Brown), but they show how terrifyingly inaccurate such prognostications can be in only two and a half years. The national growth rate is well below what was indicated in the National Plan, and its estimates are about 150 per cent. out. I accept that they were not predicated on the aspects of natural gas—I have no wish to make a debating point of this—but nobody can 642 be certain for a period of five to 10 years that there will not be other breaks through in fuel policies which may not put some of this forecasting considerably out of date.
§ Mr. Gunter
The hon. Gentleman was honourable in declaring his interest at the beginning of his remarks. Following his argument, I, as Minister, am bound to accept what the Phillips company has told me about its forecasts. I think that the company was right and honourable to do that, and I accept them. Is the hon. Gentleman arguing that I must not believe anybody's forecasts?
§ Mr. Emery
No. I declared my interest and, following the right hon. Gentleman's question, there is, of course, no doubt about the reserve figures and that they are the best which any oil company can give the right hon. Gentleman. I have been questioning whether the investment prognostications made by Ministries—I have given the prognostications in the National Plan—are likely to be as accurate in two or three years' time as they are at the moment. There is proof that they have not been accurate. If I were to pursue some of my personal interests I might be said to be arguing that we should be investing more rather than less. I am trying to think of the national interest and not of any sectional or individual interest.
I return to the question of investment forecasts, with particular reference to the forecasts outlined by the Gas Council and mentioned by the Minister. We see £1,221 million on fixed assets, £276 million on the conversion of consumer appliances, £44 million on loans for Gas Council North Sea prospecting and £63 million on financing and expanding turnover. This gives a total of £1,604 million. On top of that we have present borrowing at 31st March, which is already established, and this brings the figure to £2,667 million. However, we have finance from the Gas Council from its resources of £500 million and from this Bill of £2,400 million. This leaves, on those calculations a figure in hand of £233 million for extra use and not £237 million as the P.R. statement of the Gas Council of 8th May made clear. Nor does it leave a figure of £250 million as suggested in the Ministry of Power's Press Notice No. 5508.
643 I quote these figures not in an attempt to be clever with small amounts, but to show that we are talking about such vast sums that they can get entirely out of hand. It seems that £4 million here or £13 million there does not matter. It should matter to Parliament and we should pay special attention to the whole subject.
I come to a matter which has not received any attention; overall investment in gas—not just for the Gas Council but for the industry as a whole. The Gas Council's figure of £1,604 million is correct. On top of that we have to begin estimating what private industry will be putting into the development of gas.
On the production, piping and development of the fields and processing, I cannot be more accurate than to say that it will be between £300 million and £500 million. It is impossible to be more accurate over a five-year period. Let us say that it will be about £400 million. On exploration, surely the Gas Council's figure of £44 million can be multiplied by six or seven to get somewhere about £250 million or £300 million. Industry and the piped assets are likely to bring a total figure of £2,400 million to £2,700 million as a necessary investment for North Sea development. Compare that with the overall industrial investment. In the private sector last year it was £3,458 million. In the manufacturing industry, according to the Board of Trade, it was estimated at £1,160 million.
Taking the figures I have given over a five-year period, this means that the overall investment for gas will have to run at about £500 million nationally out of the investment "cake". Is this House absolutely certain that that is the proper level and that we should have as high a level in one industry? I do not know, but we have not debated this. It has not been particularly apparent in the arguments put forward either by the Gas Council or the Government that that high level of investment without overall limited resources is the right and proper amount.
Presumably, we still hold to the Letter of Intent. It was suggested that this year the investment should be left at £1,000 million—one billion as it is termed in the Letter. That makes one wonder whether the Government are getting out of step with what the country can afford at this 644 moment. This is something which the House has to consider.
§ Mr. Leadbitter
It is noticeable that the hon. Member is expressing concern about the possibility of the Government getting out of step with investment. The hon. Member is summing up for the Opposition in an important debate. Will he tell the House, after special consideration of this Bill, what his party thinks the level of investment should be.
§ Mr. Emery
As I am summing up an important debate, I will tell the hon. Member what I think the investment should be. That is in part of my conclusions which he will hear at the end of my speech.
I turn to the question of obsolescence and conservation. I ask the Government whether they have considered fully the factor of conservation. Is the run-down of this natural gas asset at a level at present estimated between 20 and 25 years right? Is it accepted by the House? We have not debated it.
§ Mr. J. T. Price
It is not accepted by the Gas Council either. That should be on the record. The Gas Council does not postulate a figure anywhere near the figure which the hon. Member has given.
§ Mr. Emery
I thought the figures I quoted earlier were the Gas Council's figures and that they would be confirmed by the Minister. Would we not require a much smaller capital programme if the reserves were to be run down over a longer period, over 40 years or even more? Would not this allow a better use of existing capital equipment and a more economical rundown of some of our other national assets, which was made so apparent by the hon. Member for Bristol, Central (Mr. Palmer), who spoke with such authority on the electricity industry?
On the point of obsolescence made so evident by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), instead of £300 million for plant yet not amortised and which will have to be abolished, will not the total writedown of plant which has not finished its useful life be about £600 million to £700 million? If so, we should be told. It is very important.
645 My hon. and gallant Friend the Member for South Fylde (Colonel Lancaster) made a most thoughtful and helpful speech. We should pay credit to him for the work he does as Chairman of Sub-Committee B of the Select Committee on the Nationalised Industries.
The hon. Member for Westhoughton (Mr. J. T. Price) said that he was not concerned about the Bill, because the matter would come forward on a Vote of Supply. I must correct the hon. Gentleman and make it apparent that, if this was on foreign borrowing, which the Bill would allow, there would be no Vote of Supply and his argument would fall.
The hon. Member for Ince (Mr. McGuire) spoke about outrageously optimistic forecasts. I defend the members of the Gas Council. I believe these forecasts have often been made by the Press and have never been backed by statements made by leaders of the gas industry.
The hon. Member for Orpington (Mr. Lubbock) said that he thought that the right place to consider the borrowing powers of the gas industry was not on the Floor of the House but in Committee. He must realise, as a Whip of the Labour Party—[Interruption.]—I mean the Liberal Party. I was thinking that the hon Gentleman had moved over. He must realise that with our present Parliamentary procedures the only way of dealing with this in depth, with all Members able to participate, is on the Floor of the House.
My hon. Friend the Member for Cambridge (Mr. Lane) and the hon. Member for Reading (Mr. John Lee) were right to discuss the use of rigs in the North Sea. It is important that nobody should be discouraged from continuing with exploration.
I want to ask one direct question which has not been raised. Is any of this borrowing power to be used to increase the manufacturing scope of the Gas Council or of the Gas Boards? It would be possible. Powers exist. I should like a categorical assurance that that will not be so. The strengthening of the Gas Council, which we welcome, was originally suggested by the Select Committee in 1961–62.
I turn to the borrowing powers from abroad. 646You cannot go, cap in hand, to the central bankers of Europe … and maintain your freedom of action. … The central bankers will, before long, be demanding that Britain puts her house in order.That is a quotation that hon. Members opposite might recognise. There has been condemnation of some of these central bankers and perhaps the Left-wing, with which the Parliamentary Secretary had some connection at one time, should be condemning this short-term palliative in the Bill, because that is all it is. It is an ability to obtain extra foreign exchange which will assist our balance of payments today. But in the long term that money must be repaid, and then there will be the opposite effect, a harmful effect on the Exchange Equalisation Account.
Two necessary points were made by my hon. Friend the Member for Worcester, South—
§ Mr. Emery
I should think that my hon. Friend may have a shire all unto himself. My hon. Friend pointed out that B.E.A. and B.O.A.C. have foreign capital investment, foreign capital assets and foreign currency earnings.
We must consider the long-term effect. This borrowing by the Socialists is likely to leave a millstone, a hidden depth charge, to upset the balance of payments at some time in the future, when a Conservative Government will have to put it right.
The Minister was all sweet reasonableness in suggesting that we did not divide on this matter. He was described, I think, as a Pickwick. Without meaning to be unkind, I would perhaps describe him as the greatest smiling Parliamentary cherub that we have in the House. But his blandishments fall on very stony ground here. We argue for more Parliamentary control. But he and I know that the control he wishes will only be by an order which could be debated for only 90 minutes.
Too much money, too quickly, with little real financial prospectus showing exactly how it will be used, is our real condemnation of the Bill. What we want is extra borrowing and investment not by order but by a Bill which will allow us to have the necessary Parliamentary control, and that is what our Amendment would do.
647 I do not believe that any self-respecting bank manager, after the Government's own impoverished pleas, would grant a 100 per cent. increase in a fantastic overdraft of £1,200 million for vast spending over a five-year period without an adequate estimate of likely return. It has been evident from speech after speech that we have not had that.
This practice is precisely what successive Governors of the Bank of England have rightly condemned as the root and branch failure of the Government's economic policy. By granting these borrowing powers we shall relinquish any real further Parliamentary control of this vast amount of spending. Parliament is being asked to underwrite an estimate without an adequate prospectus.
I ask my right hon. and hon. Friends to support us in the Lobbies on our reasoned Amendment.
§ 9.33 p.m.
§ The Parliamentary Secretary to the Ministry of Power (Mr. Reginald Freeson)
To some extent I forecast the kind of points that would be raised and did my best to obtain information before the debate. I shall seek to answer as many points, both general and specific, as I can. We shall study the OFFICIAL REPORT and, as it our practice, do our best to reply within the next few days to any points with which I cannot deal now.
I shall try to avoid turning the debate into a screaming match, at any rate from this side of the Dispatch Box.
Several themes have come out in the debate. The main ones have been on the issue of the range of spending, whether it is necessary to authorise so much; the question of Parliamentary and Government control over spending, or what some describe as overspending; the impact on other industries; and the efficiency and capacity of the industry to absorb the gas for which it is planning, and to plan investment policies appropriately.
The last direct question put to me was whether any of the moneys raised under the borrowing powers would be used for manufacturing purposes. I take the question to refer to diversification of manufacture and not necessarily to plant con- 648 nected with the industry's central activity. The answer is that there is to be no change of policy.
We have had a number of questions on the Scottish position, and I know the hon. Gentleman will forgive me if I do not pursue them all in detail. Whatever views and arguments there might be about postalising prices, it is not correct to repeat so categorically that Scotland is worse off with regard to gas price differentials than all other parts of the country. It is not. At least one other area, the South-Western, has a bigger differential than Scotland. Whatever the merits or demerits of postalisation of prices, it is not correct to assume that if prices were postalised the development areas would benefit. Some might, others would not. I have said this before.
I was congratulated by the hon. Member on a previous occasion when I made this point. For the central subject matter of the debate, natural gas, there will be a postalised price for bulk supply to area boards if that is the correct term to use. I hope we can get at least one little smile from the hon. Member on this point.
A number of questions were put by the hon. Member for Orpington (Mr. Lubbock) while I was out of the Chamber. Earlier in the debate he quoted evidence given by the Gas Council to the Select Committee on Nationalised Industries, at paragraph 47. The industry's investment total was £1,221 million for the five years from 1968–69. This is expressed in the evidence as investment in fixed assets. This is the same as on the top of page 15 of the pamphlet, "Investment in Natural Gas", and to that sum must be added: North Sea exploration £44 million; working capital £63 million; conversion of consumers £276 million. These figures make the total of £1,604 million which he queried.
There was another query from the hon. Member on a figure quoted by Sir Henry Jones relating to the cost of conversion per consumer. I understand the figure of £10 relates to a cooker in the context to which he was referring, but there are other costs which have to be added for other kinds of equipment and which are included in the figure of £30. One must take account of industrial and other commercial users whose equipment will also have to be converted, and the cost of 649 this must be included in the average figure.
To deal with the headings I have given as being the main themes of the debate, the first one is: why the range of expenditure which has been proposed? Merely to meet the past rate of increase in demand for manufactured gas, instead of natural gas from the North Sea, would cost between £200 million and £250 million a year. This is on the basis of an annual rate of increase of 9 per cent. to 10 per cent. in recent years, and a much faster rate of increase which is forecast for future years. There will be a rapid increase, and therefore we must expect a major slice of investment per year. So long as there is a strong demand for gas there must be heavy investment in the industry. With the discovery of North Sea gas the amount of investment has to be increased above £200 million to £250 million a year, but the increase is expected to produce important benefits.
It has been a rather negative debate in spite of the detailed arguments deployed, particularly by hon. Members on the other side. Not enough has been brought out in debate about how the industry is expected to benefit. First, there will be savings in resources used by the gas industry. Secondly, the industry will be supplied with increasing quantities of modern, relatively low-cost fuel, and it will be cheaper. Thirdly, there will be a reduction in the cost of foreign exchange to meet the country's energy needs. These things have been discussed at some length in the White Paper which has been referred to many times this evening, as well as in other speeches and debates in different parts of the country. I am surprised that we still hear statements that are contrary to some of the elementary points which have been established in the White Paper studies.
The next main heading which I drew out of the debate questioned the efficiency of Governmental and Parliamentary control of expenditure. One is guided in the control of expenditure in the gas industry, just as in other industries within the purview of the Department, by the White Paper dealing with the financial obligations of the industries.
The procedure which is followed centres around five general points. Each year, the Department discuss in detail the 650 capital expenditure for a period five years ahead on a rolling programme. We fix the upper limit of expenditure for two years ahead having examined the programmes of capital investment and projects being put forward. The Department base borrowings on reasoned estimates submitted by the industry each year. The Department must be kept informed of capital being invested or proposed to be invested in projects which are considered to have too low a return in relation to the objects laid down in the White Paper. It is our task, in overseeing the industry's responsibilities, to ensure that its organisation scrutinised capital expenditure properly.
I know that that is dealing with it in a few sentences, but I ask hon. Members to accept that whatever inadequacies they may feel in the extent to which Parliament can oversee massive expenditures involved in a modern State, whether it be what is before us now or on other occasions, the Department does a very thorough job. We have personnel travelling all over the country each year investigating these matters with the boards of the various industries under our responsibility. To talk as if this one debate tonight is the full extent of our supervision of expenditure is misleading. I am sure that hon. Members do not intend it to be so.
The importance of Parliamentary control or scrutiny was stressed by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and the hon. Member for Honiton (Mr. Emery), who made much play with the £237 million contingency margin included in the figures before us. The borrowing powers in the Bill aim at meeting the industry's needs for about five years. Even in the most stable circumstances for the industry, it is difficult to forecast borrowing needs accurately, and some margin for contingencies is reasonable and common practice in small as well as big industry, public or private.
As the hon. Member for Finchley (Mrs. Thatcher) said, at present there is more than unusual uncertainty. That is no reason for cutting down on one's margin for contingencies. I would have thought that it is a reason for making sure that provision is made for items which may be necessary, always with the proviso that there is adequate Government scrutiny and control in the approvals and permissions given.
651 The uncertainty is affecting the industry, and that must affect its long term investment plans. We do not know the full extent of the amount of North Sea gas which will become available, and I will have more to say about that in a moment. Markets cannot be known fully, nor can beach prices, despite the fact that some have been fixed—one important one quite recently. The industry does not yet know how peak demands will be met when natural gas comes on stream fully from the North Sea. There must be a margin to allow for changes in the pace, direction and content of the capital investment for the industry in the years ahead.
That does not mean that the money will be used automatically. The Minister must ask the House to approve an Order raising the borrowing limit. He will have to justify a new figure for the next three years to the House. If less than £800 million becomes necessary, a smaller sum will be proposed.
This is not the first time that this has happened. It has happened with the electricity industry in the past and with other industries with which Parliament is concerned.
The limit in the Bill is on borrowings over about five years and does not directly control either borrowing or expenditure in the next year or two. If the Opposition wish to question the industry's plans for expenditure on borrowing, they can do so by debate on the annual White Paper on loans made by the National Loans Fund, which shows the authorised borrowing or expenditure for the year, or they can do so by debating the industry's annual report and accounts.
There are always other occasions on which there can be Parliamentary scrutiny of this kind of expenditure. My right hon. Friend's request for an immediate increase of only £400 million is in order that Parliament may have an earlier opportunity than it would otherwise have done to scrutinise the expenditure and policy of the industry because of the kind of uncertainties to which hon. Members have referred.
I have been asked about foreign borrowing. This power is being taken at the request of the two industries concerned so that, if opportunities arise of borrowing more advantageously than from the 652 National Loans Fund, they will be able to take advantage of them. In so far as the national interest is involved in incurring obligations in foreign exchange, it would be covered by the kind of provisions that such borrowing must be on terms and from persons specified by the Minister. Again, there will be detailed control. Just to give the authority does not mean that the money will be raised. This provision is designed to remove a statutory obstacle to such action should it ever be considered desirable, as is the case with the other part of the Bill dealing with the removal of obstacles to assisting foreign Governments in technical work. This, too, does not mean that the money or the services will be provided. It merely gives power for them to be provided if the industries so wish.
Much has been made of the uncertainty of the rate of absorption with regard to the supply of natural gas. Despite the continued doubts expressed or implied in the debate, the known reserves—not those yet to be investigated and covered—are estimated to be sufficient to provide 3,000 million cubic feet per day and more available on beach to this country in the years beyond 1971. It may well go above that figure. The plans that are now in hand and the powers which are being put forward in the Bill are in order that this work may proceed and that the capacity of the industry should be to take on full steam up to something like 4,000 million cubic feet per day.
Whether or not this will be absorbed into the economy is a matter of marketing and not a matter of investment power and authority for laying down the framework by which one can use the gas. This will be decided from time to time on the Minister's authority, subject to the kind of Parliamentary scrutiny I have referred to as the system and the markets develop. But we know that we can reach the figure I have quoted by the end of this decade. This is hard fact and I hope that there will be no further doubts about this.
§ Mr. Freeson
I wish the hon. Gentleman would not throw the word "supposition" across the Table. He himself confirmed what I am saying in his own speech. This is not supposition. These are known reserves. What may be supposition is how much capacity may become available with further investigation.
I had hoped that it would not be necessary to state the obvious. One cannot market what one has not got. If we want supplies on tap to the country, we have to have the grid and plant. We cannot sell the gas if we have not got it. We have to have investment powers to get the grid into operation and all the servicing required to get natural gas into the country so that it can be marketed. This will be an evolving and growing policy. It will be subject to control by the industry and the Government and will be subject to Parliamentary scrutiny as I have indicated.
This kind of playing around with words, coming to the House and saying: "We are in favour of natural gas being discovered—" which is rather an obvious thing to say, "we are in favour of bringing it ashore and using it in the economy", and then arguing against the means by which it can be done—this is what we have been getting from hon. Members opposite. We will not turn this into a series of debating points. There is a job to be done and we want the powers in order that the job may be done. That is why we come to Parliament.
The question of the rate of absorption must be borne in mind in relation to the kind of prices that will be obtained. I have been asked whether we are quite sure that it is right to have as rapid a rate of absorption of natural gas as we can possibly get. The answer is "Yes", and anyone who has studied the White Paper will have seen the kind of examination given to this question—the kind of factors we took into account in drawing this policy conclusion. I have mentioned one important factor, not the most important one, namely the question of the price one obtains. The more rapidly one can absorb this natural gas into the economy, the more satisfactory will be the price level obtained by the Gas Council, and in turn by the ultimate consumers, domestic and industrial.
If the gas industry is to increase by two, three or four times over the years 654 ahead on the lines I have suggested, the price will have to be attractive by the standard of the prices of other fuels. We think that North Sea gas will prove a much cheaper fuel. We have said so in the White Paper, and we stand by that. Some boards have already made small reductions in prices in areas which have already been converted to natural gas. Similar reductions may be made in other areas as conversion proceeds. It will be four years or so before the new system of supply is well-established, and most consumers are converted—and I hope the Opposition too.
Before then there is a great deal of investment which has to be financed. Existing towns' gas supply has to be kept going as we move over to natural gas. This will prevent sweeping price reductions in the immediate future, but one thing is certain: the gas will be cheaper than manufactured gas and there will be foreign exchange savings to the country. In the next few years the real beneficiary is likely to be industry in so far as special contracts can be negotiated for large-scale demand with a cut rate factor or on a seasonal or interruptible basis, but ultimately consumers will benefit through prices which are lower absolutely or in relation to other fuels. In real terms we are certain that there will be a reduction over the years. It will not take place until we are fully on stream into the new national grid.
Hon. Members have talked about the impact of natural gas on other fuels. It is bound to have an impact, but it should not be exaggerated. We estimated in the White Paper that by 1970 the use of North Sea gas would be equivalent to about 5 per cent. of the total energy needs of the country. This represents about 17 million tons of coal equivalent, which is in turn 1,300 million cubic feet a day. Even by 1975, assuming that additional discoveries raise availability to the 4,000 million cubic feet I referred to earlier, its share will only be about 15 per cent.
Natural gas is coming into an expanding and changing energy market. Coal, which has been referred to, is already being displaced by oil in the gas industry. The main effect of the North Sea gas discoveries is to provide another indigenous fuel as an alternative to oil, displacing coal. Members have spoken 655 of the consequences of this to the coal industry. I want to stress, as we have done on previous occasions, that most natural gas will go to the premium markets where it will mainly displace oil.
I hope that the hon. Lady will not mind my saying it, but it was quite wrong, particularly at this time in the light of the industry, for her to raise further unnecessary anxieties in the coal industry and the coal communities. This has been made perfectly clear in the past. The use of natural gas in power stations was also touched upon. In this connection I can confirm what has been said earlier, that there has been this experimental conversion at Hams Hall power station and there has been an application to undertake a similar conversion at the power station at South Denes. These applications will be considered in the light of the criteria laid down in the White Paper for matters of this kind.
Lastly, I would like to turn to the general implications that came from many of the speeches we have had, and which I have found very regrettable. I suppose that it is understandable that in a debate on an Amendment of the kind we have had, dealing with large sums of public money against a background of many years of built-in prejudice against public industries, we should have the kind of negative carping comments made by a number of hon. Members opposite. I want to make clear that in my view whatever room there is for improvement —and undoubtedly there is—the Gas Industry has nothing of which it need be ashamed with regard to its record in productivity and changing its managerial techniques.
There was a constant theme throughout the speeches from the other side of the House during the course of the debate which gave the impression that we have here an industry which is not doing its job properly, is full of uncertainty and is incapable. This, whether hon. Gentlemen opposite intended it or not, was the kind of impression given by some speeches. This industry like the coal and electricity industries has a good record with regard to efficiency. It is playing an important part in modernising Britain's 656 economy. It is now handling an exciting new revolution in introducing North Sea gas which will have major implications for domestic and industrial consumers. This industry has already pulled itself up by its bootstraps, changing from coal carbonisation to oil conversion in a few years and carving out for itself an important new place in the energy economy in the last few years, after a time when many people had described it as a dying industry.
Over the last six years its manpower productivity has gone up by 7 per cent. per year and the forecast is that it will increase by 15 per cent. a year over the next five years. Major improvements in productivity have been made with a much smaller labour force. There has been a reduction from 140,000 to 124,000 in the total number of personnel within the industry. I could go on to list a whole series of other things in the computer field, in management techniques, organisation, supply and services to consumers, market research and a whole range of things in which this industry is "on the ball".
Whatever improvements need to be made, we as a Department, the Gas Council and the N.B.P.I., on behalf of the Government generally, are looking at further ways in which the industry can be improved and of helping the industry to improve its organisation and methods. These are the kind of things we should be trying to bring out from time to time rather than constantly carping against the industry.
This is the kind of thing that is also to be brought out in regard to the great campaign which the industry is waging to bring natural gas into the economy of the country. There has been some commendation this evening for the rôle which the exploring companies in the North Sea have played in this whole business. I do not fall behind anybody so far as that is concerned but due and excellent credit should be given for the job that has been done by the gas industry itself. It has a good record in this as it has in other things and it should be given the opportunity to get on with the job on which it has embarked so that we can switch over to natural gas fully by the early 1970s.
§ Question put, That the Amendment be made: —658
§ The House divided: Ayes 147, Noes 210.659
|Division No. 157.]||AYES||[10.0 p.m.|
|Alison, Michael (Barkston Ash)||Gower, Raymond||Noble, Rt. Hn. Michael|
|Allason, James (Hemel Hempstead)||Grant, Anthony||Nott, John|
|Astor, John||Grant-Ferris, R.||Page, Graham (Crosby)|
|Awdry, Daniel||Gresham Cooke, R.||Page, John (Harrow, W.)|
|Baker, Kenneth (Acton)||Grieve, Percy||Pearson, Sir Frank (Clitheroe)|
|Baker, W. H. K. (Banff)||Griffiths, Eldon (Bury St. Edmunds)||Percival, Ian|
|Balniel, Lord||Hall, John (Wycombe)||Pink, R. Bonner|
|Beamish, Col. Sir Tufton||Hall-Davis, A. G. F.||Pounder, Rafton|
|Bennett, Sir Frederic (Torquay)||Hamilton, Lord (Fermanagh)||Price, David (Eastleigh)|
|Bennett, Dr. Reginald (Gos. & Fhm)||Harvey, Sir Arthur Vere||Prior, j. M. L.|
|Birch, Rt. Hn. Nigel||Hawkins, Paul||Pym, Francis|
|Black, Sir Cyril||Heald, Rt. Hn. Sir Lionel||Quennell, Miss J. M.|
|Boardman, Tom||Heath, Rt. Hn. Edward||Ramsden, Rt. Hn. James|
|Bossom, Sir Clive||Higgins, Terence L.||Rawlinson, Rt. Hn. Sir Peter|
|Boyle, Rt. Hn. Sir Edward||Hiley, Joseph||Ridley, Hn. Nicholas|
|Brewis, John||Hill, J. E. B.||Ridsdale, Julian|
|Bromley-Davenport,Lt.-Col.SirWalter||Hirst, Geoffrey||Rippon, Rt. Hn. Geoffrey|
|Brown, Sir Edward (Bath)||Holland, Philip||Rodgers, Sir John (Sevenoaks)|
|Bruce-Gardyne, J.||Hordem, Peter||Rossi, Hugh (Hornsey)|
|Buchanan-Smith,Alick(Angus,N&M)||Hunt, John||Royle, Anthony|
|Burden, F. A.||Iremonger, T. L.||Russell, sir Ronald|
|Campbell, Gordon||Irvine, Bryant Godman (Rye)||Scott-Hopkins, James|
|Carr, Rt. Hn. Robert||Jenkin, Patrick (Woodford)||Shaw, Michael (Sc'b'gh & Whitby)|
|Chichester-Clark, R.||Kaberry, Sir Donald||Silvester, Frederick|
|Clegg, Walter||King, Evelyn (Dorset, S.)||Sinclair, Sir George|
|Cooke, Robert||Kirk, Peter||Smith, Dudley (W'wick & L'mington)|
|Corfield, F. V.||Kitson, Timothy||Speed, Keith|
|Craddock, Sir Beresford (Spelthorne)||Lancaster, Col. C. G.||Stainton, Keith|
|Crowder, F. P.||Lane, David||Taylor, Sir Charles (Eastbourne)|
|Currie, G. B. H.||Langford-Holt, Sir John||Taylor, Frank (Moss Side)|
|Dalkeith, Earl of||Legge-Bourke, Sir Harry||Temple, John M.|
|Dance, James||MacArthur, Ian||Thatcher, Mrs. Margaret|
|d'Avigdor-Goldsmid, Sir Henry||McMaster, Stanley||Turton, Rt. Hn. R. H.|
|Digby, Simon Wingfield||Maginnis, John E.||Vaughan-Morgan, Rt. Hn. Sir John|
|Doughty, Charles||Maude, Angus||Vickers, Dame Joan|
|Drayson, C. B.||Mawby, Ray||Wall, Patrick|
|du Cann, Rt. Hn. Edward||Maxwell-Hyslop, R. J.||Walters, Dennis|
|Eden, Sir John||Maydon, Lt.-Cmdr. S. L. C.||Ward, Dame Irene|
|Elliott,R.W.(N'c'tle-upon-Tyne,N.)||Mills, Peter (Torrington)||Webster, David|
|Emery, Peter||Mills, Stratton (Belfast, N.)||Whitelaw, Rt. Hn. William|
|Errington, Sir Eric||Miscampbell, Norman||Williams, Donald (Dudley)|
|Eyre, Reginald||Monro, Hector||Wills, Sir Cerald (Bridgwater)|
|Farr, John||Montgomery, Fergus||Wilson, Geoffrey (Truro)|
|Fisher, Nigel||More, Jasper||Wolrige-Gordon, Patrick|
|Fletcher-Cooke, Charles||Morgan, Geraint (Denbigh)||Worsley, Marcus|
|Fortescue, Tim||Mott-Radclyffe, Sir Charles||Wright, Esmond|
|Foster, Sir John||Munro-Lucas-Tooth, Sir Hugh||Wylie, N. R.|
|Gibson-Watt, David||Murton, Oscar|
|Gilmour, Ian (Norfolk, C.)||Nabarro, Sir Gerald||TELLERS FOR THE AYES:|
|Goodhew, Victor||Nicholls, Sir Harmar||Mr. Bernard Weatherill and|
|Mr. Humphrey Atkins.|
|Abse, Leo||Brooks, Edwin||Dickens, James|
|Albu, Austen||Broughton, Dr. A. D. D.||Doig, Peter|
|Allaun, Frank (Salford, E.)||Brown, Hugh D. (G'gow, Provan)||Driberg, Tom|
|Allen, Scholefield||Brown,Bob(N'c'tie-upon-Tyne,W.)||Dunnett, Jack|
|Anderson, Donald||Brown, R. W. (Shoreditch & F'bury)||Dunwoody, Mrs. Gwyneth (Exeter)|
|Archer, Peter||Buchan, Norman||Dunwoody, Dr. John (F'th & C'b'e)|
|Armstrong, Ernest||Cant, R. B.||Eadie, Alex|
|Atkins, Ronald (Preston, N.)||Carter-Jones, Lewis||Edwards, William (Merioneth)|
|Atkinson, Norman (Tottenham)||Chapman, Donald||Ellis, John|
|Bacon, Rt. Hn. Alice||Coe, Denis||English, Michael|
|Bagier, Gordon A. T.||Coleman, Donald||Ennals, David|
|Barnett, Joel||Craddock, George (Bradford, S.)||Evans, Albert (Islington, S. W.)|
|Baxter, William||Cullen, Mrs. Alice||Evans, loan L. (Birm'h'm, Yardley)|
|Beaney, Alan||Dalyell, Tarn||Faulds, Andrew|
|Bence, Cyril||Davidson, Arthur (Accrington)||Fletcher, Raymond (Ilkeston)|
|Benn, Rt. Hn. Anthony Wedgwood||Davidson,James(Aberdeenshire,W.)||Fletcher, Ted (Darlington)|
|Bennett, James, (G'gow, Bridgeton)||Davies, G. Elfed (Rhondda, E.)||Foot, Michael (Ebbw Vale)|
|Blackburn, F.||Davies, Harold (Leek)||Ford, Ben|
|Blenkinsop, Arthur||Davies, Ifor (Gower)||Forrester, John|
|Boardman, H. (Leigh)||Delargy, Hugh||Freeson, Reginald|
|Booth, Albert||Dempsey, James||Galpern, Sir Myer|
|Braddock, Mrs. E. M.||Dewar, Donald||Gardner, Tony|
|Bray, Dr. Jeremy||Diamond, Rt. Hn. John||Gourlay, Harry|
|Gray, Dr. Hugh (Yarmouth)||Mackenzie, Gregor (Rutherglen)||Richard, Ivor|
|Gregory, Arnold||Mackintosh, John P.||Robertson, John (Paisley)|
|Grey, Charles (Durham)||McNamara, J. Kevin||Robinson, W. 0. J. (Walth'stow, E.)|
|Griffiths, David (Rother Valley)||MacPherson, Malcolm||Rodgers, William (Stockton)|
|Griffiths, Will (Exchange)||Mallalieu, E. L. (Brigg)||Rose, Paul|
|Gunter, Rt. Hn. R. J.||Mallalieu, J. P. W.(Huddersfield, E.)||Ross, Rt. Hn. William|
|Hamilton, James (Bothwell)||Mapp, Charles||Rowlands, E. (Cardiff, N.)|
|Hamilton, William (Fife, W.)||Marks, Kenneth||Sheldon, Robert|
|Hamling, William||Marquand, David||Short, Rt. Hn. Edward (N'c'tle-u-Tyne)|
|Hannan, William||Mason, Rt. Hn. Roy||Silkin, Rt. Hn. John (Deptford)|
|Harper, Joseph||Mendelson, J. J.||Silverman, Julius (Aston)|
|Harrison, Walter (Wakefield)||Mikardo, Ian||Skeffington, Arthur|
|Haseldine, Norman||Millan, Bruce||Slater, Joseph|
|Hazell, Bert||Miller, Dr. M. S.||Small, William|
|Heffer, Eric S.||Milne, Edward (Blyth)||Snow, Julian|
|Herbison, Rt. Hn. Margaret||Morgan, Elystan (Cardiganshire)||Spriggs, Leslie|
|Homer, John||Moyle, Roland||Steel, David (Roxburgh)|
|Houghton, Rt. Hn. Douglas||Murray, Albert||Steele, Thomas (Dunbartonshire, W.)|
|Howie, W.||Neal, Harold||Stonehouse, John|
|Hoy, James||Newens, Stan||Swingler, Stephen|
|Hughes, Emrys (Ayrshire, S.)||Ogden, Eric||Taverne, Dick|
|Hughes, Roy (Newport)||O'Malley, Brian||Thornton, Ernest|
|Hunter, Adam||Oram, Albert E.||Tinn, James|
|Jackson, Colin (B'h'se & Spenb'gh)||Orbach, Maurice||Tomney, Frank|
|Jackson, Peter M. (High Peak)||Orme, Stanley||Urwin, T. W.|
|Janner, Sir Barnett||Oswald, Thomas||Varley, Eric G|
|Jenkins, Hugh (Putney)||Owen, Dr. David (Plymouth, S'tn)||Wainwright, Edwin (Dearne Valley)|
|Jenkins, Rt. Hn. Roy (Stechford)||Page, Derek (King's Lynn)||Wainwright, Richard (Colne Valley)|
|Johnson, James (K'ston-on-Hull, W.)||Paget, R. T.||Walden, Brian (All Saints)|
|Jones, Dan (Burnley)||Palmer, Arthur||Walker, Harold (Doncaster)|
|Jones, J. Idwal (Wrexham)||Pannell, Rt. Hn, Charles||Wallace, George|
|Kelley, Richard||Pardoe, John||Watkins, David (Consett)|
|Lawson, George||Park, Trevor||Watkins, Tudor (Brecon & Radnor)|
|Leadbitter, Ted||Parker, John (Dagenham)||Weitzman, David|
|Ledger, Ron||Parkyn, Brian (Bedford)||Wellbeloved, James|
|Lee, John (Reading)||Pavitt, Laurence||Whitaker, Ben|
|Lever, Harold (Cheetham)||Pearson, Arthur (Pontypridd)||White, Mrs. Eirene|
|Lewis, Ron (Carlisle)||Peart, Rt. Hn. Fred||Williams, Alan (Swansea, W.)|
|Loughlin, Charles||Pentland, Norman||Williams, Clifford (Abertillery)|
|Lubbock, Eric||Perry, George H. (Nottingham, S.)||Williams, Mrs. Shirley (Hitchin)|
|Mabon, Dr. J. Dickson||Prentice, Rt. Hn. R. E.||Willis, Rt. Hn. George|
|McBride, Neil||Price, Thomas (Westhoughton)||Winstanley, Dr. M. P.|
|McCann, John||Price, William (Rugby)||Woodburn, Rt. Hn. A.|
|MacColl, James||Probert, Arthur||Woof, Robert|
|MacDermot, Niall||Rankin, John||Yates, Victor|
|Macdonald, A. H.||Rees, Merlyn|
|McGuire, Michael||Reynolds, G. W.||TELLERS FOR THE NOES:|
|Mackenzie, Alasdair (Ross &Crom'ty)||Rhodes, Geoffrey||Mr. Alan Fitch and Mr. J. D. Concannon.|
§ Main Question put forthwith, pursuant to Standing Order No. 39 (Amendment on Second or Third Reading) and agreed to.660
§ Bill accordingly read a Second time.
§ Bill committed to a Committee of the whole House.—[Mr. Gourlay.]
§ Committee Tomorrow.