HC I 2R [Gas and Electricity Bill]
|Document type:||public statement|
|Document kind:||House of Commons Intervention|
|Venue:||House of Commons|
|Source:||Hansard HC [765/608-18]|
|Editorial comments:||1928-58. MT intervened at c615.|
|Themes:||Energy, Monetary policy|
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.
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.609
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.
The hon. Member would agree that unless individual points of view are expressed we cannot easily co-ordinate them, can we?
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 610slightest 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.
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.
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 611thing 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.
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. J. T. Price
There were no members of the Liberal Party.
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 612by 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..."
613but 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. David Steel (Roxburgh, Selkirk and Peebles)
Except for the last ten minutes.
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 underesti614mated 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.
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 615too 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.
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.
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 616is 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 618industry 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.
Sir G. Nabarro
I did not say "rush".
Sir G. Nabarro
No. Tread with a glad heart.
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.