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Column 249That pensioner couple, on Lewis, were 35 yards from an electricity connection, yet the Hydro Board told them that it would cost them over £3,000, and that, I understand, was the second, revised--and hence lower--price that they were quoted. When the Secretary of State for Scotland appeared before the Select Committee, he seemed to take the view that that pensioner couple had situated their house in the wrong place. He appeared to say that it was their fault for not being nearer than 35 yards to the nearest power connection.
I accept that the legislation guarantees a price for anyone whose home is situated within 50 yards of a power connection. But that is a theoretical right for most consumers, certainly if we are to have charges of £3,000 or more for a 35-yard connection. The Select Committee took the view that, the needs of remote areas of Scotland were not satisfied by existing connection arrangements alone and we said that the development of such areas, with new houses and more people, would occur only if new connection charges were reasonable. That would be a key responsibility of a Scottish director general. 7.15 pm
In Standing Committee, the Minister of State argued that a single director general at United Kingdom level having a dual responsibility would not be a problem, even though he would be responsible both to the Secretary of State for Scotland and to the Secretary of State for Energy. The Minister of State argued that the Government spoke with one voice, claiming that both Secretaries of State spoke on behalf of the Government.
It was an interesting concept. Can we expect the two Secretaries of State to speak with one voice on these matters? That question was put to the test a few weeks later when, on 25 January, I questioned the Secretary of State for Energy about whether it was likely that the main office of the United Kingdom Director General of Electricity Supply would be located in Scotland. After conceding that he had not given the matter a great deal of thought, the right hon. Gentleman decided--off the cuff and in front of the Select Committee--that his answer should be no. I asked him why not, and he replied : "Because we believe that he"--
the Director General of Electricity Supply--
"will have a duty to Scotland, but he will also have a duty to England and Wales, and that is far and away the biggest part of his job."
The right hon. Gentleman went on to use a phrase that he may now regret using. When I argued that the Select Committee might take a different view, he said that that was unlikely, and he described as "an eccentric notion" my argument that the director general's main office should be in Scotland.
The Secretary of State for Scotland appeared before the Select Committee a few weeks later, on 22 February. I thought that, as the two Ministers were said to speak with one voice on Government policy, it would be interesting to ask him similar questions. The Secretary of State for Scotland did not seem to believe that it was "an eccentric notion". He said that, on the contrary, it was not an issue on which the Government had reached a conclusion, and he added : "It is not a word that I would have chosen"
when asked if my argument was an eccentric notion. The right hon. Gentleman seemed sympathetic to the idea of
Column 250having the office located in Scotland, and I have subsequently been in correspondence with the Minister of State, who has assured me that the Government have an open mind on the issue.
We can see the fallacy of the contention that there is no problem in having dual responsibility, the belief that the director general can report, on the one hand, to the Secretary of State for Energy and, on the other, to the Secretary of State for Scotland. The Government argue that there is no difference between the views of the two Secretaries of State, but even on that issue, when questioned before the Select Committee, we saw a substantial difference of view. In those circumstances and with the conflicts of interest that might arise in the electricity supply industry, all Members representing Scottish constituencies must wonder whose view will prevail. I have no doubt that it will be the view of the Secretary of State for Energy, and the Scottish Office will tag along behind and try to reconcile the position at a later date.
It was said earlier that the recent price increase of 8 per cent. announced for the Scottish electricity industry represents an outstanding example of why we need a Scottish director general with responsibility, power and authority to intervene on behalf of the interests of Scottish consumers. That is particularly important in view of the suggestion that somehow the deal that has been arrived at between British Coal and the SSEB might have been the cause of these price increases. I heard the Minister of State suggest on the radio a few days ago that that deal might have been responsible for such sharp price increases.
The figures show that his view is nonsense. In the last three years, there has been a 28 per cent. decline in the real price charged for coal supplies to the SSEB. Indeed, the price charged for coal is only a fraction of the SSEB's overall costs. In the same three years, according to evidence given to the Select Committee by the SSEB, there has been an unexpected increase, costing the SSEB £240 million, in the nuclear costs of fuel reprocessing, waste treatment and decommissioning.
If we had a Scottish director general in Scotland, nobody--not the Minister or the SSEB--would be allowed to get away with misleading explanations for an over-the-odds increase in electricity charges, such as giving the impression that a minor and declining part of the SSEB's costs can be held responsible for such an exceptional increase in charges. A Scottish director general is necessary so that Scottish consumers can be told the truth about their electricity bills and protected from unreasonable increases in future.
Everything about the legislation--the lack of competition and the vulnerability of Scottish consumers--surely leads us to the conclusion that Scottish consumers need the maximum protection in the privatised structure. That protection should be provided by a Scottish director general with the full authority and prestige of that position. He should be nobody's deputy, nobody's office boy, but a Scottish director general reporting to the Secretary of State for Scotland. I very much hope that we shall be able to vote on new clause 15.
Mr. McAvoy : I am well aware of the constraints of time. I only wish that previous contributors had paid some attention to them. I have no intention of dealing with any of the points raised by members of the Scottish National party. The comments of the hon. Member for Banff and
Column 251Buchan (Mr. Salmond) were counter- productive. When we agree about so much, his pejorative and speculative attacks invite response, and I am certainly not prepared to listen to his remarks without replying. The hon. Gentleman and other Members of his party make great play of trying to get on to Committees and interfering with the processes of the House, yet when they were offered a place on the Standing Committee considering the Electricity Bill they refused that opportunity. Having refused an opportunity to participate in the processes of the House, they have no credibility whatever when they try to disrupt those processes.
Opposition Members who took the opportunity to work on behalf of the people of Scotland repeatedly made the point that all logic and fairness pointed to the need for a separate Scottish director general. The Minister of State, Scottish Office, made great play about the unionist and separatist arguments, but every move that the Government make reinforces the sentiment that Scotland will not have a fair deal from England within the British structure. Paradoxically, the so-called Scottish Conservative and Unionist party is the main driving force in encouraging resentment against the union which the majority of Opposition Members favour.
The integrated monopoly status of the electricity industry in Scotland and the fact that the public monopoly is to become a private monopoly demonstrate the need for a separate Scottish director general. Within the set-up envisaged by the Government, there is no clear responsibility for the privatised Scottish industry. The Select Committee on Energy observed that Scotland is different and there should have been a separate Bill. New clause 2 would at least ensure that there would be a director general for Scotland answerable to the Secretary of State for Scotland.
The pricing impact requires a strictly Scottish approach. Scottish consumers will pay a price based on United Kingdom average generating costs, not on Scottish generating costs which are lower. Because of the weather and climatic conditions, Scottish consumers already incur higher costs than elsewhere in the United Kingdom. My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) said in Committee that Mr. Donald Miller, the chairman of the SSEB, was supporting a single United Kingdom director general. My hon. Friend rightly suggested that Mr. Miller's support was at least partly based on the hope that privatisation would be a vehicle for maximising profits for his privatised company, which presumably would result in extra payment to him personally.
There is a desperate need for a director general concerned directly with Scotland, especially when we consider what has happened before privatisation. The SSEB increased prices by 8 per cent.--a greater increase than in England and Wales, and more than was necessary to keep in line with inflation. That is what has happened under the direction of Mr. Miller without the benefits, as he would see them, of a privatised structure.
A further demonstration of the need for a Scottish director general is the ludicrous situation between SSEB and British Coal. A great deal has been said about that and some important points have been raised. If Mr. Miller seeks to minimise costs for the SSEB, perhaps he should reduce the legal costs incurred in such disputes. Conservative Members may say that the situation between the SSEB and British Coal shows that there is no need for
Column 252a Scottish director general because two Scottish institutions are in dispute and the presence of the Secretary of State for Scotland did not prevent the development of such a damaging dispute. That is absolutely right. The Secretary of State's presence had no effect and the political world could not have an impact on the dispute because, disgracefully, the Secretary of State for Scotland did not see fit to intervene in a matter which was causing damage to Scotland. If we had a truly independent Scottish director general, it is inconceivable that he or she would not have intervened on behalf of the Scottish people.
The philosophy of privatisation is the free market and the survival of the fittest. The hon. Member for Banff and Buchan rightly mentioned that if there are commercial disputes between the Scottish producers and the English and Welsh consumers, according to the free market philosophy on which the privatisation is based, it is inevitable that England and Wales will have greater influence. According to the Government's philosophy, might is right, so England and Wales will have more voice and that will count against Scotland. That is the clear logic of the Government's privatisation policies. New clause 2 tries to protect Scottish interests from a Tory Government who have no support in Scotland for their Bill.
Mr. Calum Macdonald (Western Isles) : In speaking in favour of new clause 2 I shall endeavour to keep my remarks as brief as possible by focusing on one part of Scotland and on one specific problem. I wish to focus on the Highlands and Islands of Scotland, covered by the North of Scotland Hydro-Electric Board, and the problem of ensuring the supply of electricity to remote areas of the Highlands and Islands at a reasonable cost.
The hon. Member for Gordon (Mr. Bruce) said that it might seem odd that the Highlands and Islands had a very high percentage of connections compared with other parts of the United Kingdom. Despite the remote locations of many of the properties, a great number of them have been connected over the years. That is due to the unique ethos that has governed the hydro-electric board since its inception and given it a determination to provide electricity to remote areas at a reasonable cost and to spread the costs, which would otherwise fall very hard upon particular individuals in remote areas, among consumers and taxpayers in the locality.
In recent years there has been a second factor to explain the wide extent of electricity connection in the Highlands and Islands--the availability of finance from the EEC through the European regional development fund, which has been channelled into the North of Scotland Hydro-Electric Board to enable it to connect people living in remote rural areas.
The Bill will do away with both factors which enable those living in remote areas to be connected to the electricity supply, because privatisation will do away with the private status of the North of Scotland Hydro-Electric Board and make it a privatised company. The board will thus lose access to the EEC money that it has had until now. I deeply regret that the Government have chosen to go ahead with the privatisation and did not take the step that they took in regard to the privatisation of Caledonian MacBrayne, which had a similar EEC financial status. When they realised that that finance would be lost, they abandoned their privatisation plans. I wish that the Government had taken the same route with the North of Scotland Hydro-Electric Board.
Column 253I wish to put the case for my constituents. The hon. Member for Banff and Buchan (Mr. Salmond) has already mentioned the problems that they face, although he did not cite the worst examples to be found in my constituency of individuals requiring electricity and having to pay extraordinary and impossible sums to obtain it. In one community in my constituency, a household has been asked to pay £63, 000 to receive an electricity supply--a sum that is clearly way beyond the means of the couple who occupy the house. In case the Minister thinks that a nouveau riche couple have moved into the Highlands and Islands, I will tell him that the couple lived there long before the hydro board was established. They have been bypassed by the age of electricity.
Another significant case is that of Mr. MacDonald living in the village of Balallan. He did not choose to build a new house in an impossibly remote and inaccessible area. In fact, the new house is only 35 yards from the mains electricity supply at the edge of one of the largest villages in my constituency. Yet he is being asked to pay more than £3,000 for the privilege of receiving electricity. In Committee that case was put to the Minister very ably by my hon. Friend the Member for Makerfield (Mr. McCartney). The Minister's reply was that if Mr. MacDonald waited two or three years there might be a reduction in the price to £1,500 or so. As my constituent is 78 years old, that was not the most gracious of suggestions. The publicity given to the case by various newspapers and by my hon. Friend the Member for Makerfield has stung the North of Scotland Hydro-Electric Board. It has actually produced a booklet relating to the case, which has been sent to every Scottish Member of Parliament and to every newspaper in Scotland, because it is so fearful of the adverse publicity that it has been receiving. That seems to suggest that the board at least has a guilty conscience.
The first thing that one sees in the booklet is a "Summary of Activity" which stretches over a year and a half, but it is clear that nothing was done by the board in that year and a half to help my constituents to receive their electricity. All that happened was that a series of letters were sent explaining why my constituents could not receive electricity. In letters to me, the chairman of the board has made it clear that after privatisation consumers in remote areas cannot expect to receive any help from the general body of consumers in relation to connection and supply. That statement shows the future facing remote areas after privatisation. The ability to receive electricity will depend how remote one is from the mains electricity supply and it will come down simply to ability to pay.
I have mentioned only a minority of cases in the Highlands and Islands, but hundreds of properties in the area face such obstacles. That is why I, my constituents and others fear the effects of the Bill.
Mr. Lang : The House would have had more sympathy with the hon. Member for Western Isles (Mr. Macdonald) if he had acknowledged that under the arrangements that we are introducing the successor company to the hydro board will be required to set a common tariff precisely to benefit his constituents. He might also have acknowledged the virtual completion by the industry, with Government
Column 254and European assistance, of the supply network. He might have acknowledged the existence of the uneconomic rural development programme which the board has operated.
The hon. Member referred to the Balallan case. Although the sum of £3,100 may seem large, it is already £600 lower as a result of the negotiations with the board. Someone proposing to build a new house in such an area--we are not talking about an existing house--would take such a figure into account. Indeed, the applicants were told when they sought planning permission what the cost of supplying electricty would be. Therefore, the hon. Gentleman might have been more forthcoming on some of the details of the circumstances affecting the Western Isles and the consumption of electricity there.
The wording of proposed new clause 2 suggests that a deputy director general of electricity supply should be directly responsible to the Secretary of State for the regulation of the industry in Scotland. This would remove from the director general the duties which the Bill lays upon him in relation to Scotland and would effectively result in a separate regulator. New clause 15, proposed by the hon. Member for Banff and Buchan (Mr. Salmond) goes one step further and prescribes the appointment of a scottish director. It is quite clear to us that neither case would be beneficial, since both new clauses ignore the fact that the Scottish companies will be competing in a British market. We are clear that two separate regulators would be inefficient ; would fail adequately to monitor common carriage arrangements and fair trading practices across the border ; and would lose the opportunity for yardstick comparisons across the whole British industry to bring out best practices and provide leverage for increased efficiency. Our proposal for a deputy director general in Scotland reporting direct to the director general, who in turn reports to the Secretary of State, ensures that the Scottish industry has the best of both worlds : a representative of the director general based in Scotland, but still part of a single regulatory regime. New clause 15 is therefore unnecessary as well as impracticable.
Neither do I see any need for the detailed structure of the director general's organisation to be set out in the Bill as new clause 2 suggests. The Bill rightly restricts itself to describing the functions and responsibility of the director general, as the regulator of the single British market. The director general will be appointed jointly by the Secretaries of State for Energy and for Scotland and be responsible to both Secretaries of State. There is no need for the Bill to provide for the details of the director general's office. The House is well aware of the categoric assurances it has been given on a number of occasions that the director general will have reporting to him a deputy director general based in Scotland. That arrangement is quite different and is preferable to the confused view set out in the new clause.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) and others referred to prices. They made the mistake that all Socialists seem to make on such occasions. They assume that the Government decide what the prices should be. That may have been the case under the Labour Government, but it is not the case under this Government. Such matters are decided by the industry and, in determining tariffs, the industry must take account of a range of factors including cost structure and the need to make an adequate return on assets employed.
The tariff increase in Scotland in 1988-89--4.75 per cent.--was significantly lower than in England and Wales
Column 255where prices ranged in their increase from 7 per cent. to 12 per cent. The recently announced tariff increases in Scotland for this year of 8 per cent. from 1 April are slightly higher than in England and Wales but still lower than the average increases last year south of the border. The tariff increase in Scotland is greater this year than last, principally because of the effect of higher rates of inflation on operating costs generally, but also reflecting the higher than anticipated fuel costs--both nuclear and coal. Even with the latest increase, tariffs in Scotland are 9 per cent. lower in real terms than in 1982-83. One can compare that with the record of the last Labour Government, when tariffs rose by 20 per cent. in real terms.
Tariffs are primarily a matter for the boards to decide and in determining the level, they have to take into account a complex range of financial and operational factors, including the financial targets agreed with the Government. The financial target for 1989-90 is 2.7 per cent., set jointly to reflect the board's shared responsibility for nuclear generation. That holds the target at broadly the same level as it has been for the past two years.
There is no reason why tariffs should go up as a consequence of privatisation. Privatisation of the two companies will lead to increased efficiency and thus, in time, to lower prices. Competition in the broadest sense and private sector disciplines will put downward pressure on the costs that go into consumers' electricity bills. Where a monopoly will remain, prices to the consumer will be subject to strict and fair regulation and there will be downward pressure through the price condition. The restructuring proposals will create two companies satisfactorily balanced in terms of the mix of generating plant, spare capacity and forecast levels of profitability. Any tariff divergence will, therefore, relate substantially to the effectiveness of management decisions rather than simply to the structure.
The hon. Member for Clydesdale (Mr. Hood) referred to coal. I must point out to him that since we came to power, we have put over £1 billion a year in deficit and non-deficit grant into the coal industry. Nobody can say that we have not taken full account of our responsibilities in that regard. Equally, it is quite wrong to imagine that prices are uninfluenced by the price of coal. If the SSEB were forced to take coal at a high price, there would clearly be implications for the price of electricity.
The hon. Member for Banff and Buchan (Mr. Salmond) quoted the Select Committee on Energy on the question of a separate regulator, but he neglected to record the Select Committee's view that the arguments for and against a separate regulator were finely balanced. We feel that they are substantially weighted towards a single Great Britain regulator, but we took account of the Select Committee's arguments in reaching a conclusion. We also note with interest that both the boards in Scotland favour a single director general and that the electricity consultative council for the south of Scotland stated :
"Regulation in Scotland needs to be an integral part of the UK system of regulation while recognising the different circumstances of the industry in Scotland."
Mr. Salmond : Of course the Select Committee considered the arguments for and against carefully, but the conclusion it came to was for a separate Scottish regulator. The Minister has not yet answered the question why, given that he found other aspects of the Select Committee report
Column 256so useful, he did not take that recommendation on board. Incidentally, the Select Committee had only one Scottish member.
Mr. Lang : We took account of the recommendations of the Select Committee, but we also took account of other viewpoints and aspects of the matter that were relevant and important in reaching the conclusion that I described a few moments ago. The new clause will do nothing for consumers in Scotland. Consumers in Scotland will derive benefits from the rights that the Bill will give them, the competition that will be introduced through the privatisation of the industry, the downward pressure of the regulator and the more efficient operation of the industry in the private sector. Those are the ways in which the rights of consumers will be best protected, so I urge the House to reject the new clause.
I must say to the hon. Member for Banff and Buchan (Mr. Salmond) that the Labour party now accepts that every time a Scottish National Member speaks here, or anywhere else, his target is not the Government or the Conservative party, but the Labour party. The Scottish nationalists know that it is in their political interest to ensure the return of a Conservative Government rather than a Labour Government at the next general election. The Scottish nationalists are interested not in the people of Scotland, but only in their own cheap political ends. That is what the hon. Gentleman's speech was about.
We would prefer first not to have any privatisation of the electricity supply in Scotland. Our second preference is that there should be a wholly separate directorate and our third is new clause 2. We believe that only a separate Scottish director or one who is responsible to the Secretary of State for Scotland, whether a deputy or not, can ensure that the special needs of the Scottish industry and of the Scottish consumer are protected.
It is strange that just a week before the boards announced their price increases, for which the Minister disclaimed all responsibility, the Scottish Office, in the name of the Secretary of State, put out a release saying :
"The Secretary of State for Scotland has agreed a financial target for 1989 -90 with the South of Scotland Electricity board and the North of Scotland Hydro-Electric Board."
It is beyond belief that the Minister can argue the he has no responsibility for the price increases when he is setting the financial targets for the boards. What the Minister has said differs strongly from what the chairman of the North of Scotland Hydro-Electric Board, Mr. Joughin, said when referring to the 8 per cent. price increase that his board was introducing. He said : "These price increases are designed to ease the path towards privatisation."
Mr. Maxton : It is the easiest opt-out in the world to claim that one was misquoted. I am sure that all of us, at one time or another, have tried to claim that when we have said something that we regretted. I have spoken to Mr. Joughin and others and I am sure that his original remark was the correct view.
Column 257We believe that the Scottish industry should never be privatised and that there should be a director who is responsible for it. We are not satisfied that assurances given by Tory Ministers mean anything in terms of final promises. I call on my hon. Friends to join me in voting for the new clause.
Question put, That the clause be read a Second time :
The House divided : Ayes 205, Noes 266.
Division No. 140] [7.46 pm
Abbott, Ms Diane
Adams, Allen (Paisley N)
Archer, Rt Hon Peter
Ashley, Rt Hon Jack
Banks, Tony (Newham NW)
Barnes, Harry (Derbyshire NE)
Barnes, Mrs Rosie (Greenwich)
Beith, A. J.
Benn, Rt Hon Tony
Bennett, A. F. (D'nt'n & R'dish)
Bray, Dr Jeremy
Brown, Gordon (D'mline E)
Brown, Nicholas (Newcastle E)
Brown, Ron (Edinburgh Leith)
Bruce, Malcolm (Gordon)
Buckley, George J.
Campbell, Menzies (Fife NE)
Campbell, Ron (Blyth Valley)
Campbell-Savours, D. N.
Carlile, Alex (Mont'g)
Clark, Dr David (S Shields)
Clarke, Tom (Monklands W)
Clwyd, Mrs Ann
Cunningham, Dr John
Davies, Rt Hon Denzil (Llanelli)
Davies, Ron (Caerphilly)
Duffy, A. E. P.
Dunwoody, Hon Mrs Gwyneth
Evans, John (St Helens N)
Ewing, Harry (Falkirk E)
Ewing, Mrs Margaret (Moray)
Field, Frank (Birkenhead)
Foot, Rt Hon Michael
Garrett, John (Norwich South)
Garrett, Ted (Wallsend)
Gilbert, Rt Hon Dr John
Godman, Dr Norman A.
Grant, Bernie (Tottenham)
Griffiths, Nigel (Edinburgh S)
Griffiths, Win (Bridgend)
Healey, Rt Hon Denis
Heffer, Eric S.
Hogg, N. (C'nauld & Kilsyth)
Home Robertson, John
Howarth, George (Knowsley N)
Howells, Dr. Kim (Pontypridd)
Hughes, John (Coventry NE)
Hughes, Robert (Aberdeen N)
Hughes, Sean (Knowsley S)
Johnston, Sir Russell
Jones, Barry (Alyn & Deeside)
Jones, Ieuan (Ynys Mo n)
Kinnock, Rt Hon Neil
Lloyd, Tony (Stretford)
Macdonald, Calum A.
McKay, Allen (Barnsley West)