I am initiating this debate to voice the strongest possible protest against the decision of the South-Eastern Regional Hospital Board in Scotland, supported by the Secretary of State for Scotland, to heat certain new hospitals in Edinburgh by oil instead of by coal.
I wrote to the Secretary of State on this issue last October, asking that the figures on which the board based its decision be published, in particular to show the economy in favour of oil installations. The Secretary of State replied to me on 17th January and said that the board had issued a Press notice to this effect, showing an advantage in the annual cost of £10,000 in favour of oil. Neither then nor indeed in further challenges in the House were any references made by the Secretary of State or the hospital board to the social considerations in arriving at this decision. In the House on 29th January the Secretary of State repeated the figure of £10,000 as an indication of the economy of oil against coal.
The Secretary of State was not lying to the House but it was very much less than the whole truth, as I shall try to show. I gave notice to the Under-Secretary of State for Scotland of six questions to which I should like to have answers but in the interim, in the interest of greater accuracy, I decided to answer them myself.
The first question that I put to him was: how many oil companies were asked to tender and how many did so? The answer to that is seven, of which six produced a tender quotation. The second question was: of those six which quoted, did all of them, or most of them, quote the same price? The answer is that two of them quoted 8d. per gallon and the other four quoted 8·12d. per gallon—correct to the last one-hundredth of a penny. This smacks very strongly of a rigged market, and I hope that the Secretary of State will look into it.
The third question which I put to him was: is it true that not one of the oil companies would give any assurance whatever that the price quoted would be the same in 1966–67 when the oil would be needed by the hospital? The answer is that every single one of the oil companies made it abundantly clear that no such clear assurance could be given. In fact, they all asked the regional hospital board to be allowed to submit revised quotations nearer the date when the installations were completed. Not a single firm quotation came from any of those oil companies.
Fourthly, I asked the hon. Member whether it was true that no guarantee was given by any of the oil companies about any kind of price stability, either short term or long term. The answer is that no guarantees of any kind were given by any oil company, either short term or long term.
I turn to the Coal Board. Question No. 5 related to the price quoted by the Coal Board. Is it true, I ask, that the Coal Board was prepared to give a special tonnage rebate on all coals supplied to all hospitals in the region, to come into effect on 1st January, 1964—this year—and to remain in effect until 31st December, 1968? The answer to that is, "Yes, the Coal Board gave these assurances". There was a generous rebate applicable to all coal for all hospitals, the rebate increasing as the total tonnage consumed increased.
Question No. 6 also referred to the Coal Board: is it true that the Coal Board guaranteed a stable price for its coal? The answer is, "Yes, it did." It quoted a firm price now which would stay firm when the coal was needed in 1966–67. Moreover, it guaranteed that that price would remain stable right up to 1st January, 1969. The Government are desperately anxious to stabilise prices, and yet they spurned this magnificent example set by a nationalised industry.
The total amount of coal involved is 37,000 tons a year, which is the annual output of 135 Scottish miners on the basis of the O.M.Y. provided for me by the reference library yesterday. My hon. Friend the Member for Edinbrugh, East (Mr. Willis) asked a Question last Wednesday about the effect of the discriminatory charge of 10s. a ton. If that 10s. a ton had not been on the coal, which means 37,000 times 10s., or more than £18,000, it would have had the effect of the Coal Board getting this contract instead of losing it.
Yet the Secretary of State admitted last Wednesday that he had had no consultation whatever with the Coal Board, none with the Ministry of Power and none with anybody else, as far as we know, except the oil companies. The Secretary of State seems to be quite content to let the regional hospital board do what it likes. With its hospitals surrounded by Scottish coal, sitting on top of Scottish coal, it was happy to see them heated by Middle East oil.
By his action the Secretary of State, it seems to us, has shown a singular lack of interest in Scotland's most important industry, a lamentable display of ingratitude to an industry which has increased its output per manshift by 20 per cent. in two years—than which there is no better record in any industry in Britain. The industry has come through very difficult times. Its outlook is now reasonably promising, but it still needs every market it can get, and it was very anxious to get this one. The first priority of the Government ought to have been and ought still to be to see that the order books of the National Coal Board are kept full, but this episode has made it clearer to me and to all my hon. Friends than it was before that there are forces at work which are hostile to the coal industry. These private profit-making interests do not cherish the idea of a flourishing nationalised industry, and those interests have the ready and sympathetic ear of the Government.
All the protests of all the local authorities involved, Fife County Council and all the others, all the protests from this side of the House, have had no effect whatever on the Government. They were determined to yield to the private profit-making interests of the oil industry. This seems to us a grisly example of the Government's neglect of the real interests of Scotland. The unchallengeable facts which I gave in the early part of my remarks are ample proof of the accusations I have made in the latter part, and the elec- torate will shortly give their reply to these nefarious policies.
My hon. Friend the Member for Fife, West (Mr. W. Hamilton) has given to the House some facts which had to be taken into account by the regional hospital board and by the Secretary of State in reaching this decision, and everyone who has listened to my hon. Friend, and everyone who reads what he has said, will recognise very readily that, if he has told the truth in the figures which he quoted and about the tenders which were offered by the oil companies and by the National Coal Board, there is no fair competition between coal and oil in the tendering for contracts, even to supply public authorities in Scotland—that there is, in fact, a definite and disgraceful bias in favour of oil.
I wrote to Lord Robens the other week when I had a reply from the Secretary of State intimating and justifying the decision to give the oil company this contract. In the absence of Lord Robens, the chairman of the Coal Board, I had a letter yesterday, 4th February, from Mr. Wilkinson, the member for marketing. I have not time to read his letter, but Mr. Wilkinson has given me in this letter the information about the offer made by the Coal Board which my hon. Friend has just given to the House, namely, that this hospital board, had it chosen coal for the heating installations in these two new hospitals still to be built, would from this day have got at a reduced price every ton of coal it bought for all the hospitals. It would have paid less for every ton it would get from now on for the next five years.
Mr. Wilkinson says he would be interested to know whether the price the oil companies quoted was a firm price, and the period for which it was to remain unaltered. My information is the same as that of my hon. Friend, that they could not even make a firm offer; and yet the Secretary of State was able to calculate that the offer which they made showed an advantage to the regional hospital board amounting to £10,000 a year.
This was a calculation which, so far as I can ascertain, it was impossible to make. Inasmuch as we have all, in our correspondence with the National Coal Board and with the Secretary of State, expressed concern for the Scottish economy and the well-being of the Scottish coal industry, it is astonishing that the Secretary of State, in his letter of 17th January, should state:
I am of course very much aware of your concern about the general problem of the effect of changes of this kind on the employment situation, but it does not seem to me that our long-term interests would be best served by making uneconomic decisions in particular cases.
Was the decision to use coal uneconomic? Does this have an effect on the coal industry? Is the coal industry important in the efforts that we were all making to bring about an improvement in the Scottish economy?
The Board member for marketing, writing to me, said:
We made these special offers against the background of the improved results of the Scottish coalfield, an improvement which we expect to continue and so allow us to reduce the selective increase.
Is the Secretary of State not interested in getting a reduction in the selective increase? The letter continues:
We very much wanted this business … We are very disappointed and the loss of such a large order can only make it more difficult for us to enable the Scottish coalfield to pay its way.
Are these not considerations which the Secretary of State ought to take into account? He told us last Wednesday that he had not consulted the Coal Board or the Minister of Power. He has consulted nobody. One doubts very much whether he had make an examination of the offers made by the National Coal Board and the oil companies which were mentioned by my hon. Friend. I want the Under-Secretary tonight to tell us if the Secretary of State knows that the Coal Board offered an immediate price reduction for all the coal taken by the regional hospital board as a condition, for getting the market. Did he know that? If he did, why did he not say something about it last Wednesday, and why did he not say something about it in his letter to us telling us that the oil companies' offer showed a substantial economy in favour of oil? Will he tell us which oil company has been given the contract? Public money is involved,
and we are entitled to know. We are also entitled to know how it was possible to make a decision between the oil companies when all of them made virtually the same offer to the regional hospital board.
Will the Under-Secretary tell us whether this company which got the contract quoted a firm price to operate when the the plants start, and for a guaranteed period after that, as the Coal Board did? My information is that it did not make any such offer. If there was no such firm price offered by the company—and I hope he will tell us which company it was—will the hon. Gentleman promise to have the whole matter reconsidered? I am sure that we would all be happy if the Under-Secretary, feeling unable to answer some of the questions he has been asked, would see that the matter is reconsidered. It is essential, in the interests of the Scottish economy, that this matter should be reconsidered. This is the final question which I shall put to the Under-Secretary tonight, and I hope he will answer it in the affirmative.
I should like first of all to say that I am extremely glad to have the opportunity of replying to the debate, for two reasons. The first is because a matter of considerable interest is involved. The second is because it was I who took part in the exchanges which occurred at Question Time on 27th November during which I gave certain assurances to the hon. Member for Fife, West (Mr. W. Hamilton). I am most grateful for his information about the questions that he proposed to raise. I am equally grateful, though slightly taken aback, that he has answered them as well.
I stated in reply to the hon. Member in November that social factors such as the dependence of Fife on the coal mining industry would be given most careful consideration. But I added that I was not prepared to say that hospitals should use coal regardless of cost. In the present case the Works and Buildings Committee of the South-Eastern Regional Hospital Board, after considering the report of its consulting engineers, recommended last October that oil should be used for the boiler houses that were built at the Royal Infirmary of Edinburgh and at the Western General Hospital.
Those recommendations were made as part of the preparations for the rebuilding of these two major teaching hospitals, and although it will be some time yet before building begins, it is clearly necessary to make these decisions now in order to enable the engineers and the architects to prepare their detailed plans.
From the functional point of view, the consulting engineer had recommended that coal or oil could suitably be used in either case, although in the case of the Royal Infirmary his opinion was that oil would be more convenient because the boiler house had to be very close to the main buildings and special measures would be needed to overcome the additional problems of noise, dust and traffic that coal would raise.
So far as costs were concerned, the engineer's report showed that on the best information to be obtained about fuel prices, there were substantial margins in favour of oil at both hospitals, taking the running costs and the appropriate annual allowances for capital costs together. I should explain that the coal prices used in the calculation had been obtained from the National Coal Board. The oil price assumed was the standard bulk contract price for supplies to the hospital service.
A great deal of concern was expressed publicly about the recommendation that oil should be used, and the National Coal Board asked the regional board for an opportunity to submit revised proposals about the supply of coal. The regional board asked for my right hon. Friend's advice about this, and he advised it that it should invite revised proposals from the Coal Board and should also give the other fuel interests concerned the opportunity to submit proposals.
As the hon. Gentleman said, seven oil companies were invited to submit proposals, and six did so. Formal tenders were not asked for by the regional board. The object of the operation was to assess for planning purposes the relative costs of the different fuels so that an informed choice of fuel could be made. The supply of fuel for the new boiler houses at these hospitals will not begin for several years, and, therefore, the board was not seeking tenders at this stage. The majority of the oil companies confirmed that the current bulk contract rate would be the correct price to assume at present, but others made slightly lower quotations and they are precisely the figures quoted by the hon. Member. None of the oil companies made forward forecasts but the revised proposal submitted by the N.C.B. was in the form of a firm offer for two years from January, 1967, at a price rather lower than the one it had previously quoted.
When the proposals had been received, the regional board asked for the Secretary of State's guidance on the factors it should take into account in reaching a decision. As my right hon. Friend said last Wednesday, he advised the board that, after consideration of the functional factors which might affect the choice, it should compare the cost of the fuel available on the basis of an annual charge, including fuel and operational and maintenance costs, together with an appropriate annual allowance for the capital cost. If the difference were more than marginal, it should be regarded as pointing to a decision in favour of the lower cost installation.
The figures calculated by the engineers on the basis of the revised prices for coal and oils showed that where the lowest priced suitable coal and the lowest priced suitable oil were used there would be a margin at the Royal Infirmary of about £5,200 a year in total annual costs in favour of oil and a corresponding margin at the Western General Hospital of about £5,400 a year in favour of oil. This difference represents approximately seven per cent. of the total annual costs, and on the basis of this substantial difference the regional board decided that oil should be used.
If the hon. Member will let me go on he will find that we have.
The hon. Member for Hamilton (Mr. T. Fraser) asked whether the special rebate was taken fully into account. It was. The rebate was, as he knows, for a limited period of five years and its total value—and it is absolutely right to say that this included a rebate on all coal supplied to every hospital in the region—affected only to a small extent the financial advantages of oil.
Hon. Members have referred to the selective coal price increases which were introduced by the National Coal Board in 1962 in an endeavour to bring the proceeds of its heavily losing divisions more closely into line with their costs of production. Basically any decision on the possibility of reductions being made in the Scottish coal price differential will have to be taken by the National Coal Board.
As my right hon. Friend said on Wednesday:
It is for the Coal Board to decide what price it is prepared to quote for any particular tonnage in any particular place".—[OFFICIAL REPORT, 29th January, 1964; Vol. 688, c. 347.]
I am sure that it quoted as competitive a price as it could in this instance.
I was asked specifically what the effect of the removal of the selective price increases would have been. As I have explained, the N.C.B. quoted the regional hospital board a special price for the supply of coal to the two hospitals, and it is at this point, and only at this point, that I think that the hon. Member has drawn an assumption which is not correct.
It does not follow, in view of this price quoted, that the price would be further reduced by the full amount of the selective increase if this had been removed, and therefore I cannot accurately say what the difference would have been.
The point which I ought to take up, because it arose at Question Time last week, was made by the hon. Member for Fife, West, who asked what Scotland got from the oil industry that the Secretary of State for Scotland should give it preferential treatment. Of course we are in no way giving oil preferential treatment. If costs had been equal, or if the difference had been only marginal, my right hon. Friend would have advised the regional board to choose our indigenous fuel, coal, and this obviously makes sense.
The hon. Member should not take the line that the oil industry has contributed comparatively little to the Scottish economy. One of the most hopeful growth areas in Scotland is Falkirk and Grangemouth, and the growth there stems very largely, if not almost entirely, from the oil refinery at Grangemouth. The contribution which this refinery has made to Scotland's economy is enormous. The refinery is at present being expanded by almost 40 per cent. with a great £25 million scheme. An enormous volume of oil traffic has made Grangemouth one of Scotland's largest and most successful ports, importing crude oil and exporting refined products to the Continent as well as distributing throughout Scotland.
Hon. Members opposite, with great justification, have expressed great concern about our shipbuilding industry. In the last 10 years alone, three dozen new tankers have been launched on the Clyde for the group connected with Grangemouth. Local rates attributable to the oil industry in Scotland extend to several hundreds of thousands of £s a year.
All this is a very considerable contribution to Scotland's economy and it is quite wrong to convey the impression that oil is some kind of exotic product in which Scotland has no share. We should indeed be—