HC Deb 29 June 1967 vol 749 cc765-8
The Minister of Power (Mr. Richard Marsh)

With permission, Mr. Speaker, I should like to make a statement.

Temporarily, the cost of oil supplies to the United Kingdom, as for other Western European countries, has increased substantially as a result principally of the lengthening of tanker routes and higher tanker freight rates. These costs have to be met in order to maintain our supplies. They represent broadly an average of £2 a ton.

The oil companies have consulted me in detail about the position and have sought my advice on how to handle the increased costs. The Government have accepted that a temporary surcharge of 2d. a gallon on the prices of all petroleum products would be reasonable to meet the cost of the present supply difficulties.

Petrol prices were reduced recently and the surcharge returns them roughly to their previous level. It should be clearly understood that these surcharges are justified only by the present difficulties and that the whole situation will be kept under close review.

Sir K. Joseph

Will the right hon. Gentleman accept that the reduction of petrol prices to which he referred was due to the operation of a free market? Secondly, what is the Government's view of the effects of these rising costs on the balance of payments? Thirdly, do the Government expect that rationing may have to be considered.

Hon. Members

What about Suez?

Mr. Marsh

Suez would involve a longer answer.

Governmental calculations have clearly taken place of the effect on the balance of payments, but I should want notice of that question. Rationing is certainly very much under consideration. I work on the assumption that it is easier not to use rationing if one finds that it is not necessary, than to find at the very last moment that one is unprepared and then have to use it. I see no prospect of rationing in the immediate future, but preparations are being made so that, at some time in the future that we cannot see, we shall be able to deal with it.

Mr. Arthur Lewis

As my right hon. Friend said that this is only temporary and as all the petrol companies have been showing vast profits for years, surely it is not too much to ask them to meet this extra charge temporarily out of their profits and pro tanto to reduce those profits for a little while, since the Government have said that when costs go up temporarily, they should be absorbed by the companies?

Mr. Marsh

The position is a trifle more complicated than that. Freight rates, for example, vary very widely, but they are, at the moment, broadly three times as high as they were before the Middle East crisis. I accept my hon. Friend's concern, but we are not dependent for our oil supplies solely on British companies. Many people in the world want to buy petrol, and in those circumstances one has to pay a price for it.

Mr. Lubbock

Would the right hon. Gentleman say whether he considered, in conjunction with his right hon. Friend the Chancellor of the Exchequer, the use of the regulator, so that this increase need not have been passed on to the consumer? Will any steps be taken to exempt the operators of public service vehicles, either under the Bus Fuel Grants Act, or by some other means?

Mr. Marsh

I do not see how the regulator would meet this problem. Clearly, this will involve increases in costs for industry and transport, but the difficulty is that there is no alternative.

Mr. Mendelson

With reference to his remark about foreign companies being heavily involved, with a consequent absence of any British control over their prices and movements, will my right hon. Friend bear this in mind when he reconsiders the future of the coal industry in this country, and call a halt to any accelerated shut-down of coal mines?

Mr. Marsh

That is a rather wider point, and an issue of fuel policy, which the House will have opportunities to discuss.

My simple point is that, in this case, for very exceptional reasons, the increased cost can be seen. Given that there is a heavy world demand for the petroleum products available, if one is not prepared to pay what other countries are paying—some are paying more and most have put up their prices; West Germany, Holland, Sweden, Belgium, Switzerland, Norway, Denmark and Italy, for example—one will find that one cannot have the oil.

The purpose is to be realistic, and I should have thought that most people would realise that the increase is about as low as anyone expected and rather lower than some of the forecasts.

Mr. Burden

When will the increases operate? Would the right hon. Gentleman consider discussing with his right hon. Friend the Chancellor of the Exchequer the possibility of reducing the petroleum levy from 3s. 7d. a gallon to 3s. 5d. a gallon so that the prices need not be increased?

Mr. Marsh

That would be an extraordinarily expensive exercise. It should be made clear that there is no Government control over these prices. I have been asked for advice, on behalf of the Government, by the companies and I have given that advice. We expect them to conform to it.

Mr. Burden

When will the increases operate?

Mr. Marsh

That is a matter for the companies, but soon.

Mr. Hugh D. Brown

Even though the cost of promotional advertising may have only a very marginal effect on the cost of petrol, has the Minister taken any steps to abolish some of the crazy schemes which are in operation at the moment? In spite of the claims made for a free market. I am certain that most motorists would not know whether they had a tiger in their tank.

Mr. Marsh

A distinction has to be drawn between petrol retailers and oil in bulk. Much of the advertising and many of the give-away schemes are not matters for the companies, but for individual garages; and in any case they certainly do not affect fuel oil, which is one of the biggest sectors here.

Several Hon. Members rose

Mr. Speaker

Order. We have a lot of business ahead of us.