ENERGY SUPPLIES (Hansard, 13 December 1973)

§ The Prime Minister (Mr. Edward Heath)
With permission, Mr. Speaker, I will make a statement on the energy situation.
The ban on overtime working by the coal miners has led to a sharp fall in coal 646 supplies to the power stations which are now running at nearly 40 per cent. below the expected level and are well below normal levels of consumption. Though the electricity supply industry started the winter with good stocks of coal, those stocks are now having to be run down at the rate of about 1 million tons a week at the present rate of electricity use, even after the restrictions already imposed.
To conserve coal stocks my right hon. Friend the Secretary of State for Trade and Industry instructed the oil companies, on 5th December, to increase supplies of fuel oil to the power stations. But fuel oil supplies are also under pressure, and a still larger allocation to the electricity industry could be only at the expense of severe further cuts to other users of fuel oil.
Deliveries of coal and of oil to the power stations are seriously threatened by the industrial action of train drivers started yesterday by ASLEF.
The ability of the electricity industry to deal with the consequences of these disruptions of supply has been further constrained by the action of the power engineers to restrict out-of-hours working.
It is clear that, so long as the industrial action by the coal miners and the train drivers continues, stocks of fuel at the power stations will continue to be run down at a rate which could, before many weeks had passed, reach a point when large-scale interruption and disruption of electricity supply became unavoidable.
In this situation the Government have a responsibility to take the measures necessary to safeguard the electricity system from major disruption, to prevent essential services from being placed in jeopardy, and to ensure the maintenance of a reasonable level of industrial activity.
The Government judge that this requires further savings amounting to 20 per cent. of electricity consumption, in addition to the measures already announced by my right hon. Friend the Secretary of State for Trade and Industry. This will inevitably require reductions in consumption in homes, in industry and in commerce.
First, in homes. The Government are asking all domestic consumers to restrict the use of electricity for space heating in the home to one room, and then only 647 if the householder has no other form of heating available.
Secondly, in industry and commerce. From next Monday 17th December, large, continuous process users will be limited to 65 per cent. of their normal electricity consumption each week. Electricity supplies for other industry and for commercial premises will, in general, be limited to a total of any five days over the next two weeks ending 30th December. After that, from 31st December, they will be limited to three specified days each week, which will be consecutive, and the days will be selected on the basis of schedules drawn up for each Electricity Board area. On the days when firms are free to use electricity, they will not be able to work longer hours than usual. Maintenance or other work not involving the use of electricity could continue on other days and most shops and offices would also be able to open on those days, though they would not be able to use electricity.
Orders to give effect to the restrictions on industry and commerce will be made over the next few days. The orders will name certain essential businesses which will be exempt from these restrictions, and specify other special purposes for which the use of electricity would be permitted at all times, for example, the operation of fire-fighting equipment, computers, cheque-sorting machinery and office machinery.
From next Monday, BBC Television and Independent Television services will close down not later than 10.30 p.m. each evening, save over Christmas and on New Year's Eve.
In addition the Government ask that everyone should economise in the use of all fuels and save all the electricity they can. There are innumerable ways in which all of us can do this: by keeping rooms at lower temperatures and heating them for shorter periods; by switching off lights and by not using electrical appliances unless absolutely necessary; by setting thermostats controlling water-heaters, refrigerators and deep-freezers at the most economical levels; by reducing lighting levels in theatres and other places of entertainment. These are only examples: unless we can save electricity—and indeed all fuels—in every aspect of our daily lives, 648 we shall have to impose yet further restrictions on business.
You will have noted, Mr. Speaker, that the measures we propose do not include rota cuts or periods of electricity disconnection. The Government have thought it right to avoid such cuts as long as possible, particularly in view of the fact that the ban on out-of-hours working by the power engineers would mean that any cuts would have to be highly unselective and would be bound to affect essential services. But I must warn the House and the country. If we failed to achieve the necessary savings in electricity consumption as a result of the reduction in domestic consumption for which we are asking and the other measures I have announced, frequent periods of electricity disconnection would become unavoidable. Essential industries and vital services would be cut indiscriminately. Young and old alike, at home, at work, or in hospitals, would all be hit.
I should also like to say a few words to the House about the oil situation.
The restrictions on oil exports by the Arab oil-producing countries affect the whole world: the developed countries of North America, Europe and Japan and the developing countries in Africa, Asia, and Central and South America.
We have been less hard hit than some other European countries, partly because—given normal levels of supply for other fuels—we are less dependent than they are on oil, and partly because the Arab producers have applied their reductions less severely to us.
But, when the whole world is short of oil, we cannot escape entirely.
This month we shall probably get about 85 tons of oil for every 100 tons we expected. The figure may be lower in January.
That is why we have had to ask everyone to economise in the use of oil in the home, in the office, in the factory, in the shops, on the road. But I can confirm that, on the basis of the level of supplies we now expect, the allocations of petrol and diesel to garages will continue at their present levels throughout January.
The situation has been greatly helped by the savings which drivers have made. I should like to take this opportunity to thank the public for their co-operation. 649 It is vital that these efforts should continue. The savings in the demand for petrol over the last few days have amounted to about 15 per cent. As a result I can announce today that, although plans for rationing will proceed so that it could be introduced at short notice, it will not be introduced this side of the New Year.
The improvement of the supply position clearly depends upon progress towards a peace settlement in the Middle East. The peace conference is due to open in Geneva on 16th December. We are doing and will continue to do all we can, by diplomatic means, to promote the success of the conference and to make the Arab oil-producing countries aware of the hardship and the damage which the restrictions inflict.
We must hope that the shortage of supplies will be reversed before long. We cannot expect the sharp rise in oil prices to be reversed. This is bound to have a very damaging effect upon our balance of payments, which is in any case running in substantial deficit at present.
Until a few weeks ago we could foresee a progressive diminution in the balance of payments deficit during the course of next year. But that prospect has now disappeared. We shall have to find—and therefore to earn—much more foreign exchange to pay for the same amount of oil.
In the long run some of the money will, we hope, come back to us in payment for increased exports to the oil-producing countries, who will need the goods and services we can provide for their own development. Here again, we in Britain are more fortunate than most. Within five to seven years we can look forward to bringing two-thirds of the amount of oil we need in from the North Sea. That will in due course make an enormous improvement in our balance-of-payments position.
But that does not help in the immediate future. In the short run, if we have to have oil, as we do, and we have to pay more for it, as we shall, the country will have less to spend on other things from abroad. The Chancellor of the Exchequer will be making a statement in the House on Monday about fresh measures to achieve these purposes. For the time 650 being as long as the shortages last we shall have to postpone some of the hopes and aims we have set ourselves for expansion and for our standard of living.
Other countries will be similarly affected by the rise in oil prices, and will be having to consider the implications for their balance of payments. In this situation there is an acute danger that, if we all independently resort to deflationary measures for the sake of our individual balances of payments, we shall set off a disastrous slump in the level of world trade. It will require all the effort and all the farsightedness of which the international community is capable to escape that consequence.
I leave for Copenhagen this evening for the Community summit meeting tomorrow. We shall be discussing the energy situation in all its aspects; but this particular aspect will be very much in mind.
The House will have seen that in his speech in London last night Dr. Kissinger announced a proposal for an Energy Action Group, which would have as its goal the assurance of required energy supplies at reasonable cost. Under this proposal the nations of North America, Europe and Japan would co-operate in a programme to rationalise and conserve the use of energy, develop alternative sources of supply, and give existing producers an incentive to increase supply. I shall be discussing that matter with the other Community Heads of Government at Copenhagen; but I can say here and now that the British Government warmly welcome this imaginative proposal, which is in the great tradition of the Marshall Plan after the war.
I must apologise to the House for so long a statement; but it seemed to me that the House should be given as full a statement of the position as possible, as a basis for our debate next week.

§ Mr. Harold Wilson
The Prime Minister has made an extremely grave speech. No one will complain at the length or comprehensiveness of his statement, particularly as he spelt out the special situations regarding electricity which require special treatment. Without seeking to inhibit any hon. Members who may wish to press the right hon. Gentleman further on what he said and on the implications of his statement, I suggest 651 that it will be right for us to take full advantage of the two-day debate which is planned for next week to fulfil our duty to examine the reasons and responsibility for the present state of affairs. We can then put forward our proposals or whatever view we may take for dealing not only with the emergency situation described today but with the more fundamental problems which the country is facing, as shown once again by today's tragic trade figures.
It is right that we should have a full investigation across the Floor of the House next week, as we have just heard that the Chancellor of the Exchequer is to make what will clearly be a more wide-ranging economic statement on Monday. The Prime Minister said that in his international discussions this weekend he would hope, as we would all hope, that there will be no lurch into world deflation as a result of the present very difficult situations. I hope that he will be able to ensure that the Chancellor's statement next week will not mean a lurch into deflation in this country.
We shall hear more about the general economic situation from the Chancellor, but will the Prime Minister take it from me, in advance of next week's debate, that the Labour Party does not feel that there is any reason to agree that the trade figures were likely to have improved in the New Year without the new dimension of oil? Indeed, everything seemed to be pointing the other way.
Is the Prime Minister prepared, in view of the gravity of his statement, to agree to the proposition that if the mine workers, the train drivers and the power station staffs were to resume normal work he would empower the Secretary of State for Employment, whose record in another context we all applaud, to enter into immediate discussions with the unions concerned, and the employers, with a view to ending the grave situation, it being understood that the Secretary of State for Employment, with his wise judgment in such matters, will be allowed reasonable flexibility which he considers necessary in respect of the present rigidities imposed by stage 3? The Prime Minister has shown that he is no longer in charge of the situation and that he must depend on interpretations put on any deal by the Pay Board.
652 We are all glad that the Prime Minister gave such a warm welcome to the initiative proposed by Dr. Henry Kissinger in London last night. We hope that he will urge on his colleagues that there is a need for communal action on oil which transcends any individual country or, indeed, Western Europe. I hope that the Prime Minister will do everything in his power to fulfil the proposal which he has so warmly endorsed.
The Prime Minister gave what appeared to be an assurance that there was no question of introducing petrol rationing this side of the New Year. The Secretary of State for Trade and Industry, if he was correctly reported, recently gave the impression that there was no question of introducing petrol rationing before the end of January. Does the Prime Minister's statement represent a change? Is the Prime Minister prepared to endorse the statement of the Secretary of State for Trade and Industry that there is no question of petrol rationing before the end of January?

§ The Prime Minister
As I said in my statement, on the present basis of supplies the present allocation of petrol can continue until the end of January. I gave an assurance that there would not be rationing this side of the New Year. Obviously the equation depends not only on supply but on demand. Demand will depend en other available forms of transport. I have given an assurance about the New Year—namely, that the present allocation will remain until the end of January.
I am grateful to the right hon. Gentleman for what he said about my welcome to Dr. Kissinger's proposal. We shall be discussing that matter in Copenhagen, together with a number of wide-ranging proposals for relations between Europe and the Arab countries and the future supply of oil. My right hon. Friend the Chancellor of the Exchequer will make a statement later on the general question of the economy. I note the right hon. Gentleman's declaration that he does not wish any measure of deflation.
I hope that the right hon. Gentleman will forgive me if I say that I have noted on previous occasions that he has made negotiating offers across the Floor of the House. I must say to him that I think it better that negotiations on the present 653 industrial disputes should not be dealt with in that way—[HON. MEMBERS: "Oh."] I say that seriously, in a situation in which the industrial disputes which now exist are threatening the life of this country. I am prepared, as is my right hon. Friend the Secretary of State for Employment, to consider proposals which are made and to reflect upon them. I am not prepared to enter into discussions across the Floor of the House. [HON. MEMBERS: "Why not?"] Because the trade unions themselves dislike it intensely, as I was told only too plainly by the National Union of Mineworkers when its representatives last came to see me.
Let us deal with these matters through the proper channels. If the right hon. Gentleman wishes to deal with inflation and to look after the national interest, it is not wise to encourage people to try to break stage 3.

§ Mr. Harold Wilson
If the Prime Minister wishes to import such a note into the discussion, does he recall that when Parliament used to have control of these matters under the last Labour Government, it had the right to vote on every order which was made? These matters were not left to authoritarian bodies outside the control of the Government and Parliament. Let the right hon. Gentleman remember that he used to invoke the TUC, the doctors and everyone else against national policies.
Does not the right hon. Gentleman feel that the House of Commons has the right to raise the suggestion that the Secretary of State for Employment should be given the powers suggested? Are we all to be gagged on these important issues? The right hon. Gentleman referred to what the miners said to him. Does he mean to tell us that if I had not referred to that way of settling the miners' dispute he would have agreed to it?

§ The Prime Minister
Of course Parliament has the right to discuss these matters at any time it wishes. What I am suggesting to the right hon. Gentleman is that he should not try to negotiate the settlement of a dispute across the Floor of the House with me. If he sends me a confidential letter on the matter, I hope he will keep it confidential.

§ Mr. Skeet
After the Arab auctions, where oil is changing hands at between 654 16 and 17 dollars a barrel, will my right hon. Friend endeavour to give us his interpretation of the likely cost to the balance of payments of the higher prices which are likely to be paid in world markets? Will he also do his utmost to ensure that the chemical industry gets the necessary naphtha and fuel oil essential to it?

§ The Prime Minister
I do not think it possible for anyone to forecast what will be the company price of oil during 1974. Of course, there is an escalation clause in the arrangements which were agreed in Vienna, but wo do not know the extent to which the oil-producing countries are being influenced by the prices at which some of the participation oil has been sold in the last few days. There is a very wide area of uncertainty in this matter and for that reason I would not care to forecast—nor, I think, would anyone else. Therefore, one cannot say what the precise impact on the balance of payments is likely to be.
We have fully recognised the requirements of the chemical industry from the beginning in the allocations.

§ Mr. David Steel
Will the right hon. Gentleman consider setting up an energy commission, with one Minister responsible for it to this House, to introduce a fair and comprehensive system of rationing of fuels as soon as possible, giving priority to industrial production?

§ The Prime Minister
We have an allocation scheme for industry which is now working smoothly. We have the machinery to carry out rationing when it is judged right to do so. The first stage for private consumers has been completed and the machinery for special allowances will be completed within a reasonable time.
I do not think the need exists to set up an energy commission to handle this matter. The House has discussed the question of rationing. A rationing system, however one tries to make it fair, is bound to involve unfairnesses. So long as the present situation exists, in which people are exercising restraint themselves, with the result that there is reasonable flexibility in use, we judge that rationing is not necessary before the New Year.

§ Sir Gilbert Longden
Do not Dr. Kissinger's proposals and the energy situation generally provide another argument, if one were needed, that it is absolutely essential that the EEC should speak and act as one?

§ The Prime Minister
Yes, Sir. I think that is the case. I think that Dr. Kissinger expects this. I had the opportunity of a talk with him yesterday. It is part of the relationship between the EEC, Japan and the United States. I believe that we are likely to be far more effective in our long-term policy with the Arab world if Europe speaks with one voice. It involves investment, Arab countries' balances, and development of the Arab world. All this has to be done on an enormous scale.

§ Mr. Palmer
Is the Prime Minister aware that he has announced today some of the severest restrictions ever in the history of the British electricity supply industry? Should he not examine his own responsibility in this matter for bringing in an incomes policy which in manifestly unfair and unjust to devoted servants who have never before resorted to industrial action in the 60 years of the electricity supply industry? Does he not feel that he should depart, if he can, from this obstinate attitude of mind which he possesses?

§ The Prime Minister
I was about to sympathise with the hon. Gentleman in the problem he raised because we have always recognised that a particular difficulty is involved. I hope that, in the process of negotiation, those concerned will find a solution to it. I cannot accept the last part of what the hon. Gentleman said because what the House approved in the code is by far the most flexible form of incomes arrangement which has existed in this country in all the attempts which have been made in the last decade.

§ Mr. Maude
Is my right hon. Friend aware that, while it is one thing for coal miners and electricity power engineers to refuse overtime work, the public will become increasingly angry if ASLEF train drivers continue to receive full wages for virtually refusing to work at all?

§ The Prime Minister
My hon. Friend is right, but this is a matter for the British Railways Board.

§ Mr. Heffer
Would not the right hon. Gentleman agree that, whilst it is quite correct that negotiations should not be conducted across the Floor of the House of Commons, it is true that, over a long period of time, it is precisely because of their so-called incomes policies that Governments have got themselves into this sort of situation? Does not he also agree that it is the Government's rigidity that is leading to this grave industrial situation? Would not the right hon. Gentleman further agree that, in a democracy, one cannot smash the trade unions but can only negotiate with them? Is it not better to have negotiations now to solve the problems rather than get into a situation where there is confrontation and no end in sight except disaster?

§ The Prime Minister
Hon. Members surely recognise that the present Government have done more to negotiate with the unions, and to carry on discussions with the TUC, either separately or with the CBI, than any other Government in British history. The hon. Gentleman talks about flexibility. He is talking not only about a basic rate but about the flexibility arrangements to meet particular problems, which the miners have used to deal with their holidays anomaly; the unsocial hours provisions, which the miners have used to deal with those working on night-shift; and the opportunity to have a productivity or efficiency agreement, which has been offered to the miners. All of these aspects provide flexibility, and they add up to a 16½ per cent. increase in one year. If by "flexibility" the hon. Gentleman means going higher than 16½ per cent. in one year for one group of workers, that is completely unacceptable.

Mr. Edward Taylor
In view of the uncertainty which will exist between now and Monday, can my right hon. Friend say whether consideration has been given to closing the money markets and the stock market?
Secondly, in view of the hardship which people will suffer if there are power cuts at home, particularly the elderly and disabled living at the top of multi-storey flats, will my right hon. Friend give instructions or advice to local authorities to set up action groups to visit elderly or disabled people who live alone in multi-storey flats and who may not have a lift, heating and lighting?

§ The Prime Minister
The Government do not intend to bring about the closing of the markets my hon. Friend mentioned.
We fully recognise the difficulties that will be involved in the power cuts. This is why we have adopted the procedures I have announced to the House in an attempt to avoid power cuts over an area which hurts particularly those my hon. Friend mentioned, the aged and the sick. If the whole country will cooperate, as I believe it wants to do, in the proposals I have made for reducing the use of electricity—not other fuels—in the home, it should be possible to avoid power cuts.
I wholeheartedly agree with my hon. Friend that many people in the community feel that they would like to perform a service to their fellow citizens. This they can best do at this difficult time by visiting them in their homes, helping to alleviate difficulties which may arise—for example, by doing the shopping, and so on.

§ Mr. Ewing
Does the right hon. Gentleman agree that what his statement amounts to is an admission that the country is gradually grinding to a halt? To prevent this happening will he recognise the vitally important part which miners, power supply workers and ASLEF train drivers play in keeping the economy of the country going? Will he make it clear what approaches have been made by the new Secretary of State for Employment to the trade unions since the last time it was announced that the unions and the Minister had met? If the Prime Minister is serious about wanting to arrive at a satisfactory conclusion to these disputes, may I ask him how long are the Government prepared to sit waiting for an approach from the trade unions instead of themselves making that approach?

§ The Prime Minister
The purpose of the arrangements I have announced to the House is to maintain the life of this country at a reasonable level and to maintain a reasonable level of industrial production. It will be far lower than this country ought to be producing at the moment, especially with all the opportunities open to it for exporting to the world. That is not the responsibility of the Government. It is the responsibility of those who are not producing the fuel which we could use. We 658 accept the responsibility of seeing that what is available is fairly distributed between the domestic consumer and industry. We are determined to keep this country surviving at a reasonable level in both these instances. My right hon. Friend, since he became Secretary of State for Employment, has had a number of discussions with union leaders. These have been confidential and it is not customary to make details known to the House or outside.

§ Mr. Wyn Roberts
Will my right hon. Friend confirm that the level of coal production is about 28 per cent. down, and that this jeopardises the basis of phase 3? Does he agree that if the level of permissible wage increases is to be changed that level should be revised downwards?

§ The Prime Minister
The loss of production is at present rather higher than my hon. Friend said. He raised the basic question whether, with such a loss of production and growth in the country as a whole, it is still justifiable to make the sort of offer which has been made by the NCB to the miners. I emphasise that if hon. and right hon. Gentlemen opposite are urging the Government to deal with inflation they cannot justify going further than the NCB has gone with the miners, or justify going further with other groups.

§ Mr. Elystan Morgan
In view of the much more severe hardships that will be suffered by the development areas compared with the rest of the country, and in the light of their generally debilitated condition, may I urge the Prime Minister to consider substantial relaxations in the rigour of the restrictions announced for those areas this afternoon?

§ The Prime Minister
It is difficult to accede to the hon. Gentleman's request, particularly from the point of view of the electricity supply industry. Where I do agree with him is that at a time when we have real development taking place in the development areas, and, as he knows as well as anyone, when we have brought unemployment down to a substantially lower level than for many years, it is wrong that the country should be afflicted in a way which will result in the development areas suffering more than other areas.

§ Mr. Tugendhat
It is clear that the measures announced by the Prime Minister today will have an effect on unemployment. Has he been able to produce any estimates of the likely level of unemployment during the coming months in view of Sir Frederick Cather-wood's statement and, if so, has he been able to draw these to the attention of ASLEF and the mineworkers' union?

§ The Prime Minister
When, in the New Year, the country comes on to what is a three-day working week, either Monday, Tuesday, Wednesday or Thursday, Friday, Saturday, then the numbers of those who will not be working for half of the week will be substantial. This is a consequence of the measures I have announced. There can be a change only if the coal supplies are resumed and the country gets the fuel it requires.

§ Mr. Sheldon
Is it not clear that as a result of the large increase in the price of oil, coal is now very cheap and the Prime Minister should thus find it reasonably easy to settle at a much higher level of wages with the mineworkers than has been so far negotiated? Is it not astonishing that, at a time of national emergency when the price of coal is so cheap, the Prime Minister should refuse to negotiate with the mineworkers?

§ The Prime Minister
Is the hon. Gentleman suggesting that we should raise the price of coal substantially when his right hon. Friend the Leader of the Opposition and all other Labour Members have been continually criticising the Government for rising prices? Is that what he is suggesting? Secondly, is he not aware that the £44 million offered by the NCB will have to be met by the taxpayer?

§ Mr. Walters
Would my right hon. Friend agree that if British foreign policy on the Middle East, enunciated so clearly over three years ago, had been accepted there would not be an oil crisis today? When my right hon. Friend goes to the European Summit, since there have been some economic advantages to this country and to Europe because of our policy, will he ensure that a European policy is formulated which does not frustrate those advantages?

§ The Prime Minister
I think I can give that assurance because this was agreed between the Foreign Ministers in 660 their statement. It was an agreed foreign policy towards the Middle East, the Arab world and Israel. I am hopeful that the Heads of Government will reaffirm the policy worked out by the Foreign Ministers.

§ Mr. Benn
Can the Prime Minister tell the House why rationing is being delayed when transport and agriculture are so obviously affected? Secondly, can he say why he has not announced a total ban on the export of coal and oil since the country now faces such dislocation? Finally, is he telling the House that, confronted with this situation, Members of Parliament should not be allowed to urge the Government to be flexible about the item of policy which is preventing a settlement?

§ The Prime Minister
The amount of coal which is exported is very small indeed. The arrangements with various suppliers are mutual arrangements. What we have to weigh up, especially with oil products, as the right hon. Gentleman knows, is the balance of advantage in cutting off some of the exchanges which at present we make to get other oil products back. In calculating this advantage we believe at the moment that the arrangements are suitable to us. All of these things can be reviewed. As for petrol, I have said that supplies can be maintained on the present basis until the end of January. I have given the assurance that we do not propose to introduce rationing before the New Year. This assurance makes the position clear to people for the Christmas period and up to the New Year and need not therefore, lead to any particular difficulty at the pumps. On the right hon. Gentleman's last point, I am saying that we will not give way to grossly inflationary wage claims proposed by him and his colleagues.

§ Mr. Speaker
Mr. Wilson, business question.

§ Mr. Kelley
On a point of order, Mr. Speaker. As the Prime Minister made several references to the position in the mining industry, I am surprised that you, Mr. Speaker, did not take an opportunity to call an hon. Member from the coalfields to take part in discussion of this issue.

§ Mr. Speaker
If the hon. Gentleman wishes to criticise me there are ways in which he can do so. I do my best. I do not think that hon. Members who represent mining constituencies can complain that they have not been frequently called in the past.