HC Deb 29 July 1974 vol 878 cc43-8
The Secretary of State for Energy (Mr. Eric G. Varley)

With permission, Mr. Speaker, I will make a statement on off-peak electricity charges.

I informed the House on 20th June that I had asked the Chairman of the Electricity Council to examine what adjustment could be made to give relief to the domestic consumer of electricity on the off-peak rates. I also indicated that my aim would be to restore the previous differential between off-peak electricity and electricity at the standard rate.

There are basically four off-peak and night-rate tariffs still being used, although not all of them have been offered to new consumers for some years. The actual rates, both off-peak and standard, differ between each electricity area board reflecting differing local circumstances. The area boards in England and Wales will at my request adjust each of these off-peak rates so that they once more represent the same percentage of the new standard domestic rate as they did in relation to the previous standard domestic rate in March 1974. This will restore all the domestic off-peak percentage relationships to the same position they held before the introduction of the fuel cost adjustment clauses. The overall national average percentage increase on the off-peak rates is now expected to be approximately 34 per cent. as compared with the 70 per cent. expected earlier.

A substantial proportion of the consumers on non-domestic tariffs are, however, also residential consumers, such as small shopkeepers and those living in old people's homes and hostels. I am advised by the Electricity Council that it is administratively impracticable to segregate from the tariffs concerned consumers in premises used wholly or mainly for residential purposes. I have therefore decided, in order to avoid any hardship to the consumers concerned, that similar adjustments should be made to all quarterly off-peak tariffs.

These adjustments will take effect in respect of consumption starting from the first meter-reading on or after 1st August. This means that all these off-peak consumers will receive a bill for one summer quarter at the full rate. I regret that it is not practicable to make this adjustment retrospective on consumption which has started to be incurred at the existing higher rates during May to July. To attempt to do so would impose an excessive administrative burden on the industry and prejudice our aim of giving the earliest possible relief for the autumn when heating requirements increase.

These adjustments, the full details of which will be published as soon as possible by the area boards, will on present fuel costs result in a loss of revenue for the industry of about £30 million this year and about £40 million in a full year. The industry will have to be compensated by the Government. This will be a substantial additional burden on the Exchequer and is not a concession which can continue indefinitely. In the changed world energy scene, we have to accept that electricity, like other forms of energy, is going to cost considerably more than it did in the past.

The Government are, however, conscious that fuel costs bear heavily on the poorer sections of the community. We shall, therefore, as I explained to the House on 20th June, be reviewing the policy for energy prices in the light of their impact on household expenditure. In the meantime, the adjustments I have announced today will give substantial relief to off-peak consumers.

I believe we have dealt with the problem fairly and responsibly and I trust the House will accept that we have met the genuine concern which was expressed on off-peak charges.

Mr. Patrick Jenkin

The whole House will be grateful to the Secretary of State for having met in substance the case presented on both sides of the House in the debate on the Opposition motion on 20th June.

Can the right hon. Gentleman be a little more explicit about the future relationship of off-peak charges to the standard charges? Can he indicate how much longer off-peak consumers can expect their off-peak charges to bear a relationship to the standard charges; or will they have to move to a higher percentage figure?

Mr. Varley

I do not envisage any early adjustment. As I told the House on 20th June, we are reviewing the impact of energy prices on household expenditure. That is part of a wider review. I am not sure that the present fuel subsidies work in the redistributive way in which some of my hon. Friends would like them to work. I cannot give a precise date, but I do not see any early changes.

Mr. Raphael Tuck

As leader of the rebellious Members who revolted, may I ask my right hon. Friend whether be is aware that his statement will give great satisfaction to me and my hon. Friends who felt as I did? Is he also aware that it will show the country at large, and, in particular, Her Majesty's Opposition, that if the Labour Government make a mistake they at least have the honesty to admit it and to attempt to right the wrong which would otherwise have been done?

Mr. Varley

I am very pleased that my hon. Friend accepts that we have dealt with this matter fairly and responsibly.

Mr. Beith

Will the Secretary of State accept thanks, which I am sure come from both sides of the House, for deferring, in a generous friendly manner, to the realities of the minority Government situation? Can he be clearer about the nature of the subsidy? Does he agree that it would be possible, without subsidy, to retain the percentage differential between off-peak and normal prices however much electricity prices in general rose? Is there any reason why the difference between the two levels should not be retained indefinitely without subsidy?

In the absence of the Secretary of State for Scotland, can the right hon. Gentleman confirm that consumers who get their electricity from Scottish electricity boards will not face increases of the kind originally projected?

Mr. Varley

Comparable arrangements are being made for Scotland, and I understand that my right hon. Friend the Secretary of State for Scotland will take an opportunity to make a statement later today.

There are difficulties in the relationship between the standard unit and the off-peak unit. It is not as easy as the hon. Gentleman supposes. There is the additional factor that many old people who are poor cannot afford off-peak electricity but still have to rely on electricity. No help is given to them in my statement, and I want to consider them urgently.

Mr. Skeet

Will the right hon. Gentleman be frank about the deficit of the industry, which is running at £500 million a year, bearing in mind the £176 million which he has given to the industry in the past week? Will he maintain the ratio between peak pricing and standard rate, or will he raise all the charges in the near future? It is not sufficient to say on this occasion that he is not prepared to say. He should be frank and tell us what the prospective charges are likely to be to the consumer.

Mr. Varley

It is not possible to do what the hon. Gentleman suggests. As a result of this additional concession, the expected deficit of the electricity supply industry will be well over £200 million. The House will certainly have to consider this at some stage.

Mr. Tomlinson

Will my right hon. Friend accept congratulations from one of the rebels who did not realise that he had a leader in the hon. Member for Watford (Mr. Tuck)? When my right hon. Friend is considering the long-term relationship between off-peak and standard prices, will he bear in mind the problems of rural areas which have no alternative to electricity for heating? This applies particularly in my constituency, large parts of which are denied access to gas.

Mr. Varley

I am aware of that problem and it will form part of our review.

Mr. Wyn Roberts

As the Member who secured an Adjournment debate which perhaps roused the rebels to their cause, I welcome the Minister's announcement. He spoke in terms of the effect of electricity charges on household expenditure. Will he also bear in mind the needs of old people's homes, some of which are semi-commercial premises?

Mr. Varley

Residential old people's homes are covered by my statement. Arrangements are being made for those establishments, and when the hon. Gentleman has had time to consider my statement he will realise that. I want to consider old people in the light of the review I announced on 20th June. I can only repeat that many old people cannot afford off-peak electricity and cannot even afford the installation charges for night-storage heaters. Something should be done for them.

Mr. Atkinson

Will my right hon. Friend confirm that there is little or no substance in the claims made by the Chairman of the CEGB that the Government's decision to use steam generating reactors represents an increase in loan charges of £5,000 million or £6,000 million? Will be confirm that the decision will not add to the cost of generation or to the tariffs as he has suggested? Will my right hon. Friend further confirm that there is no substance in the claim made by the member of the CEGB who recently resigned because he believed that the nuclear decision was wrong and would have a bad effect on tariff charges?

Mr. Varley

The question of the steam generating heavy water reactor does not come into this statement. I admire my hon. Friend's ingenuity in getting it in. On the question whether I accept some statements made by the CEGB and Mr. Clark, I do not accept the statements made by the CEGB, and certainly not those made by Mr. Clark.

Mr. Bray

In view of the continued non-availability of the OFFICIAL REPORT, will the right hon. Gentleman circulate to hon. Members who have written to him on the subject the detailed statement which he has made today?

Mr. Varley

I will look into the possibility, but I cannot make a specific promise. There may be insuperable administrative difficulties.