HC Deb 24 May 1974 vol 874 cc805-21

1.27 p.m.

Mr. Wyn Roberts (Conway)

The matter which I wish to bring to the attention of the House is the high percentage increase in the cost of off-peak and night rate electricity which is used by more than 2 million consumers mainly for central heating. The increase referred to is about 70 per cent.

The first inkling that we had of what was in store for us was in the debate on 13th March when an exchange took place between the Secretary of State for Energy and my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin). We had to wait for the Budget Statement 13 days later for some light on this ominously dark situation.

However, the Chancellor of the Exchequer was less than frank with the House in dealing with the subject of increased charges for electricity. He said: Electricity prices have given us the most difficult decision. Here, too, it is right that prices should reflect the realities of the energy situation. On the other hand, if we had imposed the full increases proposed for domestic and other consumers on quarterly accounts, including pre-payment meters, this would have meant a 50 per cent. price increase. We are therefore asking the industry to restrict these increases to the amount required broadly to cover its higher fuel costs alone. Even this will mean price increases to domestic consumers averaging about 30 per cent. on bills reaching most of them from the beginning of August." — [OFFICIAL REPORT, 26th March 1974; Vol. 871, c. 301.] There is no mention there of a 70 per cent. or even a 50 per cent. increase for anyone. The impression given was that the Government had shied away from the larger increase and opted for a more moderate one, and consumers were rightly shocked when the truth was brought home to them that the average domestic consumer on day and night rates would suffer an increase of about 50 per cent. in his bill.

I am at this stage dealing not with the rights or wrongs of the increase but simply with the Government's handling of the facts. I am told that this is the first time that increases in electricity charges have been announced in a Budget Statement. If so, it seems to have been a mistake, because the Chancellor did not do justice to the subject. He left himself wide open to the charge, at worst, of misleading the House and the country and, at best, of suppressing some facts that should have been made known. I make that charge and hope that the Government will answer it fully.

When mistakes of this kind are made there is usually an instantaneous reaction on the part of the public, and we had it in this instance. Consumers of off-peak electricity referred to the advertisements that had prompted them to buy night storage heaters. I quote from one which appeared in January 1972. Its constant theme is "half-price" electricity. In retrospect it sounds humorous. Under the headline, Overnight, Liz and Mike found they could afford electric central heating ". it states: Enjoy an 'overnight success'—like Liz and Mike—simply by going to White Meter for all your electricity. The White Meter supplies all electricity used overnight at half price. The electricity you use during the day is at one price, but the electricity you use during the night is half that price. The phrase "half-price" occurs in each of the three substantive paragraphs of that advertisement, and it is all summed up with the slogan: White Meter brings you half-price electricity overnight! I do not know what Liz and Mike think of the situation now, because the off-peak and night consumption rate is no longer available at half price. It has gone up from 47 per cent. to 60 per cent. of the unrestricted consumption rate. Many people see this as a breach of faith, to put it mildly, on the part of a nationalised industry. I cannot say that it is a breach of contract, because I have not seen a contract which includes the phrase "half price".

I come now to the key question whether this increase was justified. The Government will in all probability say that it was foreseen by their predecessors, and will no doubt seek to put the blame on them.

We all know that the basic reason for increased electricity prices is the doubling in cost of power station fuel, which consists of a combination of oil and coal. The increase in the cost of the oil component was unavoidable, but, according to the reply given by the Minister to the hon. Member for Ince (Mr. McGuire) on 11th April, there is a tax element in it. Is that tax element still present in the cost of the oil? Has it been increased? Could it be diminished?

I should like to know how much of the increase in electricity prices is due to the miners' settlement. Again, let us have the facts, not a suppression of them, on this matter. I should like to know what the miners' settlement has meant in terms of the increased price of coal and, indirectly, of electricity.

My second point under this heading is that the previous Government subsidised both coal and electricity prices at a mounting rate although on 17th December my right hon. Friend the Member for Altrincham and Sale (Mr. Barber), the former Chancellor, said that it was anomalous to do so.

We now have a Government committed in principle to extending subsidies, and, indeed, still subsidising the domestic electricity consumer to the tune of £130 million to £140 million this year. But what was the thinking behind the limitation of subsidy to the off-peak user? In other words, why pick on him for this devastating increase of 70 per cent.? Could it be that the Government knew that these users had invested a lot of money in storage heaters and were unlikely to do away with them and that about 330,000 people who have under-floor heating derived from the off-peak source could do nothing about changing their heating system?

I remind the Minister—I know that he will have sympathy with these people— that the majority of those who have written to me are pensioners, the chronic sick and those who care for them and those who care for the mentally sick. I have a letter here from a lady in Nottingham who says: I look after mental hospital day patients at my own home. As I am a widow, I have found that I have no time to grow old or suffer imaginary illnesses. It is a most satisfying occupation, for which I receive £8.50 per man per week. For this I supply two cooked meals and tea and biscuits five days per week and three cooked meals and tea and biscuits two days per week. These men are destructive and do not treat either bed clothes or furniture or carpets with any respect whatever. However, I decided to install overnight storage heaters in all bedrooms as the men are getting old—like I am—for their extra comfort. I have installed nine. Over the last two to three quarters I have been able to cope with the bills for extra electricity, but if the price per heater goes up more then I am afraid my poor semi-senseless old souls will have to go back to hot water bottles. My home is open to inspection and should you wish to verify my statement you can contact the Secretary at Mapperley Hospital. That is typical of the letters that I have received.

The Government owe the country an explanation for their actions, and a statement on their future policy of charging for off-peak electricity and on their policy of charging for gas. I am astonished at the numbers of people who have written to me in disgust at this increase who say that they are going to throw out their overnight heaters and install gas heaters. I feel obliged to warn them—I hope that the Minister will confirm this point— that, although increase in gas prices have been delayed, they are bound to go up sooner or later. At least we can save these people a certain amount of expenditure.

The Government have offended many people. These increases, coupled with increases in indirect taxes, are bound to have a deplorable effect on the retail price index, will contribute to the damaging 20 per cent. price inflation which we and others expect later this year, and will certainly wreck the lives of many people in this country.

1.39 p.m.

Mr. Edward Gardner (South Fylde)

I congratulate my hon. Friend the Member for Conway (Mr. Roberts) on initiating this debate, on the choice of subject, and on the speech that he has just made on behalf of people who will undoubtedly suffer greatly as a result of the increased price of electricity.

An unusually large number of people have chosen to go to the North-West coast to retire in attractive places like Lytham and St. Annes-on-Sea and the countryside in Fylde. Some of them are fairly well to do but many have to rely on a small amount of capital which they accumulated over a lifetime of work, and once they find that they are outstripped by rising prices they have no hope of catching up again. Others have little or no money of their own and have to fall back almost exclusively—and some exclusively—on retirement pensions.

I should like to speak on behalf of those retired people, but most strongly on behalf of those who have been tired by age and cannot fight back, and have no one to represent them. These are the people who find that the tide of rising prices is about to drown all their hopes of a dignified and contented old age. It is very difficult for someone to be dignified when he cannot afford the cost of keeping warm. Anyone who has looked after old parents or old relatives in their last years will, I am sure, understand and agree that high on the list of priorities in old age is the need to keep warm. It is almost as important as food, and it has to be paid for.

Many old people in my constituency found an attraction that was almost irresistible in the advertisements, to which my hon. Friend referred, put out by the electricity boards, the cost of which must have run into many millions of pounds. They were told that they could get a cheap source of electricity that would do what it was essential should be done in their homes to keep them warm during the cold winter, so they bought night storage heaters and they still have them. I cannot recollect ever having had so many letters on one topic as I have received over the last few weeks by way of protest from people who say that (hey cannot see any chance of being able to afford to keep themselves warm and comfortable during the coming winter.

The Chancellor of the Exchequer in his Budget speech promised that the rise in the cost of electricity would not be more than about 30 per cent on bills from 1st May of this year, and I think that we ought to be grateful for the diligence and patience of a reporter working for the northern editions of the Sunday Express who researched into this and discovered that, far from there being an increase of only about 30 per cent., the cost of cheap electricity for domestic consumers is to be increased by 70 per cent. over most of the country and up to 75 per cent. in the North-West. We made our protests, and we put down Questions, but we have had no satisfactory reaction from the Government.

I should like—and I welcome the opportunity of doing so—to invite the Government to say today whether they are satisfied that these increases in electricity charges are justified and, if they are satisfied, what steps they propose to take to help those who will be distressed economically in their domestic budgets by these increases, especially in the price of this cheap source of energy.

It is all very well to contemplate a reduction in the standard of living for people who can go out and, by their own efforts and initiative, do something to preserve their living standards, but the elderly cannot do that. They need help, and I beg the Government, not on any political basis or division of party opinion but on a humanitarian basis, to say today that they will do something to help these people who stand in dire need of assistance.

1.45 p.m.

Mr. John Page (Harrow, West)

I am sure we are all grateful to my hon. Friend the Member for Conway (Mr. Roberts) for having taken the opportunity to raise this important subject in today's debate. I am sure that the gratitude for his doing so will not be confined to this House but will be expressed by many thousands outside who will find their budgeting shattered because of the matter which my hon. Friend has taken the trouble to raise today.

I have had an enormous number of letters on this subject from my constituents. In my part of Harrow, which was developed between the wars, many retired people are living in homes which they bought in the 'twenties when they were young civil servants, teachers or employed in other professions. They do not want to leave their homes, even though their value may have greatly increased, because they are their homes, they have seen the neighbourhood develop and they have their roots in the area.

Many of my constituents are living on fixed retirement pensions and other savings income, and it is hardly necessary for their difficulties to be stressed in the House today. Those with savings and retirement incomes of between £1,500 and £2,500 a year are having the greatest difficulty in maintaining the standards which they have tried to provide for themselves. These are the people who, by their own provision, have sought to prevent themselves from becoming a burden on the community. They want to be independent and look after themselves.

Many of them did not have large capital sums at their disposal. They wanted to use what capital they had for income, so instead of installing full central heating they succumbed to the advertising campaign and installed night storage heaters because they felt that in that way they would keep down their overheads and running expenses. It is almost inconceivable that, at the stroke of a pen, they should be expected to pay double the increase to be paid by the user of the ordinary electric supply. This is a disgraceful example of insensitive manage- ment, from whichever source the decision came.

There is growing resentment in my constituency over what is considered to be a "con" trick by a nationalised industry on a group of people. Because it is a nationalised industry, the dishonour rubs off on to the Government and on to Parliament. The reputation of this House has not been unsullied in recent months, neither has it been improved by certain additions to the Honours List announced last night. I hope that the Government and the Minister this afternoon will do something to restore a sense of honour in our nationalised industries and those industries which are controlled by the Government and by Parliament.

1.50 p.m.

Mr. Michael Marshall (Arundel)

I should like to draw the Minister's attention to some broad aspects of this problem which are certainly within his competence. I refer to public relations and the way in which this unfair charge, as we would describe it, has been introduced without proper explanation to many pensioners.

What adds particular insult to injury is that those who have received their electricity demands in the last few days find that they contain not a word of explanation of the increases. All they find with their normal demand is an advertisement for a "super-value" Electra washing machine, offering special prices "for a limited period only". In the light of this saga, anyone receiving an offer of that kind will, I am sure look at it in a sideways direction.

If nothing else, one of the most important tasks is to make clear to consumers exactly how these charges are made up and how they are justified. I therefore join my hon. Friends in calling for assurances from the Minister not only of the basis on which the charges have been put together but about the way in which the Government will explain to all concerned why they face this unfair burden.

1.52 p.m.

Mr. John Hannam (Exeter)

I am sure that all hon. Members are grateful to my hon. Friend the Member for Conway (Mr. Roberts) for raising this important subject. The theme of the speeches has been consistent. The dramatic rise in off-peak electricity tariffs, coming on top of the other shocks that consumers are experiencing in these inflationary days, has caused more dismay and alarm among pensioners than among any other section of the population.

What rankles in the minds of the 2 million families who possess night storage heaters is the feeling that they have been misled by the electricity industry. For 10 years a clever and successful selling campaign has persuaded many people to install these systems as a long-term measure. They were represented not just as cheaper than normal electric systems but as being competitive with other forms of heating. Now, suddenly, in an across-the-board increase, off-peak electricity jumps nearly 70 per cent. in cost.

The full impact of such a sharp rise will not be felt until the autumn, but already many hon. Members are showing their concern by their Questions and by their statements to Ministers. They have been pointing out the unfairness of the new charges and their doubts about the sales promotion schemes used until recently by appliance manufacturers and retailers. Electricity boards claim to have ceased Press advertising 18 months ago, but television advertising continued until recently, with several stores offering advantageous terms.

Is the Minister satisfied that no misleading advertising has taken place since the decision was made to increase charges? I should also like him to ensure that the public are now made fully aware of the new tariffs. Does he know the number of night storage heaters held in stock? There could now be a cut-price selling campaign based on outdated costs.

I am sure we are all concerned about the impact of these charges on the elderly and disabled, who have often installed those heaters under special free installation schemes. Such a couple wrote to me: My wife and I, aged 76 and 77 years, were advised by our doctor to install some form of heating. I suffer from bronchitis and my wife is arthritic, so two years ago we bought 3 night storage heaters, which were installed free under some scheme for the elderly. We have enjoyed two comfortable winters, but with the anticipated 70 per cent. increase in the cost of running these, I am afraid we shall be unable to use them even with the extra pension. Can something be done in this case for the elderly? I am sure there are many others in this position or worse. I am sure that that letter is indicative of the many letters that hon. Members on both sides of the House have received.

It has been argued that the oil crisis and its effect on electricity generating costs means that an across-the-board increase of 0.3p a unit has to be made. That is an over-simplification. It is probably easier to administer but it is rough justice to the off-peak consumer, who has been led up the garden path by subtle and effective advertising.

Of course we knew that electricity tariffs would have to rise, but does not the Minister agree that, even assuming a doubling of generating fuel costs, it is still a rough and ready method to apportion the overall increase in unit costs equally on the cheaper marginal night electricity and the expensive peak-hour generation? In any case, during this vital battle against rising prices would it not have been more sensible and conducive to public unity to avoid such a sharp and dramatic jump in this one area of heating?

How can people be expected to understand the problems of Government when on the one hand, we see massive subsidies and stifling price controls yet in the one area where the Government have direct control—in the nationalised industries—there are violent surges in prices? During the last three and a half years, when my right hon. Friend the Leader of the Opposition was Prime Minister, he was taunted with a familiar slogan, misquoted of course, about a pledge to cut prices at a stroke. During his efforts to combat rising prices he took action to restrain prices in the public sector. With the rises in price of coal petrol and electricity, the present Government have, at a series of strokes, given a massive impetus to the prices spiral. The cost-of-living index figures to be released later today will. I am sure, cause grave concern.

I hope that the Minister will be able to look again at these charges and take steps to spread the load a little more fairly.

1.57 p.m.

The Under-Secretary of State for Energy (Mr. Alex Eadie)

The whole House will be indebted to the hon. Member for Conway (Mr. Roberts). There can be no doubt, to judge from the volume of correspondence that we have received, that he has articulated a strong point of view which is properly held. I have received details of 204 cases from hon. Members and 244 from the general public. It is right that we should argue this matter, but it is improper to use this debate, as one hon. Member did, to attack nationalised industries and their dedicated staff. Nor do I know how the honours system managed to get into a debate on electricity.

The new charges for electricity for night storage heaters is only one aspect of increased electricity prices. If we are to debate this issue we must examine it in context. The Chancellor of the Exchequer explained in his Budget Statement why substantial electricity price increases were unavoidable, particularly if we were to avoid an unnacceptable level of Exchequer support and reflect the realities of the energy situation. I may want to come on to that matter if I have time, particularly with regard to the allegations against my right hon. Friend, which cannot be substantiated by fact or by a careful reading of HANSARD and various statements made by Ministers.

In round terms, however, the electricity boards faced the prospect of a deficit this year of about £500 million— a very substantial deficit. Something had to be done by the present Government to cut this down. As the worsening prospect was due mainly to the sudden and massive increase in the industry's fuel costs, it makes sense that it should be tackled on this front. I concede frankly to all hon. Members that it was not an easy decision.

To get close to break-even, the boards needed an overall price increase of 50 per cent. for domestic and other quarterly consumers. But, as my right hon. Friend the Chancellor made clear in his Budget Statement, we asked the electricity boards to restrict the increase to the amount required broadly to cover the higher fuel costs alone. That is the reason for these domestic price increases, which will average about 30 per cent. overall.

We have been asked why there is to be the much higher percentage increase in the off-peak and night rates for electricity used for storage heaters. The answer is that the price increase to cover the increased fuel cost will be secured through fuel cost adjustment clauses; in short, paying for the fuel used. This will make a uniform addition to all unit charges for electricity. The percentage increase will, therefore, be higher for the off-peak and night rates—to which I shall refer as off-peak rates for short— because these rates were, and will still be, lower than the ordinary rates.

We have been asked why we could not do something to subsidise the cost in order to lessen the burden of this aspect to the off-peak user. That is what we have done. There will be a subsidy; and, whilst the percentage increases in off-peak rates is bigger, the off-peak units will remain, as they were previously, about 0.5 cheaper than ordinary units. The off-peak rates consist mainly of the cost of fuel burned to produce the electricity. The fuel clause will recover from off-peak consumers, as from ordinary-rate consumers, the increased fuel costs of supplying their units.

The small consumer will pay a little more; the big consumer will pay quite a bit more. This applies to night storage as to other consumption. This is fair, and it is sensible in the new energy market, which has so suddenly radically changed following the massive oil price increases.

I hope that hon. Members will remember—the facts are on record—that the previous Government recognised the need for price changes of this kind. As long ago as 17th December, the Conservative Chancellor of the Exchequer was telling the House that At a time of the most acute energy shortage and in our present financial difficulties, it is anomalous—to say the least—that we are subsidising coal and electricity prices at a mounting rate." —[OFFICIAL REPORT, 17th December 1973; Vol. 866, c. 962.] That was true. The present Government have taken action.

We were also told by the previous Government's spokesman on energy, on 13th March that they had accepted the principle of a domestic fuel clause, the clause which I have tried to explain. There again, we have acted to allow the clause, with the consequences that I have described for the different ordinary and night rates.

It has been suggested, however, that my right hon. Friend's Budget Statement suppressed the facts about the higher percentage increases for off-peak rates. My right hon. Friend could not be expected to go into the detail of every part of his total Budget Statement. But no one has tried to mislead anyone. The electricity industry announced at the time that the average 30 per cent. increase would come through the fuel clause, expected to add 0.3p to the price of every unit. I myself took a very early opportunity to illustrate to the House on 1st April, when replying to the hon. Member for Derbyshire, South-East (Mr. Rost), how the price increases would vary according to the amount and type of consumption.

Mr. Wyn Roberts

Does not the Minister consider that it was misleading on the part of the Chancellor to say that if the domestic consumer had to bear the full charges his bills would increase by 50 per cent. but as he would not be asked to bear the full charges the increases that he was agreeing to would be 30 per cent., and then for 2 million electricity consumers on day and night rates to be subject to increases, as from next August, of about 50 per cent.? Is not that misleading?

Mr. Eadie

With all due respect to the hon. Gentleman, he has only repeated what he said in his speech. If I have time, I shall show how the hon. Gentleman has been very selective in his quotations and in the accusation that my right hon. Friend the Chancellor had misled the House. I have here other extracts from what my right hon. Friend said. He did not mislead the House. Hon. Members know very well that when the present Government came into office we inherited the three-day working week. They know perfectly well that we were in an energy crisis which was bound to refect on the situation that we faced in relation not only to the general economy but to the whole question of the cost of energy. I become concerned when right hon. and hon. Members seem to forget that there was then a war in the Middle East and energy crisis. Vol. 874

I should like to quote what my right hon. Friend said, in reply to the selective quotation given by the hon. Gentleman in his speech. In his Budget Statement my right hon. Friend said: I cannot believe that the previous Government would not have taken action to deal with deficits on this appalling scale. A deficit of £550 million was lying on the desk when we came to office. Therefore, it is not a question of trying to blame someone. It was the hon. Member for Conway who initiated the debate and it is his right hon. and hon. Friends who are complaining about costs of energy. But the contribution which they made to the present mess in relation to energy sparked off many of our present problems.

In the Budget Statement my right hon. Friend also said: We could not allow the existing state of affairs to go on. Costs had to be reflected more closely in prices. There is no other way of avoiding a heavy excess of demand for the products concerned, the uneconomic use of resources the collapse of all financial disciplines, and an unacceptable level of support by the Government." —[OFFICIAL REPORT, 26th March 1974: Vol. 871, c. 300.]

Several Hon. Members rose——

Mr. Eadie

I shall not give way, certainly not to the hon. Member for Harrow, West (Mr. Page). He has no contribution to make. If hon. Members want answers, I must be allowed the time to give them. Perhaps I am not giving the answers that the hon. Gentleman would like. The hon. Gentleman talked about compassion and understanding for the elderly. We on this side need no lectures from him or from any of his hon. Friends on that subject. This Government have said that in July they will increase old-age pensions to £10 and £16 and heating allowances for the elderly. I should have thought that the hon. Gentleman would have welcomed that. The purport of his remarks was that he was concerned about costs for the elderly. He should have referred to the fact that pensions are to be greatly increased in July.

It has been said that we should take cognisance of this point. We have already taken cognisance of that point. I concede that a Government who were not concerned about the important issue the hon. Gentleman raised would be a very foolish Government. This Government listen and learn and are receptive to the point of view expressed by hon. Members. If hon. Members want to make a political football of it, they must not resent it if I reply in kind.

I was dealing with what my right hon. Friend said and with the allegation that he had in his Budget Statement suppressed the situation we are in. No one is trying to mislead anyone. The electricity industry announced at the time that the average 30 per cent. increase would come through the fuel clause and would be 0.3p on every unit.

On 1st April I told the House what effect the increase would have and said: My right hon. Friend is satisfied that the industry is efficient and economical. As far as the effect on consumers' bills is concerned, the small domestic consumer may expect to pay only about 10 per cent. more—for example, 3p per week; the average domestic consumer may expect to pay 30 per cent. more, which is just over 25p per week; and the large domestic consumer with a high proportion of off-peak and night use may expect to pay nearly 50 per cent. more in some cases—for example 75p per week." —[OFFICIAL REPORT, 1st April 1974; Vol. 871, c. 873.] I do not deny that this is substantial in relation to some people's income. Of course it is. I am answering the charge that there was an attempt by Ministers to mislead the House. This charge cannot be substantiated on any objective analysis of what the Government have done.

It has been said that the industry's early campaign for promoting half-price electricity was misleading and that these new off-peak charges are cheating those who installed off-peak central heating. This is chiefly a point for the industry. However, from what I have seen I do not think that the public have been cheated. Off-peak rates were half price for many years, but I am not aware that there was any commitment that the percentage relationship to ordinary rates should remain precisely the same for all time.

The hon. Member for Exeter (Mr. Hannan) will concede that I strongly advocated in the House that the nation should pay more attention to the coal industry. I admit that my advocacy fell on deaf ears, not only on the Tory benches but also amongst my hon. Friends. I campaigned vigorously for a substantial coal industry. I warned the House constantly of what would happen if we allowed the coal industry to contract. I said that there would be a serious energy crisis based on cost.

That is precisely what happened. Arising from the Middle East crisis and the last miners' strike, we discovered that the nation had been wrong to contract its mining industry. It would be wrong for anyone to pose as a prophet and predict what will happen. It is also wrong to say that the electricity boards practised deception on the general public. The electricity industry may well have acted under the delusion that there would be an abundance of cheap oil and other energy and that cheap rates for off-peak electricity would continue indefinitely. So in one sense we are all guilty. I do not seek to appear at the Dispatch Box either in the role of prophet or wearing a white sheet. We all made serious errors and it would be wise to remember this before flinging allegations across the Floor of the House.

If we are to deal with energy and electricity supply we must avoid a return to the disastrous three-day working week. We must instead turn to the kind of economy that we have created. We must also consider that, even though these increases in the price of electricity mean substantial extra payments for pensioners and the chronic sick, the Government are taking steps to assist those categories.

I am sure that hon. Members will be keen to hear what the assistance will mean as regards additional heating for the elderly. I asked that the figures should be produced so that the House could be informed. Supplementary benefits—extra heating additions—are given in cases where the recipient is in poor health or lives in bad accommodation. There are three categories and they reflect different degrees of severity of these circumstances. The appropriate additions are at present 30p, 60p and 90p per week. My right hon. Friend announced that after the July increases these rates will become 40p, 80p and 120p. I hope that hon. Members will return to their constituencies and assist people to obtain these additional benefits.

In the course of a debate such as this a Minister cannot reply to all the points. The hon. Member introduced the debate in a constructive manner. I assure him that if there are any matters to which I have not replied and on which he would like a reply I will certainly write to him.