§ 4.28 p.m.
§ Mr. Patrick Jenkin (Wanstead and Woodford)
I beg to move,That the salary of the Secretary of State for Energy should be reduced by the sum of £1,000.
§ Mr. Jenkin
By the time I have finished, I think that hon. Members opposite will agree that we are right.
It is almost exactly a year since the Secretary of State entered upon his high office and it is time that he was called to account. It has been a year which has seen the world price of oil forced inexorably upwards; a year in which the United Kingdom's oil deficit may have exceeded £3,500 million; a year in which most of the developed world has embarked on a major expansion of nuclear power; and a year in which in many parts of the world the prospects for oil and gas exploration have become brighter and activity has greatly intensified. Such places as Indonesia, Mexico, Brazil, India, offshore Canada and the United States are attracting intensive activity. It has been a year in which the potential outlook for the United Kingdom's coal industry has been dramatically enhanced. I stress the word "potential" because the reality already looks a little shaky. It has been a year in which the world has had to begin to learn how to save energy, how to use it more rationally, how to use it more efficiently.
It has by any standards been a challenging year. How has the Government's energy policy measured up to the challenge? How does the right hon. Gentleman's balance sheet stand? Although some of my remarks will be critical of the Government and their policy, I want to be fair to the right hon. Gentleman, because what we need to do is to strike a balance.
On the credit side—and I say this unhesitatingly and unstintingly—the right hon. Gentleman and the Government have 312 taken major steps to move towards a system of rational energy pricing throughout the economy, and we support that. Indeed, it was foreshadowed by my noble Friend Lord Barber, as he now is, when he was Chancellor of the Exchequer in his statement in December 1973. All I ask in relation to that, addressing myself to the Government back benches, is what the Labour Party's reaction would have been if it had been a Conservative Government which had had to take these hard decisions. I should like Labour Members to examine their consciences on that.
§ Mr. Arthur Palmer (Bristol, North-East)
Some hon. Members who were then on the Opposition benches opposed the previous subsidy policy introduced by the Conservative Government from the very beginning, and I was one of them.
§ Mr. Jenkin
The hon. Gentleman is right, but I wonder what the reaction of most of his hon. Friends below the Gangway would have been if we had tried to take those hard decisions.
Secondly, the right hon. Gentleman has taken a major step to bring justice to the sufferers of pneumoconiosis, hitherto neglected by Governments of all parties. The Bill is going through the House, and it has our support.
Thirdly, the right hon. Gentleman took a firm and clear decision on the choice of nuclear reactors. It was an extraordinarily complex and difficult decision, and it required courage. It was, as my right hon. Friend the Member for Knutsford (Mr. Davies) said, an act of faith, and therefore I do not grudge the Secretary of State his due.
But whatever credit the right hon. Gentleman may claim for the successes of his energy policy, they are massively outweighed by the failures that are plain for all to see. The crumbling North Sea oil programme, the stagnating nuclear programme, the astonishingly lethargic approach to energy saving and energy research, the speed with which price rises in the coal industry have gobbled up the headroom created by the rise in oil prices—these are the chilly results of the right hon. Gentleman's year in office; it is on these that he and his policies stand condemned.
Before I catalogue the details of these charges there is one separate matter 313 with which I must deal, and that refers to the 20 per cent. holding in BP sold by the Burmah Oil Company to the Bank of England. There are two distinct aspects of this affair which merit examination.
The first is whether Burmah shareholders are entitled to share in the profits which the Bank has made—profits which stand at more than £100 million. It is not for me to intervene between Burmah shareholders and the directors of the company—and I understand that there is a possibility of legal action—but it is very much the concern of the House and of the Opposition to see that public bodies behave honourably and fairly.
All the indications are that the Bank of England was, and remains, prepared to enter into an arrangement to share the profit with the company, and all the indications are that it was the Government who killed the idea. That was confirmed in a Written Answer on Friday in answer to a Question put down by my hon. Friend the Member for Tynemouth (Mr. Trotter):The Government considered that this arrangement was fair both to the shareholders and to the taxpayer".—[Official Report, 21st February 1975; Vol. 886, c. 561.]The right hon. Gentleman does not need me to tell him that thousands of small shareholders in the company, pension funds and institutional investors take a very different view. There is a deep sense of outrage that although the Bank is ready to recognise the harsh effect of what has happened the Government should forbid it to do anything about the situation.
It may be that the matter will be tested in the courts. Whatever the outcome—and I should like the right hon. Gentleman to be aware of this—the episode will have done lasting damage to the credibility and independence of the Bank of England as a lender of last resort.
§ Dr. Colin Phipps (Dudley, West)
Will the right hon. Gentleman tell the House what his attitude would have been had the stock market fallen during the subsequent period?
§ Mr. Jenkin
That is a hypothetical question, because it did not. In fact, it rose substantially.
314 Even more serious is the confusion about what is to happen about the BP shares. The House will know that when the shares were bought the Bank, on behalf of the Government, gave a pledge to the Takeover Panel—and I quote from the Financial Times of 24th January—thatIt is not Her Majesty's Government's intention that this transaction should change in any way the existing arrangements between the Government and BP and that, accordingly, while the stock in question remains in the Bank's hands, Her Majesty's Government will not exercise a greater proportionate voting power in relation to other shareholders than they could have exercised hitherto.The statement went on to say that the panel had ruled that in these circumstances there need be no bid for the outstanding shares.
But what do we see? Perhaps the Sun had the best headline:Benn backs bid for State to grab BP.The Home Affairs Committee of the Labour Party, of which the right hon. Gentleman the Secretary of State for Industry is chairman, has openly challenged that ruling and has apparently sent representations to the Secretary of State for Energy and his right hon. Friends that the Bank of England should now hand over these shares to the Government. We have the bizarre spectacle of the Bank and Treasury, having given solemn undertakings to the Takeover Panel, being publicly challenged by another member of the Cabinet. This is outrageous. This can be met only by a clear and unequivocal statement by the right hon. Gentleman today that the Government stand by the undertaking which they gave to the Takeover Panel and, furthermore, that the Bank will aim to dispose of the BP shares on the market as soon as practicable.
§ The Secretary of State for Energy (Mr. Eric G. Varley)
Perhaps I may clear that matter up straight away. My right hon. Friend the Secretary of State for Industry was not at the meeting to which the right hon. Gentleman has referred, and that report is inaccurate.
§ Mr. Jenkin
In that case, every newspaper got it wrong. I understood the right hon. Gentleman to say—and I chose my words with great care—that he was not in the chair on that occasion. If the Secretary of State says that his right hon. 315 Friend was not at the meeting at all, of course I accept this.
This matter of the disposal of the BP shares is of crucial importance. Over the years BP has succeeded in establishing credibility overseas as an independent commercial company, and that it is not a mere creature of Government. By this dangerous flirting with the idea of takeover the Government risk wrecking it all. BP has huge assets in Alaska and the United States of America, and there is already a growing volume of criticism there that their oil supplies are in the hands of a foreign Government. The stupid talk of takeover can only damage the national interest and make the company's position more vulnerable than it is now.
I now turn to the main counts in the Government's energy policy failures. The first is energy saving. The Department has truly lived up to its sobriquet as "Department of Lethargy". We had to wait until 9th December to get anything, and then we had the 12-point programme which was little more than a public relations exercise. It has been estimated that it will not save more than £10 million to £15 million of oil in a year, which is equal to, say, one to one-and-a-half days' delay in bringing ashore North Sea oil.
The advertising campaign is a dismal flop. Incidentally, who in the Department was responsible for the remarkable observation in one of the advertisements—Did you realise steam costs even more per ton than oil?I hope they did not realise that, because it is wrong by a factor of 10.
The failure stems partly from a lack of any capacity in the right hon. Gentleman's Department to deal with conservation, and partly because he appears to lack any sense of urgency about the matter. This is emerging from the evidence to the Select Committee. Sir Ieuan Maddock gave evidence last month thathe was dismayed at the lack of feeling of crisis and high drama over the United Kingdom's energy situation.Again, the Secretary of State's chief scientific adviser, Dr. Walter Marshallhad some difficulty yesterday convincing the Commons Energy sub-committee that anything much was happening in his Department.316 I know that we have been promised further statements, but what are the Government doing about the proposals put forward by NIFES—the National Industrial Fuel Efficiency Service, the largest and most experienced fuel efficiency firm in Europe? Does the right hon. Gentleman realise that NIFES's proposals have been sitting on his desk for about six months? Does he realise that the directors of NIFES have become so desperate at their failure to get any answers from his Department that they have now gone to the Department of Industry to see whether they can interest that Minister in what they are doing? Truly did the The Times describe the right hon. Gentleman's policy as one ofdelay and confusion in saving energy".It is time for the right hon. Gentleman to take a grip on this, to get things moving and to inject some sense of urgency.
I will tell him what he should do. We need proper energy-saving targets for every sector of the economy. We need a crash programme to train fuel technologists. We need a proper system of energy audits in industry. We need proper incentives to invest in an energy-saving plant. The Secretary of State is fond of saying that more effective energy-saving measures could only result in misery. That simply is not true. It could result in greater efficiency and greater profitability. We need some imagination, some go, some enthusiasm. So far we have had absolutely none.
The story is the same with the nuclear programme. A courageous decision was made in July to go for heavy water reactors. What has happened since then? Virtually nothing. There has been almost total silence. The National Nuclear Corporation was to be restructured, but nothing has happened, and with what results? As The Sunday Times of 16th February said,Seven months after Energy Secretary Eric Varley took his dramatic decision to go firm on a series of British-designed power stations, the nuclear industry stands as demoralised and uncertain as ever it did.There has been no announcement of revised shareholdings in NNC, no announcement of who is in charge, no announcement of contracts signed or 317 designs approved. Last Wednesday we read in The Times,Statement expected today on nuclear restructuringbut absolutely nothing happened. A few days ago we were told that an agreement on hand-over of AGR contracts was imminent, but on Thursday one read The Times headline,CEGB reactor agreement is deferred again".It is an endless tale of delay and muddle. Why does not the Secretary of State knock their silly heads together, inject some urgency and get things moving? Not unnaturally, the people on the ground are getting restive. I have here a document from the Staff Side of the Joint Negotiating Panel of the TNPG. It reads:Staff representatives are becoming increasingly concerned at the lack of positive direction that is now evident in the nuclear industry.They go on to blame GEC. I blame the Secretary of State. He is in charge.
There is one other matter I must raise in relation to the nuclear programme. On all sides it is agreed that it is a tiny programme—only 4,000 megawatts as compared with programmes three or four times that size by France and Germany. The CBI has argued that we need a bigger programme. The TUC is urging the right hon. Gentleman to speed up the country's nuclear energy programme. My hon. Friend the Member for Stretford (Mr. Churchill), whom I am glad to see in his place, asked the right hon. Gentleman a question which perhaps I may be allowed to quote,Is the Secretary of State aware of the disappointment … at the Government's decision to proceed with a programme only one-third the size which the CEGB thought desirable? Will he confirm that the full programme suggested by the CEGB was unacceptable to the National Union of Mineworkers?To this question the right hon. Gentleman gave a very snide reply:I do not know what connection that supplementary question has with the matter under discussion. Perhaps the hon. Gentleman will take me to one side and explain precisely what he meant."—[Official Report, 10th July 1974; Vol. 876, c. 1368.]But of course the right hon. Gentleman knows exactly what my hon. Friend meant because when he addressed the National Union of Mineworkers on 14th November 1974 he told them that the 318 decision—that is, on the nuclear programme—was a decision of great importance to the coal industry. It puts faith in the British coal industry and British miners to deliver the coal needed for our power station programme … it can also be construed as an act of faith in the British coal industry and British miners to deliver the coal … needed.It is nonsense for the right hon. Gentleman to say that he did not understand what my hon. Friend meant by his question.
So, to the charge of lethargy we have to add the charge of not being wholly frank with the House of Commons. [Interruption.] I am quoting from a Department of Energy hand-out of the right hon. Gentleman's speech. The answer to my hon. Friend followed the right hon. Gentleman's statement on 10th July.
There is a disturbing rumour that work is not now to start for another two years, until the end of 1976. Is that true, and is it true that the Nuclear Inspectorate has raised a whole range of new difficulties on which it requires to be satisfied before it can give a site licence?
On coal, the Government were elected, and the right hon. Gentlemen's appointment was welcomed, because of, it was said, his ability to deal with the miners. In fact, in his first year he has suffered two major defeats. First, the union threw out the productivity scheme on which the right hon. Gentleman had placed so much importance. Secondly, the Government have been forced to accept a settlement which in the words of a leader in The Guardian of 14th February,only the broad-minded or the short-sighted could see … as being within the guildelines set out in the social contract.That leader ended:The coalminers have not just made the prospects for unemployment this year more bleak. They may eventually find some of their own members have been priced out of work.Hard on the heels of that judgment comes the warning from Mr. Arthur Hawkins that the colossal price increases which the miners' pay deal means for the CEGB can only lead to a sharp downturn in the demand for electricity. My hon. Friend the Member for Oswestry (Mr. Biffen) yesterday drew attention to this and to the grim consequences for the power station programme and for employment in the electric equipment industry.
319 I hope that in his reply the Secretary of State will give his Department's forecast for the building programme. Tens of thousands of jobs will depend upon it.
Indeed, I would ask him to go further. The tripartite examination of the coal industry was based on the assumption of a 30 per cent. headroom between coal and oil prices. Two great pay hikes in a year have eroded that headroom to the point of disappearance. The Secretary of State should now reconvene the tripartite study and re-examine the assumptions on which the Plan for Coal was based.
Finally, oil. This is the saddest, most disastrous tale of the lot, for to the charges of lethargy and lack of frankness must be added the charge of sheer, doctrinaire folly. A year ago when this Government came into office the offshore oil industry was all go. Finance was readily available, confidence was high, programmes were expanding and orders for equipment were booming. Today what do we see? We see confidence badly shaken, project finance—off-balance sheet finance—out of the question, unobtainable. United Kingdom oil is no longer a bankable proposition.
Almost every day over the last two months we have read in the Press of programmes slowing down, of rigs diverted and of investment postponed. The right hon. Gentleman should know that there have been redundancies in pipe coating mills in Leith because there has been no work. There has been labour unrest in platform yards due to lack of orders coming in for platforms. On every side there has been doubt, confusion, down-right dismay. The loss of confidence is mainly due to the Government's inept fiscal policy and doctrinaire nationalisation policy.
Today's announcement on PRT may go some way to repair the damage that has been done, but I doubt whether it will restore the incentive to explore for the small fields. The test will come over the next two years, to show how many exploration rigs there are—[Interruption.] The hon. Gentleman may not know this, but at the moment between a half and a third of the number of oil rigs are wildcatting in the North Sea compared with those anticipated a year ago. I have read the speech that the hon. Gentleman 320 made in Edinburgh and no doubt he will deal with that in his reply.
§ The Under-Secretary of State for Energy (Mr. John Smith)
Perhaps the right hon. Gentleman would also confirm, as I said in Edinburgh—it is the truth—that the 28 rigs operating in the North Sea at present represent the highest proportion which has ever operated in the British sector.
§ Mr. Jenkin
But not as many as the industry had anticipated, and the great majority are now engaged in appraisal and delineation, and not in wild-catting for new discoveries. That is where future discoveries must come from.
§ Dr. Phipps
I can assure the right hon. Gentleman from personal knowledge that one of the reasons that there is such a delay is that rigs ordered from American yards, which should have arrived two years ago, are only just arriving in the North Sea. There has been an enormous slow down in rig production in the States. A rig with which my company is involved has just arrived, one year and eleven months late.
§ Mr. Jenkin
I accept that there have been delays all along, but I hope that the hon. Gentleman will equally accept that, whereas a year ago it was impossible to get a rig for love or money less than two years ahead, one can now go straight into the market and get rigs, because companies do not want to take up their options.
Then there is participation. Here I must confess to being totally bewildered about what the Government are trying to do. At first it was the money that they were after. This was clearly spelled out by the Secretary of State in an article in the Glasgow Herald during the election;They—the Government—will acquire a direct stake in the most profitable investment going in this country … The return on the public half-share participation will be sufficient to pay back the whole initial investment in about a year or so.Only a month or two ago, the Under-Secretary of State made the same point at a conference when he said that participation was needed by the Governmentto guarantee its revenue not simply by taxation but also by a share of profits earned on 321 its investment … I find it difficult to understand why what is a good investment for the oil companies and others is not equally good for the nation.
§ Mr. Jenkin
But the Under-Secretary must learn that that is not now the Government's policy. The Under-Secretary may not have realised it, but it was changed by the statement made by the Chancellor of the Duchy in Washington, according to The Times on 3rd February:The key point that had to be appreciated, he said, was that the British Government had no intention of adding to its take from the North Sea through participation plans designed to give the Government majority control over the oil resources … it believed the only way it should obtain revenues from the North Sea oil was by means of the new oil tax and through corporation taxes.That may come as news to the Under-Secretary, but it has been Government policy for at least a month and was repeated in the House by the Chancellor of the Duchy only last Wednesday. I must make it clear that in one sense we welcome this. It has always been our view that the Government should look for their share of the revenues to the tax system. I am glad that they now accept the view that we have always put forward.
If it is not money, what are they looking for? The answer is control over the oil itself. But they have a good deal of control already. The oil has to come ashore in the United Kingdom unless the Government give consent otherwise. Power exists over exports and imports. They propose to take new powers to control such things as depletion and pipelines. Control will stem from legislation and not from ownership. We shall see the legislation when it comes forward.
So last Wednesday we had a new phrase from the Government to justify State participation. In answer to the hon. Member for Bolsover (Mr. Skinner), the Chancellor of the Duchy said:What we are now seeking is to give the British people the title to a share of the oil itself ".He went on to say that the Government would scrupulously honour all their contractual and commercial obligations.
How on earth will that be done? The right hon. Gentleman has made it clear 322 that the expected rate of profit would be "unchanged" by "acceptance of 51 per cent. participation"—I am quoting from the Chancellor of the Duchy on 10th January—the so-called "no gain, no loss" solution. I am at a loss to know what that means. It could be no more than an empty facade to cover embarrassing political commitments, but it is causing immense doubt, confusion and loss of confidence.
Still worse, there has now crept into all this an element of compulsion. When the policy was first announced it was going to be voluntary. Yet last Wednesday, in the same exchange, in reply to my hon. Friend the Member for Bedford (Mr. Skeet), the right hon. Gentleman said:I told them that the Cabinet might feel obliged, if it were unable to satisfy its objectives, which seem to us fair and reasonable and not incompatible with the interests of the oil companies, by voluntary agreement with them, to nationalise—".My hon. Friend interposed:Blackmail.The Chancellor went on:to nationalise that proportion of the licences that it thought right to nationalise."—[Official Report, 19th February 1975; Vol. 886, c. 1338, 1341.]That sounds to me very much like coercion. I would remind the Secretary of State of what he said. It was considered so noteworthy that the Observer put it into its "Sayings of the Week" column on 14th July:We in Britain do not go in for coercion like some other oil producing countries.Like hell they don't.
So where do we now stand? We are talking of Britain's most valuable natural asset, capable in five years of making us self-sufficient in oil and relieving us of a balance of payments burden of £3½ billion a year. The Government want 51 per cent. of the oil but want to leave the companies no worse off. They are going to honour their contractual obligations but will take half of the licences away. They will negotiate voluntarily but under threat of expropriation if the companies do not volunteer.
That is why I describe their policy as one of utter shambles, and I know why it is a shambles. They are trying to reconcile the irreconcilable. They are trying to reconcile the commitments that they made to the Left before the election with 323 the national need to get the industry investing. They cannot possibly pay for the 51 per cent. that they want because that would cost £3 billion or £4 billion and they do not have that kind of money. Yet they are hooked on an election pledge. I know of no more apt case for the application of that memorable epitaph on Socialist governments which was apparently stated by the noble Lord, Lord Gardiner, according to the Crossman diaries:Is it really impossible for a Labour Government ever to drop an idea because it is found to be impractical?So, weighing up the credits and debits of the right hon. Gentleman's energy balance sheet after his first year in office, I am bound to declare him bankrupt. His coal objectives are threatened by massive pay settlements way outside the social contract which now offer a severe threat to the industry's future. His nuclear plans, after a brave start, are bogged down in delay and indecision and the prospect of a new nuclear programme is further off than ever. His energy savings policy is no more than tinkering and has no sense of urgency about it. His energy research and development policy, on the evidence of his own chief scientist, has not even started yet. And his oil policy is a total and utter shambles.
In this motion we seek to cut his salary. The truth is, he should resign.
§ 4.58 p.m.
§ The Secretary of State for Energy (Mr. Eric G. Varley)
For the last 30 minutes or so the right hon. Member for Wanstead and Woodford (Mr. Jenkin) has been huffing and puffing away in an attempt to convince the House that he was genuinely moving a motion of censure on the Government for their energy policies. However, the right hon. Gentleman does not have his heart in this. I am always reluctant to criticise him, especially when it comes to conservation. It is very tempting to do so, but I will let it go on this occasion, because everybody knows what a marvellous record he has on conservation since those heady days of a year ago when he was Minister of Energy.
I prefer to look upon this debate not as an occasion for the synthetic outbursts to which we have just listened but rather as a sentimental journey. I am sorry 324 that the right hon. Lady the Leader of the Opposition is not present. I make no complaint about that. But I well remember when she was the Conservative Party's spokesman, or spokesperson, on energy in the late 1960's. I find it extremely touching that her first Supply Day as Leader of the Opposition should be devoted to a return to the scene of her former triumphs. I am far too much of a gentleman to suggest that she is returning to the scene of her crime. But re-reading those speeches of hers in the late 1960's—as I have over the weekend, because I thought that there might be something very interesting in what she said when spokesman on energy—I noted in particular a very forthright statement she made about the future of the coal industry. When talking about the coal industry on 5th December 1967, the right hon. Lady said:As far as I can see, morale will be raised … only when the industry has finished its contraction and is once again competitive on its own unsubsidised merits."—[Official Report, 5th December 1967; Vol. 755, c. 1273.]That is our policy exactly. We are ending the contraction. We are introducing realistic pricing policies, and morale in the industry is higher than it has been for years. So this censure certainly cannot be about our coal policy, especially in view of the right hon. Lady's advocacy seven years ago—and especially, also, since the right hon. Member for Wanstead and Woodford himself insisted in a speech last June that the Conservative Government were committed to the tripartite examination into the coal industry that we ourselves carried through. I cannot pretend that I noticed it at the time, but it is nice to know now. This confirms that the Tory Party cannot be opposed to our coal policy since this is entirely based on the tripartite examination which we carried through and which the Opposition say they would have carried through.
§ Mr. John Hannam (Exeter)
Is not the key word invoked by my right hon. Friend the Leader of the Opposition in that earlier speech, and in comments made by the Secretary of State himself, the word "competitive"? Does not the future of the coal industry depend on it remaining competitive? Will the right hon. Gentleman assure the House that 325 his policies will result in the industry remaining competitive? It is not apparent to the House and the country that the recent pay awards, which have received no comment from the right hon. Gentleman, will enable the coal industry to remain competitive.
§ Mr. Varley
It is the Government's intention to ensure as far as possible that the coal industry and all fuel industries keep competitive. We have said again and again that we want to phase out subsidies. I am surprised if the hon. Gentleman is returning to the question of wages and the mining industry, because only last week when we debated this matter the hon. Member for New Forest (Mr. McNair-Wilson), in opening his speech, saidThe Secretary of State need have no fears about my indulging in any attacks upon the wage award made to the mining industry."—[Official Report, 19th February 1975; Vol. 886, c. 1357.]I have just been asked about policies. I hope that the Opposition will not change policies within a few days.
§ Mr. Patrick Jenkin
Will the right hon. Gentleman take note of the fact that a year ago there was a 30 per cent. leeway between the price of coal and the price of oil, and that as a result of a year of Labour administration that has now disappeared?
§ Mr. Varley
Perhaps the right hon. Gentleman would suggest what we should have done. I have another marvellous quotation, if he will bear with me. His right hon. Friend the Member for Lowestoft (Mr. Prior), on radio two weeks ago, when asked what he would have done had he been the Secretary of State for Employment responsible for whatever social contract a Conservative Government would have had, said:I do not think that we could have done anything other than what has happened.The only thing I have said is that when the wages go up in the mining industry, it is the Government's intention that the subsidies should be phased out, and phased out as quickly as possible. That is our policy, and I cannot understand what the Opposition are complaining about.
§ Mr. Varley
I could argue this matter over days. Perhaps I will give way to the hon. Gentleman later, but not now. I know that he is very anxious to speak and that he is knowledgeable about energy matters. I may say something later which may provoke him again.
As I have said I cannot understand what the Conservative Party is complaining about on coal policy. What about nuclear policy? Our nuclear policy is based upon the choice of the steam generating heavy water reactor to power the next generation of nuclear power stations. The Tory Party manifesto declares that, if the Tories had been returned to power, they wouldcarry through the recently announced pilot programme of nuclear power stations based on the British designed 'heavy water' system.And let us be perfectly fair: the passage continued:We believe that a larger nuclear programme must be initiated at an early date. In all nuclear matters, safety and reliability must be our paramount considerations.No more—that is the whole passage on nuclear power. So I cannot understand what the right hon. Member for Wan-stead and Woodford is complaining about in opposing this—especially since at the right hand of the right hon. Lady the Leader of the Opposition sits the hon. Member for Abingdon (Mr. Neave)—Airey the queen maker. He is the most passionate advocate of all of the SGHWR. So it cannot be to our nuclear policy that they object. What can it be? Can it be our oil policy? Our oil policy is, of course, based upon majority State participation. With his customary frankness the right hon. Member for Wanstead and Woodford has confessed that "The last Conservative Government …"—[Interruption] I do not know what the Opposition Chief Whip is complaining about. What is he muttering about? He keeps muttering on the Front Bench. If he wants to intervene I suggest that he rises to speak.
§ Mr. Jenkin
My right hon. Friend the Opposition Chief Whip was making the very pertinent comment that the Minister was not attempting to answer any of the 327 accusations which I made against him in my speech.
§ Mr. Varley
I have been speaking for only five minutes. It may be that I shall have something to say which will suit the Opposition Chief Whip. I hope that he will be patient, but if he feels that he must intervene I should much prefer it if he would move to the Dispatch Box and intervene in the debate properly.
But what about oil policy? About a year ago the right hon. Member for Wanstead and Woodford was saying that the last Conservative Government had by no means ruled out participation. He will remember those words well, because he delivered them in a speech in Oslo last April.
This attack on our policy is a very "phoney" attack. For nearly four years the Conservatives staggered along from crisis to crisis without any energy policy at all, except that from time to time they had it in mind to stir up unnecessary confrontations. When we came into office, almost exactly a year ago, we found no coal policy, and no trace of any preparation for a tripartite examination. We found no nuclear policy, and no sign of a decision on nuclear reactors. We found no oil policy—which was somewhat of a relief, when one recalls the previous Tory Government's weak-kneed attitude towards the division of the North Sea in 1963. There had been plenty of promises but no action.
Our task since 5th March 1974 has been to work out a viable, comprehensive and co-ordinated energy policy for Britain based on exploitation and control of our indigenous fuels, and we have made a pretty good start. In the coal industry new confidence has returned following the ending of the dispute that the Conservatives provoked. Manpower is increasing again, for the first time for 10 years—4,600 up on a year ago—and recruitment is exceeding the NCB's target rate. I saw the other day that in one region there is a waiting list for vacancies at the pits. Coal stocks are encouragingly high. Partly, of course, this is because of the wonderfully mild winter that we have had, but that is, I think, a better reason than the deliberate stockpiling which occurred under the previous Government 18 months ago. Absenteeism during the past 11 months has been 328 below the level of absenteeism during the comparable previous 11 months of the previous Tory Government.
We are going full speed ahead with the increased investment programme. Already 24 major projects have been approved which will provide some 8 million tons of output a year. Assuming that planning permission is granted, the proposed new mine at Selby should produce 10 million tons a year. Thus, within 18 months of our taking office, projects should be in hand to produce half our extra coal in the National Coal Board's plan. What is more, the industry is pressing on with an extensive exploration programme. It is not surprising that the men in the pits are providing solid evidence of their determination to produce the coal that Britain needs.
Since the return to work after the summer holidays the overall face productivity record has been beaten on three occasions. The story is the same all over Britain. Rawdon in the South Midlands set up a national face driveage record of 143 yards in 10 shifts. Dawdon in the North East produced 4,000 saleable tons from a single face in 24 hours. Solsgirth in Scotland only last month produced 25,260 tons from one face in five days. That beat the previous British record held by Kellingly in North Yorkshire and may well be a world record. That is the high morale that the right hon. Lady asked for, and it is producing the coal the nation needs.
And morale is high as well in our nuclear industry and among our nuclear technologists, who endured years of Tory Government without any sign of a decision. The right hon. Member for Wanstead and Woodford has always tried to have this one all ways. On the one hand, especially with his hon. Friend the Member for Abingdon breathing over his shoulder, he has concurred in the decision that we took. But at the same time he has niggled about it. In his heart I do not think that he likes our decision. I believe that he would rather have PWR, but he has never had the courage to say so from the Dispatch Box. At least it is a programme based on a decision made after only four months in office compared with the 44 months without a nuclear programme when the Conservative Party was in Government. In only four months we took a decision.
329 The right hon. Gentleman says that our programme is only a tiny one compared with what our main competitors are doing. Anyone who read Sunday's Observer, with its sombre account of the setbacks, cutbacks and reappraisals of our main competitors and the experience that they are undergoing, has to acknowledge that both our choice of reactor and pace of development are absolutely right.
I am grateful to the right hon. Gentleman for reminding me of the statement that I made on 10th July about nuclear reactor choice. I thought that he quoted rather effectively the remarks of the hon. Member for Stretford (Mr. Churchill) on that day. The hon. Gentleman asked me on that occasion:Is the Secretary of State aware of the disappointment among those who work in heavy electrical engineering at Trafford Park in the Greater Manchester area …"—[Official Report, 10th July 1974; Vol. 876, c. 1368.]I do not know whether he wants to stick by that or to withdraw it.
The very next day the workers of Trafford Park sent me a telegram congratulating the Government on the decision that we had taken and on our choice of the SGHWR as giving the nuclear industry, which had been without orders since 1970, a firm base after years of uncertainty on which to plan its future. The implementation of the nuclear strategy that was announced in July 1974 is now well in hand. As is generally the case with major technological developments—
§ Mr. Patrick Jenkin
Will the right hon. Gentleman comment on the views being expressed by the staff side of the joint negotiating committee of the TNPG? They do not begin to match his description. They are complaining of a lack of purpose in the industry.
§ Mr. Varley
I have met the representatives of the TNPG and the Institution of Professional Civil Servants and all those within industry. They are at one in saying that it was a good decision. They are anxious about getting the programme under way. I recognise that. I want to get it under way as quickly as possible. The right hon. Gentleman cannot have it both ways. The National Nuclear Corporation was set up by the right hon. Member for Worcester (Mr. Walker) in the middle of 1973. He did not get the Nuclear Power Company set up because 330 of the difficulties associated with it. I wish that the right hon. Gentleman, instead of putting forward all the problems faced by the coal and nuclear industries, would bear some of the matters in mind that I have put forward if he wants to be absolutely fair.
The decision has been welcomed and some progress has been made, although I realise that not enough progress has as yet been made. I am not satisfied with what has been done. I want to see much more progress, but I shall outline to the House what has been done so far. Consents under the Electric Lighting Act 1909 have already been granted for the Sizewell and Torness sites, thus enabling the electricity boards to go ahead with preliminary non-nuclear site work. Authority for the National Nuclear Corporation to proceed with the design and development of the Sizewell "B" station has been announced by the CEGB. Negotiations are well advanced for collaboration with the Canadians, notably for the purchase of our initial heavy water requirements and for a technical information collaboration agreement. Time spent now in careful planning and execution will more than offset the delays that could occur later.
The SGHWR programme means jobs for British workers. Not only is the technology of United Kingdom origin, but the engineering components are based on development programmes carried out by the Atomic Energy Authority and our major firms. Benefits should flow directly from the development of SGHWR power stations into many engineering firms and to the construction sector.
The work generated through our programme will reach many areas of British industry—for example, fabrication work for the reactor system, mechanical plant of all kinds, electrical equipment, cranes and civil engineering. The civil engineering work will require manpower resources, mostly locally recruited, running at its peak into thousands. So will the mechanical work, which will reach many sectors of the engineering trades, including Trafford Park.
The right hon. Gentleman certainly cannot justify any allegations of slippage in our nuclear programme, and certainly not in his Government's non-existent nuclear programme. So he tried all the harder to prove that there had been 331 some slippage in our programme of getting oil from the North Sea. Of course there has been some slippage. That took place during the Conservative Party's period of office, which I described to the House in my very first speech in this job.
When we took office a year ago it was clear that the last Tory Government's estimate of production of 25 million tons of oil from the North Sea this year was totally unrealistic. They had failed to appreciate the immense technical and other difficulties which had to be overcome before the oil could be brought ashore. Slippage as a result of delays during their period of office led to a drastic reduction in the quantities of oil expected to be brought ashore this year.
Of course, the right hon. Gentleman has always had slippage in the forefront of his mind—namely, slippage caused by the headlong rush away from the North Sea. That is what he has said in the past and he said it again this afternoon. He suggested a headlong rush away from the North Sea by the oil companies as a result of the Labour Government's predatory policies.
I have had cause before to comment on the right hon. Gentleman's inferiority complex when it comes to British relationships with the international oil companies. I have drawn attention before to the much more drastic oil policies of other oil-producing countries, and of the acceptance by the multinational companies of those policies. The right hon. Gentleman shrinks delicately away from the policy advocated a couple of years ago by the House of Commons Public Accounts Committee. Two years ago that Committee, which had a majority of Tory members, reported that there should be some public participation.
§ Mr. Patrick Jenkin
The committee made only two recommendations and I have quoted them to the House on previous occasions. Perhaps the right hon. Gentleman will look at the recommendations made by the committee. First, is recommended that there should be a plugging of the tax loopholes. Secondly, it recommended that the Government should consider increasing their take. There were no recommendations about participation. 332 I hope that the right hon. Gentleman will correct himself.
§ Mr. Varley
I have not a great deal of experience of Select Committees. Is the right hon. Gentleman telling me that eight of his colleagues—the majority of the Committee—would allow these words to appear in a report to the House:We are also concerned that there were no provisions for variation or renegotiation of the financial terms, however much the find, or for obtaining a degree of Government participation.That is what the right hon. Gentleman's colleagues, who were in a majority on that Committee, said.
Since our last debate there have been other developments. It is always interesting and wise to look at what is happening throughout the world in major oil-producing countries. Saudi Arabia is continuing its negotiations with Aramco to acquire 100 per cent. participation and Aramco has accepted the concept in principle.
§ Mr. Churchill (Stretford)
Does not the Secretary of State appreciate the difference between the situation in a country such as Saudi Arabia or the Gulf States where they already have millions of tons of oil per day on stream and the situation we have in this island where we are seeking desperately to attract more people and more capital to help us to exploit our own natural resources?
§ Mr. Varley
I am coming to that point in a few moments. If Saudi Arabia does not suit the hon. Gentleman, what about Norway? Is Norway more akin? It is a pretty well developed country. I think it even has a Labour Government. Norway proposes to step up her stake through taxation and participation and it has a national oil company, too.
Yet the right hon. Member for Wan-stead and Woodford believes that the oil companies will flee in panic from the policies outlined in such sober and sensible language in the House last week by my right hon. Friend the Chancellor of the Duchy of Lancaster. In last February's election campaign the right 333 hon. Member for Wanstead and Woodford painted the most terrifying picture of what would ensue if the unthinkable happened and a Labour Government were returned to carry out our participation policies. This is the warning the right hon. Gentleman gave in a Press hand-out from Central Office on 13th February, and this is if Labour won the election:The immediate effect would be to halt all operations. Oil rigs would immediately be transferred to other countries' offshore areas. Valuable teams would be dispersed and the whole of our offshore oil effort would come to a grinding halt.That was the right hon. Gentleman's warning.
After a year of office during which we have made no secret of our policies and are indeed actively pursuing them, what is the position? The right hon. Gentleman prophesied that all operations would be halted. In fact, activity on the United Kingdom Continental Shelf at present is at a much higher level than a year ago. The right hon. Gentleman had lurid visions of oil rigs being towed off to distant oceans.
§ Mr. Skeet
The Secretary of State was dealing with Norway. He will recognise one great difference. Norway has no major international oil company such as British Petroleum or Royal Dutch Shell. It has only one small company, namely, Norsk Hydro. Norway has adopted the very strict policy that it would not break existing concessions. The British Government are breaking existing concessions and are threatening nationalisation if the voluntary arrangements break up.
§ Mr. Varley
There is a political commitment that we have to fulfil. The hon. Gentleman should know this. It was a policy set out clearly without any apologies in the February and October manifestos. That political commitment must be honoured.
Far from the right hon. Gentleman's suggestion that the efforts would come to a grinding halt being correct, at present there are 29 exploration rigs operating in the British sector compared with 21 at this time last year. Yet the right hon. Gentleman said on 13th February of last year thatthe whole of our offshore oil effort would come to a erinding halt.334 Far from coming to a halt, that effort is going ahead well and providing jobs for Britain as well. During 1974, 100 exploration and appraisal wells were begun or drilled compared with only 61 during 1973.
Contrary to all the scare stories which the right hon. Gentleman has been putting about, present indications are that this high level of activity is likely to continue this year. The Forties and Auk production platforms are now being installed and development drilling is expected to commence shortly. Of 18 platforms under construction or on order for the United Kingdom sector of the North Sea, 11 are being built in the United Kingdom. In the second half of 1972 only two modules were being built in the United Kingdom. By 1974 this had increased to 152.
I am sorry that the right hon. Gentleman should be so upset by good news, for I am well aware that he thrives on bad news. In fact, good news for Britain is had news for the Tory Party. It is only a matter of three months ago that the right hon. Gentleman, addressing an appreciative audience of Conservative women in Somerset on 22nd November, declared:The Government maintain their bland confidence that we can get through the winter without power cuts, but this assumes a mild winter, no industrial action, no interruption in oil supplies, no power station breakdowns. A scarcely credible combination.I am a cautious man and the winter is not over yet, but so far at any rate we have had that "scarcely credible combination". We have had a mild winter. Industrial action—there has not been any. Oil supplies—they are flowing freely. Power station breakdowns—touch wood, there has been none so far.
The only "scarcely credible combination" is the combination of right hon. Ladies and Gentlemen who so deservedly occupy the Opposition Front Bench. They cannot believe in government without power cuts, since during every single winter when they held office there were power cuts and black-outs brought about by their deliberate policies of industrial confrontation. This is the first winter since 1969 which we have so far managed to get through while avoiding dimmed lights, sudden cuts or fuel restrictions.
The right hon. Gentleman sneered at our energy conservation policies as 335 inadequate. I have never said that our proposals on energy conservation are the last word. I am not proud. If there are those who can make politically realistic and credible energy conservation proposals, we shall consider them sincerely and carefully. We have a long way to go on energy conservation, but at least our energy conservation policies are voluntary policies. Those of the Tories were forced on them in an unnecessary crisis brought about by the massive failure of their industrial and energy policies.
It is the Tory Party which has the brass neck to move a vote of censure on the Government who are at last taking action that makes sense on coal, gas, nuclear policy, and oil. The House will reject the Tories' words and their motion.
§ 5.30 p.m.
§ Mr. T. H. H. Skeet (Bedford)
The Secretary of State for Energy made some interesting comments when he spoke of oil prices and the recent settlement. He did not concede what my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) has indicated, namely, that the difference between the price of oil and the price of coal has now eroded. I hope he will concede the point that a coal price of 6p per therm and a fuel oil price of 8.75p, with another wage deal on top, will lead to the final erosion. The bulk of the tripartite arrangements is aimed at developing coal potential in the United Kingdom at 150 million tons. Therefore, if prices continue to erode there will be little opportunity for manoeuvre open to the right hon. Gentleman.
In regard to the nuclear programme, it is interesting to note that one of the observations made by the Government's Nuclear Power Advisory Board was as follows. We appreciate that what the Government wanted to do to placate the miners was to build fewer nuclear power stations. This is a very good philosophy, if that is the Government's case. However, it may be a very expensive price for the United Kingdom to pay. The Nuclear Power Advisory Board, as reported in The Times on 14th September 1974, said:The amount of additional fossil fuel required today is very large, with a manual cost up to £500 million in 1985–86 and increasing in the years thereafter possibly to £1,000 mil- 336 lion in 1990–91. Therefore, the cost to the consumer would be reduced to some extent, say to 20 per cent., by the effect of the lower capital cost of the fossil fuel plant.Is the Secretary of State prepared to concede that the price of fuel will continue to rise? If he had adopted a realistic nuclear policy there would be a saving to the taxpayer because these plants are operating at a lower operating cost. One has only to look at the pittance the right hon. Gentleman resorted to: three nuclear power stations of 4,000 MW over a period of four years. That is all he intended to undertake.
Let us compare that situation with that in other European countries—and they cannot all be wrong. In France the figure is six stations of 1,000 to 1,300 MW per annum for 1976–77. In Western Germany they are aiming at 30 stations of over 1,000 MW by 1985. Sweden is going ahead with an expensive nuclear programme—and that country, incidentally, has a Socialist Government. In the EEC the figure in 1970 was 20 million tons of coal for nuclear power equivalent to 1.4 per cent. of the EEC energy balance. By 1985, 372 million tons of coal equivalent is to be allocated, representing a figure of 17 per cent. The extraordinary fact is that the Secretary of State seeks to diminish the responsibility of the electricity industry while the EEC is going in an entirely different direction.
If France, the Federal Republic of Germany, Sweden and other European countries are to go for nuclear power as the only way out of the fuel crisis, why must we have this diminished programme? Should we not attribute to the Government a lack of appreciation of the nature of the crisis with which we are involved? Does the Minister not recognise that a 1,000 MW station would replace an annual consumption of 2.25 million tons of coal per year? I am prepared to concede that if the idea is to ensure that coal goes into the power stations it may be an extremely good programme, but it may mean for the public higher prices for electricity and other fuels. Let the Secretary of State tell the nation now about the situation.
§ Mr. Edwin Wainwright (Dearne Valley)
Does the hon. Gentleman realise that in regard to the Magnox power station, of which we decided to build about six, 337 many people thought that there would be far too many to obtain the normal level required for the next series of power stations? Therefore, in terms of the three which are to be built, that is a greater step forward than anything done by the Conservative Government during their period of office.
§ Mr. Skeet
We are going ahead with the SGHWR and I am prepared to put forward my personal opinion that we should have gone in for the light water reactors. They could have been ordered off the shelf and within a couple of years there would have been the possibility of that amount of extra electric power—[An HON. MEMBER: "Not off the shelf."] It is curious that in France, West Germany and elsewhere they have these stations operating already and are experiencing no difficulty at all. Furthermore, one is to be built close to the United Kingdom—namely, in Dunkirk.
Let me come to the question of the utter shemozzle of the Government in their dealings with the National Nuclear Corporation. Why have they been experiencing such difficulties in this regard in the past seven months? There have been uncertainties about the management structure. Perhaps the GEC does not want the investment of 50 per cent. What have the figures been scaled down to? Is the figure to be 50 per cent. or 20 per cent.? Why has the Secretary of State not told us? We are still awaiting a statement some seven to eight months later. Perhaps it involves the question of who is to bear the responsibility for the phased completion of the AGRs. I thought that there would be a draft agreement made between the NNC and the CEGB. This matter was mentioned in The Times on 22nd February 1975, but my right hon. Friend believes that this has been deferred still further.
338 Obviously, if responsibility for the AGRs cannot be handed to the NNC, it is impossible for the corporation to go ahead realistically with the programme for SHGWR reactors. For one thing, there is the difficulty of resources. Many of the skilled workers of the nuclear programme have dispersed and have gone to other industries. Certainly many of the design teams have broken up. No nuclear station has been ordered since 1970 and there is only one in the offing for 1976. In regard to the other stations we find that the chairman of the CEGB is going back on Killingholme and an oil-fired station which would have been built at Plymouth. Therefore, if we are to have no effective nuclear industry in the United Kingdom, how are we to build the SGHWR here?
§ Mr. Thomas Swain (Derbyshire, North-East)
Will the hon. Gentleman say how many nuclear power stations were ordered and put into operation in the years when the Tories had the reins of office? One has only to look at what a hell of mess they made to realise what sort of a situation we should now be facing if they were still in office.
§ Mr. Skeet
I have mentioned the nuclear programme, the Magnox and the AGR programmes. The first lot are complete but the second lot are incomplete, and that is most regrettable. The hon. Gentleman is trying to divert me from my main aim of incriminating the Government, which I intend to do. I have mentioned the two programmes which I support.
There is a management direction problem with the National Nuclear Corporation. Who is to be in charge? Is it to be the GEC or the National Power Group? I hope that the Secretary of State will tell us. [Interruption.] There might be less laughter if he faced the serious situation in which he finds himself. He was going to make a statement last week, but unfortunately—according to The Times and all the reputable national Press—we have not yet had that statement. He is apparently not in a position to make it. He does not know whether he will reduce the GEC holding from 50 per cent. He does not know whether the control is to pass from the 339 GEC to TNPG. Perhaps he will condescend to make a statement later today and tell us precisely where we stand.
Perhaps the right hon. Gentleman will also say something about the Nuclear Inspectorate, what it thinks about the matter, and whether it is concerned about the safety side of the steam generated heavy water reactors.
Will he also say something about the CEGB and the modifications it requires for the 100-megawatt prototype at Winfrith Heath? It is possible that it cannot be scaled up as easily as he contemplates. It may be that we shall not see many of these stations materialising in the next two or three years.
I put to the Secretary of State yesterday a Question about the spirit of co-operation with Atomic Energy of Canada Ltd. It was mentioned that there are already negotiations. Mr. Gordon Leaist, the nuclear power marketing manager for AECY, said last September, as reported in The Times:We are supposed to exchange design information, and there is not an organisation in existence in Britain at present. We know who will operate the British reactors, but we do not know who will design and build them.The report continues:Mr. Eric Varley, Secretary of State for Energy, told the Commons when he announced the British Government's decision in July 'United Kingdom's nuclear organisations and the electricity boards will start discussing co-operation with their Canadian counterparts immediately'.The Secretary of State is embarrassed by this. He knows that he does not have the organisation fit to conduct the negotiations about co-operation over Candu with the Canadians, and he has to stave the matter off by saying that informal discussions are being held. On this score the Government's nuclear programme has broken down completely.
In the last sentence of his speech the Secretary of State referred to natural gas, but he said nothing about it. The United Kingdom has various sources of supply—
§ Mr. Skeet
I am much obliged, Mr. Deputy Speaker.
In the United Kingdom we have been deriving a small quantity of liquid natural gas through Canvey Island. The south North Sea Basin has been producing 4,000 million cubic feet per day. From Frigg, which is likely to come into operation 1977, not 1976, there will come a further 1,500 million cubic feet a day, and from Brent a further 600 million cubic feet a day by 1979. What is apparent, and what the Government have overlooked, is that there has been a tight supply of gas for many years. Yet the Government have been under-pricing this commodity to such an extent that fairly recently they had to break one of the sections of the Gas Act 1972 to cut down the British Gas Corporation's obligations to industry. The corporation was entitled to do that because it received a direction from the Minister.
In contrast, there has been a rapid speed-up in the development of natural gas in Europe, where gas has been considered in the whole European context. The United Kingdom has adopted a purely insular policy. Europe has been securing gas from Algeria, the Soviet Union and North Holland. The United Kingdom has taken it only from what is available in the south North Sea.
The Government now want it from the north North Sea, from the Brent and Forties fields. What about the important potential that has been run down? The corporation has not been able to build up supplies. Another major mistake the Government made was to assume that they would get an enormous supply of gas from the Locton field, which was supposed to run for a contract period of 15 years. The field, discovered by Home Oil of Canada, started to feed the grid in May 1971. The contract was to run for 15 years, but the well was shut down on 1st September 1974, after three years. The Secretary of State may know that if the reservoir structure is sound he may have further difficulties in the southern North sea. He may have discovered that some of the optimistic estimates made several years ago have already been revised.
341 The Secretary of State has underpaid the producers. I will give a few figures to illustrate what has been happening. In the Viking field he paid the producers 36 US cents for 1,000 cubic feet—1.5p per therm. Norway gets 52 US cents for Ekofisk gas as a starting price. The Dutch border price in 1974 was 70 US cents. Iran now sells to the Russians at 62 US cents. We pay the producers the basic price. The result is that there is no further exploration in the south North Sea. The Secretary of State is not encouraging further development or exploration.
How does the consumer fare? The domestic consumer in England and Wales pays 10.81p per therm. In Scotland he pays 13.78p per therm. In the Netherlands he pays a lower price. Now I take the Secretary of State's figures, which appeared in Hansard on 18th December 1974. The range of gas prices in pence per therm was as follows: United Kingdom, 10.5; Belgium, 16.2; the Federal Republic of Germany, 17.8; and France, 21.2.
Has the Secretary of State not learned that the Federal Power Commission of the United States made the big mistake of under-pricing natural gas? The result was that demand outran supply, which led to great problems. The Secretary of State is in exactly the same situation. He is not raising the price of natural gas along with the prices of other forms of energy. People are coming out of electricity, oil, coal and going into gas. He will run short of supplies again. When will he adopt a policy which is reasonable and in the national interest? I hope that he will take into account what I have said on that score.
The whole of the Government's oil policy has been based on three enactments. First, the Offshore Petroleum Development (Scotland) Bill is to provide more sites for production platforms which are not now required.
Secondly, there is the Oil Taxation Bill, which is to provide for the taxation of the North Sea. The approach is wholly wrong. It has had the effect of driving people out of the North Sea so that we shall not get the maximum supply of oil. Thirdly, there is the Petroleum 342 Bill, which provides for a 51 per cent. participation. Surely, if the right hon. Gentleman wants to maximise extraction from the North Sea he should provide an economic climate in which the companies can operate. I am not against taxing them heavily—far from it: it is most desirable—but if at the end of the road the oil does not come and if we fall further and further behind on our schedules we can blame only the Secretary of State and his colleagues. Before that happens I hope that there will be a change of policy.
On the oil front the Secretary of State has been unsuccessful. On the nuclear front he has taken the wrong route. On the gas front he has chosen the wrong price for natural gas and we shall run short of supplies. On the coal front he is prepared to pay the miners any price they demand. He is paying danegeld to prevent strikes, with the result that he will produce coal but may not have a market for it. Before it is too late, will the Secretary of State look again at his national programme to see whether it is right? All the Europeans cannot be wrong.
§ 5.51 p.m.
§ Dr. John A. Cunningham (Whitehaven)
My right hon. Friend need hardly fear for his salary. A glance at the Opposition benches shows that the Opposition will barely have sufficient speakers to keep the debate going let alone win a Division in the Lobby.
In the two speeches we have heard from the Opposition my right hon. Friend has been blamed for everything except for a failure to build windmills. Opposition Members tilted at a few windmills, because what has been criticised is the messy energy policy which the Labour administration and my right hon. Friend inherited in February last year. We inherited a situation in which conservation was brought about by confrontation, and that was particularly true in the energy industries. We had confrontation in the electricity generating industry, and in coal mining we had confrontation so often and of so prolonged a nature that eventually the British people became heartily sick of it and rejected that policy and the administration which had been responsible for it.
343 In the barely 12 months we have had since then we can argue with some justification that serious attempts have been made to get a co-ordinated energy policy. Far from making decisions on nuclear energy of the kind referred to by the hon. Member for Bedford (Mr. Skeet), the Opposition made not a single decision in this area of policy in the four years they were in office. Far from complaining about the decisions which have been made, the Opposition should look to then own record. On nuclear energy we inherited a policy vacuum. We cannot accept, and nor will the British people, the churlish criticisms we have heard from the Opposition today.
We should not be rigid about the various rôles which individual fuels play in our total energy policy. Coal undoubtedly will be a long-term component of any energy policy, but there are hon. Members in the Chamber who are better qualified than I am to discuss that aspect. Oil and gas will be much the least lengthy participants in any energy policy in the long term. They will play a transient rôle in future energy patterns, but it is none the less important that as a Government and as a country we should control the part they play in our energy provisions, and I welcome the decisions which my right hon. Friend and his colleagues have made. Nuclear power generation will almost inevitably play a long-term rôle in power generation in the United Kingdom. In that sense I agree with the hon. Member for Bedford that the present programme is disappointing.
In a recent energy debate my right hon. Friend said:That programme has been described as a modest programme of 4,000 megawatts which will perhaps come on stream in the early 1980s.… when one looks at the British nuclear programme in relation to Europe, there is nothing at all to complain about."—[Official Report, 11th February 1975; Vol. 886, c. 237.]I would rather we looked at our programme not necessarily solely in the context of European programmes but in the context of our own previous performance and, additionally, in terms of the research and development effort that the United Kindom has put into, and is still putting into, nuclear energy. The Department of Energy's research and development budget is inadequate, as the Chief 344 Scientist admitted recently to the Select Committee on Science and Technology.
Unfortunately, we still have no clearly defined research and development strategy for energy. While I recognise that it is perhaps too soon to complain too strongly on that account, I believe that we should be moving quickly towards a well-defined research and development strategy for energy policy. My right hon. Friend may be correct in his comparison of our efforts with those of other countries, but looked at in terms of our previous position the present programme is too small. The current research and development budget of about £110 million does not keep pace with inflation. Of that amount more than 50 per cent. is spent on nuclear research and development. It seems a little odd that our major research and development effort in energy produces so small a return in terms of the size of the programme we are embarked upon. That is not satisfactory and the position should be examined.
We cannot, however, contemplate a massive expansion along the lines advocated by the hon. Member for Bedford. It is not realistic in terms either of personnel or of capital investment to embark on the kind of nuclear programme which has appeared in recent European energy documents. We should make sure not only that the industry is in the right shape but that our processing, supportive industries are capable of providing the fuels we need and of dealing with the nuclear wastes which will inevitably increase with an enlarged policy. We should be able to capitalise on our investment in enrichment capacity and fuel technology in terms of world-wide expansion in nuclear power.
We are still awaiting the reorganisation and the reconstruction of the National Nuclear Corporation. Only yesterday my right hon. Friend said that he regarded this as a matter of some urgency, but we are entitled to ask him to be, in his own defence, a little more forthcoming about why there is such a long delay. Is it that those who were opposed to the decisions on the steam-generating heavy water reactors are procrastinating? Is it because some financial argument is going on behind the scenes about responsibility over the 345 AGRs? We cannot get moving on these matters until this is sorted out. The Secretary of State is in danger of being embarrassed by a delay for which he may not be responsible. It is about time he got a grip on the people responsible in order to produce a decision.
There are problems, particularly in my constituency, associated with any expansion of nuclear power generation—such as the disposal of waste and the safety and health of personnel in plants and in the communities surrounding them. Wind-scale, which is probably the most complex nuclear installation in the United Kingdom, is in my constituency. It is a name which is bandied about a great deal these days in the media and even in the House by many people who have only a limited knowledge of its location, let alone what is going on there.
I certainly deplore in the strongest possible way the scaremongering which is damaging not only to the interests of the industry but to the interests of the people involved in it and to the interests of our energy policy generally. I deplore particularly the kind of cheap sensationalism that some newspapers have brought to the subject recently. There are no doubt problems about the disposal of plutonium waste and about the size of the facilities we need to cope with this material. There are problems about the recovery of wastes which cannot be disposed of and there are problems about how to deal with the security of such materials.
I am most concerned about a number of recent incidents where safety has broken down and where there has been a systems failure, perhaps because of human error or perhaps because of a technological error. There have been incidents which have given rise to concern and it seems to me that a general attitude of slackness has crept in. This should be very seriously looked at. It could bring the industry into disrepute more than anything else.
I am a supporter of an enlargement of our nuclear programme, but I want in no small way to make clear that the health risks which appear to exist for the people who work in the industry must be treated seriously both by the Government and by the management of the industry. I am not suggesting that they 346 are not treated seriously or that people are not doing their statutory duty or meeting their legal obligations. There is a tendency on the part of some, however, to dismiss as without foundation the idea that health risks exist. The evidence we already have contradicts that attitude, and this is a problem which must be closely watched. The protection of workers and their families has to be the paramount consideration in this industry.
In considering the expansion of the nuclear power generation programme, my right hon. Friend the Secretary of State should ensure that there is an appropriate amount of investment in plants such as Windscale or that the extra capacity is available to deal with reprocessing and waste handling. He must ensure that expansion does not lead to undue risk for the people who work in the industry. It is crucial that we should ensure that all those who work in the industry and the public are sanguine about their position.
I turn to the question of conservation policy. The Select Committee on Science and Technology, of which I am a member, has been looking at this matter for some weeks. We are astonished at the plethora of bodies and committees which in one way or another advise the Secretary of State. My right hon. Friend's initial interim statement was welcome. I believe, however, that we are getting into a situation in which a further statement should at least be in a state of preparation to tell us how the Government intend to follow up the first attempt at energy conservation. The psychological approach and policies of exhortation will have only a limited effect on people's attitudes and the time is opportune now for a further strengthening of the Government's demand that industry, commerce and the general public should conserve energy.
Are there any accurate energy use projections in the Department? Certainly some of the witnesses we on the Select Committee have interviewed seem to doubt this. We have been told that many companies, even major companies, do not know in any detail the facts of their energy use. They know only that they have a massive bill for energy, but they have no breakdown on the use of the energy and it is almost impossible for 347 them to respond to demands for conservation. They cannot tell where waste is taking place or where economies could be made. Since the major savings will obviously be made in industry, this matter must be given urgent attention.
We have been told in the Committee that undue interference by the Government would be intolerable. That is interesting because we were also told that in some circumstances perhaps the Government should come forward with incentives in the form of cash grants to encourage people to become conservation conscious. That is a kind of interference—and I have been led to believe that the last thing British industry wanted was a subsidy from the Government. One way or another, however, the Government must be able to get to grips with industries which are major users of energy.
We must be able to get to grips with the thousands of small companies which individually are not major consumers but which collectively offer substantial possibilities for energy saving. Here again, the important aspect is how the matter is approached. The Government should be considering codes of practice for various industries so that firm recommendations can be made to industrialists and targets set. I know that so far my right hon. Friend has set his face against targets, but the system has been used in other countries, notably France, with some success. I recognise that the targets will not always be met, but that is no reason for refusing to set a target.
The Government have taken a different approach on the question of petrol consumption where they have tried not only exhortation but extortion through price increases. The kind of energy saving produced by reductions in petrol consumption are almost negligible compared with the possible savings in industry and commerce. I see no sense in introducing a two-tier pricing system for petrol. That would militate against the very people whom it is sought to help by proposing it. That is especially true in the case of the rural areas. Allowances would have to be large enough to make it positively attractive for people to use petrol at the cheaper rate. However such a policy would be self-defeating.
348 The answer to the problem is to encourage people in rural areas to stop using cars and to use public transport. I should like to know what consultations the Department of Energy is holding with the Department of the Environment to co-ordinate the Government's attitude to energy policies and to public transport. I recognise that my right hon. Friend and his Department have made progress on nuclear energy and conservation in the past 12 months. I have attempted to push my right hon. Friend a little further on both those fronts, since a few more decisions are required from him and his colleagues. I hope that those decisions will be made in the near future.
§ 6.11 p.m.
§ Mr. Peter Rost (Derbyshire, South-East)
I am grateful for being called after the hon. Member for Whitehaven (Dr. Cunningham) because I agree with much of what he said towards the end of his speech, especially with regard to energy conservation or, as I prefer to call it, a more rational use of energy.
Our standard of living is declining because we are living beyond our means. Our balance of payments is draining away and we are running up a vast burden of foreign debt, the interest on which will cripple us for generations. Yet that need not be so. We could be taking more vigorous action at least to reduce the energy element of the balance of payments deficit. We should take firmer and more purposeful action to save on oil imports.
The problem results from our past mistakes and from the lack of political will to help ourselves. It is related not only to this Government's inaction but to that of the 1950s and the 1960s, and it is the legacy of our reliance on cheap oil from abroad, which resulted in a rundown of our indigenous coal industry and brought about a lack of incentive to use energy more efficiently. That led to the allocation of far too small a proportion of capital investment in the more efficient production and consumption of energy.
The rundown of the coal industry, the lack of incentive for efficiency and the lack of capital investment have brought about the problems with which we are afflicted today. On top of that, cheap oil imports resulted in the neglect of modern transport systems and brought 349 about disincentives rather than incentives for research into and development of conservation projects.
We were also afflicted with political policies for which the present Opposition must take their share of the blame. On top of the cheap oil, the policy of subsidising energy aggravated our problems and distorted our energy consumption patterns during the previous years. That policy encouraged waste and caused the misapplication of research and development expenditure. Those legacies result in our being far less independent and secure and far more vulnerable than we need be.
The problems of the previous decades are no justification for saying that something could not have been done during the past 12 to 15 months, since the sudden quadrupling of the foreign oil price should have awakened us to the realities of the need to adopt an energy strategy.
This is my main charge against the Secretary of State. After more than a year there is still no integrated, co-ordinated, credible energy policy. The Secretary of State said on several occasions that the Conservative Opposition simply criticised the policies that had been adopted instead of offering constructive proposals. One reason we have not offered constructive proposals is that there has been no energy debate since December, when the Secretary of State offered his first package of conservation measures.
It is unjust to suggest that there have not been plenty of suggestions available to the Government in recent months. The Government have been inundated with sound technical advice from a vast variety of sources. In the light of that advice we must ask why so little has been done to implement it. The Central Policy Review Study on Energy Conservation was published in July and contained an excellent series of recommendations. The NEDO Report on energy conservation, which contained valuable proposals on which we could have acted, was published in December. We have received the OECD document on energy prospects to 1985, which was the result of extensive research work by a team of experts, and the EEC Commission issued a series of 350 working papers on the more rational use of energy.
§ Mr. Peter Hardy (Rother Valley)
The lion. Gentleman is in danger of misleading the House. All the documents to which he referred, and the central policy review document of last summer, point the way mostly to long-term savings. The conservation measures proposed in all those documents offer little savings by way of short-term measures. Therefore my right hon. Friend is correct to take a long view.
§ Mr. Rost
Although those documents propose longer-term solutions, they include a large number of small, but not insignificant, immediate short-term as well as long-term measures. I do not quarrel about that, since my argument relates both to short-term and longer-term policies.
In addition to the detailed technical recommendations, a plethora of committees and advisory bodies and expert bodies offer practical recommendations. The problem is that the effort has been diffused and the research work has not been integrated. Therefore I am not surprised that, rather than being able to arrive at a clear policy as a result of all the advice, the Secretary of State has become confused.
What should our national energy strategy be now? I suggest that there should be three fundamental objectives. First there should be an understanding and acceptance of the fact that there is no energy shortage. There is simply a problem that we waste too much of our energy.
The second fundamental point is that we should plan more vigorously to develop our indigenous and alternative resources.
The third is probably the most important of all, because without it the other two become irrelevant. It is that the Government must display political determination to devote a greater priority, a greater sense of effort and purpose and greater urgency to a co-ordinated effort to overcome these problems.
The real criticism which we should be making of the Government is that they have not shown the political will to get on with the short, medium or long-term 351 solutions. Therefore, I offer a few suggestions on the first of these fundamental objectives, which is the reduction of waste or a more rational utilisation of our energy resources.
It is disgraceful that the United Kingdom is the biggest consumer of energy in the Western world, in relation to gross domestic product. We are the biggest waster. Considering that we are also one of the poorest nations and have the biggest balance of payments deficit, it is all the more important that we should be top of the league in terms of energy consumption in relation to gross domestic product, rather than at the bottom of the league. The Secretary of State said yesterday that energy conservation was a hard slog. I agree. But we should be asking him when he proposes to put on his track suit.
There are no short-term magic-wand solutions, as the right hon. Gentleman rightly says, but there are many measures, each of which would produce a relatively small contribution to conservation but which cumulatively would make some contribution towards the EEC target of a 15 per cent. reduction in waste by 1985 and a 25 per cent. reduction by the turn of the century. Yet the measures announced so far as not expected to produce more than a 1 per cent. or 2 per cent. reduction in our energy consumption over the next year or so, and not even the most optimistic expert would suggest that the measures so far announced by the Government will produce anything approaching more than a 10 per cent. improvement in the situation by 1985.
That is not good enough. There are several areas for action, and I hope that the Secretary of State will consider them. I list 10 of my own pet priorities.
The first is the recycling of heat. It is not good enough that we still generate power and that the CEGB is still putting up new power stations the most modern of which have a thermal efficiency of no more than 35 per cent. I know the problems of combining heat with electricity production. But other countries are overcoming them because they have the political will and determination to make some contribution to the economy in doing it. In Sweden, France, Germany, Russia and elsewhere electricity generation is now being combined with district heating or with the recycling of heat for 352 useful purposes. It will not do to continue this prolific waste. Therefore, one of my first points is that the Minister should be directing his efforts towards getting a more efficient conversion of our energy through our electricity generation.
Secondly, we should be doing more to encourage refuse incineration. It has been estimated that this would save between 6 million and 10 million tons of coal equivalent a year and produce favourable environmental side effects.
Thirdly, some contribution could be made by combining sewage with methane production. This is happening elsewhere, and there is no reason why we should not move towards it.
I turn to the development of alternative resources. None of these could make a major or immediate impact on our energy consumption, but over the years they could make an important cumulative contribution. I refer to solar heating, which it is easy to decry because of our climate. Nevertheless, research which is going on indicates that it can make a valuable contribution, and we should be getting on with it. We have wind power, tidal power, wave power, and looking at the longer-term, geo-thermal power. We should be devoting more research and development expenditure in these directions.
Fifthly, we should be doing more in transport by encouraging research into more efficient internal combustion engines and into the diesel engine. In addition, there are many other suggestions which would make a marginal medium-to long-term contribution.
Then we have the appalling situation with thermal insulation. Our record is the worst in Western Europe. Why have the Government still not made a determined effort to provide incentives for thermal insulation of our buildings. I give one example. Those householders who spend money on improved insulation are penalised subsequently by being re-rated for improved central heating, double glazing, storm porches or whatever else they spend money on. This is not an incentive; it is a disincentive. Why is not there more encouragement for rented accommodation and council accommodation to provide improved insulation? More thought should be devoted to this area.
353 Next I come to energy auditing and calculating consumption. This applies mainly to industry. Here we can achieve short-term benefits. One example is that of Marks and Spencers, which has achieved a 15 per cent. reduction in energy consumption simply through good housekeeping.
Auditing energy, calculating consumption and advertising consumption could make a major contribution in giving the consumer advice on whether he was getting value for money. A motor manufacturer advertises the petrol consumption of his car, and this is a sales point. Why does not the builder of a house advertise its thermal efficiency and point out how advantageous it is to spend a few hundred pounds more buying that house because it will produce economies in heating bills? The same applies to domestic appliances. The energy consumption should be advertised so that the consumer can see whether he is getting value for money by comparing one product with another. In our industrial processes as well energy consumptions can be advertised so that we know where we are.
Then there is the question of reversing the electricity tariffs. This is a difficult problem, but something could be done here to discourage waste by the larger consumer and to encourage greater efficiency.
We should also be doing more by providing incentives to industries. I shall not elaborate this point because I know the Secretary of State has it well in mind, but one aspect of it is to give greater importance to energy consultants and their work. There is a shortage of them. Here I declare an interest, as a director of a company which involves itself in advising on electricity consumption. The application of energy consultants can make a tremendous contribution. The one example given in the NEDO Report is most significant.
A survey was done of 453 Government Department buildings. It was shown that in 306 of them, for an expenditure of just under £500,000 the fuel saving could be £250,000 a year—and that is at 1973 prices. That is an example of what can be done.
What holds us back? What stops us getting on with this programme? I believe that it is a fear by the Govern- 354 ment that in the public mind conservation might mean restrictions, hardship and cuts. Of course, the opposite is true. A more rational use of our energy will allow us to maintain our standard of living, improve our environment and provide major economic advantages. We should be advertising this more extensively.
In addition to the pathological fear of the Government that the people may think they are carrying on a "switch something off" campaign, what holds back the Government is a lack of political determination. The proper sense of priority has not yet been struck by the Government. We need a complete rethink and restructuring of the relationship between the Department of Energy and the nationalised boards.
The creation of a national energy board, which would help the Secretary of State, should be considered. We are all loth to recommend new bodies. This needs careful thought. At the moment we have an unco-ordinated series of monopoly nationalised energy industries—coal, gas, electricity and nuclear power. There is no co-ordinated planning or any capital investment programme directed from a central body.
To succeed with a national energy strategy we must have a more purposeful direction of research and development. We have to get away from the tubby holes of the nationalised industries, all squabbling with one another without reaching a co-ordinated programme in the national interest.
A national energy board could allocate Government expenditure on energy-saving investment. To give an example of what I mean by greater priority of capital investment, we are spending about £700 million a year on food subsidies, which do not produce an economic return. If we were to re-allocate that sum, in a Budget, to produce energy conservation, the economic return would be substantial. If Labour Members do not like the idea of cutting food subsidies they might consider cutting the budget of the Secretary of State for Industry. If the thousands of millions of pounds that are being spent on nationalisation were re-allocated towards a programme of energy conservation and the development of a national programme for an integrated energy 355 policy I believe it would produce a positive return to the economy and a substantial saving on the balance of payments.
An energy board would assist the Secretary of State by giving directions on energy saving and on the development of our indigenous resources. It would give directions, for example, on the conversion of electricity in a more economic way, and on research and development. It could provide more funds for technology in the coal industry, so that there might be more automatic coal mining and so that, perhaps, we could increase our coal production to about 250 million tons a year. That figure is not by any means up in the clouds.
In my view the Minister stands condemned because the measures he has announced so far are only tinkering with the problem. We have no co-ordinated energy strategy. There is a lack of overall direction. What is needed is a political decision to get to grips with the problem, more rational use and more efficient production of our energy resources, a national energy board with the backing of the Government to integrate and co-ordinate policy, a determination to move away from the antiquated structure of the 1950s to a modernised structure to fit the new situation, and, above all, a greater priority for public expenditure on research and development in the energy industries. This would produce a return to the economy and help the balance of payments.
Britain has the resources, the technology and the expertise. All we need is the political will to achieve sensible objectives. All that is lacking is a Minister with determination to face the problems instead of muddling through, praying for mild winters and docile unions. If the Secretary of State does not have that will, or cannot persuade his Cabinet colleagues, it is time that he resigned.