§ 10.1 p.m.
§ The Under-Secretary of State for Energy (Mr. Gordon Oakes)
I beg to move,That the Compensation for Limitation of Prices (British Gas Corporation) Order 1976, a draft of which was laid before this House on 10th June, be approved.This Order specifies the amount which the Secretary of State for Energy proposes to pay to the British Gas Corporation for loss due to price restraint in the financial year 1974–75. It has been laid in accordance with the provisions of the Statutory Corporations (Financial Provisions) Act 1975, which hon. Members will know is the successor to the 1974 Act of the same name. The 1975 Act does not set a limit to compensation other than to stipulate that it shall not exceed the deficit on the revenue account of the corporation concerned. It also provides for compensation to be extended from 1974–75 and 1975–76 to 1976–77 by Treasury Order.
The amount which the Government propose to pay to the British Gas Corporation in respect of 1974–75 is less than the deficit on revenue account shown in the annual report and accounts. This is, I think, a unique occurrence in these compensation Orders, and merits a few words of explanation. The British Gas 1974–75 accounts included a provision against settlement of outstanding claims by Southern Basin Gas Producers. This provision was agreed with the auditors, who are appointed by the Secretary of State. It was particularly difficult to be precise about the quantum or the timing of the payments which would follow settlement of outstanding issues.
An Order was therefore drafted to pay compensation based on the deficit shown in the accounts, with an arrangement that British Gas would repay to the Government any difference between the provision and the settlement reached if it turned out to be less.
In the event, negotiations between British Gas and the producers moved faster than expected, and it appeared more sensible, and constitutionally more appropriate, to delay the laying of the 1308 Order until the sum of the settlements was fully known.
I should like to say to the House that the extent of the back payments for the period up to 31st March 1975 is only one element, and taken in the round the outcome of the settlement is no less favourable to the producers than was expected when the provision was made in the British Gas accounts last year. It is merely that the incidence of payments is different from that anticipated.
The 1975 Act and the sum payable under this Order are basically the legacies of policies begun by the previous Administration, which prevented industries from increasing prices in order to meet their costs. It was not possible to reverse these policies overnight. British Gas increased their prices for industrial and commercial consumers in September 1974, but acceded to a request by the Government to defer increasing their prices to domestic consumers until January 1975. The deficit which we are discussing arises directly from this situation, and we are satisfied that it could in no practicable way have been avoided.
In November 1974 my right hon. Friend the Chancellor announced the Government's intention of phasing out subsidies to the nationalised industries as soon as possible, and during the Second Reading debate on the 1975 Act it was made clear that the Government intended to complete the process by the end of 1975–76 so that no payments would be made in relation to 1976–77. Consequently, the contingency provision in the Act for 1976–77 is not expected to be needed. The British Gas Corporation is expected to declare a modest surplus for 1975–76, so that 1974–75 is likely to be the last year in which subsidies in respect of limitation of prices will be made under the 1975 Act.
Perhaps I should add that the Government fully appreciate the difficulties which the price rises, which have been required to return British Gas to a surplus-making position, have involved for some of the larger domestic users. Amongst these, those least able to pay are protected in some measure by social security. We shall continue to do what we can in this direction.
1309 I hope that I have given enough background to enable informed discussion of the Order to take place, and I commend it to the House.
§ 10.6 p.m.
§ Mr. T. H. H. Skeet (Bedford)
The purpose of the Order, as the Under-Secretary of State said, is to compensate the British Gas Council for losses, though not loss of profit, sustained in complying with the Government's demand for price restraint in the year 1974–75. There is, however, a lack of consistency in the treatment of the deficits of the nationalised corporations charged with abiding by price restraint, and that is very significant. British Rail and the National Coal Board do not have to show that their deficits are due to price restraint. The National Coal Board lies within the European Coal and Steel Community and thus falls outside the operation of the normal price control rules.
It is otherwise, however, for gas and electricity under the Statutory Corporations (Financial Provisions) Act 1974. The Under-Secretary of State explained the discrepancy between the figure which appeared in the accounts and the figure which now appears in the Order. Part of the British Gas Corporation's deficit was due to price restraint, and this was initially underestimated. In the accounts the figure was thought to be £42.3 million and subsequently in the Order the figure turned out to be £28.9 million. This is an over-provision of 45 per cent. on the actual deficit, and represents a unique example in contingency planning. Perhaps the Minister will elaborate a little on how that occurred.
It is apparent from what the Minister said that a policy of charging economic prices for the products and services of nationalised corporations is to be established. At least that is the trend, but it does not seem to apply to gas, because the BGC is not permitted to charge the free market price. Accordingly, the taxpayer has been called upon to foot a substantial bill since 1971. The compensation for price restraint from 1971 to 1974–75 for BGC totals £104 million, which is comparable to the electricity generating and area boards' total of £572 million.
Price restraint may be effected under the counter-inflation policy through direct 1310 subsidy to the BGC or by diminishing the corporation's profitability, and that is the point I wish to emphasise. Either approach represents a subsidy to the consumer in general, with disproportionate benefit accruing to the wealthy and little relief for the poor.
In its Fourth Report entitled "Gas and Electricity Prices", House of Commons Paper 353, the Select Committee on Nationalised Industries also takes a narrow view, but the House should note the comment which appeared in the Financial Times editorial of 2nd July 1976, which is as follows:The arguments against cheap gas are exactly the same as the argument against food subsidies. It costs less to help the poor than to cheapen what everybody buys.That is self-evident.
There are several courses open to the Government. First, they could keep gas prices below their economic band, which is what they appear to be doing. The consequences of that are significant. It would encourage over-production of a particular fuel at the expense of others in the energy market, reminiscent of the prolonged problems of the United States and with the concept of premium use of gas considerably shaded. It would distort the fuel market by rendering electricity increasingly uncompetitive in the domestic market, with severe repercussions on the coal industry which is primarily dependent upon it.
The ingredients that enter into the costs of gas, electricity and coal are different. Coal is derived from a higher labour-intensive industry, and its costs have to be added to those of the generating and area boards. The British Gas Corporation purchases its raw materials from the oil companies well below the market value. From the southern section of the North Sea it works out at 1.5p per therm. Gas prices relative to those of oil are also significant. Gasoil for domestic heating works out at 18.5p per therm and natural gas at 14p to 15p per therm. The difference in price between the two is equivalent to 6.6 per cent. per gallon on gasoil. Gasoil for industry is between 14.9p and 15.5p per therm. Natural gas for industry is 8.5p to 12p per therm on the interruptable supply contract. The difference works out at an average of 8.2p per gallon. A further consequence is that the continuation of cheap gas could affect the flexibility 1311 of refining operations in the United Kingdom.
I offer in aid a small exerpt from the July 1976 issue of Petroleum Economist from which the Government could learn a lesson. It says:Since Dutch supplies have tended to be at prices appreciably below cif price parity with oil, Groningen has arguably done Western Europe a disservice—as regulation has in the USA—by encouraging dependence on a premium fuel at discounted price.The Government should realise that United Kingdom prices of gas are higher than those of many member States of the EEC. The domestic prices per therm are: the Federal Republic 19.8p with VAT at 11 per cent.; Belgium 19.3p with 6 per cent. VAT; France 20p with 17.6 per cent. VAT; Italy 12.9p with 6 per cent. VAT; the Netherlands 12.8p with 4 per cent. VAT; and the United Kingdom 13.7p with zero rate VAT.
The second course which is open to the Government is to tax gas to bring it into line with other fuels. I heard the hon. Member for Bassetlaw (Mr. Ashton) ask "Why not tax it?" That course is not recommended. Fuels are not subject to VAT in the United Kingdom as they are on the Continent.
The third course is to allow gas prices to rise in response to market forces without general subsidy, the corporation being called upon to pay corporation tax on its surpluses. That would enable the corporation to increase its return on net assets after depreciation and interest charges. The 1974–75 position was totally unsatisfactory and returned only 5.5 per cent. after depreciation but before interest. That is borne out by an observation by the Secretary of State on 29th January 1976, as reported at column 313 of Hansard.
Further, I am not sure that the corporation's accounts have been adjusted for inflation. The corporation can provide well over 50 per cent. of its capital requirements from its own resources without the necessity for much additional borrowing. By March this year it had borrowed £2.3 billion against its statutory borrowing ceiling of £2.7 billion.
The corporation could expand its research into synthetic natural gas processes to provide revenue for licensing and provide for the necessary follow-on 1312 after the year 2000, when North Sea gas resources may reach exhaustion. Finally —and this is one of the most significant points—it could devise ways and means to aid those in the domestic market who may be embarrassed by realistic prices.
Perhaps the Under-Secretary can reconcile two observations in two different documents. Paragraph 26 of the White Paper "The Attack on Inflation, The Second Year", Cmnd. 6507, said.The subsidies to the nationalised industries needed for price restraint have been phased out.But in the Fourth Report from the Select Committee on Nationalised Industries, Session 1975–76, on gas and electricity prices, there is the following interesting observation in paragraph 177:The other major factor in this debate must be the position of the domestic gas consumer. At a time when the prices of all forms of heating have risen so markedly, we would place overwhelming weight on the harmful social effects of deliberately closing or diminishing by fiscal or other means the price differential of the one relatively cheap fuel.What do the Government propose to do? Does the Minister propose to hold down the prices of gas well below their market level or, as would appear from the White Paper, to let them rise to a market level which is probably in parity with the other fuels?
§ 10.17 p.m.
§ Mr. Arthur Palmer (Bristol, North-East)
I congratulate the hon. Member for Bedford (Mr. Skeet) on his elevation, even if late at night, to the Opposition Front Bench.
It is no good the hon. Gentleman becoming so indignant about the subsidisation of energy prices because his own former Government introduced it. It was the most remarkable contribution that the right hon. Member for Knutsford (Mr. Davies) made to our affairs. He came from that citadel of capitalism, the CBI, and promptly set out to subsidise the nationalised industries.
I share one thing with the hon. Member for Oswestry (Mr. Biffen). We both opposed that policy. I think that such opposition is now generally-accepted wisdom, but both parties have departed from wisdom in the past, so it is no good our abusing each other. We must all try to look at the matter realistically from now on.
1313 My own industry, electricity supply, never asked for subsidies. They have been much resented by the boards, because they often lead to sloppy management. They have been opposed by all the unions in the industry. Once a publicly-owned industry takes to receiving subsidies, realistic collective bargaining on salaries and wages usually flies out of the window. At any rate, that has been our experience.
I want to make a few comments about the absurdity of present gas pricing. Here we have a premium fuel which can be used in many ways. Apart from being used for straight burning, it is a feed stock for the chemical industry. The question of the rate at which it should be used up is obviously of very great importance in itself. It is now taken for granted that the gas industry cannot supply all its would-be customers, certainly not until the Frigg field comes along. It is also unable to charge the normal market price but is to be subsidised to the tune of £20 million. That is an absurd situation.
In addition, it is now to have a right which I am sure the electricity supply industry would dearly love to have. Under the Energy Bill, to which we gave a Second Reading recently, which is now in Standing Committee, the gas industry does not have to supply all its customers if it does not pay it to do so. The electricity supply industry, however, is still under a statutory obligation to supply all its customers, whether or not those customers are economically useful.
I am well aware that this is not a simple but an extremely complex probblem but it is one which I would urge my hon. Friend the Under-Secretary to take seriously because I hope he will not mind my saying that his reply to my intervention a week or so back irritated me. On the Second Reading of the Energy Bill referring to gas pricing I said:Surely the Minister accepts that this is a point which is open to considerable argument".My hon. Friend brushed aside my objection and said:This concerns the counter-inflation policy and the effect that any unnatural increase in the price of fuel would have on that. There are no current plans in the Department to 1314 institute a special gas tax."—[Official Report, 15th June 1976; vol. 913, c. 408.]I had never suggested a special gas tax. I merely suggested there was a very real problem.
Let us turn to evidence given in public recently to the Select Committee on Science and Technology which I am perfectly in order in quoting. I was in the Chair at this Energy Sub-Committee session. The Committee was questioning in public high officials in the Department, including Mr. T. P. Jones, the Deputy Secretary. The advantage of having a Select Committee is that a great deal comes out into the open and does not have to be filtered or read through the Minister's mouth. Mr. Jones said in answer to a question of mine:The Chairman of the Central Electricity Generating Board has pressed hard for a tax on gas. There is certainly a problem here which we are looking atThe CEGB Chairman certainly has not been silent on this subject. This was the Deputy Secretary, speaking of the Department. He went on:and which I think we have got to look at further.Therefore, when some of us raise this a very serious issue the question of the related pricing of fuels in this country, we are entitled to be taken seriously.
Let us look at the Department of Energy Statistical Bulletin Energy Returns, May 1976. It states:Total natural gas growth continues. Total gas sent out in the four months January to April 1976 was nearly 8½ per cent. higher than in the corresponding period last year. Total electricity supply in the first three months of 1976 was 1.3 per cent. lower than in the corresponding period of 1975. The corresponding decline in primary fuel used for generation during the period was 2 per cent.Surely this situation must cause the Ministry some concern? Whilst I am not going to press too hard tonight, because there is not time, I hope the House can have some serious future discussion on the subject.
May I commend as reading to the Department, therefore, a most useful paper presented to the Institution of Mechanical Engineers by Sir William Hawthorne, the chairman of one of the many advisory committees to the Department, in December last year. The paper is entitled "Energy: a renewed challenge to engineers". This eminent 1315 engineer, with great experience in these matters, had this to say:Modified thermal pricing has not yet been fully accepted by governments or public opinion. We still tend to cling to the concept that energy should be sold at the average cost of production and supply, modified perhaps to allow for the effects of peaks and extraordinary marginal costs. It is evidently not sufficiently realised that the pricing of a fuel below its thermal parity with the comparable fraction of oil, which is the dominant fuel offering the widest range of substitutions with other fuels, leads to a waste of the underpriced fuel, hence to a general waste of energy, a higher demand for all fuels and a pressure on world prices.
§ Mr. Palmer
I am not making any suggestion. I am saying merely that here is an eminent gentleman, one of the principal outside advisers to the Department, who is arguing that we need a more intelligent system for the pricing of energy than the chance methods currently used.
If, for the moment, we cannot do very much at source, I should like to know when it is hoped in the Department to get back to the kind of discipline which was applied to the nationalised industries, especially gas and electricity, in the late 1950s and the 1960s, largely as a result of the recommendation of the Select Committee on Nationalised Industries, by which there was laid down a rate of return on net capital assets which was decided by the Ministry. It was varied from time to time. Historically, it was always the gas industry which was given the benefit because the gas industry then relied on town gas derived from coal and had not then switched to the highly remunerative natural gas. So there was always a lower rate of return fixed by the Ministry for the gas industry and a higher rate fixed for the electricity supply industry. It was a rough and ready discipline, but it was a workable financial discipline.
All that was thrown out by the action of the Conservative Government. But once we get away from subsidisation, which is the very proper aim of the Department now, has the Secretary of State in mind some new system of financial discipline for the nationalised industries? In that connection, it might be 1316 as well for the Department to look back at the system of fixing a balanced rate of return on net capital assets. The system worked well at the time. I regard the late 1950s and the 1960s as the period when probably the nationalised fuel industries were working as well as they have ever done.
§ 10.29 p.m.
§ Mr. Geoffrey Dodsworth (Hertfordshire, South-West)
In a most beguiling and disarming way, the Minister sought to explain that the benefit of this Order was akin to winning the football pools. From the accounts of the British Gas Corporation last year, we had thought that we should be asked to provide £42,309,475 —a figure remarkable for its precision and accuracy. We are now told that we are fortunate and that the sum is to be only £28,949,333. I understand the Minister to say that it had been possible for certain negotiations to be concluded and that as a result we should have the benefit of the lower figure.
By profession, I am a chartered accountant and, as a result, I am a suspicious person. I thought that I should like to examine the accounts of the British Gas Corporation in more detail. I propose to read the relevant parts of the accounts prepared for last year 1974–75, and to indicate the absolute certainty of the deficit recorded and the references made to it.
On page 41, paragraph 9, which refers to the notes on the accounts, says:The Department of Energy has written to the Corporation stating that in accordance with Clause 1 of the Statutory Corporations (Financial Provision) Bill recently presented to Parliament, provided the Bill is enacted in essentially it present form, an Order will be laid before Parliament in due course to seek its approval to pay compensation to the British Gas Corporation in respect of the loss of £42,309,475 incurred on its operations during the year to 31st March 1975, arising out of price restraint. This amount has been brought into the profit and loss account and is included in current assets. The text of the letter is set out on page 52.I fear that, in the interests of a proper record, I must refer to the specific letter because it is from the Department of Energy and is addressed to the Chairman of the British Gas Corporation and signed by an Assistant Secretary of the Department of Energy. I shall read an extract because it indicates yet again that the figures that were provided were done so with a degree of accuracy and certainty, 1317 and if such accuracy and certainty existed, there has either been gross mismanagement subsequently or the accounts seem to have been misleading.
The letter reads:The Secretary of State understands that the deficit in your Corporation's Revenue Account for the year 1974/75 will be £42,309,475 and that this deficit is equal to or less than the loss which has been incurred by the Corporation in consequence of their compliance with the nationa 1 policy relating to limitation on prices.So we have a note in the accounts which refers to a letter from the Department of Energy which is absolutely categorical.
There is one other matter that we should properly look at in defence of the Minister. After all, he did indicate that the members of the corporation were aware of this situation and were being cautious, careful people. The notes in the accounts on this subject would not lead anyone to think that there was any doubt at all.
Under the heading "Contingent liabilities", it says:Provision has been made in the accounts for the actual and estimated costs of gas purchased. Whilst the Corporation believes that such estimates are reasonable there exists at 31st March 1975 a contingent liability which might he substantial in respect of further costs arising from the interpretation of supply agreements which is the subject of a dispute between the Corporation and its suppliers.Such a note implies that there might be a need for further provision for an increase in the deficit rather than a reduction, and therefore it seems that this rather glossy publication, this guide to the affairs of the British Gas Corporation, is a rather misleading document.
There is an even more serious factor—the report of the auditors. After all, we employed professional, highly-skilled people, one of the top five auditing firms in the world—Price Waterhouse & Company—who signed a certificate on 2nd July 1975 which said:In our opinion the accounts and notes set out on pages 32 to 47 (which include compensation for price restraint of £42.3 million still subject to enactment of the Statutory Corporations (Financial Provisions) Bill and to the approval of the amount by Parliament)—and we are approving it exactly a year later—give a true and fair view of the state of affairs at 31st March 1975 and of the results for the year then ended of the Corporation and 1318 of the Group consisting of the Corporation, its subsidiaries and interests in associated companies, and comply with the requirements of the Gas Act 1972, and the Directions received by the Corporation from the Secretary of State.We have accounts that are sharply defined and clearly categorised, a letter from the Department of Energy and the auditors' report. We have to ask whether, at that time, the chairman of the corporation knew of these doubts and uncertainties and, if so, why he allowed such a set of accounts to be presented as a record of the year ending 31st March 1975. If he did not know, why did he not know?
This is an immense change. We are talking not of a book-keeping error but of a change from £28 million to £42 million, yet there is no clue to this situation in the accounts.
The Minister has been less than fair to the House in his presentation of the facts. I seek a much more satisfactory explanation.
§ 10.35 p.m.
§ Mr. Oakes
We have had an interesting debate. I congratulate the hon. Member for Bedford (Mr. Skeet) on his elevation to the Opposition Front Bench for the debate. We seem to be spending all our time together in Committee lately. The hon. Gentleman has considerable expertise in energy matters, but I have to disagree with some of the results of his deployment of that expertise.
The Order is not the brain child of this Government; it results from the price restraint policy of the last Conservative Government and relates to the years 1974 and 1975. Hon. Members opposite did not take up my remark that this is likely to be the last Order that we shall bring before the House resulting from that policy.
The hon. Member for Bedford said that gas was being sold at below the economic and market value, and he quoted continental comparisons. Natural gas is now saving our balance of payments more than £1,000 million a year. To do that, it has had to take some markets from oil. It could not have done so without being able to compete in terms of price, convenience, or both.
I praise the gas industry for what it has done for this country and the balance 1319 of payments and also for its extraordinary efficiency since 1970.
The Opposition might have said that the Order resulted not from their price restraint policies but from the inefficiency of a nationalised industry.
Let us look at the record of British Gas. During the period of price restraint since 1970, the corporation has more than doubled the volume of gas supplied to customers and at the same time has reduced its work force by 15 per cent. In 1975–76, having been permitted by the Price Code to earn 2 per cent. on turnover, the corporation expects, subject to audit, to declare a modest surplus of about £25 million. Is that the record of an inefficient industry?
This Order, therefore, clearly and manifestly results from the policy of the previous Administration, and it is the last such Order we shall have to bring before the House. I am convinced of that.
Many interesting comments have been made in this debate. I am somewhat puzzled by the remarks of the hon. Member for Bedford, because this is not the first time that he has raised the question of the price of gas. He did so early one morning, about a fortnight ago, when he chastised me about another Order. I was not being awkward, because I had expected that Order to go through on the nod. The hon. Member criticised the price of gas very strongly on that occasion. Whether he was implying that there should be a tax on gas, I do not know. He is now sitting on the Opposition Front Bench and repeating many of the things that he said a fortnight ago about the unrealistic price of gas.
My hon. Friend the Member for Bristol North-East (Mr. Palmer) and I may find ourselves in disagreement here, but I would certainly never brush him aside. I have the greatest respect and regard for his expertise over the past 12 years on the question of energy.
In a period of counter-inflation, and at a time when gas is the primary fuel supplied to many households in this country, it seems to be a very difficult proposition that one should artificially raise the price of that fuel in any way—especially at a time when Government policy is to keep prices down and to have a wage agreement with the trade unions. I know that there are difficulties 1320 in relation to the electricity industry, and we are well aware of them. It is true that the official in my Department said, in replying to the Select Committee, that we were looking at this. Of course we are looking at it. But I repeat what I said a fortnight ago—there are no current plans in my Department to introduce a tax on gas or to raise artificially the price of gas. It would be a foolish thing to do to a very efficient industry in this country at a time of counter-inflation policy.
In the first instance, such a tax would have an effect on the ordinary consumer, and particularly the consumer who is in the lower income group. Also, it would have a very adverse effect on industry. If we introduced such a tax it would not benefit the industry. One could understand the argument that prices should be increased to make greater resources available for investment to explore new fields, but a tax on gas would not do that. Artificially raised prices would have very adverse effects socially.
§ Mr. Palmer
I entirely agree with my hon. Friend about the social effects of pushing up the price of any source of energy, but I hope that he will not overlook the considerable number of poor people who live in all-electric flats. There are a considerable number in my constituency, and I am sure that other hon. Members are in the same position. The electricity supply industry is being forced all the time to put up the price of electricity.
§ Mr. Oakes
I have the greatest sympathy with my hon. Friend about people who are "locked into" the electricity supply in that way. But an artificial increase in the price of gas would not help the person who is on electricity. I have tried, under severe criticism from the nationalised boards concerned, to help by various ways the people who are locked in in this way. One of my ministerial duties concerns energy conservation, insulation, and so on, so that councils and individuals can help themselves to reduce the cost of fuel. I have sympathy for people who are compelled to go all-electric and bear a heavier fuel cost by a council that finds that the cost of the electric appliance is cheap.
However, we are talking about gas. My hon. Friend has a valid argument 1321 when he refers to the depletion of our gas resources. The gas industry, however, is convinced that the proven and possible reserves of gas will take us a considerable distance into the future. In our present economic plight, can we ignore those proven resources? It might be better if we had all sorts of alternative resources to turn to, but we do not have them. My hon. Friend the Minister of State for Energy said in the House recently that it was God's oil. It is also God's gas, and in our hour of need God has been very good to this country in respect of both.
An artificial increase in the price of gas would have an adverse effect for our incomes and counter-inflation policies. We are considering the whole question of depletion of fuel supplies, but there are no current plans in my Department for any artificial increase in the price of gas, or for any tax on gas.
I should like to take this opportunity of praising the gas industry for the miracle that it performed in converting the country from town gas to natural gas. It was one of the smoothest operations of the kind in the world. Of course, there were accidents and complaints. Every hon. Member received letters from aggrieved consumers, but we put the number of such complaints at one in 1,000. The remaining 999 consumers were perfectly happy with the fuel being supplied to them.
Perhaps I should deal here with the difference between the £42 million of the auditors' figures and the £29 million that we are asking for in the Order
§ Mr. Peter Hardy (Rother Valley)
The Minister is right to spell out the position with gas being extracted from the southern basin of the North Sea and the implications of gas pricing, but will he make it clear that when the gas undertakings begin to take gas from areas other than the southern basin it may be more expensive than current reserves?
§ Mr. Oakes
That may well be. I would not dispute that. However, we are concerned with the Order now before us.
My hon. Friend has led me in to what I was about to say about the £42 million. The hon. Member for Hertfordshire, 1322 South-West (Mr. Dodsworth) asks how we can trust the auditors or the nationalised industries when originally they asked for £42 million and in the outcome they need only £29 million. That is relevant to what my hon. Friend has said. In future the cost may be greater. The Order deals with 1974–1975, so the only relevant contract with which we are concerned is the southern basin contract.
I find it astonishing that there should be complaint when the Government—this could apply to a Labour or a Conservative Government—tell the House that £42 million in subsidies was originally thought necessary, but that as a result of a sensible arrangement arrived at between the suppliers and the gas board, to the benefit of both, only £29 million of taxpayers' money is now required. Is anyone complaining that the taxpayer is saved £13 million? I believe that I am presenting a triumph to the House—namely, a saving of £13 million of taxpayers' money. I find it difficult to accept criticism when the original Order—it was introduced by the Conservative Government, not by us—was £42 million and now I ask for only £29 million.
§ Mr. Dodsworth
If we follow the hon. Gentleman's argument to its logical conclusion, next year he could present the House with a disaster and say that this year's surplus has become a deficit. The notes to the accounts provide that a continuing liability may be substantial in respect of further costs. That implies that there will be a further cost to provide for any reduction of the required demand. On that basis I regard the accounts as misleading.
§ Mr. Oakes
I suppose that one can never project oneself entirely into the future. However, I am hopeful that this is the last Order for which the Government will ever have to ask. For this year there is a modest surplus of about £25 million. I cannot make a projection for next year, as the hon. Gentleman requests. However, with an industry as efficient as British Gas, which has made a surplus even under the adverse conditions of this year, it is unlikely, given our residue and reserve powers, that the 1975 Act will have to be invoked, despite the fact that prices in the northern basin could be dearer than prices in the southern basin.
1323 As the House knows, in the autumn of this year the Gas Board is making an application for a modest increase in prices. It is making that application of its own volition. I find it difficult to accept the criticism of Opposition Members, who are so preoccupied with public expenditure, when the Government seek to eliminate the need for the taxpayer to pay the bills of the nationalised industries. After all, this was their policy. This is the back end of their policy. Although it has been necessary for ordinary people to pay for some of the nationalised industries' bills, those industries, to use the words of some Opposition Members, are now standing on their own feet.
I believe that the Government's policy is right. I hope that this is the last Order that we shall bring under the policy of the previous Government. It is an Order for £29 million and not £42 million—for a considerably smaller sum than was originally envisaged. I think that it is a tribute to British Gas and to their negotiations with the oil companies, and that it is a benefit to the British taxpayer.
It is probably the last Order that will ever be introduced on behalf of British Gas. I hope that the House will confirm and approve this last Order resulting from the disastrous policy of the previous Administration.
§ 10.56 p.m.
§ Mr. John Biffen (Oswestry)
I had rather hoped that the debate could be so structured that the Under-Secretary of State could have begged leave to reply after I had spoken.
§ Mr. Oakes
On a point of order, Mr. Deputy Speaker. I am very sorry the hon. Gentleman said that. I had thought I was the last speaker. I do not need the leave of the House to speak again, because this is my motion. I am sorry if I have offended the hon. Gentleman, but I did look around the Chamber, and nobody rose to speak.
§ Mr. Deputy Speaker (Mr. Bryant Godman Irvine)
Perhaps I may help the hon. Member for Oswestry (Mr. Biffen). I did see that both Dispatch Boxes were occupied, and I took my choice of the Minister.
§ Mr. Biffen
I quite understand your sense of preference, Mr. Deputy Speaker and it is the last thing that I would want to challenge. I do not want the Under-Secretary to think that I was in any way criticising him. I was merely going to say that I regret that he will not be able to answer the few remarks that I shall make.
This is, in a sense, a historic occasion, even though it is not exactly "standing room only" in the House. As the Minister said, this Order is almost certainly the last of its kind that will be presented to the House, certainly in respect of gas, and we hope that is true of the other energy industries as well. It marks the phasing out of the price restraint policy. That is welcome.
I am not attempting to manufacture discord between the two sides of the House. I am not disposed to engage in any inquest as to how we came to arrive at this policy. I would only say that the fact that this marks the end of the price restraint policy means that there is now more of a possibility of the nationalised industries operating in a somewhat different climate, and adopting a different relationship between their economic and social responsibilities, than would have been the case 12 months, 18 months or two years ago. Personally, I welcome that. I think that it is to the benefit of the climate within which those industries have to operate, and that it will also enable us to concentrate our minds much more upon other means of providing social and welfare benefits than using the nationalised industries to that end.
In that context, I very much hope that the representations that have been made by the Gas Corporation, among others, in respect of the impact upon their cash flow, where the powers of disconnection are to be removed, will be taken account of by the Department. However, as the Under-Secretary will be the first to concede, this is not really in the Order that is before the House this evening.
My hon. Friend the Member for Bedford (Mr. Skeet) did the House a great service by using this debate as an opportunity to raise the wider issues of what the proper policies are for the gas industry, given its current situation. There is no doubt that were a really active and 1325 pungent caricaturist or satirist looking at the whole machinery of government today he would not draw a veil at February 1974 and suppose that everything had been surprisingly different before that date. What he would observe is that the one fuel that manages to get into the red triangle scheme is gas.
The public expect that a degree of price stability will be conferred on this fuel, although we know that there are serious people in the apparatus of government who question whether this fuel, far from enjoying stability, should not be subject to a tax. I think that the advocacy of this has come from within the Department of Energy. I was delighted when my hon. Friend the Member for Bedford made it clear that a tax on gas is not acceptable to the Opposition.
Now that we are moving back to a more economic climate and a more economic framework for the nationalised industries, it is important for us to ask ourselves whether the British Gas Corporation should make provision for the future to take account of its own exploration costs, because it has its own responsibilities in the North Sea and because it will inevitably, as the hon. Member for Rother Valley (Mr. Hardy) indicated, purchase its gas from much higher cost areas of the Continental Shelf. I think that we should do well to mark that prospect on this occasion.
I conclude by joining the hon. Member for Bristol, North-East (Mr. Palmer) in hoping that we shall now be able to proceed to a situation in which the economic and financial obligations of the nationalised industries are put on a basis that will do much to restore morale, especially management morale, which has been debilitated by events of recent years.
To mark the occasion, and to show that I travel hopefully, I have brought with me the White Paper entitled "The Financial and Economic Obligations of the Nationalised Industries," Cmnd. 1337, which was published in April 1961, under the then Macmillan Conservative Government. To show my even-handedness I also have Cmnd. 3437, entitled "Nationalised Industries, A Review of the Economic and Financial Objectives," which was published in November 1967 by the Government under the premiership of the 1326 right hon. Member for Huyton (Sir H. Wilson).
May I suggest that, as we live by fashion in politics, if we moved back to the fashion that was outlined in those two White Papers it would be to the advantage not only of the gas industry but of the economy and the community.
§ 11.3 p.m.
§ Mr. Peter Bottomley (Woolwich, West)
I apologise to the Minister and my hon. Friend for not being here at the beginning of the debate. I do not intend to hold up the House for more than a minute or two.
I should like to confirm what the Under-Secretary said about the natural gas conversion, which went through my constituency not quite like wildfire but very smoothly. Only three problems were raised with me, all of which the South-Eastern Gas Board cleared up quickly. A tribute to the people of the gas board and its contractors is due from this House. I should very much like to associate myself with what the Minister said.
I should also like to add my weight to those who argued against a gas tax. Some of the reported comments from the Church House conference showed that the economic pressure groups often get carried away with the idea of protecting themselves. Even though we may be concerned with 200,000 people in the coal industry and perhaps an equivalent number in the electricity supply industry, when we think of gas and domestic energy we are considering every person in the country.
The reply that the Department of Energy gave me a month ago clearly showed the decline in the consumption of energy in the domestic market, following the massive increases in prices of coal and electricity during the past five years, and especially so in the past two years. Many people, mainly on lower incomes, and often in council houses or all-electric homes, suffer a great deal from the vast increases in prices. I certainly would not tolerate the imposition of a gas tax because gas is too competitive when compared with coal and electricity. On the other hand, there is a lot to be said for fuel efficiency and conservation.
If we are willing to approach the question on these lines, perhaps we can 1327 arrive at a more realistic attitude, but I do not think that we can go on for much longer tolerating the uneconomic production of fuel and then say that because other parts of the fuel industry cannot compete the profitable and efficient parts must have their legs hobbled, so that we end up with what can be rudely and unkindly categorised as the equality theory. Under that theory, as some are more efficient than others, the efficient have to have more hurdles placed in front of them, so that everyone can fall down together half-way along the course. That is not a very efficient way of running industry.
Finally, I address myself to the question, brought into the debate in a very mild way, of the power for automatic disconnection by the energy boards. I do not ask the Minister to reply again this evening, but it is very important that the House should have an opportunity to debate the various reports that have been published during the last two months, because a lot of hot air is being talked. We often see this in politics when nationalised industries come up against well-meaning Members of Parliament.
I believe that most ratepayers pay their rates when they receive a notice from their local council threatening court action. I think the same would apply if the energy boards did exactly the same thing. There is no evidence that someone such as myself, occasionally paying the gas or electricity bill when there is a threat of disconnection, will not do exactly the same if threatened with court action. There is no—
§ Mr. Deputy Speaker
Order. The hon. Gentleman must address himself solely to the gas industry, relating his remarks to the Order.
§ Mr. Bottomley
I take your guidance, Mr. Deputy Speaker. I hope that the Minister will not have to bring forward another price restraint compensation Order next year because of the implementation of proposals to get rid of the automatic power of disconnection. I hope that the Minister will have a word or two with his right hon. Friend the Leader of the House and arrange for a debate on that important topic, so that we can bring it completely within order, because it is 1328 a subject that needs full discussion. The Early-Day Motions indicate this.
§ Question put and agreed to.
That the Compensation for Limitation of Prices (British Gas Corporation) Order 1976, a draft of which was laid before this House on 10th June, be approved.