HC Deb 22 March 1976 vol 908 cc13-5
10. Mr. Gow

asked the Secretary of State for Energy whether he will make a statement about the phasing-out of subsidies for consumers of gas and electricity.

Mr. John Smith

The gas industry expects to make a modest surplus for the financial year ending this month. The electricity boards expect to make losses totalling about £65 million, for which compensation for price restraint will be considered. I am not expecting losses for either industry for the financial year 1976–77.

Mr. Gow

Does the hon. Gentleman accept that from the Opposition side of the House there is support for him for the courageous policies that he is following? Does he accept that, where there is real hardship among consumers, that hardship is best alleviated by special assistance to the consumer in individual circumstances rather than by subsidising the prices of gas and electricity?

Mr. Smith

I hope that some of the hon. Gentleman's colleagues will read the opening part of his supplementary question.

The Government have made it clear that it would be difficult to follow a price subsidy policy at a time when the requirement is for energy conservation. However, action was taken regarding the disconnection of pensioners who were living on their own. A committee was set up under Lord Lovell-Davis to undertake an informal review of payment and collection arrangements. We were not sure that those arrangements were perfect.

Mr. Palmer

Does the Minister agree that the Conservative Government introduced the policy of subsidisation, and that until then the electricity supply industry had had a proper return on capital?

Mr. Smith

I am grateful to my hon. Friend for reminding the House that the Labour Government inherited a formidable problem, which was entirely the result of the then Conservative Government, no doubt with an election in mind.

Mr. Fletcher-Cooke

Will the Minister ensure that the gas industry is not penalised for its modest profit by the imposition of a selective tax upon it?

Mr. Smith

Any question of taxation would be a matter for my right hon. Friend the Chancellor of the Exchequer. No doubt the hon. and learned Gentleman is referring to comments recently made by heads of other nationalised industries. The Government have not reached any decision on this matter. This country is fortunate in having fairly low gas prices, flowing from decisions taken by previous Governments that the British Gas Corporation should have a monopoly position on offshore gas.

Dr. Bray

Will the Minister confirm that price increases for electricity in the South of Scotland Electricity Board are higher than those in the United Kingdom generally, but that increases that have taken place in England under the fuel price escalation clauses have not taken place in Scotland during the year?

Mr. Smith

As was made clear by the South of Scotland Electricity Board when the announcement was made—and I should make it clear that this is not part of my direct ministerial responsibility—there was no increase over the whole year. During that period in England and Wales I understand that three price increases were triggered off by those clauses. In Scotland there was no price increase at all in that period; in England and Wales there were several increases.

Mr. Biffen

Is the Minister aware that we fully realise that the return to economic pricing for the electricity industry necessitates the substantial price increases to which he has referred? Is he also aware that that fact will concentrate public attention on the question whether people are receiving value for money from the electricity services? In that context, will he take account of the desirability of instituting some kind of efficiency audit of generating activities of the CEGB, in the light of the table in paragraph 417 of the Plowden Report, which shows that we are at the bottom of the table in terms of thermal efficiency?

Mr. Smith

It is difficult for me to give my reaction to that Report until the Government have fully considered the whole of it. Therefore, the hon. Gentleman's suggestion must be seen in that context. I shall bear in mind what he said.