HC Deb 08 December 1980 vol 995 cc606-9
4. Mr. Hal Miller

asked the Secretary of State for Energy what representations he has received from British industry regarding energy costs.

5. Mr. Campbell-Savours

asked the Secretary of State for Energy if he will make a statement on Government policy on energy prices.

8. Mr. Palmer

asked the Secretary of State for Energy if he will make a statement on the Government's energy pricing policy.

18. Sir David Price

asked the Secretary of State for Energy what steps he is taking to ensure that British industry does not pay higher prices for its fuel and energy than its European competitors; and if he will make a statement.

The Secretary of State for Energy (Mr. David Howell)

I have received representations from the CBI, trade associations, companies and individuals on energy costs. While I would not agree that, in general, our energy costs have risen faster than, or are now above, those of our European competitors, it is, however, clear that some firms, especially in energy-intensive industries, have been hard hit. I have been discussing with the energy supply industries ways of helping to meet these problems. We are also vigorously pursuing cases of unfair foreign competition in energy pricing.

Mr. Miller

Does my right hon. Friend understand industry's suspicion that the Government have aggravated the difficulties by seeking to make energy prices a source of taxation? Does he appreciate the industry's resentment that it is being selected as much cow for that purpose?

Mr. Howell

I understand the suspicion, but it is not well grounded. The Government expect industry to meet the external financing limits, by reducing costs, not by passing them on. Tight EFLs are a healthy and desirable discipline on the efficiency of nationalised industries. However, I recognise that high energy costs are hitting industries. We have taken, and are taking, a number of steps to ease the specific problems experienced by individual industries and firms.

Several Hon. Members rose

—

Mr. Speaker

Order. I shall call first those hon. Members whose questions are being answered, in the order in which they appear on the Order Paper.

Mr. Campbell-Savours

Taking into account the constant level of investment in wages, plant and equipment and raw materials by competing manufacturers overseas and the constant prices that their products command on the world markets, how does the Secretary of State expect British industry to compete when it is paying higher energy prices?

Mr. Howell

All countries in the Western world are facing high energy costs. That is the consequence of the last 18 months, when the price of crude oil increased by about 150 per cent. Heavy fuel oil, even after tax, is cheaper here than in France, Denmark, Belgium and Ireland. I understand that the price in West Germany has now overtaken ours. That may not remain so, but that is the present position.

I have asked the Gas Corporation to review the need to charge full oil-equivalent prices for new supplies. All over Europe prices are rising fast, and may have overtaken ours in many cases. Electricity boards are being asked to consider whether they can provide greater flexibility for the large, continual user. The coal industry is meeting the challenge to compete effectively with world market prices for coal. All that means that we are moving in the right direction. However, everyone in the world must face and adjust to high energy costs. It would be fatal to insulate ourselves from them.

Mr. Palmer

Does the Secretary of State understand that relative energy pricing is his Department's most fundamental responsibility? Is he aware that in neglecting that issue he is putting on British industry burdens additional to those that it carries already because of the Government's policies?

Mr. Howell

I am not sure what the hon. Gentleman means by "relative energy pricing". If he means that our energy prices, together with energy distribution prices, should be competitive, he is correct. We are seeking to improve competition, and we are making some progress. That duty is being fulfilled to the benefit, including security of supply, of British industry.

Sir David Price

Is my right hon. Friend aware of the basic difference of fact between what he and his ministerial colleagues say and what is represented to us by large continual users of energy, such as the chemical industry? Will he meet the Chemical Industries Association urgently to see whether at least there can be agreement about the facts so that we might have a slightly more reasoned debate on possible policy?

Mr. Howell

I welcome the thought behind my hon. Friend's question. We did get together with the CBI, which has produced an initial report. This is to be supported by more evidence, since it was rather thin originally. We have had submissions from, and talks with, a number of industries. We find that there is no basic division of view on the overall general energy price position. The division involved individual cases. Some industries are paying more than their European competitors, and some substantially less. Companies that are paying more obviously feel badly treated. There is no basic division of view about the facts. Where there is a division, we are establishing the realities.

Mr. Park

Is the Secretary of State aware that checks made in the last few days indicate clearly that Italy and Spain are paying 18½p and 20p per therm respectively for gas? Is he aware that the average price in Britain is 30p

Mr. Howell

The average price of gas is not as high as that. The average is in the mid-20s. Spot checks can reveal large variations. However, the evidence is that throughout Europe substantial increases are taking place. In West Germany, Ruhrgas is establishing prices for renewed contracts, let alone for new customers, which are considerably higher in many cases than they are here. I do not dispute that unfavourable disadvantages for Britain exist in some cases, but, in general, the pattern is less unfavourable—and, indeed, moderately favourable—for British industry. That is what we wish.

Mr. Forman

Will my right hon. Friend confirm that realistic energy pricing is an indispensable part of his Department's energy conservation policy? Will he ensure that it is always presented in such a light, instead of as a means of improving the financial position of nationalised industries?

Mr. Howell

My hon. Friend is right. The economic pricing of energy is sensible in energy policy terms. That is why it is pursued in all countries, and that is why the United States, which has pursued other policies disastrous to the world and to itself, is moving rapidly in that direction.

Mr. Eadie

Does the right hon. Gentleman accept that he has failed this afternoon to answer questions about energy pricing Does he agree that it is not a question of the document that we have all received being a little thin? Does he accept that British industry is suffering from high energy prices and that it is disappointed because of that? The right hon. Gentleman mentioned coal and West Germany. Is he aware that West Germany gives a bigger subsidy than Britain does to its coal industry and that that disadvantages the British coal industry?

Mr. Howell

I understand the hon. Gentleman's feelings. The best way to help firms in difficulty is to concentrate on their particular problems, rather than resort to unproven generalities. That is what my Department seeks to do. By doing that we shall ensure that competitive power is increasingly available on advantageous terms to British industry. That is the aim of our policy. We must concentrate on specifics. Generalities are of no help to anybody.

Mr. Patrick McNair-Wilson

Does my right hon. Friend agree that the meeting of the International Energy Agency that he will attend in Paris tomorrow will have a profound effect on both prices and supply? Will he urge the other members of the agency to adopt a much more realistic policy towards the stocking that has taken place as a result of the war in the Gulf? Does he agree that if the hoarding of fuel continues there is a danger, not only of price war, but a cut in production by some of the major world suppliers?

Mr. Howell

I agree about: the importance of the meeting. At present the world oil position is not unmanageable, and we must take steps and have the maximum international co-operation to ensure that it remains so. If we succeed we shall have greater stability in world oil and energy prices in the future than we had in the last year or so. The price of failure would be high indeed.

Mr. Hardy

Does the Secretary of State recognise that there seems to be a contradiction between his initial answer, when although he suggested that some firms were hard hit he appeared to reveal an appalling complacency about the problem? Does he recognise that British industry will see the contradiction, if he cannot, and that industry generally, especially those industries that are hard hit, are becoming sick of the inertia that he is showing in this matter, since he appears to rest his policy entirely on the hype that other people will raise their prices and forfeit the advantage that they now enjoy?

Mr. Howell

The hon. Gentleman is utterly confused, both about my answer and about his assessment of the situation. British industry recognises that the overall policy of economic energy pricing is correct and that we should, wherever possible pursue examples of unfair foreign competition, as we are doing. It is also recognised that, for particular firms and individual cases, there are problems, which the Government have sought to meet by dealing with the supply industries—gas and electricity—and with the oil industry and by ensuring that our heavy fuel oil at this moment, even after our tax, which is admittedly high by European standards, is cheaper than that of probably every other European country. That is dealing with the problem.