GAS PRICES

HC Deb 29 January 1980 vol 977 cc1129-206

Mr. Speaker

Before I call the right hon. Member for Plymouth, Devonport (Dr. Owen) I remind the House that this is expected to be a short debate. I believe that it is the intention that it should finish at as near 7 o'clock as possible. There are four Front Bench speakers in the short debate. Therefore, I hope that both they and the rest of the House will realise that whoever is in the Chair can call hon. Members to speak only if those who are fortunate bear their colleagues in mind.

3.42 pm

Dr. David Owen (Plymouth, Devonport)

I beg to move. That this House condemns Her Majesty's Government's savage increase in gas prices over the next three years which will hit ordinary families and have a devastating effect upon the cost of living; and calls for a comprehensive scheme to protect the most vulnerable sections of the community from the inflationary effects of high fuel prices. A year ago inflation in Britain was running at 8 per cent. It is currently running at over 17 per cent. By the spring it will be over 20 per cent. Of the current 17 per cent. inflation, 8½ per cent. has been induced by specific decisions of Conservative Members; value added tax accounts for 3¾ per cent.: reduced local authority grants, 1 per cent.; reduced support for nationalised industries, ¾per cent.; higher national insurance contributions, ½ per cent.; green pound devaluation, ¾ per cent.; and increased interest in mortgage rates, l¾ per cent.

Can anyone who voted for the Conservative Party have really believed that in less than a year it would have brought to this country 8½ per cent. inflation—double the rate that it was a year ago?

The central core of our indictment of Conservative Members is their callous disregard for the consequences of inflation on most families. They have acted in a way that has gravely prejudiced the competitiveness of British industry and weakened our already weak industrial base.

We have now a further¼ per cent. on gas prices alone, and ½ per cent. on all fuels, to take effect from April. What is worse, the Government have committed themselves to a formula of 10 percent. over and above inflation, not only this year but next year and the year beyond. That is not a drip, drip, but a torrent of inflationary action from the Government that is putting our rate well above the 12 per cent. average for OECD countries.

Britain cannot continue with such inflationary rates. Domestic fuel bills, on average, will rise next year by £28. For the two winter quarters it will be near to £20. That is a large amount to find from family budgets that are already under great strain.

The Secretary of State may claim in his defence that oil prices are rising, that international energy prices are rising, and that we are now receiving about 50 per cent. of our gas from the Northern basin, which costs much more than the gas from the Southern basin. The right hon. Gentleman may stress that the Price Commission advocated a phased increase. On all that we agree. He may point also to the need to invest in more gas gathering pipelines if we are to avoid the scandalous position of burning up gas in the North Sea. At times we have been burning as much as one-third of our domestic gas consumption. I would wish to see greater exploitation of the gas that I believe exists, but is yet undiscovered, in the North Sea. We need to build up reserves for the eventual switch to synthetic gas.

On all these matters there is agreement. However, the matters are known to the British Gas Corporation. They are better known to the corporation than they are to Conservative Members. What we have to ask is why the British Gas Corporation, knowing full well that these increases were to be made, and taking them into account with its commercial interests, does not agree that gas prices should rise by the amount stated for the years 1981–82 and 1982–83.

The only reason why it shows a broad measure of agreement with the 29 per cent. increase this year is that the Government, especially the Prime Minister, vetoed any price increases last summer. The reason why we are facing such substantial increases is that Conservative Members refused to increase prices last year.

Mr. Tony Marlow (Northampton, North)

rose—

Dr. Owen

I shall not give way. It is no use Conservative Members complaining. If they wished to phase the price increase they could have raised prices a little last year and a little more this year. The central core of the argument is the rate of these increases, the effect on inflation and the effect on families.

The other argument that has been used is the link between gas prices and oil prices. That is an extremely dangerous argument. OPEC countries have a vested interest—

Mr. Marlow

The right hon. Gentleman has made a grave accusation. He claimed that Conservative Members were frightened of raising domestic gas prices. Will he tell us what happened to domestic gas prices when his Government were in power and what they did to hold down domestic gas prices against the commercial interests of Britain?

Dr. Owen

The hon. Gentleman cannot have it both ways. On the one hand he attacks us for showing enough courage to hold down gas prices and then becomes upset when I say that the right hon. Lady made a great principle of not raising gas prices in the summer of last year. She is now raising gas prices against the commercial judgment of the British Gas Corporation.

It is an extraordinary position. My right hon. and hon. Friends are not slaves to market forces. Conservative hon. Members spend their time demanding that we should accept commercial judgments. The OPEC countries have a vested interest in ensuring that the price of gas, which it currently does little about other than burn, rises to meet oil prices.

It is not in the interests of this country, or in the interests of Western Europe or anyone in the world, that gas prices should follow oil prices. [HON. MEMBERS: "Why not?"] Because one of the great virtues of gas is that it comes from a much wider range of countries than the OPEC countries. The largest supplies that are currently being marketed do not come from OPEC countries. Algeria is a large source, but the Netherlands is the largest exporter. Considerable amounts of gas also come from Thailand, the ASEAN countries, and North America. If we want to keep down world energy prices, there is a great deal to be said for trying to keep gas prices below oil prices.

Several Hon. Members

rose—

Dr. Owen

If hon. Members want all energy prices to go up, they are setting a most extraordinary example. What I am warning—

Several Hon. Members

rose—

Mr. Speaker

Order. I believe that it is now clear that the right hon. Gentleman is not giving way.

Dr. Owen

We understand the sensitivity of Conservative Members on this issue, but if they are arguing that gas prices should be encouraged to follow oil prices, it is a very strange argument. What I am saying is that if one can possibly keep a distinction—

Mr. T. H. H. Skeet (Bedford)

Is the right hon. Gentleman aware of what the chairman of the British Gas Corporation said in a letter to me on 2 August 1979? It was: The practice of market relating to the nearest alternative fuel was established right at the beginning of natural gas marketing as a means of ensuring the best use is made of the premium quantities of this natural resource. The chairman did not, of course, relate his remarks to gas and oil.

Dr. Owen

There is a relationship with regard to industrial use, where there is an immediate transfer and flexibility between the two. That linkage has been established for some time. It has not been established in the domestic market, and the Secretary of State knows that. Is he now trying to establish the same linkage between oil and gas in the domestic market that has hitherto existed in the industrial market? If that is the case it will mean much greater increased gas prices than the increase that has been currently produced by the Government.

Industry and all of us are already suffering seriously from a very high exchange rate, put up by the fact that we have a petro-currency. If it must also accept the highest energy prices that operate in the world, our industry, which is already experiencing great difficulty against the exchange rate, will have a particularly difficult time. Conservative Members will have to face the fact that it is not in our interests to tie domestic gas prices to oil prices. Of course, gas prices must bear some relationship, because they cannot be divorced totally—[Hon. Members. "Oh."]—Of course, because that is an inevitable fact of life. What we are talking about is the savage rate of increase. The Secretary of State will also have to consider the question of conservation. As one of the prime reasons for increasing gas prices, the right hon. Gentleman has suggested that this was necessary because if the price were too low we should burn it up too fast and bring forward the day when we would have to turn to more expensive sources of supply.

Where in the Gas Act 1972 is the legislative authority for such an argument for increasing gas prices? I hope that the right hon. Gentleman will explain that to the House. Under sections 2 and 14 of the Act, it is the corporation's duty in respect of pricing that, taking one year with another, it should charge prices that enable it to meet its outgoings and to make such allocations to reserve as it thinks adequate. Presumably, the word "adequate", means adequate for the purpose of performing the corporation's statutory responsibility to develop and maintain an efficient, co-ordinated and economic system of gas supply and to satisfy, so far as it is economical to do so, all reasonable demands for gas—not for any other purpose.

It seems that the new policy is to use higher pricing to deter people from entering, or remaining in, the market for gas. I have been able to discover no power under the Gas Act for the corporation to secure revenue or build up reserves for the purpose of stopping people from using gas, and still less to encourage them to use other sources of energy. I find it difficult to understand how it is consistent with that policy for the corporation to satisfy, so far as it is economical to do so, all reasonable demands for gas in Great Britain.

Mr. Peter Viggers (Gosport)

The right hon. Gentleman has advanced the argument that the Government should not control gas prices for any reason other than those inherent in the Gas Act itself. Is he aware that his right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon), who was a Minister in the Labour Government, said in 1977, when he increased gas prices: We were aware of these considerations, but an increase in gas prices was necessary to reduce the level of Government financing."—[Official Report, 17 March 1977; Vol. 928, c. 251.] Is that what the right hon. Gentleman wants?

Dr. Owen

That is quite a different reason. Under section 15 of the Gas Act it is arguable that the Government of the day were using the powers of discretionary decision that are open to the Secretary of State. Had Conservative Members wished to challenge that at the time, no doubt they would have done so, but my argument relates to a quite new issue. If the Government wish to use rationing by price as grounds for a gas increase, it is my submission that that authority is not contained in the Gas Act. I hope that the right hon. Gentleman will tell us whether he consulted the Attorney-General about the reasons for raising gas prices. It may well be that one of the consumer councils will wish to challenge the validity of this policy.

Mr. Peter Bottomley (Woolwich, West)

rose—

Dr. Owen

No, I shall not give way. Our main criticism of the Government relates to their overall argument about conservation. They underestimate the importance of gas on conservation grounds. It is a far better way of heating homes than electricity, where about 70per cent. of the energy goes up the chimney in waste. It is much easier to use the supply lines for gas heating to domestic homes. It is much easier for the industry to diversify into coal. By using price as a means of conservation, the Government must face the fact that they are selectively hitting those people who have no other option, such as young families who must keep the house warm for 24 hours a day and the housebound, disabled or elderly who also have heating bills in respect of a 24-hour period. It is for that reason that we find that families on low incomes, or families with young children, spend a much higher proportion of their income on fuel bills. It is they who will be most savagely hit.

Furthermore, it seems to be envisaged that the tariff will hit prepayment customers hardest. There is already a differential, and it is suggested that it should be increased. That again will affect the poorest. If conservation is the key factor, it would be better for the Secretary of State to consider a peak load tariff—which was suggested by the Price Commission or even an inverted tariff, where the average price increases with usage after an initial basic allowance. There are difficulties in that respect, but that at least would encourage conservation and not penalise basic users.

If the right hon. Gentleman is to be taken seriously, and if conservation is the key factor for a price increase, we have the right to ask why he has not increased the £50 allowance for roof and loft insulation. Why has he cut back on the "Save It" campaign budget? Why has he scrapped a pilot project for centres to advise on home insulation? Why is it intended to stop the £25 million scheme to help industry and businesses insulate buildings and improve their boilers? Why is it intended—effectively, it has already occurred—to cut back on the STEP programme to insulate old people's houses and to help them to obtain grants?

The right hon. Gentleman would carry more conviction on conservation grounds had he acted more to promote conservation. It is not just a question of words. For some time now we have urged specific measures on the Government, which they have consistently rejected. It would have carried more conviction in the country had some of the substantial increases in profit that will occur as a result of these decisions been diverted into genuine measures to help conservation.

But the real question that we must face is the impact that this will have on poor families. Council tenants increasingly use gas. In 1978, more than 80 per cent. of all new council houses had gas installed in them.

The supplementary benefits inspectorate has estimated that 60 per cent. of pensioners receiving supplementary benefits under heat their homes. Half the people who run fuel debts are pensioners; the other half are mainly single-parent families. It is difficult to assess the full extent of hypothermia, because it is rarely recorded as the sole cause of death. Obviously, winter death rates can be influenced by many factors, and cold must be one. Over the last 10 years the death rate in winter has been 17 per cent. higher for people aged 60 to 69, 20 per cent. higher for people in their 70s, and 25 per cent. higher for people over 80. For infants aged between 12 weeks and four months, the winter death rate is 40 per cent. higher than the summer rate. It is difficult to believe that cold is not playing a part in those figures for people who would normally be confined to their homes in winter.

We are told that the Government have a review in hand to examine ways of helping poor families. That is a bit rich from a Government who last year made a central public expenditure cut of between £20 million and £30 million, at the expense of electricity users, by scrapping the electricity discount scheme. A new fuel scheme is urgently needed. The Secretary of State for Social Services says that there is nothing in our proposal. I can suggest a scheme that he should introduce. He knows as well as I do that if he is to introduce it a decision to do so must be made in the next few months. The right hon. Gentleman will claim that no allocation was made for the electricity discount scheme. That is the great defence of the Conservative Party. The electricity discount scheme was already operating.

The Secretary of State for Social Services (Mr. Patrick Jenkin)

The right hon. Gentleman repeats his canard that the Government cut spending on the electricity discount scheme. With the greatest respect, one cannot cut something that is not there. There was no provision in the estimates by the previous Labour Government. We introduced a new and better scheme, at a cost of £16½ million a year.

Dr. Owen

The electricity discount scheme was always decided on by the Cabinet, as an overall decision, to try to relieve poverty. It has not been borne specifically by the social security budget. One of the reasons for that, as the right hon. Gentleman knows, is that it was felt that there should be a contribution to help with fuel, not simply from the social security budget but from the Department of Energy and other Departments. That scheme would have continued, and the right hon. Gentleman knows it.

We were aware that there was a strong case for a comprehensive scheme, not simply to cover electricity. The Government must now introduce for next winter a comprehensive scheme that will cover not only electricity and gas but coal, paraffin and oil. It must be implemented by next winter, and therefore a decision must be taken by the summer, at the latest. The scheme should be simple to administer and, given the time restraints under which we are currently operating, keep the existing heating allowances and use the categories covered by existing schemes. It should be a scheme that could develop further into a proper comprehensive fuel benefit.

Mr. David Winnick (Was all, North)

Is my right hon. Friend aware that it is now virtually impossible for hon. Members to collect information from the DHSS about the number of people who are likely to benefit from the Government scheme—for example, the number of pensioners over the age of 75? It seems that instructions have been given by the Secretary of State for such information not to be given to hon. Members. What is the Government's reason for covering up? Is it not clear that the reason why they are refusing to give information is that many people whom the Government claim are entitled to benefit will not receive it?

Dr. Owen

Sadly, there is likely to be a low take-up. Whereas, previously, over 3 million people were benefiting, even on the Government's estimates, only 350,000 people would benefit from the new scheme.

A comprehensive scheme must cover not only those people who receive supplementary benefits. If the scheme were confined solely to people receiving supplementary benefit, as a recent survey by the economic advisers to the DHSS has shown, it would miss 60 per cent. of the people in greatest need. The scheme must cover the working poor, the low-income wage earner with a large family, the poor elderly who are just outside supplementary benefit levels, couples with small occupational pensions, and the disabled. The scheme must give an entitlement to anyone claiming a rent or rate rebate, people receiving invalidity benefits, as well as people on supplementary benefits and family income supplement. The cost of the scheme cannot start at less than £100 million, and it should be a good deal more than that.

The logic of the right hon. Gentleman is that if he is to increase energy prices, part of the profit that will accrue to those industries must be turned back to finance a comprehensive scheme to help people in need. It must cover the two winter quarters and be paid either in cash, or, if there are objections to cash payments, through fuel stamps, provided that fuel stamps are available for all energy consumers. That method of saving and budgeting for fuel bills is advocated by the Gas and Electricity Consumer Councils. That is the only way in which to salvage the wreckage caused by the right hon. Gentleman's insensitivity and callous disregard for the consequences of his decision, which takes effect in April. Its worst consequences will come in the winter of next year. The House will judge the right hon. Gentleman and the Conservative Party savagely if all they produce for next winter is a small addition to the already mean-minded scheme produced by the Secretary of State for Social Services.

Our indictment of the Government is that they are savagely increasing inflation, and seem not to care what happens.

Mr. Michael Latham (Melton)

Will the right hon. Gentleman clarify one point? Are the Opposition in favour of a gas price increase? If so, by how much?

Dr. Owen

All my remarks have indicated that there will have to be a gas price increase. I have not shirked that in anything that I have said. My criticism is of the rate and pace at which it is being increased. The Price Commission recommended that if there were to be a gas price increase it should be phased. I believe that a 29 per cent. increase, at a time when inflation is spiralling upwards to 17 per cent., is too high. At the very least, the increase should have been at the current rate of inflation.

It is no use Conservative Members salvaging their consciences by voting against the motion tonight and somehow thinking that they are clothing themselves with realistic virtue in voting for some increase, because Labour Members are not facing up to the need for any increase. That is not the case. We recognise that there is a need for an increase. Our indictment is of the savage and callous nature of the increase. It does not simply cover the current year. Conservative Members are committing themselves to inflationary increases for next year and the year after. They are building in inflation-plus on fuel prices. They have acted against the commercial judgment of the British Gas Corporation. The corporation does not think very much of the phasing.

The Government are intervening in an industry at a time when Minister after Minister states that the Government cannot interfere in the dispute at the BSC, and that their stance is one of non-intervention. They make a virtue of non-intervention over steel, and serve their own ends over gas. The Government have introduced what the Financial Times has called a disguised tax. They have introduced it on grounds of conservation, which are very doubtful legal grounds. In effect, they are using the price increase as a way of taxing gas consumers. It is unfair and retrogressive. They have failed to introduce a comprehensive scheme to help those people least able to cope with ever-increasing fuel bills. They have shown a total insensitivity to the feelings and fears of the 14 million gas consumers.

The Secretary of State's reputation, which has already slumped—by 29 per cent. according to some Tory newspapers—deserves to slump a good deal further tonight. Are Conservative Members prepared to vote for their intentions? We have heard that the Tory Party is extremely annoyed by the Secretary of State's decision. Many Conservative Members who are concerned about the poor are worried about the absence of any new scheme, and the hard-faced market people are upset at the intervention in market forces.

Tonight will reveal the true extent to which the Tory Party really cares. I suggest to Conservative Members that if they cannot join us in the Lobbies they should at least abstain.

The Secretary of State for Energy has made a dangerous decision. He has fuelled inflation and he has undoubtedly introduced a scheme that will cause very great hardship. It is the duty of this House to reject his decision tonight.

Mr. Speaker

I have selected the amendment in the name of the Prime Minister.

4.10 pm

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

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof: recognises the inevitable need for domestic gas prices to rise, bearing in mind that no profit is now made on domestic gas sales, while industry goes short of gas; welcomes the Government's determination not to evade or disguise economic realities; and believes that the Government's stated intention to review the whole range of fuel assistance offers much the best basis for helping the old and those in need in an era of high energy costs". I ask the House to reject the motion proposed by the right hon. Member for Plymouth, Devonport (Dr. Owen). He has made his case—except perhaps at the end—in very fair terms. He has put forward his feelings on this matter and expressed his concern about an era of high energy costs. His whole tone was somewhat different from the slightly hysterical note struck by the motion. I am glad to be able to offer the House the opportunity to discuss a key aspect of the nation's energy supplies.

I do not disguise for one moment that the decisions that I announced the other day, setting three-year financial targets for the gas and electricity industries, were unpleasant and difficult. They were decisions that had been shirked for a long time and were thus all the more difficult to make, but in the Government's view they were decisions that could be shirked no longer.

I shall deal immediately with the question of legal powers, which was raised by the right hon. Gentleman. The chairman of the Gas Corporation has informed me that the corporation will implement the target set by the Government. It regards its acceptance of the target as consistent with its obligations under section 14 of the Gas Act 1972. Indeed, if the right hon. Gentleman reads section 14 (b), he will see that it requires the corporation to set aside reserves. as may be necessary to comply with any directions given by the Secretary of State under section 15 below. As the British Gas Corporation has agreed to implement these targets, no question of legislative direction or power arises. The British Gas Corporation has accepted these targets and intends to implement them. That is consistent with its legal obligations, and that is what it will do.

When the right hon. Gentleman talks about such matters, I have to suggest to him that his memory is a little short. Surely he recalls that, for instance, in March 1977 his right hon. Friend, my predecessor, slapped an increase on domestic gas prices, exclusively to reduce the public sector borrowing requirement. That may have been right. It was done without any energy policy need or justification at all, although there was some muttering at the time about conservation. It was done without proper consultation with the British Gas Corporation, and it was in defiance of the previous Government's own beloved Price Commission. The then Secretary of State may have been right to do it, but I do not recall that there was then any dancing up and down about powers. The truth is that the British Gas Corporation is well within its powers in pursuing these financial targets, which it has accepted.

The emphasis today in our debate is on gas. The first tariff increases implied by the three-year target are to be brought in on 1 April, and my announcement in the House was necessary in mid-January in order to give the corporation time in which to complete its consultations with its consumer councils and to publish the tariff proposals. There have this time been proper consultations.

My statement looks forward over three years. I can see the point behind some of the remarks of the right hon. Member for Devonport. There would have been attractions in announcing a single-year target, taking cover behind a one-year figure, and saying nothing about local price increases in later years. That is what the previous Government did for the current year, in December 1978; indeed, they released the news of the one-year target on Christmas Eve in a press release, despite having published earlier that year their White Paper on the nationalised industries, which was full of high-minded virtue, advocating the set- ting of targets for three to five years. But when it came to doing the difficult thing they ducked the issue.

If, as I shall argue shortly, it is now essential for domestic gas prices to increase by at least 30 per cent. in real terms, it would have been dishonest not to give consumers full warning. In fact, much of the strong feeling that we have heard about what we have had to save on gas prices arises precisely because people who banked on gas staying cheap were not told by previous Governments what they should have been told, namely, that prices would have to rise substantially in the years ahead. People felt misled. The Government believe that in this area, as in many others, it is time for the misleading to stop.

Let me explain to the House the thinking that underlies the Government's view. The real price of domestic gas has fallen by more than one-third over the past 10years—and this against the background of energy prices rising in real terms. Last year crude oil prices rose by 100 per cent. or more. In contrast, the price of domestic gas went up by only 8 per cent. in June, after more than two years with no increase at all.

Hon. Members may recall what happened when the British Gas Corporation submitted its proposed 8 per cent. increase to the then Price Commission. Not only did that commission allow the increase in full; it said that prices should be 30 to 35 per cent. higher still, even after the 8 per cent. increase was implemented. The Price Commission, as far as I recall, was not in the business of urging price increases unnecessarily, and since that time—the report was made last July—the costs for new gas have soared further.

That is the position on the gas side. Turning from gas to the crucial question of supply and demand, we find that British Gas sells gas to industry at prices broadly related to those of the competing oil products. It must follow that policy. At one stage in the right hon. Gentleman's speech I thought that he was arguing for that, although he seemed to veer away from it. This is the only way in which to match supply and demand, since much of industry can switch quite easily between gas and oil.

The corporation's market-related pricing policy, as was emphasised in an intervention, is long established and has been endorsed by successive Governments. Industry is now renewing contracts for firm supplies at about 24p per therm—a price that is bound to increase substantially in the light of recent oil price increases. Indeed, entirely new contracts are already fetching over 28p per therm. In contrast, the current average revenue per therm from the domestic market is less than 20p, which is well below the industrial trade price, despite the fact that the costs of supplying smaller users are significantly higher than those for bulk quantities.

That is the position. The relative prices for industrial and domestic users are topsy-turvy, and industry has rightly been complaining. The profitability of British Gas sales to the two markets reflects this position. About half of the gas sold goes to domestic consumers and the other half goes to industry. In the past about half the profits came from each market, but in the current financial year, ending on 1 April, domestic sales will barely break even; in fact, without the forthcoming price increases—and I am not at all sure from the right hon. Gentleman's speech whether he is for them or against them—they would make a loss. It would have been a question of subsidised fuel. It will not be until towards the end of the three-year target period that the domestic market will again be making a reasonable contribution.

The key factor underlying this market approach to pricing policy is that gas is an increasingly valuable resource. As we run down our reserves of gas from the old low-cost fields—and already nearly half of these have been used up—we shall, as I have indicated, have to replace them with higher cost supplies from deeper, more distant, northern waters and with further imports from Norway in addition to those that we import already, or perhaps from elsewhere, either in liquid natural gas form or in some other form. Indeed, some hon. Members may have seen recent press reports that the Algerians are seeking to double the price of the gas that they sell.

Although gas sells under different terms from oil and is generally cheaper to produce, it is bound to be dragged upwards by the world oil price explosion. We cannot insulate ourselves from that in reaching decisions on gas pricing policy. I found it difficult to follow the view of the right hon. Member for Devonport that somehow we could wish away the increasing pressure in the world for gas prices to be related to oil prices. That is what those who sell gas to other countries seek to do. That is the reality which we must meet.

Dr. Owen

The Secretary of State does not have to tie domestic gas prices in Britain to oil prices. Britain is self-sufficient in energy. Britain has substantial indigenous gas reserves and does not have to price its gas at the same level as Dutch gas or LNG from OPEC countries. The right hon. Gentleman knows that. That is an option that is open to a British Government to enable them to keep prices down, and wherever they can they should keep gas prices below oil prices.

Mr. Howell

The right hon. Gentleman is confusing production costs, which is what I was talking about, with supply and demand. The facts cannot be blinked away. On the production side, nations which sell gas, whether as liquefied natural gas or as directly piped dry gas, are seeking to relate the price of the gas to the price of oil.

As regards supply and demand, I think that the right hon. Gentleman recognised earlier—though he was ambiguous on this—that the policy of relating the price of gas sold to industrial customers to oil was long recognised and correct. All that the Government have proposed in their financial targets is that domestic price gas prices should move some of the way towards the market-determined level. There is no question of the price of gas moving all the way under our proposed financial targets, yet the right hon. Gentleman appears to be excited about those targets and has denounced them as savage. He cannot have it both ways, although he is trying hard to do so.

I turn now to the setting of the financial targets for British Gas and the claim of the right hon. Gentleman and others that by setting financial targets for three years we are interfering in some way with free market prices. It is true that the setting of any financial target, whether for the steel industry or the Gas Corporation as a public utility, is an attempt to provide some of the disciplines of market forces. Were there a completely free and competitive market for the supply of gas in the United Kingdom, prices would already have risen above the level now proposed for three years' time.

British Gas is fully agreed on the objective of economic pricing. It has agreed to implement the financial targets. It has agreed the price increases proposed for this year, but I believe that I heard the right hon. Gentleman say that he did not agree. Therefore, had the right hon. Gentleman been in my place, presumably he would have overruled British Gas.

Though British Gas wanted to go slower in later years, the Government have to take account of the need to conserve and to delay the dangerous day—the right hon. Gentleman, as a former Foreign Secretary, must know of the dangers—when we have to rely once more on far more expensive gas and politically less reliable supplies.

Dr. J. Dickson Mabon (Greenock and Port Glasgow)

Can the Secretary of State tell us precisely what the British Gas Corporation told him with regard to the later years? Just how much slower does the corporation want to go?

Mr. Howell

When I discussed the financial targets with the corporation, it said that it would like the objective to be achieved but paced out over a greater number of years. That is exactly what I have just told the House. The corporation wanted to go slower in later years. I was given no precise figures.

What I have said should emphasise that the Government are not in any way artificially pushing up prices. What we are doing is to phase out some of the restraints on artificially low domestic gas price levels, allowing them to rise to something closer to their true market value. That is less intervention than in the past, not more. Those who argue the other way round have got the matter precisely 180 degrees wrong.

Mr. Tim Renton (Mid-Sussex)

Before my right hon. Friend leaves that point, doubtless he will remember that the Select Committee on nationalised indusries in the previous Parliament, with a Labour chairman and a Labour majority, recommended that all nationalised indus- tries should be set financial targets for three to five years by the Government. My right hon. Friend will also recall that British Gas, in its last report, regretted that the Labour Government had not set a three- to five-year target for the corporation. Can my right hon. Friend confirm that the new target is based on replacement cost of capital employed rather than on the historical cost?

Mr. Howell

Yes, I can confirm that. I can confirm also that this is a move to set three-year financial targets which were consistently ducked by the previous Government. A great many people regretted many things under the previous Government, and this was one of them.

Quite apart from the long-term importance of conserving scarce resources, the British Gas Corporation also needs to use the price mechanism in the short term to help match demand to available gas supplies. I do not know whether the right hon. Gentleman is in favour of the price mechanism or against it, but if he says that what we are doing is rationing by price, my answer is that his approach would be rationing by rationing.

Mr. Dick Douglas (Dunfermline)

What estimates have the Government and the corporation made of the reduction in demand for its product, or the rate of decrease or increase in demand for its product?

Mr. Howell

If the hon. Member for Dunfermline (Mr. Douglas) will allow me, I shall come to that in a moment. I was about to refer to the surge in demand and the effects, as far as can be estimated, that the financial targets will have, but I shall come to those in detail in a moment.

Following last year's oil price increases and supply uncertainties, there was, as the House knows, a huge surge in demand for gas. About 70,000 domestic customers and about 4,000 firms are waiting to be connected. I am sure that many hon. Members are aware of that situation from their own constituencies.

The pressures are so great that British Gas has had to ration the provision of new supplies almost entirely to those who have a statutory right to be connected because they are within 25 yards of a gas main. That puts industry at a substantial disadvantage compared with the domestic consumer, despite companies queueing up, as they are, to pay a higher price. My right hon. Friend the Secretary of State for Industry and I have received many complaints from firms waiting to build new factories or undertake other developments which cannot get a gas supply. That cannot be satisfactory. I cannot believe that even the Opposition are prepared to condone that.

The rising demand from the domestic market has also increased the frequency of interruptions to supplies to industry on the type of contract that provides for a limited number of days' shut-off in cold weather. We believe that the sooner industry gets the gas that it is ready to pay for, the better it will be for us in the future and the better it will be for the economic health of the country.

After a decade during which domestic prices have been falling in real terms, I agree that it is difficult to predict precisely what savings in gas consumption will be made when prices start rising, but I believe that the combination of higher prices and the extra capital investment by British Gas will mean a real improvement in the availability of new gas supplies to British industry in the coming years.

I have spent some time telling the House the reasons why domestic gas prices have to rise. Let me now turn to some of the other factors that the Government took into account in reaching their decision on the three-year financial target.

British Gas is, of course, making big profits. The corporation made £360 million last year and the profits will increase substantially over the target period, though, as I have already indicated, this year there will be virtually no profit from domestic sales. The reason for those profits arises from the fact that the corporation managed to negotiate gas contracts with producers on a basis that originally did not take full account of future increases in the price of oil. In consequence, the oil price rises since 1973 have left British Gas in receipt of a substantial windfall in "economic rent" which boosts its profits enormously. Its profits help to finance its high level of capital expenditure—nearly £600 million in the coming year.

Mr. Joseph Ashton (Bassetlaw)

Is it not a fact that British Gas is one of the few nationalised industries operating on current cost accounting and that it is possible to shrink its profits from a surplus of £500 million in 1977–78 to about £180 million because it uses a system of accounting which is different from that of other nationalised industries?

Mr. Howell

Like the previous Government, we are seeking to get a standard accounting practice in the nationalised industries, but the figures are a fair indication of the operations of the gas industry.

The increased capital expenditure will increase the availability of gas by strengthening the transmission and gas storage systems and by bringing gas ashore faster from the Morecambe Bay gas field.

The corporation should also begin to pay corporation tax on a substantial scale in the coming years. Nevertheless, the new financial target regime will leave British Gas with cash surplus to its immediate requirements, and that cash will be deposited with the National Loans Fund. The interest will serve to increase the sums that can be deposited.

I hope that the House will accept my explanation that there are compelling energy policy reasons for increasing gas prices, though the increased profits that will result from higher prices will make an important contribution to the Government's central economic objective of holding down the public sector borrowing requirement. I see nothing wrong with that. The fact that there are two additional reinforcing arguments for the policy makes it stronger, not weaker. Some sort of gas tax has been suggested, and we shall have to look at that, but we need to be clear that whether the profits of British Gas are left in its name or taken away by tax, the effects on the PSBR are exactly the same.

There is a further important point connected with the corporation's profits. At present, about 70 per cent. of households have access to a gas supply. The remaining 30 per cent. do not benefit from having on tap the cheapest of the household fuels. Raising domestic prices will inevitably mean a transfer of the benefit from those who happen to be near enough to a gas main, via the public expenditure effects that I have described, to the community at large.

All the factors that I have mentioned so far point, regrettably, in the same direction—towards higher domestic gas prices. No one likes bigger bills, and I did not expect this necessary view of the future, which we believe it right to take, to be greeted with enthusiasm. Gas consumers have enjoyed falling prices, in relation to their incomes, for at least 10 years.

The motion vastly exaggerates the effect of the proposed gas price increases on the cost of living. The April increase will add about 0.25 per cent. to the going rate of inflation, and the October increase, which is the one which the right hon. Member for Devonport finds so objectionable, will add an additional 0.16 per cent.—both spread over the subsequent three months.

Mr. David Price (Eastleigh)

Although the motion may exaggerate what my right hon. Friend has been doing, the presence on the Labour Back Benches does not.

Mr. Howell

It is not quite the crowded assault that was billed by some of the extravagant pre-publicity.

The Opposition talk of savage increases, but I wonder what their real feelings are. When the right hon. Member for Chesterfield (Mr. Varley), as Secretary of State for Energy, hiked domestic electricity prices up by 28½ per cent. in one go, I did not hear his right hon. Friends shouting "savage increase". That may be because they did not notice, because the announcement was slipped out in a written answer. Of course they were not setting proper financial targets either. In addition, there was no special scheme for the old and the poor. Let us have a little more candour from the Opposition.

To ask the British Gas Corporation to hold prices down at current levels for all domestic gas consumers is the worst possible and most wasteful and totally counter-productive way of trying to help those for whom rising fuel costs mean real hardship. We cannot protect everybody against high energy costs in today's dangerous world. It is far more sensible to identify those who need help directly.

The two policies go together, and I have never sought to hide the fact—market prices for energy and effective help for those in need, especially the old and the poor. The nationalised indus- tries' consumer councils agree that that is the best way of helping. So did the late lamented Price Commission and the 1978 White Paper of the previous Labour Government. The motion has taken leave of all those views for a start.

The previous Government had an electricity discount scheme, but it was generally recognised to be complicated and expensive to administer—it cost £4 million to run—and all too often it went to those not in real need of help with electricity bills. It did not offer much help either to those in need whose main fuel was gas rather than electricity.

I am sure that the motives behind the scheme were excellent, but it was a classic example of trying to help everybody and ending up helping hardly anybody. The new scheme of assistance with heating costs announced by my right hon. Friend the Secretary of State for Social Services in October is at least a start in providing worthwhile help for those most in need this winter.

At least the current benefit, worth £50 in a year, which is seven times the average help given by the electricity discount scheme, is big enough to make a substantial dent in a winter quarter's fuel bill for some of those in greatest hardship. The National Gas Consumers Council rightly says that it is an improvement on the previous Government's scheme.

Mr. Winnick

Is the right hon. Gentleman ruling out any possibility of a national fuel rebate scheme? Secondly, if the scheme introduced by the Government to replace the electricity discount scheme is so good, why is it that I, like, no doubt, many other hon. Members, have been refused information about the numbers eligible to receive the benefit? No doubt it is the policy of the Secretary of State that we should be refused information about how many people in our constituencies will receive the benefit announced by the Government.

Mr. Howell

There is no secret about the figures. They are available. I shall deal later with how the Government see the matter.

Mr. F. A. Burden (Gillingham)

Most of my hon. Friends were concerned about the effect that the increases would have on pensioners and in particular the disabled. We are greatly encouraged by my right hon. Friend's statement, but it is essential that it should be made clear beyond doubt, and I hope that he will issue a press release outlining his intentions.

Mr. Howell

I am grateful for that intervention. I am aware of my hon. Friend's worries, and I hope that what I am saying will reassure him.

The price increase resulting from the new financial target will not affect this winter's bills. As I told the House on 16 January, we shall take proper account of the higher cost of energy in our social policies and in determining benefit levels, particularly the levels of extra heating allowances. In that context we are reviewing the whole range of help available to assist consumers with fuel bills and to make extra provision for the elderly and others on low incomes who need help. My right hon. Friend will announce our proposals in good time for people to plan how they can manage next winter, and the proposals will be fully publicised.

To set a three-yeas financial target and to warn people openly that prices will have to be allowed to rise is, I acknowledge, never easy, and that is presumably why the last Government never got around to doing it. The decision which this Government have now made was a hard one to reach and is an easy one to criticise, but it is, none the less, I believe, the right one, and as time goes by it will increasingly be seen to be right. Despite all that has been said or implied by the Opposition, economic reason and effective social policies are not opposites. They go hand in hand. Our policy is rooted in that reality and I ask the House to support it, and with it our amendment.

4.41 pm

Dr. J. Dickson Mabon (Greenock and Port Glasgow)

We all know that the Secretary of State for Energy is a very able man in his own way and we have certainly today had as fair a defence as he could muster, but I submit that there are three defects in what he has just told us.

First of all there was the apologia for the present scheme. I have never been a part of the yahoo school of politics in believing that simply because my side did something wrong, therefore the other side is entitled to do equally wrong and I should not and cannot criticise. Nor have I ever believed the reverse. I believe that situations have to be taken in the circumstances of the time.

By the way, if the hon. Member for Gillingham (Mr. Burden) is satisfied with the present scheme, why do we need another scheme? If the present scheme is adequate, why should we have a new one? The answer is that prices will go up by 29 per cent. in April, which is a very formidable figure. Also, it must be taken into account that in the next two years after that there will be a 10 per cent. impost on top of the figure for the rate of inflation. That is what we are told. So obviously the scheme we are discussing is something very relevant to the winters to come.

When we listened to the pathetic response of the Secretary of State for Social Services today in regard to this, it was quite clear that a struggle is going on within the Government over the nature of this scheme.

I say to Tory Members, with all respect, that their influence in Parliament is largely determined not just by what they do in voting but also by what they do behind the scenes, and I hope that a great effort will be mustered in the ranks of the Tory Party in favour of those Ministers who want to introduce a really comprehensive heating allowance scheme. This whole proposal of gas price increases smacks not of the Department of Energy but of the Treasury. Indeed, the right hon. Gentleman's references to the National Loans Fund gave the game away.

The three defects of the Minister's programme are the following. The first is the total absence of any comprehensive socially conscious scheme. The Secretary of State for Energy did his best. He has probably been fighting very hard to get a scheme of such a kind, but he is not able to announce it today, and this shows that the fight is still going on. It has to be a comprehensive scheme, comparable with nothing that we have ever had before, and one that takes into account every fuel. We all know that. The argument is that the true value of every fuel has to be known to the consumer. This is the new doctrine of the Government. We are not dissenting. In terms of present conditions, it is not an unreasonable proposition. But, if that is true, obviously the obverse of the coin is that there must be a heating allowance scheme of a comprehensive nature.

That is mentioned at the end of our motion. What the Secretary of State for Social Services said today, and what the Secretary of State for Energy has said, gives us on the Labour Benches no confidence at all that an adequate scheme of that size will be announced this summer.

I specifically asked the Secretary of State for Social Services today two points at Question Time: first, would the new scheme be comprehensive and would it take into account more categories than those spelt out on 22 October? He refused to make any comment. Secondly, I asked whether it would be of such a size in terms of the multiple that it would get anywhere near the kind of increases that are being proposed by the Secretary of State in his three-year programme.

That is the first defect, and the Government have got to accept it. Their own Benches are uncomfortable about it. That is why all these speeches are made at the weekends by senior Ministers to try to make us believe that something is going to be done and is going to be done reasonably quickly. We are entitled as the Opposition to complain about this defect and to have it put on the record with our votes. We hope that some Tory Members will abstain or perhaps even vote with us. On that count alone, I submit that today, having heard the Secretary of State for Social Services, we have no assurance that such a scheme will be brought in.

The second argument, perhaps moving away from the anti-social aspects of these proposals, concerns the so-called three-year programme. What a laugh that is in the world of energy—the idea that anything will last three years! One need only look at the procession of White Papers we have had from various Governments trying to look ahead 10 years, seven years or five years. How reckless. To take even three years, I submit, is incredibly frivolous. I am not against planning; I am not against saying that that might be our intention and that we would like to get there, but who knows what the price of oil will be in three years' time?

Mr. David Stoddart (Swindon)

In three months' time.

Dr. Mabon

Even in three months' time. But here we are debating a three-year proposal. I am not against the Government having intentions, having guidelines, but firmly to announce a 10 per cent. increase on top of inflation, without even knowing what the inflation figure will be, is reckless. I suggest that the right hon. Gentleman will not be the Secretary of State for Energy in two years' time and his successor will have abandoned these figures in favour, quite rightly, of the reality of that moment.

What is the point of having all this hassle, of raising these things, burdening us with these figures, when they may not come true? The British Gas Corporation is supposed to be demanding these figures. It is not demanding these price rises; the Secretary of State now has admitted that. Of course, the British Gas Corporation welcomes the idea of having three-year guidelines, but not figures of this order. The Secretary of State is trying to have it both ways. Therefore, I submit that the second defect of this proposal is the economic nonsense of trying to argue that it is possible rigidly to plan and set firm figures for three years.

Within that context we are talking about the use of this money. What should be the use of this money? The ordinary citizen, paying his gas bills, not concerned about getting a rebate, not concerned about the heating allowance because he does not qualify, wants to know one simple thing about the Gas Corporation's profits: are they being used to improve the industry? Take the great problem of gas that is yet to come. Is it not the case that the Gas Corporation is about to embark upon one of the biggest gas-gathering pipeline systems in the world? Would it not be wise for that to be taken into account? Would it not be right for the Gas Corporation to be told that it will not be able to spend a great deal of money on exploring for gas and developing finds of gas which at the present moment are uneconomic? None of that is acknowledged. No. The money is pouring into the National Loans Fund. The Gas Corporation is in the most extraordinary situation for a nationalised industry. It is virtually free of debt, yet at the same time the Government are forcing up the prices of gas.

Mr. Peter Emery (Honiton)

I know that the right hon. Gentleman would never knowingly mislead the House. The money going to the National Loans Fund is only on loan; it is not a gift. Therefore, any time the Gas Corporation wants it back it can be reclaimed.

Dr. Mabon

The hon. Gentleman, whom I regard as a friend, has been a Minister and knows as well as I do what a sticky-handed lot the Treasury are. He knows as well as anybody that once it is in their hands it takes a hell of a big effort to get it out of them.

I can see the argument going on in the various Cabinet committees about this, and I would much prefer that the Gas Corporation was able to commit itself to many of these programmes of exploration, gas-gathering development of new fields and systems of pipelines and take a step forward towards the synthesising of gas, which ultimately will be its enormous role. We witnessed the Gas Corporation changing from town gas to natural gas in 10 years—one of the most remarkable achievements of British industry, or, indeed, of any industry, at any time. The yahoo aspect has to stop. It is an achievement of the industry, not of the Tory Party or the Labour Party. It is an achievement of Britain.

In time, when natural gas from the North Sea province has gone, we shall have to invent synthetic fuels by means of using waste gasifying coal and so on. These are the sort of things that the consumer wants to hear are being done with profit from gas.

Consumers would like to hear that the money is being used for that sort of benefit. But, that is not the case here. To my mind and the minds of many others—including many in the Tory Party—it is an exercise on behalf of the Treasury to try to meet the immense challenge that the Tory Party has set itself. The Treasury has to find how to make a massive cut in public expenditure in a very short space of time. For purposes of my argument, it does not matter whether that object is a good or a bad thing. The gas industry is being subverted to that end—not to the end of promoting gas or advancing energy interests, but to that end primarily and immediately.

Mr. Peter Rost (Derbyshire, South-East)

Does the right hon. Gentleman agree that the principal argument in support of putting up the price of gas is that the investment that he is talking about, which he admits will be required in years to come, will become cost effective? It will become cost effective only if the market price of gas is a European or world price.

Dr. Mabon

That leads me on to what I believe is the third defect. First, I have alleged that the proposals are anti-social. Secondly, I have alleged that they are economic nonsense because they have never been properly explained and defended and that they are not about energy saving but are about a Treasury PSBR-cutting exercise. I am glad that the hon. Member for Derbyshire, South-East (Mr. Rost) intervened, because I can add the third defect, namely, that there has been no justification for the actual figures. The Secretary of State has taken no time, either in this speech or in previous speeches, to defend any of the figures. I have listened carefully to him and read a great deal of what he has said on the matter, he will be surprised to hear. They are curious figures, not vague but very definite.

Other than the explanation about a Treasury exercise that I have given, there is no real explanation to justify what the figures mean in terms of the industry. However ineffective some hon. Members may feel at times—merely by voting and not speaking often—being a voter tonight is something. I hope that all my right hon. and hon. Friends will vote for the motion, whatever may be its language in the eyes of the Secretary of State for Energy. Likewise, I hope that Conservative Members will be tempted to vote for the motion so that we might bring some sense to bear upon the Government.

4.52 pm

Mr. John Hannam (Exeter)

Most hon. Members have a great liking for the right hon. Member for Greenock and Port Glasgow (Dr. Mabon). However, they should agree that most of his arguments this afternoon support the amendment that was moved by my right hon. Friend the Secretary of State to the Opposition motion. I should like to take up briefly some of the points raised by the right hon. Member for Greenock and Port Glasgow. I know that many of my hon. Friends wish to take part in the debate and that some of the right hon. Gentleman's points will be referred to by them.

On 9 January, a report in the Financial Times stated that it was just as well that New Year's Day was a public holiday, otherwise United Kingdom industry would have its gas supplies cut off because of a surge in demand by domestic consumers. The report added that only a steel strike would avert further cuts in gas supply this winter, regardless of weather conditions. In July 1979, after two years of the freezing of gas prices by the Labour Government, when the real price of gas fell by about 15 per cent., the Price Commission called for a 30 per cent. increase in gas prices. That was at a time when inflation was running at between 8 and 9 per cent.

In November of last year, at an energy seminar in Plymouth, the Opposition spokesman on energy, the right hon. Member for Plymouth, Devonport (Dr. Owen), referred to the likely energy gap in 1990 and the immediate need to conserve energy. He said that we would need to build more nuclear power stations. I agree with him on that. He also said that conservation of fuels was essential. I agree with him on that, too. He added that a pricing policy was inevitable and that a special scheme of help for poorer families would therefore be needed. I agree with him on that as well

At the same conference, the deputy chairman of South Western Gas spoke of the fivefold increase in gas usage since the 1960s and the dramatic effect on the gas market of the "flight from oil" of last year. He said that a great imbalance in demand and supply had been created by the surge of new customers and appliances. I should like to quote briefly from his speech. I believe that his remarks relate directly to today's debate and what I consider to be the hypocritical attitude of the Opposition.

On the subject of price, the deputy chairman said: The demand for domestic gas has been intensified by an artificially low price, which has, by successive Governments and their price-regulatory bodies, been held down to a rate of increase roughly two-thirds of the RPI or one-half of earnings or pensions…The Price Commission has recently commented on this and indicated that a substantial increase in gas price is overdue and that there should be more parity between these and industrial prices…Supplies of natural gas will last well into the next century as long as they are not recklessly dissipated as a result of short-term pressures. When natural gas does commence to be depleted there are practical and economical processes to make a completely interchangeable gas from oil products or, more importantly, from coal. The price of natural gas must increase—Industrial prices will be geared to oil—Commercial prices have already increased substantially this year and will follow the same trend, and—Domestic prices, artificially held down for so long, will certainly rise next year by a significant amount. Under the previous Government, not only did the former Secretary of State for Energy, the right hon. Member for Bristol, South-East (Mr. Benn), hold down gas prices artificially for two years but, at the same time, he allowed spending of large amounts of money—millions of pounds—to persuade people to use more gas. Over seven years about £73.7 million was spent with that objective in mind. It is no wonder that this winter has seen a dangerous over-demand for gas and a loss-making domestic sector in the Gas Corporation. Industrial gas users are being clobbered not only by high gas prices and charges but by the serious lack of guaranteed supplies.

In Holland, a similar problem developed over the previous decade. Through the low pricing of gas, the country allowed such a substantial increase of its usage that the crazy result was that about 90 per cent. of space heating in Holland was provided by gas, and about80 per cent. of electricity generation was provided from the burning of gas. In economic thermal usage terms, that makes no sense at all. Holland saw the danger about three years ago and effected a doubling of gas prices in that time.

Sir Denis Rooke was reported as being so concerned about the instability of gas supply that he was considering cutting off gas supplies to the House of Commons if the necessary steps were not taken to remove the requirement to buy gas without discrimination. He realised the danger and made that comment. We have a price structure which means that, at a time when energy conservation is being preached by everybody, United Kingdom domestic gas prices are half those in Germany and France and 70 per cent. lower than prices in Italy. Yet industry in this country is paying more for gas than our competitors in those countries.

About 20 per cent. of our gas comes from the Norwegian sector of the Frigg field. The next main new source of gas is likely to be the Norwegian Statfjord field. Gas prices from those northern fields are five times higher than the old southern-based gas contracts. There is fierce European competition for supplies of gas from those fields. If gas prices were to be increased on an oil-related basis, the increase would be nearer 60 per cent. compared with the 29 or 30 per cent. that is proposed for the next three years. That answers the point raised by the right hon. Member for Devonport about the unfairness of these increases. If gas prices were linked to oil prices, the increase would have to be double that announced by the Government.

Dr. J. Dickson Mabon

If the Gas Corporation negotiates with an oil company, is it not the case that from now on it will be in a considerably weaker position as regards the rates at which it can obtain supplies of gas? It was not in such a weak position in the classic case mentioned by the Secretary of State in relation to the southern fields.

Mr. Hannam

The Gas Corporation is still in a monopoly situation in the southern fields. It is competing with overseas buyers for gas, and it is therefore having to pay the market price. That is the price that the British consumer has to pay. It is the market price of the northern gas fields that we must accept. If one adds to the price of gas the need for massive investment during the coming decade in order to ensure a switchover to gasification from coal—when oil and gas reserves run out—the arguments for the Government's action are irrefutable.

When and how fast should those increases be applied? That is the nub of the Opposition's argument. The other part of that argument is about how to protect the poor and the elderly. First, the price increases should be implemented immediately. I have pointed to the Dutch example and said that we are only halfway towards achieving parity with oil. No one will dispute that there should be a substantial increase now. That point was emphasised at the conference in Plymouth which the right hon. Member for Devonport attended. He did not dispute that fact then.

The former top Labour economic adviser, Michael Posner, has come out decisively in favour of the timing and method of the gas price increase. He favours stable long-term financial objectives for nationalised industries rather than short-term taxes that are subject to the whims of the Government. I should like a system which ensures a proper revenue return to the taxpayer, in addition to giving proper incentives for the development of marginal gas fields. The present system does not do that. Perhaps my hon. Friend the Minister will outline the Government's views on the advantages and disadvantages of a gas tax system.

Finally, I turn to the emotive aspect of the three-year hike in gas prices, which is the effect on the elderly and the poor. The Opposition seized the political opportunity presented by the rather hurried announcement that was made after a press leak. They painted a picture of people faced with grave hardships and of their sometimes dying as a result of price increases that will rise 10 per cent. above inflation next year. All hon. Members are concerned to ensure that proper protection is given to those who are unable to adjust their weekly budgets to allow for a particular commodity price increase.

I should have welcomed the announcement of a major social package at the same time as these price increases. The lack of it is probably the cause of complaints by many hon. Members. However, in recent years we have had increases for electricity, oil and coal similar to the present increase. How many people suffered death or the consequences that were portrayed in remarks made at the time of the announcements? When coal prices rose as a result of the miners' pay demand, did Labour Members raise the same cries? The same situation applies, because it involves a dramatic increase in the cost of fuel to consumers.

We must look at this problem from all angles as part of a rational policy to help the poor and the elderly. Many poor and elderly people have night storage heaters. They face the same problems as gas consumers face now. We must consider a new system of charging. Instead of reducing the charge as consumption increases, we should reverse that process. We should demand an increased charge for increased consumption. North Thames Gas charges about 29.30p per therm for an annual use of 80 units. That drops to 17.27p per therm for 1,200 units. That is ridiculous, because the more fuel one uses, the cheaper the price. If a new system were introduced, combined with a drive to insulate many of the older properties in which the elderly and poor live, we should get to grips with the problem.

I call for a package that will give real help to the elderly and to the poor. I should like a better system of charges, in order to encourage conservation. I seek an explanation of the gas tax versus financial objectives argument. However, I reiterate my support for the Government's decision, unpopular as it may be in the short term. Natural gas is a resource that is precious to the nation, and it is invaluable to the economy. However, it is not infinite in quantity. We must ensure its supply for as long as possible into the next century.

5.6 pm

Mr. Thomas Torney (Bradford, South)

I wish to take issue with the Minister about his use of the word "hysterical" to describe the motion on the Order Paper in the names of my right hon. and hon. Friends. Is it hysterical to condemn savage increases that will hit ordinary families? Is it hysterical to say that those increases will have a devastating effect on the cost of living? Is it hysterical to draw the Government's attention, and that of the House, to the devastating effect that those increases will have on the worst-hit sections of the community?

The hon. Member for Exeter (Mr. Hannam) pointed out that a number of people have already suffered because of the high cost of fuel. Perhaps he does not represent a constituency like mine. I regularly receive letters and calls at my surgeries from those who have had their gas or electricity cut off because they cannot pay the bill. They are not spendthrifts or drunkards. They do not waste their money. That is not why they can- not pay their bills. They are families with children, where perhaps the breadwinner is disabled or sick. Perhaps there is no breadwinner.

Those who cannot pay their bills often include pensioners and those receiving disability allowances. They are people in the lowest income groups. Single parent families also find it difficult to pay their bills. It is not good enough for the Minister to point to the increases that were allowed last October. Those were agreed in the previous Budget. It is people on social security, pensioners and other low income groups who are worst affected. I accept that the Labour Party can be criticised as much as the Conservative Party for the way that a Budget announcement is made. When an announcement is made in April or May, people must wait until October before any benefit is received.

The Minister cannot use the argument that whatever was given to those unfortunate people last October will benefit them as regards future increases in gas prices. Such increases—meagre as they were—have already been absorbed by the general increase in the cost of living. The Minister has promised us something for the future. We do not know what it is. We certainly know the record of the Government during the short time that they have been in power. We can judge by that record what the lower income groups and the poorer people of Britain will receive in future.

The dogma of the Conservative Government is to cut, cut and cut again. We have been warned of the possibility of future cuts. The cuts that have occurred have hit hardest at the lower income groups, the sick, the disabled and other badly off sections in our community. I find it extremely difficult to accept a vague promise that the Government will do something for these unfortunate people.

Let us consider another section of the community—owner-occupiers, young couples, perhaps with young families, who are setting up homes. Many of them misguidedly helped to return this Government. How are they feeling about the proposals? I know how many of them are feeling in my constituency. They have borne the brunt of increased VAT, with household goods and clothing costing a tremendous amount. Owner-occupiers are saddled with large mortgage repayments. They have suffered increases in the mortgage rate which can be attributed directly to this Government's policy.

The Conservative Party in Opposition levelled tough and bitter criticisms at the Labour Government for increases in the cost of living. We were attacked because it was held that we had caused those increases—and such increases obviously are felt most severely by the poorest sections in the community. The actions of this Conservative Government have contributed more to the increased cost of living than our legislation on such matters as imports.

I was extremely cross when I first heard of the gas price increases. I knew how they would affect the people whom I represent. I made a little press statement. Unusual though it may be, that statement appeared in many newspapers, not just the one in my constituency. As a result, I have received letters from all over the country. It may surprise the Government to know that I received letters from Tory strongholds, such as Bournemouth, Eastbourne and Torquay. These people read my statement and wished to join me in protesting bitterly and strongly. They are not Socialists. They are not Labour supporters. The Government should look to their laurels and consider not only the poorest sections of our community, which I wish to support, but their own supporters.

I venture to suggest that if this Government went to the country now the result would not be the same as in May 1979. Many of the people who supported them then would not vote at all or would go over to the other side. Increased prices and cuts in public services are being felt, not only by the poorer people but throughout the country, and the Government are responsible.

We cannot increase the price of such a commodity as gas without industry being affected. It has already been badly hit by the increased bank rate that the Government imposed. The consequences for industry will, in turn, cause higher prices in the shops. We shall also be less competitive in selling our goods abroad, and we must sell abroad if we are to buy the food and raw materials that we need. That is our lifeline.

In their short time in power, the Government have added insult to injury in bringing our country to its knees. There will be worse to come. As a result of their economic policies, industrial stagnation has already set in. I wonder what industry will have left in 10 years' time.

The Government's policies will make life more difficult for the domestic consumer, and especially those who cannot afford price increases. Further, the cuts in services will affect most the sick, the disabled and those least able to look after themselves. Their policy appears to be: if people have, they can have more; if people have little, they can have less. The Government's method of rationalising or conserving supplies is to ensure that those who can afford to pay will get the supplies that there are and those who cannot will go short.

5.16 pm

Mr. Peter Emery (Honiton)

This is a curious debate. I found the comments of the right hon. Member for Plymouth, Devonport (Dr. Owen) quite irrelevant to the problems of gas and energy policy. It seems to me that the sooner he goes back to foreign affairs, the better for him and for the country. [HON. MEMBERS: "No."] Yes. And it will be better for the Opposition, so that we can rectify Left-wing pressure on foreign affairs.

In all the publicity that the hon. Member for Bradford, South (Mr. Torney) put out, I wonder what he believes will be the average increase on the average bill.

Mr. Torney

It will be 29 per cent.

Mr. Emery

How much is it in real terms?

Mr. Torney

Quite a lot.

Mr. Emery

It is not quite a lot.

Mr. Torney

It is for those who are not earning much.

Mr. Emery

Let me tell the House exactly what it will be. We should consider the facts of the "savage increase" that the hon. Gentleman talks of. The increase to the average domestic consumer will be 56p a week.

Mr. Torney

That is a lot for those on social security.

Mr. Emery

The hon. Member for Bradford, South suggests that this Government have no feeling for those who are worst off. Since his Government left office, we have given a fuel allowance of over £50 a year for the 355,000 who are worst off. We have dealt more generously with the worst-off section in the community than the Labour Government, and that fact must be registered.

Mr. David Penhaligon (Truro)

Can the hon. Gentleman justify that argument? It would mean that in the great parliamentary constituency of Honiton, which I know fairly well, there are only 500 people who need help with their fuel bills. In effect, that is the proportion helped by the Government's legislation.

Mr. Emery

Those who are severely badly off are getting aid from a Conservative Government which they did not get from a Labour Government.

Having said that, I find myself in a worrying and difficult position. I helped to set up the Department of Energy with my right hon. Friend, and I resolutely admire his intellectual approach in politics and his work for the Conservative Party on policy matters. The last thing that I wish to do is to begin condemning his approach today.

However generous any of us may feel, the presentation of the new gas prices that will be necessary to obtain the new financial objectives for the British Gas Corporation can hardly be described as an oustanding success. Nor could it be claimed, certainly before the debate, that the British public knew or understood what was behind the new energy policy.

I listened with great attention to my right hon. Friend's speech. I congratulate him. I believe that he has cleared up a number of previously unanswered questions, most specifically in view of the assurance he has given of further assistance to the least well off before the new price increases begin to bite. Many consumers turned to gas because they believed the Gas Corporation's advertising that stated Gas—the clean, cheap fuel or Join the bonanza of gas from the North Sea. That is what the new consumers wanted. Now they see a nationalised industry being well managed, highly successful and making major profits. "Hurry, damn!" might well be their expletive. But the pleasure may not last long. We now have a Government policy that demands greater profits, increasing the net return on replacement cost of capital employed from 6.1 per cent. to 9 per cent. That is a one-third increase in profits. In terms of profitability, this means an increase not to the BGC but to the Government?

Mr. Tim Eggar (Enfield, North)

Does my hon. Friend agree that much of the profit to which he refers is in the form of the economic rent that should be accruing not to the BGC but to the Government?

Mr. Emery

That is an interesting argument about the economic rent factor of mineral resources underground. It is not part of the argument with which I am trying to deal.

My worry is that the Government have failed to communicate and have failed to convince the public about the reasons for their policy. The domestic consumer knows that the Government are determined to overcome inflation and wish to see prices rise as little as necessary. The consumer sees the British Gas Corporation operating effiently and making substantial profits. It is, therefore, strange and, to many, unacceptable that the supplier of something better and cheaper than that provided by competitors should be forced to put up the price. Surely, it would not be unreasonable to claim that this is the worst practice of a monopolist. In private industry, it would be condemned. The argument that competition is meant to bring down prices, not push prices upward to match the prices of expensive competitors, such as coal and electricity, must be answered completely.

Mr. David Howell

I am listening closely to my hon. Friend. He has great experience in these matters. To give a fair picture of the profits issue, he has to emphasise what is the position, namely, that no profit is being made from domestic gas sales. If there was not a price increase, we would have a subsidised domestic gas price. That cannot be right.

Mr. Emery

I reject that approach. I am trying to establish an argument that people can understand. It is necessary to talk of the efficiency of the gas industry. I shall then come to the point made by my right hon. Friend.

It is important to stress, and give praise to, the efficiency of the gas industry and the success of its management. It has carried out 13 million conversions to North Sea gas with a minimum of dislocation. Over the last two years, it has reduced its borrowing and capital liabilities from £2,093 million on 1 April 1977 to £881 million on 1 April 1979. That is over £1.2 billion down—a remarkable performance.

Mr. Geoffrey Dickens (Huddersfield, West)

I seek clarification. You said that the British Gas Corporation had hoodwinked—

Mr. Deputy Speaker (Mr Bernard Weatherill)

I did not say anything.

Mr. Dickens

My hon. Friend was saying that the British Gas Corporation had hoodwinked the general public in switching to cheap gas. He is now singing the praises of the British Gas Corporation.

Mr. Emery

I never said that the Gas Corporation had hoodwinked the public about cheap gas. I said that the public believed that it would stay at the levels at which it was.

Mr. Dickens

As advertised.

Mr. Emery

As advertised, if my hon. Friend cares to say so. At the same time, the transfer of depreciation from historic cost basis to current price replacement cost basis has cost an extra £310 million over the last two years. Accumulated reserves of £783 million have been built up and still there have been pre-tax profits of £360 million and £180 million. Over the last two years, surpluses on operation of an amount in the region of £2,050 million have been created. That is a remarkable financial prospect of which any company would have reason to be proud.

I now wish to turn to conservation. In the ultimate, as my right hon. Friend the Minister says, gas supplies are finite. But we must be honest with the people. At the moment, we have announced gas reserves to last for 30 years. Knowing the oil companies, I feel that this will be a conservative estimate. It does not take into account associated gas from oil production fields or the aspects of imported Algerian gas contracts that may be available. Nor does it accept that new technology will allow for much greater extraction from existing fields. With only minimal new discoveries and even a doubling of our gas consumption, I believe that we shall have adequate domestic supplies in 50 or probably 75 to 100 years' time.

Mr. Arthur Palmer (Bristol, North-East)

rose—

Mr. Emery

I have given way a lot. Many hon. Members rise to speak. I shall give way, but this will be the last time.

Mr. Palmer

At least, I am on the Opposition side of the House. Are the figures that the hon. Gentleman has quoted British supplies or do they depend on the Norwegians?

Mr. Emery

These are British supplies. But these supplies are likely in time—I stress "in time"—to become more expensive. However, in considering conservation, I have to be convinced that the demand is so elastic that, for heating, it alters greatly as the price increases. I shall attempt to argue that this is not the case.

It is true that although British Gas has, in past years, always had a surplus of gas available of between 3½ to 5 per cent. of total demand per annum, there are problems of shortages during very cold weather at the highest peak of demand. But this is not basically a pricing policy matter. Whatever the price in the most bitter weather, people will heat their homes if this is possible. I refuse to believe that there is great elasticity of demand in that sense. I would argue that there need never be any shortage for domestic consumers.

I would suggest that a surge of an extra 10 per cent. by domestic consumers can be easily met. It has always been catered for in the past by the use of interruptible supply contracts to industry that make up between 15 to 20 per cent. of industrial contracts. These companies have always made provision to deal with the problem of supply interruption and have been willing to accept this to obtain special discounts. To talk of domestic gas consumers freezing is nothing short of scare-mongering. I am, however, worried that, because of the cheapness of gas, the vast majority of the nation will want to turn to gas. Then, of course, existing facilities will be inadequate to meet that situation.

I turn to the argument that there is no profit in the supply of gas to domestic consumers. I believe that this is an argument of some considerable ingenuity. It is based entirely on the management accounting decision as to how one applies certain overhead costs. It rests on the decision concerning the correct proportion of capital overheads and operating expenses as between industrial and domestic consumers.

Last year industry purchased just over six million therms of gas at a total cost of £721 million. That gives an average of cost per therm of 11.9p. Domestic consumers purchased about 7.9 million therms. At the same average cost, they would have contributed £939 million to the British Gas Corporation's accounts. What did they actually contribute? The domestic consumers actually paid £519 million more, so that the average cost per therm was 55 per cent. higher than the industrial price—an average of 18.5p a therm.

If the gas were to be supplied at the same cost per therm without quantity discounts, and the total costs were divided on the basis of equal proportion per therms supplied, the average thermal cost would be 15.9p. On that basis the Government's argument could not be correct, and the domestic consumer could expect a reduction of at least 2.5p a therm. Therefore, it is ingenious to argue that the domestic consumer does not contribute to the profits of the British Gas Corporation, because this must depend on the accounting factors of the corporation.

The fact of most overriding importance is that BGC is making a thumping good profit. Therefore, how can the Government stop a massive rise of gas demand from new consumers? There are two respectable arguments for dealing with price increases. First, the Government could think that it is unfair that energy consumers other than gas consumers should pay between 200 and 250 per cent. more for the same amount of energy, or that a gas consumer should be able to heat his home at one-third the cost faced by electricity consumers. Therefore gas prices, it could be argued, should go up to obtain the profits which would allow an equalisation of prices between the two commodities. However, that is not the argument, nor is it the policy of the Government.

Secondly, it is honest to say that because of the low price of British gas compared with world energy prices generally, the Government will put up the price of gas in order to reduce the public sector borrowing requirement by another £360 million. That would benefit everyone. If that is the policy, the Government should say so openly. Although there is the power to do this, it would breach the intention of section 14 of the Gas Act 1972, which requires the industry to break even, taking one year with the next.

Therefore, let us consider the alternative of a gas tax. This is not a revolutionary suggestion and it should be realised that there is already an existing tax on heating oil—the rebate tax on oil of 3p a gallon which is the equivalent to 1.7p a therm if applied to gas. At that rate it would raise some £290 million for the Government on the basis of present consumption. Therefore, it must be understood absolutely by gas consumers that they have been in a most favoured position over the last few years. I quote an exact example because one has not been given today. I found this in the Library and it affects London prices. If a small customer consumes 2,500 kilowatts a year, one kilowatt hour of heat would cost 1p if it was gas but 3.516p if it was electricity. If the same applied to a large customer consuming 30,000 kilowatts a year, those costs would be .589p for gas but 2.179p for electricity.

It must be clearly understood beyond peradventure that gas consumers have been in a special position because of the low price of their commodity. It is clear that the Government may well consider the requirement for a major capital expenditure—I would hope in a utility company—to finance a pipeline complex to ensure that smaller gas fields which are uneconomic on their own can be drawn together to maximise energy potential and go forward. I know that it is difficult to afford that money from the Treasury, but I suggest that the profits that are being made by the British Gas Corporation should be set towards the ability—if this cannot be launched on the market—for financing that type of extra energy. I believe that the capital requirement to do that would be more than £2 billion at present prices, and, as such a project is likely to be some way off, obviously the cost will be very much more.

While that pipeline scheme is being prepared, there is nothing wrong with the reserve going to the public sector borrowing requirement so as to benefit everyone.

In conclusion, one can dismiss the whole Opposition argument as inconsequential, unrelated to their actions in Government and out of tune with reality. One must recognise that the Government are propounding a new policy for the gas industry. Whatever arguments are used, gas consumers, both domestic and industrial, are getting an unbelievable bargain at the present level of prices, which are massively below other energy costs. These consumers will still be getting a bargain even after the increase. Therefore, the Government are quite justified in setting out to rectify the position.

Having said that, I believe that section 14 of the Gas Act might be altered. However, rather than have excess profits within a nationalised industry—which is not the intention in the structure of any nationalised industry—it would be much better to introduce a direct taxing method to ensure that that does not come about. This should be phased in, perhaps to increase the retail price index by no more than a half per cent. in any one year. It should be phased in with the necessary fuel assistance for the poor which, thank goodness, the Government have announced.

The pricing policy will not stop major and continuing demand by new customers—particularly industrial customers—for connection to the gas supply. I do not believe that the price increases will do that. Therefore, I believe that there should be an amendment to the fourth schedule to the Act, altering the obligation to supply so that this is brought more into line with the general approach of section 2(1) of the Act. I will not go into all these matters but they are very specific. Section 2 makes it quite clear that it is the duty of the Corporation to develop supplies so far as it is economical to do so". That interpretation should be used by the Gas Corporation instead of the very much more precise obligations in the Act.

I should point out that the increased income from gas passing to the Government would allow the money to be used across the board, whether for the PSBR or to relieve taxation, but most certainly for fuel assistance, as promised by the Government, to the benefit of all users.

I find myself more or less where I started on 14 January. I warned the Government during Question Time then that they had better explain the reasons for their gas policy or they would be open to criticism. We did not get that across to begin with. I only hope that this debate will have contributed to getting that message across to the public.

5.41 pm

Mr. David Penhaligon (Truro)

The Minister is making a major policy decision in this debate, or at least he is backing up one made over the past few years. That decision is to give OPEC countries the power to fix the internal prices of our gas and oil even though we are one of the few countries that are self-sufficient in both.

Having listened to the Minister's argument for this increase, which comprises inflation plus 10 per cent., I would like to know how firm the three-year programme is. The argument for this increase is that the world price of oil generated by OPEC has gone up. If OPEC increases the price again in six months, nine months, 12 months or two years' time, what will the Government do about gas prices then? Will they say that the increase will be kept at inflation plus 10 per cent. provided that OPEC does not put up the price of oil yet again? Or are the Government saying that given another OPEC oil price increase gas prices will be increased further? If they do not announce that, their argument is not logical.

I can see an argument for increasing gas prices on the basis of inflation. Internal labour costs, if nothing else, have gone up. However, I do not concede the case that has been employed in this debate, which is that Britain must, automatically and slavishly, follow world demand prices for energy. It strikes me as ironic that one of the few nations self-sufficient in oil charges more for its oil than almost any other country. We certainly charge as much as the OPEC countries, and more, I believe, than all but one of them. I do not understand the logic of that for an industrially based country such as ours.

Mr. Eggar

Perhaps the hon. Member for Truro (Mr. Penhaligon) will clarify that remark. I am not aware that North Sea crude is sold for any greater sum than comparable—I stress the word "comparable"—African or North African crude.

Mr. Penhaligon

I thought that that was what I said. We are following totally the latest OPEC oil price increase, but our oil does not have a stated price relative to some particular crude from North Africa. If the price of OPEC oil goes up, ours automatically goes up. There is no price justification for that increase. Nothing has changed. There is no extra labour force. No sudden extra investment is required. But when OPEC puts the price up we put ours up by exactly the same margin, on the same day bar a few hours.

We have reached the ludicrous position in our economy of realising that the saddest day in our economic growth in the last couple of decades was the day that we discovered North Sea oil and gas. That is a ludicrous proposition, but already one can see the effects on our industry.

The international value of the pound in part reflects the fact that we are self-sufficient in oil. It also partially reflects the ludicrous monetary policy of the Government. That, however, is a debate for another time. We apply to our industry an international value for our currency—a value that cannot be justified on any basis.

As a rural Member who lives many miles from the industrial heartland of Great Britain, I can say that the future of my constituents relies on the ability of our industry to survive and compete in international trade. The combination of following—to the penny—international energy prices and monetary blight is killing our industry stone dead or is, at least, having a good try.

I could have been more sympathetic to the Government today on three counts. There is no point in arguing that there is no problem. The problem was underlined by the statistics quoted by the hon. Member for Honiton (Mr. Emery). There is not much point in the people of my village, which I have never left, arguing against gas price increases. They have never seen a cubic foot of gas in their lives. Nor will they ever see one, because their village is a long way from the local gas pipe. There is a case to be made that those people are being penalised by being excluded from a supply of gas.

If the Government had come forward and said that they were putting up the price of gas to enable them to operate a system of cross-subsidy for other sources of fuel, I would have had some sympathy for them and seen some logic in their argument. I might even have been persuaded to stand up and argue the case for them. But the Government have not announced that.

If the Government had told the House that their main concern was the conservation of energy, that they had an employment problem on their hands that would get worse, and that as a result of the new increase in gas prices they would establish a massive scheme for energy conservation throughout the length and breadth of Britain, I could have seen some logic in that. That would have been a rationale for saving energy and providing jobs.

Thirdly, had the Government come forward today with a firm indication of what they proposed to do to help the elderly, the disabled and the low paid—of whom my constituency has more than are found in the constituencies of the majority of hon. Members—I could have had some sympathy for the Government. On the first two counts, the Government have clearly indicated that they will do nothing. On the third, they have expressed little more than a pious hope that they might produce something before the end of the year. If the scheme they produced last time is any indication of what is to come, I suspect that the overwhelming majority of hon. Members—when not in the Division Lobby—will admit that it is disappointing.

I do not expect any difficulty in persuading my colleagues to vote with the Opposition tonight against this increase. The Government have not made out their case.

Mr. Cyril Smith (Rochdale)

It is a tax.

Mr. Penhaligon

My hon. Friend the Member for Rochdale (Mr. Smith) is making my case for me. The Government have introduced a tax. That fits in with the argument of the hon. Member for Honiton. Had the Government stood up and admitted that, they would have got away with it better than they have.

5.47 pm

Mr. William Waldegrave (Bristol, West)

It is an intimidating thing for an experienced speaker in this House to face the serried ranks of the Opposition on a major occasion like this. Unfortunately, this time the Leader of the Opposition appears to have called a war and nobody has turned up for it. Perhaps there is a war going on elsewhere that is of more interest to Opposition Members.

This debate has been full of pleasant ironies. The most enjoyable of them was that the main weapon with which we were able to beat the chief Opposition spokesman on energy was the performance of his predecessor, the right hon. Member for Bristol, South-East (Mr. Benn), whose policy at the end of 1976 was based on exactly the same principles as those that we are now following. I have no doubt that the right hon. Member did not believe in that policy then, since he is not a great supporter of the price mechanism, whereas the right hon. Member for Plymouth, Devonport (Dr. Owen), in attacking our policy, is probably attacking a policy that he believed in then and still believes in now. I have never seen two such intelligent people as the right hon. Member for Devonport and the right hon. Member for Greenock and Port Glasgow (Dr. Mabon) struggling so desperately to find arguments against Government policy.

On the other hand, the Conservative Party is full of resource and is providing its own debate. Indeed, we have had, more or less, a one-man debate in the shape of the contribution of my hon. Friend the Member for Honiton (Mr. Emery). I have no doubt that my hon. Friend the Member for Huddersfield, West (Mr. Dickens), who is given to surprising forays, will also add savour to the debate. We had to wait until the speech of my hon. Friend the Member for Honiton to discover some of the arguments against the gas price increases, just as we had to wait until the speech of the right hon. Member for Greenock and Port Glasgow to find some of the arguments in favour of our policy. The right hon. Member put the case against imposing a tax on gas quite clearly.

I reiterate the three principal grounds in favour of the kind of policy decided upon by Her Majesty's Government. The first argument is, who gets the rent from the North Sea gas fields? Surely that is the fundamental argument. It was not due to the inventiveness of the British Gas Corporation or of anybody else, nor was it due to great capital investment over many years, that a great asset was discovered in the North Sea. It was a gift of God to the whole community. The Government are quite justified in taking the surplus and distributing it. It is most likely that it will be used to reduce the public debt and for the diminution of taxation. It will thus be distributed to the entire community.

I appreciate that some hon. Members, such as the hon. Member for Truro (Mr. Penhaligon),represent areas where gas connection is not always available. Most of my constituents are within the range of gas mains, but I accept that for those who live in the area of Somerset in which I was born, for example, it is unfair that they should not in any way be able to derive benefit from the national asset of North Sea gas.

The second argument was advanced neatly and accurately by my friend Michael Posner, in a letter to The Times. At present it is irrational to invest capital in energy conservation in one's house or to undertake proper methods of insulation if it is possible to connect oneself to the gas system, that system being a much cheaper alternative. It cannot be sensible to take any other course under present conditions.

Investment is not being undertaken, furthermore, by industry in, for example, new forms of electrical space heating, which, I have no doubt, in the long term will be the basis of home heating. There is not sufficient investment in heat pumps, for example, because the low level of gas prices makes such investment not worthwhile. I have heard representations from companies involved in that type of development and I have been urged by them to advance that argument.

The third principal argument hangs on the irresponsibility of luring into an attachment to the gas system an increasing number of domestic consumers who at some stage will have to be disconnected, or on whose behalf great capital investment in chancy new processes will have to be made to meet their future needs. About1 million new domestic consumers have been attracted to attachment to the gas system in the past three years. Surely it is not in their interests to maintain an artificially low price for gas, so that in due course we have either to cut off their supply or increase prices in an enormous step.

There is a clever-silly argument, the sort of argument that my alma mater, the Oxford Union, is sometimes accused of encouraging. It is this: "Is not this price rise an intervention by a Conservative Government who are committed to non-intervention?" I do not think that any of my right hon. and hon. Friends will argue that the Government, however free-market we might like them to be, should not have a view on the prices of a monopoly buyer that is a monopoly distributor. As I have said, it is a clever-silly argument. I hope that we shall not hear it again from the editor of the Spectator or from anyone else.

I add two major caveats. First, it is a great Pity in presentation and political terms that we were not able to announce a scheme to help the old and the cold at the same time as the price increase. I have worked in Whitehall and I respect the reasons that led to that announcement not being made. I am aware of the difficulties, but it is a pity that no such announcement was made. It may be that the indisposition of my right hon. Friend the Paymaster General led us temporarily to lose our grip on presentation. However, I welcome wholeheartedly my right hon. Friend's announcement today that such a scheme is well under way. We shall welcome it when it is put before us.

The second caveat is this. The British Gas Corporation is now protected by a cost-plus method of pricing, which removes it, even though it has to meet its target return, from some of the pressure for efficiency and from some of the pressure to control its costs. That is a matter of some concern. It is fortunate that the Government are about to put themselves in a position to deal with that problem. When the Competition Bill is enacted, we shall be able to refer nationalised industries to the Monopolies and Mergers Commission. That would be a sensible course to take at some stage during the next three years, to ensure that the corporation does not take advantage of its now privileged position on prices to waste money.

The House is not always at its best when it is responding to pressure groups and losing sight of the common good and the future national interest. It is so easy for the right hon. Member for Devonport to say that although he supports the principle of increasing prices, he would have increased them differently, more slowly, or in some magical way that would have hurt no one. The truth is that many people will have to pay higher gas prices, higher oil prices and higher energy costs generally over the next few years. There is nothing that the House or anybody else can do to avoid that. However, we can and should take steps to ensure that those who are least able to help themselves are protected. It is irresponsible of those who are responding to their constituents' letters to try to pretend that there is a way out of an expensive energy future.

Those who argue against the gas price increase will have a pretty feeble answer when asked by their children what they did in the great energy war. Their only answer will be "I kept down the price of gas so that the supply ran out quicker." That will be a frightfully helpful answer. It will come to be seen that those who have acted like my right hon. Friend the Secretary of State—courageously, and in so doing facing short-term unpopularity—to relate the prices of the gas industry to the reality of the world's energy economy did the right thing. That is why I hope that all hon. Members will support the Government's amendment and face the short-term unpopularity that may derive from that vote.

5.58 pm

Mr. Arthur Palmer (Bristol, North East)

My fellow Bristol parliamentarian, the hon. Member for Bristol, West (Mr. Waldegrave), made an interesting remark at the beginning of his speech when he said that the undoubted success of the gas industry did not owe all that much to the ingenuity of the industry; it owed much more to the forces of God—shall we say the forces of nature—which provided, on discovery, a great new resource in the North Sea.

I have always felt that it was something of a blunder—it was a Conservative Government who introduced the Gas Act 1972—to allow the gas industry, a retail industry in competition with the electricity industry, to have unlimited access to wholesaling. If the electricity supply industry owned the coal industry, that would probably make a great difference to its economics. The hon. Gentleman started a useful chain of thought.

Thanks to the consideration of the Chair, I have taken part fairly frequently in energy debates. I have long argued that one of the most obvious tasks of the Department of Energy is to maintain, under varying world conditions of price and supply, a rational relative pricing structure for available energy sources.

It is no good saying that the industries can do that between themselves. They cannot. They naturally look to their own interests. There are those who talk about the forces of the market. Perfect competition may make sense for grocers' shops or hairdressing salons, but with gigantic public utilities such as the gas and electricity industries, which involve vast capital investment that the nation cannot afford to under-use and have a national monopoly, market forces can have only a limited effect towards achieving good results.

The price of coal is emerging more and more in electricity prices rather than in its own right in terms of the coal industry. Oil price is dominated as much by international political considerations as anything else. I have always been against interference by Ministers in the day-to-day running of the fuel industries, but I believe that ministerial price intervention is essential if the consumer is to make a choice that he or she will not afterwards regret.

Domestic consumers have spent money that they perhaps could ill afford in moving from one fuel to another in recent years. They might have changed from electricity night storage heaters that appeared to be less expensive to oil when that seemed to be the cheapest domestic source, and then during the past two or three years to natural gas. That is not genuine consumer choice.

In principle, I have no objection to the Secretary of State continuing to fix up-to-date rates of return on assets for nationalised gas and electricity. A Conservative Member suggested that that was a recent recommendation of the Select Committee on nationalised industries. My experience of these matters goes back rather further. It was, first, a recommendation of the Select Committee on nationalised industries of two decades ago that Ministers should fix the proper rates of return in order to have a balance in matters of consumer choice and cost.

Twenty years ago electricity was expected to make a high cash return on its assets because it was doing extremely well. At that time town gas was doing very badly and, hence, the rate of return was set well down. Now the boot is on the other foot. I wish to make a fair party point—as many party points have been made during the debate—by asking who broke up, who smashed, who sabotaged that rational way of carrying through energy pricing policies. I know who it was. It was the Conservative Government of the right hon. Member for Sidcup (Mr. Heath). The hon. Member for Honiton (Mr. Emery) occupied a junior position in that Government. I am sure that his talents deserved better.

That Conservative Government started the subsidisation of two prosperous nationalised industries. The industries did not ask for that. The electricity supply management resented it enormously, as did the trade unions operating within that industry. The Conservatives subsidised the industries to hold down prices to help the acceptability of their policy of wage restraint. It was the Conservative Party that broke a system that had been working well. It was Labour Ministers, especially my right hon. Friend the Member for Chesterfield (Mr. Varley)—who is not here today—who risked a great deal of unpopularity within the Labour Party to return prices to something like rationality.

The unrestricted way in which the British Gas Corporation has been allowed to behave in recent years has not been in the national interest. I am not blaming its energetic chairman, Sir Denis Rooke, for the manner in which he acted in the interests of his industry. British resources of gas in the North Sea have been depleted too fast and too soon, leaving more to come eventually from the Norwegian field. It has unbalanced the British fuel economy, largely at the expense of electricity. I declare my known interest here.

Mr. Skeet

The hon. Gentleman says that gas resources have been depleted too fast. There is a known reserve of between possibly more. Following that, there will 35 trillion cu ft and 80 trillion cu ft, and be synthetic gas available from the further gasification of oil products or coal.

Mr. Palmer

I am well aware of the hoped-for coming of unnatural gas. The hon. Gentleman must understand that that is for the future. It will come one day, but it is not yet here. In the meantime, the North Sea supplies are already running down. I was rather surprised by the remarks of the hon. Member for Honiton, who was one of the leaders in the Standing Committee in 1972. He said that he thought that the gas industry had been tied too tightly to a statutory obligation to supply consumers. That is not the case. One must compare the obligation of the gas industry to that of the electricity supply industry, which must supply everybody, profitably or otherwise. It is not in the general interest of the fuel economy of the country for the gas industry to be even more loosely controlled in this re-respect.

As an advocate and defender of the nationalisation of basic industries over many years, I have never believed that they should be run as a social service either in whole or in part. The responsibility for protecting and caring for our less fortunate citizens must be that of the community as a whole and not that of the gas and electricity industries, if only for the good Socialist reason that it is bad for the reputation of nationalisation.

The Government have behaved badly in that social area. I cannot quarrel with the economics of the action. In the supply position in which we find ourselves, it is inescapable. I quarrel with the Government's social behaviour, as the Opposition motion states, at a time when everything else is rising in price—mortgages, rents and fares. People are suffering badly. Many hon. Members on both sides know that that is true. If the gas price increases had to come about, they should have been phased in more gradually. That could have been done. I agree with other hon. Members that they should have been combined with a wider heating allowance—for whatever fuel is used—than that proposed by the Government to cover the needs of families with small incomes, hard-pressed pensioners and so on. That view has gained much currency this afternoon on both sides of the House. The Government should pay attention.

Also, it is now the time to step up and not reduce spending on conservation programmes. Incredible as it sounds, the Government, in their cutting spree—Governments may have spending sprees, but this is a cutting spree—have included as a victim of their economies many aspects of the "Save It" campaign, to which the previous Administration were committed. Will the Minister, when he replies, confirm that the Government have scrapped a project to establish local centres to advise on insulation of homes?

If ever there was a time when a programme of that kind was needed, it is now. We should realise that once we have cut our conservation efforts—never very good—we shall have slipped far below what is being done in France, Germany and throughout much of the Continent. I urge the Government to think again, because this is a false economy that should not be proceeded with.

Mr. Rost

The hon. Gentleman will know that I share his concern about investment in conservation. Does he agree that the best incentive to more investment in conservation is through the price mechanism, which is exactly what a more realistic price for gas will achieve?

Mr. Palmer

I must refer the hon. Gentleman to what was said by his hon. Friend the Member for Honiton who seemed to think that people would pay in any case if they were to remain warm. In other words, these proposals are not very price-elastic. In that respect, I am more in agreement with the hon. Member for Honiton than I am with the hon. Member for Derbyshire, South-East (Mr. Rost). I have made my points, and I shall soon sit down.

Mr. W. R. Rees-Davies (Thanet, West)

Before the hon. Gentleman sits down—

Mr. Deputy Speaker

Order. I think that the hon. Gentleman has sat down. Has the hon. Gentleman sat down?

Mr. Palmer

indicated dissent.

Mr. Deputy Speaker

I apologise. Perhaps I confused the hon. and learned Member for Thanet, West (Mr. Rees-Davies).

Mr. Rees-Davies

I wanted to invite the hon. Member for Bristol, North-East (Mr. Palmer) to enlarge on one matter with which he dealt. I think that he was still standing at the time. He was sort of suspended in mid-air. The hon. Gentleman has great experience as Chairman of the Select Committee on science and technology and, indeed, is at the present time the leader of his own group on the energy Select Committee. He raised the question of heating allowances and other items that those in need ought to receive, and suggested that they should be much widened. From his experience, does he think that it would be useful if the Social Services Committee considered this as a matter of urgency in order to decide whether the question of need and heating allowances should be considered, and whether that type of approach—

Mr. Deputy Speaker

Order. The hon. and learned Gentleman must make an intervention, not a speech.

Mr. Palmer

I would have thought that that was a matter for the Select Committee in question, but I would be in favour of it.

6.12 pm

Mr. Geoffrey Dickens (Huddersfield, West)

Since 1977, the British Gas Corporation has conducted an intensive campaign to encourage people to switch to warm natural gas. Many people with perfectly good oil or coal-fired burners switched over. They took out loans and used their savings to switch home and water heating appliances to gas on the strength of the availability of cheap gas.

Overnight, the Conservative Government made a statement to the effect that in one year those people would have to face a 29 per cent. increase in those costs. Of course gas prices must go up—no one disputes that—but one wonders why the increase is so savage. I agree with Opposition Members that this is a savage increase in the first year of a three-year phase. There is no doubt about that.

The British Gas Corporation has perhaps been less than honest in its advertisements, because someone at home could not expect to know that the United Kingdom shelves were rapidly running dry. He could not know that we already buy gas from Norway. He could not know that the Morecambe field will not be opened until 1985–86. He could not know that we are going into partnership with the Norwegians, on a ratio of 15.1 per cent. British and 84.9 per cent. Norwegian. He could not know that we shall be in competition with France and Germany. The State and the British Gas Corporation have known those things for a long time, but the people who trusted the advertisements on television, and who switched over to cheap gas, did not.

Many hon. Members on both sides of the House have advanced financial arguments. That does not impress the person at home. It worries the elderly and the disabled, but at least it now seems that they will be protected by a Conservative Government, as one would expect. It is a pity that the Government's proposals in that regard were not introduced today.

I have based my figure on a Library 1977, 1 million more people applied for gas and were connected to it. They prided themselves that they had been clever enough to select gas as their heating source. Many householders have committed themselves to gas for their heating, water and cooking purposes, and some will have to pay £100 more on their first annual bill. The figures that were quoted earlier were quite unacceptable. The people who will be forced to pay the lion's share of these gas increases are the people who are paying the lion's share of mortgage increases, income tax and domestic rate increases. Many are Conservative Party supporters.

I have based by figure on a Library quotation, which I analysed, and that was the average. When hon. Members talk about the average gas user, they usually mean someone who has an Ascot water heater in his kitchen, but I can tell the House that some people will be faced with very high bills.

We have criticised the Labour Opposition on many occasions and have said that on many issues they have done too little too late.

Mr. Skeet

I just happen to have pencilled down the fact that a consumer of 1,200 therms will pay only 17p per therm in London but 33.5 in Dusseldorf and 43p in Copenhagen. Therefore, I do not believe that the United Kingdom consumer has done badly, and I do not believe that the consequences indicated by my hon. Friend will occur.

Mr. Dickens

I am not impressed by my hon. Friend's argument about what people pay in other countries, because they do not pay as much tax as British people do or pay many of the high prices. They also earn more money than people in this country. Therefore, my hon. Friend should not throw that argument at me.

On many occasions, we Conservatives have said too little too late. In this instance, the State has a moral obligation. It does not matter that Labour Members have a cross to bear or that we have a smaller cross to bear. It was the State and the British Gas Corporation which hoodwinked the general public. We Conservatives now have a moral obligation to do something about it. I believe that the first year's increase should be scaled down tremendously, because at present we are guilty of imposing too much too quickly.

6.18 pm

Mr. George Foulkes (South Ayrshire)

It is always a pleasure to follow a vigorous speech such as we have just heard from the hon. Member for Huddersfield, West (Mr. Dickens). On behalf of Labour Members, I assure him of a warm welcome in the Opposition Lobby this evening.

I do not propose to concentrate on the economic and financial arguments, but rather to deal with the social consequences of the increase in gas prices. In my view, they will be disastrous. The spiral of inflation that will result from this increase will in itself affect the elderly, the disabled and the poor. The gas price increase alone is enough to worry them. I compare the speedy introduction of the gas price increase by the Government—truly it was a "high-speed increase", to use the terminology of the gas publicity advertisers—with the tardy, not so speedy announcement of any help for the disabled, elderly and poor.

The hon. Member for Bristol, West (Mr. Waldegrave)—as he was speaking, the Chamber filled with Conservative Members and I almost began to believe in reincarnation—said that it was a pity that the Government did not make a simultaneous announcement about the poor, the elderly and the disabled. It is much more than a pity. It is tragic and disastrous. The Secretary of State may say that anew scheme is on its way, but there was a scheme for electricity discounts. There were criticisms of the electricity discount scheme, but there is an all-party motion on the Order Paper, signed by Conservative Members including the hon. Member for Huddersfield, West, suggesting that the electricity discount scheme should have been expanded and developed by the Government into a fuel discount scheme, covering electricity, oil and gas prices. Instead of taking up that suggestion, the Government abandoned the electricity discount scheme and introduced an extra measly 10p increase in the heating allowance, which will benefit only those receiving supplementary benefit. Many hundreds of thousands of people who previously benefited from the electricity discount scheme will no longer do so.

What can we expect from the Government's announcement, which was anticipated by the hon. Member for Bristol, West? I do not think that we can expect very much from a Secretary of State for Social Services who tells us when the lights go out that we must clean our teeth in the dark, and who tells us not to go to the doctor until we fall on the ground writhing in agony because treatment will cost too much at an earlier stage. Perhaps the right hon. Gentleman will tell old people not to switch on their gas fires until they are really cold and shivering.

The Government's figures for hypothermia do not reveal the true picture. That is true also of the figures of the previous Labour Government. Old people are living in conditions not only below the recommended temperature for the elderly but below the temperature recommended for people who are young and relatively active. That is the situation with the current level of fuel prices, and the poor, the elderly and the disabled merely receive reassurances that at some time in the far-distant future the Government's social policy will remedy it.

What faith can those people have in the Government's social policy? What faith can they have in a social policy which abandoned the electricity discount scheme? What faith can they have in a social policy which will abandon the link between pensions and earnings? What faith can they have in a social policy which is cheating pensioners out of a week's pension which the Government are duty bound to give to them? I believe that the Government are morally and legally bound to give it because of the increase in wages above the level of inflation. What can we expect from a Government with that sort of social policy? We must increase our help to the elderly, the disabled and the needy. We must have a totally new scheme, and the Government have shown no indication or will to introduce such a scheme.

Fuel poverty is already a great problem. It has been highlighted by many voluntary organisations which have submitted evidence to the Government. Those organisations have pointed out that the effect on old people of the gas price increases will not merely be that of the increases, but will be much greater. The budget of every old person consists primarily of the cost of food, of housing—rent, mortgage, or rates, all of which are increasing—and, most important, of fuel. The cost of fuel is a major element in the budget of every old person. The gas price increases will affect them and the disabled more than they will affect others. It is no use giving vague assurances about the possibility of the Government's social policy taking account of that in the future. Old people are suffering in the cold now, this winter. We need a speedy announcement from the Government.

I turn now to two other arguments advanced by Conservative Members in justification of this unwarranted price increase. First, they say that the money generated can be used for all sorts of good and worthwhile projects. The hon. Member for Honiton (Mr. Emery) suggested that there would be a decrease in the public sector borrowing requirement which would benefit everyone. The Government's record so far on benefits for everyone—for example, the tax cuts—does not lead us to believe that there is anything like that in store.

It has been suggested that if we could anticipate a subsidy on other fuel to bring down its cost, there might be some logic in that. If there was more money for the insulation scheme, to encourage people to save energy, we might have more understanding of the increase in gas prices, but the opposite is the case. The Government's insulation scheme is being cut back. All that we can expect from the Government is that any money that they can grab from the increase in gas prices will be used to improve the standard of life of those who are already wealthy, by further tax cuts.

Secondly, I turn to the argument—in which the Secretary of State seems to have great faith—that this is being done to protect our stocks. That point was dealt with on a previous occasion by the right hon. Member for Down, South (Mr. Powell). With his impeccable, ultimate logic, he asked for whom we were preserving the stocks. If we were to take the Secretary of State's logic to its ultimate conclusion, we would use no gas and no energy. We would increase the prices so much that we would cut out their use totally. We must get the balance right, but it is not a balance that should result in this sort of doubling of prices over three years.

For those reasons, and above all for the social effect on vulnerable people, I hope that some Conservative Members, such as the hon. Member for Huddersfield, West, who feel strongly about the issue and who are anxious to protect the standard of life of our elderly, disabled and needy, will go through the Opposition Lobby tonight and show the Government what they think of this mean and despicable increase.

6.29 pm

Mr. T. H. H. Skeet (Bedford)

I refer to the oil-related price of gas. The wise chairman of the British Gas Corporation, Sir Denis Rooke, in a letter to me on 2 August 1979, set down principles of policy with which I totally concur. He said: In the industrial sector most of our firm gas supplies are sold on individually negotiated contracts at prices related to the price of the nearest alternative premium fuel, which is usually gas oil. At the present time this produce is being sold to industry in the United Kingdom at net prices in excess of 28p per therm. He continued: Interruptible gas is sold into non-premium uses and the price is related to the price of heavy fuel oil which is currently just below 20p per therm". My point is that under the previous Administration these principles were being applied to the gas industry, with the consent and approval of the Ministers at that time. As these ideas are now being pursued by the present Government. I cannot see that the Opposition can have any objection to them.

At the present moment there is a broad differential between the industrial prices for gas and the domestic prices. The domestic prices are about 40 per cent. cheaper than the industrial prices. It is laid down in the Gas Act that the corporation must not discriminate in favour of or against any particular category of consumer. It has been doing this over the years. Therefore, it is only right that my right hon. Friend should rectify the position. He is doing so by putting up prices in the way proposed.

Let us bear in mind that the price of oil today is roughly $30 a barrel in the United Kingdom. If we relate it to gas, it works out very conveniently at 25.5p per therm. I fully concur with what the Secretary of State is doing. Those who have listened to the speeches made in the debate will realise that the course that he has taken is right, although I will say, in deference to all the speakers today that perhaps the presentation could have been better.

6.31 pm

Mr. Joseph Ashton (Bassetlaw)

It would be very easy today for me to take lists of statistics, as many speakers have done, but statistics can be bent in any way in order to present certain points of view.

My right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon) hit the nail on the head when he said that behind all this is the grasping hand of the Treasury and not the Department of Energy. What we are talking about with the gas industry is not just a licence to print money; it is really a licence to mint gold, because of the size of the industry and the enormous level of profits made over the past two or three years. Much of the profit is hidden by the system of current cost accounting, whereby profits of £564 million can be written down to £182 million. Here I am quoting Kenneth Fleet, the editor of the business news section of The Sunday Times.

We are really talking about a capitalistic dream. My hon. Friend the Member for Bristol, North-East (Mr. Palmer) pointed out that the Tory policy in the early 1970s used to be to starve the nationalised industries, to keep down their prices, and to use them as a means of keeping down inflation. Now, we have the opposite policy—to milk the nationalised industries, at least the ones that can be milked. The policy is to put up their prices not to a point that is as high as the consumer can bear but to a point that he has to bear, having no other option. Then the Government suck in the cash, but the question then is, what is to happen to the cash?

The policy of the Secretary of State for Energy, as revealed in the last few weeks, really involves a tax on gas. Although the policy is presented on the basis of the need for conservation, it really is a tax on gas. We know from the Prime Minister that she is not so much concerned with what Ministers say as with whether they do what she tells them to do. This is evident from the policy that we are seeing from the Department of Energy. The target set for the industry was 6 per cent. on turnover. It has not been changed to 9 per cent., not on turnover but on the value of the asset.

We are therefore witnessing a major shift in Government policy, and it is inconsistent in its operation. There is intervention in profitable concerns, such as British Airways and British Gas, but there is a policy of non-intervention in the unprofitable industries, such as steel. Why do we see the figure-juggling? Why is there the insistence on massive profits? Is it for the purpose of conservation or is it because the Government intend to sell the gas industry?

Ten days ago I tabled a question to the Secretary of State asking whether he had any plans for selling off any part of the gas industry. I received a quick reply, informing me that he would let me have an answer as soon as it was possible. I am still waiting for a definite answer. Perhaps I shall get one from the Minister tonight when he replies to the debate. Perhaps I can be told whether it is the intention of the Government to sell off part of the gas industry. Perhaps that is why the Government are fattening it up, so that they will get a good price. Or perhaps they want to make a very good profit for the people to whom they sell the industry. Perhaps, again, the Government are trying to slim down the steel industry before selling it. We have been desperately trying to find out what is the Government's policy in this respect.

Is it the policy of the Government not to sell off the industry but to put a tax on gas? If it is really a tax on gas, why not be honest about it? Why not point out that all the other countries in Europe have VAT on their gas—as they do—and that, therefore, the Government propose to fall into line with them? At the time of the general election, the Conservative Party said that it would not do this, but now the Government have changed their mind about it. In effect, they are putting VAT on gas—10 per cent. now, and next year another 10 per cent. over and above the rate of inflation. What is involved is the gradual bringing of gas into the VAT range. It would be much more honest of the Government if they were to admit that this is their intention.

After all, there is a tax on petrol, and it is accepted that we have a tax on petrol. The difference is that petrol tends to be used by affluent members of the community who own cars, whereas gas is used by elderly ladies who cannot afford to own cars and who cannot afford to pay a tax on gas.

In this action of the Government we are seeing a major shift of wealth from elderly people, who will have to pay higher gas prices because of a gas tax, to the Treasury. Although the money goes to the loans board, once the Treasury gets its hands on it it will use it for some purpose of its own, as we have seen in the past with the road fund tax and petrol tax. It is a shift in tax gathering, via the gas industry, so that the money goes from old ladies to the Treasury.

If the Government had had the courage to put 10 per cent. VAT on gas—which is what this is—there would have been a massive outcry, and they would have been accused of going back on their election promises. As I am reminded, there is an outcry anyway. In effect, that is what the Government have done, although by using this method they have sought to avoid an outcry.

The effect on the poor has already been well dealt with, but there is also the effect on industry. Again, this has been wrapped up to a great extent. It must be remembered that industries such as glass, chemicals, clay and pottery use a great deal of gas. It is no good saying that they can suddenly switch to conservation. They cannot do that. They can use less gas only by sacking people or by having a massive reinvestment programme.

I have some figures that have been given to me by the Chemical Industries Association. At April 1979, the United Kingdom industries were paying 14.5p per therm, compared with a figure of 13.4p for West Germany, 13.4p for France, 14.9p for Italy, 13.1p for Belgium, and 12.2p for the Netherlands—all more or less in line. Then comes a swingeing gas price increase for our industry. It is not simply a 17 per cent. plus 10 per cent. increase for industry; it is a free market, and some industries are having to pay a 50 per cent. increase. Many of our competitors are not having to pay that sort of figure.

Our foreign competitors pay for their gas on three-year to five-year contracts. Our industries tend to be on 12-month contracts. Suddenly, in the space of a few months, the gas-using industries are having to pay 50 per cent. more for their gas. A firm in my constituency—it will not mind if I mention it—was paying £2 million a year for its gas. The firm, Harworth Glass Bulbs, is now having to pay £3 million a year—a massive increase. On top of that, the value of the £ sterling has gone up. The company's export trade has been almost ruined within a few months. It exports 50 per cent. of its products, and within a few months, because of the massive cost of gas and the rise in the exchange rate of the pound, it has been knocked sideways.

I cannot see any point in conserving gas supplies under the North Sea if it means ruining industry. That is a false economy. I do not think that the Government have done any sums relating to the effects of inflation on exports or on the capacity of firms to stand up to swingeing increases of this sort.

Mr. Eggar

Will the hon. Gentleman confirm that the British Gas Corporation is following the same pricing policy for industrial consumers as it has always followed?

Mr. Ashton

If that means keeping pace with oil, it means that the Arabs are fixing the costs of our industry. [HON. MEMBERS: "They are."] As has been argued already, one of the best ways of keeping down the international price of oil is to keep down the international price of gas. If oil has a competitor, that will help to deflate the oil economy. That is a very valid point.

Let us look at the conservation argument put forward by the Government. If they wish to conserve energy, why is there no crash programme to install double glazing and insulation in the roofs of council buildings and council housing? I know that grants are available, and they are very often taken up, but old ladies cannot scramble up ladders to insulate the loft. They need somebody to do it for them.

There is no pressure on councils to undertake this sort of work. It is work that would create a large number of jobs. No massive capital investment would be needed if councils decided to introduce a programme to install double glazing and insulate the lofts of council properties. If it is necessary to put a few shillings on the rent to pay for it, the tenant would at least get that money back through decreased heating costs. Those on rent rebate might not have to pay anything towards such a programme. It would be a good, self-financing scheme.

No such ideas have come from the Department of Energy. The reason is that the argument for increasing the price of gas is not a conservation argument but a tax argument. The Government are hiding behind OPEC and using the increase in the price of oil as an excuse to raise cash for the Treasury to use in cutting taxes for the rich in 1982 and 1983. There is no doubt about that.

Those who are concerned with the old and the cold will tell the Government that 10 per cent. of pensioners are in serious danger of hypothermia because they cannot afford to heat their homes or even their bedrooms. One-third of all old-age pensioners' bedrooms are heated to less than 50 degrees Fahrenheit. It will not just mean 56p on the weekly gas bill, as the hon. Member for Honiton (Mr. Emery) said. People do not pay for their gas weekly. They receive big bills in the winter and small bills in the summer. It is highly probable that the 56p per week will mean £18 on the winter gas bill, and an increase of £18 is a great deal of cash for a pensioner.

We may hear more in the Budget or over the next few months about the scheme that has been hinted at, but if it is anything like the scheme brought in to replace the electricity discount scheme in November it will, as usual, be some sort of sham scheme designed to help a select few elderly people so that the Conservatives can at least salve their consciences.

I hope that all hon. Members will support our motion, for the reasons that I have outlined. We believe that the action of the Government is a transfer of wealth from the ordinary people, via a gas tax, to the Treasury, so that tax cuts can be paid out to friends of the Conservatives in future years.

6.42 pm

The Under-Secretary of State for Energy (Mr. Norman Lamont)

I intended to begin tonight by saying that the whole House had expressed concern about the rising gas prices, but the tears have been crocodile tears, because the Opposition Benches have been empty for much of this debate. We never had any doubt about the concern that our announcement would cause. That is why we spelt out the consequences for three years with a frankness that is disturbing to the "week is a long time in politics" mentality.

The reasons why the price increases and financial targets are necessary were spelt out both in the announcement made to the House and in the speech made by my right hon. Friend this afternoon. They were not seriously challenged by the right hon. Member for Plymouth, Devonport (Dr. Owen), let alone in the speech that we have just heard from the hon. Member for Bassetlaw (Mr. Ashton). Unpalatable as they may be, the facts stare us in the face.

First, new supplies of gas from the northern North Sea will be increasingly expensive—perhaps six or seven times as expensive as at present. As my hon. Friend the Member for Exeter (Mr. Hannam) pointed out, those contracts are likely to be increasingly related to the price of oil, a point which the right hon. Gentleman might have taken into account when he was making his strictures about the impact of the price of oil on gas prices.

Secondly, domestic gas barely covers its costs. Although domestic gas accounts for 50 per cent. of the business of the British Gas Corporation, this year it will probably make no contribution to profits. My hon. Friend the Member for Honiton (Mr. Emery) took issue with this point and rightly pointed out that when attributing losses and profits to particular divisions of a business much depends on how one attributes the overheads and other costs. That is right. The practice of BGC has not only been approved by auditors but has been the subject of investigation by the Price Commission, which came to the same conclusion.

A further point that I put to my hon. Friend the Member for Honiton is that the trend, on the same accounting basis, is clear; the sort of profits made on domestic gas sales two years ago are no longer being made. Two years ago, 50 per cent. of the Gas Corporation's profits came from domestic sales. That is not so today. If there is not a substantial price increase, on the basis of the accounting practices which the corporation has pursued in the past there will be a loss on domestic gas sales. I cannot believe that anyone in the House, at a time of increasing awareness of energy problems and rising energy prices, would think it a wise and prudent policy to sell gas to domestic users at a loss.

Thirdly, while domestic gas prices have been frozen for two years—and there will have been an increase of only 8 per cent. between 1 April 1977 and 31 March 1980—the retail price index will have increased by about 35 to 40 per cent. Though domestic gas prices have been frozen, industrial prices have definitely not been frozen, as was pointed out by my hon. Friend the Member for Exeter.

Many industrial firms are paying up to 50 per cent. more for gas than is paid by the domestic consumer. This has brought the corporation close to a breach of its statutory obligation not to dis- criminate between different categories of user.

Mr. Torney

I believe that the Minister has sat through the entire debate. He talks about no profits in the gas industry, but did he not hear the excellent early part of the speech of his hon. Friend the Member for Honiton (Mr. Emery), in which he seemed to elucidate details of the considerable profits that were being made in the gas industry?

Mr. Lamont

Indeed, I heard that clearly. I listened to it more closely than the hon. Member for Bradford, South (Mr. Torney) seems to have listened to my comments on it.

While industrial prices have accelerated, domestic demand has increased enormously. Nearly 1 million new customers have been supplied with gas during the past three years, while at the same time industry has been paying very high prices and been unable to obtain the gas that it wants and needs.

I was astonished when my right hon. Friend made his announcement in the House and the right hon. Member for Bristol, South-East (Mr. Benn) commented on it by referring to the damage that it would do to industry. The right hon. Gentleman could not have got it more wrong if he had tried. It is industry that is complaining about the enormous difference between domestic and industrial prices. I cannot believe that my right hon. and hon. Friends think that it would be right for domestic consumers to be subsidised by the wealth-creating private sector. If the right hon. Gentleman had his way, there would be plenty of centrally heated houses in which the unemployed could live. The implication of his policy is that industry would have supplies diverted from it.

My hon. Friend the Member for Honiton suggested that the Government should impress upon consumers the great benefit that gas has been to them. He is right. A pensioner today needs to spend less of his income on gas to heat his house than he did 10 years ago. The real price of gas has fallen steadily during that time.

Even after three years of real price increases, gas will still be far and away the best and most attractive buy for the consumer. Regular surveys are conducted on the average costs of heating a three-bedroom house, and the latest figures show that the annual bill for oil is £272, for electricity £253, for coal £222, and for gas £157. Even after three years of real increases of 10 per cent. above the rate of inflation, gas will still be cheaper than any other fuel—even coal, which may dismay Labour Members—by a distinct margin. Gas is still a good buy for the consumer.

The Government recognise that the correction of years of under pricing will cause problems for poorer consumers. Economic pricing and social policy must go hand in hand, and my right hon. Friend the Prime Minister acknowledged at a recent Question Time the need for greater help for the elderly. As my right hon. Friend the Secretary of State said, our policies are being reviewed, and we hope to make an early announcement in good time for people to make their plans for the winter.

Mr. Rees-Davies

This is a matter on which many of us feel strongly. Will my hon. Friend consider producing a scheme that shows what is desirable to meet the needs of the elderly and the disabled, particularly in relation to the heating allowance, so that we may have an opportunity to consider it and make suggestions before it has statutory effect? If I do not have that assurance, I shall try to ensure that the Select Committee on Social Services considers the subject a matter of emergency. It is an issue of the greatest importance to the nation as a whole.

Mr. Lamont

I agree with my hon. and learned Friend. It is important that we should consult hon. Members and, as we have indicated we wish to do, the welfare organisations and others with particular knowledge who have been energetic in these matters. We shall consult, and if my hon. and learned Friend has any suggestions we shall be happy to receive them.

On the radio this morning the right hon. Member for Devonport cast grave doubts on the Government's sincerity and questioned why, if we intended to help those in need, we scrapped the electricity discount scheme. We did that because it was a pretty lousy scheme. It gave only a small amount of help, far less—six or seven times less in individual cases—than the replacement scheme offers, and it was of no use to gas consumers. It would not have helped them one bit.

The U-turn watchers in the House have suggested that the Government's policies towards the Gas Corporation contrast with our attitude towards other nationalised industries, such as the steel industry. My hon. Friend the Member for Bristol, West (Mr. Waldegrave) called that the "silly-clever" argument. In the mouth of the hon. Member for Bassetlaw it sounded a lot more silly than clever. It is not an argument to say that because a Government set a financial target for an industry and leave the management to achieve it, that constitutes a new sort of intervention.

The White Paper of the previous Government suggested that Governments ought to set three-year financial targets for the nationalised industries. We have to set the Gas Corporation a financial target. Anyone who seeks to deny the Government that opportunity is suggesting that the corporation should set its own target.

In setting the target, we have assumed that the contribution to the profits of the corporation will return by the third year to the same division between domestic and industrial contributions as two years ago, before the previous Government interfered through the imposition of price freezes.

It has also been suggested that there is a major disagreement between the corporation and the Government. My right hon. Friend made it clear earlier that the corporation accepts both the magnitude of the under pricing that needs to be corrected and that there must be a price increase of the amount proposed for this year. The corporation says that it is necessary because of the danger of interruptions to supply. That is not the Government's opinion; it is the opinion of the Gas Corporation. It does not believe that it could cope with peak demand to a greater extent by switching away from the interruptible contracts. During recent winters there have been enough risks to hospitals and schools from the switching away of gas because of accelerating demand from the domestic consumer.

Mr. Douglas

Will the hon. Gentleman explain the impact of the Government's philosophy in economic terms on the corporation's bargaining position with oil companies, particularly in relation to the North Sea?

Mr. Lamont

The corporation's negotiations on the price at which it buys gas from the North Sea are confidential matters for its management. However, it is an open secret that the contracts are increasingly related to the price of oil. That happens already, and nothing said by my right hon. Friend the Secretary of State or announced by the Government will change that situation.

The Government reject accusations that what is being proposed is a tax. I understand why the Opposition are so keen to make that accusation, because they did precisely what they accuse us of when, in 1977, they increased gas prices by 10 per cent. more than the Price Commission recommended, and did so purely to satisfy the IMF and reduce the public sector borrowing requirement.

We have freely admitted that we are pleased—in our current financial situation it is enormously helpful—that the Gas Corporation is contributing to a reduction in the public sector borrowing requirement, but that is not the reason for the changes. They were made for reasons of energy policy.

Much has been made of the profits of the Gas Corporation. I have already said that domestic gas is not contributing to those profits, but the point is that costs ought to determine the price that British Gas charges for its products, and there is no doubt that the costs of gas are increasing steadily.

A number of my hon. Friends have put forward the arguments for a gas tax. We note their suggestions, though if there were a gas tax we should have to be careful that it was not imposed on top of the price increases.

Mr. Ashton

Before the hon. Gentleman sits down, will he say whether it is the Government's intention to sell off all or part of the industry?

Mr. Lamont £

The hon. Gentleman has misrepresented the answer that I gave him. I do not know why he did not just read it out. There is a lot of difference between answering as he described it, "I will communicate with the hon. Gentleman shortly", and saying in a perfectly standard way "I have no plans at present to denationalise the British Gas Corporation." It seems an extraordinary piece of misrepresentation by the hon. Gentleman. The Government are not intending to denationalise the British Gas Corporation, and for the hon. Gentleman, who is causing great dissension in the ranks of Tuscany behind me, to suggest that is, I fear, to fall back upon his talents as a novelist. It is a work of pure fiction.

It is interesting that the Opposition have not been able today to put their full weight against the necessity for a rise in gas prices. The right hon. Member for Devonport even managed to attack the Government for not having put up the gas prices in June. It is difficult for the Opposition to attack these rises when in 1975 they put up electricity prices by 28½ per cent. It is difficult for them to attack economic pricing when they repeatedly defended it in office. It is difficult for them to attack the need for targets when it was their White Paper which called for them. They quibble about the amounts of the increase, but the amounts of the increase were recommended by their own creature, the Price Commission, in its last desperate gasp of life. And now they have the effrontery to criticise the timing of the increase, when they doubled electricity prices in two years. Then, of course, they introduced the electricity discount scheme, long after the massive rise in electricity prices.

This country is extremely fortunate in the fact that it is very well endowed with energy supplies, but this country is not on the Persian Gulf. Perhaps if we were Saudi Arabia or Venezuela, with reserves of oil and gas stretching on for years and years, we could afford to subsidise the domestic consumer, subsidise the motorist or divert supplies from industry. But we are not in that position, and all the best estimates are that supplies of oil and gas in this country will run down in the 1990s. It would be folly for this country, at this of all times, with all our problems, to waste and burn up one of the few advantages that we have.

The Government were elected to face the economic and commercial realities, and in this case if we do not face the consequences they will face us, in terms of distortions, shortages and waste. It would be wholly inconsistent and wholly out of line with the purposes and objectives of the Government if we were to shirk this decision today. The Govern-

ment have accepted reality, and I hope that the House will do likewise.

Question put, That the original words stand part of the Question: —

The House divided: Ayes 252, Noes 305.

Division No.146]	AYES	[7.00 pm
Abse, Leo	Evans, John (Newton)	McKelvey, William
Adams, Allen	Ewing, Harry	MacKenzie, Rt Hon Gregor
Allaun, Frank	Field, Frank	Maclennan, Robert
Anderson, Donald	Fitch, Alan	McMahon, Andrew
Archer, Rt Hon Peter	Flannery, Martin	McMillan, Tom (Glasgow, Central)
Armstrong, Rt Hon Ernest	Fletcher, Ted (Darlington)	McNally, Thomas
Ashley, Rt Hon Jack	Foot, Rt Hon Michael	McWilliam, John
Ashton, Joe	Ford, Ben	Magee, Bryan
Atkinson, Norman (H'gey, Tott'ham)	Forrester, John	Marks, Kenneth
Barnett, Guy (Greenwich)	Foster, Derek	Marshall, David (Gl'sgow, Shettles'n)
Barnett, Rt Hon Joel (Heywood)	Foulkes, George	Marshall, Dr Edmund (Goole)
Beith, A. J.	Fraser, John (Lambeth, Norwood)	Marshall, Jim (Leicester South)
Benn, Rt Hon Anthony Wedgwood	Freeson, Rt Hon Reginald	Martin, Michael (Gl'gow, Springb'rn)
Bennett, Andrew (Stockport N)	Freud, Clement	Mason, Rt Hon Roy
Bidwell, Sydney	Garrett, John (Norwich S)	Maynard, Miss Joan
Booth, Rt Hon Albert	Garrett, W. E. (Wallsend)	Meacher, Michael
Boothroyd, Miss Betty	George, Bruce	Mellish, Rt Hon Robert
Bottomley, RI Hon Arthur (M'brough)	Gilbert, Rt Hon Dr John	Mikardo, Ian
Bradley, Tom	Ginsburg, David	Millan, Rt Hon Bruce
Bray, Dr Jeremy	Golding, John	Mitchell, Austin (Grimsby)
Brown, Hugh D. (Proven)	Gourley, Harry	Mitchell, R. C. (Soton, Itchen)
Brown, Robert C. (Newcastle W)	Graham, Ted	Morris, Rt Hon Alfred(Wythenshawe)
Brown, Ronald W. (Hackney S)	Grant, George (Morpeth)	Morris, Rt Hon Charles(Openshaw)
Brown, Ron (Edinburgh, Leith)	Grant, John (Islington C)	Morris, Rt Hon John (Aberavon
Buchan, Norman	Grimond, Rt Hon J.	Morton, George
Callaghan, Rt Hon J. (Cardiff SE)	Hamilton, James (Bothwell)	Moyle, Rt Hon Roland
Callaghan, Jim (Middleton & P)	Hamilton, W. W. (Central Fife)	Newens, Stanley
Campbell, Ian	Harrison, Rt Hon Walter	Oakes, Rt Hon Gordon
Campbell-Savours, Dale	Hart, Rt Hon Dame Judith	Ogden, Eric
Canavan, Dennis	Hattersley, Rt Hon Roy	O'Halloran, Michael
Cant, R. B.	Haynes, Frank	O'Neill, Martin
Carmichael, Neil	Heffer, Eric S	Orme, Rt Hon Stanley
Carter-Jones, Lewis	Hogg, Norman (E Dunbartonshire)	Owen, Rt Hon Dr David
Cartwright, John	Holland, Stuart (L'beth, Vauxhall)	Palmer, Arthur
Clark, Dr David(South Shields)	Home Robertson, John	Park, George
Cocks, Rt Hon Michael (Bristol S)	Homewood, William	Parker, John
Cohen, Stanley	Hooley, Frank	Parry, Robert
Coleman, Donald	Horam, John	Pavitt, Laurie
Concannon, Rt Hon J. D.	Howell, Rt Hon Denis (B'ham, Sm H)	Pendry, Tom
Conlan, Bernard	Howells, Geraint	Penhaligon, David
Cowans, Harry	Huckfield, Les	Powell, Raymond (Ogmore)
Crowther, J. S.	Hudson Davies, Gwilym Ednyfed	Prescott, John
Cryer, Bob	Hughes, Mark (Durham)	Price, Christopher (Lewisham West)
Cunliffe, Lawrence	Hughes, Robert (Aberdeen North)	Race, Reg
Cunningham, George (Islington S)	Hughes, Roy (Newport)	Radice, Giles
Cunningham, Dr John (Whitehaven)	Janner, Hon Greville	Rees, Rt Hon Merlyn (Leeds South)
Dalyell, Tam	Jay, Rt Hon Douglas	Richardson, Jo
Davidson, Arthur	John, Brynmor	Roberts, Albert (Normanton)
Davies, Rt Hon Denzil (Llanelli)	Johnson, Walter (Derby South)	Roberts, Ernest (Hackney North)
Davies, Ifor (Gower)	Johnston, Russell (Inverness)	Roberts, Gwilym (Cannock)
Davis, Clinton, (Hackney Central)	Jones, Rt Hon Alec (Rhondda)	Robertson, George
Davis, Terry (B'rm'ham, Stechford)	Jones, Barry (East Flint)	Robinson, Geoffrey (Coventry NW)
Deakins, Eric	Jones, Dan (Burnley)	Rodgers, Rt Hon William
Dean, Joseph (Leeds West)	Kaufman, Rt Hon Gerald	Rooker, J. W.
Dempsey, James	Kerr, Russell	Ross, Ernest (Dundee West)
Dewar, Donald	Kilroy-Silk, Robert	Ross, Stephen (Isle of Wight)
Dixon, Donald	Kinnock, Neil	Rowlands, Ted
Dobson, Frank	Lambie, David	Ryman, John
Dormand, Jack	Lamborn, Harry	Sandelson, Neville
Douglas, Dick	Lamond, James	Sever, John
Douglas-Mann, Bruce	Leadbitter, Ted	Sheerman, Barry
Dubs, Alfred	Leighton, Ronald	Sheldon, Rt Hon Robert (A'ton-u-L)
Dunnett, Jack	Lestor, Miss Joan (Eton & Slough)	Shore, Rt Hon Peter (Step and Pop)
Dunwoody, Mrs Gwyneth	Lewis, Ron (Carlisle)	Short, Mrs Renée
Eadie, Alex	Litherland, Robert	Silkin, Rt Hon John (Deptford)
Eastham, Ken	Lofthouse, Geoffrey	Silverman, Julius
Edwards, Robert (Wolv SE)	Lyon, Alexander (York)	Smith, Cyril (Rochdale)
Ellis, Raymond (NE Derbyshire)	Mabon, Rt Hon Dr J. Dickson	Smith, Rt Hon J. (North Lanarkshire)
Ellis, Tom (Wrexham)	McCusker, H.	Snape, Peter
English, Michael	McDonald, Dr Oonagh	Soley, Clive
Ennals, Rt Hon David	McElhone, Frank	Spearing, Nigel
Evans, Ioan (Aberdare)	McKay, Allan (Penistone)	Spriggs, Leslie
Stallard, A. W.	Torney, Tom	Wilson, Gordon (Dundee East)
Steel, Rt Hon David	Varley, Rt Hon Eric G.	Wilson, Rt Hon Sir Harold (Huyton)
Stewart, Rt Hon Donald (W Isles)	Wainwright, Edwin (Dearne Valley)	Wilson, William (Coventry SE)
Stoddart, David	Wainwright, Richard (Colne Valley)	Winnick, David
Stott, Roger	Walker, Rt Hon Harold (Doncaster)	Woodall, Alec
Strang, Gavin	Watkins, David	Woolmer, kenneth
Straw, Jack	Weetch, ken	Wrigglesworth, Ian
Summerskill, Hon Dr Shirley	Wellbeloved, James	Young, David (Bolton East)
Taylor, Mrs Ann (Bolton West)	Welsh, Michael
Thomas, Dafydd (Merioneth)	White, Frank R. (Bury & Radcliffe)	TELLERS FOR THE AYES:
Thomas, Jeffrey (Abertillery)	White, James (Glasgow, Pollok)
Thomas, Dr Roger (Carmarthen)	Whitlock, William	Mr. Hugh McCartney and
Thorne, Stan (Preston South)	Willey, Rt Hon Frederick	Mr. James Tinn.
Tilley, John	Williams, Rt Hon Alan (Swansea W)
NOES
Adley, Robert	Dunn, Robert (Dartford)	Irving, Charles (Cheltenham)
Aitken, Jonathan	Durant, Tony	Jenkin, Rt Hon Patrick
Alexander, Richard	Dykes, Hugh	Johnson Smith, Geoffrey
Alison, Michael	Eden, Rt Hon Sir John	Jopling, Rt Hon Michael
Amery, Rt Hon Julian	Edwards, Rt Hon N. (Pembroke)	Joseph, Rt Hon Sir Keith
Ancram, Michael	Eggar, Timothy	Kaberry, Sir Donald
Arnold, Tom	Elliott, Sir William	Kellett-Bowman, Mrs Elaine
Aspinwall, Jack	Emery, Peter	King, Rt Hon Tom
Atkins, Robert (Preston North)	Eyre, Reginald	Knox, David
Baker, Nicholas (North Dorset)	Fairbairn, Nicholas	Lamont, Norman
Beaumont-Dark, Anthony	Fairgrieve, Russell	Lang, Ian
Bell, Sir Ronald	Faith, Mrs Sheila	Langford-Holt, Sir John
Bendall, Vivian	Farr, John	Latham, Michael
Benyon, Thomas (Abingdon)	Fell, Anthony	Lawrence, Ivan
Benyon, W. (Buckingham)	Fenner, Mrs Peggy	Lawson, Nigel
Best, Keith	Finsberg, Geoffrey	Lee, John
Biffen, Rt Hon John	Fisher, Sir Nigel	Lennox-Boyd, Hon Mark
Biggs-Davison, John	Fletcher, Alexander (Edinburgh N)	Lester, Jim (Beston)
Blackburn, John	Fletcher-Cooke, Charles	Lewis, Kenneth (Rutland)
Blaker, Peter	Fookes, Miss Janet	Lloyd, Ian (Havant & Waterloo)
Body, Richard	Forman, Nigel	Lloyd, Peter (Fareham)
Bonsor, Sir Nicholas	Fowler, Rt Hon Norman	Loveridge, John
Boscawen, Hon Robert	Fox, Marcus	Luce, Richard
Bottomley, Peter (Woolwich West)	Fraser, Rt Hon H. (Stafford & St)	Lyell, Nicholas
Bowden, Andrew	Fraser, Peter (South Angus)	McCrindle, Robert
Boyson, Dr Rhodes	Galbraith, Hon T. G. D.	Macfarlane, Neil
Bradford, Rev. R.	Gardiner, George (Reigate)	MacGregor, John
Braine, Sir Bernard	Gardner, Edward (South Fylde)	MacKay, John (Argyll)
Bright, Graham	Garel-Jones, Tristan	McNair-Wilson, Michael (Newbury)
Brinton, Tim	Gilmour, Rt Hon Sir Ian	McNair-Wilson, Patrick (New Forest)
Brittan, Leon	Glyn, Dr Alan	McQuarrie, Albert
Brocklebank-Fowler, Christopher	Goodhart, Philip	Madel, David
Brooke, Hon Peter	Goodhew, Victor	Major, John
Brown, Michael (Brigg & Sc'thorpe)	Goodlad, Alastair	Marland, Paul
Browne, John (Winchester)	Gorst, John	Marlow, Tony
Bruce-Gardyne, John	Gow, Ian	Marshall, Michael (Arundel)
Bryan, Sir Paul	Gower, Sir Raymond	Marten, Neil (Banbury)
Buck, Antony	Gray, Hamish	Mates, Michael
Budgen, Nick	Greenway, Harry	Mather, Carol
Bulmer, Esmond	Griffiths, Eldon (Bury St Edmunds)	Mawby, Ray
Burden, F. A.	Griffiths, Peter (Portsmouth N)	Mawhinney, Dr Brian
Butcher, John	Grist, Ian	Maxwell-Hyslop, Robin
Butler, Hon Adam	Grylls, Michael	Mayhew, Patrick
Cadbury, Jocelyn	Gummer, John Selwyn	Mellor, David
Carlisle, John (Luton West)	Hamilton, Hon Archie (Eps'm & Ew'll)	Meyer, Sir Anthony
Carlisle, Kenneth (Lincoln)	Hamilton, Michael (Salisbury)	Miller, Hal (Bromsgrove & Redditch)
Carlisle, Rt Hon Mark (Runcorn)	Hampson, Dr Keith	Mills, Iain (Meriden)
Chalker, Mrs. Lynda	Hannam, John	Mills, Peter (West Devon)
Channon, Paul	Haselhurst, Alan	Miscampbell, Norman
Chapman, Sydney	Hastings, Stephen	Mitchell, David (Basingstoke)
Churchill, W. S.	Havers, Rt Hon Sir Michael	Moate, Roger
Clark, Hon Alan (Plymouth, Sutton)	Hawksley, Warren	Molyneaux, James
Clark, Sir William (Croydon South)	Hayhoe, Barney	Monro, Hector
Clarke, Kenneth (Rushcliffe)	Heddle, John	Montgomery, Fergus
Cockeram, Eric	Henderson, Barry	Moore, John
Colvin, Michael	Heseltine, Rt Hon Michael	Morgan, Geraint
Cope, John	Hicks, Robert	Morris, Michael (Northampton, Sth)
Cormack, Patrick	Higgins, Rt Hon Terence L.	Morrison, Hon Charles (Devizes)
Corrie, John	Hogg, Hon Douglas (Grantham)	Morrison, Hon Peter (City of Chester)
Costain, A. P.	Holland, Philip (Carlton)	Mudd, David
Cranborne, Viscount	Hooson, Tom	Murphy, Christopher
Critchley, Julian	Hordern, Peter	Myles, David
Crouch, David	Howe, Rt Hon Sir Geoffrey	Neale, Gerrard
Dean, Paul (North Somerset)	Howell, Rt Hon David (Guildford)	Needham, Richard
Dorrell, Stephen	Howell, Ralph (North Norfolk)	Nelson, Anthony
Douglas-Hamilton, Lord James	Hunt, David (Wirral)	Neubert, Michael
Dover, Denshore	Hunt, John (Ravensbourne)	Newton, Tony
du Cann, Rt Hon Edward	Hurd, Hon Douglas	Normanton, Tom

Onslow, Cranley	Royle, Sir Anthony	Thorne, Neil (Ilford South)
Oppenheim, Rt Hon Mrs Sally	Sainsbury, Hon Timothy	Thornton, Malcolm
Page, John (Harrow, West)	St. John-Stevas, Rt Hon Norman	Townend, John (Bridlington)
Page, Rt Hon Sir R. Graham	Scott, Nicholas	Townsend, Cyril D. (Bexleyheath)
Page, Richard (SW Hertfordshire)	Shaw, Giles (Pudsey)	Trippier, David
Parkinson, Cecil	Shaw, Michael (Scarborough)	Trotter, Neville
Parris, Matthew	Shelton, William (Streatham)	van Straubenzee, W. R.
Patten, Christopher (Bath)	Shepherd, Colin (Hereford)	Vaughan, Dr Gerard
Patten, John (Oxford)	Shepherd, Richard (Aldridge-Br'hills)	Viggers, Peter
Pattie, Geoffrey	Shersby, Michael	Waddington, David
Pawsey, James	Silvester, Fred	Wakeham, John
Percival, Sir Ian	Sims, Roger	Waldegrave, Hon William
Pink, R. Bonner	Skeet, T. H. H.	Walker, Rt Hon Peter (Worcester)
Pollock, Alexander	Speed, Keith	Walker, Bill (Perth & E Perthshire)
Porter, George	Speller, Tony	Walker-Smith, Rt Hon Sir Derek
Powell, Rt Hon J. Enoch (S Down)	Spence, John	Waller, Gary
Prentice, Rt Hon Reg	Spicer, Jim (West Dorset)	Walters, Dennis
Price, David (Eastleigh)	Spicer, Michael (S Worcestershire)	Ward, John
Prior, Rt Hon James	Sproat, Iain	Warren, Kenneth
Proctor, K. Harvey	Squire, Robin	Watson, John
Pym, Rt Hon Francis	Stanbrook, Ivor	Wells, John (Maidstone)
Raison, Timothy	Stanley, John	Wells, Bowen (Hert'rd & Stev'nage)
Rathbone, Tim	Steen, Anthony	Wheeler, John
Rees, Peter (Dover and Deal)	Stevens, Martin	Whitelaw, Rt Hon William
Rees-Davies, W. R.	Stewart, Ian (Hitchin)	Whitney, Raymond
Renton, Tim	Stewart, John (East Renfrewshire)	Wickenden, Keith
Rhodes James, Robert	Stokes, John	Wiggin, Jerry
Rhys Williams, Sir Brandon	Strading Thomas, J.	Williams, Delwyn (Montgomery)
Ridley, Hon Nicholas	Tapsell, Peter	Wolfson, Mark
Ridsdale, Julian	Taylor, Robert (Croydon NW)	Young, Sir George (Acton)
Rifkind, Malcolm	Tebbit, Norman	Younger, Rt Hon George
Roberts, Wyn (Conway)	Temple-Morris, Peter
Ross, Wm. (Londonderry)	Thatcher, Rt Hon Mrs Margaret	TELLERS FOR THE NOES:
Rossi, Hugh	Thomas, Rt Hon Peter (Hendon S)	Mr. Spencer Le Marchant and
Rost, Peter	Thompson, Donald	Mr. Anthony Berry

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on amendments), and agreed to.

Mr. Deputy Speaker

forthwith declared the main Question, as amended, to be agreed to, pursuant to Standing Order No. 18 (Business of Supply).

Resolved, That this House recognises the inevitable need for domestic gas prices to rise bearing in mind that no profit is now made on domestic gas sales, while industry goes short of gas; welcomes the Government's determination not to evade or disguise economic realities; and believes that the Government's stated intention to review the whole range of fuel assistance offers much the best basis for helping the old and those in need in an era of high energy costs.