§ Mr. John Cartwright (Woolwich, East)
I beg to move,That this House, concerned by the impact of ever rising fuel prices, by the growing level of disconnections for fuel debt and by the number of households left without gas or electricity for periods of more than one month, calls on the Government to end wasteful energy consumption and to ensure that every household can afford adequate warmth.I am acutely conscious of the fact that a sunny May afternoon is not, perhaps, a suitable occasion on which to ask the House to consider the position of those who cannot afford adequate heating in their homes. Nevertheless, this morning's announcement of a second electricity price rise in four months underlines the fact that none of us can shelter from the inexorable increase in fuel prices, even in summer months. It will be too late to discuss these issues in the winter, when our constituents will discover that their fuel bills will be around 30 per cent. higher than those that they struggled to pay last winter.
The motion refers to the impact of ever-rising fuel prices. No hon. Member can argue about the significance of those price rises. Department of Energy figures show that between 1973 and 1979 solid fuel prices rose by 131 per cent., gas prices by 85 per cent., and electricity prices by a staggering 183 per cent. As we know, the prospects for the immediate future are a great deal worse. The Government are requiring that domestic gas prices shall rise by 10 per cent. above the rate of inflation, not only this year but for the succeeding two years. There was a 17 per cent. rise in April, and there will now be a further 10 per cent. rise in October. Paraffin, which was decontrolled by the Government in July 1979, has risen in price by about 60 per cent. since then—from 53p per gallon before it was decontrolled to between 80p and 85p a gallon today. Paraffin is very much the fuel of the needy, the poor, and particularly the elderly.
The most frightening figures are those for electricity. The Government have required that electricity prices shall rise by 5 per cent. over and above the industry's costs this year, and for the two succeeding years. There was an announcement of a 17 per cent. increase in April, and 855 today there was an announcement that the October increase of 10 per cent. is to be brought forward to August. It is worth recalling the increases in electricity prices during the past two years. On 1 June 1979 there was an increase of 8.6 per cent.; on 1 September 1979 there was an increase of 8 per cent.; and on 1 April 1980 there was an increase of 17 per cent.
That means that the price for the average domestic user will be between 30 and 40 per cent. higher than a year ago, and that is before taking into account the most recent increase of 10 per cent., announced today. It is no wonder, with a record such as that, that the Government have decided that the industry's costs and efficiency should be referred to the Monopolies Commission. I welcome that decision, but I doubt whether it will have much impact on the bills that my constituents will have to pay next winter.
The Electricity Council has produced figures that show that the price per unit for the average domestic user, including the standing charge, has risen from 1.03p per unit in January 1974 to 3.97p per unit in April 1979. The price has almost quadrupled in that period of five years. It is a staggering price rise. The result of the second increase of 10 per cent., announced today, means that electricity prices this year will rise almost as much as gas prices. That undermines one of the reasons that we were given for the rise in gas prices earlier this year. They had to be jacked up in order to make gas less attractive, as compared with electricity. Gas and electricity prices now seem to be chasing each other, with the consumer struggling hard to keep up.
In 1978 the previous Administration estimated that fuel prices in real terms would double by the end of the century. It seems as though that prediction is out of date. At the present rate, fuel prices must surely treble, if not quadruple, by the end of the century. We all feel the impact of this sort of price rise, but its impact on the poor should worry us.
Low-income households tend to have above-average fuel consumption. Single-parent families, families with children under 5, the retired, the sick and the unemployed all spend long periods of the day at home, when they need heating. 856 Also, they tend to live in worse housing conditions—property with no insulation—and often they are locked into the most expensive systems of heating.
The Supplementary Benefits Commission showed that in 1977 37 per cent. of all households receiving supplementary benefit had all-electric systems of heating A single mother with a child under 5 receives the princely sum of £23.50 in supplementary benefit, with a 90p additional heating supplement, which is shortly to rise to £1.40. Set against that, her winter quarter's fuel bill could easily be £100 for electricity, and could be as high as £150—a payment of about £10 a week. Faced with that sort of expenditure, people have to make a conscious decision between paying for their fuel and spending adequately on clothes and food.
In the winter of 1978–79 a group of enterprising pensioners in my constituency carried out a survey of high-rise flats with all-electric heating systems. Most were one or two-bedroomed properties. They found that where the under-floor heating system was in use, the average bill was £118.63. Where under-floor heating was not used, the average bill was £80. The London borough of Greenwich published the results of an expert council survey on the problems, in those flats. It showed that electricity costs between 1970—when the flats were first occupied—and 1979 had increased fivefold. It showed that, to be used properly, the electrical systems in a typical one-bed-roomed flat would cost £556 a year—£10.69 a week. The London Electricity Board produced a sample showing that none of the flats in those blocks was adequately using the under-floor heating system,no doubt because of the high costIt was also discovered in a survey, and confirmed by the borough council, that many of the flat owners who attempted to use the under-floor heating found that the heating was lost into neighbouring flats. I suggest that that happens in blocks of flats in many parts of the country.
It is clear that rising prices are putting people at risk. The Office of Population Censuses and Surveys, in the "Monitor" published on 15 April 1980, reveals a significant rise in deaths directly due to hypothermia in the March quarter of 1979. There were 153 deaths during the 857 same period in 1978, and 292—almost double—in the March quarter of 1979. The "Monitor" comments:It is, of course, very likely that the increased number of deaths were due to the very cold winter in 1978–79, particularly in early January 1979.Apart from the deaths that are directly attributed to hypothermia, lack of warmth contributes to many other deaths. If we examine the figures for deaths over the past 10 years, for example, we find that the death rate for infants aged between four weeks and 12 months is 40 per cent. higher in the period from October to March than in the period from April to September. That means that an average of 550 more babies die in winter than in summer. The same is true for pensioners. The death rate for the over-eighties is 25 per cent. higher in winter than in summer—20,000 more deaths—and there are 25 per cent. more deaths among the over-sixties in winter than in summer.
I do not suggest that lack of warmth is the only factor in those deaths, but it is a contributory factor in a great many of them. Many elderly people are afraid to heat their homes adequately because they are worried about the fuel bills. That was confirmed by a national Citizens Advice Bureau survey in September 1979. It stated that:There is evidence that the elderly do not keep warm in winter through fear of incurring high fuel bills.The Supplementary Benefits Inspectorate estimated that 60 per cent. of pensioners on supplementary benefit underheat their homes.
The high cost of fuel aggravates another problem—that of condensation, particularly in council flats. It is an increasing worry for many councils. Many people have had the unpleasant experience of going into council flats and smelling the dampness and seeing the fungus and black mould growing on the walls, and the contamination of carpets and cloths. Usually, the problem occurs in bedrooms because tenants cannot afford to heat them. The advice that they are always given is no doubt technically excellent. They are told to put on the heating and to open the windows. That is totally unrealistic advice for a substantial number of council tenants. One might as well tell them to burn pound notes to keep warm.
858 The problem of condensation ruins the quality of life for a great many people, especially for children who are forced to live and sleep in homes whose walls are wringing wet. It also has an impact on the condition of the housing stock in many council estates.
The motion refers to the growing number of disconnections. The December 1979 electricity disconnections were 21,145—the highest since December 1976. The annual rolling figure in December was 88,846, the highest since June 1978. I accept that the rate of disconnection appears to be low—namely, 0.5 per cent.—but one consumer in every 200 is cut off at some period during the year.
I am told that we should not get so excited about disconnections, as consumers are disconnected for comparatively short periods. Those of us who have taken some interest in the problem have had considerable difficulty in obtaining the figures. The information that is now available indicates that in 1978–79 no fewer than 16,370 electricity consumers were cut off for one month or more. That is about one-fifth of all disconnections.
The figures vary much from region to region. The North-Eastern electricity board area is the worst, where 30 per cent. of disconnections were for longer than one month. The Yorkshire board is the next worst, with 29 per cent., while South Wales comes third, with 25 per cent. It may be said that the code of practice should take account of these problems. The code was introduced as a result of unacceptably high rates of disconnection. It slowed down the rate and eased the problem for a period. However, I suggest that it is no real solution for those who cannot afford to pay for their heating.
The code was very much a public relations exercise rather than real help for those in need. That is demonstrated by the number who were allegedly protected by the code who have found themselves disconnected. The national Citizens Advice Bureau survey indicated that 45 per cent of surveyed clients who were disconnected were on supplementary benefit, family income supplement, or unemployment benefit. The survey showed that 66 per cent. of them had dependent 859 children and that one-quarter of these were single-parent families. That is evidence that the code is clearly failing to help many of those whom it was designed to protect.
In many instances, consumers who are covered by the code have found that they cannot maintain the weekly payments that are required from them by the fuel boards. In 1979, in the South-Eastern board area, 38 per cent. of disconnections were in the homes of those covered by the code of practice who were unable to maintain their weekly payments. In the London electricity board area, in 1978–79 that applied to 44 per cent. of disconnections. If that is reflected nationally, it means that about 35,000 of the 88,000 disconnections were clear hardship cases, which the code of practice was designed to protect.
That indicates that in many instances the repayments expected of consumers were far too high. All of us who have had experience of these problems know only too well of cases where the Department of Health and Social Security has said that the weekly repayment demanded by the fuel board is too high for the client to suffer when account is taken of the benefit that he is receiving. The result is that those in hardship are forced either to become disconnected or to continue to be disconnected.
One of the difficulties lies in the interpretation of the code of practice. The deputy chairman of the Electricity Council in a letter to the director of the Child Poverty Action Group on 14 December 1979, stated:although there is one code of practice there are 12 area boards which all have many districts, and the day to day interpretation of the code in respect of individual cases is carried out a long way from me.We find that the ground rules vary very much from one district to another. It is difficult for those who seek to advise consumers who are in difficulty, because they often find themselves on shifting ground and do not know what the policy of the board will turn out to be.
There is also ample evidence of a profound lack of public knowledge of the code. Research sponsored by the Electricity Consumers' Council indicated that only 30 per cent of consumers had ever heard of the code. Of those, only one 860 in five had read the leaflet. Those practical criticisms underline the importance of the independent review of the code that is being sponsored by the industries and by consumer councils. The review was announced by the then Under-Secretary of State for Energy as long ago as 1 August 1978. It was confirmed in a written answer on 13 December 1978, when the then Under-Secretary of State said that the reviewwill start shortly",and added:The aim is to complete it in as short a time as possible"—[Official Report, 13 December 1978; Vol 960, c. 199.]I hope that when the Minister replies to the debate he will tell us what has been delaying the review of the code, and when the results are expected.
It is difficult for many hon. Members to understand the impact of disconnection on ordinary people. They are deprived of heat, light and often cooking facilities. They lose all the facilities of modern living that most of us take for granted. They are condemned to exist by using candles, paraffin and calor gas, and the dangers are obvious. There have been instances in various areas of deaths through fires that resulted directly from the fact that those concerned had been disconnected and were using those fuels. That applies especially to electricity disconnections.
The punishment of disconnection is far worse than any fine could ever be. It is far worse than a suspended prison sentence. However, the victim has no right to have his side of the case heard. He has no right of access to a lawyer. He has no right of appeal against the decision. That decision is often taken in secret by a fairly low-level official, who takes no account of the rules of evidence or natural justice. Worst of all, the disconnection can be carried out in the absence of the accused person. It is a barbaric punishment which is much more akin to Dickensian debtors' prisons than to a twentieth century caring society.
What are the alternatives? It is argued by many that debts should be collected through the courts in the same way as other debts. The Electricity Council claims that that would cost between £45 million and £65 million. It has produced no details to indicate how those figures 861 are arrived at. The South-Eastern electricity board prepared calculations for its electricity consumers' council in July 1978. It stated that using the courts would cost it up to £500,000. That would mean a national figure of about £6 million. The National Consumer Council produced a detailed calculation which suggested that collecting debts through the courts would cost the industry nationally about £12 million.
If that is set against the £2,200 million of domestic electricity sales, we find that the highest estimate of the cost of using the courts is that it would add about 3 per cent. to domestic electricity costs. The lowest estimate is about 0.3 per cent. It is not surprising that a number of bodies, including the National Consumer Council, the national Citizens Advice Bureau and even the Department of Energy's ministerial inquiry have all come out against allowing the fuel boards to retain the arbitrary right of disconnection.
In April 1976 the Select Committee on nationalised industries stated:The hardships of disconnections are such that if the incidence cannot be very considerably reduced we believe that the powers of the electricity and gas authorities may need to be circumscribed.That is equally true today.
The motion also refers to conservation. The programme that the Government inherited was inadequate, but it has now been cut to ribbons. We hear that in September 1979 the Department of Energy scrapped plans for 14 regional home energy saving advice centres which would have advised householders on all aspects of conservation in the home. The cost would have been about £500,000. We hear that in January 1980 the Department of the Environment produced a consultation document on higher thermal insulation standards for new homes which, sadly, included a standard for loft insulation lower that that recommended by the Department of Energy.
We find that the worst cuts are in the Government's own direct insulation programme. There were useful schemes being undertaken by the Manpower Services Commission to provide insulation for the homes of the elderly under the special temporary employment programme, but the budget was halved in 1979 and many of the programmes have been scrapped. 862 I accept that Ministers have indicated that they will urgently be reviewing the possibility of restarting the scheme, but it would have been very much better if it had not been closed down in the first place.
The Government are most vulnerable when it comes to the scandal of home insulation. The allocation for local authorities for home insulation in 1978–79 provided for about 250,000 homes to be insulated at a cost of £12½ million. In 1979–80 the figures rose to about 500,000 homes at £25 million. However, in 1980–81 there is no separate allocation for local authority home insulation. It is merely included in the block housing investment allocation for local authorities. That allocation has been cut substantially, and local councils are having to close down their home loan schemes and stop improvement programmes and new building. It is therefore unlikely that insulation will be a high priority in their budgets.
Under the Homes Insulation Act, grants for loft insulation have been made available to council and housing association tenants, in addition to owner-occupiers. That means that a larger number of households are eligible, but the cash provided under the scheme has been cut. In 1979–80 it was £25 million, which would insulate about 500,000 homes. For the current year the figure has been cut by half. It is now £12½ million, which is sufficient for only about 250,000 homes.
The scope for energy saving through loft insulation is gigantic. On the Government's estimates of the number of dwellings with acceptable loft insulation, only 12 per cent. of local authority homes, 28 per cent. of owner-occupied homes and 11 per cent. of housing association and private rented homes have acceptable standards.
The industry is already saying that the cutback has caused it considerable difficulty. Eurisol-UK, the Association of British Manufacturers of Mineral Insulating Fibres, warned this year that the cutback would cause considerable difficulties. It says that its worst fears have been realised. Member companies have declared redundancies of between 10 and 20 per cent.
The insulating industry was encouraged by successive Governments to put down 863 new productive capacity to meet the growing demand for insulation. It has invested over £80 million in the past two years to combat the problem last year of a shortage of loft insulation material, when the extension of local authority schemes increased the market by 25 per cent. The industry now finds that the local authority market this year will be almost non-existent. It feels that the homes insulation scheme cannot fill the gap because the available cash has been halved, although the potential take-up has been extended.
The industry believes that demand for its products will be cut back by 25 per cent.—the percentage by which it was expanded last year. As the trade association says in its letter to hon. Members:No industry can cope sensibly with the effects of switching on and off this kind of percentage of its total market.That is one of the most frightening indictments of the Government's insulation policy.
That comment was confirmed by an article in the New Scientist on 27 March, which quoted from an apparently secret memorandum from a senior official in the Department of Energy to the Secretary of State. Having surveyed the various departures from the Government's original conservation policy, the memorandum sums it up:All this represents a sharp and visible contraction of the government's conservation programme and is, I fear, likely to attract increasingly adverse criticism.The memorandum goes on to say that, in comparison with other countries" energy saving programmes, Britain's is now slipping fast.
It is hard to understand why, in a period of public sector cuts, the Department of Energy does not seem able to persuade its colleagues in the Government that money spent on conservation and insulation is not money down the drain, but is investment in the future that will produce savings of precious money and the conservation of even more precious energy. It should be protected from public sector cuts.
The Government appear to be relying on pricing policy as their main tool for conservation. Pricing has a role to play, but its impact on many consumers is serious and many simply cannot react 864 to higher prices. Those locked into inefficient and expensive local authority heating systems have no way in which to find alternative heating. The Secretary of State has accepted that pricing is not enough. In a speech to the RIBA in October 1979 he saidTo rely totally on the price mechanism and people's response to it, without sensible and sensitive Government intervention, would be an unbalanced energy conservation programme.The Government's limited intervention is neither sensible nor particularly sensitive.
I deal finally with fuel assistance schemes. The Secretary of State for Social Services, on 27 March, referred to the scheme that the Government had launched to provide help for the needy with their fuel bills. He claimed that the scheme was absorbing £200 million of Government spending, which looks like a large figure, but closer examination shows that it is less impressive. The normal heating additions under supplementary benefit account for £100 million of that spending, the extra schemes introduced last winter account for £20 million more and normal uprating would have added a further £20 million. The new money available, as set out in the Government's most recent statement, is only £65 million. About £9 million of that is in relation to the extension for the 70 to 74-year-olds, and £56 million as a result of the large increase in heating additions.
The scheme is welcome, but of 460,000 70 to 74-year-olds on supplementary benefit, only 122,000 have no heating addition. The remainder receive heating additions now, and will get no extra help. Providing the automatic heating addition for supplementary benefit families with children under 5 years old will cause difficulties. The Social Security (No. 2) Bill provides that from 24 November there will be a single rate of benefit of £7.30 for children up to the age of 10. When the youngest child, in a supplementary benefit family-, passes, the, age of 5, there will be an automatic reduction of £1.40 in the family's benefit.
What about pensioners under 70? What about those not on supplementary benefit; for example, those on rent and rate rebate? Do they not feel the cold? What about the estimated 900,000 believed to qualify for supplementary benefit who never claim it?. What about 865 those with small occupational pensions that take them just above supplementary benefit, level? They may have exactly the same cash, income as the family next-door on supplementary benefit, but they can claim no extra help with their heating bills.
The Government scheme falls far short of what is needed. I hope that the Minister will not tell us that cash is not available for extra help. Many of my constituents will not understand why hundreds of thousands of needy people should be sentenced to shiver when the gas industry is expected to make a profit of £600 million this year.
Ideas for practical schemes exist. In its 1977 report the Supplementary Benefits Commission called for a comprehensive fuel rebate or bonus scheme. That call was repeated in its 1978 report, published in October 1979, which said:Fuel costs have risen dramatically since 1973 and are likely to go on rising in real terms till the end of the century … a confusion, of benefits has grown up to help poorer households … we have argued that these arrangements should be replaced by a single, comprehensive scheme of fuel rebates or bonuses".The Commission believes that that would be fairer, easier to understand, more acceptable to the public and less likely than present arrangements to deter people from returning to work. Other suggestions have been made. The Electricity Consumers' Council contributed ideas on how such a scheme could work. Such schemes are worthy of serious debate.
When I have raised these problems with Ministers, of both Administrations, I have usually been told that the problem of fuel poverty—the fact that a great many people cannot afford adequate warmth in their homes—is new. However, it has been with us for five years and is not likely to go away. There are no, ideal solutions, but we should argue for an end' to arbitrary disconnections. We want an imaginative insulation and conservation programme and genuine help for all the needy, not merely selected groups.
I believe that we cannot go on jacking up fuel prices every few months and finding a few bits of sticking plaster to bandage up the casualties. I put down this motion in the hope that the House would give the matter serious consideration, which is long overdue.
§ Mr. T. H. H. Skeet (Bedford)
The hon. Member for Woolwich, East (Mr. Cartwright) is to be congratulated on raising this matter today. Obviously it is a subject which should be ventilated in the House. I wish to take up two points that he mentioned.
The first concerns disconnections. It is difficult for any of the nationalised corporations to get some of their bills paid. They would like to collect debts by way of the county court, but unfortunately the best course is to disconnect the supply if a person is not prepared to pay over a period. If a person has not paid over a number of months or years the corporations have no alternative. However, I suggest that the hon. Member should tell his constituents to go along to him, as a sympathetic Member of Parliament, and raise these matters so that he can take them up with the local electricity authority which will exercise discretion and compassion in such cases. I have done this with a great deal of success in Bedford.
Another matter that I wish to pursue is that of conservation and home insulation. One of the big difficulties about having grants—and this was the experience in the United States when grants were used in a big way—is that the grant gets annexed to the price, and the price of insulation accordingly rises. That is not necessarily to the benefit of the consumer. On the other hand, if the product is good and it provides an incentive to the consumer in that his bill will be reduced substantially, he will put the money aside or borrow it in order to insulate his property. In other words, a good product will sell itself.
The hon. Member for Woolwich, East mentioned Eurisol-UK. In this case a grant of £25 million was available but only about £12.5 million was taken up. Therefore, the market did not really require it or the public had not been educated to use it. The company built a new plant which has considerable unused capacity. The hon. Member mentioned a figure of £80 million, and he told the House that, when a building was put up and assurances had been given, there was a moral obligation for a grant to follow. I do not accept that at all. It is entirely up to the market and the board of directors. If they go ahead with a speculative 867 process hoping to make a bonanza, they may well do so, but if their judgment is wrong difficulties can follow.
I listened to the hon. Members' speech with considerable interest, but I found it defective in this way. Although he went into the end results, he did not examine some of the causes and it is the causes with which I am concerned. I can do no better than to begin with one or two of the axioms of the fuel business. One is that the nation cannot have cheap electricity on expensive coal. If the public are concerned about exaggerating the implications of nuclear power, high electricity costs for consumers will prove inevitable.
The miners have already indicated today in The Times that they want £10,000 a year. Also, the electricity industry is concerned about the recent increase in coal prices. Perhaps I can use this formula to illustrate the burdens that the electricity industry must take account of in its fuel supply and in the wages and salaries paid. A 3 per cent. increase in coal prices means 1 per cent. on electricity prices, and 6 per cent. on miners' wages means 1 per cent. on electricity prices. Therefore, it is no good complaining about the electricity industry pushing up its prices; one must go back a step further and find the basic cause. Mr. McGahey calls for very much higher wages—and the miners deserve every penny they get, although I do not accept that the same should apply to those who work on the surface—but that is one way of ensuring that the public will have to pay more.
Another axiom of the fuel industry is that coal prices are not immune to market forces but tend to align themselves closely to oil prices. There was a wide price differential between coal and oil in 1973 in favour of coal, but that had virtually disappeared by the end of the decade as coal moved forward to close the gap. I must stress that every NUM wage demand increases the price of coal to the consumer. It is not the miner who pays but the consumer, whether he burns his coal in his grate or uses it in the form of electricity.
I turn to the question of oil. OPEC sets the world oil price and it is not possible for the United Kingdom to be insu- 868 lated against economic realities. The EEC competition rules say that indigenous oil cannot be sold on the local market at preferential rates which are not made available to other members of the Community. I stress that, although the hon. Member for Woolwich East, complains about the increase in fuel prices, all the industries involved, with the exception of oil, are run by State corporations. Over the course of the years the exact results have been forecast. Those industries tend not to be competitive in the market place and they tend to push up their prices.
I turn now to the subject of gas. British gas prices for domestic consumers are the cheapest in Western Europe. They were bound to rise in order to prevent extravagant use of the product and to enable the distributor—the British Gas Corporation—to meet the higher North Sea prices based on oil-gas parity ratings. The industry is faced with insatiable demand and it has inadequate supplies. The position would have been different if, in the past, the British Gas Corporation had paid a reasonable price for gas rather than deterring companies from either looking for it or working what they had already discovered.
This is a question of supply, not merely of demand. In 1979 the United Kingdom flared about 14 per cent. of the total available. About 38 billion cubic metres of gas was disposed of by the British Gas Corporation. The gas flared totalled about 6.6 billion cubic metres. People may say that it is quite wrong to let this occur, but unless one builds a pipeline and that pipeline is economic, there is no alternative. I emphasise that the construction of the projected North Sea natural gas pipline is essential to bring in to the system anything between 12 and 20 trillion cubic feet of natural gas. This should be accompanied by the modification of the British Gas Corporation's monopoly which was established under the 1972 and 1976 Acts, in order to permit private initiatives, and freedom should be given to decontrol the chemical feedstock supplies. At present, permission of the British Gas Corporation must be given in certain cases.
I admit that the recent price increases were severe and many people throughout the country suffered. I agree with the hon. Member for Woolwich, East that people over 80 years of age who are not 869 on national insurance should receive a fuel allowance. They should not have to indicate to their local departments whether they have earnings in order to qualify. They have a right to reasonable warmth.
When the Secretary of State made his statement on gas price increases in the middle of January, four elements should have accompanied it—the increase in gas prices, the provision to be made for the disadvantaged, including old-age pensioners, the investment provision by the British Gas Corporation, and a windfall profits tax.
It is instructive to see how those announcements appeared. In mid-January came the initial statement of the notification of the price rise. Provision for the disadvantaged was not indicated to the House until my right hon. Friend the Secretary of State for Social Services made a statement on 27 March. The investment provision by the BGC has not been adequately canvassed in any parliamentary questions, though it has been referred to in the Financial Times on 14 January, 11 March and 10 May.
On the important question of a windfall profits tax, in answer to a question that I tabled, my right hon. and learned Friend the Chancellor of the Exchequer indicated through one of his Treasury Ministers that he was looking into that matter. I tabled another question three weeks ago but received the answer only today stating that the Government had accepted that point in principle. The overall result has been that an essential move has been stymied to a certain extent by the fact that the separate provisions were announced at different times.
One of the facts of economic life is that the price of natural gas in the market is related to the oil price. The distinguished chairman of the BGC, who should know a lot about this subject, wrote on 2 August last year: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 product is being sold to industry in the UK at net prices in excess of 28p per therm. Interruptable 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.870 I must stress that that fact is acceptable to OPEC and is becoming progressively more acceptable internationally. In fact, it was stated at the time when the Labour Party would have accepted the point that all nationalised corporations must charge economic prices. Private companies have also endorsed that view.
BP has used the oil-related price for the disposal of ULA Norwegian gas to Gelsenberg AG of the Federal Republic of Germany. We have become used to the fact that oil and gas are increasingly being priced at a parity rating.
In the United Kingdom the domestic price of gas for a London semi-detached three-bedroomed house with central heating works out at about 23p per therm. The gas oil price for a 500 gallon delivery works out at 39.5p per therm, or 65.1p per gallon. Thus the domestic price of 23p is about 58 per cent. of the prevailing gas oil price. The differential between those prices is unduly large and is likely to close, with gas maintaining a distinctly competitive advantage.
The Government are right to do what they are doing. Their action would have to be advocated by a Labour Government if they were in power. It was the policy of the previous Labour Government.
On the industrial front, new firm contract prices—I stress that they are limited in number—are between 37p and 40.5p per therm, bearing a much closer relationship to the nearest equivalent fuel—a tanker load of gas oil approximates at 38.9p per therm. For interruptable contracts linked to the heavy fuel oil price, 22.5p per therm compares with 29.2p per therm, or 47.87p per gallon for oil products.
It is significant that, while industry has been called upon to bear a heavy burden and take on an oil-related price for gas, that has not been the case with the domestic consumer. The Government are ensuring, as would any Government in a situation of tight supply, that the burden is spread more evenly between industry and domestic consumers. Industry is important because it provides the jobs.
The British Ceramic Manufacturers Federation wrote recently:Evidence that our competitors in Continental Europe enjoy and benefit from prices as 871 much as 8p/therm less than those imposed by the Gas Council monopoly in the UK must argue for an urgent review of Government policy in this area.Cannot we see that if Continental gas prices for manufacturers are very much lower than those in the United Kingdom it will result in our industry growing less competitive and its position becoming more difficult? However, if some of the burden is shared with those in the domestic market, a much better response will be secured. Those who are disadvantaged can be assisted by my right hon. Friend the Secretary of State for Social Services who looks after the old and the infirm.
Over the years we have noticed a decline in the real price of gas. Many of those who complain to me say how badly they are doing in respect of the gas appliances that they have bought, but when I compare them with my appliance, which is not gas, I see that those people are living in a dream world and are doing remarkably well.
During the years 1970–79, taking the index base in 1970 as 100, the gas price has been deflated by the retail price index to a figure of about 69. In real terms, domestic consumers are paying less for their gas now than they did in 1970. Even if we add the recent price increases announced by the Secretary of State for April and October, the figure will rise to only 75.
That figure has been regressive. The indexed figures from 1970 to October 1979 indicate that under both Conservative and Labour Governments the real cost has been coming down and the domestic consumer has been receiving an ever better deal. That situation must be rectified. Starting with 100 in 1970, the successive annual figures have been 100, 98, 91, 82, 76, 80, 81, 77 and 69. Recent increases restore that figure to 75. There will be an obvious desire to perpetuate the advantage that gas consumers have enjoyed, but as gas is currently oversold that situation is not likely to occur.
For years, Britsh gas has traditionally been the cheapest in Europe, being marginally below even that in Rotterdam. The European range for domestic consumers of 1,200 therms a year, according to January 1978 figures, is 43p a therm in Copenhagen, 33.5p in Düsseldorf and 872 17.3p in London. The British price is not subject to VAT. VAT works out at 17.6 per cent. in France, 13 per cent. in the Federal Republic of Germany and 18 per cent. for the Netherlands. Those figures are for 1979.
I am convinced that if the British Gas Corporation had paid a reasonable price in earlier days, when the House passed the Continental Shelf Act 1964, more gas would have been located in the southern sector of the North Sea and companies would have utilised the resources available to them. This has not been the case. The price paid to companies has risen from the old figure of £l.87p per therm to about 6p now for the southern fields. Frigg gas is purchased now for about 12½p a therm, athough I understand that the price currently on offer for other supplies will exceed 20p.
The hon. Member for Woolwich, East is right to outline the consequences that we face in the House. The hon. Gentleman tries to portray people in this country as being fed up with increased oil, gas and coal prices. That may be the effect, but the hon. Gentleman should examine the causes.
Coal prices depend on the miners and the Government's programme for capital investment. If the public want more coal mined through methods that have been laid down—by expensive schemes—they must be prepared to pay a higher price for the coal. The electricity industry depends on coal. Seventy per cent. of the fuel used by the CEGB in its power stations is coal. The price of electricity, therefore, depends on the price of coal.
OPEC decides how high the oil price is pitched. If the price is pitched high, we have to face reality. The only way out of the impasse, over the years, is for Britain to act as wisely as France and switch much more to nuclear power. Then prices would not rise as steeply as in recent years. I hope that the picture presented by the hon. Member for Woolwich, East will be corrected by other hon. Members. I hope that they will deal with cause and effect and not try to hoodwink the public.
I hope that Opposition Members will not say that if they had the opportunity of governing prices would come down at a stroke. That is not possible. Their 873 approach was to say that economic pricing was essential in order to look after the nationalised industries. This Government cannot be blamed if they pursue exactly the same policy.
§ 5.3 pm
§ Mr. David Winnick (Walsall, North)
I listened with great interest to the hon. Member for Bedford (Mr. Skeet), who specialises in energy matters. I congratulate my hon. Friend the Member for Woolwich, East (Mr. Cartwright) on choosing this topic for debate. I agree with his comments on home insulation, and disconnections—they are all valid points. I intend to concentrate my remarks on the last part of the motion.
I welcome the additional help that people on supplementary benefit and family income supplement will receive from November to help pay their fuel bills. However, a large number of people on limited incomes who are not in receipt of supplementary benefit or FIS will not receive an extra penny to help pay the bills. The Secretary of State for Social Services announced that only one group would receive additional help. That group consists of pensioners, aged 70 and over, receiving supplementary benefit who, like pensioners over 75 years of age, will receive an additional heating increase that comes into effect in November. My hon. Friend the Member for Woolwich, East made the point that a sizeable number of pensioners on supplementary benefit will already have been receiving the heating addition and, although they will receive a little more, it must be stated that the Government have not made much of a concession towards fuel poverty in the United Kingdom.
The increases in electricity prices have been staggering. From the beginning of 1974 to the end of the current year electricity prices will have gone up by about 240 per cent. That is far in excess of price rises generally or increases in pensions and supplementary benefits. The hon. Member for Bedford argued that Opposition Members should not give the impression that if we were in office we could stop large increases. I have to concede that a substantial increase in electricity prices took place under a Labour Government for reasons that the hon. Member for Bedford described.
874 Gas prices are more the responsibility of the present Government. I do not know whether a Labour Administration would have acted differently, but this year gas is to go up in price by about 30 per cent. and will rise by 10 per cent. above the inflation rate at least in 1981 and 1982. One can imagine the hardship that will be caused to people who were previously safeguarded because they were not using electricity. They now find this sharp and substantial increase in gas prices. It is understandable that many people should be puzzled that electricity is apparently to go up in price because of falling demand while gas is to go up in order to ensure that it is not used to excess and for reasons of conservation.
I do not want to argue the rights and wrongs of substantial increases in fuel prices. The hon. Member for Bedford may be right in stating that there is no alternative to substantial increases in gas and electricity prices. If, however, such increases are to occur, real and effective help must be given to those in the community who cannot afford to pay.
As some hon. Members know, I proposed recently a Ten-Minute Bill to provide fuel rebates for people on low incomes. As a result of my efforts to bring about such legislation, I received a number of letters. I would appreciate the patience of the House in order to quote from one or two letters, mainly from elderly people. One lady living in East Yorkshire wrote:I could weep when the cold weather comes because I feel it so intensely. Last year, we did have a little help but this year we have been obliged to put off the heat, because of the cost, very frequently. We do not claim supplementary pension, although we have very little in the bank. But, please, a little help is very much appreciated as we found out last year.A second letter stated:I am a widow. My net income from the State pension and a small pension from my late husband's office is £31.27 per week. Because of my late husband's pension, I cannot get supplementary benefit. The only help I get is a rate rebate. So the Government must help us with fuel bills. Good luck and success to your campaign.The final letter I shall read came from someone in a neighbouring constituency. It states:My husband must be one of thousands of men who are in receipt of a tiny, now index-linked company pension which means that apart from a small rate rebate we cannot apply 875 for any of the supplementary grants which are already available—degrading prospect anyway when we have never applied to the State for assistance.The person who wrote that letter said that she had received a leaflet from the Department of Energy explaining various ways of paying her fuel bills. She writes:I know how to pay the bills, Mr. Winnick, it is the lack of the means to pay them that gives me nightmares.That is a fair and valid point.
Ever since fuel prices rose substantially—particularly the price of electricity—I have argued that a comprehensive fuel allowance or rebate scheme should be introduced to help people on limited incomes. If it is right—there is no longer any controversy about the matter—to have rebates for rents and rates and assistance for rents in the private sector by way of a rent allowance, surely it is equally right to have fuel rebates or allowances for people on limited incomes.
Fuel is vital and if there are people in any controversy about the matter—to the community—I know that there are many—who are not on supplementary benefit and do not receive family income supplement and who cannot afford to pay staggering increases in the prices of electricity and gas, they need effective help and it is our duty and responsibility as Members of Parliament to see that they receive it.
Clearly it would be foolish at this stage to harbour any illusions that the Government intend this year to provide the sort of assistance in this area that so many of us would like to see provided. However, the next logical step for the Government, if they are serious about wanting to help people in need, is to ensure that those already receiving rebates on rates and rent and receiving rent allowances should be eligible for assistance to pay their fuel bills.
The Labour Government's electricity discount scheme was harshly criticised by the Conservatives. However, it provided help for many people, particularly, in its second year, to those receiving rebates. This Government can criticise the last Administration's discount scheme because certain aspects justified criticism, but instead of abolishing it they should have built it up.
This problem clearly will not go away. I was interested to see a copy of a letter 876 sent to the Secretary of State for Social Services. Another copy has apparently been sent to the Secretary of State for Energy. It is from the three chairmen of the nationalised energy industry consumers' councils. Their letter, dated 3 April, was written as a result of the announcement by the Secretary of State for Social Services on 27 March. It reads:In your statement on 22 October 1979, you indicated that you would continue to keep under review the range of help available to assist poor consumers with their fuel bills. We hope that this review is continuing and is a long-term one. We would be interested to know whether this is the case, since we feel that the package of fuel bill assistance announced last week still falls a long way short of the comprehensive fuel allowance scheme for which we have been asking. The limited categories that are eligible for the help you have announced will certainly be better off as a result of the statement you have made.But they make this important point:However, there will be many elderly people and families with children who will not qualify and who will be left—literally—out in the cold.That letter sums up the situation as well as any speech in this House could do.
When there is a clear case of injustice, this House tends to put sufficient pressure on the Government of the day to ensure that that injustice is removed. At the moment there is a clear case of injustice. The hon. Member for Bedford argued the case for substantial increases in fuel prices. When the Minister replies, I am sure that he will tell us that there was no alternative to those increases. However, the injustice remains. The Government have not yet provided the assistance necessary to make sure that those who cannot afford to pay these increases are helped. I hope that there will be sufficient pressure from both sides of the House to see that this injustice is cleared up as soon as possible.
§ Mr. Jocelyn Cadbury (Birmingham, Northfield)
I am grateful to the hon. Member for Woolwich, East (Mr. Cartwright) for initiating a debate on this important topic. I agreed with many of his points. It is most unpleasant to have one's electricity cut off. Many of my constituents who live in blocks of flats would agree with the hon. Member that nothing is more infuriating than being told to turn on one's heating and open one's windows. I get letters about that.
877 The motion, however, is concerned with two different objectives. It calls on the Government to end wasteful energy consumption. Secondly, it calls on the Government to ensure that every household can afford adequate warmth. Those are admirable objectives, but there is a certain contradiction in them. The central issue in this debate is how to solve that contradiction. We certainly shall not solve it by artificially holding down energy prices. If the costs were held down below the true market level, that might achieve the second objective in the very short term. However, it would guarantee the absolute failure of the first aim of an energy efficient economy.
A policy of subsidising energy is bound to work against effective energy conservation. We must allow energy prices to rise so that they reflect the true cost of energy as a scarce resource. But we must devise social policies to insulate the most vulnerable sections of the community from effects of the high costs of fuel. That is the path that the Government have already embarked upon with considerable courage and I support what they are doing.
I wish to comment on the relationship between the demand for energy and its price and then to refute some of the criticisms made of specific aspects of the Government's energy policy. Those of us on both sides who argue that market forces should be allowed to determine the cost of energy must demonstrate that the demand for it is strongly influenced by cost. We must demonstrate that demand is elastic. There is a great deal of evidence for that. Recent studies have shown that in the years up to 1973, when the price of energy was falling in real terms, energy consumption in the Western industrialised countries tended to rise in line with or ahead of the growth in gross domestic product.
However, after 1973, when the Arabs dramatically raised the price of oil, the relationship changed. Once those Western countries had recovered from the shock of 1973, their economies began to grow, but their consumption of energy no longer kept pace. There was a significant reduction in the use of energy per unit of GDP. Surely that is the outcome one would have expected. Energy is no different from any other resource. If the price mechanism is allowed to operate it 878 will send out signals to the consumer and the supplier. It will tell managers to look for less wasteful industrial processes, and it will motivate householders to insulate their homes.
Those arguments are not just the propositions of the Friedmanites. It is significant that Mr. Michael Posner, a former adviser to Labour Governments, favoured the Conservative Government's decision to raise gas prices. He wrote a letter to the Financial Times this year saying:The risks of preparing for too high an energy price in the next decade are much less than the risks incurred by hoping—mistakenly—that somehow energy will become cheap again.On this basis the domestic gas price has become markedly out of line.That is the view of a former adviser to the Labour Government.
It must have been a temptation, when the Government first came to office, to subsidise British industry by holding down the price of North Sea oil and gas. On the surface that was an attractive idea. After all, we are struggling to sell our exports and we are at the same time suffering high prices because of the high value of the pound. We face the problem of achieving our basic objective, namely, the control of inflation, and subsidies would have been an attractive option.
The Government were, and are, right not to give way to that temptation. The shortage of energy is a world-wide phenomenon that will get worse. We must remember not only the extreme vulnerability of the West's overseas oil supplies and the chaos that would ensue if there were a left-wing coup in Saudi Arabia, but the enormous increase in the consumption of energy by the developing countries.
We should realise that when India and China take off economically there will be a dramatic increase in their demand for energy. We cannot expect the people of Asia to rely on burning cow dung for ever. We would be arrogant to assume that they should. Therefore, we have to allow market forces in this country to condition consumers of energy to its true value.
If Britain's brief period of self-sufficiency in energy is used to hold down fuel 879 prices we shall be left, in 20 years' time, with British industry totally ill equipped for an energy-hungry world. Neither industry nor domestic energy consumers can adapt overnight. We must make use of the next 10 to 20 years to transform Britain into an energy-efficient economy and the price mechanism must be the prime mover in that transformation.
In some respects Government policy has been wrongly criticised. The principal arguments for the proposed increase in the price of gas have been well rehearsed in the House. My hon. Friend the Member for Bedford (Mr. Skeet) has underlined them. I wish to emphasise one reason why it is necessary to raise the price of gas by more than the general rate of inflation over the next three years.
Governments in the past have seen a differential opening up between the domestic and the industrial market. In the first quarter of 1979 industrial customers were paying 27p per therm for firm supplies of gas while domestic consumers were paying only 19p per therm. The subsidising of domestic gas consumers by industry has exacerbated the stampede by householders to convert to gas heating and gas appliances. Yet domestic consumers are much more expensive to supply than industry.
Whereas industrial demand for gas is relatively constant throughout the year, demand in the domestic market—because variations in the weather create greater fluctuations in demand—means that it is necessary to instal expensive storage systems.
By contrast, not only are industrialists paying oil-related prices for gas. There are 4,000 potential industrial customers who cannot get gas supplies at all. Many of those potential customers are not within 25 yards of a gas main. Therefore, the prospect of their premises being connected to the gas supply is bleak. Furthermore, many of the companies using gas are on interruptable supply contracts. In the extremely cold winter of 1978–79 they were subject to serious interruptions. That was highly damaging because the substitute for gas is liquefied petroleum gas which is expensive and difficult to obtain.
It is nonsensical that industry should not only be subsidising the domestic mar- 880 ket but that in so doing it should be depriving itself of the gas that it badly needs. The Government's decision to raise the price of domestic gas over the next three years will go a long way to eliminating that absurdity.
There is a way of preventing this situation from occurring again. We must break the monopoly of the British Gas Corporation both as a purchaser and a distributor of gas. If private companies were allowed to compete with the British Gas Corporation for North Sea gas and if they were permitted to distribute it the price to the consumer would be determined by market forces. That would remove from future Governments the embarrassment of having to intervene. I ask my right hon. and learned Friends in the Government to look seriously at that option.
There has been some criticism of the Government's conservation policies. The hon. Member for Woolwich, East maintained that, apart from using their pricing policy, the Government were not doing sufficient to promote conservation. I believe that the Government have made strides in the right direction. First, they have maintained the level of grant to local authorities for insulation at last year's take-up point, which was £12½ million. Therefore, it is not true to say that the Government have cut the grant. The Government have also increased spending on information to educate the public about conservation.
That spending has been increased from £2.2 million to £3.2 million. That is important. If people know that the opportunities are there to enable them to insulate their houses, they are more likely to do something about it. Pensioners on supplementary benefit will now receive a 90 per cent. grant for home insulation. I believe that the Government are moving in the right direction, though I would like to see more being done.
I think that the nationalised industries should be encouraged to sell the idea of conservation. For example, the British Gas Corporation has the expertise to carry out energy audits in the homes of its customers. Its staff could visit the homes of consumers, carry out audits and make recommendations as to how the consumer could best use gas appliances and reduce heat loss.
881 I believe that building regulations for new houses must be modified in order to incorporate the highest insulation standards. It is absurd to build houses which will leak like sieves. We must change that.
I began by saying that two apparently conflicting objectives were expressed in this motion. How can we achieve the second objective, which is to ensure that every household enjoys adequate warmth? I am certain that the most wasteful method of assisting those hardest hit by high fuel prices is to hold prices down.
If fuel prices are subsidised, the people who will gain most are the better off because they use most energy. We must ration the nation as a whole by price and at the same time implement social policies that will help those who are hardest hit. The Government's package of assistance to poor domestic consumers does precisely that. It is hardly reasonable to accuse the Government of oppressing the poor by imposing high fuel prices when they have recently introduced a scheme to give help worth £104 million to 2 million people.
The present Conservative Government have beyond doubt done far more in this respect than the last Labour Government whose equivalent scheme was worth £38 million only. Even if that were uprated, to account for inflation, to £50 million, this Government are being more generous. I welcome in particular the extension of the automatic heating addition of £1.40 a week for householders over 70 years of age who are on supplementary benefit. That follows the giving of automatic entitlement last year to pensioners over the age of 75.
The hon. Member for Woolwich, East spoke of disconnections, and I agree with him that this is a most unpleasant phenomenon. We have a duty to try to reduce the number of disconnections. However, it is important to keep a sense of proportion about them. When we investigate electricity disconnections, we discover that the vast majority of them are for periods of a few days only. The number of disconnections which lasted for more than a month—as the hon. Member for Woolwich, East said—during 1978–79 was 16,370.
882 If we compare that figure with the total of 18 million domestic consumers, it is not very high. There has been a steady fall in the number of electricity disconnections since 1975–76. In that year the figure was 125,000. While it is true that the figures for 1979–80 show that this downward trend has been reversed, the overall figures are still well below those for 1976. We must reduce the number of disconnections, and the Government's social policy will help us to achieve that.
The two objectives in the motion will not be achieved by sacrificing sound economics in energy pricing in a misguided attempt to protect the public from the reality of the world energy shortage. In 20 years the people will not thank the Government if they allow a cheap fuel policy to leave Britain defenceless in an energy-starved world. The Government are right to allow energy prices to rise, just as they are right to shield the people who are least able to bear the consequences.
§ Mr. David Penhaligon (Truro)
Several hon. Members have referred to the gas price increases. All hon. Members will have been asked about that issue. It is still bubbling in the political forum.
I do not accept the arguments of the hon. Member for Bedford (Mr. Skeet). He pointed out the anomaly between the price of gas and other fuels. He is correct and it needed to be rectified. However, if the Government had announced that the profits from increased gas prices were to be used for a massive scheme of cross-subsidy in fuel, for a subsidy to the disadvantaged or for a massive insulation scheme, I could have better swallowed the hon. Gentleman's arguments.
§ Mr. Penhaligon
I hope that the banks are included in the provision, because we should then have even more money to throw in that direction. The Government have put up the price of gas, but 883 they have rejected two of the schemes which I have suggested and they have taken the minimum action on the third suggestion.
In spite of the international situation and fuel shortages, the Government probably make more money out of North Sea oil and gas than anything that anybody can think of. The Government are making a "bomb" out of fuel, yet we must tell our constituents that for their long-term benefit they must accept a rise in fuel prices. It is a difficult argument to support and it is not helped by other Government actions in the last few months.
I am not a great enthusiast of a nuclear power economy. The day after the Government announced a reduction in the insulation programme from £25 million to £12 million a year they announced the building of 10 pressurised water reactors at an estimated cost of £10,000 million. Such large figures mean nothing. The £10,000 million represents £500 for every house in our great nation. The insulation programme costs £1 a house. Such a situation is not rational.
If we do not do better at guessing what will be required in the next 20 years than we have done in the last 20 years, I wonder what mess we shall be in the year 2000. In the last 20 years we have installed electrical systems which people cannot control and do not understand. I still meet elderly people who genuinely believe that the only way to control a night storage heater is to open the windows. When constituents sometimes tell me about the size of their electricity bills I scratch my head in disbelief. It is impossible to work out how anybody can spend such large sums on such small properties. I have visited elderly constituents whose main problem is caused because a system has been imposed upon them and they do not understand it. Some of them heat rooms to a level which they would never have dreamt of when they used coal and had control. Vast quantities of their precious money is wasted by the ludicrous system.
Perhaps I am lucky in my region, but usually when a constituent comes to me on the question of being disconnected I contact the local electricity board which deals with the matter reasonably. That does not mean that there are not discon- 884 nections because some constituents do not believe that they should have to pay for fuel.
§ Mr. Cartwright
When I raise cases with the electricity board it deals with them sympathetically. I am worried about the many people who do not understand about bringing cases to their Member of Parliament.
§ Mr. Penhaligon
That worries me on a whole paraphernalia of subjects. I often wonder how the hundreds of people in difficulty who do not come to us fare.
The age allowances for the over-eighties was introduced in 1971. Do the Government think that the 25p age allowance should be scrapped, or do they agree with me that it should be uprated to a meaningful sum? In 1971 25p might have been useful, but today it is an insult. The simplest way to help the elderly is to uprate the age allowance to a more realistic level and also to give it to the younger elderly.
If we want to help the single parent mother, especially if she works, we must pay child benefit. It was a disaster that the Government, when examining how to save a few pennies to justify tax reductions for the well off, penny pinched on child benefit. It is a tragedy that single parents who often have low incomes because of their family responsibilities should have to pay for tax reductions. I know the Government's view about child benefit, so we must agree to disagree. However, the age allowance could be extended and could make a useful contribution to helping the elderly who are affected by the technology that we have imposed upon them and the price increases on which we are insisting.
I emphasise how much money we are making out of fuel while imposing such agony on the people. Whether it is oil or gas, enormous sums of money are involved. It is only right and proper that people should look to the Government to put some of that money into reducing the impact of fuel bills, even if it is done on the basis of cross-subsidy, for the long-term good and sensible development of energy supplies.
§ Mr. Nigel Forman (Carshalton)
It is always a pleasure to speak after the hon. Member for Truro (Mr. Penhaligon), 885 because I feel that I am listening to the authentic tones of "Poldark". I have had that experience on a number of occasions, and it improves each time.
The House is grateful to the hon. Member for Woolwich, East (Mr. Cart-wright) for introducing this important and wide-ranging motion, which enables us to discuss a number of related aspects, not all of which I intend to touch upon this evening. I wish to concentrate my remarks on two aspects of the motion—namely, the need to end wasteful energy consumption in so far as that is possible, and the need to ensure—again in so far as it is possible—that every household can afford adequate warmth. As my hon. Friend the Member for Birmingham, Northfield (Mr. Cadbury) said, those are probably the two key aspects of the motion.
Taking energy conservation first, it seems that the motion should lead Ministers to encourage, more energetically than they are at present, better insulation in all of the domestic housing sector. That is one of the most important points, which has been mentioned already by my hon. Friend the Member for Northfield. Similarly, I think that the use of the price mechanism has encouraged and will continue to encourage industry and commerce towards greater efficiency in their energy use. That should not be underestimated as a technique for ensuring greater efficiency and, hence, more conservation.
In considering the transport sector and the impact of the price mechanism there, some figures that I was kindly sent by my hon. Friend the Under-Secretary of State relating to the price of petrol should make interesting reading to the House and should command the necessary conclusions from both sides. Taking 1960 as 100, the figures show the price of petrol in 1980 as 549.4 whereas the retail price index was a little less, at 513.4. If the Government, or any Government, are serious about using the price mechanism in an important and sensitive area such as petrol, the disparity between the rate at which the price of petrol rises in real terms, as compared with the rate at which the retail price index rises, should widen. It is as well for the House and the country to recognise that.
In so far as the motion applies to conservation, it implies more active dis- 886 couragrment of electric space heating than the Government have shown themselves willing to give. I remember once hearing Lord Flowers describe electric space heating as tantamount to a crime, and I am inclined to agree with him. I know that it is difficult to tear up investment that is already made, and probably it would be imprudent to do so, but I think that in future firm guidance should be given by the Department of Energy to the fuel industries to discourage electric space heating, because of its energy inefficiency.
Several hon. Members, including my hon. Friend the Member for Northfield, have said that the Government's policy relies on the price mechanism as the main means to bring about conservation. That is obviously right and it has my full support, as I am sure it has the support of my hon. Friends and, secretly, of some Opposition Members. There is a supplementary role for regulation, mandatory standards, incentives and tax allowances on top of the price mechanism. I am encouraged by the growing number of statements that I have been able to secure from Ministers—from my right hon. Friend the Prime Minister downwards—showing that the Government are now moving along those other lines as well. I stress the phrase "as well."
I wish to cite to the House a number of interesting points, of which hon. Members will not be aware because they were first raised in correspondence with myself. In one case my hon. Friend the Under-Secretary of State for Energy said, in a letter to me on 8 February:I would agree that in the short term, and probably in the medium term too, potential for energy saving as the result of individual actions by consumers is likely to be greater than the potential for increasing supply, as many energy conservation measures can be implemented quite quickly.I pay credit to my hon. Friend for that statement of the obvious. It is good to have it on record.
Equally, it was heartening to learn from my right hon. Friend the Prime Minister, as I did in a letter on 22 April:All my colleagues in the Government are, I know, already well aware of my strong views on the urgent need for increased efficiency and the elimination of waste throughout the economy. This applies with as great force to energy as to any other resource.887 Once again, all power to the elbow of Ministers at the Department of Energy who are trying to bring home that message, not only within their own Departments but, more crucially, within other Departments in Whitehall. I know that they face some tough and difficult negotiations. I wonder whether the Government are doing enough about conservation in that way. The record so far has been reasonable, but I should like to see more done in a number of spheres.
I wish to give a few brief examples. If he were here this evening my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) would tell us about the great benefits of combined heat and power and co-generation. We should never lose sight of the enormous contribution that could be made by the energy industries towards the overall goal of energy conservation and efficiency. The House will be aware that the energy industries, as a sector, are the largest consumers of energy on a fuel input basis. Therefore, the potential for saving is great. I hope that when he replies—or on some other appropriate occasion—my hon. Friend the Minister will tell the House of the positive progress that we are making towards a demonstration project for a district heating and/or combined heat and power.
It is not simply a matter of our own experience; we need to consider also what is being suggested elsewhere in the world. I know that my right hon. Friend the Secretary of State is keen on a recent report of the Ford Foundation study entitled "Energy: The Next Twenty Years", in which there are five clear recommendations on energy conservation. As the report comes from the home of free enterprise, I wish to know whether my hon. Friend will be able to say anything to reassure me that some of the ideas mentioned in the study are being seriously considered, and even acted upon, by the Government.
The report said:The most important thing energy policy can do to stimulate efficient development of the conservation 'source', is to let the prices of other energy forms rise to reflect their real economic value.I am sure that my hon. Friend will give me an assurance, because it is precisely the Government's policy, as I understand it.
888 Secondly, the report recommends thatthe government subsidise conservation investments until other sources are efficiently priced".That would be a prudent investment for the future. I hope that that recommendation is being followed. Thirdly, the report suggests:Valuable legislative direction now exists for encouraging government agencies to use life-cycle-costing techniques in purchases. This legislation should be administered so that government provides a market for energy-conserving technology.Again, that shows that the role of public procurement can be valuable in Government policy.
Fourthly, the report talks about increasing what it calls " Nonhardware conservation research", and states:Much of energy conservation is not a matter of inventing a new gadget but rather of discovering ways to remove barriers or provide incentives, so that people will be able to make choices of less energy-intensive methods of benefit to them and the nation.Again, that coincides with the Government's policy, and I should like to see an even stronger commitment to that. Fifthly, it recommends thatfederal, state and local governments should aggressively 'market' conservation information, especially to households, consumers and small commercial establishments".It gives as examples:Appliance and product labelling, hot lines for advice, mandatory disclosure of energy use of buildings, energy consumption 'extension' services, and other actions that focus attention on energy use".Those recommendations come from the font of the free enterprise culture. They should be distinctly arid as opposed to "wet" in their prominence, and I very much hope that the Government will endorse them and set about ways of putting them into effect.
The second aspect of the motion is the politically more sensitive one of ensuring that every household can afford adequate warmth. That aspect of the motion underlines the importance of the rather generous fuel discount scheme announced by my right hon. Friend the Secretary of State for Social Services on 27 March. In my view, any scheme that, when totalled up, enables £200 million a year to be spent on special help for those who are least able to cope with rising fuel costs, cannot be all bad. I urge the Govern- 889 ment, as and when resources become available, to build on that.
I also think that that should imply the need to encourage, or even to require, the British Gas Corporation and other fuel industries to get more involved in energy conservation, as my hon. Friend the Member for Northfield pointed out. In that connection, some change in the statutory requirements for those industries may have to be considered. One does not have to reform those industries in toto in order to do that; one can perhaps merely make some modification to their statutory requirements in order to build the conservation objective into all their activities.
I shall not weary the House by quoting it, but there was an interesting article on that subject by Mr. John Davis, of the Intermediate Technology Development Group, in The Guardian on 7 May, and I commend it to Ministers and their officials. I believe that a great deal more can be done in that direction. The Government may even have to consider such things as inverted tariffs, more prepayment meters, and the wider provision of payment on easy terms for electricity and gas consumers.
However, as my hon. Friend the Member for Northfield has already pointed out, the reality is that at the end of the day no responsible Government should shelter everyone from every price increase. That is just not the path of responsibility. We must rely on effective and selective help. In the long run, if we are concerned with fuel poverty, as with many other kinds of poverty, we should be dusting off our manifesto's proposal for a tax credit scheme. There is no doubt that, within the right framework, real help for "fuel-poor" people could be included. Therefore, I commend the Government for what they are doing on conservation, I urge them to do more, and I pay tribute to the hon. Gentleman for introducing such an interesting debate.
§ Mr. Frank Dobson (Holborn and St. Pancras, South)
I begin by paying tribute to my hon. Friend the Member for Woolwich, East (Mr. Cartwright) for giving us the opportunity to debate matters connected with fuel. I shall not concentrate on the consumption end, as a 890 number of hon. Members have done, but, rather, on the supply end, because, in some circumstances, it is the cost of the supply of fuel which is one of the major sources of the trouble. That certainly applies in the case of electricity.
There are certain costs which the electricity industry must bear. It must bear the cost of the basic fuels that it uses as well as the cost of providing decent wages for those who work in the industry. However, there are two costs that the electricity industry, and the manufacturing companies that build power stations, have imposed on us that were avoidable, and ought to be avoided in future, and whose imposition on the rest of us has been quite scandalous. The costs and delays in the construction of power stations have been a national scandal for some time, and the gross overestimation of the likely demand for electricity has meant that the electricity industry now has a stupendous spare capacity, which is producing nothing and for which we must pay while it is standing idle.
There is no worse example—or, in a sense, no better example—of what has gone wrong in the electricity industry than the record of the advanced gas-cooled reactor programme—the AGR programme.
I find it slightly amusing that on 29 May last year the Under-Secretary of State, when quoting the costs of supplying units of electricity from various types of power station, added, almost as an afterthought, that because of limited experience of AGR nuclear stations their costs were not included. That is quite right. There was very limited experience. But if the projections made by the CEGB, and its suppliers, of the time that it would take to build nuclear power stations had been correct, four nuclear power stations would have been operating for a minimum of five years, which by my reckoning would have meant at least 20 years' experience of running AGR stations. According to the record, the CEGB's contractors commenced building Dungeness B in May 1965. They then estimated that it would produce electricity in May 1970, but unless there is a late wire from the course in the middle of this debate it still has not produced one watt of electricity.
Hartlepool was commenced in August 1968. It was supposed to have produced electricity by September 1973, but it, too, 891 has produced no electricity to date. Hey-sham A was commenced in October 1969. It was supposed to produce electricity in September 1975, but it has still not produced a watt. Hinkley Point B, the triumph of the AGR. programme in England, was started in April 1966. It was supposed to have produced electricity in April 1972, and miraculously it has managed to produce some electricity, but only since September 1976. It has done so intermittently since then, because to say that the CEGB has had considerable trouble in achieving its rated output would be an understatement, and, as you know, Mr. Deputy Speaker, I am not given to understatement.
I should also point out that those delays have had gigantic financial consequences, which have driven up electricity bills. Dungeness B should have cost £89 million, but the latest cost from the CEGB is £410 million. Hartlepool should have cost £92 million, whereas the latest figure is £381 million. Heysham A should have cost £142 million, but that has now risen to £396 million. Hinkley Point B should have cost £95 million, but that cost "only" £162 million. I emphasise that the figures for the uncompleted stations will increase substantially by the time they produce electricity, but even discounting that, the original estimated cost of the four stations that I have mentioned was just over £400 million, whereas it is safe to say that it is now approaching £1,400 million.
That is a disgrace to the industry, to the private manufacturers and contractors who have failed to build the plant, and to those who committed the country to such a programme. It has become clear that that programme was a non-starter.
According to figures supplied by the CEGB, the cost of generating electricity in other power stations—resulting from delays in the completion of AGRs—has been estimated at £1,200 million. That takes us to a total of £3,000 million. Electricity users had to pay that amount because scandalous delays were involved in building four nuclear power stations.
However, every cloud has a silver lining. In some senses benefits have arisen from the fact that these stations, and others that the CEGB is having built for it, have not been completed. 892 Although the CEGB intends the surplus of plant over the system's maximum demand to be 28 per cent., it is now about 33 per cent. If the plant that was supposed to have been built by 1979 had been built, surplus capacity would have reached 50 per cent. Indeed, it has exceeded that amount in Scotland. Every electricity user is paying for that surplus capacity.
What should be the country's policy on nuclear power? Given the figures that I have quoted, all hon. Members should consider with a jaundiced eye any predictions made by the electricity supply industry or manufacturers, or under the imprimatur of the Department of Energy. The Department of Energy has been involved in all the calculations that have gone wrong, and there is nothing to suggest that it is likely to make any better calculations. The hon. Member for Truro (Mr. Penhaligon) pointed out that if we get our guesses as badly wrong in the next 20 years as we have done in the past 20 years we shall not be able to spend our money on anything else, because we shall be using it to keep ourselves warm and to keep our factory wheels turning.
The Government are said to be committing themselves to a nuclear programme that will cost £10,000 million. The figures that I quoted earlier are readily available to the public. On the basis of those figures, one would expect to find a mysterious reason for the Government's decision to go ahead with the programme. Indeed, it is being propounded by the same people who made a mess of the programme that is still shambling along.
By some freak, I received an article through the post. I do not know whether it is out of order to quote from it, Mr. Speaker. I hope that it is not. It purports to be the minutes of a Cabinet committee. The minutes relate to a discussion of nuclear power policy and the nuclear industry. The document refers to the minutes of a meeting that was held on 25 October 1979. There seems to be no cogent reason that would justify going ahead with a massive nuclear power programme—on the lines suggested by the Government—with the exception of one sentence. Some explanation for that sentence may be found in 893 the Government's anti-trade union obsession. It states:But a nuclear programme would have the advantage of removing a substantial portion of electricity production from the dangers of disruption by industrial action by coal miners or transport workers.That appears to be the Government's justification of their amazing commitment to nuclear power.
§ Mr. Geoffrey Johnson Smith (East Grinstead)
Is not the hon. Gentleman being less than fair to the Government? Surely he will agree that it would be very stupid to base an energy policy entirely on coal. Given the best of good will from the present mining force, there is no guarantee that it can reach targets capable of sustaining coal production to the level required by an expanding British industry.
§ Mr. Dobson
I accept that there are doubts about the capacity of the mining industry to produce all the coal that we may need. However, the figures demonstrate a lack of progress in the AGR programme. They suggest that only a madman or mad woman would put his or her faith in the capacity of the nuclear industry to produce power at anything like the cost, or within the time span, that it estimates.
The Government should tell the nuclear industry and the CEGB to get working on the stations promised for 1970 and 1975. They should point out that that must be done, before an extra penny is committed to a new nuclear power programme. That would be a justifiable approach. It would also be a safe approach. We shall not run out of electricity, because there is an enormous plant margin. The Government have been penny wise and pound foolish. They have roughly halved the amount of money being put into house insulation. They have cut the amount of money given by £12 million or £13 million. That is pennies in terms of Government expenditure. The Government have been wise and careful about that. On the other hand, they plan to squander £10,000 million on a nuclear programme, despite the fact that its completion cannot be guaranteed.
Not all faults can be attributed to the management of the CEGB. Before the country launches itself into a massive programme of expenditure there should be a 894 thoroughgoing investigation into what has gone wrong with the nuclear programme. I do not seek an investigation so that people can be vilified. We should be able to identify the causes of failures, so that some effort can be made to put things right before the same ramshackle outfits are expected to build the next generation of nuclear power stations.
Unless it can be proved that those outfits were right, people will become doubtful about spending any money. If those who have committed money find that they cannot get the stations to work, people's doubts about the safety of the nuclear power programme will increase. If a station cannot even be built, the capacity to build one safely will be brought further into doubt.
I hope that the Government will commit themselves to a careful look at the input side of fuel prices. They should ensure that unnecessary prices are not built in. At present, the people of Britain are having to chip in about £3,000 million in order to pay for a programme that has produced practically no electricity.
§ 6.9 pm
§ Mr. Peter Bottomley (Woolwich, West)
It seems that two and a half debates are taking place tonight. The first debate was introduced by the hon. Member for Woolwich, East (Mr. Cartwright). The second debate has taken place about a general rise in fuel prices. The half debate has been introduced by the hon. Member for Holborn and St. Paneras, South (Mr. Dobson). When he spoke about the problems of the nuclear fuel industry, I was surprised that he did not find time to mention the £500 million that has been spent on an oil-fired station. It has not been completed because of 27 laggers. However, I understand that a rise in the cost of oil has had something to do with the final decision.
Before coming on to the debate introduced by the hon. Member for Woolwich, East, it is worth noting that during the last 10 to 15 years a number of things have happened to most of the primary fuels. The coal industry has gone through its difficulties. One can argue that one of the advantages of nuclear power it that it does not suddenly get switched off, as coal was in 895 1972 and 1974. One might argue that the change in the price of gas over the last 10 years was unpredicted. Although Government encouragement to stop the real price of gas from falling, at least for domestic customers, is right, the relative movement in the price of gas has consequences that are not always considered when decisions are taken. We all know what has happened to the price of oil.
Returning to the first debate, I must say that I always start thinking of blocks of flats in Nightingale Vale, between the hon. Gentleman's constituency and my own, which are stuck with all-electric heating. It is the kind of heating that people cannot afford to keep going, in the kind of housing that is normally occupied by those who cannot afford to move. This problem needs to be dealt with on its merits.
I do not believe that we shall be able to find a solution that will apply to all forms of heating in all forms of housing tenure and all forms of housing construction, and which will meet the particular needs of the disasters, in heating terms and poverty terms, of industrialised building, followed by Ronan Point, which have left these people with all-electric heating.
I believe that it would be right for local authorities, in their associations, to discuss with the Government and representatives of the tenants concerned—let us remember that in the main we are talking about tenants rather than owner-occupiers of such homes—how this problem can be dealt with. No solution will deal with their needs unless it is a scheme tailor-made for them. I do not believe that it will be a scheme that can be dealt with by the Department of Health and Social Security. I think that it will have to be taken into account and dealt with by local authorities.
I should like to make a general point on what I might call the economics of poverty. I think that it would be wrong not to accept that there is a growing problem of fuel poverty. I think that it would be right to accept that the level of disconnections and the type of disconnection need to be analysed on a regular basis, preferably in the early half of the year, so that whatever remedial action 896 is decided as appropriate can be taken before the next winter comes in. I recognise that because of the fairly mild winter that we had in 1979–80, perhaps we shall not learn this year as many lessons as we would have learnt had that been a severe winter. The problem of disconnections needs to be raised in this House each year, because I have no doubt that we shall evolve better codes of practice with the fuel boards, and it is a matter with which the House should be concerned.
Having said that, however, if we are to move to a special form of additional finance for poor families—and clearly the cure to poverty is money rather than services, in most cases—and if we are to start looking for additional sources of finance for fuel and water service charges—as I believe we shall as the impact of rising water rates makes itself more and more apparent; again, an example of a charge rising faster than the old-age pension—we shall end up with a rather odd society in 20 years' time.
It will be a society in which, first, we shall have increased the pensions of those who have retired and we shall, I hope, have increased the level of child benefit to deal with those children who are also at risk through hypothermia and lack of effective heating. We shall have brought in both higher benefits as of right for these people, and we shall have got some kind of fuel assistance, and perhaps water rate assistance.
We shall, therefore, have a generally rising standard of living, with extra help for necessities and essentials, and in effect we shall be saying to people "Use your increased spending power on candy floss. Move on from the black and white television to a colour set, to Teletext, to Viewdata and whatever", but we shall still be left in the illogical position of allowing every group that is arguing for some necessity to come forward and say "We need a special scheme." Whatever action the Government take, this year or in future years, they should make sure that we do not end up in that kind of situation.
Finally, on the whole question of insulation, what is important is not what the Government spend on insulation, but what is spent on insulation. Here again 897 it seems to me that the Government's job is to make sure that sufficient research and analysis is going on. If it turns out that more Government action is required to encourage others to spend their money on insulation, that will be fine. If it turns out that it is necessary for the Government to spend our money on insulation, that again will be fine. The important issue is not whether the Government spend £15 million or £30 million, or even £7½ million, on insulation measures. What is vital is that we all spend our money on insulation, because it is in our interest to do that, and, having done it for ourselves, I think that we are far more likely to provide the help that is needed for those who are not able to organise it for themselves or to pay for it themselves.
§ Mr. Allen McKay (Penistone)
Following the remarks of the hon. Member for Woolwich, West (Mr. Botomley) on home insulation, I believe that this is an adequate measure, which should be carried out. Therefore, it was with some regret that we saw that the Government had cut grants for home insulation by half. The City of Sheffield, and Barnsley—my old authority—were achieving very good progress on home insulation, but because of Government policy on various matters that programme has now had to be cut out.
Local authorities need help in other ways as well, because they have a problem in relation to condensation. This problem is not confined to any particular area; it stretches from one end of the country to the other. The remedy for condensation suggested by the Department is that one should turn up one's heating and open one's windows. That is what the planners, the architects and the departmental information services are suggesting. Turning up one's heating and opening one's windows constitute a contradiction of sorts, but if that is the only way in which some people can get rid of condensation, they are having to do so.
Many of my constituents are hit by rising fuel prices—none more so than the elderly. They cannot understand why the Government have raised gas prices by far more than the Gas Corporation wanted. If we are to run into a market situation, for heaven's sake let us have that market situation and let us not have 898 one created from Government sources by doing exactly what the Government have done and putting the price of gas out of the reach of many old-age pensioners.
Before North Sea gas started to come on stream, people were told that it would lower gas prices. It was said that it would make gas the cheapest fuel of all. Therefore, we do not believe the Government when they start talking about cheap prices arising from nuclear energy.
Local authorities need help when going into a building programme. If double glazing and extra fitments are to be put in, the price of a house will increase. Already people cannot afford their houses, anyway. They cannot afford the rents, so one has to look after that aspect as well.
I come finally to the points made about the coal industry. It has been said in this debate that the industry could not produce the necessary coal. In fact, we can produce the coal if we know exactly what is wanted. Let the Government say what the National Coal Board must produce and the NCB will produce the miners who will produce the coal and satisfy any coal requirement of this country. The coal is there. The miners are there. I closed about 20 collieries while working for the NCB and I watched experienced miners drift away from the industry. If that is the type of policy to be carried out we shall not have the coal, but if that type of policy is reversed, and if coal is exploited to the full, the mining industry can provide as much coal as the nation needs.
Following on that point and on building, if the coal is produced let us have houses in which to burn the coal. In future every house should be built with a chimney, because with a chimney it has an alternative means of heating, by whatever fuel is the cheapest.
§ Mr. Joseph Ashton (Bassetlaw)
I am sure that all right hon. and hon. Members are deeply grateful to the hon. Member for Woolwich, East (Mr. Cartwright) for tabling this motion. Fortuitously, it is being discussed on a day when it has been announced that the increase in electricity charges will now take effect from August, rather than October. I understand that the Government intend to refer 899 the matter to the Monopolies Commission. I do not know what the Monopolies Commission is expected to say or do to stop the increase, because the cash limits of the Government have pushed up the prices. There should be some interesting investigations.
During the past year there has been a totally inconsistent energy policy, which almost defies description. First, there was a massive advertising campaign, asking people to "Switch off" and "Save it". Then, gas prices were increased by 29 per cent. because gas was being used too quickly, and the Government wanted to bring the price of it in line with that of electricity. Then the price of electricity was raised because people were not using enough. What sort of paradox is that? We shall soon reach the stage where the Government will be telling the pensioners to keep warm by buying a jar of Fiery Jack ointment, rubbing it in well, and running on the spot, singing "There's a hole in my bucket, dear Liza".
We are now taking a Monty Python attitude to pricing of electricity. The Government believe in a free market economy and Milton Friedman monetarism, except in energy. When gas can be sold cheaply, at great benefit to consumers, the price is lifted in order to conserve it. That in itself is not too bad a policy, if it is only part of the policy. If it were backed up by vigorous insulation and protection policy for the poor we might go along with it. But it is not being backed up by either. We have a Catch-22 situation. If we use too much gas the price goes up. That is a policy that defies belief.
As the hon. Member for Truro (Mr. Penhaligon) said, massive profits are being made from energy. North Sea oil and gas are both bringing in massive profits. As my hon. Friend the Member for St. Paneras, North (Mr. Stallard) said, the electricity industry could have made massive profits if it had completed its building programme on time. Every one is making money and enjoying it, except the pensioner. Old-age pensioners were promised a 16½ per cent. increase in the Budget, supposedly to keep in line with the rate of inflation. There was an announcement today that inflation is likely to top 21 per cent., so the old-age pen- 900 sioners are 5 per cent. worse off. Gas prices are to rise by 29 per cent. So, the poor get poorer under the Conservative Government and there is a massive redistribution of wealth from the poor to the rich.
Instead of the poor enjoying the benefits and profits of North Sea gas and oil, those profits are going straight to the Treasury. The Chancellor simply says "Thank you very much", and says that he will use them to reduce the public sector borrowing requirement. In effect, they will be used to finance the tax cuts for the rich. Under the Conservative Government in 1970–73 there was a policy of keeping down nationalised industry prices to reduce inflation, but this Conservative Government have a policy of milking nationalised industries to produce the maximum profits so that the money can be given away in tax cuts.
§ Mr. Forman
The hon. Gentleman would be wise to bear in mind what was said publicly by his hon. Friend the Member for Birkenhead (Mr. Field), before he became an hon. Member, about the record of the Labour Government during 1966–70, which he documented when he was in charge of the Child Poverty Action Group. The then Labour Government's policies left the poor worse off, by a long chalk.
§ Mr. Ashton
I do not wish to go back 14 years, to a date before North Sea oil extraction. We are now talking about the massive profits of North Sea oil and gas, which were not there during 1966–70. They are so embarrassing that the Government are now having to bring in an excess profits tax to ensure that the money goes to the Exchequer. It is a tragedy that they did not bring in legislation to help the poor and to provide them with some cheap gas. The cash is there. The Gas Corporation's profits have doubled from £300 million to £600 million.
The Government have put forward a social security solution of paying £1.45 a week in fuel allowances. That is a flat rate benefit. I do not accept that it is anywhere near as good as the electricity discount scheme introduced by the previous Labour Government. No matter what the size of the house, only £1.45 is allowed. Some old ladies—many of them Conservatives—may be living in 901 large four and five-bedroomed houses, which cost more to heat than a bedsitter of a one-bedroomed flat. There are many examples of that.
Some of the facts produced by the National Right to Fuel Campaign are illuminating. They give as an example a lady who is receiving the £1.45 a week benefit. She lives in an all-electric house with her 2½-year-oId son who has pneumonia. Last year, a quarter of her electricity bill—£85—was paid. She received that in addition to the fuel allowance. Now she receives nothing.
Another example is that of a lady with two children, aged 6 and 10. Last year her electricity bill was £64. She received £16 back under the electricity discount scheme, but as her youngest child is over 5 she is not entitled to the extra £1.45 that the Government allow. She is therefore £16 worse off. The allowances given by the Government apply only to couples over the age of 75 and families on low incomes where the youngest child is under 5. There are literally millions of people who would have benefited from the electricity discount scheme, but who do not now benefit under the fuel allowance scheme. Large families and the elderly are mainly affected. Large families need to burn more fuel because children are at home, and the elderly feel the cold more. Families with children have to keep them warm and have to cook for them. Their comparative costs are much higher, and they need the cash, but they do not get it.
§ Mr. Ashton
I am sorry; I shall not give way now. I shall sit down in about 10 minutes.
About 15,000 households have their electricity supply disconnected for more than a month, because they are too poor to pay the bill. The costs of electricity have risen far higher over the last few years than have supplementary benefits or pensions. When the proposals in the Budget are analysed in terms of what has been granted—the electricity discount scheme cost about £130 million last year—and that is updated in line with the cost of fuel, it will be seen that the Government will not have given a single penny in extra allowances from the profits that have been made to keep the poor warm.
902 Their policy on insulation is equally appalling. We should be starting a crash scheme of insulation, particularly for our council houses. I do not need to repeat the statistics that have already been mentioned. There have been cuts all the way along the line. There have been cuts in the allowance for people who wanted to carry out their own insulation schemes from £25 million to £12 million, and there have been cuts in insulation schemes that could have been carried out by the local councils, and that have been swallowed up in block grants. When a Labour Government were in power and were prepared to give grants for insulation, the Tory councils would not take them up. Now a Tory Government is in power, and the Labour councils are willing to take up such schemes, but the money has vanished into the block grants. That is crazy. The Tory councils who would not take up the grants previously have now given an excuse to the Tory Government to cut them. To start cutting back on insulation grants is a pretty poor conservation policy.
Now that North Sea oil and gas are making profits, we need a total reappraisal of domestic fuel consumption and needs. In February 1976 a White Paper was produced, entitled "Energy Tariffs and the Poor". It contained many good recommendations on inverted tariffs, which are worthy of reconsideration. It suggested that instead of starting with expensive units that become cheaper as the consumer uses more electricity, we should start with lower-priced units and introduce heavier charges per unit as consumption increases. That would mean that someone living in a six-bedroomed house who wanted to keep every room at 75 degrees would have to pay much more than a poor pensioner living in one room. We must use profits—I think that everybody accepts this—to provide greater benefits for the poor.
I thought that we might hear something from the Government Benches about the use of slot meters. Coin-in-the-slot meters for the poor are acceptable. I am ashamed at the way in which electricity boards have dragged their heels and made various excuses for not installing such meters in new properties. They say that they do not want to collect the cash, because they are scared that their collectors will be under threat of having it stolen. They 903 think that such meters tempt some families to break them open. They claim that it is difficult to measure the supply and that the system costs about 10 per cent. more to operate.
All those who come to my surgery— I am sure that this applies to all hon. Members—who have an energy problem say "Yes" when I ask them whether they would like a coin-in-the-slot meter. They ask me to assist them in getting one installed. A Member of Parliament can always arrange for installation. However, many consumers have often applied for coin-in-the-slot meters and have been fobbed off with various excuses. Such a meter is one of the best aids that a poor family has. The family is able to pay as it goes. It knows how much the electricity supply is costing. If the house is warm and the electric fire goes off at II pm, the family will go to bed rather than put another 50p in the slot so that they may stay up and keep warm until midnight.
The scheme was available many years ago. How did suppliers sell electricity at the turn of the century, when people were very poor? The answer is that they sold it through slot meters. The cost of electricity and gas has now reached such a level, and has become such a major part of a family's budget, that it is ridiculous to expect ordinary people to run up a bill for three months and then to face them with a demand for £150 or £100. The electricity boards show no inclination to install slot meters. There is a need for legislation so that the consumer will have the right to demand slot meters for gas and electricity.
Thirdly, we must have a fuel rebate system. We have had a rate rebate system for many years. The scheme was introduced by a Conservative Government. We have had rent rebate systems. These have not been flat rate allowances. We do not give a flat rate allowance. Rent and rate rebates depend on the size of the property and on an individual's needs. We must adopt the same approach with a fuel rebate system.
The electricity discount scheme of a previous Labour Government had its merits. That Government kept gas reasonably cheap to help the poor consumer. Those who lived in all-electric 904 high-rise flats received a good discount. However, it did not do a lot for the old lady who was living alone in a large house—the family having grown up and left—and who had a gas fire in one room, a paraffin stove in the hall, an electric fire in the bedroom and a coal fire in the kitchen. However, if that old lady were given a fuel rebate stamp it would be acceptable.
We have talked to the heads of the industries and they would be prepared to accept stamps. Bus tokens or free bus passes are acceptable to pensioners. They do not regard them as charity, or handouts. They know that they have, in effect, paid for them all their lives and that they are entitled to them. The cheap television licence is acceptable to pensioners. They complain only when they cannot get it, not because it is available.
That is the sort of scheme that must be produced, and if a Labour Government are returned following the next general election they will produce one. We shall take some of the profits from North Sea oil and gas and use the money to help the poor, who are entitled to keep warm in the 1980s. That has not been done by the Government.
§ The Under-Secretary of State for Energy (Mr. Norman Lamont)
When my hon. Friend the Member for Woolwich, West (Mr. Bottomley) said that the debate had been divided into two separate debates, I think that he was being rather optimistic. One of the great difficulties about replying to the debate is that it has been so wide-ranging and has covered so many different aspects. I should like to take up the remarks of the hon. Member for Holborn and St. Pancras, South (Mr. Dobson) about the nuclear industry, but alas, I fear that time does not permit that today. That will have to await another occasion.
I shall ensure that some of the comments of the hon. Member for Truro (Mr. Penhaligon) are passed on to my right hon. and hon. Friends in the Department of Health and Social Security. A number of matters that have been raised in the debate are appropriate to refer to that Department, and I shall ensure that that is done.
I join the House in congratulating the hon. Member for Woolwich, East (Mr. Cartwright) on choosing the subject and 905 on the way in which he introduced the debate. The hon. Gentleman made a formidable speech, which was full of detail. He highlighted many important matters and I want to try to reply to a number of them. I cannot cover them all, but I assure the hon. Gentleman that we shall carefully study his speech, which was extremely valuable.
The Government's approach to energy policy can be characterised as both realistic and responsible. Some of the criticisms that are sometimes made, not least from the Opposition Benches, could best be described as both irresponsible and unrealistic. It would be pleasant to pretend that we live in a world in which energy is cheap and abundant; a world in which nothing had been heard of OPEC. However, as a responsible Goverment we must face the realities of the world. The garage forecourts have been blazing the news for some time, but it has not always sunk in that this is a world of rising energy prices, insecure energy supplies and increasingly scarce energy.
Energy, like peace, is indivisible. Rising fuel prices, to which the motion draws attention, are a worldwide phenomenon. Over the past decade the price of crude oil has risen twentyfold in money terms. Between December 1978 and April 1979 the cost of crude oil to United Kingdom refiners rose by the sky-scraping figure of 130 per cent.
The United Kingdom is relatively well placed with its substantial resources of oil, coal and gas, but we are neither insulated nor isolated from worldwide trends. Britain is not the Persian Gulf. We do not have hundreds of years of supplies of oil and gas, and we must adopt pricing policies that prolong our period of self-sufficiency and enable us to conserve our resources.
Against that background, there is no point in trying to delude ourselves that the days of superabundant fossil fuel can return. They cannot, and we must not be irresponsible and pretend that they can. My hon. Friends the Members for Birmingham, Northfield (Mr. Cadbury) and for Bedford (Mr. Skeet) both put extremely well the case for economic pricing.
We must bear in mind that the cost of gas to the British Gas Corporation 906 is rising rapidly. New gas supplies are many times more costly than the cheap southern basin gas that is available under old contracts. Demand for gas far exceeds supply. It is far better to use pricing to improve the balance between supply and demand than to rely upon rationing.
§ Mr. Lamont
I am sure that, on reflection, my hon. Friend will understand when I say that it would not be prudent for me publicly to give him that information.
The third point about gas pricing is that, because the real price of gas to the domestic consumer has been falling for several years, last year sales to the domestic sector only broke even. The British Gas Corporation would make a loss on domestic sales if price increases were not allowed. The corporation, buying gas from the North Sea, is a monopoly purchaser, buying sometimes on historic contracts, which adds to its profits. The hon. Member for Bassetlaw (Mr. Ashton) and others have referred to the large profits of the energy industries and how they create a bonanza, which the hon. Gentleman can use for all sorts of purposes. However, the large profits of the energy industries cannot be isolated from our national finances and our large debts. We cannot pretend that we have one and not the other.
With electricity, the effect of rising energy costs is felt even more directly than with gas. Fuel costs account for over half the final price of electricity. While the industry must make every effort further to improve its efficiency, that must not be used as an excuse to shield consumers artificially from developments that have led to a real increase in the cost of producing electricity.
It was announced in January that area electricity boards would introduce in two stages the electricity price increases needed this year. The first stage, averaging 17 per cent., took effect from 1 April. Area electricity boards are now considering increases in August, against a background of somewhat higher increases in 907 costs than anticipated. Tariffs are a matter for the industry, but the council has announced today that, although the tariff increases will vary from board to board, on a national average they will be about 10 per cent. Those increases stem largely from increased fuel costs, which, as I say, now account for over half of the industry's total costs.
There have been further increases in fuel oil prices this year. The largest fuel cost is coal. A price increase of roughly 3 per cent. on coal adds 1 per cent. to electricity prices. With the electricity industry's coal bill well in excess of £2,000 million per annum, even small increases in the price of coal, if unmatched by tariff increases, have a deleterious effect on its finances.
In assessing fuel costs the industry has to take account of a number of factors, including the recent coal price increase and the alteration in settlement dates for wages claims in the coal industry. In addition to fuel costs, other costs, such as capital charges, salaries and purchases, have risen in spite of real economy efforts. It is vital that everything should be done by the electricity industry to absorb costs, and the Government have stressed that fact to the corporation.
The House will recall that the Government have taken powers under the Competition Act to refer, amongst other things, the costs and efficiency of the nationalised industries to the Monopolies and Mergers Commission. My right hon. Friend the Minister of State for Consumer Affairs today announced that the CEGB's costs and efficiency are being referred to the Commission for investigation to establish whether everything possible is being done by the board to absorb costs and increase efficiency in order to keep prices as low as possible. The terms of the reference will be announced shortly.
It is sometimes alleged that economic pricing for fuels is an eccentric aberration pursued by this Government alone in Europe. That is not the case. Other Governments in Europe have indicated that they are moving to economic pricing for fuels. If we look at the position in neighbouring countries, we see that British prices—certainly domestic prices—are by no means excessive. The latest available EEC Commission data indicate 908 that domestic prices in Britain are among the lowest in Europe. Even if the prices are adjusted to take account of higher wage levels in Europe, United Kingdom prices are still well below the EEC average.
The Government accept that economic pricing and social policy must go hand in hand. We recognise, as my hon. Friend the Member for Woolwich, West argued in his admirable speech, that large and sudden fuel price rises can pose problems for the old and the poor. Fuel poverty can trap people into a cycle of debt. There is the danger that, if elderly people cannot go without heat, they will go without some other necessities. If the poor run into rent arrears too, they may be prevented from moving to housing that is more economically heated. Several hon. Members have referred to the problem of economic heating, particularly in housing heated by electricity. My colleagues in the Department of the Environment are making detailed technical advice available not only on insulation but on property design. It is a problem, and local authorities can be helped with advice.
The elderly and the poor tend to devote more of their total expenditure to fuel and other necessities than does the average family. Fuel price increases can therefore have a disproportionate impact on those vulnerable groups. That does not necessarily mean that their overall cost of living increases faster than that of the average household. Different indices for different groups over a longer period move remarkably in parallel. However, that may not be so in future, and the Government must watch that closely. Nevertheless, given the impact that fuel prices can have on the budgets of low-income households, the problem of adjustment can be acute. For that reason, next winter, in addition to the normal uprating of pensions and long-term benefits, we are extending entitlement to the extra heating additions under the supplementary benefit scheme and increasingly by large amounts the sums that would have been available.
Although the hon. Member for Walsall, North (Mr. Winnick) was generous enough to welcome the scheme, he implied that the amounts would have been adjusted anyway. However, they are being adjusted by even more. The Government's package of measures for next 909 winter is generous at a time when public expenditure is under pressure. We are spending £205 million, compared with £125 million spent on aid with heating costs under the previous Government. A substantial amount of that is new money. We are increasing help with fuel costs in real terms over and above the rise in fuel costs. It has been made clear that in future those amounts will be adjusted by reference to fuel price increases. A permanent uplift has been given.
§ Mr. David Ennals (Norwich, North)
I welcomed the move when it was announced by the Secretary of State, but does the hon. Gentleman accept that it is much more than paid for by making a 54-week year for pensioners? By losing two weeks of uprating, pensioners will pay for the benefits that they will get for their heating allowance.
§ Mr. Lamont
Although I am doubtful about the right hon. Gentleman's comment, I shall draw it to the attention of my right hon. Friend the Secretary of State for Social Services.
It cannot be denied that £85 million of that money is new money, over and above the money allocated by the previous Administration. Our help is more effective. The previous Government's discount scheme was spread so widely that the help was given on an insignificant basis to large numbers of people—about £7.50 per beneficiary—whereas under our scheme some people will benefit by as much as £176.80. Also, about 2 million poor consumers will benefit.
§ Mr. Arthur Lewis (Newham, Northwest)
I know that the Minister is a compassionate man and that he is doing his best in the present difficult economic situation—[Interruption.]—Hon. Members should not laugh at me for taking my shoe off. I happen to have a bad foot, and it is no laughing matter. Is the Minister aware that many old-age pensioners and sick and disabled people just cannot afford to meet the costs? Before the electricity or gas industry cuts off the supplies of these people, for whatever reason, will the Minister have a word with the appropriate Department and ask it to contact the Department of Health and Social Security in that area in order to ascertain the facts? I do not want to help those who can smoke or drink themselves to death and dodge their 910 fuel bills, but I believe that the electricity and gas industries should contact the DHSS to see whether people about to be disconnected need special help and whether it can be given.
§ Mr. Lamont
I shall come to the question of the code of practice and disconnections, but before I do so I wish to comment about the pay-as-you-go methods. These are no substitute for financial help, but they have a role to play in combating this problem. About 20 per cent. of electricity consumers use some sort of pay-as-you-go method.
A number of hon. Members have expressed an interest in the extension of the gas and electricity savings stamp schemes. We have had discussions with the industries about making their stamps more widely available. Negotiations have been in progress with the National Federation of Sub-Postmasters about the possibilities of the stamps being sold in the offices of the federation's members. Those negotiations have been successful, and I am happy to announce that agreement has been reached on the terms under which the industries' stamps may be sold at sub-post offices. The industries hope to implement this arrangement from 2 June. I stress that this is optional on the sub-post offices, but I hope that a large number will agree to the scheme. There are 19,000 such sub-post offices, and this should add considerably to the availability of the stamps. Another matter is the interchangeability of the stamps. I hope that agreement will be reached on that. The Government are keen to see that happen, and negotiations are proceeding.
A number of hon. Members have mentioned prepayment meters. The number of these meters has declined. That is not necessarily because of the attitude of the boards. These meters are not always suitable for many people and they pose some risks for the boards as well. However, the boards have dropped the hardship category that was necessary for prepayment meters. I share the views expressed by some hon. Members about the need for them, and I am sure that the boards will do everything possible to make more meters available.
The hon. Member for Woolwich, East also referred to the problem of disconnections. It is important to put the figures 911 into perspective. While the figures for 1979–80 showed a small increase, they were nothing like as high as those of some earlier years. The majority of those disconnected are reconnected in a short period and are only a small proportion of domestic consumers. The overall figures for disconnection do not necessarily indicate the amount of hardship being caused. Although some people are in hardship, others are feckless and allow their debts to run up. The London Electricity Board has had much criticism—I have even had letters from Members of Parliament complaining about their electricity being cut off. However, as a result of action? taken by that board, it has managed to reduce its debts by £28 million. That is a substantial achievement and a substantial advantage to all other consumers who would have had to carry the debt.
I agree that other considerations arise on the longer-term disconnections. Very little is known about these cases. I shall study the figures that the hon. Member for Woolwich, East quoted, but little is known about the cause and the hardship effects. The industries and the consumers' councils share a desire to probe the problem further. For that reason the Policy Studies Institute, which has carried out an independent review of the code of conduct, has been asked specifically to examine the problem of people who are disconnected for periods of more than one month.
The hon. Member for Woolwich, East also asked why the PSI study was taking so long. I have been asking that question myself. I am informed that as a result of the pressure that the Government have been exerting—the review is the responsibility of the sponsors, that is, the industry and the consultative councils—some preliminary results will be made available in time for the coming winter.
The hon. Member also referred to the possibility of pursuing debts through the courts rather than disconnecting people. That argument might have more validity if there were not an obligation on the industries to supply. If they do not have 912 the right to cut off, debts will continue to pile up and it will be more and more difficult for them to recover the money.
The motion calls on the Government to end wasteful consumption. If the motion referred simply to the Government setting an example in the use of energy, we could accept it. I very much agree with those of my hon. Friends who have criticised the approach that energy conservation should be a matter of the Government spending more and more. My hon. Friend the Member for Birmingham, Northfield pointed out that the money spent on conservation was not just money that was spent by Governments. A total of £200 million was spent by individuals installing insulation in their homes. The money spent by private industry may amount to thousands of millions of pounds. That is a figure that one should compare with the investment in nuclear power to which some hon. Members have objected. There is a role for the Government, and the proper role is to set an example on information, education and advertising. We are increasing spending in real terms by 30 per cent.
Lastly, the responsibility of the Government is to help the needy. That is why we are expanding the help that we give to the elderly and pensioners for insulation. We are giving more help than ever before.
While sympathising with the intentions of the hon. Member for Woolwich, East, I have some reservations about the wording of his motion. A responsible Government does not mean one who are responsible for everything and who take away all responsibility from the individual to manage his own affairs and to make his own decisions. Rising real prices are a problem, but they are a problem for us all. The Government recognise their obligations, but they must also, through pricing, hammer home the message that energy is scarce and—
§ It being Seven o'clock, the proceedings on the motion lapsed, pursuant to Standing Order No. 6 (Precedence of Government business).