§ Mr. Speaker
I must inform the House that I have selected the amendment in the name of the Prime Minister. A considerable number of hon. Members from both sides of the House have indicated that they hope to participate in the debate. I hope that those who are fortunate enough to be called to speak will bear that in mind.
§ Mr. Merlyn Rees (Leeds, South)
I beg to move,That this House deplores Her Majesty's Government's lack of overall energy policy; condemns the pricing policy which handicaps the competitiveness of British industry, and rejects a policy for coal which would lead to a reduction in the output projected in the 'Plan for Coal'.We have divided the motion into three parts. We are concerned about overall energy policy, pricing policy for industry and the "Plan for Coal." Our energy position is the one bright light in the economic firmament during a world depression that has been accompanied by a domestic economic policy that only exacerbates the position. The House does not pay enough consistent attention to energy. Every year a Budget Statement is made, from which legislation flows. There is discussion on the Government's economic policy, and such discussion spreads throughout the country. In our view, there should be an annual energy statement that should lead to debate and discussion. In addition, the Select Committee on Energy should be brought into that discussion.
I am a new Front Bench Spokesman on this subject, and during the past month I have looked back in the records. In the past, the Government have—typically—issued written answers when they have wished to put on the record key decisions on energy policy. I hope that that will not be the case in future. Just before Christmas a written answer was issued on the gas-gathering pipeline. If my hon. Friend the Member for Dunfermline (Mr. Douglas) had not used his initiative and raised this matter during the Christmas Adjournment debates it would not have been discussed. It is of vital importance to the country.
Similarly, a written answer was given on the postponement of the BNOC Clyde field. Such important matters should not be slipped in. There is room for more consistent discussion on energy policy. As a new spokesman, I have considered the Energy Commission, its work and its demise. Whatever form it may take, and whatever name it may be given, there is room for a forum in which those involved in the industry can discuss Government policy and become involved in its formulation. There is wide interest in the House on this subject, and many hon. Members have practical experience of it. No Government should think that they know best, particularly on energy policy.
We must find ways of bringing into the discussion those involved in the various energy industries. I am against bureaucracy, wherever it may exist. I have no wish—as 262 seems to have been argued—to set up a bureaucratic pimple on the body politic. Nevertheless, open discussion of this subject is vital.
We all know that not only is there a need for a general acceptance of policy; in addition, there must be a flexibility of approach. As a result of the long leads in investment, decisions taken in a short-term situation will almost certainly prove to be wrong in two or three years' time. Changes are constantly taking place.
I should like this debate to be forward-looking. About 30 years ago I studied the report of the first commission on the coal industry in 1871. That was 110 years ago. Some of the most eminent men in the coal industry were members of that commission. The commission said:Every hypothesis must be speculative,"—that shows good sense—but it is certain that if the present rate of increase in the consumption of coal be indefinitely continued, even in an approximate degree, the progress towards the exhaustion of our coal will be very rapid.Professor Jevons, a very eminent economist at that time, was one of the leading proponents of the market approach to economics. He put the case even more firmly in the report. He said that coal supplies would run out within 110 years. Exactly 110 years later, we know that he was wrong.
The commission's report raised another interesting point. It argued that much of the coal that we had could never be mined. It said that it knew of coal-bearing strata in North America that was almost untouched and that was about 70 times the area of our own strata. The commission speculated that in time we would import our coal from North America.
The report went on to say—this is very revealing:it may well be doubted whether the manufacturing supremacy of this kingdom can be maintained after the importation of coal has become a necessity".I want to return to the question of the importation of coal. The report was wrong. Wrong decisions were taken in the 1950s and the 1960s by both Labour and Conservative Governments. We on the Opposition side, know that wrong decisions on the coal industry were taken at that time. What we have to endeavour to do, in an uncertain field, where things that look right in the short term are shown to be wrong in the medium and long term, is to get it as right as possible but to be flexible, so that we can make changes when our belief of a year or six months before is proved wrong.
One other change in recent years concerns the international dimension of energy. There are international effects from the discovery and development of oil in the Middle East. There are international decisions. There is the International Energy Agency. I have read the long report that came out of a ministerial meeting on 9 December, when fundamental decisions were taken. All that we were given in the House was a written answer on 16 December. The situation demanded a full statement to the House. I ask the Secretary of State to make sure that in future the quarterly meetings of the IEA—its decisions and what happened—should be reported in exactly the same manner as meetings in the EEC are reported to the House. If it is good enough to report what happens in agricultural arguments in the Community, since energy is of far greater importance hon. Members should be given a report.
I have listed some of the issues that were decided. I hope that "decided" is the right word. One of these was 263 that there should be an extension of oil-sharing agreements. What does that mean in practice? Another was that there should be further restraint on oil consumption. What does that mean in practice? The report referred to lines of action—the word "action" was used—on energy switching. An important report was received on coal, with the Ministers recommitting themselves to a doubling of production by 1990. That dealt with a number of countries. In terms of the Opposition motion, it surely means a commitment to the "Plan for Coal", started seven years ago.
What does acceptance mean if it is not translated into action? I shall return to the coal aspect, but there are other important matters connected with energy policy which no doubt will be raised. I give notice that, in any event, the Opposition will return to them in the future and as soon as possible. I touch briefly on one of these subjects.
The question of oil revenues is, in general, a matter for the Treasury, but one aspect falls directly on to the desk of the Secretary of State. The oil revenues now coming into the Exchequer accounts give the United Kingdom more economic hope than anything else. They are the basic cause of the rise in the value of the pound which has other implications. What is the truth on the oil revenues? What is the truth, so far as one can get at it, about the output of oil?
The official projections of future Government revenues from North Sea oil are substantially lower than the projections of independent forecasters. The Treasury forecast puts the figure for 1983, at 1980 prices, at up to £2.4 billion. Wood Mackenzie gives £4.8 billion; Phillips and Drew, £6.2 billion; and the National Institute of Economic and Social Research, £7.8 billion. The right hon. Gentleman should give some justification, if not today, at some time, of the output figures on which the Treasury carries out its political arithmetic. There should be a justification from the Department of Energy to the House to explain why this has been done in a certain fashion.
Following the report in the Financial Times last Friday that the Department is reassessing the reserves, the House should know those who are carrying out the reassessment. Will a part be played by the BNOC? The figures on which the revenues are based are of the greatest importance. Far be it from me necessarily to agree with what is written in the New Statesman. Its view was that the figures were deliberately being underestimated so that they could be updated at a suitable political date. I am concerned only with the practicalities. We must know the basis on which this operation is conducted.
We shall also need to consider the problems of consumers—particularly the lower income groups—and the termination of supplies in difficult economic circumstances. This is a personal matter. I represent a working-class area of Leeds. I know the problems that face people moving into new developments. It is not a matter of world-shattering importance compared with the public sector borrowing requirement, oil revenues, and the "Plan for Coal", but it is a matter to which hon. Members should apply their minds. It is a significant issue for a small but important proportion of the people.
I should like to refer to nuclear power. I am not clear—although I accept that these are early days—about the progress made on the setting up of the public inquiry 264 into the pressurised water reactor. What form will it take? When will it start? I am aware of the great emotions that are quite properly engendered by this subject. Until we have the inquiry, until we are given the terms of reference, until we are told the date, and until people are able to gather the evidence to put to the inquiry, the emotion will remain pure emotion. There will not be the chance to translate it into proper discussion of the use of nuclear power.
Following the priorities stated in the Opposition motion, I turn to the two main subjects under the general heading of energy. The first is industrial energy prices. As the CBI has stated, there is no doubt that concern has been mounting in recent years over the rate of increase in United Kingdom energy prices. There is even greater concern that our energy prices are higher than those enjoyed by our major international competitors. High energy costs can seriously threaten the viability of certain sectors of industry. The Under-Secretary of State for Energy—the hon. Member for Kingston upon Thames (Mr. Lamont)—made a speech at Manchester on 14 January. He said, in effect, that high energy prices act as an inducement to energy conservation and even more. His words were:Over the last five years, it has become a cliché to refer to the fact that we are living in a world of high energy prices. There can be no expectation of a return to the days of cheap and plentiful fuel.
§ Mr. Rees
That is a statement of fact that only those who shout "Quite right" can ever have queried. The Under-Secretary of State went on to say:High energy prices will mean that a quite different climate for investment decisions will develop, once the first signs of business confidence are restored. Consumers across all market sectors may then feel"—not now—the necessity to invest in new energy efficient equipment—new assets, new processes. Those who jump first into this market could make a killing.The CBI's view, not necessarily referring to the hon. Gentleman's speech, was that conservation requires substantial investment, often showing returns over a relatively long period of time, and will not be enhanced by a high price energy policy at a time of tight squeeze on profit margins.
I have an abiding interest. My father was a collier, as was my grandfather and my great-grandfather. My family has been involved in energy for many years. I have studied the history of this matter. It is always the same thing. At the bottom of a slump it is not profitable to do what is right in the long term; when it comes to the long term, everyone wants to do it but then the signs are that one should not do it.
There are major problems in some industries—paper and board, chemicals and steel, for example—arising out of the high price of energy. That is another statement of fact. The Government have a view. They have put it to the National Economic Development Office. What is it? Is it that most parts of British industry are not generally disadvantaged by fuel prices as compared with European competition? Will the Government be prepared to look at this matter again? I am thinking about flexibility. What is right one year may be wrong the next year. Will the Government be prepared to look at the financial targets for the fuel and power industries and take steps to alleviate the burden?
265 Is it the case, as reported in The Economist—in very inelegant words—that the Department is cooking up a concession on gas prices and that there is to be a new sort of gas tariff, half-way between prices for firm supplies and the cheaper rate of supplies that can be shut off?
On all of this matter, will the Secretary of State make available the paper that was sent to the NEDO? It so happens that I have a copy of it. Heaven only knows how I got it. In my previous job, no doubt it would have been a matter of great concern, but now I am free from my former trammels, and it is marvellous. I suppose that I have a copy that I should not have had. I do not know what my Government did about it, but if the Government's policy or view on this matter is freely available outside, why should not Opposition Members have a copy? I accept that at the beginning of a discussion we should move on the basis that the Government know what they are doing and that they may be right. My predilection may be the other way. Nevertheless, let us have a sight of this paper.
I can have no complaint about using the NEDO as a sort of Energy Commission. That is what the Government are doing. They have now put people all together in a good corporate State way. They will all sit down and produce a paper in March. I congratulate the Government on doing this. But all the papers available to the NEDO should be available to this House, because we want to participate in the discussion as well.
In any event, there should be speedy action. It is our view that there should at least be an alleviation of energy prices to intensive users—for example, as I have just said, steel, paper and board, and foundries. Perhaps some of my hon. Friends have other suggestions.
§ Mr. David Winnick (Walsall, North)
I appreciate my right hon. Friend's remarks about the effect of high energy prices on industry. Many of us are receiving letters on that subject. However, does my right hon. Friend agree that it is also essential to have some kind of comprehensive scheme that would assist those on low incomes, and that the scheme that the present Government have introduced is totally inadequate?
§ Mr. Rees
My hon. Friend does not normally miss things. I said that about 10 minutes ago. I agree with what he said.
On many matters affecting the coal industry, apart from Blue Books, White Papers, Red Books, and so on, there are aspects that we in politics consider for other reasons. I am very worried about the coal industry, because grave mistakes may be about to be made.
We expressed concern about the coal industry legislation last June. Our motion then asked for increasing national support. It said that the NCB wasunder severe financial pressure to accelerate pit closures, putting at risk the planned indigenous coal output targets which are a vital part of the national energy policy of self-sufficiency".—[Official Report, 17 June 1980; Vol. 986, c. 1387.]In his winding-up speech in that debate the Minister gave a positive reply. Indeed, the key of what he, said was "Let us be positive. Let us look to the future." Those were his words—the same words as were in the Labour Party's manifesto some years ago. They are good phrases—"Look to the future; let us not look back."Apparently my hon. 266 Friends who work or have worked in the industry and who represent colliers were people who were looking to the past. They were reflecting the views of the people in the industry. We must look to the future, but unless we have a base on which we can move to the future, the worries and niggles, some of which have been put to me recently, will vitiate what we want to do.
What is the present situation? Has it changed since last year? In The Times on Monday there were words that came, I think, from a well-known, important member of the National Union of Mineworkers. I think that The Times was reporting his view, but it matters not, because I am putting the matter generally. The article talked of plans for widespread colliery closures. It said that 25,000 coal miners were to be put out of work.
Is this "rubbish"? I picked up the word that the Secretary of State used at the beginning of his speech in June. On some aspects of this kind he said that reports were rubbish. It is important, because people are believing this. Are the current reports rubbish?
§ Mr. Gwilym Roberts (Cannock)
My right hon. Friend mentioned the lag in investment, in the sense that what one sows today in the coal industry one reaps in 15 years' time. Does he agree that there are serious fears in the mining communities on the question of mine closures and on the Government's restrictive financial policies, which are destroying the seedcorn of the development of our coal industry for the future?
§ Mr. Rees
My hon. Friend has the Park colliery in his constituency. He is airing his constituents' views. One of the benefits of debate is that if there is nonsense, if what I have reported is nonsense—if it is "rubbish", to use the word from a previous debate—this is the place where we want the information that removes feelings of that kind.
What is the Government's present view on "Plan for Coal"? It is a most remarkable story. As a result of investment, there are the most remarkable colliery outputs. The Other day my hon. Friend the Member for Penistone (Mr. McKay) took me down a colliery in the Wakefield constituency—the Royston drift mine. It gets world records. The stuff is spewing up out of that drift mine. On the very same day I heard the Prime Minister, on a women's programme, saying how dreadful the nationalised industries were, and that they ought to run themselves like Marks and Spencer and United Biscuits. I did not see much sign of biscuits in what I saw. It is a different field—a different set-up. It is not the distribution trade; it is the productive industry of Britain. It is a remarkable story.
The Under-Secretary has always stuck to the "Plan for Coal". Because of that, in the few visits that I have made so far his role in this matter has been applauded. The congratulations that have come to the coal industry came from the chairman of the NCB at the NUM conference last year. Our congratulations ought to go to the NUM and the NCB on what they have done on the basis of the "Plan for Coal". In all those suburban political meetings at which attacking the nationalised industries is good stuff, I hope that we shall hear that the coal industry has served this country well after 20 years of being regarded as a declining industry. It has more work to do.
§ Mr. T. H. H. Skeet (Bedford)
The right hon. Gentleman is talking about "Plan for Coal". Is he serious 267 in his view that by 1985 we could have a producive capacity of 135 million tonnes when we have not got a market?
§ Mr. Rees
I am interested in coal and oil. I also want both of them, and I want the coal industry to play a major part in the years to come. The hon. Member said, in effect, that "Plan for Coal" is a lot of old rubbish. Do the Government think that? Have they changed their mind since last June, when they said that "Plan for Coal" was what they stuck by? The hon. Member thinks that they have not done so. I shall be interested in what the Government say, because it is the Government who have the responsibility. Oppositions can do no more than nudge.
It is the "Plan for Coal" that matters. Any abandonment of the figures will have major implications in other ways and will lead to colliery closures outside the "Plan for Coal". Coal miners do not object to the closures of pits. Why is the hon. Member for Bedford (Mr. Skeet) laughing? Colliers do not object to the closures of pits; they know that their life span ends. What they want are new pits and the expansion of existing pits.
The figures that are given show that whenever there are pit closures, for good geological reasons, they concentrate in certain areas. It is the duty of the House to consider wider matters than just the coal industry itself.
"Plan for Coal" matters in particular areas—for example, South Wales. I will not go into that subject at length, because there is a debate on Wales tomorrow. I am sure that that matter will be raised then. The tripartite sub-committee in Wales envisaged a reduction of uneconomic pits over a five-year period and recognised that that could be done only with help. In South Wales there has been a productivity increase of 5 per cent. Now it is faced with falling markets, with coal imports, and a falling demand for electricity. In that part of the country, in particular, feeling is strong and concern is strong. We may ask the people to look to the future, but in Wales they have a long memory, because they have seen it all before. They do not want it to happen again in exactly the same way.
The time has come for a Government statement on that matter to remove the worries. In a remarkable speech, the Under-Secretary put forward a positive statement on behalf of "Plan for Coal". I echo that. What we and the coal mining industry want to know is whether that positive statement, firmly made by the Government in June last year on the "Plan for Coal" is still the case. If it is, it will make an enormous difference to the worries expressed in the coal mining areas.
§ Mr. George Grant (Morpeth)
My right hon. Friend referred to pit closures. There is already evidence that in certain areas the National Coal Board is restricting recruitment because at the moment mounting stocks on the ground stand at just under 38 million tonnes.
The youngsters coming into the industry for recruitment and training are the seedcorn for the future. It is ridiculous that recruitment has been stopped in the coal industry, yet last year we imported 7½ million tons of coal.
§ Mr. Rees
I agree about importation. I know also from practical experience that if one removes a young man from the immediate prospect of going into the coal industry—God willing, the economy will pick up—there is no going back once that line has been broken. It is a family line; entering mining is the thing to do. The suggestion does not come from careers officers as it does for other industries, although the careers officers play a part in guiding the people into the industry.
§ Mr. Geoffrey Johnson Smith (East Grinstead)
I follow the right hon. Gentleman's argument, particularly in response to the genuine question of human concern put by his hon. Friend. However, we are in a dilemma. Does the right hon. Gentleman suggest that the Government should encourage the production of coal to put in ever-increasing reserves and stocks when there is no possibility of a market?
§ Mr. Rees
That argument has been put before. Fifteen years ago, a Labour Minister of Power complained that coal stocks were so high that if one put them in Trafalgar Square they would cover Nelson's column, but three years later we were short of coal. Coal should be stored, unless the Government are saying that the market will never come back; that it has gone for ever. Then we would understand. However, the Government have committed themselves to "Plan for Coal".
§ Mr. Nick Budgen (Wolverhampton, South-West)
Will the right hon. Gentleman expand on what he said about the importation of coal? Is he saying that the Labour Party would bring forward legislation to prevent the importation of coal? If that is so, what competitive pressures would remain upon the NCB to produce coal at a proper price?
§ Mr. Rees
It is possible, for people to rip coal from the surface 13,000 miles away and pay low rates for transportation because we are at the bottom of a recession, but that is a temporary situation. If the hon. Gentleman is arguing, like Professor Jevons 110 years ago, that we will import a great deal of coal for a long period, that is a different matter.
When there are 38,000 million tonnes of coal on the surface—6 million tonnes in South Wales—which has been dug on the money that has been well invested, let us use that and not bring it from other parts of the world. There is no competitive effect. That is not the way in which the coal industry works. I am against the importation of coal. Legislation is not needed to stop it.
In Venice the Prime Minister signed a statement that said that we would need to double the output of coal in Western countries. At the IEA meeting the Secretary of State said much the same thing. I labour this point because it is of such great importance. Otherwise, precipitate action will be taken. We wish to know whether the Government say one thing internationally and act in a different way nationally.
The Government should help with coal stocks; they should help with investment for conversion to coal; they should recall tripartite meetings and bring those concerned together. They should do for our coal industry what West Germany does for its coal industry. West Germany is held up to us as the economic schoolmaster of Europe, as the Dutch were in the 17th century. If the West Germans have 269 much to tell us, let us follow that advice and carry out their policy, because it would be better for this country in the long run.
§ Mr. Frank Haynes (Ashfield)
On the question of productivity, we are told by the Prime Minister that if we want to increase our earnings we should increase our productivity. The coal mining industry has done just that. It has put more money in the workers' pockets, but if the Government carry out the pit closures policy referred to in the national press, which we want to know more about, it means that the workers will be increasing their productivity and increasing the earnings in their pockets to put themselves out of work. The Secretary of State and the Government must come clean on that matter.
§ Mr. Rees
My hon. Friend has succinctly expressed what I have been saying for the last half hour. I fully agree with him. His last request to the Government is the one that I have been making.
I understand that one of the considerations in the discussions of the NEDO task force on energy pricing—I do not say that it necessarily comes from the Government—is that the heavy fuel oil tax should be removed. That may be the right thing to do, but it goes against the general statements about spreading oil consumption over a longer period. I ask the Government to take into account the effect that this would have on the coal industry. I have been told that it would reduce the coal burn by over 2 million tonnes and that it could remove 5 million tonnes of prospective coal burn. I do not hold to those figures; I simply say that they must be taken into account.
That is necessary for one other purpose. The coal industry, with its long gestation period of investment, will need something in return to protect it, because coal will be of the gravest and greatest importance in 20 years' time for gas supplies and, possibly, liquefaction.
I say one last personal thing to the Prime Minister—I mean, to the Secretary of State: no doubt I speak a year or so too early. I read with interest a speech that he made called "The Path for 1981", on 4 January 1981. He talked about the recovery and the new prosperity that will flourish, but he also said:Areas of former prosperity will be by-passed, with heavy social consequences.I hope that when the Secretary of State plays his role in the Department and talks in the sub-committees with his junior Ministers about decisions that have to be taken about coal, with all their regional implications, his own feeling that some areas will be bypassed will not rule. It is one thing to say what he said in Guildford or East Surrey, but it appears different in other areas. We should know what the right hon. Gentleman has in mind.
Our motion speaks of an overall energy policy, practically, as well as in principle, and of a pricing policy for industrial users of energy. There is a fear in the coal industry. We want the industry to move and to be positive and forward-looking, with investment that will bring results in the years to come. Only the Government can tell us whether that will happen.
§ The Secretary of State for Energy (Mr. David Howell)
I beg to move, to leave out from "House" to the end of the Question and to add instead therof: 270'recognises the realism of the Government's energy policy and welcomes the renewed vigour with which the nation's energy resources are being developed'.This is my first opportunity to welcome, as I do, the right hon. Member for Leeds, South (Mr. Rees) to his responsibilities as energy spokesman for the Opposition. I understand that he is not a member of the "gang of three" or the "gang of four" or any of the other gangs which roam the Labour hinterland, so he is all the more welcome for bringing his well-known fairness of mind to these subjects.
I also thank the right hon. Gentleman for the opportunity which the choice of this subject for a Supply day debate gives us for a wide-ranging discussion of energy issues. What usually happens is that bits and pieces of energy policy come bubbling to the surface. At one time we deal with industrial energy prices and at other times with oil policy. We do not have enough opportunity for a really wide debate on the overall picture. I therefore welcome this opportunity.
The right hon. Gentleman also mentioned the need for information. The papers put to NEDC by the Government were published and are freely available. I hope that that meets that need. Of course, I am always ready to provide more information for the House. I supported the development of Select Committees, which has been supported by my party over the years, and have taken the view that the House and its Committees are the places where these things should be debated. That is why I felt that the Energy Commission was not the right place to do these things.
§ Mr. Peter Hardy (Rother Valley)
Just before the Christmas Recess, I asked the Secretary of State to publish his estimate of coal consumption in 1981. He did not publish, and said that he had no plans to do so. How does that fit in with what he just said?
§ Mr. Howell
If the hon. Gentleman would like to table a question that I can answer, I will, but if he asks me to speculate on things which cannot be speculated on it will not help him or anyone else to offer mere generalisations about the future.
In the context of this overall picture, I remind the House of the turbulent scene within which we must consider our energy policy and of some of the basic facts against which we are working. The first is obvious but so staggering that it is worth repeating—that since 1972 the price of crude oil has increased by 1,800 per cent. In fact, it has nearly tripled since early 1979, although, because of the effect of the appreciation of sterling, it has less than tripled—it has just about doubled—for the United Kingdom. That is the magnitude of the volcano, the price earthquake, against which we are operating.
Those effects are rolling through every Western economy—we are not special in this respect—and are having a major impact on the energy scene in every Western economy. The first and most important thing to grasp is that, despite our North Sea oil, there is no escape for us from the price upheavals and the disruption that those colossal changes cause. Whether we take the impact on a higher exchange rate because we are an oil-producing country or on unemployment or on loss of overseas markets or on a mixture of the three, there is no escape from those terrific shocks.
Of course, we can have debates about what we do as a major oil producer with the revenues which accrue, and there are different views in different parts of the 271 House—between those who say that we should use them to reduce Government borrowing and pave the way when we can for lower taxation and create a better climate for enterprise, and those who say that we should use the revenues to pick winners or back hopefuls or pay for losers, or whatever it is. I know which of those I prefer. But there is no escape from the disruption and the shock that quantum price leaps of this kind have on economies such as ours.
That brings me to the first major point, and I am sorry if the House feels that it is a somewhat gloomy one. Much the worst danger facing the Western economies at the moment is of a further oil price explosion of the 1979 variety. That is why it is absolutely vital for there to be international work to prevent the sort of panic buying based on psychological fears which we saw in 1979 after the Iranian revolution, which led to the fantastic price increases of 1979 and 1980.
It is essential to see what can be done, on both the demand and the supply sides, to prevent the same consequences flowing from the effects of the Iran-Iraq war, which overnight knocked 4 million barrels a day out of the world supply system. There has been some progress in recent months towards ensuring that stability is achieved.
The right hon. Member for Leeds, South mentioned the International Energy Agency. There was a unified recognition in that body of the need to discourage panic buying and to see that countries on the whole drew down their very high stocks—they have been high because of the recession—rather than rush into markets and pay wild prices for term oil. That was an advantage, and informal arrangements were also agreed which I set out in my written answer to the House about measures which might be taken if one particular country, or indeed one particular company, found itself cornered and short of crude following a sudden interruption of supply such as followed the Iran-Iraq hostilities.
That is on the demand side and that, combined with the effects of the recession, has meant that demand has remained well down. On the supply side, too, there has been some effective international co-operation. We should not just ignore that. The OPEC countries—the Saudis in particular—when that war took place were contemplating cutting production, but they changed their minds and decided instead not to cut production, which they could do as political acts, and the Saudis decided to increase it by, in effect, 2 million barrels a day. So the supply moved up to compensate for what was lost, and on the demand side there was the restraint that I have described.
The net effect is that while prices have gone on pressing upwards there has been nothing approaching the sort of explosion of prices of 1979, which no sensitive modern economy can absorb without major social disruption. I have to warn the House that dangers remain. We are on a knife edge and will remain so as long as the West generally remains so heavily dependent on oil from the Middle East and through the Straits of Hormuz. Those are the broad considerations which are vital starting points for our endeavours.
I turn to the effects on us of what has happened and is happening. The first effect of the enormous increases is that the price of oil in this country is dragged up. One hears it suggested that the price has been put up by the 272 Government, but that is not so. Some suggest that it has been put up by OPEC, but even that is not so, except in the sense that OPEC influences production levels.
The high price of oil is determined by the laws of supply and demand. Anyone who doubts that should try to sell a barrel of oil on the Rotterdam market or anywhere else for more than the world market price or try to buy a barrel for less than that price. He will not succeed. We are constrained by the world market price. That is inescapable.
The second effect that follows from the enormous price increases is the flight from oil into other fuels. When oil users face an enormous increase in price they turn rapidly and in large numbers to gas.
§ Mr. Skeet
I am sure that my right hon. Friend is trying to put a fair interpretation on OPEC's actions, but surely only marginal quantities of oil pass over the Rotterdam market. Is not OPEC following the small sales on the Rotterdam market in order to interpret their price? It is the cartel which is laying down what the world will pay, and BNOC follows it, at least in part.
§ Mr. Howell
Supply and demand determine the price. By influencing the production, OPEC countries can influence supply, which, in turn, influences the price. I do not think that there is much difference between me and my right hon. Friend on that point. There is a world market price at which the buying and selling of oil, including that of the United Kingdom continental shelf, takes place.
As I said, the second effect of price increases is that there is a major flight of those using oil in industry into the use of gas, which has created a major excess demand for gas. That drags up the price of gas and all other energy prices. There were big increases last year, and, as the effects roll through, further increases in domestic and industrial gas and electricity prices are on the way this year. It would be wrong for me not to warn the House about that.
The third effect of the price increases is that the enormous additional demand for gas that results from the flight from oil drags up the price that can be obtained by gas producers in the North Sea, whether on the Norwegian or the British side of the median line. Gas is being sold, and producers are seeking prices, at up to 10 times—1,000 per cent. higher—than the price established for contracts in the North Sea in the 1960s.
§ Mr. Arthur Palmer (Bristol, North-East)
Why does the right hon. Gentleman put such stress on oil prices forcing up the price of electricity? Surely there are many other factors at work, including the borrowing costs of the electricity industry.
§ Mr. Howell
We shall come to the nature of those costs. I am starting from the basic mechanism that has sent the enormous changes through the system, and that is the huge increase in the world market price of oil.
There are some who say, in the face of everything that has happened—and there may be some hon. Members who share the view, though I do not think so—that we should step in and try to run a two-tier price for oil. After all, they say, we are an oil producer, so we could sell oil to ourselves on the cheap and have a subsidised oil price. I do not think that industry is asking for that, and I have not heard many hon. Members asking for it.
I ask those who think in that way to ponder the implications of what they suggest. The first is obvious. We 273 would do ourselves out of the high revenues. It may be less obvious, but others would collect the revenues, because subsidised oil would be sold at the market price. Secondly, we would drink up our North Sea resources, which are limited and will not last for ever, all the faster. Thirdly, we would kill North Sea investment stone dead. Fourthly, we would leave our industry totally unprepared for the high-cost-energy world which is inevitable and which involves major adjustments. In other words, we would be putting Britain in the worst possible position, instead of the best possible position, to face the stormy 1980s. I ask those who argue that line to put it aside when they realise the implications.
There are those who ask why we do not step in to control other energy prices. It is not my impression that industry is asking for that. On the contrary, the most recent NEDC meeting made it clear that there is general agreement in industry and among all who have discussed the matter in NEDC that prices should be economic, by which is meant that they should reflect the cost of replacement on a long-term basis.
Industry's complaint was that the outcome of pursuing economic pricing was to put Britain at a disadvantage to our competitors, particularly those on the Continent. If that were correct it would be extremely serious, and as soon as such suggestions were raised my Department and I looked at them closely. At first, the proposition was that Britain was generally at a disadvantage on energy prices. My Department did not accept that, and the subsequent debate and analysis culminated in a study by the NEDC, which concluded that British industry generally—I emphasise "generally"—does not suffer a disadvantage, but that bulk users in energy-intensive industries could be at a disadvantage. Chemicals, steel, foundries, and the paper and board industries were mentioned.
The Government were concerned when they heard about the feelings and worries of the industries concerned. From early last year—long before the recent NEDC reports—a succession of measures were taken. I shall come to those later. However, despite some earlier doubts, there seems to be among those who have studied the matter general agreement that there is no case for overall general intervention to hold down energy prices in the face of the forces that I have described that are playing upon our affairs.
There are two reasons why I believe that general intervention would be wrong. The first is that the industries that are energy-intensive and facing particular difficulties are, in some cases, facing structural problems that go far deeper than anything that can be solved by changes in energy prices.
It would be misleading for me to suggest to hon. Members, or for them to suggest to their local manufacturers, that there is a wand to be waved on energy prices that would solve some of the deeper and much longer lasting structural problems of some industries, of which steel is an obvious example. In addition, the recession has made things much worse.
Secondly, the problems of those industries include the threat of unfair trade. Chemicals and textiles are the obvious examples of industries in that position. There is no doubt that British industry, along with almost the whole of European industry, is being severely threatened by artificially low oil and gas prices in the United States. There is no doubt about that. My right hon. Friend the Secretary of State for Trade and I have taken, and will 274 continue to take, vigorous action both in the Community and at a bilateral level. Although we must move at Community level, there is no reason why we should not move at a bilateral level also.
Under the new American Administration there may be a faster movement towards deregulaton of oil and gas prices. There is reason to hope that that will happen. When I see the Energy Secretary in the new Reagan Administration I shall make that point to him. I hope that deregulation will be recommended to the new Congress. That issue, however, lies outside the immediate problem of the competitiveness of British industry vis-a-vis the remainder of Europe.
I must also reject the further proposition of general intervention in energy prices. Some suggest that the answer is to move more quickly towards loading fuel costs on to domestic prices. Indeed, industry has been pressing me quite hard, and also pressing other hon. Members, about the proposal that there should be a faster rise in domestic gas prices than that already envisaged. I ask industry, and those who argue that way, to reflect on whether that proposal would be in their best interests. The Government have already approved a 10 per cent. increase in domestic gas prices in real terms over a three-year period. I announced that measure a year ago. It is a gradual programme to allow prices to rise to the correct levels at which they cover the long-term cost of supply, which they do not cover at present. Even now, domestic costs are only just breaking even. Domestic costs in Britain are only half of those in France and Germany.
§ Mr. Howell
That is right. I said 10 per cent. in real terms. Our domestic prices are only half those paid by the French and German housewives. Of course, the gas all comes from the same pool, namely, the North Sea. At the same time that we announced that measure the Government decided to accompany it and give extended support for fuel hardship. It was twice as much as anything previously produced. My right hon. Friend the Secretary of State for Social Services has set out a comprehensive programme. In those circumstances it would not be right to allow domestic prices to be corrected even faster. Industry should reflect on that and understand that it would be wrong to press that point.
§ Mr. Arthur Lewis (Newham, North-West)
I wish to question the Minister on that point because it affects every hon. Member. I appreciate his remarks about domestic prices. However, he will be aware that many old-age pensioners and sick and disabled people do not understand their bills when they receive them. Consequently, they find themselves in arrears and have their supplies cut off by either the gas or the electric companies. Could not the Minister make some arrangement to ensure that before they are cut off the companies concerned contact the social security department to determine how much harm and damage could be done? It is not fair to cut off the elderly, with all the kerfuffle that that entails, when they could first be contacted and warned by the companies concerned, which could then find out the real position.
§ Mr. Howell
The hon. Gentleman follows these matters closely, and he knows that there is a disconnection code. Pensioners in the position that he has described 275 should not be cut off in winter. If they are, we obviously need closer policing of the code. The Under-Secretary, my hon. Friend the Member for Kingston upon Thames (Mr. Lamont), is actively involved in ensuring that some interim improvements are made in the code, pending a more thorough report about the whole code. He has discussed the matter with the chairman of the London Electricity Board and others involved to determine how we can ensure that the code is observed. If the hon. Gentleman has a particular instance in mind, we will examine it.
I have already said what would be wrong and irresponsible for us to do in reply to the view that high energy prices—because of colossal increases—are causing difficulties both for industry and for society as a whole. I now turn to what can be done—
§ Mr. Allen McKay (Penistone)
On two or three occasions the Secretary of State has said that industry is not concerned about the present position. At a recent meeting with the Sheffield chamber of trade representative in Sheffield, he said—and I wrote down the words so that I could quote them:The biggest single factor of troubles in industry is the cost of energy.The Sheffield chamber of trade, together with the council, intend to write to the Minister to request a meeting to explain their position. I shall be grateful if the right hon. Gentleman will receive them.
§ Mr. Howell
There have been a great many representations. That is why I have described the Government's reaction, how we see the position, and what we believe to be the best approach. I have argued the case against a general intervention, which would be utterly wrong. I must now ask the question—and I shall seek to reply to myself—what can be done? I wish to remind the House of what has been done since concern was first expressed—I refer not to recent weeks but to some time ago—about the high increases in energy prices that have rolled through our economy. In March, the British Gas Corporation—with the Government's approval—tempered for the bulk of its firm gas supplies, its long-established policy of relating its firm gas supply prices to gas oil, the nearest competing product. Instead of full equivalent relationship it moved to 75 per cent. of the gas oil price.
In July, I asked the electricity industry to undertake a major study of the bulk supply tariff, and it will shortly make an interim report to me. In August, I brought these issues to the attention of the National Economic Development Council for the first time. In the light of allegations then being made that British industry was generally at a disadvantage, I asked the CBI to prepare a paper analysing the charges and allegations to determine precisely where the problems lay. It willingly undertook to do so. In November, I urged the electricity supply industry to seek new flexibility in its contract and tariff terms and to find ways to supply some of the major bulk users more cheaply through a better management of supply and load needs—although we recognise that, whatever we do, we are not in a position to match the very different cost structures of countries that have large sources of hydropower, which is by far the cheapest, or that have pricing policies that are closely related to the operating costs of nuclear plants.
276 When looking at the position on the nuclear power front among our competitors, it fills me with concern that during the 1970s we dithered about nuclear power. By the end of 1985 France will have 44 per cent. of its power coming from nuclear generation, and West Germany will have 25 per cent. There is no way on fossil fuels—coal, let alone oil—that we can compete with the cost structures being built up by other countries. I wish to put that fact on the record. I am prepared to take responsibility for many things, but not for the dithering indecision about nuclear power in the second half of the 1970s. However, I believe that we can take steps to put right that position in due course.
In response to further requests from me in the autumn, the British Gas Corporation has agreed that new customers who, in their first year, pay a price about full equivalent to gas oil, will be charged at about the renewal price—the 75 per cent. rate—for the second and third years of their initial contracts. That should bring some alleviation of the problem. More recently, I asked the corporation to consider what further assistance it could justifiably give to the larger bulk users in energy intensive industries. I refer to those on firm contracts. There are not many, but the burden is heavy. The corporation has agreed to pursue that proposition.
I have further discussed with the electricity industry the possibility of cost savings through load management, and the industry is actively considering that. Savings through that approach would benefit customers with appropriate load characteristics. They include some of the major bulk heavy continuous users. I put this proposal to the new chairman of the Electricity Council, Mr. Austin Bunch, whose appointment I am announcing today, and he has agreed to pursue it swiftly.
These are some of the things that have been done over the past many months. We eventually received the CBI report, and now there is the NEDO task force, which has started from the point that generally British industry does not suffer but that larger bulk users, in particular in the energy-intensive industries, may do so. As I have explained, this is the view that the Department has taken over the months, to which I have responded. As all sides are represented on the task force, it will provide a unique opportunity to reach agreement on the facts, which will be very helpful. The Government will obviously consider carefully the facts established by the task force.
In particular—the right hon. Member for Leeds, South mentioned this point—I know that one of the points made all along by the industry is that our heavy fuel oil duty is higher than that of other European countries and that that has put our oil prices to industry out of line. In fact, the latest available statistics show that in early January our oil prices to industry, including tax, were somewhat lower than those to Continental industry. Since then—even in the last few days—I know that United Kingdom prices have gone up again, but crude cost increases are also working their way into Continental prices. Therefore, it would be wrong to assume that the United Kingdom's favourable position will necessarily be altered again. I freely concede that these things swing round. I know that my right hon. and learned Friend the Chancellor of the Exchequer has heard the strong views of industry arguing for a reduction in heavy fuel oil duty to bring it more into line with the similar duties being charged by our Continental competitors.
§ Mr. Tim Eggar (Enfield, North)
I am sure that the House is impressed by the various measures that my right hon. Friend has indicated today, but could he give some idea of how much revenue will be forgone by the nationalised industries as a result of those measures and whether that will have any impact on the public sector borrowing requirement in the coming financial year?
§ Mr. Howell
No, I cannot. The simple reason is that the quantification of those who are in difficulties—particularly the bulk users—is still far from clear. One of the purposes of the NEDO task force will be to bring home more clearly what degree of shading and adjustment is needed to meet the particular worries of the bulk users which, after all the argument, was what the whole thing came down to.
Those are the things that have been done. I repeat my view that it is no good applying general remedies—even if this kind of intervention were a remedy, which I do not think it is—to particular problems. As I said, it has been difficult, amidst the general expressions of concern, to identify the real problems. The appreciation of sterling has further distorted these international comparisons. I have heard it suggested that if we discount sterling appreciation over the past 18 months the overall slight advantage that British energy users have had would have been greater. Obviously, that makes all the comparisons more complicated.
What more can be done to meet the problems of efficient energy supply and of easing the burdens on industry as it prepares for the move out of recession into recovery? First, there must be greater efficiency in the nationalised industries. [Interruption.] The Opposition should listen to what I have to say on this matter. The key weapon here is to have tight and demanding external financial limits or cash requirements. I have heard it suggested that the effect of tight and demanding EFLs is to put up prices, but that is not correct. The purpose of these challenging EFLs is not to put up prices, but to push down costs and to increase efficiency. The nationalised industries—which seem to have very few friends in the Opposition—and their chairmen recognise that these cash limits are a tough and effective discipline in reducing costs and increasing efficiency. That is the way in which the Government can ensure that industries take all possible steps to increase efficiency rather than to turn to their customers—who may be captive customers—and load it on to them or to resort to more borrowing.
Although there is a long way to go in improving efficiency in the nationalised industries, it is a fact—if I can get this over to the hon. Member for Merthyr Tydfil (Mr. Rowlands) who seems to be getting excited—that labour costs per unit have been falling faster in the electricity and gas industries than the average for the whole of United Kingdom industry. Efficiency still needs to be increased. However, the EFLs are an effective weapon, and are recognised as such, for increasing efficiency in industry, not for raising prices or adding a tax as some people have suggested.
The tariffs that emerge come not from the EFLs but from either competition—in the gas industry there is competition between oil and gas—or, in areas where there is a monopoly supply condition, from adhering to the principle of covering costs on a long-term basis, which everyone recognises is the only sensible principle.
278 The second thing that we can and must do is to increase competition. I have already told the House of our plan, when a suitable legislative opportunity arises, to introduce greater freedom for private electricity generation. I think that that will improve competition, and competition is healthy.
The third thing that we can do is to encourage investment in new energy resources, including investment in conservation and equipment that will use energy more efficiently. In that respect, some major developments are going on. The gas, gathering pipeline—an enormous project—is going ahead and is on schedule. We have had the sixth round of oil licensing, which I inherited from my predecessor, and the seventh round is in process of going through now. There has been criticism from some, including the oil industry, that the petroleum production tax announced by my right hon. and learned Friend was over-burdening the industry and would slow down exploration. When the first part of the seventh round was announced—that was after the new tax regime had been made clear—every licence offered for exploration was eagerly taken up and paid for by the industry.
The fourth thing that we can and must do is to sustain heavy investment in coal—I want to come to some of the points on that aspect made by the right hon. Member for Leeds, South—and in nuclear power. Frankly, the programme of nuclear power, if such it can be called, that I inherited when the Government came to office was in complete chaos. I think that we are now getting it straight and beginning to get some momentum and morale and confidence restored, but we had quite a mess to clear up.
We can also encourage major investment in conservation. Conservation investment—if I may say a passing but not unimportant word on that aspect—primarily goes on through the decisions of industries and individuals. It is not publicly visible in the public spending figures. Therefore, people tend to compare what they see with the major investments which are visible in public spending and to conclude that there is no major investment in conservation. But there is evidence that it is continuing at a very high level in industry. The best way to promote conservation investment is not to throw more taxpayers' money at it but to see that the price signals are correct and stimulate the right new investment backed by research and demonstration projects which industry can use commercially and with confidence. That is what we can do on that front.
I turn now to the coal industry, on which the right hon. Member for Leeds, South had a good deal to say. I know that the coal industry, like all industries, as the right hon. Gentleman reminded us, faces immediate short-term problems of falling demand in the recession. Of course it does. Also, because it is an extractive industry, closures and exhaustions are bound to lead to difficult decisions. No one has sought to disguise that fact, certainly not the realists in the industry. I do not share the defeatism or believe the allegations of low morale that have been expressed by some Labour Members. That is not the impression that I have of the industry. If morale is so low, why is productivity and output per manshift so high? Why are recruits queuing up to join the industry? It does not add up. The evidence is that people want to get into the industry. Morale is high, not low, as the hon. Gentlemen suggested.
In spite of all the immediate difficulties, my long-term confidence in the coal industry as a successful and 279 profitable energy industry is complete. I believe that it can and will overcome the present problems and achieve financial viability.
The right hon. Member for Leeds, South asked what we thought about "Plan for Coal". We have provided a financial strategy and framework. We have provided both the framework and the means for the National Coal Board and the industry to attain the "Plan for Coal". How that plan is maintained is a matter for the National Coal Board. We have provided the opportunity for it to be maintained, and it is for the NCB to see how that is done. I believe that it can be done.
The right hon. Gentleman mentioned the growing revenues from North Sea oil and gas. People ask "Why not plough back the North Sea oil revenues?" The answer is simple: they are being ploughed back. They are being ploughed back through industrial and regional assistance and Government funding—some of which is not popular or to every hon. Member's liking—through research support, through reduced, downward pressure on Government borrowing, thus paying off the overdraft that we inherited, and through substantial tax reliefs to industry. In my view, those last two measures are the essential conditions for the new investment, because without them there will be no new investment. Industry must make, and in some instances increasingly is making, that investment—an investment which will be energy-saving and more energy-efficient. In Japan, firms are now tearing out oil-fired or inefficient high energy-consuming systems and replacing them with entirely new equipment in order to be competitive in the high-cost energy era ahead. Our industry must do the same, and must re-equip. Otherwise, we shall be unable to compete in the late 1980s.
Contrary to the argument that we have no policy, we are in fact ending the shambles of subsidy and control, thus achieving two further vital aims which I want to outline. The first concerns security of supply. I reject again the proposition that we should behave like the United States in the 1970s and run an internal subsidised oil price, and intervene in that way. That would be utterly irresponsible. It was a catastrophic policy for the United States, as both the outgoing and new Administrations have recognised. It led to some of the highest international tensions that have occurred since the Second World War. That course I know to be wrong.
People talk about lower gas prices. They wonder why we cannot have lower gas prices, like the French and Italians. Not only has the French gas price risen by 70 per cent. in the last year—something which is perhaps overlooked by those who favour lower gas prices—but there were major interruptions last spring and summer even for companies on firm gas contracts, not nominal interruptible contracts. Indeed, last winter in Italy companies, whether on firm contracts or provision for interruption, were cut off completely. Cheap gas is no good if there is no gas. People tend to overlook the value of security of supply until, of course, there is no supply; and then they change their view. That is something that our energy policy has been and is achieving.
Secondly, we are paving the way for new investment in energy and energy-related industries on a massive scale. Indeed, it is happening now. That gives Britain an important advantage because all over the world major 280 projects and investment, the large export markets, are related to energy development and energy projects in the energy-producing countries. That is happening around the Pacific basin, in the Middle East, and everywhere where people think that they can tap new energy resources.
The right hon. Member for Stepney and Poplar (Mr. Shore) moans, as he did during the economic debate, about the lack of effective demand, as though he had just read "General Theory" for the first time, but the effective demand in these industries is there. There is vast expansion across the world, and vast opportunities, and, as a result of our policies, these British industries are building up to the most advantageous position, from which they will be able to seize those opportunities.
No one questions the difficulties of transition. Certainly I do not; nor do the Government. No one questions the need to allow and encourage industries that use a lot of energy to respond by bringing in the new less energy-intensive technologies. But that is not an argument for reversing the policy or plunging into a wilderness of subsidies.
It is an argument for sensitive response by fuel supply industries. I have described what we have sought to do, and I shall continue to do everything possible to encourage that process. It is an argument for well focused transitional aid by the Government, and the whole thrust of our economic policy is in that direction. I must admit that some of the aid offered is not always taken up, as happened with Bowaters at Ellesmere Port, where the aid was offered but the closure decision still went ahead. Perhaps most important, it is an argument for waging war on unfair trade practices by other countries. Every Government Department is ready to take up any allegations or evidence of unfair trade practice wherever industry can provide the details.
That has been and will continue to be our policy. If we stick to it, as we shall, I believe that it will provide—indeed, it is already providing—the foundation for an economic recovery which will be strong and sustained, rather that feeble or short-lived. That recovery itself will give us increasing resources to help the hardest hit. I believe that it would be an utter betrayal to try to cocoon our country against the reality of high priced energy only to have that reality hit us with typhoon ferocity later. Conversely, everything is to be gained for the British economy if we let it adapt now to the dangerous and stormy conditions ahead. If we have the determination and steadiness now to let that process go forward, in the years ahead there will be very few national economies stronger than the British. For all those reasons, I ask the House to reject the motion and support the amendment.
§ Mr. Lawrence Cunliffe (Leigh)
I want to refer first to one or two matters raised by the Secretary of State for Energy, and particularly to the mining industry. He wondered why—in my opinion his remark will be interpreted by the British mining industry as a rather niggardly and grudging compliment—morale was low, as Opposition Members alleged, when productivity was so high. There is no single reason for high productivity. One reason is that the previous Government had the foresight and vision to produce a massive investment programme that was to put the British mining industry on a par with any great industry in Western Europe or, indeed, the world. A further reason is the sustained effort of the British 281 miner. He has operated in an atmosphere of good industrial relations, has accepted on many occasions maximum mechanisation of the pits, colliery closures, and reduced numbers of men employed within the industry.
The Minister tried to appraise the situation in about 40 seconds. That will do nothing to boost the morale of employers and employees in the industry. The irony is that 1979, in terms of production, industrial relations and maximum effort, was a remarkable year. It is acknowledged, not only by my hon. Friends but by the CBI and other industries, that 1980 was another wonderful year of achievement.
In the last few weeks results have improved steadily. British miners ended the year with a near all-time productivity record. Output per manshift in successive weeks in December was 2.46 tonnes. That is only one-hundredth of a tonne less than the record for production set seven years ago.
§ Mr. Cunliffe
It is too early. All that is against the background of 7,000 fewer miners in the industry and many colliery closures.
Sir Derek Ezra, the chairman of the National Coal Board, said:These improved results are coming at the right time—they are badly needed to help the industry to cope with major problems inflicted on us by the general recession in Britain.Who created the general recession? It was created by the Government and their crazy economic policies. Industries are no longer able to predict their productivity requirements.
§ Mr. Cunliffe
I shall come to that later. I am sure that the hon. Member will be attentive. There are alternative formulas to the straitjacket of pure monetarism.
Let us examine the current situation developing in the industry. The Secretary of State called for greater efficiency in industry. The British mining industry has nothing to fear in that respect. Its record is impeccable in comparison with other industries in Britain. By a wide margin it still has the lowest production costs in Western Europe. Coal will remain considerably cheaper than heavy fuel oil. That is one of our strongest bargaining weapons when we sell our coal in the European and world market.
The recession is caused mainly by the Government's silly, doctrinaire policies. The Government have deliberately slowed down industry by insisting on a strong pound and a high interest rate. Those policies have had their effects on the mining industry. In 1980–81 we shall lose 6 million tonnes of business simply because of the industrial recession. The problems are intensified, for obvious reasons, by the importation of foreign coal. Coal imports are three times higher than they were under the previous Government.
The argument is that coal imports act as a spur to the industry. It is argued that they cause a psychological fear about job security and opportunity. The whole of British industry suffers from that fear. The Government believe that they can use that old-fashioned technique to bring workers to heel and reduce wage demands. The board has to face a practical problem. Extra stocking costs will add seriously to the industry's financial problems. There are 282 physical limits to what can be put on the ground. We are talking of an extractive industry. Coal has to be physically deposited.
I understand the Government's distaste for intervention. A philosophical conflict is involved, especially in financial intervention. The industry has met all the targets set by Government. It has been exhorted on many occasions and has filled the gap in British energy shortages. Surely there is now a case for selective help and intervention in that industry.
The productivity agreement signed by the National Union of Mineworkers and the National Coal Board produced remarkable results. As stocks grow and productivity increases, the Government should recognise the need for sensible and prudent intervention. They should provide some form of subsidy on stockpiling so that we can live through the current problems caused by the industrial recession brought about by Government policies. Is that not fair? Does that not apply the Queensberry rules in relation to fair trading competition? The Government should take immediate action.
Assurances have been given. At the Venice summit the Prime Minister and other leaders of the industrialised nations said that steps would be taken to encourage long-term commitments by coal producers and consumers; to improve infrastructures in both exporting and importing countries, as far as is economically justified, to ensure the required supply and use of coal. The Heads of Government agreed that the industrialised nations must rely on other fuels than oil to meet the energy needs of future economic growth.
Will the British Government honour the commitment made at Venice? Are they still on the same wavelength? The call is for a doubling of coal production by 1990. Will the Government renege? Strong and persistent rumours are spreading throughout the British mining industry. At a recent meetimg of the NUM an area director said that he had been instructed to impose severe cutbacks in coal production in his area. A national executive member predicted that if the cut to be applied to the North-West were multiplied throughout the mining areas, 9 million tonnes and 20,000 mining jobs would be lost. Will the Minister confirm or deny that?
I turn to European Community action. The European Coal and Steel Communities should assess the situation caused by the industrial recession. They should examine in particular our mining industry. I hope that the Community does not pay lip service to resolutions of its Consultative Committee. One such resolution urges the Community to assist in financing the production and use of coal. This gives the Council of Energy Ministers an opportunity to take action and end their longstanding deadlock on coal policy. I hope that the Government pressed that point at the European meetings. The Consultative Committee, which represents coal and steel producers, consumers, traders, trade union representatives and other interested parties, also calls on the European Commission to develop urgently fresh initiatives to implement positive policy for Community coal, in particular promoting investment in coal production by grants or, at least, reduced-interest loans.
If the Secretary of State wants alternatives, we can point them out to him. He talks of the flight of British industry to gas. There could be a similar flight of British industry to coal. If industrialists were given some guarantee, loan help, a lowering of interest rates or any 283 financial help whatever, many of them would convert back to solid fuel tomorrow. That is what is called for. Help should be given to the many industries which desire to do these things. We also need more vigorous and intensified encouragement and support for research and development of mining techniques, coal utilisation and so on.
If there is strong support for providing United Kingdom industrialists with incentives to convert from oil to coal and to use energy effectively in the years ahead, it is estimated that we could save approximately 14 million tonnes of oil a year and open up a market in industry for 23 million tonnes of coal. The Minister says that intervention is not generally appropriate. I remind him that several countries already offer financial assistance to encourage the move away from oil. Australia uses tax concessions; France offers a variety of incentives; Japan is introducing grants and subsidies at low interest rates; in the United States of America major industrialists are prohibited from building new oil or gas-burning boilers and receive tax credits for capital investment in coal-fired equipment. These possibilities should be considered sensibly.
A realistic approach should be adopted to try to help in the great energy crisis which will undoubtedly engulf the world in the next decade or two. I hope that in this regard we shall accept the example of the United States, which has decided to convert more than half its electricity generating stations back to coal-fired plants. The Americans have made dramatic improvements. They forecast that the coal share in electricity generation will increase by 30 per cent. to 35 per cent. If we are to reach our target, set in Venice, by 1990 we should also be moving in that direction. Dramatic improvements can be made if we have the will and the determination and if the Government will act.
The price differential between coal and oil is such that it is much more economic to build and operate a new base-load coal-fired plant than to build and operate a comparable oil-fired plant—those are the facts of life—even with full environmental controls adding 25 per cent. to the capital cost and 10 per cent. to the ultimate price of electricity.
I should say a word of caution about a too-rapid development of nuclear energy. We all know of the American experience on Three Mile Island. The Americans already have 70 atomic plants, producing 12 per cent. of their electricity. Since that experience 15 nuclear projects have been cancelled and no nuclear complex of any kind will be built in the next two years. The simple reason is that there is still a great degree of uncertainty. No one can predict with any accuracy whether the kind of safety techniques being employed in the development of nuclear energy are first-class and absolute in view of the potential dangers that one normally associates with this form of power.
The British public's greatest objections to, and their principal fears about, atomic energy are twofold. The first concerns the safe disposal of nuclear waste. Spent fuel rods containing radioactive isotopes remain potentially lethal for thousands of years. The British public must be convinced that there are proper safeguards. If nuclear energy is to be developed for consumer purposes, there must be absolute guarantees.
284 Secondly, when one has the benefit of electricity generation by gas, oil or coal, it can be turned off virtually immediately in an emergency. Nuclear plants, however, while they can be isolated to a degree, are absolutely perilous. There is no argument about that. Much more money will be needed for the training of staff and the development of far more stringent safety laws before we can be assured that nuclear energy can play a positive and permanent role in our society.
I do not believe that anything that the Government have said so far will boost the confidence or the morale of the energy-producing industries or of the British people.
§ Mr. T. H. H. Skeet (Bedford)
I listened with interest to the hon. Member for Leigh (Mr. Cunliffe). I wish to pursue a number of points that he made. I raised one in an intervention, namely, the question of the very large stocks. I said that they were 50 million tonnes. In fact, the figure is close to 40 million tonnes. I believe that that is a record figure. In 1979, it was 29 million tonnes. By October 1980, it was 36 million tonnes. It is now approaching 40 million tonnes.
"Current Energy Trends" shows that production is up by 3 per cent. and consumption is down by 5.7 per cent. Stocks are excessive. This means very heavy commitments for the National Coal Board. In those circumstances, one needs to know what the National Coal Board intends to do.
The Opposition motion refers to the "Plan for Coal". That was endorsed many years ago, of course. It had two facets. One was that the Government of the day would considerably increase investment. I understand that we are at present spending some £700 million per year on it, so the Government have kept to the commitment. But what about the National Coal Board and the miners? The other part of the commitment was to get rid of uneconomic capacity.
I listened intently to the right hon. Member for Leeds, South (Mr. Rees) when he indicated that he was not against closures if the pits were not financially successful, provided that new ones were opened. That is precisely what the Government are doing. There is an inquiry on Belvoir now. Whether it will come into operation is another matter. Personally, I have been against it, but I can see certain arguments in its favour. Over the years, however, we have not had the closures that would make for an effective coal industry, and it is because of the extensive losses that the coal mines are in great difficulties today.
I wonder whether the Opposition have recognised the force of what they are saying. The production of the coal mines by 1985 would be 135 million tonnes, and by the end of the century it would be 170 million tonnes. We have already been told that it will take 10 years to build a mine and bring it fully into operation. Selby will not be producing at full capacity by 1985. If production now, with opencast, is 120 million tonnes, the industry is likely to be well off target. Therefore, one can denounce the figures that the Opposition have given.
Whose funds are we dealing with? Are they the National Coal Board's? My hon. Friend the Under-Secretary told me in a written answer last yearThe sources of funds available to the NCB and its subsidiaries between April 1973 and March industry. [Official Report, 2 June 1980; Vol. 985, c. 571.]285 I shall quote only "Internal resources" which provided 4 per cent.—no more. All the rest comes from the public. When the taxpayers are under great pressure, they will say that if there should be no more production than the country demands, and if there is a lot of coal about which cannot be sold—and which cannot be exported because it is a competitive market—there will probably have to be certain cutbacks. That is unanswerable.
At a fairly early date we must find a method of making suitable but limited cuts in the capacity of the totally uneconomic pits. I have before me some of the NCB statistics, though not the most recent. They deal with South Wales, showing that a great number of pits there have an overall output per man-shift of under two tonnes. There are about 20. Many of them are loss-makers. Some should be closed down, because they will never be profitable and can never be modernised. It would probably help the Yorkshire and East Midlands pits and the board's overall position if some of them were closed and new capacity were opened up.
However, a booklet has already been circulated by the triumvirate of steel, rail and coal—Mr. Sirs, Mr. Weighell and Mr. Daly. The interesting part is at the back, where we find the recommendation:no closure of collieries on purely economic grounds.If the document's recommendations are fully carried out, there will be no possibility of ever having economic pits in the United Kingdom, and therefore no possibility of the 1980 Act ever working.
There is another problem. If we have a limited market for coal, and we can persuade the CEGB to consume 75 million tonnes a year, and probably a little more if it can, provided that the price of coal remains competitive within a certain range, where do we place the coal in the rest of the market? I should like to say that it is in the domestic sector, but that has been taken away by gas. I should like to say that it is in the steel industry, but that has dwindled to between 3 million and 4 million tonnes, and there is a certain amount of importation. I should like to say that it is in industry and commerce, but unfortunately the fluidised bed combustor, which I fully supported, is about three years from being able to make a full impact on the market. Therefore, there are another three or four years to go before anything can be done to assist the coal mining industry.
Before making what I think are some useful suggestions, I should like to read something that indicates the attitude that probably the right hon. Gentleman, and certainly other Opposition Members, will adopt. The booklet that I have already mentioned says:The principle embodied in the 1979 TUC Congress Composite Resolution 15 that 'the CEGB and other nationalised industries must be compelled to provide an assured market for indigenous coal as a necessary guarantee of increased coal output', must be extended to a requirement that all nationalised industries should use each other's products and implemented forthwith. In particular the steel and coal industries must be compelled to make full use of rail transport.Heavens above! What are we coming to? If that happens, there will be a cosy arrangement worked out between the three unions concerned under which it is mandatory that the coal be used. There is no right to import from elsewhere; indigenous coal must be used in all circumstances, however uneconomic, whatever the costs of production. That seems to me to be utter madness.
§ Mr. Allen McKay
The hon. Gentleman talked about over-producing, and asked what we should do with the 286 coal. Under the common agricultural policy we over-produce food, and yet we subsidise it to a vast extent and then sell it to Russia at a lower price. Could we not do something like that with coal? If we over-produce it, can we not sell it at a lower price or use it to help many old-age people who suffer from hypothermia, for example, when we have large stocks of coal?
§ Mr. Skeet
That is an interesting argument. As the Opposition want to pull out of the Common Market, and as they do not like the CAP anyway, I do not see why such a policy should be extended to fuels.
Why should the steel industry, for example, take British coking coal when there is such a differential between prices? In Australia coking coal costs £27.4 per tonne cif United Kingdom ports against the NCB's £45. If there is that differential, perhaps it is not unreasonable for the British Steel Corporation, even though it is a State corporation, to go abroad for coking coal.
I should now like to make one or two recommendations, because I want to assist the NCB. I think that it will have to roll forward "Plan for Coal" and probably defer the Vale of Belvoir investment, which will be too costly at present.
I recommend the closure of a limited number of pits which are perennial losers and are not open to modernisation.
I should devote resources towards the marketing of coal, with special emphasis on the fluidised bed combustor. Too much money is being spent on the production end and too little on marketing. If I could get that one point into the heads of the Opposition they would be on the road to recovery.
I shall now say something that my own Government may not support, but I think that I should say it, because I said it at the relevant time. I am prepared to consider that we may have to phase the working of the Coal Industry Act 1980 over two years from 1983–84. As the Government are to take a certain modicum of revenue from the British Gas Corporation, I see no reason why some of it should not be used by my right hon and learned Friend the Chancellor of the Exchequer for budgetary purposes in order to effect a transition from oil to coal. That may come about.
I do not want to hog too much of the time available, but I wish to make one or two other points, particularly as my right hon. Friend the Secretary of State mentioned competitive industry and energy policies. There is no doubt in my mind that external financial limits determine prices, quite apart from the market. Therefore, the price that heavy industry must pay is to some extent dictated by them. I understand my right hon. Friend's point that they could be used for a reduction of costs, but in many cases they do not operate like that, and in fact increase prices.
The tax on fuel oil, inaugurated in 1963 to benefit coal and later used as a revenue producer, is absurd today. I think that my right hon. Friend has acknowledged that. In West Germany the tax is £3.28 and in France it is 0.09p. In the United Kingdom it is £8.08. That is absurd.
My right hon. Friend's point was that in the United Kingdom the fuel oil position was a little better than in the rest of the Common Market, but in 1980 as a whole prices, excluding tax, were higher here than in all other countries studied. We should recognise that there are energy policy differences between the United Kingdom and the rest of Western Europe. One is the external financial limits, which have a distorting influence. Another is the tax on 287 fuel oil. I have dealt with both these matters. I turn to the third, which is that different basic data are used for the establishment of gas prices.
In the United Kingdom, gas oil is the factor. In Europe it is fuel oil. Gas prices for these industries should be assessed on a common basic oil product. If it is fuel oil, the United Kingdom should share with the EEC, and have a fuel-oil related gas price. That can be indicated as follows:the pricing of natural gas in the United Kingdom is computed from a different base in the several countries in the EEC. Approximating the price of gas to gas oil which at current figures is 40.80p per therm would work out differently if fuel oil—the EEC base—at 27.80p per therm was employed. The price of petroleum products differs throughout Europe due in part to the proximity of the Rotterdam spot market and the consequent reductions of distribution costs.I should have thought that that was an easy way of approaching the matter. If we settle our gas prices by different data, there will be different results. I appreciate all the steps that my right hon. Friend has taken in that direction, but he has not gone far enough yet. He mentioned that he was not responsible for the cost structures of countries such as France, which have big nuclear and hydroelectric programmes. He may have amazed the House when he mentioned that by 1985, 44 per cent. of France's power would be nuclear power. That is what we have been saying for a long time. In 1985, we shall have no more than about 20 per cent. nuclear power.
I agree that we cannot rival the hydro side, but we contemplate that France's energy costs will be very different from ours. That will be visited on the Government at the time. The Conservatives have been in Government for 18 months. Contracts have just gone out for Totnes. We are waiting for a further plant in Lancashire, and we are still waiting for the inquiry into the pressurised water reactor for Sizewell. We have not acted quickly in order to build more nuclear plants. If we want to match the French, we must get ahead with that.
I should like to make two further recommendations. An electricity tariff structure should be modelled on the European system, favouring energy-intensive industries. I agree that there is no case for any special preference to industries generally, but energy-intensive industries are at a disadvantage compared with Europe. My right hon. Friend acknowledged that, and made one or two recommendations. But they are not sufficient. We are waiting for reports. We are waiting for the Chancellor of the Exchequer. We are waiting for certain things to be done. But if the French and Germans had had North Sea oil, they would have turned it to the advantage of their industries—much more than we have ever attempted to do. We have been acting as gentlemen all along the line. I am not suggesting that we should subsidise our industries. I suggest, that if there were harmonisation of the European and United Kingdom provisions, we would be better placed.
Nevertheless, having made those comments, I will state my firm view that the proposals that have been put forward by the Opposition are absurd, and I intend to support the Government tonight.
§ Mr. Frank R. White (Bury and Radcliffe)
I am grateful for the opportunity of participating in this debate. 288 First, I declare a double interest. I am sponsored as a Member of Parliament by the General and Municipal Workers Union, which has 75,000 members in the gas, electricity and nuclear industries. I am also chairman of the all-party paper group, which seeks to represent the interests of this vital high-energy-consuming industry. Within that industry my constituency has the heaviest concentration of paper mills, and hence we are very concerned with energy policy.
I know from the discussions that I have had with my colleagues in the GMWU and with heads of industry in my constituency that there is deep concern that the Government have no clear coherent energy policy and are failing to co-ordinate the energy sources that are now at our disposal, with the inevitable result that today's lost opportunities and squandered resources will be paid for by future generations.
I understand that the Government are reluctant to intervene in the free market. After all, that is their declared policy on which they won the election. But they must forgive Labour Members when they tend to look at the Government's hypocrisy. While worshipping at the altar of free market-ism for the private sector, they destructively intervene in the public sector. How else does one explain the Government's intervention that forced gas prices up to a level 10 per cent. higher than the rate of inflation, and electricity prices up to a level 5 per cent. higher than the rate of inflation? If that is the Prime Minister's idea of constructive intervention, I advise her that many of my constituents—the poorer members of our community—wish that she would direct her personal energies in another direction.
That sort of price fixing on domestic heating attacks the weakest in our society. I am all for intervention, but this is an example of Conservative Party bigotry against these industries. The Conservatives have undermined nationalised industries, and they have attacked both management and unions in those industries. They have attacked and laid waste their investment plans and, like a pimp treats a prostitute, they have foced up consumer costs, using the extra revenues to finance their spending.
I should like to point the Minister to a more worthwhile course of intervention that most fair-minded people would support. We as a nation happily enjoy a four-fuel economy—that of coal, gas, oil and nuclear generation. It is essential that these fuels should be used in the most efficient manner. To that end, the General and Municipal Workers Union recently published a pamphlet entitled "Energy Planning for the Future". I hope that Ministers have read that document, and if they do not have a copy I shall make sure that they receive one.
Those of my hon. Friends who are waiting to speak in the debate will no doubt follow my hon. Friend the Member for Leigh (Mr. Cunliffe) in drawing the attention of the House to the position of the coal industry and coal reserves. At present, coal reserves are sufficient to support the current rate of production over the next 300 years. My union supports the view that coal, above any other fuel, should be used for bulk steam raising in industry and that industry should be encouraged to reconvert to coal burn by way of investment grants and a pricing policy that makes coal attractive for this purpose.
Gas is a clean, controllable fuel, which presents the user with few storage problems. It is ideal for small-scale heating and for premium industrial use, where tight temperature control is required. However, its special 289 advantages are wasted if it is merely used as bulk heat. It should therefore be priced accordingly and withdrawn from the heavy industrial market as quickly as possible.
On the question of oil, we need a well-defined policy on depletion to ensure that supplies last as long as possible. That cannot be achieved by the Government withdrawing from the market. It requires constructive intervention, and the Government should re-examine their policy towards the British National Oil Corporation. A depletion policy must be aimed at the point of use. As far as possible, oil use should be confined to non-substitutable uses.
Electricity should not only provide light and heat. Other uses can and should be found for it, particularly in the electrification of transport—not only in mass transport schemes but in short-distance and local schemes, such as battery-operated buses and cars.
In short, we have precious little time really to get to grips with the energy problem, and the Government must take positive initiatives in this area. Our abundance of energy sources places a responsibility on us to ensure a sensible use. That can come only from a willingness by the Government to intervene, both with legislation and with cash.
Recently, the science policy research unit at Sussex university concluded that if over the next 20 years all industrial boilers now using oil were converted to coal burning it would cost the nation £150 million a year. That would be a positive step in energy conservation and in the correct utilisation of resources. It would also be of great benefit to the machinery and engineering supply industries.
If hon. Members believe that there is no demand for this, I should like to quote from correspondence that I have received from the Elton Cop Dyeing Company, in my constituency. Mr. Herbert Hand, the managing director, recently wrote to me complaining about a circular that he had received from the Total oil company, informing him that the cost of heavy duty oil was to be increased by 1.20p per litre, to a price of 10p per litre. In January 1979, the cost to the company for that commodity was 4.79p per litre. Therefore there was an increase of over 100 per cent. in two years. The cost to the company this year will be £275,000 at the new price—an increase of £33,000.
This is a company in a hard-pressed sector of British industry—the textile sector. It has a modern finishing plant, with a high degree of automation. It has an excellent record for controlling costs. It has first-class industrial relations. But it cannot control the cost of oil, electricity, water, effluent and rates. Oil is now accounting for 14 per cent. of its costs, while its direct materials—dyestuffs and chemicals—are costing less than that.
The position is even more ludicrous when we consider that the company would now benefit—and would like to benefit—from conversion to coal. But, because of the increased cost of oil and its effect on cash flow, and the competitive edge of foreign competitors, with their subsidised energy, the company cannot generate the money it requires and is in a "Catch 22" situation. It is in circumstances such as these that the Government should act on behalf of this type of company.
The question of foreign competitors leads me to my final point, which concerns the paper and board industry. Last year, that industry closed a paper mill every 22 days. It closed a paper machine every eight days. It lost 24 men every day during 1980.
290 During 1980, the bad economic climate was compounded by the Government's policies, and it gave our competitors a 25 per cent. price advantage in the paper and board industry. Energy costs, without doubt, played a serious part in creating this disadvantage. The fact that energy is increasing in price is worrying to all of us, and to no industry more than the paper and board industry. The fact that energy is priced higher, in an energy-rich country such as ours, than in the countries of the majority of our competitors, is totally unnecessary and is a major disadvantage to our industry imposed on us by the Government.
Up to November 1980, heavy fuel oil in the United Kingdom cost up to 53 per cent. more than in most other countries—especially the United States of America and Canada. Industry has to pay between 6 per cent. and no less than 319 per cent. more than industry in other countries in Europe and North America for its natural gas.
We have to pay between 3 per cent. and 238 per cent. more than other countries in Europe and north America for our electricity. This country pays between 16 per cent. and 34 per cent. more for diesel than other EEC countries have to pay.
In this respect, the paper industry welcomes the NEDC initiative; indeed, paper was one of the major inputs into the NEDC study. But we need action and assistance now. The NEDC will not be receiving its next report until just before Budget day. Meanwhile, companies are daily at risk. We look now to the Chancellor of the Exchequer and to the Energy Ministers to alleviate our problems.
Those of us who are involved in the paper industry ask the Government for a freeze on all increases in energy prices for industry until those of our European competitors catch up with our prices. We ask that the energy subsidies of North America be declared to be unfair trading, and that appropriate tariff action be taken against them.
The Government must look again—the Minister referred to this—at the recent decision in the NEDC to agree to set up a task force on fuel costs. Is it true—I should like the Minister to deal with this question—that the task force has been given a remit only to compare EEC fuel costs with this country and not to bring into the comparisons the costs in Scandinavia and North America? The Minister seems to be confirming that by nodding his head. If that is so, the Energy Ministers are ignoring the disrupting force that is affecting much of British industry. They are ignoring the particular problems that Notth America and Scandinavia are creating in the paper industry and the textile industry. These problems are leading us along the road to disaster. We need firm action, and a comparison with costs in those countries should be included in the work of the task force.
If the Minister is not to be regarded as a twentieth-century Nero, he needs to stop fiddling and to take some action now.
§ Mr. David Crouch (Canterbury)
The hon. Member for Bury and Radcliffe (Mr. White) declared a double interest. As the House knows, I have an interest in the chemical industry and also in the oil and gas industries.
The hon. Member for Bury and Radcliffe expressed his concern flir the paper industry. My principal concern in speaking this afternoon arises from a representation made to me by a very profitable paper mill in my constituency. Out of an annual output of £13 million it exports £8 291 million. That company asked me to do something about the rise in the price of gas. This price rise has come not from the oil industry but from the British Gas Corporation. The company has had a rise in the price of gas for this year—I pause for effect—of 47 per cent. That is the increase from one year to another. I became very concerned about the prospects for industry under the weight burden of such remarkable changes in price from one year to the other. I can hardly believe my ears, and I have spent a lifetime in the chemical industry.
Listening to the speech of the right hon. Member for Leeds, South (Mr. Rees) this afternoon, I felt that he was in some way unsure of his ground. He reminded me of a dismounted cavalry general who suddenly found himself in a major staff appointment—he did not like it, he was restless, and he wanted to get out into the field again. I thought that perhaps he had not given as much study to this vital question as he would have liked to give, but perhaps there are other things on his mind as he approaches this weekend. Just as I thought of the right hon. Member for Leeds, South as finding himself in a staff appointment and not liking it, dare I say also that my right hon. Friend the Secretary of State for Energy sometimes gives the impression of being a staff officer who does not give the greatest weight to the opinions of those of his field officers who are fighting the battle on the industrial front? I make those comments out of respect for each of the right hon. Gentlemen that I have mentioned.
I welcome the Government's decision that there should be an urgent inquiry into the cost of energy to British industry and to see whether British industry is being seriously disadvantaged by our present pricing policies. By their decision the Government have acknowledged that there is a case to answer. The establishment of an energy task force in the NEDC—which has been asked to report in six weeks—shows that the Government appreciate the urgency with which the problem must be investigated and resolved. I hope that its findings will be published in time, so that any fiscal measures that may be recommended can be acted upon by the Chancellor of the Exchequer in his Budget.
It has taken a long and very determined siege of the Department of Energy by the CBI, the Chemical Industries Association, and other industries in the intensive energy-consuming fields, to get this inquiry. They have had to batter at the doors for it.
We do not merely want interesting thoughts from the task force on the problem that it studies, because there is an urgent need for it to point to areas of action. It will need to be both specific and courageous.
There is no doubt that, to say the least, energy's present price structure for our industry is out of line with that of the rest of the world. British industry is paying through the nose for its energy. We pay much more than our industrial competitors on the other side of the Channel. As a result, we are losing business, and losing it fast. Foreign competitors have not been slow to jump into our established markets. As a result of their lower prices they take business from us. Manufacturers in France, West Germany, the Netherlands and Switzerland have led the way. Who can blame them? They have seen our weakness and have seized their chance.
I shall not weary the House with a long catalogue of price comparisons. They are well known in general, and 292 well known in particular by the Government. Too often, the Department of Energy has brushed them aside. The Department has given the impression of having a self-righteous approach to industry's complaints. That has proved irritating during a trying time for British industry.
Early this month the price of heavy fuel oil in the United Kingdom, excluding tax, was reported in the EEC oil bulletin as being $202 per tonne. Early this month the average price in the EEC was $212 per tonne. There would appear to be a slight advantage to Britain, which has a slightly lower price. However, there is a tax differential between the United Kingdom and the EEC countries of $12 per tonne. As a result, the United Kingdom is at a slight disadvantage. United Kingdom oil prices have just been increased by 13 per cent., which is equivalent to about $26 per tonne. Consequently, our prices are far higher than the EEC spot price.
The position is much worse in relation to natural gas. In the United Kingdom the price of gas for a firm contract is between 29p and 29.5p per therm. In West Germany the price is between 19.7p and 21p per therm. In France it is 19.5p. For interruptable supplies in the United Kingdom there is a slightly lower price, of between 24.5p and 25.5p per therm. In October 1980 the price in Belgium for such supplies was 17.5p and in Italy 18p per therm. Such figures led and still lead to a demand for an inquiry.
In recent months both the House and the public have complained that British industry is failing or having to struggle because of a variety of problems that could or should be corrected. Sometimes we have said that high wage costs have crippled our competitiveness. We have blamed management for inadequate investment and a failure to replace old plant and machine tools. We have said that productivity in British industry is too low. We have even heard business men—big and small—complain about the high cost of money and blame it for their uncompetitive position. British exporters had to jump a final hurdle in the industrial pentathlon, namely, the overvalued pound. They had to get over that hurdle before they could get into the market in Europe that we used to call the Common Market.
With remarkable stoicism British business men have accepted such restraints, but not without complaints, bankruptcies, many closures, and an increasing number of lay-offs. They have accepted such restraints because they have accepted and still accept the paramount need dramatically to reduce the rate of inflation. The time will come when there will have to be some amelioration of the financial pressures on industry. We must be very near that time.
We should be careful not to push industry too far. When a company falls, it finds it more difficult than it used to to recover lost business. When businesses fall and try to recover they are likely to find that their business has been taken by a foreign competitor. Business men know the danger and try to hold on to their export business at all costs. They do so by marginal costing, by selling at low profits, or by selling at a loss. They cannot go on like that for long. When they find that a major element in their costs—an element that is dependent on Government policy—is the artificially high price of energy in Britain compared with the prices found in other EEC countries, it sticks in their gullets.
Why should Britain, which is self-sufficient in coal, oil and gas, find itself priced out of the market? It is not the result of free market forces; far from it. It is the result of 293 Government intervention. I understand the Government's strategic aim for energy. The Government say that we must think of the future. They say that we are running out of gas and oil and must not burn them up too fast. We must make them last as long as possible. Meanwhile, we must strive to find the best options. Therefore, the Government argue that we must raise the price in order to restrict demand. Such a policy would be all right in an ideal world, where everyone did the same thing, but we are not in an ideal world, and everyone is not doing the same thing. In the EEC there is no harmonisation on energy prices; far from it. Our European partners must be laughing at our high-minded policy. Their manufacturers are cashing in on it.
The Government of the United States of America make no bones about it. They have deliberately held down oil prices to their industrial manufacturers. They have encouraged them to jump into the export markets of the world with a major price advantage. What does the EEC Commission have to say? It has quite a lot to say. A Commission statement that was issued a few months ago says:Progress towards a Community energy policy is hampered today by wide national variations on pricing and fuel taxThe Commission states that consumers will have to face "higher realistic prices."
In an even more controversial passage, the Commission makes the following suggestion:an effort should be made to harmonise national taxation and domestic energy price systems.It mentions present differences and states that they were:the root cause of a number of problems such as the deflection of trade between member countries.Amen to that.
The world energy problem and its solution is the major issue facing the world. It involves all nations of the industrialised world and the Third world. We should give this subject top priority. It should certainly have top priority within the EEC. If we cannot agree among ourselves, what hope exists of trying to persuade or to bring pressure to bear on the United States or the OPEC countries? Could we even pretend to help Third world countries?
Let us not lose our strategic objectives. Let us give a lead in Europe. Let us take a world stance in the energy crisis. Let us also remember, however, that we have to stay alive industrially in a world grown tougher in competition than at any time in history. We must not neglect the immediate tactical problems that we face at home. We should not seek to exploit our partners and allies as a result of our energy-rich base. We have not done so yet. I am not suggesting that we should do so now.
My complaint is that our energy policy is a mixture of high endeavour and low experience—low experience of the facts of life in industrial Britain today. I am not so worried about our energy base. I am more concerned that our industrial lines of communication should not be broken and that our industrial front line should not be outflanked in the battle that we are fighting to keep alive. We have to win at least our share of that battle. Then, perhaps, we can lead the way to winning the war.
§ 6.1 pm
§ Mr. Peter Hardy (Rother Valley)
If I have to disagree at all with the hon. Member for Canterbury (Mr. Crouch), my only regret is over the timing of his speech. I wish that he had made it six months ago—or, better still, 12 months 294 ago. The hon. Gentleman told the House that British business has been stoical. I prefer to regard it as meek. The New Testament may say that the meek are blessed and will inherit the earth, British business men, however will not inherit very much if present policies persist.
Reference has been made to the paper industry. As a country that is 91 per cent. dependent on imported timber we are now in the ridiculous position of exporting raw timber to buy back paper and other timber products from other parts of the world where energy policies are pursued rather more sanely.
I agree with the Secretary of State that this is an important debate. My right hon. Friend the Member for Leeds, South (Mr. Rees) suggested that we need regular opportunities of this kind. As energy will be a vital problem for the rest of the century, it would be a good idea if the House arranged regular opportunities to discuss matters of current energy concern. At the moment we could consider the gas-gathering pipeline to which my right hon. Friend referred. It is a pity that we did not debate this issue before Christmas rather than being presented with a written answer. I would like to have heard the views of my hon. Friend the Member for Dunfermline (Mr. Douglas) before the new year.
§ Mr. Hardy
My hon. Friend has done so, but he did not have the opportunity that should have been accorded him at the time.
We should be able to debate our concern over conservation and energy pricing. I hope to mention those matters briefly, but the main concern of Opposition Members at this time must be the mining industry. The Minister should know that there is no record of opposition to proposed closures where pits are exhausted. In my constituency in the last few years the Barley Hall and New Stubbin collieries have been closed without causing anything other than anxiety about what would happen to the people there.
There is concern, however, about the proposed closure of Orgreave colliery, which has reserves. I recognise that there is an argument on the question whether those reserves, under the area of Aughton, where it is wet, should be mined. There cannot be argument that coal exists under the Tinsley marshalling yard, which is to be closed. We shall therefore lose a rail link as well as the coal underneath it. The closure of that pit should be approached with a great deal more caution than has so far been shown.
The Minister should be aware that anxiety and anger in the coalfield is not restricted to one organisation. The National Union of Mineworkers is rightly concerned. I know that management is also worried. I spoke yesterday to leaders of the Yorkshire area of the National Association of Colliery Overmen, Deputies and Shotfirers, one of the most responsible trade unions in the country. They are extremely anxious. They want me to make it clear that they will resist proposals to close collieries other than on the ground of exhaustion. If a pit with reserves is closed, the opportunity presented by those reserves is locked away permanently and will never be realised.
We hear rumours of the possible closure of between 15 and 25, or more, collieries, on the ground not of exhaustion but of short-term economic considerations. We should express not merely our anxiety but our anger. The 295 Government should know that if 25 pits are closed the cost of the unemployment that will directly result from the closures will amount to at least £140 million a year. It would be far better to keep people in employment than to incur the greater cost resulting from the wastefulness of an unnnecessary closure.
Less than a year ago Opposition Members warned the Government of the consequences of recession and particularly of the likely vicious effect of the Coal Industry Bill. We are now seeing the conditions that we said would result a year earlier than we forecast at that time. It is foolish to allow what may amount to over 8 million tons of coal to be imported in 1981 when pits with coal beneath them are closed in the same period. It is right to point out to the Minister that 8 million tons of coal imported means an unemployment cost in this country, in 1981–1982, of £80 million. Importing coal at that level is a very bad bargain.
The problem is that the National Coal Board is expected to break even. The board is also expected to maintain capacity, as well as its research and its ability to provide the oil, gas and feedstock that will be needed from coal in the 1990s. If the board is threatened today, this will destroy its capacity to meet the national need in 10 or 15 years' time. This is a fundamental consideration, which should be overrriding. It has not been given adequate recognition by the Government. Four years ago I suggested to the then Secretary of State for Energy and to the chairman of the National Coal Board that it would be worth their while to seek to increase the level of exports to Europe. At the time Sir Derek Ezra took the view that such exports would attract loss. That may have been the case, although just afterwards the Community introduced the coking coal intra-Community subsidy, which would have eased the burden.
A situation occured in my constituency that will compel the very proposal that I made, but in extremely unfortunate circumstances. Just before Christmas I was astonished to learn that in his proposals for the steel industry Mr. MacGregor proposed the earliest possible closure of the Brookhouse and Orgreave coking plants, in my constituency. I had not anticipated that development at the time. I began deep consultations. I visited the works and met management and unions. I discovered that the British Steel Corporation had apparently forgotten that the Orgreave coking plant provided gas for the Sheffield steel industry and that there was no immediate alternative source of supply.
Mr. MacGregor may wish to obtain North Sea gas for the Sheffield steel industry. As private owners, domestic occupiers and other industrial units in my constituency have been refused North Sea gas, I shall resist strongly and object strenuously to any proposal that renders my constituents unemployed in order to provide North Sea gas for the Sheffield steel industry. A good, sensible and viable plant already provides that gas. When North Sea gas runs out we shall need another plant in our area to provide the gas to replace it. That seems an odd situation.
I wrote to Mr. MacGregor about these things. I was rather saddened by his reply, because I always took the view that as he was able to demonstrate a remarkable ability to look after himself he might be able to demonstrate a remarkable ability to look after the steel 296 industry. However, he replied saying that he did not think that it would be helpful to the National Coal Board to encourage or help it to keep open uneconomic pits.
We must ask ourselves, what is an uneconomic pit? In the successful collieries in my constituency the vast majority of those mining the Swallowwood seam occasionally run into difficulties with the roof at the coalface. The seam is notorious for roofing conditions; nevertheless it is a very good quality coal. But if a pit happens to have difficult roofing conditions for three months or six months, shall we have Sir Derek Ezra, Mr. MacGregor or a Minister from the Department of Energy saying "That pit is uneconomic. Let us close it"?
I believe that we are making too short-term a calculation in this matter. It may be all very well for the Minister to say to the NCB "Tighten up your finances, manage your accounting, improve your practices, and be economic in your arrangements," but what we are seeing now is not an insistence upon efficiency. We are telling the NCB not merely to trim its nails but to trim them by amputation at the elbow. That is the development that seems to be beginning.
In the last 12 months we have heard repeated calls for improved production. The coal industry has provided that productivity. Over the years during which I have been a Member we have heard repeated calls for far better attendance in the mining industry. In the last two years, as the Minister knows, absenteeism has been halved. We have heard calls for British workers generally to improve their arrangements to co-operate and to work hard. In my constituency the coal miners and steel workers have been doing that for a long time. In steel we have seen a very poor reward. For example, partly because of the ridiculous energy pricing faced by the record breaking special steels industry in South Yorkshire, we are priced out of markets in which we were previously massively competitive. The result has been that activity has been reduced and demand for energy has fallen.
Therefore, instead of supporting the use of our energy, in which we have a massive international advantage, and instead of encouraging competition and sustaining activity, we now see, at regular intervals, further burdens being placed upon business. I do not differentiate between those in the private sector and those in the public sector. I do not think that the hon. Member for Canterbury was differentiating between them, either. Each one of those groups in a wide variety of industries, and certainly the industries of South Yorkshire, is finding as each month passes that it is more and more difficult to survive.
If we are to have additional unemployment above and beyond the 15 per cent. or 20 per cent. that many South Yorkshire areas are currently experiencing we shall not see merely a great waste of money but a greater anger. The Minister knows that in the 1960s the miners and mining communities were quite tame in their acceptance of a policy of contraction. But they learnt in the 1970s that the arguments that they advanced about the folly of closing pits in the 1960s were right and justified. They will not accept a repetition of the history of the 1960s by exhibiting the tame docility that was expressed at that time. The Minister must not expect docility in this situation. He will not receive it.
Whilst I do not believe in violent demonstrations and responses of that kind to political arguments, I would join those in my constituency who would rather see public money spent in keeping people in successful production 297 than see it spent in paying them, their children and their grandchildren to waste their time on the dole. We do not want that situation. It is avoidable. It is easier and less costly to avoid that than it is to adopt the alternative. I beg the Government to listen to the voices not merely of the economists who may be employed in No. 10 Downing Street but of those who have long been concerned about the need to make industry successful in all our areas, and certainly to retain the necessary industrial activity in coal and steel.
§ Mr. Patrick McNair-Wilson (New Forest)
Like other hon. Members. I welcome the right hon. Member for Leeds, South (Mr. Rees) to his new Front Bench job. However, I remind him and the hon. Member for Rother Valley (Mr. Hardy) that we on the Conservative Benches do not need lectures from the Opposition on energy policy. It was their policy, particularly in the 1960s, that led to the Coal Industry Act 1965—which some say tore the heart out of the industry—and to the 1967 White Paper, which carried such engaging comments as:This reinforces the case for continuing to accept a degree of risk with oil supplies for those markets which it retains, so that we may benefit from its cheapness".The Labour Party is the party that is now lecturing the present Government on their energy policy. It is a party that has a very poor record of achievement when in office.
The right hon. Member for Leeds, South is reading himself into his new job. As he does so I hope that he will take an early opportunity to look at the Coal Industry Act 1965—before he tells the present Government what they should be doing.
§ Mr. Albert Roberts (Normanton)
The hon. Gentleman ought to have a better memory. He should go back to 1957, when we were stocking coal at 10s a ton. We are now stocking coal which is deteriorating in value, and with the crisis stock of 38 million tonnes, hordes of people are shivering in their homes.
§ Mr. McNair-Wilson
The hon. Gentleman will recall that Lord Robens always said that if the coal production figure fell below 200 million tonnes, the industry could not be kept together. Many of these figures have now, regrettably, passed into history. All that I am saying to Labour Members is that no one has a monopoly of all the wisdom in terms of energy policy.
I urge my hon. Friend the Under-Secretary to press on with all speed with the review of prices. I do not believe that we should be aiming to return to a cheap energy policy, because if we do that the miners' wages will reflect it. However, I want to see that we get as near fair competition as possible. I hope that my hon. Friend will recognise that as sterling increases in value so, inevitably, the difficulties for manufacturing industry become that much worse.
I do not want to spend any time on the coal industry this evening because I made my views on the current situation clear on the Second Reading of the Coal Industry Bill, now the Act of 1980. However, I ask this question of my hon. Friend: if British coal is supposed to be as competitive as we are told it is, and if we are now part of an effective, expanding Common Market, what attitudes are being struck by the European coal cartel? If European countries such as France and Germany want to share in our oil, they 298 should take our coal to burn in their power stations. I should have thought that that was a perfectly reasonable deal that we could put to our colleagues.
I very much hope that now that there has been a change of emphasis in Poland—one of the cheapest suppliers of coal to the North German power stations and elsewhere—we shall take advantage of that change and try to push our export market a litle more strongly.
I declare my interest, in that I am employed by a company that makes graphite products. That interest will become clearer in a moment. I begin my remarks by asking my hon. Friend whether he could help me with a constituency problem. I share the view expressed by the Secretary of State about the looming oil crisis. I think that the present situation, when there appears to be a glut, will soon give way to a situation of shortage, worry and all the other things to which my right hon. Friend referred. Therefore it makes sense for us to determine as quickly as we can the extent of our indigenous resources.
My hon. Friend the Under-Secretary will know that many parts of the South of England have been set aside for exploration. My constituency is one of them, Shell Exploration has plans to drill an exploration well of about 6,000 ft to determine whether there is oil there. When it is put in, that application will be decided on and determined by the county council.
Accepting that the New Forest is a somewhat unusual area of natural beauty—if oil is found there, or in the national parks and other areas of outstanding natural beauty, can my hon. Friend give an assurance that we shall be able to have the same type of full open public planning inquiry as those that took place at Belvoir and Windscale? In an area of environmental importance it would only be reasonable to have such a planning inquiry—
§ Mr. McNair Wilson
—despite what my hon. Friend the Member for Bedford (Mr. Skeet) says. My main point relates to electricity. Electricity takes about 30 per cent. of all the fuel that we burn. It has certain applications where there is clearly no competition. Therefore, the method of generating electricity must be of central priority to any discussion on energy policy.
I firmly believe that in energy terms, in 15 to 20 years' time we will effectively be talking about coal and nuclear energy, with oil perhaps being reserved more and more for transportation, coal taking on a whole new range of activities, and nuclear energy beginning to take up the base load for electricity generation.
It has already been proved, at least to my satisfaction, that the nuclear power generating systems operating in this country are very safe. There have been no fatal accidents in nuclear power stations from nuclear causes. However, argument continues on the question how best electricity should be generated by nuclear means. If we are to understand that problem we must recognise that we are talking only about a nuclear furnace. It may be a coal furnace or an oil-fired station. It is a device to boil water to drive a turbine.
Over the years there has been much discussion of the different systems that can be employed. In the 1950s this country led the world in nuclear generation technology. We opted to go for gas-cooled technology. In almost every respect it has proved that its performance capability is excellent. It has shown a fine safety record, and it enjoys the distinction of being British technology.
299 Under the Labour Government there was an attempt to find an alternative. The heavy water option was examined at great cost. It is an option that I have always found it difficult to understand, since we have no heavy water plant. Nevertheless, the steam generating heavy water reactor option has now closed. We are once again being asked to re-examine the pressurised water reactor. This system, according to its proponents, has many advantages, one of which is that it is an off-the-shelf form of generation. They say that it has a lower overall cost, and that if we were to opt for PWR we would begin to enjoy the opportunities of exporting the stations.
I do not accept any of those arguments in favour of PWR. Although many of the AGRs have turned out to be more costly and have taken longer to build than was expected, if we are to build PWR stations to the safety standards that we must insist on we shall not find that we automatically have an off-the-shelf, cheap form of electricity generation. The early stations—the Magnox stations—are still, after all these years, turning out electricity as cheaply and efficiently as predicted—in many cases more so. We would be making a big mistake if we wasted another mass of taxpayers' money on examining the opportunities of placing orders for PWRs when we already have our own thermal reactors, which work perfectly well.
We should now recognise that we have come to the end of the thermal programme as we know it. To waste further money on new designs at this stage would not be sensible. We should give urgent consideration to using the fast reactor.
In 1959, the first Dounreay reactor—the small one—was brought into being. It has performed magnificently since then. In 1974, the prototype reactor—the larger demonstration model—was brought on stream. That is doing likewise.
The fast breeder reactor has the advantage of a better utilisation of fuel—let us remember that uranium is just as finite as oil—and also has the advantage of being more efficient. Today, we should be making active plans for a commercial fast breeder reactor. If we do not, we shall be overtaken by our European colleagues. We shall find that when the shortages to which I referred earlier come upon us we shall still be very much in the second league.
What time scale do the Government see for the building of a commercial fast reactor? Any energy policy for a period between now and the end of the century that does not include, for this country, the development of this technology will mean that Britain will have missed a magnificent opportunity to take advantage of her own technology. It is an opportunity that we cannot afford to miss.
§ Mr. David Penhaligon (Truro)
We have heard some interesting speeches, with some of which I would concur and with some of which I would not.
The hon. Member for Canterbury (Mr. Crouch) said much with which I agree, although he has clearly met different business people from those that I have met. The business people in my constituency who have gone bankrupt see their life's work in shreds, as they have had to sack people who have worked for them for 20, 30 or 40 300 years. They have not said that that is their contribution to fighting inflation. There are more generous industrialists in the hon. Member's constituency than there are in mine.
The theme of the hon. Gentleman's speech was very interesting, and I should like to continue part of it. The single most important contribution that energy has made to the British economy in the past five or six years is the effect of North Sea oil on our exchange rate. That is the major reason why Britain is in such difficulties on the job front.
The Government slavishly follow each OPEC rise, which has three effects. First, it substantially increases Government revenue. Secondly, it pushes up the international value of the pound, as those countries that are not self-sufficient in oil can see that the gap between the real production costs of oil and the price at which it is being sold is, for Britain, increasing. The third effect, not long after the other two, is that every OPEC price rise makes our industry substantially less competitive with other countries because of the effect on the pound.
The Government say—it seems a nice, simple, pat answer—that this all produces a great deal of revenue, which they will use to reduce the taxation of companies and the profits of our industrial enterprises. I have not seen the most recent figures, but the profits of our industrial enterprises are going through the floor. That is why they are closing. The hint that the Government might reduce the tax on the profits of a company which has just gone to the wall is an extremely cruel joke.
In any case, it could be argued that the contribution that industry makes to the Government by way of taxes on profits has gone through the floor in the last 20 years anyway. I do not know what percentage of Government revenue comes from taxation on profits today, but it is a fraction of what it was 20 years ago.
The Government have two options. The first is not to follow OPEC. I strongly refute the claim that this option would be a subsidy. A policy of subsidy means selling something for less than it costs to produce. North Sea oil production costs $4 a barrel—perhaps $6—which is so much less than the current price that we are not, by a mile, talking about a subsidy. If we had a lower internal oil price in the United Kingdom than those of other European countries that would not be a subsidy.
The Government's second option is to put each increase in revenue that they receive from an OPEC price rise into a separate fund to compensate industry for the difficulties caused by that price rise. It could be used to reduce payroll tax or to provide major investment grants to industry.
The choice between those two options is marginal. I do not worry which one the Government pursue. All I pray them to do, while we still have some industry left, is to pursue one of them.
§ Mr. Penhaligon
It remains to be proved that that is what we would have to do. I have offered two options. At the moment, we sell oil to Germany, where it is passed on to industry at a lower price than the price charged to our industry. There can be no rationale in that. As things stand I cannot agree that my suggested alternative is impossible.
301 Nuclear power has had scant attention tonight. Yet the Government's projected expenditure on their newer nuclear building programme is between £12,000 million and £15,000 million. Such a sum deserves a day's debate in itself. One of the major functions of the House, if it has any real purpose at all, is closely to examine Government expenditure plans. For the Government to slip through such a sum as this without using any of the time available to them for debate is a disgrace.
The public perceive this building programme as representing a substantial risk. I am by training a professional engineer and I must tell the House that I find it difficult to quantify the risks. The Three Mile Island incident, some say, proves that the risks are small. Others say—I would be in this camp—that we were so near a desperate and monumental accident at Three Mile Island that it is a warning written on the wall for all of us.
As a Member for a rural seat, I am amazed that the Government should claim to have confidence in nuclear power stations while still insisting on building them in remote areas. On the day that they have the courage to build one in London, my constituents in the far South-West will be more impressed with their safety. Correspondence with the Government clearly shows that the real reason why these stations are built in areas with sparse population is that, if—I do not over-emphasise the "if"—there were an accident, evacuation would be much easier than in urban areas. That is not exactly an admission which will greatly increase confidence in an area where Governments have spent no other money at all yet which they suddenly wish to bless with a nuclear power station costing £1,000 million.
§ Mr. Palmer
I hope that the hon. Gentleman is aware that there are three nuclear stations within easy reach of Bristol. Does he think that we are in danger?
§ Mr. Penhaligon
Candidly, yes. As I have said, I find it difficult to quantify the risks, but if an accident should occur on any of those sites, the good people of Bristol are at risk. They are less at risk than the people in some of the villages in my constituency are from the possible nuclear power station in their area, because those in Bristol at least have the advantage of a few miles between them and a nearby station, but the risk undoubtedly exists.
I have some questions about the PWR inquiry. When will it start? What will be the terms of reference? Will the Government fund or help to fund those who want to use the inquiry to present an alternative case?
I say this with no malice, but if the public perceive those arguing against the PWR to be less well funded and less able, because of lack of money, to present their arguments than those arguing for it, they will take no notice of the inquiry's report. What are the Government doing to ensure that those with doubts about the PWR are not restricted by lack of money from fully and articulately presenting their case?
If the inquiry decides that it is no go—that the PWR is not safe enough—what will happen to all the sites in Britain which are currently being investigated for PWR stations if the system is approved? Do the Government intend simply to go back to AGRs and to build them on the sites?
Conservation also has had scant attention tonight. I believe that 10 or 20 per cent. of our energy could be saved 302 by a massive conservation programme. Insulation, draught proofing and more efficient machines all come immediately to mind.
A particular interest of mine is district heating systems. I hope that the Minister will let the House know where we are in this saga. I see faces around me that are familiar in energy debates. I do not know how many times hon. Members have raised the subject of district heating schemes, but their potential is enormous.
The average thermal efficiency of British power stations is not more than about one-third. Until a new generation of materials can be discovered, that figure is not likely to increase. We use one-third of our energy to produce electricity and waste two-thirds to heat rivers, birds and fish. If we could save only one-half of the two-thirds that we waste, the contribution of useful energy to Britain's energy supplies would be equivalent to the total current output of the Central Electricity Generating Board. We shall take a long time to reach such a day, but I should like to see the Government start on the plan to establish massive district heating schemes.
§ Mr. Edwin Wainwright (Dearne Valley)
My purpose is to keep the debate as wide as possible, but as I represent the coal industry I hope that the House will forgive me if I dwell on that industry.
I am sorry that the hon. Member for New Forest (Mr. McNair-Wilson) has left the Chamber. He spoke about nuclear power, which is still a comparatively new industry. We are not yet aware of all its dangers. Throughout the world, especially after the Three Mile Island incident, people are afraid of the dangers that may arise from the burning down of the core. There must be ways of controlling nuclear power and making it safe for the future.
We must not move too easily and too quickly, especially with the fast breeder reactor, because that could leave in its wake great dangers to mankind for a long time. I hope that before the Government do anything about the fast breeder reactor and the siting of any pressurised water reactor they will call a large public meeting to discuss where reactors should be sited and whether they should be allowed to proceed. We have heard a great deal about Three Mile Island. Some of us know that there was human error in the control room. Two panels were sited damned stupidly. They were at the back of the control panel and could not be seen. One of those panels was essential and should have been visible. If it had been, the operator would have been aware of what was happening and the danger could have been avoided. We have to ensure that operators in the control rooms of nuclear power stations are sufficiently well educated and professionally minded to deal with the problems. The Government must always be careful that the building and running of nuclear power stations are as safe as possible.
In the midst of social and industrial decline, our standards, like those of other developed nations, are bound to be affected. No sector of British industry can remain unaffected. That applies to the energy industries as well as to manufacturing industry and all forms of commerce. We must take into account the present economic climate and must prepare for the future, when, I hope, that climate becomes brighter and the economy starts soaring.
We are more fortunate than many other countries, because we are self-supporting in energy. I hope that we 303 do not become too complacent, because energy and energy prices are of great importance to our industry. We must prepare to use our energy supplies in the best possible way so that the self-supporting period may be extended beyond the estimates. It is estimated that our oil will last for two decades, coal for about 300 years and gas for four to five decades. By careful conservation we can extend those periods.
I shall confine the rest of my speech to the coal mining industry, because it is essential that we get that industry right. There is great danger in what may happen to the industry. What is to be done to keep energy costs to our industry similar to those charged to industry on the Continent? The costs of energy to our industry are far greater than those on the Continent, despite what is said.
Let us look at the subsidies to the coal mining industry. In Belgium the subsidy to the coal mining industry, though the industry is small, is £58 per tonne; in France it is £45 per tonne; in West Germany it is £41 per tonne; and in the United Kingdom it is £29 per tonne. Direct aid to productivity to the industry in Belgium is £207.7 million, costing £34.05 per tonne; in France it is £334.1 million, costing £17.96 per tonne; in West Germany it is £1,385.7 million, costing £14.85 per tonne and in the United Kingdom it is £195.4 million, costing £1.62 per tonne. We expect our coal mining industry to produce the coal as cheaply as coal is supplied on the Continent.
The income from North Sea oil should produce subsidies for the coal industry so that the cost of coal to our consumers is cheaper. Why should we import nearly 8 million tonnes of coal? Why do we allow that when we have coal here? I know that some of the imported coal is coking coal, but the NCB can satisfactorily blend our coal for our coke oven plants. We allow imported coal to come in because it is cheaper. I remember that we allowed oil to be imported, because we depended on oil. As a result, we nearly decimated our coal industry. All Governments were guilty because they allowed cheap oil to come in from OPEC countries. But we have been taught a lesson. The Secretary of State gave us a new price today. He said that there had been a 1,800 per cent. increase in the price of oil since 1973. That is a terrific increase.
I remember when we started to import coal from America shortly after the war. It was to be supplied to the NCB at a cheap rate, but as soon as the contracts were fixed the cost of transporting the coal went up and the NCB had to pay £70 million for that coal.
There has been low investment in the coal mining industry. We shall require coal when the oil has run out and we cannot close a pit and expect to recover in 10 years' time. It is essential to retain a coal mining industry.
I look forward to the day when we have co-ordination among our energy industries. One would expect such co-ordination if they were part of a multinational corporation, but the Government expect them to work separately, and their attitude is that if one industry is facing difficulties it should be allowed to lose. We cannot allow that, because the coal mining industry must be maintained to be able to produce the increased tonnages that we shall need in 20 or 30 years' time.
We must not allow market forces to operate in energy and industry generally. We have to cater for the needs of our people and we need to export large quantities of our goods in order to pay for imports. It is essential that we 304 make certain that our industries work as efficiently and productively as possible. The coal mining industry has done that. Miners have produced almost everything that has been asked of them, but because there is now a large stock of coal we hear talk of pit closures.
The Government will try to close pits, and that will cause conflict in the industry. We hear that the NCB plans to close 25 pits; but no evidence has been given to the NUM. Where is the co-ordination between the management and the union? Why is there no openness? Why do we have to rely on a mole leaking the fact that pits are to be closed? Even now, we have not been given the list, but everybody says that there is a list. It ought to be divulged to the miners.
The Govenment must make sure that their policies are wide and prudent enough to ensure that our energy industries work together and achieve greater co-ordination. We must not allow one to fall by the wayside when we know that in 20 or 30 years' time we shall have to build it up into perhaps the most important industry for the nation.
I hope that the Government will think more deeply about the future of the coal industry. If they carry on as we expect there is bound to be conflict. I fought in many struggles in my younger days. I have had a tough life fighting for the rights of miners, but if everybody works as he should in a nationalised industry and we make sure that we are planning with the best co-operative methods and co-ordination, strikes should not be necessary. The nation, workmen, and the whole economy lose when a strike takes place.
I hope that the Government will have second and third thoughts before allowing the National Coal Board to close any pits against the wishes of the NUM.
§ Mr. Geoffrey Johnson Smith (East Grinstead)
It is always a pleasure to follow the hon. Member for Dearne Valley (Mr. Wainwright), who speaks with great knowledge of the coal mining industry. His memory goes back a long way. He reminded us of the many battles that he has fought. Mine is not such a long memory and I have no personal experience of the coal industry.
However, having surveyed the scene at Westminster for a number of years, I think that there has never been a time when there was so much agreement between the two sides of the House about the value and long-term importance of the coal industry. We are all agreed about that. An Opposition Front Bench spokesman agreed on the radio this morning that the "Plan for Coal" published by the previous Government in 1974 was the policy of the present Government.
The hon. Member for Dearne Valley referred to subsidies. Of course Continental countries subsidise their small coal industries. The German coal industry is declining, and because the Germans depend so much on coal they have to get every scrap that they can. The picture in this country is entirely different. I hope that I am not looking at it through rose-tinted spectacles, but the hon. Gentleman knows that the Government have pledged to spend between £600 million and £800 million, not so much on subsidies as on investment for modernisation, so that we are able to compete with other fuels and have a prosperous coal industry.
§ Mr. Edwin Wainwright
The hon. Gentleman is saying things which he knows have not been accepted by 305 the NUM. He talks about investment, but what about investment in liquefaction? Has not that been neglected? Have we not lost coal because we have not spent the money needed to modernise more pits?
I know that there is a surplus of coal, but I remember—
§ Mr Speaker
Order. I am sure that the hon. Gentleman remembers, but he has already made his speech.
§ Mr. Johnson Smith
I shall not follow the hon. Member in too much detail, but there is a tremendous amount of investment in the coal industry. I do not know of any Government who have greater good will or could spend more money than the present Government, bearing in mind their responsibilities in other directions. The Government are trying to improve the investment record of the industry, and productivity is increasing. The industry suffers high cost elements, because there are many uneconomic pits still in existence. Any Government, even a Labour Government, would have to pay attention to the fact that such costs are uneconomic and that the industry must put its house in order. That is a discipline to which it, like any other industry, must be subjected.
My purpose is not so much to talk about the coal industry as to examine the relationship of energy prices to industry generally. I understand the difficulties that the Government got into with the CBI and other organisations in industry in respect of their energy pricing policy. It is generally agreed that, overall, our energy prices are not out of line with those of our competitors. However, there are problems, though they are difficult to quantify, and that is why the Government have agreed to sit down with the CBI and other interested parties—they were a bit slow about agreeing to do so, but I make no complaint about that—to discover in what areas we are out of line.
I am glad that during the past year the Government did not yield to the temptation artificially to hold down the prices of indigenous oil and gas. General subsidies for energy are bad for efficiency, for conservation and for innovation. We must carry the Opposition Front Bench on that point. I have not heard it argue that point. Subsidies only postpone the day when we shall be less dependent on the vulnerable oil supplies from that area of tremendous political instability, the Middle East. Surely that is agreed on both sides of the House. The Government's policy of market pricing for fuel is not simply an ideological aberration of a Right-wing Thatcher Government.
At the international Venice summit our friends and allies supported our policy and agreed on the need for Governments to ensure the market pricing of fuel. Equally, we all agreed that there should be some market stability. The sudden increases in the price of oil do not lie within our hands. The OPEC strategic committee said that that was not to its advantage either, but we have yet to have as good a track record from that committee as we should like to see. From time to time the various OPEC Governments seem not to follow the policy of their strategic committee. In those circumstances we shall need, on a European basis, to use every bit of muscle that we have to persuade the OPEC Governments that it is as much in their interest as it is in our interest and the world's interest to have a stable market.
I understand that there is no quarrel between British industry and the Government about the fundamental approach to what I believe is a sound energy policy. The 306 CBI is not asking for subsidies but, as my hon. Friend the Member for New Forest (Mr. McNair-Wilson) said, it is asking for fairness. That is right. We reject subsidies as a way out of our difficulties in an era which marks the end of cheap energy. That must mean that we reject the need for Government interference with the pricing policies of our nationalised fuel industries. They have been mucked about by Ministers for too long. That is one reason why the chairmen of nationalised fuel industries have a most unenviable task—and I do not refer only to fuel industries. How can we have a sustained policy if Governments yield to consumer pressures and interfere with the pricing and marketing policies of those who were set up by Parliament to run the industry as proper managers?
§ Mr. McKay
The hon. Gentleman is missing the vital point about the coal industry. It has been in a position of under-investment from private enterprise for many years. Because various Governments have put money into the coal industry—for which we are grateful—it is now on the fringe of coming into its own. But the short period that the Government are giving it to achieve that will ruin the industry.
§ Mr. Johnson Smith
We can argue whether it is too short a period for the coal indstry to come into its own and make a profit, but it is not a matter of principle that divides us; it is only a matter of emphasis and timing. Given the general good will on both sides of the House towards this tremendously important industry, we should be sensible enough to agree on a timetable that suits most people. There will always be some who will argue that it is too fast or too slow, but I have never known any policy that does not attract that sort of argument. That is of no importance in the end.
If we reject price controls—and I am glad that the Government do so—it is not the same as saying that the British Government or British industry should reject ways and means to reduce energy costs and use. It is to that aspect of the Government's policy that I now turn. I see no point in paying more for energy than necessary, and thereby putting ourselves at a cost disadvantage compared with our competitors. There is evidence that that happens. It is clear that the tariff arrangements of the Central Electricity Generating Board are insufficiently flexible. I understand that that matter is under consideration. However, the facts have been known for some time. The Government were right to refer the electricity supply industry to the Monopolies and Mergers Commission. I hope that the Government's discussions with the CBI will speedily result in the conclusion that the power to be more flexible should be vested in the CEGB.
In general, the concept is that the CEGB may not offer a special favourable tariff to one customer in case that results in the placing of a burden on other customers—even if the CEGB regards the new load to be used by the new customer as ideal for its network. Because of that inflexible arrangement, the new intensive demand industries wanting special tariff arrangements that can be obtained in other countries are unable to obtain them in Britain, even though Britain has generating capacity lying 307 idle. In the United States there is competition between public power utilities to attract industries to a specific state.
If the Government think that it is wise to give money to industries in certain parts of Britain—for example, to help with start-up costs because the Government believe that it is important to encourage the expansion of new industries in certain areas and even, in some instances, to ensure their survival—surely the same holds good when trying to strengthen industries that depend on having power costs equal to those available to their competitors in Europe, Japan or North America.
There is nothing in the CEGB arrangements to convince me that we have that right. Similarly, there are other major processing and metallurgical industries that require gas either for energy or for chemical feed stock at the prices paid by international competitors. I understand that that is now beginning to happen. There should be some mechanism to make possible a more flexible tariff arrangement. That is one reason why our costs in some companies and industries have proved to be out of line with those in other countries.
The second reason why our energy costs are too high is that manufacturing industry does not have a good record in reducing energy costs. The figures since 1974 show that energy consumed per unit output by manufacturing industry has hardly altered. The Germans achieved a 17 per cent. improvement between 1974 and 1978. The Americans, whom we regard as squanderbugs in energy, achieved a 14 per cent. increase in efficiency; France achieved an increase of 9 per cent.; and the Japanese industrial energy efficiency rate improved by 10 per cent. between 1976 and 1978. Industry must put its house in order. It cannot expect the Government to help it with grants. If it knows that energy is costly it has every incentive to introduce the technology that is now available, based on the microchip, to improve its use of energy. I was once involved in trying to sell that. The conservatism of some managers in British industry was appalling. Some companies have a good record, but the remainder lag far behind.
The third reason why our costs are higher has much to do with the structure of British nationalised industries. The steel industry must take a leaf out of the book of the Japanese steel industry. That applies whether it is in private or public ownership. There is no ideological babble about that. We are talking sheer market economics. The great iron ore developments in Western Australia and other parts of the world to a large extent took place with Japanese purchasing contracts. Australia was one source, the development in Africa another, and there were many other sources all over the world. They went to the source of supply for their steel industries. If they could buy their way in they entered into a long-range purchase contract, which often included the sale of their steel goods. It was a good deal.
Following the second nationalisation of the British Steel Corporation, the British steel industry could have entered into joint ventures or partnerships to develop iron ore or—this is more delicate ground because some hon. Members represent coal constituencies—even to develop coking coal mines. That would have achieved a secure supply at a cost well below the world price. Yet it did nothing in that respect. British Steel's ability to offer 308 major long-term contracts to a new mining venture in which it wished to become a partner could have been financed not through the taxpayer but by bank loans to the new venture with only a modest equity investment from BSC. We now have a corporation, probably the largest single consumer of raw materials in Britain, without any integrated source of materials. I am informed that no other steel producer of comparable size, anywhere in the world, is so lucky in that respect. I doubt whether any steel producer anywhere else in the world has received and is continuing to receive so much assistance from the taxpayer. Something is wrong with the way that we capitalise on the advantages that should be available to us.
The Central Electricity Generating Board is another example of an industry which could have benefited from a mineral procurement policy, but I realise that that is delicate ground because it is virtually tied to coal. Therefore, I shall skate hastily over that thin ice in case I encourage interventions from hon. Members representing constituencies with coal interests. However, I think that the electricity industry could benefit from integrated supplies.
If it is delicate for the British Steel Corporation and the CEGB to enter into arrangements for investment in overseas sources of coal supplies, I can only say that I am somewhat disturbed that neither of these industries is as involved as I should like it to be in North Sea oil. Both industries are large consumers of oil.
The Government have encouraged a wide variety of companies—some of them unlikely companies—to participate in North Sea oil exploitation. I should have thought that it would do a great deal for the strength of these two national corporations, on which so much of our industrial well-being rests, if they were encouraged to take part in North Sea oil. I do not suggest that they should develop it. If they were given blocks, many people with the expertise would come in to do the development. But there is not much of a record of the BSC or the CEGB having access in that respect. If they were allocated favoured areas I believe that that would do a great deal to generate funds to help them to face the future with greater confidence.
Perhaps one of the first steps to which we should give greater attention in terms of energy resources is that those resources should become an integrated part of our overall industrial structure. Several hon. Members have either said or implied that our energy industries appear to be somewhat remote from national industrial strategy. Each seems to be concerned with its own affairs.
No one knows from one year to the next—or from one miners' conference to another, because that has a significant effect—what the price of coal will be. No one can be sure what the price of oil will be, because that is generally set by OPEC. Gas follows in train, because that is related to oil prices. Then along comes electricity in the rear, following willy-nilly according to what prices the industry's fuel suppliers charge.
If we were able to develop an energy-industrial strategy that aimed at creating the greatest overall added value from the conversion of energy to competitive industrial products we should obtain the maximum benefit from our energy sources. We would then be concerned not with what prices we could get for coal, oil or gas, per se, but with the benefits that the nation could achieve by using those 309 energy sources, combined with an imaginative and long-overdue raw materials procurement policy, to make our industries more competitive—in fact, the most competitive in Europe.
In making these comments, I draw heavily on the views expressed to me over some weeks by a constituent who has a deep and long-term knowledge of materials procurement in a well-known international company. As hon. Members know, I take a very keen interest in energy problems. Therefore, I hope that the Government will comment on my suggestions.
§ Mr. Harold McCusker (Armagh)
When I spoke in an energy debate last year, I said that Members of Parliament representing Northern Ireland constituencies contributing to debates such as this could be likened to underprivileged children with their noses pressed against the window of a wealthy neighbour's house admiring the fire in the hearth, because it is cheaper to have a fire in the hearth in any region of Great Britain than in Northern Ireland: envying the gas-fired central heating, because gas in Northern Ireland costs four times more than in the rest of the United Kingdom; and wondering at the galaxy of electrical appliances, because electricity in Northern Ireland costs 25 per cent. more than in the United Kingdom in general. If anyone disputes those figures, I should point out that they are to be found in the columns of Hansard, having been given by the Minister of State, Northern Ireland Office. I ask hon. Members to add those figures to the figures that have already been given when they talk of the consequences for their constituents of the energy crisis that faces us.
I shall not bore the House with the catalogue of underprivilege which is suffered in Northern Ireland and is reiterated almost every week in this Chamber. However, I propose to emphasise the disadvantages experienced by those in Northern Ireland because there is no coherent energy policy for the whole of the United Kingdom.
This Government, and to a lesser extent their predecessors—who in their latter days were beginning to move towards a common energy policy for the whole of the United Kingdom—appear to want two energy policies for the United Kingdom; one for Great Britain and one for Northern Ireland. One, of course, is 40 times bigger than the other. One has all the natural resources; the other has none.
If Northern Ireland had all the natural resources there would be no problem. I would support the Government in exploiting and using those natural resources for the benefit of the whole kingdom, just as the Government are doing with what can be urged to be Scotland's natural resources. The consequence of Government policy, which I described in my opening comments, is inevitable. The part of the United Kingdom which can least afford it is being asked to pay the maximum for its energy. It is impossible for Northern Ireland any longer to have a viable and separate energy policy. That might have been possible when Stormont existed. I am sure that many former Ministers in the last Stormont Administration were relieved that it was prorogued in 1972, because it almost coincided with the 1,800 per cent. increase in the cost of oil. Today they would be faced with the problem of trying to explain to the people of Northern Ireland why they were having to pay exorbitant rates for their electricity. Indeed, they could not have done anything to change that situation.
310 Recently, at some political disadvantage to myself, I worked very hard to co-ordinate energy resources on the whole island of Ireland, and to see that they were shared. The dangers inherent in the isolation of the Irish Republic are best seen in its approaches to the Department of Energy here to obtain a link with the United Kingdom system or, as the Republic would argue, the greater European system.
Northern Ireland is underprivileged in another way. This is the Parliament of the whole United Kingdom, from which operate the Government of the whole United Kingdom, and sitting on the Government Front Bench is the Secretary of State for Energy of the whole United Kingdom. I am allowed to speak in the debate and to vote tonight. However, I am a second-class Member of Parliament because I shall not get a response to my remarks. I shall be told by the Minister, whom I hold responsible for energy policy for the whole United Kingdom, that he is not responsible for energy policy in Northern Ireland. That is scandalous. I wish that hon. Members on both sides of the House who were so devoted to the cause of devolution were here to experience it. It is very frustrating. I hope that the Secretary of State will change his mind, but I have no doubt that he will say what was said last time—that he cannot make any comments about energy policy for Northern Ireland because it is a matter for the Secretary of State for Northern Ireland. Nevertheless, having said that, perhaps he will think again.
This deplorable situation arises not because of the disparity in domestic energy prices between one region and another in the United Kingdom but because of the crippling effects of the differentials in industrial and commercial tariffs.
There is one difference between the situation now and the situation eight months ago. Eight months ago, when I first spoke on the subject, 60,000 people were unemployed in Northern Ireland; now there are 100,000. We are told that during the next 12 months the figure will rise to 125,000. Yet, with unemployment totals in Northern Ireland rising to 20 per cent. and above, light engineering tariffs in the Province are 34 per cent. higher than in the North-East of England—a comparable region. Commercial tariffs in Northern Ireland are 32 per cent. higher than in the North-East of England. Heavy engineering tariffs in Northern Ireland are also about 30 per cent. higher than in a comparable region of the United Kingdom. Northern Ireland has the worst unemployment rate. With that penalty on top of the other penalties which have been described earlier today, I do not know how some of our industries manage to survive. For that reason alone I shall support the Opposition motion tonight, as, I am sure, will my colleagues. We believe that the United Kingdom needs an overall energy policy which includes Northern Ireland. The Province must become another electricity or gas region within the appropriate United Kingdom structure. That is the only way to reduce the unacceptable differentials which currently exist.
The last Government, in equally difficult times, did a lot to help. The former Secretary of State for Northern Ireland—the right hon. Member for Barnsley (Mr. Mason)—obtained£350 million from the Treasury in an attempt to put Northern Ireland's electricity industry on its feet. Let me put that £350 million into perspective; it is equivalent to the total cost of terrorist damage done in Northern Ireland up to the date on which that money was obtained.
311 I believe that the previous Government were about to take the steps that we have now suggested. The process must begin with the construction of electricity and gas interconnectors across the North Channel. That is not a Unionist political ploy. In fact, the Government of the Irish Republic want electricity interconnectors between Holyhead and Dun Laoghaire, and also a gas interconnector from the northern gas fields to Dublin. I do not imagine that the Irish Government are thinking in terms of political unity, nor am I thinking in those terms.
The arguments are best put in a report of the Northern Ireland Economic Council entitled "Recommendations on Energy Policy in Northern Ireland". I wonder whether anyone in the Department has read that report or, indeed, any of the excellent reports produced by this body on the subject of energy problems in Northern Ireland. The report says:we question whether it is realistic to expect an entirely separate and self-contained electricity supply industry in Northern Ireland to be able to provide electricity at charges and at a standard of service which match those prevailing in Great Britain. Since costs, relative to Great Britain, are of great importance to the economic viability of the Province, the Council is led to the conclusion that the interests of Northern Ireland might be well served by some form of amalgamation between the electricity supply industry in the Province and the main body of the industry in Great Britain.In another part of the report the council argues exactly the same case for the gas industry.
At a time when there are 100,000 unemployed in the Province, rising by another 25,000, I can think of no better way of boosting the whole economy of Northern Ireland than to allow its citizens and manufacturing industry to have parity of energy costs with their fellow citizens in the rest of the country. Because the Government resist that proposition, I shall vote against them tonight.
§ Mr. Tim Renton (Mid-Sussex)
Speaking after the hon. Member for Armagh (Mr. McCusker), it is easier than usual to say that I listened to his remarks closely but that I do not propose to comment on them. I leave that to the Minister. There is one matter that I should like to raise with the hon. Member. I understand that the Irish Government are considering the possibility of extending the new gas pipeline to take gas from the Kinsale field from Dublin to Ulster. I hope that that will happen, and that the proposition will be given serious consideration. If it comes about, it will provide a good example of cross-border co-operation, and it will have the effect of lowering gas prices in Ulster.
I shall confine my remarks primarily to oil and gas. I declare two interests; first, in the search for energy, as a director of an oil exploration company, and secondly, in the conservation of energy, as a director of a company making replacement double-glazed windows and doors. I shall say more about that company in a moment.
Unlike my hon. Friend the Member for Canterbury (Mr. Crouch), I congratulate my right hon. Friend the Secretary of State and his ministerial team on their solid achievements over the past 18 months. They inherited a tangled skein of energy policies from the previous Administration and have tried, in what I believe to be the second most exciting and exacting job in Government, to draw from that an orderly energy policy. I say "second" 312 advisedly, because the problem of monetary aggregates and sorting out sterling M3 must remain the most exciting and exacting job of all.
The Secretary of State and his team have a tremendous task to perform. In three areas they have done well. First, they have done well in the decisions that they have taken about nuclear power plants. It must be a great help to the heavy engineering industry to know where it stands. As my right hon. Friend said in his opening remarks, we shall slowly and belatedly get into the position of having more cheap, nuclear-produced electricity. The second area in which the Government have done well is in their decision to go ahead with the gas-gathering pipeline. Thirdly, they have done well in the encouragement that they gave to the smaller British company in the seventh round of North Sea licensing. The BNOC is no longer in as predominant a position in this round as it was in previous rounds. Those are three important steps forward.
The production of energy is now as important for any industrialised nation as that of steam or iron and steel was in the first Industrial Revolution. Every industrial nation will now be judged on its control over energy resources, its energy consumption and energy conservation. But what worries me is that as we enter the great period of energy independence for this country, for which we are so much envied by other EEC countries, that independence lies almost entirely within the control of three 100 per cent. nationalised industries—the Coal Board, British Gas and the BNOC. That in itself is a paradox for this Conservative Government.
We in the Conservative Party are very concerned about the overall record of nationalised industries—their losses, their poor industrial relations, the discontent of the unions and of the management within them. In my view, it is then totally illogical to leave energy, by and large, within the orbit of nationalisation.
§ Mr. Renton
With respect to the hon. Gentleman, I shall not give way because we have been asked to keep our speeches brief. For that reason alone I shall not give way to him, because I know his deep knowledge of the coal industry.
Nationalisation tends to lead to monopoly and, almost inevitably, monopoly leads to abuse of monopoly. I see signs of that already in British Gas. I have the greatest respect for the technical achievements of British Gas and for what Sir Denis Rooke, its chairman, has done to make it such a competent and internationally respected organisation. But there are signs in that organisation of abuse of monopoly power, not only in its control over gas heating appliances but in its approach to industrial consumers who, once they have installed gas and are dependent on it, are treated as members of a closed shop in which British Gas holds all the union cards.
I refer the Minister to the double glazing company that I mentioned earlier and to a copy of the contract in which Eastern Gas asks the company to move to a special offer and special supply arrangements. If the company signs the contract the price per therm will be 26.1p. If it does not sign, the general tariff rate of 42p per therm will apply. Obviously the company is encouraged to sign.
However, if the company signs the contract it will be penalised heavily for any excess use. When it takes in excess of the maximum agreed it will be charged 40p per 313 therm per month and £4.50 per therm per day. Furthermore, the corporation does not believe its own meter reading. All bills will be increased by 1 per cent. in respect of temperature and by 2 per cent. in respect of pressure. In layman's language that is a straight uplift of 3 per cent. in the meter reading.
The contract contains many other objectionable clauses. One involves the payment terms. At present the company pays its gas bills quarterly. If it signs the special contract, it must pay monthly. That is not so bad in itself, since it is acceptable as normal practice. However, condition 4 of the contract states that payment must be made within 12 days of the corporation dispatching the invoice. That is completely unacceptable. Any efficient commercial concern operates a monthly bought ledger which allows the use of computers and payments by a single cheque for supplies for the whole month. However, if the company does not pay on time, interest is charged at 4 per cent. above the Midland base rate. There is a simple word to describe that contract—"blackmail." It is not tolerable whether it is operated by a nationalised industry or by the private sector. The only remedy is competition wherever feasible.
I therefore welcome the steps that the Secretary of State is taking to introduce freedom to import coal, to encourage private electricity generation, and to help towards the break-up of the monopoly on the distribution of onshore gas. But in many cases competition is not feasible. Therefore, I urge my right hon. Friend to allow employees and British consumers to own some of the equity—some of the action—in the energy producers—the BNOC and the British Gas Corporation. There are many reasons for that. One is the profitability of the two organisations. It is likely that within a year or two the two organisations combined will be making between £1,000 million and £1,500 million profit, pre-tax, per year. If we do not introduce private equity capital and private shareholders that profit will be available to be frittered away by the next Labour Administration.
A second reason is involvement by employees and consumers in ownership of the company for which they work and of their own national assets. Shareholders are certainly far better watchdogs than any Select Committee. In any nationalised industry only one shareholder is allowed to attend the AGM—the sponsoring Minister. That is hardly industrial democracy.
But the most important reason is that the last 30 years have shown the inefficiency of nationalisation as a means of running large industrial corporations and of organising and motivating the work force and management in such corporations. I have no doubt that, just as the British Steel Corporation started as an amalgam of 14 steel companies, some of them successful, and has turned into a Moloch of bad industrial relations, low productivity and depressed management, so in time the BGC and the BNOC, if left without any element of inquisitive private capital and of, at times, querulous and assertive private and employee shareholders, will lose their edge. They will lose some of their international competitiveness and their ability to lead the field. It is vital to our industry that the two major corporations should remain ahead in productivity and technology.
The development of the North Sea and the continental shelf is one of the finest engineering achievements in the world. In the years ahead we shall have the ability to sell to the rest of the world the engineering skills that have 314 come from North Sea development. We shall have the ability to sell the geological knowledge. Much of that knowledge could be used in the exploitation of sea bed minerals, for example. But I do not believe that that can or will be done successfully by nationalised industries if they remain 100 per cent. State controlled. We must have mixed share ownership, which brings the private and public sector together.
A common objection from the Opposition is that if that happens we shall lose control of our national assets. However, do we lose control of the family jewellery if we hand it on to members of the family? Is that not exactly where it should go? The articles of association of the two industries, once in mixed share ownership, could be so arranged that control could not pass to an overseas company. Britain could still retain full control of the direction in which the oil and gas production flowed.
Let us examine other international oil companies. BP is a tremendous example of an oil company in which the Government have a 25 per cent. interest. The Bank of England has a 19.6 per cent. interest and the rest is held by private shareholders. Many other companies are similar. The Norwegian Government have a 51 per cent. interest in Norsk Hydro. The French Government have a 35 per cent. interest in Companie Francaise des Petroles, which controls Total. The French Government have a 67 per cent. interest in Elf Aquitaine. The German Government have a 54 per cent. interest in Deminex and a 40 per cent. interest in Veba. Those companies are highly successful. They have all shown that the private and public sector can work together in partnership and share ownership.
I urge the Secretary of State to ensure that a firm start is made on the process of involving private capital and employees in the ownership of the equity of the BGC and the BNOC. The ideal split could be 40 per cent. State, 10 per cent. employees and 50 per cent. private sector, including the pension funds and the life assurance companies. That would be a fulfilment of our belief that employees should participate in the ownership of their own organisations. It would be a fulfilment of our belief that people are much better able than politicians to look after their own savings.
I realise the difficulties involved if all the cash from the organisation does not flow back into the public sector, but there should be a firm commitment to have this process well under way by the autumn of 1982. If we do not do that, I fear that in 10 years, in the 1990s, we shall look back and say, as the founders of British Steel say today, "We had our chance. We could have brought in private and employee ownership of these great national assets as a balance to politicial misjudgment but we failed. Now we have once again let Labour, with direction of funds and State intervention, turn golden geese into dead ducks."
§ Mr. Gordon Wilson (Dundee, East)
The debate has ranged fairly far and wide, as one would expect with such a general subject. I am glad that the hon. Member for Armagh (Mr. McCusker) has blazed a trail that is different from the normal United Kingdom approach to energy problems. I intend to do something similar in relation to Scotland.
In debates of this kind it is my practice to begin by re-emphasising that the United Kingdom is reliant upon Scottish sources for its domestically owned oil supplies 315 and will be increasingly so for gas. I make that statement not to suggest that Scotland has so far benefited very much from the oil industry, except in jobs related to development, but to point out to the hon. Member for Armagh that although one may indeed possess large resources, in the neo-colonial situation that sometimes exists in the United Kingdom one does not always get the advantage from them.
Scotland is in the front line in oil. I had great sympathy for the late Dr. Mossadeq of Iran, when he had to face the Anglo-Iranian Oil Company, and for many of the Arab countries that were faced with a similar situation, in which their natural resources were relentlessly and ruthlessly taken over.
My remarks this evening will relate particularly to the electricity industry in Scotland. Although the nuclear industry has not featured over-largely in the debate it is clear that the United Kingdom, having started out very strongly in that sphere, has succeeded in spreading its resources over so many forms of nuclear power that it has ended up with a very messy situation. On my calculations, there has been investment in about six different types of reactor—the Magnox, the AGR, the SGHWR, the AGR Type 2—the AGR being hardly ever completed and seeming to be designed and redesigned all the time—the PWR and the FBR. The generation of electricity by nuclear means has therefore left much to be desired, whether one agrees or disagrees with nuclear generation as such.
This evening I wish to deal with the situation in respect of the electricity boards in Scotland. In my youth I was brought up to admire the enterprise of the Scottish electricity boards, and in particular the North of Scotland Hydro-Electricity Board. In its early days, under the dynamic leadership of the late Tom Johnson, the hydro-board operated with social and economic purposes akin to those of the Tennessee Valley Authority, and brought social and economic developments as well as power to many parts of my country.
There is clear evidence that that situation has changed. A number of years ago there was a joint generation arrangement between the hydro-board and the South of Scotland Electricity Board in which they shared generating facilities and operated on a joint accounting basis. Unfortunately, that seems to have sapped a great deal of the enterprise and vigour previously exhibited by the hydro-board. It was almost as though the greater body had absorbed the lesser. In that context—I refer here to the remarks of the hon. Member for Armagh—there would indeed be a danger for Scotland if our electricity systems were to come into any wider European arrangement. I am well aware of the Channel line that has been proposed. A CEGB document estimates that a fair proportion—up to 40 per cent.—of the power required could come from Scotland. That seems an extraordinarily high proportion. The same would apply if there were stronger links in generation with the CEGB in England.
Last summer, far from trying to encourage development in remote areas the hydro-board turned its back on its traditions and sought to impose an additional charge for electricity supplied to island communities. That plan was abandoned only after a great deal of protest by my right hon. Friend the Member for Western Isles (Mr. Stewart), the right hon. Member for Orkney and Shetland (Mr. Grimond) 316 and the hon. Member for Argyll (Mr. MacKay). It is hardly surprising that it was changed. Nevertheless, it was what the hydro-board had set out to do, completely at variance with its own tradition.
I am particularly worried about the situation that is developing in Scotland in relation to generation over-capacity. The situation is something of a mess to begin with. The hon. Member for Armagh referred to the situation obtaining between Northern Ireland and the Department of Energy. In Scotland, the electricity industry is under the control of the Secretary of State for Scotland. When decisions are taken on nuclear power, however, the evidence seems to suggest that the Secretary of State for Scotland does not play a leading role, and that United Kingdom decisions are taken which have ramifications in Scotland well beyond those that the Secretary of State for Scotland may have considered—if, indeed, he had turned his mind towards them.
The Department of Energy has oversight of coal, 70 per cent. of whose market is to the South of Scotland Electricity Board. It also has control over oil, gas, and research and development into nuclear power and renewable sources. I believe that we also have to share the Select Committee on Energy, since although the Select Committee on Scottish Affairs has parallel jurisdiction it has to cover an area equivalent to seven or eight United Kingdom Ministries amd therefore has not sufficient time to do that kind of job in relation to energy matters in Scotland. I hope that it will give it a try, but so far it has not set out to do so.
There are certainly problems about the attitude of the South of Scotland Electricity Board. I may say that one problem is that it tends to have a pro-nuclear mania. Leaving that aside, however, over a considerable period it has overestimated the demand for electricity. It probably had a very good record in the 1950s and early 1960s, based largely upon the fact that so many houses in Scotland were all-electric that demand could be expected to grow indefinitely. The board therefore followed that course through. From the late 1960s onwards, however, steps were taken—for which the House must take a good deal of blame—that led to the waste of large amounts of public money.
Every year there is a debate on a statutory instrument seeking to give money as a subsidy to the Invergordon smelter. It is not that one minds subsidising industrial activities in an area such as Ross and Cromarty, but about £200 million has been set aside for this purpose over a long period, and already £70 million has been paid out—all based upon a miscalculation in the commissioning of the nuclear reactor at Hunterston B and the cost of electricity that would be generated by that reactor. In anyone's language, that is a fair amount of money to be set aside because of wrong calculations, yet no witch hunt seems to have followed, and there has been no attempt to assert some kind of discipline over the Civil Service, which had made the mistake.
Throughout the 1970s grossly inflated demand growth forecasts were rarely reached. Between 1970 and 1975, the South of Scotland Electricity Board estimated an annual growth of 6 per cent. Yet only once, in 1972–73, did the figure go beyond that, to 6.5 per cent. The next highest was 2.8 per cent. In 1975, after considerable urging, the board reduced its estimate to 5 per cent. annual 317 growth. In 1978 it was reduced to 4 per cent. In 1979, it was reduced to between 3 per cent. and 3½per cent., but the actual figure achieved in 1979 was 2.5 per cent.
§ Mr. Palmer
Is it not possible that the reason for that overestimating of electricity demand in Scotland is simply that the Scottish electricity authorities will persist in estimating their needs on their own, on a Scottish national basis? If they shared demand with the rest of the United Kingdom, without giving up their identity, they would need to overestimate.
§ Mr. Wilson
I do not agree at all. I think that the boards' duty should be to estimate demand accurately for Scotland. One could take that example further and say that if the CEGB made the same mistakes' in miscalculation, and there were the Scottish and Northern Irish miscalculations in addition, there would be a bigger blunder at the end.
I think that the problem arises because the electricity boards in Scotland have been super-optimistic in two ways. One was that electricity, despite the increases in cost, would still be the main form of fuel to be used in Scotland. That was not true, because gas came in later in Scotland and began to have an impact on the market. The second was in their estimation of the economy. In the Electrical Review of March 1979 the chairman of the South of Scotland Electricity Board admitted a plant margin of both boards of 40 per cent. He declared:We take an optimistic view of the economy",adding that not to do so was a policy of defeat. It might have been a defeat for what I call the madcap nuclear expansionists in the SSEB, but it would have been a damned sight cheaper than building all the new power stations.
Inverkip, an oil-fired station that may well he mothballed, cost £170 million. Peterhead cost £220 million. Torness, in which the Government have a degree of complicity, will cost £1,097 million.
By May last year growth expectation had dropped to 1¾per cent., and there was a 63 per cent. overcapacity at maximum demand, but in that month the first set came into existence in the area of the hydro-electric board, at Peterhead power station. A second set will be commissioned this year, bringing another 1,250 megawatts on to the Scottish scene. That shows that the whole business of forecasting power demand in Scotland has gone mad.
I am very disappointed that the Select Committee on Energy has not produced its report. Only last month the South of Scotland board rushed ahead and placed orders for £500 million or £600 million worth of machinery for Torness. I do not see how that can be justified in any language. I await with great interest the Select Committee's report. I sat in as an observer last May, when evidence was given by the chairman of the SSEB and a representative of the Scottish Economic Planning Department. As a Scot, I was ashamed by the low quality of the evidence given and the inability to justify the course of action that the board had adopted.
We have overcapacity and the mothballing of stations. It is a disgrace that this has happened. I am surprised that it has, in view of all the concern about the expenditure of public money and the 63 per cent. over-capacity, especially if we add in the Peterhead output and the fact that the Torness station is going ahead. This will, in my view, lead to the closure of power stations. Kincardine 318 must be at risk. Carolina Port B, in Dundee, is already having redundancies, and there are other examples, with modern plant rather than old plant being taken out of commission. In 1978 I was told by the SSEB that:No existing plant will be phased out specifically to allow the introduction of Torness. We expect that some 400 MW of old plant will have reached the end of its useful life and will be retired in the normal way between now and the time when Torness first comes into service.Inverkip—which is an oil-fired station, and is admittedly expensive to run—was envisaged for peak load and what the board nicely describe asvariable output, depending on price".Some of the coal-fired power stations may now begin to drift into the danger zone. If they do, that could lead to problems for the coal industry in Scotland.
I have a number of suggestions. The use of oil revenues for energy purposes is a good use. We should give resources to industry to install more efficient energy-using equipment and to use heat recovery. There is a lovely story that the SSEB now taps heat from its computer system. It finds it cheaper to heat its head office in that way rather than by using its own electricity. Fluidised bed furnaces and better insulation should also be installed in the industrial sector.
Secondly, it would be very useful, despite the over-capacity that I have mentioned, to have a combined heat and power system. I admit that the overcapacity may be an argument against it, but it would be appropriate for reasons of climate.
Thirdly, we should insulate every house to North European standards. Our present standards are abysmal, resulting in economic hardship, physical discomfort and illness as well as dampness and condensation, which have now reached epidemic proportions in the public sector.
Fourthly, additional investment should be given to the Scottish coal industry to make sure that it is not forced out, although the policy that the boards have adopted will make that very difficult. The National Union of Mineworkers should be very wary about what is happening.
Fifthly, we should try to convert the somewhat dozy and reactionary hydro-board into the board responsible for developing and using renewable energy resources, including wave and wind power. There is also an improving potential for small-scale or low-fall hydro schemes.
All of those proposals would in addition make us more efficient, provide jobs in construction, give relief from higher prices and provide better health and comfort.
Lastly, in Scotland there is a great injustice to be rectified. The hon. Member for Armagh had a fair number of injustices of his own to mention. The Scottish injustice to which I refer is that the flat-rate social security fuel allowance is applied to England and northern areas, including Scotland, at the same rate. Coincidentally, I yesterday received a letter dated 14 January from the electricity consultative councils for the north and south of Scotland districts. It said that the scheme should be improved by providing assistance in different ways with energy vouchers, and should take account of different climatic conditions in Scotland. It went on:For example, the over-all average Domestic consumption of electricity in England and Wales in the year to 31 March 1980 was 4,020 units per annum with consumers in one Board Area averaging 3,373 units. The comparable average Domestic consumption of electricity in the South of Scotland Area was 5,328 units, and in the North of Scotland Area 6,678 units or just about twice the number of units consumed in the Area of the 319 lowest usage of the supply in any Board area outside of Scotland. It hardly seems reasonable therefore that for those who qualify for Fuel Allowances, the level of assistance is identical.It is one of the facts of life in Scotland that, with many of the benefits of scenery, space, other environmental qualities, and so on, the climate is colder and that many people—the sick, the old, the disabled, those short of money because they are unemployed and have children—suffer considerably.
An energy policy is not simply a question of the ordering of priorities for the assessment of forecasts. It should relate to the supply of fuel at prices that ordinary people can afford to pay.
§ 8 pm
§ Mr. John H. Osborn (Sheffield, Hallam)
I cannot support the wording of the motion, which asks the House to condemnthe pricing policy which handicaps the competitiveness of British industry",but I accept the amendment, which refers to:the realism of the Government's energy policy and…the renewed vigourof our policies. I praise my right hon. Friend the Secretary of State for the lucid way in which he outlined the problem that faces him as Secretary of State and this country when he replied to the questions of the right hon. Member for Leeds, South (Mr. Rees). It has already been mentioned in the debate, but the local branch of the CBI in Sheffield the steel industry, the British Independent Steel Producers' Association, the chamber of trade and the chamber of commerce have pressed me to condemn the pricing policies of the Government, particularly the pricing policy of the British Gas Corporation.
As the Secretary of State said, energy—even energy in Yorkshire—is costly. That poses a challenge to industry in our country, but it also poses challenges to industry throughout the world. I accept the comments of the Secretary of State on the NEDC meeting and on the task force. If our competitors in Germany and France enjoy cheaper gas, oil and coal, and if it is due to a distortion, we should know more about it. He said that in general British prices to industry are comparable to those in the Community. I welcome the fact—it was mentioned by my hon. Friend the Member for Mid-Sussex (Mr. Renton)—that these monopolies have been invited to look at their tariffs. When the right hon. Member for Leeds, South was pressed on this matter, he said that he was not prepared to raise domestic prices in order to benefit industry. I do not think that many hon. Members would do so. Therefore, the principle that my right hon. Friend has put forward on pricing electricity and other sources of energy at economic levels is a policy that I endorse.
In Sheffield, in December, I welcomed the coal miners' settlement, but since then a problem has been posed to me. I have had meetings even this weekend, and it has been put to me that British coal is too expensive for the housewife. Between 60 and 65 per cent. of our electricity is dependent on coal-fired generation, and it is therefore also possible that our electricity is too costly for the housewife. While that responsible settlement is to be welcomed it is natural to be disturbed and vexed that energy may be more expensive in this country. I welcome a reassessment of the situation jointly with the trade unions, industry and the Government.
320 This is one of those difficulties that must be resolved. I have had the privilege of looking at the problem for many years from a wider point of view. I am delighted that my hon. Friend the Member for Lancaster (Mrs Kellett-Bowman) is present. In a European context, she looked at this problem with me when I was a nominated Member with her in the European Parliament. During the debate on steel, I mentioned that I had just returned from a meeting of the Western European Union in Paris. We had studied the question of the security of supply on the initiative of a German Social Democrat, Herr Flamig. Since then, I have had the privilege of having meetings with the OECD on economic, rather than energy matters, and there will be a debate in the Council of Europe on this subject, in so far as it affects our European neighbours as it does us. There had been the debate earlier this month in the Europe Parliament, too.
There is a priority in Europe that there should be greater independence from oil. I accept the Secretary of State's warning that oil is a material that we expect but cannot guarantee. Therefore, all the steps to reduce to consumption—a modern energy-saving programme, energy-saving concepts—are essential. But if the EEC was 60 per cent. dependent on oil eight years ago, Western Europe is now 63 per cent. to 65 per cent. dependent on it. It is possible that Europe will not get down to that level in time.
The Venice summit took place last summer, and all the alternatives are being examined on a European and international basis. I hope that in his reply my hon. Friend will refer to what has followed after Venice.
I return to the problem of coal. During the debate on steel it emerged that perhaps the more prosperous pits—not the Selby of tomorrow, but perhaps those in Yorkshire, Derbyshire and Nottingham—could, because of average coal—pricing policy, be carrying the high cost of mining in Wales and Scotland. There has been talk in this debate about further closures. If there were further closures, the high-cost pits would be closed, and the cost of British coal would be cheaper. This is a balancing operation that the Coal Board and the Government have carried out for years. I share the views of my right hon. Friend the Secretary of State that the "Plan for Coal" should be pursued. But by keeping these pits open we have a controversy in our steel works. They are aware that our coal is more expensive than it need be in order to keep miners in jobs.
It has been suggested that we should have subsidies, particularly for coking coal, on the scale of those in Germany. But it must be borne in mind that the Germans, with all their subsidies, produce a more expensive coal than we produce. There have been discussions on imported coal. The EEC concept is that in about 10 years there would be a demand for about 300 million tonnes of coal, of which 100 million tonnes would be imported. I discussed that in British Columbia; I saw it in Queensland, and even in Melbourne last year I saw opencast mining, where the coal extract in process is bound to be cheaper and safer than the deep mining that is encountered in this country. In the past, and even now, I would favour a levy on all imported coal, and an evening-out of prices. I remember that when I raised this matter last year as part of a common energy policy, in contrast to a common agricultural policy, my hon. Friend the Member for 321 Bedford (Mr. Skeet) asked which countries would support it. He said that a common energy policy was only in the interest of Britain.
I welcome the fact that the Minister spoke about the competitive advantage of the United States in chemical feed stocks and synthetic fibres because of its slowness in deregulation. There has been pressure on the United States, and I hope that the pressure will continue under its new Administration. It must be borne in mind that the United States has invoked anti-dumping legislation on steel and other products from Europe and the United Kingdom, but it has an unfair advantage in subsidising its energy.
I return to another point that the Under-Secretary of State for Energy made in letters to industry. We do not have the advantage of hydro-electricity which, to a certain extent, Switzerland, Austria and France have in Europe. Certainly, Canada has vast sources of hydro-electricity, which is bound to give the smelting industries of that country an advantage. I mentioned in the debate on steel that part of the Indian energy policy is to put dams in the Himalayas and make up its energy deficit by an expanded hydro-electric programme, thereby reducing the price of electricity for their industries. This solution is not available to Great Britain.
I turn again to coal. One question that I cannot answer is why we have a fuel oil tax to protect our coal industry at this time. It may have made sense 10 or 20 years ago, when it was introduced. I hope that the Secretary of State will ask the Chancellor of the Exchequer to look at that.
The problem facing Britain in the European context is that we have the energy, but at a price. We have the coal, but at a price. We have the gas and oil, but at a high cost of extraction compared with Middle East sources—say, 10 to 12 times the cost of extraction.
On top of that, in talking to politicians from Germany and France, I find it disturbing to hear them say that they look upon Britain as a high-cost energy supplier. Germany is getting out of the difficulty—this emerged from Herr Flamig's report—by using gas from Eastern bloc countries. On existing pipelines, Germany has 17 per cent. imported natural gas from Eastern bloc countries. It could well reach 30 per cent. when new pipelines are in use.
I discussed this matter in a committee meeting in the Council of Europe only last week and learnt that the Austrians were not getting regular supplies. They rather feared that the supplies were going to Germany, for some reason. Dependence on one source of external supply is, therefore, risky. The Italians and the French are developing links across the Mediterranean for gas and oil. That will be yet another source of supply.
Britain ought to sell to its European colleagues the fact that it has energy in the North Sea and that it is economically secure—in a military situation it may not be so secure—and I hope that the Secretary of State will emphasise this in talking to his ministerial colleagues when the Council of Ministers meets in the EEC.
It has to be borne in mind that France and Germany have embarked on an ambitious nuclear programme. This fact has been brought to my attention continuously. They will have cheap nuclear energy, at probably 60 to 70 per cent. of our cost. But this is a speculation and there is no information available on it.
Finally. I should like to mention a small matter which may seem irrelevant in the debate. The French have announced that they have a product called Carburol—a 322 mixture of alcohol and petrol. It is possible that the liquefaction of coal will be our answer, but I hope that within the Community there will be some standardisation. I should hate to take my car—dependent on petrol from refined North Sea oil—to countries just across the Channel, only to find that there are different grades of Carburol on sale there. This is a question that we should pursue closely. Certainly it must be pursued within the Community.
§ Mr. Arthur Palmer (Bristol, North-East)
I hope that the hon. Member for Sheffield, Hallarn (Mr. Osborn) will forgive me if I do not follow him in his remarks. He painted a fairly wide European canvas and I want to confine myself to two points that are very important to our own domestic electricity supply industry. The House knows my interest in that direction.
Five or six years ago a high-powered committee, made up of all the talents, with Lord Plowden—who chairs many such committees—in the chair, looked into the desirability or otherwise of the present structure of the electricity supply industry. I am sure that the Under-Secretary of State is familar with the report of that committee. A vast amount of evidence was taken; indeed, I gave evidence myself. It was confidently expected that action would follow.
The former Secretary of State for Energy, my right hon. Friend the Member for Bristol, South-East (Mr. Benn), prepared a Bill, which was later published as a White Paper. However, because of the parliamentary difficulties that existed at that time for the Labour Party, with the need to reach agreement with the Liberal Party, the Bill did not reach Parliament. I say frankly—I said it at the time—that I do not think that the matter was particularly well handled, but certainly there was much life and activity then.
What did the incoming Secretary of State for Energy do? The answer is: simply nothing. The problems that were outlined at great length by Plowden remain, but the Secretary of State for Energy dismissed the whole question in a written answer that was given towards the end of the Summer Recess. The usual inspired question was tabled and the Secretary of State called on those in the industry to work together more closely. He set out six principles on which they should work together, rather as if he were an executive director. I am sure that the electricity boards will undertake to do their best to work together and that they will do so in good faith. But, given the nature of their statutory responsibilities—which ultimately are to the Secretary of State for Energy and not to the Electricity Council—it is inevitably these that will be uppermost.
The board chairman—whether of the CEGB or the area boards—really cannot escape, their statutory responsibilities. When difficulties arise from time to time, as they are bound to do, the first consideration that any chairman has to give—he will be advised by his lawyers to this effect—is to the legal obligations. So it is the statutory responsibilities in the electricity supply industry that must be changed if there is to be any new way of doing things.
I say very strongly that the Secretary of State should not have ducked his responsibilities in these matters. His ministerial inaction led to the resignation of Sir Francis Tombs, the chairman of the Electricity Council. He is a very well-regarded man, of great experience in the 323 electricity supply industry and in electrical manufacturing, and his resignation has attracted, quite naturally, a fair amount of publicity.
Sir Francis was invited to become the chairman of the Electricity Council on the plain understanding that the organisational framework of the industry would be changed. He made it clear at the time that he accepted the appointment on that basis and had no wish to become chairman of the boneless wonder, the Electricity Council, as set up under the Conservative Government's Electricity Act of 1957.
It was announced today—we have been waiting for this for some time—that the new chairman of the Electricity Council has been appointed—Mr. Austin Bunch. I am sure that we all wish him well. I am glad that the promotion came from within the electricity supply industry—Mr. Bunch was previously deputy chairman of the Electricity Council—and that someone was not brought in from elsewhere, as in the case of the British Steel Corporation and the BNOC. I am glad that we have not had someone from across the Atlantic, or a merchant banker.
The new chairman is a man who knows something about the industry that he is asked to supervise. But Mr. Bunch will be lucky if he escapes the doleful experience of Sir Francis—to sit in the chair of a body that cannot take a decision unless it is agreed to by a multiplicity of area boards and the CEGB, which bodies, being separately on the distribution and the generation side, are often at odds with each other.
Since Sir Francis left he has said some rather unkind things about the Secretary of State, but as he said equally unkind things about the former Secretary of State we can allow these comments to cancel each other out. Appropriately, Sir Francis recently addressed the Institute of Bankers in Bristol. I am sure that the Department will have a copy of the address in its archives. He said:I have shown that the nationalised industries occupy a major place in the industrial affairs of this country; that the country cannot achieve economic prosperity unless these industries are prosperous; and that the planning horizons of many nationalised industries extend well beyond the lifetime of a Parliament, let alone the short-term preoccupations of Ministers. How can we be expected to be successful when we are forced to spend so much management time in attempting to cope with the fundamental differences of approach produced by the political see-saw?That was a cry from the heart. No one is more insistent than I on the proper differences of principle between political parties. Without those differences of belief and outlook politics would have little meaning. Sir Francis gives facts and figures to show how successful the electricity supply industry is. It achieves a higher return on capital than the majority of private industries do at present in Britain. If nationalised industries are to be fully successful, he says, there must be some continuity of policy between Governments. I agree with him but I do not think that the present Administration do, judged by their actions.
The Secretary of State should also face up to his responsibility for the steep rises in electricity prices. No one has been a stauncher defender than I of the need for a strong nuclear contribution to our fuel economy. However, we should leave the size of that contribution, in terms of extra generating capacity, to the electricity industry to decide. One must bear in mind the fall in 324 demand that has resulted from the general depression both at home and abroad, and the consequent swift rise in the margin of available capacity. Despite the replacement of old plant, the margin of spare capacity is likely to eat its head off in interest charges that will be passed on to the consumer in the form of higher price.
Whether the method of firing is nuclear energy, coal or oil is immaterial. The argument would be the same whether we were building extra Drax B coal-fired power stations or oil-fired stations. I have always argued that the use of nuclear power or coal-fired energy is primarily a matter of economics, although safety is also involved. Power supply engineers would be just as happy to burn kitchen refuse or manure if they thought that it would produce a better and cheaper result.
Once the pressurised water reactor is under way and has completed its inquiry stage, it is said that one new reactor will be built every year. One may not necessarily desire that outcome, but it will prove difficult for the electricity supply industry to carry the burden of interest charges on them. I must be careful because the hon. Member for Skipton (Mr. Watson) is on the same Committee as I and I do not wish to anticipate the Select Committee's nuclear report, which will soon be published. Those who followed the evidence given to the Committee in public will agree that capital charges have become so high that they are putting a break not only on nuclear development but on the general development of the electricity supply industry in terms of the improvement of load factors and efficiency.
The real culprit is the inclusion of investment within the straitjacket of the public sector borrowing requirement. Earlier, the Secretary of State said that the chairmen of the nationalised industries were content with cash limits. Sir Francis Tombs was not content. Sir Francis' address at Bristol is a fine textbook on the running of nationalised industries, I hope that the Minister will listen carefully to his words, because they contradict the earlier remarks made. Sir Francis said:Government's interest in net borrowing arises from the fact that nationalised industry borrowing appears in the public sector borrowing requirement, undistinguished from revenue borrowing, for local authorities, social services or the National Health Service. This is patently nonsense. No private industry would confuse revenue and capital expenditure in this way. What, one might ask, is the fundamental difference between borrowing to build a power station and borrowing to build a new factory in Lancashire? Both contribute to the national welfare, both give an adequate return which services and repays the capital.After all, a power station is simply a factory for producing electricity.
The Government are preoccupied—certainly the Prime Minister is—with the need to complete a big nuclear power programme. Indeed, the Prime Minister went to France and came back converted to the need to adopt in Britain the French programme. However, France faces a different energy situation. There is hardly any coal worth having in France, and no oil. If the Government, however, want to complete the British nuclear power programme as it stands, and if they wish to replace old plant that is becoming more and more worn, they must revise their narrow ideas about cash limits.
What does the present financial system mean to the consumer? It means that the present generation of electricity consumers—hard-pressed as they are—are paying to provide electricity for their children. If there is no change, very soon they will be paying to provide their grandchildren with electricity.
§ Mr. John Watson (Skipton)
I hope that it will not be regarded as impertinent if I add my personal congratulations to the right hon. Member for Leeds, South (Mr. Rees) on the way he has mastered his brief on this complicated subject. The motion before the House statesThat this House deplores Her Majesty's Government's lack of overall energy policyandcondemns the pricing policy which handicaps the competitiveness of British industry".It was, therefore, with some concentration that I listened to the right hon. Member for Leeds, South in the hope that I could glean from his speech some indication of what would be Government energy pricing policy in the event of his becoming Secretary of State for Energy. It must be a reflection on my powers of concentration that, at the end of his speech, I found myself substantially unilluminated. From what I can see, the policy of many Opposition Members is, first, that British industry is paying too much for its energy and, secondly, that, even if it is not, it should be paying less. Both those contentions are highly arguable.
Even though I listened with great respect to my hon. Friend the Member for Canterbury (Mr. Crouch), I have yet to be convinced that British industry is paying over the odds for its energy. For every convincing speech that I hear to the effect that it is, I read a convincing document to the effect that it is not. I was personally unimpressed by the CBI case, presented to the Select Committee, to the effect that British industry, across the board, was paying too much for energy. It seems that the initial glitter of all the claims of unfair competition may not turn out to be the purest gold on closer inspection.
Is there a case for some form of Government assistance towards energy pricing? I should like to advance four reasons why I believe that there is not. First, if we are expecting people in British industry to take sensible decisions about their use of energy, we need to provide them with a sensible base of information on which those decisions can be taken. As soon as the Government start interfering in some artificial way in energy pricing, a degree of artificiality creeps in, which makes the reality of the decisions to be taken all the more difficult to achieve.
Secondly, there is now a refreshing degree of international agreement that energy should be based upon actual prices and market demand. That is entirely good. In conjunction with many other hon. Members who have textile interests, I join occasionally in the fulminations against the energy price policies of North America. We say that it is terrible that their industry should be subsidised to such an extent. I would feel the worst kind of hypocrite if, at one and the same time, I was to advocate that their policies should be changed to ours but that we should somehow be subsidising and, in that direction, changing our policies to theirs.
Thirdly, I do not believe that energy is so significant to the majority of British industry as has sometimes been made out in the debate. There are only six-industries where the total energy bill represents more than 10 per cent. of their added value—steel, aluminium, chemicals, glass, paper and cement. For all the rest, average energy costs are about 3 per cent. or 4 per cent. Even in those six industries I have mentioned, I submit that energy prices are not the biggest problem that they have to bear. Other 326 problems of overmanning, overcapacity or simply shortage of demand would be presented, I believe, by each of those industries as being a bigger problem than the price they are having to pay for energy.
This brings me to my final point. If the resources are available, is some form of energy subsidy the most worthwhile use of those resources? I shall not trot out the familiar PSBR argument. I do not completely agree with it. In a time of natural world recession, there is a case for a greater degree of flexibility in the amount of money that the Government may borrow. I note that total Government borrowing at the moment is 45 per cent. of our gross national product. In 1965, it was 80 per cent. of our gross national product. We could have a responsible degree of flexibility on the PSBR without any deleterious effect on interest rates or anything else.
Having made the assumption that some cash resources may be available, I fail to see that they should be put straight away into some form of energy pricing subsidy. I have two reasons. I do not see why, if a subsidy is available, the greatest part of that subsidy should go simply to those who use the greatest amount of energy. I refer to the industries I have mentioned. It has to be asked "Is any one of those industries so important and of such strategic or employment significance that it needs this specific degree of assistance?" My conclusion is that, important though they are, none attains that level.
I have a nagging doubt that if we were to use resources to subsidise energy prices, we would be treating the symptoms rather than the disease. If we are to use our scarce resources to bolster profitability in times of low natural demand, it has to be asked whether those scarce resources could not better be employed bolstering demand itself.
People have different suggestions. My hon. Friend the Member for Bath (Mr. Patten) would say that the PSBR should be increased and we should do something to reduce national insurance contributions. If some funds are available and we want to give some assistance, why not give something towards a conservation campaign in British industry which might conceivably save more than the assistance could buy in industry in the first place?
Finally, having read a great deal about this issue and having heard a great many expert people make long speeches upon it, I remain unconvinced that British industry is paying an unfairly high price for its energy. I cannot dispel from my mind the lasting suspicion that this idea that we are paying unfairly is advanced not because of the intrinsic common sense that it possesses but because it happens to represent the most convenient common ground for some kind of agreement amongst all the parties represented.
§ Dr. Oonagh McDonald (Thurrock)
I am glad to be able to speak after the hon. Member for Skipton (Mr. Watson), because I disagree with virtually all his speech. I shall spend most of my speech disagreeing with almost all of the points he made.
I take the hon. Gentleman's last remarks as a convenient starting point. He said that the concentration upon the difficulties faced by industry over energy pricing was a convenient common ground—even, one may say, between both sides of the House, as well as between unions and management in industry, and as well as between the CBI, the NEDO and independent research 327 bodies. Does this mean, therefore, that this is a convenient stick that we can all use, for our various reasons, to beat the much beleaguered—and understandably beleaguered—Government? I do not think so.
Surely the point is that this is one of the problems which industry currently faces. For many industries, particularly medium and larger users of energy, their problems over high energy costs add to all their other difficulties, many of which, but not all, arise from the present Government's policies. It is not simply that we have found a convenient source of agreement between us. It is simply that this is one area, among others, in which changes in Government policy are urgently needed if our manufacturing base is not to disappear completely by the time that the present Government have finished their period of office.
Let us look at a few different aspects of this matter. I shall pick out as a convenient starting point some of the main points made in the NEDO report. Industrial users of electricity find that larger tariff discounts are available on the Continent, and that large users on the Continent can negotiate special further reductions, amounting in total to a cost advantage of up to 40 per cent. over United Kingdom users. American and Canadian users pay only one-quarter or one-third of the United Kingdom rate—although in those two cases there are special reasons for that, apart from matters of pure policy.
We find the same sort of problems in relation to gas prices. The large industrial users of gas on the Continent have a cost advantage over the United Kingdom users of up to about 20 per cent. That is an enormous advantage. Taking the average prices of gas identified in November-December by the National Utility Service, which is part of an international research conglomerate, we find that it is claimed that in a survey of 550,000 energy-using locations in eight countries around the world, British gas prices were found to be 18 per cent. more than German prices, 47 per cent. more than French prices, 108 per cent. more than American prices, and 200 per cent. more than Australian prices—although I would think that the Australian example is one that we should not use. Australian policy was quite successful in encouraging individual domestic consumers to use electricity, leaving vast amounts of gas available to industrial users, so perhaps that would not be the fairest comparison to consider.
The problem of fuel duty on heavy fuel oil has already been referred to. I do not want to concentrate on that issue.
The NEDO survey and other evidence supports what industrialists have been saying to the Government for the past year, that for industrial users, particularly heavy industrial users, the prices have been much too high.
The hon. Member for Skipton referred to the paper industry. The paper and board industry is well represented in my constituency. The energy costs for that industry are by no means an inconsiderable cost of production. Overall energy costs are rising above labour costs, and amount to about 30 per cent. of its total costs.
It may be thought that the board industry is not that important, but two features must be mentioned. First, it employs large numbers of people and, secondly, it supplies about 75 per cent. of the domestic market. If it were to vanish entirely—one feels that the industry as a whole is greatly at risk—what would happen? Immediately, the costs in terms of the balance of trade 328 would be about £100 million a year. More than that, in future those costs would rise, because we would have to import packaging products which would be more expensive because we use raw materials rather than waste products from abroad.
The hon. Gentleman may not consider such matters to be important, but I do, not only out of constituency interest but out of national interest. The same sort of points can be made about the other major industries to which he referred.
In addition to the CBI and the NEDO document, we have had the Department of Energy's reponse to it, which was more elegantly reiterated by the Secretary of State in his opening remarks. The response of the Department of Energy makes three basic points. It suggests that under-pricing of energy would encourage the wasteful use of energy. However, it fails to take account of two points. The first is that for the smaller and medium users of energy resources, the prices are an insufficient trigger to encourage energy conservation, which should be an important part of Government policy.
For the larger users, the high price of energy is not serving solely to encourage energy conservation. It is encouraging conservation, but at an enormously high price and at the cost of the loss of export markets and the loss of jobs. When considering policies, one should take one policy in relation to the other. If the high price of energy is destroying some of our basic industries and adding endlessly to the loss of jobs, it is high time that the Department of Energy got together with the Department of Employment which at least, under its Secretary of State, seems to recognise the seriousness of unemployment, if the recent remarks of the Secretary of State are anything to go by.
I particularly like the second point made in the response of the Department of Energy—Energy prices are not fixed at a particular level for PSBR reasons.The next sentence says:But they are taken into account in framing the Government strategy. Reducing energy prices would affect the PSBR and even a small reduction would be expensive.That is a wonderful piece of Civil Service jargon because it is an example of having one's cake and eating it.
It tries to pretend that the Government's pricing policy has nothing to do with their financial policies and their attitudes towards the PSBR. However, it plainly has. Some of my hon. Friends, particularly my hon. Friend the Member for Bristol, North-East (Mr. Palmer), have pointed out exactly what the impact of that policy is on the nationalised industries and on their attempts to invest properly and to supply energy properly in the future.
While I am on that topic, it would be interesting to know what the Secretary of State will do about the possible problems facing the British Gas Corporation. It is possible that the corporation has miscalculated the effect of the recession on demand for gas and also the effects of raising gas prices as much as has already taken place, and that it will therefore fail to sell enough gas this winter. What will be the consequences of that, both for the PSBR and for future gas pricing policy? It would be interesting to know whether the Secretary of State considers that the corporation has made such a calculation and what consequences he foresees for both domestic and industrial consumers.
329 Thirdly—this relates to what the Secretary of State said about setting up a task force, which is unfortunately much too restricted in looking only at energy prices in the EEC and not more widely—this response referred to the NEDO document and to comparisons of energy costs, for industrial users in particular, between one country and another. Quite rightly, the document says that it is difficult to make such comparisons, and describes the difficulties of comparing like with like and of taking into account the changes in the range of prices in force, and so on.
I agree that those are problems which must be taken into account if one is making a careful comparison. As an ex-academic, I know the importance of making sure that such comparisons are thoroughly worked out and that one's research is carried out as carefully and as properly as possible. Of course—but what a wonderful example of delaying tactics. Once one has written difficulties such as that into one's project, I can quite see—again, as an ex-academic—that one can spend five years ensuring that the comparisons between countries are thoroughly worked out.
That is what concerns me about the task force. For at least a year now the major industrial energy users—not people represented on these benches—have been crying out for the Government to do something urgently about energy prices before some of our basic industries are utterly destroyed.
In reponse, we get a document such as this, which has thoroughly built into it—as will, no doubt, be reiterated in the ground rules for the task force examining it—endless delaying tactics. We shall be told that the studies are being carried out and comparisons carefully worked out, and by the end of this Government's period of office we shall not only see no change in their energy policy but we shall not have much of an industrial base left either.
What I do not want to see is one of the policy recommendations in the NEDO document. That points out correctly that in other EEC countries domestic consumers pay more for energy than industrial users do. I do not necessarily want that kind of switch in this country. We all know that many domestic consumers in our constituencies already face a crippling burden of energy prices.
Instead, I should like to see what the Secretary of State referred to. He rightly pointed out that many industrialists are trying to conserve energy. They are looking at ways of cutting back energy costs. That is happening in my constituency. I should like to see positive interventionist policies—I am talking not about the Eastern bloc but about the examples of Japan and Sweden.
Japan is extremely vulnerable in energy supplies. With its high dependence on external energy sources it passed in 1979 a law on the rationalisation of the use of energy. It obliges factories to improve fuel utilisation to prevent heat losses and to look at heat recovery. A better standard has been developed by the Government. It is the function of the Ministry of International Trade and Industry to judge progress. Plants with high fuel consumption have been designated energy control factories. They have to appoint energy controllers whose brief is to cut fuel use. The Government insist not only that such people are employed but that they are properly qualified and, with Japanese thoroughness, the Government impose a two-day annual examination on each of the energy controllers to ensure that they know their job, are up to date, and are carrying the work out as thoroughly as possible.
330 Low-interest finance is available to companies to ensure energy conservation. That is serious intervention. It is not sitting back and hoping that if the prices are shoved up far enough the sort of conservation wanted will be achieved.
Sweden's scheme is less rigid than that imposed by the Japanese. It depends more on voluntary co-operation. But Japan has made more than £7 million available in low-interest finance for companies and large grants are made available in Sweden to assist high-energy users to conserve energy. Among those high-energy users—this is interesting from the point of view of the industries referred to by the hon. Member for Slcipton—almost half the total grants are to the pulp and paper industries to ensure that these high energy users make proper use of energy.
I should like to see not simply a review of the artificially high prices of energy resources, particularly gas, of which we have enormous supplies, and coal, but a serious interventionist policy by the Government to conserve energy and to provide finance for industry. That would be a rational policy for the Government to pursue. It is essential for the Government to pursue that policy as quickly as possible, before jobs and industry disappear by the end of their tern of office.
§ Mr. Nick Budgen (Wolverhampton, South-West)
It is often my pleasure in general debates on the economy to follow the hon. Member for Thurrock (Dr. McDonald). She refers often to learned debates with great charm and thoroughness. I suspect that my approach to these problems is different from hers. The only common ground that she and I have is that both of us are primarily concerned with the grave problems faced by British manufacturing industry.
I start from the prejudice of representing a primarily suburban seat, but a seat where almost all my constituents work in heavy manufacturing industry. The few shares that I have are in a family company which has foundries, so my interests and affections are intimately tied up with heavy industry.
In the last 18 months I have had the very great privilege, under the arrangements made by the Industry and Parliament Trust, to spend much time with BP. I have come to admire the very intelligent but extremely discreet people who run BP. Anything that I say about oil pricing has nothing to do with any views that have been suggested to me by anyone in BP, as I hope will become clear.
My right hon. Friend the Secretary of State did not set out the Government's overall energy policy. May I suggest what it should be? This matter arises from my right hon. Friend's slightly evasive answer to the intervention of my hon. Friend the Member for Bedford (Mr. Skeet). The Government's energy policy must be the policy of OPEC. If OPEC forces up the real value of one form of energy, it follows, unhappily but inevitably, that other forms of energy will have to be priced at much the same sort of level, because otherwise there will be the sort of distortion that we saw in relation to gas when domestic consumers found that they got such an infinitely better deal from gas that they made enormous demands on the British Gas Corporation for the installation of gas heating, which could not be met by the corporation. Indeed, the corporation took the view that it would be dangerous to 331 meet that demand, because it knew that the price of gas was only temporarily significantly lower than the prices of other forms of energy.
My right hon. Friend the Secretary of State is as much a follower of OPEC as is Sheikh Yamani. Indeed, every producer of energy, from Sir David Steel down to Joe Bloggs in the Cannock pit, owes a great debt of gratitude to the cartel, but that cartel is having an appalling effect on British heavy manufacturing industry.
The three principal complaints made to hon. Members who represent manufacturing areas are that interest rates are too high, energy prices are too high, and the sterling exchange rate is too high. On the first point, I disagree with my hon. Friend the Member for Skipton (Mr. Watson). We have a public sector borrowing requirement of about £12 billion and every prospect that, for the reasons that my hon. Friend spelt out, the PSBR will be even larger in the next financial year. If we wish to finance a large PSBR and do not wish to cut it by cutting public expenditure significantly or increasing taxation, the corollary, if we wish to keep to monetary targets—and although we have not kept to them, I understand that they are still important—is high interest rates. That is disagreeable, but it is the logic of our professed, if not activated, monetarism.
On energy prices, I appreciate that we live in a world in which we have to accept world market prices for energy. I do not say that there is any such thing as a totally rigged market or a totally free market. We have what the Secretary of State describes as a free market price for energy but what is actually a partially rigged price.
I want us to ensure that if the cartel breaks in future the British Government have not got so hooked on high energy prices that they become the most active participant in supporting the cartel. That could easily happen. If the cartel broke it would have an appalling effect, especially on some of the small oil companies that have come riding in on the back of the oil boom. There will be great pressure on them. But it will be splendid for my constituents. Not only will they obtain cheaper energy; they will also find that one of the factors that hold up the sterling exchange rate has disappeared. They will find that the rapid process of change, which has been so much welcomed by so many of my hon. Friends, does not have to take place.
My right hon. Friend the Secretary of State, in his speech on 4 January, seemed to be rather forgetful of the electors of Dudley, whose votes he once canvassed. He spoke instead of the new prosperity bypassing the old manufacturing areas such as Wolverhampton and Dudley. No doubt the new prosperity will be strong in Guildford. On the other hand, the Governor of the Bank of England, in his speech of 20 November, appeared to say something very different. In paragraph 27 he said:The adaptations that will ultimately be required to a high relative price for oil and gas are hard to foresee with precision. I very much doubt, however, that they will involve a process of de-industrialisation".I do not know, and no one can know, what will happen to OPEC. I want to see some element of detachment between the Government and the oil industry.
Time is short, and I shall be brief. It is vital that the Government now raise funds by selling their remaining shares in BP. I agree entirely with Mr. Ivan Fallan's argument about that. I understand that the price tag is £1.7 332 billion. I much regret that the Government have not decided to reduce the activities of BNOC. I accept that there may be an argument for some Government activity in oil, principally to find out the real incidence of tax upon those companies which—I shall put this carefully—are discreetly and intelligently run. I believe that Mr. Peter Lilley's arguments about the auctioning of licences ar correct. I wish to see both the Government and the Department of Energy become less wedded to the producer, and more mindful of the appalling effects being felt by the consumer.
§ 9.3 pm
§ Mr. Alex Eadie (Midlothian)
What has characterised the debate, especially on the question of pricing, bas been the different points of view of Conservative Members. There was no unanimity of agreement with the Secretary of State's opening remarks. The right Gentleman spoke for 50 minutes. I am entitled to press him on some of the main points made by my right hon. Friend the Member for Leeds, South (Mr. Rees). The right hon. Gentleman could have responded to them in his speech. When my right hon. Friend pointed out that it was time that we had a full-scale energy debate in the House there was general acclamation from both sides of the House. Yet this full-scale energy debate has been initiated by the Opposition, in Opposition time. It would have been lovely if the Secretary of State had said "I shall see my right hon. Friends and we shall have more energy debates". But the right hon. Gentleman had a brief, and he stuck to it. He never lifted his head. He did not respond to my right hon. Friend's points.
It was reasonable for my right hon. Friend to say that if the Secretary of State is going to Europe to attend Energy Council meetings of great import for energy decisions, energy policies and energy impact, he should come to the House and make a statement. Indeed, it is already established procedure. It is done for agriculture and all matters relating to Europe. I thought that the right hon. Gentleman would respond. Even if he had said "No", one would have gained the impression that he had listened to what was a reasonable proposition.
We can have all the Select Committees under the sun and all the various bodies outside the House of Commons, but this is the place where discussions should take place. It is in the House of Commons where we should have great discussions and information about energy. I am disappointed that the Secretary of State did not respond, not to a party political point but to a matter relating to the stature and structure of the House of Commons. I hope that the right hon. Gentleman will reflect on this matter and ask his hon. Friend the Under-Secretary of State when he replies to the debate to comment on it.
I understand the predicament of the Under-Secretary in replying to the debate. He will not have time to reply to all the points that were made. That is all the more reason for having more energy debates. The Minister will then have the opportunity of putting the Government's view and of trying to rally support from his hon. Friends who are very much divided on, for example, pricing policy.
I note that the hon. Member for Dundee, East (Mr. Wilson) has returned to the Chamber. The hon. Gentleman made a point which I do not really think he meant. The Minister will appreciate the point that I am about to make. The reference of the hon. Member for Dundee, East to the dozy North of Scotland Hydro-electric Board was unfortunate. It may be that he has some conflict with 333 individuals on the board. The Hydro-electric Board brought power to the Highlands and Islands. Tom Johnston was referred to in glowing terms. But the record must be made clear. I know many people who work for the Hydro-electric Board. They are very good public servants. Those people, even in terrible winter weather, maintain the electricity supply to the Highlands and Islands. We owe them a debt of gratitude. The hydro-electric system was one of the greatest pieces of public enterprise introduced by any Government. Therefore, I do not think that the hon. Member for Dundee, East meant what he said and it is necessary that the record should be put straight.
§ Mr. Gordon Wilson
I am grateful to the hon. Gentleman for putting the record right. I was not in any way impugning the services given by linesmen and others; I was attacking the policy makers and board members of the Hydro-electric Board who are not living up to the principles that were established on the formation of that excellent body.
§ Mr. Eadie
I thought I heard somebody say that "dozy" was not a good description. It may be of a football team. I do not know. I do not think that there are many dozy football teams in Scotland. Some may be indifferent. The hon. Gentleman's phraseology was not a precise description. I think that we can leave it at that.
I do not want to deal with pricing policy for very long, but various points of view have been put forward. I say that I do not want to deal with it for very long, because I bear in mind that the task force has been appointed. We wish it well in trying to give accurate information. One Conservative Member said that it was a question of industries looking not for subsidies but for fairness. Will the Under-Secretary of State clarify the precise terms of reference of the task force? Do the terms of reference of the task force cover only the EEC or is a more comprehensive examination envisaged? That is important, because we are speaking of Scandinavia and other countries.
All hon. Members welcome the task force examination. However, we have heard that electricity prices are to be increased. Will that price increase take place before the task force examination? Will the Government wait for the objective analysis before electricity prices are increased? Will they hold their hand a little in anything that affects industry? I ask that because I have received information from the Chemical Industries Association Limited. It claims that it is disadvantaged to the extent of £200 million compared with France and West Germany. That is a substantial amount. If that is true we are entitled to say that blatant discrimination exists.
I listened to the doctrinaire, anti-nationalisation, anti-trade union speeches by Government Members. I do not chastise hon. Members for holding a view but I am entitled to express the contrary view. It is ironic that the Government, not the trade unions, are causing unemployment because industry is paying a higher price for energy than it should.
§ Mr. Eadie
No. The hon. Gentleman's hon. Friends would not give way to me so I shall not give way to him. It is no good saying that energy represents about 6 or 10 per cent. of costs and that that does not matter much. Of course it matters, to industry. It can make the difference 334 between an industry surviving and going to the wall. We should not try to play the issue dowm. By all means, let us try to get the information. However, if the task force reveals that we are disadvantaged compared with our main competitors in Europe—and there is evidence of that—the Government must accept responsibility.
I have some sympathy with the argument about improper price cycles which can defeat attempts at a conservation policy. That is a fair argument. I have listened to the contributions from the Government side. The Government are being hoist with their own petard. The Secretary of State confessed that the main thrust of the energy conservation policy is based on pricing. The Government base their conservation policy on the market. That is a lazy, inefficient way to run a conservation policy. None of the bodies involved in conservation have suggested that pricing can be viewed in isolation. None of them ever suggested that pricing alone was an excuse for a Government pursuing an energy conservation policy.
I hope that as a result of the contributions made by both Conservative and Labour Members the Government will look afresh at the whole question of conservation policies and will able to produce a far more imaginative conservation policy than their present policy. What has happened to the concept that energy conservation should be a fifth source of energy, in the sense that one identifies oil, gas, coal, nuclear power and alternative sources of energy? The Secretary of State's argument on conservation was not convincing.
The hon. Member for New Forest (Mr. McNair-Wilson) expressed some misgivings about the Government's nuclear power policy. The Secretary of State suggested that the Government had inherited a shambles of a nuclear power policy. I do not know whether that is so, but it was the Secretary of State and the Government who announced the commencement of 12 nuclear reactors in 1982. I have here a press report in which the Under-Secretary of State is reported to have given a funeral oration for the Government's nuclear power programme. Have the Government reversed their policy on nuclear power? Do they find themselves unable to carry out the policy that they announced to the House? We are entitled to know.
I turn to the PWR. If the Government are running into difficulty with their nuclear power policy, it is of their own making. To have chosen the PWR and to have been associated with the Three Mile Island concept damaged the image of nuclear power in this country. I am not arguing from a Friends of the Earth point of view. I am simply saying that we had a nuclear power reactor that was associated with the Three Mile Island incident. It was a reactor of foreign make. The right hon. Gentleman knows from his own experience that the idea of a British PWR just will not materialise. The Nuclear Installations Inspectorate will insist that a British PWR meets the standards prescribed by it, so we are really talking about another brand-new, virgin reactor. The experience with brand-new, virgin nuclear reactors is that there have been problems and faults. I predict that the Government's policy on nuclear power will founder as a result of the technology upon which they have based it. If they wished to pursue a tested nuclear power policy, they should have backed British equipment. The AGRs should have predominated in that policy.
335 I wished to make those points because I think that the hon. Member for New Forest was the only person to try to bring that argument into the debate—
§ Mr. Eadie
No. I have already told the hon. Gentleman that I shall not give way.
What is the Government's policy on the fast breeder reactor? The hon. Member for New Forest expressed doubt about its future and its credibility. We are entitled to know. We must take advantage of these energy debates to obtain information from the Government. This is an important matter. It is no accident that we included in our motion the reference to "Plan for Coal", about which the Secretary of State made little comment. For the Government to stand aside, watching, or aiding and abetting, the plan's failure, will have serious consequences for those who work in the coal industry; for industry in general, which is dependent on supplying goods and services; and for the nation as a whole, because it is dependent on safe, secure supplies of indigenous energy with a long lifespan, to meet the appetite of the country's industry and provide for the people their creature comfort in the shape of light and warmth.
Without energy provision, our industry collapses and our people freeze. It has been said before, but it is well worth repeating, that a nation that wishes to be an industrial country must have access to energy, and preferably indigenous energy. It is not a question of facing relegation in the industrial league of nations. If one does not have the energy, one is just not in the league at all.
It is partly in this setting that the Opposition approached this debate when we incorporated the reference to "Plan for Coal". It is an established fact that, of all the energy riches that we possess in fossil fuels, coal is the one that we have in abundance. We have hundreds of years' supply of that fuel—50 years forward of identified, planned reserves. No other fossil fuel in this country can match that time span. Indeed, by the end of the century our other fossil fuels—oil and gas—will start to be a diminishing factor in our energy provisions. What is certain is that compared with coal they are finite.
As a raw material, coal has a flexibility in its use that other fossil fuels cannot match. It took the Yom Kippur war and the election of a new Government to reverse the trend and follies of previous Governments. The stupidity of the contraction of the coal industry was replaced by a policy of expansion and more investment. "Plan for Coal" was adopted as the industry's target and motivation: a deep-mined output of 120 million tonnes by 1985, with a later longer-term plan for 150 million tonnes by the end of the century.
I was asked to give evidence to a Select Committee of the House of Lords, whose main complaint was that our target should be higher, based on the forward studies and evidence that the Committee had taken.
It is worth while to refer to the table of National Coal Board capital expenditure for the years 1974–80. In 1974 capital expenditure stood at the disgraceful figure of £68 million. Then it raced to £112 million in 1975, £211 million in 1976, £266 million in 1977, £334 million in 1978, £454 million in 1979 and £617 million in 1980. I refer to those figures because doing so gives me the opportunity to mention the financial problen that we have 336 piled on the NCB. The Government make the capital available; they do not give the money to industry. The NCB is now paying £250 million a year in interest charges on that roll call of investment.
We starved the industry of investment previously and then we asked it to go like the hammers of hell in six years, knowing full well that it takes a long time for such investment to pay off. It takes 10 years to bring a new mine into production. The Government should look at that anomaly more constructively than they have done in the past. I refer to the Coal Industry Act 1980, which must be seen as the most extravagant piece of irrelevance that any Government ever presented to the House. The Government should withdraw that Act now. We should also ask the National Coal Board about the question of breaking even in three years. That is also irrelevant nonsense. When the hon. Member for East Grinstead (Mr. Johnson Smith) spoke earlier he said that the difference in the timing did not matter. But it matters to the extent of £200 million, which is very important to the industry. If the Coal Industry Act is applied it will cost the National Coal Board another £200 million.
The Secretary of State's comments about the 1980 Act are more related to political dogma than to reason. I support part of the case that the Government will advance about the difficulties of the energy industry at present. We have a mother-and-father of a world recession, in which most of the Western world is dipped at present. The irony of that is that it makes the Government's actions more inexcusable. Other Governments support their coal industries. In Belgium, Government support is worth £33.90 a tonne; in France, £18; Western Germany £14.90, and in Britain, £1.50 a tonne. Conservative Members talk about fair competition. What sort of competition is that, when our competitors receive those subsidies? What have the Government to say about that? Do the Government think that it is fair that our competitors should operate like that?
Britain's coal is the cheapest in Western Europe. I do not think that Conservative Members would deny it. Many factories are waiting to switch over from oil to coal, but because of the recession and lack of capital they are force to delay the switch. At present, coal has a 30 per cent. price advantage over oil. The figures for the costs of producing one tonne of coal in other countries are available. It costs £58 in Belgium, £45 in France, £41 in West Germany and £29 in Britain. Who says that the British coal industry is not competitive? Of course, the price of British coal has been undercut by Poland, the United States and Australia. Opencast mining, compared to deep mining, is part of the reason for that.
§ Mr. Eadie
I stand by the statement that was made by the Under-Secretary of State for Energy, which I quoted during the debate on the Coal Industry Bill on 17 June 1980. He said:we cannot necessarily rely on long-term continued availability and low price of imported coal. We in Britain are not alone in taking this line. As recent International Energy Agency studies have shown, the potential importance of coal is increasingly recognised everywhere.I could not do better than that myself. Why should we import coal now? This year we shall import about 8 million tonnes of coal. That could be supplied by our industry. At present, there are about 39 million tonnes of 337 coal in stock, lying in the ground. The demand this year for coal is likely to drop by 6 million tonnes, therefore it makes sense to look at the whole question of coal importation. What about the promise made to the industry to protect it against short-term fluctuations in the price and availability of competing fuels?
It is clear, when we look at the cost in which the National Coal Board is involved, that an increase in stocks of 1 million tonnes costs it £30 million, and the cash limits with which the NCB is involved at present are in no way adjusted to take account of these rising stocks.
The Coal Industry Act 1980, to which I referred earlier, imposes severe additional restrictions on National Coal Board finances. All regional and operating grants are to be withdrawn over the next three years. It has been estimated, as I said previously, that this legislation will cost the coal industry £200 million.
With regard to coking coal, the position is a most serious one for most of the coalfields in Britain, even taking into consideration the severe contraction of the steel industry. We know what one of our competitors, West Germany, has done about its coking coal. Its coking coal industry received £418.3 million in direct aid, compared with the aid that our industry received of £8.4 million in 1979. Even when social grants are taken into consideration, the German subsidy was more than £35 per tonne. The right hon. Gentleman made some reference to the United States of America, but even there indirect subsidies and assistance are given to the coal industry.
Taking all these facts into consideration, I cannot put the case any better than it is put in the triple alliance "Steel-Rail-Coal" document, "What is the future?", which I hope the Minster has read. It says:Coal—Because of the Government's refusal to grant the same support to the UK coking coal industry as is provided elsewhere in Europe, BSC in an effort to reduce its costs and improve its competitive position, has begun importing substantial quantities of coking coal which could be supplied from NCB collieries. At the same time the cut-back in steel production has reduced the total BSC demand…Initially, the Corporation defended its imports by claiming that there was a shortage in the UK of rank 301 coal.There is no shortage now. The National Coal Board is involved in price rebate payments of £22 million in order to get the allocation from the British Steel Corporation at the present time. This will increase to £47 million.
The case that the Opposition have advanced tonight in support of their motion is a substantial one. The right hon. Gentleman, in the course of his remarks, talked about betrayal. If the Government pursue their policy in relation to the "Plan for Coal" and there are wholesale closures in the country, 27,000 jobs will be at stake. It will be an act of betrayal by the Government. The miners will be betrayed and the people will be betrayed. That is why my hon. Friends and I will go into the Opposition Lobby tonight and vote against the policy of the Government, who not only do not understand the position but handle it with amazing incompetence.
§ The Under-Secretary of State for Energy (Mr. Norman Lamont)
I am grateful to the hon. Member for Midlothian (Mr. Eadie), because he said that it would be difficult for me to reply to the debate owing to its wide-ranging nature. Many different points have been raised and I shall do my best to reply to them.
The hon. Member for Midlothian concentrated on coal. We well understand some of the anxieties expressed. 338 Obviously, the recession has had a considerable impact on the coal industry, just as it has had a considerable impact on other parts of the public and private sectors. During this Administration it has often been said from the Dispatch Box that the Government believe—as I do—in a strong coal industry, and that it has a bright future. We believe that the industry has the ability to take advantage of the opportunities open to it. Great opportunities are open to it.
In the long term, for example, there are significant opportunities in liquefaction and gasification. If all transport fuel were to be produced from liquefied petroleum based on coal it would use 100 million tonnes of coal per annum. If all our gas were substiute natural gas it would use up 120 million tonnes of coal per annum. In the long term and the short term the outlook is very bright.
The hon. Member for Leigh (Mr. Cunliffe) and the hon. Member for Rother Valley (Mr. Hardy)—who is always very assiduous in speaking up for the coal industry—stressed the necessity to lessen our dependence on oil. They stressed the opportunities available to industry because coal has a relative price advantage over oil—to substitute coal-fired boilers for oil-fired boilers.
Despite the recession many of the pay-back periods for investment projects are short, and profitable investments can be made. Indeed, despite the recession this is a good time to make such investments. We hope that as much of manufacturing industry as possible will switch from oil to coal. It is right to be confident about the coal industry, but anxieties have been expressed, particularly about closures. The coal industry will not become like the steel industry. It will expand. New mines and new coal faces will be opened up. There will be a new coal industry.
Itis in the very nature of an extractive industry that some old mines close when new faces and mines are opened up. I was pleased that the right hon. Member for Leeds, South (Mr. Rees) accepted that. He said that there would have to be some closures, as had been accepted in the "Plan for Coal". It is for the management of the NCB to decide about the closure of individual pits. The industry has a good record of co-operation and consultation and I am sure that the unions will be consulted at an early stage about any closures.
The right hon. Member for Leeds, South also referred to the absence of a production target and the fact that no production targets had been specified for the longer term. It is for the industry to produce what the market will bear in the long term. The opportunities exist. The existence of a figure does not make any great difference. It is the market, and the need to satisfy that market, that is crucial.
Opposition Members have suggested that too onerous a turn about is being demanded. We are not so gloomy as the Opposition. As recently as 1976–77 the NCB achieved a break-even, before operating grants. Productivity is rising sharply. We have seen the first increase in deep-mined output since 1963. This turnabout is not impossible. It is a relatively small turnabout in relation to the overall turnover of the NCB. It is about £200 million, or 5 per cent. of turnover over a period of three years.
The question was raised of imports from, and subsidies in, other countries. Our imports, which are very small in relation to the total market—we expect a decline next year—do not come from those countries that subsidise their coal industries. They come overwhelmingly from the United States and from Australia where the industries are unsubsidised. It is true that in France, Germany and Belgium the industry gets, per tonne of coal, a higher 339 subsidy than in this country but it is a totally different sort of industry from this country's. It is much smaller in relation to the total energy market and the total demand for energy from industry in those countries. Those countries are importing much more than we import. Furthermore, they intend to expand their imports in the future. It is precisely because we believe that the industry can be competitive that we have set it a financial strategy.
I was asked why the Government insist so much that the industry should be competitive. The reason why we insist and want the industry to be competitive is one that is in the best interests of the industry itself. The future expanded market for coal will occur in the industrial sector, not in the Government-dominated electricity generation. In the industrial market, coal will be in competition with other fuels. One cannot dictate to industry which fuel it is going to use. That is why we owe it to those in the industry and to the miners that this should be a competitive industry. Only in that way will the future of the industry be assured. Only in that way will it be able to capture a significant part of the industrial market.
§ Mr. Lamont
This leads me naturally to the other great concern expressed in the debate about industrial energy pricing. I want to deal with the points that have been raised, particularly by my hon. Friend the Member for Canterbury (Mr. Crouch), who made a powerful speech—
§ Mr. Lamont
No such proposal has been put to us. The comments in the newspapers are pure speculation. It is not a matter on which we have received any indication from the National Coal Board.
I should like to return to the question of industrial energy pricing and the speech of my hon. Friend the Member for Canterbury. There has been considerable controversy, not just over the principles of policy, but also over the facts of the situation. That is why the task force to be set up by NEDO is a major step forward, not because, as the hon. Member for Thurrock (Dr. McDonald) suggested, it is merely going to be a talking shop or because it is going to shelve the problem. It is a major step forward because the differences about the facts and the differences of interpretation of the facts have been narrowed considerably.
At the NEDO meeting it was accepted, first, that the pricing of energy must be on an economic basis. Secondly, it was accepted that in general our energy prices are not out of line with those in Europe, although there was clearly a great difference in energy prices between ourselves and the United States.
Thirdly, it was agreed that there are some specific problems mainly relating to the large energy users, the energy-intensive industries, mainly on the electricity side but also, possibly, on the gas side. The hon. Members for Midlothian and for Bury and Radcliffe (Mr. White) asked whether the task force would be able to deal with energy 340 prices outside the EEC—in Europe, America and Scandinavia. The answer is that it can, although in those areas I think there is substantial agreement about the problems that already exist.
My right hon. Friend announced today the changes that we are asking the electricity and gas industries to investigate—the review of the bulk supply tariff and the possibility of larger discounts for bulk users of both electricity and gas. We hope that those things will bring substantial relief to industry. I ought, however, to be realistic about what is proposed for electricity. In electricity costs there is a difference between Britain and some other countries, but in some cases that may well reflect fundamental cost differences. The fact that a country such as France has a higher proportion of hydro-electricity and nuclear electricity is one of the reasons why it has a substantial advantage over us in the cost of electricity.
My hon. Friends the Members for Bedford (Mr. Skeet) and for Canterbury, and the right hon. Member for Leeds, South raised the question of the heavy fuel oil duty. That is a matter for the Chancellor of the Exchequer, who was at the meeting at the NEDO and is well aware of the strength of feeling from the representations that have been made.
Our heavy fuel oil duty is higher than that in other European countries, although our duty on other oil products may be lower. One has to look at the matter as a whole. The question of heavy fuel oil duty has many ramifications. It affects the price of industrial gas, because that is tied to the price of oil. Also, as the right hon. Gentleman clearly showed, it affects the price of electricity. That was why he had some reservations about reducing or abolishing that duty—which just goes to show the sort of conflicting considerations and the box that one is in when considering this problem.
At present, our heavy fuel oil prices are among the very cheapest in Europe. For much of 1980 they were higher, but it is a changing situation and probably over a five-year period our prices have not been much out of line with those in countries such as Germany. However, because they affect gas prices, as my hon. Friend the Member for Canterbury said, this is a problem that we shall consider very seriously.
My hon. Friend the Member for New Forest (Mr. McNair-Wilson) raised the question of the exchange rate and comparisons of energy prices. One point that tends to be overlooked when people ask why we cannot have cheaper energy is that a strong and rising pound gives cheaper energy in sterling terms. Because oil is priced in dollars, the price of North Sea oil is converted back into sterling, and thus, when the pound rises, the price of North Sea oil is cheaper to United Kingdom users than it would otherwise have been.
I give an example. A $39½barrel of oil would, at an exchange rate of $1.57 to the pound, cost £25.16 instead of the £16.46 that it now costs. So a strong pound helps energy users; it helps purchasers of oil; and it also affects the price of gas. That is one reason why, when looking at the price of gas in local currency terms, and looking at the price in sterling and comparing it with the price in francs or deutschemarks and comparing the increase in each of those countries in their local currencies, we find that British gas prices, as measured in individual national currencies, have risen very much less than have gas prices 341 in other European countries. That point was acknowledged in the Independent Market Research consultants' report, which was carried out for the steel producers.
The Government's view, which has been accepted by the CBI and by the Labour Party, is that our energy should be priced so as to ensure adequate and secure supplies iver the medium term. That does not mean pricing at yesterday's cost; it means taking account of the trend of future costs of energy. That policy was accepted and endorsed by the Green Paper of the right hon. Member for Bristol, South-East (Mr. Benn) when he was Secretary of State for Energy.
A number of my hon. Friends, including my hon. Friend the Member for Bedford, raised the question of the influence of cash limits on energy prices. I repeat what my right hon. Friend said, that energy prices are not determined by cash limits. They are set in order to cover the medium-term marginal costs. The external financing limit is worked out after that, and is not the determinant of energy prices.
A number of hon. Members asked why a country such as ours, which is energy-rich, should not subsidise it or have cheap energy, as in the United States. A few hon. Members—I am glad that there were only a few—suggested that we should follow the United States practice. I believe that to follow the United States energy pricing policy would be a great folly. It is often forgotten that before 1973 the United States priced its energy above word levels in order to protect its domestic producers. After the oil price hike in 1973 it changed its policy and decided to price below world market levels. The result was disastrous. Consumption was stimulated, and imports that were only 20 per cent. in 1973 soared, in a few years, to over half the energy requirements of the United States. Thus, to follow the example of the United States would be disastrous.
Another question raised in the date was why the price of oil should affect the price of gas. People have translated that question as "Why should our gas prices be determined by OPEC?" There are strong reasons, when the price of oil goes up, why those of gas and other fossil fuels are bound to follow. In many uses the two products are interchangeable. As my right hon. Friend said, the world is consuming more oil and gas than it is discovering. There is an imbalance between the world's demand for oil and its supply.
As some hon. Members argued, all these estimates of reserves and finite resources may prove to be grossly over-pessimistic. Some hon. Members argued that the answer to the oil problem might be oil itself—that more oil will be discovered under the sea, offshore, from coal and from shale. All these new sources of oil will come on stream only if we have the right pricing policy.
A number of hon. Members raised specific points relating to nuclear power. The right hon. Member for Leeds, South asked when the inquiry into the PWR would be held. It is expected to be held in 1982. I cannot say what the precise form of the inquiry will be, except that it will be as wide as possible. We want maximum discussion, and it is hoped that the construction of a PWR can be started in 1983.
My hon. Friend the Member for Bedford suggested that the nuclear programme was not going fast enough. But when we have been through a decade when the industry has had no inquiries and is run down, I do not believe that we can go quicker than we are just now. I do not believe 342 that we could build more stations, and build them to time. Heavens knows, we have had enough problems building them in time in the past. We have of course discussed with the industry what the scale of the programme should be.
The hon. Member for Truro (Mr. Penhaligon) criticised us because nuclear power stations were being sited in rural areas. This, he thought, implied that they were being acknowledged by Governments as unsafe; otherwise they would be located in the middle of city centres. The nuclear industry and Government simply cannot win. To satisfy public opinion and allay anxieties, they do not build nuclear power stations in the middle of cities, but they are then accused of doing so precisely because they know that they are unsafe. It a ridiculous argument.
My hon. Friend the Member for Mid-Sussex (Mr. Renton) asked about mixed finance for some of the energy industries. My right hon. Friend the Secretary of State has said that we shall be taking powers to inject private equity into BNOC. I hope that that will meet my hon. Friend's point.
Listening to the arguments from some Opposition Members tonight—to be fair, only some of them—one wonders whether they are aware of the world beyond this country, whether news has reached them of the revolution in Iran or the war between Iran and Iraq. While that war continues, the danger is that vital supplies of oil will be interrupted and that the world will face another price explosion.
Even after the world returns to calm on the oil markets, we shall still be using our supplies faster than we discover new ones. In those circumstances, we cannot expect to live quiet lives and enjoy low energy prices.
As my hon Friend the Member for Skipton (Mr. Watson) said in an admirable speech, this country, like every other, needs to adapt to higher energy prices. We shall be in a better position than countries with no energy resources, for whom the rise in energy prices has been nothing short of calamitious. High prices bring problems for our energy-intensive industries and my right hon. Friend has announced some measures today to deal with them. But the fact that this country is rich in energy resources also brings opportunities.
That is why this Government have overthrown the policies of the last Government, which worked against greater investment in the North Sea. That is why we have insisted that the National Coal Board should be profitable again. Do the Opposition really suggest that, in an era of high energy prices, one of our major energy industries should be a loss maker? That is surely ridiculous. It is only by maintaining realistic prices that we can maximise our advantages as an energy-rich country.
To reverse our policies will mean that many of the jobs which have been created in the industries that supply the energy industries will not come into being. Many of the changes and adaptations in industry towards economising on energy use will not occur without proper economic prices—again, as my hon. Friend the Member for Skipton said in his excellent speech.
The route suggested by the Opposition will bring this country certainly not prosperity but great problems. Under the last Government, we tried to hide from falling demand for the products of some of our traditional industries. We hit competition from the low labour cost countries. we turned a blind eye to overmanning and overspending. We indulged restrictive practices. As a result, this country is 343 now chronically uncompetitive. The road back, the one along which we are leading the country, is difficult enough without repeating the follies of the last Government.
The time to pretend that our industries could hide and remain embedded in the past has gone. If we do not face reality, reality will face us with some very unpleasant consequences. The challenges to this country are great, but we can turn the transient advantage of energy into a permanent competitive gain. I urge the House to reject the motion and to support the Government amendment.
§ Question put, That the original words stand part of the Question:-
§ The House divided: Ayes 255, Noes 309.346
|Division No. 48]||[10 pm|
|Abse, Leo||Dunn, James A.|
|Adams, Allen||Dunnett, Jack|
|Allaun, Frank||Dunwoody, Hon Mrs G.|
|Alton, David||Eadie, Alex|
|Anderson, Donald||Eastham, Ken|
|Archer, Rt Hon Peter||Edwards, R. (W'hampt'n S E)|
|Armstrong, Rt Hon Ernest||Ellis, R. (NED'bysh're)|
|Atkinson, N. (H'gey,)||Ellis, Tom (Wrexham)|
|Bagier, Gordon A. T.||English, Michael|
|Barnett, Guy (Greenwich)||Ennals, Rt Hon David|
|Barnett, Rt Hon Joel (H'wd)||Evans, Ioan (Aberdare)|
|Beith, A. J.||Evans, John (Newton)|
|Bennett, Andrew (St'kp'tN)||Ewing, Harry|
|Bidwell, Sydney||Faulds, Andrew|
|Booth, Rt Hon Albert||Field, Frank|
|Boothroyd, Miss Betty||Fitt, Gerard|
|Bottomley, Rt Hon A. (M'b'ro)||Flannery, Martin|
|Bradley, Tom||Fletcher, Raymond (Ilkeston)|
|Bray, Dr Jeremy||Fletcher, Ted (Darlington)|
|Brown, Hugh D. (Provan)||Foot, Rt Hon Michael|
|Brown, Ron (E'burgh, Leith)||Ford, Ben|
|Brown, Ronald W. (H'ckn'y S)||Forrester, John|
|Buchan, Norman||Foster, Derek|
|Callaghan, Jim (Midd't'n & P)||Fraser, J. (Lamb'th, N'w'd)|
|Campbell, Ian||Freeson, Rt Hon Reginald|
|Canavan, Dennis||Garrett, John (Norwich S)|
|Cant, R. B.||Garrett, W. E. (Wallsend)|
|Carmichael, Neil||George, Bruce|
|Carter-Jones, Lewis||Gilbert, Rt Hon Dr John|
|Cartwright, John||Ginsburg, David|
|Clark, Dr David (S Shields)||Golding, John|
|Cocks, Rt Hon M. (B'stol S)||Gourlay, Harry|
|Cohen, Stanley||Graham, Ted|
|Coleman, Donald||Grant, George (Morpeth)|
|Conlan, Bernard||Grant, John (Islington C)|
|Cook, Robin F.||Grimond, Rt Hon J.|
|Cowans, Harry||Hamilton, James (Bothwell)|
|Cox, T. (W'dsw'th, Toot'g)||Hamilton, W. W. (C'tral Fife)|
|Craigen, J. M.||Hardy, Peter|
|Crowther, J. S.||Harrison, Rt Hon Walter|
|Cryer, Bob||Hart, Rt Hon Dame Judith|
|Cunliffe, Lawrence||Hattersley, Rt Hon Roy|
|Cunningham, G. (Islington S)||Haynes, Frank|
|Cunningham, Dr J. (W'h'n)||Healey, Rt Hon Denis|
|Dalyell, Tam||Heffer, Eric S.|
|Davidson, Arthur||Hogg, N. (E Dunb't'nshire)|
|Davies, Rt Hon Denzil (L'lli)||Holland, S. (L'b'th, Vauxh'll)|
|Davies, Ifor (Gower)||Home Robertson, John|
|Davis, Clinton (Hackney C)||Homewood, William|
|Davis, T. (B'ham, Stechf'd)||Hooley, Frank|
|Deakins, Eric||Horam, John|
|Dewar, Donald||Howell, Rt Hon D.|
|Dixon, Donald||Howells, Geraint|
|Dobson, Frank||Huckfield, Les|
|Dormand, Jack||Hudson Davies, Gwilym E.|
|Douglas, Dick||Hughes, Mark (Durham)|
|Douglas-Mann, Bruce||Hughes, Robert (Aberdeen N)|
|Dubs, Alfred||Hughes, Roy (Newport)|
|Dunlop, John||Jay, Rt Hon Douglas|
|John, Brynmor||Race, Reg|
|Johnson, James (Hull West)||Radice, Giles|
|Johnson, Walter (Derby S)||Rees, Rt Hon M (Leeds S)|
|Johnston, Russell (Inverness)||Richardson, Jo|
|Jones, Rt Hon Alec (Rh'dda)||Roberts, Albert (Normanton)|
|Jones, Barry (East Flint)||Roberts, Allan (Bootle)|
|Jones, Dan (Burnley)||Roberts, Gwilym (Cannock)|
|Kaufman, Rt Hon Gerald||Robertson, George|
|Kerr, Russell||Robinson, G. (Coventry NW)|
|Kilfedder, James A.||Rooker, J. W.|
|Kilroy-Silk, Robert||Roper, John|
|Lambie, David||Ross, Ernest (Dundee West)|
|Lamborn, Harry||Ross, Stephen (Isle of Wight)|
|Lamond, James||Rowlands, Ted|
|Leadbitter, Ted||Ryman, John|
|Leighton, Ronald||Sandelson, Neville|
|Lewis, Arthur (N'ham NW)||Sever, John|
|Lewis, Ron (Carlisle)||Sheerman, Barry|
|Litherland, Robert||Sheldon, Rt Hon R.|
|Lofthouse, Geoffrey||Shore, Rt Hon Peter|
|Mabon, Rt Hon Dr J. Dickson||Short, Mrs Renée|
|McCusker, H.||Silkin, Rt HonJ. (Deptford)|
|McDonald, Dr Oonagh||Silkin, Rt Hon S. C. (Dulwich)|
|McElhone, Frank||Silverman, Julius|
|McGuire, Michael (Ince)||Skinner, Dennis|
|McKay, Allen (Penistone)||Smith, Rt Hon J. (N Lanark)|
|McKelvey, William||Snape, Peter|
|Maclennan, Robert||Soley, Clive|
|McNally, Thomas||Spearing, Nigel|
|McNamara, Kevin||Spriggs, Leslie|
|McTaggart, Robert||Stallard, A. W.|
|McWilliam, John||Steel, Rt Hon David|
|Magee, Bryan||Stewart, Rt Hon D. (W Isles)|
|Marks, Kenneth||Stoddart, David|
|Marshall, Dr Edmund (Goole)||Stott, Roger|
|Marshall, Jim (Leicester S)||Strang, Gavin|
|Martin, M (G'gowS'burn)||Straw, Jack|
|Mason, Rt Hon Roy||Summerskill, Hon Dr Shirley|
|Maxton, John||Taylor, Mrs Ann (Bolton W)|
|Maynard, Miss Joan||Thomas, Jeffrey (Abertillery)|
|Meacher, Michael||Thomas, Mike (Newcastle E)|
|Mellish, Rt Hon Robert||Thomas, Dr R. (Carmarthen)|
|Mikardo, Ian||Thorne, Stan (Preston South)|
|Millan, Rt Hon Bruce||Tilley, John|
|Miller, Dr M. S. (E Kilbride)||Tinn, James|
|Mitchell, Austin (Grimsby)||Torney, Tom|
|Molyneaux, James||Urwin, Rt Hon Tom|
|Morris, Rt Hon A. (W'shawe)||Varley, Rt Hon Eric G.|
|Morris, Rt Hon C. (O'shaw)||Wainwright, E. (Dearne V)|
|Morris, Rt Hon J. (Aberavon)||Walker, Rt Hon H. (D'caster)|
|Morton, George||Watkins, David|
|Moyle, Rt Hon Roland||Welsh, Michael|
|Mulley, Rt Hon Frederick||White, J. (G'gow Pollok)|
|Newens, Stanley||Whitehead, Phillip|
|Oakes, Rt Hon Gordon||Whitlock, William|
|Ogden, Eric||Wigley, Dafydd|
|O'Halloran, Michael||Willey, Rt Hon Frederick|
|O'Neill, Martin||Williams, Rt Hon A. (S'sea W)|
|Orme, Rt Hon Stanley||Williams, Sir T. (W'ton)|
|Palmer, Arthur||Wilson, Gordon (Dundee E)|
|Park, George||Wilson, Rt Hon Sir H. (H'ton)|
|Parker, John||Wilson, William (C'try SE)|
|Parry, Robert||Winnick, David|
|Pavitt, Laurie||Woodall, Alec|
|Pendry, Tom||Woolmer, Kenneth|
|Penhaligon, David||Wrigglesworth, Ian|
|Powell, Rt Hon J. E. (S Down)||Young, David (Bolton E)|
|Powell, Raymond (Ogmore)||Tellers for the Ayes:|
|Prescott, John||Mr. Frank R. White and|
|Price, C. (Lewisham W)||Mr. Hugh McCartney|
|Adley, Robert||Athinson, David (B'm'th, E)|
|Aitken, Jonathan||Baker, Kenneth (St. M'bone)|
|Alexander, Richard||Backer, Nicholas (N Dorset)|
|Amery, Rt Hon Julian||Banks, Robert|
|Ancram, Michael||Beaumont-Dark, Anthony|
|Arnold, Tom||Bell, Sir Ronald|
|Atkins, Rt Hon H. (S'thorne)||Bendall, Vivian|
|Atkins, Robert (Preston N)||Bennett, Sir Frederic (T'bay)|
|Benyon, Thomas (A'don)||Garel-Jones, Tristan|
|Benyon, W. (Buckingham)||Gilmour, Rt Hon Sir Ian|
|Bevan, David Gilroy||Glyn, Dr Alan|
|Biggs-Davison, John||Goodhart, Philip|
|Blackburn, John||Goodlad, Alastair|
|Blaker, Peter||Gorst, John|
|Body, Richard||Gow, Ian|
|Bonsor, Sir Nicholas||Gower, Sir Raymond|
|Boscawen, Hon Robert||Gray, Hamish|
|Bottomley, Peter (W'wich W)||Greenway, Harry|
|Bowden, Andrew||Grieve, Percy|
|Boyson, Dr Rhodes||Griffiths, E. (B'y St. Edm'ds)|
|Braine, Sir Bernard||Griffiths, Peter Portsm'th N)|
|Bright, Graham||Grist, Ian|
|Brinton, Tim||Grylls, Michael|
|Brittan, Leon||Gummer, Selwyn|
|Brocklebank-Fowler, C.||Hamilton, Hon A.|
|Brooke, Hon Peter||Hamilton, Michael (Salisbury)|
|Brotherton, Michael||Hampson, Dr Keith|
|Brown, M. (Brigg and Scun)||Hannam, John|
|Browne, John (Winchester)||Haselhurst, Alan|
|Bruce-Gardyne, John||Hastings, Stephen|
|Bryan, Sir Paul||Havers, Rt Hon Sir Michael|
|Buchanan-Smith, Hon Alick||Hawkins, Paul|
|Buck, Antony||Hawksley, Warren|
|Budgen, Nick||Hayhoe, Barney|
|Bulmer, Esmond||Heath, Rt Hon Edward|
|Burden, Sir Frederick||Heddle, John|
|Butcher, John||Henderson, Barry|
|Carlisle, John (Luton West)||Heseltine, Rt Hon Michael|
|Carlisle, Kenneth (Lincoln)||Hicks, Robert|
|Carlisle, Rt Hon M. (R'c'n)||Higgins, Rt Hon Terence L.|
|Chalker, Mrs. Lynda||Hill, James|
|Channon, Rt. Hon. Paul||Hogg, Hon Douglas (Gr'th'm)|
|Chapman, Sydney||Holland, Philip (Carlton)|
|Churchill, W. S.||Hooson, Tom|
|Clark, Hon A. (Plym'th, S'n)||Hordern, Peter|
|Clark, Sir W. (Croydon S)||Howe, Rt Hon Sir Geoffrey|
|Clarke, Kenneth (Rushcliffe)||Howell, Rt Hon D. (G'ldf'd)|
|Clegg, Sir Walter||Howell, Ralph (N Norfolk)|
|Cockeram, Eric||Hunt, David (Wirral)|
|Colvin, Michael||Hunt, John (Ravensbourne)|
|Cope, John||Hurd, Hon Douglas|
|Cormack, Patrick||Irving, Charles (Cheltenham)|
|Corrie, John||Jenkin, Rt Hon Patrick|
|Costain, Sir Albert||Jessel, Toby|
|Cranborne, Viscount||Johnson Smith, Geoffrey|
|Critchley, Julian||Jopling, Rt Hon Michael|
|Crouch, David||Joseph, Rt Hon Sir Keith|
|Dean, Paul (North Somerset)||Kaberry, Sir Donald|
|Dickens, Geoffrey||Kellett-Bowman, Mrs Elaine|
|Dorrell, Stephen||Kershaw, Anthony|
|Dover, Denshore||Kimball, Marcus|
|Dunn, Robert (Dartford)||King, Rt Hon Tom|
|Durant, Tony||Kitson, Sir Timothy|
|Dykes, Hugh||Knight, Mrs Jill|
|Eden, Rt Hon Sir John||Knox, David|
|Edwards, Rt Hon N. (P'broke)||Lamont, Norman|
|Eggar, Tim||Lang, Ian|
|Elliott, Sir William||Langford-Holt, Sir John|
|Emery, Peter||Latham, Michael|
|Eyre, Reginald||Lawson, Nigel|
|Fairgrieve, Russell||Lee, John|
|Faith, Mrs Sheila||Lennox-Boyd, Hon Mark|
|Farr, John||Lester Jim (Beeston)|
|Fell, Anthony||Lewis, Kenneth (Rutland|
|Fenner, Mrs Peggy||Lloyd, Ian (Havant & W'loo)|
|Finsberg, Geoffrey||>Lloyd, Peter (Fareham)|
|Fisher, Sir Nigel||Loveridge, John|
|Fletcher, A. (Ed'nb'gh N)||Luce, Richard|
|Fletcher-Cooke, Sir Charles||Lyell, Nicholas|
|Fookes, Miss Janet||McCrindle, Robert|
|Fowler, Rt Hon Norman||Macfarlane, Neil|
|Fox, Marcus||MacGregor, John|
|Fraser, Rt Hon Sir Hugh||MacKay, John (Argyll)|
|Fraser, Peter (South Angus)||Macmillan, Rt Hon M.|
|Fry, Peter||McNair-Wilson, M. (N'bury)|
|Galbraith, Hon T. G. D.||McNair-Wilson, P. (New F'st)|
|Gardiner, George (Reigate)||McQuarrie, Albert|
|Gardner, Edward (S Fylde)||Madel, David|
|Major, John||Scott, Nicholas|
|Marland, Paul||Shaw, Giles (Pudsey)|
|Marlow, Tony||Shaw, Michael (Scarborough)|
|Marshall Michael (Arundel)||Shelton, William (Streatham)|
|Mates, Michael||Shepherd, Colin (Hereford)|
|Mather, Carol||Shepherd, Richard|
|Maude, Rt Hon Sir Angus||Shersby, Michael|
|Mawby, Ray||Silvester, Fred|
|Mawhinney, Dr Brian||Sims, Roger|
|Maxwell-Hyslop, Robin||Skeet, T. H. H.|
|Mayhew, Patrick||Smith, Dudley|
|Meyer, Sir Anthony||Spence, John|
|Miller, Hal (B'grove)||Spicer, Jim (West Dorset)|
|Mills, Iain (Meriden)||Spicer, Michael (S Worcs)|
|Mills, Peter (West Devon)||Sproat, Ian|
|Miscampbell, Norman||Squire, Robin|
|Mitchell, David (Basingstoke)||Stainton, Keith|
|Moate, Roger||Stanbrook, Ivor|
|Monro, Hector||Stanley, John|
|Montgomery, Fergus||Steen, Anthony|
|Moore, John||Stevens, Martin|
|Morgan, Geraint||Stewart, Ian (Hitchin)|
|Morris, M. (N'hampton S)||Stewart, A. (E Renfrewshire)|
|Morrison, Hon C. (Devizes)||Stokes, John|
|Mudd, David||Stradling Thomas, J.|
|Murphy, Christopher||Taylor, Teddy (S'end E)|
|Myles, David||Tebbit, Norman|
|Neale, Gerrard||Temple-Morris, Peter|
|Needham, Richard||Thatcher, Rt Hon Mrs M.|
|Nelson, Anthony||Thomas, Rt Hon Peter|
|Neubert, Michael||Thompson, Donald|
|Newton, Tony||Thorne, Neil (Ilford South)|
|Nott, Rt Hon John||Thornton, Malcolm|
|Onslow, Cranley||Townend, John (Bridlington)|
|Oppenheim, Rt Hon Mrs S.||Townsend, Cyril D, (B'heath)|
|Osborn, John||Trippier, David|
|Page, John (Harrow, West)||Trotter, Neville|
|Page, Rt Hon Sir G. (Crosby)||van Straubenzee, W. R.|
|Page, Richard (SW Herts)||Vaughan, Dr Gerard|
|Parris, Matthew||Viggers, Peter|
|Patten, Chirstopher (Bath)||Waddington, David|
|Patten, John (Oxford)||Wakeham, John|
|Pattie, Geoffrey||Waldegrave, Hon William|
|Pawsey, James||Walker, Rt Hon P. (W'cester)|
|Percival, Sir Ian||Walker, B. (Perth)|
|Peyton, Rt Hon John||Walker-Smith, Rt Hon Sir D.|
|Pink, R. Bonner||Waller, Gary|
|Pollock, Alexander||Walters, Dennis|
|Porter, Barry||Ward, John|
|Prentice, Rt Hon Reg||Warren, Kenneth|
|Price, Sir David (Eastleigh)||Watson, John|
|Prior, Rt Hon James||Wells, John (Maidstone)|
|Proctor, K. Harvey||Wells, Bowen|
|Pym, Rt Hon Francis||Wheeler, John|
|Raison, Timothy||Whitelaw, Rt Hon William|
|Rathbone, Tim||Whitney, Raymond|
|Rees, Peter (Dover and Deal)||Wickenden, Keith|
|Rees-Davies, W. R.||Wiggin, Jerry|
|Renton, Tim||Wilkinson, John|
|Rhodes James, Robert||Williams, D. (Montgomery)|
|Rhys Williams, Sir Brandon||Winterton, Nicholas|
|Ridsdale, Sir Julian||Wolfson, Mark|
|Rifkind, Malcolm||Young, Sir George (Action)|
|Roberts, M. (Cardiff NW)||Younger, Rt Hon George|
|Roberts, Wyn (Conway)|
|Rossi, Hugh||Tellers for the Noes:|
|Rost, Peter||Mr. Spencer Le Marchant|
|Royle, Sir Anthony||and Mr. Anthony Berry|
|Sainsbury, Hon Timothy|
§ Question accordingly negatived.
§ Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 32 (Questions on amendments), and agreed to.
§ MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.
§ That this House recognises the realism of the Government's energy policy and welcomes the renewed vigour with which the nation's energy resources are being developed.