HC Deb 26 January 1981 vol 997 cc627-9
8. Dr. Edmund Marshall

asked the Secretary of State for Energy if he will make a statement on the progress of discussions about the cost of gas and electricity for large industrial consumers.

15. Mr. Skeet

asked the Secretary of State for Energy whether he has any further proposals to ease the burdens of gas and electricity prices for the energy-intensive industries.

Mr. David Howell

I outlined to the House in the debate on energy policy last Wednesday a number of measures already taken and still under discussion, aimed particularly at the large energy intensive industrial users. The NEDC task force will provide a unique opportunity to reach agreement on the facts. The Government will obviously consider carefully the facts established by the task force.

Dr. Marshall

Will the right hon. Gentleman inject a sense of great urgency into the discussions, because almost weekly firms consuming industrial energy are closing or contracting? May we have a reply to the question asked by my right hon. Friend the Member for Leeds, South (Mr. Rees) last Wednesday, as to whether a new gas tariff for such consumers is to be introduced, halfway between the present tariffs, for firm and interruptible supplies?

Mr. Howell

A sense of urgency was injected by the Government at the beginning of last year, when we first saw the enormous impact rolling through our economy and others of the gigantic leap in oil prices in 1979–80. For instance, the British Gas Corporation decided to abandon its policy under the previous Government, of fully relating its prices to firm contracts to gas oil and to abate them to 75 per cent. As I said last Wednesday, all along the Government have been seeing what response can be made within the limits of economic principles. We should like to see the task force producing results as soon as possible, and I believe that we shall do so. Changes in the pricing practice of BGC is a matter for the corporation, but I have raised with BGC the idea of a different category of interruptible supplies. It has also undertaken, as has been mentioned, that for new customers in the second and third year the contract can be renewed at the 75 per cent. rate, which will help many firms.

Mr. Skeet

Is the Secretary of State aware that industrial gas prices are related to fuel oil in Europe and gas oil in the United Kingdom? Should we not try to harmonise the approach?

Mr. Howell

My hon. Friend is not entirely right. It is hard to follow the matter, as the position changes quickly, but he is becoming less right by the day. Firm gas prices are being increasingly related, particularly by Ruhr Gas and other German suppliers, to the full gas oil price. For interruptible supplies—supplies where there is an undertaking that there may be a cut-off at any time and the firm has facilities to go to oil instead—the relationship is to heavy fuel oil. At the moment, although I cannot guarantee that it will stay this way, the price of heavy fuel oil in this country is below that in almost every other country in Europe, so the relationship there brings a favourable advantage for the British. However, all energy prices are high and rising, which is very uncomfortable for the high energy user.

Mr. Allen McKay

Does the Minister realise that the Government's policies—or lack of policies—over energy pricing are causing small firms and factories to go out of business? Is he aware that this weekend someone from BSC told me that its largest enemy was energy prices? Does he accept that council tenants and others in rented property are faced not only with high energy prices but increasing rents, also as a result of Government policies?

Mr. Howell

No one welcomes or likes the enormous upheaval in energy prices that we have had to face and absorb. However, the choice is between not facing increased prices and absorbing them or pretending that they are not with us, between facing them and absorbing them now or deliberately burying our heads and seeing far greater and more unpleasant consequences, which will hit the very people whom the hon. Gentleman wants to protect.

Mr. Nicholas Winterton

Will the Minister bear in mind the almost unanimous representations made to the Government by business organisations about the price of energy? Will he go slightly further than the statements he made last week, take on board the message of the hon. Member for Goole (Mr. Marshall) and bring forward an energy package as soon as possible? Large consumers of energy cannot tolerate the current rise in prices, which is the straw that will break the camel's back, as it broke the back of Bowater's on Merseyside.

Mr. Howell

I take up the last part of my hon. Friend's question. In fact, Bowater's was offered quite favourable energy prices, but it decided not to accept that offer and closed for other reasons. That leads me to my general reply to my hon. Friend, who is second to none in his robust defence of manufacturers in his area, which, as in other areas, are in great difficulty. It would be misleading of me and of him—I know that he would not wish to mislead his local people—to suggest that the Government can wave a wand over internal energy prices to meet the colossal problems that industry faces in his area and in others. There are deeper structural problems to be faced. They are faced throughout Europe in synthetic fibres and textiles and these have to be overcome. That cannot be done by flicking a switch and changing our internal energy prices. That cannot be done, and it would not help if it were possible to do so.