HC Deb 10 March 1981 vol 1000 cc777-8

Another area of concern to industry has been energy prices.

I recognise the strength of the representations put to me to bring the level of fuel oil duty in this country more closely into line with that of our major European competitors. I have carefully considered the case for doing so.

The direct benefits to industrial costs are obvious. But there are also other consequences, arising particularly from arrangements entered into some years ago for gas purchases. I understand that the overall effect of those arrangements would be to put up the cost of gas purchased by the British Gas Corporation and, with it, the United Kingdom's gas import bill.

We shall keep the position under review. But in present circumstances I had to conclude that the wider national interest would be best served by not reducing that duty, but keeping it at its present level.

I am, however, able to announce measures which will assist industry on energy prices. The National Economic Development Council last Wednesday discussed the report of its task force on energy prices. The report showed that, while prices for the vast majority of industrial customers in this country remain in line with Europe, a limited but important number of large users of electricity and gas pay more for supplies than competitors in Europe.

In these circumstances, the electricity supply industry in England and Wales will, in addition to the action it has already taken, introduce new flexibility into its pricing arrangements, providing further scope for large high load factor industrial consumers to reduce their electricity coats.

The British Gas Corporation has already relaxed its industrial pricing policy to help its industrial customers. In addition, the corporation will now hold renewal prices for gas sold under contract to the present renewal levels until 1 December 1981. Furthermore, the normal quarterly price escalation arrangements for gas provided on a continuous basis will not be applied during this period. The action which is to be taken in this area by the Scottish electricity boards will be announced by the Scottish Office later today.

These moves will give direct benefit to British industry. Accordingly, I am increasing the external financing limits for the gas and electricity industries by some £120 million in 1981–82. That cost will add to the public expenditure total.

The NEDC task force also drew attention to industry's difficulties in the recession of finding the capital to convert equipment from oil to coal use. To help here we shall commit £50 million over the next two years for grants towards the cost incurred in converting from oil-fired boilers to coal. The expenditure will be offset, at least in part, by greater coal sales. Any net cost will be met from the contingency reserve.

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