HC Deb 23 March 1981 vol 1 cc614-7
3. Mr. Michael Morris

asked the Secretary of State for Energy if he will make a statement on the Government's response to the National Economic Development Council report on comparative energy prices.

4. Sir David Price

asked the Secretary of State for Energy what action he proposes to take in the light of the National Economic Development Council energy task force report.

16. Dr. Edmund Marshall

asked the Secretary of State for Energy what action he is taking in consequence of the National Economic Development Council energy task force report published on 4 March.

24. Mr. Neubert

asked the Secretary of State for Energy what action he proposes to take on the National Economic Development Council report on comparative costs of industrial fuels.

Mr. David Howell

Energy supply industries are implementing measures which, in addition to steps already taken last year, will provide considerable benefit, particularly to large energy intensive users. The NEDC task force report was fully taken into account in reaching these decisions.

The necessary adjustment to the industries cash limits will assist industry by some £120 million in the financial year.

Mr. Morris

Despite the welcome adjustments, is my right hon. Friend aware that heavy energy users still have to face prices that are uncompetitive with those of their European counterparts, let alone those in the United States, Canada, Scandinavia and even Japan? Will he therefore bring forward further proposals to adjust the disadvantage, reconsider the heavy fuel oil duty and, last but by no means least, take action over the 30 per cent. premium on coking coal?

Mr. Howell

I am grateful to my hon. Friend for his welcome for the new measures. Action has been taken successively over the past year. The price plateau announced by the BGC will go a considerable way towards offsetting the disadvantage to bulk energy users, which was mainly, although not entirely, caused by the steep climb in sterling, which distorted comparative prices.

There are greater difficulties over electricity, particularly for heavy users. The electricity supply industry is announcing measures to ease the position for heavy load users. However, we must face the fact that the basic structure of our industry is less efficient than, for instance, that of the French, who built nuclear power stations in the 1970s, while the previous Government dithered and failed to take the decisions necessary to get on with nuclear power. We shall overcome the problem, but it is bound to take time. Heavy fuel oil duty is a matter for my right hon. and learned Friend the Chancellor, but he says that he will keep it under review.

The NEDC report mentioned foundry coke, which is a particularly difficult area. I recognise the disparity. We are examining the matter, but solutions are not easy.

Mr. Speaker

Order. Hon. Members should ask only one supplementary question and only one should be answered.

Sir David Price

Is my right hon. Friend aware that, in spite of the measures announced in the Budget, large and continuous energy users are not satisfied that energy costs are down to those of their European competitors? Will he take on board the fact that it is a question not of theoretical economics and margin of costing, but of the competition that our industry has to face?

Mr. Howell

My hon. Friend is right about competition. The Government wish to see the competitive production of energy, as of all other goods. The gas price plateau will put us broadly in line with the remainder of Europe, remembering that 95 per cent. of all users are already in line, as the NEDC report confirms, but, as I said, we have a long-term structural problem to overcome with electricity. Our price, including duty, for heavy fuel oil is probably one of the lowest in Europe.

Dr. Marshall

What guarantee does the gas price plateau give if there is future fluctuation in comparative overseas prices, and particularly if the exchange rate continues to change? Will the Secretary of State urge the BGC to consider new contractual arrangements with the 15 per cent. of intensive users, which take about 85 per cent. of the total usage in order to protect them from that form of overseas competition?

Mr. Howell

I should be happy to answer all the hon. Gentleman's questions, but I shall answer only the first. Energy prices cannot move up and down as exchange rates fluctuate. It would make the system impossible to operate. As I said, we believe that our energy prices should be competitive, like all other prices, although we should not hand out subsidies where industries are not covering costs, nor abandon economic prices. Because of hideous past errors, competitive electricity pricing will take time to achieve.

Mr. Neubert

On the day on which the Italian Government have given artificial assistance to exports, may I emphasise to my right hon. Friend and the Government that unless they come up trumps our industrialists are in danger of losing most of the tricks?

Mr. Howell

We wish to hold as many trumps as possible, one of which is security of energy supply, which many other countries, including our Italian friends, lack. Let us not foret that. Help for individual industries through the difficult transitional period is a matter for my right hon. Friend the Secretary of State for Industry. Much the most sensible aim in our energy policy is to stick to economic pricing, while seeking to ensure that the fuel supply industries are fully sensitive to their customers' needs, particularly in the difficult time of recession.

Mr. Merlyn Rees

Are we to tell heavy energy users, who continue to contact us, that the provisions in the Budget are the Government's only response to the NEDC task force report?

Mr. Howell

Keeping a gas price plateau for industry while Continental gas prices are set to rise rapidly will place our heavy users in a favourable position. Our domestic gas prices are by far the cheapest in Europe, although that fact may not necessarily be welcome to industry. The right hon. Gentleman should not belittle what has been done.

Mr. Skeet

Is my right hon. Friend aware that this matter is to be discussed in my motion on Friday? Is he further aware that unless he shortly brings forward adequate proposals he will force energy intensive industries into decline?

Mr. Howell

I was aware of the debate that is to be held in the House because of my hon. Friend's efforts. His services to the House are unending. In preparing for that debate, will he examine carefully our energy position vis-a-vis our Continental and world competitors? He will be the first to recognise that, although the French have an advantage because of cheaper nuclear power, it will take us time to equal. In many other areas we have competitive prices. Indeed according to the NEDC 95 per cent. of all our consumers have broadly competitive prices with Europe. In addition, we have security of supply. I hope that my hon. Friend will emphasise those points in the debate that he is usefully and helpfully promoting.

Mr. Hooley

May we have slightly more intelligent cooperation between the Departments of Energy and Industry? Is the right hon. Gentleman aware that, while he has been busy forcing up the price of gas and electricity to the BSC, his unfortunate right hon. Friend the Secretary of State for Industry has had to foot the bill from the taxpayer?

Mr. Howell

The hon. Gentleman uses the phrase "forcing up". I find it highly disagreeable that prices have to rise, but rises were necessary to cover the costs of supplying electricity. If the hon. Gentleman is suggesting that costs should not be covered, who does he suggest should pick up the tab? Where is the money to come from? It does not grow on trees.

Mr. Moate

How much of the extra Budget provision for bulk energy users will go to the steel industry? Can my right hon. Friend spell out precisely how the provisions will benefit bulk energy users, particularly a steel firm which alleges that its electricity is costing 50 per cent. more than the cost to its Continental competitors?

Mr. Howell

The electricity industry will announce precise details and put them into practice after 1 April. It is already discussing with customers how it can help. Customers that can be helped will be those with a particularly high load factor who can meet the peak pattern of electricity supplies. The gain in terms of a reduced increase in tariff will be quite substantial. However, I am afraid that we shall not be in the league we should have been in had we had lower cost electricity generally as a result of a larger nuclear element, which is what we need.

Mr. Hardy

We hope that the proposals in the Budget will be of some help, but will the Minister reassure the steel industry, in both the public and private sectors, that further help will be forthcoming if the end result of the task force recommendations is to leave it still in an uncompetitive position in relation to German and French producers?

Mr. Howell

The general problems of the steel industry world-wide are considerable. My right hon. Friend the Secretary of State for Industry has addressed them vigorously. On the energy side, however, as I have explained, provisions have been made—not only in the last Budget, but previously—to ease the burden of electricity costs for large users in this country. The disparity with France, however, which is of particular concern to the steel industry, will remain, for the simple reason that decisions that should have been taken to build nuclear in the 1970s were met instead with dithering and indecision by the Labour Government.