HC Deb 31 March 1982 vol 21 cc357-70
Mr. Dalyell

I beg to move amendment No. 6, in page 13, line 12, leave out 'Subject to section 29A below'.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

With this it will be convenient to take amendment No. 7, in page 14, line 14, leave out from beginning to end of line 4 on page 15, and Government amendment No. 8.

Mr. Dalyell

Our amendment would simplify the clause by creating a two-tier rather than a three-tier structure. It would create a backstop to ensure that all supplies are subject to the Secretary of State's consent. It is an insurance policy if things go wrong. It in no way impinges on the other provisions in the Bill. It simply gives the Secretary of State powers to take control, if necessary.

In a perfect market there may not be any need for intervention, but the gas market is not perfect. There is uncertainty. In Committee on 9 March the Secretary of State concurred with my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands), who said that anyone who forecast more than three months ahead was a fool. That applies not merely to prices, but to how much oil and gas are available. We do not know how much gas there is in the North Sea. We know that there would be severe problems if gas were used up too quickly and expensive alternatives had to be found if it looked like running out. Can we imagine the outcry if we had to switch to other fuels, involving massive investment in distribution?

7.15 pm

If the Government are serious about their assurances on the depletion policy, why can they not be enshrined in the legislation? My colleagues will have noticed that the Secretary of State waxed eloquent and righteous on the assurances. What is the objection to putting the assurances in the legislation? It is very puzzling. In all those hours in Committee, when so many amendments moved by my right hon. and hon. Friends were rejected, we were never let into the secret of why they could not be accepted. Instead, assurances were given.

If the Government are willing to give assurances, why can they not be put in black and white in legislative form so that the courts can do the interpretation? However eloquent the speeches of my right hon. Friend the Member for Leeds, South (Mr. Rees), my hon. Friend the Member for Merthyr Tydfil, my hon. Friend the Member for Dunfermline (Mr. Douglas) and others, no court of law will read meticulously those speeches and the Government's replies. That is why, not only on this issue, but on compatibility and negotiations with the British Gas Corporation before anything happens, something ought to be written into the Bill.

The Government cannot make the objection that the amendment would somehow prevent market forces from working. It would give the Secretary of State power, which he does not have under the Bill as drafted, to operate a depletion policy. The Secretary of State says that this is unnecessary because he has powers under the Petroleum and Submarine Pipe-Lines Act 1975. The Opposition do not agree. The Secretary of State can restrict flaring, but Ministers cannot tell the House that by restricting flaring they are implementing a depletion policy. Flaring is about the prevention of waste and the conservation of valuable resources. It has nothing to do with producing an orderly depletion policy.

The Secretary of State said: It is entirely right and proper that the Government of the day, rather than some nationalised industry, should decide whether a depletion policy is in the national interest, and, if so, what that policy should be."—[Official Report, Standing Committee E, 9 March 1982; c. 799.] That is precisely what our amendment proposes. Even if the Government have difficulty in accepting other amendments, surely they can accept this one, because it is precisely on the point that they say is important and acceptable. It would help them to do what in their own terms they say they want to do.

The 1975 Act does not give the Secretary of State the powers that he needs. It stops at the beach, and understandably so. That is why the 1975 Act was so designed. It was not designed to cover this situation. It is always unsatisfactory to go back to an Act that was designed to cover one situation and say that it should cover a new situation which was not anticipated when the measure was going through Parliament.

The 1975 Act does not cover the inshore use of gas. It is at best an imperfect instrument. It can only control offshore development and, to an extremely limited extent, production. There is a long time lag between the decisions on development and the gas coming on stream. That time barrier must be taken into account. The 1975 Act is inadequate for what the Government say they want to do.

The amendment places control in the Government's hands—not in the hands of the British Gas Corporation, which is where the Secretary of State himself says that it should lie. The Secretary of State himself makes the case for our amendment. Without more ado, I invite the Minister to rise and accept it as graciously as possible. The Government can, and indeed ought, to accept it. Having moved the amendment succinctly, the Opposition reserve the right to come back if the Minister's reply is less than favourable.

Mr. Robert C. Brown (Newcastle upon Tyne, West)

I support amendments Nos. 6 and 7. They are crucial to the Bill and to the future of both the British Gas Corporation and what passes as the Government's energy policy. We have stated forcefully, in the Chamber and in Committee, our opposition to the Bill. Given the Government's inbuilt, almost automaton-like majority, however, the amendments are designed to minimise the damage that this very bad Bill will do to the nation and national life.

British is fortunate to have several indigenous sources of energy—coal, gas and oil. We are assured that coal will not run out for several generations, but that should not lead us to assume that we can squander our other indigenous sources of supply. For coal to be a viable form of energy, mines must be developed. Such development takes at least 12 years, and who knows how many Dukes of Rutland there are and whether the National Coal Board's experience in the Vale of Belvoir will be repeated. In that case, 12 years for development fades into insignificance—it could be 15 or 20 years before the deep-mine coal that we shall need in future will start to appear.

When mines are developed, we should ensure also that the maximum possible quantity of coal is extracted. The cost of sinking new deep mines, such as at Selby, is enormous. That process is anything but rapid. I accept that there are more rapid methods of obtaining coal, but the express method of pulling coal out of the bowels of the earth destroys the very source that we are mining. Such considerations become pertinent when one takes account of the Bill's provisions. That is one of my reasons for strongly supporting the amendment.

It is said that there are still about 17 trillion cu. ft. of natural gas under the North Sea. More may be discovered. Only a fool would say that there is no possibility of further discoveries of natural gas. No doubt we all hope that the 17 trillion cu. ft. are an underestimate and that we shall discover much more, but we cannot rely on that. Even with the so-called magic wand of the Bill, there is absolutely no guarantee that we shall be able to pull out the 17 trillion cu. ft. that are supposed to be under the North Sea.

At the current rate of depletion, those gas reserves will last for a maximum of 25 years. In the lifetime of a nation, 25 years is nothing. Indeed, with increased longevity that is not even one lifetime today. The figures are not somehow whistled out of the air. They are part of the necessary planning that the British Gas Corporation does and submits annually to the Secretary of State. More important anxieties arise. If gas reserves will last only for another generation, we should be seriously concerned about its uses.

It is by now almost conventional wisdom that, because of the scarcity of other fuels, gas should be used efficiently. That means that gas should be used in the premium markets. That is, first, in the areas where gas is the only sensible fue—for example, where there is a need for tight temperature control and its use is not easily substituted. Secondly, gas should be used for the domestic market. It is accepted by all—except, it seems, the Secretary of State and the Government—that for bulk steam raising coal is the obvious and more appropriate fuel. Yet the Government are ambivalent about this aspect. On the one hand, they have made considerable sums of money available in grants to convert industrial boilers to coal, and I applaud them for that. On the other hand, however, they are promoting a Bill which effectively allows the unrestricted use of gas.

Once the Bill is passed, it will not matter what people decide to use gas for—steam raising or any other industrial process. They will be able to use it without let or hindrance. That is a criminal betrayal of the nation and an utter waste of our natural assets. If gas is to be allowed to be sold to any industry irrespective of use, not only will severe damage be done to the coal industry, which is trying to build up its industrial market, but gas will run out considerably faster and the 25 years may become a substantial overestimate.

As a result of the Bill, the coal that we need and will continue to need will not exist, because the unrestricted use of gas will force the British coal industry to run down. What will then happen? There is only one answer. We shall be forced to scramble for coal, thus doing irreparable harm to coal stocks. Worse than that, unlimited depletion will mean that, as the coal industry will be damaged, the substitute natural gas programme will simply not be ready in time. At the moment the plan is to use SNG for natural gas in the mid-1990s. That programme depends upon a viable coal industry.

The unlimited use of gas for steam raising will mean that the coal will simply not be there, and nor will the gas. That will have devastating and dire consequences both for industry and for domestic consumers—and all for a short-term advantage for the Government. As I said when we debated the gas levy yesterday, the Government are more interested in a major contribution to the PSBR to facilitate the giving of a tax handout in the Budget leading up to the general election than in the future welfare of the country.

7.30 pm

I see that the Untler-Secretary of State is already getting excited. He will no doubt accuse me of gross scaremongering—a view with which I might have some sympathy, although I would be the accused. Nevertheless if the new section 29A is allowed to stand, the situation that I have described could arise. A more likely scenario, however, is that the oil companies will be able to apply the screw to gas prices, armed with the powers of unlimited sales over 2 million therms. As the Bill stands, the figure is 1 million, but I am grateful to see from Government amendment No. 8 that the Minister is prepared to honour the commitment that he made in Committee when I sought to change the figure from 1 million to 3 million. As I said in Committee, I am grateful for half a loaf rather than none, and I compliment the Under-Secretary of State on having seen the folly of the authors of the Bill in setting the figure at 1 million therms in the first place.

If section 29A stands, the nation will be in the crazy situation either of running out of gas far more quickly because there is no control on depletion or fuel substitution, with all the damage that that would cause, or of allowing price to be the determinant of energy policy. Neither is acceptable, and letting price determine how our finite resources should be used is lunacy in anyone's language.

It is also unacceptable that, at this time, gas prices should be set to treble, which is a cautious estimate of the effect of the Bill. Given the way in which the Government have crucified British gas consumers over the past few years, it is diabolical to introduce legislation which will almost certainly treble the price of gas in the not-too-distant future.

There are many reasons why the proposed section 29A should not be accepted. As I have said, it is an incentive to energy guzzling. Even if the House rejects that view, it should take account of the other defects. A glaring defect is that the only consideration in section 29A is whether users can guzzle energy fast enough. There is no consideration of whether the supply of private gas will endanger safety or security of supply. In Committee we tried to write in safety provisions, but because there were other safety provisions of equal or greater importance we were more or less impelled to leave consideration of this issue.

The new section 29A destroys whatever pretence the Government have of an energy policy. I hope that the House will join us in throwing it out.

Mr. Rost

Member for Newcastle upon Tyne, West (Mr. Brown) seems to want to have it both ways. On the one hand, he suggests that if the new section is allowed to remain in the Bill it will allow many more consumers to have access to gas and the supplies will be used up much more quickly. On the other hand, he argues that the price of gas will treble. The hon. Gentleman seems not to be listening. Perhaps I could have his attention for a moment. He argues that many more customers will want the new gas which will become available when there is more competition, but at the same time he argues that the price will treble.

Where will all the new customers come from if gas is to be as expensive as he suggests? He cannot have it both ways. He suggests that the legislation will lead to massive energy guzzling, that the demand for gas will expand and that the supplies will be burnt up in all kinds of wasteful non-premium uses, although he believes that the price will soar to about three times the present level. He is talking absolute nonsense. If the price rises as much as that, how does he imagine that all the new customers will be able to afford to use it? What other fuels will they be persuaded to reject in favour of this much more expensive gas so that they can waste it? If the price is to rise so much, all those consumers will continue to use their existing fuel rather than switch to a far more expensive fuel. The hon. Gentleman's argument does not bear examination.

Mr. Robert C. Brown

The hon. Gentleman is clearly not paying much attention to the affirmed basis of Toryism—the law of supply and demand. He well knows that the Bill as drafted—and there is no doubt about the Government's determination to get it on to the statute book in this form—will allow oil companies to sell direct to Continental customers gas which by rights is British, and he knows that that will happen.

Mr. Rost

The hon. Gentleman has raised a completely new issue to try to wriggle out of the collapse of his earlier argument. He now says that the oil companies will export the gas. As he will know, because he was present when the Standing Committee debated this matter at considerable length, there is no immediate intention to allow any export of gas. Some of us would argue that it should be allowed, but the Government have made it clear that until we are more than reassured that substantial new resources of gas have been discovered and are ready to be exploited, as I believe will result from the legislation, until we are assured that there is no need for a severe depletion policy because we know that there is sufficient gas for many years at present rates of consumption, there is no question of export.

I return to the justification for rejecting the amendment. It simply makes no sense. The Opposition argue on the one hand that British Gas will no longer be able to obtain all the gas that it needs to meet its domestic and industrial contracts, and that because of this legislation new gas supplies will be channelled direct to new customers. They cannot at the same time argue that the effect of the legislation will be to raise the price of gas so high as to price it out of the market. Surely it must be one or the other.

The proposed legislation will introduce more competition and provide more incentives for gas exploration and development. Much more gas will become available. British Gas will have alternative sources of supply which it does not have at present. That will stabilise rather than increase the price. New sources will be available for additional consumers, who will be offered a choice of supply. Consumers who have not been offered supplies by British Gas, because it is said that there is not enough gas available, will in some instances have the opportunity of contracting for supplies.

To argue that all this gas will be burnt inefficiently is inconsistent with the laws of economics. Gas will continue to be a premium fuel because it has a premium value as an energy source. Therefore, it will continue to command a premium price. No consumer who wants to remain in business, whether industrial or commercial, will be able to use gas wastefully.

In supporting the proposed legislation, I strongly argued that British Gas had abused its monopoly powers. It has used the excuse that it must continue to reserve supplies for the so-called premium market. That excuse was used to prevent the most efficient use of gas. It is obvious that there are more efficient ways of using gas than by burning it in homes to provide central heating, and in the other ways in which it is burnt in boilers. That is efficient, but it is more efficient for gas to be burnt in combined cycle burners, where it produces both electricity and heat. However, British Gas has prevented that from happening because it would have been in competition with its own marketing objectives of selling gas to domestic consumers rather than allowing them the opportunity of having district heating that is a by-product of electricity generation.

The proposed legislation will encourage the more efficient use of gas and provide an alternative market. British Gas has prevented the efficient development of a market for industries and commercial establishments that want to burn gas to produce electricity and heat combined, as happens in other countries. That is without question the most efficient way in which gas can be consumed as a fuel. Therefore, it should not be discouraged. More effective development will follow from the competition which will result if the legislation is enacted.

Mr. Robert C. Brown

We must not get obsessed with the idea of using gas in combined heat and power schemes. In my native city of Newcastle the Government are considering a combined heat and power scheme. In a new development a combined heat and power scheme is feasible. However, in an old established development, such as the city centre of Newcastle, the capital expenditure and disruption necessary to put in the services from the power station would be enormous. We are a long way from the first major combined heat and power scheme.

Mr. Rost

We have heard that argument before. It is used by those who wish to prevent the public from having an opportunity of much cheaper heat than has hitherto been available. The disruption caused by laying hot water pipes into a city is no more than the disruption caused when British Gas lays pipes to supply gas to houses. The hon. Gentleman has only to look to Europe to see how the consumer is benefiting from cheaper heating in homes because it is a by-product from the production of electricity. There is no question but that it is feasible and cost effective. This is one important premium use for gas which other countries have found to be the most valuable and cheapest form of using energy and providing heat for the consumer.

7.45 pm

British Gas was given a monopoly by Parliament and was, therefore, perfectly entitled to develop and exploit it. However, that has not been in the consumers' best interests because it has prevented the alternative development of even more efficient forms of heating, as have been developed on the Continent, through the combined production of heat and power. The Bill will allow the economic advantages of that form of energy use to become more self-evident. For that reason alone the Bill, when enacted, will be to the consumers' longer term advantage.

Mr. Harry Cowans (Newcastle upon Tyne, Central)

I listened to the argument of the hon. Member for Derbyshire, South-East (Mr. Rost) with great care. In my view, the entire Bill is nonsense. It does nothing for the gas and coal industries. Indeed, it seeks to destroy them both. The amendment's aim is to save the Government from themselves. Its purpose is to take the sting out of the Bill. The Opposition seek to maintain the gas and oil industries and not destroy them; the Government seemingly wish to destroy them both.

The hon. Member for Derbyshire, South-East spoke of other sources of supply but he neglected to identify them. I hope that he will enlighten the House when he has the opportunity to do so. Even if he gives a satisfactory answer, that will do nothing to enhance the clause.

When the Government took office they were pledged to energy conservation. The Bill will do exactly the reverse as it will allow all and sundry to squander our natural resources. We have throughout the world a premium of coal and gas and it will be nonsensical to allow it to be squandered.

The amendment's aim is to save the Government. If they had the common sense to accept it, common sense would appear in the Bill and common sense would be made out of nonsense. Even at this late stage, it is not unreasonable to ask the Government closely to consider the amendment and to accept it. Many who work in the coal and gas industries would welcome the Government's acceptance of the realities. It does not make sense to waste a natural resource. Surely it makes sense to garner and protect it. The amendment will enable us to do so, but the Bill as it stands will do the reverse. It allows all and sundry to take away that natural resource and squander it ad lib on whatever they want. The amendment seeks to alter that. If the Government had any sense they would accept it.

This Government want to squander the few natural resources that we have in our favour by giving them to private enterprise. That must be nonsense. It seems that at any time in the history of the country when coal and gas were under a central body responsible to the people to look after that resource, it made sure that it was not squandered ad lib. I have heard it said that if the amendment is not carried, and if the Bill goes through, we may have to import gas because of the squandering of this resource by private enterprise.

I speak in the hope of persuading the Government to see common sense but alas, in the absence of their leaping to their feet to say they accept the amendment, it seems that the people will be sold—

Mr. Robert C. Brown

My hon. Friend has had the hairy experience of serving on two Standing Committees at the same time over the past several weeks or months. With that experience behind him, has he any reason to suppose that he will have any more common sense from the Government now than he received in those Committees?

Mr. Cowans

I am grateful to my hon. Friend. He and I come from the same city and we have many things in common. I have to reply to that valuable intervention by saying that in the course of serving on a number of committees—he and I have walked on the Committee corridor at some late hours—our tragic experience appears to be that the Government are infected by dogma. Once their dogma is applied, any logical argument and common sense flies out of the window. The Government can hear common-sense, logical arguments but because they are so infected with dogma they cannot accept the realities of life. They came in by a democratic election—I fully accept that—to look after the interests of the country. Yet, very quickly, they are selling the country down the river.

If only, even at this late stage, the Government would have the sense to produce a rational energy policy whereby we sensibly husbanded our good resources and looked after them in the interests of the people, that would make a great deal of sense. The Bill as it is seems to be part of the dogma that because there is a nationalised concern—that takes care of gas and coal—we must get rid of it. In the interests of doing that, in the dogma that they have adopted across the board, it appears that the Government are prepared to get rid of this at any price.

The price that we shall have to pay—I hope that everybody outside the House is listening carefully—is that those resources that we have by inheritance—a natural field of gas close to our shores that should be used sparingly right across for the benefit of all, and the coal that is under the country that should be used for the benefit of the whole country—will be squandered on the altar of "profit only" and not for the best interests of the country. It seems that one would have to be a genius to be surrounded by gas and walking on coal and yet create a shortage of both so that only a few people can make a few shekels out of them. That is a very good reason why the amendment should be accepted by the Government.

The Under-Secretary of State for Energy (Mr. David Mellor)

I congratulate the hon. Member for West Lothian (Mr. Dalyell) on what is, I think, the first time that he has formally moved an amendment in these proceedings, although he was a very active member of the Committee. I wish that it were possible for me to go further towards his position than I fear I shall be able to do.

I would be wrong not to pay tribute at the beginning to the speech of my hon. Friend the Member for Derbyshire, South-East (Mr. Rost), who painted a wholly accurate picture of present-day gas. Such reality was sadly lacking in much of what we heard from the hon. Members for Newcastle upon Tyne, Central (Mr. Cowans) and for Newcastle upon Tyne, West (Mr. Brown). We do not have gas coming ashore more than the nation requires. All of it is fully contracted and there are many people who would like to use gas but are not able to obtain it.

I wish that the hon. Member for Newcastle upon Tyne, Central had been a member of the Committee that considered the Bill. I could perhaps have disabused him of one thing before now on the question of imports. He must know that more than 20 per cent. of our gas comes from Norway, and has done for most of the time that we have had North Sea gas. It is unreal to suggest that our prime concern must be to examine what gas we have and simply consider whether it is being properly used. We have to consider the way in which we are able to give some impetus for exploration for those gas resources in the North Sea which we hope will be found and brought ashore. That needs to be done in the best interests of our nation.

Before I turn to the more serious points raised by the hon. Member for West Lothian, I must say a word or two about the accusation of "guzzling". It does not sound right in their mouths for the Opposition to be talking about "guzzling", when they supported a policy, deliberately, and for the most squalid of party political reasons, of keeping down the price of domestic gas to 30 per cent. below what it was in real terms a decade before they left office.

The hon. Member for Newcastle upon Tyne, Central coupled that with a policy of conservation, but what is the incentive for anyone using domestic gas under that price regime to value the fuel and not to use it in some of those artificial coal-gas fires with 16 per cent. efficiency? What is the incentive for people to put in roof insulation with that kind of pricing?

It is irritating when one reads in the last Government's 1977 Energy Policy Review: The Price Code limits, being related to current costs based on cheap Southern Basin gas, have prevented prices from giving consumers signals reflecting the limited nature of this resource and the substantially higher cost of future gas supplies … Even at fully economic prices gas will still be highly competitive and the 'best buy' in the domestic market. The allegation against the Labour Government is not that they obviously did not understand the point that we have been trying to get across in the teeth of a particularly unattractive campaign against trying to bring some reality into the market. The only way in which we will get sensible use of what is still the best buy for the domestic consumer is by a measure of de-regulation of the price of domestic gas. In that way, people will have the incentive to do some of the things that the hon. Member for Newcastle upon Tyne, Central would like, but which I fear are a long way from the reality of what he was suggesting.

Having made clear, as I hope, our view of the problems in the present gas market—too many customers chasing too few supplies—what the Bill is about is providing an incentive for more exploration. Although we may wish to have an "Alice in Wonderland" position, companies will not go at enormous cost to some of the most difficult territory in the world to extract gas if they are asked to accept a price for it which is less than the cost of extracting it. Plainly, the market must be liberated so that those who extract the gas have the opportunity to sell and distribute it.

8 pm

When I hear some of the points made by Labour Members about premium fuel and guzzling, I fear that it is a thinly disguised attack on industry, because industry is not getting the gas that it needs at the moment. Anything that is seen as a defence of the present position could only be an attack on the legitimate requirements of industry to get the gas that it needs at a difficult time.

We are also concerned to establish an effective regime whereby, having introduced competition into the gas market, the gas can be brought properly and safely to the customers. That lies at the heart of the clause.

Mr. W. E. Garrett (Wallsend)

The Under-Secretary of State said that industry was short of gas. I said in Committee that I knew of no company that had been denied gas supplies, to the detriment of its production being maintained or extended. I have no knowledge of any company, that wishes to expand and create new jobs, that has been denied gas supplies. Will the Under-Secretary of State tonight tell the House about any company—whether major, medium or minor—that is experiencing such difficulties? In the regions supplied by the Northern Gas Board, no company has been denied supplies.

Mr. Mellor

I have the highest regard for the hon. Member for Wallsend (Mr. Garrett), but I cannot pretend that that is the most convincing observation that I have heard him make in the House. He should understand that there are many industries, businesses and combined heat and power schemes—which my hon. Friend the Member for Derbyshire, South-East mentioned—which would wish to obtain access to gas and which cannot do so either because there are no supplies or because the position is rationalised by the industry into the doctrine of premium and non-premium use, to which I wish to turn in my reply to the central points of the hon. Member for West Lothian.

As I know the hon. Member for West Lothian understands only too well, in clause 12 we wish to establish a three-tier arrangement. First, the British Gas Corporation will retain a monopoly of supply for premises within 25 yards of its mains and taking up to 25,000 therms a year. The second category includes enterprises other than the BGC which, with the Secretary of State's consent, may supply premises taking less than the required rate but, if those premises are within 25 yards of the BGC main, they must take more than 25,000 therms a year. If the House is so minded, the required rate will be changed by amendment tonight to 2 million therms rather than 1 million therms. The third and final category is where companies other than the BGC may supply premises taking more than the required rate without the Secretary of State's consent.

We have not tried to disguise why we decided on that arrangement. It has nothing to do with the premium use of fuel. The regime that my right hon. Friend proposes, as he made clear on Second Reading, is based on safety requirements. I know that the hon. Member for West Lothian understands that. My right hon. Friend said on Second Reading: In the case of those consumers whose premises take less than 1 million therms a year, the supply of gas will still be by the Secretary of State's consent. But I would envisage granting such consent in all cases where I was satisfied that the safety arrangements proposed were adequate."—[Official Report, 19 January 1982; Vol. 16, c. 173.] My right hon. Friend was making it clear that the reason for erecting this part of the structure was so that the Secretary of State should have the right to consider the proposals and to decide whether, in all the circumstances, he would be prepared to permit supply. However, in essence, my right hon. Friend is concerned about safety.

My right hon. Friend has made clear his view about the premium uses of fuel. It is difficult for some of us to see the argument about the premium use of gas as anything other than a rationalisation of the corporation's difficulties. At present it is unable to supply all the customers that wish to have gas and must therefore draw up plans whereby it can differentiate between customers. At the heart of what has been said on the Government Benches is the fact that for many of the differentiations in terms of the mystique of the premium use the emperor has no clothes.

We entirely agree that it is not proper to use gas for the wide-scale generation of electricity. Section 14 of the Energy Act 1976, which implements our obligations under EEC directives, precludes that. However, there are some combined power schemes—as my hon. Friend the Member for Derbyshire, South-East made clear—where gas is highly appropriate and where it would be wrong to introduce an argument about premium or non-premium use. One is dealing with a scheme that will lead to much greater efficiency in the overall use of fuel because one will get so much electricity and heat from it. It would be quite wrong for any mysterious device such as the premium use concept to preclude that happening.

Essentially, market and price will determine the question of premium use, which brings me to coal.

Mr. Merlyn Rees

I am a little worried about what the Under-Secretary of State is saying. During the past five to seven years, not only the British Gas Corporation has believed in what he calls the doctrine of depletion, as though it is a sort of papal bull about premium and non-premium uses. The hon. Gentleman is talking as if that will go. He says that there is no objective or logical division between the two, but that the British Gas Corporation has erected it. Because it does not have enough gas and the Morecambe field is not yet on stream, therefore the corporation erects dogma which prevents us from having a proper market-dominated system.

Is the Under-Secretary of State saying on behalf of the Government that the policy of premium and non-premium use—non-premium for steam raising and bulk heat raising—will be finished as a result of the Bill? He talked about a doctrine as though it were an erected dogma, whereas I understood that it was Government policy.

Mr. Mellor

The right hon. Gentleman is inviting me to subscribe to a more simplistic point of view than I would wish. I have already made it clear to him that we fully accept section 14 of the Energy Act 1976, which deals with steam raising. However, as well as that legal requirement, there is also the essential common sense point that very few people are likely to use gas for mass steam raising when coal is so much more economical.

As to other uses, when one talks about premium usage and getting the most out of our fuel, one must start with a sensible pricing structure. It lies at the heart of our domestic gas price policy and the deregulation that has taken place that we can now more credibly put forward insulation measures designed so that people can get more from their fuel, as against the present pricing regime when gas prices are artificially held down.

As my right hon. Friend said in Committee in a more robust and effective way than I am capable of doing, it is essentially for the market, through the relative pricings of various fuels, to decide a large part of the usage of fuels and the amount that will be consumed. However much one may try to hide behind the mystique of premium and non-premium use, on many occasions when BGC is not supplying, the probability is that it would not be able to supply even if it wanted to. There must be an element of suspicion of the kind voiced by my hon. Friend the Member for Derbyshire, South-East when we know that at the end of the day one is trying to get a pint of gas into a quart pot. There is no question of our going back on the use of gas in power stations. That remains the law.

It is perhaps appropriate at this point to deal with coal. It is at the heart of what the Government are saying that the market for gas, coal or any other form of energy ultimately hangs on its competitiveness. We are working to ensure the availability of all fuels on the keenest terms possible, consistent with the ability to maintain supply. We have maintained a solid commitment to the coal industry—I am glad that my hon. Friend the Under-Secretary of State for Energy, the Member for Croydon. Central (Mr. Moore), is present because no one has shown greater dedication to the coal industry than he and given it the opportunity to realise the benefits of productivity and efficiency that should accrue from the massive investment that the industry has undertaken.

We believe that the tripartite structure that I have suggested is the best way to ensure that private gas supplies go forward in a way that enables the Secretary of State, using the powers in the rest of the Bill, to have an appropriate safety regime, which on the one hand properly opens up the market with the minimum bureaucratic intervention and on the other gives everyone the protection to which they are fully entitled when dealing with a substance which, if mishandled, is dangerous.

As I told the Committee when I indicated to the hon. Member for Newcastle upon Tyne, West that we were minded to uprate the limit, the question that we had to consider when drafting the Bill was the proper dividing line between those cases where consent is to be required and those where it is not. Before the original dividing line of 1 million therms a year was set, we obtained provisional data from BGC about the quantities of gas supplied within various bands to individual premises and about the type of work carried out at those premises. It was in the light of that data, and for no other reason, that in our judgment a rate of supply of 1 million therms a year was the proper rate to insert in the Bill.

We then obtained further, more reliable data from BGC, which led to some different conclusions, and as a result we think it right to increase the level to 2 million therms. I hope that the House will accept the Government amendment in that regard.

8.15 pm
Mr. Dalyell

I welcome the last few sentences of the Minister's remarks, but perhaps I shall be forgiven if I try to interrogate him on some of the things that he said.

Was not the cat let out of the bag, because it seems that the whole concept of non-premium use has now gone out the proverbial window? It was never made that explicit in Committee. From now on, do we entertain the concept of non-premium use? That must be made explicit, because it seems to us that the concept of non-premium use has gone the way of the Dodo. If we are wrong, we should be told.

I return to the proper intervention of my hon. Friend the Member for Wallsend (Mr. Garrett) when the Minister was replying to my hon. Friends the Members for Newcastle upon Tyne, Central (Mr. Cowans) and Newcastle upon Tyne, West (Mr. Brown). Early in his speech, the Minister said that many people who use gas cannot obtain enough of it. Explicitly, in answer to my hon. Friend the Member for Wallsend, he then said that industry is not at present getting the gas it needs.

The information received by my hon. Friend the Member for Wallsend from his region in the North of England contradicts that, as does the information that I receive from Scotland. I gather that other of my hon. Friends have the same experience. Therefore, who are these folk who cannot obtain gas? They may exist, but we deserve clear examples.

I do not want to embarrass the Under-Secretary, but when we raised questions about Brush Electric we discovered that there were two sides of the coin. I am beginning to wonder whether this is another Brush Electric case.

I see a number of civil servants in the Box. They must have at their fingertips examples of those industries that want to obtain gas but cannot do so. We are asking for some examples.

I understand why the Secretary of State could not attend throughout our debate. I do not complain about that, because Sheik Yamani is not in London every day. However, the right hon. Gentleman and his hon. Friends might give careful consideration to my moderate opening speech. In the light of what has been said, perhaps the Government will return to the matter in the other place and do something to meet the points we have made. The Minister has not answered the issue upon which I dwelt at some length about providing an insurance policy in case things go wrong. This amendment creates something of a backstop, ensuring that all supplies are subject to the Secretary of State's consent. I thought the Secretary of State wanted that. It impinges in no way on the other provisions in the Bill and simply gives the Secretary of State powers, if necessary, to use them.

This amendment would be helpful to the Secretary of State if he were faced by the sort of emergency that none of us wants but which may occur. He clearly agreed in column 799 of the Standing Committee Official Report with my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands) that anybody who looked forward three months and made forecasts would be a fool. However, in crises this power may be useful. I see the Secretary of State frowning to his hon. Friends. However, he spelt out in some detail, in rather eloquent words, the reasons for the amendment we are putting forward.

Flaring is no substitute for a depletion policy. Do the Government think that, by implying several times in Committee that they are doing something about flaring, they are putting forward a depletion policy? I am not a great one for yah-boo politics. However, since the Secretary of State is doing me the courtesy of listening carefully, I shall read his words: It is entirely right and proper that the Government of the day, rather than some nationalised industry, should decide whether a depletion policy is in the national interest and, if so, what that policy should be."—[Official Report, Standing Committee E, 9 March 1982; c. 799]. That is precisely what we propose. On reflection of his remarks, the Secretary of State might want to accept the amendment.

Finally, I ask for comment on my remarks, which may be right or wrong, about the severe limitations of the powers of the Petroleum and Submarine Pipe-Lines Act 1975. That Act simply does not cover the use of onshore gas. At best, it is an imperfect instrument. All the Secretary of State can do is to control offshore development and, to a limited extent, production. There is a long time lag between decisions on development and gas coming on stream. Again, I ask that direct question about the Act and hope, after my hon. Friend's remarks, that the Minister, with the Secretary of State by his side, can give some answer.

Amendment negatived.

Amendment made: No. 8, in page 14, line 17, leave out `1,000,000' and insert '2,000,000'.—[Mr. Mellor.]

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