HC Deb 16 June 1986 vol 99 cc741-3
4. Mr. Douglas

asked the Secretary of State for Energy if he will make a statement on the effect of the current fall in oil prices on the demand for coal, with particular regard to the proportion of coal output taken by electricity boards.

Mr. Peter Walker

The current fall in oil prices is reflected in the successful discussions that the National Coal Board has completed with the CEGB. This agreement will enable the CEGB's coal demand to be maintained at its previously planned level and electricity consumers to benefit from lower prices.

Mr. Douglas

That was a reasonably interesting reply, but does the Secretary of State agree that we should be considering energy policy overall? Will he consult his colleague the Secretary of State for Scotland to see what effect the fall in oil prices is having on the coal burn in Scotland? Is he aware that if Torness comes on stream —I hope that the Government will review that in the light of the right hon. Gentleman's previous answer—it will imperil the jobs of about 2,000 miners and the coal industry in Scotland will be linked to just one power station, in the Longannet complex? Will the right hon. Gentleman take that consideration on board?

Mr. Walker

It is not Torness that is making the difference in Scotland, but the fact that there is a certain amount of oil firing where there are facilities for it. Talks are taking place between the National Coal Board and the South of Scotland Electricity Board and I hope that they will be successful.

Sir Trevor Skeet

Does my right hon. Friend agree that as the oil price goes right down to $10 per barrel it will be unreasonable not to take into account the customers' wish for electricity at the cheapest possible price. bearing in mind a certain responsibility to the coal industry?

Mr. Walker

Yes, but it is also right for the CEGB to take into account the fact that oil prices have been known to rise to $30 as well as to fall to $10. Rather than relying on the uncertainty of that market, when we have an important form of energy of our own, which one hopes will become more competative through improved productivity, I am sure that for the long-term assurance of supplies it was right for the CEGB to enter into that important five-year agreement.

Mr. Mason

The fall in oil prices has already cost the NCB an average of £3 a tonne in its recent contract with the CEGB. To what extent will that cause the NCB to fail in its financial objectives next year, and to what extent does the Secretary of State envisage more pit closures as a result?

Mr. Walker

Obviously, if an industry suddenly loses £300 million a year of revenue, that will put pressure on it. I expect that that will make it difficult for the NCB to fulfil its financial targets next year as envisaged on the basis of the previous ruling price. Obviously it will put further financial pressure on the NCB.

Mr. Rogers

Is the Secretary of State aware that as a result of the CEGB agreement cuts have already been announced in south Wales of about 10 per cent. in manpower and more than £20 million in revenue to that coalfield? Is he further aware that during the past year the south Wales coalfield has come back into a profitable position and is making money, yet suddenly the goal posts are changed again? Why does the Secretary of State not intervene so that we may have a planned energy policy, instead of continually lurching from crisis to crisis?

Mr. Walker

If we had a planned energy policy such as the hon. Gentleman envisages and our competitors throughout the world did not have similar plans, if we were not careful we could cause a great deal of unemployment and hardship. The last time we had a planned energy policy was under the Labour Government who came in in 1964, and every one of their plans was violated and broken.

Mr. Favell

Does my right hon. Friend agree that recent events have shown how right Sir Ian MacGregor has been to drive for viability during his period as chairman? Will he take an early opportunity to wish Sir Ian well and to congratulate him on his well-deserved honour?

Mr. Walker

Yes. As a result of the improved productivity figures, the heavy capital investment in that industry is at long last showing some return.

Mr. Eadie

Surely the Minister must be aware that the understanding—it is not an agreement or a contract—with the CEGB on coal burn will mean more job losses in the coalfields in England and Wales? Indeed, the Secretary of State practically admitted that in answer to my right hon. Friend the Member for Barnsley, Central (Mr. Mason). How many job losses will there be as a consequence of that? Can he explain to the House, when at present in Scotland the total coal production of some pits is going to stock, why the South of Scotland Electricity Board has never tried to have an agreement, a contract or an understanding signed before now? Is it because it is so busy trying to push ahead with the commissioning of Torness?

Mr. Walker

I am surprised at the hon. Gentleman not rejoicing in the fact that in spite of the immense attractiveness of the present oil price the CEGB has agreed to enter into an agreement with the NCB which will guarantee that 75 per cent. of the NCB's production continues to go to the CEGB for some years to come. I am surprised that there is not more rejoicing on the other side of the House about that.

Mr. Kennedy

How can it be consistent for the Secretary of State to argue in this context that he welcomes the fact that the market is responding dramatically to the falling oil price and he sees it as clear evidence of the changed conditions, yet at the same time to argue that the falling oil price has not brought any significant change in the market which would encourage the Government to begin to look favourably on the pledge about incremental investment which the Chancellor of the Exchequer gave in the Budget in March?

Mr. Walker

The Chancellor of the Exchequer made it clear that he was going to study the position of incremental investment. The majority of oil companies recognise that if we have a fluctuation in the oil price which started only a few months previously the Government will not immediately change the taxation system. If the price moves in the opposite direction, I doubt whether we shall hear many oil companies suggesting that the tax change quickly in the opposite direction.