§ 9. Mr. Barronasked the Secretary of State for Energy what assessment he has made of the implications of the proposed privatisation of the electricity supply industry for British Coal contracts with that industry; and if he will make a statement.
§ Mr. ParkinsonThe taxpayer is funding a very substantial and continuing investment programme for the modernisation and development of British Coal. If properly utilised, that investment, which is currently £2 million per day, should result in British Coal being able to meet the demands of a privatised electricity supply industry efficiently and effectively.
§ Mr. BarronWill the Secretary of State recognise that the current joint understanding between British Coal and the CEGB has meant that about 60 million tonnes of coal are sold to the CEGB for a price that is cheaper than it costs to produce? Last year, in response to the massive shortfall in world oil prices, British Coal gave £300 million to the CEGB and gave further reductions in the remaining two years of the current contract. With regard to any break-up as a result of competitive generation, will the Secretary of State ensure that British Coal's case is heard, and heard well, so that it can win all the contracts to carry on its supply to the CEGB and to protect the mining communities of Britain?
§ Mr. ParkinsonI cannot bind the privatised industry to buy its coal from any particular supplier. If British Coal is a reliable, efficient and competitive supplier, I do not see any reason why industries should look elsewhere for their coal. The key is for British Coal to use its investment well, for management and unions to stop wasting time on useless working to rule and overtime bans and to get down to the business of developing modern working methods to use the modern machinery that is available. In that way, British Coal will have a future, but only in that way.
§ Mr. John MarshallDoes my right hon. Friend agree that the price of coal has a major impact on the price of electricity? Does he agree that if the electricity industry were to buy coal at world prices, instead of acting as a semi-captive customer of British Coal, the price of electricity for everyone in this country would fall significantly?
§ Mr. ParkinsonIt is clear that the CEGB pays a higher price for its coal than the most marginal world price, but that case can be overstated. If British Coal were to stop supplying, and if the CEGB were to go into the market for 70 million tonnes, the price would change. British Coal must realise that its future is dependent, not on any agreement with the electricity supply industry, but on its performance. If British Coal performs as I believe it can, it has a good future.
§ Mr. RogersFollowing the right hon. Gentleman's own logic, if he suggests that the coal industry should be shut down, will he urge his Cabinet colleagues to shut down every inefficient farm which results in consumers, 642 including coal miners, having to buy food at well over the right prices? That might stop the hypocritical cant from Conservative Members.
§ Mr. ParkinsonMay I make it clear that I do not want to close down the coal or agriculture industries. Both have a very bright future, but the future of the coal industry—to repeat myself—depends on its performance and not on any understandings between the CEGB and British Coal.
§ 10. Mr. Forthasked the Secretary of State for Energy what was the average cost of electricity generated in the United Kingdom compared with the average cost in France.
§ Mr. Peter MorrisonThe average cost of electricity generated in the United Kingdom in 1986–87 was 2.8p per unit sold. It is not possible to quote a directly comparable figure for France because of different accounting procedures.
§ Mr. ForthI thank my hon. Friend for his partial answer, but does he not agree that it is probable that the costs in France are lower because of the larger content of nuclear generation? What success has the British industry had in reducing its costs and improving its efficiency over the past few years?
§ Mr. MorrisonI am most grateful for my hon. Friend's complimentary remarks about my partial answer. He referred to the average costs of electricity generated. It is genuinely not possible, due to the different accounting procedures, to give a directly comparable figure. I can give my hon. Friend the standard tariff for domestic consumers. The cost in France is about 7.94p per unit, and in England and Wales about 6.3p per unit, which is cheaper. But, to qualify that remark, the French figure includes local taxes and VAT. As for productivity increases, I am delighted to say that in England and Wales the operating costs per unit have fallen some 10 per cent. since 1983–84. That is a major achievement, on which the industry needs to be congratulated.
§ Miss MowlamDoes the Minister accept that the average cost of electricity generated in the United Kingdom in the future will be affected by the proposed expansions at Hinkley Point? In view of that, will he tell us whether the public inquiry at Hinkley Point will take place before, or after, privatisation?
§ Mr. MorrisonI certainly would not accept the premise of the hon. Lady's question. As we work towards privatisation I would expect to see further productivity gains, as has happened in the past, and therefore generating costs being reduced rather than increased.
§ Mr. PrescottIs the Minister aware that Mr. Baker, the managing director of the CEGB, said in a speech at the CBI conference yesterday that the average price for the publicly owned electricity supply industry in France and Britain was 4.7p per kilowatt hour compared to the average price for the privately owned electricity supply industry in Japan and the United States of 9.6p per kilowatt hour. As this represents a doubling in the price of electricity and as the Secretary of State says that we must expect an increase in prices to deal with the rate of return under privatisation, is that the cost that consumers will pay for the privatisation of electricity?
§ Mr. MorrisonNo, Sir.