HC Deb 23 November 1987 vol 123 cc5-7
5. Mr. John Marshall

To ask the Secretary of State for Energy what information he has as to how comparable costs of electricity affect the competitiveness of British industry vis-à-vis other European Economic Community countries.

Mr. Parkinson

Electricity accounts for only a small fraction — less than 2 per cent, on average — of industries' total production costs. It therefore has a limited effect on most industries' competitiveness. Large industrial users, for whom electricity may comprise a greater than average share of total costs, pay electricity prices which are amongst the lowest in Europe.

Mr. Marshall

Does my right hon. Friend agree that for large users of electricity costs in the United Kingdom are lower than in any other major Community country? Is it not time that the CBI stopped whingeing about electricity prices and congratulated the Government on this happy state of affairs instead?

Mr. Parkinson

My hon. Friend has made a very strong point. Our electricity prices are extremely competitive, and both the industry and the electricity suppliers agree with that. They account for about 2 per cent, on average of our costs. Therefore, next year's increases affect one sixth of 1 per cent, of industry's costs. Of course, industry does not like rising costs, but it overstates its case.

Mr. Madden

Were not the dismay and the astonishment expressed by industry when the Secretary of State announced a monster increase in electricity prices for next year and an increase well above inflation for the year after a sign of the considerable difficulties that that will impose? Does he not recognise that industries, such as the textile industry, which use a very substantial amount of electricity, accept that that will be a substantial additional on-cost? That is a kick in the teeth for the British textile industry, which plays a major and important role in trying to reverse decline in a number of important regions in this country.

Mr. Parkinson

I repeat that, even after the increase, our prices will be extremely competitive compared with those of many other major countries. For instance, they will be about half those set by Japan, and nobody has complained that Japan is uncompetitive in its electricity prices. Nobody likes increases. I explained in my statement why they are necessary.

It might interest the hon. Gentleman to know that at a subsequent meeting with CBI representatives, following their initial reaction, they left my Department saying that they were reassured.

Mr. Hannam

Is it not a fact that under a Conservative Government electricity prices to industry once again became competitive with European countries? In the five and a half years of the Labour Government industrial electricity prices went up by over 116 per cent., whereas under the Conservative Government prices went up by only 56 per cent. Will my right hon. Friend reassure British industry that this will continue and that electricity costs will remain competitive?

Mr. Parkinson

My hon. Friend is incorrect in one small item. Electricity prices to industry went up by 56 per cent, in eight and a half years under this Government and by 116 per cent, in five and a half years under the Labour Government. The Labour Government's record was abysmal. Labour Members are the least qualified in the world to start shouting.

Mr. Matthew Taylor

Does the Minister accept that on the day that he announced increases in electricity costs for industry — to which industry reacted badly — the Chancellor of the Exchequer was downgrading his estimates of economic growth, which was cited as the reason why the industry would have to expand and the rates of return would have to increase? Is the Department now reviewing estimates of the need for those increases?

Mr. Parkinson

I realise that for members of the Liberal party 24 hours is a long time in politics. We are talking about an investment programme for the next 12 years. The events of one day do not change fundamentals, such as the capacity gap and the need for more capacity over the next 12 years. The hon. Gentleman will certainly not be here to be interested by then.

Mr. Moss

Can my right hon. Friend confirm that industrial electricity prices in this country are about half those in West Germany and substantially below those in the rest of the EEC?

Mr. Parkinson

Our prices are extremely competitive. I heard somebody on the radio comparing our prices with those in Belgium. He said that after the first increase they would be slightly higher than in Belgium. I wondered why he did not mention any other major country. The reason is that our prices will be lower than those in almost every other major country.

Mr. John Garrett

Is the Minister aware of a study by Price Waterhouse and the Electricty Council which shows that prices of electricity to industry will rise by more than 20 per cent, because the financial targets set by the Treasury do not take bulk discounts into account? Is that true, and is it a case of the Treasury putting one over on him? If so, what will be the effect on industrial costs?

Mr. Parkinson

The hon. Gentleman is mixing up a number of matters. The Price Waterhouse report was commissioned to study the make-up and the working of the bulk supply tariff under the last price regime. It had nothing to do with the price increases which I announced the other day. I have not seen a copy of that report. It has not been submitted to the Department, so I have no idea of its contents.