HC Deb 25 November 1987 vol 123 cc246-8
5. Mr. Wallace

To ask the Chancellor of the Duchy of Lancaster if he will make a statement on the effect of energy costs on industry's competitiveness.

Mr. Butcher

On average, energy costs account for 3 per cent. of industrial gross output. The impact of changes in energy costs on competitiveness depends on a variety of factors, including the movement of other costs.

Mr. Wallace

Does the Minister accept that, until the commission reports, the news on today's tapes that British Gas charges to industrial competitors have been referred to the Monopolies and Mergers Commission is welcome? Does he further accept that the recent announcement of increases in electricity charges is of considerable concern to industry as it will add £1 billion to its costs?

In future, will the Minister ensure that the priorities of industries have some bearing in these matters? When will the eight detailed questions asked by the director general of the Confederation of British Industry be answered?

Mr. Butcher

I share the hon. Gentleman's welcome for the referral announced at half-past 10 this morning. It is right that the Monopolies and Mergers Commission should consider the prices for contract gas supplies, and we look forward to its report. I am aware that energy costs are a controversial matter that is continuously focused upon, in particular by the manufacturing sector. Even after the proposed increases, our prices will be at the lower end of the range of world prices.

Mrs. Ann Winterton

Does my hon. Friend accept that the proposed increases in electricity charges will be a severe disadavantage to British manufacturing industry, especially the chemical industry? Does he realise that in recent years production has increased directly as energy prices have fallen in real terms? Does he further accept that if the increases are allowed to go through British industry will be placed at a disadvantage compared with its European competitors?

Mr. Butcher

My hon. Friend makes a valid point when she says that some industries, especially the intensive energy users, are significantly affected by movements in energy prices. But, in the generality, the proposed increase will account for no more than one sixth of 1per cent. of industry's costs, and prices for industrial consumers have fallen by more than 15 per cent. in real terms during the past five years.

To answer the second part of my hon. Friend's question, I am sure that she will be as pleased as I am that the qualifying industrial consumer scheme, introduced in October 1986, will continue to give intensive users a price reduction averaging 6 per cent.

Mr. Crowther

Does the Minister accept that to talk about generalities of 3 per cent. is no great consolation to the energy-intensive industries, such as steel, coal, aluminium and chemicals, in which energy costs may account for as much as 25 per cent. of production costs? What will the Department do to protect those industries from the enormous electricity price increases that will take effect from next April? Does he accept that Ministers have a responsibility to ensure that British manufacturers are not placed at a competitive disadvantage?

Mr. Butcher

The hon. Gentleman cannot have heard the second part of my answer to my hon. Friend the Member for Congleton (Mrs. Winterton). For the reasons that he cited, we are pleased that the qualifying industrial consumer scheme will continue to help those who have high energy-intensive production processes.

Mr. McLoughlin

My hon. Friend should not accept the Opposition's statements without reminding us of their record in government. Is it not a fact—[Interruption.]Labour Members do not like it. Is it not fact that, under the Labour Government, electricity prices increased by 112 per cent.? Yet they are complaining about a 3 per cent. increase. Is it not a fact that gas prices increased by 28 per cent. in real terms, yet they have the gall to criticise the Government for increasing prices only modestly?

Mr. Butcher

My hon. Friend speaks with the directness and candour of an ex-miner, and I welcome his comments. His figures are correct. Under the Labour Administration the price increases were almost exactly twice as high as they have been under this Administration.

Mr. Blair

Instead of standing there and supporting the attempt by his colleagues in other Departments to get industry and the consumer to bear the cost of saving the Government's face on their privatisation programme, which is what this is about — the country knows that, even if Conservative Members do not — why will the Minister and his colleagues not fight for British industry in the Cabinet instead of selling it down the river?

Mr. Butcher

For many years we have been defending the interests of the British manufacturing sector, to the extent that our industries are better placed than their international competitors. My right hon. Friend the Secretary of State for Energy has introduced policies that will ensure that the Conservative Administration in the year 2000 will be presiding over an economy that is still underpinned by a cost-effective and efficient energy industry.