HC Deb 15 February 2001 vol 363 cc443-6
5. Mr. John Grogan (Selby)

What assessment he has made of the impact on manufacturing industry of the rise in the price of gas. [149004]

The Secretary of State for Trade and Industry (Mr. Stephen Byers)

The Government are very much aware of the impact that the rise has had on manufacturing. We are addressing that by pressing for greater liberalisation in Europe and working for improvements in the United Kingdom market. We shall also refer any evidence of anti-competitive behaviour to the appropriate competition authorities. I particularly welcome the Commission's announcement on 1 February that it has agreed to my request for a Commission competition inquiry into the operation of the interconnector.

Mr. Grogan

I thank my right hon. Friend for that reply. Given that the price of industrial gas has doubled in the past year, does he agree that there is a strong case for encouraging the Office of Fair Trading to take a look at the gas industry, especially as the interconnector, which is often blamed for the rise, accounts for less than 6 per cent. of total consumption by British industry?

Mr. Byers

The Government are doing three things. First, we are tying to make a reality of the single market in Europe with regard to energy. Secondly, we are trying to ensure that the UK market functions properly. One way to achieve that is by securing greater price transparency, and I hope that the industry will agree to that. Thirdly, to reinforce the point made by my hon. Friend, we have to ensure that competition works effectively. If there are examples of anti-competitive behaviour in the sector, we will move quickly and refer them to the relevant competition authorities.

Mr. Geoffrey Clifton-Brown (Cotswold)

The Secretary of State says that if the European Union is to mean anything, the single market must work properly. The fact that energy is not fully liberalised within the EU, but is generally liberalised within the UK, is putting us at a considerable competitive disadvantage. What is he doing to press the commissioner to complete his inquiry? Is it not wrong that a fully French-owned company should be able to take over London Electricity when British companies cannot take over French energy companies?

Mr. Byers

Eléctricité de France's takeover of London Electricity did not raise any competition concerns, but we do need to make a reality of the single market in energy. I agree with the hon. Gentleman that that is an important prize. We are pushing that agenda forward, have secured a commitment in Lisbon for a timetable on it and will raise that important item at the Stockholm Council in a couple of months.

There is no doubt chat we stand to gain enormously if we make a reality of the single market. At the moment, it is not acting in the interests of the UK, which is why the interconnector and the way in which it operates are particularly significant and why I am pleased that the Commission has agreed to open the inquiry to ensure that it is operating competitively.

Mr. Michael Clapham (Barnsley, West and Penistone)

Does my right hon. Friend agree that a major cause of the increase in gas prices is the fact that gas suppliers are pushing more gas down the interconnector to chase higher prices on the continent, which has pulled UK prices into line and squeezed our market? If he agrees with that analysis, does he also agree that it is time to consider putting more resources into the research and development of clean coal technology)?

Mr. Byers

I was waiting for that final question. My hon. Friend makes a good point, which I shall address. As for the reasons for the price increase, there is often a tie between the price of oil and the price of gas. Contracts, especially in continental Europe, are related to the two prices. As a result, when contracts were renegotiated last autumn, the very high oil prices at that time led to a significant spike in gas prices. That should not necessarily affect the United Kingdom, but the way in which the interconnector has operated gives cause for concern. As my hon. Friend said, UK gas now chases higher prices in continental Europe, even when demand in the UK is very strong.

If hon. Members have time, I invite them to consider how the interconnector operated on 15 January. When the market was tight in the UK and a good price was being paid, the interconnector suddenly switched from import mode to exporting. That is one of the issues that the Commission will investigate, because it appears that the operation of the interconnector is not truly competitive.

On my hon. Friend's final point, we are interested in considering clean coal technology. He will be aware that we are discussing with the sector how we can develop pilot projects in this area.

Mr. David Heathcoat-Amory (Wells)

Will the Secretary of State confirm that whole sale gas prices have doubled over the past year and that they will go up again from April as a result of the new energy tax? Will he also confirm that retail prices are starting to be affected? They are due to go up by nearly 5 per cent. shortly, with more rises in the pipeline. Why is the Department's only response to blame the increases on the interconnector and the lack of liberalisation in the European energy market? The Government say that they have much influence in Europe, so why have they done nothing about the problem for the past four years?

Why do we have a Secretary of State who does not know what the problem is? He will not do anything about it and he is simply reduced to the role of spectator while the damage is done. As a spectator, he makes a stopped clock—as mentioned by the Minister for Competitiveness—look like a positive model of energy, activity and accuracy.

Mr. Byers

That sounded very much like a Tory demand for renationalisation of the gas and electricity industries, and that may well be supported by some of my hon. Friends. The right hon. Gentleman clearly was not listening, but we must make sure that the market works effectively. He has considered the issues, so he will know that we inherited from the Conservative Administration a market that was not working effectively.

The right hon. Gentleman mentioned the figures for gas and electricity prices, so let us consider what we have been able to do. Industrial consumers pay 4 per cent. more for gas than they did in 1997, but they pay 12 per cent. less for electricity. According to the latest figures, domestic consumers pay 14 per cent. less for electricity and 12 per cent. less for gas. [interruption.]

Mr. Speaker

Order. When the right hon. Member for Wells (Mr. Heathcoat-Amory) asks a question, I expect him to allow an answer.

Mr. Byers

The difficulty, Mr. Speaker, is that the right hon. Gentleman does not like the facts getting in the way of his own prejudice. However, the facts for domestic customers are clear. The latest figures show that they pay 14 per cent. less for electricity and 12 per cent. less for gas. That is what we have done. The right hon. Gentleman needs to reflect on those figures. He asked what the Government had done, and I have told him what we have achieved—we have taken the prices down.