§ 10. Norman Baker (Lewes)What recent assessment he has carried out to establish the correlation between the cost of oil supplies and the performance of the British economy. [92742]
§ The Chancellor of the Exchequer (Mr. Gordon Brown)In the last five years, Britain has had to cope with an oil price that has ranged from $10 to $35 per barrel. In these circumstances, and given the changing dollar exchange rates, it is all the more important for the growth of the British economy to hold to a disciplined monetary and fiscal policy. OPEC has said that it seeks an oil price of between $22 and $28 and, following the events in Venezuela, it has recently announced increases in its production target of 1.5 million barrels a day.
§ Norman BakerGiven the global increase in oil consumption, and the fact that the supply of this finite resource is set to peak and be exceeded by demand, which will inevitably lead to further price increases, and that oil is disproportionately found in the volatile middle east, is it not important to the long-term economy of this country that the Treasury should have a strategy to reduce our dependency on oil? What is that strategy? It is not working, because renewable energy generated only 3.1 per cent. of our electricity last year, compared with 3.3 per cent. the year before. We must reduce our dependency on oil. What are the Government doing about that?
§ Mr. BrownThe hon. Gentleman must wait for the energy paper, but I disagree with him: we have taken measures in successive Budgets to discourage dependence on one sole fuel. I also disagree with his first premise. The international community must act to increase oil supplies at this point, and that is why OPEC made its decision. The initial problem arose from Venezuela, which produces 3 million barrels of oil a day. Ninety per cent. of production has been withdrawn, and it is right to increase production.
429 Iraq is responsible for 2.4 million barrels of oil a day, 1.7 million of which are exported. It is also right for OPEC to ensure that its supply is established for the months to come.
§ Miss Anne Begg (Aberdeen, South)Does my right hon. Friend agree that, while low prices are tempting to motorists, who always want low oil and petrol prices, the British economy—particularly the economy in my area—depends on a relatively high price? If the oil price drops below $8 a barrel, production on the North sea continental shelf shuts down overnight. If the Exchequer is to secure its return from taxation of the oil industry, and if at the same time there is to be a viable oil industry in north-east Scotland and indeed throughout the United Kingdom, the price of oil must be about $20 a barrel, if not slightly more.
§ Mr. BrownMy hon. Friend, along with her fellow Members representing north-east Scotland, campaigns consistently for the oil industry and the contribution it makes to the British economy. We are still an oil exporter as a result of the wealth in the North sea. We want to encourage the future development of fields in the North sea, and we will continue to pursue a policy that gives the oil industry huge incentives to develop future fields and the new production that is available from the North sea. Obviously we must balance the need to keep the price low to help the growth of the domestic economy with our needs as an oil producer.
§ Mr. Henry Bellingham (North-West Norfolk)Did the Chancellor see yesterday's disastrous figures showing that the number of firms operating below capacity is at a 20-year low? Is that due to oil price increases, or does the Chancellor agree with the Confederation of British Industry, which says that it is almost entirely due to a huge increase in red tape and bureaucracy, which is stifling enterprise?
§ Mr. BrownI know it is the hon. Gentleman's policy and that of the shadow Chancellor to suggest that Britain is somehow in recession. The fact is that America has been in recession, Japan has been in recession and Germany has been in recession, while the British economy is growing. The hon. Gentleman should be congratulating us.