§ 3.25 p.m.
§ Lord LOVELL-DAVIS
My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
§ Moved, that the House do now resolve itself into Committee—(Lord Lovell-Davis.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The EARL OF LISTOWEL in the Chair.]
§ Clause 1 [General control by order]:
§ On Question, Whether Clause 1 shall stand part of the Bill?
§ Lord STRATHCONA and MOUNT ROYAL
I think it may be for the convenience of the Committee if I make one or two observations on the Question, Whether Clause 1 shall stand part of the Bill? We shall start off this afternoon by appearing to go rather slowly with this Bill. I should like to assure the Government that it is not our intention to obstruct the passing of the Bill as such. It is a fairly objectionable measure, but we expect that we shall have to grind our way through it on the next three sitting days with a view to getting the Committee stage behind us before adjourning for Easter.
The way in which the Bill is laid out makes this debate rather difficult. The concept underlying the first three clauses 1796 is intended to achieve three things. There are the powers to deal with an international emergency and with a domestic crisis; and there are permanent powers for the promotion of what is called energy conservation, as distinct from other forms of conservation. As I read it, one has to go to Clause 3 in order to give full effect to Clause 1, and the way in which the Bill is drafted, certainly from my standpoint, seems thoroughly confusing.
In the course of moving our Amendments there will be various threads running through the arguments. One of these will be that the powers for which the Government are asking in this Bill considerably exceed those they require to honour their international obligations. We shall seek to limit the powers to those which are really needed. If, indeed, the Government require some of the powers for which they contend, we believe it would be better if they produced separate clauses setting out quite clearly what powers are needed and, in the course of debate, justified the taking of those powers.
Clause 1 sets out the purposes for which an Order can be made by the Secretary of State. Again, subject to various equivocations, I think it is fair to say that these powers are subject to Negative Resolution procedure by Parliament—which in any case is a fairly weak power. Under Clause 15 there is one area which is identified as being subject to a Negative Resolution by Parliament. The wording used in the first three clauses is similar to that in the Fuel and Electricity (Control) Act 1973, which was brought in by the Conservative Government at the time of the major energy crisis.
The first point I want to make is that Clause 1 of this Bill includes natural gas, which was not included in the 1973 Act and is not included by the EEC in the regulations in regard to which the Government are seeking these powers. These powers create some consternation in the hearts of the Gas Corporation. They feel that they give the Secretary of State power to disrupt the Corporation's marketing strategy, with possibly disastrous effects on their financial results, which could go so far as to bring the whole gas industry into disarray.
When the 1973 Act was introduced, the then Secretary of State, Peter Walker, 1797 expressed what we consider a very proper sentiment. He regretted asking for such wide-ranging powers, and said he felt that both sides of the House would naturally wish that most of the powers suggested would never be implemented or acted upon. We hope that this afternoon the Minister may be able to set a good tone at the start of these proceedings by making a similar declaration himself, although I realise that in suggesting that I may be crying for the moon. Nevertheless, I think I should ask him whether he can go along with that sentiment, although I expect that part of his argument will be to say, "All we are doing is making the emergency powers in the 1973 Act, which have to be renewed every year, into a more permanent arrangement which will not have to take up Parliamentary time year by year." I shall be interested to hear what the Minister has to say on this point.
§ 3.32 p.m.
§ Lord LOVELL-DAVIS
I hope that we shall be able to move much more quickly through the Committee stage than the noble Lord, Lord Strathcona and Mount Royal, seems to expect. I do not want to go into great detail at this stage, but I accept that he has no basic objection to Clause 1, in spite of what he has said. He is perfectly right in saying that we need powers to honour our international obligations, but I cannot agree with him at all that the powers are in any way excessive. Although the Bill is not very complicated, it is not absolutely straightforward and immediately clear. But I believe that its construction and the necessity for the powers contained in it will become apparent.
As the noble Lord has said, many aspects of the Bill are very similar to the Fuel and Electricity (Control) Act 1973. One reason for embodying sections of that Act is to ensure that we have the powers we need, first, to honour our international obligations to the IEA and the EEC; and, secondly, to implement a proper energy conservation policy. In querying the necessity for these powers to honour our international obligations, the noble Lord said that the 1973 Act did not include natural gas. I should like to correct him there, because Section 1(1) of that Act covers petroleum, which was defined as it was defined in the Petroleum (Production) Act 1934, so it there- 1798 fore includes natural gas. The noble Lord also said that the provisions covering gas are designed to bring the British Gas Corporation's affairs into disarray. Nothing could be further from the truth, and I am surprised that he should make a statement of that kind. I have stated precisely why we are introducing this Bill, and what the noble Lord suggested is far and away from our intention. The purpose of this Bill is to enable us to deal with a situation where we might be put into disarray by an energy crisis.
I share the noble Lord's views about the use of the powers in an emergency, and I hope we shall never face such an emergency as would necessitate our implementing all of them. Nevertheless, as he has reminded us, when the Party of which the noble Lord is a member was in Government in 1973–74, we walked into an emergency which resulted in the Act, parts of which are incorporated in the Bill before your Lordships this afternoon. As regards the use of the powers for energy conservation, which is an extremely vital matter, I shall have more to say as we proceed through the Committee stage.
§ The Earl of LAUDERDALE
Before the noble Lord sits down, may I come back to his point about the legislation passed by the Government of the day which was formed from this Party? If I understood him aright, he was citing the Act which established our adhesion to the European Community. If that is the case, does he not overlook the fact that all the powers in Section 2(2) of that Act were subject to the Negative Resolution procedure? Furthermore, having told the House that he thought it was not fair or reasonable to suggest that the Government are now taking excessive powers, he is surely overlooking the fact that under Clause 15(1),Orders under this Act shall…(except in the case of Orders in Council under section 3…) be subject to annulment…".and so on. Does he not appreciate that we are apprehensive that these powers, needed in the first place for executing Treaty obligations, might conceivably be used for other purposes as well? So will he not recognise that there is serious anxiety here? While not wishing to raise the temperature of the debate, I put that to him as nicely as possible.
§ Lord LOVELL-DAVIS
The fact of the matter is that we are not anticipating going into the details of clauses at this stage. However, I will reply to that point. The powers under Clause 3(1) are specifically for honouring our international obligations to the IEA and the EEC, as the noble Earl is aware. Paragraph (b) covers emergency powers to deal with a domestic emergency, and Clauses 1 and 2 are affected by Clause 3(1) only in terms of an emergency under the conditions I have described. There are certain powers covering use which are brought in by subsection (2) of Clause 3, and which are largely concerned with such matters as energy conservation. However, at this stage I do not think I should go any further into the Bill. I should prefer to wait until the Amendments come up in turn, when I have no doubt that the noble Earl will intervene again.
§ Lord STRATHCONA and MOUNT ROYAL
I must remind the noble Lord that this is the Committee stage of the Bill, because at one point he suggested that we should wait until we reached the Committee stage. I must take him up on one word. I never suggested that these clauses had been designed to mess up the gas industry. Even on the most contentious political argument, one would not go so far as that. What I did say was that the Government would have a power which could conceivably lead to that in certain circumstances. May I remind the noble Lord again that, when these powers were originally taken, the then Secretary of State went to a considerable amount of trouble to explain the limitations which he saw in exercising them. So may I ask the noble Lord to assure the Committee, particularly so far as the gas industry is concerned, that the very least that will happen is that the Government will consult with the industry before they exercise any powers under Clause 1?
§ Lord LOVELL-DAVIS
I do not think that I can give such an undertaking to the noble Lord. It depends exactly on the nature of the emergency. In emergencies such as an oil emergency which would affect our obligations under the terms of the IEA and the EEC, we should have to act quickly and would not have time to consult. Similarly, we might have to act in precisely the same way in the 1800 case of a domestic emergency, and we are taking emergency powers for that purpose. We shall come shortly to the time when these powers will be put into effect. I cannot give any undertaking to the noble Lord that in all the circumstances we shall, in fact, have prior consultation.
§ Clause 1 agreed to.
§ Clause 2 [Reserve power to control by government directions]:
§ 3.41 p.m.
Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 1:
Page 2 leave out line 23.
§ The noble Lord said: With the leave of the Committee I shall speak to the first three Amendments together, since they are all aimed at sounding out the Government on a similar principle, or asking the Government to agree with us in asserting a similar principle. These are probing Amendments. Even if they were accepted, they do not deal wholly with the problem which is worrying us. If we wanted to be really satisfied, the whole of Clause 2(1) would need to be redrafted. All of the directions in this clause are exceedingly vague, and to make them satisfactory they ought to be a great deal more specific. What we have sought to do, therefore, is to introduce certain limitations.
§ The object of Clause 2 is to cover the purposes for which the Secretary of State may give directions when an emergency has been declared and when he is making and laying before Parliament the requisite Orders in Council. Unlike orders under Clause 1, these orders are not subject to Parliamentary scrutiny, with the possible exception of Clause 15(5) which conceivably introduces the Negative Resolution Procedure—although, like so many other parts of the Bill, I find that it is rather difficult to understand what is meant by that clause to which we shall come in due course.
§ Clause 2 appears to set out the type of people to whom a direction may be given; that is, a producer regarding production and use, a supplier as regards supply and a user as regards use. Subsection (2) gives examples of the type of directions which may be given. However, subsection (2)(a) is very general but it is confined to the production and disposal of stocks, both the substances themselves and the use of any material for 1801 the production of those substances. Subsection (2)(b) deals with supply. We have suggested two Amendments here, simply to narrow the favourite trick of the Parliamentary draftsman which runs all through this Bill which virtually says, "This gives me any powers which I did not think I might need". Indeed, as I see it, the way in which this Bill has been phrased is to get away from the possibility of something not having been thought of that may be needed later. Inevitably, anybody who is interested in the Parliamentary process is bound to pause if the Government are taking the power to say, "We have got all the powers we need except for a few which we are prepared not to take".
§ I understand why this is done. It is so that the Government do not find themselves without powers which they think they may want but which they forgot to take. However, I should prefer time to have been taken in which to think about exactly what powers are needed. If we are to give Governments a great deal of power to which we object in principle, we should like to know what those powers are and to be sure that there is Parliamentary control of those powers.
§ Therefore, in these Amendments we have attempted to narrow the field to a certain extent. If we look at the words "to specified persons" in line 29, we find that if we do not have these words the Secretary of State could specify the prices of products but not the persons to whom the products are to be supplied. This would lead to confusion and argument with the person being supplied as to whether or not the specified prices apply to him. This is the reason why we have put down this Amendment. At this point, perhaps I ought to allow the Minister to tell us how he reacts to the suggestions we are making. Then we shall see how we ought to proceed thereafter.
§ Lord LOVELL-DAVIS
First, may I remind noble Lords that the power to give directions under Clause 2 is exercisable only during an energy emergency when an Order in Council is in force under Clause 3(1) of the Bill. If I may deal with the first Amendment standing in the name of the noble Lord, I am sure that noble Lords will agree that in such emergencies the Government should have available powers to ensure that 1802 energy resources are supplied in a way which will best serve the national interest. If this Amendment were to be made, it might cast doubt on the power to give directions prohibiting or restricting the supply to all persons other than those specified. The Government need to have the power to give directions imposing general prohibitions or restrictions on supply, subject to specified exceptions. I think that this is the important aspect of this Amendment and the reason why I shall ask the Committee to reject it.
So far as the second Amendment is concerned, as I have said these are emergency powers. In an emergency, the Government will require the power to specify prices in directions concerning the supply of petroleum-related substances in order to be able to fulfil their obligations under the Agreement on the International Energy Program. Article 10 of the Agreement requires participating countries to ensure that the price charged for oil allocated under the IEP emergency sharing scheme is based on the conditions prevailing for comparable commercial transactions. All directions given for the purpose would specify the person to be supplied. It is not our intention to use the power to specify prices except in a direction of this kind.
In this case, therefore, I am able to accept the Amendment in principle and am prepared to reconsider the wording of this provision. I hope that answer will satisfy the noble Lord in respect of his second Amendment. In the case of his first Amendment, however, I am afraid that I must ask the Committee to reject it.
§ Lord STRATHCONA and MOUNT ROYAL
I am not quite sure whether we are in a procedural difficulty. The noble Lord has not referred to the third Amendment. I thought that I was speaking to the first three Amendments at the same time.
§ Lord LOVELL-DAVIS
I apologise to the noble Lord and will certainly deal with Amendment No. 3. I thought that the noble Lord was asking me whether I would deal first with Amendments Nos. 1 and 2. So far as Amendment No. 3 is concerned, it would permit the giving of directions prohibiting or restricting the use of energy resources only if the Government were able to specify the purposes 1803 or periods for which the prohibition or restriction was to apply. We feel that this would inhibit the Government's efforts to ensure the best use of available energy resources during an energy emergency, and while I appreciate the concern underlying the Amendment, and I will undertake to consider whether the drafting can be made more positive, I ask the Committee to reject this Amendment as well.
§ Lord WYNNE-JONES
Does not some of the difficulty which arises in regard to this Bill come from two facts: one—and this is where I would agree with the noble Lord, Lord Strathcona and Mount Royal—that at times the drafting is very difficult to follow, and in addition the Bill would seem to carry a misleading title. It is called an "Energy Bill"; it is really a Bill which deals with exceptional circumstances and crises which can arise and under which we may get instructions coming from the EEC or from the International Energy Agency requesting that, as we are members, we should do certain things. During the Second Reading debate I pointed out that there might be some contradiction between the requirements coming from these different bodies.
If it is agreed that such a Bill is needed it has to be left for the Government in those times of emergency which would be decided upon, to take action which would ensure that the requirements of the agencies were carried out.
§ Lord LOVELL-DAVIS
I am grateful to my noble friend for his intervention. I hope—and indeed this is the purpose of the Committee stage—that wherever the drafting of the Bill requires clarification we shall be able to provide just that. With regard to the Title of the Bill, I agree that it covers emergencies but I must also point out that it is very much related to the essential need for energy conservation, and it is in terms of energy conservation as well as the emergencies that I think the title "Energy Bill" is not a bad one.
§ Lord STRATHCONA and MOUNT ROYAL
I am grateful for the intervention of the noble Lord, Lord Wynne-Jones, because he has in fact put his 1804 finger on one of the problems with which we are faced in this Bill. At Second Reading I suggested that it was something of a rag-bag of a Bill, which the noble Lord, Lord Lovell-Davis, predictably did not altogether accept. What he says about some of the provisions in this Bill is perfectly true; they are trying to deal with emergencies. But one of the problems with the Bill is that in the process of trying to deal with some of the emergency legislation the opportunity has been taken by the Government to include a number of other things which are not of an emergency nature. Without wishing to sound provocative, in some cases one suspects that there is a certain amount of opportunism here, where the Government have taken the opportunity to introduce powers which they might like to have, masquerading under the need for these powers to honour international obligations. That is one of the things that we object to.
Dealing now with the answer given by the noble Lord, Lord Lovell-Davis, to the three Amendments with which we are dealing, at this juncture we are clearly not going to press these Amendments, and indeed it would be positively churlish of me if I did not accept the Government's offer, particularly in connection with Amendment No. 2, which I think the noble Lord said he was prepared to consider.
In regard to Amendment No. 3, the noble Lord has gone quite a long way by saying that he will look at the drafting again. I should like to remind him when we use the word "purposes", that I believe in his Second Reading speech the noble Lord said that the Government were quite clear on the purposes for which they required these powers. Part of our case, which will crop up in a moment and several times in the Bill, is that if the Government are clear about the purposes for which they need some of these powers, would it not be in the interests of Parliament to state these purposes in the Bill? We are rather nervous about giving Governments blanket powers, and I think it is a good, healthy Parliamentary attitude to continue to maintain that stand. However, having said that, I beg leave to withdraw Amendment No. 1.
§ Amendment, by leave, withdrawn
§ On Question, Whether Clause 2 shall stand part of the Bill?1805
§ 3.55 p.m.
§ Lord STRATHCONA and MOUNT ROYAL
I wish to make one point in connection with Clause 2. There is a curious thread running through this clause; namely, the inclusion of electricty for all purposes except price control. Why is electricity being treated differently? Is the answer that electricity is a nationalised industry and therefore the Government feel that they already have a price control over a nationalised industry? If it is, does this not give one certain procedural qualms about the relationship between the Government and the nationalised industry? Are the Government saying, in effect: "Well, what we do is to have a quiet word with the chairman of our nationalised industry and tell him what we want, and he is liable to accede to our request"? If they are saying that, it seems to me to raise, in our minds, anyway, one of the major reservations that we all have about the way in which the nationalised industries work.
We would always prefer to see an overt instruction if the Government feel it necessary to give it; but the concept of the rather comfortable relationship about having a word in the ear of the nationalised industry and getting them to do something which the Government want but which is not necessarily in the interests of the industry, I find rather objectionable in principle. Therefore I ask the noble Lord, as I did also during the Second Reading debate, whether he can explain why the Government are treating electricity in rather a different way from other forms of energy.
§ Lord DAVIES of LEEK
I am not clear on this, either. I thought subsection (4) also applied in relation to electricity and, looking at the Report of the Department of Energy Advisory Council to the Secretary of State for Energy on energy conservation, it seems to me that one of the direct purposes of this Bill, without any ulterior motive, is simply to serve the terms of reference of Paper 3 of the Advisory Council on Energy Conservation, which points out that, in addition, the Secretary of State has:To identify areas where existing knowledge and techniques could be applied to achieve quick results in energy conservation to identify where immediate action would produce a gradual but cumulative saving of resources,1806 and finally,to explore the whole area of research and development in the long term interests of this and future generations.I consider that the whole gamut of energy is covered by that sentence and I see no ulterior motive in the purpose of my noble friend when he presents the Bill in this form. Whereas I may attack the semantics of the drafting in some cases, I see no ulterior motive on the part of my noble friend.
§ Lord WYNNE-JONES
With regard to the question which has just been raised by the noble Lord, Lord Strathcona and Mount Royal, surely the point is fairly clear. Electricity is not a fuel. The others are all fuels, but electricity is in a different category. Electricial energy is something that is produced from the others; it is not something which to any large extent is sold across national borders. In other words, it is produced in this country from the purely primary fuels. Therefore the price of energy is not something which is significant or important in the control. The control really depends upon how much fuel gets into the power station; whereas when one is dealing with oil, with gas, with coal or any primary fuel, then it is the quantity of this fuel which is imported or used in any way which becomes all-important. It ought to be clear that the two are totally different. Unfortunately, we sometimes use the word "energy" as a blanket term to cover the lot. The fuels should not be called energy. The electricity is energy.
§ Lord ROBBINS
Is not part of the difficulty the fact that this Bill is concerned with two rather distinct questions: the situation which may arise in an emergency, and of the long-term conservation of resources of energy? No person of good sense will question that emergencies may arise, and that there may arise questions of long-term policy concerned with the conservation of energy. But I see throughout this Bill a certain blurring, so to speak, of purpose. It is not certain whether the powers are taken to meet a sudden emergency or whether they are taken in the interests of long-term policy. I think that it would conduce greatly to the clarity of discussion if "emergency" were somehow or other defined, in such a way as exception may be taken to 1807 regulations concerning particular emergencies, and that question reasonably segregated from questions of long-term policy, which concerns us all, in regard to general conservation.
§ The Earl of KINTORE
I should be happy if "emergency" could be defined. Are we talking only of a national emergency, or are we talking of what might be equally important, a plant emergency? The North Sea gas at the moment is about to come ashore at St. Fergus, where they have a plant for separating the natural gas liquids in total before methane is put into the pipeline the natural gas liquids are to be piped somewhere else, possibly Peterhead. Part of the secondary separation is producing ethane, which is supposed to be going to be used as a fuel for fuelling Boddam Power Station. This is a continuous process. Supposing, for one reason or another, Boddam cannot take fuel, and it has to be piped back to St. Fergus and it is then used for heat requirements at the original plant. Are we talking about those kinds of emergencies? Are they covered as well, or not? If they are covered as well we can get into frightful difficulties. If they are not, then it matters not.
§ Lord LOVELL-DAVIS
For a start, as the noble Lord, Lord Strathcona and Mount Royal, said, electricity is excluded from price control. The situation is exactly the same as that which applied under the Fuel and Electricity (Control) Act 1973. There is absolutely nothing sinister at all in this so far as the nationalised industries are concerned. I am rather surprised that the noble Lord raised the matter. Ministers have frequent consultations with the Electricity Boards on prices, and the Government's views are made known. There is nothing sinister in it at all. The main reason why electricity is listed separately is, as my noble friend Lord Wynne-Jones said, that it is not a substance. The important thing is to control the primary fuels. That is what we are doing. I am grateful to my noble friend Lord Davies of Leek for his helpful intervention in this matter.
In reply to the noble Lord, Lord Robbins, I do not think there is a great blurring of purpose here. I think the emergency requirements are clearly defined as distinct from the conservation needs. The 1808 Bill makes quite clear the terms under which powers can be exercised in an emergency and the powers which can be taken in the much longer term for continuing energy conservation, something to which we and other countries are committed, and, as we are doing here today, taking into account in our legislation.
With regard to the points made by the noble Earl, Lord Kintore, I am afraid they are fairly technical and, I am sorry to say, I did not exactly follow him. I am wondering whether the points he raised would be more adequately covered when we come to Clauses 8 to 12, which specifically cover gas. If he feels he could leave the question until then, I should be very happy to answer him. I would be a little put to it to say whether or not the situation he was describing would in fact constitute an emergency, because I did not entirely follow him. It is my fault entirely.
§ Clause 2 agreed to.
§ Clause 3 [Implementation of reserve powers]:
§ 4.6 p.m.
Lord STRATHCONA and MOUNT ROYAL had given Notice of his intention to move Amendment No. 4:
Page 2, line 39, at beginning insert ("Subject to subsection (7) below,")
§ The noble Lord said: This is a paving Amendment for Amendment No. 12, which is in itself a probing Amendment. I think it would be better if we left discussion of this until we get to No. 12, and therefore I do not move this Amendment.
§ 4.7 p.m.
§ Viscount LONG moved Amendment No. 5:
Page 2, line 39, leave out from ("Council") to end of line 6 on page 3 and insert ("provide for the powers of sections 1 and 2 above to be exercisable—
§ The noble Viscount said: I beg to move Amendment No. 5. This is the crux of the first two clauses, which provide for the implementing of powers. In the existing wording of the clause I find a total lack of precision. Therefore, the purpose of this Amendment is to define as precisely as possible the circumstances in which the emergency powers can be activated.
§ Clause 3(1) describes the conditions in which an Order in Council may be made activating all the powers of the Secretary of State to make an order under Clause 1, and indeed give directions under Clause 2. It is, therefore, of vital importance at this stage of the Bill to ensure that the powers can be exercised only in a formally declared international emergency, in a genuine international emergency, or a general domestic supply crisis. If I may say so, there cannot possibly be any activating of these powers for any other purpose. Therefore, I feel it is necessary to redraft the clause to make the wording stronger. This would probably help the Secretary of State in an emergency. I can imagine him looking at Clause 3(1), paragraphs (a) and (b), in an emergency, sitting on the fence and strumming at his guitar, trying to conjure up a magic word strong enough to bring into action the powers to meet the emergency.
§ I feel that the procedure envisaged by Clause 3(1) in the Bill is that an Order in Council merely declares the powers in Clauses 1 and 2 to be exercisable because they are required for circumstances outlined in paragraphs (a) and (b). Therefore, in an emergency a much stronger word is needed, and the word "provide" seems to us to be the stronger word, implying that an Order in Council would be required actually to state the specific purposes either in Clause 3(1)(a) or (b) for which powers were being given to the Secretary of State, and if carrying out or exercising these powers he went beyond the terms of the Order in Council his action could well be challenged in the courts.
§ In this Amendment, turning to page 2, line 40, we feel that, by leaving out "to their fullest extent", it could imply that the powers could be exercised to less than the full extent, but also looking at subsections (1) and (2) to the rest of Clause 3, it indicates to us that the powers 1810 could, or would, be less than fully utilised. Therefore, these words could be unnecessary. Moreover, if one accepts that these powers should be used only in an international emergency or a real domestic crisis—and that could be a disaster on an oil rig or oil platform, or a major strike—then they shall be exercised to the full. I think the omission of these words removes an area of doubt, especially if a situation can be envisaged in which an Order in Council could be made under Clause 3(1)(b) for a situation less than the real domestic supply crisis which I have already outlined. If it does happen, we need the best words so that the Secretary of State can move in fast, as I have already said.
§ Turning again to page 2, lines 41 and 42, I think that the reason for leaving out, "because…they are required for", and inserting, "solely for the purpose of", and adding, "for the duration of an emergency formally declared by any of these bodies", is because they are needed to fulfil the United Kingdom's obligations as a member of the IEA and the EEC. Of course we accept this, but under the IEA and EEC requirements such powers are needed only during an emergency. The drafting of Clause 3(1)(a) in the Bill apears to contain no reference to an emergency, so by placing the word "solely" in the Bill it should make the emergency situation as clear as possible.
§ In moving this Amendment, I shall be interested to hear what the noble Lord, Lord Lovell-Davis, has to say, and any other of my noble friends. Without defining and getting the words completely clear, an emergency could go on for any length of time while the Minister tried to find ways and means of dealing with it, and we must have a word that is exact. I think that what we are trying to define will help the Secretary of State.
§ 4.14 p.m.
§ The Earl of LAUDERDALE
In the peaceful endeavour to assist noble Lords opposite and the Secretary of State, I should like to support what has just been said from my own Front Bench—in itself an unusual exercise for me. First, in this debate the noble Lord, Lord Lovell-Davis, has repudiated any idea of his or his friends seeking excessive powers. He was quite clear about that in his reply to the debate on, Whether Clause I shall 1811 stand part. Of course we take him at his word, as I, at any rate, always do.
This debate is taking place in a week which is historically and constitutionally interesting, because in another part of this building there has been a Budget proposed to tax the people without their representation—or, equally, to relieve them of taxation without their representation. Of course that very coincidence this week makes one rather more curious and careful in one's endeavour to assist the Government to get the powers they need, whether or not those are coterminus with the powers that they actually want.
In this Amendment I should like to draw the noble Lord's attention to two words. The first is in the Amendment in paragraph (a), the word "solely". The noble Lord may say that that is superfluous, but we are trying to assist him and his Government, and his Secretary of State, by getting absolutely clear and exact the circumstances in which these powers would be used. Although he might say that "solely" is unnecessary, I thought that perhaps this week it is rather a useful addition and helps to make it more precise.
Then the noble Lord will notice that at the end of the proposed paragraph (a) we have,for the duration of an emergency formally declared by any of these bodies…In other words, in the exercise of the Government's obligations under these agreements it is left not to the Government to decide whether there is an emergency, but to the agencies and international bodies concerned to say whether or not there is an emergency. Surely, these two precisions can only be welcomed by a Government who do not seek excessive powers, who do not wish to steamroller the House, who are democratic, and will perhaps submit themselves very soon to the judgment of the people, and who therefore are acting with the best possible motives.
We are trying simply to help the noble Lord, and help him help his Secretary of State, to get the most exact circumstances in which these powers can be exercised. I am sure that he will accept our Amendment in the spirit in which it is intended. The drafting may be unsatisfactory, but the purpose is quite clear. I 1812 can only believe that it will be most welcome to the noble Lord and, I might almost say, my noble friend opposite, because I was accustomed to calling his predecessor "my noble friend", and I hope that we shall be the same.
§ Lord WYNNE-JONES
The noble Earl, Lord Lauderdale, is extremely adept at his friendliness and we all recognise that. Indeed, I join with him in his unusually amicable approach to the whole position. It seems that we are dealing with a situation in which we are trying to find the right form of words, but of course—and the noble Earl, being a Scotsman, will agree—the ideas must be correct before the words can be chosen to suit them. In this case we are faced with a situation which is far from being as simple as the noble Viscount, Lord Long, suggested, for we have two separate agencies which are outside this country. One is the European Economic Community, working presumably through the Commission, and the other is the International Energy Agency.
As I pointed out on Second Reading, it is conceivable—as the membership of those two organisations is quite different—that one could get differing instructions from the two agencies. This means that, if Her Majesty's Government are to take action, they must themselves decide which body is giving them the correct instructions. It might, of course, by good chance, be that the two instructions are identical, but that might not be the case and we must bear this in mind. I suggest, therefore, that it is impossible to say that Her Majesty's Government will act on the declaration of an emergency formally declared by either of these bodies. I do not know how these bodies formally declare an emergency. It is much more likely that they simply say that under present conditions such and such action should be taken by all members, and the wording of the Bill then allows Her Majesty's Government to take such action.
But suppose there is no such formal declaration. Must it be signed by all the members? How is this declaration to be made? If we get a situation in which the Agency or the Community say that something should be done, but they do not issue what can legally be called a formal declaration, then presumably nothing is done. Surely this is not the 1813 purpose of the Amendment. Its purpose it seems to me, as the noble Earl generously indicated, is to give the utmost assistance to Her Majesty's Government. I should have thought that in giving the utmost assistance to them—in enabling them to perform their duty—they should be left to act on the statement made and not have to wait for some formal declaration, whatever that might be. I suggest, therefore, that words matter and that if we put in words which are not clear we shall be doing a complete disservice.
§ Lord ROBBINS
I always feel especially virtuous if I find myself in agreement with the noble Earl, Lord Lauderdale. On this occasion I feel that, while there may be some differences as regards wording, there must be great sympathy with the fundamental point which he is trying to make; that is, to give precision to the powers of whatever Government may be in Office as regards the exercise of these provisions. Although there may be imperfections in the Amendment, it appears to sustain the general argument of the noble Earl and is in the spirit of the point I was trying to make earlier; namely, that it is extremely important to distinguish between powers which are taken in respect of a particular emergency, whether it be enunciated by an international body or the Government themselves, and orders which are enforced in the long-term interest of the conservation of energy. This seems to me to be a different matter and one which it is essential to distinguish from the other matter which has been mentioned. I say this in no Party spirit at all.
Although it may be an obtuse question, I come back to the point raised by the noble Lord, Lord Wynne-Jones. Am I wrong in thinking that the words, "formal declaration" mean the formal declaration that there is an emergency and not a formal declaration as to what should be done in that emergency? In my view, that seems to make a difference. If a sudden emergency arises, one would not expect a formal declaration as to what should be done. But if it is proclaimed formally as an emergency, that would seem to be a different matter, although I may have the wrong end of the stick.
§ Lord LOVELL-DAVIS
Regarding the question just asked by the noble Viscount, Lord Barrington, I suggest that he addresses it to the noble Viscount, Lord Long, because it is, after all, his Amendment. I do not know whether the noble Viscount cares to answer it now, but I certainly cannot. I think I welcome the peaceful and unusual endeavour to be helpful on the part of the noble Earl, Lord Lauderdale, especially when it is backed up by the noble Lord, Lord Robbins. As my noble friend Lord Wynne-Jones said, it is a matter of trying to find the right sort of words. The situation is not quite as simple as I think noble Lords opposite imagine. However, before I proceed in my attempt to be helpful to the Committee, perhaps I should, while referring to the helpful intervention of Lord Wynne-Jones, refer to the matter he raised on Second Reading about the possibility of IEA and EEC obligations. I must make it clear that it is the intention of the Government to ensure that no situation arises where there is conflict in this matter when it conies to the triggering of emergency-sharing arrangements. In EEC discussions, which are continuing, one of our first objectives is to establish this point.
In essence, the Amendment reflects in different words the objectives of the Government in Clause 3(1). However, we are not able to accept this rephrasing and it might help the Committee if I took some time to try to explain why. In the view of the Government, it is not necessary to limit the operation of the Order in Council under Clause 3(1)(a) to the duration of an emergency. The duration of the operation of the powers triggered by Clause 3(1)(a) will be limited by the making, first, of an Order in Council under this subsection declaring an emergency, and, then, by the making of another declaring its end. The Government intend to take these powers only on the declaration by the IEA or the EEC or both of an energy crisis. So the starting point would normally be the same.
It is, however, quite possible that the Government, for internal reasons, would not wish to declare the end of an energy emergency simultaneously with or immediately after such a declaration by the IEA or the EEC, for example, if there 1815 were a continuing oil embargo against the United Kingdom only, or if it were considered necessary to continue national oil allocation or demand restraint for a little longer simply to establish a better supply and distribution base from which to move easily to complete normality of operations.
§ Lord STRATHCONA and MOUNT ROYAL
Is it not a fact that the point of the IEA is precisely to avoid embargoes being operated against one country at a time?
§ Lord LOVELL-DAVIS
Yes, indeed, that is the reason behind it. The Agreement is to ensure that, in an energy crisis, the member countries can operate in such a way as to mitigate the effects and can continue to operate normally.
We also feel that it is neither necessary nor desirable to make the powers "solely" exercisable to meet IEA/EEC obligations. As drafted, the clause is quite clear in specifying that subsection (1)(a) is to be activated in relation to EEC/IEA obligations. Let us imagine that, in the midst of an internationally triggered energy crisis—and with an Order in Council in force under Clause 3(1)(a)—there arose in addition some other national circumstances such as industrial disruption. It would be impossible, in practice, to distinguish between the measures necessary to meet the latter and those to meet the "international" crisis. And yet if the Amendment to include "solely" at the beginning of subsection (1)(a) were accepted, the propriety of the various actions the Government would need to take in an emergency could be challenged. However, I can assure your Lordships that we would not abuse this possible flexibility of action under Clause 3(1) paragraphs (a) and (b). In such a confused situation, where IEA or EEC, or both, declared an end to the energy emergency but where our national industrial situation required further constraints, the Government would intend quickly to cease the operation of powers under Clause 3(1)(a) and make a new Order in Council under Clause 3(1)(b).
The noble Lord, Lord Strathcona and Mount Royal, raised on Second Reading the question of exercising the Clause 3(1) powers "to their fullest extent", and we 1816 now have his proposal to drop this phrase. I cannot accept that this is necessary. The meaning of the provision is clear. It simply means that the powers conferred by Clauses 1 and 2 are exercisable in full and without qualification only when an Order in Council under Clause 3(1) is in force—that is, only during an energy emergency. Moreover, this Amendment seeks to replace Clause 3(1)(b)—which triggers a non-IEA/EEC crisis—with a narrower formula. I repeat that the intention of the Amendment seems to us to coincide very closely with that of the Government under Clause 3(1)(b). But the wording of the noble Lord's proposal is rather too narrow in scope. The key difference is in the use of the phrase "required urgently to preserve essential supply and distribution" of the substances in Clause 1(1) of the Bill.
I do not quibble about the first two words. The whole point of this provision is to deal with an urgent domestic crisis. But, in the Government's view, it is vital not only that we should have the appropriate powers to deal with energy crises but that the criteria for triggering and using such powers should be wide enough to cater for the necessities of the crisis and the unlikely and unforeseen circumstance. The provision we have in Clause 3(1)(a) may, therefore, appear to your Lordships not to be such as to need, in reference to a "domestic crisis", the qualifying words which, under this Amendment, the noble Lord, Lord Strathcona, is seeking to insert. In the context of our own proposal, on Second Reading I explained in some detail the Government's intentions. In our view, this Amendment refers too narrowly to the "supply and distribution" problem and would hamper the Government of the day in triggering the necessary Order in Council action and throw doubt on the use of the Clause 1 and 2 powers to control production, acquisition, use and price of energy. I hone that I have helped to clarify the situation by that rather long statement. I recommend that this Amendment should be rejected.
§ 4.36 p.m.
§ The Earl of LAUDERDALE
I wonder whether the noble Lord can help us a little more. He mentioned that the Government want the widest possible criteria for the definition of an "emergency" and has assured us that there 1817 could not and would not be any abuse of those powers. It is within the recollection of your Lordships that some while back we explored the inwardness of the Petroleum and Submarine Pipe-lines Act. The Government's defence of almost every clause in that Act when it was a Bill was studded with assurances that there could not conceivably be any abuse of their powers. We are, and have been ever since then, watching with great interest the evolution of BNOC in order to access how far the Government's assurances are being honoured. I do not want to explore that field too thoroughly, but I must say that some of the Government's observations have put us a little on the alert.
It is for that reason that I should like to join in an appeal to the noble Lord, not to accept these words—we agree that this is simply a try-out—but seriously to take another look at the wording of the clause in order to make absolutely certain in his own conscience—and I put it like that because I am sure that he has a conscience, but I see that the noble Lord shakes his head so I will alter that and say, as a more suitable humanist definition, that he should make certain in the secret recesses of his being—that the words are adequate. Will the noble Lord not search his mind and make sure that that is so? We all agree on the need for exactness. We all agree that there should be no abuse of power. That is common ground.
I would just draw attention to one parallelism of phrase: the Government's draft contains the words, "for the implementation of", which I think a horrible construction. The Amendment uses the words, "of implementing". I believe that the participle is always better than the abstract noun. If the noble Lord will simply undertake to look again at the wording of the clause, he will give the satisfaction which I know he seeks to give to the House and would also help to set at rest the worries which have been expressed by the noble Lord, Lord Robbins, as to the confusion throughout the Bill of the tactical with the strategic. It is confusion that worries us. Naturally, we do not question the purity of intention of the noble Lord very much.
§ Lord LOVELL-DAVIS
As the noble Earl, Lord Lauderdale, does not care for the Government's assurances and in 1818 view of the arguments which have been advanced, I accept that there may be a problem on Clause 3(1)(b) which may need examining. I will, therefore, say that the Government will have another look at the point and may be able to suggest something which will meet the spirit of this part of the Amendment.
I do not know whether it was my noble friend from the Back Benches who persuaded the noble Lord, but we are most grateful that he is to look again at Clause 3(1)(b). I am also grateful to all noble Lords who had a good try in persuading the Government to come round to our way of thinking that the wording in the existing Bill was not strong enough and was, if anything, probably rather weak. So in that case, and bearing in mind that we are proceeding very well this afternoon, I should hate to delay the proceedings. Therefore, I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ 4.40 p.m.
Lord STRATHCONA and MOUNT ROYAL moved Amendment No. 6:
Page 3, line 11, leave out from ("section 1") to end of line 20 and insert ("or give directions under section 2 are not exercisable.")
§ The noble Lord said: We are now coming to a rather crucial Amendment. First, I should try to explain what I believe to be the situation we are attempting to deal with. When one cleaves a way through all the various double and treble negatives in the exceptions, one ends up with a situation whereby the two powers under Clause 3(2) become permanent Government powers once the Bill is passed; that is to say, there is introduced a permanent control over the end use of crude oil, and petroleum products are singled out for a special permanent price control. That is my understanding of the effect of the Bill. At risk of repeating myself, I must say that I am not alone in finding it quite difficult to discover what the Bill purports to do. Thus, I thought that I had better start by asserting the brief to which I am speaking.
§ We see two objections. There is the objection in principle to the accretion of powers, to which we have referred a number of times this afternoon, and to which, I suspect, we shall go on referring throughout the Committee stage debates We object in principle to an additional 1819 accretion of powers to the Government in a non-emergency situation. But there is also an objection in practice, in that we on this side of the Committee—and I think we are not alone in this—believe that the Government are at least no more likely to be more effective and more equitable than ordinary market forces in the complicated kind of situation which obtains in the petroleum market, both nationally and internationally.
§ What we propose in Amendment No. 6 would have the effect of removing both the power of control over the end use and the power for regulating the price of petroleum products. The proposed powers, as they stand, run a risk of further undermining the confidence of the industry. I regret having to hark back to points we made so often during consideration of the Petroleum and Submarine Pipe-lines Act, but I believe that the Government have consistently underestimated and failed to understand. If Ministers think that in saying that I am suggesting that they are incapable of understanding, then I must say that I am not intending to do so. But if they have understood what we have said to them, then I can only say that they appear to have turned a very deaf ear to our entreaties to appreciate the extent to which the industry feels that powers like this undermine its confidence at a time when it is being asked to make massive investments in the oil resources of this country.
§ The Amendment seeks to delete these powers, because we believe that if these powers have to be used, the Government should say that the controls are needed only for genuine and significant energy saving policies, which are demonstrably desirable and which could not be achieved through the operation of the market; and for policies which would not have an adverse effect on British industry and place it at a disadvantage vis-à-vis its overseas competitors.
§ If we must have price controls, then let us be sure that we continue to allow enough flexibility to the companies to make an adequate return on the large amounts of capital they are investing, and to leave them—to use the Government's favourite word—sufficient "flexibility" to react promptly to the complicated, and 1820 very often rapidly evolving, changes in the market. I do not believe that it will be at all easy to draft suitable price control regulations which leave this important degree of flexibility.
§ We have referred to the importance of assisting the Government in achieving their aims of conservation, and I believe that the noble Lord, Lord Lovell-Davis, has a special responsibility for this matter in his Department. We should not want in any way to cut across the power he needs. But surely the impact of the higher prices has, in the minds of some people, lent weight to the view that the market forces alone may not be enough to achieve sufficient economies in the use of fuels. It may well be that fuel consumers are being sluggish in achieving the economies that they could achieve, but it is worth noting that it has been estimated that of the 7½ per cent. drop in energy consumption in this country between 1973 and 1975 about 5 per cent is thought to have been due to the recession, whereas 2 per cent. represented the reaction to higher prices.
§ Despite this, the Government intend to take these very wide-ranging powers. They do not state in the Bill what criteria the Secretary of State should employ in deciding whether to use the powers of the end use control, except on the first page of the Bill, where in the Explanatory Memorandum it is stated that the Bill "makes provision for energy conservation…". We believe that it would be unwise to look towards making fuel savings or to enforce directions for altering from one fuel source to another at the expense of manufacturing efficiency. It is here that we are really worried, because the Government are now taking the power to exercise their value judgment on the market in terms of total prohibition of the use of all fuels, or particular fuels for specified purposes. For example, it could be argued that there is no particular reason why electricity, when used for advertising, should have been singled out and regarded as inferior to other uses of fuel.
§ Should the Secretary of State have the right to impose value judgments of this kind, and what reason is there to believe that his value judgment is to be preferred to that of anybody else? We would suggest that, in any time except an emergency, it is wrong to tackle the energy 1821 problem by blanket prohibitions of the kind that the Government are taking power to impose under this section of the Bill.
§ Returning to the worry which has been expressed so often, I would ask the Minister: is it not possible that under the Bill as it stands these powers could be used in a highly discriminatory fashion to favour organisations for which they particularly wanted to smooth the way? I have no doubt that the noble Lord will say to us, "Perish the thought! We would never have such an unworthy idea in our minds." With the greatest of respect, it is difficult for us to accept that if not this Government then another Government may not be tempted, under the powers they are taking in this Bill, to help some chosen instrument which they have set up. We therefore propose that there should be modified powers which would allow the Secretary of State to issue only orders for fuel saving purposes which are of some significance to the economy, and which would provide that when he tables such an order he should have to develop his reasons for issuing this order, in consultation with the fuel industries.
§ I turn now to the price control issue. I think we can all accept that, in these days, Governments have to have power to control prices. The Government already have extensive powers through the Price Commission, and we are not here today discussing whether or not we think that the controls of the Price Commission are desirable or undesirable. Those controls are here now. Why, then, should the Government feel it necessary to take powers, beyond the powers already acquired by the Price Commission, to deal with some unspecified contingency which cannot be foreseen at the present time? Why, too, are the Government singling out the petroleum industry for this special restrictive treatment? I do not believe any other manufacturer is subjected to permanent powers of price control which are related solely to his products. I would not want to go into too much detail about some of the underlying reasons why one cannot disclaim a certain amount of unease about these powers, but there are some technical points. For example, it is not at all easy to establish what the price of some petroleum products really is, because they are part of a wide spectrum of products being produced from crude oil. The fear is that the Govern- 1822 ment will inevitably be tempted to take some kind of average price on which they are going to base their control and which may not necessarily be a realistic one.
§ There is also the inevitable fear that there is a widespread feeling that oil companies make obscene profits. I think we ought to get that point out of the way. I have some figures for the return on capital made by 30 major oil companies in recent years, which are really rather surprising. In 1970 the return was 7.6 per cent.; 1971, 7.8; 1972, 7.1; 1973, 11.1; and 1974, 12.4 per cent. That was the return on investment made by 30 major oil companies; and those figures were produced by the Chase Manhattan Bank, who specialise in oil company finance. I would suggest that those figures are not excessive profits for what is, after all, as we have so often said, a very high risk industry. The risk we would be running would be that a permanent system of price control might seriously impair the dynamics of the very sophisticated and complicated market system which exists in the oil industry. The rigidities and the distortions which price control could impose would be in danger of blunting the whole oil industry's response to the changes in market conditions, and could lead to a less efficient allocation of their economic resources. Might it not also have the danger of blunting the cutting edge of competition? I think we shoud be grateful that competition has so far done a very good job in keeping down the cost of petroleum products.
§ I also think it is worth citing one or two overseas examples to show that price controls, which are beloved by some, have their dangers. It is an axiomatic joke—or, rather, a sick joke—in the United States that the effect of price control has been to distort the natural gas market to the point where the United States is now running into very serious difficulties of supply of natural gas. That is one example. The French have gone from a monopoly situation. They found that it did not work in the energy crisis, and they are now finding that their rigid price control system is going to have to be made more flexible. I would therefore suggest to the Government that they are going to have to work very hard indeed to convince many people in this country that there is the slightest justification for either 1823 of the two powers which they are proposing to take, on a permanent basis, once this Bill is passed, if we leave Clause 3(2) as it is now. I therefore—
§ Lord DAVIES of LEEK
May I ask the noble Lord a question? I am awry. What are we doing? I thought we were moving on to Clause 6, and I have been trying to follow what Amendment the noble Lord is speaking to. I am doing it respectfully.
§ Lord STRATHCONA and MOUNT ROYAL
I think I can help the noble Lord. We are on Amendment No. 6, not Clause 6.
§ Lord STRATHCONA and MOUNT ROYAL
I have been known to speak to the wrong brief, but I do not think I have been doing that in this instance. If I have, noble Lords have been remarkably patient in listening to me discourse on something which is quite irrelevant. I beg to move.
§ Lord ROBBINS
May I say a few words on this extremely complicated question? I should not like to enter into controversy with the noble Lord on the general observations that he made relating to the effects of price control. I think that experience through two world wars shows that price control, unless extremely cleverly administered—by which I mean price control which follows, roughly speaking, the course which an ideal market would have taken—tends to cause, on one side, excess demand and, on the other side, complications on the side of supply. Therefore, I endorse the general observations made by the noble Viscount.
On the other hand, I try to put myself into the position of the framers of this legislation. I can conceive of catastrophic changes in the supply of petroleum which might, if left to themselves, cause market conditions which would give rise to a severe sense of injustice. Certainly, this was the case in the two World Wars of this century and it led the Governments of those countries concerned to impose price controls; but they speedily found that, in order that the price controls might not cause the adverse cones- 1824 quences that I have mentioned, they were led on to the policy of rationing. It is that second question to which I should like to address my final observations in this particular intervention.
I see very grave difficulties in the attempt to control final uses save in the broadest possible sense. All attempts to control final uses, especially in regard to petroleum, simply give rise to corruption and inequitable distribution. The only remedy in such cases, if the situation is so grave that it is necessary to resort to rationing as well as price control, is to allow the selling of ration tickets. It takes place in any case under the counter and it is better in those circumstances, rather than to attempt minute control of end uses, to allow people to buy and sell ration tickets.
§ 5.3 p.m.
§ Lord WYNNE-JONES
Unlike the noble Lord, Lord Strathcona and Mount Royal, I should always be reluctant to impute any motives at all to the Government. I think that on the whole it is far safer to assume that things take their course—and they take their course very much independently of what may be planned. Perhaps the noble Lord, Lord Robbins, will agree with me on that. With regard to the particular Amendments with which we are dealing, when I first read them I must admit I was not very clear about them and they seemed to me largely to cancel out Clause 1 of the Bill. Leaving that aside, I was not clear what they meant. However, the noble Lord explained them very well. We have had the benefit of hearing from both him and from the noble Lord, Lord Robbins, of the need for differentiating between the two purposes of this Bill. It seems to me, looking at it, that the Amendment we are dealing with now, which is an Amendment to Clause 3(2) of the Bill, is essentially something which tries to separate the two purposes of the Bill.
In general terms, I should have thought that that was desirable. I should have thought it a good thing to get some separation of the two purposes of the Bill. Up to this stage we have been discussing essentially the emergency aspects of the Bill and I think that is a part which with minor Amendments has to go forward in the form which we have before us. But when it comes to the 1825 conservation of energy aspect of the Bill, we are on different ground altogether. I should have thought it very important that the Government in their Bill should make clear that they are wanting to take these powers for conservation purposes. I think this is very important to do.
It may be—I am not a drafting expert—that some of the proposals put forward in the Amendment should be given careful consideration by the Government in looking again at the drafting of this subsection. In any case, I feel the subsection ought to emphasise clearly its purpose; because, although I do not impute motives to a Government, I hope they can have a purpose and that the purpose could be described in this subsection.
With regard to the question of the nature of petroleum products, one must bear in mind that petroleum is an unpleasing raw material of very little apparent value when one first sees it. It is entirely the refining process, the separation process, everything that is done to the petroleum after we have got the raw material, which makes all the products important. This refining is something which is under control and can be controlled by Government instructions. I hope that it can be more controlled in the future, but it is something which can be controlled apart from pricing. It may be that pricing plays an important part here and, as I am sure anyone who knows anything about petroleum knows very well, the pricing is the most extraordinary thing about petroleum and petroleum products. It is extremely difficult to find out exactly how the pricing is done and the whole position is further aggravated by taxation which comes afterwards. In the end it means that no one has any idea of whether what he is paying bears any sort of simple relationship to the original material or the processes through which it has gone.
§ Lord ROBBINS
May I interrupt the noble Lord for a moment to point out one clear distinction in this complicated business; namely, the distinction between principles of pricing in an emergency and principles of pricing for conservation. In an emergency, if you resort to price control at all you are permitted to impose maximum prices and if you ate concerned about long-period conservation you are concerned with minimum prices.
§ Lord WYNNE-JONES
What the noble Lord, Lord Robbins, has said is perfectly correct. I would point out that although you may say that long-term pricing is not really a suitable way of doing it, nevertheless it is a method which is practised in all taxation. We do, in effect, control prices. We control the price of tobacco; we can control the price of particular petroleum products in the same sort of way. It may or may not be desirable. What I was trying to say was that the Government, if they have an objective of conservation, may legitimately use the different methods, but we should be told so in the Bill. To that extent, I agree with the principle though not necessarily the words behind the Amendment.
§ Lord TREVELYAN
This is an important Amendment. I suggest that probably Clause 3(2) is the least acceptable part of the Bill. The permanent powers which are implicit in this clause for the Secretary of State to make orders regulating use and price exceed the requirements of government in any situation other than an emergency. They would permit permanent interference and distortion of freedom to trade and earn a return on investment. I suggest therefore the Order in Council procedure under Clause 3(1) is sufficient in itself to meet any international treaty obligations and would also suffice in any purely domestic emergency. Therefore I strongly support the Amendment.
I was pleased to hear the intervention of the noble Lord, Lord Wynne-Jones. He has enlightened me on something: that these powers were required for conservation. Reading the Bill and the Amendment, I had a violent feeling in favour of the Amendment and a prejudice against the Bill. Coming from the stable it does, one naturally starts with some suspicion against it. But now that my eyes have been opened and these powers are required for conservation, I believe they are not so bad provided somewhere there is a proviso that the Minister when he exercises them has to do so, and show himself to be doing so, for purely conservation reasons.
§ Lord DAVIES of LEEK
There is an assumption that no reference has been made to anyone who knows anything 1827 about the petroleum or other industries. But if noble Lords had taken the trouble to read the paper of the Advisory Council on Energy, they would have seen that we have consulted all types of firms all through the history of the development of this effort to conserve our resources including in the industry group British Leyland, British Petroleum and the British Steel Corporation. The industry group companies accounted for 50 per cent. of the energy consumption of Great Britain and they have been consulted. They have arrived at a decision that there should be conservation and, neatly put, for what? To explore the whole area of research and development in the long-term interests of this and future generations. A time comes when as well as profit and loss, the needs of future generations should be looked at so far as these raw materials, which are easily and quickly consumed, are concerned. After such a long debate, which has been very interesting, that is enough to say to noble Lords who know so much.
§ 5.14 p.m.
§ Lord LOVELL-DAVIS
The effect of this Amendment is to strike from the Bill the powers of Clause 3(2)(a) and (b) to control permanently the use of energy (for conservation purposes) and the price of petroleum products—not as I understood the noble Lord, Lord Strathcona and Mount Royal to say "crude"—by orders under Clause 1. As I explained on Second Reading, the Government attach importance to these two provisions. First, let me take the matter of the control on the use of energy. This is required to enable the Government to continue existing energy conservation measures, and to introduce such measures in future as are considered necessary.
The noble Lord, Lord Strathcona and Mount Royal, tended to relegate energy conservation to the role of an optional extra so far as energy is concerned. The noble Lord, Lord Trevelyan, said he considered that this particular part of the Bill exceeded the requirements other than in an emergency situation. The noble Lord, Lord Hawke, also referred to energy conservation. I am grateful for what my noble friend Lord Davies of Leek said on this matter. I believe I must say as a matter of urgency why we believe we must have a wider under- 1828 standing of the role energy conservation has to play in our overall energy policy.
Our energy demand has been growing at an annual average at about 1.8 per cent. for the past 20 years. If it went on growing by no more than that, we should need in the region of from between 465 million to 495 million tonnes of coal equivalent by 1990, and by the year 2000 our energy demand will be of the order of from between 600 million to 650 million tonnes of coal equivalent. That is nearly double our 1974 demand. Knowing what we do about the likely supply from our own fuel reserves to the end of the century, we would, on these predictions, need to find a lot of energy from other sources, including nuclear energy. The gap between energy demand and the indigenous supply of exhaustible fossil fuels, coal, gas and oil, could be around 200 million tonnes of coal equivalent by the year 2000. There is one important way we can help to bridge the gap that is opening up, that is, by building energy conservation into our way of life—not least our industrial way of life—cutting out waste and wholeheartedly pursuing policies to secure increasingly efficient and economic use of energy. I believe that more and more people and industries are accepting the validity of this.
Against the energy supply background that I have described, energy conservation is not an optional extra. It is a vital necessity now and in the future because it makes a vital contribution to narrowing the potential gap between energy supply and demand, and to making the best use of scarce energy resources. It is vital if we are to minimise the share of our financial resources which we shall have to devote to securing our energy supplies. We have to recognise the fact that energy saving is, and will continue to be, an essential part of our way of life. We have been talking about the International Energy Agency. I should like to quote one short passage from an article in World Today published this March by the executive director of the International Energy Agency in Paris. It reads:The overriding concern at the moment is to retain the conservation effects brought about by the crisis, to keep the public and the private consumer aware of the need to be rational in their use of energy and to 1829 set in motion long-term developments which contribute further to its rational use.I entirely endorse that view. I consider that energy conservation is absolutely a vital part of our overall energy policy.
As I explained before, the similar power in the Fuel and Electricity (Control) Act 1973 is currently being used to control heating in non-domestic premises, and to restrict lighting for advertising. We believe it is essential to have available the power to control use of energy in other appropriate cases in support of our future energy conservation programme. I urge the Committee to reject this Amendment firmly on this account alone.
Secondly, however, the permanent power to control the price of petroleum products—Clause 3(2)(b)—would also be lost if this Amendment were carried. The power is a continuation of that in the 1973 Act under which the price of only one product (paraffin) is controlled at present. As we all know, many old or poorer people rely on paraffin as their main fuel for domestic heating. There is no intention at present to control the price of oil products other than paraffin, but the need could well arise in future and we need to have such powers in reserve. The supply of oil products is of great importance to the United Kingdom economy.
The noble Lord, Lord Strathcona and Mount Royal, was trying to give us the impression that our taking powers to control oil product prices was seriously undermining the confidence of the oil companies. I can only assume that this must be the final straw which broke the camel's back because most other industrial countries, and a large number of European countries, already have the power to control individual oil product prices. Therefore, I do not see that our taking powers which are also being taken by the majority of industrialised countries will deplete the confidence of the oil companies. The present control of prices through the Counter Inflation Act and the Price Code, which has been referred to, takes the form of general rules governing the prices and profit margins of individual companies. The control therefore operates mainly across the barrel where the oil companies normally decide what weight of increase to put on each 1830 fraction of the barrel, except in the case of paraffin.
Finally I should like to refer to the point about rationing made by the noble Lord, Lord Robbins. The Government have no intention of introducing fuel rationing or allocation schemes in the context of energy conservation, and the powers in the Bill have been drawn narrowly so as to control use only on a permanent basis. Perhaps I might also get one canard out of the way, which was produced by the noble Lord, Lord Strathcona and Mount Royal; that is, the suggestion that price control could be used to enable the Government to favour specific bodies, or in some way to pursue what the noble Lord indicated might be nefarious intentions of their own.
Since taking Office, the Government have had powers under the Fuel and Electricity (Control) Act 1973 to regulate all oil prices. There has been no attempt to use them in the way suggested. The maximum retail price of petrol and Derv, inherited from the previous Government, was abolished in 1974. Paraffin alone remains under control because of its importance to low-income users. I hope noble Lords will take note of what I have said about energy conservation and will recognise how vital an element it is of our overall energy policy and how important it is that we should have the powers we seek. I would ask your Lordships to reject the Amendment.
I think we are all fully aware of the necessity of energy conservation. This has been a public topic for a very long time, and we were interested in the noble Lord's little dissertation on the subject. But I would remind him that over the last 30 years in this Chamber we have had many debates on energy, one or two of which have been initiated by me. By and large, I think it can be said that the prognostication figures have not been worth the paper they were written on. So I should not take the figures in the ministerial brief too seriously.
§ Lord LUCAS of CHILWORTH
Before the noble Lord the Minister finishes, could he answer the question I put to him on Second Reading? The noble Lord talks about "petroleum products", on the one hand, and, on the other hand, 1831 of "oil products". I should like to know exactly what he is talking about and what the Bill is talking about. If it is petroleum products that are meant, then the Bill is referring to only the minutest portion of oil; surely it is the conservation of the oil that the noble Lord wishes to talk about, and not necessarily the conservation of the petroleum products derived from the oil.
Perhaps I might remind the Committee that, derived from oil, a number of essential products, petrol and some petroleum products come almost as an extra. In some circumstances it is very difficult to get rid of this "extra". In fact, one might remind the Committee of the position of ICI, when some years ago they bought crude oil for chemical and petrochemical purposes. They ended up with petroleum spirit which they could not get rid of through normal outlets and had to set up their own retail points. Therefore, if we are talking about petroleum products, I believe we are talking about only 15 per cent. of a barrel. I am sure that somewhere tucked away in his papers the noble Lord will have this figure. I asked him about it on Second Reading, but of course he was not able to give me an answer then. He should tell us now what we are talking about and the proportions involved.
The noble Lord should also tell us exactly what is meant by "petroleum products" within the context of this Bill. If it is what most of us are thinking about—petrol as a fuel for driving vehicles or heating factories, and so on—then we are talking about an infinitesimal amount. So I hope the noble Lord will now be quite fair and remind us of what will be the price of, say, a gallon of diesel or petrol next Monday morning, and then break that down as between excise duty, the product and value added tax. The noble Lord must then tell your Lordships that any Government are not effectively controlling the price of that product by fixing the selling price, because that is an infinitesimal part of the total. The price is controlled through taxation, customs duty and value added tax. Therefore, I think what the noble Lord has been telling us has perhaps been a little misleading. If he were now to be a little more open with us, perhaps 1832 we should be in a better position to judge why the Government need price regulation built into a Bill of this nature.
§ Lord LOVELL-DAVIS
May I recommend to the noble Lord, Lord Lucas of Chilworth, that he refers to the Bill. In Clause 19(1) he will find a clear definition of precisely what is meant by "petroleum products". It lists the substances there. The noble Lord did indeed press me on Second Reading for information regarding motor spirit. At the time, it was true I was not able to answer him. I can now tell him that normal United Kingdom refinery yield of motor spirit is 13 or 14 per cent. of throughput. In 1975, because of the recession in the petrochemical industry, a sharp drop in demand for naphtha allowed additional quantities to be used to produce petrol; and so overall United Kingdom production of motor spirit was somewhat better than normal. It was 13.7 million tonnes out of a throughput of 92.1 million tonnes, or nearly 15 per cent.
The point is that the production of motor spirit cannot be viewed in isolation. For various reasons, United Kingdom demand for petroleum products is not matched exactly by the output of our refineries, and the resultant deficits and surpluses are balanced by a complex import and export trade in products. Traditionally, the United Kingdom has been a net importer of motor spirit, which happens to be one of the more expensive fractions of the barrel, currently averaging about £70 per tonne cif. Despite the greater yield, in 1975 United Kingdom demand exceeded United Kingdom production by 2.2 million tonnes. The deficit was met by imports and stock run-down. It is therefore apparent that, with an annual demand for petrol of about 16 million tonnes, there is scope for a not inconsiderable balance-of-payments saving. I shall not follow the noble Lord, Lord Lucas of Chilworth, at this time into an analysis of the amount of a gallon of petrol which is covered by excise duty, product cost and VAT. I am simply going, once again, to resist this Amendment.
§ Lord ROBBINS
May I furnish a very friendly elucidation for the noble Lord, Lord Lovell-Davis, who is battling with 1833 all his critics on this difficult and complex subject? I cannot believe that anybody in this Chamber differs from him in his general argument with regard to the need for the conservation of scarce resources. Also, I cannot believe that very many noble Lords find it impossible to believe in emergency situations in which the price of oil needs to be kept down for distributional reasons, and perhaps a rationing system imposed. The trouble is that, as I have urged several times this afternoon, the desirability of maintaining maximum prices is different from the desirability of maintaining minimum prices whether that is done by direct order or by taxation. It is because these things are mixed up in the Bill that people like myself sitting on the Cross-Benches, not taking either side at all but simply trying to examine this matter on its merits, feel that this Bill is rather a muddle.
§ Lord STRATHCONA and MOUNT ROYAL
I am extremely grateful to the noble Lord, Lord Robbins, for both his first and his second interventions. As usual he has said more concisely and eloquently than I could what I wanted to say. I shall not dispute energy conservation with the noble Lord, Lord Lovell-Davis, but I would remind him that I initiated a debate on this very subject some years ago in this House; and I have indeed criticised him, I do criticise him and I intend continuing to criticise him, for a comparative lack of interest on the part of the Government in this important issue. I am delighted to hear that he is against sin, so he will have my support so far as that goes. And, of course, to some extent this is the position of the noble Lord, Lord Hawke.
We begin to part company in two ways. First, do we not find ourselves saying, "If it is for energy conservation that you
§ need these powers, then, for goodness sake!, say so in the Bill and try to reassure those of us who are worried about granting the Government excessive powers"? This is what lies behind our thinking. Secondly, the noble Lord, Lord Robbins, has again made the point that the kind of situation which is one of the applications of these powers is surely an emergency situation, and that is not what this clause of the Bill is trying to deal with. Therefore, as he said, the Government are getting themselves hoist by their own petard of the drafting and arrangement of this very convoluted and obscure Bill.
§ I do not think I was so confused when I started arguing about crude oil. I was simply making the point which the noble Lord, Lord Wynne-Jones, also underlined, that petroleum products are the products derived from crude oil, and it is exceedingly difficult to allocate a true cost as between these various products which come from crude. That is why I referred to "crude". But throughout this debate this afternoon—and I believe we are now coming to the end of the time allocated to this Committee stage today—the noble Lord, Lord Lovell-Davis, has totally failed to convince the Committee that the Government need these draconian and widespread permanent powers for the very noble purpose of conservation, and I am sorry that I must invite noble Lords who think as I do to express their disapproval of what is currently in the Bill.
§ 5.34 p.m.
§ On Question, Whether the said Amendment (No. 6) shall be agreed to?
§ Their Lordships divided: Contents, 82; Not-Contents, 49.1835
|Aberdare, L.||Campbell of Croy, L.||Gainford, L.|
|Amherst of Hackney, L.||Carrington, L.||Garner, L.|
|Amory, V.||Coleraine, L.||Glendevon, L.|
|Amulree, L.||Cullen of Ashbourne, L.||Glenkinglas, L.|
|Arran, E.||de Clifford, L.||Goschen, V.|
|Auckland, L.||Denham, L. [Teller.]||Greenway, L.|
|Balerno, L.||Digby, L.||Grimston of Westbury, L.|
|Banks, L.||Drumalbyn, L.||Hanworth, V.|
|Barnby L.||Eccles, V.||Harvington, L.|
|Barrington, V.||Elliot of Harwood, B.||Hawke, L.|
|Belstead, L.||Elton, L.||Henley, L.|
|Blake, L.||Emmet of Amberley, B.||Home of the Hirsel, L.|
|Boothby, L.||Faithfull, B.||Hylton-Foster, B.|
|Brooke of Cumnor, L.||Ferrier, L.||Jessel, L.|
|Brooke of Ystradfellte, B.||Forbes, L.||Kinloss, Ly.|
|Cairns, E.||Fraser of Kilmorack, L.||Kintore, E.|
|Lauderdale, E.||Newall, L.||Strathcarron, L.|
|Lloyd of Kilgerran, L.||Northesk, E.||Strathclyde, L.|
|Long, V.[Teller.]||Norwich, V.||Strathcona and Mount Royal, L.|
|Lucas of Chilworth, L.||Ogmore, L.|
|Lyell, L.||Orr-Ewing, L.||Stratheden and Campbell, L.|
|Margadale, L.||Rankeillour, L.||Strathspey, L.|
|Massereene and Ferrard, V.||Robbins, L.||Trevelyan, L.|
|Merrivale, L.||St. Just, L.||Tweedsmuir, L.|
|Meston, L.||Sandys, L.||Vivian, L.|
|Monson, L.||Savile, L.||Ward of North Tyneside, B.|
|Mottistone, L.||Selkirk, E.||Wise, L.|
|Netherthorpe, L.||Sempill, Ly.|
|Annan, L.||Gaitskell, B.||Oram, L.|
|Aylestone, L.||Greenwood of Rossendale, L.||Pitt of Hampstead, L.|
|Birk, B.||Hall, V.||Platt, L.|
|Bradwell, L.||Henderson, L.||Segal, L.|
|Brimelow, L.||Houghton of Sowerby, L.||Serota, B.|
|Buckinghamshire, E.||Jacobson, L.||Shepherd, L. (L. Privy Seal)|
|Champion, L.||Janner, L.||Shinwell, L.|
|Collison, L.||Kirkhill, L.||Stedman, B. [Teller.]|
|Cooper of Stockton Heath, L.||Leatherland, L.||Stow Hill, L.|
|Crook, L.||Llewelyn-Davies of Hastoe, B.||Strabolgi, L. [Teller.]|
|Davies of Leek, L.||Longford, E.||Wallace of Coslany, L.|
|Delacourt-Smith of Alteryn B.||Lovell-Davis, L.||White, B.|
|Douglass of Cleveland L.||McCarthy, L.||Willis, L.|
|Elwyn-Jones, L. (L. Chancellor.)||Mais, L.||Winterbottom, L.|
|Evans of Hungershall, L.||Milner of Leeds, L.||Wootton of Abinger, B.|
|Feather, L.||Noel-Buxton, L.||Wynne-Jones, L.|
On Question, Motion agreed to.
§ Resolved in the affirmative, and Amendment agreed to accordingly.
§ Lord LOVELL-DAVIS
As your Lordships know, it was agreed that at about 5.30 we should defer further consideration of the Committee stage of the Energy Bill until Monday. With the approval of noble Lords, therefore, I beg to move that this House do now resume.
§ Moved accordingly, and, on Question, Motion agreed to: House resumed.