HL Deb 21 November 1979 vol 403 cc115-7

2.44 p.m.

The Earl of LAUDERDALE

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what they estimate would be the increase in repayment of loans advanced to the British Gas Corporation if it were encouraged to bring the price of gas into line with other energy prices.

The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie)

My Lords, the British Gas Corporation have repaid all their medium and long-term debt to the National Loans Fund. The timing of the repayment of other debt is a commercial matter for the corporation.

The Earl of LAUDERDALE

My Lords, in thanking my noble friend for that rather obscure reply, may I ask him whether he is aware that many people, observing the energy industry, applaud the Government's decision to stop the flaring of gas in the North Sea? But would he not agree that the artificially low price the British Gas Corporation have been charging in recent years has led to the threat of a very serious shortage both because of increased, unnatural and excessive demand on the one hand and because of disincentives to explore and develop in the southern area on the other?

The Earl of GOWRIE

My Lords, I am very anxious that my reply to my noble friend should not be obscure, so perhaps I should flesh it out a little. In fact, the capital liabilities of the British Gas Corporation have fallen steeply over the last two years from over £2,000 million in 1977 to only £800 million in March 1979, and this process and this fall are continuing. I recognise the force of his argument that the price of gas and other fuels should not be allowed to get too far out of line. Matching up supply and demand can become difficult when, as now, gas is much cheaper than the alternatives. Therefore, the Government are taking this aspect and this argument into account in their current review.

Lord AVEBURY

My Lords, while the matter of the repayment of loans by the British Gas Corporation is obviously a matter for the corporation itself, may I ask whether the general pricing policy of the energy industries is not a question in which the Government themselves should take a firm interest? Have not the Government power to issue a direction to the British Gas Corporation, if they wish to do so, to bring its prices into line with those of other fuels? Should the Government not take such an initiative, in the interests not only of reduction of public expenditure but of conservation of the supplies of gas in the North Sea, which may run out before the end of the century?

The Earl of GOWRIE

My Lords, I think the noble Lord may have misheard me. I agree with very much of what he said. When I said that the timing of repayment of other debts is a commercial matter for the corporation, I meant the cash-flow debt, which is very insubstantial. The original Answer was that the British Gas Corporation had in fact repaid all their medium- and long-term debts, but the other points the Government have certainly taken on board and that is why they are urgently reviewing the situation.

Lord PARGITER

My Lords, in view of the fact that they are committed to market forces operating generally, could the noble Earl say what is the Government's policy? Why have they other than market forces operating in regard to fuel supplies? Would the noble Earl also say what is an artificially low price?

The Earl of GOWRIE

My Lords, there is no such thing as market forces where you have a monopoly and therefore the Government have a direct interest in pricing in a monopoly industry. Regarding the second part of the noble Lord's question, we feel it has been confusing and that it is dangerous that gas prices have got right out of line with other energy prices at a time of short energy supply and high energy demand. We are therefore taking steps to rectify that situation.

The Earl of LAUDERDALE

My Lords, perhaps my noble friend could add to what he has just said, which has helped to clarify the situation. Is it not the case that the disequilibrium of the price of gas and other fuels is a confusing factor in the situation? If we are to understand that the Government are looking closely at this situation, could we also infer that, in doing so, they will consider whether the monopoly position of the British Gas Corporation is in the interests of energy production and conservation generally?

The Earl of GOWRIE

My Lords, I will certainly take my noble friend's point into account.

Lord LEE of NEWTON

My Lords, would the noble Earl keep in mind that when gas was not produced by a monopoly it was in grave danger of going out of existence altogether?

The Earl of GOWRIE

My Lords, we are talking, of course, of an earlier period when the energy crisis was not upon us in the forms in which it is upon us today; so that has to be taken into account.