§ 2.55 p.m.
§ Lord JACQUESMy 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 why British industry is being handicapped by having to pay substantially more for natural gas than its competitors in France, West Germany, Italy and the Netherlands.
The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie)My Lords, reliable international comparisons of gas prices to industry are not easy to make. But on the basis of the most up to date information available to the Government I would not accept that British industry is in fact paying substantially more on average than its competitors in other EEC countries.
§ Lord JACQUESMy Lords, I thank the Minister for that reply, and I should like to put to him two supplementary questions. First, is he aware that a document published by the Chemical Industries Association this month indicated that the gas prices paid by United Kingdom industry as at 1st April 1980 were, on average, 50 per cent. greater than the gas prices paid by industries in those EEC countries which I have named in the Question? Secondly, would the Minister not agree that if the industries in other EEC countries are being supplied with cheaper gas for whatever reason, then this Government should have reduced the prices to our industry so that it is not handicapped and so that there is greater harmony in the Community?
The Earl of GOWRIEMy Lords, I should like to take the noble Lord's supplementaries in reverse order. I think that he will find that if there is a discrepancy with our European Community competitors—and I am not convinced that there is—it will last very little longer, because gas prices tend to follow oil prices, as the uses of the two are largely interchangeable, and as oil prices throughout the world have been raised in the 871 last year or year and a half, so gas prices are inevitably following.
As regards the noble Lord's first supplementary, that matter is also connected. I am aware of the Chemical Industries Association figures, but because of the lag times between gas price rises and oil price rises it is rather hard to be precise. As I have said to the noble Lord, the evidence we have is that there is no significant differential.
§ Lord RHODESMy Lords, is the Minister aware that gigantic losses are being made at present by the fibres industry in this country due to the disparity in oil prices throughout the world? Is he aware that if that is allowed to continue for many more months, much of our fibres industry in this country will have to close down?
The Earl of GOWRIEMy Lords, I am aware—as we are all painfully aware—that increases in energy costs bear heavily on individual industries, on consumers and on whole economies. It is our duty and the duty of all the industrialised nations to adapt as fast and as efficiently as we can to dear energy. That is what we are trying to do.
§ Lord IRVING of DARTFORDMy Lords, will the noble Earl bear in mind that in the paper industry gas prices are already 15 per cent. of total costs? If the forecast in the Financial Times that a further 50 per cent. increase is due in the next 18 months is right, it will be totally ruinous to an industry already suffering great difficulties. Will he confirm that on the Third Reading of the Gas Bill he undertook to monitor the prices over the next 12 or 18 months? Will he be sure that he does that?
The Earl of GOWRIEMy Lords, I shall certainly honour that obligation and I am glad that the noble Lord reminded me of it. But the fact remains—as I said to the noble Lord, Lord Rhodes, and previously to the noble Lord, Lord Jacques—that the price of gas is very intimately related, though with some time lag, to the price of oil. We can no more protect industry, including the paper industry, from gas price rises in the long term, than we can from price rises in respect of oil.
§ Lord JACQUESMy Lords, why is it that the time lag seems to make it cheaper for everybody else except the United Kingdom?
The Earl of GOWRIEMy Lords, as I said to the noble Lord, I do not accept that. However, I may be able to give him an example. Let us say that the Dutch Government had negotiated gas contracts for a fixed price and for a term of years with the German Government. This is a hypothetical example. It would not be until that term of years had come to an end that the Dutch Government would be able, in respect of the German Government, to raise their tariffs. Both Germany and Britain do not operate on fixed tariffs: they operate in respect of industry on individually negotiated contracts, and that is another significant difference.
Lord BRUCE of DONINGTONMy Lords, in his reply the noble Earl appeared to cast doubt on the figures that were produced by my noble friend Lord Jacques. He referred to the evidence at his disposal. Will he therefore undertake that the evidence at his disposal, documented by source, will be published by him, so that we may know the facts? Will he give the House a further assurance that the Government's own policy of artificially fixing gas prices, as distinct from determining their cost, may receive some reconsideration?
The Earl of GOWRIEMy Lords, I should be delighted to publish a Written Answer to any Question that the noble Lord wishes to put to me. As I said, one of our difficulties is that many gas contracts in this country as well as in Germany do not follow fixed rates—as the noble Lord appears to suggest—but are negotiated between the consumers and the suppliers. This, of course, is not a matter within the remit of the Government but is within the remit of the British Gas Corporation. However, I should be delighted to publish the figures that we have which show that there is no substantial difference between our own tariffs overall and those on the continental mainland.
§ Lord SKELMERSDALEMy Lords, is my noble friend aware that the glasshouse sector of the horticultural industry has been complaining for years about the 873 unfair competition between Holland and ourselves? Is this not something which the Treaty of Rome was set up to rectify, and can my noble friend say whether any discussions are taking place within the EEC forum to correct this unhappy state of affairs?
The Earl of GOWRIEMy Lords, we are continually sensitive of and continually working to reduce any disparities in fair competition between us and our trading partners, whether they are in the European Community or outside it. As to the horticultural industry at large, regrettably we cannot insulate it from dear energy costs. It will have to make that adaptation itself.
§ Lord BOWDENMy Lords, if the Minister is about to publish figures for the relative price of gas, could he similarly include those for electricity? The figures that I have recently seen suggest that the cost of electricity in this country is three times as great as it is in any large industrial city in America, with the sole exception of New York City itself. Furthermore, will he itemise the differential between the cost to domestic consumers and to commercial consumers? In most countries in Europe I believe that the price is in favour of industry; in this country it is in favour of the domestic consumer.
The Earl of GOWRIEMy Lords, as I said to the noble Lord, Lord Bruce of Donington, if, like the noble Lord, Lord Bruce, the noble Lord cares to put down a Question for Written Answer—and I would respectfully suggest that complex issues of tariffs are perhaps better published in the form of a Written Answer —I shall, of course, answer it. With regard to the United States of America —and this is my own view—it seems to me that America's failure at sufficient speed to adapt to dear energy costs is probably largely behind her inflation and her very withered currency.
§ Lord RHODESMy Lords, is the Minister aware that the fibres industry depends on oil as a basic raw material? If other countries have oil at prices below those available to us we are bound to lose out, and it will not be long before the fibres industry of this country is on its beams end.
The Earl of GOWRIEMy Lords, I do not think it is true to say that our European competitors are gaining where we are not, and certainly our own energy position is considerably more favourable in terms of supply than is theirs. However, we are all having to adapt painfully to dearer energy costs.
§ Lord RHODESMy Lords, will the Minister then substitute "American" for "European"?
The Earl of GOWRIEMy Lords, I think that the point which I would wish to make in respect of America I made in respect of the previous supplementary question asked by the noble Lord on the other side of the House.
§ Lord LEATHERLANDMy Lords, can the Minister say whether it is a fact that the British Gas Industry is making very large profits, probably of £500 million a year? If that be so, would it not be possible for the gas industry to reduce its prices both to industry and to the household consumer?
The Earl of GOWRIEMy Lords, ultimately the benefit of North Sea gas, as of North Sea oil, derives on this economy and this country as a whole. It is certainly true that in this aspect of our economy we are being very successful, and I hope that that continues.