Energy Costs: Relief Measures for Industry (Hansard, 29 November 1982)

§ The Earl of Lauderdale
My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

§ Lord Skelmersdale
My Lords, measures worth over £250 million were announced in the 1981 and 1982 Budgets to help industry with energy costs. They included action on gas, electricity and foundry coke prices. Over 100 of the largest electricity consumers have subscribed to the load management scheme introduced in the last Budget. Savings of up to 16 per cent. are possible and as a result many of the larger electricity consumers are paying little if anything more than they paid last year.
This month the British Gas Corporation has announced that the present price freeze on contracted gas supplies to industry will be extended for another nine months. And, following our review of electricity pricing policy, the Government have agreed with the electricity supply industry that the average level of electricity prices next year to all consumers should be the same as this year. These new measures have been warmly welcomed by industry.

§ The Earl of Lauderdale
My Lords, I thank the noble Lord for that comprehensive and interesting reply. Would he not agree that this signifies two things? Does it not show, first of all, that the new freezes may well save industry something of the order of £100 million a year and, secondly, that the Government are not as obdurate as is sometimes thought but in fact listen to the public?

§ Lord Skelmersdale
My Lords, I have never regarded myself as obdurate. However, the benefit of these latest measures which I have described is quite impossible to quantify, nor is it possible to put on them a figure of £100 million, as did my noble friend, as to a great extent they depend on the uptake by the energy concerns. However, energy costs are a significant proportion of many industries' costs and their reduction can only help to make them more competitive-something that we would all wish to see.

§ Lord Cledwyn of Penrhos
My Lords, would the noble Lord agree that there are some very important industries which, in order to remain viable, need electricity at rather below the average cost? Is he aware 1058 that the petrochemical industry and the aluminium smelting industry come within this category, and that the aluminium smelting industry is particularly important in terms of import substitution? While the assistance which he has now enumerated in terms is welcome, it is nevertheless not necessarily as magnanimous as his noble friend would wish to point out to the House. Can he say what assistance the Government are proposing to give to the industries I have mentioned?

§ Lord Skelmersdale
My Lords, help over energy prices is always considered by all Governments on its merits and is given to particular industries at particular times when the need arises. So fas as electricity is concerned, as I said in my original Answer, special electricity load management arrangements are designed to help large users who in return can offer the electricity supply industry some control of their electricity demands. Over 100 of the largest electricity consumers are able to benefit from the latest load management arrangements, which can produce price reductions of up to 16 per cent. The noble Lord must surely agree that this is a great help.

§ The Earl of Lauderdale
My Lords, would my noble friend agree that, with regard to supplying industries with cheaper electricity, it comes back to the price at which the CEGB can buy coal from the NCB? Does that not come back to the question of the Plan for Coal being fulfilled on its productivity as well as on its investment side?

§ Lord Skelmersdale
My Lords, large consumers of coal are, generally speaking, under long-term contractual arrangements, so it is not always the prima facie price that the various industries actually pay. However, I take my noble friend's point firmly to mind.

§ Lord Molloy
My Lords, can the noble Lord say whether or not this relief applies to the steel industry? If the Government are serious about the re-establishment of our industrial base, this would create a demand for British steel, and both the public and private sectors of British Steel could be assisted by the sort of thing that the noble Lord has adumbrated this afternoon. Can he say whether it applies to them?

§ Lord Skelmersdale
My Lords, I am not sure whether it applies to the steel industry directly, but certainly as a large user of electricity it would apply to them. However, the specific measure applying to the iron industry is of course the foundry coke subsidy, which has gone a long way to make the raw material of steel considerably cheaper.

§ The Earl of Lauderdale
My Lords, can my noble friend say whether there is any sign of agreement between the Coal Board and the Electricity Generating Board on the Coal Board's requirement that they pay something like 7 per cent. or 8 per cent. more on their next long-term contract?

§ Lord Skelmersdale
My Lords, I am afraid I have no up-to-date news on that.

§ Lord Cledwyn of Penrhos
My Lords, would the noble Lord make clear that the monies that are available are in fact to assist industry-and the House would of course agree that that is a good thing-but would he be good enough to answer my original supplementary question? Is he aware that there are very important industries in this country-important in terms of import substitution and important to the economy of this country at this stage-which need electricity at a slightly cheaper rate than the average? Two of them are the petrochemical industry and the aluminium smelting industry. Is the noble Lord able to say now whether or not the Government are making special provisions for those two industries?

§ Lord Skelmersdale
My Lords, I am not aware of any special provision, over and above the measures that I have outlined, relating to those two industries. However, my original answer to the noble Lord's supplementary still stands, that these matters are treated at the time that they are raised and on their merits.

§ Lord Irving of Dartford
My Lords, is the noble Lord aware that, welcome though the concessions are, the paper industry and other high energy users are still having to pay more for their energy than industrialists in America and indeed in some parts of Europe?

§ Lord Skelmersdale
Yes, my Lords. Ever since there has been a Motion on the Order Paper in the name of my noble friend Lord Boardman, I have taken this matter very much to heart.

§ The Earl of Lauderdale
May I ask my noble friend—

Noble Lords
No!

§ The Earl of Lauderdale
A final point, my Lords. Would my noble friend say whether the Coal Board, the Gas Corporation and the CEGB are still working on long-range marginal replacement costs as the basis of their decisions on prices?

§ Lord Skelmersdale
Not without notice, my Lords.

Lord Bruce of Donington
My Lords, would the Minister agree that the concessions which he has repeated this afternoon and which, as he said, were announced in the Budget are in the case of industry still far short of the artificial increases imposed by the Government at 10 per cent. above the rate of inflation? Would he agree that there is still a long way to go before prices are reduced to those which are termed to be within the control of market forces?

§ Lord Skelmersdale
I assume that loaded questions permit loaded answers, my Lords. The 10 per cent. to which the noble Lord referred was specifically for the gas industry for domestic prices, which has now worked its way through, for which we are all grateful. The reason for it, of course, was that the party opposite sought, rather unsuccessfully, to buy votes by this rather strange mechanism.