ECC 8th Report: The Rational Use of Energy in Industry

HL Deb 24 March 1983 vol 440 cc1286-321

7.3 p.m.

Lord Kings Norton rose to move, That this House takes note of the Report of the European Communities Committee on The Rational Use of Energy in Industry (8th Report, 1982–83, H.L. 83).

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper.

We have long been familiar with the expression "energy conservation" which broadly means reducing fuel consumption by applying economical methods in energy usage. The expression "rational use of energy" which is European Community usage covers not only the notion of conservation, but is aimed more broadly at putting available energy to more efficient use and so, by avoiding waste and applying the best technology, achieving higher productivity or higher standards or greater economy from a given energy input. In Community usage, RUE, as we have come to call it, includes also measures to reduce Europe's dependence on oil.

Whereas the Community documents relevant to the inquiry which has produced the report which I am introducing to your Lordships cover the whole field of energy consumption, your Select Committee and its Sub-Committee F which conducted the inquiry, restricted consideration to energy usage in industry. The use of energy in buildings has been studied exhaustively by a Select Committee in another place and the field of energy usage in transport in our view also requires separate consideration. We are therefore, in the report before your Lordships, dealing, so far as the United Kingdom is concerned, with about one-fifth of the energy consumed here, perhaps a smaller proportion than you might have expected, but a proportion in which rational use, or, if you prefer, economical use, is vital to industrial prosperity.

Consequently, your committee believe that RUE demands high priority in the United Kingdom and Community energy strategy. The current plenty in energy supply must not be allowed to induce complacency, not only because in the longer term oil and gas reserves will significantly diminish and even coal may become increasingly expensive to win, but because, even in industries where energy costs are low, achievable economies in usage can still make important improvements in profits. The Commission documents to which I have referred are reviewed in the report and they exhibit a sensible attitude to the energy problem. While an element in EEC policy is support for a variety of projects from EEC funds, the main thrust of the policy is encouragement to member states further to develop incentives and to expand investment.

The proposals in the EEC documents have in general been received sympathetically by member states. It is difficult to decide to what extent the national policies have been influenced by the EEC—probably very little, as the documents are recent—but there is no doubt that some of the national efforts, notably those of France, Germany and Denmark, are far more ambitious than our own. Once again, however, it is not easy to discover how effective they are proving. What seems undoubted is that United Kingdom performance in recent years has been inferior to that of most of the other member states. Fully to understand why this is requires study of the report itself, but noble Lords have to go no further than the summary of conclusions to understand the nature of the criticisms which the report is levelling at sections of industry and at Government. The summary of conclusions is at paragraph 72 and it is so clear and unambiguous that I feel that to recapitulate it would be superfluous.

I feel also, however, that some parts of the conclusions will bear emphasis, particularly those parts where clear-cut steps for improvement are proposed. Perhaps the most important of these is under head (j). In paragraph 16 is the bald statement that because the Government's activities are carried out in a dozen different Government departments, they do not form a coherent programme, and the evidence to Sub-Committee F led to the unusually strong words with which paragraph 53 starts, and which I feel I must quote: The Committee support the widely held belief that UK Government measures to promote RUE are neither effectively led nor focussed. Stronger co-ordination is needed to correct the impression that undoubtedly prevails in industry of half-heartedness and fragmentation of responsibility. There should therefore be one single central agency with overall responsibility for RUE, including coordinating the tasks at present scattered through many government departments.". The paragraph continues in elaboration of this recommendation, saying that the new agency should not be a strengthened conservation division of the Department of Energy, and that it should indeed have authority and independence in the same degree as the Health and Safety Commission has.

Now, when that recommendation was formulated Sub-Committee F was not aware of the conclusions of the Rayner scrutiny on the way in which the Government handle energy conservation. By the time its own inquiry was complete, my sub-committee had for some weeks been eagerly awaiting the publication not only of the Rayner conclusions but of the Armitage-Norton report on the reasons for industry's poor performance in energy conservation, and of the Government's reaction to the report from the Select Committee in another place on energy conservation in buildings. It proceeded to publish the report before your Lordships, without the benefit of these documents, which indeed have still not been published. The report of the Rayner scrutiny, which was conducted by Dr. Finer was, however, made available to the sub-committee about a fortnight ago. While a great many of the conclusions of the Rayner scrutiny are outside the purview of today's debate, the most important proposal is of the same character as our own recommendation of the creation of a new agency. In paragraph 3.2 of his report, Dr. Finer writes: I propose the formulation of a new Division of the Department of Energy to be named the Energy Efficiency Office". This office would appear to have the same central and co-ordinating terms of reference as we had in mind for our proposed new agency, but it would not have the degree of independence we believe is required.

In our report we say in paragraph 53 that: it is not enough merely to strengthen the Conservation Division of the Department of Energy". That appears to be what Dr. Finer proposes should be done.

Your Lordship's Select Committee's inquiry and the Rayner scrutiny both conclude that a new central organisation is required, but the latter sees it as an office within the Department of Energy and the former sees it as an independent body outside the departments of state. I hope that the noble Earl, Lord Avon, will be able to tell us how Her Majesty's Government see it. As I see it, on this major and fundamental issue the Select Committee and the Rayner scrutiny are, in principle, at one. As I have said we differ in the degree of independence in the new agency we both ask for, but we agree that the present administrative situation is not good enough and should not he allowed to continue.

This agreement extends beyond the Select Committee and the Rayner scrutiny to a report of the House of Commons Select Committee on energy conservation, to which I have already referred. The case for change to a central and co-ordinating agency is overwhelming.

Another part of our conclusions to which I want to refer is the attitude in industry to energy usage. If noble Lords had had time to examine the voluminous evidence which Sub-Committee F received, they would have discovered that, while it was clear that some companies, notably the larger organisations, followed effective energy conservation policies, and while some industries—we were much impressed by the brewing industry—had made notable strides forward, the criticism of conclusion (c) that there is widespread ignorance in British industry of the benefits of RUE is unfortunately justified. This cannot fairly be laid entirely at the Government's door, and a greater and more effective effort is required from industry's own agencies, the research associations and the trade bodies.

Indeed, turning to conclusion (k) there is, too, in existence a branch of the Department of Industry—that of the regional energy conservation officers—which does an excellent educational job within its severely circumscribed limits. The committee considers that there are too few of these excellent people—there are eleven of them—and states in paragraph 55 that a modest strengthening of their ranks, in terms of officers and supporting staff, would enable them to reach far more companies than they do now.

I have already said that I do not intend to comment individually on the 13 conclusions of the report. I have spoken on three of them. To do more in these introductory remarks would be an unwarranted absorption of the time of the House. Nevertheless, I hope that noble Lords will, between them, underline the importance of these conclusions and that the noble Earl, Lord Avon will give us the Government's views on them all.

In conclusion, I want Her Majesty's Government to know that we who were concerned with the preparation of the report that I am now presenting to the House are well aware that we have been unusually plain spoken in our criticisms. We feel, however, that the rational use of energy is so vital a component in industrial efficiency, and hence in national prosperity, that to have been otherwise would have been to fail in our duty. My Lords, I beg to move.

Moved, That this House takes note of the Report of the European Communities Committee on the Rational Use of Energy in Industry.—(Lord Kings Norton.)

7.15 p.m.

The Parliamentary Under- Secretary of State, Department of Energy (The Earl of Avon)

My Lords, I welcome this report on the rational use of energy in industry from the Select Committee on the European Communities. It is an important contribution to a subject that we think is equally important. The Government share the report's concern—underlined so ably this evening by the noble Lord, Lord Kings Norton—to improve the efficiency with which our society uses energy. Indeed, encouraging efficiency in the use of energy is an important feature of the Government's energy policy.

Our concern with energy efficiency reflects our general concern to improve efficiency throughout all sectors of the economy. Energy policy cannot be considered in isolation but must contribute to our overall economic aim—that is, to revitalise the supply side of the British economy and to create the right framework to enable industry to perform and compete more effectively both at home and abroad.

Our task in relation to energy is to set a framework within which the energy market operates with the minimum of distortion, so that market forces themselves ensure that energy is produced and consumed efficiently. The economic pricing of energy is a central element in this approach, and I welcome the commitee's conclusion in its report that realistic pricing is essential in promoting the rational use of energy.

There are those who question our commitment to improving energy efficiency on the evidence of the present organisation of the Government's energy conservation effort. While I believe that some of the criticisms are overstated, I regard the fact that the Government commissioned the Rayner scrutiny into how our energy conservation effort is organised, and commissioned the Armitage-Norton study of energy conservation investment in industry, as proof of our commitment to energy efficiency.

I see—as the noble Lord, Lord Kings Norton, has drawn to our attention, too—that one of the main conclusions in the summary of this report, paragraph 72(i), bears directly on the organisation of Government effort on conservation, which is the subject of the Rayner scrutiny.

The Government are currently considering this report. It encompasses subjects which touch upon the interests of a number of Government departments and it requires careful study. I am unconvinced that creating an agency outside government is the best solution. The Government hope to reach decisions on the report soon. They will then publish their response.

With characteristic modesty, the noble Lord, Lord Kings Norton, remarked that the committee had restricted its consideration to energy usage in industry. The report that the committee has prepared is, I believe, a wide-ranging one, touching on many important questions. Let me, by way of introduction, make some remarks about the wider questions which the report mentions. The title of the report is The Rational Use of Energy in Industry. I mentioned before that the Government recently commissioned a study by consultants into the question of investment by industry in energy efficiency. The study is really a management tool for those involved in conservation policy in Government. We intend to publish it at the same time as we publish our response to the Select Committee on Energy's report on energy conservation in buildings.

Although the last few months have seen a number of reports on energy conservation and efficiency, from our point of view, and from the point of view of our department, it has also been a time of action. Indeed, as far as Armitage-Norton is concerned, we have action in hand on the three main barriers to investment in energy efficiency which that study identified. Those barriers were, first, that many firms seemed unaware of, or unwilling to use, the technical knowledge and advice available; secondly, that many firms did not have procedures to enable them to monitor their energy use; and, thirdly, that industry tended to give investment in energy efficiency a relatively low priority in comparison with other investment or cost-cutting proposals.

We have work in hand on all these points. On the first, technical knowledge, the Government see information, advice and encouragement as key elements in their energy conservation policies. They promote these through their network of Regional Energy Conservation Officers, their free newspaper Energy Management and a whole range of schemes designed to improve efficiency in energy use; for example, the Energy Conservation Demonstration Projects Scheme and the Energy Survey Scheme.

On the second point, monitoring of energy use, I share the view expressed in paragraph 29 of the report, that this is a particularly important area—and for this reason it is one of the priority areas in our conservation activities. For instance, last June, my predecessor opened a conference held at Centre Point on Monitoring and Target Setting. This conference was in conjunction with the CBI. The Department of Energy has set aside £½ million per annum over the next four years to aid activities in this field. There are proposals for pilot studies and in five cases work programmes are in progress—in close co-operation with the trade associations concerned. The result of the pilot studies so far is encouraging. Indeed, Armitage-Norton consultants found that even companies with a rudimentary system of monitoring energy use had a markedly better record in energy management than their competitors.

To come to the last of these three points raised by the consultants, the best way to redress the priority which industry gives to energy efficiency investments is to involve senior management in energy efficiency so that they can see the real financial benefits which are there for the taking. We are already in touch with the CBI on this whole question of senior management involvement. I warmly endorse the statement in paragraph 59 of the report, which emphasises the important role which representative bodies of industry, such as the CBI and trade and research associations, have to play in increasing awareness among companies of the opportunities to improve efficiency of energy use.

Over recent weeks, I have spoken to a group of senior managers in the CBI's regional organisation, to one trade association in Manchester, to one in London this morning and to another visiting our research unit at Harwell. I know therefore from my own experience that the CBI has this basic message of information and advice very much at heart and co-operation is close. In addition, the Government have mounted an advertising campaign directed at industrial energy conservation, with a booklet entitled Realising Better Results With Energy. It is specifically designed to reach industrial management.

I should like to explain how Government schemes fit into industrial energy conservation with two examples. I see that the Sub-Committee took evidence from the Energy Technology Support Unit about the Energy Conservation Demonstration Projects Scheme. They will, therefore, appreciate what we are trying to achieve through this scheme. The aim of the scheme is to encourage the widespread adoption of technologies which lead to the more efficient use of energy. It does this by demonstrating their technical and economic effectiveness in practice and by encouraging replication of successful proposals. So far 222 projects have been approved and are expected to proceed. Of these projects. 110 are now operational. It is early days yet, but so far 315 replications have taken place, spread over 35 of the projects in 303 companies. A major publicity campaign to publicise the results of the projects which we are funding is under way. In 1982, nine open days and 35 exhibitions were held.

Another scheme to promote efficient use of energy is the Energy Survey Scheme. This provides financial assistance towards the cost of employing energy consultants to identify potential energy savings in industrial, commercial and public sector premises. So far, over 60,000 applicants have been reimbursed for short one-day surveys. The savings identified through these surveys are estimated to be worth over £10 per annum for every £1 of Government money spent. In addition, over 2,000 applications for extended surveys have been received. The recommendations in these extended surveys also include changes to capital plant and equipment and the savings identified here are even greater.

If I may come briefly to comparisons with Europe, I know that Sub-Committee F takes a poor view of the United Kingdom's performance in comparison with that of other countries. I should like to mention one published review of the International Energy Agency. This is the 1981 review, Energy Policies and Programmes in IEA Countries. It looked at the United Kingdom's position, again in comparison with that of other countries, and it concluded that the United Kingdom's record of achievement in reducing energy and oil consumption in recent years reflects a high level of success in policy measures adopted thus far". I recognise that this is about consumption, but that, too, is a strong aim of conservation. The lesson to be drawn is that international comparisons in this field are difficult to make, and we should take care before selling ourselves short by ignoring what we have achieved. We should see our present position as one on which to build.

The IEA's review laid particular emphasis on our realistic policies on energy pricing; and, indeed, the Sub-Committee's report, as I mentioned earlier, rightly, we believe, recognises that realistic pricing is an essential element in any policy to promote rational energy use. We have supported the principles of economic pricing and price transparency enunciated in the European Community, and share the Committee's wish that the Commission should continue to monitor effectively energy pricing in the Community. What is important is that the market should be free from distortion, so that price signals are as clear as possible. As the Committee acknowledges in paragraph 72 (f), the Government can have no special knowledge about the future market movements on which prices will depend.

I know that the Committee looked at comparative energy prices. The recent CBI report on energy pricing shows that it is not the case that British industry has to pay more for energy than its competitors. Gas prices are in line with the EEC for firm contracts, and interruptible United Kingdom users indeed have a price advantage. The vast majority of United Kingdom industrial electricity users face no general price disparity except, along with every other European country, against the French. Only a small minority of high load factor United Kingdom electricity consumers can find themselves at a disadvantage.

I was interested to see the Committee's conclusion that the energy supply industries should increase their efforts to promote energy saving by their customers and I generally endorse this conclusion. I share the scepticism of the Committee about the need for a statutory conservation duty. But we shall be seeking discussions with each of the state fuel industries to review their current energy conservation activities and the scope for extending them.

I know that the Committee were impressed by some of the high savings in energy achieved by some individual firms. Paragraph 29 of the report refers to this. My experience so far, as Minister in this department, confirms this impression. I can see why the Committee concluded that it is difficult, during a recession, for companies to find the necessary resources to invest in energy efficiency. This was a conclusion in paragraph 72 (i). But the significant savings are still there for the taking, and often this can be exploited without sizeable capital expenditure. And investment in energy efficiency projects can generate important income within a company and exert a multiplier effect on all operations.

Last week, I visited the Principality of Wales. I spent time with the Wrexham Lager Beer Company, with Monsanto and visited the Clwyd Council—and I spoke at a seminar "Profit from Energy Management" as part of a Welsh Energy Awareness Week organised by the Welsh Regional Energy Conservation Officer, who, incidentally, gave oral evidence to the Committee. During my visit, I was told that the energy saving measures which Wrexham Lager Beer Company had taken over the past six years were now yielding savings of £67,000 per annum. At Monsanto, I was told that the group set itself two targets on energy efficiency. One was to achieve in 1979 a 25 per cent. reduction in energy efficiency compared with 1972 in one year. This goal was achieved so quickly that a second target was set: this was to achieve a 35 per cent. reduction in energy rate compared with 1972 by 1985—The management team is on course for that target, too. One of the speakers who followed me at the seminar reported that an investment of £155,000 in energy efficiency in improving a muffle furnace (this was supported by our demonstration project schemes) was yielding savings of £ 100,000 a year in reduced fuel and labour costs. Indeed, the company were so pleased with the investment they had made that they intend to replicate the project.

The opportunities, then, are there, and it is important that companies should be fully aware of them. I was interested in the committee's conclusion that company annual reports should give information about energy use, In fact, the Government have invited companies to state in their annual reports their expenditure on fuel and the steps taken to save energy. I hope companies will make this move. I hope it will not be necessary to make it a statutory requirement.

I am grateful to the House for allowing me to make these remarks by way of introduction—this seems to be a new form—so that the committee and the House can follow the Government's views, rather than having to wait until the end. I hope the House will find this to be satisfactory. The committee's report has raised many fascinating issues and I look forward to an interesting debate. By leave, I shall try to answer some of the specific points raised at the conclusion of the debate.

7.32 p.m.

Lord Lovell-Davis

My Lords, first I should like to congratulate the noble Lord, Lord Kings Norton, and his colleagues on Sub-Committee F on the full and careful report which is before us today. At the same time, since there is always a need to justify the continuing existence of this House, I should like to underline the value of the work carried out by the Select Committee on the European Communities and its sub-committees. There is no other body at Westminster which undertakes the close and detailed scrutiny of the variety of proposals and draft legislation which pours, like a paper flood, from Brussels. And I doubt whether there is anywhere such a reservoir of experience and expertise to stem this flood and calmly analyse its contents. It is a function of this House in which we can take some pride. Members who regularly visit the Commission in Brussels and the European Parliament will also know that the reports which emanate from the Select Committee command attention and respect. I sometimes feel that we, and our colleagues in another place, undervalue this special contribution that Members of this House make to our membership of the Community.

Having said that, what this report has to say is appalling. Just examine the first three of its main conclusions: RUE deserves much more priority in United Kingdom energy policy". United Kingdom performance in RUE falls short of other EEC countries and far short of the best". There is widespread ignorance in British industry of the savings which RUE can make. British management's performance here is depressing and disturbing". I believe it is true to say that before the welcome appointment of the noble Earl, Lord Avon, I was the last Minister from the Department of Energy in your Lordships' House. I did not last very long. Some of us up here do not. But while I had the job I could speak directly for the department, as I feel sure the Minister is speaking for the department tonight, although I am not greatly encouraged by what he has said so far. I took up my post hard on the heels of the 1973–74 oil price crisis which precipitated so many of the world's economic problems. My instructions were to get a new energy conservation programme on the road. With the help of some very capable people in the department, that is what I did. We showed that it was possible to save a great deal of our energy resources and, therefore, money. Unfortunately, subsequent Governments seem not to have recognised the need for a continuing RUE programme as an essential component of energy policy. The steam was allowed to go out of it. Consequently, this country has gone on wasting probably billions of pounds worth of its resources and signally failing to evolve an integrated energy policy.

Early in 1979 I had the honour of chairing Sub-Committee F for an earlier look at energy conservation in the European Community. Our report, published in June of that year, was a slim volume. It had nothing like the substance of the RUE report which we are now considering. However, it did point out that, Progress since 1974 has been slow and the committee believe that this must to some extent be linked to the low priority accorded to the RUE programme and to the limited resources allocated to it". In commenting adversely on the progress of the RUE programme we stated that, Energy conservation, which will soon become a matter of continual rather than sporadic urgency, depends above all on changing social attitudes". I invite your Lordships to compare the recommendations of our 1979 report with those of the 1983 report, particularly if noble Lords want yet another depressing example of why this country is where it is today. Not much seems to have happened. Somewhat disturbed political characters, such as the Secretary of State for Employment, seem to be of the opinion that most of our industrial ills stem from the activities of the trade unions. I commend to his attention the conclusion of this latest report: that, there is widespread ignorance in British industry of the savings which RUE can make and that, British management's performance here is depressing and disturbing". I think the right honourable gentleman could make a more helpful contribution to our national well-being if he accepted the fact that our troubles more often spring from the ignorance and inactivity of management. RUE, for instance, is not something which blooms on the shop floor, with workers remembering to switch off the lights. It is a management responsibility—a responsibility to plan wisely, to set out and implement proper schemes to ensure the efficient use of energy.

The really depressing reflection in all this, and the reason I refer to past events, is that a decade has passed since we ran into the energy crisis and we seem not to have advanced very far along this particular road. In fact, we have regressed to the point where other member states of the Community, who used to send representatives over here to learn from us about RUE, now draw attention to the fall in the relative resources being allocated to energy efficiency by the United Kingdom.

Moreover, as the report says, The United Kingdom's conservation effort is fragmented and, Government policy lacks thrust and focus". No one would pretend that it is easy to quantify the saving on demand and resources which would result from higher levels of energy efficiency. But, as the report points out, some industries have established targets for energy saving, with systems for monitoring, and have achieved "substantial savings". It is worrying, to say the least, at a time when there is grave public concern about the nuclear reactor programme, which in the United States has led to a cutting back of their programme and in our case is reflected in the Sizewell B inquiry, that no one seems to have any clear idea whether or not investing vast sums in even one reactor or, for that matter, a fossil fuel station is as cost effective as investing a similar sum to achieve much more efficient use of energy.

However, to turn to the specific recommendations in the report, pricing policy is fully covered and, apart from saying that I agree with much, if not most of the sub-committee's comments and conclusions, I shall not cover that area. What I should like to do in the remainder of a speech of, I hope, approximate brevity for this particular day and hour is to focus upon two of the conclusions reached by the sub-committee. The first I have already mentioned. It is that, there is widespread ignorance in British industry of the savings which RUE can make and that, industry should share with Government responsibility for encouraging energy efficiency". The current recession is no sufficient reason for firms not to invest in energy saving, as the noble Earl the Minister has just pointed out, because such a wide range of schemes is available, from simple, low cost, housekeeping measures through to more ambitious, longer pay-back projects.

The point is that awareness of the benefits of making efficient use of energy must be raised: that industry must be made aware of the benefits to be gained for themselves by using energy efficiently. People—and this goes for the domestic consumer as well—have to become energy conscious in their own interests. That is the first step and it has not been taken decisively enough by Government. It can be done by putting more money into more effective, better directed publicity and promotion (using examples of companies employing best practice and improving their profits, similar to those mentioned within the confines of this House by the noble Earl the Minister), perhaps by introducing special and attractive awards, certainly by making the qualifying conditions for Government schemes less restrictive and cutting out the delay in processing applications, by redeploying existing resources, and by getting a new drive into a simpler range of short training courses in energy management.

All this depends on the Government taking a fresh initiative and, considering the vast potential for savings on our energy bill and for helping to resolve our overall energy problems, this must be given high priority. As the report says, There must be more evidence of political will, and of commitment via the Government to promote RUE". The second point referred to in part 7 of the report under the heading "How to make better progress", is the committee's recommendation that there should be created one central agency with overall responsibility for RUE, drawing together and co-ordinating the activities and tasks at present inefficiently and ineffectively spread over a whole band of Government departments. The reason for doing this is so self-evident that I shall not labour the point. Suffice it to say that shortly after the "Save It!" campaign was launched in 1974 and 1975, it became clear that other departments which could be called to account in terms of energy saving were busily setting up their own individual schemes and fall-back positions. They did so largely, I suppose, because in the tribal society of Whitehall they were not going to tolerate aliens from the Department of Energy invading their territory. The results were predictable and the report rightly comes out strongly for centralising responsibility and a new body powerful and independent enough—as the noble Lord, Lord Kings Norton, has emphasised—to do what is needed. I am glad to hear from the noble Earl, Lord Avon, that the Government are considering this recommendation—I hope more favourably than he seemed to imply.

Having tried for some years now to make a contribution to the more efficient use of energy at all levels, your Lordships will understand why, although this report addresses itself to industry, I find it hard to resist the opportunity to stress again the case for the ordinary domestic consumer, particularly in these desperate times. Fuel costs bear heavily on the poor, millions of whom live in badly insulated homes which are often equipped with expensive heating systems. A recent paper from the National Consumer Council pointed out that illness, bad housing, or the need to spend most of the day at home—for instance, in the case of people with young children, the unemployed, the permanently disabled and the elderly—can lead to high fuel consumption and literally terrifying hills. Yet it is these people who have responded least to the opportunities offered by the 1978 Homes Insulation Scheme.

More also has to be done to help them, either by improved methods of publicity and information, with more generous financial incentives and improved loan facilities, or by launching a comprehensive direct insulation programme which, in itself, could create employment. Not to take action at this level too is not only to continue wasting our energy resources but our human resources as well.

This report is the most important and certainly the most comprehensive on this subject to have been recommended to us for debate. I hope that the Government and industry will accept the validity of its comments and act decisively upon its recommendations. The problem has been with us for many years and we are not making enough progress towards resolving it. It will not go away or become less urgent, and we shall seriously handicap ourselves if Governments continue largely to ignore it.

7.45 p.m.

Lord Tanlaw

My Lords, it was a privilege to serve under the noble Lord, Lord Kings Norton, on his committee and be a part of this report. Congratulations are also due—and other noble Lords have given them—to the staff who made this report not only readable but also a very important document. I was particularly pleased to hear the noble Earl the Minister, in his opening contribution to this debate, make reference to company reports and the fact that there should be some mention of energy saving made in them. On the quéstion of the statutory prompting of companies to do this, I had a slight disagreement with the Committee because I thought companies would not do so and that this requirement should go straight on to the statute book. But as the noble Earl has said that he will persuade companies, I shall be happy merely to hear those words at this early stage.

I was most impressed by the other parts of the noble Lord's contribution. It was almost a litany of conservation. As the noble Earl continued I could almost see an aura glowing every time that conservation was mentioned, with all the good and wonderful things which the Department of Energy had done. I believe that the noble Earl went a little too far when he used the term "300 replications". I have no idea what this means, but if it is a polite word for repeats, will he please say so? Or is this a Euro-word or a departmental word? It should be abandoned rather quickly whether it concerns this subject or any other, hut maybe he can persuade me to incorporate it later into my vocabulary.

Conservation is regarded by most people—and certainly this seems true if one looks around your Lordships' Chamber now—as being rather a dull subject. Those of us who have taken part in this report know that that is not the case. Those who have actually gone so far as reading this report will have seen that it contains not only interesting but also extremely surprising evidence which is relevant to the economy as a whole.

Witness after witness reported on the poor state of British industry and the difficulty of looking to the future with confidence. It was also said that there was a lack of understanding by Government and by Government departments as to the reality of the harshness of the economic situation from which industry was and still is suffering. I believe that their worries were made so great in regard to the finding of work for their workforces, that energy saving appeared to come rather low on their list of priorities. As one witness said, to sum up this general attitude: When the ship is sinking, you do not bother overmuch about how efficient the engines are. To me, this was a very significant statement and summed up a great wealth of evidence on the worry and concern that industry has about its position—let alone towards its attitude towards energy as a whole.

To me personally, and to other noble Lords who sat on the committee, this aspect came as something of a shock and surprise. I say that because even in the past two or three weeks, much of the media, the CBI and indeed the Conservative Party political broadcast last night have given the impression that the economy is once again on the way up and the recession is ending. If one looks at the evidence in this report, one finds that is not the case for 1983. I run two engineering companies, and from my own experience this is not the position as I and my workforce see it, with some of the lowest order books we have ever had in history, which are dependent on the backbone of British industry—British steel, the British coal industry and so on.

It is therefore no surprise to see in the business section of The Times today the chairman of one of our largest companies, which is involved in the forefront of technology and whose company would be one of the first to benefit if there were an end to the recession, is saying, there is no sign yet of any upturn in our manufacturing businesses at home or overseas". I think that that is one point that should not be forgotten and that this report should be seen in the context that industry is still in recession and there is not much hope of doing much conservation when industry is having trouble with survival.

I would just want to mention the question of pricing, which has already been raised. On my desk today there is a paper from none other than the British Manmade Fibres Federation, the British Independent Steel Producers' Association, the British Paper and Board Industry Federation, the British Steel Corporation, the Chemical Industries Association, the Glass Manufacturers' Federation and the National Federation of Clay Industries. That is a pretty broad cross-section of British industry, and they are far from happy with the present pricing of energy to their respective industries. Perhaps I may quote, to remind the noble Lord the Minister, who I am sure has received this document. It ends up by saying: The continuation of the present uncompetitive UK pricing policies of electricity will inevitably result in further contraction of these industries we represent and the transfer of the jobs they provide to our European competitors. We again urge the Government to take rapid corrective action before it is too late". They are saying this now; this is not something that has not been said before, because the situation has not changed. Therefore, it is rather in conflict, if I may say so with the utmost respect, with what the noble Earl has been saying in his introductory remarks. I would just hope that he will also bear in mind that British industry has had to look to exports to survive. The home markets are just not there. There has been no Government stimulus to the economy. Exports depend on competitive pricing, and, in those industries I have mentioned, that means competitive energy prices, and they are complaining that it is not there at the moment. I hope the noble Earl will bear these thoughts in mind and reconsider some of the pleas put forward by these particular industries.

I want to come on to another point to which the noble Lord, Lord Kings Norton, referred: the conclusions regarding what should be done with energy conservation. The conclusions were the same as those reached in the Rayner Report. I suppose one could say that a conclusion is that one should make rational use of civil servants in energy conservation in the same way that one makes rational use of energy in industry. The evidence given to us, and indeed to the Rayner Committee, was that there has been an irrational use of civil servants across the departments. Their energies have been dissipated and diffused, and in some respects have been unproductive. Therefore, I very much welcome the conclusions made in the report, and I hope that they will be pursued. I am also very pleased to see that the Rayner Report came to exactly the same conclusions.

Perhaps I may move on to one point which was touched on by the noble Lord, Lord Lovell-Davis. It refers to the embarrassing question of leaks from Government departments. This is the second debate in which I have spoken in this House in the last month where I as a parliamentarian was one of the last people to see the report. I referred first to the Serpell Report, where parliamentarians seemed to be left behind, and I now refer to the report published in the Guardian, emanating from the Department of Energy but suppressed by the right honourable gentleman the Minister himself. Therefore, we cannot discuss it in your Lordships' House. This was touched on in the evidence put before the Committee from the Association for the Conservation of Energy, and it concerns the point raised by Lord Lovell-Davis: would money be better spent in conservation rather than in energy supply?

This is a very big matter of philosophy and of policy. At least we should like to have some facts as to what is the difference between investing in a nuclear power station or using a similar amount of money in terms of energy conservation. Inside the Department of Energy is a clear-cut report which in fact gives the figures and gives the conclusions. We do not have access to that report, except a doctored version, report DN/S3/NE, which does not really answer this question, for the simple reason that its conclusions are that the efficiency of investment of this kind, in respect of energy supply or energy conservation, must be judged on its benefits to the Exchequer. All I am asking the noble Earl is to look a little wider than this, as he is a Minister for Energy. We have a very major unemployment problem in this country, and we perhaps have less need for as many power stations as had originally been thought.

So I do think this is a moment for the Government to consider this in a little more detail than they have done, or to take the report I have just quoted a little further along the road to see whether or not there is a wider social benefit as well as economic benefits in investing more in conservation of energy rather than in the supply of energy. I think this could be of particular relevance when the alternative is to import another technology, a foreign technology, and to build a nuclear power station, for instance, of non-British design. I believe this has some further distance to be argued than has happened so far before we from these Benches are going to be completely convinced by the Department of Energy's attitude that it is of no benefit to the country or the taxpayer to spend more on direct investment in energy conservation. I would hope that this argument can be kept going and is not going simply to be closed at the end of this debate or at the end of this report.

There are many other points that I should like to touch on, but I feel at this late hour it is best to listen to what other members of the committee have to say, and hope that the Government response will be somewhat better than that which was referred to in the Rayner Report as lack of Government commitment. What we should like to hear when the noble Lord the Minister answers is that there is not a lack of Government commitment, but that there should be more Government commitment to energy conservation as it relates to industry.

7.57 p.m.

Lord Nelson of Stafford

My Lords, may I also add my congratulations to the noble Lord, Lord Kings Norton, for this excellent report and the study which lies behind it. I think it is an extremely valuable contribution at the present time and obviously should be studied by many people, judging by its conclusions. I also valued very much the comments from my noble friend Lord Avon on the Government's action so far on what appears in this report, and I am glad that they are showing a full awareness of this problem.

I would like to make one or two brief comments on certain features of this report. First of all, I would express surprise, as other noble Lords have done, at the conclusions of this report, in which it speaks very harshly of industry's approach to this particular problem. I wonder where this information all comes from. There is reference here to the Armitage-Norton Report. I do not think that that has been published yet, or if it has it was only very recently, so we have not seen it and we cannot see where its information comes from. I have seen a reference in one of the technical journals that it arises from a study of 128 firms, which seems a pretty small cross-section on which to have come to a sweeping conclusion as to what is happening in the whole of British industry. However, I can only conclude that the committee has given very careful consideration to these factors in that they endorse these criticisms, and therefore we must obviously take them very seriously. I took them seriously enough to make some inquiries in my own company as to exactly what the position was on this question.

We set up a special task force some 10 years ago to investigate this exact problem. These are the results which I found. The saving on energy consumption in our particular operation, which is a pretty countrywide engineering operation, shows a saving, taking into account changes in manufacturing activity, of some 27 per cent. over the 10-year period. That seems to compare very well with what is recorded in this report for other countries. Over the past five years our saving has been some 14 per cent. So I can only conclude that we must be one of the brighter spots referred to in this report. I should like to feel that there are other brighter spots because I do not think we are in isolation bearing in mind the pressure on industry to control costs.

I do not entirely go along with the views that have been expressed that because industry is hard pressed it cannot afford to conserve its energy costs or for that matter any other items of cost. All my experience is that hard times intensify the effort to reduce costs—hence my own experience in my own company on this particular aspect of energy saving.

My examination also revealed one or two other interesting features in which I think noble Lords might be interested. During this period our consumption of solid fuel has gone down, as a percentage, from 9 per cent. to 6 per cent. Oil fuel has gone down from 22 per cent. to 20 per cent. Electricity has gone down from 56 per cent. to 51 per cent. and gas has gone up from 12 per cent. to 22 per cent.—a tremendous swing over that period to gas which has been brought about by the need to switch fuels in order to get the maximum economy in energy use.

I draw your Lordships' attention to the high proportion of electricity. Even with the savings, over 50 per cent. of our energy consumed is in the form of electricity. To put that in its context I must tell your Lordships that we are talking about an energy bill of £40 million-odd a year, so we are not talking about small money. This question of the price of electricity is, therefore, an extremely important factor, not only in my own case, but, I am sure, in other cases as well.

Reference has been made in this debate and in the report, very wisely in my opinion, to the need for realistic pricing and the need to keep energy costs down. I draw attention to the fact that the chairman of the Central Electricity Generating Board, in his 1981–82 report, stressed the urgent need for an overhaul on coal pricing structures and for relating prices to the cost of production from individual sources. This is the main element in the electricity price to which I have already referred. The coal-fired stations of the CEGB produce, I am told, some 83 per cent. of the total power despatched, and of the cost of that energy well over 60 per cent. is, in fact, the cost of the fuel—in this case, coal. Therefore, the question of realistic pricing of coal is extremely important and the CEGB drew particular attention to the need for realistic pricing and, I quote the chairman's words, relating prices to the cost of production from their individual sources". Energy is a very important part of industry's costs. Therefore, its price is very important to the competitiveness of its products and, therefore, to stability of employment in industry. I think every step must be taken not only to save energy but also to get the cheapest possible energy in industry.

I should like to make one or two other comments on items in the report. There is a reference to the performance of the French which I find very puzzling. It refers to a saving of 15 per cent. as compared with the United Kingdom's 5 per cent. These figures do not seem to gel at all and my noble friend Lord Avon confused the matter in my mind even more when he referred to the International Energy Agency review which did not seem to agree with these figures either. I ask the Government whether this should not be looked into? Is it not possible to make inquiries in France on how they achieved these savings and the methods employed? What were the incentives and what was the cost? Perhaps we could learn something out of that if it proves to be the case that they have done so much better than we have.

I support the reference in the report to the question of competitive energy pricing for bulk users. I listened with great interest to the reference to competitive energy prices with our competitors on the Continent by my noble friend Lord Avon. I have heard it said before that there is some doubt being expressed as to whether our energy prices are the same as theirs, but on examination I am told they are except in this case of bulk users of energy. Is this not something that should be looked at? We are an energy-rich country. We have coal, oil and gas and yet for some reason or other we shy away from making it attractive to have high energy consuming industries in this country.

I ask the Government whether they should not look at this again. Energy consuming industries produce materials which are otherwise imported and this is, therefore, an important element in our balance of trade. They also employ people, many of them in remote places where many of the energy consuming industries are located, and that itself is important. Thirdly, energy consuming industries also purchase much plant and employ high technology, both of which if developed in this country could help our exports to other countries who are utilising similar plants. Therefore, I ask the Government whether that also is not something which should be looked at again. I hope that the Government will be able to tell us something of their views on this matter.

8.7 p.m.

Lord Kearton

My Lords, I should like to follow my noble friend Lord Tanlaw in saying what a privilege it was to sit on Sub-Committee F under the chairmanship of the noble Lord, Lord Kings Norton. The noble Lord is a very shrewd chairman with a gift for getting the very best out of his witnesses and keeping his colleagues under the closest of close control. He also shows remarkable talent in drafting reports. The report which the House is at present debating is one of the best written and most succinct reports that the House has had the privilege of receiving.

I should also like to say how much I welcome the apparently new custom of the Minister giving an indication of the Government's position at the start of the debate. We are all extremely pleased to see the noble Earl, Lord Avon, here in his capacity as Minister at the Department of Energy. We very much hope that he will think on what is said in this report and perhaps come to rather more vigorous conclusions than the opening statement with which he regaled us.

The main conclusions of the report are set out in paragraph 72 and comprise five statements and eight recommendations. These statements and recommendations are based on the very wide range of evidence received, both written and oral. These statements and recommendations are worthy of your Lordships' very serious consideration.

The committee's investigation was based on a number of Commission documents which are listed in a footnote to paragraph 1 of the report. I think it is fair to say that the committee found itself in general agreement with the thrust and purpose of all the Commission documents, as did the witnesses, with regard to the use of energy in industry. Some of the Commission's proposals are well in line with the Government's present activities in the energy conservation field and in the rational use of energy, and others of their proposals, in essence, call for an extension of such activities and therefore should be well received by Her Majesty's Government.

With my noble friend Lord Nelson of Stafford. I do not think the achievements of industry and of Government to date should be understated. They have led to savings in the use of energy which are difficult to quantify exactly but which must currently be in the range of £150 million to £200 million a year and probably amount to well over £1 billion since the campaign started. It is clear from the evidence that some of the larger businesses in this country have been most vigorous in their pursuit of energy savings. I am happy to say that the company with which I had the honour once to be associated has done almost as well as that which Lord Nelson adorns. We set up our energy management scheme back in 1974. I think that the company in fact spends more on energy than Lord Nelson's company and has made correspondingly larger savings.

It is quite clear that the appointment throughout industry of energy managers with wide remits has been most beneficial, with resulting big gains in energy efficiency. But it is also clear from the evidence that we received that a multitude of smaller companies had a long way to go. Some of them had apparently given very little attention to the matter. Some of these smaller businesses appeared to be unaware of their energy costs and of the aid and advice, and sometimes money, which was available from Government sources to enable them to become more efficient. At this stage, reference must be made to, and admiration expressed for, the work of the handful of regional energy conservation officers. But it is clear that they are far too thin on the ground for the great task which faces them.

The committee was impressed by the wide range of expertise available in the various Government departments which gave evidence. The evidence of the Energy Technology Support Unit at Harwell stood out in this respect. But it is impossible to avoid the conclusion that the Energy Conservation Division of the Department of Energy has powers for itself which are much too limited and has to do its work in a framework which is inimical to achieving the best results. Some 12 Government departments are independently engaged, one way or another, in energy conservation work—12 separate departments—and there is no effective co-ordination.

We understand that the Rayner scrutiny, under the direction of Dr. Finer, came to similar conclusions. But, whereas the scrutiny came down in favour of centralisation of the Government effort under a strengthened Energy Conservation Division of the Department of Energy, the committee felt, and felt very strongly, that, while such a development would undoubtedly be an improvement, a much better proposal would be to establish a separate agency with responsibility to a senior Minister. This in fact is almost the key conclusion of the committee's report. As paragraph 53 of the report states, such an agency—for which the Health and Safety Commission perhaps provides a precedent—would be a welcome sign to industry of a new firmness of purpose and of political will on the part of the Government. I do hope that, in his winding up, my noble friend Lord Avon will indicate that this firmness of purpose and this accession of new political will will in fact be part of the Government's policy.

The committee acknowledged the part the energy supply industries, which report to the Department of Energy, play in urging their customers to be efficient in the use of the particular fuels and energy sources they supply. In parenthesis, the committee recommended that this activity of theirs should be strengthened. But the committee felt that there was an inherent contradiction in having a department which oversees the spending of vast sums of money on energy supply being at the same time the promoter of schemes to make some of that spending unnecessary. In this connection, I think that some of the observations with which Lord Tanlaw has favoured us during the debate are extremely apt and very much to the point and I hope will be taken on board by the Government.

There are two other paragraghs in the summary to which I should like to refer. Recommendation (h) is that large industrial consumers should be given, by legislation if necessary, the full cost benefit of their pattern of high energy use. It is acknowledged that the Government have indeed made some steps in this direction, but the committee, having heard and weighed the evidence they received, felt that more could and should be done. They felt that such action would be equitable and would contain no element of subsidy. Once again, I should like very much to say that I agree with everything that Lord Tanlaw said on the subject.

The other proposal to which I would draw your Lordships' attention is lettered (i). I think that the Minister has referred to it and, directly or indirectly, my noble friend Lord Nelson has referred to it. It relates to the reluctance to invest in energy efficiency schemes even when these schemes have a very rapid pay-off. It is a reluctance because of lack of cash flow. I accept completely that Lord Nelson's company finds that difficult to understand because it is the fortunate possessor of a cash mountain which is the envy of many other people in business. But for many companies, especially smaller companies, the problem of cash flow has been acute and lack of confidence in the future was most evident. Time and time again, as my noble friend Lord Tanlaw has said, the committee was told that sheer survival was the problem for many firms. The position given to us was a far cry from the image of a lean and fit industrial sector, full of self-confidence and looking forward to a buoyant future—that image which Government spokesmen sometimes appear to have in their mind's eye. In many cases what we sensed—perhaps to be strictly accurate I should say what I sensed—was something akin to desperation.

Since the committee started the inquiry, the value of the pound has come down against a wide range of currencies, including those of many of our major industrial competitors. Interest rates, while still high in real terms, are also down. It could be that this de facto devaluation, with none of the traumas of the French official devaluation within the EMS, will be the trigger for a sustained industrial revival. But so much productive capacity has been actually lost—not just mothballed, but lost—that the ability of industry to take widespread advantage of the new situation must be in doubt. It is certain that we shall need new investment in productive capacity.

In the energy field—the rational use of energy—the Government's new agency which the committee's report suggests should be set up would have, as one of its major tasks, the promotion of the rational and most economic use of energy in any such new investment. But investment we must have and rational use of energy we must have, and, for these, we need a sense of dynamism, purpose and commitment on the part of the Government which we all hope and trust our noble friend the Minister will reinforce when he concludes.

8.17 p.m.

Lord Irving of Dartford

My Lords, I have an interest to declare as I am associated with the paper and board industry and it will be about the problems of this industry that I shall be talking tonight. But I ought to say that there are a number of other industries who share the same problems acutely. I, too, would like to thank the noble Lord, Lord Kings Norton, for a very thorough and valuable report.

The report of the committee stems from a communication from the EEC Commission to the Council of 10th February 1982 entitled Investment in the Rational Use of Energy. The Commission document is a wide-ranging survey of opportunities and constraints for and upon industry in its efforts to invest to use energy more efficiently and in particular to use less imported oil. The Commission document concludes with a draft Council recommendation containing 14 recommendations to encourage appropriate investment. The recommendations contain ideas to reform the structured constraints to investment, as well as touching on pricing and going more deeply into sources of finance and channels for its supply. But it is to the committee's report that I want to come.

The committee has produced an excellent report with 13 recommendations. I want to say at once that the paper industry feels in sympathy with all these recommendations. However, conclusions (e), (h), (i) and (j) seem to be especially relevant to the United Kingdom paper and board industry. I would like to tell the House why.

On (e) there has been much muddle and disagreement about the true cost of energy in the EEC. The Neddy reports of February and November 1981 already highlighted the plight of large energy intensive users. The CBI produced a further report in February this year which indicated an improved position but with still a considerable gap between the United Kingdom and continental competitors.

The noble Lord, Lord Kearton, referred to (h) where the committee said that industrial consumers should get the benefit of their size, continuity and, in the case of electricity and gas, attractive load patterns, and accepted that at present there is a major problem which needs Government understanding and action. The committee acknowledged that international price comparisons cannot be a precise art and that there will be considerable variations both within and between countries for various groups of consumers. The comparisons, of course, are also affected by the volatility of currency and foreign exchange.

The CBI report came to the following conclusions in respect of the three major energy sources as at 15th October 1982. As regards oil it said that during the 12 months period up to October 1982 the weighted average of all United Kingdom oil product prices, including duty and taxes, remained higher than the equivalent weighted average for the major EEC countries. United Kingdom heavy fuel oil prices were higher than those on the Continent throughout the period, mainly on account of the higher rate of duty levied in the United Kingdom and the higher prices resulting from the structure differences between the United Kingdom oil produce market and those on the Continent. So some British companies were clearly at a disadvantage.

In the case of gas the report said that the United Kingdom firm gas prices for loads in the range of 1 million to 10 million therms per annum were at the top end or, in some instances, above the general range of prices prevailing in other EEC countries, although, as before, the position was complicated by the fact that the West German prices, which were supplied on a gas-oil link basis, were considerably higher than United Kingdom prices. In all EEC countries except the United Kingdom a range of firm gas prices applied making quantification of price differentials very difficult. However, it said that it is estimated that United Kingdom firm prices were in the area of 10 per cent. higher than the average EEC level. United Kingdom interruptible gas prices for the same load sizes were closely in line with those of other countries.

The movement in exchange rates subsequent to October 1982, irrespective of any price increases in local currencies in the various EEC countries, had by the end of the year removed the average firm gas price disparity and given the United Kingdom interruptible gas prices an advantage. The extension of the United Kingdom contract gas price and freeze until the end of 1983 should ensure the continuation of the recent position in 1983.

However, it is electricity where the real difficulties arise. It is said that industrial electricity prices in England and Wales on 1st October 1982 to most consumers were broadly in line with those on the Continent, except in the case of France whose prices remain the lowest in the EEC. Within this general picture—and this is the burden of my case—significant price disparities existed for a relatively small, but nonetheless important, number of high load and/or high load factor consumers in England and Wales, particularly those unable to take advantage of load management terms.

Paragraph 39 of the report said that strong representations had been made in evidence by some of the energy intensive industries, notably the paper and board manufacturers. They spoke about the disadvantage which they claim to suffer by being exposed to higher energy prices than their European competitors. Although the committee has not undertaken the study needed to evaluate those claims, there was no doubt in the mind of the committee about the strength of grievance or the seriousness of the problems facing these industries, aggravated as it is by surplus capacity due to the recession.

The committee said that it did not support the suggestion that the United Kingdom Government should subsidise energy prices generally so as to equalise them with prices in other countries with low cost energy, because on any widespread scale this would undermine realistic pricing—and I would entirely agree. It said that it was also a matter of debate whether all the most energy-intensive industries can survive in Britain at all when faced with the continued challenge of world recession and competitors with access to low-cost energy. Whether special measures should be taken to assist their survival is a question of industrial policy on which the committee made no comment.

However, the committee said that it is compatible with a realistic energy pricing policy to offer relief to such industries to allow them to adjust to higher energy prices. The Government and the publicly-owned energy industries should review tariff structures to ensure that large consumers do get any benefits to which their higher consumption and pattern of demand may entitle them. Indeed, it would make commercial sense for the energy supply industries to make such concessions, within limits, as are calculated to keep their large consumers in business. Finally, it said that if the nationalisation statutes were adjudged to constrain reasonable flexibility in this respect, the statutes should be amended.

The paper and board industry could not have stated its own case more clearly or more concisely. There have, since 1979, been 15 meetings with Ministers and on each occasion the industry has pleaded not for a general subsidy but that in highly intensive energy- using industries—and in paper energy is between 15 per cent. and 20 per cent. of total costs—they should not, by Government action, be put at a disadvantage with their competitors. But there has been little response to those requests. Mills have continued to close and companies decline. In all, since January 1980 when the problem really commenced, 36 mills and 94 machines have disappeared; 15,000 jobs have gone and 10 companies no longer exist.

In pursuing a policy of realistic energy prices, the Select Committee urged that where the financial targets are settled, the policy of the rational use of energy should not be pursued so as to impose handicaps on British industry—and we certainly agree with that—prices should be effectively monitored and the problems of the energy intensive industries, like the paper and board industry, should engage the Government's attention.

Sir Alex Jarratt of Reed International, when speaking for the CBI to the Secretaries of State for Energy and Industry, indicated the international scope of the problem. In particular he pointed to the fact that the angle of the slope of reducing costs in the United Kingdom is not as steep as their EEC competitors, as the intensity of the load factor increases. This is one of the major reasons why electricity in the United Kingdom paper and board industry is higher than that of our EEC competitors.

Sir Terence Beckett restated the case in a letter to the Financial Times on the 8th March. He said that in referring to the CBI report Mr. Nigel Lawson had said that energy prices in the United Kingdom in general compare well with those in most of the Community. This, said Sir Terence, is true as far as it goes. But it omits reference to a highly important sector of Britain's economy employing many thousands of people which is in danger of facing further redundancies and decline if its particular energy problems are not treated more realistically—the so-called "high load and high factor electricity users". These include parts of the steel, chemical, paper, glass, man-made fibre, refractory and aluminium industries and, indeed, I might add the clay-using industries as well. They still face a significant price disadvantage against their Continental competitors, even taking into account the fall in the value of sterling.

The data in the CBI report relates to published tariff information. Even on this basis, allowing for current exchange rates, French industrial electricity prices are lower than in the United Kingdom, irrespective of load characteristics. At high load factors, German, Belgian and Italian prices are also below United Kingdom levels. The urgency has been heightened by a press release to which I think the noble Lord, Lord Tanlaw, referred, issued only on 21st March, which says, of the seven industries that I have mentioned: With the new tariff year due to begin on 1st April, Energy Ministers and the Supply industry have still not made a positive response to representations by the electricity intensive industries to eliminate their competitive disadvantage in electricity prices against European competitors. Prices to these industries in the UK are due to rise in April even though they are already higher than in continental Europe; there, Governments and utilities pursue a policy of offering competitive prices to such customers, in contrast to the bias against high load and high load factor customers in the UK". In paragraph 72(i) of its conclusions the committee says that reluctance to invest in rational use of energy reflects British management's lack of confidence in the economy, and greater investment is likely when we get some industrial recovery. I think that that is well understood. Nevertheless, the Government are still in some confusion over their conservation efforts.

According to replies given in another place only last week, several reports on the use of energy—including the report of Dr. Finer on How the Government Handles Energy Conservation, the Armitage and Newton Research Report entitled Invest in Energy Conservation in Industry, the Government response to the Report of the Energy Committee on Energy Conservation in Buildings—have not yet seen the light of day. The report of the noble Lord, Lord Rayner, having been leaked, suggests that he will be proposing some wide-ranging changes for greater centralisation and co-ordination of the whole of this activity. The noble Earl spoke of the consultants' report. Perhaps when we get the consultants' report the whole thing can be tied up a lot more neatly than it has been in the past.

At present the Department of Energy is dominated by supply considerations, while the Department of Industry has much sympathy with industrial energy problems but little direct power. The Department of Industry controls many of the grant arrangements, while the Department of Energy has, or should have, most of the knowledge to judge conservation needs. It may be said that it is up to the paper and board industry to make the effort at conservation. In this respect the industry has not been backward at all. In 1977 it used 238 therms per tonne; by 1981 this was down to 207, and the figure for last year, although it has not yet been validated, shows a further reduction. In terms of the schemes about which the noble Earl spoke, there is a demonstration project in four mills which in co-operation with the Department of Energy, is showing quite encouraging improvements, but the 25 per cent. is not sufficient to make investment possible in hard pressed industries and even those not so hard pressed.

I do not think that I can do better than repeat the last paragraph of the release made by the seven industries that I mentioned. It says; The failure of the UK electricity supply monopoly to compete on prices with its EEC competitors places a real burden on the electricity intensive industries for whom, by definition, electricity represents a major cost element over which they have little control. Continuation of the present and uncompetitive UK pricing policies of electricity will inevitably result in further contraction of these industries and the transfer of the jobs they provide to our European competitors. Again, these industries urge the Government to take rapid corrective action before it is too late, and I hope that the noble Earl-will pay heed to that plea.

8.34 p.m.

Viscount Torrington

My Lords, as a relative newcomer to Sub-Committee F, I, too, should like to pay tribute to the way in which the noble Lord, Lord Kings Norton, moulded together a plethora of often conflicting information into an excellent report with hard-hitting conclusions. I, too, must declare an interest in this subject. Perhaps I have some conflict of interest here, in that outside your Lordships' House I earn my living by producing and selling oil in a falling market and I am here today to try to counsel you to use less of it. Of course, the cost of oil is not really falling, especially for those of us who have to pay for it in sterling, and that makes the conclusions of the report all the more relevant.

Like the noble Lord, Lord Tanlaw, and others, I was saddened by the evidence of apathy and ignorance in British industry and, although I appreciate—as the noble Lord, Lord Nelson, and the Minister have said—that many large companies have been extremely successful in their energy conservation efforts, I think that the noble Lord, Lord Nelson, put his finger on it when he said that in his company he had set up a task force. In fact, there are many companies in British industry which are much too small to have task forces, and I think that it is such small companies which bring about the example given by the noble Lord, Lord Tanlaw, of those who are much more concerned with survival than with the efficiency of their boiler or their process plant. The adage, "Who cares about the engines when the ship is sinking?" brings to mind that I noticed in the Rayner scrutiny that the Energy Conservation Unit of the Department of Energy had not concerned itself with energy conservation in transport. That was a pity because, although I do not expect to see British Rail reconverting to coal, I think that the aviation industry provides some very useful examples of energy conservation at work.

The great wars between the major aircraft engine manufacturers have, in fact, been fought on the battleground of energy conservation. The manufacturer who gets the engine contract for a given aircraft with a given thrust requirement is the one whose engines are most energy efficient. I was very impressed by one witness to the committee who said that, of all the savings available to British industry in the rational use of energy, approximately one-third would require quite considerable capital investment, one-third would require pretty modest capital investment, and one-third would require nothing at all.

The aviation industry brings to mind a particular example of the latter third. I think I read that Japan Airlines had managed to save millions of dollars a year in fuel costs simply by printing their inflight magazine on thinner paper. One obviously hopes that they will not go too far in this, or they may decide that they can print it on rice paper and combine it with their in-flight meals.

There are inefficiencies in the whole energy chain. There are inefficiencies in companies' plants and in consumption; there are inefficiencies in the process of energy conversion; and there are inefficiencies on the production side. Hand in hand with the rational use of energy needs to go something that I should like to call the rational production of energy. I am sure that the oil industry greatly welcomes the tax changes in the Chancellor's Budget. This at least means that, in effect, taxes are now on profits rather than revenues, with the abolition of royalty and advance corporation tax. But there are still quite considerable fields out in the North Sea which will never get developed unless there are further changes of sensitivity in the tax system.

On the other side of the coin, there are coal mines into which the resources in terms of money, manpower, effort and, indeed, energy put in are by no means compensated for by the amount of coal that comes out. So I think we have to look at the rational production of energy on all fronts.

Cheap energy is, of course, an illusion. We are using all fossil fuels far faster than they are being replaced in the earth's crust. Therefore, I think that all the recommendations of this report are particularly valid. I welcome the Minister's response to these and I look forward to hearing of the Government's deliberations in due course on the setting up of an independent body.

8.40 p.m.

Viscount Hanworth

My Lords, I owe a profound apology to the House and to the Minister. It so happens—and it does not often happen to me—that I have to attend a dinner in the Cholmondeley Room which was a long-time prior engagement. Therefore, I have not been here for the other speeches and I must leave immediately after this speech. The rational use of energy and saving energy are really two sides of the same coin. As in the domestic field the better insulation of industrial buildings is probably the most cost effective—if not the most dramatic—way of saving energy. However, I do not want to pursue this topic today but to concentrate on combined heat and power, which I shall refer to as "CHP".

With any prime mover, be it a steam turbine, gas turbine, or diesel engine, only a proportion of the energy used is converted to mechanical energy; at the best about 38 per cent. Most of the rest is rejected as waste heat. In the case of the steam turbine this energy appears at low temperature in the condenser cooling water, in the exhaust gases, with the gas turbine and similarly for the diesel engine, but some waste heat also appears in the engine cooling water.

By using this waste heat for other useful purposes the overall efficiency of a generating station can be raised from under 40 per cent. to around 80 per cent. This is potentially an enormous energy saving, but unfortunately there are difficulties. A privately owned generating station has to balance the electricity demand with the waste heat requirement which is usually needed primarily for some industrial process. To some extent this equation can be balanced by supplying surplus electricity to the national grid, but the price that the CEGB offers is not very attractive and separate boilers have to be installed to give the required flexibility.

In spite of these difficulties there are several industrial CHP plants in use both here and, to a much greater extent, in Europe. If energy saving is an important consideration I am sure that the Government should try to encourage these types of schemes and the CEGB must offer better terms for taking surplus electricity. In fairness however it must be pointed out that the energy gains are not as great as they appear at first sight. A comparison must be made with taking the electricity from the CEGB, with its much more efficient large generating plant, and using a boiler which is about 80 per cent. efficient for the heat load. The more exciting way forward is to use the waste heat from the CEGB power stations for domestic heating. The potential is for some 23,000 megawatts of heat, giving energy savings equivalent to 14 million tons of coal annually.

The amount of waste heat from our large 1,200 megawatt power stations is far greater than most of our cities require but there is no need to take the full amount. The temperature of the relatively cool water from the power station condensers has to be raised to an acceptable temperature of, say, 90 degrees centigrade by bleeding off steam or by using a higher condenser pressure. Both of these methods of course reduce the electrical generation output but overall efficiency could still reach up to 80 per cent. if enough of the waste heat is used.

The problems of making this kind of CHP scheme commercially viable are the capital costs, which include some for the power station but primarily for the heat mains and distribution system. In fact, with a 10 per cent. interest rate and a housing density of 20 dwellings to the acre the interest on the capital spent on the CHP scheme and its maintenance represents nearly 90 per cent. of the cost of supplying the heat to the consumer. Unfortunately, there are few district heating schemes in this country to which a CHP scheme could be connected. This means that to avoid digging up all the streets in a town at the same time the development of any CHP scheme will have to be phased in over a period of years.

Another economic consideration is the way in which our national electrical grid and the power stations operate: only the most efficient power stations are used for the base load; others are then brought in to meet the increased demand. It follows that the operating time for a CHP station may be limited, especially if it is, or becomes, one of the less efficient stations. Hot water storage reservoirs and back-up heating boilers are therefore likely to be needed.

In spite of these disadvantages, a CHP scheme for a medium sized city with a fairly high housing density should at least break even with the Government's requirement of a 5 per cent. return on capital. What of course matters is how the station performs economically during its expected life and the importance which is attached to energy saving in the future. The interesting thing is how much depends on the very artificial and changing criterion of interest rates. This raises the question of how far economic calculations provide the best method for assessment.

No less than 25 of our cities have shown interest in having a CHP scheme. From these a short list of nine was prepared on the basis of the ease of connection to a suitable power station. Possible schemes for these cities were studied in detail by W. S. Atkins and Partners for the Department of Energy. They concluded that all nine cities could be suitable for a lead scheme on reasonably economic terms and could provide a return of 5 per cent. or more on the capital invested on present-day assumptions. As a result of a wide market survey they also concluded that if the heat was sold at 10 per cent. below the cheapest alternative, the majority of consumers would wish to be connected and would make any necessary alterations to their existing heating system.

There is no doubt that the real cost of energy will continue to rise in the future. This, I should think, is as certain as anything is certain in this uncertain world. With the delay of around 15 years in getting a scheme fully implemented there is no time to lose in starting at least one lead scheme. I earnestly hope that the Government will lose no time in coming to a decision, and will provide whatever may be needed to get at least one—and, ideally, more—lead schemes started. I end by apologising again to the Minister for having to leave immediately after this speech. This is something which I particularly regret.

8.50 p.m.

Lord Bishopston

My Lords, I too pay tribute to the noble Lord, Lord Kings Norton, for the way in which he presented the report, and tribute must go to the committee for the enormous amount of work they did to present the 340 page report which we are discussing. The amount of work they did can be seen from the interviews with witnesses, from reading their detailed submissions, when considering the comments of the committee and after studying their conclusions. Noble Lords will recall the last report of the Select Committee, also introduced by Lord Kings Noton, on another aspect of industry, and I refer of course to the report of the European Communities Committee on Natural Gas which was before the House on 21st October.

The subject we are discussing is of concern to the House because noble Lords will recall the debates initiated by the noble Lord, Lord Mottistone, on energy costs to industry, the last being as recently as 20th January. Those debates contained aspects relevant to today's debate because although we are concerned now with particular aspects, nevertheless we must try to see the whole matter of energy production and use in the proper perspective.

I was pleased to hear the remarks of my noble friend Lord Lovell-Davis because he recalled that the Labour Government took production and conservation seriously, setting up the Energy Commission in 1977 representing, as it did, the views of Government, industry, unions and consumer bodies. What has happened to that commission? Has anything taken its place, if it is still not operating, and what are the functions which are now being carried out? The House will also have regard to the Energy Act 1976 which contained powers to implement national and international obligations.

As the Select Committee's report points out, since the increase in prices of imported crude oil from the Middle East in 1973–74, to which my noble friend also referred, there is greater need for the saving of energy. The last Government introduced a "Save It" campaign in January 1975, and it was estimated that total savings from 1974 to 1979, measured in terms of oil, were worth about £3 billion; and a multi-million pound conservation programme was under way and that was expected to save the equivalent of about 10 million tonnes of oil a year from 1988. Following the introductory remarks of the noble Lord, Lord Kings Norton, several noble Lords have contributed to the debate and their comments have been well identified with the interests of the industry, and I shall avoid repeating their contributions so far as possible. I wish however to emphasise some points which I think need greater stress.

The conclusion in paragraph 72(j), to which the noble Lord, Lord Kings Norton, referred, is of major importance because, if the United Kingdom's conservation effort is fragmented and there is a diversity of schemes and a diffusion of effort among Government departments, and if Government policy lacks thrust and focus, one will hardly be able to imagine a more critical assessment of the Government's record in such an important matter. The conclusion in paragraph 72(i) is also a factor, for that draws attention to the reluctance to invest in RUE and reflects British managements' lack of confidence in the economy. Greater investment is likely to depend, as we know, on industrial recovery, and vice versa.

The report does not say—or, if it does, there seems little evidence of it—that it may well be that the uncertainty, so evident, could partly be due to the many changes which have taken place in Government energy policy in recent years. Energy, like transport and many other major aspects of national life, needs a clear lead from the top, from Government. There is need for perspectives for a comprehensive policy and for co-ordination among the public and private sectors, and basically industry needs economic and industrial confidence. This is not the occasion to argue about who is responsible for the present situation, as outlined in the report, for if the report is to have the effect and influence it deserves, we must consider what we should do in the future.

Having said that, it is clear that there will be uncertainty for some time ahead while some of the Government's policies are being worked out. I refer, of course, to the changes in policies for the production of energy resulting from recent legislation. One has in mind particularly the Oil and Gas (Enterprise) Act 1982, with the immense changes taking place in those two vital industries. I thought that one of the most significant comments in Part 6 headed "Obstacles to Improvement" appeared in paragraphs 49 and 50, because they are not factors which can quickly be overcome. Paragraph 49—I quote what others have said, notably the noble Lord, Lord Tanlaw, but certain of the points need stressing again—says: Where the opportunities for energy saving are identified, and new investment is required, the investment is not often undertaken … A surprising number of companies are not confident of staying in business long enough to reap the benefits … An analogy given to a member of the Committee by a senior businessman was that when the ship is sinking, one does not bother overmuch about how efficient the engines are". That point was made by the noble Lord, Lord Tanlaw. Paragraph 50 begins: Many firms have no money to spare, and if they had they would devote it to immediate survival purposes,". Those points, which were not touched on by the noble Earl, Lord Avon, are some of the basic problems that we must recognise in making any changes dealing with RUE. I do not wish to be partisan about the economic and industrial situation, but if the Government really believe all they say about the happy and healthy state of British industry—this too was touched on by the noble Lord, Lord Tanlaw—then this is another major obstacle to any immediate improvements being forthcoming.

The paragraphs from which I have quoted might be a reason for the committee's conclusion in paragraph 72(c), which states of British management: there is widespread ignorance in British industry of the savings which RUE can make. British managements' performance here is depressing and disturbing". However, from reading the evidence and submissions of witnesses, the papers of British industry and the TUC, I gained the impression that they were eager to co-operate, given a lead and facilities; so if there is any blame to be attached, I am not sure how much of it should be placed on industry itself, and that point was also dealt with by the noble Lord, Lord Kings Norton.

I thought the noble Lord, Nelson of Stafford, made some valid points, in particular his comment that hard times intensify the need to save, and not the other way round—of opting out in order to save money. Among those who gave evidence and submitted memoranda were the Electricity Council and the Gas Corporation, and their contributions show how much those bodies are sensitive to their responsibilities. Again however we are in the process of change, because the Energy Bill, which is now before Parliament, subjects the electricity industry, like oil and gas, to uncertainties. Already the evidence of the Electricity Council to the Select Committee has been outdated, for it does not take into account those revisions to Section 50 of the Electricity Act 1947 proposed by Clause 19 of the Energy Bill.

Reference has been made to the submissions of the Glass Manufacturers' Federation, who also gave constructive evidence. They draw attention to paragraph 42 of the report, which summarises much of what the industry has been pressing for over the years. Paragraph 42 states that the problems of the energy-intensive industries should engage the Government's attention as a matter of industrial policy. In any case, the Government should ensure that tariff structures do not deprive such industries of the full benefits to which their energy usage might entitle them.

I make that point because although the Government may have a general policy which helps, or is aimed to help, industry, there may be certain exceptions where the industries concerned are not helped. The glass industry, for example, has not shared in the concessions which the Chancellor made in 1982 for electricity users in energy-intensive industries, if they can shape their demands to the supply pattern. The glass industry is a continuous process industry with a high demand for electricity and natural gas; and that demand, due to the nature of their operations, cannot be turned off at a moment's notice to suit the supply industries.

Among the publications which I am sure a number of us have received has been that from the Association for the Conservation of Industry. The association gave evidence—and one is pleased to know of the work of such bodies within industry—stressing that energy conservation is a cost-effective way of promoting RUE, since effective industry sells its own products—as was highlighted in the Rayner Report. The association urges the establishment of a single independent agency to co-ordinate those efforts and to take responsibility for conservation. It points out that about 150,000 new jobs could be generated if Britain were to adopt a major energy conservation industrial programme, which would pay for itself within five years of completion, and would save about £2,800 million-worth of fuel in a full year.

There is also the role of the trade unions to consider. They are often maligned nationally. Their evidence, which runs to 15 pages of constructive suggestions, indicates in great detail what might be done and also takes into account the context of the European dimension.

Pricing policy has been mentioned by a number of noble Lords, and of course it features in the report. As we all know, energy costs are a significant proportion of the costs of the domestic and industrial budgets. The Government seem to have rather conflicting views about pricing policy. This topic was suitable for the earlier debate (on 21st January) to which I have referred. Some charges have been increased at Government insistence in order to gain a higher yield from public investment, with direct instructions being given about financial targets in gas and electricity. Some price levels have been forced up for some years at 10 per cent. above the level of inflation.

In the case of the oil industry there have been repeated demands for a review of taxation levels and of pricing policy. Some action has been taken. I am very pleased to note—I must give credit here—that there is a justified welcome for the reduction in taxation, which has been hailed by some oil interests as a "positive stimulus" to development. We hope that the Government will always be sensitive to energy producers' problems as they work in changing legislative and other environments.

On one of the most important points—the need for a lead from the top—it might be helpful to remind the Government of what was said by one of their present Secretaries of State, Mr. Tom King. At a meeting of the Chelsea Young Conservatives on 26th October 1977, when he was the shadow Secretary for Energy, Mr. King spoke of the need for strong leadership in the conservation of energy. He stated: What then should be done really to get energy saving moving at the sort of rate we need? First, it must come from the top … The lead must come from the top. That is the only way to co-ordinate the efforts of all departments of Government towards what should be a national crusade". I believe that that is what we want—a national crusade—not only in terms of the conservation of energy, important though it is, but also taking into account other factors, too.

Although we are considering only one aspect of energy policy, we ought to see conservation as being of equal importance as the creation of energy. The noble Lord, Lord Tanlaw, made the point about investing more in conservation relative to the costs of production. All involved in energy production, in both the private and public sectors, have a remarkable record in producing the energy which every aspect of our domestic and industrial life needs.

I must refer to the views of the noble Viscount, Lord Torrington. As a former engineer and aircraft designer, I was interested in what he had to say. We all know that in Britain in science, technology and industry we have an excellence in terms of productivity, and there is also an excellent spin-off which can benefit our industries as well.

The production of energy invariably requires not only financial resources, but also what is not always recognised—human resources. There is no aspect of the matter which does not sometimes result in the sacrifice of life itself. Many lives have been lost in getting oil and gas from the sea and from land. Many lives have been lost in getting coal, and in electricity, nuclear energy and other production. It is time that we gave credit to those who run, and those who work in, these great energy-producing industries. Let us recognise also that when energy is wasted, or misused, or when it is not used to the best advantage, we waste not only money, but sometimes, most important of all, lives. Therefore, it behoves each one of us to treat energy as though our own life was at risk.

9.5 p.m.

The Earl of Avon

My Lords, it has indeed been a stimulating debate, with many interesting points being raised, and I shall try to answer some of them. The noble Lord, Lord Lovell-Davies, said that when he was in my seat he did not last very long in the ministry. May I say that in this respect I am the third one already in the present Government so I, too, am a little nervous about how long I shall last there. However, I am happy to say that my two predecessors have gone both onwards and upwards. I was also pleased that the noble Lord was able to make his remarks more or less on a non-party basis, and indeed, with the exception of one or two observations, the noble Lord, Lord Bishopston, was similarly uncontroversial. When going around the country I have found tremendous all-party support for energy conservation. It is not a matter of party; it is a matter which crosses all barriers. Like the noble Lord, Lord Tanlaw, I, too, have been told how dull is the subject of energy conservation. But I have been fascinated by it, and have had quite the opposite reaction to it. I try to pass on this feeling when I go around the country.

The noble Lord, Lord Tanlaw, said that I delivered a slight litany in my opening speech. I hope that my reply will be more like an evensong. The noble Lord asked me about the word "replication". I thought that it meant making a replica—and I think that is the dictionary definition. The word comes not from the department, but from Harwell. That is the origin of the word so far as I am concerned. The noble Lord, Lord Lovell-Davis, referred to making better use of energy supply investments, or investing in energy conservation. I shall come to this in more detail later because the noble Lord, Lord Tanlaw, also mentioned it.

As the Committee's report makes clear in paragraph 69, the two types of investment are not precise alternatives at any time. Both are necessary. What is important is that energy is produced efficiently and that energy is used efficiently. The noble Lord, Lord Tanlaw, referred to the document which I do not think he said was being suppressed but which might have been so. In any case, he could not get a copy of it. The paper concerned does not represent Government policy nor the views of the Department of Energy. It was superficial, based on incomplete—even doubtful—data, lacking in economic analysis and manifestly inadequate. The document was an internal working draft which could at best be regarded as an early contribution to advice to Ministers. I can say categorically that no document intended for publication has been suppressed by the department.

We have, however, provided the paper to the Sizewell B Inquiry. This is in response to the inspector's request for the Department of Energy to make available the factual basis of its work. This is an extremely thorough paper entitled Investment in Energy Use as an alternative to investment in energy supply. The department's paper is not a policy document. Its publication is a contribution to the discussion of the Sizewell Inquiry as an economic analysis of the extent to which investments in energy conservation can be seen as substitutes for investment in energy supply. The paper has been deposited in the Library. I may mention a few key points. It covers conservation, which is not an end in itself, the overall aim is economic efficiency. Economic efficiency will often mean fuel substitution which may involve using more fuel. Energy supply investments can be as important as conservation investments themselves. I could go on but, as the noble Lord said, this is a fascinating subject and perhaps we had better debate it completely by itself one day.

We then come on to the subject which was raised by a number of noble Lords: to start with by the noble Lord, Lord Tanlaw; almost entirely by the noble Lord, Lord Irving of Dartford and also by my noble friend Lord Nelson—that is, electricity pricing. I must confess that I was surprised at the amount of time spent on it, for the reason that we had a debate on 20th January on the subject, which I remember very well as it was the first occasion on which I stood at the Dispatch Box to answer on energy matters.

As all noble Lords have said, comparisons here are difficult. At that time, I was in the situation as I am now with the Rayner scrutiny of not having CBI figures in order to present a case. Now, at least, we have documentation for me to fall back on. Things have changed. The noble Lord, Lord Tanlaw, said they had not. They have changed in two ways. One is the exchange rate going down by 14 per cent. and the other is the Government's announcement earlier that there will be a freeze in average electricity prices this year. Those are two fundamental differences.

We are totally aware of the 2 per cent. (I think we call them) big energy users who are comparatively disadvantaged with their Continental counterparts. I should like to say right at the beginning that if we are going to consider France, there is a different picture because France's electricity prices are considerably below those of the rest of Europe. As we all know, to a large degree this is because they have gone 40 per cent. to nuclear energy for their electricity as well as their hydro-electric works. If we come to the other countries concerned, I think that the noble Lord, Lord Irving, will admit that we have got much closer now than we were last November, almost entirely due to the exchange rates. The Government are looking all the time at getting—

Lord Irving of Dartford

My Lords, I do not particularly want to interrupt the flow of the noble Earl's speech but that is not the conclusion of the CBI report, which says that, with the currency changes since October, we still have a differential against British industry.

The Earl of Avon

My Lords, I think that if the noble Lord reads back in Hansard he will see that I opened my remarks on the electricity prices by saying that I recognise that. What I was going on to say is that we are looking continually at the energy efficiency of the electricity supply industry. Both the Electricity Council and the CEGB are well aware of the problem. We have asked that as much flexibility be given as possible without having undue preference. The noble Lord, Lord Irving, produced a long list of people who were disadvantaged in this way. I believe that if we look at that list we will see how difficult it would be to help them all without taking the money from somebody else. I think that, equally, he agreed that he did not want subsidy. As a word of encouragement to him, may I say that the Department of Energy and the paper and board industry are having discussions at the moment about monitoring and target-setting studies. The department is well aware of all the industries and the pressures on them of which I have been made aware over the past three months. We shall continue to work so far as we can to make sure that they are not disadvantaged more than they need be.

My noble friend Lord Nelson of Stafford in his opening remarks paid tribute to the noble Lord, Lord Kings Norton, by saying that he had been inspired to investigate by this report, and the very fact that we have been listening to examples tonight has shown that top management is getting interested in energy conservation, which is one of the things we were all hoping to bring out. I was also interested when he mentioned switching fuels, because one of the companies I recently visited has gone to the extent of having one coal, one oil and one gas boiler so that it can get the best of whichever world when the prices happen to move.

I do not believe we can insulate the United Kingdom from the world energy market. We import gas and we both import and export oil; all at world prices. Subject to the need to meet costs of supply and of the bounds of the energy market, we are determined that energy prices to the United Kingdom industry should be as competitive as possible.

The noble Lord, Lord Nelson, rightly referred to the importance of competitive coal prices. I agree with him also about the importance of prices in this field and the Government are determined that coal shall be produced as efficiently as possible and priced accordingly.

The noble Lord referred to some international comparisons about conservation. I have in front of me what goes on in France, Germany, Denmark and the Netherlands. I should not like to weary the House by reading it all out at the moment, but I think I can say that national figures for energy conservation achievements directly attributable to Government measures are themselves difficult to define, and to compare our own with those claimed by other countries, often on different bases, must therefore be an exercise of only limited value. But if he wishes, I am quite happy to let him have afterwards the comparative figures which I have here.

The noble Lord Lord Kearton, mentioned the desperation which he found in some industries. I do not wish to go into an argument on this score now, but I should like to say that from my experience I cannot agree with him and I have been around to a number of different places over the past weeks. I should also like to thank him for his kind remarks when he started his speech.

My noble friend Lord Torrington, in an excellent resumé of the present stivation, referred to air and transport. I thought again that this underlined our difficulties, but transport comes under the Department of Transport whereas air comes under the Department of Trade. I am sure it will please the noble Lord, Lord Kings Norton, to have another reference to look up on that. My noble friend made particular reference to aviation. I can confirm that the Government are supporting research and development in aero engines, much of which will result directly in major reductions in energy use. However, as this programme is primarily directed to overall engine improvement, we modestly refrain from including this expenditure—some £20 million—within our energy conservation programme.

The noble Viscount, Lord Hanworth, mentioned combined heat and power. I should like to put on record that we are at present analysing the report of the leading consultants he mentioned with a view to decisions on how best to press forward. In the meantime, we are continuing to demonstrate our support of viable schemes. A new clause has been added to the Energy Bill which we shall be taking in this House next Monday, which places a duty on electricity boards to adopt and support CH P. Copies of this report of the consultants have been sent for comment to local authorities, fuel industries and other interested parties. There is a copy of the report in the Library.

We have had a good debate and I should like to add my congratulations to the noble Lord, Lord Kings Norton, and his committee for their excellent report.

We now return to paragraph (j). Much has been said about reports not published as well as those awaiting the response from Government to the Select Committee of the House. I am sorry that the delicacy of timing prevents me from giving a response tonight. I can only express to your Lordships my awareness of the real feeling that I know is here and elsewhere. This gives me valuable encouragement. The report we are debating and the remarks of all noble Lords here tonight will add to the constructive input, and I hope the Government will be able to give a full response soon.

9. 17 p.m.

Lord Kings Norton

My Lords, I think that all that remains for me to do is to thank all who have contributed to what has been a most interesting and informative debate. I say "informative" because half the speakers were members of the committee which conducted the inquiry and half were from outside that committee. The support evidenced in those speeches is the source of some gratification, I know, to all members of the committee who are here.

I think your Lordships would all agree that the most important of the recommendations was the one for the creation of a new independent agency co-ordinating all the work which the Government are doing in this field of energy conservation. Had he been able to stay, the noble Earl, Lord Bessborough, intended to point out that the French, who have been notably successful in this field, have created just such an agency for themselves.

That is all, my Lords. Thank your very much for your contributions to the debate. We will not keep the noble Lord, Lord Donaldson of Kingsbridge, waiting any longer.

On Question, Motion agreed to.