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Gas Prices

Volume 929: debated on Monday 28 March 1977

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2.

asked the Secretary of State for Energy if he will meet the Chairman of the British Gas Corporation to discuss increased charges.

Since the Government's request to British Gas was announced by my right hon. Friend the Chancellor of the Exchequer on 15th December, I have been in touch with the chairman about its consequences on several occasions. The proposed increases will come into effect from 1st April.

In view of the collaboration that was asked for and given by the trade union movement to the Government's economic policies over the last few years, does not my right hon. Friend think that this decision is a slap in the face to the movement for the sacrifices that have been made? Will he confirm that it suggests that prices in the public sector are likely to increase for some time ahead? Has he tried to justify this decision to a trade union audience?

I think that any increase in prices is regrettable, but my hon. Friend will know that this increase derived from the necessity to reduce the public sector borrowing requirement in connection with the IMF loan.

As the increase is due to debt repayment, why is it that the gas industry is the only corporation that is asked to repay any debt? The Post Office, after all, has also made quite a substantial profit.

I appreciate that. The reason for the increase I have just announced—and the House knows it anyway in the context of the energy industries—is that if the choice was between a reduction of investment in coal, gas, electricity or nuclear power and increases in the prices, the comparable figures show that electricity has increased in price by 119 per cent. in the last three years, coal and coke by 92 per cent. and gas by 57 per cent.

3.

asked the Secretary of State for Energy what representations he has received to date from consumer associations or others following the announcement of a rise in gas prices.

6.

asked the Secretary of State for Energy what representations he has received about his decision to authorise a 10 per cent. increase in gas prices.

My right hon. Friend has received about 500 representations from consumers and their representatives up to 25th March.

The arbitrary manner in which the Government have increased gas prices without proper consultation has rightly angered the consumer. Does the Minister agree that it must be in the longer-term interests of the consumer that gas prices should not be artificially lower than other energy prices, in view of the need for huge investment in the longer term to provide alternative energy sources?

I agree at least with the latter part of the hon. Gentleman's question, but he will recall that the Government had to make a decision quickly to get the fuel industries out of the deficit into which they had been forced by the previous Administration. [Interruption.] The hon. Member for Bedford (Mr. Skeet) laughs, but it is true. The Government also decided, because of conservation measures, to move towards the economic pricing of fuels.

Having said that, I go on to say that I agree with what the hon. Gentleman said about the long term. It is a fact that, even taking the 10 per cent. increase into account, the cost of gas is lower in real terms than it was five years ago.

As has already been said by our right hon. Friend, does my hon. Friend accept that, as this price increase was agreed as part of the IMF loan package last year, and as we now know that that package was based partly on inaccurate public sector borrowing requirement forecasting, the Secretary of State should take back to the Cabinet at least proposals for a proportionate decrease in this price increase which has caused outrage among many of our own working supporters?

I can only emphasise that the cost of gas in real terms is still lower than it was five years ago. But, of course, I recognise what my hon. Friend says, namely, that any increase in price at this time is bound to cause concern among people on low incomes. However, my answer to the point put to me about a reconsideration of the matter is that, as this comes under the decisions associated with the IMF loan, my hon. Friend should put his question to the Chancellor of the Exchequer and not to me.

Surely the Minister is not being frank with the House. This has nothing to do with the IMF. Is it not because of fears about the price of gas versus electricity—15p per therm for the former and the equivalent of 60p per therm for electricity—that the Government had to raise the price of gas in order to bring about some parity with electricity, otherwise the latter industry would have been destroyed?

Absolutely not. The hon. Gentleman says that I am not being frank with the House. He knows as well as I do that the decision was announced as part of the measures in December of last year. No one can gainsay that as a fact. As for the situation vis-à-vis the electricity industry—and, for that matter, other industries—my right hon. Friend has already given the comparable figures in an earlier answer. I have nothing to add to what he said then.

If this increase was a requirement of our obtaining the IMF loan, was this requirement imposed by the IMF or was it offered by the Chancellor of the Exchequer?

The decision was part of a package of measures that were considered by the Government, agreed by the Cabinet and subsequently agreed between the Government and the International Monetary Fund.

On a point of order, Mr. Speaker. As these Questions were really aimed at a Cabinet Minister and as a Cabinet Minister obviously has responsibility for replying, should not all the Questions on this matter have been put together so that the Secretary of State could answer them?

9.

asked the Secretary of State for Energy what discussions or correspondence he has had with the Gas Corporation about the prospective increase in the price of gas.

14.

asked the Secretary of State for Energy what recent discussions he has had with the Chairman of the British Gas Corporation about price and the effects of a price increase and their effect on domestic consumers.

I would refer the hon. Members to the answer I have just given to my hon. Friend the Member for Basildon (Mr. Moonman).

Is it not most misleading for the Secretary of State to blame the increase in gas prices on the IMF? Is he not aware that there was no commitment in the infamous letter of 15th December to Dr. Witteveen to increase gas prices? Ought not the Secretary of State admit that he has issued a directive to the British Gas Corporation to put up the price of gas, which the British Gas Corporation itself did not want?

If the hon. Gentleman had heard my earlier answer, he would have heard exactly the words I used. This derived from the necessity to reduce the public sector borrowing requirement. There was no suggestion of blame directly; it was a part of the package which involved a reduction of the PSBR. What flowed from that was the necessity to raise the price.

Is the Secretary of State aware that this will hit consumers very hard indeed, particularly consumers with below-average incomes, above-average-size families, and the elderly and old-age pensioners? Will the Secretary of State undertake at least, in order to mitigate the effects of the increase from 1st April, to authorise one of his senior officials to keep permanently in touch with DHSS Ministers lest there be any problems arising for consumers on below-average incomes who do not qualify for supplementary benefit?

I appreciate that, but, as the hon. Gentleman knows, the arrangements already exist for that and are not affected by the increase. I would say to Opposition Members who demanded very much larger cuts in public expenditure that, had they been implemented, the impact on poorer people would have been much greater.

In view of the fact that I requested my right hon. Friend the Secretary of State for Prices and Consumer Protection to ask the Cabinet to reconsider this matter, will my right hon. Friend indicate whether he has been back to the Cabinet and what decision it took on the matter, because there is a strong feeling that even now that decision should be reconsidered so that there is not an increase that can put additional burdens on those who cannot afford them?

Perhaps I may remind my hon. Friend that I answered Question No. 2 myself. He knows that these are Cabinet decisions.

What is the point of having meetings with the Chairman of the British Gas Corporation if the Secretary of State takes decisions, such as increasing the price of gas, without consulting the Corporation in the first place, and then volunteers it himself, independent of the Cabinet, as a potential saving? What is the point of a Price Code if it can be avoided unilaterally by one nationalised industry?

Perhaps I may take the two points separately. It was not an energy policy decision, because the House knows that there has been a demand for a tax on gas from the other industries for a long time.

I said there had been a demand and that it was not an energy policy decision. I think the hon. Gentleman will know that on budgetary matters—and the IMF package was thus regarded—preconsultation is not possible.

On a point of order, Mr. Speaker. You said in answer to my hon. Friend the Member for Liverpool, Walton (Mr. Heffer) that it was not for you to decide how Questions were dealt with. However, we have had an extra-ordinary procedure this afternoon of a sort that I have not seen before in that the grouping of Questions has been taken in three goes. If you, Mr. Speaker, are unable to give a judgment on this—I respect your position—is this a matter that we must take up in another place? What has happened this afternoon is extremely odd.

The hon. Gentleman knows the sort of places where he should pursue that matter, but it is not with me.

On a point of order, Mr Speaker. I wish to give notice that, in view of the totally unsatisfactory nature of the replies, I should like to raise the matter on the Adjournment.