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Business Of The House

Volume 984: debated on Wednesday 14 May 1980

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That, at this day's sitting, the Gas Bill and the Sea Fish Industry Bill may be proceeded with, though opposed, until any hour.—[Lord James Douglas-Hamilton.]

Gas Bill

Question again proposed, That the Bill be now read a Second time.

One cannot but feel that the Government's decisions over British Gas have been taken in a piecemeal fashion. We first had the price announcement, which is welcome. We must move towards more realistic pricing of energy sources. However, it is flying in the face of logic for the Government to announce a system of price increases whereby the price of gas is not linked to the price of oil—and here I part company with the right hon. Member for Plymouth, Devon-port (Dr. Owen). It is also unfortunate that the second major announcement— the decision to introduce a levy on gas profits—again came by way of written answer. Additionally, it gave us so little information. We have had no opportunity to question the Government in detail prior, presumably, to an amendment being laid to the Finance Bill.

The Government are facing what could be called the third stage of development of North Sea gas reserves. We are awaiting the announcement on the gas gathering pipeline, and there is an increasing number of interesting and significant find off the coast of Norway. There is increased United Kingdom demand for gas from domestic and industrial customers. It should be obvious to our Continental partners and to Norway that there would be a significant cost advantage in routing Norwegian gas through the United Kingdom mainland and down to the Continent rather than through Norway or by the sub-sea route into Ekofisk. All those factors combined give the Government the chance to make radical changes in the British Gas Corporation.

I hope that we shall shortly be seeing an announcement of the end of the monopoly power of the BGC to purchase United Kingdom sector gas and, furthermore, that its monopoly power to distribute gas will be ended. Those announcements will have certain beneficial effects.

First, there will be a significant increase in offshore exploration. The availability of higher prices forced on British Gas by competition will produce higher incentives for oil and other companies to explore for gas in the North Sea. Secondly, the ending of the distribution monopoly will in certain limited instances give private industry a chance to develop a pipeline system of supplies of industrial quality gas, although not necessarily mains quality. The announcements would also enable the Government and private enterprise to combine together to build and finance the significant major trunk pipeline systems that will be needed if gas is to be brought through the United Kingdom to the Continent and if more gas is to be available to United Kingdom domestic and industrial consumers.

However, those two measures will not be sufficient. A more radical approach is needed and the Government should go further. The section on State industry in " The Right Approach to the Economy ", of which my right hon. Friend the Secretary of State was co-author, states:
" The long-term aim must be to reduce the preponderance of State ownership and to widen the base of ownership in our community. Ownership by the State is not the same as ownership by the people."
I heartily concur with that. I believe that the plans for privatisation—I apologise for using that word—that are widely talked about do not meet the indications given in that document of the way in which the Conservative Party would move in government.

Privatisation would not offer every individual a direct stake in a nationalised industry. I understand that plans have been discussed for United Kingdom citizens to be offered shares in nationalised industries at reduced prices, through a share offering on the stock market.

That would be regrettable, because the benefits of such reduced prices would probably go to those who are wealthy enough not to deserve them. Any scheme for privatisation should ensure that ordinary working people who are not normally involved in the stock market and the majority of whom have never owned a share, should be given—I repeat given— shares in nationalised industries and particularly in the BGC. In that way, ordinary people would benefit directly from our North Sea wealth.

The Government should start making plans for a free rights issue of shares in the BGC which should be made available to every citizen of voting age. Without going into too much detail, may I say that I believe that the balance sheet of the corporation would make it possible for every citizen to be given shares with a market value between £10 and £20. Furthermore, there might be advantages in those shares being deferred so that after about five years their market value would have risen to three or four times the original value and the shares would be a reasonable block to be traded on the Stock Exchange.

At the same time as the free issue, a general share offering should be made available and preference should be given to subscriptions from individuals, with a limit being placed on the maximum holdings of institutions.

Such a scheme would have many advantages. The Government would have to take politics out of gas pricing and make clear in advance what the tax regime for the BGC was to be. In addition, the direct ownership of the corporation by the people could only be beneficial and would lead inevitably to increased interest throughout the country in the ownership of shares. There would also be an educational effect through a greater understanding of the need for profit.

Not insignificantly, such a move would make it virtually impossible for the Labour Party to consider renationalisation. I do not have to remind my right hon. Friend of the considerable PSBR benefits that would flow from privatisation of the British Gas Corporation on this scale. There are criticisms of such a scheme. The major criticism always raised is the administrative problem that would be created in giving shares to over 40 million people.

I am the first to admit that there would be considerable problems. I do not believe however, that they are insuperable. I note the ease with which such administrative problems were overcome in the Canadian province of British Columbia which recently gave away shares to its 2¾ million citizens. The hurdle is not impossible to overcome.

A second criticism is that the shares, once issued to individual citizens, would in many cases be immediately sold before they were sold on the stock market and that some kind of secondary market would develop on street kerbs and in pubs. That may happen. Who are we to deprive people, given shares by the Government, of the right to sell them when they wish and how they wish if they want to realise the money?

I regret that the Bill does not go further. I am convinced that the Government side of the House cannot, and should not, continue to take an ambivalent attitude towards nationalised industries. Radical change is needed. It is needed sooner rather than later.

10.12 pm

This debate and this Bill are academic to Northern Ireland Members. It must have interested hon. Members to see almost 50 per cent. of Northern Ireland Members present. It is a situation akin to children from an underprivileged home background who dearly want a particular plaything that they have seen given to their wealthier playmates. Hon. Members from Northern Ireland are here with our noses pressed up against the Englishman's double glazing, watching how he enjoys this plaything in the comfort of his gas-fired, centrally-heated home. This is no joke. Northern Ireland has been deprived of what is sometimes called this national asset.

It was with rare amusement that I heard the Secretary of State talk about the fact that British companies were anxious to obtain a gas supply because there was work to be done and jobs to be created. That is true in Northern Ireland. We were anxious to get a gas supply. The Secretary of State talked about the increasing role that gas would play in energy supplies in the future and of the exciting innovations that lay before the United Kingdom. Those do not lie before the people of Northern Ireland.

We have a gas industry in Northern Ireland—just about. The Government have declared that the industry will die. It has been interesting to hear hon. Members talk of the prices paid, and the potential prices to be paid, and what would or would not be desirable. I should like to inform them of the situation in Northern Ireland. The hon. Member for Bedford (Mr. Skeet) should not talk about relating the price of gas to oil. Why not take the logical step and relate it to the price of gas produced by other means—for example, by naphtha reformation? The Government have told the gas industry and the people of Northern Ireland that if they want gas they should pay the price of producing it by naphtha reformation. That is the method that was used in this country in some places such as Dundee until a few years ago.

If that is done, people will pay, like those in the Bogside, 90p a therm for their gas. That is what the people in the Bogside are paying today, because they have no option. Coal is not much of an option, because in Northern Ireland it is much more expensive than on the mainland. Electricity is also much more expensive. In the Secretary of State's words, our electricity is generated by high-priced oil, whose price, as he described it, has gone through the roof.

Northern Ireland is caught in the trap of meeting 90 per cent. of its electricity needs with oil whose price has gone through the roof and having to use coal, the price of which is much higher because of transportation costs and so on. The Government say " You have a choice. You can have gas at the price of producing it by naphtha reformation ", which is 90p today and could be 100p tomorrow. Hon. Members who take an interest in these matters will know that during the past decade the price of naphtha has risen from £6 or £7 a ton to £200 today. The price is increasing monthly.

Therefore, the hon. Member for Bedford should perhaps suggest that the British Gas Corporation should pitch its price for gas at the cost of producing it by that method. That would be unrealistic, but the argument would be fairly logical.

When we in Northern Ireland said that we should like a share of natural gas we were not even asking for it at the price at which our wealthier brethren on the mainland were getting it. Two years ago we proposed to the Government that we would take that natural gas for 50p or 60p a therm. Even then, that was four or five times the price at which people were obtaining it here. We felt that that was a price comparable with coal and electricity prices, and that with it we could perhaps continue our industry and maintain employment, our almost 2,000 people employed in the industry. But the Government said " No ".

The Bill does not apply to Northern Ireland because the 1972 Act does not apply. Therein lies the rub. In 1972, a few months after Stormont was done away with, it was perhaps understandable that this House would not apply that Act to Northern Ireland. Eight years later, with no sign of our getting our Stormont Parliament back, continuing to refuse to apply such legislation to what is, after all, an integral part of the United Kingdom can hardly be justified.

I hope that in winding up the debate the Minister will not simply brush aside what I have said as being of no interest. He is the spokesman for the Government of the whole United Kingdom. It is not enough for him to say " You will have to discuss this with one of my colleagues responsible for the situation in Northern Ireland." Ministers responsible in Northern Ireland when confronted with the fact that Northern Ireland gas consumers are paying 90p a therm for their gas say " That is a courageous pricing policy." Will the Minister say that one day when someone proposes charging 90p a therm for gas over here?

I suppose that we are begging again, but we are only begging this time for a share of what is always described as a national asset, a United Kingdom asset. In effect, it is a Great Britain asset. We cannot help but wonder whether, if in years to come gas or oil is discovered off the coast of Northern Ireland, which is not beyond the bounds of possibility, there will be any hesitation in rushing in a pipeline to take it in the other direction. Shall we have the experience of hon. Members from Scotland, who watch their gas being pumped down to the wealthier parts of England and cannot even get their share of it? Would people be surprised if Ulster nationalism became a reality?

10.19 pm

I cannot remember in the 14 years that I have been in the House a single-clause Bill having spawned such a rich debate, dealing with such a wide variety of subjects.

The technology of gas-gathering pipelines is quite beyond me. I do not understand the high finance of gas pricing but I found attractive the political theory which emerged at the end of the speech by the hon. Member for Enfield, North (Mr. Eggar). We have also heard a little of the agony of Northern Ireland and we must take that seriously.

Having said that, I wish to make a simple speech. It will be a constituency speech and it will be a plug for one of the most remarkable successes in post-war British industry. I refer to the pottery or ceramics industry. I make this speech because I feel that, though the Bill may be too narrow to help that industry, it may not be wide enough to embrace the other facets and difficulties of the general pricing problem.

The pottery industry is remarkable. Before the war everybody knew the typical bottle kilns which were crucibles not only for beautiful pottery but also of much human misery. Collectively those kilns in the Stoke-on-Trent area at that time consumed 1,500,000 tons of crude coal each year.

Today we have an industry which, as I have said, is one of the success stories of British industry. It has increased output, and exports vary between 35 per cent. and 90 per cent. according to the product. Workers in the pottery industry do not go on strike, management is excellent and investment is running at a high level. However, without doubt, the industry is showing signs of strain. One of the problems it shares with most industries is the strength of the pound. An- other problem is the high interest rate, which is common to industry generally.

Gas is absolutely critical for the pottery industry. Anyone who has been round a firm turning out Wedgwood, Spode, Minton or one of the other great products of the industry will know that pottery is produced in very long tunnel kilns and that those kilns are fired by gas. Two things are essential to the prosperity of the industry in relation to fuel. One is continuity of supply. If the gas has to be turned off or the supply breaks down, the effect on the earthenware and china passing slowly through the tunnel kilns, being heated in the process, can be catastrophic.

I am interested—though strictly in parenthesis, as we are all politicians here —that nobody has really grasped the nettle of domestic consumption. I must tell the hon. Member for Armagh (Mr. McCusker) that in my house we have a primitive heating system. We have a single large coal fire and a few one-bar electric fires to heat the bedrooms. My wife is always asking why we cannot have the system that so many British people regard as their birthright—the delightful system of gas central heating. All my married children have such a system. When they come home they say "Oh, dad, for goodness sake, can we buy a gas central heating system for you?" I say " No. We are getting a salary increase next month—I hope."

The Labour Government were responsible for introducing the wrong policy for a great industrial nation. It is just as well that I have a safe seat. It is a terrible thought that anyone with a gas pipe within 25 yards can receive 25,000 therms of gas per annum whereas some industrialists cannot have a guaranteed supply and some cannot even have a supply.

When talking of the wide-ranging technological developments in the 1980s and 1990s we should come nearer home, if we have the courage as politicians. We must put industry first. The Bill, small as it is, loosens the supply problem for the industrialist because he can obtain a supply if he can afford it. The country might have to face the problem.

The price of gas causes anxiety in the pottery industry. The pottery industry consumes 80 million therms of gas a year. The price of a therm of gas in 1971— in those halcyon days—was 3½p. That must have been the first price registered in decimal currency. The current price is 25·3p, and it is to go up again in September. Since 1974 fuel costs have risen from 4 per cent. to 11 per cent. of total cost.

The paradox is that we are the inheritors of rich supplies of oil and gas and yet pottery competitors on the Continent are paying 8p a therm less than we in Britain. That might be all right for some industries, but the pottery industry is dependent on exports. Much of the competition is vicious—I was going to say that it is unfair. It is unfortunate that the industry suffers such a price disadvantage.

I do not want to become involved in the principles which we have been discussing so learnedly. However, since we have a relatively plentiful supply of gas it should be our policy to sell it relatively cheaply. That should be a matter of policy. I do not know whether we can justify a policy that is based on the equalisation of gas and oil prices, or an attempt to equalise, in a broader sense, all fuel prices.

Before we wake up one day and find that we do not have an industry, we must come to grips with the fact that if we have these advantages we should use them. Other nations do so. [HON. MEMBERS: " Which countries? "] Several countries, even some in the Common Market. If France had the advantage of relatively cheap fuel, it would maximise that advantage. We speak academically. We may talk more practically about import controls to guarantee our industrial and manufacturing salvation in the 1980s.

I wish to make a naked plea to the Minister, on behalf of the pottery industry, that pricing policy should be directed to help those industries that are dependent upon this source of fuel. I do not make this argument in a generalised manner; I make it in terms of the needs of the chemical and pottery industries. We could say that they could have as much as they need up to 25,000 therms or, in contract price, beyond 100,000 therms. Why not say to the large pottery manufacturers " Let us start talking about those who consume 1 million therms, and see whether they could be given some advantage because they are such large consumers "?

The hon. Member for Bristol, North-West (Mr. Colvin) is another theoretician. I am talking about an industry that produces 400 million-worth of cups and saucers, and which exports, through a vigorous marketing policy, between 35 and 90 per cent. of its products. The industry is now under considerable strain because of the factors that I have mentioned. It may be that we cannot do anything about a strong pound, because of the commodity that we are discussing tonight, and because of the high interest rates that the stupid Government maintain at a higher level than needed. Because of the cost of gas, the Government might have to use that weapon to maintain the prosperity of the industry. That may not be theoretically or philosophically acceptable to those who believe in the pure doctrine of market forces.

I am using this argument tonight in reference to the way in which we price gas. We are making certain changes. They are small changes, and I am asking that they should be extended. What I am saying will not only contribute to the future of the pottery industry but, if applied more widely, will assist us to prevent the deindustrialisation of Britain.

10.35 pm

My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) has indicated an area of concern in his constituency. I share some of that concern, because the Government are embarking upon a process that will destroy huge sections of British industry on the basis of a belief in market forces.

If I follow the logic of the Secretary of State's argument, the Bill is designed to free the British Gas Corporation from certain statutory contractual obligations under which it must supply gas to certain industrial users in particular. The underlying argument is that if we relieve the Gas Corporation of its statutory responsibility, and have arm's length, freely negotiated contracts for supplies of more than 25,000 therms a year, somehow or other that will feed through into the oil industry, which is the main explorer for gas, and perhaps into the British Gas Corporation itself. It is argued that that will lead to a greater exploration activity in the northern and southern sectors of the North Sea, that more gas will be discovered and that eventually, in the long run, we shall cure the present apparent shortage.

That may be the case, but the Secretary of State, wearing his other hat, is creaming off some of the funds, not only from the oil companies but also from the Gas Corporation itself, which might be used for exploration activity. I can see difficult theoretical arguments in relation to windfall profits, and I do not want to pursue them this evening. However, when the Secretary of State puts forward this small Bill, he has an obligation to indicate his expectation in relation to security of supply. That is his major obligation.

In general terms, I do not demur a great deal from what some Conservative Members have said in relation to comparability of price, because I feel that energy prices in interventionist terms will have to be equated, although not strictly across the board. However, there will be a need for some form of loose equation, because gas and oil are in general found in association. Therefore, the Secretary of State has an obligation to indicate the number of industrial consumers who might be affected by these proposals, as well as the number of key industries which might be affected, as my hon. Friend the Member for Stoke-on-Trent, Central pointed out.

The hon. Member for Dundee, East (Mr. Wilson) mentioned some Scottish concerns, and I do not necessarily cross swords with him. However, in parenthesis I should point out that in my constituency the Scottish National Party opposed certain gas and associated developments which will bring jobs and benefits to Fife.

The Secretary of State has an obligation to indicate how, in association with the corporation, he proposes to ensure that industries which are already handicapped are not more severely handicapped because they are tied to gas as the most useful and beneficial fuel. If the result will be to increase gas prices to other public sector activities, such as hospitals and schools, he should tell us what proposals, in association with the Treasury, exist to secure an adjustment of cash limits to ensure that those other public sector bodies are able to pay the price increases.

I have particular experience of that in my own constituency, where a hospital board in the Fife area wanted to embark on certain expansion activities but had to delay or alter them in order to accommodate other fuels because the gas was not available. Other areas have been helped by the Scottish section of the BGC. We have been able to make adjustments, and firms that could use only gas—considerable volume and capital expenditure were involved—have been met by the corporation. It eventually came along with the supply. A number of industrial estates have been set up in Scotland and elsewhere that are tied to obtaining gas supplies. Industrial expansion and new jobs might be delayed if the Secretary of State does not indicate clearly to the corporation his allocation of priorities.

I shall not go into the technological fantasies of the hon. Member for Bedford (Mr. Skeet). The hon. Gentleman's argument for importing LNG is too fanciful for words. There are insufficient LNG tankers available, and if they were available we would not have the port facilities to accommodate them. We have one port facility that has a great question mark over it—Canvey Island. The corporation has great responsibility for enhancing the safety requirements on Canvey Island. I hope that the Secretary of State will make a statement on another occasion on what the corporation is doing to improve, in futuristic terms, the importation of LNG.

I had in mind the peak load, with which the Secretary of State was concerned. The House will probably recognise that LNG will be valuable in meeting the peak load. The facilities on Canvey Island could be used for that purpose. If we had increased the LNG supply from Somatrach in Algeria, as the French have done, it is possible that we would not be in our present position.

I shall not follow the technical argument about Somatrach and LNG. Somatrach has had extreme difficulty in exploiting its fuel. Let the hon. Gentleman tell the hon. Member for Essex, South-East (Sir B. Braine), who represents Canvey Island, that more LNG should be imported through that terminal. He will not be pleased to hear that.

My right hon. Friend the Member for Plymouth, Devonport (Dr. Owen) indicated the crying need to get a statement from the Government on exploitation. I was present when the Minister of State uttered glowing statements in Houston to the assembled American-British audience about how well we are doing and saying that we shall get a gas-gathering system. However, not a word is said in the House about that. The Minister goes to Dallas before he says anything in the House on that score. I suppose that JR. and others might be pleased, but we are not told of the Government's thinking.

It is essential that we should be given clarification. That is of importance not only to our sector of the North Sea but to the Norwegian sector. We are happy that the Norwegians are finding more gas. If more gas is found in the North Sea, that will benefit Britain and Western Europe as a whole. I shall be extremely grateful if the Under-Secretary of State makes clear that the overall provisions of the corporation's policy will not inhibit it in participating in a transmission system. There are companies that will want to be associated by means of a partnership arrangement. I think that the Opposition would mount massive opposition to any proposal to denude the corporation of the right to participate—I am not suggesting as a majority partner—in any additional transmission system for the North Sea.

It is extremely important when talking about security of supply to be sure that every platform in the North Sea has enhanced recovery techniques deployment. We know that secondary recovery techniques are used. I am talking about water and gas injection. We know that the Offshore Energy Technology Board has a study on enhanced recovery. It is important for the future supply of oil and gas that we get a clear indication soon of the Government's policy on enhanced recovery techniques. It may be that by extracting quickly, or even storing it, we are destroying the possibilities of increased recovery of oil in place of natural gas in future. I submit that we are a bit late—two to three years late—with the gathering system. I hope that we shall not be late in ensuring that every platform that can take it in terms of its deck loading capacity deploys enhanced recovery techniques so that we can ensure supply well into the twenty-first century.

10.45 pm

There has been a far-ranging and wide—worldwide—debate on every aspect of gas tonight. As there is still a lot of business before the House, I am sure that hon. Members will cheer when I say that I intend to confine my remarks to the one-clause Bill and put forward some of the matters that we want to question.

We should have liked the Bill to go into Committee upstairs, because then we would have had more time to examine its effects on industry. But the Government have decreed that it shall be taken tonight on the Floor of the House, so we shall have to make the best of it.

We do not oppose the Bill in principle, because we are in favour of flexibility for nationalised industries. We do not believe that nationalised industries, from our Socialist point of view, should be rigidly hidebound and penalised in any way. We are glad that the Government have come round to that way of thinking. Nevertheless, we want to talk about the Bill's effects on consumers and the Government's reasons for introducing it.

Obviously the British Gas Corporation could not satisfy an increasing demand with 40,000 new customers each year. It was facing an annual increase of 400,000 new customers and seeing its sales increase by a quarter with a trebling of demand. There would be total chaos if no attempt were made to give the corporation these powers. Therefore, we are not arguing too much about its having these powers. But we are unhappy with the Government's policy of linking the gas price to the taxed, not the basic, oil price and their intimation that they propose to tax gas prices through their excess profits tax.

We notice that the Government have no plans for an excess profits tax on the banks. I should have thought that, as with the ITV levy, some sort of excess profits tax on bank profits would have been acceptable.

We cannot understand why there should be a need for an excess profits tax on the gas industry but not on banking. This is due to a change in policy, whereby energy is run by the Treasury, not by the Department of Energy. The attitude towards the nationalised industries now is not that of the 1970–74 Conservative Government, which was to keep their profits down to control inflation, but to milk them for as much as the market will bear and to allow the Chancellor of the Exchequer to use the cash to cut taxes to keep down the public sector borrowing requirement, or to do as he thinks fit. If old ladies have to pay increased gas bills to provide more cash for the Treasury with which to cut taxes for the rich, that is the sort of redistribution of wealth which we expect the Government to introduce.

I turn to the price rises that industry will have to face. It seems sometimes from the attitude of the Government that industry is some grey, amorphous mass somewhere north of the Trent or starting at Stoke and that somehow it will bear these increases.

The gas price has a massive effect on certain industries. For example, the chemical industry, which uses 44 per cent. of all industrial gas, is hammered by the big price increases and the gas tax that the Government have proposed. The glass, clay, ceramics and brick industries are affected. About 30 per cent. of the cost of a brick represents the cost of the energy. That affects building costs throughout the country.

The ceramics and clay industries are concerned about the Bill. The refractory industry, from which British Steel has to buy, is also concerned. One of the biggest customers of the refractory industry is British Steel, because it buys the bricks for its furnaces and so on from that industry.

I am not giving way. I am sorry. Sit down. The hon. Gentleman had his chance. He ranged far and wide, referring to Mexico, Canada and so on. The hour is getting late and my hon. Friends wish to speak on fishing and Northern Ireland. We must get on.

Many firms in the glass industry are affected. One in my constituency has faced a 53 per cent. increase in the cost of its gas this year. Last year it was spending £2 million on gas. This year it is having to spend £3 million. Last year the exchange rate of the pound was below $2. Now it is well above $2. All of this firm's export trade has vanished. It has had to make about 25 per cent. of its employees redundant. It can no longer export because of the high level of the pound. The price of gas, which is essential for melting down the glass, has risen to such an extent that the firm is now laying off people and making them redundant.

It may be that this excess profit is doing the Treasury a great deal of good. But it is not doing British industry a great deal of good. Many industries are suffering. The clay pipe industry—not clay pipes for smoking but pipes for agricultural drainage—is suffering. The tile industry is suffering. It exports 70 to 80 per cent. of its products. All these industries need massive amounts of energy. Even the beer industry needs it. Anyone who drinks draught Bass may be glad to know that the brewers use considerable amounts of gas—not to put in the beer but to use in the breweries.

Many industries have committed themselves to extensive investment and they now find that because of that—much of it in modern equipment—they are having to pay very high charges. Again, many of them are dissatisfied with the sort of contracts that they have been forced to take on. The Minister knows that there are generally two types—although there may be more—of contracts with the British Gas Corporation: the firm price and the interruptible price contract. In general, the gas undertaking likes to negotiate on interruptible prices, with probably about 5p per therm difference. My hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) mentioned how much this was costing.

It can also be very awkward for an industry, to say the least, to be forced to accept an interruptible supply, which means that on the coldest day of the year when consumers come home from work and switch on their domestic gas fires suddenly the corporation telephones firms, literally with a few hours' notice, and says " We shall be putting you on interruptible supply tomorrow." The firms then have to look around for some sort of liquid gas, which is difficult to obtain and very expensive, in order to maintain their continuity.

There are now about 700 companies, one-third of our industry, having to take on the interruptible supply. They are very concerned about it The Bill does not lay down any guidelines for the corporation on what sort of supply it must offer to industry. But the corporation is in a monopoly situation. We hope that it will take notice of industry, try to play fair with it, and not abuse its monopoly powers by insisting on totally interruptable supplies.

Last winter seven out of 12 regions had cuts to industry because of the policy of interruptible supplies. Some of the contracts which the corporation insisted on negotiating insisted on interruptions on as many as 60 or 70 days a year. The average cut was 35 days. My hon. Friend the Member for Stoke-on-Trent, Central mentioned the interruption in the ceramics industry. He will be interested to know that Wedgwood's contract contains provision for 28 days of cuts in supply. Continuity is needed in industry to keep products at a certain temperature, but some of the new contracts provide for as much as 90 days of interruptible supply. This matter must be re-examined.

The Secretary of State would not be going too far in taking powers to step in as a mediator perhaps and act on behalf of industry with the monopoly supplier. There must be some sort of appeal if the corporation abuses its powers.

The price of liquid gas, which is the standby, even if industry can obtain it, has doubled in 18 months. Industry is facing a total lack of stability. It does not know where it stands with the price of gas shooting up, the interruption of supplies, the level of the pound, and high interest rates. It is one more, kick to British industry, which is not doing it any good. UKF, which uses gas as feedstock for fertiliser, reckons that interruptions cost it £100,000 last year. However, British Gas compelled it to take on an interruptible supply contract.

Our industry faces fierce competition from the EEC. The level of our gas prices has already been mentioned twice. Our prices are the highest in the Common Market. The chemical industry has pro- duced figures. At first, the Secretary of State denied that we had the highest prices in the EEC. However, the statistical department of the EEC has generally accepted that our prices are the highest in Europe.

If prices are considered in pounds sterling per gigajoule, Great Britain's prices represent 1·4, Italy 1·2, Germany 1·1 the Netherlands 0·9, and France and Belgium 0·8. The price of gas in France and Belgium is about half that in the United Kingdom. It has been mentioned that if the French had this situation they would use it to help their industry. That is exactly what they are doing. Our competitors in the glass and ceramics industries are finding competition very fierce. They are hidebound. Many firms are having to lay off workers. They are having to give up the export opportunities that they have enjoyed for many years.

Why have the Government done this? The answer is that they want to tax gas. As has been said, there is no reason to tie the gas industry to oil prices. If gas is to be taxed to that extent, and if exporters are to be forced out of business, nothing will be gained. The extra tax will be used to pay unemployment benefit. Some of our energy supplies must be used to help our exporting industries. I am also interested in the Government's policy on energy conservation.

We shall not vote against the Bill, because we realise that it is needed by the BGC. However, we shall probe the effects of the Bill further when the Government introduce their proposals for an excess profits tax on gas.

10.57 pm

The most surprising comment that I have heard came from my hon. Friend the Member for Bedford (Mr. Skeet). I heard him shout " Back to the Bill." There has been no discussion of the Bill. At one stage I thought that we were still discussing the Whitsun Adjournment motion.

I was surprised that the Bill was not discussed in more detail. However, as the hon. Member for Stoke-on-Trent, Central (Mr. Cant) said, given the considerable problems in the supply of gas which face British industry, it is not surprising that many hon. Members, representing different industries and interests, are here. It is right that they should represent their constituents' needs.

The Government recognise that a serious problem has arisen over the supply of gas to industry. Strong criticims have been made to the British Gas Corporation. However, the demand for gas has run ahead of the BGC's ability to supply it. It has done so for two reasons. First, industrial gas remains cheap compared with competing products. Because it is so much cheaper, everybody wants it. Hon. Members should think before comparing the price of gas with industry's inability to get it. Because gas is cheap, industry wants it.

Another reason behind the sudden acceleration in the demand for gas has been a lack of confidence in oil. There are world-wide fears that there will be interruptions in supply. It is feared that even a major oil producer such as Britain will not be immune from interruptions in the Middle East.

The hon. Member for Bassetlaw (Mr. Ashton) placed great emphasis—and rightly so—on the complaints made by British industry about the availability and the price of gas. He placed less emphasis on the fact that one of industry's complaints has been the underpricing of domestic gas for many years. Domestic gas has been so underpriced that supplies have been diverted and the demand has run away.

It is worth bearing in mind that over the past 10 years supplies of gas to industry have increased fivefold, whereas those to domestic consumers in the same period have doubled. Therefore, British industry has been supplied with a large amount of gas over the past 10 years.

The right hon. Member for Plymouth, Devonport (Dr. Owen) repeated an argument that he has expressed before in the House—that gas prices should not be influenced by oil prices. In a way, it was surprising for him to say that, because it has been the policy of all Governments that the prices charged by British Gas should relate to those of competing products. There is sound logic in that. First, there is the fact that a lot of gas is sold by the producers at prices that relate to those of oil. We may not like that, but there is not much that we can do to alter it. Secondly, in the market many buyers of gas have the ability to switch from gas to oil, and unless there is some relationship between the two prices there would be no control over the demand for gas and the British Gas Corporation would find the situation unmanageable. That is the logic behind gas and oil prices being related.

That policy is not unique to this country. It is noticeable that other countries have announced that they are relating oil and gas prices. Hon. Members will have read of the negotiations between Algeria and Gasunie in which Algeria has announced that it is relating gas and oil prices. That is not a policy that is peculiar to this Government.

The right hon. Member also raised the question of a gas-gathering system and asked about the delay. The Government cannot be accused of delay and we appreciate the interest of hon. Members in the urgency of this matter. However, we have only just received the British Gas Corporation-Mobil study, and we are not yet in a position to make an announcement about it. I cannot give any more information. We are proceeding as quickly as we can, and an announcement will be made in a few weeks.

The third point raised by the right hon. Member was one with which I agree. He said that the Opposition believed that industries for which gas was essential and for which there was no substitute should be handled with care by the corporation. The British Gas Corporation tries to give priority to those industries that have to use gas because there is no alternative. It tries to approach such problems with great care.

My hon. Friend the Member for Bedford put forward far-reaching ideas, as did my hon. Friend the Member for Enfield (Mr. Eggar), with regard to the structure and ownership of the corporation. We shall study those ideas, but I cannot go into detail now. Both my hon. Friends asked whether the monopsony— the monopoly of the British Gas Corporation in the North Sea—should be repealed. The Chemical Industries Association feels strongly about the matter, and has made representations to us, which we are considering.

My hon. Friends and the hon. Member for Dunfermline (Mr. Douglas) referred to the gas levy and the fact that we have not been able to announce details to the House. Objection was taken because the levy was announced by way of written answer. The Department of Energy is not the sole master and does not control the time of the House. We had to come not quite at the top of the queue with that answer. We announced merely the principle of the levy. There will be ample opportunity for debate when the proposals are put before the House. It is intended that the levy will operate in this financial year and over the period of the financial target set for the corporation.

I put the question to my right hon. and learned Friend the Chancellor of the Exchequer and expected him to reply. The situation is unique. I received a reply from the Secretary of State for Energy. Will the legislation be a peculiar animal prepared by the Department of Energy or will it be prepared by the Chancellor of the Exchequer?

The legislation is being prepared by the Department of Energy. I cannot make a commitment about the precise legislative vehicle.

Hon. Members asked whether the levy would have an impact on BGC's investment programme. We entirely accept that it is not enough to choke off demand and get greater control over the off-take of gas, which is the purpose of the Bill. We also have to look at supply. We are satisfied that the levy has no impact on BGC's investment programme. It will be investing £600 million in 1980–81 and £4,000 million in the years up to 1984–85. That investment will not be affected by the levy.

My hon. Friend the Member for Bedford also asked, fairly and relevantly, about the numbers affected by the Bill. About 4,250 existing contract customers, who use between them over 6,200 million therms per annum, and 7,000 premises currently on the non-domestic tariff will lose their pre-1976 statutory entitlement. A total of 11,000 premises, using 550 million therms per annum, currently on the non-domestic tariff will be offered a contract supply.

That is a substantial number of customers. Will my hon. Friend confirm whether the BGC will be prepared to give those customers firm con- tracts as opposed to interruptible contracts?

In the number of customers that I read out, I included those who already have contracts—and they will not be affected—and those on the non-domestic tariff who have a pre-1976 right. The latter group will be most affected and they do not use a large number of therms. The 7,000 people with a pre-1976 right account for only 380,000 therms. Of course, both groups matter, because it is thought that those on contracts may have a statutory right to a tariff supply. That is the point of the Bill.

I turn to the points raised by the hon. Member for Dundee, East (Mr. Wilson). Nothing in the Bill affects Moss Morran, we do not have plans for exporting gas to the Continent and I do not intend to issue directives to BGC on how it should supply its customers.

The Department did not intervene in the case of Altens because we all know that the supply situation is difficult and the BGC has to decide on allocation within its statutory duties. The corporation has assured us that it tries to be as helpful as possible, within supply constraints, with supplies to new industrial estates, especially in high unemployment areas.

The hon. Member for Armagh (Mr. McCusker) raised the question of gas supplies to Northern Ireland, and I regret that I shall nave to disappoint him and repeat what he has heard before in such debates. He raised questions that are matters for the Secretary of State for Northern Ireland. That does not mean that we do not understand the problems that the hon. Gentleman has outlined, but he will remember that a study was made of the possibility of a pipeline to Northern Ireland and it was concluded that it would not make the gas industry there viable. The problems are of concern to the Government and I shall see that the hon. Gentleman's comments are passed on to my right hon. Friend.

Much criticism has been made of the Bill. It has been said that it does not deal adequately with the problems of gas pricing and supplies. We must be realistic and recognise that the Bill is only one small step and a single measure that the corporation has asked us to introduce. The purpose of the Bill is specifically to move people who have inherited a privileged position off tariff and on to contract. This will give the corporation greater control over its off-take of gas supplies.

Is not the difficulty that the Bill was introduced at the request of the corporation? Are the Government intending to act on their own thinking to put right some of the obvious defects in the gas industry in relation to fuel economy?

My right hon. Friend the Secretary of State set out our thinking in his opening remarks. We have to deal with the pricing conundrum. Whatever else is levelled at the Government, we cannot be accused of not grasping the nettle of the imbalance between domestic and industrial pricing, to the dismay of some of our own supporters. The problem of increasing gas supplies depends on investment in the transmission system, the gas-gathering system and what happens in the North Sea. No one pretends that this Bill is the answer to the considerable problems of gas supplies.

The hon. Member for Bassetlaw compared gas supplies in this country with those in Europe. He alleged that he was making comparisons between prices. I noted that he concentrated entirely on industrial prices. That was no doubt convenient. Whereas it is often alleged that our industrial prices are very high, it is also an undisputed fact that our domestic prices are among the cheapest in Europe. This is part of the problem. The hon. Gentleman quoted a number of Eurostat statistics alleged to show that our industrial supplies were priced higher than those in other countries. That survey was carried out on the basis of several cities in Europe. It was a comparison of tariff rates in different countries. Eighty per cent. of industrial supplies in this country are on contract, not on tariff. There is a 7p per therm difference on average between contract and tariff. The table to which the hon. Gentleman referred cannot be used as a basis for comparison.

Division No. 306]


[11.20 pm

Alexander, RichardAspinwall, JackBest, Keith
Alison, MichaelBeaumont-Dark, AnthonyBlackburn, John
Ancram, MichaelBenyon, W. (Buckingham)Boscawen, Hon Robert

the price in France at about 55 per cent. of ours and the price of a therm at about 25p, that is still a considerable advantage, even allowing for the 7p per therm that the hon. Gentleman mentioned.

Even if that was the position, the hon. Gentleman will have noticed that the French have just had their gas supplies cut off by the Algerians. The Algerians are asking for higher prices per therm than are common in this country.

The trend throughout Europe is for gas prices increasingly to be linked to oil prices. I have explained why that approach has sound practical logic—not doctrine, not theory—behind it. That is what the Bill is partly about. The purpose partly, as the hon. Member for Stoke-on-Trent, Central remarked, is to ease up the relationship of one price to another and to enable us to move to our market pricing strategy.

Without a sensible approach to energy pricing, we shall consume our own natural resources more quickly and bring forward the day when we have to rely on much more expensive alternative sources. The Bill will give the corporation greater control over the off-take of gas supplies. It will not solve all the problems of British industry, but it will perhaps make it a little easier for the corporation to deal with the sort of problem that concerned the hon. Member for Dunfermline, the sort of emergency that might arise in a hospital in a period of peak demand. It gives the corporation more control over the supplies of gas, to see that gas is directed to those customers who can make the best use of it and who are in the most urgent need of it

The Bill does not solve all the problems of gas supplies, but it is a measure that is very much needed.

Question put, That the Bill be now read a Second time: —

The House divided: Ayes 85, Noes 12.

Braine, Sir BernardHowell, Rt Hon David (Guildford)Proctor, K. Harvey
Brooke, Hon PeterJopling, Rt Hon MichaelRees-Davies, W. R.
Brown, Michael (Brigg & Sc'thorpe)Knox, DavidSt. John-Stevas, Rt Hon Norman
Cadbury, JocelynLamont, NormanShepherd, Colin (Hereford)
Carlisle, Kenneth (Lincoln)Lang, IanSkeet, T. H. H.
Chalker, Mrs LyndaLawrence, IvanSpeller, Tony
Chapman, SydneyLloyd, Peter (Fareham)Spicer, Jim (West Dorset)
Clarke, Kenneth (Rushcliffe)Lyell, NicholasSproat, lain
Clegg, Sir WalterMacfarlane, NellStevens, Martin
Colvin, MichaelMcNair-Wilson, Michael (Newbury)Stradling Thomas, J.
Dean, Paul (North Somerset)McQuarrie, AlbertTebbit, Norman
Dorrell, StephenMajor, JohnThompson, Donald
Douglas-Hamilton, Lord JamesMarlow, TonyThorne, Neil (llford South)
Dunn, Robert (Dartford)Maude, Rt Hon AngusTownend, John (Bridlington)
Eggar, TimothyMaxwell-Hyslop, RobinViggers, Peter
Faith, Mrs SheilaMoate, RogerWaddington, David
Fookes, Miss JanetMorris, Michael (Northampton, Sth)Walker, Bill (Perth & E Perthshire)
Fox, MarcusMorrison, Hon Peter (City of Chester)Waller, Gary
Garel-Jones. TristanMudd, DavidWard, John
Gow, IanMyles, DavidWatson, John
Gower, Sir RaymondNeedham, RichardWheeler, John
Gray, HamishNelson, AnthonyWickenden, Keith
Griffiths, Peter (Portsmouth N)Neubert, MichaelYoung, Sir George (Acton)
Hawkins, PaulNewton, Tony
Hawksley, WarrenPage, Richard (SW Hertfordshire)TELLERS FOR THE AYES:
Hicks, RobertParris, MatthewMr. John Wakeham and
Hogg, Hon Douglas (Grantham)Pollock, AlexanderMr. John Cope.


Alton, DavidPenhaligon, DavidStewart, Rt Hon Donald (W Isles)
Beith, A. J.Robinson, Peter (Belfast East)
Bradford, Rev. R.Ross, Stephen (Isle of Wight)TELLERS FOR THE NOES:
Freud, ClementRoss, Wm. (Londonderry)Mr. Gordon Wilson an d
McQuade, JohnSteel, Rt Hon DavidMr. Harold McCusker.
Molyneaux, James

Question accordingly agreed to.

Bill read a Second time.

Bill committed to a Committee of the whole House—[ Mr. Boscawen.]

Bill immediately considered in Committee.

[Mr. Richard Crawshaw in the Chair]

Clause 1

Supply Of Gas At An Annual Rate In Excess Of 25,000 Therms To Be Subject To Special Agreement Of British Gas Corporation

Amendment made: in page 1, line 9, at end insert:

"(1A) Section 25(5) of that Act shall not apply in relation to tariffs fixed by the Corporation under subsection (3) of that section with respect to the prices to be charged for therms supplied to any premises in excess of 25,000 therms in any such period of twelve months; and nothing in section 24(1) of that Act shall be construed as affecting the power of the Corporation to fix such tariffs as they think fit with respect to the prices to be charged for therms so supplied."—[Mr. David Howell.]

I beg to move, in page 1, line 17, at end insert:

" (3) An existing consumer who in the period of 12 months immediately preceding the pass- ing of this Act has been provided under tariff with a minimum supply of gas to any premises in excess of 25,000 therms shall have the right to require the corporation to enter into a special agreement with him. The terms specified in the agreement shall ensure continuity of supply of an annual volume not less than that supplied in the previous 12 months immediately preceding the passing of the Act and at a price to be agreed. In the case of a dispute as to any of the terms of such agreements an appeal shall lie to the Secretary of State."
I listened with interest to the hon. Member for Bassetlaw (Mr. Ashton) talking about the flexibility of arrangements for nationalised corporations. I pay tribute to the Government, because their amendments help towards achieving my objective. I am concerned about consumers and how they fare. The number of consumers likely to be affected by the Bill is no fewer than 11,000 and the amount of gas involved is about 6 billion therms.

The hon. Member for Bassetlaw discussed people who are not affected by the Bill. The British Ceramic Manufacturers' Federation states in a letter:
" Whilst the strict objective of the alteration to the Bill does not affect any of our members as far as we can ascertain … all their consumptions are in excess of 100,000 therms ".
The firms involved consume between 25,000 therms and 100,000 therms. The British Gas Corporation is obliged to supply existing users and new users within 25 yards of a gas distribution pipeline. That is provided for in schedule 4 of the Gas Act 1972,. Under section 13 of the Energy Act 1976 it must provide a volume of gas but it is not obliged to exceed 25,000 therms per year. That has the effect of giving priority to small industry and commercial consumers as opposed to industry generally.

The corporation supplies gas at published tariffs up to an annual consumption of 100,000 therms per annum. Higher levels are supplied on the basis of special contract terms related to the market.

Section 25(3) of the Gas Act 1972 provides:
" the prices to be charged by the Corporation for the supply of gas… shall be in accordance with tariffs … and those tariffs … shall be so framed as to show the methods by which and the principles on which the charges are to be made as well as the prices which are to be charged, and shall be published."
This Bill, unfortunately, goes along a different tack and provides that supplies of gas in excess of 25,000 therms per annum—that is, anything between 25,000 and 100,000 therms—shall cease to be on tariff but shall be under contractual terms, that is, contractual terms with the monopoly seller, the British Gas Corporation.

My anxiety here is that there are certain disadvantages in oil-related contracts. The Minister has said that more consumers will move off tariffs and on to contract terms. These, of course, can be made subject to a minimum and a maximum take. Penalties can be imposed for exceeding the upper limit. There is no comparability with payments by other customers. There is therefore a lack of transparency in these contracts, because they are not published. The terms are therefore not at published rates. Furthermore, they are not tariffs, but I want to ask the Minister what contractual terms are likely to apply.

I admit that at present new contracts are few and far between, but the rates prevailing are anything in excess of 35p and 41 p per therm. The latter figure is very high indeed. Are they to be moved from very attractive, or reasonably attractive, conditions to very much higher rates, which will be imposed by the corpora- tion? Should not we say that we will do something for their protection?

My hon. Friend has indicated that he would like to know whether customers will be on firm contracts or interruptable contracts. The latter are very much cheaper and are related to the price of fuel oil, but firm and renewable contracts will be related to gas oil. I am not against the point in principle. I think that this is right, but here we find that a right is conceded by at least 11,000 customers. They get no compensation for their loss. There is no quid pro quo. This will help the corporation, but it will not necessarily help them, because they will be on higher contractual rates.

I seek a number of guarantees from the Minister, some of which he has already conceded. Customers should have continuity of supply at the rate of the previous 12 months in excess of 25,000 therms per annum. Secondly, the price should be agreed inter se with an appeal lying to the Secretary of State in the event of there being any dispute.

I stress the importance of an appeal, because I can tell the Minister that in Committee on the Continental Shelf Bill in 1964 I moved an amendment to clause 9 that a reasonable price should be given to the companies supplying gas to the BGC. If there had been a reasonable price and it had been agreed by arbitration, all the difficulties that have supervened would never have arisen.

That is the analogy that I am using on this occasion, and all that I am suggesting to the Minister is that if there could be an appeal to the Secretary of State anyone who loses his rights and receives no compensation will have an opportunity to go to the Secretary of State to ensure that he gets justice.

I can put this in two final points. What I want to do, and what the amendment seeks to do, is to protect the consumer against the abuse of the exercise of monopoly power by the corporation. I should have thought that those ideas would commend themselves to the Minister. Perhaps he will be able to give us further clarification on what is likely to occur.

I rise briefly to support my hon. Friend the Member for Bedford (Mr. Skeet). We are proposing to take away a statutory right that was granted by the House to certain industrial gas consumers. It is right that we should seek to safeguard and protect those industrial consumers who have come to rely upon the right given to them by the House. It is in that spirit that I seek some clarification from my hon. Friend the Minister about whether the customers affected will be granted a right to firm supply contracts, and some indication of the price that they will be offered.

My hon. Friend the Member for Bedford (Mr. Skeet) acknowledged that our amendment has gone a long way towards meeting what he had in mind. As my right hon. Friend the Secretary of State said, we have received an assurance that the BGC does not intend to cut off or to reduce supplies to industrial customers. Obviously, I cannot say what the contractual terms will be, because they are negotiable. My right hon. Friend said that customers would be in a position broadly similar to that of new customers—it would be on that sort of basis.

Our amendment—which has already been accepted by the Committee— ensures that the legislative provisions that prohibit discrimination between tariffs should not apply over 25,000 therms. The precise purpose of that is to enable the BGC to have a standby tariff which would be available to the pre-1976 customers using more than 25,000 therms. They will have a standby tariff where agreements may not have been fully reached on the terms of a contract. The tariffs will be published. They will be submitted to the consumer councils in the normal way. That is the mitigating factor. The difference between our amendment and that of my hon. Friend the Member for Bedford is that he wants a final court of appeal to rest with the Secretary of State, whereas we have said that there should be standby tariffs for special circumstances where an agreement may not have been reached.

I am grateful for the opportunity to say a few additional words on the matter. I had hoped that the Minister would concede a little further and say that he would not be against an appeal to the Secretary of State, who is the fount of all wisdom on energy matters. He would be able to arbitrate quite impartially on the matter.

Obviously, the Minister will not be moved in the direction that I had hoped. However, he has conceded a lot of ground and. on that basis, I beg to ask leave to withdraw the amendment

Amendment, by leave, withdrawn.

Clause 1, as amended, ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.


Amendment made: in line 3, at end insert

" and that charges for therms supplied to any premises in excess of 25,000 therms a year may be fixed by the Corporation under section 25(3) of the Gas Act 1972 without regard to the requirements of section 24(1) or 25(5) of that Act".—[Mr. David Howell.]

Bill reported, with amendments; read the Third time and passed.