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Fuel Costs

Volume 13: debated on Monday 23 November 1981

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1.

asked the Secretary of State for Energy what is his response to the lastest report from the National Economic Development Council energy task force on comparative costs for fuel in industry in France, West Germany, Italy and the United Kingdom.

7.

asked the Secretary of State for Energy if he proposes to take action on energy costs in manufacturing industry in the light of the findings of the National Economic Development Council task force.

28.

asked the Secretary of State for Energy when he expects to receive the updated National Economic Development Council report on energy prices.

The report shows clearly the substantial improvement in the relative position of United Kingdom energy users since the previous report. I shall keep the position of bulk users of electricity under close review, but the heart of the problem remains the costs faced by the supply industry.

Does my right hon. Friend accept that it is part of the duties of the Secretary of State to ensure that British industry receives competitively priced fuel supplies? To that end, to assist bulk users of electricity, will he consider authorising consultants or auditors to examine the pricing structure of the CEGB?

My hon. Friend is right to remind me that I have many responsibilities. I am not, however, responsible for the exchange rate—[HON. MEMBERS: "Oh!"]. Nor am I responsible for the fact that the French long ago decided to go for nuclear power in a substantial way, resulting in lower electricity generation costs than in this country. Nevertheless, I accept that there is a genuine problem, and my hon. Friend has put his finger on it. I am expecting shortly the review of the bulk supply tariff commissioned by my predecessor. I do not wish to raise premature hopes, but we must see whether that offers any change in the tariff to the advantage of bulk electricity consumers. In any event, I shall certainly bear in mind my hon. Friend's final suggestion.

Order. With every respect, may I encourage everyone to be a little briefer?

Is the Secretary of State aware that his reply is utterly abysmal? Does he appreciate that the West Germans give massive subsidies to their coal industry? Does he realise that current electricity prices in this country are threatening the very existence of electric arc furnace steel making? Will he take a more positive and intelligent attitude to this serious problem that is damaging British industry?

As I said earlier, the position—although for electric arc steel companies it is difficult in some respects—is considerably better right across the board than it was when the first task force report was made

With regard to European comparisons—I shall bear in mind your injunction, Mr. Speaker—the hon. Gentleman will be aware that the British Government took an initiative on energy pricing within the framework of the European Community and we are very close to reaching agreement on the draft guidelines.

Does my right hon. Friend agree that, as 80 per cent. of our electricity is generated by coal-fired power stations, the most effective way to help British industry and jobs is for the coal miners to accept realistically moderate pay increases?

Will the Secretary of State confirm that although things may be better, as he puts it, bulk users in British industry are still penalised by the Government's energy policy? Does his answer mean that he intends to leave it to so-called free market forces and to continue to ignore the subsidies given in other European countries?

It is not simply a matter of subsides. In a number of countries, particularly France, hydroelectric power and especially nuclear power result in lower electricity costs, and advantage is bound to derive from that. In Germany there are certain long-standing contracts that will gradually come to an end, and the new contracts will not be made on the same terms. Nevertheless, there is a problem there. That is why we pressed so hard within the European Community for guidelines concerning the phasing out of State subsidies through transparency, which is a dreadful jargon word, but it is important to know exactly what is happening in other countries.

Does my right hon. Friend accept that the British paper industry, for example, is paying at least 20 per cent. more for its electricity than are its French and German competitors? Does he expect to eliminate that differential? If so, how and when?

As I said earlier—I respect my hon. Friend's persistence on the issue—the next step is to see what emerges from the bulk supply tariff review. There is a possibility that there wil be some mitigation as a result of that, although it would be wrong to hold out the hope that it will eliminate or substantially eliminate the disparity with certain European countries. It is not true that there is a disparity with all European countries.

Does the Secretary of State recognise that several steelworks in South Yorkshire are already facing severe competition from the Italian industry? How on earth does he expect them to survive now that the Italian Government have decided to subsidise electric arc steel production to the extent of over £30 million a year?

I realise that there are real problems for the companies concerned, but I am sure that not even the hon. Gentleman would suggest that it would be sensible policy for Her Majesty's Government to look at each country, see whether a subsidy is given and match that in every respect, whatever the cost to the rest of the economy and industry.