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Electricity Charges

Volume 124: debated on Monday 14 December 1987

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11.

To ask the Secretary of State For Energy what representations he has received from (a) district or regional health authorities or (b) other centrally funded public service employers relating to the proposed increases in electricity charges.

Nevertheless, in view of the serious financial crisis facing the hospital service, which according to the Daily Telegraph is recognised by the vast majority of people in this country, does the Minister agree that the Department should either give concessions to health authorities or press the Secretary of State for Social Services to provide added budget allocations for health authorities to cover the quite unnecessary increases in electricity charges?

I do not accept the hon. Gentleman's view that the increases are unnecessary. On present assessments, electricity accounts for slightly less than 1 per cent. of health services costs. The expected increases will thus be less than one tenth of 1 per cent. How that increased cost —estimated at about £8 million in a total budget of £22 billion next year—is finally accommodated is a matter for my right hon. Friend the Secretary of State for Social Services.

As I understand it, the Government want to increase the rate of return by increasing the charges because the rate of return is under 2·5 per cent., which is only one quarter of the rate of return in private industry. Once that rate of return has been increased and attracts private investors into the electricity generating industry, competition will drive down prices. Obviously, there is in the Government's policy a subtle point that has escaped my attention, but does that make sense?

That is pretty good. The only additional point is that it was the Labour Government who introduced the concept of a 5 per cent. rate of return on new investment in the public sector. The Government are trying to edge the rate of return in the electricity industry towards that 5 per cent.

The Minister has just confirmed an answer given by one of his colleagues in the DHSS in a written answer on 24 November, in which the hon. Lady said that the increased cost of electricity would add about £8 million to the annual costs of the National Health Service. The Prime Minister frequently makes great play about giving extra funds of far less than that to the Health Service. Given the underfunding of the National Health Service and the great public concern about that, is it not right that hospitals should have some exemption from these electricity charges?

I do not know whether it is my place to engage in the question of the funding of the Health Service. If it is, I have to say that the Government have raised expenditure on the Health Service by almost 30 per cent. in real terms since we came to office. Let us get the context in which these things are being discussed. It is that expenditure of £22 billion is planned for next year, out of which this £8 million looks a rather small item.