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Energy: Economic Pricing

Volume 413: debated on Monday 20 October 1980

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2.43 p.m.

My Lords, I beg leave to ask the first Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether they will take steps, by instructions to the power supply industries concerned, to reduce the electricity and gas charges to British industry to levels comparable with corresponding charges in France and Germany in order that it may compete in both domestic and overseas markets on fair terms with its continental trade rivals.

No, my Lords. Government policy is based on the economic pricing of energy—a principle which has been endorsed by all European Community member states. This means relating energy prices to the longer term costs of production and market conditions prevailing in the country concerned. Where there is evidence that other states are not observing this principle and thereby subsidising energy costs, the Government will not hesitate to back up our industries with representations to the European Commission.

My Lords, is the noble Earl aware that the concept of economic pricing has never been fully ventilated and that the calculations in support of this concept have never been produced, at any rate to this House? Is the noble Earl further aware that it is undoubtedly true, if the Financial Times report of 6th August last can be believed, as well as earlier reports of The Times, that other European countries which are our competitors are being subsidised and are getting their fuel at a far lower price than our own, even though it may be calculated on the basis of the economic concept to which the noble Earl has referred? Is the noble Earl also aware that in today's Times there appears a report emanating from Mr. MacGregor that in the case of the steel industry our competitors are being subsidised at the rate of £8 per tonne for every hit of steel which is being produced? In view of the fact that Her Majesty's Government now control fuel prices in respect of gas and electricity, do not they think that it is high time that British industry should be given some relief?

My Lords, if I may work backwards through the noble Lord's list of supplementaries and take first the issue of the steel industry which is affected by electricity prices, I think that the noble Lord and the House will find that price comparisons are extremely difficult because they are influenced by what are the main sources of raw material for electricity generation which exist in the different countries. It would be extremely difficult to provide absolute standardisation in that way because some countries are more fortunate than others in their raw materials. The noble Lord and the House will be aware that the CBI are collecting factual data and will be presenting their findings to the Government so that they are able to challenge the Government's overall view, which is that our overall energy costs are comparable with those of our European competitors.

My Lords, is not the noble Earl aware that thanks to the British Gas Council having paid far too low a price for the gas available from the southern fields of the North Sea they have not been properly developed? Although the public benefited from lower gas prices in the sense which the noble Lord opposite would like to see, the fact is that less gas has been produced. Now that arrangements are being made to redevelop and extend those gas fields, a much higher price has had to be paid to make it worth while.

My Lords, I am grateful to my noble friend for reminding the House that the situation with regard to energy costs both in this country and in the Community is very fluid and that circumstances change. There is evidence that British industry did operate under a competitive disadvantage, but as higher energy costs work through and contracts are revised in the Community industries, the noble Earl and the House will find that the competitive disadvantage is rapidly narrowing.

My Lords, the noble Earl said, quite rightly, that some countries are more fortunate than others in their sources of supplies for the production of energy, so may I ask him whether we are not the most fortunate of all the European countries?

My Lords, with respect to the noble Viscount, I think he is confusing the issue of being fortunate in terms of supply and of being fortunate in terms of cost. This country is fortunate in having a supply of dear-cost energy. It cannot afford to undercut the dearness of that cost. It is not fortunate in having sources of cheap energy available to it today, such as hydro-electric energy.

My Lords, is the noble Earl aware that the course which should be taken by him is to produce his own calculations? Is he also aware that the figures which have been published not only in The Times but in the Financial Times have been supplied by industries with a very high reputation, which are not in the habit of bandying about estimated figures? Will be give the House an undertaking that, as and when he has received the estimated figures from the CBI, he will come out with an unequivocal statement as to where he agrees with the figures produced and where he disagrees, and why?

My Lords, neither I nor anybody else in the Government have in any way attempted to conceal the fact that British industry operates under a competitive disadvantage over energy pricing in certain key sectors where our competitors are on the North American continent. But the noble Lord's Question was linked to the issue of the European Community. There, as I have said, with the proviso that we are waiting to see what the CBI says as well, our information is that that competitive disadvantage is uneven and is narrowing very fast.

My Lords, would not my noble friend agree, reverting to the good fortune of this country to which the noble Viscount, Lord Simon, referred, that our greatest good fortune is to have a sound Government with a resolute Prime Minister?