asked the Prime Minister if she will list her official engagements for 29 January.

In addition to my duties in this House, I shall be having meetings with ministerial colleagues and others. I shall also have a meeting with Signor Cossiga and later I shall give a dinner in his honour.

When the Prime Minister sees her right hon. Friend the Secretary of State for Energy will she discuss with him again the worsening problem of coking coal imports? Is she aware that 10,000 jobs are at stake here and that all we are talking about is a subsidy of £18 million after the National Coal Board has made its financial contribution? If the Prime Minister still resolutely refuses this subsidy from the Government, will she, as a matter of urgency, make an application to the EEC for that comparatively small sum, bearing in mind that those countries have received far greater subsidies.

As the hon. Member knows, a large amount of financing for the National Coal Board comes from what is called public money. In 1979–80 this will amount to £607 million. The Government certainly have no objection to some of that being used to subsidise coking coal.

In the course of the day will my right hon. Friend consider the events in Birmingham last Sunday? Does she consider it right that the Sinn Fein should have been allowed to march there when a few yards away and only four years ago the IRA was responsible for the deaths of four people and the injury of 191 others on one day? If she does not find that acceptable, will she tell us what the Government intend to do about it?

Sinn Fein is not a proscribed organisation. Therefore, whether a march should be re-routed or allowed to be held at all is a matter in the first instance for the chief constable. If he decides that it should not be held, he must consult the Home Secretary. If he decides that the march should go ahead—as this one did—the decision, in the first instance, is for the chief constable; and that is as it should be.

In view of the fact that the latest figures available show that the Federal Republic of Germany subsidised the coking industry to the tune of £290 million and the NCB subsidises it only to the tune of about £10 million, how can the Prime Minister justify not making an application to the EEC if she refuses to give Government money? The amount of a mere £l8 million would avoid a substantial number of redudancies and pit closures.

I do not know whether the right hon. Gentleman heard precisely what I said. This year the cash limit for external financing for the NCB is some £607 million overall. That is a great deal of money. On top of that there is external financing for steel, for British Rail and British Leyland. Surely the right hon. Gentleman would expect that the small amount for coking coal could have been provided out of that considerable sum.

While pursuing her busy schedule and rightly urging the Olympic athletes to boycott Moscow, will the Prime Minister bear in mind the situation of the English Chamber Orchestra under the patronage of Prince Charles, which is due to leave in five weeks on a British Council-sponsored tour of Moscow? The orchestra is looking to the Government for a directive on whether to go on this tour.

The hon. Gentleman knows that we do not necessarily issue directives; and quite rightly so. We tender advice. It is the responsibility of those who receive that advice to decide whether to take it. In general, as the hon. Gentleman knows, the advice is to cut off many political and cultural contacts for the time being as a way of making the protest that we can make against what has happened in Afghanistan.

Has my right hon. Friend seen the report in a sunday newspaper concerning a moderate shop steward in the steel industry who complained of violent intimidation of himself, his wife and his children? That intimidation occurred because he wanted a say in what was happening. Will my right hon. Friend look at the industrial relations legislation now before Parliament to make sure that it is strong enough to prevent that kind of thing?

Violent intimidation, or intimidation of any kind, must be totally and utterly condemned by everyone in this country. Violent intimidation can be dealt with by the criminal law, but my hon. Friend knows that the difficulty is in getting evidence. There is not the slightest shadow of doubt that some people are frightened.

Is the Prime Minister aware of the report published today that Mr. Poniatowski is proposing a nuclear force for Europe? If the Government are aware of it, what is their reaction to that proposal?

It is not the first time that our French allies have proposed that there should be a European nuclear deterrent. This is not a new suggestion. We discuss these matters from time to time and undoubtedly this proposal will be discussed in the future.

asked the Prime Minister if she will list her official engagements for 29 January.

I refer my hon. Friend to the reply which I have just given.

Will my right hon. Friend now deplore the rabble-rousing partnership at work yesterday between Mr. Arthur Scargill and the deputy leader of the Labour Party, the right hon. Member for Ebbw Vale (Mr. Foot)—[HON. MEMBERS: "Reading".]—which aims to destroy respect for the rule of law and the rights of majorities within trade unions? Will the Prime Minister please assure the House that the Government's industrial legislation proposals will provide adequate protection against violent picketing, blacking and intimidation?

I believe that the vast majority of trade unionists—almost all of them—would agree that the law must be upheld. I am glad that a vast majority in the House believes that the law must be upheld and I am glad that the president and the general secretary of the ISTC also took that view. There would be no civilisation unless the law were upheld. My hon. Friend will recollect, in relation to the provisions in the Employment Bill, that my right hon. Friend the Secretary of State for Employment indicated that he would consider, when we knew the decision on the McShane case, whether further provisions should be brought forward in Committee He is actively considering that. However, it would seem that the law is far from clear.

Will the Prime Minister consider telling her hon. Friends who sit behind her that if they would stop making their hyena-like remarks we might be able to get the strike settled?

It is rather significant that the hon. Gentleman refers to upholding the law in that way. We do not.

Is my right hon. Friend aware that most local authorities have complied with the wishes of the Cabinet on public expenditure cuts? If there are to be further cuts, the local authorities would wish central Govenment to indicate which services should be finished.

Examples of waste within many services are noted almost daily by the newspapers. If one looks at the enormous number of people employed by local authorities and the way in which that number has steadily increased, one can but reach the conclusion that there is considerable scope for further economies in administration.

How long does the Prime Minister intend to maintain the Government's posture of non-intervention in the steel strike? Is she aware of bitter criticism today of the Government's proposal for the rundown of BSC as regards numbers, speed and the fact that no application has been made to the EEC for aid? Will she publish a White Paper on her negotiations on this matter with the EEC and her responses to the criticisms that are being ventilated?

I heard on the early morning news the criticisms made by Commissioner Vredeling. He seemed to indicate that we had not applied for aid from Europe. However, since 1973 there have been 100 such applications. On 12 December the Department of Industry informed Commission officials of BSC's proposals for redundancies in 1980 and 1981. The Commission decided that £7·7 million should be allocated to Shotton and that allocation was signed by Commissioner Vredeling.

Will my right hon. Friend consider today the increase in the United States defence budget? Will she consider whether we could increase our defence spending by more than the 4 per cent. that may be possible? Perhaps it could be increased to 10 per cent?

I do not think that we can go beyond the pledges we have already given. If we manage to get expansion in the economy and earnings and productivity go up, we could do a great deal more in many areas. I am not prepared to commit extra expenditure until we have got extra earnings.

asked the Prime Minister if she will make an official visit to Drongan.

I have at present no plans to do so.

If the Prime Minister visits Drongan will she compare the excellent local authority sheltered housing there with the old people's homes highlighted recently in The Sunday Times? Will she ask the Secretary of State for Social Services and the Attorney-General to look into the laws governing old people's homes and the case of Olive St. Barbe in particular?

I am happy to report that many of us have excellent sheltered housing and old peoples' homes in our constituencies. When we once again have economic expansion we will be able to provide more of them. If the hon. Gentleman has particular cases in mind I am sure that he will refer them to my right hon. Friend the Secretary of State.

asked the Prime Minister if she will make a statement on her latest discussions with Mr. van Agt, Prime Minister of Holland, on security at the joint conference project at URENCO, Almelo, Holland.

I have not spoken to Mr. van Agt since our meeting on 6 December 1979, when I made my concern about the Khan affair very clear to him. As I told the hon. Gentleman on 17 January, we remain in close touch with the Netherlands and German Governments through diplomatic channels and the URENCO joint committee to ensure that all the necessary action to prevent a repetition is being taken.

Has there yet been a complete and candid explanation by the Dutch as to why, for four long years, their British and German partners were not told about a major security leak to Pakistan?

As the hon. Gentleman knows, there is a report of which we have received a confidential copy. I know of the hon. Gentleman's concern about this matter and I wish to make it quite clear that we are every bit as concerned as he is. It was an appalling breach of security which can have very far-reaching consequences. All our efforts at the moment are strained to see that there is no repetition of that incident.

Since Pakistan deceived the British Government into sending it inverters for a nuclear weapon plant under the pretence that they were for a textile mill—I was personally involved in bringing this to the attention of the House—is it right to send arms to Pakistan?

With respect to the hon. Gentleman, I do not think that the two issues are exactly related. My right hon. and noble Friend the Foreign Secretary made our views very clear to the Pakistan Government. As the hon. Gentleman knows, Pakistan has not signed the non-proliferation agreement, which is a matter of great concern to us. We tried to secure undertakings from the Government of Pakistan that they would not transfer any nuclear technology anywhere else.

The selling of arms to Pakistan is a different matter, especially as Pakistan is right in the front line now.

Order. I shall make a brief personal statement. Those who were in the Chamber earlier this afternoon will know that right hon. and hon. Members were kind enough to give me birthday greetings. [HON. MEMBERS: "Hear, Hear."] I really was not asking for more. In view of the article in The Times today, it is in the interests of the House for me to make a brief statement to end speculation about my intentions for the future.

It is but eight months since the House did me the honour of electing me Mr. Speaker for the life of this Parliament. That is a trust that I hope to fulfil. I do not wish to tempt providence, but I am feeling as fit as when I assumed the Chair. Therefore, it is my intention to continue to serve the House for this Parliament as it invited me to do eight month ago. [HON. MEMBERS: "Hear, hear."]

Before I call the right hon. Member for Plymouth, Devonport (Dr. Owen) I remind the House that this is expected to be a short debate. I believe that it is the intention that it should finish at as near 7 o'clock as possible. There are four Front Bench speakers in the short debate. Therefore, I hope that both they and the rest of the House will realise that whoever is in the Chair can call hon. Members to speak only if those who are fortunate bear their colleagues in mind.

I beg to move.

That this House condemns Her Majesty's Government's savage increase in gas prices over the next three years which will hit ordinary families and have a devastating effect upon the cost of living; and calls for a comprehensive scheme to protect the most vulnerable sections of the community from the inflationary effects of high fuel prices.

A year ago inflation in Britain was running at 8 per cent. It is currently running at over 17 per cent. By the spring it will be over 20 per cent. Of the current 17 per cent. inflation, 8½ per cent. has been induced by specific decisions of Conservative Members; value added tax accounts for 3¾ per cent.: reduced local authority grants, 1 per cent.; reduced support for nationalised industries, ¾per cent.; higher national insurance contributions, ½ per cent.; green pound devaluation, ¾ per cent.; and increased interest in mortgage rates, l¾ per cent.

Can anyone who voted for the Conservative Party have really believed that in less than a year it would have brought to this country 8½ per cent. inflation—double the rate that it was a year ago?

The central core of our indictment of Conservative Members is their callous disregard for the consequences of inflation on most families. They have acted in a way that has gravely prejudiced the competitiveness of British industry and weakened our already weak industrial base.

We have now a further¼ per cent. on gas prices alone, and ½ per cent. on all fuels, to take effect from April. What is worse, the Government have committed themselves to a formula of 10 percent. over and above inflation, not only this year but next year and the year beyond. That is not a drip, drip, but a torrent of inflationary action from the Government that is putting our rate well above the 12 per cent. average for OECD countries.

Britain cannot continue with such inflationary rates. Domestic fuel bills, on average, will rise next year by £28. For the two winter quarters it will be near to £20. That is a large amount to find from family budgets that are already under great strain.

The Secretary of State may claim in his defence that oil prices are rising, that international energy prices are rising, and that we are now receiving about 50 per cent. of our gas from the Northern basin, which costs much more than the gas from the Southern basin. The right hon. Gentleman may stress that the Price Commission advocated a phased increase. On all that we agree. He may point also to the need to invest in more gas gathering pipelines if we are to avoid the scandalous position of burning up gas in the North Sea. At times we have been burning as much as one-third of our domestic gas consumption. I would wish to see greater exploitation of the gas that I believe exists, but is yet undiscovered, in the North Sea. We need to build up reserves for the eventual switch to synthetic gas.

On all these matters there is agreement. However, the matters are known to the British Gas Corporation. They are better known to the corporation than they are to Conservative Members. What we have to ask is why the British Gas Corporation, knowing full well that these increases were to be made, and taking them into account with its commercial interests, does not agree that gas prices should rise by the amount stated for the years 1981–82 and 1982–83.

The only reason why it shows a broad measure of agreement with the 29 per cent. increase this year is that the Government, especially the Prime Minister, vetoed any price increases last summer. The reason why we are facing such substantial increases is that Conservative Members refused to increase prices last year.

rose—

I shall not give way. It is no use Conservative Members complaining. If they wished to phase the price increase they could have raised prices a little last year and a little more this year. The central core of the argument is the rate of these increases, the effect on inflation and the effect on families.

The other argument that has been used is the link between gas prices and oil prices. That is an extremely dangerous argument. OPEC countries have a vested interest—

The right hon. Gentleman has made a grave accusation. He claimed that Conservative Members were frightened of raising domestic gas prices. Will he tell us what happened to domestic gas prices when his Government were in power and what they did to hold down domestic gas prices against the commercial interests of Britain?

The hon. Gentleman cannot have it both ways. On the one hand he attacks us for showing enough courage to hold down gas prices and then becomes upset when I say that the right hon. Lady made a great principle of not raising gas prices in the summer of last year. She is now raising gas prices against the commercial judgment of the British Gas Corporation.

It is an extraordinary position. My right hon. and hon. Friends are not slaves to market forces. Conservative hon. Members spend their time demanding that we should accept commercial judgments. The OPEC countries have a vested interest in ensuring that the price of gas, which it currently does little about other than burn, rises to meet oil prices.

It is not in the interests of this country, or in the interests of Western Europe or anyone in the world, that gas prices should follow oil prices. [HON. MEMBERS: "Why not?"] Because one of the great virtues of gas is that it comes from a much wider range of countries than the OPEC countries. The largest supplies that are currently being marketed do not come from OPEC countries. Algeria is a large source, but the Netherlands is the largest exporter. Considerable amounts of gas also come from Thailand, the ASEAN countries, and North America. If we want to keep down world energy prices, there is a great deal to be said for trying to keep gas prices below oil prices.

rose—

If hon. Members want all energy prices to go up, they are setting a most extraordinary example. What I am warning—

rose—

Order. I believe that it is now clear that the right hon. Gentleman is not giving way.

We understand the sensitivity of Conservative Members on this issue, but if they are arguing that gas prices should be encouraged to follow oil prices, it is a very strange argument. What I am saying is that if one can possibly keep a distinction—

Is the right hon. Gentleman aware of what the chairman of the British Gas Corporation said in a letter to me on 2 August 1979? It was:

"The practice of market relating to the nearest alternative fuel was established right at the beginning of natural gas marketing as a means of ensuring the best use is made of the premium quantities of this natural resource."

The chairman did not, of course, relate his remarks to gas and oil.

There is a relationship with regard to industrial use, where there is an immediate transfer and flexibility between the two. That linkage has been established for some time. It has not been established in the domestic market, and the Secretary of State knows that. Is he now trying to establish the same linkage between oil and gas in the domestic market that has hitherto existed in the industrial market? If that is the case it will mean much greater increased gas prices than the increase that has been currently produced by the Government.

Industry and all of us are already suffering seriously from a very high exchange rate, put up by the fact that we have a petro-currency. If it must also accept the highest energy prices that operate in the world, our industry, which is already experiencing great difficulty against the exchange rate, will have a particularly difficult time. Conservative Members will have to face the fact that it is not in our interests to tie domestic gas prices to oil prices. Of course, gas prices must bear some relationship, because they cannot be divorced totally—[Hon. Members. "Oh."]—Of course, because that is an inevitable fact of life. What we are talking about is the savage rate of increase. The Secretary of State will also have to consider the question of conservation. As one of the prime reasons for increasing gas prices, the right hon. Gentleman has suggested that this was necessary because if the price were too low we should burn it up too fast and bring forward the day when we would have to turn to more expensive sources of supply.

Where in the Gas Act 1972 is the legislative authority for such an argument for increasing gas prices? I hope that the right hon. Gentleman will explain that to the House. Under sections 2 and 14 of the Act, it is the corporation's duty in respect of pricing that, taking one year with another, it should charge prices that enable it to meet its outgoings and to make such allocations to reserve as it thinks adequate. Presumably, the word "adequate", means adequate for the purpose of performing the corporation's statutory responsibility to develop and maintain an efficient, co-ordinated and economic system of gas supply and to satisfy, so far as it is economical to do so, all reasonable demands for gas—not for any other purpose.

It seems that the new policy is to use higher pricing to deter people from entering, or remaining in, the market for gas. I have been able to discover no power under the Gas Act for the corporation to secure revenue or build up reserves for the purpose of stopping people from using gas, and still less to encourage them to use other sources of energy. I find it difficult to understand how it is consistent with that policy for the corporation to satisfy, so far as it is economical to do so, all reasonable demands for gas in Great Britain.

The right hon. Gentleman has advanced the argument that the Government should not control gas prices for any reason other than those inherent in the Gas Act itself. Is he aware that his right hon. Friend the Member for Greenock and Port Glasgow (Dr. Mabon), who was a Minister in the Labour Government, said in 1977, when he increased gas prices:

"We were aware of these considerations, but an increase in gas prices was necessary to reduce the level of Government financing."—[Official Report, 17 March 1977; Vol. 928, c. 251.]

Is that what the right hon. Gentleman wants?

That is quite a different reason. Under section 15 of the Gas Act it is arguable that the Government of the day were using the powers of discretionary decision that are open to the Secretary of State. Had Conservative Members wished to challenge that at the time, no doubt they would have done so, but my argument relates to a quite new issue. If the Government wish to use rationing by price as grounds for a gas increase, it is my submission that that authority is not contained in the Gas Act. I hope that the right hon. Gentleman will tell us whether he consulted the Attorney-General about the reasons for raising gas prices. It may well be that one of the consumer councils will wish to challenge the validity of this policy.

rose—

No, I shall not give way. Our main criticism of the Government relates to their overall argument about conservation. They underestimate the importance of gas on conservation grounds. It is a far better way of heating homes than electricity, where about 70per cent. of the energy goes up the chimney in waste. It is much easier to use the supply lines for gas heating to domestic homes. It is much easier for the industry to diversify into coal. By using price as a means of conservation, the Government must face the fact that they are selectively hitting those people who have no other option, such as young families who must keep the house warm for 24 hours a day and the housebound, disabled or elderly who also have heating bills in respect of a 24-hour period. It is for that reason that we find that families on low incomes, or families with young children, spend a much higher proportion of their income on fuel bills. It is they who will be most savagely hit.

Furthermore, it seems to be envisaged that the tariff will hit prepayment customers hardest. There is already a differential, and it is suggested that it should be increased. That again will affect the poorest. If conservation is the key factor, it would be better for the Secretary of State to consider a peak load tariff—which was suggested by the Price Commission or even an inverted tariff, where the average price increases with usage after an initial basic allowance. There are difficulties in that respect, but that at least would encourage conservation and not penalise basic users.

If the right hon. Gentleman is to be taken seriously, and if conservation is the key factor for a price increase, we have the right to ask why he has not increased the £50 allowance for roof and loft insulation. Why has he cut back on the "Save It" campaign budget? Why has he scrapped a pilot project for centres to advise on home insulation? Why is it intended to stop the £25 million scheme to help industry and businesses insulate buildings and improve their boilers? Why is it intended—effectively, it has already occurred—to cut back on the STEP programme to insulate old people's houses and to help them to obtain grants?

The right hon. Gentleman would carry more conviction on conservation grounds had he acted more to promote conservation. It is not just a question of words. For some time now we have urged specific measures on the Government, which they have consistently rejected. It would have carried more conviction in the country had some of the substantial increases in profit that will occur as a result of these decisions been diverted into genuine measures to help conservation.

But the real question that we must face is the impact that this will have on poor families. Council tenants increasingly use gas. In 1978, more than 80 per cent. of all new council houses had gas installed in them.

The supplementary benefits inspectorate has estimated that 60 per cent. of pensioners receiving supplementary benefits under heat their homes. Half the people who run fuel debts are pensioners; the other half are mainly single-parent families. It is difficult to assess the full extent of hypothermia, because it is rarely recorded as the sole cause of death. Obviously, winter death rates can be influenced by many factors, and cold must be one. Over the last 10 years the death rate in winter has been 17 per cent. higher for people aged 60 to 69, 20 per cent. higher for people in their 70s, and 25 per cent. higher for people over 80. For infants aged between 12 weeks and four months, the winter death rate is 40 per cent. higher than the summer rate. It is difficult to believe that cold is not playing a part in those figures for people who would normally be confined to their homes in winter.

We are told that the Government have a review in hand to examine ways of helping poor families. That is a bit rich from a Government who last year made a central public expenditure cut of between £20 million and £30 million, at the expense of electricity users, by scrapping the electricity discount scheme. A new fuel scheme is urgently needed. The Secretary of State for Social Services says that there is nothing in our proposal. I can suggest a scheme that he should introduce. He knows as well as I do that if he is to introduce it a decision to do so must be made in the next few months. The right hon. Gentleman will claim that no allocation was made for the electricity discount scheme. That is the great defence of the Conservative Party. The electricity discount scheme was already operating.

The right hon. Gentleman repeats his canard that the Government cut spending on the electricity discount scheme. With the greatest respect, one cannot cut something that is not there. There was no provision in the estimates by the previous Labour Government. We introduced a new and better scheme, at a cost of £16½ million a year.

The electricity discount scheme was always decided on by the Cabinet, as an overall decision, to try to relieve poverty. It has not been borne specifically by the social security budget. One of the reasons for that, as the right hon. Gentleman knows, is that it was felt that there should be a contribution to help with fuel, not simply from the social security budget but from the Department of Energy and other Departments. That scheme would have continued, and the right hon. Gentleman knows it.

We were aware that there was a strong case for a comprehensive scheme, not simply to cover electricity. The Government must now introduce for next winter a comprehensive scheme that will cover not only electricity and gas but coal, paraffin and oil. It must be implemented by next winter, and therefore a decision must be taken by the summer, at the latest. The scheme should be simple to administer and, given the time restraints under which we are currently operating, keep the existing heating allowances and use the categories covered by existing schemes. It should be a scheme that could develop further into a proper comprehensive fuel benefit.

Is my right hon. Friend aware that it is now virtually impossible for hon. Members to collect information from the DHSS about the number of people who are likely to benefit from the Government scheme—for example, the number of pensioners over the age of 75? It seems that instructions have been given by the Secretary of State for such information not to be given to hon. Members. What is the Government's reason for covering up? Is it not clear that the reason why they are refusing to give information is that many people whom the Government claim are entitled to benefit will not receive it?

Sadly, there is likely to be a low take-up. Whereas, previously, over 3 million people were benefiting, even on the Government's estimates, only 350,000 people would benefit from the new scheme.

A comprehensive scheme must cover not only those people who receive supplementary benefits. If the scheme were confined solely to people receiving supplementary benefit, as a recent survey by the economic advisers to the DHSS has shown, it would miss 60 per cent. of the people in greatest need. The scheme must cover the working poor, the low-income wage earner with a large family, the poor elderly who are just outside supplementary benefit levels, couples with small occupational pensions, and the disabled. The scheme must give an entitlement to anyone claiming a rent or rate rebate, people receiving invalidity benefits, as well as people on supplementary benefits and family income supplement. The cost of the scheme cannot start at less than £100 million, and it should be a good deal more than that.

The logic of the right hon. Gentleman is that if he is to increase energy prices, part of the profit that will accrue to those industries must be turned back to finance a comprehensive scheme to help people in need. It must cover the two winter quarters and be paid either in cash, or, if there are objections to cash payments, through fuel stamps, provided that fuel stamps are available for all energy consumers. That method of saving and budgeting for fuel bills is advocated by the Gas and Electricity Consumer Councils. That is the only way in which to salvage the wreckage caused by the right hon. Gentleman's insensitivity and callous disregard for the consequences of his decision, which takes effect in April. Its worst consequences will come in the winter of next year. The House will judge the right hon. Gentleman and the Conservative Party savagely if all they produce for next winter is a small addition to the already mean-minded scheme produced by the Secretary of State for Social Services.

Our indictment of the Government is that they are savagely increasing inflation, and seem not to care what happens.

Will the right hon. Gentleman clarify one point? Are the Opposition in favour of a gas price increase? If so, by how much?

All my remarks have indicated that there will have to be a gas price increase. I have not shirked that in anything that I have said. My criticism is of the rate and pace at which it is being increased. The Price Commission recommended that if there were to be a gas price increase it should be phased. I believe that a 29 per cent. increase, at a time when inflation is spiralling upwards to 17 per cent., is too high. At the very least, the increase should have been at the current rate of inflation.

It is no use Conservative Members salvaging their consciences by voting against the motion tonight and somehow thinking that they are clothing themselves with realistic virtue in voting for some increase, because Labour Members are not facing up to the need for any increase. That is not the case. We recognise that there is a need for an increase. Our indictment is of the savage and callous nature of the increase. It does not simply cover the current year. Conservative Members are committing themselves to inflationary increases for next year and the year after. They are building in inflation-plus on fuel prices. They have acted against the commercial judgment of the British Gas Corporation. The corporation does not think very much of the phasing.

The Government are intervening in an industry at a time when Minister after Minister states that the Government cannot interfere in the dispute at the BSC, and that their stance is one of non-intervention. They make a virtue of non-intervention over steel, and serve their own ends over gas. The Government have introduced what the Financial Times has called a disguised tax. They have introduced it on grounds of conservation, which are very doubtful legal grounds. In effect, they are using the price increase as a way of taxing gas consumers. It is unfair and retrogressive. They have failed to introduce a comprehensive scheme to help those people least able to cope with ever-increasing fuel bills. They have shown a total insensitivity to the feelings and fears of the 14 million gas consumers.

The Secretary of State's reputation, which has already slumped—by 29 per cent. according to some Tory newspapers—deserves to slump a good deal further tonight. Are Conservative Members prepared to vote for their intentions? We have heard that the Tory Party is extremely annoyed by the Secretary of State's decision. Many Conservative Members who are concerned about the poor are worried about the absence of any new scheme, and the hard-faced market people are upset at the intervention in market forces.

Tonight will reveal the true extent to which the Tory Party really cares. I suggest to Conservative Members that if they cannot join us in the Lobbies they should at least abstain.

The Secretary of State for Energy has made a dangerous decision. He has fuelled inflation and he has undoubtedly introduced a scheme that will cause very great hardship. It is the duty of this House to reject his decision tonight.

I have selected the amendment in the name of the Prime Minister.

I beg to move, to leave out from "House" to the end of the Question and to add instead thereof:

"recognises the inevitable need for domestic gas prices to rise, bearing in mind that no profit is now made on domestic gas sales, while industry goes short of gas; welcomes the Government's determination not to evade or disguise economic realities; and believes that the Government's stated intention to review the whole range of fuel assistance offers much the best basis for helping the old and those in need in an era of high energy costs".

I ask the House to reject the motion proposed by the right hon. Member for Plymouth, Devonport (Dr. Owen). He has made his case—except perhaps at the end—in very fair terms. He has put forward his feelings on this matter and expressed his concern about an era of high energy costs. His whole tone was somewhat different from the slightly hysterical note struck by the motion. I am glad to be able to offer the House the opportunity to discuss a key aspect of the nation's energy supplies.

I do not disguise for one moment that the decisions that I announced the other day, setting three-year financial targets for the gas and electricity industries, were unpleasant and difficult. They were decisions that had been shirked for a long time and were thus all the more difficult to make, but in the Government's view they were decisions that could be shirked no longer.

I shall deal immediately with the question of legal powers, which was raised by the right hon. Gentleman. The chairman of the Gas Corporation has informed me that the corporation will implement the target set by the Government. It regards its acceptance of the target as consistent with its obligations under section 14 of the Gas Act 1972. Indeed, if the right hon. Gentleman reads section 14 (b), he will see that it requires the corporation to set aside reserves.

"as may be necessary to comply with any directions given by the Secretary of State under section 15 below."

As the British Gas Corporation has agreed to implement these targets, no question of legislative direction or power arises. The British Gas Corporation has accepted these targets and intends to implement them. That is consistent with its legal obligations, and that is what it will do.

When the right hon. Gentleman talks about such matters, I have to suggest to him that his memory is a little short. Surely he recalls that, for instance, in March 1977 his right hon. Friend, my predecessor, slapped an increase on domestic gas prices, exclusively to reduce the public sector borrowing requirement. That may have been right. It was done without any energy policy need or justification at all, although there was some muttering at the time about conservation. It was done without proper consultation with the British Gas Corporation, and it was in defiance of the previous Government's own beloved Price Commission. The then Secretary of State may have been right to do it, but I do not recall that there was then any dancing up and down about powers. The truth is that the British Gas Corporation is well within its powers in pursuing these financial targets, which it has accepted.

The emphasis today in our debate is on gas. The first tariff increases implied by the three-year target are to be brought in on 1 April, and my announcement in the House was necessary in mid-January in order to give the corporation time in which to complete its consultations with its consumer councils and to publish the tariff proposals. There have this time been proper consultations.

My statement looks forward over three years. I can see the point behind some of the remarks of the right hon. Member for Devonport. There would have been attractions in announcing a single-year target, taking cover behind a one-year figure, and saying nothing about local price increases in later years. That is what the previous Government did for the current year, in December 1978; indeed, they released the news of the one-year target on Christmas Eve in a press release, despite having published earlier that year their White Paper on the nationalised industries, which was full of high-minded virtue, advocating the set- ting of targets for three to five years. But when it came to doing the difficult thing they ducked the issue.

If, as I shall argue shortly, it is now essential for domestic gas prices to increase by at least 30 per cent. in real terms, it would have been dishonest not to give consumers full warning. In fact, much of the strong feeling that we have heard about what we have had to save on gas prices arises precisely because people who banked on gas staying cheap were not told by previous Governments what they should have been told, namely, that prices would have to rise substantially in the years ahead. People felt misled. The Government believe that in this area, as in many others, it is time for the misleading to stop.

Let me explain to the House the thinking that underlies the Government's view. The real price of domestic gas has fallen by more than one-third over the past 10years—and this against the background of energy prices rising in real terms. Last year crude oil prices rose by 100 per cent. or more. In contrast, the price of domestic gas went up by only 8 per cent. in June, after more than two years with no increase at all.

Hon. Members may recall what happened when the British Gas Corporation submitted its proposed 8 per cent. increase to the then Price Commission. Not only did that commission allow the increase in full; it said that prices should be 30 to 35 per cent. higher still, even after the 8 per cent. increase was implemented. The Price Commission, as far as I recall, was not in the business of urging price increases unnecessarily, and since that time—the report was made last July—the costs for new gas have soared further.

That is the position on the gas side. Turning from gas to the crucial question of supply and demand, we find that British Gas sells gas to industry at prices broadly related to those of the competing oil products. It must follow that policy. At one stage in the right hon. Gentleman's speech I thought that he was arguing for that, although he seemed to veer away from it. This is the only way in which to match supply and demand, since much of industry can switch quite easily between gas and oil.

The corporation's market-related pricing policy, as was emphasised in an intervention, is long established and has been endorsed by successive Governments. Industry is now renewing contracts for firm supplies at about 24p per therm—a price that is bound to increase substantially in the light of recent oil price increases. Indeed, entirely new contracts are already fetching over 28p per therm. In contrast, the current average revenue per therm from the domestic market is less than 20p, which is well below the industrial trade price, despite the fact that the costs of supplying smaller users are significantly higher than those for bulk quantities.

That is the position. The relative prices for industrial and domestic users are topsy-turvy, and industry has rightly been complaining. The profitability of British Gas sales to the two markets reflects this position. About half of the gas sold goes to domestic consumers and the other half goes to industry. In the past about half the profits came from each market, but in the current financial year, ending on 1 April, domestic sales will barely break even; in fact, without the forthcoming price increases—and I am not at all sure from the right hon. Gentleman's speech whether he is for them or against them—they would make a loss. It would have been a question of subsidised fuel. It will not be until towards the end of the three-year target period that the domestic market will again be making a reasonable contribution.

The key factor underlying this market approach to pricing policy is that gas is an increasingly valuable resource. As we run down our reserves of gas from the old low-cost fields—and already nearly half of these have been used up—we shall, as I have indicated, have to replace them with higher cost supplies from deeper, more distant, northern waters and with further imports from Norway in addition to those that we import already, or perhaps from elsewhere, either in liquid natural gas form or in some other form. Indeed, some hon. Members may have seen recent press reports that the Algerians are seeking to double the price of the gas that they sell.

Although gas sells under different terms from oil and is generally cheaper to produce, it is bound to be dragged upwards by the world oil price explosion. We cannot insulate ourselves from that in reaching decisions on gas pricing policy. I found it difficult to follow the view of the right hon. Member for Devonport that somehow we could wish away the increasing pressure in the world for gas prices to be related to oil prices. That is what those who sell gas to other countries seek to do. That is the reality which we must meet.

The Secretary of State does not have to tie domestic gas prices in Britain to oil prices. Britain is self-sufficient in energy. Britain has substantial indigenous gas reserves and does not have to price its gas at the same level as Dutch gas or LNG from OPEC countries. The right hon. Gentleman knows that. That is an option that is open to a British Government to enable them to keep prices down, and wherever they can they should keep gas prices below oil prices.

The right hon. Gentleman is confusing production costs, which is what I was talking about, with supply and demand. The facts cannot be blinked away. On the production side, nations which sell gas, whether as liquefied natural gas or as directly piped dry gas, are seeking to relate the price of the gas to the price of oil.

As regards supply and demand, I think that the right hon. Gentleman recognised earlier—though he was ambiguous on this—that the policy of relating the price of gas sold to industrial customers to oil was long recognised and correct. All that the Government have proposed in their financial targets is that domestic price gas prices should move some of the way towards the market-determined level. There is no question of the price of gas moving all the way under our proposed financial targets, yet the right hon. Gentleman appears to be excited about those targets and has denounced them as savage. He cannot have it both ways, although he is trying hard to do so.

I turn now to the setting of the financial targets for British Gas and the claim of the right hon. Gentleman and others that by setting financial targets for three years we are interfering in some way with free market prices. It is true that the setting of any financial target, whether for the steel industry or the Gas Corporation as a public utility, is an attempt to provide some of the disciplines of market forces. Were there a completely free and competitive market for the supply of gas in the United Kingdom, prices would already have risen above the level now proposed for three years' time.

British Gas is fully agreed on the objective of economic pricing. It has agreed to implement the financial targets. It has agreed the price increases proposed for this year, but I believe that I heard the right hon. Gentleman say that he did not agree. Therefore, had the right hon. Gentleman been in my place, presumably he would have overruled British Gas.

Though British Gas wanted to go slower in later years, the Government have to take account of the need to conserve and to delay the dangerous day—the right hon. Gentleman, as a former Foreign Secretary, must know of the dangers—when we have to rely once more on far more expensive gas and politically less reliable supplies.

Can the Secretary of State tell us precisely what the British Gas Corporation told him with regard to the later years? Just how much slower does the corporation want to go?

When I discussed the financial targets with the corporation, it said that it would like the objective to be achieved but paced out over a greater number of years. That is exactly what I have just told the House. The corporation wanted to go slower in later years. I was given no precise figures.

What I have said should emphasise that the Government are not in any way artificially pushing up prices. What we are doing is to phase out some of the restraints on artificially low domestic gas price levels, allowing them to rise to something closer to their true market value. That is less intervention than in the past, not more. Those who argue the other way round have got the matter precisely 180 degrees wrong.

Before my right hon. Friend leaves that point, doubtless he will remember that the Select Committee on nationalised indusries in the previous Parliament, with a Labour chairman and a Labour majority, recommended that all nationalised indus- tries should be set financial targets for three to five years by the Government. My right hon. Friend will also recall that British Gas, in its last report, regretted that the Labour Government had not set a three- to five-year target for the corporation. Can my right hon. Friend confirm that the new target is based on replacement cost of capital employed rather than on the historical cost?

Yes, I can confirm that. I can confirm also that this is a move to set three-year financial targets which were consistently ducked by the previous Government. A great many people regretted many things under the previous Government, and this was one of them.

Quite apart from the long-term importance of conserving scarce resources, the British Gas Corporation also needs to use the price mechanism in the short term to help match demand to available gas supplies. I do not know whether the right hon. Gentleman is in favour of the price mechanism or against it, but if he says that what we are doing is rationing by price, my answer is that his approach would be rationing by rationing.

What estimates have the Government and the corporation made of the reduction in demand for its product, or the rate of decrease or increase in demand for its product?

If the hon. Member for Dunfermline (Mr. Douglas) will allow me, I shall come to that in a moment. I was about to refer to the surge in demand and the effects, as far as can be estimated, that the financial targets will have, but I shall come to those in detail in a moment.

Following last year's oil price increases and supply uncertainties, there was, as the House knows, a huge surge in demand for gas. About 70,000 domestic customers and about 4,000 firms are waiting to be connected. I am sure that many hon. Members are aware of that situation from their own constituencies.

The pressures are so great that British Gas has had to ration the provision of new supplies almost entirely to those who have a statutory right to be connected because they are within 25 yards of a gas main. That puts industry at a substantial disadvantage compared with the domestic consumer, despite companies queueing up, as they are, to pay a higher price. My right hon. Friend the Secretary of State for Industry and I have received many complaints from firms waiting to build new factories or undertake other developments which cannot get a gas supply. That cannot be satisfactory. I cannot believe that even the Opposition are prepared to condone that.

The rising demand from the domestic market has also increased the frequency of interruptions to supplies to industry on the type of contract that provides for a limited number of days' shut-off in cold weather. We believe that the sooner industry gets the gas that it is ready to pay for, the better it will be for us in the future and the better it will be for the economic health of the country.

After a decade during which domestic prices have been falling in real terms, I agree that it is difficult to predict precisely what savings in gas consumption will be made when prices start rising, but I believe that the combination of higher prices and the extra capital investment by British Gas will mean a real improvement in the availability of new gas supplies to British industry in the coming years.

I have spent some time telling the House the reasons why domestic gas prices have to rise. Let me now turn to some of the other factors that the Government took into account in reaching their decision on the three-year financial target.

British Gas is, of course, making big profits. The corporation made £360 million last year and the profits will increase substantially over the target period, though, as I have already indicated, this year there will be virtually no profit from domestic sales. The reason for those profits arises from the fact that the corporation managed to negotiate gas contracts with producers on a basis that originally did not take full account of future increases in the price of oil. In consequence, the oil price rises since 1973 have left British Gas in receipt of a substantial windfall in "economic rent" which boosts its profits enormously. Its profits help to finance its high level of capital expenditure—nearly £600 million in the coming year.

Is it not a fact that British Gas is one of the few nationalised industries operating on current cost accounting and that it is possible to shrink its profits from a surplus of £500 million in 1977–78 to about £180 million because it uses a system of accounting which is different from that of other nationalised industries?

Like the previous Government, we are seeking to get a standard accounting practice in the nationalised industries, but the figures are a fair indication of the operations of the gas industry.

The increased capital expenditure will increase the availability of gas by strengthening the transmission and gas storage systems and by bringing gas ashore faster from the Morecambe Bay gas field.

The corporation should also begin to pay corporation tax on a substantial scale in the coming years. Nevertheless, the new financial target regime will leave British Gas with cash surplus to its immediate requirements, and that cash will be deposited with the National Loans Fund. The interest will serve to increase the sums that can be deposited.

I hope that the House will accept my explanation that there are compelling energy policy reasons for increasing gas prices, though the increased profits that will result from higher prices will make an important contribution to the Government's central economic objective of holding down the public sector borrowing requirement. I see nothing wrong with that. The fact that there are two additional reinforcing arguments for the policy makes it stronger, not weaker. Some sort of gas tax has been suggested, and we shall have to look at that, but we need to be clear that whether the profits of British Gas are left in its name or taken away by tax, the effects on the PSBR are exactly the same.

There is a further important point connected with the corporation's profits. At present, about 70 per cent. of households have access to a gas supply. The remaining 30 per cent. do not benefit from having on tap the cheapest of the household fuels. Raising domestic prices will inevitably mean a transfer of the benefit from those who happen to be near enough to a gas main, via the public expenditure effects that I have described, to the community at large.

All the factors that I have mentioned so far point, regrettably, in the same direction—towards higher domestic gas prices. No one likes bigger bills, and I did not expect this necessary view of the future, which we believe it right to take, to be greeted with enthusiasm. Gas consumers have enjoyed falling prices, in relation to their incomes, for at least 10 years.

The motion vastly exaggerates the effect of the proposed gas price increases on the cost of living. The April increase will add about 0·25 per cent. to the going rate of inflation, and the October increase, which is the one which the right hon. Member for Devonport finds so objectionable, will add an additional 0·16 per cent.—both spread over the subsequent three months.

Although the motion may exaggerate what my right hon. Friend has been doing, the presence on the Labour Back Benches does not.

It is not quite the crowded assault that was billed by some of the extravagant pre-publicity.

The Opposition talk of savage increases, but I wonder what their real feelings are. When the right hon. Member for Chesterfield (Mr. Varley), as Secretary of State for Energy, hiked domestic electricity prices up by 28½ per cent. in one go, I did not hear his right hon. Friends shouting "savage increase". That may be because they did not notice, because the announcement was slipped out in a written answer. Of course they were not setting proper financial targets either. In addition, there was no special scheme for the old and the poor. Let us have a little more candour from the Opposition.

To ask the British Gas Corporation to hold prices down at current levels for all domestic gas consumers is the worst possible and most wasteful and totally counter-productive way of trying to help those for whom rising fuel costs mean real hardship. We cannot protect everybody against high energy costs in today's dangerous world. It is far more sensible to identify those who need help directly.

The two policies go together, and I have never sought to hide the fact—market prices for energy and effective help for those in need, especially the old and the poor. The nationalised indus- tries' consumer councils agree that that is the best way of helping. So did the late lamented Price Commission and the 1978 White Paper of the previous Labour Government. The motion has taken leave of all those views for a start.

The previous Government had an electricity discount scheme, but it was generally recognised to be complicated and expensive to administer—it cost £4 million to run—and all too often it went to those not in real need of help with electricity bills. It did not offer much help either to those in need whose main fuel was gas rather than electricity.

I am sure that the motives behind the scheme were excellent, but it was a classic example of trying to help everybody and ending up helping hardly anybody. The new scheme of assistance with heating costs announced by my right hon. Friend the Secretary of State for Social Services in October is at least a start in providing worthwhile help for those most in need this winter.

At least the current benefit, worth £50 in a year, which is seven times the average help given by the electricity discount scheme, is big enough to make a substantial dent in a winter quarter's fuel bill for some of those in greatest hardship. The National Gas Consumers Council rightly says that it is an improvement on the previous Government's scheme.

Is the right hon. Gentleman ruling out any possibility of a national fuel rebate scheme? Secondly, if the scheme introduced by the Government to replace the electricity discount scheme is so good, why is it that I, like, no doubt, many other hon. Members, have been refused information about the numbers eligible to receive the benefit? No doubt it is the policy of the Secretary of State that we should be refused information about how many people in our constituencies will receive the benefit announced by the Government.

There is no secret about the figures. They are available. I shall deal later with how the Government see the matter.

Most of my hon. Friends were concerned about the effect that the increases would have on pensioners and in particular the disabled. We are greatly encouraged by my right hon. Friend's statement, but it is essential that it should be made clear beyond doubt, and I hope that he will issue a press release outlining his intentions.

I am grateful for that intervention. I am aware of my hon. Friend's worries, and I hope that what I am saying will reassure him.

The price increase resulting from the new financial target will not affect this winter's bills. As I told the House on 16 January, we shall take proper account of the higher cost of energy in our social policies and in determining benefit levels, particularly the levels of extra heating allowances. In that context we are reviewing the whole range of help available to assist consumers with fuel bills and to make extra provision for the elderly and others on low incomes who need help. My right hon. Friend will announce our proposals in good time for people to plan how they can manage next winter, and the proposals will be fully publicised.

To set a three-yeas financial target and to warn people openly that prices will have to be allowed to rise is, I acknowledge, never easy, and that is presumably why the last Government never got around to doing it. The decision which this Government have now made was a hard one to reach and is an easy one to criticise, but it is, none the less, I believe, the right one, and as time goes by it will increasingly be seen to be right. Despite all that has been said or implied by the Opposition, economic reason and effective social policies are not opposites. They go hand in hand. Our policy is rooted in that reality and I ask the House to support it, and with it our amendment.

We all know that the Secretary of State for Energy is a very able man in his own way and we have certainly today had as fair a defence as he could muster, but I submit that there are three defects in what he has just told us.

First of all there was the apologia for the present scheme. I have never been a part of the yahoo school of politics in believing that simply because my side did something wrong, therefore the other side is entitled to do equally wrong and I should not and cannot criticise. Nor have I ever believed the reverse. I believe that situations have to be taken in the circumstances of the time.

By the way, if the hon. Member for Gillingham (Mr. Burden) is satisfied with the present scheme, why do we need another scheme? If the present scheme is adequate, why should we have a new one? The answer is that prices will go up by 29 per cent. in April, which is a very formidable figure. Also, it must be taken into account that in the next two years after that there will be a 10 per cent. impost on top of the figure for the rate of inflation. That is what we are told. So obviously the scheme we are discussing is something very relevant to the winters to come.

When we listened to the pathetic response of the Secretary of State for Social Services today in regard to this, it was quite clear that a struggle is going on within the Government over the nature of this scheme.

I say to Tory Members, with all respect, that their influence in Parliament is largely determined not just by what they do in voting but also by what they do behind the scenes, and I hope that a great effort will be mustered in the ranks of the Tory Party in favour of those Ministers who want to introduce a really comprehensive heating allowance scheme. This whole proposal of gas price increases smacks not of the Department of Energy but of the Treasury. Indeed, the right hon. Gentleman's references to the National Loans Fund gave the game away.

The three defects of the Minister's programme are the following. The first is the total absence of any comprehensive socially conscious scheme. The Secretary of State for Energy did his best. He has probably been fighting very hard to get a scheme of such a kind, but he is not able to announce it today, and this shows that the fight is still going on. It has to be a comprehensive scheme, comparable with nothing that we have ever had before, and one that takes into account every fuel. We all know that. The argument is that the true value of every fuel has to be known to the consumer. This is the new doctrine of the Government. We are not dissenting. In terms of present conditions, it is not an unreasonable proposition. But, if that is true, obviously the obverse of the coin is that there must be a heating allowance scheme of a comprehensive nature.

That is mentioned at the end of our motion. What the Secretary of State for Social Services said today, and what the Secretary of State for Energy has said, gives us on the Labour Benches no confidence at all that an adequate scheme of that size will be announced this summer.

I specifically asked the Secretary of State for Social Services today two points at Question Time: first, would the new scheme be comprehensive and would it take into account more categories than those spelt out on 22 October? He refused to make any comment. Secondly, I asked whether it would be of such a size in terms of the multiple that it would get anywhere near the kind of increases that are being proposed by the Secretary of State in his three-year programme.

That is the first defect, and the Government have got to accept it. Their own Benches are uncomfortable about it. That is why all these speeches are made at the weekends by senior Ministers to try to make us believe that something is going to be done and is going to be done reasonably quickly. We are entitled as the Opposition to complain about this defect and to have it put on the record with our votes. We hope that some Tory Members will abstain or perhaps even vote with us. On that count alone, I submit that today, having heard the Secretary of State for Social Services, we have no assurance that such a scheme will be brought in.

The second argument, perhaps moving away from the anti-social aspects of these proposals, concerns the so-called three-year programme. What a laugh that is in the world of energy—the idea that anything will last three years! One need only look at the procession of White Papers we have had from various Governments trying to look ahead 10 years, seven years or five years. How reckless. To take even three years, I submit, is incredibly frivolous. I am not against planning; I am not against saying that that might be our intention and that we would like to get there, but who knows what the price of oil will be in three years' time?

In three months' time.

Even in three months' time. But here we are debating a three-year proposal. I am not against the Government having intentions, having guidelines, but firmly to announce a 10 per cent. increase on top of inflation, without even knowing what the inflation figure will be, is reckless. I suggest that the right hon. Gentleman will not be the Secretary of State for Energy in two years' time and his successor will have abandoned these figures in favour, quite rightly, of the reality of that moment.

What is the point of having all this hassle, of raising these things, burdening us with these figures, when they may not come true? The British Gas Corporation is supposed to be demanding these figures. It is not demanding these price rises; the Secretary of State now has admitted that. Of course, the British Gas Corporation welcomes the idea of having three-year guidelines, but not figures of this order. The Secretary of State is trying to have it both ways. Therefore, I submit that the second defect of this proposal is the economic nonsense of trying to argue that it is possible rigidly to plan and set firm figures for three years.

Within that context we are talking about the use of this money. What should be the use of this money? The ordinary citizen, paying his gas bills, not concerned about getting a rebate, not concerned about the heating allowance because he does not qualify, wants to know one simple thing about the Gas Corporation's profits: are they being used to improve the industry? Take the great problem of gas that is yet to come. Is it not the case that the Gas Corporation is about to embark upon one of the biggest gas-gathering pipeline systems in the world? Would it not be wise for that to be taken into account? Would it not be right for the Gas Corporation to be told that it will not be able to spend a great deal of money on exploring for gas and developing finds of gas which at the present moment are uneconomic? None of that is acknowledged. No. The money is pouring into the National Loans Fund. The Gas Corporation is in the most extraordinary situation for a nationalised industry. It is virtually free of debt, yet at the same time the Government are forcing up the prices of gas.

I know that the right hon. Gentleman would never knowingly mislead the House. The money going to the National Loans Fund is only on loan; it is not a gift. Therefore, any time the Gas Corporation wants it back it can be reclaimed.

The hon. Gentleman, whom I regard as a friend, has been a Minister and knows as well as I do what a sticky-handed lot the Treasury are. He knows as well as anybody that once it is in their hands it takes a hell of a big effort to get it out of them.

I can see the argument going on in the various Cabinet committees about this, and I would much prefer that the Gas Corporation was able to commit itself to many of these programmes of exploration, gas-gathering development of new fields and systems of pipelines and take a step forward towards the synthesising of gas, which ultimately will be its enormous role. We witnessed the Gas Corporation changing from town gas to natural gas in 10 years—one of the most remarkable achievements of British industry, or, indeed, of any industry, at any time. The yahoo aspect has to stop. It is an achievement of the industry, not of the Tory Party or the Labour Party. It is an achievement of Britain.

In time, when natural gas from the North Sea province has gone, we shall have to invent synthetic fuels by means of using waste gasifying coal and so on. These are the sort of things that the consumer wants to hear are being done with profit from gas.

Consumers would like to hear that the money is being used for that sort of benefit. But, that is not the case here. To my mind and the minds of many others—including many in the Tory Party—it is an exercise on behalf of the Treasury to try to meet the immense challenge that the Tory Party has set itself. The Treasury has to find how to make a massive cut in public expenditure in a very short space of time. For purposes of my argument, it does not matter whether that object is a good or a bad thing. The gas industry is being subverted to that end—not to the end of promoting gas or advancing energy interests, but to that end primarily and immediately.

Does the right hon. Gentleman agree that the principal argument in support of putting up the price of gas is that the investment that he is talking about, which he admits will be required in years to come, will become cost effective? It will become cost effective only if the market price of gas is a European or world price.

That leads me on to what I believe is the third defect. First, I have alleged that the proposals are anti-social. Secondly, I have alleged that they are economic nonsense because they have never been properly explained and defended and that they are not about energy saving but are about a Treasury PSBR-cutting exercise. I am glad that the hon. Member for Derbyshire, South-East (Mr. Rost) intervened, because I can add the third defect, namely, that there has been no justification for the actual figures. The Secretary of State has taken no time, either in this speech or in previous speeches, to defend any of the figures. I have listened carefully to him and read a great deal of what he has said on the matter, he will be surprised to hear. They are curious figures, not vague but very definite.

Other than the explanation about a Treasury exercise that I have given, there is no real explanation to justify what the figures mean in terms of the industry. However ineffective some hon. Members may feel at times—merely by voting and not speaking often—being a voter tonight is something. I hope that all my right hon. and hon. Friends will vote for the motion, whatever may be its language in the eyes of the Secretary of State for Energy. Likewise, I hope that Conservative Members will be tempted to vote for the motion so that we might bring some sense to bear upon the Government.

Most hon. Members have a great liking for the right hon. Member for Greenock and Port Glasgow (Dr. Mabon). However, they should agree that most of his arguments this afternoon support the amendment that was moved by my right hon. Friend the Secretary of State to the Opposition motion. I should like to take up briefly some of the points raised by the right hon. Member for Greenock and Port Glasgow. I know that many of my hon. Friends wish to take part in the debate and that some of the right hon. Gentleman's points will be referred to by them.

On 9 January, a report in the Financial Times stated that it was just as well that New Year's Day was a public holiday, otherwise United Kingdom industry would have its gas supplies cut off because of a surge in demand by domestic consumers. The report added that only a steel strike would avert further cuts in gas supply this winter, regardless of weather conditions. In July 1979, after two years of the freezing of gas prices by the Labour Government, when the real price of gas fell by about 15 per cent., the Price Commission called for a 30 per cent. increase in gas prices. That was at a time when inflation was running at between 8 and 9 per cent.

In November of last year, at an energy seminar in Plymouth, the Opposition spokesman on energy, the right hon. Member for Plymouth, Devonport (Dr. Owen), referred to the likely energy gap in 1990 and the immediate need to conserve energy. He said that we would need to build more nuclear power stations. I agree with him on that. He also said that conservation of fuels was essential. I agree with him on that, too. He added that a pricing policy was inevitable and that a special scheme of help for poorer families would therefore be needed. I agree with him on that as well

At the same conference, the deputy chairman of South Western Gas spoke of the fivefold increase in gas usage since the 1960s and the dramatic effect on the gas market of the "flight from oil" of last year. He said that a great imbalance in demand and supply had been created by the surge of new customers and appliances. I should like to quote briefly from his speech. I believe that his remarks relate directly to today's debate and what I consider to be the hypocritical attitude of the Opposition.

On the subject of price, the deputy chairman said:

"The demand for domestic gas has been intensified by an artificially low price, which has, by successive Governments and their price-regulatory bodies, been held down to a rate of increase roughly two-thirds of the RPI or one-half of earnings or pensions…The Price Commission has recently commented on this and indicated that a substantial increase in gas price is overdue and that there should be more parity between these and industrial prices…Supplies of natural gas will last well into the next century as long as they are not recklessly dissipated as a result of short-term pressures. When natural gas does commence to be depleted there are practical and economical processes to make a completely interchangeable gas from oil products or, more importantly, from coal.

The price of natural gas must increase—Industrial prices will be geared to oil—Commercial prices have already increased substantially this year and will follow the same trend, and—Domestic prices, artificially held down for so long, will certainly rise next year by a significant amount."

Under the previous Government, not only did the former Secretary of State for Energy, the right hon. Member for Bristol, South-East (Mr. Benn), hold down gas prices artificially for two years but, at the same time, he allowed spending of large amounts of money—millions of pounds—to persuade people to use more gas. Over seven years about £73·7 million was spent with that objective in mind. It is no wonder that this winter has seen a dangerous over-demand for gas and a loss-making domestic sector in the Gas Corporation. Industrial gas users are being clobbered not only by high gas prices and charges but by the serious lack of guaranteed supplies.

In Holland, a similar problem developed over the previous decade. Through the low pricing of gas, the country allowed such a substantial increase of its usage that the crazy result was that about 90 per cent. of space heating in Holland was provided by gas, and about80 per cent. of electricity generation was provided from the burning of gas. In economic thermal usage terms, that makes no sense at all. Holland saw the danger about three years ago and effected a doubling of gas prices in that time.

Sir Denis Rooke was reported as being so concerned about the instability of gas supply that he was considering cutting off gas supplies to the House of Commons if the necessary steps were not taken to remove the requirement to buy gas without discrimination. He realised the danger and made that comment. We have a price structure which means that, at a time when energy conservation is being preached by everybody, United Kingdom domestic gas prices are half those in Germany and France and 70 per cent. lower than prices in Italy. Yet industry in this country is paying more for gas than our competitors in those countries.

About 20 per cent. of our gas comes from the Norwegian sector of the Frigg field. The next main new source of gas is likely to be the Norwegian Statfjord field. Gas prices from those northern fields are five times higher than the old southern-based gas contracts. There is fierce European competition for supplies of gas from those fields. If gas prices were to be increased on an oil-related basis, the increase would be nearer 60 per cent. compared with the 29 or 30 per cent. that is proposed for the next three years. That answers the point raised by the right hon. Member for Devonport about the unfairness of these increases. If gas prices were linked to oil prices, the increase would have to be double that announced by the Government.

If the Gas Corporation negotiates with an oil company, is it not the case that from now on it will be in a considerably weaker position as regards the rates at which it can obtain supplies of gas? It was not in such a weak position in the classic case mentioned by the Secretary of State in relation to the southern fields.

The Gas Corporation is still in a monopoly situation in the southern fields. It is competing with overseas buyers for gas, and it is therefore having to pay the market price. That is the price that the British consumer has to pay. It is the market price of the northern gas fields that we must accept. If one adds to the price of gas the need for massive investment during the coming decade in order to ensure a switchover to gasification from coal—when oil and gas reserves run out—the arguments for the Government's action are irrefutable.

When and how fast should those increases be applied? That is the nub of the Opposition's argument. The other part of that argument is about how to protect the poor and the elderly. First, the price increases should be implemented immediately. I have pointed to the Dutch example and said that we are only halfway towards achieving parity with oil. No one will dispute that there should be a substantial increase now. That point was emphasised at the conference in Plymouth which the right hon. Member for Devonport attended. He did not dispute that fact then.

The former top Labour economic adviser, Michael Posner, has come out decisively in favour of the timing and method of the gas price increase. He favours stable long-term financial objectives for nationalised industries rather than short-term taxes that are subject to the whims of the Government. I should like a system which ensures a proper revenue return to the taxpayer, in addition to giving proper incentives for the development of marginal gas fields. The present system does not do that. Perhaps my hon. Friend the Minister will outline the Government's views on the advantages and disadvantages of a gas tax system.

Finally, I turn to the emotive aspect of the three-year hike in gas prices, which is the effect on the elderly and the poor. The Opposition seized the political opportunity presented by the rather hurried announcement that was made after a press leak. They painted a picture of people faced with grave hardships and of their sometimes dying as a result of price increases that will rise 10 per cent. above inflation next year. All hon. Members are concerned to ensure that proper protection is given to those who are unable to adjust their weekly budgets to allow for a particular commodity price increase.

I should have welcomed the announcement of a major social package at the same time as these price increases. The lack of it is probably the cause of complaints by many hon. Members. However, in recent years we have had increases for electricity, oil and coal similar to the present increase. How many people suffered death or the consequences that were portrayed in remarks made at the time of the announcements? When coal prices rose as a result of the miners' pay demand, did Labour Members raise the same cries? The same situation applies, because it involves a dramatic increase in the cost of fuel to consumers.

We must look at this problem from all angles as part of a rational policy to help the poor and the elderly. Many poor and elderly people have night storage heaters. They face the same problems as gas consumers face now. We must consider a new system of charging. Instead of reducing the charge as consumption increases, we should reverse that process. We should demand an increased charge for increased consumption. North Thames Gas charges about 29·30p per therm for an annual use of 80 units. That drops to 17·27p per therm for 1,200 units. That is ridiculous, because the more fuel one uses, the cheaper the price. If a new system were introduced, combined with a drive to insulate many of the older properties in which the elderly and poor live, we should get to grips with the problem.

I call for a package that will give real help to the elderly and to the poor. I should like a better system of charges, in order to encourage conservation. I seek an explanation of the gas tax versus financial objectives argument. However, I reiterate my support for the Government's decision, unpopular as it may be in the short term. Natural gas is a resource that is precious to the nation, and it is invaluable to the economy. However, it is not infinite in quantity. We must ensure its supply for as long as possible into the next century.

I wish to take issue with the Minister about his use of the word "hysterical" to describe the motion on the Order Paper in the names of my right hon. and hon. Friends. Is it hysterical to condemn savage increases that will hit ordinary families? Is it hysterical to say that those increases will have a devastating effect on the cost of living? Is it hysterical to draw the Government's attention, and that of the House, to the devastating effect that those increases will have on the worst-hit sections of the community?

The hon. Member for Exeter (Mr. Hannam) pointed out that a number of people have already suffered because of the high cost of fuel. Perhaps he does not represent a constituency like mine. I regularly receive letters and calls at my surgeries from those who have had their gas or electricity cut off because they cannot pay the bill. They are not spendthrifts or drunkards. They do not waste their money. That is not why they can- not pay their bills. They are families with children, where perhaps the breadwinner is disabled or sick. Perhaps there is no breadwinner.

Those who cannot pay their bills often include pensioners and those receiving disability allowances. They are people in the lowest income groups. Single parent families also find it difficult to pay their bills. It is not good enough for the Minister to point to the increases that were allowed last October. Those were agreed in the previous Budget. It is people on social security, pensioners and other low income groups who are worst affected. I accept that the Labour Party can be criticised as much as the Conservative Party for the way that a Budget announcement is made. When an announcement is made in April or May, people must wait until October before any benefit is received.

The Minister cannot use the argument that whatever was given to those unfortunate people last October will benefit them as regards future increases in gas prices. Such increases—meagre as they were—have already been absorbed by the general increase in the cost of living. The Minister has promised us something for the future. We do not know what it is. We certainly know the record of the Government during the short time that they have been in power. We can judge by that record what the lower income groups and the poorer people of Britain will receive in future.

The dogma of the Conservative Government is to cut, cut and cut again. We have been warned of the possibility of future cuts. The cuts that have occurred have hit hardest at the lower income groups, the sick, the disabled and other badly off sections in our community. I find it extremely difficult to accept a vague promise that the Government will do something for these unfortunate people.

Let us consider another section of the community—owner-occupiers, young couples, perhaps with young families, who are setting up homes. Many of them misguidedly helped to return this Government. How are they feeling about the proposals? I know how many of them are feeling in my constituency. They have borne the brunt of increased VAT, with household goods and clothing costing a tremendous amount. Owner-occupiers are saddled with large mortgage repayments. They have suffered increases in the mortgage rate which can be attributed directly to this Government's policy.

The Conservative Party in Opposition levelled tough and bitter criticisms at the Labour Government for increases in the cost of living. We were attacked because it was held that we had caused those increases—and such increases obviously are felt most severely by the poorest sections in the community. The actions of this Conservative Government have contributed more to the increased cost of living than our legislation on such matters as imports.

I was extremely cross when I first heard of the gas price increases. I knew how they would affect the people whom I represent. I made a little press statement. Unusual though it may be, that statement appeared in many newspapers, not just the one in my constituency. As a result, I have received letters from all over the country. It may surprise the Government to know that I received letters from Tory strongholds, such as Bournemouth, Eastbourne and Torquay. These people read my statement and wished to join me in protesting bitterly and strongly. They are not Socialists. They are not Labour supporters. The Government should look to their laurels and consider not only the poorest sections of our community, which I wish to support, but their own supporters.

I venture to suggest that if this Government went to the country now the result would not be the same as in May 1979. Many of the people who supported them then would not vote at all or would go over to the other side. Increased prices and cuts in public services are being felt, not only by the poorer people but throughout the country, and the Government are responsible.

We cannot increase the price of such a commodity as gas without industry being affected. It has already been badly hit by the increased bank rate that the Government imposed. The consequences for industry will, in turn, cause higher prices in the shops. We shall also be less competitive in selling our goods abroad, and we must sell abroad if we are to buy the food and raw materials that we need. That is our lifeline.

In their short time in power, the Government have added insult to injury in bringing our country to its knees. There will be worse to come. As a result of their economic policies, industrial stagnation has already set in. I wonder what industry will have left in 10 years' time.

The Government's policies will make life more difficult for the domestic consumer, and especially those who cannot afford price increases. Further, the cuts in services will affect most the sick, the disabled and those least able to look after themselves. Their policy appears to be: if people have, they can have more; if people have little, they can have less. The Government's method of rationalising or conserving supplies is to ensure that those who can afford to pay will get the supplies that there are and those who cannot will go short.

This is a curious debate. I found the comments of the right hon. Member for Plymouth, Devonport (Dr. Owen) quite irrelevant to the problems of gas and energy policy. It seems to me that the sooner he goes back to foreign affairs, the better for him and for the country. [HON. MEMBERS: "No."] Yes. And it will be better for the Opposition, so that we can rectify Left-wing pressure on foreign affairs.

In all the publicity that the hon. Member for Bradford, South (Mr. Torney) put out, I wonder what he believes will be the average increase on the average bill.

It will be 29 per cent.

How much is it in real terms?

Quite a lot.

It is not quite a lot.

It is for those who are not earning much.

Let me tell the House exactly what it will be. We should consider the facts of the "savage increase" that the hon. Gentleman talks of. The increase to the average domestic consumer will be 56p a week.

That is a lot for those on social security.

The hon. Member for Bradford, South suggests that this Government have no feeling for those who are worst off. Since his Government left office, we have given a fuel allowance of over £50 a year for the 355,000 who are worst off. We have dealt more generously with the worst-off section in the community than the Labour Government, and that fact must be registered.

Can the hon. Gentleman justify that argument? It would mean that in the great parliamentary constituency of Honiton, which I know fairly well, there are only 500 people who need help with their fuel bills. In effect, that is the proportion helped by the Government's legislation.

Those who are severely badly off are getting aid from a Conservative Government which they did not get from a Labour Government.

Having said that, I find myself in a worrying and difficult position. I helped to set up the Department of Energy with my right hon. Friend, and I resolutely admire his intellectual approach in politics and his work for the Conservative Party on policy matters. The last thing that I wish to do is to begin condemning his approach today.

However generous any of us may feel, the presentation of the new gas prices that will be necessary to obtain the new financial objectives for the British Gas Corporation can hardly be described as an oustanding success. Nor could it be claimed, certainly before the debate, that the British public knew or understood what was behind the new energy policy.

I listened with great attention to my right hon. Friend's speech. I congratulate him. I believe that he has cleared up a number of previously unanswered questions, most specifically in view of the assurance he has given of further assistance to the least well off before the new price increases begin to bite. Many consumers turned to gas because they believed the Gas Corporation's advertising that stated

"Gas—the clean, cheap fuel"

or

"Join the bonanza of gas from the North Sea."

That is what the new consumers wanted. Now they see a nationalised industry being well managed, highly successful and making major profits. "Hurry, damn!" might well be their expletive. But the pleasure may not last long. We now have a Government policy that demands greater profits, increasing the net return on replacement cost of capital employed from 6·1 per cent. to 9 per cent. That is a one-third increase in profits. In terms of profitability, this means an increase not to the BGC but to the Government?

Does my hon. Friend agree that much of the profit to which he refers is in the form of the economic rent that should be accruing not to the BGC but to the Government?

That is an interesting argument about the economic rent factor of mineral resources underground. It is not part of the argument with which I am trying to deal.

My worry is that the Government have failed to communicate and have failed to convince the public about the reasons for their policy. The domestic consumer knows that the Government are determined to overcome inflation and wish to see prices rise as little as necessary. The consumer sees the British Gas Corporation operating effiently and making substantial profits. It is, therefore, strange and, to many, unacceptable that the supplier of something better and cheaper than that provided by competitors should be forced to put up the price. Surely, it would not be unreasonable to claim that this is the worst practice of a monopolist. In private industry, it would be condemned. The argument that competition is meant to bring down prices, not push prices upward to match the prices of expensive competitors, such as coal and electricity, must be answered completely.

I am listening closely to my hon. Friend. He has great experience in these matters. To give a fair picture of the profits issue, he has to emphasise what is the position, namely, that no profit is being made from domestic gas sales. If there was not a price increase, we would have a subsidised domestic gas price. That cannot be right.

I reject that approach. I am trying to establish an argument that people can understand. It is necessary to talk of the efficiency of the gas industry. I shall then come to the point made by my right hon. Friend.

It is important to stress, and give praise to, the efficiency of the gas industry and the success of its management. It has carried out 13 million conversions to North Sea gas with a minimum of dislocation. Over the last two years, it has reduced its borrowing and capital liabilities from £2,093 million on 1 April 1977 to £881 million on 1 April 1979. That is over £1·2 billion down—a remarkable performance.

I seek clarification. You said that the British Gas Corporation had hoodwinked—