Orders of the Day — ENERGY BILL [Lords]

– in the House of Commons at 12:00 am on 15th June 1976.

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Order for Second reading read.

4.3 p.m.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

I beg to move, That the Bill be now read a Second time.

The Bill, as Members will realise, was taken first in another place because of the pressure of business here at the time of introduction. It has been changed in a number of ways. In some cases I shall be able to commend these changes to the House. In others I shall later explain why the changes are unacceptable to the Government and that we aim to remedy such defects during the passage of the Bill through this House.

I should like to explain first in general terms the aims of the Bill and then refer briefly to each of the main clauses to provide the House with a little more detail of key provisions. The Bill will supersede the Fuel and Electricity (Control) Act 1973 and is required to give the Government permanent powers to meet United Kingdom obligations under the Agreement on an International Energy Programme and obligations as a member of the European Communities, and to develop the Government's policies for the conservation of energy.

Therefore, this is an important Bill from both a domestic as well as an international point of view. However if hon. Members look closely at the Bill they will see that in many important respects, notably Clauses 1, 2 and 4, it re-enacts key provisions of the Fuel and Electricity (Control) Act 1973 giving the Government powers to act in an energy emergency. As concerns the actual powers to be available for such crises, therefore, the Bill touches no new ground. I shall deal later with the "triggering" provisions in Clause 3 which differentiate between a "domestic" and an "international" crisis.

We touch new territory in the provisions affording power to conserve energy—the basic power affecting use of energy is contained in Clause 3(3)—and other more specific conservation measures in Clauses 8 to 12 inclusive. Most of the other provisions arise, as does Clause 11 on the fuelling of new and converted power stations, from our international obligations to the International Energy Agency or the EEC.

To deal first with the general background to our IEA obligations, the Agreement on an International Energy Programme entered into force on 19th January 1976 for States, including ours, which have notified consent to be bound by its terms. Under the agreement we are required to have available powers which will enable us to impose restrictions on the supply and use of energy in an emergency, to meet our obligations to hold a minimum level of oil stocks and to provide information to the International Energy Agency. Some of these obligations can be met under the 1973 Act, but that Act requires annual parliamentary approval for renewal and is therefore not a satisfactory basis for the fulfilment of international obligations.

For that purpose, the requisite powers must be permanently available, and seen to be so by other signatories to the international agreement. Furthermore, the 1973 Act was designed to meet an emergency, not to meet the requirements of a long-term programme of international co-operation. It does not, for example, provide wide enough powers in respect of information, which is an important element of the International Energy Programme.

In order to prepare for an oil emergency, we need to have permanently available powers which will enable the United Kingdom to meet its obligations as a participant in the International Energy Programme's oil-sharing scheme. Among other things, this requires the United Kingdom to be able to reduce oil demand by the amounts specified in the IEP agreement and to direct United Kingdom oil companies to reallocate supplies amongst themselves and, if necessary, to supply companies in other countries. We have decided, therefore, that the crisis management powers contained in the 1973 Act should be permanently available, but we recognise that they should be exercisable only for IEP purposes at time when the IEP agreement requires them. The IEP agreement defines these circumstances, and hon. Members will note the Government's intention that the extensive powers to control production, acquisition, supply or use by order or direction should be used only after Her Majesty has, by Order in Council, activated them as a result of an oil emergency being declared by the members of the International Energy Agency.

In another place it was suggested that the original wording of Clause 3(1) in this respect might not make this declared intention crystal clear, and the clause now contains in subsection (1)(a) a compromise formula which in the Government's view puts the situation beyond any doubt.

The IEP agreement also requires us, as part of its provision for cushioning the effect of an oil shortage, to hold a minimum level of oil stocks. We are therefore seeking powers in the Bill which will enable us to meet similar EEC obligations to hold 90 days' stocks of oil.

We have also to bear in mind the continuing need to have available contingency measures for controlling the production. acquisition, use and supply of energy, and for regulating oil prices, during a domestic energy emergency. I am sure that hon. Members will agree that it would be prudent to retain powers similar to those in the 1973 Act for domestic crisis management, subject, of course, as hon. Members will see from Clause 3, to the same degree of parliamentary control as provided in that Act. Here again the wording of the provision in subsection (1)(b) about "domestic" emergencies has been clarified after exchanges in another place.

To turn to the energy conservation aims of the Bill, the Government's objective following the 1973 oil crisis and the ensuing sharp increases in energy prices has been to encourage greater efficiency in energy use and stimulate consumers to help themselves by saving energy. Much of our effort has thus been by exhortation and example, by information and advice; but in some areas voluntary restraint is insufficient and reinforcement through the statute book is appropriate. Certain measures are already in force under the 1973 Act affecting heating levels, speed limits and advertising lighting. These will be kept under review, but the present intention is that they will be continued under the Bill.

Powers are, however, needed to permit us to introduce new measures as and when the Government consider them to be necessary in support of the encouraging efforts being made to save energy throughout the economy. We are therefore proposing that the power to control the use of energy and the power to alter statutory provisions relating to the use of energy substances, similar to those in the Fuel and Electricity (Control) Act 1973, will be permanently available; but except in emergency the power to control the use of energy will be exercisable only for energy conservation purposes, only after consultation with those affected and with suitable advisory bodies, and only by Order, which will be subject to negative resolution procedure and thus to the control of Parliament.

The Government have also decided to include a new power to subject fuel consumption in cars to a standard test, the results of which will be published, thus enabling car-buyers to make a more reliable comparison of a car's fuel consumption when contemplating buying a car. Again, I shall say more of that provision later, since recent discussions have taken place with the industry following exchanges in another place on some aspects of this clause.

We are replacing Section 9 of the Continental Shelf Act 1964 by Clause 8 of the Bill, which would thus establish the ongoing régime over the supply and use of natural gas from the United Kingdom Continental Shelf. Much of the clause is designed to remove technical anomalies in the present situation, especially in the treatment of gas distilled from North Sea crude.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Does the Minister propose to keep Clause 8(2)?

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

May I come to that later? I am giving the good news first, but I shall come to the other news. I am sorry that I have to rush this, but I am trying to cover as many aspects as I can. I am only sorry that, even with the extension of time, there will not be an adequate day's debate on the Bill.

Although this effort has resulted in some unusually technical language, it has been welcomed by the industries concerned and should facilitate the rational development of our offshore oil and gas resources.

The clause also seeks to clarify the Government's control over liquefaction, which was obscure in the Continental Shelf Act; we shall hope at a later stage to correct the unsatisfactory way in which that control is at present expressed. We shall also seek to amend the clause in order to give the Secretary of State discretion not to consent to the supply and use of gas for industrial non-fuel purposes.

Clause 9 brings under control the flaring of natural gas or its release unignited into the atmosphere. In another place, certain forms of flaring were exempted from this proposed control. We may need to examine at a later stage whether these exemptions are well based, taking into account the requirement of conservation as well as the practicalities of industry. Given our limited ability to predict technical advance, it may be preferable to deal with these exemptions by Order.

The Bill also contains provisions which will enable the United Kingdom, as a member of the European Communities, to implement Council directives and enforce EEC regulations in the energy field. One important directive is 73/238, which requires us to have powers for crisis management in an energy emergency when declared by the European Communities. Other directives implemented under the Bill are 68/414, as amended, which requires us to hold a minimum level of reserves of oil and to which I referred earlier; 75 /339, which covers the holding of minimum stocks of fossil fuels at power stations; and 75/404 and 75/405, which relate to the fuelling of power stations. Of these, the directives concerning crisis management and oil stocks are currently implemented under the 1973 Act. The Bill will also allow us to implement any future arrangements in the EEC for meeting energy crises.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

Would my right hon. Friend give a figure for the ratio between the coal stocks at power stations which are required by EEC directive to be held and the present average stocks at power stations?

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

My hon. Friend the Under-Secretary will no doubt get those figures. I do not have them in my head, but no doubt he will incorporate them in his speech. I agree that that is an important point.

The Government propose to move an amendment in Committee to reinstate in the Bill the power to control the price of oil products on a permanent basis. This power is, of course, available under the Bill—Clause 1(2), triggered by Clause 3(2) —for energy emergency purposes. The power to control the price of crude oil will be limited to energy emergencies. At present the powers which exist in the Fuel and Electricity (Control) Act 1973 are being used only to control the price of paraffin, which is so important to many pensioners and other low-income users, but they were also used in December 1973 by the previous Administration, who fixed maximum retail prices for petrol and derv to protect the consumer from profiteering during a shortage.

Photo of Mr Peter Rost Mr Peter Rost , Derbyshire South East

Can the Minister explain what we could not discover from the proceedings in another place—the reason why price control for oil is required for energy conservation and its relevance to a policy for more rational use of energy? I should have thought that it had the opposite effect.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

What I wanted to do now was give notice of the Government's intentions in Committee, which is a perfectly honourable procedure. I do not want to argue the case now. I would rather do so in Committee. We shall then see whether I can convince hon. Members that there is sense in that provision and that the hon. Member's argument is not as profound as he thinks. But I give notice that we intend to have this debate in Committee, which I am sure will be a very agreeable occasion.

The Government wish to make this provision not only in the interests of the consumers, who may of course be private, commercial or industrial, but also as an important reserve power for possible use in the development of the nation's long-term energy policies. Most European countries and the United States of America already have special powers to control oil prices. The Government intend to table an appropriate amendment to the Bill in Committee.

Before looking at the key provisions of the Bill, it might help the House if I underline the way in which the powers of Clauses 1 and 2 would be triggered and operated. Clauses 1 and 2, which are a rehearsal of the 1973 Act, set out what appear to be very sweeping powers, but they are, of course, qualified as to the extent of their availability by Clause 3, which defines an "international" crisis and a "domestic" emergency and includes the general permanent power to control the use of energy for conservation purposes. In the case of an international oil emergency, we are proposing that the full emergency powers are to be activated by Order in Council when it is decided by the members of the International Energy Agency or of the EEC that an emergency exists. Such an Order in Council would not be subject to parliamentary procedure.

Secondly, for a domestic emergency we propose that the powers shall similarly be activated by Order in Council but that such an Order in Council shall be subject to affirmative resolution by both Houses of Parliament. Thirdly, for energy conservation we are seeking the power to control only the use of energy, not its supply. We have undertaken to consult before making any energy conservation Order. Such orders are subject to negative resolution procedure. Thus, the United Kingdom will be able to meet its international obligations while retaining parliamentary control over the activation of the contingency powers for a domestic emergency and over measures taken for energy conservation purposes.

I shall say nothing more about Clauses 1 and 2 but will turn now to Clause 3, on which there will probably be some debate. It covers the circumstances in which the full powers contained in Clauses 1 and 2 may be exercised. If these powers are required to meet the United Kingdom's international obligations in respect of energy emergencies, either as a member of the EEC or as a party to the Agreement on an International Energy Programme, they can be activated by the Orders that I have described.

If hon. Members will permit me, I shall say nothing at this stage about Clause 4. Clause 5 prevents normal statutory controls from unnecessarily hindering national objectives in times of emergency. In the case of an oil emergency, we shall be particularly dependent on the oil industry acting collectively to implement the Government's directions. Such joint action might infringe restrictive trade practices legislation. I believe that the then Prime Minister found this a particularly acute difficulty in 1973. The clause therefore provides partial exemption for certain restrictive agreements made by the oil industry, only during an energy crisis.

Unless hon. Members wish me to do so, I shall not say anything about Clause 6, which I think is quite clear. Clause 7 implements the United Kingdom's obligations under EEC Council Directive 75/339 to which I have referred already.

Clause 8 I have touched on already. As I said earlier, it supersedes Section 9 of the Continental Shelf Act 1964. That section did not cover the possibility of producing natural gas in association with crude or of gas-gathering pipelines not owned by the licensees or of an industrial company purchasing the gas offshore. With the help and advice of the oil industry, the Government have introduced a number of detailed technical provisions which will facilitate the development of our offshore oil and gas resources. In particular, this clause seeks to establish a rational régime for gas derived from off-shore crude and thus removes a disincentive to refining British crude in British refineries.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Clause 8 (2) deals with mandatory consent. It is contingent on the old procedure in Section 9 of the 1964 Act. I asked the Minister whether he would be leaving that in, and I assume that he will accept discretion and leave it where it is.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

We shall have to debate that in Committee, but our inclination is to delete it. We shall argue this in Committee because other subsections flow from it which obviously we shall have to take into account.

My second point in defending the Government's case on Clause 8 is that the Continental Shelf Act is obscure in its treatment of liquefaction of gas. The clause seeks to establish that it is subject to control, though in our view it still needs some amendments. Thirdly, it is our wish to amend the clause to give the Secretary of State discretion in consenting to the supply and use of gas for non-fuel purposes.

Clause 9 is primarily about flaring, but it also brings in the releasing of unignited gas into the atmosphere. It would be theoretically desirable to eliminate both practices, whether on environmental grounds or for energy conservation. But we have to admit that in some circumstances flaring is an industrial necessity. For that reason we shall have to give consideration to exemptions under Clause 9.

Clause 10 gives permanent effect to the relief of the British Gas Corporation from its obligation under the Gas Act 1972 to meet demands for new or additional supplies of gas if these would involve the supply of more than 25,000 therms a year to the premises in question. This relief has been given for the last two years by a special authority granted under the 1973 Act, and in our view it needs to be maintained to ensure that demand does not outstrip available supplies through a major unregulated growth of non-domestic use.

Clause 11 enables United Kingdom obligations under EEC Council Directives 75/404 and 75/405 to be implemented. I do not think that I should develop comments on that clause any further.

Clause 12, about which we may have difficulty, provides that the Secretary of State may make Orders requiring the fuel consumption of sample models of passenger cars to be determined by officially approved tests and the results to be recorded and brought to the notice of the Public. I know that we shall have to go into this matter more fully in Committee. Nevertheless, Clause 12 is regarded as being very useful.

Clause 13 raises the upper limit of the contributions payable under Section 2 of the Electricity Act 1972 from £25 million to £45 million, mainly to take account of inflation. Section 2 of the 1972 Act enabled the then Government to contribute to the costs incurred by the electricity boards in carrying out projects which they had agreed to advance in order to promote employment. The largest of these was the Ince B Power station in Cheshire.

Clause 14 is a general clause relating to the use of Orders and directions under the Bill. Clause 15, with the important Schedule 2, provides powers to obtain from undertakings information relating both to the substances mentioned in Clause 1 and electricity and to the undertakings themselves. I remind the House that the IEP Agreement requires us to furnish information on the structure and organisation of oil companies. The information may, however, be disclosed only in specified cases such as to the International Energy Agency, EEC institutions and other United Kingdom Government Departments for the exercise of their functions.

Schedule 2 includes powers to call for documents and, in certain circumstances and subject to certain safeguards, to enter non-domestic premises. Clause 15 also creates appropriate offences for non-compliance with provisions made by or under the Bill and with the EEC Council Regulations listed in Schedule 3, and for making false statements or possessing false documents. Clause 16 provides penalties for these offences.

The remaining clauses, Nos. 17, 18, 19 and 20, deal with miscellaneous provisions, and general matters and cover financial provisions, interpretation, repeals and savings, citation and extension to Northern Ireland, and so on.

I hope that the House will agree that I have tried to explain the Bill, albeit at a mad gallop but nevertheless in the hope that right hon. and hon. Members will realise that this is an important measure upon which we shall have further debates in Committee and one which I hope everyone will agree is a useful Bill which should be put on the statute book this Session. In our view, the Bill is essential for the wide-ranging objectives which I have described. The Government attach the greatest importance to meeting our international obligations. We recognise that the 1973 Act is unsuitable for meeting those long-term obligations and is no longer appropriate. It has been overtaken by more recent events and has the defect of having to be renewed annually.

I commend the Bill to the House. It is tailor-made for its various purposes. It is so constructed that its emergency powers are available only when necessary and with appropriate parliamentary sanctions, as I have explained. It is an important part of the development of the Government's long-term energy policies. In my view no Government, of whatever party, can afford to be without available measures to deal with energy crises, whether internal or external, or with the long-term need to ensure that our energy resources are used in the most sensible ways so as to avoid waste or inefficient use. Some executives in industry may argue that they alone know best. This it not so. The Government cannot abdicate their responsibility for making the crucial decisions in the national interest after due and proper consultation with the industry as a whole where that is appropriate.

4.26 p.m.

Photo of Mr John Biffen Mr John Biffen , Oswestry

I have a great affection for the House of Commons, but there is something slightly bizarre that, at 4 o'clock in the morning, this Chamber could be practically in turmoil on the Blaenau-Gwent Order, whereas at half-past 4 in the afternoon we are reduced to the hardy band of faithful who take an interest in energy topics when we are discussing a very significant Bill.

I was touched by the hon. and ever-optimistic Member for Bristol, North-West (Mr. Palmer) when, on 20th May, he asked the Leader of the House: Will my right hon. Friend say when time can be provided to debate the important subject of energy conservation, particularly in view of the Report of the Select Committee on Science and Technology, to which after a period of ten months, the Government have made no reply?" —[Official Report, 20th May 1976; Vol. 911, c. 1717.] I think that the whole House will have a lively sympathy with the hon. Member for Bristol, North-West on this account. Perhaps he was hoping that the commitment in the Queen's Speech would enable his expectations to be fulfilled, because, of course, the Queen's Speech said that legislation would be introduced to meet the United Kingdom's obligations under the agreement on an International Energy Programme, to control energy supplies during any shortages, and to implement energy conservation policies.

There has been a fairly general expectation—at least outside this House —that at some point there would be the occasion when Parliament would either generally debate or else have the opportunity to fashion some kind of energy conservation legislation. Clearly, if that occasion is to arise, it is not to arise today.

In some senses, the Bill before us is an Energy (Miscellaneous Provisions) Bill. The Minister of State, in his engaging and charming manner, took us through it clause by clause, and indicated that the Government appreciated the very constructive work that had been done in another place. I noted that he referred to the Bill as being "tailor-made". The bespoke practitioners up the road have clearly played their part in the fitting, and I hope, as the Minister does, that the Committee stage will be constructive and will build upon the work already done.

I should like to dwell on three themes that run through this legislation. This is perhaps an opportunity for the House to consider them in the wider context. If we do not do it now, we shall have no other opportunity.

The three themes are, first, the relations between OPEC and the consuming countries, which are central to the whole institution of the International Energy Agency; secondly, the factors that will aid conservation and the development of energy sources; and, thirdly, the political relationship between the Department of Energy and the oil and petrochemical companies. It was in a sense to that relationship that the right hon. Gentleman turned in his concluding remarks.

I fully realise that the first part of the Bill and, in a sense, Clauses 1 to 7 and some other provisions derive from an anxiety and obligation to deal with emergency situations and the maintenance of fuel reserves. A good deal of this is a consequence of our membership of the International Energy Agency.

I regret that the Bill was not drafted, and is not susceptible of amendment, in such a way as to make a clearer distinction between the objectives of emergency control and the more general issue of conservation. Their coexistence in the early clauses could give rise to misunderstanding and anxiety. If the Committee stage can help allay those fears, it will be one of the constructive rôles of the Committee. I am glad to see that I have the assent of the hon. Member for Wrexham (Mr. Ellis).

I turn to the question whether we are ever likely to find ourselves having to operate these clauses under the trigger mechanism of the International Energy Agency. The House should take this opportunity at least to make a passing comment upon the agency's operation and how it can best proceed to our national advantage. It seems to me that there is, implicit in the juxtaposition— "confrontation" is not a word I would choose—of the OPEC countries and the agency, the danger that there would develop countervailing cartels. I very much hope that the purpose of the agency will be to encourage OPEC to operate in a market situation rather than a cartel situation.

There will be interest in the recent developments in OPEC. The movement in prices has not been inexorably upward over the past few months. The recovery in industrial activity in the Western World has not set off the automatic response by OPEC producers of increasing their prices substantially. The latest indications are that Saudi Arabia, Iran and Kuwait have cut or shaded the price of their heavy crudes, whereas, in a different situation and with different qualities of fuel, Libya and Venezuela have marginally increased their prices.

I make no prophecy about the future behaviour of OPEC. I shall concede the position of prophet to my hon. Friend the Member for Bedford (Mr. Skeet), who has been fairly brave in expecting that OPEC would not prove quite as monolithic as at one time fashion had supposed. But it would be extremely unwise of any hon. Member to make prognostications on the future behaviour of OPEC. However, we are certainly wise also to monitor the OPEC world as it is and not as it was so confidently forecast by a number of people inside and outside the House 12 months ago.

Obviously, in Committee there will be great anxiety to secure for Parliament a monitoring of a situation in which there will be considerable governmental and inter-governmental controls over the disposition of oil, in a situation in which France is a member of the European Community but not a member of the International Energy Agency.

In that context, although I appreciate that there are other reasons, the Minister of State says that there is a virtue in the Orders not being annually renewable. Parliament always wants to be a little sceptical before becoming convinced that something that has been annually renewable should cease so to be.

I turn to my second theme, of conservation. This will be an area in which there will be some controversy. My hon. Friend the Member for Derbyshire, South-East (Mr. Rost) has already observed that the existence of price control as proposed in Clause 3(3) does not sit easily with a general policy of conservation. It is not just my economic prejudices; I believe that it is a general, common-sense observation that price has proved to be a great conserver. If I wanted to pray anything in aid, I should take the evidence of Sir Arthur Hawkins when he gave a talk to the North Western Fuel Luncheon Club in Manchester on 4th March this year. He said: The fuel taps have been turned down, and turned down with a vengeance, because of a combination of factors: reduced industrial activity; consumer reaction to high energy costs; and the 'Save It' campaign. He added—and I wish to underline this: Of these factors, I personally believe that the swingeing increases in energy prices have been the main cause of the downturn. The Minister of State is right to say that there are other administrative buttresses to a policy of energy conservation. He referred to Community and national obligations in respect of heating levels and speed limits. Doubtless it was under that general philosophy that there was incorporated in the Bill Clause 12, about the fuel consumption records of motor vehicles. I suspect that it is one of those clauses that has generated a good deal of correspondence and a natural anxiety on the part of the trade interests concerned. Once again, it is an appropriate subject for Committee. That is what Committee stages are all about—to enable a meeting of minds with the world outside, which I suspect is sometimes a shade more real than the world at the Department of Energy, even as refined and perfected by the work of their Lordships. There is always the danger that the whole issue of conservation could become the Trojan Horse for a more generalised political interference in the trade and commerce of the country.

That takes me to my third theme, which is the political relationship between the Department of Energy and the fuel industries generally, and the fear that the Secretary of State will use his powers of control to extend ambitions for providing enhanced political authority.

The Secretary of State could not be with us, and I make no objection to that. We are a cheerful, happy family at least for five minutes longer—and we are pleased to see the Secretary of State's ex-Parliamentary Private Secretary in the Chamber. There has been a reconcilation, and one has to clearly understand the nuances of relationships within the Labour Party to know why the Secretary of State, the Minister of State and now the Parliamentary Private Secretary all sit together in perfect amicability.

Photo of Mr John Biffen Mr John Biffen , Oswestry

I am glad that the Minister of State has confirmed that, because I wondered whether he had been popped in to keep an eye on the Secretary of State and create that bland exterior that Government Departments like to have when members of the business community become over-emotional about prominent politicians. I accept that the situation is not as facile or as simple as that.

The Secretary of State is a great communicator and he has placed on record the most interesting remarks and, many people believe, rather daunting suggestions, arguments and assertions. I have in mind that which he uttered during the debate on the Fuel and Electricity (Control) Bill which, as the Minister of State said, is being largely repeated in the current legislation. In welcoming the powers that the Bill was conferring the Secretary of State said: It will give us the power to control all the oil companies, all the multi-nationals, to fix their prices and their distribution systems; and under these powers every other fuel and its use, including the chemical industry, will be brought within the control of the Government of the day."—[Official Report, 26th November 1973; Vol. 865, c. 141.] At that time I sat where the hon. Member for Liverpool, Walton (Mr. Heffer) now sits, and listened to a fine parliamentary performance. The trouble is that the Secretary of State has to some extent become a prisoner of his past rhetoric, because that was the ambition that he had then, and that ambition returns to haunt him. The desire to control chemical feedstock gas, particularly in Clause 8(2), causes concern in the petro-chemical industry that the Secretary of State may have undisclosed but wider ambitions.

We must recognise that the House of Lords has done a valuable task in constructing a more appropriate form for the legislation. In a sense it has been trying to rescue the Secretary of State from the gaol of his former rhetoric. It has been trying to spring him. On the principle of "once a patrician, always a patrician" the House of Lords has done its best to help out, even though it is for a prodigal.

Photo of Mr John Biffen Mr John Biffen , Oswestry

I am trying to be more generous to the Secretary of State. I hope that the Minister of State will not go around making such comments about the Secretary of State. It would not be appropriate to the amicable way in which the Department of Energy's political leadership is now constituted.

However bland and reasonably good-natured we are about the Bill, there can be no doubt that it incorporates substantial powers, which will be exercised by the Executive without detailed recourse to Parliament. We have to be realistic about the matter. Perhaps it is the way of the modern world and perhaps it is the only way. I shall listen to that argument, but let us not deny that substantial powers exist in the Bill and that its implementation will not be subject to constant and renewed parliamentary scrutiny. We must recognise that in the event of a crisis, or the need for conservation, there will be tremendous authority for the Government to direct the fuel industries. Many people fear that such direction could stultify the private sector and inhibit the risk capital that is essential if we are to exploit further fuel resources.

At Question Time yesterday the Secretary of State, who is good at demonology, feared that there would be a reappearance of Adam Smith as the guide of the nation's energy policy. I was somewhat puzzled by that, until I recalled a particular perceptive and thoughtful speech by the right hon. Member for Orkney and Shetland (Mr. Grimond). His speech was not unique, as the Minister of State suggested; it was characteristic. At the Oslo Energy Conference on 4th May the right hon. Gentleman said: If the market were completely to disappear it would be impossible to carry on the nationalised sector in its present form. We are very near the situation where the market may collapse. I do not see, therefore, why oil companies which genuinely believe in a market should not say so loud, clearly and often … I believe that the question as to whether Britain ought to continue as a free and free enterprise country or is to slide over into total socialism is going to be a major question of politics for the next two or three years. In this the oil companies have a vital rôle to play. The right hon. Gentleman's words were pertinent, and the anxieties expressed about the legislation from some of the interests that are affected reflect his fears.

We shall not resist attempts to see the Bill reach the statute book, but we are determined that it should go on to the statute book in a form that is most appropriate. Above all, we are concerned that it shall not be just one further piece of legislation to prepare for the harassment of capital, price and profitability.

4.50 p.m.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

The Bill comes from the House of Lords at a time when my right hon. Friend the Secretary of State, who is unable to be with us today, is almost on the eve of his comprehensive energy conference of all the talents and interests to be held at Church House next week. I hope to attend that conference and I am grateful to my right hon. Friend for his enterprise in arranging it.

But after all present at the conference have had their say in innumerable short speeches, which will not be much longer than four or five minutes—probably working down to three minutes towards the end of the day—a policy will not be produced. No one could seriously have supposed that it could be.

That kind of conference is valuable psychologically. It helps to make all parts of the energy industry feel as one. But in the end nothing can absolve the Government from adopting an energy policy in those spheres where the State, answerable to Parliament, either has an existing statutory responsibility or should have a new statutory responsibility if present powers are inadequate or out of date.

That is the principal fault of the Bill, which has come to us somewhat mutilated from the House of Lords. The Bill does not attempt to set out any comprehensive energy policy for the United Kingdom, either nationally or internationally, in spite of its Title. I agree with the hon. Member for Oswestry (Mr. Biffen), that a more accurate title would perhaps be the Energy (General Powers) Bill.

The Bill probably started off in the Department as a simple measure to make permanent the powers in the Fuel and Electricity (Control) Act 1973—a Conservative measure. Then came in, I suspect, the necessary EEC and International Energy Agency adjustments. Later, before it reached the other place, it was found convenient to insert extra matter. That is a trick of Departments when they are bringing forward scrappy Bills of this kind.

For example, Clause 12 provides for the testing of cars to find the petrol consumption, and for the figure to be published. Clause 13 raises the limit of the contributions payable under the Electricity Act 1972—another Conservative measure—to compensate electricity authorities for losses incurred at that time in bringing forward power projects. I shall return to these clauses later, but this patchwork approach does not give us the Energy Bill or the energy policy that the times demand.

Bitter experience has taught us that we cannot successfully look too far ahead in energy matters. The 1967 White Paper on fuel published in the days when Sir Richard Marsh was Minister, is a glaring example of how difficult it is to look far in to the future. Nevertheless, from time to time decisions become pressing, and the Government should not delay too long in making those decisions. If those decisions require further statutory powers, it is proper for the Government to explain to Parliament why they should have them.

Among the pressing energy problems facing the country on which the Government must make decisions are first, the price of natural gas. There is much argument whether is is realistically priced. Secondly, there is the decision about the construction of a commercial fast breeder reactor. Sir John Hill, from Dounreay, almost begged the Select Committee on Science and Technology to bring influence to bear on the Government to make a decision fairly soon. We have had an undertaking—the evidence was taken in public this morning—from important officials of the Department, including Dr. Walter Marshall, that it is likely that a decision will be made in the autumn. Why do we have to wait for the leaves to fall before we can have a decision?

The third area in which it is important that we should have some advance in Government action is in energy conservation, which the hon. Member for Oswestry mentioned. The Select Committee on Science and Technology has a right to complain, as I have complained, that it is 12 months since the Committee produced its report. The Committee, consisting of hon. Members from both sides of the House, put in about 18 months of solid work. The report contains 42 recommendations for energy conservation. A year has passed, yet there is no sign of the White Paper that the Select Committee has a right to expect.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Did not the Select Committee, in recommendation No. 7, recommend an Energy Conservation Bill? There is still no sign of it, although a year has elapsed.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

I said that the Committee had made 42 recommendations, some of which involve Departments other than the Department of Energy. Nevertheless, it would be helpful and consoling if we could now have an explanation for such delay.

To take the matters I have just listed in more detail, it is wrong to allow natural gas, a high-grade premium fuel, to be sold off below cost. In energy matters it is difficult to decide what is the true cost. We cannot relate it entirely to market forces. That does not work. On the other hand, an over-planned price that does not take into account consumer needs does not work either. It is a question of trying to find the middle course, if we can.

The proof that natural gas is being sold off below cost is given by Clause 10; the Gas Corporation cannot supply the total consumer demand. The corporation is to be exempted permanently by the Bill from its normal statutory obligation to supply all consumers on the basis of a fair field and no favour, which is common form in energy nationalisation Bills.

It is not unknown to the House that I have close connections with the electricity supply industry. Electricity boards would also welcome, from time to time, an escape from their statutory obligation to supply the uneconomic consumer. That the Gas Corporation is to get that exemption indicates that the price mechanism is not working properly. It means that the country is consuming high-grade premium fuel too quickly and probably too wastefully.

The gas authorities are unable to meet the demand, whereas the electricity supply industry has an excess of capacity. There is a margin of between 30 per cent. and 40 per cent. between maximum electrical demand and the capacity now available to supply it. All that spare capital investment is costing money. High interest is being paid upon it. Also the electricity supply industry is the biggest consumer of coal in the United Kingdom. Therefore by under-using electrical resources, and consuming natural gas instead, as a substitute, we are hitting the coal mining industry. I know that it is difficult to work out a proper pricing relationship, but I suggest that this is an area in which the Government must soon make some decisions or at least give some explanations.

The fast breeder reactor is the key to the whole future of our nuclear technology, as it is in most advanced industrial countries, because uranium supplies are finite and the import price of the metal will steadily rise. It is important that we should have fast breeder capacity in order to maintain the whole momentum of nuclear expansion. The Atomic Energy Authority is now prepared and ready to go ahead with a commercial fast breeder reactor station. A Government decision must be made soon.

I have already expressed my feelings about conservation. I would only tell the House that page 15 of the report points out: Furthermore, it is quite clear that the capital sums involved in a sustained energy conservation programme would have to be very large indeed to equal the high costs of developing an equivalent additional supply capacity from North Sea oil and gas, the Selby coalfield, or nuclear power stations. The point was illustrated graphically by Sir Ieuan Maddock (Q. 90): a modest energy conservation programme would have saved more energy than that supplied by all Britain's nuclear power stations after 25 years of research, development and construction effort. That last sentence was from a principal Government witness. It is urgent that the Government tell us more about their intentions in respect of conservation.

So much for what I think should be in the Energy Bill but which, unfortunately, is not there. I support the general intentions of the Bill, even though it was described not unkindly in the other place as "a collation of snacks". I must confess myself that, as drafted, the Bill is awkward and confusing. The general intention is to give permanently, in emergencies, powers to the Government of the day to control and direct energy supplies and, after that, to meet our EEC and other international obligations. I do not quarrel with that, and neither should Conservative Members—certainly not in view of their own Fuel and Electricity (Control) Act 1973. But their earlier 1972 Act was a typical piece of Conservative economic distortion, which was not asked for by the electricity supply industry. Among other things, it enabled the then Conservative Government to compensate the electricity boards if they advanced projects beyond their due date to assist employment. It contributed to the surplus of generating capacity, which is now so embarrassing to the CEGB. The chief project covered was the Ince station, which was an oil-fired station.

However, I am puzzled now as to why the sum of £25 million in 1972 should have become £45 million four years later. Has none of the original sum been claimed or paid out? If there is still something left in account no doubt that would have to be increased, but I should have thought that the lot would have been paid out already. Or was that £25 million, in effect, a standby credit, awaiting the day of reckoning and now to be revalued? If so, I think that is careless accounting.

Clause 12, which is typical of the rather ragged approach of the Bill generally, merits consideration. It empowers the Minister to make Orders requiring the fuel consumption of cars to be ascertained and published. Is this to apply only to new cars? If so, I do not think it is any real triumph for conservation, because new cars are usually good in respect of fuel consumption. It is the old cars that waste petrol. The Select Committee on Science and Technology pointed this out in its report. On page 42 it tackled the motor car efficiency question in a much more realistic fashion when it recommended: Older, less well-maintained cars are often the least economic users of fuel. Checks on fuel efficiency, in relation to the age of the car, should be additional in the statutory sense to the motor vehicle safety tests of the Department of the Environment. I would have thought that that was a practical, effective and realistic way of tackling this problem. For the Department to pretend that it is helping fuel conservation on the road by giving publicity to the fuel consumption of a brand-new car, with its carburettor perfectly adjusted, shows how far from reality the Department sometimes is. It is surprising that the Select Committee's recommendation has not been met because the Bill now before us was given a Second Reading in the Lords in March of this year and the report of the Select Committee was available about seven months before that.

With these reservations, I support the Bill, but I look forward, I hope in the near future, to a more genuine and comprehensive measure to make better sense of the present United Kingdom energy situation.

5.10 p.m.

Photo of Mr Jo Grimond Mr Jo Grimond , Orkney and Shetland

As the last two speakers have said, the Bill does not pretend to set out a comprehensive energy policy. I do not entirely disapprove of that, because I think that rigid policies often lead us into trouble, but it should be read in connection with the other steps that are being taken—for instance, the research into other forms of energy, particularly solar energy.

I was glad to see from Questions yesterday that the Government are spending considerable sums in that direction. I hope also that they are keeping in very close touch with research elsewhere, particularly in America, where it is on a vastly greater scale. There should be no need to duplicate it. This has great impact upon any policy of conservation, and it is with conservation that the Bill is partly concerned.

The hon. Member for Oswestry (Mr. Biffen) rightly pointed out that there has to be some tandem work in the Bill as between general conservation and what may be necessary in an emergency, but there is, I feel, some conflict about conservation in general. I should like to repay the compliment that the hon. Gentleman paid me in quoting that quite brilliant exposition of Adam Smith, thereby emphasising the excellent relations that exist between the parties in this House—or some of them—in spite of certain local difficulties and motions on the Order Paper. I therefore draw attention to a Question that the hon. Gentleman asked yesterday about the relationship of the allocation of new blocks, the stricter time limit covering the relinquishment of blocks, and attempts to help various industries concerned with oil.

This is a constant difficulty that we are always up against. While we would wish to conserve, we wish on the other hand, to raise standards of living, and so on, and to create employment. Therefore there is often a conflict. The Government wil lhave to make some very difficult decisions if they are to take them on their own shoulders.

The Bill is also concerned with our international obligations, and surely no one can object to the Government taking powers to discharge them. But I suggest that one of the most useful things the Government can do is to show an example in the economic use of fuel. I do not think that anyone who goes about the country can really think that public authorities do this, for in both heating and the use of transport they are notoriously extravagant.

When I see the Secretary of State for Energy arriving at the House of Commons on a moped, with the Minister of State up behind, I shall know that the Government are really taking the oil situation seriously. Although that may be hoping for rather too much, I put it to the Government that we are constantly receiving complaints from the public that there are appeals to it to conserve fuel but that those appeals do not seem to get through to many of the public authorities. We should be quite clear for whose benefit we are conserving energy and passing many of these Regulations.

In this regard I refer to Clause 8 and to the position in regard to gas. Anyone who reads the House of Lords debate will know that this is a complicated subject, because of the various types of gas involved. But it is a subject in which my constituency is very interested, and our problems must be similar to those in different parts of Britain.

I am not wholly convinced that in the new situation we have the right division between the various huge organisations that deal with fuel. I am not convinced that we were right to deprive the National Coal Board of its holdings in the North Sea. I think that there is some possibility that the British Gas Corporation's monopoly of gas, and the monopoly of the North of Scotland Hydro-Electric Board, for instance, in supplying electricity, do not make sense in all parts of Scotland.

In my part of the world gas—other than bottled gas—is irrelevant to the consumer as a method of lighting or heating. No one will pipe gas over the large rural areas of the Islands, but we shall have large amounts of gas of various types brought ashore at Flotta, in Orkney, and at Sullom, in Shetland. We are very anxious, first, that this gas shall be economically used and not simply flared off, and, second, that we shall gain some advantage from it.

At various times I have raised this matter with the Government, the last time being in the Scottish Grand Committee. I had a very helpful letter from the Minister of State, Scottish Office, who assured me that the Government are seized of this problem and intend to find, within a reasonable period, a solution which will make the optimum use of this national asset with the most economic expenditure of capital. I wholly agree with that, but I am alarmed that the Minister of State also says that there is a long way to go in the discussions which are at present taking place before a conclusion is reached on how the gas might most economically be used. After all, it is now many years since we have known that this gas would come ashore, and it is rather alarming to me that there is still a long way to go before there is any firm conclusion about how it is to be used.

It is difficult to trace the history of the matter, but this is of general relevance to the Bill. Occidental offered the gas to Flotta for the generation of electricity and other purposes, and offered to lay a pipe. This has fallen through because the gas board claimed that it had a monopoly in the supply of gas, and that therefore it was not for any oil company to offer it to the NSHEB.

That, in itself, seems to me to be a doctrine that we should oppose. The position has improved since that time, and the electricity and gas boards are in consultation about it, but it would seem very necessary indeed that this gas, when brought ashore, should be used partly for the generation of power.

The Minister of State, Scottish Office, also says in his letter that the problem would be much simpler if there were a guaranteed supply of gas for say, 25–30 years, but the only certain availability at this stage is a limited supply for about three years. As I have said, this is a complicated technical matter. I have understood that inevitably, if crude were brought ashore, it would bring with it a certain amount of usable gas not necessarily of the highest quality for all purposes. I am not certain what the letter means when it says that there will be a limited supply for about three years". No one doubts that the North Sea fields will go on for 25 years or so.

I think that most of the points that I am raising here would probably be best dealt with in Committee, and I would not blame the Minister if, despite his encyclopaedic knowledge of the industry, he held over a few answers for a later stage. But there is a great deal to be investigated about how we should make the best use of this gas.

I fully realise that its most valuable use is as a feedstock, and I know that the chemical industry in this country hopes to recover its fortunes to some extent by making use of this indigenous feed stock. I wholly sympathise with it, and I hope that we shall not flare off great quantities of gas which could be used for other purposes. As this is dealt with in the Bill, I hope that later on the Government will tell us rather more about it.

The question of price is difficult. On the one hand, we know from our experience that Governments are not good at fixing prices. On the other hand, oil prices are already subject to the interference of OPEC countries. One of the great dangers is that those countries may suddenly drop their price, thereby making North Sea oil, if not uneconomical at least very much less profitable than we thought it would be, and having a serious effect on the balance of payments and in other ways.

We must emphasise the extreme difficulty of getting this fuel. There is plenty of fuel in the world, but it is extremely difficult and expensive to get, and we can spend more in getting it than it proves to be worth.

In my constituency the oil development is behind schedule. In Flotta the oil will not flow until autumn. I was assured by many authorities that it would flow last autumn. The only man who thought otherwise was the local manager, who regarded that idea as nonsense. That was denied by everybody else. At present there is an industrial dispute at Sullom Voe, which may hold up the oil supply. I shall say no more on that point, because there is a further meeting tomorrow, and the matter may be resolved.

The public must realise that winning North Sea oil is not like plucking apples from a tree; it is an extremely expensive and difficult operation. Many problems have to be solved by industry before oil can be sold at a profit, and the situation is always difficult to forecast. Obviously, we should not like to see the price kept up artificially. On the other hand, if the price drops suddenly, many calculations will be thrown out. We have to justify the immense investment that is being poured into the North Sea. Therefore, I hope that when we examine the existing powers in the Bill we shall be able to examine in detail the question of price control either in an emergency period or in general.

Behind all these matters, in financial terms we in Orkney and Shetland are gaining a great deal from the discovery of oil, although to some extent we are suffering in other ways. The ordinary people of this country want to be assured that the benefits that flow to them will be kept in mind. They would like to know that if there is a chance of cheaper heating, motor fuel, and so forth, advantage will be taken of that situation.

A certain danger is involved if we look at these matters too much from a global point of view rather than if we regard oil as a national asset to be used to bring down the cost of living and in other ways to improve our general situation. I await the Committee stage of the Bill, at which time I hope that we shall have a useful discussion. The Bill must be regarded as a miscellaneous provisions measure more than anything else.

5.24 p.m.

Photo of Mr Robert Ellis Mr Robert Ellis , Wrexham

I agree with the hon. Member for Oswestry (Mr. Biffen) and other speakers who have pointed to a confusion in the Bill between questions of crisis measures and the extension of measures which the Government might find it necessary to take as issues involving energy conservation. I agree with my hon. Friend the Member for Bristol, North-East (Mr. Palmer) that the title of the Bill is a little pretentious. It sounds all-embracing but, as the hon. Member for Oswestry said, it is, in effect, a miscellaneous provisions Bill.

On the other hand, I was surprised when the hon. Gentleman's friends in another place complained that the Bill tried to do too much and sought to interfere with the free market and all the rest of it. I was intrigued to hear the reference made to the fact that it was the oil companies who were out to defend freedom. I am not sure that I would agree with that sentiment. The issue is a little more than the British Government can deal with, and the oil companies are powerful institutions well capable of resisting all kinds of attacks, if that is the right word, from the present Government.

I have listened to many debates in this House on topics such as defence and foreign affairs, and in such matters we are almost like the Denbighshire County Council seeking to lay down its policy on Vietnam. I am not prepared to accept the premise that the British Government are seeking to usurp our freedoms and that it is the oil companies which are the last bastions in the protection of our freedoms. However, I agree with what has been said about the confusion in the Bill and its title.

The Bill seems to have been used as a bag into which to dump one or two morsels. In the other place the Bill was referred to as a collation of snacks. It is as though the extension of a previous Act is being used to provide for labels to be stuck on motor cars to show the miles per gallon and all the rest of it.

I appreciate that loopholes sometimes have to be closed and hence the provisions to limit flaring of gas. However, after three years of post-crisis situation there is little that we in this country or, indeed, we in the European Community have contributed towards a policy of energy conservation or, as the phrase goes, a. more rational use of energy. We have already brought in speed limits and provisions to control the lighting on advertisements as well as measures to govern industrial buildings. There have also been numerous exhortations to the public.

Photo of Mr Albert Roberts Mr Albert Roberts , Normanton

My My hon. Friend will appreciate that the National Coal Board is a little embarrassed since it has 32 million tons of coal in stock. Therefore, does he not agree that it is not so much a matter of conservation as of using the indigenous fuels we possess?

Photo of Mr Robert Ellis Mr Robert Ellis , Wrexham

I agree with my hon. Friend, but I am sure he would agree that nobody would advocate the wasteful use of a source of energy to make things better for a particular sector of the energy industry. It seems to me that little has been done to develop an effective energy conservation policy or a more rational use of energy.

It so happens that the European Community has an objective in regard to this problem involving a rational use of energy. The community aims by 1985 to achieve a reduction in the use of energy from what it would have been had no conservation measures been introduced. Indeed, the index in terms of energy consumption related to units of GDP means that in 1973 a figure of 1·12 kg. of oil was used per Community unit of account. The objective is that the figure of consumption in terms of GDP should be reduced by 1982 to 1·05 kg. If that were achieved, which means that the conservation programme would be realised, there would be an estimated saving of 240 million tonnes of oil equivalent. It must be accepted that this is a very large potential saving indeed. To that extent we are disappointed that so little has been done in the Bill to achieve that objective.

Yesterday I asked a supplementary question of the Minister of State, Department of Energy, involving the amount of our nation's ongoing capital expenditure devoted to the development of the British sector of the North Sea. I was given a short two-word brush-off—"Not enough". That may be so, but it is a large fraction. Figures have been quoted as great as 11 per cent. of our total capital investment being invested to develop North Sea oil. Here is strong evidence that the question of conservation of energy is important and should be treated seriously by the Government.

So far, that effort seems to have been confined to exhortation and to limits on lighting and other matters. There is another area that is open to a substantial saving in energy, and I refer to the industrial manufacturing sector of British industry. The hon. Member for Oswestry quoted Sir Arthur Hawkins and spoke of the swingeing down-turn resulting from the rising prices. I find the argument on the prices front extremely difficult. If we study the index which illustrates how energy prices have risen in comparison with consumer prices, taking 1970 as the base year and 100 as the base figure, in the last quarter of 1975 Britain's consumer prices increased from the base figure to 176·6 and the price of fuels and energy increased to 177, a similar increase. I obtained these figures from the statistics of the statistical office of the EEC.

In some other countries—notably France, Germany and Denmark—there is a substantial difference in that the consumer index has risen at a slower pace than the energy index. It can be presumed that those countries have deliberately allowed the price of fuel and energy to increase at a proportionately greater rate than consumer prices. Unfortunately, I do not have statistics to show whether there is a causal effect and, if so, how much of an effect, between prices and energy consumption. I suspect that Sir Arthur Hawkins is probably offering his own personal experience of an industry which is a heavy consumer of fuel.

It so happens that there are great differences between the electricity generation industry and the coal industry, for example, and manufacturing industry. For example, in manufacturing industry fuel costs tend to be comparatively small when expressed as a proportion of total costs. They range from 2 per cent. to, say, 6 per cent. Although manufacturing industry has an institutionalised concern for costs and has cost accountancy procedures, the sharpness of its awareness is blunted by the fact that fuel costs are a comparatively small proportion of its total costs when compared with the costs incurred by heavy industry.

A substantial part of the costs of heavy industry stems from primary fuels. Another factor which makes manufacturing industry such a potentially profitable area to work in from the point of view of saving energy is that in the manufacturing sector returns on investment are usually looked for over a comparatively short period—for example, between two years and three years. In some of the heavier industries, such as the coal and electricity industries, it may be that decades will go by before a return on capital accrues. Anyone who was anxious to sell an energy-saving scheme to an industrialist in the manufacturing sector would have to sell it on the basis that it would produce results in two or three years. That is another reason for that sector of industry being an appropriate sector for study.

One of the great problems is that only a small amount of statistical information is available by which we can make a meaningful assessment. My hon. Friend the Member for Bristol, North-East spoke about the advisability of testing cars after they had been in service for three years, four years or five years. That would be a good thing, but we do not know whether the effort involved in that testing operation would be justified by the returns. I am not saying that it would or it would not. We simply do not know.

I am disappointed that, three years after the crisis occurred, so little seems to have been done by the Government in developing their statistical information service to enable us to make a careful assessment of the work that is necessary and the work that has been done.

I sum up by saying that I support the Bill. It is clearly a measure that will get general support. However, at the same time I cannot help but express a great deal of disappointment in that it contains so little that will lead to the development of a sound energy policy. Undoubtedly we do not find in it the conservation policy that it should have contained. Failing that, there should have been an entirely different and separate Bill dealing specifically with conservation and avoiding the confusion to which reference has been made.

5.35 p.m.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

I think that the hon. Member for Wrexham (Mr. Ellis) made a very good speech. I am certain that his ideas on conservation will be read by the Department.

I have thumbed through the Bill, and my comment to the Government is that if they were prepared to accept it I, too, should be prepared to accept it. I am disappointed to find that they have upset many of the Bill's provisions by giving certain undertakings this afternoon. We are now back to square one. In another place, careful revision work was done on Clauses 3 and 8. All that was secured by compromise and negotiation has now been rejected. We are heading straight back to a period of confrontation.

I asked the Minister to refer to Clause 8(2), which is merely a re-enactment. It is a mandatory consent. If natural gas is to be used as feedstock for the chemical industry, the Minister will give his consent. The respectable antecedent for that situation is Section 9 of the Continental Shelf Act 1964, which worked perfectly well for the industry over the intervening years. I think that there has been only one application. There has been no objection from the industry, and I cannot see any objection from the Government of the day. However, we are to turn back, on the ground that the Government feel that methane could be used to produce methanol, which could be used for gasoline. Of course, a large amount of the methanol could find its way abroad, as a chemical intermediate.

I do not think that the Minister has had an opportunity to study the 1975 report of his own Department on methane-derived alcohols. The report states that There is no firm evidence that under normal driving conditions the use of methanol-alcohol-petrol blends can lead to significant improvements in petrol consumption or thermal efficiency. With the newer designs of car engines with leaner fuel to air ratios the use of methanol might be a disadvantage both from the fuel economy and driveability viewpoints. I hope that the Department will study the summary with some care and that the Minister will take it in. The summary states that the working party considered that there was no proven technical case for introducing a blend of petrol containing methanol and higher homologues as a motor spirit. What is the point of the Minister's suggestion that he will bring back a certain provision because of the fear of the production of methanol from natural gas, which is very valuable as a chemical intermediate and valuable for the production of ammonia for both fertilisers and synthetic fibres? In other words, he is raising a scare in what is known as a conservation Bill, for purposes that are not there.

I now move to Clause 8(4)(b). Provision is to be extended, and extended not merely to include methane but ethane, butane and propane. This is a singular event, because in another place the amendment as it now stands was accepted by Her Majesty's Government. What they are doing is turning down their own suggestion, or their own acceptance in another place. I have never known a Government to show such inconsistency, but here are the Government hoist with their own petard.

The Gas Act 1972 provided that the British Gas Corporation should have control of natural gas. That is how it came to be interpreted over the years. That applied to gas made from coal and later to methane plus. In the old days everybody knew the specification of gas for the British Gas Corporation—it was methane, and only methane. That has now been extended to cover liquid petroleum gases. Although the corporation is not an operator in that sector, we are told that it must have extended powers, and that it must go into competition in an international industry in which it has no concern.

When I look further down page 9 I see, in Clause 8(6), that The Secretary of State's consent under this Section"— those outside the House may be interested to find out precisely what can be done— may in any case be made subject to conditions framed by reference to the description or origin of the gas, or the quantities to be supplied, used or disposed of, or the manner of supply or use, or otherwise howsoever. In other words, the Secretary of State can say anything he likes and the conditions can be subject to negotiation, in which he brings in whatever terms he pleases. [Interruption.] I did not hear that observation. If the hon. Member for Bassetlaw (Mr. Ashton) gets off his seat, we may hear his explanation. I need not bother about that. I go to the architects who will give us guidance on how this matter came about. The Secretary of State is to hold an energy conference, at which he will be the peacock for the occasion. The right hon. Gentleman will listen to many speeches. One paper is to be presented by Frances Morrell and Francis Cripps, his political advisers in the Department.

What do we find? the Government might exercise direct administrative control and override the merit order of use in the interests of national fuel balance…It has been seen that a planned energy policy would involve deciding which fuels should be used, and by whom and how they should be used, just as much as deciding how the supply industries should develop. In other words, a complete, planned economy. The Minister of State said that he was captive. The Secretary of State is a fugitive of his Department and the Department is interventionist. They want not a free market ecnomy but one that is strictly controlled. I should have thought that was not in the interests of the British economy.

I should like to bring out one or two of the conclusions that I have drawn in putting together the permanent controls over use and price that the Secretary of State is seeking. Reading the revised Clause 3 in conjunction with the threatened revision of Clause 8, the Secretary of State will have a level for the introduction of planning agreements into the oil industry and the petrochemical industry. I have confirmation from the Minister's Parliamentary Private Secretary.

Photo of Mr Joe Ashton Mr Joe Ashton , Bassetlaw

I did not say a word.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The hon. Gentleman nodded his head in assent. It is extraordinary how one can—

Photo of Mr Joe Ashton Mr Joe Ashton , Bassetlaw

I was actually falling asleep.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

If the hon. Gentleman falls asleep by nodding his head in assent, it is an extraordinary way of doing so. But I have confirmation that that is what the Department is after. It is surprising that it should be moving in that direction. It is like the North Sea package "You can have additional licences provided you give the Government 51 per cent. of your concessions. The use of gas by the chemical industry will be subject to negotiation." The Government will be able to extract what they want in some extraordinary way, which may not appertain to the matter in question.

This proposal could prevent the diversification of fuels by the electricity industry. Such fuels have been captive by the National Coal Board for too long. It will constitute a stranglehold over the input of the petrochemical industry. It will have a bearing on price. It will have an effect not only on naphtha, which is one of the building blocks of the petrochemical industry, but also on the subsequent price of everything derived from it—ethylene, propylene, butadiene, and so on. It will also have the effect of strengthening and extending the British Gas Corporation's monopoly. It will prevent the export of methanol and ammonia. It will devise methods of circumventing exports of certain petroleum products and chemicals contrary to Article 34 of the Treaty of Rome. It will also manipulate the petroleum and chemical industries in favour of the BNOC, the British Gas Corporation and the National Coal Board.

The Minister now shakes his head. It is good to have this response. That was not assent, of course.

One need only refer to the BNOC's paper for submission to the energy conference. That suggests that the oil sector should be completely State-managed, just like coal, gas, electricity and nuclear energy. This is supposed to be a new corporation.

Mr. Jack Jones of the Transport and General Workers Union—the architect of the great ideas for the unions and management, and on the pay proposals —has indicated that the BNOC should move as quickly as possible into chemicals and plastics, That by itself is disturbing.

I have not overlooked Labour's programme for 1976, which states that Through planning agreements we must be able to issue in the national interest directives on a wide range of industrial matters. Even the Emperor Constantine, if he were alive today, would find that there are more edicts now available than in Roman times.

Is this the way to run an industry? When I first heard about the idea of an Energy Bill, I expected a consolidation measure. These are not consolidating proposals. The Government have not done what the Americans have done in their 1975 enactment. They have not accepted the recommendation of the Select Committee on Science and Technology—of which the hon. Member for Bristol, North-East (Mr. Palmer) was the chairman—that we should have many conservation proposals. Several years have passed since the oil crisis in 1973.

The Government have not done what the Federal Republic of Germany has done. The German Energy Protection Law of 1975 is worthy of consideration by this House. The Germans put it this way: The regulations shall be limited to that means, which are absolutely essential for adjustment to any endangerment to or interruption in the energy supply. Said regulations shall, in particular, be so framed as to interfere to the least possible extent with individual freedom and economic activity, furthermore so structured as to provide for the least possible effect on the overall economy. I need hardly mention that the German economy is particularly prosperous. Their example, which many have recommended, should be followed here. Their ideas on conservation should not be overlooked.

My hon. Friend mentioned the various strands in the Bill. It is not an Energy Bill at all. There is little in it on that matter. It contains emergency provisions, which I support, but it also contains provisions that I do not support—provisions that give the Government permanent powers affecting one industry—petroleum and petroleum products.

If a commodity is in short supply—petroleum, tin, lead, zinc, or anything else—are we to have State control over it for all time? Why is the Minister seeking permanent powers for ever? The only review in Parliament is by the negative procedure—a debate of one and a half hours. It is not by the affirmative procedure. There is no need to have it. I think that is correct.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

In a domestic emergency it must be by the affirmative procedure. If it is an international emergency coming from Europe, it will be by the negative procedure.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

The Minister has not been listening. He is referring to Clause 3 (1)(a) and (b). I am dealing with subsection (3) and the new provisions being brought in for permanent price controls. I hope that the hon. Gentleman will take the Bill away and study it to his heart's content. I hope that he will get it straight. I am talking not about the emergency powers in Clause 3(1)(a) and (b), but about the permanent powers that he is seeking to bring in in subsection (3). The Minister said that those permanent powers are desirable for the purpose of conserving energy and to effect price control. Those matters are not in the interests of the industry. This is the only industry in the United Kingdom that has been selected for permanent price controls. The tin and copper industries and other raw materials are not under the permanent check of any Government department. Why has the Minister sought to do that here unless he is not to follow the suggestions of the Department's political advisers, Morrell and Cripps, to ensure that the industry is "properly" planned? The Minister may laugh, but he knows that I have hit the nail on the head.

Also, the Minister must ask himself, if he wants to follow the suggestion that this is to be a conservation Bill, what will he do about price controls when they come? If one is going for conservation, prices will have to be high to deter consumption. If the prices are too low, too much will be sold on the market and supplies will be exhausted.

I promised that I would not speak for long on this occasion. Many of my colleagues will wish to speak in the debate. However, I conclude by referring to merely one or two final points on prices. The Government's policy on downside drift, which is a basic minimum price which is being negotiated in Europe today—which is being opposed by the French—is wanted by the Government to keep the price of crude oil at $7 a barrel. Therefore, the Government's prime policy is to keep up the price of crude oil. I can understand why. They want to cash in on the North Sea. For patriotic reasons, I am not against that.

However, let not the Government hood-wink the public. How can they possibly determine the price of products such as naphtha—determine either its use or price—which is quoted in dollars, when the pound is steadily depreciating and when companies have to pay more for it on the market? If the Government mean to do something on prices, let them arrest the depreciation of sterling permanently and adopt sounder policies. They are responsible for the inflation in the economy and for the escalation of the prices of many of the products which are utilised by the chemical industry. Furthermore, how can one possibly determine prices in any realistic manner if one ignores the pressure of demand?

The price of naphtha—and naphtha will be one of the products that will be controlled by the Minister himself—has risen from $37 a tonne to close on $150 a tonne at present. Will the Minister say to the chemical industry "That price is too high. I am prepared to assist you by cutting the price back to $100 a tonne and to give you a considerable subsidy", or will he buy it on the international market and pay for the difference?

If the Government intend to bring in these Socialist proposals, let the Minister say precisely how he will do it. What is the point of having price controls under the Price Code at the same time as separate price controls by his own Department?

I appreciate that I must not speak for much longer on this occasion. All of these matters will be raised again in Committee.

In conclusion, I suggest that Clause 3 is most contentious. It has been made so by the action of the Secretary of State.

Clause 8 is now totally contentious, because the Secretary of State has sought to divide industry and to fortify the monopoly position of the British Gas Corporation at the expense of the chemical industry. He is putting a premium on the use of gas as a fuel and is denying the chemical industry the right to a premium use—that is, to upgrade it into a chemical feedstock and finally into chemicals.

Tonight we have to vote on the Bill as it is before us. As I indicated in my introductory remarks, I shall not vote against the Bill. However, if the Bill comes back from Committee in a mangled form I shall not be able to give it my personal support.

5.54 p.m.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

As with all energy debates, I begin by declaring my interests. They are set out in full in the Register of Members' Interests, to which I refer the House.

I start, as other hon. Members have done, by pointing out that in many respects this is a miscellaneous provisions Bill. Perhaps I may be allowed by the House to deal with one of the matters that the Bill does not contain. It has been suggested in the debate that other things could not be put into the Bill. That is not so. There have been miscellaneous provisions Bills in which other things have been included. In the Agriculture (Miscellaneous Provisions) Bill recently before the House, what turned out to be the major item contained in it was introduced in Committee. The element that I should like to see included in this Bill is the consultation document—"United Kingdom Offshore Petroleum Production Licensing, Fifth Round—a Consultation Document".

On 27th May the Secretary of State, in giving a Written Answer to a Question, said that he would be placing a copy of the consultative document in the Library—which he did—and that he was making arrangements for discussion with various sectors of the industry. He said specifically: I am approaching the United Kingdom Offshore Operators Association, the Confederation of British Industry, and the trade unions to suggest consultations on the basis of the document. I hope to complete these consultations during June, and then to prepare Regulations, to be laid in due course before Parliament prior to inviting applications."—[Official Report, 27th May 1976; Vol. 912, c. 303.] There is a significant omission in that paragraph—that is, the House of Commons. There seems to be no provision whatever to discuss the document in the House, and the time scale—that is, completion during June—gives us about 15 days in which to discuss it, should the opportunity arise. I know that the Secretary of State has indicated to the industry that applications in the fifth round might be invited as early as 1st August, and I think that that is the date to which the Government are intending to adhere. That means that any Regulation placed before the House—I assume in the form of a Statutory Instrument, although it is not said how the Regulation would be placed before the House—would not be subject to discussion by the House.

This is a very serious omission, because the document raises a number of considerable and important departures from previous practice. These departures are of a number of kinds. There are departures which will technically be bad for the next round of licensing or, indeed, for the development of the industry. There are departures which are bad for the United Kingdom. I am greatly surprised that they should have been included by the Secretary of State.

This is a consultation document and, therefore, this matter is up for consultation. I have to take advantage of this debate to raise these matters in the House. It is wrong that I should be the only Member who should speak about them. I should like us to have a debate on these matters. If that cannot take place on the Floor of the House, let us include it in the Committee stage of the Bill so that at least on Report and Third Reading the House will have an opportunity to discuss them.

I should like to point out one or two items in the consultation document which seem to require a great deal of thought and discussion. It is proposed that the fifth round should be a much smaller round of 50 or 60 blocks and that they should have a wide geographical spread. I think that the intention of having such a round is fully understood in the House. It is that we should even out activities in the North Sea and in particular the shore-based activities that go along in conjunction with them. We have had enough boom and slump already within the platform-building industry in its short life, and anything that we can do to even out the general development of the onshore industry should be done.

However, in picking a round so small all sorts of questions are raised. First, there are in the North Sea already considerably more than 60 consortia. I do not know how many there are altogether but I suspect that there are about 120. It is certainly twice as many as there are blocks proposed to be issued. These are all consortia that have already developed expertise, and they are spending money in the North Sea. By definition and by simple statistical analysis, 50 per cent. are bound not to get anything. That is assuming that every licence will be a one-block licence. It is very probable that some larger companies—I would not dissent from this—such as the British Gas Corporation, Shell and BP and companies of that kind will get more than one block. If that is so, the number of blocks left over for the 120 consortia becomes even smaller.

I think this will be destructive, in particular to the nascent British oil industry. I make no apologies for speaking up for it as I am very much involved in it. A great deal of work has been put in by British companies and, I would be upset to find that there was a round in which they did not participate.

But there are other technical difficulties with this. We are told there will be a wide spread. This goes against the proper form of developing an area. It is also a two-edged sword. If we give a few blocks in the Western Approaches, it would be very nice if they all gave positive indications. In such an event the Government would have no trouble at all in getting a lot of people for future rounds. However, if the indications were negative we would have a great deal of difficulty in getting companies to come in future. There have to be a sufficient number of blocks to enable a proper and sufficient technical evaluation to be made of an area. That would allow a lot of work to be done and more information to be gathered which would enable a better understanding to be reached on the geological facts which are needed in finding oil and gas.

In addition, a large number of blocks gives a better opportunity for sharing pipelines. In a purely technical sense, going for a small round is damaging and it seems to be totally unnecessary. I would have thought that 100 to 120 blocks in one reasonable province was a much more sensible way of approaching this problem. It would also get away from another difficulty—the new requirement for relinquishment. Under this, one-third of an area must be relinquished after four years and another one-third after three years. With a larger number of blocks, there would be a degree of flexibility in choosing the areas of the blocks which one would give up. In the proposed circumstances, most licences must be single-block licences. The companies which actually got a licence would find themselves with one block, and after seven years they would have to give up two thirds of it.

Then we come to the requirements for minimum shape and size of an area to be given up. There are existing requirements in this respect which, if continued, would mean that it would be impossible for any company, having found an oil accumulation covering 50 per cent. of its block, to retain more than 50 per cent. of that oil accumulation. This is unfair and the Department must give deeper thought to this point.

There are a number of other issues raised which are important and significant.

Photo of Mr John Biffen Mr John Biffen , Oswestry

The hon. Gentleman is doing the House a great service by enabling this debate to cover the consultative document. Is it his impression that the provisions on relinquishment exist to try to accelerate the exploration activity and, therefore, help the offshore industry? If that is his impression, would he agree that it is rather unsatisfactory that the Secretary of State declines to give any indication of the possible consequences in platform and rig ordering for the hard-pressed offshore industries?

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

I think that the consultative document has been prepared with very good intentions in mind. It intends that we should produce extra business and that we should level out what is already going on. Unfortunately, the approach which is taken will not have that effect. I am anxious, therefore, that the House should have an opportunity to debate the Bill. Most of us on this side of the House agree that this is a good intent, but if it is not to be brought about by the consultative document there should be an opportunity to point out the reasons.

The arrangement whereby the BNOC has to pay its share of exploratory and appraisal costs is one which I would question. The only other country I know of which actually does this is Pakistan. I do not know of another country which actually calls upon its national company to pay half its appraisal costs. I am sure it is an aspect which would not be widely approved of on this side of the House if anyone were here to approve or disapprove. Maybe the Secretary of State felt that it was not worth having it in the Bill because the tiny band of us who turn up for these energy debates is not sufficient to give it a proper airing. In any situation in which there may be 20 exploration wells drilling at $8 million a time, the BNOC has to find $80 million. I would rather see that money spent in the development phase.

The Minister says that the BNOC is allowed to enter into agreements, of the kind which it is currently negotiating, for which it would not put up front-end cash. I want to impress on the House that this is a consultative document for the big companies. It certainly is not for the smaller British companies.

Photo of Mr John Biffen Mr John Biffen , Oswestry

Would the hon. Gentleman agree that it is quite extraordinary how the Secretary of State has got away with this one as far as the carried interest element is concerned? The hon. Member for West Stirlingshire (Mr. Canavan), the hon. Member for Bolsover (Mr. Skinner) and the hon. Member for Keighley (Mr. Cryer) have all been berating the Secretary of State for becoming increasingly a lackey for the oil majors. Today they are absent on the one occasion when they could develop a case and we could hear from them exactly why they think that the Government have been reneging on the implications of participation which were contained in the General Election manifesto.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

It is not for me to tell the House what my hon. Friends below the Gangway might or might not have done. It is a pity that there are not more of them here today. Under the terms of the legislation before us, however, there is no reason for them to come here and debate it. It is a pity that we cannot have a debate which would enable them to do so.

Photo of Dr Dickson Mabon Dr Dickson Mabon , Greenock and Port Glasgow

What the hon. Member for Oswestry (Mr. Biffen) says is unfair. My hon. Friends are in Committee elsewhere. I take the point that the consultative document should be discussed in the House of Commons, but this is a matter for the Leader of the House and for business. The document is a consultative document and after consultation it will become the basis of further proposals. There is no statutory need for us to take any further powers in order to carry out what we intend in the consultative document. I might say that this is not exactly the most appropriate place to discuss this matter.

Photo of Mr George Thomas Mr George Thomas , Cardiff West

Order. Do I understand that the hon. Member is addressing the House? Could we have one intervention at a time? The hon. Gentleman may get his chance in a moment.

Photo of Mr John Biffen Mr John Biffen , Oswestry

I would merely like to take this opportunity of thanking the Minister for explaining why his three hon. Friends were absent. In these circumstances I would not wish my remarks to bear the interpretation that I thought that they were neglecting their duty. I hope they will have an opportunity on Report to make their arguments.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

I am grateful for my hon. Friend's intervention. I realise that I am raising a subject which the Front Bench was not expecting to have to debate, and I do not therefore anticipate a lengthy answer on these points. My hon. Friend makes the point that this is a consultative document. I understand that the Department of Energy would not be unhappy to see the matter debated. If I am doing anything here today, it is to try to impress upon the House the importance of such a debate so that possibly on Thursday afternoon we may be able to make a concerted onslaught on my right hon. Friend the Leader of the House to arrange a debate.

I have one final point concerning the consultative document as it affects operating agreements. An operating agreement must be agreed with the BNOC before application is made. Let us suppose that 50 desirable blocks are put up for application and that 50 consortia are interested in them. The quite extraordinary position arises in which the BNOC has to negotiate a separate operating agreement with every one of those consortia for every one of the blocks. I calculate that as 2,500 separate discussions. I do not know whether the technical resources of the BNOC are sufficient to undertake this task, but I am sure that there will be no time between 1st August and the date 90 or 120 days later when the Department makes its decision.

I hope that I have been able to highlight a few of the issues which arise and on which the House might take both a Tribune and a Conservative view. There are many points which need discussing, and I hope that we shall have the opportunity of a debate on them before 1st August when these matters seem likely to become a fait accompli.

I wish to raise a point about the Bill which concerns the position of the United Kingdom with respect not only to the International Energy Agency and OPEC but to the oil majors themselves. There can be little question that in the North Sea the cost of finding and producing oil dominates the economics of conservation. It is all very well saying that we shall have the ability to conserve, but North Sea oil is extremely expensive to exploit. All the investment is in the front end. It is not like a land field where operators can drill a single well, link it to a pipeline and add other wells as time goes by. All the investment is in the front end in platforms, pipelines and wells, and the facilities have to be there before operators can begin to exploit the field. That means that the cost of exploitation is known from day one. It puts the country in a difficult position should world oil prices drop below the base economic price for recovering North Sea oil.

It is difficult for us as a country, except in most exceptional circumstances, to tell companies which have made this vast front-end investment that they may not produce their oil at a rate that will cover their investment. Conservation of this kind will be difficult in the absence of high prices. It is therefore very much in the self-interest of the United Kingdom to keep oil prices up.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Does not the hon. Member consider it incumbent upon the Government to make an early statement, subsequent to their December statement, on depletion policy? If they want companies to come in on the fifth round, they must be able to satisfy the companies that they will be able to exploit the oil they discover.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

That is one of the most important points that the Department will have to consider in future rounds. Thus, if we can produce more oil than we need we must ensure that that oil can be produced, not merely for the companies' sake but also for the sake of our balance of payments. We have been told recently by the Treasury how marvellous the oil revenues will be, and no one doubts that they will be at $11 per barrel, or even $9 per barrel. But at $7 per barrel the situation changes dramatically.

In a peculiar way, therefore, our interests are not those of the International Energy Agency. In most cases they will be distinct from those of the IEA. Our interests are not those of the major oil companies. They have investments all over the world. It makes do difference to them whether they close in here or somewhere else. Our self-interest is, I believe, aligned with countries like Saudi Arabia more than it is with some of the other OPEC countries. The Saudis appear still to be prepared to support the price of oil at current levels. It makes a lot more sense for them to produce 6 million barrels a day at $11 a barrel rather than 10 million barrels a day at $8 a barrel. Therefore, our interest is in stability now, and it would require only another Libyan situation to upset the balance.

It could happen that the Russians, for a variety of reasons, might find it expedient to put 3 million barrels of their Siberian oil on the market sometime in the next three years. That could upset the balance so much that the Saudis would be unable to support the sort of price which operates now, and as soon as that support was withdrawn the price would come down.

In arriving at our energy-pricing policy we have to recognise that if the price of North Sea oil drops we shall be faced not only with falling production but with a severe attack on our balance of payments. The idea that to discover more and more oil is good for us would collapse. We might even be in the position where it would not be of the slightest use because we could not get it out. In this connection we must consider the importance of the EEC markets. If EEC directives can determine the price of our oil, we must make it in the interest of the other members that oil prices should remain high. The sooner we do that by getting them to invest in the North Sea, no matter what the route of that investment, the better. I shall feel much more secure about future development and continued production.

I come lastly to gas production and its sale to non-domestic users. In the United States the petrochemical industry has largely gone over to natural gas as a feedstock in recent years in preference to naphtha. There is a very good case for examining the development of North Sea gas as a chemical feedstock, because as such it would be able to attract a price which would make commercial many of the existing gas discoveries and associated gas discoveries which are not commercial. I do not know how the Department would effect a proper balance between the price that the British Gas Corporation wants to charge the domestic consumer—a low price—and a much higher price, which would be competitive with naphtha prices, for the petrochemical industry. Existing gas fields are not subject to petroleum revenue tax but future discoveries will be. If we change that PRT provision, we might give a distinct fillip to our natural gas and petrochemical industries. I hope that these points will be taken into consideration.

6.20 p.m.

Photo of Mrs Margaret Bain Mrs Margaret Bain , Dunbartonshire East

I hope that the hon. Member for Dudley, West (Dr. Phipps) will forgive me if I do not follow him into the ramifications of the total oil scene. The SNP gives broad general approval to the Bill because we welcome conservation measures. We believe that they are in the interests not only of Scotland and the United Kingdom but of developing nations. The same applies to the price of our natural resources. We should do a disservice to the developing nations if we charged too little for those resources, because they are also the resources of developing nations.

Many of the economic problems of the Western world are due to the fact that for far too long we looked on natural resources as infinite and cheap. We now have to recognise that they are finite and must be paid for. The jobs associated with these resources are not infinite either. No Government can extend the areas in which jobs directly related to these resources will be involved, but I ask the Government to ensure, particularly in Scotland, that these resources are used as widely as possible to prevent the troughs and peaks which we have seen so often in the economy and which bring social as well as economic problems.

Photo of Mrs Margaret Bain Mrs Margaret Bain , Dunbartonshire East

I see the Minister nodding in agreement. I am sure that, coming from the West of Scotland, he appreciates this kind of problem.

We need to know more about the long-term conservation strategy of the International Energy Agency and the EEC. The Bill is being discussed in a void because we have little idea of their long-term plans. What relevance will the IEA have for resources in Scotland? As today's papers show, Scotland is already self-sufficient in oil. We celebrated 14th June as Oil Independence Day. With 200,000 barrels a day coming ashore, Scotland's needs can now be supplied. Will our resources be used to supply those of other countries, and how will that fit in with conservation? Will it be surplus resources that are redirected and curtailed? What effect will the IEA have on natural gas? Where does it fit into the equation?

Several hon. Members have mentioned Clause 3 of the Bill. I am sure that some will be surprised to hear me defend the institution of Westminster, but, whatever my views of the shortcomings of this place, it is essential that elected representatives of the people should have full rights of scrutiny over any legislation. In Clause 3(1)(b) the exceptional circumstances are not defined closely enough. It does not appear that the elected representatives will have the right to question in any detail. I hope that we shall receive further definition of the exceptional circumstances and how far any powers used would be extended.

Under Clause 11, since Torness was recently given up as superfluous, will Scottish electricity and gas boards be restricted in their use of gas for power stations?

I welcome the clause relating to cars and fuel consumption as a step in the right direction. Because the new Hunter is doing so well, because of its fuel consumption, all the men are now employed at Chrysler, Linwood, and they are expecting to take on 2,000 more. That is great news for the west of Scotland.

I hope that the standards suggested for new cars will also be applied to used cars. We have to fight many cases for our constituents relating to used cars. In one that I am fighting at the moment, a used car was bought on the basis of misleading information about fuel consumption. If the same standard were applied to used cars, many problems would be avoided.

The wealth of Scotland is in stark contrast to the situation of the whole of the United Kingdom. I am thinking particularly of the cuts in education expenditure, which mean that many local authorities cannot provide their communities with the services they would like to give. When drafting Bills like this, the Government should remember that Scotland will have an Assembly and eventually independence. They should consider such legislation carefully and think of the ease of transfer of such powers to an eventual Scottish Parliament.

6.27 p.m.

Photo of Mr Peter Rost Mr Peter Rost , Derbyshire South East

It is more than two and a half years since the Western world was faced with the energy emergency and the huge increase in oil prices which has led to many of the problems that we are still trying to combat. Although the Government took some measures to conserve energy in December 1974–18 months ago—we still have no conservation policy which merits that description. I was a member of the Select Committee chaired by the hon. Member for Bristol, North-East (Mr. Palmer) which produced a detailed report containing 46 recommendations for short-, medium- and long-term measures that this country could apply to make more rational use of its energy. That report appeared last September but has still received no response from the Government.

Therefore, it is two and a half years since the first emergency, more than 18 months since the introduction of what the then Government called a "preliminary package"—mostly an advertising and promotion campaign—and a year since the Select Committee reported. We were told in the Queen's Speech at the beginning of this Parliament that the Government would introduce an energy conservation Bill. It is against that background that I must express my disappointment with this Bill.

Far from being an energy conservation measure and a genuine attempt to deal with the problem and to produce more rational use of our energy, it is a hotch-potch of wide-ranging general terms. I regard it as a missed opportunity. Certainly it has very little to do with more rational use policies.

Bearing in mind that the provision of energy is now our most important single industry—it absorbs 15 per cent. of our gross domestic product, which is about £15 billion a year or about the amount that it takes to feed the nation—one would have imagined that over the past two and a half years the House could have found time at least for a debate on the need to make better use of the energy that we have and to provide it more efficiently. Despite suggestions and protestations, however, there has not been a single debate specifically on energy conservation since the emergency first arose.

We have had several debates on EEC energy policy which have been used as a peg by one or two enthusiasts like me on which to make contributions. And thanks to you, Mr. Speaker, I was even allowed an Adjournment debate in which I was able to make some suggestions about what the country should be doing. But we have not had a debate on the specific matter of providing more rational use policies, despite the emergency, despite the report of the Select Committee and despite the vast resources which are absorbed by the nation in the provision of our energy.

When considering what a large proportion of our energy resources are wasted, I have to refer to the latest report from the Department, which is its first serious contribution towards the production of an energy strategy for the country. I refer to the discussion document on energy research and development in the United Kingdom, published this week by ACORD, of which Dr. Walter Marshall is chairman. That report confirms what many of us have been saying and what many other reports have suggested over recent months: that is, that there is very substantial scope for energy conservation in the country, that only 40 per cent. of the United Kingdom's primary energy input performs a useful function and that the other 60 per cent. is rejected. There is no suggestion that we can conserve that other 60 per cent. But the report indicates that we could conserve a considerable proportion of that 60 per cent. and that probably we could increase the useful energy input from 40 per cent. to 60 per cent. if we had a constructive rational use policy.

I say this by way of expressing my disappointment that this Energy Bill, which purports to be concerned with conservation, really is nothing of the kind. There are only two clauses which can be described as directly relevant to improving the use and efficiency of our energy. One is the power to control the burn of gas in electricity generation. That is a genuine measure which will reduce the wastage of energy. The second is an extraordinary attempt to advertise the fuel efficiency of motor cars. I shall refer to that again presently. Apart from those two provisions, the other clauses provide only very wide-ranging powers and controls. They do not introduce constructive provisions for more rational use policies.

In developing the argument that the Government are only paying lip service to the need for more rational use policies, I want to refer to another document which was produced by the Government themselves. It came from the Advisory Council on Energy Conservation, of which Sir William Hawthorne is chairman and of which well-known celebrities like Derek Ezra are members. It is a body appointed by the Government to make constructive proposals for the better use of our energy. Last July, it came out with a report to the Secretary of State for Energy. It was a short report and very much to the point, and one significant passage in that report to which, so far as I am aware, the Government have made no response—certainly there is none in this legislation—refers to the disincentives which still exist for energy conservation. It says: At present there are some clear fiscal disincentives to private consumers…there is a need for the Government to review these disincentives in a more positive way. There is a wide range of disincentives, and I find it disappointing that in this legislation, despite all the prompting which has taken place over past months from all sorts of bodies and experts, the Government have still not seen fit to attempt to remove some of the fiscal disincentives which exist in our present system of taxation.

We also have another very influential report published several months ago. I refer to the report of the Plowden Committee on the Structure of the Electricity Supply Industry. This again was a report commissioned by the Government. It was presented to the Department of Energy in January. It contains some very significant recommendations about the way in which the electricity industry, if reorganised, could make a more constructive contribution to energy conservation. Here again, I must express my disappointment that we have had no indication yet of even a response to the report. Certainly there is no indication that any of the clauses in this Bill attempts to deal with some of the important recommendations in the report.

I make one brief quotation from paragraph 4.22 of that report: A good deal of evidence has been presented to us suggesting that the electricity industry could do more to secure the economic use of fuel…The industry's structure must not impede the economic use of resources. This is not the moment for me to elaborate on the way in which the electricity industry fails to make use of its fuel to the best advantage and the way in which it could be made to improve that position. We know that Dr. Walter Marshall is at the moment producing a report on the combined heat-and-power possibilities for the country, and I have no doubt that when that is published will be the time to debate these matters further.

The fact remains that the Government have ducked the specific recommendations of the Plowden Committee. They have ducked the report of the Select Committee on Science and Technology on energy conservation. They have ignored the advice of their own Advisory Council on Energy Conservation, as they have ignored innumerable other bodies. Instead, we have here a hotch-potch of measures under the guise of a conservation Bill which goes very little further towards producing a more rational use of our energy.

If I have not yet made my point, perhaps I might refer to the EEC and remind the House of what is going on there in comparison with what is not happening here. Admittedly there are two clauses in this legislation—Clauses 6 and 7—which are designed to meet our obligations under the EEC to increase stocks at power stations and so on. But I ask the House to consider whether that is really conservation. It does not reduce consumption and it does not remove the inefficiency. It is simple co-operation in case there is another emergency or shortage of supply.

Apart, however, from the directives that we should prepare ourselves for an emergency, the EEC has come forward with a great many other strong recommendations about how we can use our energy more rationally and how we can save energy. The Government have not responded to those in any way. Most of our European partners have either carried out the other recommendations or are doing so. I hope that the Minister will explain why he has not included other clauses, in addition to Clauses 6 and 7, which would make a more genuine contribution towards energy conservation as recommended by the EEC.

I give three examples of what is happening in the EEC. First, according to the report of the Commission of 16th January 1976 on the action programme for the rational use of energy, every EEC country has proposed or is proposing through its Parliament to provide tax reliefs, grants or subsidies as an incentive to improve heating systems and thermal insulation—every country, that is, except the United Kingdom.

Secondly, nearly every EEC country has provided or is providing incentives to promote combined heat and power production on a bigger scale than already exists for district heating and industry. The necessary incentives for co-operation between industry and the energy utilities are also being provided to encourage the utilisation of reject heat. In Germany, Denmark, Italy and Belgium the proportion of combined heat and power is already much higher than in this country. The condemnation is even stronger than I have suggested, because we are so much lower down the league already compared with our European counterparts. There is nothing in the Bill which removes the disincentives to promoting more combined heat and power, yet this is happening in Europe.

I give a third example of where the Bill fails to implement recommendations which other EEC countries have adopted or are adopting. It relates to the siting of nuclear power stations. The four main countries which are embarking on a nuclear power programme—France, Germany, Belgium and Italy—have all agreed to reserve sites for new nuclear power stations only where they can be associated with industrial complexes, where the processed heat can be used. We are the only country that has not committed itself to do that. According to answers to my Questions to the Department, it has not accepted responsibility for issuing a directive about siting nuclear stations where we can achieve a thermal efficiency above the average 30 per cent. or 35 per cent. That will be possible only if the reject heat is used for industry.

I am disappointed that among the vast powers which the Government are taking unto themselves the Bill, under the pretext of energy conservation, does not include a clause specifically to provide for the siting of nuclear power stations where reject heat can be used.

Photo of Mr Robert Ellis Mr Robert Ellis , Wrexham

The hon. Gentleman is perhaps unwittingly misleading the House. In the report to which he referred the Community said that three years after the crisis one-third of the proposals had yet to be adopted, and 40 per cent. of those which had been adopted concerned simply public relations and the dissemination of information. Paragraph 9(b) says: This means that very few steps have been taken to alter consumption structures and it might be feared that the underlying growth trend in energy consumption could strongly reassert itself once economic activity picks up.

Photo of Mr Peter Rost Mr Peter Rost , Derbyshire South East

I am grateful for that intervention. I have studied that report in detail. It is only a digest of more detailed reports, which I have also studied. I was quoting specific examples of areas in the EEC where measures have been taken or are being taken for more rational use, measures which have not been adopted in this country. I gave the example of the nuclear power stations and thermal insulation and heating systems, where our European partners have provided or are in the process of providing the incentives to which I referred and we are not. I am not denying that there are other areas in which we have done as much or perhaps even more. The "Save It" campaign was probably more effective in this country than in other European countries. But that is not the point I was making.

Clause 12 is one of the two clauses which I described as being apparently specifically aimed at energy conservation. It requires dealers in motor cars to advertise the fuel consumption of cars as independently tested—presumably by the Department. That is fair enough. If it is shown that it will be a worthwhile contribution to energy conservation, I shall not quibble about that. But it seems strange if, in a hotch-potch of legislation, we are not to have one clause specifically aimed at some degree of energy conservation.

It is strange that we do not have other clauses which would, for example, make it obligatory for the showrooms of the CEGB to advertise the fuel efficiency of electric cookers and refrigerators compared with gas cookers and refrigerators. If motor dealers must advertise their competitors' products, perhaps to their own disadvantage, why is not the CEGB being made to advertise the cost of running a cooker on electricity compared with the much more economical running on gas? It seems unfair that conservation proposal is not also included.

Why are not builders of houses, such as local authorities. being asked to study the thermal efficiency and cost of heating their homes compared with a well-thermally-insulated and efficiently-heated home? The Select Committee which studied the matter of energy conservation proposed that the consumer should be better able to judge the cost of heating in one home compared with another. This applies to local authority buildings as much as to privately-built houses. It would make a far more valuable contribution to energy conservation than trying to deal with the motor industry.

Photo of Mr Arthur Lewis Mr Arthur Lewis , Newham North West

I agree with the hon. Gentleman's point of view and I can understand his concern. The Government may well have been thinking that if it was well advertised that the cheaper, mass-produced car did 40 or 50 miles to the gallon the patriotic company-director doing about 10 miles to the gallon in in Rolls-Royces were driving one of the patriotic for me to switch to the XYZ car, which does 45 miles to the gallon." We would then find that patriotic company directors who hitherto drove around in Rolls-Royces were driving one of the mass-produced cars. They would save energy and no doubt save the taxpayers' money, because those company directors write off expenses for tax purposes.

Photo of Mr Peter Rost Mr Peter Rost , Derbyshire South East

I was attempting to draw my theme to a conclusion. I was emphasing that, if we have a Bill which purports to be a contribution to energy conservation, we should at least make it a decent one and have a range of proposals in it which are specific and go some way to meet advice and criticism from many sources.

I have further proposals for the type of clauses that would be suitable. Why not have a new proposal to replace the Government's failed loan scheme to industry? That scheme was small and was not taken up by industry because it was too restrictive. Why not have a proposal to change the statutory monopoly powers of the electricity supply industry, which discourages combined heat and power schemes in partnership with local authorities? Where is the clause to help pensioners and others who are housebound, in the lower income groups and trapped in an all-electrically-heated council house? Those people have to be bailed out by the taxpayers through supplementary benefits to pay their fuel bills and yet they cannot get grants for insulation. Such grants would be cost effective to the nation and would prevent people from having to pay bills for heat which they would not need to consume if they could afford insulation.

A scheme of that kind would make better sense than a continuation of the genuine suffering experienced by a large proportion of people who have no alternative but to have their electricity in short supply or even cut off because they cannot afford the bills. They would not have to pay those bills if their homes were more efficiently heated and properly insulated. Grants are awarded for pantries, kitchens and bathrooms. Why are they not available for thermal insulation? That would save on our balance of payments and it would avoid distress.

I have given a few examples of the type of measures which should be in the legislation. I hope that the Government will not think it is too late to come forward with amendments which could make the Bill a genuine energy conservation measure rather than the disappointing missed opportunity and excuse for wide-ranging control that it is. It should be a Bill which attempts to meet the urgent needs of the nation.

6.55 p.m.

Photo of Mr Nigel Forman Mr Nigel Forman , Sutton Carshalton

I am grateful for the opportunity to speak in the debate, which is disappointingly attended. I hope that in the future the House will encourage me, as a new Member, by taking a greater interest in the important subject of energy.

I do not want to follow my hon. Friend the Member for Derbyshire, South-East (Mr. Rost) too closely. Many of the points to which I wish to draw attention were admirably put by my hon. Friend the Member for Oswestry (Mr. Biffen), who rightly said that the Bill might well be called the Energy (Miscellaneous Provisions) Bill. It is little more than a shish-kebab of morsels served up by the chefs at Millbank Tower. It lacks coherence and a guiding theme. Winston Churchill was once reported to have said, when presented with a particularly unappetising pudding at a leading London restaurant, "Take it away, it has no theme". But if we took that line the Opposition might be open to misrepresentation. As the Bill stands, as my hon. Friend the Member for Oswestry said, it is broadly acceptable to those of us who take an interest in these matters, provided that it reaches the statute book in a proper form.

In the interests of clear discussion, I hope that the House on this occasion, and subsequently in Committee, will consider the Bill carefully by separating its component parts and examining them closely. That is something that the Department of Energy and its parliamentary draftsmen manifestly failed to do when the Bill was originally presented in the House of Lords.

In an endeavour to practise what I preach, I shall separate three or four aspects of the Bill and say a few words about each of them. First, there are those aspects intended to enable the United Kingdom to meet its obligations as a member of the EEC and a participant in the international energy programme. As the Government argued in another place, it is obviously right that, to prepare for an oil emergency caused by international factors, the Government must have permanently available powers which will enable the United Kingdom to meet its obligations as a participant in the international energy programme's oil-sharing scheme. That means that the crisis management powers in the Fuel and Electricity (Control) Act 1973 must be permanently available without parliamentary approval being renewed each year. I understand and accept that.

The Opposition need to be reassured, however, that under Clause 3 the powers required solely to fulfil the United Kingdom's obligation to the International Energy Agency and the EEC in an emergency created by an international oil crisis will not be used unacceptably for dubious domestic purposes. We also want an assurance that the Draconian powers in the Bill will be speedily, immediately and even automatically deactivated when, by a decision of the International Energy Agency or the EEC, an international energy emergency is declared to be over.

Secondly, there are aspects of the Bill which are intended to enable the Government to deal adequately with a domestic energy crisis. We must all have learned the often grim lessons of the winters of 1971–72 and 1973–74. There is a need for any Government, of whatever party, to have available appropriate powers and contingency measures for controlling the production, acquisition, use and supply of energy and for regulating oil prices during a domestic emergency, should that be necessary.

I do not wish to quarrel with that aspect of Clause 3 as long as the Bill defines closely the domestic circumstances which will give rise to the activation of such powers and the circumstances in which temporary powers will be terminated when the emergency has passed, although I confess that greater flexibility may be needed at the latter rather than the former stage. The Opposition want to avoid any unnecessary or unacceptable extension of "war-time" emergency powers into the ordinary "peace-time" circumstances of energy use and supply.

Thirdly, there are aspects of the Bill which are intended to enable the Government to exercise permanent controls on the use of energy in the interest of energy conservation. My hon. Friend the Member for Derbyshire, South-East dwelt expertly upon this at considerable length. Many of the Bill's provisions are justified in the holy name of energy conservation. The Opposition must guard against any possibility that in the name of conservation the Government will try to extend political control effectively over the oil and chemical industries.

In this context is was appropriate for my hon. Friend the Member for Oswestry to quote the words of the Secretary of State when speaking from the Opposition Front Bench in the debate on the Fuel and Electricity (Control) Bill on 26th November 1973. Those words serve as a warning to the Opposition of the possible long-range purposes of the Secretary of State when he uses, or perhaps I should say abuses, legislation of this kind.

The Opposition presumably can have no reasonable objection to statutory conservation measures of the kind implemented in the 1973 Act. After all, they did not go very far and were confined to limits on space-heating levels in buildings, restrictions in the use of electricity for advertising and Regulations lowering the maximum speed limits on certain roads. All those measures are common ground between Government and Opposition. It is all desirable stuff, along with the ideas put forward by my hon. Friend the Member for Derbyshire, South-East, for better insulation standards in public buildings and more efficient conversion rates in power stations and in the general process of heat and power generation.

However, if the Government, now or later, attempt to restore their powers for the permanent control of the price at which petroleum products must be supplied—here I am thinking of Clause 3(2)(b)—the Opposition would find such an initiative both illogical and unacceptable. It is illogical because the need to conserve energy is best met by allowing market forces to push up the price, thus reducing demand, as electricity demand has been reduced during the last two year or so. It is unacceptable because, with the exception of the possible need to control the price of paraffin to help old-age pensioners and others, price controls tend to distort the market and often damage industrial profitability. There is no case for singling out the 3,000 or so petroleum products which are affected by the Bill, and as the definition includes naphtha great harm could be done to the chemical industry, which is one of our major export earners.

There are other aspects of the Bill about which my noble Friends in another place expressed serious reservations and sought successfully to have the Bill amended. The so-called "gas clauses" particularly Clause 8, were touched on by my hon. Friend the Member for Bedford (Mr. Skeet). I am glad to see that certain improvements were made in another place. I should like to put them on record because they are useful changes which I should not like to be overriden at any stage of the Bill in its passage through the House.

Consent is no longer required for the incidental use of gas for fuel processes essential to ensure the supply of that gas to an affiliated company. It is no longer necessary to make a first offer to the British Gas Corporation of the gas supplied for use in terminal and similar installations handling North Sea oil and gas. It is no longer necessary to offer the British Gas Corporation the supply for fuel purposes of gas which is surplus to the corporation's requirements. All gas from stabilised crude—that is to say, gas which comes from crude during the normal refining process—is to be subject to the Gas Act 1972, and Clause 10 of the Bill as originally drafted has been removed.

The point here is that industrial users of gas, especially those in the petrochemical sector, need to safeguard their investment and to have confidence to plan ahead for the future. Confidence and investment may be threatened if consents which were previously granted are revoked or if new consents are made subject to more rigorous conditions.

Another area of concern to the industries concerned is the extensive new information powers sought by the Government in the Bill. The Opposition were glad when the Government accepted in another place that information which concerns two parties to an agreement should not be disclosed without the consent of both parties to such disclosure. We also feel reassured that information powers required under our new international obligations should be confined to such purposes, and that there should be a limitation on the number of people required to furnish this information in the first instance.

In general the Bill, as amended and improved in another place, is broadly acceptable to the Opposition and should not been seen as a particularly contentious measure. We recognise the need to legislate to enable the United Kingdom to satisfy its international obligations to the European Community and the international energy programme.

We recognise the need for the Government to have adequate powers to deal with any serious domestic emergency. We recognise and endorse the need for even greater energy conservation on a continuing basis. If it is to be effective, it must be on a continuing, permanent basis. At the same time, we question whether it might not have been wiser if the Government had instead introduced a Bill confined simply to meeting the needs of energy conservation.

Underlying everything else, we remain deeply, and I think justifiably, suspicious of the Bill, which has ben introduced, I would suggest, by a doctrinaire Labour Minister with avowed doctrinaire intentions. Anyone who seeks to challenge me has only to refer to the quotation already mentioned by my hon. Friend the Member for Oswestry. At the same time, it is a Bill justified in the holy name of energy conservation which nobdy in his right mind, looking at the problem reasonably, would seek to oppose.

We therefore find ourselves in a somewhat difficult position, with a great need to keep a wary eye on the implementation, if not the precise wording, of the Bill as it goes through its subsequent stages. It is fair to ask of the Government, both this evening and in the Bill's subsequent passage, to state their motives and intentions, and the limits to those intentions, in carrying through this legislation.

7.12 p.m.

Photo of Mr Neil Macfarlane Mr Neil Macfarlane , Sutton and Cheam

May I at the outset of my brief remarks point out that I was employed by the oil industry for a number of years before I entered the House of Commons. I worked for Shell-Mex and BP in the BP United Kingdom market. Although I have no direct pay links with them now they are the custodians of my pension, so it is hardly surprising that I keep more than a passing interest in what the oil industry is doing. It is in that context that I want to speak this evening. I must apologise for not having been present throughout the entire debate due to pressures outside the Chamber of which hon. Members are obviously well aware.

The Minister of State, whose presence at the Department of Energy many of us find reassuring, swept through his speech today at breakneck speed, ignoring vast tracts of the copious notes prepared by a diligent body of gentlemen behind Mr. Speaker's Chair. It seemed that the Minister was ignoring his speech because he believed he had a deadline to meet at 7 o'clock. The reason certainly could not have been the serried ranks of Back Benchers sitting behind him anxious to participate in the debate, as few have been present throughout.

I wish to spend a little time on the special powers which exist in the Bill. One aspect which concerns us is in respect of price controls because, in view of the Minister's remarks, it seems that the remarks made in another place are likely to be overruled when we go into Committee. I hope that the Under-Secretary will refer to this during his winding-up speech.

It seems certain that the Government will attempt to return to permanent price controls on the supply of petroleum products. That would be wholly unacceptable to many of us on this side of the House. The Government already have extensive price control powers under the Price Code, and the price of paraffin has been pegged as a relief to old-age pensioners under the Fuel and Electricity Control Act 1973.

I believe that there is no good reason for singling out petroleum products for special treatment in this way. The definition of "petroleum products" for the purposes of the Bill covers a range of more than 3,000 products. Even if the Government were to implement controls for a limited number of those products, the effect would be to distort the market and it is likely that the oil companies would have to raise other prices to maintain their margins. This definition would inevitably include naphtha, which is the vital feedstock for the chemical industry. There can be no connection between the powers to hold down prices and the need to conserve energy. On the contrary that would involve higher prices, and surely the purpose of consumer protection is to maintain prices as low as possible.

The one aspect which concerns me deeply is the question of the Secretary of State's special powers. At first sight, it looks as though their lordships had passed a relatively harmless Bill, but the aspect which causes great apprehension is the frequent reference throughout it to the powers which the Secretary of State may have. We are not in the emergency situation that we were in three years ago. I was working full-time in the oil industry in 1973 and I well recollect the enormous problems we had during that period of dire emergency—problems of production, transportation and supply. I well recall the remarks made in this Chamber on 26th November that year to which my hon. Friend the Member for Oswestry (Mr. Biffen) referred.

I draw the attention of the House again to what the Secretary of State for Energy said in one particular sentence. He stated: It will give us the power to control all the oil companies, all the multi-nationals, to fix their prices and their distribution systems; and under these powers every other fuel and its use, including the chemical industry, will be brought within the control of the Government of the day. This will include road transport and private transport."—[Official Report, 26th November 1973 Vol. 865, c. 141.] That phrase It will give us the power to control all the oil companies struck chill into all of us in that industry. We find that is now pretty well enshrined in the Bill and is the next best thing to nationalisation.

Page 1 of the Bill states: The Secretary of State may by order provide for regulating or prohibiting the production, supply, acquisition or use of—(a) any of the following substances, namely—

  1. (i) crude liquid petroleum, natural gas and petroleum products;
  2. (ii) any substance, whether solid, liquid or gaseous, not falling within sub-paragraph (i) above…"etc.
It adds: electricity. It says in Clause 2 that The Secretary of State may by order provide for regulating the price at which crude liquid petroleum, natural gas or petroleum products may be supplied. On page 2, in respect of: Reserve power to control by government directions", it states that …the Secretary of State may give directions—(a) to any person carrying on an undertaking in the course of which he produces any substance mentioned in section 1(1) above…. Throughout the Bill we see the Secretary of State taking extra special powers. We see it on page 5, where The Secretary of State may direct any person who he has reasonable cause to believe is or may be party to an agreement exempt by virtue of this section to furnish him with such particulars of the agreement as may be specified in the direction. Page 6 refers to the powers he can have over the "bulk stocks of petroleum."

There are other sweeping and extensive powers throughout the Bill. I wonder whether this is not, perhaps, the first step towards the much-sought-after objective of the Secretary of State to nationalise the petroleum industry. This may well be the first step. The Minister of State looks a little dubious, but I hope that when his hon. Friend replies we can have some assurance to the House that this is not the case.

I think that the Bill warrants close scrutiny in Committee. I hope I shall be a member of that Committee, because there is much which needs to be explored and improved. I hope that maybe the time factor is not so pressing upon the Government Front Bench at the moment and that it will enable the Minister's colleague to give us a little more detail which the Minister of State felt so reluctant to do earlier today.

7.19 p.m.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

I think it fitting that in this debate we have a maiden speech on energy from my hon. Friend the Member for Carshalton (Mr. Forman). If what he said is any indication of what we are likely to get in future, we all hope that he will continue in his new rôle and frequently take part in our debates.

It would be courteous of me if I mentioned the hon. Member for Dumbartonshire, East (Mrs. Bain), whom I do not recall having participated previously in an energy debate. I am sorry that she is not in her place. A great deal of what she said was not agreeable to me, but she mentioned that she was worried about the right of scrutiny in regard to Government Bills. We certainly agree with her in that, and hope that she will be fortunate enough to find herself on the Committee dealing with the Energy Bill, when she will have ample opportunity to put into practice that which she professes.

The introduction to the Bill by the Minister of State was delivered with his usual moderate style. He perhaps let the cat out of the bag a little when he said that what the Government intended in Clause 3(1)(a) was parliamentary control on the same basis as in the 1973 Bill.

We believe that, since the powers being sought at the present moment by the Government are permanent powers and the 1973 powers had to be annually renewed, there is a strong case for having stronger control and even more scrutiny. But we can deal with that point at greater length in Committee.

My hon. Friend the Member for Oswestry (Mr. Biffen) made what I think we all found to be a very interesting speech. He was particularly skilful in the way be deployed his argument. His observations on the relationship between OPEC and the consuming countries proved almost as interesting to those of us on the Opposition side as did his comments on the relationship between the Department and the companies. I am sure that that is an aspect on which we would have liked him to expound at greater length.

The debate has been very interesting, but I am bound to say that I found myself in agreement with my hon. Friend the Member for Sutton and Cheam (Mr. Macfarlane) when he remarked on the very poor attendance in the Chamber this afternoon, particularly on the Government side. I cannot help feeling that this, to some extent, is related to what can only be described as the ham-fisted way in which the Government set about organising their business this week. Originally, in discussion we were given to believe that we would have an all-day debate on this subject. That was quite reasonable for a Second Reading of a very important Bill. Then, to our horror, we heard the announcement by the Leader of the House last Thursday that we were to have only half a day. Then, yesterday afternoon, we heard that an extension of one and a half hours was to be given, but by then the damage had been done. Many people on both sides of the House, who would have liked to take part in the debate, having heard that it was to be only a half-day debate, had made other arrangements, and therefore found it impossible to be here today in order to take part.

I hope that the Leader of the House will realise that when important legislation is to come before the House it is not good enough, simply because the Government have already lost three and a half days of valuable time, simply to knock it off an important subject, such as energy. We naturally assumed, when the Government decided to give only a half-day to this very important Bill, that they had already taken a decision with regard to the content of the Bill, and would accept it as it came back from the Lords. We would have welcomed this. That was the only reason we could think of for the short time—

Photo of Mr Albert Roberts Mr Albert Roberts , Normanton

Does the hon. Gentleman accept that many hon. Members are disappointed and that what we want is a full day's debate on energy? I can assure the hon. Gentleman that the miners' group have a very great interest in it. It is because of the business arrangements that some of the Members sponsored by the National Union of Mineworkers are not here this evening. They would have liked to give their point of view on this subject. For the last 30 years Governments have not been able to give us the right kind of reorganisation. It is not just this one Government.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

I am grateful to the hon. Member for his intervention. He has made a very reasonable point. Many of us on the Opposition side would join him in his representations to the Leader of the House if the hon. Member were to ask for a full-day debate on energy.

The Bill, as it has come back to the House, is broadly acceptable to the principal Opposition. We should like to see a number of minor amendments made, but had the Government considered accepting the Bill in its present form there would have been great support from us.

My hon. Friend the Member for Bedford (Mr. Skeet), in one of his more robust speeches, pointed out in no uncertain terms that he considered that a state almost of confrontation had been reached as a result of the Government's insisting on bringing back Clause 3 in its original form.

We believe that the other place has greatly improved the Bill. Originally it seemed to be an innocuous enough piece of legislation. I remember talking to the predecessor of the right hon. Gentleman. He said "When the Bill comes out it will be a tidying-up measure, following very much on the lines of the Fuel and Electricity (Control) Act 1973." But, of course, we had had experience of the Petroleum and Submarine Pipe-lines Bill 1975, which had a similar history. Before it saw the light of day we were told that it was to be a relatively innocuous measure, but that was proved to be quite wrong. When the Bill was presented and we started examining it in depth, we discovered that it went a great deal further than its predecessor. It caused a great deal of worry to those who were involved and were to be affected by it.

The oil companies, the chemical companies and some of the nationalised industries had considerable reservations about what was contained in the Energy Bill, and industry warned the Government. On 8th April 1976, the day on which the Bill received its Second Reading in another place, there was an article in The Times by the energy correspondent, in which it was stated that The Bill, which comes up for its Second Reading in the House of Lords today, has, company executives say, been presented as legislation to enable Britain to meet its commitments to the International Energy Agency. But they feel the legislation goes far beyond this, particularly in the sections requiring companies to disclose information and forecasts about their operations. Powers are so wide in this direction that it amounts to the basis for 'backdoor' planning agreements, they claim, and is contrary to the voluntary spirit of the Department of Industry's proposals on planning agreements. We feel that that was quite a fair criticism. Indeed, it was reflected in many different quarters. A few days later, on 12th April 1976, when the Bill was in Committee in another place, the energy correspondent of The Financial Times said: The Government has been told that future North Sea development and, possibly, the building of ammonia and other chemical plants, could be affected if control of natural gas becomes a State monopoly. Oil companies are also anxious. The industry points out that deals like the $1 billion (£535 million) liquefied petroleum gas export contract announced by Shell last week, could be hit by the new legislation. These are serious worries that people in the industry have had. I understand that there have been a number of consultations between industrialists and members of the Government, but I do not think that all the fears have been sorted out, by any means.

Some of the amendments made in another place are welcome, but there remains a considerable amount to be done. If the Government insist on reinstating certain of the clauses, it may take some time. Concern has been expressed not only by people outside this House; in the debate today, concern was expressed by hon. Members on both sides of the House. The hon. Member for Wrexham (Mr. Ellis) referred to certain draft matters as being confusing. The hon. Member for Bristol, North-East (Mr. Palmer), to whose speeches we always listen with great interest, was worried about Clause 7 and questioned the Minister about coal stocks at power stations. I hope that the Minister will be able to deal with that point when he replies.

My hon. Friend the Member for Derbyshire, South-East (Mr. Rost) said that in terms of conservation the Bill does practically nothing. He also drew attention to the great need for legislation on that aspect of the matter. My hon. Friend, and also the hon. Member for Bristol, North-East, drew attention to the report of a Select Committee of which they were both Members.

I was particularly interested in the remarks of the hon. Member for Dudley (Dr. Phipps), who said that it was wrong that the consultative document on the future round of licensing had not been presented to the House for debate. He said that he wished that the contents of the licences had been included in the Bill. That was a fair criticism of his own Secretary of State.

We all know that the Secretary of State for Energy is a very busy man indeed. However, when the House is dealing with a Bill as important as this one, surely he could have taken a little time this afternoon to hear what hon. Members have to say on the measure. No doubt he has a very good excuse for not attending, but it is significant that, because it is obviously a measure that is not bubbling over with publicity for the right hon. Gentleman it does not attract him. If this were a Bill that attracted a great deal of emotion—a matter on which the Secretary of State could make a tub-thumping speech—I am sure that he would be here; let us make no mistake about that. In any event, I shall have a chance to say a little more about that topic in the next round of licensing.

The Bill was unquestionably prepared in haste. A number of drafting alterations have already been made, and I feel sure that others will have to be made. If the Government are prepared to accept the Bill as it came from the other place, I am sure that the Committee stage will proceed at great speed. However, if the Government insist on replacing the objectionable clauses, inevitably the Bill will take rather longer to get through the House.

We take particular exception to the permanent price controls and to the gas clauses. My hon. Friend the Member for Bedford dealt fully with our objections. We fear the controls sought by the Secretary of State. We know that both the Minister of State, Department of Energy, and the Under-Secretary of State for Energy are highly capable though mild, moderate and reasonable men, but we are apprehensive, to say the very least, about the Secretary of State for Energy. Furthermore, I believe that we represent in that view a wide body of opinion not only in the House but outside it. Perhaps in this context I may refer to the Old Testament, to which I go for an analogy. I refer to the two sons of Isaac—Jacob and Esau. If I may relate the analogy to the Bill, I must point to the Ministers as being the hand of Esau, but the voice of Jacob—and it is that voice, the voice of the Secretary of State, that is behind the thinking in the Bill.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

No, it is not. If the Minister checks his facts, I think he will find that he is wrong.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Where do the parliamentary advisers come in? It is they who direct the Secretary of State.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

I do not wish to trail the poor old parliamentary advisers through the mill at this stage. The Secretary of State for Energy is the person who has to answer to this House, when he is here, and in that event we shall reserve our criticism for him rather than for those who advise him. After all, he is not bound to take their advice.

Photo of Mr Neil Macfarlane Mr Neil Macfarlane , Sutton and Cheam

When my hon. Friend says that the Secretary of State is answerable to this House, does he not agree that once the Bill is passed the Secretary of State will not then have to answer to the House for much of the legislation that is now being considered?

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

That is a reasonable point. I am sure that my hon. Friend will wish to pursue it in Committee.

We feel very unhappy about the situation in regard to Clause 3. Our concern, and, indeed, the concern of the Opposition in the other place was, first, to ensure that powers required solely in the event of international crises are not used illegitimately for purely domestic reasons and, secondly, that domestic powers are used only in an emergency.

The purpose of the amendments in the other place was not to alter the powers themselves but to limit their application specifically. We regard these powers as important in implementing international obligations during an international emergency, or in dealing with a situation in which essential energy supplies and distribution facilities are threatened—for example, in a genuine domestic crisis—but we have great fears as to their implementation in terms of this Bill.

We are against the introduction of permanent price control, which will do nothing whatever to help conservation. Indeed, it will be difficult to administer, and will damage confidence. We know that such a policy does not work effectively elsewhere and, if the Government insist on reintroducing this clause, we shall oppose it vehemently.

My hon. Friend the Member for Bedford and the right hon. Member for Orkney and Shetland (Mr. Grimond) dealt at length with the gas clauses. They are acceptable to us in their present form. I emphasise the necessity to retain freedom in terms of refinery gases and also the gases used in refinery flaring.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Clause 9 deals with flaring. My hon. Friend will be aware that if the Government persist in the present wording of the clause it will cost the chemical companies a total of £1 million to install the necessary equipment. Surely that would be a waste of the nation's resources?

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

My hon. Friend emphasises a most important point. I am sure that he will seek to deal at length with that matter in Committee.

In regard to the proposed consent procedures, it is important that companies should retain their existing freedom, with the necessary exceptions, rather than that they should be given only qualified freedom, which would tend to undermine commercial confidence.

The changes in regard to Clause 8, if left in their present form, would have dramatic consequences. In one step the chemical industry would be cut off from supplies of a vital raw material. All rights of the industry to use natural gas as a feedstock would be lost, except as dictated by the Secretary of State. The impact would be felt not only in the fertiliser sector but throughout the plastic resin, synthetic fibre and rubber industries. The impact would also be felt by intermediates, such as pharmaceuticals and dyestuffs. At the very least, Parliament has an obligation carefully to consider how the national interest will be affected if that sort of legislation goes through without any check.

I am delighted that the Secretary of State has managed to spare some time to come to the Chamber to hear what we have to say. We welcome him to our gatherings. I hope that he will read my speech tomorrow so that he will know what I had to say about him. I acknowledge that he is probably very busy. As I say, we are delighted that he has been able to come along.

We believe that this legislation will create considerable uncertainty. As regards the gas clauses, it is reasonable to point out that the completion of a major chemical plant that depends on gas from the discovery of a North Sea gas resource can take from eight to 10 years. That, together with the life of the plant itself, which is from 10 to 15 years, is the period during which security of supply and constancy of legislative conditions are necessary. We are not satisfied that any Government will be capable of maintaining the necessary uniformity of purpose over as long a period as that.

It is not an answer for the Minister to say that the Secretary of State may give consents to specific projects, because before considering a chemical project the exploration and development of the gas field has to be undertaken. In its present form the Bill will inhibit participation in exploration activities for gas users. This is a worrying situation and one that I hope that the Minister of State and the Under-Secretary of State will think about carefully before the Bill is considered in Committee.

I know that when a Government prepare their legislation they are reluctant to give way on some aspects that they consider to be vital. However, I suggest to the Minister of State that legislation in the amended form that he has said this afternoon he intends to introduce could have an inhibiting effect on the chemical industry, an industry which is responsible for providing a great many jobs. We have seen, to the regret of us all, a decline in orders, for example, in the platform industry. I do not expect the Minister of State to agree with me, but I believe that to some extent the decline has been caused by a lack of confidence in the policies that the Government are pursuing.

I accept that the Minister of State could quite fairly present a contrary argument, but I believe that the policies that the Government are pursuing have to a large extent played their part in the decline. It would be disastrous if, for any reason of dogma, the Government were to insist that they reintroduced the legislation that they propose, which would have an impact on the gas clauses. That is terribly important, and I hope that the Minister of State will take it on board. I am not trying to make a political point; I am arguing what I consider to be a reasonable case for the industry.

Photo of Dr Colin Phipps Dr Colin Phipps , Dudley West

I take the hon. Gentleman's point about gas exploration. It is a matter that I dealt with in my own speech. Running through everything that he has said is the theme that has been put to me by people in the petrochemical industry over the past few months—namely, that in some way the demon, in the shape of the Secretary of State, will reduce prices to such a level that the whole industry will collapse, nothing will be done, and the present petrochemical complex will be put out of business. I find it difficult to see why any Secretary of State should want to destroy the British petrochemical industry by doing that. I have not yet heard an argument from Conservative Members or from the industry to tell me why my right hon. Friend should wish to take that course.

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

The hon. Gentleman has made a fair point. I am sure that the last thing that this Secretary of State or any other Secretary of State would wish willingly to do would be to damage the industry. However, we believe—certainly this is what the industry believes—that the industry is being put at risk as a result of this legislation. Therefore, as the hon. Gentleman would do if he were on this side of the House, we believe it is our duty, as a responsible Opposition, to argue as strong a case as we can on behalf of the industry and to try to convince the Government that what we want to do is to the greater benefit of the industry and in the national interest, and of greater benefit than what the Government seek to do.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

As I understand it, it is the Government's argument that there might be a shortage of methane and that the British Gas Corporation wants as much as is available from the North Sea, but as the United Kingdom has about 38 years of reserves left—Sir Arthur Hetherington mentioned a period of 25 years ahead—there appears to be no shortage for the small requirements of the chemical industry. Would it not be more appropriate to leave that supply to the chemical industry, which is of greater value than gas, and not use it for burning?

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

Obviously my hon. Friend has made a good point. I have no doubt that that is an argument that will be deployed in Committee.

As I have tried to explain to the Minister, we believe that the Government must take on board the necessity to encourage confidence in the industry. The information that is required in Schedule 2 is something that is giving the industry considerable worry. Perhaps the Under-Secretary of State will give an assurance that the requirement in the Bill in no way exceeds the requirement laid down for us as a result of our EEC membership. Those outside this place would be assured if such a statement were made.

The oil companies and the chemical companies make enormous investment in this country. The hon. Member for Wrexham asked about the amount of GDP invested in the North Sea. It was an interesting point. The Under-Secretary of State may have the answer when he replies.

My hon. Friend the Member for Bedford, in a Question, recently asked what proportion of investment in the North Sea had come from private sources and what proportion had come from the Government. The answer was that 94 per cent. of all investment in the North Sea has come from private sources. That highlights the importance of the private sector of the industry. If ever there was an argument against nationalisation, that is it. In the event of nationalisation, where would investment come from? Do we believe that it would be available in years to come, as in the past? My right hon. and hon. Friends do not have that belief.

Confidentiality, in terms of Schedule 2, is of paramount importance. We wish to see the burden of supplying information kept to a minimum. It is an enormous task to supply the required information. That is apparent when one discusses the problem with people in relatively small ways of business. They spend a considerable amount of time in form-filling and supplying information. When that time is multiplied to reflect the demands on national or multinational companies, we can get some idea of the time-wasting performance that is involved.

During the passage of the Petroleum and Submarine Pipe-lines Bill we expressed doubts about the wisdom of creating the British National Oil Corporation. As my hon. Friend the Member for Bedford mentioned today, our fears were well founded. In the Financial Times of Monday 14th June, under the headline BNOC call for more State control of oil we find: The second development is the strong reaction by the nationalised gas and electricity industries against what they consider to be unwarranted attempts by Mr. Benn's political advisers to interfere with their commercial freedom. On the one hand, we have the BNOC demanding more nationalisation and State control and, on the other, we have considerable reservations from other sections of the nationalised industry about the amount of control that has already taken place.

The Secretary of State has been congratulated this afternoon—not by me, but by one of his Back Benchers—on his initiative in organising the energy conference.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

I think that it is now the policy of the Opposition to support the mixed economy. What is the objection to the mixed economy in North Sea oil, particularly in view of the figures given by the hon. Gentleman showing overwhelming private investment? Does it hurt very much to have a little public investment as well?

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

That remains to be seen. At present we are having public investment through participation agreements that have been entered into by the BNOC. We read in the Press—the Secretary of State confirmed it during Question Time yesterday—that discussions are now taking place with Shell and Esso. There seems little doubt that the result of those discussions will be some form of participation with those companies. Whether that form of participation will follow the thinking of the Secretary of State, as he would like to see it progress, remains to be seen. Nevertheless, there is that participation.

We believe that is unnecessary. We believe that where there is an almost unlimited amount of private investment for the purpose of developing North Sea oil resources, State intervention is not required. The State has its own power, in terms of the clawing back of remuneration in due course. There is no need for the BNOC to operate in this area. It would be better to leave the exploration, development and production of North Sea oil to those who are already highly qualified in that sphere. The money can be got back through the normal taxation system.

To return to the energy confidence, there is an article in The Sunday Times of 23rd May dealing with certain of the questions that will be posed as a result of that conference.

It may be that the Secretary of State has hit on a good idea—I should be the last person to try to take ony credit away from him in that respect—but I wonder whether the conference that has been organised—given its size—provides the most likely way to arrive at decisions at the end of the day. I fear that this will be a publicity exercise from which the Prime Minister and the Secretary of State unquestionably will benefit. I doubt whether anybody else will gain a great deal from it. If the right hon. Gentleman initiates a discussion with high-powered people which, at the end of the day, leads to some constructive and concrete proposals, his time will have been well spent.

The motor industry is worried about the Bill. The Society of Motor Manufacturers and Traders Ltd. is particularly appalled at what is said concerning the determination and publication of fuel consumption for motor vehicles. I believe that that is a bit of a gimmick—a sham. I do not see how it can be accurate at the end of the day. How can statistics on petrol consumption by cars possibly be accurate? Surely much depends on how a car is driven and by whom it is driven. For example, hon. Gentlemen and I could drive down the M1 together. I could have my foot hard down on the floorboards whereas hon. Gentlemen could observe the 70 m.p.h. limit. At the end of the day there would be a vast difference in petrol consumption. I do not see how statistics can be accurate in that respect. They will cause a great deal of difficulty for the industry.

The magazine Autocar is particularly worried about this aspect, because of the complexity of Government Departments that will be involved. In an article on 29th November it states: As an example of how the ever-spreading tentacles of bureaucracy in this country are starting to twine themselves into an almost impenetrable mess, the Government's proposals for publishing fuel consumption figures are a classic.Our first enquiry on who was running the scheme was directed—appropriately enough since they ran the type approval and emission testing schemes—to the Department of the Environment. However, they said that they were not dealing with the fuel economy side of testing, but rather thought that the Vehicles Division of the Department of Industry was looking after the tests. The Department of Industry admitted to running the mpg part of the testing, although they acknowledged that the figures would be taken at the same time and on the same occasion as a vehicle was emission tested by the DoE. The Department of Industry evidently feels that as the subject of the exercise is economy, the Department of Energy ought really to be concerned with the mpg testing…However, as soon as the Department of Industry publishes the figures (which incidenttally the manufacturers will not be forced to use in their publicity material), yet another department enters the arena. This is the Department of Prices and Consumer Protection, who will be responsible for investigating Trade Descriptions Act implications of the figures and the performance aspects of consumers' cars. That seems to be a bit of a shambles, does it not? I hope that as we plough our way through the Committee stage of the Bill we shall be able to achieve a simplification of these matters.

Photo of Mr Robert Ellis Mr Robert Ellis , Wrexham

Is the hon. Gentleman aware that in America, the home of free enterprise—where, as Galbraith says, free enterprise is a minor branch of theology —there is a requirement that in 1980 motor cars will be forced not simply to have labels on them but to run at guaranteed mileages per gallon?

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

I am sure that, with their ingenuity, the United States Government will devise something slightly less complicated than I have just quoted from Autocar. I take the hon. Gentleman's point.

Photo of Mr Keith Stainton Mr Keith Stainton , Sudbury and Woodbridge

It is a question not only of the United States Government but of the United States motor manufacturers. I am particularly interested in the numbers of civil servants who will be involved. Is my hon. Friend able to enlighten us on that aspect?

Photo of Mr Hamish Gray Mr Hamish Gray , Ross and Cromarty

That is a question that we shall be putting to the Minister of State in Committee. I should not care to put a figure on the numbers of civil servants who will be involved. It may be that in his winding-up speech the Under-Secretary of State will give an indication.

We believe that the permanent powers on price control of petroleum products and on energy use and the possession of permanent powers to enable the State to obtain a wide range of confidential information are not desirable. We believe that those aspects of the Bill should be very carefully examined by Parliament. We shall seek to do that in Committee. We shall be constructive, but we shall endeavour to improve the legislation in Committee.

8.0 p.m.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

We have had an interesting and very wide-ranging debate. It is inevitable that it has been wide-ranging when the title of the Bill is the rather grandiloquent one of "Energy Bill". It is a rather high-sounding title for what is an important and useful Bill but a Bill which, perhaps, does not do many of the things that the title would lead the House to believe that it will do.

Most speeches, surprisingly enough, for one of two reasons, have criticised the Bill for what is not in it. Many of my hon. Friends and other hon. Members, such as the hon. Member for Derbyshire, South-East (Mr. Rost) and the hon. Member for Dunbartonshire, East (Mrs. Bain), wanted more measures with regard to conservation and they criticised the Bill for not containing them. They said that it was a sin of omission in the Bill. Opposition Members are possibly very concerned with the sin of omission. Hon. Members have also been criticising something that is not in the Bill but which we hope subsequently, in Committee or on Report, to put into it.

The differences between the two sides of the House in regard to the Bill as it stands are almost non-existent. On matters where there is disagreement between the two sides—for example, on Clauses 3 and 8—no doubt a large measure of agreement can be reached on some of the minor points, but on the major points there are inevitably differences and difficulties that arise between us.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

Why do not the Government leave the Bill as it is?

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

I shall deal with the hon. Gentleman shortly. We shall not leave the Bill as it is because, for instance, we are not satisfied that some of the things that the other place did will provide sufficient energy conservation measures. It is not a case of ratting on undertakings given in the other place in the matters that we are trying to put back into the Bill. In Committee and on Report and even in that rather peculiar procedure in the other place—Third Reading—we divided the House each time. The other place being what it is, we lost; but we fought it all the way through on these points.

I was saying that the Bill is being criticised for what it does not contain. I want to discuss some of the speeches we have heard today and to say what the Bill is not. The Bill is not a substitute in itself for energy policy or for the energy forum which my right hon. Friend the Secretary of State will be conducting a week from today. I am glad that hon. Members congratulated my right hon. Friend on the idea of that energy conference, where all people concerned with energy, not merely energy producers but energy consumers and energy industries, will at least be physically present at one conference and will be able to talk to one another and to put in papers. If they are not called upon to speak, they will subsequently be able to have their views put on record. This is very useful for public participation. Every political party in the House has been invited and every parliamentary political party has received an invitation to send someone to the conference. We want this to be as wide a public debate as possible.

However, the Bill is not that conference. Neither is the Bill a definitive Bill on energy policy. It cannot be. My hon. Friend the Member for Dudley, West (Dr. Phipps) said that he wondered whether an energy policy would emerge from all the discussion. Of course it will not—not immediately. It is not the sort of conference at which one passes a resolution and then goes away having an energy policy settled for the next 30 years. However, an invaluable contribution will have been given by all sections of the public and by the industries to help the Department and the Government to get an energy policy in which there has been genuine public participation.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

When is the Bill on conservation coming, as recommended by the Select Committee's report?

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

I hope that hon. Members will be patient. I shall be dealing at some length with conservation. I have a particular interest in that subject.

The other criticism, which came most forcefully in a very excited speech from the hon. Member for Bedford (Mr. Skeet) —I have no doubt that it was a very heartfelt speech—and from the hon. Member for Oswestry (Mr. Biffen), who spoke on the same theme, as did the hon. Member for Ross and Cromarty (Mr. Gray), was the theme that somehow or other contained in this apparently harmless Bill is a sort of skeleton key which will open the road to full-blooded Socialism for the oil industry. That is how it has been represented by some hon. Members.

I leave Opposition Members with this thought. The Bill limits the powers that the Secretary of State now has to do all the things that they were complaining the Bill would allow him to do, because he has those powers under the 1973 Act, which was passed in emergency circumstances by a Conservative Government, and the powers have been renewed and are still in existence. The Bill limits those powers. Therefore, when hon. Members ask where my right hon. Friend has been, if he is the villian of the piece as they have been describing, I would say that probably this afternoon he has been back at the Department busily using his powers under that Act before this Bill is enacted and takes them away from him.

It is nonsense for hon. Members to suggest that the Bill in any way increases powers to take over industry and so on. The Bill is basically dealing with energy conservation, but it is also dealing with emergency conditions—this is what hon. Members do not seem to realise—that are triggered off by set events that I shall discuss later, triggered off either because of an international emergency when an international authority requires us to do something because of a treaty obligation or because of a domestic emergency in this country. If it is a domestic emergency, the position is that it is by affirmative resolution of both Houses of Parliament that the powers contained in Clauses 1, 2 and 4 come in.

Photo of Mr Peter Rost Mr Peter Rost , Derbyshire South East

Why, then, are the Government proposing to introduce permanent powers on price control? Is the Minister assuming that there will be a permanent emergency, or that price controls make some contribution to energy conservation?

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

When Ministers give way at such a stage in their speeches, inevitably it turns out to be on a point to which they will be coming later. Hon. Members should be patient. I shall cover all these points.

On the face of them, Clauses 1, 2 and 3 look Draconian, but they are Draconian to the extent that any Government need Draconian powers in an emergency situation. However, they are emergency powers. For example, if it were a domestic emergency as distinct from an international emergency, the position would be this. An Order would have to be laid. It would have to have affirmative approval of both Houses of Parliament, and if within 28 days it did not get that approval it would lapse automatically. An Order which was approved would lapse after 12 months unless it was reaffirmed by the House. We are dealing with emergency conditions.

This is not a Bill that is giving all these powers on a permanent basis to a Secretary of State to rule the entire fuel economy with a rod of iron. However, as Conservative Members realised when they introduced their Act in 1973, it gave even greater powers. One must have these teeth to act quickly in various types of emergency situation.

Photo of Mr John Biffen Mr John Biffen , Oswestry

Will the hon. Gentleman say a little about the actual trigger mechanism itself? Under the International Energy Agency in particular, what are the provisions that cover not so much a general embargo, such as we obviously experienced in 1973, as a selective embargo? Is the Minister satisfied that there is sufficient refinement of reaction concerning the trigger mechanism?

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

It is difficult to answer the hon. Gentleman, not because I am trying to evade his question but because the circumstances of an emergency are difficult to define in advance. There may be a very varied series of things happening. It is difficult to say to the House that it would be triggered off internationally by A, B, C, D or E. Indeed, the hon. Member for Oswestry said that he would be a very foolish man who tried to predict what OPEC would do in the future as compared with what it did in 1973. That is perfectly true. For that reason, it is very difficult to give a definition, but there would be international action. Because of that action from the international authority, it would trigger oft in each member nation the introduction of the whole or part of the demand restraint and emergency measures which are contained in Clauses 1, 2 and 3 of the Bill.

A matter of great interest has been the power of price control of oil products. I understand that if the Secretary of State wanted to use the powers under the 1973 Act he could control the prices of oil products now. He has the power to do so. It is not something peculiar to this country with a Socialist Secretary of State introducing the Bill in order to get his hands on the country's oil industry. Austria, France, and Italy all have the same powers.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

What about Germany?

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

Germany is the exception, not the rule.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

I was talking about EEC countries. I was saying that almost all the EEC countries and many others as well already have these powers, and hardly any of them has a Social Democrat or Socialist Government. Spain and Portugal have these powers at present, and so does the United States of America. What we are asking for in the Bill is not a power which may be exercised by the Secretary of State as he pleases but the power to exercise it only when he needs to do so.

A number of hon. Members have talked about energy conservation. Opposition Members have claimed that price control of oil products is the antithesis of conservation because prices are kept down artificially. It is envisaged that these powers would be used only if the Secretary of State needed to do so because of a state of shortage of fuel, oil and oil products. When hon. Members opposite complain about the conservation aspect here, I should point out to them that there is a difference between the economics of prudence and the economics of famine. It would be in circumstances of the economics of famine that this sort of thing would be brought in and there would be price control in this way. All we are doing is giving powers to the Secretary of State. Indeed, we are limiting his powers slightly. Therefore, I hope that this bogy, the idea that control of prices of oil products is a Socialist device by a Labour Government wanting to lead the country along the road to rampant Socialism, will be seen by hon. Members opposite in a little more perspective.

Photo of Mr Neil Macfarlane Mr Neil Macfarlane , Sutton and Cheam

Surely the hon. Gentleman can understand our feelings in view of the comments made by his right hon. Friend on 26th November 1973.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

Yes, he made those comments while welcoming a Bill which was being introduced by a Conservative Government. But whatever those comments may have been, this Bill in fact limits the powers which hon. Gentlemen opposite gave to the then Secretary of State in their Bill.

Photo of Mr Trevor Skeet Mr Trevor Skeet , Bedford

That was an emergency.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

I come now to the main theme from hon. Members on all sides of the House—the question of energy conservation. This was mentioned particularly by my hon. Friend the Member for Bristol, North-East (Mr. Palmer). I share the general concern that the report of the Select Committee came to my Department as long ago as September 1975. It is now June 1976. I have been at this Department for only a short time. I make no excuses, but I have tried to push this report very hard. There are difficulties since not only my Department is concerned. There are 42 recommendations in the report and nearly every Department of State is involved. When one has to deal with all the other Departments and get their observations on different aspects, it takes time. I shall try to use my best efforts to make certain that the report is printed and available before the Summer Recess. We have no intention of avoiding a reply to the document.

My hon. Friend the Member for Wrexham (Mr. Ellis) mentioned the efforts of industry in energy conservation. In the "Save It" compaign we concentrated on domestic householders because space heating in domestic households is one of the ways in which a great deal of heat is wasted, and it is easier and cheaper to control this than it is to control wastage in industry. Industry often needs capital investment rather than just a simple solution like lagging a tank or insulating a roof. I have a major programme of energy conservation from now to the end of the year taking in all parts of the country.

On the question of energy audits, the firms which have employed such audits are amazed at the amount of energy and cash they have saved. In fact, the saving to the firms concerned is remarkable. Earlier today my hon. Friend the Member for Bassetlaw (Mr. Ashton) told me that the Leeds City Council had decided to take a week off the Leeds schoolchildren's summer holidays and add a week to the Christmas holidays. The parents are reasonably happy about that because the long summer holiday can become tedious for them, if not for the children. The savings in fuel amount to £93,000. If one multiplies that by 100 other cities, one is talking about £9 million a year in fuel saved. That could go towards maintaining teachers who might otherwise be lost, at a time when local authorities are in difficulty.

Fuel economy and fuel conservation make good sense, apart from the impact they have on the fuel resources of the country, which are not unlimited. I endorse all that has been said about energy conservation. Many of the matters in the Bill were criticised by the hon. Member for Derbyshire, South-East, who said that only two or three of them were directly related to conservation. If the hon. Member looks closely he will find that there are a lot more. Clauses 1, 2 and 3 re-enact the provisions of the 1973 Act which have an energy conservation base. Clause 11 on the fuelling of power stations is also concerned in this, as is Clause 12. So also are Clauses 8, 9 and 10, all of which have a conservation aspect. There is more to the Bill than perhaps the hon.

Member for Derbyshire, South-East sees. That is particularly so on the aspect of conservation.

Photo of Mr Keith Stainton Mr Keith Stainton , Sudbury and Woodbridge

I apologise for having been absent from the debate, but I have been occupied in a Standing Committee on a Government Bill. I am particularly concerned about Clauses 8, 9 and 10 on gas with regard to the lack of proper safety specifications for refrigerated liquefied petroleum gas installations. This is a great deficiency which could have been rectified in the Bill and which must be pursued in Committee.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

I have no doubt that the hon. Gentleman or his hon. Friends will deal with that in Committee.

If I may return to conservation, perhaps I should explain that the Bill goes only part of the way. Conservation is more a matter of education than legislation, and that has been echoed in our approach. Nevertheless, there may be instances where legislation is necessary, hence some of the provisions in the Bill. There may be further provisions in other Bills after discussions have taken place with other Departments about heat insulation standards and so on. But we must get it right when we talk about heat insulation, because what we do now may have to stand for 100 years. We therefore do not want to be panicked into what seems to be a good idea only to find that difficulties arise in some other respect.

My hon. Friend the Member for Bristol, North-East asked what proportion of the requirements under EEC Directive 75/339 on the 30-day stocking of fossil fuel was currently held at the CEGB's power stations. I understand that the board's commercial practice is to hold stocks sufficient to meet 50 winter days' demand at the beginning of each October and to let these run down to 50 summer days' demand at the beginning of each April. Currently the board holds more stock than is required under this commercial practice. That means that it will be able more than adequately to meet, now and in the future, the demands of the EEC directive.

My hon. Friend asked whether natural gas was realistically priced. Generally, I would say that it is. The British Gas Corporation will be seeking price increases in the autumn under the Price Commission procedure, but the increases will still leave natural gas very competitively priced, and the Government have no plans currently to disturb that arrangement by means of any special gas tax.

Photo of Mr Arthur Palmer Mr Arthur Palmer , Bristol North East

Surely the Minister accepts that this is a point which is open to considerable argument.

Photo of Mr Gordon Oakes Mr Gordon Oakes , Widnes

There could be considerable argument if one wanted to interfere with the mechanism by some form of tax to make gas less competitive with other fuels. There is another side to the argument. This concerns the counter-inflation policy and the effect that any unnatural increase in the price of fuel would have on that. There are no current plans in the Department to institute a special gas tax.

The right hon. Member for Orkney and Shetland (Mr. Grimond) made an excellent contribution to the debate, although he was a bit unfair to some Government Departments. He said that we should do more. I am never complacent about Government Departments, either for the fuel saving they can effect themselves or for the good example they can set to others. It would be pointless for me or other Ministers to fulminate around the country in search of economy measures when Government Departments could be the worst offenders—although I can assure hon. Members that they are not the worst.

Perhaps I may draw attention to the excellent scheme instituted by the Property Services Agency by which, for a quite small investment, an enormous saving is effected year by year. The Ministry of Defence has an excellent record in this respect, as has the Department of Health and Social Security. All Departments are looking at this matter, and they will continue to do so. Very shortly a ministerial committee of junior Ministers will be set up under my chairmanship to look specifically at energy conservation as it affects particular Departments.

I agree that there is some dissention on Clause 8, but there is not all that much. The other place inserted what is now subsection (2), and we presently intend to take it out. There is a conflict between that subsection and subsection (6). The idea behind the Government's proposal in the clause is not to have some fiendish hand at the throat of the petrochemical industry. That industry is using basic raw materials and fuels for other purposes, and, therefore, the fuel could be liquefied and used for another purpose with methanol and so on. One hon. Member read at length from a circular issued by the Department. Therefore the Department, for reasons no more sinister than that, wants the Secretary of State's consent to be given in all cases and it does not want that power to be qualified by the exclusion in subsection (2) as provided in the other place.

The hon. Member for Bedford raised the question of liquefaction, but in Committee we can talk together on this. I think that the matter must go further than methane and will probably have to go to ethane. The hon. Gentleman will see that I am putting the hand of friendship across the Chamber to him. It may be that ethane ought to be put with methane, but possibly not propane and butane. In Committee there may be many instances such as this on which there can be sensible agreement in this House just as there was in another place on many of the clauses.

There will be battles on Clause 3, which involves a fundamental difference of approach and principle between the two sides, partly because of the Conservatives' suspicion about how the power may be used. I think it is an exaggeration to say that we in the Commons will undo all the agreement that was achieved in the House of Lords. We disagree with what the other place did on only two clauses, Clauses 3 and 8.

My hon. Friend the Member for Dudley, West wanted to know whether there would be a debate in the House about the fifth round proposals. The Secretary of State has it in mind to let hon. Members know when the discussion between the committee, the trade unions and industry has been completed. He thinks that that would be a suitable time at which Parliament might like to consider the matter.

I do not have time to cover all the other matters that were raised. Many were Committee points in any event. No doubt they will be hotly but, I hope, fairly debated in Committee. I hope that this useful measure will eventually go on to the statute book.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee, pursuant to Standing Order No. 40 (Committal of Bills).