§ The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith)
I beg to move,That this House takes note of European Community Document No. 7163/85 and endorses the adoption of new Community Energy objectives for the period to 1995 as references for the guidance of Member States.This is the second opportunity that the House has had in recent weeks to debate Community energy issues. The Scrutiny Committee has rightly identified two documents as being of sufficient interest to put before the House as a whole. The first of these, the proposed new rules governing state aids for the coal industry, was debated on Wednesday 6 February. The second, before us this evening, addresses a general framework for the development of all energy resources and offers guidance on the way member states' energy policies might develop over the next decade.
The document before us is entitled "New Community Energy Objectives". It starts with a summary of the changes that have taken place in the availability of energy supplies since the Community agreed in June 1980 on the energy objectives for 1990.
Attention inevitably focuses on the radical changes in the oil market over the past five years. Since the last oil crisis, two trends have become apparent. First, the demand for oil is considerably less, and this reflects a greater medium-term responsiveness to price than anyone expected five years ago. That responsiveness has been marked by the successful introduction of improved energy efficiency technology, and continued switching to other fuels, notably gas in the domestic sector and nuclear and coal in electricity generation. Secondly, oil production in non-OPEC countries has continued to increase, enhancing the availability and diversity of supplies on the world market.
As a result of those changes in the energy market, the objectives outlined for 1990 have already largely been achieved. Oil imports into the Community have been cut by half over the past 10 years. Energy efficiency measures have ended the automatic relationship between energy consumption and economic growth. At the same time solid fuels and nuclear now account for over three quarters of Community electricity generation. The degree of energy self-sufficiency within the Community has increased significantly.
Despite those achievements, the document fairly warns against complacency. It argues that oil demand may once again threaten to overtake available supplies. Therefore, our long-term security of supply must continue to depend upon a diversity of sources of energy, traditional as well as new. The potential for a broad spread of economic investment needs to be maintained.
It is against that background that the Commission proposes that the Community adopt new objectives for 1995. The proposals fall into two categories—"horizontal" objectives, common to all fuels, such as greater integration of the Community energy market, a balance between energy and environmental needs and the promotion of technology; and "sectoral" objectives—a 439 phrase that I find easier to understand—covering each of the sources of energy, including the important matter of energy efficienty.
It may be helpful if I set out briefly the Government's approach to the setting of those energy objectives. At one extreme there are dangers in having a central plan, a kind of blueprint, aimed at matching supply and demand, fuel by fuel, market by market, and so on for many years.
Experience and history have proved to us that no such plan can ever pass the test of time. All attempts to forecast the energy future with any accuracy have inevitably turned out to be wrong. Grand designs have had to be abandoned. The energy market regularly confounds forecasters because it is, in part, increasingly international. It is extremely complex and, as recent events have proved to us, is subject to violent changes. If we allowed inflexible central plans to be imposed, it would involve high costs to the economy. Such plans would be extremely vulnerable to the unexpected. I do not believe that the task of energy management is well suited to government at national or at international level.
The best mechanism for deciding the best use of energy and for coping with change is the market place. It consists of a myriad of transactions between customers and producers. It is able to adapt to new circumstances far more quickly and efficiently than any bureaucracy. The Government do not therefore believe in attempts to predetermine artificially the energy balance. That should be decided by competition in the market between the various fuels. But it is important that fuel prices should reflect the true economic costs. The market should be as free from price distortions as possible, or customers will not be able to maximise the efficiency with which they use energy. There is also a need to pay heed to external costs, such as social and environmental factors.
Against that background, the Government have always regarded the Community objectives—those agreed in 1980 as well as those under discussion now—as points of reference informing one of member states' own energy policies. The objectives are not intended as binding commitments or as targets which must be reached. The energy resources available to member states and the pattens of consumption within each country differ too widely for uniform goals to make sense for the Community as a whole.
The United Kingdom for example, benefits from indigenous availability of all the major sources of energy—coal, oil, gas and nuclear. Not only can we supply our own needs, but we are substantial exporters to our Community partners. Our energy conservation and renewables programmes are well advanced, reflecting our role as major consumers as well as producers of energy. Other member states, such as the Netherlands, are also significant energy exporters. That is perhaps the one Community country with which we can draw the nearest parallel to Britain. But others still are without resources of their own and rely heavily on imports from within and without the Community. Given this diversity, there cannot be one common objective equally applicable to all member states. Therefore, we need a set of agreed objectives that provide a qualitative assessment of energy priorities. That is an approach that has been fully endorsed by the Energy Council when it last met in November to discuss the objectives. My right hon. Friend the Secretary of State said then that the objectives should act as a helpful set of 440 references for discussing the polices of member states. They are also an indication of the trends which are developing in the Community as a whole.
§ Mr. Martin Redmond (Don Valley)
I am at a loss. The hon. Gentleman talks about the benefits of objectives and then says that there is no intention of taking any notice of the objectives if the needs of the national interest prevail. If that is the case, why are we here at this hour in the morning discussing objectives when, at the end of the day, they will be thrown through the window?
§ Mr. Buchanan-Smith
The hon. Gentleman is not following what I am saying. They are important objectives against which we can test our policy. I said that it does not make sense to have a single common policy when energy supply and demand is so varied throughout the Community. I talked about objectives for such things as greater self-sufficiency, less reliance on imports from outside the Community, the development of other resources such as renewables and so on. They are all objectives but the degree to which they are achieved is bound to vary in different member states. I think that that can be easily illustrated, as I will attempt to do.
Having dealt with the horizontal aspects, I shall deal with the sectoral objectives. Those suggested in the document seek to break down the trends of general policy into their component fuels. Some figures are suggested, including a possible level of net oil imports and a ceiling on oil use in power stations. Those quantifications are illustrative and can be helpful as markers against which to judge market movements and the relevance of the objectives over time.
It would be wrong, however, to attach importance to any particular figures or to regard them as significant in any policy sense. As I said to the hon. Member for Don Valley (Mr. Redmond), an example of where this could be misleading is the attempt to set a target figure or range, for example, in nuclear generating capacity. A figure of 40 per cent. has been suggested by the Commission. That is no more than a crude averaging of different nuclear capacities across the Community. France has twice this capacity, the United Kingdom less than half, and five member states have no nuclear generating capacity at all. To try to quote such an unrepresentative average is liable to be misinterpreted as a national objective for each member state. The Government do not therefore think it appropriate to illustrate the nuclear sectoral objective in that way.
The proposed objectives by their nature seek to take a long-term view of energy developments in what we all know is an uncertain world. I hope that I have outlined the advantages of the objectives as well as the dangers of discussing such a document. Provided that Governments avoid the trap of believing that their forecasts will be realised, there is advantage in looking at the range of energy options and the directions the market might take over the next few years.
The opportunity to debate the objectives is not only valuable but timely. The Council of Energy Ministers has already discussed them twice. Discussion in Brussels is focussing on the key issues and the Council is likely to be called upon to decide a final text within the next couple of months. This short debate gives the House the opportunity to express its views. I welcome that opportunity, and I commend the document to hon. Members.
§ Mr. Stanley Orme (Salford, East)
As the Minister of State said, we are debating proposals for an EEC energy policy and its objectives, even though the Government have no coherent energy policy. That is the debate's starting point. We are talking about an energy plan—a blueprint—which the Minister has rejected. That makes nonsense of the document.
Britain is in a unique position with regard to energy requirements and production within the EEC, because we are the only country that produces its own oil, gas and coal. As the Minister said, other countries produce some or none of those commodities.
I have read, as the Minister probably has, the last debate on the EEC directive in 1979, which led to the 1980 discussions with the EEC. In the 1979 debate the House was considering what the position would be in 1985, which is just a few weeks ago. The forecast bore no relation to what happened in 1985 and what we face in 1986. I am worried, because if the EEC had its own way we could end up with an energy policy which could be as damaging to Britain as the common agricultural policy is. We must guard against that.
The document does not address itself to the position in Europe, which is faced with falling oil prices. Will recent events be discussed when the Council of Ministers meets, and if so, what line will the Government take? We are entitled to know, because tonight's debate is to enable us to give the Government our views in time for the meeting of the Council of Ministers. I am not clear, from what the Minister said, what the Government's attitude will be, not least because oil prices will be an important factor.
Britain is an oil producing country with a substantial energy surplus. I am worried about British refining capacity. It is being closed on a large scale, not least because of some of the actions of our EEC partners, for example, in Rotterdam. That is having an effect on refineries in Wales, Scotland and elsewhere. It is undermining the industry's ability to export added-value downstream products. Given its indigenous oil supplies, the United Kingdom should be exporting refined products to the rest of the Community and elsewhere, rather than merely refining for the British market. Instead, large amounts of North sea crude oil are being exported to be refined outside the United Kingdom. Much of it then returns to Britain as refined oil or added-value products.
The EEC proposals advocate greater interconnection between gas and electricity systems and increased trade. Because of the privatisation of the gas industry, we have been asking the Government for some considerable time what their attitude is to the import and export of gas. Will the Minister tell us the Government's attitude to the EC proposals? Will he advise the House of the Government's position on the crucial issue of depletion policy for both gas and oil?
A major aspect of the document, and one of the only relevant firm figures in it relates to nuclear policy. I was pleased to see that the Minister rubbished that. The document proposes that nuclear generation of electricity should be almost doubled by the year 1995, providing 40 per cent. of our electricity. We are worried about that. We are self-sufficient in coal, and we oppose the development of the pressurised water reactor. We believe that the proportion of electricity generated by nuclear power in the 442 United Kingdom should not increase. We oppose the document's proposal, and, indeed, the Minister made nonsense of it.
Five countries in the EC do not have any nuclear power. France has 80 or 90 per cent., and we produce about 20 per cent. During the miners' strike that was increased to 25 or 28 per cent. Although the document may be for consideration only, there may be pressures in the EC to develop nuclear power and to impose that type of development on countries, such as the United Kingdom. I put our opposition to that firmly on the record.
Recently, we debated the EC proposals for the coal industry. It is impossible to discuss European energy objectives without referring to coal. The document continues to accept the importation of coal into Europe, while advocating the restructuring of our industry, and maintains that the price of imported coal will continue to be set by competition in the world market. As my hon. Friend the Member for Midlothian (Mr. Eadie) pointed out on 5 February, coal imported from South Africa, Poland and Colombia is being dumped in Europe at prices that bear no relation to market forces. We cannot accept that. At the Council of Ministers' meeting the Minister must put that point firmly.
The document also calls for a 25 per cent. improvement in energy efficiency. I would have thought that the Minister would want to say something about that, especially as his Department has embarked on Energy Efficiency Year, and perhaps he will do so when he replies.
The document promotes the increased use of fluoridised bed combustion and other technologies which would make coal burning more environmentally acceptable. That is an interesting proposal, and I should like to hear the Government's attitude to it. Will the Government put money into such a development? What about developments in coal gasification and liquefaction which the document advocates? If there is a member state which can develop those two processes, it is the United Kingdom, with its large surplus of coal. That is where the future of coal lies.
The EC document advocates the continuing promotion of research and development and the demonstration of new technologies and renewables. Will the Minister assure the House that the so-called hot rocks experiment in Cornwall will continue to receive funding from the Department of energy, and that the expertise developed there will not be transferred to the United States because the Government are unwilling to continue support? That is another matter that should be raised in the Council of Ministers. The people involved in the development in Cornwall, which is an area in need of employment, are threatened with unemployment because of the removal of subsidies and support.
Combined heat and power is another idea that should be developed. We should say to the EC that that is what we are doing, and what we will continue to do, and that we do not accept a policy that binds us in an impossible position to other member states.
Although the document discusses a framework for coherent national energy policies, it is not feasible. As I have said, the Government do not have an energy policy. They do not develop a policy or intervene to propose a policy.
We believe that the debate is important, but we ask the Government to protect British interests in the EC. That is 443 their job. When they protect British interests, they protect hundreds of thousands of jobs in the United Kingdom energy industry. We await the report from the Council of Ministers, and we hope that the Secretary of State will take note of the points made by the Opposition this evening.
§ Mr. Malcolm Bruce (Gordon)
It is typical that we are debating this subject in a packed House at peak viewing time, given that Britain is the most energy-rich country in Europe and that how we manage our energy resources is the most significant and important basis of our economy. I am not surprised at the hour, because the timing of the debate is in accord with the Government's general attitude to this important industry and its importance to the British economy. It suits the Government's book very well to have a debate when nobody is listening and nobody can take on board the irresponsibility of the Government's policy.
The Minister moved the motion in the following terms: we should take note of the document, pick out what suits us, leave out what does not suit us and allow the market to sort out everything. As the right hon. Member for Salford, East (Mr. Orme) has said, for the Government to take any view on a European energy strategy or policy they would first be required to have a policy of their own. No such policy exists and the Government pride themselves on that fact.
The background to the debate of events this week highlights more than ever the need for an energy strategy. The oil price has collapsed from a peak in 1979 of just under 40 dollars a barrel to about 15 dollars a barrel and it is still falling. The implications of that are extremely significant, not least to the coal industry. In the short term, a free marketeer might be able to say, "Coal is no longer a competitive fuel. It is no longer viable. Indeed, perhaps we should be burning more oil and producing less coal." Taking the logic forward, he might say, "We need to close even more collieries, it may be time to convert existing coal-fired power stations to oil and we should build new oil-fired power stations." Why do we not do that? Presumably, in the short term, the Minister will say, "This is an aberration in the market, and we must see whether it is a long-term trend."
That uncertainty requires the Government to take a strategic view over a long period of approximately what mix of fuels we should use and how we should handle them. What should be the role for coal, oil, nuclear power and gas? Any responsible Government would do that. It is not a matter of saying, as the Minister tried to suggest, "We the Conservative Government believe that the market can sort it all out, and those terrible Socialists want to plan every detail." We need a framework within which at least broad planning is considered while recognising the factors of the market, but not the short-term volatility which is based on completely unpredictable and uncertain events. The Government must have a much more coherent policy for all our energy requirements.
The EC document states that the objective for the 1990s is that oil production in the Community should be less than one third of energy consumption from oil imports. If that is the case, we are entitled to ask whether our present level of production is compatible with that objective. If the Government's objective is to rip as much oil out of the North sea as fast as possible, regardless of the price, what will happen in 1998 when there is less oil left? Does that not contradict the Community's objectives? What 444 happened to the objective of net self-sufficiency? Last year, we produced 37 million tonnes more than our self-sufficiency requirements, and the amount is increasing.
It is worth taking account of what has happened in the oil market during the past six months and what the implications are for the United Kingdom economy. In 1985, the average price of oil was $29 a barrel. Our average production was about 2.5 million barrels a day, and the pound was worth, on average, $1.25. The average daily value of oil production in 1985 was £58 million. The packed Galleries show how important that is to the British economy.
However, the price or oil is now $15 a barrel. Production is still at that peak—for the calculation, let us say that it is still 2.5 million barrels a day, although it is slightly higher. The dollar is falling against the pound, which is an added complication. We used to be able to console ourselves when the oil price fell by saying that the exchange rate would substantially compensate us for that. That is not happening now. On the contrary, the pound is strengthening against the dollar, further aggravating the effect of the falling oil price. The average daily value of oil production is now only £27 million—a reduction of £31 million—or 53 per cent. in a few months.
No wonder the Chancellor is worried about his Budget. No wonder the Government's whole economic strategy threatens to fall to tatters against that kind of change. Against that background, the reaction of the Government is total and abject unconcern and complacency. They say, "It is nothing to do with us: is is entirely a factor for the market and there is nothing we can do about it." This is the single most important product of Britain. Its price and production level is crucial to the basis of our economy, yet the Government says it has nothing to do with them.
As recently as yesterday the members of OPEC launched another appeal to the non-OPEC countries to meet and discuss the implications of the falling oil price and current levels of production. I tabled some questions to the Government asking what representations they had received from OPEC and Saudi Arabia and what responses the Government had given. The reply that I got was none and none. I asked, were the Government prepared to meet and discuss the matter and the answer was one word, no. The Government are not prepared even to discuss the matter. That is an absurd position. Even if the discussions are not clear, and even if the outcome is not certain, to refuse to talk seems utterly unbelievable. That stance is in direct conflict with the document we are debating. Paragraph 28 on page 15 says:It is therefore right that the Community should continue with its policy of establishing good relations with countries and inter-governmental bodies in this regionthat is, the Gulf region. It goes on:The long-standing relations with the OAPEC should be further strengthened, and arrangements for exchanging information with OPEC should be established.It is difficult to see how that Community objective could conceivably be achieved by a Government that are not even prepared to discuss or admit that any contact can or should take place with these organisations. That is an absurd position that most people outside this country cannot comprehend and regard as complacent irresponsibility.
The right hon. Member for Salford, East touched on the issue of nuclear power and the objective that the Community should aim for 40 per cent. of its electricity generation from nuclear power. In Scotland, a new nuclear 445 power station is to be commissioned at Torness. Before that power station comes on stream, we in Scotland already derive 40 per cent. of our electricity from nuclear power, and the Government are anxious to stoke it up even further. The Minister told us that perhaps he did not wish to object to the 40 per cent. objective. Why do we in Scotland have to be singled out as the only part of the Community that has not only achieved but exceeded that percentage?
Nuclear power is topical at the moment, perhaps regrettably. The nuclear power industry is beleaguered, and everybody I meet in that industry is demoralised and on the defensive. We have established nuclear power stations over the years, and when we embarked on this new nuclear technology, the objective was to get into the peaceful application of a technology that was developed for warlike uses. In the 1950s there was a great deal of enthusiasm for that peaceful objective and a great deal of money was put into it. But after decades of investment in the industry, we have not got the results that we might reasonably have expected from that substantial investment.
Worse than that, it might have been well argued by any Government that, taking a long view, we possibly ought to be in this technology, that by definition oil was a finite resource and that most of our basic energy resources would eventually run out, and perhaps in one or two generations we would inevitably have to make more use of nuclear power.
That argument would be extremely cogent if we were developing British technology, but all that we shall do in the meantime is import American technology with which the Americans themselves are not prepared to continue. Given that we have oil, gas, coal, wind, wave and an opportunity for greater energy efficiency, I cannot understand why we are going ahead with the development of an expensive nuclear power station using imported technology.
§ Mr. James Wallace (Orkney and Shetland)
My hon. Friend has mentioned some of the alternatives open to us. Is he aware that the firm James Howden Ltd. recently won considerable export orders from the United States for wind turbines? Indeed, the development of wind energy in my constituency and other parts of the United Kingdom is showing great potential. In view of the small amount of investment in the development of wind energy compared with the vast amount put into nuclear energy, especially the fast reactor, over many years, would it not be a better investment of public funds if more resources were chanelled into alternative energy sources rather than continually feeding the nuclear energy industry?
§ Mr. Peter Hardy (Wentworth)
I have a great deal of sympathy with the hon. Gentleman's view. I am concerned that, although the Liberal party is usually consistent on this matter, the other half of the alliance appears to take an entirely different view.
§ Mr. Bruce
I am surprised that the hon. Gentleman has the temerity to make such an intervention in the week when the Labour party spokesman on the environment is taking a diametrically opposite view to his party on what is happening at Sellafield.
My position has been, and remains, consistent. I think that, in the long term, we are likely to need nuclear power. However, I wish to make it quite clear that the nuclear industry has had a great deal of investment, but, as yet, has failed to solve many of the problems or to produce the advantages and advances that were promised. If we are not developing British technology—which we will not be doing if we opt for the PWR—it is time that we switched our investment into other areas of energy that show greater potential.
I will go further than that. After the problems at Sellafield, there is a total lack of confidence among the public in the industry's ability to handle reprocessing technology. Against that background, it would be crass foolhardiness to go ahead with the reprocessing facility at Dounreay when there are so many troubles at Sellafield. It will not be possible to persuade the people of Scotland that that development will be in their interests. Indeed, Sellafield should be shut down until there is a full inquiry into its safety.
In the process of forcing the pace, the Government may well endanger the survival of Dounreay as an entity because they will draw attention to the whole industry and its problems. That would be a pity because, as I have said, in the long run we may well need that technology. If we pull out of the development altogether, we may regret it. The Government are not acting as a friend of the industry; they are forcing the pace in a way that is contrary to the clear will of the public. That is both unnecessary and unjustified. Now is the time to call a halt and to put our investment into areas where there will be a much greater productive return.
I do not apologise for taking some time to speak. I feel—although the Government clearly do not—that this is a subject of vital importance that needs to be debated more fully. It is the difference between bankruptcy and survival for this country, yet the Government try to duck and dodge their responsibility, and have done so ever since they came to power.
The market cannot be left alone. There must be some strategic input from the Government about what the right energy mix should be. The EEC, even if we choose to differ on one or two points, acknowledges that a strategic objective is necessary for the Community.
For the Government to come here and make the comments that they have, especially given their record, is a piece of cheek. I, for one, am sick and tired of hearing the Government's explanation for the lack of an energy policy and their unwillingness to acknowledge that in the real world responsible Governments would at least take a responsible view, especially in volatile and uncertain situations where the market can destroy long-term strategic opportunities. It cannot be allowed to take its full toll regardless of any of the implications.
I welcome any opportunity to advance thinking on energy planning. Last week I was at an open seminar organised by the alliance and attended by some people who are not members of any political party but who are actively involved in the energy industry. One person who was anxious to point out that he was not a member of a political party said that we will not get a realistic advance 447 on energy policy and energy planning which will utilise our rich resources until we get rid of this Government. That has to be our objective. Although the Minister will no doubt attack me and try to tear me to bits, I believe that he and his Government are an obstacle to the good management of our crucial resources.
§ Mr. Peter Hardy (Wentworth)
I agree with much of what the hon. Member for Gordon (Mr. Bruce) said, particularly in his concluding remarks. I am glad that I did not attend the alliance seminar on energy policy. Anyone who was not directly involved must have left it in a state of bewilderment, if not political schizophrenia.
The hon. Gentleman was right to deplore the time at which this debate is taking place. The Minister might like to sleep, but he will subscribe to the view that it is in the interests of the Government that serious debates are better held late at night when they escape attention.
It is interesting that the Community can claim to be in sight of the achievement of its 1980 agreed objectives. Possibly they were sufficiently imprecise as to facilitate achievement. My right hon. Friend the Member for Salford, East (Mr. Orme) was right to offer criticism and to suggest that some of the commitments may originally have been too sweeping. Nevertheless, one might view the current state of energy policy in the EC as in some ways being a little more intelligent than our own. The objectives of the EC are imperfect, and perhaps imprecise, but there is a positive aspect to the approach. The document before us demonstrates that on balance it is better to have a policy. Unfortunately, we do not seem to have had any discernible or intelligent policy.
Obviously the Community's assessment is broadly based. We may differ from, and need to challenge, some of the objectives, but I trust that the target of a further 25 per cent. improvement in energy efficiency will be reached. The United Kingdom should make a marked contribution after six years spent largely on brutal reliance upon pricing as the principal determinant of conservation.
One advantage of the Community's approach is that it does not depend upon a hand to mouth response to movements in oil prices. If Her Majesty's Government were to allow oil price levels to determine long-term policy, the national advantage could be enormous. It is timely, therefore, for Europe to maintain the view that imports of oil must be reduced and reliance upon oil must contract. I hope that that view will have some influence upon our Government, because they need, and have needed for some time, to examine urgently their depletion rate and to curtail the now less profitable but still excessive level of oil exports.
It would be stretching charity too far to refrain from commenting that the oil trade, with its too high place in the world oil trade league, has not served us well, since the yield has contributed to short-term requirements, while at the same time our levels of industrial investment have been dreadful.
Investment in coal has been upped and maintained—the Government have frequently boasted about that. That has created an opportunity which logic suggests should be grasped in full to accord with the EEC's objective of maintaining or increasing the share of energy consumption commanded by coal. I am not sure that the Government have fulfilled their obvious obligation to remind Europe firmly of the staggering achievements of the coal industry. 448 The closure of high-cost capacity has created sharp distress in the coalfields, but it has reduced costs. Unfortunately, the Community does not seem to be fully aware of the change.
There is an urgent need for Ministers to correct any wrong impression such as that implied in paragraph 31, which refers to production costs exceeding imported prices. That misconception must be challenged. The Government must stress that the Community cannot expect coal to be produced in Europe at below the price at which it is sold in Europe, which may in turn be below the price at which it is produced abroad. We must insist that some priority is given to indigenous energy and not allow a substantial dependency to develop upon dumped coal from abroad.
United Kingdom coal prices are now not far off, or are, perhaps just about the same as, the cost of imported coal. It must be accepted that that is a substantial achievement and provides grounds for further consideration of the matter in Brussels. At the same time, the point that I made the other day must be strengthened and acted upon. Our French partners must be advised that they cannot pretend to command the diplomatic initiative in deploring conditions in South Africa, while at the same time developing businesses to enhance the trade of South African coal in Europe.
Paragraphs 46 and 53 are very important, in that they relate to the development of technology to show that the environmental impact of fossil fuel combustion can be dramatically changed. For this reason, we should hesitate before indulging in any obsessive concentration on nuclear development. I believe that the economy, the environment and the international interest could be very well served if new coal-fired generating capacity is developed embodying the latest available technology in fluidised bed and low nitrogen combustion, as a sign of good faith to our Scandinavian neighbours, which may well have substantial commercial advantages. That would also assist: the industrial base, which needs orders, and maintain a capacity which would continue to be internationally significant.
Given the wealth of our energy self-sufficiency the United Kingdom does not need to go far along the road towards a 40 per cent. contribution from nuclear power, especially in view of the need to avoid the huge costs involved in such development and the reliance on the present generation of nuclear reactors. As I have said, we must have industrial orders, and a full and vigorous programme of CHP would be welcomed. There should also be further development of renewable reserves, which merit a higher place in the Government's assessments.
The national interest has certainly not been so well served in Britain as in Europe. Too much has been left to market forces. My right hon. Friend the Member for Salford, East recognised this when he reminded us of the astonishing and dreadful ebb of United Kingdom refinery capacity. The figures reveal the stark horror of that decline. In 1979 we produced 77 million tonnes of oil offshore, and we refined 84.5 million tonnes. In the first 11 months of 1985 we produced 117 million tonnes—an enormous increase—but the amount refined in United Kingdom refineries fell to 65 million tonnes. That appalling decline makes a mockery of the oil policies pursued by the Government, who surrendered responsibility and sat supinely by while the effect of cartels developed enormously to the nation's disadvantage.
449 It is time that we expressed a firm view in Europe, but it is also time that we expressed a firm attitude to policies here. If we served our interests as well as Europe seems to have served its own interests, this country would be better off. Perhaps we should emulate the priorities that Europe proposes. It is astonishing that with all the energy self-sufficiency that we enjoy we have become the sick man of Europe while our oil reserves have been extracted to a fantastic extent. In the mid-1970s, or even in the late 1970s, no one could have imagined that Britain would be brought to the sorry pass in which it is now placed. One reason for that is that the Government have demonstrated that they are not competent to operate an energy policy. They have not even tried to follow one.
§ 1.4 am
§ Mr. Michael Welsh (Doncaster, North)
The general point of the document can be summed up briefly. It is that energy should be provided when required at an acceptable cost. It is also important to have a secure supply of resources to stop the threat of shortages that eventually affect the quality of life and undermine the economy. More specifically, the document speaks of strengthening the internal market and transport policy and securing the development of industry and job creation.
I should like to ask the Minister some questions relating to solid fuel, because that is the type of energy with which I am involved. The Commission would like tomaintain and if possible increase, the market share of solid fuelsbecause, since 1973, Community coal production has fallen by 16 per cent. while coal imports have doubled to 20 per cent. That must be considered. The statement seems all right at first, but it could be altered slightly. I hope that the Minister will bear that in mind in Europe in a few weeks' time. I believe that by inserting the words "Community-produced" before "solid fuels", the sentence would be a little clearer and it would satisfy me, if not others. The sentence would then read:maintain and if possible increase, the market share of Community-produced solid fuelsThat is vital for Britain and the coal mining industry. Paragraph 73 of the document shows that Community production has fallen by 16 per cent. The real use of coal has dropped by 5.5 per cent. Why will we allow, as paragraph 29 says:imports of coal … from third countries … to increase"?Is not an increase of 189 per cent. in imported coal during the past 10 years enough? Is that not terribly high for a country that sits on coal? Will the Minister accept paragraph 29, or put it in for discussion?
What effort have the Government made to assist corporations that are trying to develop new technologies which can cope with the tighter environmental standards that we all subscribe to? What has been done to assist those experimenting with coal-water mixtures? That is a vital matter.
In 1980, the Prime Minister attended the Venice summit. Paragraph 12 of the communiqué said:Together we intend to double coal production and use by early 1990".What has happened to that prediction? According to paragraph 80 of the document,Solid fuels will play a key rôle in the electricity sector … the consumption of solid fuels in this sector could increase by 40 million tons of coal equivalent by 1995.450 What measures are being taken to ensure that that is Community-produced coal rather than imported coal? Its source is not stated clearly. That, too, is vital. If no provisions are made, and the majority of the increase goes to imported coal, will the market be in the same situation as in the early 1970s, but relying on imported coal rather than oil? Will we be in a similar position if we do not depend on the production of our own solid fuel?
There are different ways of fulfilling this increase in tonnage, but the only correct way—even though it may not suit the Government's philosophy—is to plan ahead. Coal cannot be obtained overnight. It cannot be produced in a factory. It now takes 10 to 15 years to open a mine. We must therefore plan well ahead. Market forces do not come into it, because without proper planning one cannot produce to satisfy demand. There is nothing wrong with Britain supplying the extra 40 million tonnes in Europe, but that means planning ahead.
Equally, it is no good our saying that we shall increase productivity. There is such a thing as price, and an increase in productivity without an increase in production will solve nothing. In a capital-intensive industry such as mining, increased productivity and decreased production is likely to increase unit costs unless all the capital is written of. Therefore, there must be increased productivity and increased production at the same time so that unit costs are kept down. That is essential.
We should allow the British mining industry to produce more tonnage. If the Government give the industry the money that it needs to invest, it can give Europe all the energy it desires without the necessity of going to the Third world. I hope that the Minister makes those points when he goes to Europe.
§ Mr. Martin Redmond (Don Valley)
I did not intend to speak, but I asked the Minister a question about the objectives of the EEC and the objectives of the United Kingdom. I listened intently to what he said, but he did not answer the question to my satisfaction. Has this debate been a charade, or does the right hon. Gentleman intend to pursue the objectives that he outlined?
If the Government have objectives, they must get shot of market forces. Alternatively, if they allow market forces to dictate to this country, there can be no objectives because market forces fluctuate over the years if not month by month. If market forces are to determine the size and shape of the United Kingdom's energy policy, the Minister must convince me that it is worth while following these EEC objectives.
The only common policy in the EEC seems to relate to agriculture. Perhaps the right hon. Gentleman should have a word with his gaffer to see whether aspects of farming policy can be incorporated into energy policy. If we had such co-ordination, no one would criticise the Government.
I have heard the words "forward planning" on a number of occasions, but I am afraid that it is a foreign language to the Government. They are incapable of forward planning. If they had forward planning, they would not be squandering the oil reserves and other of our energy reserves, but would be making sure that our capacities are used in a planned way without any outside interference from market forces. Will the Minister tell us whether he 451 intends to let the market forces determine our energy policies, or whether he will have objectives to determine the energy policy?
§ Mr. Buchanan-Smith
With the leave of the House, Mr. Deputy Speaker, I shall respond immediately to the hon. Member for Don Valley (Mr. Redmond) by assuring him that the Government are committed to objectives in an energy policy. I thought that I had earlier made it clear that the Government are not, and do not believe that it is common sense to be, committed to a detailed policy in the form of a blueprint. As the right hon. Member for Salford, East (Mr. Orme) said, the objectives laid out at the time of our last debate do not bear comparision with what has happened since then. We subscribe to many of the objectives, but it does not make sense to try to apply a detailed policy.
We pay attention to debates such as this, and the points that are raised will be considered by my right hon. Friend the Secretary of State and myself and, where appropriate, we will make sure that they are represented in the Council of Ministers. A number of detailed points have been raised that I shall want to consider further before the Council meets.
The right hon. Member and the hon. Members for Wentworth (Mr. Hardy), for Doncaster, North (Mr. Welsh) and for Don Valley referred in particular to the problems of the coal industry. This was a subject of another debate, and was dealt with in much more detail by the hon. Member for Midlothian (Mr. Eadie). I know that my hon. Friend the Parliamentary Under-Secretary took on board the arguments and views set out.
We are committed to the objective of utilising properly our indigenous resources—in the European Community we are the country most blessed with them. Here, I refute what the hon. Member for Gordon (Mr. Bruce) said about a lack of strategy. We should not be putting the money that we are into the coal industry, if we did not believe that there was a long-term future for that industry, but, as he and the House know, our resources of coal extend not into decades longer but probably centuries longer than our resources of oil. We should be foolish to ignore that. If the Government had no strategy, we would not be putting resources into coal to the extent that we are, and we would not have the commitment to create a viable coal industry. That is our commitment, and we hope to be able to succeed because we believe that it is in the country's interests to exploit those resources for those who work in the industry in the most effective way possible.
A considerable number of other coal issues were raised, and I assure the House that in the Community we shall continue to stand up for the objectives of our energy policy, as we have in the past, and for the interests of our industry, particularly where funds have been available for development, whether they are of a social or other nature. When attending the Council of Ministers, I have argued to make sure that we get a share of what is available and ensure it reflects the importance and position of the industry. So often, self-sufficiency is considered in terms of oil and gas resources, but coal resources are equally important.
§ Mr. Hardy
I would not challenge that, but many of us are worried about whether the Government are making it clear to Europe that it should respect the advance that 452 has been made in the British coal industry and recognise that it should not require British coal prices, which must reflect the costs of production, to be below the price of coal which is now being dumped in European markets.
§ Mr. Buchanan-Smith
Coal has been discussed at meetings in Europe that I have attended and, although criticism has often been thrown at us about the average production costs of our coal, which by some standards appears to be high, I have been at pains to point out that production costs at our better pits and those under development are well below the European average. Therefore, we can demonstrate that Britain's coal industry has a long-term future and that we shall continue to support it. I take on board the hon. Gentleman's point.
The fall in oil prices is a matter of interest to the Community. It has already been discussed with the Commission. It is interesting that it believes that the position must be watched and monitored but does not consider that any intervention by it would be appropriate at this stage. No doubt that matter will be discussed at the Council of Ministers. As the hon. Gentleman said, one must consider falling oil prices in relation to the effect that that has on the balance of the energy market and on other fuels.
The hon. Member for Gordon dwelt on that subject more than others and he must remember, as other hon. Members do, that Britain is not only an oil-producing nation; we are a considerable energy-consuming nation and a considerable oil-consuming nation. One of Britain's most dramatic experiences was the hike in the oil price in the 1970s. It triggered off the world recession and Britain's trade and economic difficulties. People do not understand that a fall in the oil price is bad but that equally, as a consumer country, that brings benefit to many of our industries. It can bring benefit to employment and to consumers, domestic and otherwise.
If one adopts the view that I regret the hon. Member for Gordon largely takes, that Britain is a producer country, that is to forget and ignore an important consumer interest. Britain and Norway have exactly the same view on this and their interests are not the same as those of the OPEC countries. Of course, we have informal contacts with individual OPEC members. There always have been and they continue. But to have any kind of formal dealings with OPEC in the way that the hon. Gentleman suggests would not be in the best interests of Europe or Norway. The Governments of both countries agree about that.
§ Mr. Buchanan-Smith
My right hon. Friend and I met the Norwegian Minister during his visit yesterday to London, as was reported in today's newspapers. There is no difference in policy between Britain and Norway.
§ Mr. James Wallace (Orkney and Shetland)
The right hon. Gentleman said that Britain was also an oil-consuming nation and that consumers can enjoy advantages from a fall in oil prices. Does he agree that it would be regrettable if the Government sought to recoup some of the lost revenue resulting from decreased oil prices through increases in the duty on petrol greater than the increase as a result of index linking?
§ Mr. Buchanan-Smith
I do not think that that will be a matter for the Council of Minister's when it meets in March. I have no doubt that my right hon. Friend the Chancellor will receive much advice on this and other matters between now and Budget day.
The hon. Member for Gordon disagrees with the policies of this Government and the previous one in going for a fast rate of exploration and development of our resources. I make one point to the hon. Gentleman that was made in a recent letter to a newspaper—we have at least had the benefit of much of the oil produced over some years at a high price. Most importantly—unfortunately, the hon. Member for Gordon does not recognise the importance of this, but I note it from a constituency point of view—we have seen the development in Britain of the supply industry, providing the goods and services that the oil companies and industries require.
§ Mr. Buchanan-Smith
I shall come to that.
Britain's industry is competitive with the rest of the world in a way that Norway's industry is not. Without our policies, we would not have had those benefits. I have no doubt from talking to the oil companies and the supply industries that they do not disagree with the policy that this Government and the previous Government have followed.
§ Mr. Bruce
Of course I recognise the benefits we have had. Two points arise from that. First, if it was right for us to sell when the price was high, is there not an argument for holding back when the price is low until the price recovers? I recognise that the supply industry has benefited. Secondly, if the price collapses and stays down at $11 or $12 a barrel, might that not depress the industry's prosperity?
§ Mr. Buchanan-Smith
The hon. Gentleman has not begun to understand what the oil industry is all about. Does he not realise that the oil industry made development plans, undertook exploration and invested billions of pounds on the understanding that the Government would not interfere in the commercial decisions the firms took? That has been the recognised policy from the beginning. If it is changed, we shall destroy one of the great assets we have in the North sea—policy stability. That means that there is little doubt that, no matter how serious conditions in the oil industry world wide become, our offshore industry will be attractive. I know from my contacts with the oil industry—I am sure that they do not differ from the contacts of the hon. Member for Gordon—that the United Kingdom's offshore industry is the most attractive in the world, not least because of our policies.
I urge the hon. Member for Gordon to consult more closely with the supply side of the industry and the oil companies. I think that he will find that there is little support for the type of policies which he sought to advocate and which I do not believe will be in the interests of Britain.
§ Mr. Redmond
During the discussions with the Norwegian Minister, did the right hon. Gentleman discuss the sale of Norwegian gas to Britain?
§ Mr. Buchanan-Smith
So far as I know, Norway does not yet intend becoming a member of the European Community. Therefore, I do not think that that subject will arise at the meeting of the Council of Ministers.
454 I was interested in what the hon. Member for Gordon said about nuclear power. I think that the House and those outside will take note of the ambivalent attitude of the hon. Gentleman towards that. He tried to draw credit to Scotland by saying that Scotland has a higher percentage of nuclear generation than the rest of the United Kingdom and that it was much closer to the European objective, but he failed to say that that is one of the reasons why electricity in Scotland has tended to be cheaper than in other parts of the United Kingdom. There is no doubt that for both industrial and domestic consumers in Scotland that has been an advantage. I hope that industrial and domestic consumers in Scotland will note that the hon. Gentleman is against an extension of electricity generation which is to the benefit of consumers in Scotland.
Perhaps what is most significant is that the hon. Member for Gordon is opposed to Sellafield and supports the closure of that plant on the north-west coast of England. I take note of that and I hope that those outside the House also take note. I shall say no more than that.
The right hon. Member for Salford, East raised a number of points, and I apologise if I have not covered all of them. Some of them are certainly important. I acknowledge what he said about energy efficiency. It is correct that our objective of 20 per cent. is a little lower than the European objective and over a slightly longer time scale, but we believe that this country can achieve its aim. It is certainly an objective which my right hon. Friend, myself and my colleagues in the Department of Energy will pursue with considerable vigour.
The hon. Gentleman also raised the subject of refineries. That concerns me because in Britain we have carried through a degree of rationalisation in the refinery industry which is as great as that which has taken place in almost any other country in Europe. One or two other countries which came slightly later to this area are having to carry that through now. That policy has been painful, particularly for jobs in certain areas, but it means that we have a more viable industry which is better able to compete in a very competitive world market.
I am concerned about the threat of competition from imports of petroleum products from the middle east. We have discussed that in a relevant European context. It is important that we work with our colleagues in Europe and with our colleagues in the International Energy Agency to ensure that we meet any challenge fairly and share the burdens with our partners in Europe and in the IEA.
We have had a useful debate. I have not covered all the points. As the hon. Member for Wentworth (Mr. Hardy) said, there is an element of schizophrenia in the discussion. I am criticised for my earlier remarks because it appeared that I was picking what suited Britain and leaving out what did not and yet I am told to stand up for British interests and ensure that the interests of British industry are properly represented. I believe that that is right. I worked for four years in agriculture and, as I said to the hon. Member for Don Valley, my experiences there do not encourage me to seek an extension of similar policies to energy.
I assure the House that, where the objectives are in the interests of Britain and in the broader interests of Europe, we shall support them. At the same time, it is important fully to represent Britain's interests because of the importance of our energy industries to our interests which are not necessarily the same as the interests of other countries in Europe.
§ Question put and agreed to.
That this House takes note of European Community Document No. 7163/85 and endorses the adoption of new Community Energy objectives for the period to 1995 as references for the guidance of Member States.