Mr. Gerald Kaufman (Manchester, Gorton) (by private notice) : To ask the Secretary of State for Foreign and Commonwealth affairs if he will make a statement on Government policy towards South Africa following the release of Nelson Mandella.
The Minister of State, Foreign and Commonwealth Office (Mr. William Waldegrave) : We warmly welcome the release of Nelson Mandela. He symbolises the aspirations of millions of South Africans for a non-racial democratic South Africa.
Since Mr. de Klerk became president, he has transformed the policy of the South African Government. He has initiated a series of steps including the commitment to abolish much of the remains of so-called petty apartheid, the unbanning of political organisations and now the release of Nelson Mandela. All these steps have been demanded time and again by the British Government, by the international community and by the House. Taken together, they create a completely new climate in South Africa--a climate in which dialogue can begin about the massive task of dismantling apartheid peacefully. This new climate presents a decisive challenge to those, black and white, who wish to maintain the old orthodoxies of confrontation.
We urge the African National Congress, the Pan-Africanist Congress, the Inkatha movement, the various white parties and all other political organisations in South Africa to rise to this challenge, end violence, and enter negotiations.
It is vital to send a signal to the white community that President de Klerk's steps will find a response from the international community. That is why the British Government believe that it makes sense to stop discouraging investment and tourism in South Africa.
Mr. Kaufman : Is the right hon. Gentleman aware that, having consistently called for the release of Mr. Nelson Mandela for many years, we in the Labour party express our profound satisfaction that he is no longer in prison? We emphasise that he should never have been in prison in the first place. We welcome his release and other recent steps taken by President de Klerk. We trust that successful negotiations will soon begin to bring about a South Africa with a vote for every man and woman on a common roll.
Is the right hon Gentleman aware that although Mr. Mandela is no longer in prison, he is not a free man? He cannot live where he chooses. He has no vote. For him and for the rest of the non-white majority in South Africa, that country continues to be a prison and it will be until apartheid and the police state are completely dismantled.
Does the Secretary of State recollect the Commonwealth Heads of Government meeting in Kuala Lumpur last October.? The Prime Minister signed up--to use her phraseology--a statement which affirmed that the :
"justification for sanctions against South Africa"
"to abolish apartheid by bringing Pretoria to the negotiating table and keeping it there until that change was irreversibly secured". As that objective to which the Prime Minister put her signature has clearly not been achieved, how can she call
Column 22for relaxation in sanctions--particularly the ban on direct investment, to which the right hon. Gentleman has referred? Is not the right hon. Gentleman aware that the ban has been responsible for one third of the 100 billion rand of losses to the South African economy caused by sanctions over the past four years? It is by far the most effective sanction. Is not that precisely why the Prime Minister wants to end that sanction?
Mr. Mandela has called for sanctions to be maintained. Should we trust the British Prime Minister, whose every action has been to prop up apartheid, or should we pay heed to Mr. Mandela, who has given more than 27 years of his life fighting the injustice of apartheid? The world has made its choice, and that is why the Prime Minister is isolated in the United Nations, isolated in the Commonwealth and isolated in the European Community. It is no thanks to her, but with all thanks and praise to Mr. Mandela and the millions of other Africans fighting for justice, that apartheid is doomed and will be destroyed.
The sanctions that were introduced in 1986--and some of them will continue- -by the European Community were aimed explicitly at bringing about a national dialogue. Mr. Mandela has said that he believes that national dialogue is liable to begin within days. If we do not recognise the courage behind the steps that have been taken--and that I hope will be taken, in response, by the other side--we would not be doing the right thing. The House is owed an explanation by the right hon. Member, on behalf of his party, whether its policy is to step up mandatory sanctions. If that remains its policy, Opposition Members are, as usual, completely out of touch.
Sir Peter Blaker (Blackpool, South) : Is my right hon. Friend aware that there is a lot of support from Conservative Members for what he has said, and especially for his welcome for the release of Mr. Mandela?
If we hope for the survival of Mr. Gorbachev should not we equally hope for the survival of Mr. de Klerk, as long as white majority rule continues?
Does my right hon. Friend agree that the Opposition appear to be too obtuse to understand that there is a serious danger of a Right-wing backlash from some elements of the white
population--possibly among the Afrikaners or even among the security forces, which could be accentuated if there is no recognition given by the outside world to the dramatic and imaginative steps that President de Klerk has announced?
Mr. Waldegrave : I entirely agree with my right hon. Friend, and I find it depressing that the right hon. Member for Manchester, Gorton (Mr. Kaufman) has used his eloquence to try to get a dialogue going in the Arab- Israel conflict, and has expressed enthusiasm for and welcomed the Soviet Union into the community of nations, but he is so blinkered that he cannot see the window of opportunity here, and the possibility for real progress in South Africa. To let that slip by sticking in the old tired positions would be a terrible waste of opportunity.
Column 23simply appalled when we found that the first words that the Prime Minister could bring herself to utter on the momentous release of Nelson Mandela were about increasing British investment in South Africa? Will he try to get her to understand that the best way to secure British investment in South Africa is to pay more attention in future to the views of the ANC and other movements that are pressing for the future of democracy in that country? While President de Klerk is, of course, to be congratulated on the brave steps that he has taken, does the Minister accept that South Africa cannot be treated as a normal state until the legal entrenchment of apartheid is lifted?
Mr. Waldegrave : The right hon. Gentleman is wrong on one point. The Prime Minister's first words were an expression of delight ; which, I am sure, is shared by all hon. Members ; at Mr. Mandela's release. The right hon. Gentleman is quite right to say that South Africa is at the beginning of a long process. We say that surely we must recognise--as we are trying to do in relation to the Soviet Union and the Palestine Liberation Organisation--that those who wish to sit down and negotiate need our support. If we do not provide any response at all the right hon. Gentleman will surely blame us when the white backlash sweeps de Klerk away.
Mr. Tim Rathbone (Lewes) : While recognising that risk and the reality of what my right hon. Friend says, may I ask him whether he should not differentiate between the relaxation of some sanctions now unilaterally by Britain and the encouragement worldwide of doing away with sanctions overall? The Government have made subtle and positive contributions to bringing about what has happened in South Africa. Can my right hon. Friend assure the House that the Government will continue their subtle handling of this matter?
Mr. Waldegrave : My hon. Friend is right. Those who are opposed to dialogue in South Africa know very well the position of the British Government. That is why white extremists have been shooting at the British embassy in Pretoria. As my hon. Friend says, our approach remains careful and, I hope, subtle. We want to see de Klerk's position strengthened because, as Mr. Mandela has said in the most eloquent language, de Klerk stands honourably for dialogue.
Mr. Robert Hughes (Aberdeen, North) : On this momentous occasion of historic importance, which has brought great joy to millions of people throughout the world, will the Minister reflect on what has been happening over the weekend in relation to Government policy? Does he recognise the great hand of reconciliation that has been offered by Nelson Mandela? Does he recognise that the pillars of apartheid remain in place and that Nelson Mandela has said that until those pillars are substantially removed and there are substantial negotiations, sanctions must stay? Instead of always talking about offering carrots to President de Klerk, what about offering a little comfort and support to the people of South Africa instead of the contemptible, craven attitude that we get from the Dispatch Box?
Column 24have been reaching out for reconciliation. The steps that we have taken are to support that process and I am sure that we are right so to do.
Mr. Carlisle : Does my right hon. Friend agree that Mr. Mandela's support for the continued armed struggle is a chilling reminder that, regrettably, violence is still a part of African National Congress policy? Does my right hon. Friend agree that the lifting of sanctions will ensure the prosperity of the black South African and that it is only under such conditions that the world can reasonably hope for peaceful reform and meaningful change?
Mr. Waldegrave : At his press conference this morning, Mr. Mandela spoke about the need for peace and said that he foresaw dialogue soon. We should surely concentrate on what he is saying and on such elements of the present situation. We should be seeking to support that hope of reconciliation.
Will the Minister explain why the Prime Minister has simply refused to recognise that the pressure of the international community and the liberation movement in South Africa brought about the release of Nelson Mandela and the removal of the ban on the ANC? Will he make the strongest possible representations to the South African Government on how their security forces are completely out of control? Many of its members, perhaps the large majority, are clearly sympathetic to the forces of the ultra- Right and the Nazi terror groups that want to assassinate Mr. Mandela and refuse to recognise the advances that must be made in that country.
Mr. Waldegrave : The hon. Gentleman is well known as a spokesman for consensus and moderation. He is right that the Government have found it necessary--with, I am sure, the support of the House--to make protests again and again about the behaviour of the South African security forces. The hon. Gentleman was not fair in his remarks about yesterday's events. Mr. Dullah Omar, one of the pricnipal organisers for the Mass Democratic Movement at the large march and demonstration yesterday, did not blame the police for the violence that occurred. He said that he was not satisfied with the security arrangements made by the organisers.
Mr. Julian Amery (Brighton, Pavilion) : Does my right hon. Friend agree that the South African Government could not have run the risk of releasing Mr. Mandela--his release is welcome--if President Gorbachev had not withdrawn his support for militant revolutionary forces in central and southern Africa? Will he congratulate my right hon. Friend the Prime Minister on the contribution that she and former President Reagan made by standing up to the imperialist advance in Africa which has been halted? Thanks to its being halted, the chances of fruitful dialogue have increased.
Column 25Union has contributed--many other things have also contributed--to the change in atmosphere. We are well aware that the advice of the Soviet Union to the ANC, the South-West Africa People's Organisation and other organisations in southern Africa has been to seek dialogue and peace.
Mr. Stanley Orme (Salford, East) : Will the Minister reconsider his remarks about the white backlash sweeping away President de Klerk? Should not he be more positive in his approach to the liberal whites and the black majority in South Africa? Were not his earlier remarks very unfortunate?
Mr. Waldegrave : If I spoke with urgency, I meant it. The person who is under most immediate pressure from his constituency is President de Klerk, which is why it is right that we should signal to him that there are benefits for his constituency in going down the road to peace and dialogue.
Mr. Nicholas Soames (Crawley) : Will my right hon. Friend encourage, in every international forum that he attends, a full and generous response from the international community to the fundamental changes that have taken place in South Africa, and which need to take place in the future? Does he agree that the hopes and aspirations of the black community in South Africa will be best served by peaceful and steady reform and not by a headlong rush into what may be a very dangerous period?
Mr. Waldegrave : The challenge facing all sides is to transfer the most powerful economy in Africa to its rightful owners--all the people of South Africa--under a proper constitution and without revolutionary chaos in the process. I agree with what my hon. Friend said about that. The steps that have been taken by Mr. de Klerk, which have transformed the situation away from the simple certainties of the past few years and to which we are already seeing a response from Mr. Mandela, deserve our wholehearted support.
Ms. Diane Abbott (Hackney, North and Stoke Newington) : Is the Minister aware that it will have been noted that he went out of his way to praise the courage of President de Klerk but said nothing about the courage of the tens of thousands of people who struggled for a generation to bring about yesterday's historical event? Is the right hon. Gentleman aware that the Prime Minister is widely regarded in this country and abroad as a fifth columnist for apartheid? In her headlong rush to drop sanctions before there has been a word from de Klerk about bringing down the fundamentals of apartheid and about one person, one vote, is not she--like collaborators and fifth columnists throughout time--exposed as redundant, marginal and out of step?
Mr. Waldegrave : I do not agree with the extravagance of the hon. Lady's language. The importance of the events in South Africa should not be underestimated. It is easy to imagine this opportunity being lost because we do not rise to the scale of the events but stick to the old rhetoric-- that is the danger which faces us. My right hon. Friend the Prime Minister is as determined as any of us in the House to see the destruction of apartheid. We need, therefore, to get negotiations under way quickly, and that is what Mr. de Klerk is doing. Hon. Members have paid tribute many times to those who have suffered and who continue to
Column 26suffer under apartheid. It is worth thinking of those people in South Africa who are not alive today and who could have contributed to this process of peace. If Mr. Steve Biko were alive today, he would contribute to the process of reconciliation and negotiation.
Mr. Cyril D. Townsend (Bexleyheath) : I welcome the call by my right hon. Friend the Foreign Secretary for a measured response to this historic event. That response should be co-ordinated to the maximum extent with our European Community partners, the Commonwealth and, in particular, the United States, which has taken a strong line on sanctions. Does my right hon. Friend agree that sanctions were imposed not for the release of one distinguished and courageous leader from prison but to help bring down a system that was seen as unjust by the international community?
Mr. Waldegrave : My hon. Friend is right--the objective of the House and of the world is the destruction of apartheid. It is vital to get negotiations going. In 1986, the Council of Ministers reaffirmed "the urgent need for a genuine national dialogue"
in South Africa and proposed various sanctions to bring that about. We believe, as Mr. Mandela clearly believes, that that national dialogue is about to begin.
Several Hon. Members rose --
Mr. Speaker : Order. I remind the House that this is a day for private Members' motions and that an important statement is to follow this private notice question. I shall call two more Members from each side, and then I am afraid that we must move on.
Dr. Dafydd Elis Thomas (Meirionnydd Nant Conwy) : The Minister of State referred a number of times to giving "signals" to the present regime in South Africa. Is not the concern throughout the House, including that of the hon. Member for Bexleyheath (Mr. Townsend), about the fact that the Government are contributing to confusing signals? As the right hon. Gentleman is a strong advocate of a common foreign policy in the European Community, will he assure us that the British Government will not take a position with the Council of Ministers whereby it seeks to withdraw any sanctions at this stage? Does the right hon. Gentleman accept that there is no parallel between the democratic movement in central and eastern Europe and the changes in South Africa? The South African regime is based on institutional racism. That is qualitatively different from any other lack of democracy worldwide.
Mr. Waldegrave : The lack of democracy in Stalinist Russia was built on institutionalised persecution of the population by a so-called vanguard. The institutional racism of South Africa is an equal or greater evil. Both are evils, and we should welcome the destruction of both.
The hon. Gentleman asked me about the European Community. We will discuss these matters with our partners, but we do not believe that it would be right at this moment to send no signal to the South African Government.
Sir Ian Lloyd (Havant) : I give the warmest possible endorsement to my right hon. Friend's analysis and the sentiments that he expressed. Does he agree that the three greatest dangers now are the extremism of the extreme Right, the extremism of the extreme Left and the
Column 27extremism of the extremely stupid? In the light of the analysis of sub-Saharan Africa in the recent report of the World Bank, would not it be extremely stupid to go along the lines suggested by Mr. Mandela and strengthen sanctions when, as my right hon. Friend said, the South African economy is the powerhouse of the whole of sub-Saharan Africa? That is what we must now recognise and support.
Mr. Waldegrave : I find my hon. Friend's analysis rather attractive. The present circumstances have their parallels : the extremists on both sides sometimes end up in the same position. I have never been able to understand why it should be thought that damaging the economy of South Africa further would bring about any progress at such a juncture.
My hon. Friend asked about Mr. Mandela and sanctions. Mr. Mandela has made it perfectly clear that he is a loyal member of the ANC, and the view that he has expressed is ANC policy. No one imagined that he would change ANC policy overnight, and there was no surprise whatever when he took the stance that he took.
Mr. Tony Benn (Chesterfield) : Is the Minister aware that the Prime Minister's view--reflected in his answer--is open to a wholly different interpretation : that apartheid is a system of economic exploitation, made possible by the denial of political rights, and that the profits from it accrue to foreign investors, many of whom live in this country? The Government's opposition to sanctions has been motivated more by a wish to preserve the economic interests of their business friends than by any interest in the Africans themselves.
Mr. Waldegrave : Not for the first time, the right hon. Gentleman has the wrong conspiracy theory. If he wants to examine the way in which economic pressures are affecting the position, he should recognise that it is perfectly clear that those who want dialogue and fundamental change in South Africa are now to be found among South Africa's business community. They know that without the use of all the country's resources--including both blacks and whites--the economy will begin to be damaged, and they are a force for progress.
Mr. Michael Knowles (Nottingham, East) : Let me follow up what my hon. Friend the Member for Havant (Sir Ian Lloyd) said about the World Bank report. There is only one democratic country in the whole of Africa, and that is Botswana. We can see Namibia becoming independent next month, and we have high hopes of freedom in South Africa. Will the British Government then press for the abolition of the one-party state in Zimbabwe, Zambia and Tanzania?
Mr. Waldegrave : The World Bank report makes depressing reading. The great prize in southern Africa is a peaceful transition of Africa's most powerful economy to its proper ownership--ownership by all South Africa's people. We believe that Mr. Mandela wants that, and that Mr. de Klerk is entering on the great task. We welcome what Mr. de Klerk has done, and for that reason we support him.
The Secretary of State for Energy (Mr. John Wakeham) : With permission, Mr. Speaker, I should like to make a statement about electricity privatisation, the publication of the draft regulatory licences for the industry and the non-fossil fuel obligation. Good progress continues to be made in preparing the electricity supply industry for vesting on 31 March. The House will be aware that the second commencement order under the Electricity Act 1989 was made at the end of January. Today I am taking another important step towards completing the restructuring of the industry.
I have today made available to the House copies of revised drafts of the licences to be issued to the successors of the Central Electricity Generating Board and area electricity boards, which were initially published on 10 January 1989. The revised drafts take account of the commitments made during the passage of the Electricity Act, and of consultations since the original drafts were published. Other licensees will receive licences based on those drafts, but tailored to their particular requirements. Regulations are being laid today setting out how to apply for a licence and the details of the application procedure. The exemption order identifying those who will not require a licence is also being tabled today.
The principal changes in the draft licences published today are in the conditions dealing with price control, security of supply and the transition to a competitive market. The revised conditions are explained in detail in the explanatory notes that accompany the licences.
The average price for all customers supplied by the public electricity supply companies will be controlled by an RPI X Y formula, where Y represents the actual costs to the companies of purchasing the electricity supplied. Customers taking more than 1 MW will benefit from the competition in supply that will be introduced by privatisation. I expect many of them to enjoy price reductions. It may take some time for customers to gain experience of the market and negotiate terms. I have therefore sought an undertaking from the industry that it will use its best endeavours to offer a one-year real price freeze to customers taking more than 1 MW.
Customers taking less than 1MW will benefit from an addition to the price control. Although the industry has yet to propose a final figure, I see no reason why the average price to these customers should rise by much more than the current rate of inflation this year. The price control should prevent any further real increases before the end of March 1993. Indeed, the public electricity supply companies could well be able to offer some real price reductions to these customers in this period.
I believe that the combination of these controls will be more effective than the yardstick price control proposed in the original draft licences. Altogether I do not expect the average price for all customers to rise in real terms this year.
All these expectations on prices allow for the effect of the fossil fuel levy, which I intend to set for 1990-91 at a rate of 10.6 per cent. on the value of final sales. I expect the rate of levy to decline significantly over the next eight years. I shall shortly be laying regulations under which the levy will be established and collected.
Column 29I also intend to lay at the same time an order setting the initial non-fossil fuel obligation for the public electricity supply companies. The intention of the obligation is not only to ensure that existing and committed nuclear plant in England and Wales is contracted for ; it is also to encourage the development of commercial renewable energy sources. Around 300 projects have been put forward to the area boards in response to that policy. The Government have been extremely encouraged by this response and wish to ensure a full contribution from renewables to the NFFO. Given the size of the response, it has not been possible to assess all those projects fully by the time the initial order needs to be made. Accordingly, the initial order will cover only nuclear capacity. I intend to allow a further two months for the area boards to complete their negotiations with renewable operators and I shall then lay a second order relating specifically to renewables. That will ensure that renewables projects can be assessed fairly and a proper contribution obtained.
The initial order will, therefore, amount to some 8,000 MW or so in total for the period 1990-91 to 1997-98. As I told the House on 9 November, the Government will review the prospects for nuclear power in 1994. Decisions about the level of the obligation beyond 1998 will be taken then.
Returning to the licences, the conditions on security of supply have been amended to ensure that all suppliers meet the current standards of security, except where their customers choose otherwise. Suppliers may meet that condition by becoming members of the new electricity trading pool that is being established since the price of electricity in the pool will include a capacity charge that reflects the value of secure supplies to customers. Suppliers will have economic incentives to ensure that sufficient generating plant is available. I believe that that approach will provide secure supplies more effectively than central planning by a monopoly supplier. As for competition in supply, the licences now incorporate provisions to implement the decisions announced on 29 September 1989. Those provide for an orderly and stable transition to a fully competitive market by allowing other suppliers to compete with the area supply companies for customers taking more than 1 MW at the outset, for customers taking more than 100 kW after four years, and for all customers after eight years.
The licences, therefore, contain corresponding transitional constraints on the premises that such competitors can supply. If they apply for licences to supply customers falling within those restrictions, I will look to the Director General of Electricity Supply to advise me on whether such licences should be issued. Although I shall be disposed to act in accordance with the restrictions announced on 29 September, I accept that I will need to exercise discretion to deal with particular circumstances that already exist or may arise. Such cases will be considered on their merits. The licences also contain transitional limits on the extent to which National Power and PowerGen can engage in direct sales to enable competition in supply and new supply arrangements to develop. The arrangements that I have set out today mark the successful achievement of another stage in this privatisation. When the new companies are vested on 31 March, this country will have the most competitive electricity supply industry in the world. I know that those in the
Column 30industry are keen to be privatised to respond to the new challenges and to rid themselves of the dead hand of the public sector. I am sure also that the public will welcome the benefits of competition and will seize the opportunities to invest in the new companies.
Mr. Frank Dobson (Holborn and St. Pancras) : I thank the Secretary of State for his statement. I realise that my first point is not a matter for him, but will he confirm for the benefit of my Scottish colleagues that a statement on what is to happen to the electricity industry in Scotland will be made in the House?
The Secretary of State told us about his amazing RPI X Y formula, but there must be a more important definition of Y. Everyone in the country will want to know why it is necessary for there to be any electricity price increases. Will he confirm that price increases are quite unnecessary and are needed only to fatten up the industry for privatisation? Is it not the case that, over the past three years, coal prices have gone down by 6 per cent., electricity prices have gone up by 12 per cent., the generating board's profits have gone up by 90 per cent., and the new coal contract envisages further reductions in the price of coal? So why is it necessary to have any price increases for consumers?
The Secretary of State is an accountant and he is usually fairly precise, but his statement was rather vague about price increases to be faced by major industrial consumers in particular, such as the special steels industry, the chemicals industry and paper and board mills. Will he guarantee that he will not handicap those companies by enormous price increases in the run-up to 1992? What will be the increases for domestic consumers in future years?
Will the Secretary of State confirm that a nuclear levy of 10.6 per cent. means that nuclear power costs must now be at least 40 per cent. more than the cost of electricity produced at conventional stations? If that is the case, why does he insist that the most expensive stations on the system provide the base load while the cheapest power stations on the system are not run all the time? Surely that is the reverse of common sense.
I hope that the Secretary of State will forgive my colleagues and me if we do not comment on the licences, because we have had the details only since 3 o'clock and we have not had an opportunity to consider them in detail. However, do the licences place an obligation to supply upon the two main generating companies? If not, how can there be any guarantee of security of supply? Will the licences promote energy conservation by the distribution companies? Will they require the generating companies to install equipment to clean up flue gases, or is there truth in the rumour that the right hon. Gentleman is allowing the generating companies to wriggle out of their obligation to clean up flue gases? In other words, is it true that he is willing to accept them continuing in their present dirty ways, as they have for the past two decades, to make the industry more attractive to private purchasers?
We welcome the news that there are many applications for renewables, but will the Secretary of State reconsider the position and allow combined heat and power to be included in that category, and thus give it the boost that it needs?
Finally, will the Secretary of State confirm that everything in his statement amounts to his putting privatisation first, and that the interests of industrial consumers, the balance of payments, the environment and
Column 31domestic consumers are all being put second to the requirement that has been placed on him by the Prime Minister, which is get the industry sold off as quickly as possible?
Mr. Wakeham : The hon. Gentleman asked me 10 questions. He is right that his first question--about Scotland--is a matter for my right hon. and learned Friend the Secretary of State for Scotland, and I shall certainly put it to him.
The hon. Member then talked about price increases and about fattening up the industry for privatisation, as he put it. He must make up his mind fairly soon about whether we are fattening up the industry for privatisation or selling it for a song. The fact is that we are doing neither. We intend to privatise the industry at a proper and fair price. If the hon. Gentleman had listened to what I said about price increases, he would have heard me say that I did not expect that on average there would be any price increases in real terms and that prices would stay the same in real terms. I shall not quote the Labour party's record on electricity prices as there are plenty of other questions to answer.
The hon. Gentleman asked me not to be vague about large users of electricity. I certainly shall not be vague and I have said that I expect the industry to offer terms to the large users and to any user over 1MW of consumption and to keep the price increases to the RPI for the current year. Thereafter, they will be in a position to negotiate freely for prices within the market and I know that a number of them are already setting about that task.
The hon. Gentleman's fourth question related to domestic prices. I have said that customers below 1 MW will have the benefits of the overall price control and of regulation. I see no reason why their prices should increase by much more than the rate of inflation this year, although the area boards have not yet made their proposals. The price control formula will ensure that price rises are limited so that there will be no real increase in prices for the next two years. As I have said, they are maximum figures, and the area boards could well do better for many of their customers.
With regard to the fossil fuel levy that I announced, the hon. Gentleman is misleading the House if he states that it is an additional impost on electricity consumers. Consumers pay for the cost of nuclear power in their bills at the moment. The levy simply brings the matter out in the open, as set out in the Electricity Act 1989, and there will be no increase in the price of nuclear power as a result of the change. The levy will still be there, but, at 10.6 per cent., it is less than a lot of people thought, and it will decrease over the next eight years.
On the question of the obligation to supply, or the security of supply, I believe that the present arrangements under the Electricity Act are better than the previous bureaucratic arrangements of the Central Electricity Generating Board. Under the Electricity Act, the area boards are required to offer terms to any customers in their area and that offer will be backed up by the licensing conditions and by stiff financial penalties. Therefore, they will have a clear legal obligation to contract for sufficient supplies to meet the requirements in their areas.
The hon. Gentleman is right to raise the important matter of energy conservation. He should remember that over the past 10 years there has been a substantial
Column 32improvement in energy efficiency in Britain. While there has been a 20 per cent. increase in gross domestic product, we have used the same levels of energy. We expect that to continue. It is very much in the consumer's interest to pursue improvements in energy efficiency. Several proposals in my statement will improve energy efficiency further. First--
The overwhelmingly important factor in efficiency of energy consumption is to create competition in generation. The area boards will have a responsibility to encourage energy efficiency and will draw up codes of practice.
The Government stand by their commitment to ensure that the European convention on flue gases, to which we are signatories, is met. Proposals will be made to do that in the most effective and efficient way possible. Negotiations on the most effective way will include desulphurisation retrofitting of electricity stations. In some stations, it will not be necesary because of the planned changeover to gas. Negotiations with the industry are being held now. I confirm that the Government are fully committed to the European directive. The industry will be fully committed to any environmental matters that arise out of the Environmental Protection Bill currently going through the House.
The hon. Member for Holborn and St. Pancras asked me about renewables and combined heat and power procedures. We did not include CHP power stations in the renewables. We believe that CHP proposals can provide some of the most efficient forms of electricity generation. There will be a great incentive for builders of electricity generating stations to use those principles wherever appropriate. In the initial period, most CHP proposals will come within the proposals for own-generation, which will be free of the fossil fuel levy. Builders of power stations will benefit from that. The hon. Gentleman is wrong about privatisation. The purpose of privatisation is to provide customers with a better deal by encouraging competition in electricity generation. It can be seen from the date of my statement that that has already begun. At the end of the transitional period all consumers will benefit.
Several Hon. Members rose
Mr. Speaker : Order. The House knows that I always endeavour to look after the interests of Back Benchers and give them at least as long as Front-Bench Members. However, I ask hon. Members to put their questions succinctly so that we can get on with the business set down. This is a private Members' day.