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House of Commons

Monday 25 February 1991

The House met at half-past Two o'clock


[Mr. Speaker-- in the Chair ]

Oral Answers to Questions


Electricity Privatisation

1. Mr. Viggers : To ask the Secretary of State for Energy if he will make a statement on progress on the privatisation of the electricity industry.

The Secretary of State for Energy (Mr. John Wakeham) : Following the successful flotation of the 12 regional electricity companies with a total value to the taxpayer of around £8 billion, we are now proceeding with the sale of the two generating companies. I announced on Friday that the total value to the taxpayer of National Power and PowerGen would be more that £4.3 billion. This share offer has now been successfully underwritten. The offer will close on 6 March and dealings will commence on 12 March. The total value of the businesses comprising the electricity supply industry of England and Wales of more than £12 billion makes it by far the largest privatisation ever undertaken in the United Kingdom.

Mr. Viggers : I congratulate my right hon. Friend on the great skill with which he has undertaken these privatisations. In connection with the regional electricity companies, is not the most pleasing feature the fact that 98 per cent. of eligible employees have taken up shares and become shareholders? I also congratulate my right hon. Friend on the skilful and sophisticated arrangements that he has put in hand for the underwriting of the generating companies for privatisation. There have already been signs of innovative thinking by the electricity industry and, in the long run, will not the beneficiary be the consumer?

Mr. Wakeham : I agree with my hon. Friend that one of the main purposes of privatising these industries is to bring new thinking into the way they operate. I also agree that one of the pleasing things has been the way in which the employees have taken shares in the company, and many of them are continuing to hold those shares. That is satisfactory.

Mr. Haynes : I want to know what is going on. I think that the Secretary of State had better have a look at this privatisation of the electricity industry. What about the prices that these people are charging? I thought that the aim of privatisation was to look after the consumer, but consumers in my area are getting a right belting on prices. Is it not high time the Minister had a look at this, or he will not be coming to the Dispatch Box any longer?

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Mr. Wakeham : The hon. Gentleman and I obviously read the same newspapers, but the companies have not yet made their proposals for price increases. When they have, they will have to justify them to the regulator, who I know will be looking at them closely.

Mr. Rost : Will my hon. Friend confirm that, as a result of privatisation, the vast overwhelming number of commercial and industrial customers are already getting lower electricity prices than they were a year ago, before privatisation, thanks to competition and the ability to shop around?

Mr. Wakeham : My hon. Friend is right. The vast majority are paying lower prices as a direct result of the competitive nature of the regime for commercial and industrial customers.

Mr. Dobson : The Secretary of State talked about bringing new thinking into the industry. Can he confirm that the new thinking started off with his approving a 9.2 per cent. price increase for domestic consumers last year, when the projected rate of inflation, however inaccurate, was 6 per cent. and that the companies are now contemplating increases up to 13 per cent. when the projected rate of inflation is only 5 per cent? That is the kind of new thinking that customers could well do without.

Mr. Wakeham : The hon. Gentleman is wrong. We have not yet had any proposals from the companies. As I have said, they will be making their proposals to the regulator, who will have to be satisfied that the increases are justified under the price regime that is included in the licence.

Renewable Energy

2. Mr. Ian Bruce : To ask the Secretary of State for Energy what was the annual average level of expenditure on research and development into renewable sources of energy between 1974 and 1979 and between 1985 and 1989.

The Parliamentary Under-Secretary of State for Energy (Mr. Colin Moynihan) : The annual average expenditure by the Department of Energy on research and development into renewable sources of energy between 1 April 1975 and 31 March 1979 was £1.9 million, and between 1 April 1985 and 31 March 1989 the figure was £14.4 million.

Mr. Bruce : I thank my hon. Friend for that answer, which illustrates the commitment of this Government to renewable energies compared with that of the Labour Government. Is not the biggest problem with renewable energy sources the high cost of producing electricity from such sources? Would not it be difficult to get past the House provisions that made little old ladies pay twice or perhaps even more times as much as they would for electricity generated by coal or nuclear energy?

Mr. Moynihan : I thank my hon. Friend for his observation. It is as important for these projects to be environmentally acceptable as for them to be economically competitive. With the introduction of the non-fossil fuel obligation we have been able to create a marketplace so that commercially competitive renewable energy projects can come onstream effectively.

Ms. Armstrong : I hope that the Minister is looking at new projects for possible development and that at some

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stage he will look at one in my constituency, where, as part of an attempt to regenerate Consett, we are considering a wind park on part of the old steel works site. I am not sure that it would exactly replace what was there, but I hope that the Minister will consider these projects carefully, because there are people in my area who still do not have electricity and we hope that these projects will supply electricity to more far flung places.

Mr. Moynihan : The hon. Lady makes a valid point. It is important to identify new wind projects. She will be pleased to learn that the largest tranche of research and development expenditure is on wind energy. I am not aware of the specific project to which she referred, but I know that my officials will be only too happy to look in detail at any proposals. We want to give commercially viable wind energy projects as big a push as we can.

Mr. Simon Coombs : Does my hon. Friend agree that there is no virtue simply in increasing expenditure on research and development on renewable sources of energy for its own sake? Does he further agree that what is needed is the careful examination of each project to see what its potential long-term yield is for the future?

Mr. Moynihan : I hope that my hon. Friend heard my earlier comments and is satisfied that we are aware of the importance of ensuring that proposed projects are commercially viable. Many are not. The great advantage of having the non-fossil fuel obligation is that we not only back the research and development with increasing resources, but provide a marketplace for those projects to play an important role in the diversity of energy supply on competitive terms.

Mr. Simon Hughes : Is not the reality that for the Government renewables are still the poor relation? Less than £25 million per year is spent on research and development into renewables while more than £95 million is spent on research and development in the nuclear industry. The other day the Government closed down the Camborne geothermal facility with a loss of 30 jobs. The evidence is that the cost of producing geothermal electricity is 3.1 per kWh, the cost of producing electricity is about 3.5p per kWh and the cost of producing nuclear power is more than 6p per kWh. On all assessments, nuclear power is a bad bargain and renewables are good, but the Government are blind to any sensible opposition.

Mr. Moynihan : I am sorry to inform the House that the hon. Gentleman has got his facts wrong. The hot dry rocks project in Cornwall was not closed down last week. That important project was given a new direction and a boost of £3.3 million for the period 1991 to 1994 so that we can work on it with our European colleagues and make it as economically viable as possible. I spent a day visiting that project. The cost per kilowatt hour to which the hon. Gentleman referred bears no reality to the sort of cost produced from the research on geothermal hot dry rocks, which can be up to 10 times higher than the figures that the hon. Gentleman quoted. That said, however, it is an important source of potential renewable energy within the European Community and further research is being undertaken to try to make sure that we can make it commercially viable. If we cannot, we cannot put further research and development into that energy source. In answer to the hon. Gentleman's first point, any Government who spend £160 million on renewable

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research and development are committed to renewable energy projects and any Government who increase next year's provision by 20 per cent. more than that for this year are committed to undertaking research and development for commercially effective renewable energy projects.

Energy Conservation

3. Mr. Knox : To ask the Secretary of State for Energy what recent representations he has received about the adequacy of existing energy conservation schemes.

The Parliamentary Under-Secretary of State for Energy (Mr. David Heathcoat-Amory) : My right hon. Friend and I have received frequentrepresentations about our energy efficiency programmes to which we accord high priority.

Mr. Knox : What is my hon. Friend's estimate of the potential for further energy savings? Is he satisfied that the existing schemes will enable us to achieve those savings?

Mr. Heathcoat-Amory : It has been estimated that further savings of up to 20 per cent. are possible. I am convinced that we shall be able to approach that target through a mixture of regulations, such as the improved building regulations, labelling, advice, and targeted grants such as the home energy efficiency scheme, which directs grant aid to low-income households.

Mr. Loyden : What encouragement has been given to local government to draught-proof the windows and doors of older houses so that many millions of homes can benefit from the conservation of energy?

Mr. Heathcoat-Amory : I can confirm that the estate action programme is directing substantial sums of money towards upgrading older council estates. In addition to that, the home energy efficiency scheme is targeted precisely at older dwellings, which are often occupied by low-income households who need grant aid to improve the energy efficiency, draught- proofing and insulation standards of their homes.

Coal Mines

4. Mr. Mullin : To ask the Secretary of State for Energy how many pits he expects will still be operating by 1993.

Mr. Heathcoat-Amory : Decisions on future capacity are a matter for the British Coal Corporation, but it is clear that the future of every pit depends crucially on the degree to which management and men are successful in containing costs and continuing their productivity improvements.

Mr. Mullin : The Minister will be aware that, since the privatisation of electricity, the country has been flooded with cheap coal, which no amount of productivity improvements are capable of competing against. In the unhappy event of the Minister's party winning another general election, not one pit in the north-east will survive. I invite the Minister to deny that.

Mr. Heathcoat-Amory : The future capacity of the north-east coalfield is a matter for the British Coal Corporation. It would not be right artificially to restrict imports of coal and to insulate British industry from overseas competition. The future of that coalfield depends on continuing the productivity improvements of recent

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years, and I pay tribute to the British Coal Corporation and to those who work for it for the 85 per cent. productivity improvement since the coal strike.

Mr. Hannam : The Government have invested some £7 billion in British Coal since 1979. That is surely proof that the Government see a good future for a competitive coal industry. Does my hon. Friend agree that the 85 per cent. productivity increase since the miners' strike is evidence that the coal industry has an important role to play in the future energy market?

Mr. Heathcoat-Amory : I entirely agree. The Government have put more than £17 billion of grant aid into the coal industry since 1979. That is proof of our financial commitment to the industry. The future prosperity and success of that industry, however, depend on continuing those productivity improvements.

Mr. Hardy : Will the Minister offer the House some estimate of the effect on the balance of payments deficit, which is already enormous, of our increasing reliance on imported coal, which will become more and more expensive, to the ruinous deprivation of the country?

Mr. Heathcoat-Amory : It would not be to the advantage of the balance of payments or of British industry artificially to restrict imported energy sources. I confirm, however, that until 1993 British Coal has secure contracts with the electricity generators and I anticipate that after 1993 electricity generators will recognise the value of an indigenous source of supply.

Mr. Dickens : Is not it a fact that the future of the British coal industry lies in the hands of the mineworkers themselves? Is not it marvellous that once the power of stupid trade union leaders such as Arthur Scargill is diluted the men at the coal face respond and have increased their productivity by 87 per cent. since the coal strike?

Mr. Heathcoat-Amory : I cannot improve on my hon. Friend's description of the situation.

Mr. Barron : The Minister knows full well that the framework of privatisation of the electricity supply industry has thrown British Coal's marketing into chaos. Does he honestly think that the £17 billion investment of which he boasts is a sound investment, given the ending of current contracts in 1993? When will the Government take action not just in the interests of the miners, who have improved their productivity, but in the national interest, instead of increasing the growing energy deficit of this energy-rich country?

Mr. Heathcoat-Amory : It is up to the industry to prove the soundness of that investment, but the signs are that management and workers are rising to the challenge and can mine coal competitively.

Offshore Oil and Gas

5. Mr. John Marshall : To ask the Secretary of State for Energy what was the level of direct employment in the offshore oil and gas industry in 1990 ; and what is his estimate of the number of jobs indirectly supported by the industry.

Mr. Moynihan : Direct employment offshore in 1990 was at an all-time record level of 36,500, some 19 per cent.

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higher than in 1989. The number of those employed indirectly in the oil and gas industry is considerably larger than those working offshore.

Mr. Marshall : As a former Aberdeen councillor, I welcome that answer as good news for Aberdeen, for the north-east of Scotland and for the country. Does my hon. Friend agree that it shows the efficiency of private enterprise in creating jobs?

Mr. Moynihan : I entirely agree with my hon. Friend.

Dr. Godman : The expansion is indeed good news for Scotland--if not for my constituency, where unemployment at 13.8 per cent. is no laughing matter. I remind the Minister that Scott Lithgow on the lower Clyde is the finest shipbuilding and oil rig construction yard in the United Kingdom. Has he any hope to offer to my oil rig workers and dockers, or anything to say about Scott Lithgow?

Mr. Moynihan : There is no doubt that the position for many offshore fabricators is very strong. Their order books are strong. They have opportunities now because levels of investment and activity in the North sea have never been more buoyant. I hope that they will use those opportunities to the full by producing, on time, good-quality products to meet foreign competition.

Nuclear Power

6. Mr. Butler : To ask the Secretary of State for Energy what proportion of the production of electricity in the United Kingdom is currently supplied by nuclear power.

Mr. Wakeham : In 1990 about 20 per cent. of electricity available in the United Kingdom came from United Kingdom nuclear sources.

Mr. Butler : Will my right hon. Friend confirm that for the foreseeable future nuclear power has an assured role in generating safe, clean and reliable energy?

Mr. Wakeham : Yes, I can confirm that. Nuclear generation is vital to ensure security and diversity of supply and brings with it excellent environmental benefits in that it produces no carbon dioxide, sulphur dioxide or nitrogen doxide.

Dr. Reid : Will the Minister confirm that the largest single industrial user of electricity provided by any source in Scotland is the Ravescraig steel plant? Is he aware of the announcement of a further 1,500 redundancies there? Can he give an assurance that, under a privatised electricity set-up, the costs of the decline of Ravescraig and the demise of the steel industry will not be passed on to the individual electricity consumer in Scotland or in the United Kingdom?

Mr. Wakeham : Questions to do with the steel industry or the Scottish industry are clearly not for me, but under the system that we have introduced industrial consumers generally pay lower prices as a result of the competitive nature of the electricity industry.

Sir Trevor Skeet : Will the Secretary of State bear it in mind that unless more nuclear power stations are built and the review is accelerated, there will be very few new nuclear

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power stations by the turn of the century? Will not that lead to the disintegration of an industry which it is most important to preserve?

Mr. Wakeham : I know that my hon. Friend knows a great deal about the nuclear industry. As he is aware, a full-scale review of the prospects for nuclear power in the future will be undertaken in 1994, when the Sizewell B project will be nearing completion. That review will have to take all the relevant factors into account.

Mr. Morgan : Will the Secretary of State confirm that--given the progessive unravelling of the beautiful Heath Robinson structure erected by his predecessor, the right hon Member for Hertsmere (Mr. Parkinson), the withdrawal from privatisation of the nuclear industry and the fact that 40 per cent. of generators are now not being sold on the market--by the time of the next election less than 50 per cent. of the electricity-generating industry in England and Wales will be in private hands? If that is what the right hon. Gentleman and his honourable lemmings on the Back Benches think that they voted for in 1988, and if that is what they call a success, we should welcome many more such successes.

Mr. Wakeham : The hon. Gentleman's facts are wrong. Very shortly, the generating industry--National Power and PowerGen, that is--will be in the private sector ; indeed, they are at this moment. Nuclear Electric will remain in the public sector for the foreseeable future. I think that the hon. Gentleman is confusing the facts with some view of creative accountancy. The 40 per cent. stake that the Government retain in the privatised companies will be retained for another two years ; I have explained what will happen after that.

Offshore Oil and Gas

7. Mr. Tim Smith : To ask the Secretary of State for Energy what is his estimate of the level of investment on the United Kingdom continental shelf in 1990.

Mr. Moynihan : My estimate of investment in 1990 on the United Kingdom continental shelf is £3.5 billion. That represents a significant increase of around one third on 1989.

Mr. Smith : Is not that a remarkable achievement by Shell, Esso, British Petroleum and the other oil companies that invest in the North sea? Given the substantial fall in the real price of oil in the past decade, is not it also a tribute to the improved technology there, as well as to the fiscal and regulatory regime governing the area? Will my hon. Friend continue to press Treasury Ministers to ensure that our tax regime encourages marginal investment?

Mr. Moynihan : The answer to my hon. Friend's first two questions is yes ; as for the third, the Government are fully aware that a stable fiscal regime and regulatory framework have been part and parcel of the success of investment in the North sea over the past decade.

Mr. Skinner : The Minister just said, in a kind of coded language, that the Government would allow the tax regime to be shifted in relation to the smaller underground pools of oil. When miners run into narrow seams of coal, however, the Department decides that they are unprofitable--in its language--and closes them. If it is right to use

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every possible effort to maximise oil production, the same should apply to getting out the coal, and pits such as Creswell in my constituency should not be shut.

Mr. Moynihan : The hon. Gentleman has obviously misunderstood the code.

Mr. Bill Walker : The Opposition constantly seek to ignore the effects of our indigenous energy, and our investment in oil and gas, on the performance of the United Kingdom economy, while constantly drawing attention to the technology and out-of-date practices in the coal industry. Does not that clearly show that they are people of the past, not of the present--and certainly not of the future?

Mr. Moynihan : I entirely agree. I am glad that my hon. Friend has recognised the continuing outstanding success of our buoyant oil and gas market.

Mr. Doran : The Minister will know that a substantial part of the investment that he rightly praised relates to safety improvements. Is he aware that, according to the trade figures announced this morning, our present deficit includes an oil deficit of £109 million compared with the surpluses that we have enjoyed over most of the past decade? Does he agree that the main reason for that deficit is the need to close down platforms for safety modifications? Had the Government taken their job of ensuring safety more seriously, and had they accepted the Opposition's criticisms, the shutdowns would have been unnecessary, the improvements phased and the present large deficits avoided.

Mr. Moynihan : I disagree with the hon. Gentleman's conclusion. I agree, however, that the reason for our lower net exports is a temporary reduction in North sea oil production. The first priority must always be the safety of the work force in the North sea. If that means reducing output at any time, so be it.

Gas Disconnections

8. Mrs. Roe : To ask the Secretary of State for Energy what discussions he has had with the Director General of Ofgas about disconnection for debt.

Mr. Moynihan : I have had no specific discussions with the Director General of Gas Supply on the subject of disconnection for debt. I can confirm that the number of British Gas customers who have been disconnected because of debt is lower than at any time since 1977, when records were first kept.

Mrs. Roe : I am grateful for my hon. Friend's reply, especially as 3 million new customers have been connected. Does he agree that protection for debtors has increased since privatisation, not decreased?

Mr. Moynihan : That is absolutely true. From a peak of almost 62, 000 in the year ended March 1988, just over 19,000 people have been disconnected for debt.

Mr. Allen McKay : Is not it also a fact that the drop in disconnections has coincided with an increase in the installation of credit meters, which have an automatic cut-off on what people can pay? As the Government are trying to encourage wage settlements below the rate of inflation, will the Minister tell the electric industry not to increase its prices by more than the rate of inflation?

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Mr. Moynihan : On the substantive question, I acknowledge that the offer of a prepayment meter as an alternative to disconnection has played an important role, but the reality is that privatisation and the excellent work of the Office of Gas Supply have been paramount in assisting the gas industry to reduce the number of people who are disconnected for debt.

Unleaded Petrol

9. Mr. Carrington : To ask the Secretary of State for Energy what has been the increase since 1989 in the number of petrol-retailing outlets selling unleaded petrol ; and what is the level in other EC countries.

Mr. Moynihan : The United Kingdom Petroleum Industry Association estimates that, at the end of November 1990, 98 per cent. of filling stations in the United Kingdom sold premium unleaded petrol, compared with about 80 per cent. at the end of 1989 and 20 per cent. at the end of 1988.

The latest available comparable figures for 1990 in the European Community were : West Germany, Belgium and Luxembourg 100 per cent.; Denmark and Netherlands 85 per cent.; Italy 64 per cent.; Ireland 50 per cent.; France 40 per cent.; Spain 19 per cent.; Greece 11 per cent.; and Portugal 4 per cent.

Mr. Carrington : Do not those figures, taken in conjunction with those for the sale of unleaded petrol, show the determination of the Government, the industry and the people to reduce the amount of lead in our air? Is it not it possible, perhaps through the European Commission, to encourage our European partners, who are not as environmentally friendly as we are, to improve their actions and environment?

Mr. Moynihan : I agree that it is important for the Government to continue to pursue that objective throughout the Community.

Mr. Tony Banks : It is welcome that so many petrol stations are making unleaded petrol available, but the Minister understands that the real test is the number of cars using it. What discussions are being held within the Department or with Treasury Ministers and officials to encourage the take-up of unleaded petrol by giving further tax incentives or cuts in petrol prices?

Mr. Moynihan : The latter point is for my right hon. Friend the Chancellor of the Exchequer. The 1990 Budget, which increased the duty differential to nearly 14p a gallon, was important. About seven out of 10 cars are capable of using unleaded petrol. The Department of Energy and other Departments have been promoting a publicity and information campaign to encourage those who can convert rapidly to do so.

Clean Coal Technology

10. Mr. Hayes : To ask the Secretary of State for Energy what support his Department is giving to the investigation of the prospects for clean coal technology.

Mr. Wakeham : My Department is currently reviewing coal-related research and development and this summer will publish a document setting out our strategy. Much important work on clean coal technology has already been carried out by British Coal and others.

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Mr. Hayes : Does my right hon. Friend agree that environmentalists should be greatly encouraged by the Government's clear commitment to clean coal technology? [Laughter.] Hon. Members may laugh, but my right hon. Friend may like to remind them that the Government are contributing £17 million to 15 separate projects.

Mr. Wakeham : I confirm what my hon. Friend said. The current programme of more than 15 projects which are under way or planned has a contract value of more than £80 million and my Department's contribution is more than £17 million. I am not satisfied that we are doing enough. That is why we have set in hand a study to find out what more can be done.

Mr. Eadie : It is refreshing for the House to hear candour from the right hon. Gentleman about the investment in clean coal technology. Is he aware that the investment, which is running at about 3 per cent., is pathetic? In the quest for clean coal, I hope that the right hon. Gentleman will consider Monktonhall colliery which, although it produces more or less sulphur-free coal and has received £14 million of investment, has been mothballed. Will the right hon. Gentleman consider reopening that colliery? It would result in jobs as well as sulphur-free coal.

Mr. Wakeham : I am grateful to the hon. Gentleman for his support of what we are doing about clean coal technology, but Monktonhall colliery is a matter for British Coal's management, not for me.

Dr. Michael Clark : Does my right hon. Friend agree that clean coal burn technology is important for not only the future of the British coal industry but the environment? Does he agree that it is important also in ensuring that we achieve the maximum use of our indigenous industry? Does he recognise that, although we may be in the lead in terms of research and development and investigations into these techniques, we are somewhat behind in building demonstration plants? Will he undertake to find ways to encourage the building of demonstration plants? That work can be done in various ways. It does not always involve Government money.

Mr. Wakeham : Yes, indeed. Recently we announced the provision of an additional £3.7 million towards British Coal's topping cycle project at Grimethorpe. That brings the Government's support for the project this year to £9.2 million and clearly demonstrates our commitment to supporting clean coal technology. We have set up a coal task force, a new advisory body to develop new strategies and project selection methods, and United Kingdom industry is strongly represented on that task force. That shows confidence in the way forward.

Mr. Dobson : Does the Secretary of State agree that the failure to back the demonstration plants which the hon. Member for Rochford (Dr. Clark) endorsed is putting British plant manufacturers at a disadvantage compared with their competitors in Germany, Sweden, Switzerland and France? Would not it be better to put some money into that work? Will the right hon. Gentleman confirm that more money was spent tarting up his Department's headquarters than the Government are investing in clean coal technology?

Mr. Wakeham : I have no idea about that last point. I had no responsibility for those matters. I would support

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any project that was worth while and could be shown to have a commercial future. The first projects that we demonstrate must have the possibility of being economically viable in the long term.

Mr. Hind : Does my right hon. Friend agree that coal will not have a future as an electricity-generating fuel unless the technologies of decarbonisation are improved to a level at which CO emissions are much lower? My right hon. Friend's efforts in that regard are greatly appreciated by people who work in the coal industry, as those developments will give them a future.

Mr. Wakeham : Absolutely. My hon. Friend knows that most of the new power generation projects in the next few years are likely to be gas-fired projects. It is important that research and development should occur so that coal is increasingly thought of as a fuel to be used and is seen to be environmentally safe.

Energy Efficiency

12. Mr. Alan W. Williams : To ask the Secretary of State for Energy what is the total spent by his Department in the current financial year on promoting energy efficiency.

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