Mr. Knox : Does my right hon. Friend agree that that is an impressive increase over that period of years? Can he say whether productivity in the British coal industry is beginning to catch up with productivity in the coal industries of our major competitors?
Mr. Wakeham : Certainly the productivity of the coal industry has improved greatly over the years, but further improvement is still required. Although our productivity compares well with coal industries in Europe, it has some way to go before it is at the level of some of the coal industries outside Europe.
Mr. Alan W. Williams : Does the Secretary of State accept that Britain has the most cost efficient coal industry in Europe, producing the cheapest coal, and that if it were in any one of the other 11 European countries there would be no question of its further contraction at this time? What is his view of the European Commission's proposals for reference pricing, which would allow Governments to support certain mines which produce coal for less than £50 per tonne?
Mr. Wakeham : No communication has been sent to the British Government about European reference prices, so I have not had a chance to study those, but I pay full tribute to the improvement in productivity. What is important is that the British coal industry should achieve contracts with the generators in the next round of contracts due to start in April 1993. The size and volume of the contracts secured is the best safeguard for the future of the coal industry.
Mr. Norris : I thank my hon. Friend for that entirely commendable answer. Was his calculation based on any assessment of what he thinks the cost of that renationalisation might be? Perhaps more important, given that it is Labour party policy, what impact would that have on the price of electricity for consumers?
Mr. Heathcoat-Amory : Yes, I entirely agree with my hon. Friend. To take the grid company back into public ownership would cost about £2 billion. I do not know how the money would be found, except from higher taxes or higher electricity prices, or both. Such a move would reimpose the dead hand of state control and political interference. That is Labour party policy, so taxpayers and electricity customers had better beware.
Mr. Hague : Is my hon. Friend aware that although it would be wasteful, unnecessary and expensive to renationalise the National Grid Company, the company has incurred great unpopularity due to its proposals to build pylons through the finest parts of our rural landscape in Cleveland? May I welcome his decision to hold a public inquiry about these proposals and urge him to ensure that the inquiry is held in such a way, in such a place and at such a time that the concerns of many thousands of people about the proposals can be fully communicated?
Mr. Heathcoat-Amory : I know of the proposal to which my hon. Friend refers and I know that he has vigorously represented the concerns of his constituents. I wish to ensure that environmental considerations are properly taken into account. I can tell my hon. Friend that there will be a public inquiry into the proposal and that my right hon. Friend the Secretary of State will announce that formally in due course.
Mr. Dobson : Before the Minister starts to make criticisms of the cost to the taxpayer of buying back the grid company, may I remind him what happened when his right hon. Friend sold it? He so underpriced the shares that the taxpayer lost £1,200 million on the first afternoon of dealing. Since then, the directors have done little other than line their own pockets, award themselves enormous pay increases and indulge in dodgy share options, all of which has been done at the expense of the domestic customer, whose bill has gone up by 40 per cent. since privatisation was announced.
Mr. Heathcoat-Amory : The hon. Gentleman is entirely wrong. The taxpayer and the electricity customer have benefited in every way from privatisation and restructuring of the electricity supply market. I remind the hon. Gentleman that, for the first time, domestic electricity customers are protected by a price cap which ensures that, for the next three years, electricity prices will not rise by more than retail price inflation.
Column 593The Parliamentary Under-Secretary of State for Energy (Mr. Colin Moynihan) : Capital investment in the North sea in 1990 was £3.5 billion. In the first half of 1991 it was £2.1 billion, which is some 30 per cent. higher than in the first half of 1990.
Mr. Thompson : Is my hon. Friend aware that continuity of orders is most important for manufacturers in my constituency who produce valves, pumps and pipes for the North sea oil industry? I welcome my hon. Friend's answer.
Mr. Moynihan : In this industry as, no doubt, in the rest of the manufacturing sector in my hon. Friend's constituency, my hon. Friend has continued to work assiduously for his constituents. I believe that we shall have greater continuity of orders throughout the 1990s than we did in the 1980s, due to the maturing nature of offshore oil and gas work, including refurbishment, sub-sea systems and satellite developments.
Mr. Wilson : In relation to the North sea, I am sure that the Minister will recall that during the Kincardine and Deeside by-election, various hints and half-promises were given about the transfer of the petroleum exploration division jobs to Aberdeen. We understand that consultants have now been appointed, so can the Minister give us an assurance about the timetable for those inquiries? Will he also guarantee that there will be an announcement this side of the general election? The Government may believe that once the Kincardine and Deeside election was out on the road--somewhat unsuccessfully for the Government--those promises might be out of sight and out of mind, but they are still in the mind of the Opposition.
Mr. Moynihan : We are seeking tenders from a range of consultants to review the location of the petroleum engineering directorate. My right hon. Friend the Secretary of State will announce who is to carry out that review as soon as the consultants have been chosen.
Dr. Michael Clark : Will my hon. Friend confirm that 1990 was an all -time record year for activity in the North sea, with the drilling of 224 exploration and appraisal wells resulting in 16 significant finds? Will my hon. Friend also confirm that 1991 has been a vibrant and exciting year in the North sea? On the eve of discussions at Maastricht, will my hon. Friend confirm that such activity in the North sea enables this country to provide 82 per cent. of Europe's indigenous oil?
Mr. Moynihan : I can confirm those three points. If company intentions on wells to be drilled, as recorded in a survey by my Department, are realised, the total of such wells in 1992 could yet again be extremely high indeed, as high as 220.
Mr. Hood : I welcome the capital investment, but will the Minister join me in condemning those oil companies which use the Economic League to blacklist workers and potential workers? Surely the best way to look after the industry is to stop the nonsense of blacklisting people simply because they belong to a union or for whatever other reason?
Column 594in the House, the Department is more than happy to receive representations from the hon. Gentleman or anyone else about specific cases of blacklisting.
The results of this work were disseminated most recently at a workshop in Peterborough on 7 November 1991 which we jointly sponsored with the Agricultural Development and Advisory Service.
Mr. Moss : I thank my hon. Friend for that reply. Given that about 7 million tonnes of surplus straw is produced each year, much of it from the cereal-growing area of East Anglia in my constituency, does my hon. Friend agree that it is an important source of energy? The ban on straw burning will come into effect in 1993, so does my hon. Friend agree that we in East Anglia have a ready market for such initiatives?
Mr. Moynihan : I entirely agree with my hon. Friend. In particular, the ban on burning straw in the field from 1993 could stimulate the use of straw as a fuel. That practice has already been very successful--as, for example, in straw combustion for space heating, which was demonstrated at Woburn abbey. There is good potential for straw as a fuel source, so long as we continue the important research and development programme that we are currently commissioning.
Mr. Haynes : Mr. Speaker, Sir, may I congratulate the Minister on his engagement? It is about time. The Minister ought to come off it, though. He is under instructions from the Secretary of State. Anything that the Government can burn to destroy the mining industry, they have done and will do. If it is not gas, it is oil. If it is not oil, it is straw. If it is not straw, it is imported coal from foreign lands. Why do the Government not come off it? We in the coal fields know what is going on. The Secretary of State ought to say, through the Minister, that the Government will back off. Let us keep the mining industry.
Mr. Moynihan : I am most grateful to the hon. Gentleman for his kind opening remarks. I was certainly under no instructions from my right hon. Friend the Secretary of State in that respect. As to the hon. Gentleman's other points, he will be the first to accept that straw is very low in sulphur and will reduce acid rain when it is substituted for--or, as the hon. Gentleman would no doubt hope, co-fired with--fossil fuels.
If it is true that 7 million tonnes of straw are wasted each year, why is straw so expensive to horse riding, racing, and show jumping stables? If straw is used as a fuel, will that not make it much more expensive to the horse fraternity?
Column 595when considering the economics of straw. For that reason, straw as a fuel is likely to be most efficient and economical when used in heating close to the point of production. That is due not just to its comparatively high transport costs but to its low density.
Dr. Howells : Whatever one might think about the virtues or otherwise of nuclear energy, clearly it is a viable source of base load electricity for the future. However, it requires long-term thinking, in terms of the industry's future funding. Does the Secretary of State agree that it is too large an area of expertise and of excellence in many ways to be allowed to rely simply on the vagaries of the open market?
Mr. Wakeham : The Government have made it clear that they will review the future of this country's nuclear power industry in 1994. By that time, we want to see a future which demonstrates that nuclear power can be produced safely and economically. Today, Nuclear Electric published its half-year results, which show continuing and encouraging progress towards Nuclear Electric's aims. Its output is up by 13 per cent. compared with the same period last year, its market share is up from 17 to 19 per cent., and its operating profits are up by 50 per cent.--entirely reflecting higher output and tighter cost control.
Mr. Hannam : Does my right hon. Friend agree that Nuclear Electric's half-year results confirm a long-term future for nuclear power? It is not important that we keep together the teams that will ensure that the nuclear power construction industry will continue in the future?
Mr. Wakeham : My hon. Friend is absolutely right. That is why I am delighted that the Sizewell B project is being built on time and within cost. That is a testament to Nuclear Electric's management in respect of that project, which is a major achievement by British industry.
Mr. Wigley : The Secretary of State will be aware of the uncertainty surrounding the future of the Trawsfynydd nuclear power station, which employs up to 200 people in my constituency. Can he give an assurance that if the Magnox reactors are indeed approaching the end of their days and Trawsfynydd has no continuing nuclear future, the Government will accept responsibility for finding jobs for those who depend on the industry? Such responsibility has been taken in other areas where a major rundown of significant employers has taken place.
Mr. Wakeham : I think that we must deal with such matters stage by stage. First, we must satisfy the nuclear installations inspectorate that the reactor is safe ; it will not reopen until that has been done. The same applies to any other Magnox stations whose safety is being reviewed by the NII. We shall see what happens after that.
Sir Trevor Skeet : Is my right hon. Friend aware that if the nuclear power programme were abandoned completely, 15 million tonnes of carbon dioxide would be pumped into the atmosphere every year? That is one thing that we should avoid. If my right hon. Friend holds a review in 1994, he may find that not much of the industry is left by then, because many of the teams will be broken up.
My hon. Friend mentioned 1994. That is the year in which the Sizewell B project will come on stream, and will start to produce electricity. I feel that that is a good time at which to review the implications for the future, and I very much hope that the expertise that now exists will not be lost to the industry.
Mr. Morgan : Can the Secretary of State confirm that, notwithstanding the encouraging programme that he has just reported, Nuclear Electric's directors could not continue to pay the £1 million per day that it costs to continue the Sizewell B construction project if they were not covered by a letter of comfort from the Treasury, without which the company would be technically insolvent? Does the right hon. Gentleman propose that in 1994, when the review is completed, that safeguard protecting the company's directors against the threat of unlawful trading while technically insolvent should be lifted? Will he also tell us when he expects the nuclear levy, which is still rising, to start to fall in the light of this morning's results from Nuclear Electric?
Mr. Wakeham : As the hon. Gentleman knows, Nuclear Electric was formed out of the old Central Electricity Generating Board and has remained a Government-owned project throughout. It is therefore entirely proper for the directors to be given proper assurances by Government about the funding of a project undertaken on behalf of Government.
The nuclear levy is set to decline over the 1990s, and at present runs only until 1998. The calculation is quite complicated, as I am sure the hon. Gentleman knows. The actual amount of cash is not rising ; it is the relation of that cash to the output of electricity and, therefore, the area that must be covered, which make the difference to the percentage. [Interruption.] The percentage went up last year, but the amount of the levy is still set to fall over the 1990s.
Mr. Irvine : Does my hon. Friend agree that all those involved in the work on the power station, many of whom are constituents of mine, deserve great credit for the fact that it is proceeding so well? Does not that provide a welcome contrast with the bad old days of the 1950s, 1960s
Column 597and 1970s, when all too often the construction of power stations--nuclear and conventional alike--fell years behind ?
Mr. Heathcoat-Amory : Yes. The project remains eight months ahead of the committed 72-month programme. That reflects very well on the management and work force concerned. It contrasts markedly with similar past projects which often suffered from appalling industrial relations and were sometimes years late.
8. Mr. French : To ask the Secretary of State for Energy what is his Department's estimate of North sea oil reserves and how long it is anticipated they will last ; and what were the corresponding estimates five years ago.
Mr. Moynihan : My Department's central estimate of reserves remaining in existing discoveries at 31 December 1985 was 1,230 million tonnes. The corresponding estimate at 31 December 1990, after production of 549 million tonnes in the intervening period, was 1,195 million tonnes. These estimates confirm that the United Kingdom will remain an important oil producer.
Mr. French : Do not the figures reveal that those independent oil analysts who, in the early and middle 1980s, forecast a substantial depletion of United Kingdom resources in the early 1990s got it wrong? Is not the position that the United Kingdom will remain a very substantial oil producer until well into the next century?
Mr. Moynihan : It is certainly the case that, due to the substantial improvements in the technical ability to recover oil, in particular by means of enhanced oil recovery techniques, many of the past estimates have proved inaccurate. Many of the reserves that were not then technically capable of being produced economically will come on stream and, in my view, will ensure that we are a major oil producer until well into the next century.
Mr. Doran : As well as North sea oil, we have also been fortunate enough to discover gas in the North sea. Can the Minister provide similar figures for the amount of gas discovered in the North sea and an estimate of the life of our gas supplies? That issue is the subject of debate, given the recent Office of Fair Trading report into British Gas. I should also be interested to hear the Minister's views on the Government's policy regarding gas imports. I noticed that last week permission was given for gas exports. Will the Minister make a statement on that issue, too?
Mr. Moynihan : In 1990, gas produced from the United Kingdom continental shelf increased to 50 billion cu m, compared with 45 billion cu m in 1989. That included gas used by operators for drilling and production operations. As for gas imports and exports, United Kingdom continental shelf gas reserves should also be capable of supplying the expanding United Kingdom gas market well into the next century. The Government's objective is to work towards freer trade in gas throughout Europe. For that to happen, we need to be able to export United Kingdom continental shelf gas. The European gas market, which is dominated by large and often state- controlled monopolies which shun competition, needs to be liberalised.
Mr. Simon Hughes : Given that we need to ensure that we should have as a priority the conservation of resources and energy efficiency, whatever the amount of reserves of oil and gas, what progress has been made by the Department and the Treasury in discussions with the European Community on the value added tax harmonisation talks with a view to the introduction of a lower level of VAT for environmentally friendly technologies which conserve resources?
Mr. Moynihan : I will happily refer the hon. Gentleman's latter point to my right hon. Friend the Chancellor of the Exchequer. Energy conservation and environmental pressures are rightly being placed on oil and gas producers in the North sea. A very high priority is placed on both issues. I can assure the hon. Gentleman that his concerns are well reflected in all the discussions between operators and Ministers.
Mr. Dickens : Will my hon. Friend confirm that the greatest danger to the North sea would be an incoming Labour Government, who would seek to shackle the oil and gas companies by imposing new controls and high taxes?
Mr. Heathcoat-Amory : The Government fully recognise the environmental and energy efficiency benefits of combined heat and power. The Energy Efficiency Office in my Department continues to promote the wider use of the technology under its best practice programme. Interest in CHP is at a high level and the prospects for CHP in the 1990s are excellent.
Mr. Vaz : In view of Leicester Energy Limited's continued interest in the establishment of a combined heat and power scheme in Leicester, will the Minister give his wholehearted support and instruct his officials to give their wholehearted co-operation to Leicester Energy Limited in the tremendous efforts that it is making to promote that scheme?
Mr. Heathcoat-Amory : I know of the hon. Gentleman's interest in the subject. He will know that my Department gave a grant for a feasibility study into large-scale CHP in Leicester, but the scheme did not proceed. The privatisation and restructuring of the electricity industry have offered new opportunities for independent electricity-generating schemes, particularly those that combine heat generation with electricity generation. That will assist those in Leicester, if they decide to revive the scheme, and those elsewhere.
Mr. Rost : Under the Electricity Act 1989, the regulator is directed to monitor the progress of combined heat and power. Will my hon. Friend discuss with the Office of Electricity Regulation the complaints of the Combined Heat and Power Association that existing regulations contain barriers to the progress of combined heat and power, which should be removed?
Column 599Mr. Heathcoat-Amory : I know that the Combined Heat and Power Association recently submitted a report to OFFER pointing out some institutional and administrative barriers that it should like to be tackled. That is being considered, with our support, by the Director-General of Electricity Supply.
Mr. Barron : The Minister cannot fail to acknowledge what has been common knowledge in the combined heat and power industry--that the major block is electricity prices. Despite the so-called new market that the Government have created, they have never recognised the price differences between electricity from combined heat and power plants and that from conventional generation. When will they act instead of saying at every Question Time how much they are in favour of combined heat and power?
Mr. Heathcoat-Amory : The combined heat and power industry was held up for many years because it was in the hands of a state monopoly. We have ended that and have given unprecedented new opportunities for independent generators, particularly those that employ combined heat and power technology.
11. Mr. Kennedy : To ask the Secretary of State for Energy if he will assess the implications of the single European market post-1992 upon the United Kingdom oil-related fabrication sector ; and if he will make a statement.
Mr. Moynihan : United Kingdom companies that have a good track record and are competitive will continue to win orders. It is up to United Kingdom industry to demonstrate and promote its strengths--its productivity, its advanced capabilities, its technological edge, its reliability and its safety record, all of which are vital ingredients of a bid package.
Mr. Kennedy : I am grateful for that reply. I am sure that, from the Minister's knowledge of and visits to the area, he will agree that companies such as Highlands Fabricators at Nigg, which has an excellent work force, a good track record, is competitive and highly skilled and has diversified on site, are well placed to take advantage of the single market. Will he recognise the persistent anxiety and doubts of United Kingdom-based fabrication yards about indirect subsidies finding their way to yards based in some of our main European competitors? Will he continue to press our interests on that front?
Mr. Moynihan : On the former point, the hon. Gentleman will be pleased to note that all of the most recent fabrication contracts have been awarded to United Kingdom yards. For many of the reasons that he gave, the contract for a Shell Sole Pit compression platform has been awarded to Highfab. The Offshore Supplies Office will continue to play an important role in promoting fair commercial opportunity in all oil and gas markets and in supporting EC initiatives for the creation of open and commercially fair markets.
Mr. Moss : May I congratulate my hon. Friend the Minister on securing a 40 per cent. increase in the budget for the Energy Efficiency Office for next year? It will total about £59 million, which compares favourably with the
Column 600measly £3 million that Labour spent in its last year in office. May I extend the grateful thanks of Mr. and Mrs. Emery of Eye in my constituency, whom I visited this morning and who have just had their home insulated under the Government's home energy efficiency scheme?
Mr. Moynihan : I am delighted to accept those congratulations, not least on behalf of my right hon. Friend the Secretary of State and my hon. Friend the Under-Secretary, who have spearheaded the campaign.
Mr. Moynihan : Since the beginning of 1990, a total of 13 exploration and four appraisal wells have been drilled in that part of the United Kingdom sector of the Irish sea generally known as the Manx basin. In addition, four exploration wells have been drilled in surrounding onshore areas of Great Britain. Four significant gas discoveries and one significant oil discovery, all offshore, have been announced resulting from this activity.
Mr. Wareing : Does the Minister agree about the urgent need to exploit the resources of the Irish sea, in the hope that there will soon be a Government who will not dissipate the revenues from such exploration, as happened so tragically in regard to the North sea? Will the hon. Gentleman give an assurance, which is urgently needed on Merseyside, that every effort will be made to ensure that contracts for Irish sea exploration are given to firms in the north-west of England in general and to Merseyside in particular?
Mr. Sumberg : My hon. Friend will know of the considerable worry in the Radcliffe part of my constituency about the prospect of an opencast coal mine being developed there. That matter will be determined by the local council a week on Thursday. Although jobs are always welcome, particularly at this time, does my hon. Friend agree that the environmental impact on the locality is also important, because a safe environment will protect the area for future generations?
Mr. Heathcoat-Amory : My hon. Friend has vigorously represented the interests of views of those who may be affected by this project. I agree that there must be a balance between the need to exploit economic coal reserves and the need to pay close attention to any possible environmental impact. That is done through the planning
Column 601system and the fact that appeals are heard not by my right hon. Friend the Secretary of State but by the Department of the Environment.
Mr. McAllion : Will the Minister confirm that there will be fewer jobs in opencast mining as a direct result of the Government's policies? Will he confirm that, for example, opencast mines and jobs in Ayrshire are threatened by the Government's proposals to privatise Northern Ireland Electricity? Will the hon. Gentleman explain to miners and other people in Ayrshire how the Government can try to persuade them to vote for Tories in marginal seats when Government policies, because of their privatisation obsessions, lead directly to job losses in Ayrshire?
Mr. Heathcoat-Amory : No. Jobs in the opencast sector are at risk from the vendetta against opencast mining conducted by the Labour party. We know that a successful deep-mine sector and a successful opencast sector are complementary. We need the output from both for blending purposes.
Mr. Michael Morris : Is not opencast coal a vital national resource in the same way as sand and gravel in my constituency are? Does my hon. Friend agree that, except in areas of outstanding natural beauty or sites of scientific interest, our mineral resources must be exploited?
Mr. Heathcoat-Amory : I agree with my hon. Friend that an important balance must be struck. Provided that environmental concerns are met and are specifically addressed in the planning process, we believe that output from the opencast sector must be blended with output from the deep-mine sector. Indeed, the coal industry as a whole would be put at risk through premature shutdown of the opencast sector.
Mr. Dobson : If the Department of Energy believes that 17,000 people are employed directly or indirectly in the opencast coal sector, why did the Secretary of State for Employment recently say that 40,000 people were employed there? Who is right?
Mr. Heathcoat-Amory : The figure that I gave was of those who are directly or indirectly affected by the opencast sector. The figure that my right hon. and learned Friend the Secretary of State for Employment gave included those who might be affected in other ways by premature closure.
Mr. Moynihan : My Department has invested £17 million since 1979-80 on wave energy research, including £900,000 for an experimental shoreline wave energy project on the Scottish island of Islay, which is the most technologically advanced of its type in the world. The review of wave energy currently under way is due to report early next year.