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8.38 pm
Dr. Michael Clark (Rochford): It is a pleasure to follow the hon. Member for Barnsley, West and Penistone (Mr. Clapham). We served together on the Select Committee on Trade and Industry following the demise of the Energy Select Committee, to which he referred.
I support the amendment in the name of the Prime Minister. Energy has been a key feature of this Conservative Government's policies since 1979. No Government had a realistic energy policy before that, although attempts were made to establish energy policies of sorts. Under the 1974-79 Labour Government, there were attempts to introduce such a policy, but in the context of a command economy; never before have we had an energy policy in the context of a supply economy.
Energy is a commodity, but it is not like other commodities in that it is not tangible. In other words, it cannot be felt or seen. At the same time, it can be measured. The tangible commodity is the fuel that generates energy, so to a large extent energy policy has to be determined by fuels. It is therefore important that we have fuels available at realistic prices. It is also necessary, if we are to build power stations, that we take into account the cost of capital for such investment. That, too, will have a bearing on energy policy.
We must ensure reliability of power supply, which there has not always been. Above all, we must ensure--the Government have succeeded on this score--that we take into account consumer satisfaction and industrial competitiveness for the well-being of our country. On all these scores, the Government have succeeded, and in all instances the points obtained have been high.
From the outset, the Government declared that their policy would be one of diversification and market forces. The then Minister who espoused that policy more than any other was Lord Wakeham, as he now is. He constantly stressed the need for diversification and market forces. I remember arguing with him on some occasions and asserting that the latter, market forces, would destroy the former. I argued that diversification would go as market forces took over.
I accept, however, that that has not been the outcome. Market forces have obliged other energy sources and other fuels to become more competitive. That has
happened in the short term, and as a result, there have been price reductions. There has been a downward spiral of prices as competition has come into play. Fuels have decreased in price, as has energy, and consumers, whether domestic or industrial, have benefited.
We want to see the liberalisation of markets, and those markets should be looked after by regulators who are promoting competition and acting as a proxy for competition when fuel competition is not available for the time being. The Government have ensured that that has happened.
The greatest step forward on the road towards a liberalised, competitive, consumer-oriented energy policy has been the Government's privatisation programme. It was thought by some--I dare say that the hon. Member for Barnsley, West and Penistone took the view--that, in the state sector, there was greater security of energy supply. I do not criticise the hon. Gentleman for taking that approach. Sometimes, however, it was a false sense of security. Frequently, the monoliths in the state sector were inefficient, bureaucratic and susceptible to the whims of union power. It seemed at times that they were run more for the benefit of employees than for consumers.
The Government privatisation programme took place in five stages. We saw the first stage in the early 1980s with the privatisation of British Petroleum, Britoil and Enterprise Oil between 1981 and 1984. That set the tone, and paved the way for future privatisations. The early privatisations ensured that the oil industry, both upstream and downstream, exploration and retail, was in the private sector.
Oil was important, of course, for transportation, for heating and for chemical feedstock. Let us never forget that oil should be reserved for chemical feedstock. It is not a fuel for burning. It is a feedstock, as it were, for a complex and highly sophisticated chemical industry.
Mr. Jack Thompson (Wansbeck):
Does the hon. Gentleman accept that the use of gas for power generation is also a waste of a valuable fuel? Gas should be retained for the domestic and commercial markets, not used for the generation of electricity.
Dr. Clark:
I concede that gas is a premium fuel. Indeed, it could be said to be more of a premium fuel than oil. We can use gas for chemical feedstock and for sophisticated forms of transportation where oil could not be used. If we went down that path for any distance, we could say that coal, too, is a chemical and should be used as a chemical rather than as fuel.
The hon. Gentleman tempts me to go down the path that leads to the conclusion that the only fuel that we should be using is nuclear energy. I shall leave that argument for the time being. That, however, is the path down which the hon. Gentleman takes me if we are to consider all hydrocarbons as chemicals rather than as fuels for burning.
When privatisations took place--this is apart from feedstock and transportation being primary forms of usage--oil was being burned in our power stations, as was coal. Those were the two main sources of fuel for power generation for industry, as well as for home and industrial heating.
The next form of privatisation took place in 1986 with British Gas. We privatised it as one entity. Some criticised the process for introducing a privatised monopoly, and I suppose that in some ways that is what it was. It was, however, a big and bold privatisation, the like of which had not been attempted by any other Government, in any country, let alone in the United Kingdom. If there were some aspects of that privatisation to which we wished to return, perhaps that was not too surprising bearing in mind when privatisation took place and how large the endeavour was.
Prices decreased dramatically as a result of privatisation. As we have already heard from my right hon. Friend the Minister and others, since privatisation, industrial gas prices have decreased by 48 per cent. Domestic gas prices, notwithstanding the imposition of value added tax, have decreased by 18 to 19 per cent. In real terms, gas prices have returned to the prices of 1970, 26 years ago. We have seen efficiency improvements in British Gas. Indeed, British Gas became a world-class international gas company. It was able to export its expertise and to gain contracts for international consultancy.
As it was an early privatisation, there was clearly a need for regulatory readjustment. Accordingly, the Gas Act 1995 was enacted. That measure will ensure that there will be domestic choice for gas by 1998. Test trials are already being conducted in the south-west. Consumer choice for gas supply has brought about radical change to British Gas. I accept that it has been painful for British Gas employees, and difficult for British Gas shareholders, but it has been beneficial to consumers, many of whom are also employees and shareholders.
Mr. John Home Robertson (East Lothian):
The hon. Gentleman is talking about choice for gas consumers. In the coldest days of the year, during the beginning of January, about 10,000 of my constituents found that their gas supply had failed because of the inadequacy of the distribution system in the area. Is the hon. Gentleman sure and satisfied that there will be security of supply in the brave new privatised world he is describing?
Dr. Clark:
It is always difficult to give a cast-iron 100 per cent. guarantee. I doubt very much, however, whether the failure in the hon. Gentleman's constituency, which we all regret, was anything to do with the privatisation of British Gas. If there is competition and two or three companies are supplying gas, there is a greater chance of gas being available.
Mr. Home Robertson:
The distribution system failed.
Dr. Clark:
We know that there is only one distribution network. If it was that which had failed, it would have failed whether it was a private sector company, public sector company, privatised or nationalised competition. I think that the failure to which the hon. Gentleman refers was probably incidental and nothing to do with privatisation.
Mr. Richard Caborn (Sheffield, Central):
Will the hon. Gentleman give way?
Dr. Clark:
I will continue if I may. I may give way in a moment.
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