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Gas Prices

2. Huw Irranca-Davies (Ogmore) (Lab): What recent discussions she has had with Ofgem on fair competition in gas prices. [195861]

The Minister for Energy and E-Commerce (Mr. Mike O'Brien): I have discussed gas market prices with Ofgem. It recently published a report that identified the cause of such rises as the impact on the UK wholesale market of the cost of gas in continental Europe—gas prices there are linked to oil prices, which have obviously risen—and of declining gas production in the North sea.

Huw Irranca-Davies: My hon. Friend will be aware of the considerable disquiet that exists among residential gas consumers at what seem to be runaway prices in the gas market. I attended a CBI dinner two weeks ago, at which the main topic of conversation was the impact of gas prices on the manufacturing base in south Wales. The manufacturing base in my constituency is very healthy and there are many jobs, but can my hon. Friend give me and employers in my constituency an assurance that gas prices will be brought under control, and that there will be genuine and fair competition in respect of them?

Mr. O'Brien: A recent report by Oxford Economic Research Associates, published in October, showed that the UK has the most competitive energy market in Europe. Prices are indeed increasing, but from a historically very low base in real terms. Domestic consumers can of course substantially reduce their gas bills by switching suppliers; indeed, a £30 reduction for gas and £20 for electricity is achievable. Customers who can switch their method of payment to direct debit can save up to £13 on their electricity bills and £14 to £26 on their gas bills, and some companies are offering low-cost—or, indeed, free—insulation to pensioners and those on benefit. The owner of a typical 1970s semi that is heated by gas could save up to £130 per annum by using proper insulation. On industrial prices, Ofgem is looking at the way in which the market is operating to ensure that it continues to do so efficiently.

Malcolm Bruce (Gordon) (LD): Does the Minister acknowledge Ofgem's estimate that wholesale energy prices in the UK will rise this winter by £5 billion as a result of these increases, and that that will dramatically increase fuel poverty, hit households hard and undermine the competitiveness of British industry? The fact is that competitiveness within the UK market does not help if we are being undermined by a lack of competitiveness in the European market. Is it not time that the European Commission de-linked the coupling of gas and oil prices and introduced a genuinely
 
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competitive market? As things stand, we are exporting gas to the continent when prices are low, and importing it back again when prices are at a record high.

Mr. O'Brien: On the hon. Gentleman's final point, I certainly agree that we need to get the European Commission to ensure that there is a liberalisation of the energy market in Europe. The increase in oil prices is affecting gas prices, and there is a link to Europe, but if we can ensure a greater degree of liberalisation in the European energy market, we may be able to get some of those prices under more effective control.

We view the energy sector here as market-based and it has functioned remarkably well in recent years. As I said, domestic customers can reduce their gas bills through energy insulation methods, by switching suppliers and, if they can, by direct debit payment. Those are means by which domestic consumers can make substantial savings on their bills. Ofgem has looked at the way in which the market is operating for    industrial customers. It is conducting further investigations into particular issues such as the excessive spike in some prices and will get back to us on that. We are monitoring the issue carefully. It is important and the hon. Gentleman can be sure that the Government take the matter seriously.

Mr. Mike Hall (Weaver Vale) (Lab): May I draw my hon. Friend's attention to the impact of gas prices on INEOS Chlor in Runcorn? The gas price per therm has gone up from 17p to 34p—double the price paid last year, which is costing the firm £170,000 a day extra, £50 million a year more. It has to pay 25 per cent. more for its gas, yet it comes from the same fields that supply continental Europe. What are the Government going to do about it?

Mr. O'Brien: Ofgem has studied with a great deal of care the way in which the gas market operates and it concluded that wholesale price increases have caused the increases in domestic prices. A number of gas companies have taken the view that they will hold their prices; others that they will increase their prices to their customers. In those circumstances, customers will want to look for companies that will cost them less and consider switching to them to receive lower bills. What we want to do is encourage customers to examine their bills, check with Energywatch to find out who is charging the lowest prices and, where they can, switch. They should also take the other measures that I mentioned, which will also ensure that their bills come down.

Richard Ottaway (Croydon, South) (Con): Will the Minister accept that consumers will take with a pinch of salt the idea that savings can be made by switching accounts? When the price of gas fell by nearly half, consumer prices fell by only 10 per cent. The truth of the matter is that when gas prices go up, the consumers take the burden, but when gas prices go down, they do not gain the benefit.

Mr. O'Brien: I am not sure whether the hon. Gentleman is suggesting that we should dispense with the market and somehow introduce regulation. That would be a volte-face for the Conservatives. As far as we
 
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are concerned, the consumer has a number of options available. Different consumers will have different available options. It is certainly the case that, on average, switching supplier can save £30 on a gas bill per year, and by switching payment to direct debit a further £26 could be saved on gas bills. Furthermore, if consumers properly insulate, they could save £130 per annum. Some of the companies increasing their prices are making it clear that they will offer some of the insulation free of charge. I might add that replacing an old boiler with a modern, energy-saving one—I accept that it is a capital cost—could bring about savings of up to £120 per annum. Those are quite significant savings that consumers could make, but none of that disputes the fact that the issue is serious and that we are watching the market with a great deal of care.

Inward Investment

3. Mr. Colin Challen (Morley and Rothwell) (Lab): What action is being taken by UK Trade and Investment to promote inward investment in the UK. [195862]

The Minister for Trade and Investment (Mr. Douglas Alexander): UK Trade and Investment has 39 inward investment teams in 19 countries striving to bring investment here to the United Kingdom. UKTI, the regional development agencies and the devolved Administrations work hard to turn those proposals into reality. The priority is to bring in knowledge-driven investments. Under the terms of the 2004 spending review, UKTI will expand its operation over the next three years in order to maintain the UK's position as the No. 1 location in Europe for attracting inward investment and to increase the quantity and quality of investment into the UK.

Mr. Challen: I thank my hon. Friend for that answer which, combined with the recent improvements in the manufacturing sector, demonstrates that Britain is working. However, I want to add the caveat that I am very concerned about regional disparities. The overheating in the south-eastern economy means that areas such as Yorkshire and the Humber could miss out on inward investments and improvements in manufacturing. In his evidence last week to the Environmental Audit Committee, Sir John Egan gave the impression that success should be encouraged to breed success in successful areas, and that we should almost forget the rest. What are the Government doing to counterbalance that sort of approach?

Mr. Alexander: I am grateful to my hon. Friend for raising that matter. The Government are determined to ensure regionally balanced economic growth right across the UK. That is why, in my hon. Friend's area, Yorkshire Forward is progressing the agenda of bringing inward investment directly into Yorkshire and Humberside. The Government have put in place a platform of stability, and we want that to be the basis for regional devolution. In turn, that can be a real driver for the economic generation of every part of this country.

Mr. Roy Beggs (East Antrim) (UUP): Thousands of jobs have been lost in Belfast, in heavy engineering,
 
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shipbuilding and the manufacture of textile machinery, and they have not been replaced. There is great disappointment in Protestant areas, and people feel that more has been lost than gained since the Belfast agreement was signed. Will the Secretary of State and the Minister use their influence to persuade potential investors in the UK that Belfast is a good place to locate? There has always been a good work ethic there, and education and training services are excellent. Will the Government encourage investors to work with the development agencies in Northern Ireland?

Mr. Alexander: The hon. Gentleman raises an important point. One of the elements of the Government's approach to Northern Ireland is that we are determined to secure the economic regeneration of areas that have suffered the de-industrialisation that he describes. I have great sympathy with that, not least because the area that I represent suffered similar de-industrialisation when jobs in the traditional manufacturing and shipbuilding sectors were lost in recent years. The latest figures available to me show that, in 2003–04, 26 inward investment successes were enjoyed by the Northern Ireland Office. I shall be happy to communicate that information to the hon. Gentleman directly. At the same time, I shall make colleagues in Government aware of the matters that he has raised in respect of the ongoing challenge in Northern Ireland.

Chris Ruane (Vale of Clwyd) (Lab): May I take this opportunity to inform my hon. Friend of the great successes achieved in my constituency in attracting foreign inward investments? Before 1997, there were no foreign inward investors there, but now we have Merloni, an Italian company, TRB, a Japanese company, and Pachem, an Austrian company. What steps can be taken to increase the co-operation between the Department, the Welsh Development Agency and the National Assembly for Wales to ensure that further foreign inward investment takes place, in my constituency and in Wales as a whole?

Mr. Alexander: I join my hon. Friend in paying tribute to the work undertaken by the WDA, which has combined with the work done by the Government to advance the sort of inward investment that he describes. One of the challenges for UKTI is to balance the strategic overview available at the centre with the regional reach of agencies such as the WDA. We need to strike a balance between ensuring that we speak with a common voice to the inward investment community around the world—and we should emphasise Britain's competitiveness without shame or embarrassment—and ensuring that we speak up for those parts of the economy that may not, traditionally, have received as much inward investment as other areas. That is why I believe that the regional focus of directly involving the RDAs strikes exactly the right balance between strength at the centre and real regional reach.

Mr. James Arbuthnot (North-East Hampshire) (Con): In June, the Organisation for Economic Co-operation and Development issued a report stating that the foreign direct investment flows into the UK fell by almost half in 2003, from a level that was unimpressive
 
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by historical standards. Was the OECD wrong? Will the Minister give a slightly better reply than the Secretary of State did when she said, in the previous DTI question session, that the OECD was using the wrong statistics?

Mr. Alexander: I am grateful to the right hon. Gentleman for that characteristically gracious question. There is of course a technical distinction to be drawn between stock and flows of inward investment, and I would be happy to write to him on the technical point that underpinned the answer given by my right hon. Friend the Secretary of State. However, it ill behoves the Opposition to lecture this Government on the success of inward investment, when Ernst and Young, in a recent report, declared that the UK remains the No. 1 location in Europe for inward investment. The anti-European policies of the Conservatives would imperil that leadership position.

Mr. Brian Jenkins (Tamworth) (Lab): Will my hon. Friend explain who has a watching brief on the effect of inward investment? I know that we have a good success story, but I put to him the case of a marvellous investment in the purchase of a company, with promises of expansion and technological development, followed—a couple of years later—by the shift of most production overseas, with the consequent suffering by suppliers. Has that investment had a negative or positive impact?

Mr. Alexander: My hon. Friend raises an important point, which has exercised the Government for several years. We need to ensure that we get best value for money for any public support that is provided for inward investment. Our response is not to turn away inward investment, but to ensure that support is provided to our own indigenous manufacturing base and British companies. That is why we have advanced the research and development tax credit and put in place regional economic development strategies from a foundation of economic strength. We need to ensure that, as well as attracting inward investment, we ensure that we get value for money for it and that we support indigenous British companies.


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