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The Minister for Energy (Malcolm Wicks): Rising energy prices are a global phenomenon but the current construction of new pipelines and liquefied natural gas terminals will significantly boost gas supply over the coming year or two.
For small and medium-sized enterprises, my Department has organised a seminar with Energywatch to share best practice on purchasing strategy. Several energy efficiency measures have been developed to help SMEs reduce their demand for energy.
Mary Creagh: I thank the Minister for his correspondence on the problems faced by the Brotherton chemical company, which employs 50 people in Wakefield. It has suffered the double whammy of its gas prices doubling in the past two years and a 50 per cent. increase in the price of its raw materials. Has he had any response from Ofgem on its inquiries to the European Commission about why the gas interconnector has not been flowing at its full capacity when demand is so high in this country? Does he share the industry's concerns that the unusual
Malcolm Wicks: I understand the concerns of the Brotherton company and others in the chemicals sectora bigger company is Ineos Chlorabout the rising costs of energy. We are working closely with the industry to do our best in the short, medium and long-term. I have not yet heard from Ofgem about any response to its proper inquiry and its serious questions about the workings of the interconnector. Although gas is flowing into Britain through the interconnector, the overall performance has been disappointing and it is right that Ofgem is asking serious questions.
Mr. Peter Bone (Wellingborough) (Con): Does the Minister agree that the forward electricity price in this country has been 60 per cent. higher than in Europe? Is that due to the fact that the European Union has not properly liberalised the energy market?
Malcolm Wicks: We need to consider price carefully. I recognise the pain that rising prices cause both the domestic customer and industry but, compared with continental Europe, especially France and Germany, our prices for most businesses and domestic customers are lower than the European average. However, for intensive users, such as Brotherton, the prices are higher, not least because those companies are purchasing over a relatively short period, sometimes on the spot market. That is their commercial judgment, which is difficult to make. We are doing our best, not least when the UK had the presidency of the European Union up to December, to push market liberalisation. I am impressed by the European Commission's determination to press that forward as quickly as possible.
Mr. Russell Brown (Dumfries and Galloway) (Lab): Small and medium-sized enterprises are the lifeblood of rural economies. I have a plastics recycling company in my constituency that feels greatly disadvantaged by current energy prices. Will my hon. Friend meet representatives of that company who have grave concerns that they are now at a disadvantage compared with some of their competitors on the continent?
Malcolm Wicks: Of course I will. Indeed, the Secretary of State and I have met many representatives of such intensive energy users across a range of industries. I would welcome such a meeting. There is an uncertain correlation between gas supply and price. This winter, despite some people predicting otherwise, we have gas supply, with plenty in storage at the moment, yet prices have been a serious problem. In the longer term, new liquefied natural gas terminals that could provide one fifth of our annual needs will come on stream and pipelines in Norway and the Netherlands that could provide up to one third of our annual gas needs will open. The supply situation should then ease and I hope that that will have an impact on price.
Mr. Nigel Dodds (Belfast, North)
(DUP): This morning, Phoenix Natural Gas, the main gas supplier in Northern Ireland, announced a 17.5 per cent. increase in its gas price, which brings the overall gas price increase in Northern Ireland to 52 per cent. in just a couple of months. That will obviously have a major impact on small and medium-sized businesses and domestic
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consumers. Does the Minister agree that such increases over such a short time are unacceptable and that something needs to be done about it?
Malcolm Wicks: The prices are high and they are rising globally, in Europe, and in the United Kingdom. I am not complacent about that. We have a market economy in relation to price. I am interested in practical ideas about what can be done, given the market constraints. The task of the Government has been to ensure that we are in the best possible position this winter in terms of maintenance of the infrastructure and the North sea oil rigs, of talking to the supply companieswhich we did throughout the spring and summerand of ensuring that the new pipelines and liquefied natural gas terminals come on stream as fast as possible. We are doing all that, and that is the task of the Government, in my judgment.
Mr. John Grogan (Selby) (Lab): Given the Chancellor's statement in the pre-Budget report that the owners of the gas interconnector must either use or lose the facility, is there not now a strong case for insisting on third-party access to the interconnector to widen the options for companies when negotiating gas contracts?
Malcolm Wicks: While I am mindful of the fact that the interconnector is a privately owned facility, with the companies that put up the investment for it holding shares in it, I believe that it is in Europe's and the United Kingdom's interests that it should be used at full capacity, and that, with Ofgem, we need to investigate the idea.
Miss Anne McIntosh (Vale of York) (Con): Is the Minister aware that, in the third quarter of last year, average electricity prices rose by more than 27 per cent? That was due in large part to the climate change levy. Does he realise that the levy is impacting even more harshly on small and medium-sized companies than on others? What do the Government propose to do about that?
Malcolm Wicks: This is the issue: we share a common concern about rising prices, but we also share a common concern about our planet and about global warming. The task for energy policy is to have adequate energy supply at affordable prices for business and the householder, while going in for cleaner and greener energy. I understand that Conservative Front Benchers are now foremost in presenting themselves as the cleaner and greener partythey are signing up to all sorts of things in their dash for popularityso I am sure that we are in agreement on this issue. However, I understand the pain that higher prices are causing.
The Minister for Industry and the Regions (Alun Michael):
The Government are helping UK manufacturing to rise to the challenge of globalisation. A successful and dynamic UK manufacturing sector, in which we should
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take great pride, is being helped to compete in world markets by our manufacturing strategy. That is helping companies to move to high value-added production to meet the challenge through the application of science and innovation, world-class practice and skills development.
John Robertson: I thank my right hon. Friend for his comprehensive answer and for the support given to manufacturing industry by this Government. Most fair and knowledgeable people will accept that it is almost impossible for this country to keep up with China and India in low-value, low-skill and high-volume products. Will he redouble his efforts on research and development grants and impress on manufacturing industry the need not only to invest in equipment but in skills and training?
Alun Michael: My hon. Friend packs a lot into his sensible comments about the challenge that faces us. We should remember that China and India, in being ambitious for the growth of their markets, also create a market in which we should be ambitious to compete. Certainly, investment decisions and manufacturers' planning could be helped through the manufacturing advisory service. Skills development can complement that. Even the smallest firms can access help from the Department for Education and Skills and the Learning and Skills Council through the local Business Link, and initiatives such as the manufacturing academy will help considerably at the high-skill end. I agree with much of what he said in his question.
Mr. Mark Prisk (Hertford and Stortford) (Con): Despite the Minister's good intentions, the ability of British industry to compete is being held back by the Treasury. Business is now paying an extra £50 billion in tax each year and manufacturing investments are frustrated by a complex tax system that the Chancellor constantly changes. It is no wonder that productivity growth per worker is just one fifth of what it was in 1997. Will the Minister, in his role as a business advocate in Government, stand up to the Treasury and tell the Chancellor to stop tinkering with the tax system and give manufacturers what they want: a simple, certain fiscal environment in which they can invest for the future? Will he stand up for business against the Treasury?
Alun Michael: Will the hon. Gentleman stand up to his leader? It is obvious that Conservative Members, rather than asking questions about trade and industry, are under a three-line Whip to attack the Chancellor. It was the Chancellor who provided £30 million of Government funding that has enabled the manufacturing advisory service to generate £188 million in added value for over 3,000 companies. The hon. Gentleman should praise both the Department of Trade and Industry and the Treasury.
Keith Vaz (Leicester, East)
(Lab): Is there not another side to the story? As the Minister for Trade's visit to India has shown, there is a great deal of inward investment from India and China into the United Kingdom. In fact, that inward investment might exceed the investment of our country into countries such as
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India. Is not that good for British jobs? Should not we see China and India as partners in the new global economy?
Alun Michael: My hon. Friend is right. It should be seen as an opportunity, especially given the contacts of many of this country's business people whose roots and ethnic origin are in, for instance, India. The link that they have made and the creativity that they bring to bear is providing a real impetus in parts of our industry and commerce and should be welcomed.
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